<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarter Ended September 30, 2000
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act for the
transition period from _______________ to __________________
Commission File Number 000-29032
CHAMPION COMMUNICATION SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 76-0448005
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1610 WOODSTEAD COURT
SUITE 330
THE WOODLANDS, TEXAS 77380
(Address of Principal Executive Offices) (Zip Code)
(281) 362-0144
(Issuer's Telephone Number, including area code.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
periods 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 [ ]
As of November 14, 2000, there were 6,195,418 shares of common stock, $0.01 par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format
(check one): Yes [ ] No [X]
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CHAMPION COMMUNICATION SERVICES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -
September 30, 2000 and December 31, 1999 (audited)............................. 1
Statements of Operations -
Three Months and Nine Months Ended
September 30, 2000 and 1999.................................................... 2
Statements of Stockholders' Equity -
Nine Months Ended September 30, 2000 and
Year Ended December 31, 1999 (audited)......................................... 3
Statements of Cash Flows -
Three Months and Nine Months Ended
September 30, 2000 and 1999.................................................... 4
Notes to Interim Financial Statements.......................................... 5
Earnings Per Share Computations -
Three Months and Nine Months Ended
September 30, 2000 and 1999.................................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................. 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 10
SIGNATURE........................................................................................ 11
</TABLE>
<PAGE> 3
CHAMPION COMMUNICATION SERVICES, INC.
BALANCE SHEETS
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
2000 1999
------------- -------------
Unaudited
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 491,550 $ 376,368
Accounts receivable, net of allowance of $163,453
at September 30, 2000 and $95,860 at December 31, 1999 487,085 837,451
Notes receivable 46,713 52,256
Inventories 390,408 380,506
Prepaid expenses and other 104,024 156,792
------------- -------------
Total Current Assets 1,519,780 1,803,373
------------- -------------
Communications equipment and related assets, net 2,387,181 2,819,207
Notes receivable, long-term 333,758 355,389
Deferred taxes 196,000 196,000
Other assets, net of amortization of $693,460 at September 30, 2000
and $505,769 at December 31, 1999 1,512,978 1,888,709
------------- -------------
$ 5,949,697 $ 7,062,678
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank $ 350,000 $ 475,000
Accounts payable 354,537 540,534
Accrued expenses 588,283 610,795
License sales deposits 320,500 660,500
Deferred revenue 112,005 424,345
Current maturities of notes payable 145,364 292,390
------------- -------------
Total Current Liabilities 1,870,689 3,003,564
------------- -------------
Long-Term Liabilities
Notes payable 172,704 299,795
Customer deposits 2,607 2,558
------------- -------------
Total Long-Term Liabilities 175,311 302,353
------------- -------------
Stockholders' Equity
Common stock, $0.01 par value, 20,000,000 shares authorized, 6,201,690
shares issued and 6,195,418 outstanding at September 30, 2000
and 6,150,622 shares issued and outstanding at December 31, 1999 62,017 61,506
Additional paid-in capital 5,226,234 5,201,211
Accumulated deficit (1,379,850) (1,505,956)
------------- -------------
Total 3,908,401 3,756,761
Less 6,272 shares treasury stock, at cost (4,704) --
------------- -------------
Total Stockholders' Equity 3,903,697 3,756,761
------------- -------------
$ 5,949,697 $ 7,062,678
============= =============
</TABLE>
See accompanying notes to financial statements.
