Champion Records Profit Gain on Lower Sales
Toney K. Adkins, President and Chief Operating Officer, noted, "Our second quarter continued to see pressure on our top line which reflected the continued fragile state of the economy in relation to our core businesses. Even with the revenue constraints we were able to record an improvement in operating income for the second quarter of 2010 over the prior year. Our profit improvement plan should continue to yield an improved cost structure in subsequent quarters of 2010."
The 2009 results are reflective of a restatement of earnings associated with approximately $0.3 million per quarter of non-cash related adjustments reflected as deferred tax expense associated with deferred tax liability attributes related to goodwill, trade name and masthead of The Herald-Dispatch. This was recorded in the fourth quarter of 2009 and therefore the interim periods for 2009 have been restated accordingly to reflect such adjustment. In the three months ended January 31, 2010, the Company recorded as a component of other income a hedging arrangement of approximately $0.3 million or $0.2 million net of tax.
Reynolds concluded, "We continued our operating cost realignment strategy and were able to reduce additional costs during the second quarter and into the first few weeks of the third quarter of 2010. The second quarter was very productive from both an operational and strategic perspective. We continue to move the Company in the proper direction to enhance market competitiveness and improve operating results."
At April 30, 2010 the Company had approximately $61.6 million of interest bearing debt. Our interest bearing debt has been reduced by approximately $22.8 million since October 31, 2007 through utilization of our earnings, cash flow and working capital management. As a result of the Second Amendment entered into during the second quarter of 2010 the Company was able to achieve extensive covenant relief including higher leverage ratios, lower fixed charge coverage ratios, lower EBITDA thresholds, EBITDA definition modifications, a reinstitution of LIBOR borrowings and a reduction in minimum revolving loan availability thresholds. The Company is also subject to various new covenants as further described and defined in the Second Amendment.