<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 March 31, 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 April 30, 2000, there were 6,201,690 shares of common stock, $0.01 par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format
(check one): Yes [ ] No [X]
<PAGE> 2
CHAMPION COMMUNICATION SERVICES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -
March 31, 2000 and December 31, 1999 (audited) ..................... 1
Statements of Operations -
Three Months Ended March 31, 2000 and 1999 and
Year Ended December 31, 1999 (audited) ............................. 2
Statements of Stockholders' Equity -
Three Months Ended March 31, 2000 and
Year Ended December 31, 1999 (audited).......... ................... 3
Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 and
Year Ended December 31, 1999 (audited).............................. 4
Notes to Financial Statements....................................... 5
Earnings Per Share Computations -
Three Months Ended March 31, 2000 and 1999 and
Year Ended December 31, 1999 (audited).............................. 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........................... 9
SIGNATURE............................................................................. 10
</TABLE>
<PAGE> 3
CHAMPION COMMUNICATION SERVICES, INC.
BALANCE SHEETS
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
2000 1999
----------- -----------
Unaudited
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 744,707 $ 376,368
Accounts receivable net of allowance for doubtful accounts
of $117,698 at March 31, 2000 and $95,860 at December 31, 1999 578,447 837,451
Notes receivable 45,368 52,256
Inventories 394,725 380,506
Prepaid expenses and other 95,841 156,792
----------- -----------
Total Current Assets 1,859,088 1,803,373
----------- -----------
Communications equipment and related assets, net 2,647,770 2,819,207
Notes receivable, long-term 348,357 355,389
Deferred taxes 196,000 196,000
Other assets, net of amortization of $524,079 at March 31, 2000 and
$505,769 at December 31, 1999 1,715,107 1,888,709
----------- -----------
$ 6,766,322 $ 7,062,678
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank $ 425,000 $ 475,000
Accounts payable 562,161 540,534
Accrued expenses 601,694 610,795
License sales deposits 603,000 660,500
Deferred revenue 215,961 424,345
Current maturities of notes payable 223,708 292,390
----------- -----------
Total Current Liabilities 2,631,524 3,003,564
----------- -----------
Long-Term Liabilities
Notes payable 250,964 299,795
Customer deposits 2,607 2,558
----------- -----------
Total Long-Term Liabilities 253,571 302,353
----------- -----------
Stockholders' Equity
Common stock, $0.01 par value, 20,000,000 shares authorized, 6,150,622
shares issued and outstanding at March 31, 2000
and at December 31, 1999 61,506 61,506
Additional paid-in capital 5,201,211 5,201,211
Accumulated deficit (1,381,490) (1,505,956)
----------- -----------
Total Stockholders' Equity 3,881,227 3,756,761
----------- -----------
$ 6,766,322 $ 7,062,678
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 4
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 2000 and 1999 and
the year ended December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1999
----------- ----------- -----------
Unaudited
<S> <C> <C> <C>
Revenues $ 1,727,617 $ 2,104,100 $ 7,897,105
----------- ----------- -----------
Operating expenses:
Cost of sales 866,144 1,239,655 4,202,099
Provision for doubtful accounts 27,000 18,000 127,000
Depreciation and amortization 280,257 242,543 1,021,246
General and administrative expenses 949,444 714,573 3,410,269
----------- ----------- -----------
Total Operating Expenses 2,122,845 2,214,771 8,760,614
----------- ----------- -----------
Operating Income (Loss) (395,228) (110,671) (863,509)
----------- ----------- -----------
Other income (expenses):
Net gain (loss) on disposal of fixed assets 552,843 114,825 (592,757)
Interest income 15,833 3,306 38,888
Interest expense (23,282) (19,176) (103,281)
----------- ----------- -----------
Income (loss) before income taxes 150,166 (11,716) (1,520,659)
Income tax (expense) benefit (25,700) 73 167,530
----------- ----------- -----------
Net income (loss) $ 124,466 $ (11,643) $(1,353,129)
=========== =========== ===========
Weighted average common shares and common stock
equivalents outstanding 6,150,622 6,119,712 6,140,460
=========== =========== ===========
Basic and diluted net income (loss) per common share $ 0.02 $ 0.00 $ (0.22)
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE> 5
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2000 and
For the year ended December 31, 1999 (audited)
<TABLE>
<CAPTION>
Common Additional Total
stock Common paid-in Accumulated Stockholders'
shares stock capital deficit Equity
----------- ----------- ----------- ----------- ------------
<S> <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
Net income for 2000 (unaudited) -- -- -- 124,466 124,466
----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 6,150,622 $ 61,506 $ 5,201,211 $(1,381,490) $ 3,881,227
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE> 6
