<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 June 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)
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<S> <C>
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)
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(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 August 14, 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]
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CHAMPION COMMUNICATION SERVICES, INC.
INDEX TO FORM 10-QSB
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets -
June 30, 2000 and December 31, 1999 (audited)........................ 1
Statements of Operations -
Three Months and Six Months Ended June 30, 2000 and 1999............. 2
Statements of Stockholders' Equity -
Six Months Ended June 30, 2000 and
Year Ended December 31, 1999 (audited).......... ................... 3
Statements of Cash Flows -
Three Months and Six Months Ended June 30, 2000 and 1999............. 4
Notes to Interim Financial Statements................................ 5
Earnings Per Share Computations -
Three Months and Six Months Ended June 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
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CHAMPION COMMUNICATION SERVICES, INC.
BALANCE SHEETS
June 30, 2000 and December 31, 1999
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<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 622,414 $ 376,368
Accounts receivable, net of allowance of $137,364
at June 30, 2000 and $95,860 at December 31, 1999 592,287 837,451
Notes receivable 38,335 52,256
Inventories 409,828 380,506
Prepaid expenses and other 88,219 156,792
---------- ----------
Total Current Assets 1,751,083 1,803,373
---------- ----------
Communications equipment and related assets, net 2,504,300 2,819,207
Notes receivable, long-term 341,148 355,389
Deferred taxes 196,000 196,000 196,000
Other assets, net of amortization of $599,748 at June 30, 2000
and $505,769 at December 31, 1999 1,648,607 1,888,709
---------- ----------
$6,441,138 $7,062,678
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to bank $ 350,000 $ 475,000
Accounts payable 379,224 540,534
Accrued expenses 550,740 610,795
License sales deposits 406,200 660,500
Deferred revenue 178,022 424,345
Current maturities of notes payable 168,929 292,390
---------- ----------
Total Current Liabilities 2,033,115 3,003,564
---------- ----------
Long-Term Liabilities
Notes payable 201,264 299,795
Customer deposits 2,607 2,558
---------- ----------
Total Long-Term Liabilities 203,871 302,353
---------- ----------
Stockholders' Equity
Common stock, $0.01 par value, 20,000,000 shares authorized,
6,201,690 shares issued and 6,199,711 outstanding at June 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 (1,082,615) (1,505,956)
---------- ----------
Total 4,205,636 3,756,761
Less 1,979 shares treasury stock, at cost (1,484) --
---------- ----------
Total Stockholders' Equity 4,204,152 3,756,761
---------- ----------
$6,441,138 $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 six months ended June 30, 2000 and 1999
Unaudited
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<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------- ------------------------
<S> <C> <C>
Revenues $2,387,424 $1,802,786 $4,115,041 $3,906,886
---------- ---------- ---------- ----------
Operating expenses:
Cost of sales 818,070 1,037,861 1,684,214 2,277,516
Provision for doubtful accounts 27,000 18,000 54,000 36,000
Depreciation and amortization 236,952 249,842 517,209 492,385
General and administrative expenses 978,434 861,561 1,927,878 1,576,134
---------- ---------- ---------- ----------
Total Operating Expenses 2,060,456 2,167,264 4,183,301 4,382,035
---------- ---------- ---------- ----------
Operating Income (Loss) 326,968 (364,478) (68,260) (475,149)
---------- ---------- ---------- ----------
Other income (expenses):
Net gain (loss) on disposal of fixed assets (1,345) 25,311 551,498 140,136
Interest income 18,164 11,280 33,997 14,586
Interest expense (19,312) (26,065) (42,594) (45,241)
---------- ---------- ---------- ----------
Income (loss) before income taxes 324,475 (353,952) 474,641 (365,668)
Income taxes 25,600 999 51,300 926
---------- ---------- ---------- ----------
Net income (loss) $ 298,875 ($ 354,951) $ 423,341 ($ 366,594)
========== ========== ========== ==========
Weighted average common shares and common
stock equivalents outstanding 6,200,524 6,140,432 6,175,573 6,130,129
========== ========== ========== ==========
Basic and diluted net income (loss) per
common share $ 0.05 ($ 0.06) $ 0.07 ($ 0.06)
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
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CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 2000 and
For the years ended December 31, 1999 (audited)
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<CAPTION>
Common Additional Accumulated Total
stock Common paid-in earnings Treasury Stockholders'
shares stock capital (deficit) Stock Equity
--------- --------- ---------- ----------- -------- -----------
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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 -- -- -- -- (1,484) (1,484)
Net income for 2000 (unaudited) -- -- -- 423,341 -- 423,341
--------- ------- ---------- ----------- ------- -----------
Balance at June 30, 2000 6,201,690 $62,017 $5,226,234 ($1,082,954) ($1,484) $ 4,204,152
========= ======= ========== =========== ======= ===========
</TABLE>
See accompanying notes to financial statements.
