6

7

8

* - Services Provided

9

10

11

12

13

14

15

ITEM 2 ‑ PROPERTIES

           The Company conducts its operations from twenty-six (26) different physical locations, eighteen (18) of which are leased, and eight (8) of which are owned in fee simple by Company subsidiaries.  The Company does not anticipate any issues in regards to the renewal of certain leases when the terms expire.  The properties leased, and certain of the lease terms are set forth below:

(1)        Lease is “triple net”, whereby the Company pays for all utilities, insurance, taxes, repairs and maintenance and all other costs associated with properties.

(2)        The U.S. Tag operation was relocated to Huntington, West Virginia in August 2003.        

(3)        Champion has an option to purchase building at end of lease term and Williams Land Corporation has an option to put the building to Champion at end of lease term.

(4)        The Company has contractually committed to rent 2800 Seventh Avenue for not more than two years of which the second year rent expense is $60,000.

            The Dallas Printing subsidiary owns, and operates from, a single‑story masonry structure of approximately 19,600 square feet at 321‑323 East Hamilton Street, Jackson, Mississippi.

            The Chapman Printing Charleston operation is conducted from a single story masonry building of approximately 21,360 square feet owned by the Company at 1563 Hansford Street, Charleston, West Virginia.

           The Bourque Printing subsidiary owns, and operates from, a single‑story building of approximately 42,693 square feet building at 10848 Airline Highway, Baton Rouge , Louisiana. The Company also owns a facility of approximately 18,501 square feet at 13112 South Choctaw Drive, Baton Rouge, Louisiana.

           Stationers' Clarksburg operation is conducted from a single‑story masonry building of approximately 20,800 square feet owned by the Company at 700 N. Fourth Street, Clarksburg, West Virginia.

           Donihe owns, and operates from, a single‑story steel building of approximately 38,500 square feet situated on roughly 14.5 acres at 766 Brookside Drive, Kingsport, Tennessee.

           Blue Ridge owns, and operates from, (i) a two‑story masonry and steel building of approximately 28,000 square feet and a contiguous 1,692 square foot former residential structure at 544 and 560 Haywood Road, Asheville, North Carolina.

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            The Capitol subsidiary of Stationers owns and operates from a 22,000 square foot building at 711 Indiana Avenue, Charleston, West Virginia. 

            The Company continually reviews its production facilities and has and continues to consolidate facilities as deemed economically feasible. The company believes its production facilities are suitable and adequate to meet current production needs.

ITEM 3 ‑ LEGAL PROCEEDINGS

            The Company is subject to various claims and legal actions, other than the claim discussed below, that arise in the ordinary course of business.  In the opinion of management, after consulting with legal counsel, the Company believes that the ultimate resolution of these claims and legal actions will not have a material effect on the consolidated financial statements of the Company.

           On February 16, 2002, a jury verdict was rendered against the Company in a civil action brought against the Company in state court in Jackson, Mississippi. The plaintiff in this civil action asserted that the Company and its Dallas Printing Company, Inc. subsidiary had engaged in unfair competition and other wrongful acts in hiring certain of its employees.  The jury awarded the plaintiff $1,745,000 in actual damages and $750,000 in punitive damages.

           On March 1, 2002, the plaintiff filed a motion for attorney’s fees and costs in the amount of $889,401.  On July 16, 2002, the court entered an order granting plaintiff $645,119 in attorney fees and expenses, and ordered that interest on the amount of the jury award accrue from February 22, 2002.

           The Company appealed both the jury award and the attorney fee and expense award. 

           The Company was advised on February 3, 2004 that the Court of Appeals of the State of Mississippi had reversed the aforementioned judgment and jury verdict rendered against the Company and had remanded the case for new trial. The plaintiff petitioned the appeals court for rehearing of its ruling on February 17, 2004. The Company’s response was filed on February 24, 2004.

           On June 22, 2004 the Company was advised that the Court of Appeals of the State of Mississippi had upheld its February 3, 2004 reversal of the judgment and jury verdict and its remand of the case for new trial and had denied plaintiff’s petition for rehearing of that decision. Plaintiff filed a petition for writ of certiorari with the Mississippi Supreme Court to contest the ruling of the Court of Appeals on July 6, 2004. The Company filed a response to such petition on July 27, 2004.

           The Company was advised on September 16, 2004 that the Supreme Court of Mississippi had upheld the Court of Appeals of the State of Mississippi’s February 3, 2004 reversal of the judgment and jury verdict rendered February 16, 2002 against the Company and had upheld the reversal and remand of the case for new trial.

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           The effect of the appeals courts orders of February 3, 2004 and June 22, 2004 and the Mississippi Supreme Court’s denial of plaintiff’s petition for certiorari is to negate the trial court’s award of damages and attorneys fees previously granted against the Company, and grant a new trial on plaintiff’s claims.

ITEM 4 ‑ SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5 ‑ MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

           Champion common stock has traded on the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”) National Market System since the Offering under the symbol “CHMP.”

           The following table sets forth the high and low closing prices for Champion common stock for the period indicated. The range of high and low closing prices are based on data from NASDAQ and does not include retail mark‑up, mark‑down or commission.

			Fiscal Year 2004								Fiscal Year 2003
			High				Low				High				Low
First quarter		$	4.94			$	4.11			$	3.35			$	2.45
Second quarter			5.40				4.46				3.31				2.77
Third quarter			4.70				3.94				3.88				2.70
Fourth quarter			4.12				3.50				5.05				3.68

            At the close of business on January 7, 2005, there were 476 shareholders of record of Champion common stock. The shareholders of record are determined by the Company’s transfer agent.

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The following table sets forth the quarterly dividends per share declared on Champion common stock.

			Fiscal Year 2005				Fiscal Year 2004				Fiscal Year 2003
First quarter		$	0.05			$	0.05			$	0.05
Second quarter			-				0.05				0.05
Third quarter			-				0.05				0.05
Fourth quarter			-				0.05				0.05

 

ITEM 6 – SELECTED FINANCIAL DATA

                                SELECTED CONSOLIDATED FINANCIAL DATA

           The following selected consolidated financial data for each of the five years in the period ended October 31, 2004 have been derived from the Audited Consolidated Financial Statements of the Company. The information set forth below should be read in conjunction with the Audited Consolidated Financial Statements, related notes, and the information contained in Management's Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere herein.

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	Year Ended October 31,
			2004				2003				2002				2001 (1)				2000
	(In thousands, except share and per share data)
OPERATING STATEMENT DATA:
Revenues:
Printing		$	95,325			$	96,537			$	95,194			$	98,146			$	96,657
Office products and office furniture			29,077				25,646				27,690				26,998				29,672
Total revenues			124,402				122,183				122,884				125,144				126,329
Cost of sales:
Printing			70,209				70,352				68,771				71,816				69,376
Office products and office furniture			19,690				17,453				19,480				18,661				19,927
Total cost of sales			89,899				87,805				88,251				90,477				89,303
Gross profit			34,503				34,378				34,633				34,667				37,026
Selling, general and administrative expense			33,165				31,222				30,560				31,800				32,621
Restructuring costs			-				-				-				2,052				-
Asset impairment costs			-				-				-				3,061				-
Income (loss) from operations			1,338				3,156				4,073				(2,246	)			4,405
Interest income			7				4				14				64				71
Interest expense			(301	)			(167	)			(386	)			(891	)			(1,018	)
Other income			288				10				73				528				114
Income (loss) before income taxes			1,332				3,003				3,774				(2,545	)			3,572
Income tax (expense) benefit			(582	)			(1,235	)			(1,566	)			363				(1,463	)
Net income (loss)		$	750			$	1,768			$	2,208			$	(2,182	)		$	2,109
Earnings (loss) per share:
Basic		$	0.08			$	0.18			$	0.23			$	(0.22	)		$	0.22
Diluted			0.08				0.18				0.23				(0.22	)			0.22
Dividends per share		$	0.20			$	0.20			$	0.20			$	0.20			$	0.20
Weighted average common shares outstanding:
Basic			9,729,000				9,714,000				9,714,000				9,714,000				9,714,000
Diluted			9,825,000				9,761,000				9,726,000				9,714,000				9,714,000

(1)     The Company initiated a corporate-wide restructuring and profitability enhancement plan in the third quarter 2001.  As a result of this plan, the Company recorded a pre-tax charge of $6.1 million or $4.3 million net of tax or $0.44 per share on a basic and diluted basis.

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	At October 31,
	2004			2003		2002		2001		2000
	(In Thousands)
BALANCE SHEET DATA:
Cash and cash equivalents	$  1,745		$   2,172			$  4,507		$  5,765		$ 3,174
Working capital	26,913		26,977			26,072		26,041		29,070
Total assets	64,150		58,469			59,508		63,950		71,559
Long‑term debt (net of current portion) (1)	8,257		3,966			1,805		4,549		8,070
Shareholders' equity	41,551		42,691			42,866		42,601		46,726

(1) Includes non-current borrowings under the Company’s revolving credit facility.

ITEM 7 –  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 of the United States of America, east of the Mississippi River.  The Company has grown through strategic acquisitions and internal growth.  Through such growth, the Company has realized regional economies of scale, operational efficiencies, and exposure of its core products to new markets. The Company has acquired fifteen printing companies, eight office products and office furniture companies, one Company with a combined emphasis on both printing and office products and office furniture and a paper distribution division (which was subsequently sold in 2001) since its initial public offering on January 28, 1993.

           The Company's net 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 revenues when products are shipped or ownership is transferred and when services are rendered to the customer. The Company's revenues are subject to seasonal fluctuations caused by variations in demand for its products.

           The Company's cost of sales primarily consists of raw materials, including paper, ink, pre‑press supplies and purchased office supplies, furniture and data products, and manufacturing costs including direct labor, indirect labor and overhead. Significant factors affecting the Company's cost of sales include the costs of paper in both printing and office supplies, the costs of labor and other raw materials.

