Attached files
file | filename |
---|---|
EX-32 - EXHIBIT 32 - CHAMPION INDUSTRIES INC | exhibit32.htm |
EX-31.1 - EXHIBIT 31.1 - CHAMPION INDUSTRIES INC | exhibit311.htm |
EX-31.3 - EXHIBIT 31.3 - CHAMPION INDUSTRIES INC | exhibit313.htm |
EX-31.2 - EXHIBIT 31.2 - CHAMPION INDUSTRIES INC | exhibit312.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period
ended January 31, 2010
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
For the
transition period from _________to_________
Commission
File No. 0-21084
Champion Industries,
Inc.
(Exact
name of Registrant as specified in its charter)
West
Virginia
|
|
55-0717455
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
2450-90
1st Avenue
P.O. Box
2968
Huntington,
WV 25728
(Address
of principal executive offices)
(Zip
Code)
(304)
528-2700
(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 ü No _____.
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes _____ No _____.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definition of “large accelerated filer”, "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large accelerated
filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller reporting company þ |
(Do not check
if a smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes _____No ü .
Indicate
the number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date.
Class
|
|
Outstanding
at January 31, 2010
|
Common
stock, $1.00 par value per share
|
|
9,987,913 shares
|
Champion
Industries, Inc.
INDEX
|
Page
No.
|
Part
I. Financial
Information
|
|
Item 1. Financial
Statements
|
|
Consolidated Balance Sheets
(Unaudited)
|
3
|
Consolidated Statements
of Operations (Unaudited)
|
5
|
Consolidated Statements of Shareholders' Equity
(Unaudited)
|
6 |
Consolidated Statements of Cash
Flows
(Unaudited)
|
7
|
Notes to Consolidated Financial
Statements
|
8
|
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
|
16
|
Item 3. Quantitative and Qualitative
Disclosure About Market
Risk
|
20
|
Item 4T. Controls and Procedures
|
20
|
Part
II. Other
Information
|
|
Item 1A. Risk Factors | 21 |
Item 6.
Exhibits
|
21
|
Signatures
|
22
|
2
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Champion
Industries, Inc. and Subsidiaries
Consolidated
Balance Sheets
ASSETS
|
|
January
31,
|
|
|
|
October
31,
|
|
|
|
2010
(Unaudited)
|
|
|
|
2009
(Audited)
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
-
|
|
|
$
|
1,159,282
|
|
Accounts receivable, net of allowance of $1,343,000 and
1,353,000
|
|
17,691,711
|
|
|
|
18,424,310
|
|
Inventories
|
|
10,580,057
|
|
|
|
11,161,977
|
|
Income tax
refund
|
2,522,292
|
1,911,400 | |||||
Other current assets
|
|
1,261,180
|
|
|
|
925,120
|
|
Deferred income tax assets
|
|
1,000,847
|
|
|
|
1,000,847
|
|
Total current
assets
|
|
33,056,087
|
|
|
|
34,582,936
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost:
|
|
|
|
|
|
|
|
Land
|
|
2,016,148
|
|
|
|
2,016,148
|
|
Buildings and
improvements
|
|
11,817,789
|
|
|
|
11,806,238
|
|
Machinery and
equipment
|
|
57,628,390
|
|
|
|
57,481,742
|
|
Furniture and
fixtures
|
|
4,129,537
|
|
|
|
4,129,537
|
|
Vehicles
|
|
3,123,939
|
|
|
|
3,145,772
|
|
|
|
78,715,803
|
|
|
|
78,579,437
|
|
Less accumulated
depreciation
|
|
(54,095,824
|
)
|
|
|
(53,170,108
|
) |
|
|
24,619,979
|
|
|
|
25,409,329
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
15,332,283
|
|
|
|
15,332,283
|
|
Deferred financing
costs
|
1,121,832 | 1,199,199 | |||||
Other
intangibles, net of accumulated amortization
|
|
5,421,935
|
|
|
|
5,645,078
|
|
Trademark and masthead | 10,001,812 | 10,001,812 | |||||
Deferred tax asset, net of current portion | 8,344,185 | 8,799,518 | |||||
Other assets
|
|
47,446
|
|
|
|
51,738
|
|
|
|
40,269,493
|
|
|
|
41,029,628
|
|
Total
assets
|
$
|
97,945,559
|
|
|
$
|
101,021,893
|
See notes
to consolidated financial statements.
3
Champion
Industries, Inc. and Subsidiaries
Consolidated
Balance Sheets (continued)
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
January
31,
|
|
October
31,
|
|||
|
2010
(Unaudited)
|
|
2009
(Audited)
|
|||
Current
liabilities:
|
|
|
|
|
|
|
Notes payable, line of credit | $ |
9,285,496
|
$ | 8,725,496 | ||
Negative book cash balances | 670,812 | - | ||||
Accounts
payable
|
|
6,293,769
|
|
|
4,637,199
|
|
Accrued payroll and
commissions
|
|
1,727,376
|
|
|
2,392,971
|
|
Taxes accrued and
withheld
|
|
1,694,622
|
|
|
1,391,718
|
|
Accrued
expenses
|
|
2,146,438
|
|
|
2,027,266
|
|
Other current liabilities | 678,814 | 962,893 | ||||
Current portion of long-term
debt:
|
|
|
|
|
|
|
Notes
payable
|
48,844,495 | 57,024,424 | ||||
Total current
liabilities
|
|
71,341,822
|
|
|
77,161,967
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion:
|
|
|
|
|
|
|
Notes payable
|
|
3,875,383
|
|
|
918,436
|
|
Other liabilities
|
|
6,900
|
|
|
7,350
|
|
Total
liabilities
|
|
75,224,105
|
|
|
78,087,753
|
|
Shareholders’
equity:
|
|
|
|
|
|
|
Common stock, $1 par value, 20,000,000 shares
authorized;
9,987,913 shares issued and
outstanding
|
|
9,987,913
|
|
|
9,987,913
|
|
Additional paid-in
capital
|
|
22,768,610
|
|
|
22,768,610
|
|
Retained
deficit
|
|
(10,035,069
|
)
|
|
(9,822,383
|
) |
Total shareholders’
equity
|
|
22,721,454
|
|
|
22,934,140
|
|
Total liabilities and shareholders’
equity
|
$
|
97,945,559
|
|
$
|
101,021,893
|
See notes
to consolidated financial statements.
