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Share Name | Share Symbol | Market | Type |
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Champion Industries Inc (CE) | USOTC:CHMP | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
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Champion Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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1.
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To approve proposed amendments to Article 7 of Champion’s Articles of Incorporation (capital stock) to effectuate a 1:200 reverse stock split of all the common shares of the Company, and related resolutions authorizing the Board to implement the reverse stock split, or abandon the proposed reverse stock split up until the time Articles of Amendment to the Company’s Articles of Incorporation are actually filed with the West Virginia Secretary of State), as more fully disclosed in the accompanying proxy statement.
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To approve proposed amendments to Article 7 of Champion’s Articles of Incorporation (capital stock) to authorize and create a new class of capital stock, specifically 2,500 shares of Preferred Series A stock having a par value of $1,000.00 per share, and having such other rights and attributes, as more fully disclosed in the accompanying proxy statement.
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To transact such other business as may properly come before the meeting or any adjournment thereof.
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If approved, as more fully disclosed in the accompanying proxy statement, the proposed amendments to Article 7 of the Company’s Articles of Incorporation that are the subject
of Proposal Number One would allow the Board to implement a proposed 1:200 reverse stock split.
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Pursuant to the proposal, for each 200 shares of Class A Common Stock held by a shareholder immediately before the reverse stock split, such shareholder would receive one share of Class A Common Stock post-split.
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The Company intends to have no fractional shares after the reverse stock split.
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In lieu of fractional shares, the Company will pay thirty cents ($0.30) for each pre-split share to each shareholder who after the reverse stock split had, in whole or in part, any fractional share interest.
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Accordingly, stockholders holding fewer than 200 shares of common stock immediately before the reverse stock split will have a fractional share of less than one (1.0) whole share after the split. Such stockholders (sometimes referred to as the “Cashed-Out Stockholders”) will have their shares canceled post-split, and in lieu of fractional shares will be entitled to receive a cash payment of thirty cents ($0.30) for each such share owned
before
the reverse stock split.
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Stockholders holding 200 or more shares of common stock immediately before the split will receive one share for each 200 common shares held, and, as applicable, any resulting (post-split) fractional shares consisting of less than one (1.0) whole share will be cancelled and converted into the right to receive from the Company a cash payment of thirty cents ($0.30) for each such share owned before the reverse stock split. To the extent any shareholder, including any affiliated shareholder, owns a number of pre-split shares that is greater than 200 but is not evenly divisible by 200, then the fractional shares of such shareholder (including any affiliated shareholder) resulting from the proposed reverse stock split would be cashed out at thirty cents ($0.30) per pre-split share. The maximum amount payable to any one shareholder (including any affiliated shareholder) would be $59.70 (199 pre-split shares at $0.30 per pre-split share).
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Cash consideration will only be paid for fractional shares, and only to shareholders whose post-split shares will consist entirely of, or will include in part, fractional shares consisting of less than one (1.0) whole share of the post-split Class A Common Stock.
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Approval of the proposed amendments to Article 7 of the Company’s Articles of Incorporation, and related shareholders resolutions, to effectuate the reverse stock split, will require approval by holders of a majority of the outstanding shares of Common Stock entitled to vote thereon. (See Annex 2).
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If the proposed amendments are approved by the Company’s stockholders and implemented, the Company expects to have fewer than 300 stockholders of record of its outstanding common stock, in which event the Company intends to deregister its shares and cease to be a reporting company under the Securities and Exchange Act of 1934, as also more fully disclosed in the accompanying proxy statement.
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Though it will no longer be required to do so by the Exchange Act or Securities and Exchange Commission (“SEC”) rules and regulations, following deregistration, the Company plans to continue to provide stockholders with annual audited financial statements and quarterly unaudited financial statements and to solicit proxies in connection with its annual stockholder meeting.
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The Board established a process for considering a possible transaction at its September 21, 2015 meeting, appointing a Special Committee of independent, disinterested and non-employee directors (Louis J. Akers and Glenn W. Wilcox, Sr.) to explore and evaluate potential transactions that would allow the Company to have fewer than 300 stockholders of record and deregister with the SEC, including a possible reverse stock split followed by deregistration. The Board charged the Special Committee with exploring alternatives, evaluating the advantages and disadvantages of a possible transaction, and making a recommendation to the full Board. The Special Committee on January 13, 2016 recommended the proposed 1:200 reverse stock split and related transactions that are the subject of Proposal Number One and are summarized in this section and in other sections of this proxy statement. See “Special Factors - Deliberations of the Board and Special Committee”, and “Special Factors - Fairness of Proposed Reverse Stock Split”.
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The Board, after consideration of various factors including the recommendations of the Special Committee, adopted resolutions accepting and adopting the Special Committee’s recommendations and supporting rationale, authorizing the proposed amendments to the Company’s Articles of Incorporation to effectuate the reverse stock split and related transactions including subsequent deregistration, and submitting those to a vote of shareholders.