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CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,725,637 $ 2,016,107 $ 5,840,678 $ 5,922,993
----------- ----------- ----------- -----------
Operating expenses:
Cost of sales 838,812 924,780 2,523,026 3,202,296
Provision for doubtful accounts 27,000 18,000 81,000 54,000
Depreciation and amortization 229,982 265,766 747,191 758,151
General and administrative expenses 918,124 894,460 2,846,002 2,470,594
----------- ----------- ----------- -----------
Total Operating Expenses 2,013,918 2,103,006 6,197,219 6,485,041
----------- ----------- ----------- -----------
Operating Income (Loss) (288,281) (86,899) (356,541) (562,048)
----------- ----------- ----------- -----------
Other income (expenses):
Net gain (loss) on disposal of fixed assets (13,858) (262,534) 537,640 (122,398)
Interest income 19,314 11,364 53,311 25,950
Interest expense (13,810) (29,014) (56,404) (74,255)
----------- ----------- ----------- -----------
Income (loss) before income taxes (296,635) (367,083) 178,006 (732,751)
Income taxes 600 15,237 51,900 16,163
----------- ----------- ----------- -----------
Net income (loss) ($ 297,235) ($ 382,320) $ 126,106 ($ 748,914)
=========== =========== =========== ===========
Weighted average common shares and common
stock equivalents outstanding 6,199,575 6,150,622 6,183,468 6,137,035
=========== =========== =========== ===========
Basic and diluted net income (loss) per
common share ($ 0.05) ($ 0.06) $ 0.02 ($ 0.12)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 2000 and
For the year ended December 31, 1999 (audited)
<TABLE>
<CAPTION>
Common Additional Accumulated Total
Stock Common Paid-in Earnings Treasury Stockholders'
Shares Stock Capital (Deficit) Stock Equity
---------- ------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $6,119,712 $61,197 $5,179,265 ($ 152,827) -- $ 5,087,635
Contribution of common stock to
Company 401(k) Plan 30,910 309 21,946 -- -- 22,255
Net loss for 1999 -- -- -- (1,353,129) -- (1,353,129)
---------- ------- ---------- ----------- ------- -----------
Balance at December 31, 1999 $6,150,622 $61,506 $5,201,211 ($1,505,956) -- $ 3,756,761
Contribution of common stock to
Company 401(k) Plan 51,068 511 25,023 -- -- 25,534
Purchase of treasury stock -- -- -- -- (4,704) (4,704)
Net income for 2000 (unaudited) -- -- -- 126,106 -- 126,106
---------- ------- ---------- ----------- ------- -----------
Balance at September 30, 2000 $6,201,690 $62,017 $5,226,234 ($1,379,850) ($4,704) $ 3,903,697
========== ======= ========== =========== ======= ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 6
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the three months and nine months ended September 30, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------------------ ------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($297,235) ($382,320) $ 126,106 ($748,914)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 229,982 265,766 747,191 758,151
Bad debt expense 27,000 18,000 81,000 54,000
Common stock issued for services -- -- 20,829 22,255
Gain (loss) on disposal/sale of fixed assets 13,858 262,534 (537,640) 122,398
Change in assets and liabilities:
Accounts receivable 78,082 (60,755) 269,366 (235,775)
Inventory (11,340) 3,050 (40,662) 47,303
Prepaid expenses (15,805) 33,024 52,768 108,615
Accounts payable (24,638) 204,179 (185,948) 100,136
Accrued expenses 37,544 236,997 (22,511) 383,983
License sales deposits (85,700) -- (340,000) --
Other assets (22,073) -- (22,073) --
Deferred revenue (66,017) (162,697) (312,340) (617,725)
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities (136,342) 417,778 (163,914) (5,573)
--------- --------- --------- ---------
Cash flows from investing activities:
Issuance of notes receivable -- -- (25,650) (400,000)
Collections of notes receivable 24,662 38,297 52,824 110,513
Dispositions (additions) to property and equipment (42,745) (347,577) (63,937) (689,888)
Proceeds from sale of fixed assets 26,730 45,850 801,321 796,678
Dispositions (additions) to other assets 48,956 75,504 (86,345) (204,478)
--------- --------- --------- ---------
Net cash provided by (used in) investing
activities 57,603 (187,926) 678,213 (387,175)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable -- 50,000 -- 615,000
Repayment of notes payable (52,125) (158,755) (399,117) (358,290)
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities (52,125) (108,755) (399,117) 256,710
--------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents (130,864) 121,097 115,182 (136,038)
Cash and cash equivalents at beginning of period 622,414 96,981 376,368 354,116
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 491,550 $ 218,078 $ 491,550 $ 218,078
========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Taxes $ 26,300 $ 14,715 $ 26,300 $ 15,641
========= ========= ========= =========
Interest $ 16,927 $ 27,389 $ 58,476 $ 76,579
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 7
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
financial statements for the three and nine months ended September 30, 2000 and
1999 are unaudited and, in the opinion of management, reflect all adjustments
which, are necessary for a fair statement of the financial position, results of
operations and cash flows as of and for the interim periods then ended. Such
adjustments consist of only items of a normal recurring nature. The results of
operations for the interim periods are not necessarily indicative of the
financial position or results of operations expected for the full fiscal year or
for any other future periods. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's annual report and Form 10-KSB for the year ended December 31, 1999.
The differences between accounting principles generally accepted in the
United States and Canada do not have a material impact on the accompanying
financial statements.
2. Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
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<PAGE> 8
CHAMPION COMMUNICATION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
For the three months and nine months ended September 30, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------------------------- --------------------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 297,235) ($ 382,320) $ 126,106 ($ 748,914)
----------- ----------- ---------- -----------
Shares used in earnings per share computations 6,199,575 6,150,622 6,183,468 6,137,035
Net income (loss) per weighted average common share ($ 0.05) ($ 0.06) $ 0.02 ($ 0.12)
=========== =========== ========== ===========
DILUTED EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 297,235) ($ 382,320) $ 121,106 ($ 748,914)
----------- ----------- ---------- -----------
Shares used in earnings per share computation 6,199,575 6,150,622 6,183,468 6,137,035
Net income (loss) per weighted average common share ($ 0.05) ($ 0.06) $ 0.02 ($ 0.12)
=========== =========== ========== ===========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - BASIC
Outstanding common shares at beginning of period 6,199,711 6,150,622 6,150,622 6,119,712
Weighted average common shares issued during period, net (136) 0 32,846 17,323
----------- ----------- ---------- -----------
Weighted average common shares used in earnings
per share computation 6,199,575 6,150,622 6,183,468 6,137,035
=========== =========== ========== ===========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - DILUTED
Outstanding common shares at beginning of period 6,199,711 6,150,622 6,150,622 6,119,712
Weighted average common shares issued during period, net (136) 0 32,846 17,323
----------- ----------- ---------- -----------
Weighted average common shares used in earnings
per share computation 6,199,575 6,150,622 6,183,468 6,137,035
=========== =========== ========== ===========
</TABLE>
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<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - Quarters Ended September 30, 2000 and 1999
Revenues for the quarter ended September 30, 2000 were $1,726,000 compared
with $2,016,000 for the quarter ended September 30, 1999. Spectrum revenue
during the third quarter of 2000 was $181,000, compared to $61,000 recorded in
the same quarter 1999. Spectrum sales rely upon FCC approval for the transfer of
licenses and are therefore sporadic. Several licenses were transferred during
the third quarter. Dispatch revenues decreased $156,000 to $1,186,000 for the
quarter ended September 30, 2000 from $1,341,000 in the same quarter 1999. This
decrease reflects the reduction of revenues due to sales of non-strategic sites
and a net reduction in trunked loading in the metro areas during the third
quarter ended September 30, 2000. Equipment sales, service, rental and lease
revenues decreased $254,000 or 41% for the third quarter 2000 as compared with
third quarter 1999. This revenue decrease consisted of equipment sales decrease
of $191,000, service revenue decrease of $26,000, and rental and lease revenue
decrease of $37,000 for the third quarter 2000.
Costs and expenses decreased $86,000 for the third quarter ended September
30, 2000 as compared with the third quarter ended September 30, 1999. The cost
of dispatch revenue increased $48,000 for the quarter ended September 30, 2000
from the quarter ended September 30, 1999. The costs of equipment sales,
service, rental and leases decreased $178,000, or 47% to $197,000 for the third
quarter 2000 from $375,000 for the third quarter 1999, corresponding to the
decreased revenues. The cost of spectrum sales increased to $82,000 for the
quarter ended September 30, 2000.
Depreciation and amortization for the quarter ended September 30, 2000 was
$230,000, a decrease of $36,000, or 14% from $266,000 reported for the quarter
ended September 30, 1999, due to disposition of various non strategic repeater
sites.
General and administrative expenses were up $24,000 to $918,000 from
$894,000. This increase is attributable to expansion of sales and service in the
regional offices.
Interest expense was $14,000 for the quarter ended September 30, 2000,
compared with $29,000 for the same quarter 1999.
The loss for the quarter ended September 30, 2000 was $297,000 as compared
with a loss of $382,000 for the third quarter ended September 30, 1999. The
decrease is due to the spectrum sales discussed above.
Results of Operations - Nine months ended September 30, 2000 and 1999
Revenues for the nine months ended September 30, 2000 were $5,841,000
compared with $5,923,000 for the nine months ended September 30, 1999. Spectrum
revenue during the first nine months of 2000 was $1,142,000, compared to $63,000
recorded in the same nine months in 1999. Dispatch revenues decreased $631,000
to $3,540,000 for the nine months ended September 30, 2000
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<PAGE> 10
from $4,172,000 in the same period in 1999. This decrease reflects the reduction
of revenues due to sales of non-strategic sites and a net reduction in trunked
loading in the metro areas during the first nine months ended September 30,
2000. Equipment sales, service, rental and lease revenues decreased $531,000 or
31% for the first nine months of 2000 as compared with the same period in 1999.