4
Champion
Industries, Inc. and Subsidiaries
Consolidated
Statements of Operations
(Unaudited)
|
|
Three
Months Ended
January
31,
|
|||||
|
|
|
2010
|
|
|
2009
(Restated)
|
|
Revenues:
|
|
|
|
|
|
|
|
Printing
|
|
$
|
19,749,471
|
|
$
|
23,140,821
|
|
Office products and office
furniture
|
|
|
8,261,714
|
|
|
9,237,402
|
|
Newspaper | 4,376,061 | 4,512,790 | |||||
Total
revenues
|
|
|
32,387,246
|
|
|
36,891,013
|
|
|
|
|
|
|
|
|
|
Cost
of sales and newspaper operating costs:
|
|
|
|
|
|
|
|
Printing
|
|
|
14,721,374
|
|
|
17,974,794
|
|
Office products and office
furniture
|
|
|
5,931,021
|
|
|
6,696,650
|
|
Newspaper cost of sales and operating costs | 2,128,606 | 2,440,302 | |||||
Total cost of sales and newspaper
operating
costs
|
|
|
22,781,001
|
|
|
27,111,746
|
|
Gross
profit
|
|
|
9,606,245
|
|
|
9,779,267
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
8,716,644
|
|
|
9,777,113
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
889,601
|
|
|
2,154
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
2,724
|
|
Interest expense
|
|
|
(1,569,812
|
)
|
|
(1,099,333
|
) |
Other
|
|
|
304,581
|
|
|
24,112
|
|
|
|
|
(1,265,231
|
)
|
|
(1,072,497
|
) |
(Loss) before
income taxes
|
|
|
(375,630
|
)
|
|
(1,070,343
|
) |
Income tax benefit
|
|
|
162,944
|
|
|
435,972
|
|
Net
(loss)
|
|
$
|
(212,686
|
)
|
$
|
(634,371
|
) |
|
|
|
|
|
|
|
|
(Loss)
per share
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
$
|
(0.06
|
) |
Diluted
|
|
$
|
(0.02
|
)
|
$
|
(0.06
|
) |
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
9,988,000
|
|
|
9,988,000
|
|
Diluted
|
|
|
9,988,000
|
|
|
9,988,000
|
|
Dividends
per share
|
|
$
|
-
|
|
$
|
0.06
|
See notes to consolidated financial statements.
5
Champion
Industries, Inc. and Subsidiaries
Consolidated
Statements of Shareholders’ Equity
(Unaudited)
Additional
|
Other
|
|||||||||||||||||
Common
Stock
|
Paid-In
|
Retained
|
Comprehensive
|
|||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Total
|
|||||||||||||
Balance, October 31, 2009 | 9,987,913 | $ | 9,987,913 | $ | 22,768,610 | $ | (9,822,383 | ) | $ | - | $ |
22,934,140
|
||||||
Comprehensive loss: | ||||||||||||||||||
Net loss for
2010
|
-
|
-
|
-
|
(212,686
|
) |
-
|
(212,686
|
) | ||||||||||
Other
comprehensive loss (net of tax)
|
- | - | - | - | - |
-
|
||||||||||||
Total comprehensive loss | - | - | - | (212,686 | ) | - | (212,686 | ) | ||||||||||
Balance, January
31, 2010
|
9,987,913
|
$
|
9,987,913
|
$
|
22,768,610
|
$
|
(10,035,069
|
) |
$
|
-
|
|
$
|
22,721,454
|
See notes
to consolidated financial statements.
6
Champion
Industries, Inc. and Subsidiaries
Consolidated
Statements of Cash Flows (Unaudited)
|
|
Three Months
Ended January 31,
|
|
||||
|
|
2010
|
|
2009
(Restated)
|
|
||
Cash
flows from operating activities:
|
|
|
|
|
|
||
Net
(loss)
|
|
$
|
(212,686
|
)
|
$
|
(634,371
|
)
|
Adjustments
to reconcile net (loss) to cash
provided
by operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,217,641
|
|
|
1,316,320
|
|
(Gain) on sale of
assets
|
|
|
(1,075
|
)
|
|
(14,113
|
) |
Deferred income taxes | 455,333 | 340,981 | |||||
Deferred financing
costs
|
77,368 |
77,368
|
|||||
Bad
debt expense
|
|
|
102,966
|
|
|
266,910
|
|
(Gain) on hedging agreements | (284,079) | - | |||||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts
receivable
|
|
|
629,633
|
|
4,224,262
|
|
|
Inventories
|
|
|
581,920
|
|
|
399,999
|
|
Other current
assets
|
|
|
(336,060
|
)
|
|
(280,211
|
)
|
Accounts
payable
|
|
|
1,656,570
|
|
|
(321,265
|
)
|
Accrued payroll and
commission
|
|
|
(665,595
|
)
|
|
(867,882
|
)
|
Taxes accrued and
withheld
|
|
|
302,904
|
|
|
92,368
|
|
Income
taxes
|
|
|
(610,892
|
)
|
|
(781,590
|
) |
Accrued
expenses
|
|
|
119,172
|
|
|
233,205
|
|
Other
liabilities
|
|
|
(450
|
)
|
|
(450
|
)
|
Net cash provided by operating activities
|
|
|
3,032,670
|
|
|
4,051,531
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(107,203
|
)
|
|
(560,747
|
)
|
Proceeds
from sales of fixed assets
|
|
|
9,392
|
|
|
33,358
|
|
Change in other assets |
1,292
|
1,292
|
|||||
Net cash used in investing activities |
(96,519
|
) |
(526,097
|
) | |||
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Borrowing on line of credit | 8,520,000 | - | |||||
Payments
on line of credit
|
|
|
(7,960,000
|
)
|
|
-
|
|
Increase in negative book cash balances | 670,812 | 389,876 | |||||
Principal
payments on long-term debt
|
|
|
(5,326,245
|
)
|
|
(3,316,034
|
)
|
Dividends
paid
|
|
|
-
|
|
|
(599,276
|
)
|
Net cash used in financing activities
|
|
|
(4,095,433
|
) |
|
(3,525,434
|
)
|
Net
(decrease) in cash and cash equivalents
|
|
|
(1,159,282
|
)
|
|
-
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,159,282
|
|
|
-
|
|
Cash
and cash equivalents, end of period
|
|
$
|
-
|
|
$
|
-
|
|
See notes to consolidated
financial
statements.
