<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2000 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 (I.R.S. Employer
incorporation or organization) Identification No.)
Route 2
Kyle Industrial Park
Industrial Lane
P. O. Box 2968
Huntington, West Virginia 25728
(Address of principal executives 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 X No .
--- ---
9,713,913 shares of common stock of the Registrant were outstanding at
January 31, 2000.
<PAGE> 2
CHAMPION INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets................................................................................2
Consolidated Income Statements.............................................................................4
Consolidated Statements of Cash Flows......................................................................5
Notes to Consolidated Financial Statements.................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..........................................................................11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K....................................................................16
Signatures...........................................................................................................17
Exhibit Index........................................................................................................18
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS JANUARY 31, OCTOBER 31,
2000 1999
------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,763,147 $ 2,463,554
Accounts receivable, net of allowance of
$1,576,000 and $1,448,000 20,922,570 24,041,919
Inventories 13,672,530 14,072,694
Other current assets 1,266,474 828,189
Deferred income tax assets 849,181 849,181
------------------------------------
Total current assets 39,473,902 42,255,537
Property and equipment, at cost:
Land 984,889 984,889
Buildings and improvements 6,377,296 6,308,530
Machinery and equipment 33,340,816 32,861,577
Equipment under capital leases 1,600,000 1,600,000
Furniture and fixtures 2,387,806 2,353,191
Vehicles 2,789,951 2,621,696
------------------------------------
47,480,758 46,729,883
Less accumulated depreciation (21,604,410) (20,667,666)
------------------------------------
25,876,348 26,062,217
Cash surrender value of officers' life insurance 962,169 956,769
Goodwill, net of accumulated amortization 3,590,289 3,317,849
Other assets 877,738 728,833
------------------------------------
5,430,196 5,003,451
------------------------------------
Total assets $ 70,780,446 $73,321,205
====================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY JANUARY 31, OCTOBER 31,
2000 1999
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,786,644 $3,521,282
Accrued payroll 1,422,419 1,768,345
Taxes accrued and withheld 947,765 905,854
Accrued income taxes 323,615 677,119
Accrued expenses 753,454 885,864
Current portion of long-term debt:
Notes payable 3,604,000 3,607,354
Capital lease obligations 316,598 316,598
------------------------------------
Total current liabilities 10,154,495 11,682,416
Long-term debt, net of current portion:
Notes payable 8,572,319 9,222,191
Capital lease obligations 601,516 710,433
Deferred income tax liability 4,318,571 4,318,571
Other liabilities 807,419 827,725
------------------------------------
Total liabilities 24,454,320 26,761,336
Shareholders' equity:
Common stock, $1 par value, 20,000,000 shares authorized;
9,713,913 shares issued and outstanding 9,713,913 9,713,913
Additional paid-in capital 22,242,047 22,242,047
Retained earnings 14,370,166 14,603,909
------------------------------------
Total shareholders' equity 46,326,126 46,559,869
------------------------------------
Total liabilities and shareholders' equity $ 70,780,446 $73,321,205
====================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
2000 1999
------------------------------------
<S> <C> <C>
Revenues:
Printing $23,841,983 $21,911,733
Office products and office furniture 7,790,543 7,318,733
------------------------------------
Total revenues 31,632,526 29,230,466
Cost of sales:
Printing 17,763,859 15,706,372
Office products and office furniture 5,235,476 4,902,808
------------------------------------
Total cost of sales 22,999,335 20,609,180
------------------------------------
Gross profit 8,633,191 8,621,286
Selling, general and administrative expenses 8,057,604 6,892,499
------------------------------------
Income from operations 575,587 1,728,787
Other income (expense):
Interest income 10,729 58,169
Interest expense (235,982) (367,884)
Other 70,137 27,335
------------------------------------
(155,116) (282,380)
------------------------------------
Income before income taxes 420,471 1,446,407
Income taxes (168,519) (591,239)
------------------------------------
Net income $ 251,952 $ 855,168
====================================
Earnings per share
Basic $0.03 $0.09
====================================