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
and the year ended December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Unaudited
Cash flows from operating activities:
Net income (loss) $ 124,466 $ (11,643) $(1,353,129)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 280,257 242,543 1,021,246
Bad debt expense 27,000 18,000 127,000
Common stock issued for services -- -- 22,255
Loss (gain) on disposal/sale of fixed assets (552,843) (114,825) 592,757
Change in assets and liabilities:
Accounts receivable 232,004 (186,345) (184,869)
Inventories (14,219) 69,508 236,447
Prepaid expenses 60,951 35,588 60,204
Accounts payable 21,676 (62,095) (192,682)
Accrued expenses (9,101) 54,821 (97,441)
License sales deposits (57,500) -- 645,500
Deferred taxes -- -- (196,000)
Deferred revenue (208,384) (381,844) (373,862)
----------- ----------- -----------
Net cash provided by (used in) operating activities (95,693) (336,292) 307,426
----------- ----------- -----------
Cash flows from investing activities:
Issuance of notes receivable -- (425,000) (400,000)
Collections of notes receivable 13,920 34,221 140,791
Dispositions (additions) to property and equipment (54,564) 445,076 (615,051)
Proceeds from sale of fixed assets 746,087 123,578 825,678
Additions to other assets (73,898) (343,134) (676,159)
----------- ----------- -----------
Net cash provided by (used in) investing activities 631,545 (165,259) (724,741)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable -- 442,856 945,150
Repayment of notes payable (167,513) (145,672) (505,583)
----------- ----------- -----------
Net cash provided by (used in) financing activities (167,513) 297,184 439,567
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 368,339 (204,367) 22,252
Cash and cash equivalents at beginning of period 376,368 354,116 354,116
----------- ----------- -----------
Cash and cash equivalents at end of period $ 744,707 $ 149,749 $ 376,368
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Taxes $ 21,226 $ (74) $ 31,093
Interest $ 25,700 $ 24,136 $ 102,273
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 7
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 months ended March 31, 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. 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.
3. Sale of Fixed Assets
Arizona communication equipment and license assets with a net book value of
$194,099 were sold in the first quarter resulting in a gain of $443,779. In
addition, other communication equipment assets with a net book value of $11,435
were sold with a gain of $109,064.
-5-
<PAGE> 8
CHAMPION COMMUNICATION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
For the three months ended March 31, 2000 and 1999 and
For the year ended December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Unaudited
BASIC EARNINGS PER SHARE
Net income (loss) as reported $ 124,466 $ (11,643) $(1,353,129)
---------- ---------- -----------
Weighted average shares used in earnings per share computations 6,150,622 6,119,712 6,140,460
Basic net income (loss) per share $ 0.02 $ 0.00 $ (0.22)
========== ========== ===========
DILUTED EARNINGS PER SHARE
Net income (loss) as reported $ 124,466 $ (11,643) $(1,353,129)
---------- ---------- -----------
Weighted average shares used in earnings per share computation 6,150,622 6,119,712 6,140,460
Diluted net income (loss) per weighted average common share $ 0.02 $ 0.00 $ (0.22)
========== ========== ===========
</TABLE>
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - BASIC
<TABLE>
<S> <C> <C> <C>
Outstanding common shares at beginning of period 6,150,622 6,119,712 6,119,712
Weighted average common shares issued during period -- -- 20,748
--------- --------- ---------
Weighted average common shares used in earnings
per share computation 6,150,622 6,119,712 6,140,460
========= ========= =========
</TABLE>
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - DILUTED
<TABLE>
<S> <C> <C> <C>
Outstanding common shares at beginning of period 6,150,622 6,119,712 6,119,712
Weighted average common shares issued during period -- -- 20,748
--------- --------- ---------
Weighted average common shares used in earnings
per share computation 6,150,622 6,119,712 6,140,460
========= ========= =========
</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 March 31, 2000 and 1999
Revenues for the quarter ended March 31, 2000 were $1,728,000 compared with
$2,104,000 for the quarter ended March 31, 1999. Spectrum and related revenue
during the first quarter of 2000 were $95,000, compared to $1,000 recorded in
the same quarter 1999. Dispatch revenues decreased $224,000 to $1,202,000 for
the quarter ended March 31, 2000 from $1,426,000 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 first
quarter ended March 31, 2000. Equipment sales, service, rental and lease
revenues decreased $246,000 or 36% for the first quarter 2000 as compared with
first quarter 1999. This revenue decrease consisted of equipment sales decrease
of $148,000, service revenue decrease of $33,000, and rental and lease revenue
decrease of $65,000 for the first quarter 2000.