7
Champion
Industries, Inc. and
Subsidiaries
Notes
to Consolidated Financial Statements
(Unaudited)
January
31, 2010
1.
Basis of Presentation, Business Operations and Recent Accounting
Pronouncements
The foregoing financial
information has been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) and rules and regulations of
the Securities and Exchange Commission for interim financial reporting. The
preparation of the financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates. In the opinion of management, the financial information
reflects all adjustments (consisting of items of a normal recurring nature)
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with GAAP. These interim financial statements
should be read in conjunction with the consolidated financial statements for the
year ended October 31, 2009, and related notes thereto contained in Champion
Industries, Inc.’s Form 10-K dated January 27, 2010. The accompanying
interim financial information is unaudited. The results of operations for the
period are not necessarily indicative of the results to be expected for the full
year. The balance sheet information as of October 31, 2009 was derived from our
audited financial
statements.
The
Company identified approximately $0.3 million or $0.03 per share on a basic and
diluted basis of non-cash deferred tax related adjustments for the first quarter
of 2009. This
adjustment was initially recorded in the fourth quarter of 2009 for the full
year and therefore the interim periods for 2009 have been restated accordingly
to reflect such adjustment. Accordingly, the Consolidated Financial
statements for January 31, 2009 have been restated to increase deferred income
tax expense and to increase deferred income tax liability. This
adjustment is related to the goodwill, trade name and masthead associated with
the acquisition of The Herald-Dispatch. This deferred tax liability
will remain on the balance sheet until such time as the associated intangible
assets are impaired, sold, or otherwise disposed of. Certain
prior-year amounts have been reclassified to conform to the current year
financial statement presentation.
2.
Earnings per Share
Basic
earnings per share is computed by dividing net income by the weighted average
shares of common stock outstanding for the period and excludes any dilutive
effects of stock options. Diluted earnings per share is computed by dividing net
income by the weighted average shares of common stock outstanding for the period
plus the shares that would be outstanding assuming the exercise of dilutive
stock options. The dilutive effect of stock options was 0 shares for the three
months ended January 31, 2010 and 2009.
8
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (Unaudited)
(continued)
3.
Inventories
Inventories
are principally stated at the lower of first-in, first-out cost or market.
Manufactured finished goods and work in process inventories include material,
direct labor and overhead based on standard costs, which approximate actual
costs. The Company utilizes an estimated gross profit method for determining
cost of sales in interim periods.
Inventories
consisted of the
following:
|
|
January
31,
|
|
October
31,
|
|
||
|
|
2010
|
|
2009
|
|
||
Printing
and newspaper:
|
|
|
|
|
|
||
Raw
materials
|
|
$
|
2,867,433
|
|
$
|
2,854,938
|
|
Work in
process
|
|
|
1,576,095
|
|
|
1,405,320
|
|
Finished
goods
|
|
|
3,487,281
|
|
|
3,765,244
|
|
Office
products and office furniture
|
|
|
2,649,248
|
|
|
3,136,475
|
|
|
|
$
|
10,580,057
|
|
$
|
11,161,977
|
|
4.
Long-Term Debt
Long-term
debt consisted of the following:
|
January
31,
|
|
October
31,
|
|
|||
|
|
2010
|
|
2009
|
|
||
Installment
notes payable to banks & shareholder
|
|
$
|
4,312,436
|
|
$
|
1,310,418
|
|
Term
loan facility with a bank
|
|
|
48,407,442
|
|
|
56,632,442
|
|
|
|
|
52,719,878
|
|
|
57,942,860
|
|
Less
current portion
|
|
|
48,844,495
|
|
|
57,024,424
|
|
Long-term
debt, net of current portion
|
|
$
|
3,875,383
|
|
$
|
918,436
|
|
9
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (Unaudited)
(continued)
On
December 29, 2009, the Administrative Agent and Lenders under the Company's
Credit Agreement dated September 14, 2007 ("Credit Agreement"), the
Company and Marshall T. Reynolds entered into a Forbearance Agreement (the
"Forbearance Agreement") which provides, among other things, that during a
standstill period commencing on December 29, 2009 and ending on March 31, 2010
(unless sooner terminated by default of Champion under the Forbearance Agreement
or the Credit Agreement), the Required Lenders are willing to temporarily
forbear exercising certain rights and remedies available to them, including
acceleration of the obligations or enforcement of any of the liens provided for
in the Credit Agreement. The Company acknowledged in the Forbearance
Agreement that as a result of the existing defaults, the Lenders are entitled to
decline to provide further credit to the Company, to terminate their loan
commitments, to accelerate the outstanding loans, and to enforce their
liens.