           The Company's operating costs consist of selling, general and administrative expenses. These costs include salaries, commissions and wages for sales, customer service, accounting, administrative and executive personnel, rent, utilities, legal, audit, information systems equipment costs, software maintenance and depreciation.

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CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

            The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 15 of this Form 10-K.  The discussion and analysis of the financial statements and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  The following critical accounting policies affect the Company’s more significant judgments and estimates used in the preparation of the consolidated financial statements.  There can be no assurance that actual results will not differ from those estimates.

            Asset Impairment:  The Company is required to test for asset impairment relating to property and equipment whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable.  The Company applies Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement No. 144) in order to determine whether or not an asset is impaired.  This standard requires an impairment analysis when indicators of impairment are present.  If such indicators are present, the standard indicates that if the sum of the future expected cash flows from the Company’s asset, undiscounted and without interest charges, is less than the carrying value, an asset impairment must be recognized in the financial statements.  The amount of the impairment is the difference between the fair value of the asset and the carrying value of the asset.

            The Company believes that the accounting estimate related to an asset impairment is a “critical accounting estimate” because it is highly susceptible to change from period to period because it requires management to make assumptions about future cash flows over future years and that the impact of recognizing an impairment could have a significant effect on operations.  Management’s assumptions about future cash flows requires significant judgment because actual operating levels have fluctuated in the past and are expected to continue to do so in the future.  Management has discussed the development and selection of this critical accounting estimate with the audit committee of our board of directors and the audit committee has reviewed the Company’s disclosure relating to it in the MD&A.

            Beginning in fiscal year 2002, goodwill and other intangibles are required to be evaluated annually for impairment, according to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” (Statement No. 142).  The standard requires a two-step process be performed to analyze whether or not goodwill has been impaired.   Step one is to test for potential impairment, and requires that the fair value of the reporting unit be compared to its book value including goodwill.  If the fair value is higher than the book value, no impairment is recognized.  If the fair value is lower than the book value, a second step must be performed.  The second step is to measure the amount of impairment loss, if any, and requires that a hypothetical purchase price allocation be done to determine the implied fair value of goodwill and other intangibles.  This fair value is then compared to the carrying value of goodwill and other intangibles.  If the implied fair value is lower than the carrying value, an impairment must be recorded.  

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            As discussed in the notes to the financial statements, goodwill and other intangibles are recorded at the adjusted book value and were analyzed for impairment with the implementation of Statement No. 142. The fair value of the Company’s goodwill and other intangibles was estimated using discounted cash flow methodologies. Based on the analysis, the Company determined that fair value relating to goodwill and other intangibles resulted in an implied fair value greater than the book value recorded for the corresponding goodwill and other intangibles, and therefore no impairment was recognized in any period subsequent to the adoption of this statement.

            The Company believes that the accounting estimate related to the goodwill and other intangibles impairment is a “critical accounting estimate” because the underlying assumptions used for the discounted cash flow can change from period to period and could potentially cause a material impact to the income statement.  Management’s assumptions about discount rates, inflation rates and other internal and external economic conditions, such as earnings growth rate, require significant judgment based on fluctuating rates and expected revenues.  Additionally, Statement No. 142 requires that the goodwill and other intangibles be analyzed for impairment on an annual basis using the assumptions that apply at the time the analysis is updated.  Management has discussed the development of these estimates with the audit committee of the board of directors.  Additionally, the board of directors has reviewed this disclosure and its relation to MD&A.

            Allowance for Doubtful Accounts:  The Company encounters risks associated with sales and the collection of the associated accounts receivable.  As such, the Company records a monthly provision for accounts receivable that are considered to be uncollectible.  In order to calculate the appropriate monthly provision, the Company primarily utilizes a historical rate of accounts receivables written off as a percentage of total revenue.  This historical rate is applied to the current revenues on a monthly basis.  The historical rate is updated periodically based on events that may change the rate such as a significant increase or decrease in collection performance and timing of payments as well as the calculated total exposure in relation to the allowance.  Periodically, the Company compares the identified credit risks with the allowance that has been established using historical experience and adjusts the allowance accordingly.   

            The Company believes that the accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” because the underlying assumptions used for the allowance can change from period to period and could potentially cause a material impact to the income statement and working capital.  Management has discussed the development and selection of this estimate with the audit committee of the board of directors, and the board has, in turn, reviewed the disclosure and its relation to MD&A.

            During 2004, 2003 and 2002 $488,000, $336,000 and $363,000 of bad debt expense was incurred and the allowance for doubtful accounts was $1,422,000, $1,191,000 and $1,397,000 as of October 31, 2004, 2003 and 2002.  The actual write-offs for the periods were $464,000, $543,000 and $398,000 during 2004, 2003 and 2002.  General economic conditions and specific geographic and customer concerns are major factors that may affect the adequacy of the allowance and may result in a change in the annual bad debt expense.  

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            The following discussion and analysis presents the significant changes in the financial position and results of operations of the Company and should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included elsewhere herein.

RESULTS OF OPERATIONS

           The following table sets forth for the periods indicated information derived from the Company's Consolidated Statements of Operations, including certain information presented as a percentage of total revenues.

				Year Ended October 31,
				($ In thousands)
				2004								2003								2002
Revenues:
	Printing			$	95,325				76.6	%		$	96,537				79.0	%		$	95,194				77.5	%
	Office products and office furniture				29,077				23.4				25,646				21.0				27,690				22.5
		Total revenues			124,402				100.0				122,183				100.0				122,884				100.0
Cost of sales
	Printing				70,209				56.4				70,352				57.6				68,771				56.0
	Office products and office furniture				19,690				15.8				17,453				14.3				19,480				15.8
		Total cost of sales			89,899				72.2				87,805				71.9				88,251				71.8
Gross Profit					34,503				27.8				34,378				28.1				34,633				28.2
Selling, general and administrative expenses					33,165				26.7				31,222				25.6				30,560				24.9
Income from operations					1,338				1.1				3,156				2.5				4,073				3.3
Other income (expense):
	Interest income				7				0.0				4				0.0				14				0.0
	Interest expense				(301	)			(0.2	)			(167	)			(0.1	)			(386	)			(0.3	)
	Other income				288				0.2				10				0.0				73				0.1
Income before income taxes					1,332				1.1				3,003				2.4				3,774				3.1
	Income tax expense				(582	)			(0.5	)			(1,235	)			(1.0	)			(1,566	)			(1.3	)
Net income				$	750				0.6	%		$	1,768				1.4	%		$	2,208				1.8	%

 

Year Ended October 31, 2004 Compared to Year Ended October 31, 2003

Revenues

            Consolidated net revenues were $124.4 million for the year ended October 31, 2004 compared to $122.2 million in the prior fiscal year. This change represents an increase in revenues of approximately $2.2 million or 1.8%. Printing revenues decreased by $1.2 million or 1.3% from $96.5 million in 2003 to $95.3 million in 2004.  The decrease in printing sales was reflective of an industry wide sluggish print economy as well as competitive market factors partially offset by two months of sales from the Syscan acquisition. Office products and office furniture revenue increased $3.4 million or 13.4% from $25.6 million in 2003 to $29.1 million in 2004. The increase in revenues for the office products and office furniture segment was primarily attributable to a full years sales in 2004 for Contract Business Interiors and two months of sales from the Syscan acquisition.

Cost of Sales

            Total cost of sales for the year ended October 31, 2004 totaled $89.9 million compared to $87.8 million in the previous year. This change represented an increase of $2.1 million or 2.4% in cost of sales. Printing cost of sales decreased $140,000 or 0.2% to $70.2 million in 2004 compared to $70.4 million in 2003. Printing cost of sales were lower due to an overall decrease in printing sales. This, coupled with competitive pressures and overhead related costs associated primarily with equipment relocations resulting from facility consolidations, led to gross margin compression in 2004. Office products and office furniture cost of sales increased $2.2 million to $19.7 million in 2004 from $17.5 million in 2003. This resulted in enhanced gross margins due to lower cost of goods sold resulting from continued purchasing reductions from imports, enhanced market pricing power due in part to contractual pricing adjustments and stable margins on remaining furniture sales.

Operating Expenses and Income

            Selling, general and administrative (S,G&A) expenses increased $1.9 million to $33.2 million in 2004 from $31.2 million in 2003. S,G&A as a percentage of net sales represented 26.7% of net sales in 2004 compared with 25.6%  of net sales in 2003. This increase is related, in part, to higher payroll and other selling costs to support sales growth initiatives, increased bad debt expenses and professional service related expenses and operating costs of acquired entities.

Other Income (Expense)

                Other expense decreased approximately $150,000 from ($153,000) in 2003 to ($6,000) in 2004, due to higher other income primarily related to the gains on the sale of two buildings during 2004 and a casualty gain resulting from a roof collapse at one division. These gains were offset by increased interest expense of $130,000 primarily as a result of an increase in interest rates and higher outstanding borrowings.

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Income Taxes

           Income taxes as a percentage of income before taxes were 43.7% in 2004 compared with  41.1% in 2003. The increase in income taxes as a percentage of income before taxes is primarily related to the nondeductibility of certain selling related expenses.

           The effective income tax rate in 2004 and 2003 approximates the combined federal and state, net of federal benefit, statutory income tax rate.

Net Income

           For reasons set forth above, net income for 2004 decreased $1.0 million to $750,000, or $0.08 per share on a basic and diluted basis, from net income of $1.8 million for 2003, or $0.18 per share on a basic and diluted basis.

 

Year Ended October 31, 2003 Compared to Year Ended October 31, 2002

Revenues

            Consolidated net revenues were $122.2 million for the year ended October 31, 2003 compared to $122.9 million in the prior fiscal year. This change represents a decrease in revenues of approximately $700,000 or 0.6%. Printing revenues increased by $1.3 million or 1.4% from $95.2 million in 2002 to $96.5 million in 2003.  The increase in printing sales was primarily due to the addition of a new large customer and additional sales derived primarily from the operations of certain assets purchased from Integrated Marketing Solutions in July 2003. Office products and office furniture revenue decreased $2.0 million or 7.4% from $27.7 million in 2002 to $25.6 million in 2003. The decrease in revenues for the office products and office furniture segment was primarily attributable to an industry-wide slowdown in office furniture sales.