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CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the three months and six months ended June 30, 2000 and 1999
Unaudited
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Three months ended Six months ended
2000 1999 2000 1999
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Cash flows from operating activities:
Net income (loss) $ 298,875 ($ 354,951) $ 423,341 ($ 366,594)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 236,952 249,842 517,209 492,385
Bad debt expense 27,000 18,000 54,000 36,000
Common stock issued for services -- 22,255 -- 22,255
Gain on disposal/sale of fixed assets 1,345 (25,311) (551,498) (140,136)
Change in assets and liabilities:
Accounts receivable (40,720) 11,325 191,284 (175,020)
Inventory (15,103) (25,255) (29,322) 44,253
Prepaid expenses 7,622 40,003 68,573 75,591
Accounts payable (182,986) (41,948) (161,310) (104,043)
Accrued expenses (50,954) 92,165 (60,055) 146,986
License sales deposits (196,800) - (254,300) -
Deferred revenue (37,939) (73,184) (246,323) (455,028)
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities 47,292 (87,059) (48,401) (423,351)
--------- --------- --------- ---------
Cash flows from investing activities:
Issuance of notes receivable -- -- -- (425,000)
Collections of notes receivable 14,241 62,995 28,162 97,216
Dispositions (additions) to property and equipment 33,373 (787,337) (21,192) (342,311)
Proceeds from sale of fixed assets 28,504 627,250 774,591 750,828
Dispositions (additions) to other assets (66,224) 63,102 (140,122) (280,032)
--------- --------- --------- ---------
Net cash provided by (used in) investing
activities 9,894 (33,990) 641,439 (199,299)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable -- 122,144 -- 565,000
Repayment of notes payable (179,479) (53,863) (346,992) (199,535)
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities (179,479) 68,281 (346,992) 365,465
--------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents (122,293) (52,768) 246,046 (257,185)
Cash and cash equivalents at beginning of period 744,707 149,749 376,368 354,166
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 622,414 $ 96,981 $ 622,414 $ 96,981
========= ========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Taxes $ 600 $ 1,000 $ 26,300 $ 926
========= ========= ========= =========
Interest $ 20,323 $ 25,054 $ 41,549 $ 49,190
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 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 six months ended June 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. 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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CHAMPION COMMUNICATION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
For the three months and six months ended June 30, 2000 and 1999
Unaudited
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Three months ended Six months ended
2000 1999 2000 1999
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BASIC EARNINGS PER SHARE
Net income (loss) applicable to common stock $ 298,536 ($ 354,951) $ 423,002 ($ 366,594)
Shares used in earnings per share computation 6,200,524 6,140,432 6,175,573 6,130,129
Net income (loss) per weighted average common share $ 0.05 ($ 0.06) $ 0.07 ($ 0.06)
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE
Net income (loss) applicable to common stock $ 298,536 ($ 354,951) $ 423,002 ($ 366,594)
---------- ---------- ---------- ----------
Shares used in earnings per share computation 6,200,524 6,140,432 6,175,573 6,130,129
Net income (loss) per weighted average common share $ 0.05 ($ 0.06) $ 0.07 ($ 0.06)
========== ========== ========== ==========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - BASIC
Outstanding common shares at beginning of period 6,150,622 6,119,712 6,150,622 6,119,712
Weighted average common shares issued during period 49,902 20,720 24,951 10,417
---------- ---------- ---------- ----------
Weighted average common shares used in earnings
per share computation 6,200,524 6,140,432 6,175,573 6,130,129
========== ========== ========== ==========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - DILUTED
Outstanding common shares at beginning of period 6,150,622 6,119,712 6,150,622 6,119,712
Weighted average common shares issued during period 49,902 20,720 24,951 10,417
---------- ---------- ---------- ----------
Weighted average common shares used in earnings
per share computation 6,200,524 6,140,432 6,175,573 6,130,129
========== ========== ========== ==========
</TABLE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - Quarters ended June 30, 2000 and 1999
Revenues for the quarter ended June 30, 2000 were $2,387,000 compared with
$1,803,000 for the quarter ended June 30, 1999. Spectrum revenue during the
second quarter of 2000 was $867,000, compared to no sales 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 second
quarter. Dispatch revenues decreased $251,000 to $1,153,000 for the quarter
ended June 30, 2000 from $1,404,000 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 second quarter ended
June 30, 2000. Equipment sales, service, rental and lease revenues decreased
$31,000 or 8% for the second quarter 2000 as compared with second quarter 1999.