The
Company has been working with the different creditors to restructure the
existing debt; however, an agreement satisfactory to the Company has not been
reached. Upon the expiration of the Forbearance Agreement, a total of
$57,692,938 of long-term debt and outstanding revolving line of
credit borrowing are subject to accelerated maturity and, as such, the creditors
may, at their option, give notice to the Company that amounts owed are
immediately due and payable. As a result, the full amount of the related
long-term debt has been classified as a current liability in the accompanying
Balance Sheet at January 31, 2010 and October 31, 2009 representing
$52,792,938 and $60,457,938. Regardless of the non-compliance with financial
covenants, the Company has made every scheduled payment of principal and
interest, including an excess cash flow recapture payment of approximately $2.0
million in January 2009 and pursuant to the terms and of the Forbearance
Agreement a payment of $7.0 million in term loans in December 2009.
The
Company is required to make certain mandatory payments on its credit facilities
related to (1) net proceeds received from a loss subject to applicable
thresholds, (2) equity proceeds and (3) effective January 31, 2009, and
continuing each year thereafter under the terms of the agreement the Company is
required to prepay its credit facilities by 75% of excess cash flow for its most
recently completed fiscal year. The excess cash flow for purposes of this
calculation is defined as the difference (if any) between (a) EBITDA for such
period and (b) federal, state and local income taxes paid in cash during such
period plus capital expenditures during such period not financed with
indebtedness plus interest expense paid in cash during such period plus the
aggregate amount of scheduled payments made by the Borrower and its Subsidiaries
during such period in respect of all principal on all indebtedness (whether at
maturity, as a result of mandatory sinking fund redemption, or otherwise), plus
restricted payments paid in cash by the Borrower during such period in
compliance with the credit agreement. The Company paid its prepayment obligation
of approximately $2.0 million in January 2009 and had no balance
due under its prepayment obligation for fiscal 2009 that would have
been payable January 2010.
10
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (continued)
Maturities
of long-term debt for each of the next five years follow:
2010
|
$
|
48,844,495
|
||
2011
|
387,682
|
|||
2012
|
309,082
|
|||
2013
|
3,138,604
|
|||
2014
|
40,015
|
|||
$
|
52,719,878
|
The
Company was previously permitted to borrow a maximum of $30,000,000 under its
revolving line of credit subject to a borrowing base limitation with interest
payable monthly at the prime rate of interest and/or LIBOR plus a margin. In
November of 2009 the Administrative Agent advised the Company that the aggregate
availability under its revolving credit commitments would be $20,000,000. In
December of 2009, the Administrative Agent notified the Company that Eurodollar
loans would no longer be permitted. Therefore, all future borrowings will be
indexed from the base rate (prime rate based) plus the applicable margin. The
Company had borrowed $9,285,496 under this facility at January 31,
2010 and $8,725,496 at October 31, 2009. Pursuant to the terms of the
Forbearance Agreement the borrowing base certificate at October 31, 2009 would
have reflected minimum excess availability of approximately $8.9 million and
$6.9 million at January 31, 2010. The minimum excess availability and cash and
cash equivalents threshold at January 31, 2010 and October 31, 2009, reflective
of the terms of the Forbearance Agreement, was subject to a $1.0 million minimum
excess availability threshold. Any reserves, which may be applied at the sole
discretion of the Administrative Agent, are not reflected in the availability
calculations. In 2009, the Administrative Agent revised the borrowing base
calculation, which limited the eligibility of certain accounts receivable
and pursuant to the filing of its December 31, 2009 borrowing base the Company
was notified of an additional $1.5 million reserve being instituted by the
Administrative Agent. The line of credit expires in September 2012 and contains
certain restrictive financial covenants, is subject to borrowing base
limitations and is collateralized by substantially all of the assets of the
Company.
The
Company has an unsecured revolving line of credit with a bank for borrowings to
a maximum of $1,000,000 with interest payable monthly at the Wall Street Journal
prime rate. This line of credit expires in July 2010 is subject to a floor of
4.25% and contains certain financial covenants. There were no borrowings
outstanding under this facility at January 31, 2010 and October 31,
2009.
The
Company may incur costs in 2010 related to facility consolidations, employee
termination costs and other restructuring related activities. These costs may be
incurred, in part, as a response to the Company's efforts to overcome the
impact of the global economic crisis.
There
were no non-cash financing and investing activities for the three months ended
January 31, 2009 and equipment and vehicle purchases of $103,000 for the
three months ended January 31, 2010. On December 29, 2009 concurrent with
the Forbearance Agreement, Marshall T. Reynolds prepaid $3.0 million of the
Company's loans in exchange for a $3.0 million subordinated unsecured promissory
note.
11
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (Unaudited)
(continued)
5.
Commitments and Contingencies
As of
January 31, 2010 the Company had contractual obligations in the form of
leases and debt as
follows:
|
|
Payments
Due by Fiscal Year
|
|||||||||||||||||
Contractual
Obligations
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
Total
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-cancelable
operating leases
|
|
$
|
988,031
|
|
$
|
1,106,930
|
|
$
|
932,343
|
|
$
|
845,884
|
|
$
|
271,640
|
$ |
4,144,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Revolving
line of credit
|
|
|
9,285,496
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
9,285,496
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Term
debt
|
|
|
48,764,024
|
|
|
391,866
|
|
|
307,535
|
|
|
3,186,438
|
|
|
70,015
|
52,719,878
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
$
|
59,037,551
|
|
$
|
1,498,796
|
|
$
|
1,239,878
|
|
$
|
4,032,322
|
|
$
|
341,655
|
$ |
66,150,202
|
6.
Share-Based Compensation
FASB ASC
718 (ASC 718) requires companies to expense the value of employee stock
options and similar awards. Since the Company’s outstanding employee stock
options vested immediately in the year granted, the initial adoption of this
standard had no effect on the Company’s financial statements. However, the
Company will be required to expense the fair value of the employee stock options
when future options are granted or when existing options are modified or
repurchased pursuant to the provisions of ASC 718.
The
Company did not issue any employee stock options for the three months
ended January 31, 2010 and
2009.