Diluted 0.03 0.09
====================================
Weighted average shares outstanding:
Basic 9,714,000 9,714,000
====================================
Diluted 9,716,000 9,714,000
====================================
Dividends per share $0.05 $0.05
====================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
2000 1999
--------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 251,952 $ 855,168
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,078,986 957,579
(Gain) loss on sale of assets (4,939) 1,106
Other (20,306) 4,719
Bad debt expense 228,562 (34,887)
Changes in assets and liabilities:
Accounts receivable 3,033,097 1,642,681
Inventories 475,164 (763,739)
Other current assets (406,935) (273,044)
Accounts payable (830,191) (147,348)
Accrued payroll (345,926) 36,828
Taxes accrued and withheld 31,681 (124,337)
Accrued income taxes (353,504) 332,850
Accrued expenses (132,410) (33,388)
--------------------------------------
Net cash provided by operations 3,005,231 2,454,188
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (575,489) (878,237)
Proceeds from sales of property 54,018 197,388
Business acquired, net of cash received (463,477) --
Increase in other assets (199,834) (1,344)
--------------------------------------
Net cash used in investing activities (1,184,782) (682,193)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term debt and leases -- 23,160
Principal payments on long-term debt (1,035,161) (1,793,140)
Dividends paid (485,695) (485,695)
--------------------------------------
Net cash (used in) financing activities (1,520,856) (2,255,675)
--------------------------------------
Net increase (decrease) in cash and cash equivalents 299,593 (483,680)
Cash and cash equivalents, beginning of period 2,463,554 9,773,193
--------------------------------------
Cash and cash equivalents, end of period $ 2,763,147 $ 9,289,513
======================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND BUSINESS OPERATIONS
The foregoing financial information has been prepared in accordance with
generally accepted accounting principles and rules and regulations of the
Securities and Exchange Commission for interim financial reporting. The
preparation of the financial statements in accordance with generally accepted
accounting principles 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 generally
accepted accounting principles. These interim financial statements should be
read in conjunction with the consolidated financial statements for the year
ended October 31, 1999, and related notes thereto contained in the Champion
Industries, Inc.'s Form 10-K dated January 28, 2000. The accompanying interim
financial information is unaudited.
The accompanying consolidated financial statements of the Company include the
accounts of The Chapman Printing Company, Inc., Stationers, Inc., Bourque
Printing, Inc., Dallas Printing Company, Inc., Carolina Cut Sheets, Inc., U.S.
Tag & Ticket Company, Inc., Donihe Graphics, Inc., The Merten Company, Smith &
Butterfield Co., Inc., Interform Corporation, Rose City Press, Capitol Business
Equipment, Inc. d.b.a. Capitol Business Interiors, Thompson's of Morgantown,
Inc., Independent Printing Service, Inc. and Diez Business Machines.
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 effect of dilutive stock options increased
weighted average shares outstanding by 2,000 for the three months ended January
31, 2000. Stock options outstanding for the three months ended January 31, 1999
were anti-dilutive.
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.
6
<PAGE> 8
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
3. INVENTORIES (CONTINUED)
Inventories consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
Printing:
Raw materials $ 3,189,947 $ 3,267,880
Work in process 2,301,625 2,357,856
Finished goods 4,104,778 4,205,061
Office products and office furniture 4,076,180 4,241,897
-------------------- --------------------
$ 13,672,530 $ 14,072,694
==================== ====================
</TABLE>
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
2000 1999
-------------------- -------------------
<S> <C> <C>
Unsecured term note payable $ 7,589,285 $ 8,035,714
Installment notes payable to banks 2,446,815 2,444,181
Mortgage note payable to a bank 2,140,219 2,349,650
Capital lease obligations 918,114 1,027,031
-----------------------------------------
13,094,433 13,856,576
Less current portion 3,920,598 3,923,952
-----------------------------------------
Long-term debt, net of current portion $ 9,173,835 $ 9,932,624
=========================================
</TABLE>
The Company has an unsecured revolving line of credit with a bank for borrowings
to a maximum of $10,000,000 with interest payable monthly at interest rates at
LIBOR plus 1% to 1.5%. This line of credit expires in April 2002 and contains
certain restrictive financial covenants. There were no borrowings outstanding
under this facility at January 31, 2000.