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The Special Committee met four times concluding with its final meeting of January 13, 2016. The Special Committee made its recommendations after considering a number of factors. During its review process leading to its recommendations, the Special Committee considered, among other things:
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purposes of the proposed reverse stock split and subsequent deregistration;
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alternatives to the proposed transactions;
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key advantages and disadvantages of the proposed transactions, including possible mitigating factors for some disadvantages;
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estimated cost savings to be achieved by deregistration;
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estimated transaction costs associated with the reverse stock split and subsequent deregistration;
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different potential reverse split ratios and the reverse split ratio to recommend to the Board if the proposed transactions ultimately were pursued;
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what cash-out price per pre-split share would be fair to pay for resulting fractional shares (post-split) of the proposed reverse stock split both substantively and procedurally;
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draft valuation report of Chaffe & Associates, Inc., independent third party valuation firm (it should be noted that the draft valuation report was not a fairness opinion and that neither the Special Committee nor the Board obtained a fairness opinion);
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trading volumes, liquidity and price history of the Company’s registered Class A Common Stock, including its volume-weighted average price over the preceding 52 weeks prior to the January 8, 2016 data the Committee and Board reviewed; and
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other factors relating to the fairness.
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The Special Committee, and ultimately the Board, determined that it was in the best interests of the Company and shareholders to implement the proposed reverse stock split and subsequent SEC deregistration as summarized in this section and discussed in more detail in other parts of this proxy statement. See “Special Factors – Deliberations of the Board and Special Committee”, and “Special Factors - Fairness of the Proposed Reverse Stock Split” .
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The Special Committee and ultimately the Board made the following determinations as to benefits of these proposed transactions and potential alternatives:
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The primary benefits to the Company of doing a reverse stock split and subsequent deregistration are (a) to achieve savings of the annual costs of being a public company required to file reports with the SEC under the Securities and Exchange Act of 1934, and (b) free management and staff time to focus on long-term business objectives as well as internal financial reporting and analytics to support those objectives. However, there are other benefits or advantages of the proposed transactions as well. If the proposed transaction is approved by the stockholders and implemented, the Company estimates that the cost savings resulting from no longer being an SEC-reporting public company will be approximately $220,000 per year. Estimated transaction costs are expected to be less than $150,000 including estimated total cash payment of approximately $26,400 to purchase fractional share interests that will be cashed out. The Company expects to pay such transaction costs and consideration for such fractional share interests from existing cash reserves.
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The alternatives are either not feasible or (as in the case of continuing the status quo) would not allow the Company to achieve these potential benefits.
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Doing nothing and continuing the status quo also could significantly reduce the pace of recovery (i.e., restoring profitability) and slow growth (i.e., growing profitability), given the financial position of the Company and the state of the industries in which it operates.
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A potential advantage of the proposed transactions to potential Cashed-Out Stockholders and to other shareholders who end up with any fractional shares after the reverse stock split, is that the Company will purchase their fractional shares of Common Stock without charging brokerage commissions or other costs normally associated with the sale of securities
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Also, if stockholders wish to become Cashed-Out Stockholders but have 200 or more common shares presently, they can do that by selling part of their holdings in order to get below 200 shares and thereby have their remaining shares cashed out after the split. Similarly, if stockholders have less than 200 common shares presently and do not wish to become Cashed-Out Shareholders they can do so by purchasing additional shares so that they hold at least 200 common shares immediately before the reverse stock split.
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The Special Committee, and ultimately the Board, further determined that the potential advantages outweighed the potential disadvantages of the proposed reverse stock split and subsequent deregistration.
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In addition to the disadvantage that Cashed-Out Stockholders will cease to be shareholders if the proposed reverse stock split is approved and carried out, and thus will not receive certain benefits of the proposed transactions, the Special Committee and the Board considered various other potential disadvantages of the proposed transactions. Specifically, Cashed-Out Shareholders would not enjoy the benefits of (a) the annual savings that the Company anticipates it would experience by no longer being a public reporting company (estimated at approximately $220,000 annually, offset in the first year by transaction costs that are anticipated not to exceed $150,000), (b) any subsequent potential beneficial impacts those anticipated annual savings might have in terms of helping restore the Company to profitability and/or grow profitability after and if it is restored (although there can be no assurance that profitability will be restored or will grow if and after it is restored); and (c) if profitability is restored, use by the Company of deferred tax benefits (net operating loss carrying-forwards) that cannot be used unless and until the Company achieves positive taxable income.