12
Notes
to Consolidated Financial Statements (Unaudited) (continued)
7.
Industry Segment Information
The
Company operates principally in three industry segments organized on the
basis of product lines: the production, printing and sale, principally to
commercial customers, of printed materials (including brochures, pamphlets,
reports, tags, continuous and other forms), the sale of office products and
office furniture including interior
design services and publication
of The Herald-Dispatch daily newspaper in Huntington, WV with a total daily
and Sunday circulation of approximately 24,000 and 30,000,
respectively.
Our financial reporting systems present various data which is used to
operate and measure our operating performance, including internal statements of
operations which are prepared on a basis inconsistent with GAAP. Therefore, the
segment reporting may not necessarily be consistent with GAAP reporting.
Furthermore, because of our integrated business structure, operating costs
included in one segment may benefit other segments, as a result of this
structure these segments are not specifically designed to measure operating
income or loss directly related to the products or services included in each
segment.
The identifiable assets are reflective of non-GAAP assets reported on
the Company's internal balance sheets and are typically adjusted for negative
book cash balances, taxes, and other items excluded for segment reporting. The
total assets reported on the Company's balance sheet as of January 31, 2010 and
2009 are $97,945,559 and $136,595,997. The identifiable assets reported above
represent $86,408,270 and $133,726,731 at January 31, 2010 and 2009. Amounts for
prior periods have been recast to conform to the current management view.
The table
below presents information about reported segments for the three months ended January 31:
2010
Quarter 1
|
Printing
|
Office
Products & Furniture
|
Newspaper
|
Total
|
||||||||||||
Revenues
|
$ | 22,396,030 | $ | 9,892,392 | $ | 4,376,061 | $ | 36,664,483 | ||||||||
Elimination
of intersegment revenue
|
(2,646,559 | ) | (1,630,678 | ) | - | (4,277,237 | ) | |||||||||
Consolidated
revenues
|
$ | 19,749,471 | $ | 8,261,714 | $ | 4,376,061 | $ | 32,387,246 | ||||||||
Operating
income (loss)
|
(494,561 | ) | 369,251 | 1,014,911 | 889,601 | |||||||||||
Depreciation
& amortization
|
786,190 | 37,833 | 393,618 | 1,217,641 | ||||||||||||
Capital
expenditures
|
181,079 | 4,046 | 25,341 | 210,466 | ||||||||||||
Identifiable
assets
|
42,942,206 | 6,987,433 | 36,478,631 | 86,408,270 | ||||||||||||
Goodwill
|
2,226,837 | 1,230,485 | 11,874,961 | 15,332,283 | ||||||||||||
2009
Quarter 1
|
Printing
|
Office
Products and Furniture
|
Newspaper
|
Total
|
||||||||||||
Revenues
|
$ | 25,812,318 | $ | 11,010,923 | $ | 4,512,790 | $ | 41,336,031 | ||||||||
Elimination
of intersegment revenue
|
(2,671,497 | ) | (1,773,521 | ) | - | (4,445,018 | ) | |||||||||
Consolidated
revenues
|
$ | 23,140,821 | $ | 9,237,402 | $ | 4,512,790 | $ | 36,891,013 | ||||||||
Operating
income (loss)
|
(909,752 | ) | 249,651 | 662,255 | 2,154 | |||||||||||
Depreciation
& amortization
|
840,113 | 50,389 | 425,818 | 1,316,320 | ||||||||||||
Capital
expenditures
|
467,973 | 57,137 | 35,637 | 560,747 | ||||||||||||
Identifiable
assets
|
45,899,959 | 8,929,626 | 78,897,146 | 133,726,731 | ||||||||||||
Goodwill
|
2,226,837 | 1,230,485 | 35,437,456 | 38,894,778 | ||||||||||||
13
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (Unaudited)
(continued)
A
reconciliation of total segment revenues and of total segment operating income
to consolidated (loss) before income taxes, for the three months ended January
31, 2010 and 2009, is as follows:
Three months ended January 31,
|
||||||||
2010 | 2009 (Restated) | |||||||
Revenues:
|
||||||||
Total
segment revenues
|
$ | 36,664,483 | $ | 41,336,031 | ||||
Elimination
of intersegment revenue
|
(4,277,237 | ) | (4,445,018 | ) | ||||
Consolidated
revenue
|
$ | 32,387,246 | $ | 36,891,013 | ||||
Operating
Income:
|
||||||||
Total
segment operating income
|
$ | 889,601 | $ | 2,154 | ||||
Interest
income
|
- | 2,724 | ||||||
Interest
expense
|
(1,569,812 | ) | (1,099,333 | ) | ||||
Other
income
|
304,581 | 24,112 | ||||||
Consolidated (loss)
before income taxes
|
$ | (375,630 | ) | $ | (1,070,343 | ) | ||
Identifiable
assets:
|
||||||||
Total
segment identifiable assets
|
$ | 86,408,270 | $ | 133,726,731 | ||||
Assets
not allocated to a segment
|
11,537,289 | 2,869,266 | ||||||
Total
consolidated assets
|
$ | 97,945,559 | $ | 136,595,997 |
8.
Derivative Instruments and Hedging Activities
The
Company manages exposure to changes in market interest rates. The Company's use
of derivative instruments is limited to highly effective fixed and floating
interest rate swap agreements used to manage well-defined interest rate risk
exposures. The Company monitors its positions and the credit ratings of its
counterparties and does not anticipate non-performance by the
counterparties. Interest rate swap agreements are not entered into for
trading purposes.