5. SHAREHOLDERS' EQUITY
The Company declared a dividend of five cents per share to be paid on March 27,
2000 to stockholders of record on March 10, 2000.
7
<PAGE> 9
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
6. ACQUISITIONS
On November 30, 1999, the Company acquired all of the issued and outstanding
common stock of Diez Business Machines, Inc. of Gonzales, Louisiana. This
transaction was accounted for under the purchase method of accounting.
On July 16, 1999, the Company acquired certain assets and assumed certain
liabilities of AIM Printing of Knoxville, Tennessee. On June 1, 1999, the
Company acquired all of the issued and outstanding common stock of Independent
Printing Service, Inc. of Evansville, Indiana. These transactions were accounted
for under the purchase method of accounting.
Pro forma financial information related to these acquisitions has not been
presented because such information would not be materially different than that
reported herein.
7. INDUSTRY SEGMENT INFORMATION
In 1999, the Company adopted SFAS 131. The accounting policies of the segments
are the same as those described in the "Summary of Significant Accounting
Policies." The Company evaluates the performance of its segments based on an
operating profit basis prior to interest expense, interest income or other
income.
The Company operates principally in two 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); and the sale of office products and office
furniture including interior design services.
8
<PAGE> 10
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
The table below presents information about reported segments for the three
months ending January 31:
<TABLE>
<CAPTION>
OFFICE PRODUCTS
2000 PRINTING & FURNITURE TOTAL
- ---- ---------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 25,979,234 $ 8,831,691 $ 34,810,925
Elimination of intersegment revenue (2,137,251) (1,041,148) (3,178,399)
---------------------------------------------------------------
Consolidated revenues $ 23,841,983 $ 7,790,543 $ 31,632,526
===============================================================
Operating income 219,342 356,245 575,587
Depreciation & amortization 1,012,408 66,578 1,078,986
Capital expenditures 526,043 49,446 575,489
Identifiable assets 56,375,072 14,405,374 70,780,446
<CAPTION>
OFFICE PRODUCTS
1999 PRINTING & FURNITURE TOTAL
- ---- ---------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 23,910,482 $ 7,819,376 $ 31,729,858
Elimination of intersegment revenue (1,998,749) (500,643) (2,499,392)
---------------------------------------------------------------
Consolidated revenues $ 21,911,733 $ 7,318,733 $ 29,230,466
===============================================================
Operating income 1,429,032 299,755 1,728,787
Depreciation & amortization 869,900 87,679 957,579
Capital expenditures 849,454 28,783 878,237
Identifiable assets 60,828,670 12,488,103 73,316,773
</TABLE>
9
<PAGE> 11
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
A reconciliation of total segment revenue, assets and operating income to
consolidated income before income taxes for the three months ending January 31,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
-----------------------------------------
<S> <C> <C>
Revenues:
Total segment revenues $ 34,810,925 $ 31,729,858
Elimination of intersegment revenue (3,178,399) (2,499,392)
-----------------------------------------
Consolidated revenue $ 31,632,526 $ 29,230,466
=========================================
Operating Income:
Total segment operating income $ 575,587 $ 1,728,787
Interest income 10,729 58,169
Interest expense (235,982) (367,884)
Other income 70,137 27,335
-----------------------------------------
Consolidated income before income taxes $ 420,471 $ 1,446,407
=========================================
Identifiable assets:
Total segment identifiable assets $ 70,780,446 $ 73,316,773
Elimination of intersegment assets - -
-----------------------------------------
Total consolidated assets $ 70,780,446 $ 73,316,773
=========================================
</TABLE>
10
<PAGE> 12
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a commercial printer, business forms manufacturer and office
products and office furniture supplier in regional markets east of the
Mississippi. The Company has grown through acquisitions and internal growth.
