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Champion Reports Bigger Loss on Lower Revenues in Third Quarter

September 10, 2010
HUNTINGTON, WV—Sept. 10, 2010—Champion Industries, Inc. today announced results for the third quarter of 2010 of a $571,000 loss compared to a loss of $307,000 for the same period in 2009. The results were reflective of restructuring related charges of approximately $1.6 million, or $1.0 million after tax.

On a pro forma basis, adjusted for the restructuring charge, the company would have reported net income of approximately $0.4 million for the three months ended July 31, 2010, compared to a pro forma loss of $0.2 million for the three months ended July 31, 2009.

Net loss for the nine months ended July 31, 2010 was $450,000. This compares to a loss of $646,000 for the same period in 2009. On a pro forma basis, adjusted for the restructuring charge, the company would have reported net income of approximately $0.6 million for the nine months ended July 31, 2010, compared to a pro forma loss of $0.5 million for the nine months ended July 31, 2009.

Marshall T. Reynolds, Chairman of the Board and CEO of Champion, said, "Our year-to-date and third quarter income reflected a strong improvement over the prior year on a pro forma basis adjusting for the restructuring related charges. Our second quarter and year to date results were negatively impacted by costs related to the successful defense of a legal action and would have been even stronger without this event. Our third quarter was focused on continued implementation of our plant rationalization plan and a continued review of our operating cost structure."

Revenues for the three months ended July 31, 2010 were $31.9 million compared to $34.4 million in the same period in 2009. This change represented a decrease in revenues of $2.5 million or 7.2%.

Revenues for the nine months ended July 31, 2010 decreased to $98.0 million from $107.4 million in 2009. This change represented a decrease in revenues of $9.4 million or 8.7%.

The printing segment experienced a sales decrease of $6.6 million, or 9.8%, while the office products and office furniture segment experienced a decrease of $2.1 million, or 7.7%, and the newspaper segment recorded a decrease of $0.6 million, or 5.2%, on a year to date basis.

On a segment basis, printing sales were down $1.8 million, or 8.3%, office products and office furniture sales were down $383,000, or 4.2%, and the newspaper sales were down $314,000, or 8.0%, for the third quarter of 2010.

Toney K. Adkins, President and COO noted, "Our third 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 third quarter of 2010 over the prior year after adjusting for the restructuring charge. We continue to review alternatives to stabilize sales while planning for cost rationalization actions in light of the fragile economy."

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. The Company also recorded charges related to restructuring primarily associated with occupancy related costs and costs incurred to streamline production, personnel and other related costs as well as a charge for inventory related to these actions. The Company believes that additional costs will be incurred in the future to address the impact of the global economic crisis.

Reynolds concluded, "We are working on the cost side of the business but have also initiated actions to streamline sales territories in certain core markets. We are cognizant of the fragile state of the economy and are planning accordingly."

At July 31, 2010 the company had approximately $58.2 million of interest bearing debt. Our interest bearing debt has been reduced by approximately $26.2 million since October 31, 2007 through utilization of our earnings, cash flow and working capital management. As a result of the Second Amendment to Credit Agreement 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.

About Champion Industries
Champion is a commercial printer, business forms manufacturer and office products and office furniture supplier in regional markets east of the Mississippi. Champion also publishes The Herald-Dispatch daily newspaper in Huntington, WV with a total daily and Sunday circulation of approximately 25,000 and 30,000, respectively. Champion serves its customers through the following companies/divisions: Chapman Printing (West Virginia and Kentucky); Stationers, Champion Clarksburg, Capitol Business Interiors, Garrison Brewer, Carolina Cut Sheets, U.S. Tag and Champion Morgantown (West Virginia); Champion Output Solutions (West Virginia); The Merten Company (Ohio); Smith & Butterfield (Indiana and Kentucky); Champion Graphic Communications (Louisiana); Interform Solutions and Consolidated Graphic Communications (Pennsylvania, New York and New Jersey); Donihe Graphics (Tennessee); Blue Ridge Printing (North Carolina) and Champion Publishing (West Virginia, Kentucky and Ohio).
 

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