At
September 28, 2007, the Company was party to an interest rate swap agreement
which terminates on October 29, 2010. The swap agreement is with a major
financial institution and aggregates $25 million in notional principal amount
representing approximately $20.6 million and $21.1 million of outstanding
notional principal at January 31, 2010 and October 31, 2009. This swap
agreement effectively converted $25 million of variable interest rate debt to
fixed rate debt. The swap agreement requires the Company to make fixed interest
payments based on an average effective rate of 4.78% and receive variable
interest payments from its counterparties based on one-month LIBOR (actual rate
of 0.23% at January 31, 2010). The remaining term of this swap agreement
is approximately 9 months. In the three months ended January 31, 2009,
the Company recorded a net change in the fair value of the fixed interest rate
swap agreement in the amount of $266,000, net of income tax as other
comprehensive loss. In the three months ended January 31, 2010 the Company
recorded as a component of other income $284,000, related to its hedging
arrangement, or $170,000 net of income tax. Due to the termination of
LIBOR borrowing eligibility from the Administrative Agent the Company recorded a
loss in 2009 from ineffectiveness in its hedging arrangement.
The fair
value of this derivative instrument is discussed further in Footnote 9, Fair
Value of Financial Instruments.
14
Champion
Industries, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements (Unaudited) (continued)
9. Fair Value of Financial
Instruments
FASB ASC
820 (ASC 820) provides guidance for using fair value to measure assets and
liabilities and only applies when other standards require or permit the fair
value measurement of assets and liabilities. It does not expand the
use of fair value measurements. The Company adopted ASC 820 for financial assets
and liabilities only on November 1, 2008. The Company's interest rate
swap derivative liability is based on third party valuation models, and is
therefore classified as having Level 2 inputs. The adoption of ASC 820 for
financial assets and financial liabilities did not have a material impact on the
Company's results of operations, financial condition or
liquidity. The full adoption of ASC 820 for nonfinancial assets and
nonfinancial liabilities is also not expected to have a significant impact on
the Company's results of operations, financial condition or
liquidity.
FASB ASC
825 (ASC 825) permits entities to choose to measure at fair value many
financial instruments and certain other items at fair value that are not
currently required to be measured. Unrealized gains and losses on
items for which the fair value option has been elected are reported in
earnings. ASC 825 does not affect any existing accounting literature
that requires certain assets and liabilities to be carried at fair value. The
Company elected to not apply the provisions of ASC 825; therefore the adoption
of ASC 825 did not affect our consolidated financial position, results of
operations or cash flows.
The
company measures and records in the accompanying consolidated financial
statements certain liabilities at fair value on a recurring basis. ASC 820
establishes a fair value hierarchy for those instruments measured at fair value
that distinguishes between assumptions based on market data (observable inputs)
and our own assumptions (unobservable inputs). The hierarchy consists of
three levels:
Level 1 -
Quoted market prices in active markets for identical assets or
liabilities;
Level 2 -
Inputs other than Level 1 inputs that are either directly or indirectly
observable; and
Level 3 -
Unobservable inputs developed using estimates and assumptions developed by the
company, which reflect those that a market participant would use.
The
following table summarizes the financial instruments measured at fair value in
the accompanying consolidated balance sheet as of January 31, 2010:
Fair
Value Measurements as of
|
||||||||||||||||
January
31, 2010
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Interest
rate swap
|
$
|
-
|
$
|
678,814
|
$
|
-
|
$
|
678,814
|
15
Champion
Industries, Inc. and Subsidiaries
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Results of
Operations
The following table sets
forth, for the periods indicated, information derived from the Consolidated
Statements of Operations as a percentage of total revenues.
The
Company identified approximately $0.3 million or $0.03 per share on a basic and
diluted basis of non-cash deferred tax related adjustments for the first quarter
of 2009. This
adjustment was initially recorded in the fourth quarter of 2009 for the full
year and therefore the interim periods for 2009 have been restated accordingly
to reflect such adjustment. Accordingly, the Consolidated Financial
statements for January 31, 2009 have been restated to increase deferred income
tax expense and to increase deferred income tax liability. This
adjustment is related to the goodwill, trade name and masthead associated with
the acquisition of The Herald-Dispatch. This deferred tax liability
will remain on the balance sheet until such time as the associated intangible
assets are impaired, sold, or otherwise disposed of. Certain
prior-year amounts have been reclassified to conform to the current year
financial statement presentation.
Three
Months Ended January 31
($ In
thousands)
|
|||||||||||||
2010
|
2009
(Restated)
|
||||||||||||
Revenues:
|
|||||||||||||
Printing
|
$ |
19,749
|
61.0
|
%
|
$ |
23,141
|
62.7
|
%
|
|||||
Office products and office furniture
|
8,262
|
25.5
|
9,237
|
25.1
|
|||||||||
Newspaper
|
4,376
|
13.5
|
4,513
|
12.2
|
|||||||||
Total
revenues
|
32,387
|
100.00
|
36,891
|
100.00
|
|||||||||
Cost
of sales and newspaper operating costs:
|
|||||||||||||
Printing
|
14,721
|
45.4
|
17,975
|
48.7
|
|||||||||
Office products and office furniture
|
5,931
|
18.3
|
6,697
|
18.2
|
|||||||||
Newspaper
cost of sales and operating costs
|
2,129
|
6.6
|
2,440
|
6.6
|
|||||||||
Total
cost of sales and newspaper operating costs
|
22,781
|
70.3
|
27,112
|
73.5
|
|||||||||
Gross profit
|
9,606
|
29.7
|
9,779
|
26.5
|
|||||||||
Selling,
general and administrative expenses
|
8,717
|
26.9
|
9,777
|
26.5
|
|||||||||
Income
from operations
|
889
|
2.8
|
2
|
0.0
|
|||||||||
Interest
income
|
-
|
0.0
|
3
|
0.0
|
|||||||||
Interest expense |
(1,570
|
) |
(4.9
|
) |
(1,099
|
) |
(3.0
|
) | |||||
Other
income
|
305
|
0.9
|
24
|
0.1
|
|||||||||
(Loss)
before taxes
|
(376
|
) |
(1.2
|
) |
(1,070
|
) |
(2.9
|
) | |||||
Income
tax benefit
|
163
|
0.5
|
436
|
1.2
|
|||||||||
Net
(loss)
|
$ |
(213
|
)
|
(0.7
|
)%
|
$ |
(634
|
) |
(1.7
|
)%
|
16
Champion
Industries, Inc. and Subsidiaries
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations (continued)
Three
Months Ended January 31, 2010 Compared to Three Months Ended January 31, 2009
(Restated)
Revenues
Total revenues decreased
12.2% in the first quarter of 2010 compared to the same period in 2009 to
$32.4 million from $36.9 million. Printing revenue decreased 14.7% in the first
quarter of 2010 to $19.7 million from $23.1 million in the first quarter of
2009. Office products and office furniture revenue decreased 10.6% in the first
quarter of 2010 to $8.3 million from $9.2 million in the first quarter of 2009.
