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Champion reports narrower earnings loss

CHARLESTON, W.Va. - Champion Industries Inc. on Friday reported a second quarter net loss, but the Huntington-based parent company of Champion Printing, Capitol Business Interiors and The Herald-Dispatch newspaper said it is seeing "substantial improvement" in its finances.

Champion has been financially strained in recent years as it has dealt with hefty debt payments left from its 2007 purchase of The Herald-Dispatch. The company bought the newspaper for $77 million that year, financing much of the purchase with debt.

On Friday, the company reported a second-quarter net loss of $700,000, or 6 cents per share, based on continuing operations. While still a loss, the quarterly results improved from the $21 million loss the company experienced over the same time period last year.

"The results for fiscal year to date 2013 over 2012 reflected a substantial improvement," the company said in a press release announcing the earnings.

Chairman and CEO Marshall T. Reynolds said in a statement the company is generating positive cash flow from its operating businesses.  

"In the second quarter of 2013, there were no non-cash charges and it can be seen that we generated positive income from operations across all three business segments," Reynolds said. "We believe this is indicative of the resilience of our dedicated employees under a difficult credit environment and the core value of our Company to our customer base."

Earlier this year, the company received a notice of default from Fifth Third Bank of Huntington, which, along with several other banks, has provided the company with a revolving credit facility and term loan.

While the company has made all of its required principal and interest payments to the banks, Champion failed to meet minimum earnings before interest, taxes, depreciation and amortization requirements spelled out in the debt covenants.

In response to the default notification, the company retained Timothy Boates of RAS Management Advisors LLC to serve as its chief restructuring officer.

In that role, Boates has "full responsibility for all of Champion's operations, including but not limited to day-to-day management, and will report directly to Champion's board of directors," according to company filings with the U.S. Securities and Exchange Commission.

In May, following Boates' hiring, the company negotiated a forbearance agreement with Fifth Third Bank to delay action on the debt default until after Sept. 30.

The delay will give the company more time to shore up its balance sheet and address its debt. 

"Due to the short term nature of our current Forbearance Agreement our ability to operate as a going concern is dependent on our ability to address our current credit situation," the company said in its earnings release.

According to the company, it has already paid off nearly 61 percent of the debt it took on five and a half years ago during the Herald Dispatch acquisition.

It currently has about $36.5 million in interest-bearing debt on its balance sheet.

Reynolds said the company would continue to do what it can to bring down its debt burden.

"We intend to work with our secured creditors and advisors to address our debt maturities and liquidity," he said. "Furthermore, our recent Forbearance Agreement is a positive step towards our goal of stabilizing our funding platform going forward."

Contact writer Jared Hunt at business@dailymail.com or 304-348-4836.

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