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In the case of some of the potential disadvantages, the Special Committee and the Board identified potentially mitigating factors including, but not limited to, (a) holders of fractional shares after the split, including Cashed-Out Stockholders, will have those fractional shares purchased by the Company, for the cash-out consideration of thirty cents ($0.30) per pre-split share, without incurring any brokerage commissions or other costs normally associated with the sale of securities, and (b) the ability of shareholders whose holdings are somewhat more or less than 200 pre-split shares to either sell or buy shares in order to either become or avoid becoming Cashed-Out Stockholders as they may prefer.
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The Company intends to try to treat shareholders holding shares of Company Class A Common Stock in street name through a nominee (such as a bank or broker), including those who hold less than 200 shares in street name through a nominee, in the same manner as shareholders whose shares are registered directly in their own names. The Company will ask its transfer agent to request that such banks, brokers and other nominees (i.e., holding shares in street name for beneficial holders), carry out and effect the reverse stock split and the proposed cash-out of fractional shares for their various beneficial holders. See “Special Factors – Beneficial Owners of the Company’s Common Stock”.
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While the Company and its transfer agent (Broadridge Corporate Issuer Solutions, Inc.) will attempt to consolidate holdings of the same shareholder, it must be noted that (a) the Company and its transfer agent may not be able to do so, for example if they do not have the necessary information to compare and/or consolidate all of a single shareholder’s registered record holdings (if any) with any shares that same shareholder may hold in street name in a brokerage account (if any), and (b) the various banks, brokers and other nominees who hold shares in street names for various beneficial holders may have different procedures for processing the reverse stock split and the cash-out of fractional shares. Therefore, it is very important that each shareholder review his or her own holdings to determine if any shares are held through a nominee that holds shares in street name, and, if some are so held, it is very important to contact the bank, broker or other nominee holding any of the shareholder’s shares in street name. See “Special Factors – Beneficial Owners of the Company’s Common Stock”.
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It also is possible that some shareholders may hold shares in multiple certificates, or in multiple street name accounts through one or more nominees, or hold a combination of both certificated shares and shares held by a nominee in street name. Therefore, it is possible that someone holding more than 200 pre-split shares in multiple certificates and/or shares held in street name by a nominee, might end up a Cashed-Out Stockholder if each separate certificate and/or street name holding is less than 200 shares. As noted above, while the Company and its transfer agent will endeavor to consolidate holdings of a single stockholder, this may not be possible for various reasons including lack of pertinent information. Therefore, shareholders should check their holdings carefully, and contact the bank, broker or other nominee holding any of the stockholder’s shares in street name, to make sure that they take appropriate steps to either become, or avoid becoming, a Cashed-Out Stockholder, as they prefer. See “Special Factors – Benefits” and “Special Factors - Deliberations of the Board and Special Committee”.
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Each shareholder whose fractional share is purchased by the Company will recognize gain or loss for federal income tax purposes measured by the difference between the shareholder’s basis in the fractional share and the cash consideration received for the fractional share. The gain or loss will be capital gain or loss if the share was held as a capital asset. (See “Special Factors – Federal Income Tax Treatment”.
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The Board, acting on behalf of the Company, upon the recommendation of the Special Committee to the Board, has concluded that the reverse stock split, cash-out of fractional shares and related transactions (including the subsequent deregistration if the number of record shareholders is reduced below 300), is fair both procedurally and substantively (including as to the cash-out price per pre-split share to be paid in lieu of fractional shares). Without limitation, the Special Committee and the Board concluded that the proposed reverse stock split (including the proposed cash-out price) is fair both procedurally and substantively to unaffiliated security holders.
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The Special Committee and ultimately the Board evaluated price fairness, and that evaluation included consideration of the (A) multiple valuation approaches used by Chaffe in its draft valuation report (which took into account pertinent multiples for peer public companies and for transactions involving public companies in the same or similar industries, and which also included analysis of net book value as well as estimated liquidation value), as well as (B) trading history and price data for the Company’s shares, including volume-weighted average price (“VWAP”) per share of twenty four cents ($0.24) per share for the prior 52-week period (as of January 8, 2016) and (C) availability of statutory appraisal rights for qualifying dissenters who satisfy the applicable statutory requirements. See “Special Factors - Statutory Appraisal Rights” and Annex 1. The thirty cents ($0.30) per pre-split share price to be paid for cash-out of fractional shares after the reverse stock split, was considered fair. It represents an approximately 25.0% premium to the VWAP of twenty four cents ($0.24) per share and a premium of approximately 20.0% to the then last trading price of twenty five ($0.25) cents per share prior to the Special Committee’s final meeting. It represents an approximately 42.9% premium to the twenty one cents ($0.21) per share that was at the high end of the valuation range determined by Chaffe in its draft valuation report.
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As noted above, neither the Board nor the Special Committee obtained a fairness opinion and the Chaffe valuation report was not a fairness opinion.