Cost of Sales

            Total cost of sales for the year ended October 31, 2003 totaled $87.8 million compared to $88.3 million in the previous year. This change represented a decrease of $446,000 or 0.5% in cost of sales. Printing cost of sales increased $1.6 million or 2.3% to $70.4 million in 2003 compared to $68.8 million in 2002. Printing cost of sales were higher due to an overall increase in printing sales this coupled with competitive pressures led to gross margin compression in 2003. Office products and office furniture cost of sales decreased $2.0 million to $17.5 million in 2003 from $19.5 million in 2002. This resulted in enhanced gross margins due to lower cost of goods sold resulting from purchasing reductions from imports and stronger margins on remaining furniture sales.

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Operating Expenses and Income

            Selling, general and administrative (S,G&A) expenses increased $700,000 to $31.2 million in 2003 from $30.6 million in 2002. S,G&A as a percentage of net sales represented 25.6% of net sales in 2003 compared with 24.9%  of net sales in 2002. This increase is related, in part, to increases in insurance related expenses including health, general commercial and workers compensation.

Other Income (Expense)

            Interest expense decreased $219,000 to $167,000 in 2003 from $387,000 in 2002 primarily as a result of a decrease in interest rates and lower outstanding borrowings.

Income Taxes

           Income taxes as a percentage of income before taxes were 41.5% in 2002 compared with  41.1% in 2003.

           The effective income tax rate in 2003 and 2002 approximates the combined federal and state, net of federal benefit, statutory income tax rate.

Net Income

           For reasons set forth above, net income for 2003 decreased $440,000 to $1.8 million, or $0.18 per share on a basic and diluted basis, from net income of $2.2 million for 2002, or $0.23 per share on a basic and diluted basis.

LIQUIDITY AND CAPITAL RESOURCES

           As of October 31, 2004, the Company had $1.7 million of cash and cash equivalents, a decrease of $426,000 from the prior year. Working capital as of October 31, 2004 was $26.9 million, a 0.2% decrease from $27.0 million at October 31, 2003.

           The Company has historically used cash generated from operating activities and debt to finance capital expenditures and the cash portion of the purchase price of acquisitions. Management plans to continue making significant investments in equipment and to seek appropriate acquisition candidates. However, to fund the Company's continued expansion of operations, additional financing may be necessary. The Company has two available lines of credit totaling $11.0 million (See Note 3 of the Consolidated Financial Statements). For the foreseeable future including through Fiscal 2005, management believes it can fund operations, meet debt service requirements and make the planned capital expenditures based on the available cash and cash equivalents, cash flow from operations and lines of credit.

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            Additionally, the Company has minimal amounts of future contracted obligations (See Note 3 and Note 6 of the Consolidated Financial Statements). The Company is not a guarantor of indebtedness of others. The Company’s off balance sheet arrangements at October 31, 2004 relate to the Syscan acquisition and are associated with potential contingent purchase price consideration of $1.5 million payable in October 2006 and a put option from Williams Land Corporation to sell a building to the Company for $1.5 million. This option may be exercised no later than 60 days prior to the end of the lease and closing of said purchase cannot exceed 45 days from the end of the lease.

            As of October 31, 2004 the Company had contractual obligations in the form of leases and debt as follows:

Payments Due by Fiscal Year

Contractual Obligations		2005		2006		2007		2008		2009		Residual		Total
Non-cancelable operating
leases		$ 1,399,647		$ 1,220,998		$    945,183		$    701,474		$ 253,340		$             -		$   4,520,642
Revolving line of credit		-		2,300,000		-		-		-		-		2,300,000
Term debt		1,555,911		1,561,364		1,580,206		1,583,979		300,328		914,446		7,496,234
Obligations under capital
leases		132,518		16,484		-		-		-		-		149,002
		$ 3,088,076		$ 5,098,846		$ 2,525,389		$ 2,285,453		$ 553,668		$ 914,446		$ 14,465,878

Cash Flows from Operating Activities

           Cash flows from operating activities for the years ended October 31, 2004, 2003 and 2002 were $4.8 million, $4.6 million and $5.8 million. Cash flows from operating activities for the fiscal year 2004 compared to 2003 were reflective of additional cash generated in 2004 from changes in assets and liabilities, increased depreciation and amortization expense and higher bad debt expense partially offset by a reduction in net income.

Cash Flows from Investing Activities

           Cash used in investing activities was ($7.5) million, ($3.7) million and ($1.1) million for the years ended October 31, 2004, 2003 and 2002. Cash flows used in investing activities increased due to capital expenditures associated with equipment purchases, building improvements and expansion as well as the acquisition of Syscan Corporation. These expenditures were partially offset by proceeds from the sale of two buildings in 2004. Cash flows used in investing activities increased in 2003 compared to 2002 due to the purchase of a building in Baton Rouge, Louisiana and the purchase of additional equipment including several new presses, coupled with a decrease in proceeds from asset sales in 2003. In 2002 the Company sold two buildings which were reflected as proceeds from the sale of fixed assets.

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Cash Flows from Financing Activities

           Net cash flows provided by and (used in) financing activities for the years ended October 31, 2004, 2003, and 2002 were $2.2 million, ($3.2) million and ($6.0) million. During 2004, net borrowings exceeded cash payments thus generating cash flow from financing activities.  Net cash flows used in financing activities decreased in 2003 compared to 2002 due to an increase in borrowings. Dividends paid in 2004, 2003 and 2002 were $1.9 million per year.

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 contracts; therefore, to the extent permitted by competition, it has the ability to pass through to its customers most cost increases resulting from inflation, if any. In addition, the Company is not particularly energy dependent; therefore, an increase in energy costs should not have a significant impact on the Company.

SEASONALITY

                Historically, the Company has experienced a greater portion of its profitability 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.

NEWLY ISSUED ACCOUNTING STANDARDS

                In December 2004, the FASB issued SFAS No. 123R (revised 2004), Share-Based Payment. This statement revises SFAS No. 123, Accounting for Stock-Based Compensation, and requires companies to expense the value of employee stock options and similar awards. The effective date of this standard is interim and annual periods beginning after June 15, 2005.

            Historically, the Company has elected to follow the intrinsic value method in accounting for its employee stock options. Accordingly, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

            Upon the adoption of SFAS No. 123R the Company will be required to expense stock options in its Statement of Operations when they are granted. For the years ended October 31, 2004, 2003 and 2002, total stock-based employee compensation expense, net of related tax effects determined under this new standard would have been $109,962, $62,250 and $38,704. With the adoption of its 2003 Stock Option Plan, the Company has approximately 352,000 ungranted stock options. The Company will incur expense immediately upon the granting of these stock options in future years upon the effective date of this standard.

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ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            The Company does not have any significant exposure relating to market risk.

ITEM 8 ‑ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            The financial statements and other information required by this Item are contained in the financial statements and footnotes thereto included in Item 15 and listed in the index on page F‑1 of this report.

ITEM 9 ‑ CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

            The Board of Directors selects the independent accountants for the Company each year.  On February 4, 2004, the Company dismissed Ernst & Young LLP and engaged the firm of BKD, LLP as its independent accountants for the fiscal year ended October 31, 2004.  During the Company’s two most recent fiscal years and through the date of discharge of Ernst & Young LLP, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in its report.  The reports of Ernst & Young LLP on the Company’s financial statements for the fiscal years ended October 31, 2003 and October 31, 2002, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.  The Company has requested Ernst & Young LLP to furnish to the Company a letter addressed to the Commission stating whether it agrees with the above statements.  Such letter, received by the Company on February 9, 2004, was filed as an exhibit to a Form 8-K filed by the Company with the Securities and Exchange Commission on February 9, 2004.  The decision to change accountants was approved by the Audit Committee of the Board of Directors of the Company and ratified by the Board of Directors.

ITEM 9A – CONTROLS AND PROCEDURES

            Company management, including the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-15c as of the end of the period covered by this annual report. Based on that evaluation, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. There were no changes in internal controls over financial reporting during the fourth fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

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ITEM 9B – OTHER  INFORMATION

            On September 9, 2004, Bourque Printing, Inc. executed and delivered to First Century Bank, Bluefield, West Virginia, its promissory note together with commercial security agreement, guaranty and cross-collateralization and cross-default agreement in original principal amount of $600,075, bearing interest at the prime rate, maturing October 9, 2009. This note is Exhibit 10.4 to this Form 10-K.         

            On October 26, 2004, the Company executed and delivered to United Bank, Inc., Huntington, West Virginia, its promissory note and security agreement in original principal amount of $3,920,000, bearing interest at Wall Street Journal Prime, maturing October 26, 2008. The proceeds of this note constituted permanent financing for the Company’s acquisition of Syscan Corporation reported on Form 8-K on September 10, 2004. This note is Exhibit 10.5 to this Form 10-K.

            By letter dated December 28, 2004 in connection with the Business Loan Agreement in amount of $1,440,000 between the Company’s Bourque Printing subsidiary and Hibernia National Bank, the bank deleted the payment on demand feature of this loan.   Such letter is filed as Exhibit 10.6 to this Form 10-K.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            Information relating to the directors of the Company is contained under the captions “Elections of Directors”, “Director Meetings, Committees and Attendance”, “Section 16a Beneficial Ownership Reporting Compliance” and “Code of Ethics” in the Company’s definitive Proxy Statement, expected to be dated February 18, 2005, with respect to the Annual Meeting of Shareholders to be held on March 21, 2005, which will be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and which is incorporated herein by reference. Certain information concerning executive officers of the Company appear in “EXECUTIVE OFFICERS OF CHAMPION” at Part I of this report.