This revenue decrease consisted of equipment sales decrease of $344,000, service
revenue decrease of $38,000, and rental and lease revenue decrease of $149,000
for the first nine months of 2000.
Costs and expenses decreased $679,000 for the first nine months ended
September 30, 2000 as compared with the first nine months ended September 30,
1999. The cost of dispatch revenue decreased $607,000 for the nine months ended
September 30, 2000 from the nine months ended September 30, 1999. The costs of
equipment sales, service, rental and leases decreased $285,000, or 31% to
$623,000 for the first nine months of 2000 from $908,000 for the nine months of
1999, corresponding to the decreased revenues.
Depreciation and amortization for the nine months ended September 30, 2000
was $747,000, a decrease of $11,000, or 5% from $758,000 reported for the nine
months ended September 30, 1999, due to new construction and acquisition of
licenses netted with the disposition of various non strategic repeater sites.
General and administrative expenses were up $375,000 to $2,846,000 from
$2,471,000. This increase is attributable to expansion of sales and service in
the regional offices.
Interest expense was $56,000 for the nine months ended September 30, 2000,
compared with $74,000 for the same nine months of 1999. The Company reported a
gain on the sale and disposal of assets in the amount of $538,000 for the first
nine months 2000 as compared with a loss of $122,000 for the first nine months
1999.
The net income for the nine months ended September 30, 2000 was $126,000
as compared with a loss of $749,000 for the nine months ended September 30,
1999.
Financial Condition and Liquidity
The Company had $492,000 in cash and cash equivalents at September 30,
2000 as compared with $376,000 at December 31, 1999. The working capital of the
Company at September 30, 2000 was a negative $351,000 as compared with a
negative $1,200,000 at December 31, 1999.
Net income of $126,000, increased by depreciation and amortization expense
of $747,000, was $873,000 for the nine months ended September 30, 2000, compared
with $9,000 for the nine months ended September 30, 1999, while the cash flows
from operating activities were a negative $164,000 and $6,000 for the nine
months ended September 30, 2000 and 1999, respectively. The Company reported a
capital gain of $538,000 on the sale of communication assets.
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<PAGE> 11
Cash provided by investing activities was $678,000 as of September 30,
2000 as compared with $387,000 used by investing activities as of September 30,
1999. The increase was due primarily to proceeds of $801,000 from the sale of
communication assets.
Cash used in financing activities was $399,000 at September 30, 2000 and
at September 30, 1999 provided $257,000. During the first nine months of 2000,
the Company remitted $125,000 to pay down its credit line on a revolving note
payable. At September 30, 2000, the outstanding balance on the credit line was
$350,000.
The Company continues its overall business plan to migrate from the rural
community repeater areas to the metropolitan trunked repeaters which includes
the sale of non-productive assets. These anticipated proceeds will replace the
already funded capital expansion from operations. There can be no assurance of
the Company's ability to sell the non-productive and rural assets or its ability
to sell on favorable terms.
Forward-Looking Information
This Quarterly Report on Form 10-QSB includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statement of historical information provided herein are
forward-looking and may contain information about financial results, economic
conditions, trends and known uncertainties. The Company cautions the reader that
actual results could differ materially from those expected by the Company
depending on the outcome of certain factors, including without limitation
fluctuations in the Company's tower rental expenses, inventory and loan
balances, competition, operating risk, acquisition and expansion risk, liquidity
and capital requirements, and the effect of government regulations, adverse
changes in the market for the Company's equipment sales, services and rentals,
and the Company's ability to acquire and sell spectrum on favorable terms.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligations to release publicly the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereon, including without limitation, changes in the Company's
business strategy or planned capital expenditures, or to reflect the occurrence
of unanticipated events.
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<PAGE> 12
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibit is furnished in accordance with Item 601 of
Regulation S-B.
Exhibit Description
------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
CHAMPION COMMUNICATION SERVICES, INC.
By: /s/ PAMELA R. COOPER
-------------------------------------------------
Pamela R. Cooper
Chief Financial Officer, Treasurer and Controller
Date: November 13, 2000
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<PAGE> 14
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27.1 Financial Data Schedule