This revenue decrease consisted of equipment sales decrease of $5,000, service
revenue increase of $21,000, and rental and lease revenue decrease of $47,000
for the second quarter 2000.
Costs and expenses decreased $179,000 for the second quarter ended June 30,
2000 as compared with the second quarter ended June 30, 1999. The cost of
dispatch revenue decreased $320,000 for the quarter ended June 30, 2000 from the
quarter ended June 30, 1999. The costs of equipment sales, service, rental and
leases decreased $13,000, or 7% to $174,000 for the second quarter 2000 from
$187,000 for the second quarter 1999, corresponding to the decreased revenues.
The cost of spectrum sales increased to $155,000 for the quarter ended June 30,
2000.
Depreciation and amortization for the quarter ended June 30, 2000 was
$237,000, a decrease of $13,000, or 5% from $250,000 reported for the quarter
ended June 30, 1999, due to disposition of various non strategic repeater sites.
General and administrative expenses were up $123,000 to $1,005,000 from
$882,000. This increase is attributable to expansion of sales and service in the
regional offices.
Interest expense was $19,000 for the quarter ended June 30, 2000, compared
with $26,000 for the same quarter 1999.
The net income for the quarter ended June 30, 2000 was $299,000 as compared
with a loss of $355,000 for the second quarter ended June 30, 1999. The increase
is due to the spectrum sales discussed above.
Results of Operations - Six months ended June 30, 2000 and 1999
Revenues for the six months ended June 30, 2000 were $4,115,000 compared with
$3,907,000 for the six months ended June 30, 1999. Spectrum revenue during the
first six months of 2000 was $962,000, compared to $1,000 recorded in the same
six months in 1999. Dispatch revenues decreased $475,000 to $2,355,000 for the
six months ended June 30, 2000 from $2,830,000 in the same period
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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 six months ended June 30, 2000. Equipment sales, service,
rental and lease revenues decreased $277,000 or 26% for the first six months of
2000 as compared with the same period in 1999. This revenue decrease consisted
of equipment sales decrease of $153,000, service revenue increase of $12,000,
and rental and lease revenue decrease of $112,000 for the first six months of
2000.
Costs and expenses decreased $561,000 for the first six months ended June 30,
2000 as compared with the first six months ended June 30, 1999. The cost of
dispatch revenue decreased $623,000 for the six months ended June 30, 2000 from
the six months ended June 30, 1999. The costs of equipment sales, service,
rental and leases decreased $107,000, or 21% to $426,000 for the first six
months of 2000 from $533,000 for the six months of 1999, corresponding to the
decreased revenues.
Depreciation and amortization for the six months ended June 30, 2000 was
$517,000, an increase of $25,000, or 5% from $492,000 reported for the six
months ended June 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 $369,000 to $1,982,000 from
$1,614,000. This increase is attributable to expansion of sales and service in
the regional offices.
Interest expense was $43,000 for the six months ended June 30, 2000, compared
with $45,000 for the same six months of 1999. The Company reported a gain on the
sale and disposal of assets in the amount of $551,000 for the first six months
2000 as compared with a gain of $140,000 for the first six months 1999.
The net income for the six months ended June 30, 2000 was $423,000 as
compared with a loss of $367,000 for the six months ended June 30, 1999.
Financial Condition and Liquidity
The Company had $622,000 in cash and cash equivalents at June 30, 2000 as
compared with $376,000 at December 31, 1999. The working capital of the Company
at June 30, 2000 was a negative $282,000 as compared with a negative $1,200,000
at December 31, 1999. The Company continues to fund capital expenditures from
operations.
Net income of $423,000, increased by depreciation and amortization expense of
$516,000, was $939,000 for the six months ended June 30, 2000, compared with
$126,000 for the six months ended June 30, 1999, while the cash flows from
operating activities were a negative $48,000 and $423,000 for the six months
ended June 30, 2000 and 1999, respectively. The Company reported a capital gain
of $551,000 on the sale of communication assets.
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Cash provided by investing activities was $641,000 as of June 30, 2000 as
compared with $199,000 used by investing activities as of June 30, 1999. The
increase was due primarily to proceeds of $775,000 from the sale of
communication assets.
Cash used in financing activities was $347,000 at June 30, 2000 and at June
30, 1999 provided $365,000. During the first six months of 2000, the Company
remitted $125,000 to pay down its credit line on a revolving note payable. At
June 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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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
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27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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: August 14, 2000
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INDEX TO EXHIBITS
Exhibit
Number Description
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27.1 Financial Data Schedule