ITEM 11 - EXECUTIVE COMPENSATION

            The information called for by this Item is contained under the captions “Compensation of Directors and Officers”, “Compensation Committee Report on Executive Compensation” and “Stock Performance Graph” in the Company’s definitive Proxy Statement, expected to be dated February 18, 2005, with respect to the Annual Meeting of Shareholders to be held on March 21, 2005, which will be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and which is incorporated herein by reference.

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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

            The information called for by this Item is contained under the captions “Equity Compensation Plan Information” and “Ownership of Shares” in the Company’s definitive Proxy Statement, expected to be dated February 18, 2005, with respect to the Annual Meeting of Shareholders to be held on March 21, 2005, which will be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and which is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The information called for by this Item is contained under the caption “Transactions with Directors, Officers and Principal Shareholders” in the Company’s definitive Proxy Statement, expected to be dated February 18, 2005, with respect to the Annual Meeting of Shareholders to be held on March 21, 2005, which will be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and which is incorporated herein by reference.

ITEM 14  - PRINCIPAL ACCOUNTANT FEES AND SERVICES

            The information called for by this Item is contained under the caption “Independent Accountants” in the Company’s definitive Proxy Statement, expected to be dated February 18, 2005, with respect to the Annual Meeting of Shareholders to be held on March 21, 2005, which will be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and which is incorporated herein by reference.

PART IV

ITEM 15 ‑ EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8‑K

(a) (1) and (2) 

         The Consolidated Financial Statements and Schedule, required by Item 8, are listed on the index on page F-1 and included as part of Item 15.

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3.         EXHIBITS

(2)		Plan of Acquisition	Stock Purchase Agreement between Company and William G. Williams, Jr., sole shareholder of Syscan Corporation, dated September 7, 2004 filed as Exhibit 2.1 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference.
(3)	3.1	Articles of Incorporation	Filed as Exhibit 3.1 to Form 10-Q dated June 16, 1997, filed on June 16, 1997, incorporated herein by reference.
	3.2	Bylaws	Filed as Exhibit 3.2 to Registration Statement on Form S-1, File No. 33-54454, filed on November 10, 1992, incorporated herein by reference.
(4)		Instruments defining the rights of security holders, including debentures.	See Exhibit 3.1 above.
(10)		Material Contracts	Realty Lease dated January 28, 1993 between ADJ Corp. and Company regarding 2450 1st Avenue, Huntington, West Virginia, filed as Exhibit 10.1 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Realty Lease dated January 28, 1993 between The Harrah and Reynolds Corporation and Company regarding 615 4th Avenue, Huntington, West Virginia, filed as Exhibit 10.2 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Realty Lease dated January 28, 1993 between ADJ Corp. and Company regarding 617-619 4th Avenue, Huntington, West Virginia, filed as Exhibit 10.3 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Realty Lease dated January 28, 1993 between The Harrah and Reynolds Corporation and Company regarding 1945 5th Avenue, Huntington, West Virginia, filed as Exhibit 10.4 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference.

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Realty Lease dated January 28, 1993 between Printing Property Corp. and Company regarding 405 Ann Street, Parkersburg, West Virginia, filed as Exhibit 10.5 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Realty Lease dated January 28, 1993 between Printing Property Corp. and Company regarding 890 Russell Cave Road, Lexington, Kentucky, filed as Exhibit 10.6 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Realty Lease dated January 28, 1993 between BCM Company, Ltd. and Company regarding 1563 Hansford Street, Charleston, West Virginia, filed as Exhibit 10.7 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Lease dated April 11, 1994 between Terry and Anis Wyatt and Stationers Inc. regarding 214 Stone Road, Belpre, Ohio, filed as Exhibit 10.1 to Form 10-K dated January 26, 1995, filed January 27, 1995, is incorporated herein by reference. Form of Indemnification Agreement between Company and all directors and executive officers, filed as Exhibit 10.4 to Registration Statement on Form S-1, File No. 33-54454, filed on November 10, 1992, is incorporated herein by reference. Lease Agreement dated June 1, 1995 between Owl Investors Joint Venture and U.S. Tag & Ticket Company, Inc. regarding 2217 Robb Street, Baltimore, Maryland filed as Exhibit 10.1 to Form 10-K dated January 26, 1996, filed January 26, 1996, is incorporated herein by reference. Lease Agreement dated June 1, 1972 between Earl H. and Elaine D. Seibert and Smith & Butterfield Co., Inc. regarding 113-117 East Third Street, Owensboro, Kentucky, filed as Exhibit 10.3 to Form 10-K dated January 28, 1997, filed January 28, 1997, is incorporated herein by reference.

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			$12,500,000 Term Loan Credit Agreement by and among Champion Industries, Inc. and the Banks Party thereto and PNC Bank, National Association, as Agent, dated as of March 31, 1997, as amended by Amendment No. 1 to Credit Agreement dated August 1, 1997, filed as Exhibit 10.1 to Form 10-K dated January 29, 1998, filed January 29, 1998, is incorporated herein by reference. $5,600,000 Term Loan Credit Agreement by and among the Company and its subsidiaries and PNC Bank, National Association, dated as of March 13, 1998, together with promissory note and representative security agreement attendant thereto, filed as Exhibit 10.1 to Form 10-K dated January 25, 1999 is incorporated herein by reference. Agreement of Lease between Mildred Thompson and Thompson’s of Morgantown, Inc. dated May 28, 1998, regarding Kirk and Chestnut Streets, Morgantown, West Virginia, filed as Exhibit 10.3 to Form 10-K dated January 25, 1999, is incorporated herein by reference.
		Executive Compensation Plans and Arrangements	Company's 1993 Stock Option Plan, effective March 22, 1994, filed as Exhibit 10.14 to Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated herein by reference. Company’s 2003 Stock Option Plan, filed as Exhibit A to proxy statement dated February 12, 2004, filed February 13, 2004, is incorporated herein by reference. Form of Stock Option Agreement pursuant to Company’s 2003 stock option plan filed as exhibit 10.2 to form 10-Q dated September 10, 2004 filed September 13, 2004, is incorporated herein by reference. Employment Agreement dated September 7, 2004 among William G. Williams, Jr., Syscan Corporation and the Company, filed as Exhibit 10.1 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference.

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Confidentiality and Non-Competition Agreement dated September 7, 2004 among William G. Williams, Jr., Syscan Corporation and the Company, filed as Exhibit 10.2 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference. Agreement of Lease between ADJ Corp and Champion Industries, Inc. dated January 1, 1999, regarding Industrial Lane in Kyle Industrial filed Exhibit 10.1 to Form 10-K dated January 25, 2000, filed January 28, 2000, is incorporated herein by reference. $10,000,000 revolving credit agreement by and among the Company and its subsidiaries and National City Bank dated as of April 1, 1999, filed as Exhibit 10.2 to Form 10-K dated January 25, 2000, filed January 28, 2000, is incorporated herein by reference. Lease Agreement dated November 1, 1999 between Randall M. Schulz, successor trustee of The Butterfield Family Trust No. 2 and Smith & Butterfield Co., Inc. regarding 2800 Lynch Road, Evansville, Indiana, filed as Exhibit 10.3 to Form 10-K dated January 25, 2000, filed January 28, 2000, is incorporated herein by reference. Agreement of Lease dated September 25, 1998 between Ronald H. Scott and Frank J. Scott dba St. Clair Leasing Co. and Interform Corporation, regarding 1901 Mayview Road, Bridgeville , Penn­sylvania, filed as Exhibit 10.4 to Form 10-K dated January 25, 2000, filed January 28, 2000, is incorporated herein by reference. First Amendment of Real Estate Lease Agreement dated May 6, 2003 by and between Ronald H. Scott and Frank J. Scott dba St. Clair Leasing Company and Interform Corporation, filed as Exhibit 10.1 to Form 8-K filed October 4, 2004, is incorporated herein by reference.

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$1,000,000 revolving line of credit between Stationers, Inc. and First Sentry Bank dated as of October 17, 2000, filed as Exhibit 10.1 to form 10-K dated January 22, 2001, filed January 26, 2001, is incorporated herein by reference. $2,690,938 Business Loan agreement by and among the Company and One Valley Bank National Association (BB&T), dated as of May 6, 1999, together with Promissory Note and Commercial Security Agreement, filed as Exhibit 10.4 to form 10-K dated January 22, 2001, filed January 26, 2001 is incorporated herein by reference. $618,720 Promissory Note by and among the Company and Bank One, West Virginia, N.A. dated as of June 6, 2000 together with commercial security agreement, filed as Exhibit 10.5 to form 10-K dated January 22, 2001, filed January 26, 2001, is incorporated herein by reference. $550,000 Promissory Note by and among the Company and Bank One, West Virginia, N.A. dated as of August 4, 2000 together with Commercial Security Agreement and Letter of Understanding, filed as Exhibit 10.6 to form 10-K dated January 22, 2001, filed January 26, 2001, is incorporated herein by reference. Agreement of Lease dated September 1, 2002 between Marion B. and Harold A. Merten, Jr. and The Merten Company regarding 1515 Central Parkway, Cincinnati, Ohio, Filed as Exhibit (10.1) to form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated herein by reference. $415,000 Commercial Lease Agreement by and among the company and Firstar Equipment Finance dated as of January 12, 2001, Filed as Exhibit (10.2) to form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated herein by reference.