Costs and expenses decreased $374,000 for the first quarter ended March 31,
2000 as compared with the first quarter ended March 31, 1999. The cost of
dispatch revenue decreased $294,000 for the quarter ended March 31, 2000 from
the quarter ended March 31, 1999. The costs of equipment sales, service, rental
and leases decreased $93,000, or 27% to $253,000 for the first quarter 2000 from
$346,000 for the first quarter 1999, corresponding to the decreased revenues.
Depreciation and amortization for the quarter ended March 31, 2000 was
$280,000, an increase of $38,000, or 16% from $243,000 reported for the quarter
ended March 31, 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 $235,000 to $949,000 from
$714,000. This increase is attributable to expansion of sales and service in the
regional offices.
Interest expense was $23,000 for the quarter ended March 31, 2000, compared
with $19,000 for the same quarter 1999. The Company reported a gain on the sale
and disposal of assets in the amount of $553,000 for the first quarter 2000 as
compared with a gain of $115,000 for the first quarter 1999.
The net income for the quarter ended March 31, 2000 was $124,000 as
compared with a loss of $12,000 for the first quarter ended March 31, 1999.
Financial Condition and Liquidity
The Company had $745,000 in cash and cash equivalents at March 31, 2000 as
compared with $376,000 at December 31, 1999. The working capital of the Company
at March 31, 2000 was a negative $772,000 as compared with a negative $1,200,000
at December 31, 1999. The Company continues to fund capital expenditures from
operations.
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<PAGE> 10
Net income of $124,000 increased by depreciation and amortization expense
of $280,000 was $404,000 for the quarter ended March 31, 2000, compared with
$231,000 for the quarter ended March 31, 1999, while the cash flows from
operating activities were a negative $96,000 and a negative $336,000 for the
quarters ended March 31, 2000 and 1999, respectively. The Company reported a
capital gain of $553,000 on the sale of communication assets.
Cash provided by investing activities was $632,000 as of March 31, 2000 as
compared with $165,000 used in investing activities as of March 31, 1999. The
increase was due primarily to proceeds of $746,000 from the sale of
communication assets.
Cash used in financing activities was $168,000 at March 31, 2000 and at
March 31, 1999 provided $297,000. During the first quarter of 2000, the Company
remitted $50,000 to pay down its credit line on a revolving note payable. At
March 31, 2000, the outstanding balance on the credit line was $425,000.
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.
-8-
<PAGE> 11
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 5-B.
Exhibit Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
-9-
<PAGE> 12
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: May 15, 2000
-10-
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 744,707
<SECURITIES> 0
<RECEIVABLES> 696,145
<ALLOWANCES> 117,698
<INVENTORY> 394,725
<CURRENT-ASSETS> 1,859,088
<PP&E> 4,570,752
<DEPRECIATION> 1,922,982
<TOTAL-ASSETS> 6,766,322
<CURRENT-LIABILITIES> 2,631,524
<BONDS> 0
61,506
0
<COMMON> 0
<OTHER-SE> 3,819,721
<TOTAL-LIABILITY-AND-EQUITY> 6,766,322
<SALES> 0
<TOTAL-REVENUES> 1,727,617
<CGS> 0
<TOTAL-COSTS> 866,144
<OTHER-EXPENSES> 893,144
<LOSS-PROVISION> 27,000
<INTEREST-EXPENSE> 23,282
<INCOME-PRETAX> (395,228)
<INCOME-TAX> 25,700
<INCOME-CONTINUING> (428,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 522,843
<CHANGES> 0
<NET-INCOME> 124,466
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