The Company intends to continue its strategy of aggressively increasing its
market share in areas it currently serves and expanding into new markets through
acquisitions. The Company believes the printing and office products industries
are highly fragmented and that it is well positioned to acquire desirable
businesses in existing market areas, contiguous geographical regions, and new
geographical markets. The consolidated financial statements, results of
operations, and cash flows could be materially impacted depending on the timing
and magnitude of acquisitions.
The Company's revenues consist primarily of sales of commercial printing,
business forms, tags, other printed products, office supplies, office furniture,
data products, and office design services. The Company recognizes revenue when
products are shipped or services are rendered to the customer. The Company's
revenues are subject to quarterly fluctuations caused by variations in demand
for its products.
The Company's cost of sales primarily consist of raw materials, including paper,
ink, pre-press and purchased office supplies, furniture and data products, and
manufacturing costs including direct labor, indirect labor and overhead.
Significant factors affecting cost of sales include the cost of paper in both
printing and office supplies, labor costs and other raw materials.
The Company's operating costs consist of selling, general and administrative
expenses. These costs include salaries and wages for sales, customer service,
accounting, administrative and executive personnel, employee benefits, sales
commissions, rent, utilities, and equipment maintenance.
11
<PAGE> 13
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information derived
from the Consolidated Income Statements as a percentage of total revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31,
2000 1999
-------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C>
Revenues:
Printing $ 23,842 75.4% $ 21,912 75.0%
Office products and office furniture 7,791 24.6 7,318 25.0
-------------------------------------------------------------------------
Total revenues 31,633 100.0 29,230 100.0
Cost of sales:
Printing 17,764 56.2 15,706 53.7
Office products and office furniture 5,235 16.5 4,903 16.8
-------------------------------------------------------------------------
Total cost of sales 22,999 72.7 20,609 70.5
-------------------------------------------------------------------------
Gross profit 8,634 27.3 8,621 29.5
Selling, general and administrative expenses 8,058 25.5 6,892 23.6
-------------------------------------------------------------------------
Income from operations 576 1.8 1,729 5.9
Interest income 11 0.0 58 0.2
Interest expense (236) (0.7) (368) (1.3)
Other income 70 0.2 27 0.1
-------------------------------------------------------------------------
Income before income taxes 421 1.3 1,446 4.9
Income taxes (169) (0.5) (591) (2.0)
-------------------------------------------------------------------------
Net income $ 252 0.8% $ 855 2.9%
=========================================================================
</TABLE>
THREE MONTHS ENDED JANUARY 31, 2000 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1999
Revenues
Total revenues increased 8.2% in the first quarter of 2000 compared to the same
period in 1999 from $29.2 million to $31.6 million. Printing revenue increased
8.8% in the first quarter 2000 to $23.8 million from $21.9 million in the first
quarter of 1999. Office products and office furniture revenue increased 6.4% in
the first quarter of 2000 to $7.8 million from $7.3 million in the first quarter
of 1999. The increase in revenues for the printing segment was due to a mix of
internal growth and the impact of the Independent Printing Service acquisition
in June 1999 and the AIM Printing acquisition in July 1999. The increase in
revenues for the office products and office furniture segment was primarily
attributable to the Diez Business Machines acquisition in late November 1999.
Cost of Sales
Total cost of sales increased 11.6% in the first quarter of 2000 to $23.0
million from $20.6 million in the first quarter of 1999. Printing cost of sales
increased 13.1% in the first quarter of 2000 to $17.8 million
12
<PAGE> 14
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
from $15.7 million in the first quarter of 1999, due primarily to a growth in
printing revenues and increased competition.
Operating Expenses
In the first quarter of 2000, selling, general and administrative expenses
increased as a percentage of sales to 25.5% from 23.6% reported in the first
quarter of 1999 primarily due to higher corporate overhead expenses, expenses
related to acquisitions, higher health insurance costs, and an increase in the
allowance for doubtful accounts. Total selling, general and administrative
expenses increased $1.2 million to $8.1 million for the three months ended
January 31, 2000 from $6.9 million for the three months ended January 31, 1999.