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$450,000 Commercial Lease Agreement by and among the Company and Leasing One Corporation dated as of April 19, 2001, Filed as Exhibit (10.3) to form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated herein by reference. $315,665 Promissory Note by and among the Company and Community Trust Bank, N.A. as of April 27, 2001, Filed as Exhibit (10.4) to form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated herein by reference. Lease Agreement dated February 27, 1991 between the Alfred J. Moran Trust and Docutec of Louisiana, Inc. regarding 7868 Anselmo Lane, Baton Rouge, Louisiana, Filed as Exhibit (10.6) to form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated herein by reference. Amendment No. 2 to Credit Agreement by and among the Company and its subsidiaries and National City Bank dated as of April 1, 2002 along with Amended and Restated Subsidiaries Guaranty. Filed as Exhibit (10.1) to form 10-K dated January 20, 2003, Filed January 24, 2003 is incorporated herein by reference. Agreement Amending and Extending term of lease dated May 24, 2002 between Earl H. and Elaine D. Seibert and Smith and Butterfield Co., Inc. Filed as Exhibit (10.2) to form 10-K dated January 20, 2003, Filed January 24, 2003 is incorporated herein by reference. Promissory Note, $1,000,000 revolving line of credit between Stationers, Inc. and First Sentry Bank dated as of October 7, 2002. Filed as Exhibit (10.3) to form 10-K dated January 20, 2003, Filed January 24, 2003 is incorporated herein by reference. Business Loan Agreement, $1,440,000 commercial loan between Bourque Printing Company and Hibernia National Bank together with promissory note dated as of March 19, 2003,filed as exhibit 10.1 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference.

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Commercial Security Agreement, $450,050 commercial loan between Champion Industries, Inc. and First Century Bank dated as of March 2, 2003, filed as exhibit 10.2 to form 10-K dated January 19, 2004, filed January 26, 2004, is incorporated herein by reference. Business Loan Agreement, $351,000 commercial loan between Champion Industries, Inc. and City National Bank together with promissory note dated as of August 14, 2003, filed as exhibit 10.3 to form 10-K dated January 19, 2004, filed January 26, 2004, is incorporated herein by reference. Revolving Credit Agreement, $10,000,000 revolving line of credit between Champion Industries, Inc. and United Bank, Inc. dated as of August 1, 2003, filed as exhibit 10.4 to form 10-K dated January 19, 2004, filed January 26, 2004, is incorporated herein by reference. Agreement Amending and Extending term of lease dated May 9, 2003 between Champion Industries, Inc. DBA, Upton Printing and AMB Property, L.P, filed as exhibit 10.5 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference. Agreement Amending and Extending term of lease dated October 1, 2003 between Bourque Printing DBA, Upton Printing and M. Field Gomila Et. Al. , filed as exhibit 10.6 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference. Promissory Note, $122,500 between Champion Industries, Inc. and Community Trust Bank dated as of January 9, 2003, filed as exhibit 10.7 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference.

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Code of Ethics for the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer, filed as exhibit 14 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference. Code of Business Conduct and Ethics, filed as exhibit 14.2 to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated herein by reference. Agreement of Lease dated as of September 1, 2004, between Williams Land Corporation and Syscan Corporation regarding North Hills Drive and Washington Street, Charleston, West Virginia, filed as Exhibit 10.3 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference. Agreement of Lease dated as of September 1, 2004, between Williams Land Corporation and Syscan Corporation regarding 2800 Seventh Avenue, Charleston, West Virginia, filed as Exhibit 10.4 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference. Agreement of Purchase and Sale dated September 7, 2004, between Syscan Corporation and Williams Properties, LLC regarding 811 Virginia Street, East, Charleston, West Virginia, filed as Exhibit 10.5 to Form 8-K dated September 7, 2004, filed September 10, 2004, is incorporated herein by reference.

   

(10.1)	Exercise of Lease renewal option for 2800 Lynch Road Evansville, Indiana dated as of September 22, 2003.
	Page Exhibit (10.1)-p1
(10.2)	$1,000,000 Business Loan Agreement and promissory note by and between the Company and Community Trust Bank, N.A. as of March 19, 2004.
	Page Exhibit (10.2)-p1

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(10.3)	$1,000,000 revolving line of credit between Stationers, Inc. and First Sentry Bank dated as of April 7, 2004.
	Page Exhibit (10.3)-p1
(10.4)	$600,075 term note between Bourque Printing, Inc. and First Century Bank dated as of September 9, 2004.
	Page Exhibit (10.4)-p1
(10.5)	$3,920,000 promissory note and security agreement between Champion Industries, Inc. and United Bank, Inc. dated as of October 26, 2004.
	Page Exhibit (10.5)-p1
(10.6)	Modification letter to promissory note between Bourque Printing and Hibernia National Bank, Inc. dated December 28, 2004.
	Page Exhibit (10.6)-p1
(16)	Letter of Ernst & Young dated February 6, 2004, filed as Exhibit 16 to Form 8-K dated February 9, 2004, filed February 9, 2004, is incorporated herein by reference.

(21)	Subsidiaries of the Registrant	Exhibit 21                                Page Exhibit 21-p1
(23.1)	Consent of BKD, LLP	Exhibit 23.1                             Page ­­­Exhibit 23.1-p1
(23.2)	Consent of Ernst & Young LLP	Exhibit 23.2                             Page ­­­Exhibit 23.2-p1
(31.1)	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley act of 2002 - Marshall T. Reynolds	Exhibit 31.1                             Page Exhibit 31.1-p1
(31.2)	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley act of 2002 – Todd R. Fry	Exhibit 31.2                             Page Exhibit 31.2-p1
(31.3)	Principal Operating Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley act of 2002 – Kirby J. Taylor	Exhibit 31.3                             Page Exhibit 31.3-p1

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(32)

Marshall T. Reynolds, Todd R. Fry and Kirby J. Taylor Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley act of 2002

Exhibit 32                                Page Exhibit 32-p1

(b)          Exhibits – Exhibits are filed as a separate section of this report.

(c)           Financial Statement Schedules – Filed as separate section on page F-33.

 

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SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) 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.

    

44

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.

SIGNATURE AND TITLE		DATE
/s/ Lou J. Akers		January 17, 2005
Lou J. Akers, Director
/s/ Philip E. Cline		January 17, 2005
Philip E. Cline, Director
/s/ Harley F. Mooney, Jr.		January 17, 2005
Harley F. Mooney, Jr., Director
/s/ A. Michael Perry		January 17, 2005
A. Michael Perry, Director
/s/ Marshall T. Reynolds		January 17, 2005
Marshall T. Reynolds, Director
/s/ Neal W. Scaggs		January 17, 2005
Neal W. Scaggs, Director
/s/ Glenn W. Wilcox, Sr.		January 17, 2005
Glenn W. Wilcox, Sr., Director

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1. Summary of Significant Accounting Policies

           Champion is a commercial printer, business forms manufacturer and office products and office furniture supplier in regional markets in the United States of America, east of the Mississippi.

           The accounting and reporting policies of Champion conform to accounting principles generally accepted in the United States. The preparation of the financial statements in conformity 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. The following is a summary of the more significant accounting and reporting policies.

Principles of Consolidation

           The accompanying consolidated financial statements of Champion Industries, Inc. and Subsidiaries (the “Company”) include the accounts of The Chapman Printing Company, Inc., Bourque Printing, Inc., Dallas Printing Company, Inc., Stationers, Inc., Carolina Cut Sheets, Inc., U.S. Tag & Ticket Company, Inc., Donihe Graphics, Inc., Smith and Butterfield Co., Inc., The Merten Company, Interform Corporation, Blue Ridge Printing Co., Inc., CHMP Leasing, Inc., Rose City Press, Capitol Business Equipment, Inc., Thompson’s of Morgantown, Inc., Independent Printing Service, Inc., Diez Business Machines, Transdata Systems, Inc. and Syscan Corporation.

           Significant intercompany transactions have been eliminated in consolidation.

Cash and Cash Equivalents

           Cash and cash equivalents consist principally of cash on deposit with banks, repurchase agreements for government securities, and a money market account, all highly liquid investments with an original maturity of three months or less. At October 31, 2004 and 2003, the Company held overnight repurchase agreements for $834,000 and $1,415,000 of government securities with stated interest rates of 1.44% and 0.30%.

Accounts Receivable

           Accounts receivable are stated at the amount billed to customers. Accounts receivable are ordinarily due 30 days from the invoice date. 

           The Company encounters risks associated with sales and the collection of the associated accounts receivable.  As such, the Company records a monthly provision for accounts receivable that are considered to be uncollectible.  In order to calculate the appropriate monthly provision, the Company primarily utilizes a historical rate of accounts receivables written off as a percentage of total revenue.  This historical rate is applied to the current revenues on a monthly basis.  The historical rate is updated periodically based on events that may change the rate such as a significant increase or decrease in collection performance and timing of payments as well as the calculated total exposure in relation to the allowance.  Periodically, the Company compares

F-9

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

the identified credit risks with the allowance that has been established using historical experience and adjusts the allowance accordingly.   

           During 2004, 2003 and 2002 $488,000, $336,000 and $363,000 of bad debt expense was incurred and the allowance for doubtful accounts was $1,422,000, $1,191,000 and $1,397,000 as of October 31, 2004, 2003 and 2002.  The actual write-offs for the periods were $464,000, $543,000 and $398,000 during 2004, 2003 and 2002.  General economic conditions and specific geographic and customer concerns are major factors that may affect the adequacy of the allowance and may result in a change in the annual bad debt expense. 

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.

Property and Equipment

           Depreciation of property and equipment and amortization of leasehold improvements and equipment under capital leases are recognized primarily on the straight-line and declining-balance methods in amounts adequate to amortize costs over the estimated useful lives of the assets as follows:

Buildings and improvements	5 - 40 years
Machinery and equipment	3 - 10 years
Furniture and fixtures	5 - 10 years
Vehicles	3 - 5 years

F-10

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

 

15 to 25 years. The other intangible assets are being amortized over 5 to 20 years representing the future benefit of the intangible.

           In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets (FAS 142).  The Company adopted these standards with its fiscal year beginning November 1, 2001. Under the new rules, goodwill (and intangible assets deemed to have indefinite lives) is no longer amortized but is subject to annual impairment tests in accordance with FAS 142 except in the year of adoption where companies were required to evaluate impairment at the beginning of the year and again at a recurring annual date.  The first step in the impairment analysis is a screen for potential impairment and was required to be completed within six months of adopting FAS 142.  The second step if required, measures the amount of impairment.  The Company completed step one of the initial impairment analysis and the subsequent annual analysis during the second and fourth quarters of 2002. Additionally, this analysis was performed in the fourth quarter of 2004 and 2003. The application of the requirements of this standard did not result in an impairment charge.  Other intangible assets will continue to be amortized over their useful lives.  Application of the nonamortization provisions of the Statement resulted in an increase in net income of $50,000 in 2002 or approximately $0.01 per share.

