Champion Industries (OTCQB:CHMP) showed up on my latest run of the Century Club scan, a TA scan developed with MarketClub’s smart scanner. After a long descent, Champion Industries’ stock price may have bottomed.
As is so often the case, the charts reflect what is occurring fundamentally in the underlying businesses. Each of Champion’s core businesses posted lower revenues year-over-year. Profits are also way down, and the company is in violation of certain debt covenants.
But like the stock price, the fundamentals at Champion have stabilized. Champion has cut costs substantially, and remains slightly profitable. Despite the technical violations of debt covenants, it has made all required principal and interest payments. There is a minimal amount of insider buying, but at least there are no recent sales.
CEO Marshall Reynolds is guardedly optimistic:
We were able to increase our cash provided from operations during the first nine months of this year over the previous year, primarily through proper management of our balance sheet. In a deep economic recession, the ability to monetize cash from your operating activities is a very important barometer. During our fiscal third quarter of 2009 we essentially operated at a break even level compared to the prior year which was our best third quarter in Company history.
We believe the economic headwinds will continue to blow strongly within certain of our operating segments for at least the next several quarters. We also believe that our operational realignment and related cost savings initiatives will continue to bring substantial benefits to our Company for years to come. We will continue to position the Company for long-term success by making the tactical operating decisions necessary to operate in this environment within the umbrella of the strategic decisions we are making to compete for years to come.
Critically, Champion Industries has cut approximately $16.7 million of debt since October 31, 2007. Expect more asset sales, shuttering of non-core or unprofitable businesses, and debt reduction in the years to come. What emerges will be a smaller but better-positioned company.