The
decrease in printing sales was due to the continued impact of the global
economic crisis. The decrease in office products and office furniture
sales was due to weaker sales in both office products and office furniture
sales. The
Company recorded newspaper revenues associated with the acquisition of The
Herald-Dispatch of approximately $4.4 million consisting of advertising revenue
of approximately $3.4 million and $1.0 million in circulation revenues for the
first quarter of 2010. This compares to newspaper revenues of approximately $4.5
million consisting of advertising revenue of approximately $3.5 million and $1.0
million in circulation revenues for the first quarter of 2009.
Cost
of Sales
Total cost of sales
decreased 16.0% in the first quarter of 2010 to $22.8 million from $27.1 million
in the first quarter of 2009. Printing cost of sales in the first quarter of
2010 decreased $3.3 million over the prior year and decreased as a percent
of printing sales from 77.7% in 2009 to 74.5% in 2010. The decrease in
printing cost of sales as a percentage of printing sales is primarily related
to lower material costs as a percent of printing sales. Office products and
office furniture cost of sales decreased in 2010 from 2009 levels and decreased
as a percent of sales from 72.5% in 2009 to 71.8% in 2010. Newspaper
cost of sales and operating costs as a percent of newspaper sales were 48.6% for
the three months ended January 31, 2010 compared with 54.1% for the three months
ended January 31, 2009.
Operating
Expenses
In the
first quarter of 2010, selling, general and administrative expenses (S,G&A)
decreased on a gross dollar basis to $8.7 million from $9.8 million in 2009, a
decrease of $1.1 million. As a percentage of total sales, the expenses increased
on a quarter to quarter basis in 2010 to 26.9% from 26.5% in 2009. The increase
in S,G&A as a percent of sales was primarily reflective of lower sales
partially offset by a decrease in S,G&A on a gross dollar
basis.
17
Champion
Industries, Inc. and Subsidiaries
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations (continued)
Income
from Operations and Other Income and Expenses
Income from operations
increased in the first quarter of 2010 to $0.9 million from $2,000 in the
first quarter of 2009. This
increase is the result of improved operating results from each of the
Company's business segments.
Other
expenses (net), increased approximately $0.2 million from 2009 to 2010
primarily due to increases in interest expense, resulting from higher rates
associated with the Administrative Agent instituting the default rate
and eliminating the LIBOR borrowing expense. This increase was
partially offset by an increase in other income resulting from a hedging
arrangement.
Income
Taxes
The Company’s effective
income tax benefit was a benefit of 43.4% in the first quarter of 2010 and a
benefit of 40.7% for the first quarter of 2009. The effective income tax rate
approximates the combined federal and state, net of federal benefit, statutory
income tax rate. This rate is also reflective of multi-state apportionment
factors and certain federal and state adjustments in the first quarter of 2010
for fiscal 2009 reflective of estimate modifications of various apportionate
factors and a tax credit.
Net
(Loss)
Net loss
for the first quarter of 2010 was ($213,000) compared to a net loss of
($634,000) in the first quarter of 2009. Basic and diluted (loss) per share for
the three months ended January 31, 2010 and 2009 were ($0.02) and
($0.06).
Inflation
and Economic Conditions
Management
believes that the effect of inflation on the Company’s operations has not been
material and will continue to be immaterial for the foreseeable future. The
Company does not have long-term sales and purchase contracts; therefore, to the
extent permitted by competition, it has the ability to pass through to the
customer most cost increases resulting from inflation, if any.
The
United States economy has been in a recession since December 2007, according to
the National Bureau of Economic Research, and it is widely believed that certain
elements of the economy, such as housing, were in decline before that time. The
duration and depth of an economic recession in markets in which the Company
operates may further reduce its future advertising and circulation revenue,
printing revenue, office products revenue and office furniture revenue operating
results and cash flows.
Seasonality
Our
business is subject to seasonal fluctuations that we expect to continue to be
reflected in our operating results in future periods. Historically, the Company
has experienced a greater portion of its profitability in the second and fourth
quarters than in the first and third quarters. The second quarter generally
reflects increased orders for printing of corporate annual reports and proxy
statements. A post-Labor Day increase in demand for printing services and office
products coincides with the Company’s fourth quarter.
On
a historical basis The Herald-Dispatch’s first and third calendar quarters of
the year tended to be the weakest because advertising volume is at its lowest
levels following the holiday season and a seasonal slowdown in the summer
months. Correspondingly, on a historical basis the fourth calendar quarter
followed by the second calendar quarter tended to be the strongest quarters. The
fourth calendar quarter included heavy holiday season advertising. Other factors
that affect our quarterly revenues and operating results may be beyond our
control, including changes in the pricing policies of our competitors, the
hiring and retention of key personnel, wage and cost pressures, distribution
costs, changes in newsprint prices and general economic factors.
18
Champion
Industries, Inc. and Subsidiaries
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations (continued)
Liquidity
and Capital Resources
Net cash
provided by operations for the three months ended January 31, 2010, was $3.0
million compared to net cash provided by operations of $4.1 million during the
same period in 2009. This change in net cash from operations is due primarily to
timing changes in assets and liabilities.