Advertising Costs

           Advertising costs are expensed as incurred. Advertising expense for the years ended October 31, 2004, 2003 and 2002 approximated $641,000, $433,000 and $549,000.

Income Taxes

           Provisions for income taxes currently payable and deferred income taxes are based on the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

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 using the treasury stock method. The effect of dilutive stock options increased weighted average shares outstanding by 96,000, 48,000 and 12,000 for the years ended October 31, 2004, 2003 and 2002.

F-11

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Segment Information

           The Company designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. 

Accounting for Web Site Development Costs

           Certain external costs and internal payroll and payroll-related costs have been capitalized during the application, development and implementation stages of the Company’s web site.  The costs regarding the ongoing operation and maintenance are expensed in the period incurred.  The Company’s internet sales are based on a cooperative effort with the Company’s direct sales force as an optional ordering alternative.

Revenue Recognition

           Revenues are recognized when products are shipped or ownership is transferred and when services are rendered to customers.  The Company acts as a principal party in sales transactions, assumes title to products and assumes the risks and rewards of ownership including risk of loss for collection, delivery or returns. The Company typically recognizes revenue for the majority of its products upon shipment to the customer and transfer of title. Under agreements with certain customers, custom forms may be stored by the Company for future delivery. In these situations, the Company may receive a logistics and warehouse management fee for the services provided. In these cases, delivery and bill schedules are outlined with the customer and product revenue is recognized when manufacturing is complete and the product is received into the warehouse, title transfers to the customer, the order is invoiced and there is reasonable assurance of collectibility. Since the majority of products are customized, product returns are not significant. Therefore, the Company records sales on a gross basis.  Shipping and handling costs are recorded as a component of cost of sales.

Accounting for Costs Associated with Exit or Disposal Activities

            In July 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (Statement No. 146), which supercedes EITF No. 94-3, “Liability Recognition for Certain Employment Termination Benefits and Other Costs to Exit an Activity.”  Statement 146 requires companies to record liabilities for costs associated with exit or disposal activities to be recognized only when the liability is incurred instead of at the date of commitment to an exit or disposal activity.  Adoption of this standard is effective for exit or disposal activities that are initiated after December 31, 2002. The Company recognized costs for severance, lease termination and travel of approximately $123,000 during the fourth quarter of 2003, under the requirements of this standard, relating to the consolidation of the Company’s U.S. Tag facility into the Company’s existing Huntington, West Virginia location. During the second quarter of 2004 the Company recognized costs associated with facility consolidations of approximately $150,000 and personnel severance related costs of approximately $37,000.

F-12

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Accounting for Stock-Based Compensation

           In December 2004, the FASB issued SFAS No. 123R (revised 2004), Share-Based Payment. This statement revises SFAS No. 123, Accounting for Stock-Based Compensation, and requires companies to expense the value of employee stock options and similar awards. The effective date of this standard is interim and annual periods beginning after June 15, 2005.

           The Company has elected to follow the intrinsic value method in accounting for its employee stock options. Accordingly, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

           The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2004, 2003 and 2002 respectively: risk-free interest rates of 4.03%, 4.30% and 3.91%; dividend yields of 4.21%, 4.80% and 8.03%; volatility factors of the expected market price of the Company's common stock of 54.0%, 48.6% and 45.4%; and a weighted-average expected life of the option of 4 years.

           The following pro forma information has been determined as if the Company had accounted for its employee stock options under the fair value method. For purposes of pro forma disclosures, the estimated fair value of the options is expensed in the year granted since the options vest immediately. The Company's pro forma information for the years ended October 31 are as follows:

		Year Ended October 31
			2004				2003				2002
Net Income as reported		$	749,698			$	1,767,803			$	2,207,704
Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax effects			109,962				62,250				38,704
Pro Forma net income		$	639,736			$	1,705,553			$	2,169,000
Earnings per share:
Basic, as reported		$	0.08			$	0.18			$	0.23
Basic, pro forma		$	0.07			$	0.18			$	0.22
Diluted, as reported		$	0.08			$	0.18			$	0.23
Diluted, pro forma		$	0.07			$	0.17			$	0.22

F-13

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Reclassifications

           Certain prior-year amounts have been reclassified to conform to the current year financial statement presentation.

2. Inventories

           Inventories consisted of the following:

				October 31,
				2004				2003
Printing:
	Raw materials		$	2,326,821			$	2,203,228
	Work in process			1,998,824				2,022,420
	Finished goods			3,460,834				3,680,184
Office products and office furniture				3,483,035				3,444,097
			$	11,269,514			$	11,349,929

3. Long-term Debt

Long-term debt consisted of the following:

		October 31,
			2004				2003
Secured term note payable to a bank, due in monthly principal and interest installments approximating $89,950 with interest at the Wall Street Journal prime rate maturing October 2008, collateralized by substantially all assets of the Syscan Corporation and the Chapman Printing Charleston division.		$	3,920,000			$	—
Installment notes payable to banks, due in monthly installments plus interest at rates approximating the banks prime rate maturing in various periods ranging from December 2004 - February 2010, collateralized by equipment, vehicles, inventory and accounts receivable.			3,576,234				2,848,231
Capital lease obligations, due in monthly installments totaling $19,116 through February 2005, with $8,322 due in monthly installments through December 2005 at fixed rates of interest ranging from 7.0% to 7.75%.			149,002				359,027
			7,645,236				3,207,258
Less current portion			1,688,429				946,971
Long-term debt, net of current portion		$	5,956,807			$	2,260,287

The unsecured term note agreements contain restrictive financial covenants requiring the Company to maintain certain financial ratios. The Company was in compliance with these covenants at October 31, 2004.

F-14

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Notes to Consolidated Financial Statements (continued)

Maturities of long-term debt for each of the next five years follow:

	Notes	Capital
	Payable	Leases	Total
2005	$1,555,911	$132,518	$1,688,429
2006	1,561,364	16,484	1,577,848
2007	1,580,206	-	1,580,206
2008	1,583,979	-	1,583,979
2009	300,328	-	300,328
Thereafter	914,446	-	914,446
	$7,496,234	$149,002	$7,645,236

 

           On August 1, 2003 the Company obtained an unsecured revolving line of credit with a bank for borrowings to a maximum of $10,000,000 with interest payable monthly at the prime rate of interest.  The line of credit expires in July 2006 and contains certain restrictive financial covenants. The line of credit essentially replaced a previous $10,000,000 facility with another bank. The Company had outstanding borrowings of approximately $2.3 million and $1.7 million under this facility at October 31, 2004 and 2003 of which approximately $1.2 million was used to pay off an existing term loan prior to maturity in 2003.

           The Company has an unsecured revolving line of credit with a bank for borrowings to a maximum of $1,000,000 with interest payable monthly at the Wall Street Journal prime rate.  The line of credit expires in October 2005 and contains certain financial covenants.  There were no borrowings outstanding under this facility at October 31, 2004 or 2003.

           The prime rate, the base interest rate on the above loans, approximated 4.75% and 4.00% at October 31, 2004 and 2003. Interest paid during the years ended October 31, 2004, 2003 and 2002 approximated $320,000, $230,000and $385,000. The Company capitalized interest of $19,000 and $33,000 during fiscal 2004 and 2003 related to the purchase of a building in Baton Rouge, Louisiana.

           The Company’s non-cash activities for 2004, 2003 and 2002 included equipment purchases of approximately $0, $96,000 and $288,000, which were financed by a bank and the purchase in 2003 of a building in Baton Rouge, Louisiana of which $1,440,000 of the purchase price was financed by a bank.

4. Employee Benefit Plans

           The Company had a Profit Sharing Plan that covered all eligible employees and qualified as a Savings Plan under Section 401(k) of the Internal Revenue Code. Effective

F-15

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

 

January 1, 1998, the Profit Sharing Plan was merged into The Champion Industries, Inc. 401(k) Plan (the “Plan”). The Plan covers all eligible employees who satisfy the age and service requirements. Each participant may elect to contribute up to 15% of annual compensation, and the Company is obligated to contribute 100% of the participant’s contribution not to exceed 2% of the participant’s annual compensation. The Company may make discretionary contributions to the Plan. The Company’s expense under these Plans was approximately $383,000, $365,000 and $346,000 for the years ended October 31, 2004, 2003 and 2002.

           The Company's 1993 Stock Option Plan provides for the granting of both incentive and non-qualified stock options to management personnel for up to 762,939 shares of the Company's common stock. In March 2004, the Company’s 2003 stock option plan was adopted to provide for the granting of both incentive and non-qualified stock options to management personnel for up to 475,000 shares of the Company’s common stock. The option price per share for incentive stock options shall not be lower than the fair market value of the common stock at the date of grant. The option price per share for non-qualified stock options shall be at such price as the Compensation Committee of the Board of Directors may determine at its sole discretion. All options to date are incentive stock options. Exercise prices for options outstanding as of October 31, 2004 ranged from $2.49 to $4.29. Options vest immediately and may be exercised within five years from the date of grant. The weighted average remaining contractual life of those options is 2.84 years.           