Income from Operations and Other Income and Expenses
Income from operations decreased 66.7% in the first quarter of 2000 to $0.6
million from $1.7 million in the first quarter of 1999. This decrease is
primarily the result of the lower margins experienced in the printing segment
during the first quarter of 2000. Interest income declined $47,000 as a result
of lower investable funds. These funds have been used for debt payments, to
acquire equipment and fund other operational needs. Interest expense on a
comparative basis decreased $132,000 as a result of the reduction in debt.
Income Taxes
The Company's effective income tax rate was 40.1% for the first quarter of 2000
and 40.9% in 1999. The effective income tax rate approximates the combined
federal and state, net of federal benefit, statutory income tax rate.
Net Income
Net income for the first quarter of 2000 decreased 70.5% to $252,000 from
$855,000 in the first quarter of 1999 due to the reasons discussed above. Basic
and diluted earnings per share for the three months ended January 31, 2000 and
1999, were $0.03 and $0.09.
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.
SEASONALITY
Historically, the Company has experienced a greater portion of its annual sales
and net income 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.
13
<PAGE> 15
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, 2000, was
$3.0 million compared to $2.5 million during the same period in 1999. This
improvement 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,
2000, was $1.2 million compared to $700,000 during the same period in 1999. The
increase in net cash used in investing activities during the first quarter of
2000 compared to 1999 is primarily the result of the purchase of Diez Business
Machines, Inc.
Net cash used in financing activities for the three months ended January 31,
2000, was $1.5 million compared to cash used in financing activities of $2.3
million during the same period in 1999. This change is primarily due to lower
debt payments in the first quarter of 2000.
Working capital on January 31, 2000, was $29.3 million, a decrease of $1.3
million from October 31, 1999. The decrease in working capital was primarily
from the use of available funds to reduce long-term debt and acquire property
and equipment. Management believes that working capital and operating ratios
remain at acceptable levels.
The Company expects that the combination of funds available from working
capital, borrowings available under the Company's credit facility and
anticipated cash flows from operations, will provide sufficient capital
resources for the foreseeable future. In the event the Company seeks to
accelerate internal growth or make acquisitions beyond these sources, additional
financing would be necessary.
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,
general economic conditions,
14
<PAGE> 16
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
changes in business strategy or development plans, and other factors referenced
in this Form 10-Q. Given these uncertainties, readers are cautioned not to place
undue reliance on such forward-looking statements. 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.
15
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The exhibits listed on the Exhibit Index on page 16 of this Form 10-Q
are filed herewith.
b) The following reports on Form 8-K were filed during the quarter for
which this report is filed:
None.
16
<PAGE> 18
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 13, 2000 /s/ Marshall T. Reynolds
--------------------------------------------
Marshall T. Reynolds
President and Chief Executive Officer
Date: March 13, 2000 /s/ Todd R. Fry
--------------------------------------------
Todd R. Fry
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 2,763,147
<SECURITIES> 0
<RECEIVABLES> 22,498,570
<ALLOWANCES> 1,576,000
<INVENTORY> 13,672,530
<CURRENT-ASSETS> 39,473,902
<PP&E> 47,480,758
<DEPRECIATION> 21,604,410
<TOTAL-ASSETS> 70,780,446
<CURRENT-LIABILITIES> 10,154,495
<BONDS> 0
0
0
<COMMON> 9,713,913
<OTHER-SE> 36,612,213
<TOTAL-LIABILITY-AND-EQUITY> 70,780,446
<SALES> 31,632,526
<TOTAL-REVENUES> 31,632,526
<CGS> 22,999,335
<TOTAL-COSTS> 22,999,335
<OTHER-EXPENSES> 7,829,042
<LOSS-PROVISION> 228,562
<INTEREST-EXPENSE> 235,982
<INCOME-PRETAX> 420,471
<INCOME-TAX> 168,519
<INCOME-CONTINUING> 251,952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251,952
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