Net cash
used in investing activities for the three months ended January 31, 2010 was
$97,000 compared to $0.5 million during the same period in 2009. The net cash
used in investing activities during the first three months of 2010 and
2009 primarily related to the purchase of equipment and vehicles.
Net cash
used in financing activities for the three months ended January 31, 2010 was
$4.1 million compared to $3.5 million during the same period in 2009. This
increase is primarily due to higher principal payments on indebtedness
related to the terms of the Forbearance Agreement.
Working
capital on January 31, 2010 was ($38.3) million and at October 31, 2009 was
($42.6) million. The working capital deficit is a result of the classification
as a current liability at January 31, 2010 and October 31, 2009 of $52.8 million
and $60.5 million of debt which was long-term prior to the Company's violation
of certain financial covenants. This debt
was reclassified due to the Company's inability to remain in compliance with
certain of its financial covenants.
On
December 29, 2009, the Administrative Agent and Lenders under the Company's
Credit Agreement dated September 14, 2007 ("Credit Agreement"), the
Company and Marshall T. Reynolds entered into a Forbearance Agreement (the
"Forbearance Agreement") which provides, among other things, that during a
standstill period commencing on December 29, 2009 and ending on March 31, 2010
(unless sooner terminated by default of Champion under the Forbearance Agreement
or the Credit Agreement), the Required Lenders are willing to temporarily
forbear exercising certain rights and remedies available to them, including
acceleration of the obligations or enforcement of any of the liens provided for
in the Credit Agreement. The Company acknowledged in the Forbearance
Agreement that as a result of the existing defaults, the Lenders are entitled to
decline to provide further credit to the Company, to terminate their loan
commitments, to accelerate the outstanding loans, and to enforce their
liens.
The
Company has been working with the different creditors to restructure the
existing debt; however, an agreement satisfactory to the Company has not been
reached. Upon the expiration of the Forbearance Agreement, a total of
$57,692,938 of long-term debt and outstanding revolving line of
credit borrowing are subject to accelerated maturity and, as such, the creditors
may, at their option, give notice to the Company that amounts owed are
immediately due and payable. As a result, the full amount of the related
long-term debt has been classified as a current liability in the accompanying
Balance Sheet at January 31, 2010 and October 31, 2009 representing
$52,792,938 and $60,457,938. Regardless of the non-compliance with financial
covenants, the Company has made every scheduled payment of principal and
interest, including an excess cash flow recapture payment of approximately $2.0
million in January 2009 and pursuant to the terms and of the Forbearance
Agreement a payment of $7.0 million in term loans in December 2009.
19
Champion
Industries, Inc. and Subsidiaries
Management’s
Discussion and Analysis of Financial Condition
and
Results of Operations (continued)
Environmental
Regulation
The
Company is subject to the environmental laws and regulations of the United
States, and the states in which it operates, concerning emissions into the air,
discharges into the waterways and the generation, handling and disposal of waste
materials. The Company’s past expenditures relating to environmental compliance
have not had a material effect on the Company. These laws and regulations are
constantly evolving, and it is impossible to predict accurately the effect they
may have upon the capital expenditures, earnings, and competitive position of
the Company in the future. Based upon information currently available,
management believes that expenditures relating to environmental compliance will
not have a material impact on the financial position of the
Company.
Special
Note Regarding Forward-Looking Statements
Certain
statements contained in this Form 10-Q, including without limitation statements
including the word “believes,” “anticipates,” “intends,” “expects” or words of
similar import, constitute “forward-looking statements” within the meaning of
section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements of the Company expressed or implied
by such forward-looking statements. Such factors include, among
others, changes in business strategy or development plans and other factors
referenced in this Form 10-Q , including without limitations under the captions
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Business.” The Company disclaims any obligation to update any
such factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
ITEM
3. Quantitative and Qualitative Disclosure About Market Risk
The
Company does not have any significant exposure relating to market
risk.
ITEM
4T. Controls and Procedures
(a) Evaluation
of Disclosure Controls and Procedures. Under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer, we evaluated the effectiveness of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended. Based upon that evaluation, our
chief executive officer and chief financial officer concluded that our
disclosure controls were effective as of the end of the period covered by this
quarterly report.
(b) Changes
in Internal Controls. There have been no changes in our internal controls
over financial reporting that occurred during the first three months of fiscal
year 2010 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial
reporting.
20
PART
II - OTHER INFORMATION
Item
1A. Risk Factors
There
were no material changes in risk factors from disclosures previously reported in
our annual report on Form 10-K for the fiscal year ended October 31,
2009.
Item
6. Exhibits
a)
|
Exhibits:
|
||||
(31.1)
|
Principal
Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley act of 2002 - Marshall T. Reynolds
|
Exhibit
31.1 Page Exhibit 31.1-p1
|
|
(31.2)
|
Principal
Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley act of 2002 - Todd R. Fry
|
Exhibit
31.2 Page Exhibit 31.2-p1
|
|
(31.3)
|
Principal
Operating Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley act of 2002 - Toney K. Adkins
|
Exhibit
31.3 Page Exhibit 31.3-p1
|
|
(32)
|
Marshall
T. Reynolds, Todd R. Fry and Toney K. Adkins Certification Pursuant to 18
U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley act of 2002
|
Exhibit
32 Page Exhibit 32-p1
|
21
Signatures
Pursuant
to the requirement 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.
CHAMPION
INDUSTRIES, INC.
Date:
March 12, 2010
|
/s/
Marshall T. Reynolds
|
Marshall
T. Reynolds
|
|
Chief
Executive Officer
|
|
Date:
March 12, 2010
|
/s/
Toney K. Adkins
|
Toney
K. Adkins
|
|
President
and Chief Operating Officer
|
|
Date:
March 12, 2010
|
/s/
Todd R. Fry
|
Todd
R. Fry
|
|
Senior
Vice President and Chief Financial
Officer
|
22