F-16

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           A summary of the Company’s stock option activity and related information for the years ended October 31 follows:

			Weighted Average Exercise Price						Weighted Average Exercise Price						Weighted Average Exercise Price
	2004						2003						2002
Outstanding-beginning of year	312,000			$3.25			230,000			$5.41			130,000			$10.63
Granted	123,000			4.29			125,000			2.77			126,000			2.49
Exercised	(20,000	)		2.80			-			-			-			-
Forfeited or expired	(36,000	)		6.26			(43,000	)		13.42			(26,000	)		17.38
Outstanding-end of year	379,000			3.33			312,000			3.25			230,000			5.41
Weighted average fair value of options granted during the year	$1.49						$0.83						$0.52

A summary of stock options outstanding and exercisable at October 31, 2004, follows:

Exercise		Number Outstanding			Remaining
Price					Life
4.25			38,000		0.14
2.49			108,000		2.05
2.77			110,000		3.12
4.29			123,000		4.13

 

           The Company has a deferred compensation agreement with one employee of Blue Ridge Printing Co., Inc. providing for payments totaling approximately $500,000 over a ten year period after retirement. The Company had accrued approximately $365,000 and $354,000 at October 31, 2004 and 2003 relating to this agreement. The amount expensed for this agreement for the years ended October 31, 2004, 2003 and 2002 approximated $11,000, $14,000 and $18,000. To assist in funding the deferred compensation agreement, the Company has invested in life insurance policies, which had a cash surrender value of approximately $460,000 and $386,000 for years 2004 and 2003.

F-17

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

5. Income Taxes

Income tax expense consisted of the following:

			Year Ended October 31,
			2004				2003				2002
Current expense:
	Federal		$	461,383			$	1,270,574			$	1,460,913
	State			156,575				321,285				350,069
Deferred benefit				(35,866	)			(356,773	)			(245,091	)
			$	582,092			$	1,235,086			$	1,565,891

Deferred tax assets and liabilities are as follows:

				October 31,
				2004				2003
	Assets:
		Allowance for doubtful accounts		$	568,729			$	476,358
		Deferred compensation			147,260				142,973
		Net operating loss carryforward of acquired companies			611,750				604,582
		Accrued vacation			355,574				278,848
		Other accrued liabilities			186,858				189,492
		Other assets			106,596				89,240
	Gross deferred tax assets				1,976,767				1,781,493
	Liabilities:
		Property and equipment			3,537,653				3,337,530
		Intangible assets			1,384,278				-
		Gross deferred tax liability			4,921,931				3,337,530
		Valuation allowance			(285,250	)			(285,250	)
	Net deferred tax liabilities			$	3,230,414			$	1,841,287

F-18

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

		Year Ended October 31,
			2004				2003				2002
Statutory federal income tax rate			34.0	%			34.0	%			34.0	%
State taxes, net of federal benefit			7.5				7.0				6.1
Change in valuation allowance			-				(7.8	)			-
Deferred tax adjustments			-				6.1				(0.6	)
Selling expenses			5.7				2.5				2.1
Cash surrender value of life insurance accretion			(1.3	)			-				-
Other			(2.2	)			(0.7	)			(0.1	)
Effective tax rate			43.7	%			41.1	%			41.5	%

           Income taxes paid during the years ended October 31, 2004, 2003 and 2002 approximated $1,119,000, $1,758,000 and $659,000.

           The Company has available for income tax purposes net operating loss carryforwards from acquired companies of approximately $1,089,000, of which $157,000 expires in 2011, $899,000 in 2012 and $33,000 in 2013. The Company has available for state income tax purposes net operating loss carryforwards from acquired companies of approximately $2,992,000 of which $144,000 expires in 2012, $108,000 expires in 2013, $435,000 expires in 2014, $1,012,000 expires in 2015, $872,000 expires in 2016, $48,000 expires in 2018 and $373,000 expires in 2019.  The Company established valuation allowances against certain net operating loss carryforwards during 2003 the valuation allowance decreased by $259,197 resulting from changes in the estimated realizability of an acquired subsidiary’s deferred tax assets. There was no change in the valuation allowance in 2004.

6. Related Party Transactions and Operating Lease Commitments

           The Company leases operating facilities from entities controlled by its Chief Executive Officer, his family and affiliates as well as facilities controlled by a Company vice president pursuant to the acquisition of Syscan (see note 8). The original terms of these leases, which are accounted for as operating leases, range from two to fifteen years.

A summary of significant related party transactions follows:

	Year Ended October 31,
			2004				2003				2002
Rent expense paid to affiliated entities for operating facilities			$394,000				$424,000				$424,000
Sales of office products, office furniture and printing services to affiliated entities			929,000				590,000				803,000

F-19

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Notes to Consolidated Financial Statements (continued)

           In addition, the Company leases property and equipment from unrelated entities under operating leases. Rent expense amounted to $862,000, $960,000 and $881,000 for the years ended October 31, 2004, 2003 and 2002.

           Under the terms and conditions of the above-mentioned leases, the Company pays all taxes, assessments, maintenance, repairs or replacements, utilities and insurance.

           Future minimum rental commitments for all noncancelable operating leases including related party commitments with initial terms of one year or more consisted of the following at October 31, 2004:

2005	$  1,399,647
2006	1,220,998
2007	945,183
2008	701,474
2009	253,340
Thereafter	-
	$  4,520,642

           The Company participates in a self-insurance program for employee health care benefits with affiliates controlled by its Chief Executive Officer and as such is responsible for paying claims of company participants as required by the plan document. The Company is allocated costs primarily related to the reinsurance premiums based on its proportionate share to provide such benefits to its employees. The Company’s expense related to this program for the years ended October 31, 2004, 2003 and 2002 was approximately $3,197,000, $2,999,000 and $2,267,000. 

           In the first quarter of 2002, the Company made a deposit to purchase a fractional ownership in an aircraft from an entity controlled by its Chief Executive Officer for approximately $1.2 million of which $875,000 had been paid as of October 31, 2002. The Company had previously anticipated the transaction to be completed during the fourth quarter of 2002.  The Company’s Board of Directors further evaluated the transaction, and prior to its completion determined that it would be in the Company’s best interests to rescind the transaction. Therefore, the transaction has been terminated and a full refund of the deposit has been made.

           During 2004, 2003 and 2002 the Company utilized this aircraft and reimbursed the controlled entity for the use of the aircraft, fuel, air crew, ramp fees and other expenses attendant to the Company’s use, in amounts aggregating $95,000, $79,000 and $118,000.  The Company believes that such amounts are at or below the market rate charged by third-party commercial charter companies for similar aircraft.

F-20

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           The Company believes that the terms of its related party transactions are no less favorable to the Company than could be obtained with an independent third party.

7. Commitments and Contingencies

           On February 16, 2002, a jury verdict was rendered against the Company in a civil action brought against the Company in state court in Jackson, Mississippi. The plaintiff in this civil action asserted that the Company and its Dallas Printing Company, Inc. subsidiary had engaged in unfair competition and other wrongful acts in hiring certain of its employees.  The jury awarded the plaintiff $1,745,000 in actual damages and $750,000 in punitive damages.

           On March 1, 2002, the plaintiff filed a motion for attorney’s fees and costs in the amount of $889,401.  On July 16, 2002, the court entered an order granting plaintiff $645,119 in attorney fees and expenses, and ordered that interest on the amount of the jury award accrue from February 22, 2002.

            The Company appealed both the jury award and the attorney fee and expense award. 

           The Company was advised on February 3, 2004 that the Court of Appeals of the State of Mississippi had reversed the aforementioned judgment and jury verdict rendered against the Company and had remanded the case for new trial. The plaintiff petitioned the appeals court for rehearing of its ruling on February 17, 2004. The Company’s response was filed on February 24, 2004.

           On June 22, 2004 the Company was advised that the Court of Appeals of the State of Mississippi had upheld its February 3, 2004 reversal of the judgment and jury verdict and its remand of the case for new trial and had denied plaintiff’s petition for rehearing of that decision. Plaintiff filed a petition for writ of certiorari with the Mississippi Supreme Court to contest the ruling of the Court of Appeals on July 6, 2004. The Company filed a response to such petition on July 27, 2004.

           The Company was advised on September 16, 2004 that the Supreme Court of Mississippi had upheld the Court of Appeals of the State of Mississippi’s February 3, 2004 reversal of the judgment and jury verdict rendered February 16, 2002 against the Company and had upheld the reversal and remand of the case for new trial.

           The effect of the appeals courts orders of February 3, 2004 and June 22, 2004 and the Mississippi Supreme Court’s denial of plaintiff’s petition for certiorari is to negate the trial court’s award of damages and attorneys fees previously granted against the Company, and grant a new trial on plaintiff’s claims.

            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

F-21

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

 

past expenditures relating to environmental compliance have not had a material effect on the Company and are included in normal operating expenses. 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.

                The Company is subject to various claims and legal actions, other than the claim discussed above, that arise in the ordinary course of business.  In the opinion of management, after consulting with legal counsel, the Company believes that the ultimate resolution of these claims and legal actions will not have a material effect on the consolidated financial statements of the Company.

8. Acquisitions

           On September 7, 2004 the Company acquired all the issued and outstanding capital stock of Syscan Corporation (“Syscan”), a West Virginia corporation, for a cash price of $3,500,000 and a contingent purchase price, dependent upon satisfaction of certain conditions, not to exceed the amount of $1,500,000. The Company also purchased a building from an entity controlled by Syscan’s sole shareholder for $117,000 concurrent with the Syscan acquisition. After considering the cash received, the acquisition of a building and acquisition costs the net assets acquired totaled approximately $2,688,000. Syscan Corporation is a provider of integrated business products, with a primary emphasis on office and data products, printing, mailing and fulfillment services, and office furniture. The acquisition was consummated based on significant identified synergies which could be achieved due to a duplication of market territory. The acquisition brought additional supply chain management and mailing expertise to the Company and allowed Syscan to offer a broader array of printing services to its existing customer base.

           The Williams Land Corporation has the option to put the 3000 Washington Street building occupied by Syscan to the Company for a purchase price of $1.5 million and the Company has the option to purchase the building for $1.5 million at the conclusion of the five year lease term commencing September 1, 2009. This option may be exercised no later than 60 days prior to the end of the lease and closing of said purchase cannot exceed 45 days from the end of the lease.

           Two months of operations of Syscan Corporation are included in the Company’s Statement of Operations commencing concurrent with the acquisition.

F-22

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Syscan Acquisition
Current assets, net of cash received	$1,846,000
Property, plant, and equipment	782,000
Non-compete agreement	1,000,000
Customer relationships	2,461,000
Other assets	127,000
Total assets acquired	6,216,000
Current liabilities	(1,343,000)
Long-term debt	(760,000)
Deferred tax	(1,425,000)
Total liabilities acquired	(3,528,000)
Net assets acquired	$2,688,000

           The identifiable intangible assets of Syscan are being amortized on a straight-line basis over a period of 7 years for the non-compete agreement and 20 years for the customer relationships. The weighted average life of the intangible assets at the acquisition date was approximately 16 years.

           On May 13, 2004, the Company acquired certain assets of Cincinnati, Ohio Westerman Print Company.

           On July 1, 2003 the Company acquired certain assets of Pittsburgh based Integrated Marketing Solutions, the direct sales division and distributorship of Datatel Resources Corporation.

           On June 18, 2003 the Company acquired certain assets of Contract Business Interiors (CBI) of Wheeling, WV pursuant to acceptance by the U.S. Bankruptcy Court for the Northern District of West Virginia. As a result of this transaction the Company also assumed certain customer deposit liabilities in the ordinary course of business.

           Pro forma financial information and all disclosures required by FAS 141 and FAS 142 related to these acquisitions has not been presented because such information would not be materially different from amounts reported herein or is not significant.

           All of the above transactions have been accounted for using the purchase method of accounting.

9. Industry Segment Information

           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

F-23

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

 

forms); and the sale of office products and office furniture including interior design services. The Company employs approximately 830 people, of whom 78 or approximately 9% are covered by a collective bargaining agreement, which expires on May 31, 2006.

F-24

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The table below presents information about reported segments for the years ended October 31:

							Office Products
2004			Printing				& Furniture				Total
Revenues		$	107,696,605			$	34,919,102			$	142,615,707
Elimination of intersegment revenue			(12,372,291	)			(5,841,844	)			(18,214,135	)
Consolidated revenues		$	95,324,314			$	29,077,258			$	124,401,572
Operating income			632,232				705,887				1,338,119
Depreciation & amortization			4,247,164				142,594				4,389,758
Capital expenditures			4,912,115				61,719				4,973,834
Identifiable assets			54,378,626				9,771,258				64,149,884
Goodwill			1,774,344				286,442				2,060,786
							Office Products
2003			Printing				& Furniture				Total
Revenues		$	106,540,961			$	30,771,361			$	137,312,322
Elimination of intersegment revenue			(10,004,360	)			(5,125,330	)			(15,129,690	)
Consolidated revenues		$	96,536,601			$	25,646,031			$	122,182,632
Operating income (loss)			3,262,418				(106,202	)			3,156,216
Depreciation & amortization			4,145,286				143,121				4,288,407
Capital expenditures			4,572,890				126,233				4,699,123
Identifiable assets			48,387,601				10,081,234				58,468,835
Goodwill			1,643,530				286,442				1,929,972
							Office Products
2002			Printing				& Furniture				Total
Revenues		$	104,767,231			$	31,529,434			$	136,296,665
Elimination of intersegment revenue			(9,572,943	)			(3,839,813	)			(13,412,756	)
Consolidated revenues		$	95,194,288			$	27,689,621			$	122,883,909
Operating income			3,955,083				117,509				4,072,592
Depreciation & amortization			4,057,772				124,481				4,182,253
Capital expenditures			1,994,255				178,582				2,172,837
Identifiable assets			49,100,223				10,407,280				59,507,503
Goodwill			1,439,499				286,442				1,725,941

F-25

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           A reconciliation of total segment revenue, assets and operating income to consolidated income before income taxes for the years ended October 31, 2004, 2003 and 2002 is as follows:

			2004				2003				2002
Revenues:
	Total segment revenues		$	142,615,707			$	137,312,322			$	136,296,665
	Elimination of intersegment revenue			(18,214,135	)			(15,129,690	)			(13,412,756	)
	Consolidated revenue		$	124,401,572			$	122,182,632			$	122,883,909
Operating income:
	Total segment operating income		$	1,338,119			$	3,156,216			$	4,072,592
	Interest income			6,663				3,899				14,376
	Interest expense			(300,742	)			(167,442	)			(386,699	)
	Other income			287,750				10,216				73,326
Consolidated income  before income taxes			$	1,331,790			$	3,002,889			$	3,773,595
Identifiable assets:
	Total segment identifiable assets		$	64,149,884			$	58,468,835			$	59,507,503
	Elimination of intersegment assets			—				—				—
	Total consolidated assets		$	64,149,884			$	58,468,835			$	59,507,503

10.  Accounting for Costs Associated with Exit or Disposal Activities

           In August 2003, the Company relocated its U.S. Tag division from Baltimore, Maryland to Huntington, West Virginia. As a result of the Company’s decision to relocate this division the Company incurred lease termination costs of $63,000 which will be paid out on a monthly basis over the term of the lease (at a rate of approximately $3,333 per month for 19 months as of October 31, 2003), $45,000 in severance and termination benefits which were paid during the fourth quarter of 2003 and travel related costs of approximately $15,000 which were incurred during the fourth quarter of 2003. As a result of the U.S. Tag relocation 19 positions were eliminated. The Company anticipates only nominal costs related to the plant relocation to occur in the future. These costs will occur over the remaining lease term and include utility and security costs.

           During the second quarter of 2004, the Company incurred plant consolidation and facility relocation costs related to the closure of the Blue Ridge Printing Knoxville plant and consolidation into the Blue Ridge Printing Asheville plant, and the facility consolidations in Baton Rouge related to Bourque, Transdata and Diez. The facility consolidation and relocation costs approximated $150,000 and the personnel severance related costs approximated $37,000.

F-26

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           The costs associated with the aforementioned relocation of U.S. Tag and the Blue Ridge and Baton Rouge consolidations were reflected in the consolidated statements of operations statement in the category where the expenses historically have been classified and are part of the printing segment.

11. Fair Value of Financial Instruments

           The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. The fair value of long-term debt was estimated using discounted cash flows and it approximates its carrying value.

12. Acquired Intangible Assets and Goodwill

	2004				2003
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable
intangible assets
Non-compete agreement	$ 1,000,000		$      23,810		$               -		$               -
Customer relationships	2,460,696		23,631		-		-
Other	467,621		68,825		196,274		11,856
	3,928,317		116,266		196,274		11,856
Unamortizable
intangible assets
Goodwill	2,568,064		507,278		2,437,250		507,278
Total goodwill and
other intangibles	$ 6,496,381		$    623,544		$ 2,633,524		$    519,134

F-27

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

           Amortization expense for the years ended October 31, 2004, 2003 and 2002 was $104,000 and $12,000 and $0 respectively. Estimated amortization expense for each of the following years is:

2005		$	341,916
2006			341,916
2007			341,916
2008			336,810
2009			289,488
Thereafter			2,160,005
		$	3,812,051

           The changes in the carrying amount of goodwill for the years ended October 31, 2004 and 2003 were:

	2004		2003
Balance as of November 1, 2003 and 2002	$ 1,929,972		$ 1,725,941
Goodwill acquired during the year
Additions	130,814		204,031
Impairment losses	-		-
Goodwill written off related to
sales of businesses	-		-
Balance as of October 31, 2004 and 2003	$ 2,060,786		$ 1,929,972

           The changes in the carrying amounts of goodwill and other intangibles attribute to each segment at October 31, 2004 and 2003 are as follows:

GOODWILL
						Amortization
		31-Oct-03				Expense				Other				31-Oct-04
Printing	$	1,643,530			$	-			$	130,814			$	1,774,344
Office Products & furniture		286,442				-				-				286,442
Total	$	1,929,972			$	-			$	130,814			$	2,060,786

F-28

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

		31-Oct-02				Amortization Expense				Other				31-Oct-03
Printing		$	1,439,499			$	-			$	204,031				$1,643,530
Office Products & furniture			286,442				-				-				286,442
Total		$	1,725,941			$	-			$	204,031				$1,929,972
OTHER INTANGIBLES							Amortization
			31-Oct-03				Expense				Other				31-Oct-04
Printing		$	128,250			$	60,607			$	1,430,680			$	1,498,323
Office Products & furniture			56,168				43,803				2,301,363				2,313,728
Total		$	184,418			$	104,410			$	3,732,043			$	3,812,051
							Amortization
			31-Oct-02				Expense				Other				31-Oct-03
Printing		$	-			$	6,750			$	135,000			$	128,250
Office Products & furniture			-				5,106				61,274				56,168
Total		$	-			$	11,856			$	196,274			$	184,418

13. Certain Significant Estimates

            Our estimates that influence the financial statements are normally based on knowledge and experience about past and current events and assumptions about future events. The following estimates affecting the financial statements are particularly sensitive because of their significance and it is at least reasonably possible that a change in these estimates will occur in the near term.

Goodwill and Identifiable Assets

            We evaluate the recoverability of the goodwill of each of our reporting units as required under SFAS No. 142 by comparing the fair value of each reporting unit with its carrying value. The fair values of our reporting units are determined using a combination of a discounted cash flow analysis and market multiples based on historical and projected financial information. We apply our best judgment when assessing the reasonableness of the financial projections used to determine the fair value of each reporting unit.

F-29

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Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

Allowance for Doubtful Accounts

            The Company encounters risks associated with sales and the collection of the associated accounts receivable.  As such, the Company records a monthly provision for accounts receivable that are considered to be uncollectible.  In order to calculate the appropriate monthly provision, the Company primarily utilizes a historical rate of accounts receivables written off as a percentage of total revenue.  This historical rate is applied to the current revenues on a monthly basis.  The historical rate is updated periodically based on events that may change the rate such as a significant increase or decrease in collection performance and timing of payments as well as the calculated total exposure in relation to the allowance.  Periodically, the Company compares the identified credit risks with the allowance that has been established using historical experience and adjusts the allowance accordingly. The underlying assumptions used for the allowance can change from period to period and could potentially cause a material impact to the income statement and working capital.

F-30

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