One of the significant differences between a fairness opinion and a valuation is the objective third party opinion of the fairness of the proposed transaction. The other major difference between a fairness opinion and valuation is the cost to the Company. The Company’s Board considered the monetary value and share volume of the proposed transaction and determined it was most prudent to engage Chaffe to perform a valuation of the Company’s stock to considered when determining a cash out price and fairness to those shareholders cashed out.
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Any shareholder of the Company who has and who properly exercises his or her statutory right to dissent and perfect his or her statutory appraisal rights under the West Virginia Business Corporation Act (“WVBCA”), set forth in Chapter 31D, Article 13 of the West Virginia Code (the “WVBCA Article 13”), if any, shall be entitled, with respect to any shares as to which he or she shall so dissent, to the fair value of such shares as of the day prior to the date on which the shareholders of the Company voted to approve the reverse stock split, excluding any appreciation or depreciation in anticipation of the reverse stock split. A copy of WVBCA Article 13 is set forth in
Annex 1
to this proxy statement.
See “Special Factors - Statutory Appraisal Rights” and Annex 1.
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The Company believes that, in the context of the proposed transaction, WVBCA Article 13 gives statutory dissenters’ and appraisal rights to each Cashed-Out Stockholder, i.e., to each shareholder having less than 200 shares immediately before the reverse stock split, whose pre-split shares therefore would be reduced to only a fractional share after the split (consisting of less than a single share of post-split common stock), which fractional share would be cashed-out completely. To exercise statutory appraisal rights, it would be necessary to follow all the procedural and other requirements of WVBCA Article 13.
See “Special Factors - Statutory Appraisal Rights”; and Annex 1.
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The proposed reverse stock split and anticipated SEC deregistration after the split are considered a “going private” transaction as defined in Rule 13E-3 promulgated under the Exchange Act (a “Rule 13E-3 Transaction”). Accordingly, the Company and Marshall T. Reynolds, the controlling shareholder of the Company and the Company’s Chairman of the Board, have filed a Rule 13E-3 Transaction Statement on Schedule 13E-3 with the SEC related to the proposed reverse stock split and subsequent planned SEC deregistration. Amendments to the Schedule 13E-3 also have been filed with the last being on May 25, 2016. The other directors of the Company as well as the Company’s new President and Chief Executive Officer as of March 1, 2016 (Adam M. Reynolds) and its Senior Vice President and Chief Financial Officer (Justin T. Evans) have joined such Schedule 13E-3 as amended. The Schedule 13E-3 and amendments thereto are available on the SEC’s website at www.sec.gov or at https://materials.proxyvote.com/158520.
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Mr. Marshall T. Reynolds, as a controlling shareholder of the Company, is subject to Rule 13E-3 promulgated by the SEC under the Exchange Act with respect to “going private” transactions and is a “filing person” for purposes of Schedule 13E-3. Mr. Marshall T. Reynolds has, along with the Company and other affiliates identified in the next paragraph below, filed a Rule 13E-3 Transaction Statement on Schedule 13E-3 with the Commission, adopted the analysis and conclusions of the Special Committee and our Board, and concluded that the reverse stock split and subsequent deregistration are procedurally and substantively fair to the Company’s affiliated and unaffiliated shareholders, including Cashed-Out Shareholders as well as shareholders who will continue to hold shares after the reverse stock split. See “Special Factors – Fairness of the Proposed Reverse Stock Split - Determination by Marshall T. Reynolds".
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Mr. Marshall T. Reynolds is the controlling shareholder of the Company. He also controls Harrah & Reynolds Corp. of which he is the sole shareholder. In addition, each of Mr. Marshall T. Reynolds, the Chairman of the Board of the Company, the other members of the Board (Louis J. Akers, Philip E. Cline, Neal W. Scaggs and Glenn W. Wilcox, Sr.), Adam M. Reynolds (the Company’s President and Chief Executive Officer effective as of March 1, 2016), and Justin T. Evans, Senior Vice President and Chief Financial Officer of the Company are affiliates of the Company. As noted above, each affiliate has joined and adopted Schedule 13E-3, and concluded that the reverse stock split and subsequent deregistration are procedurally and substantively fair to the Company’s affiliated and unaffiliated shareholders, including Cashed-Out Shareholders as well as shareholders who will continue to hold shares after the reverse stock split. The material facts as to each such director and/or executive officer’s interest are known to or have been fully disclosed to each of the other members of the Board. For more detailed information concerning any conflict of interest of our Board or any filing person with respect to the proposed reverse stock split or concerning our relationship with any of our shareholders, please see also information under the sections of the proxy statement captioned “Security Ownership of Certain Beneficial Owners and Management”, “Certain Relationships and Related Transactions”, and “Special Factors – Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons”. See also “Special Factors – Fairness of the Proposed Reverse Stock Split - Determination by Marshall T. Reynolds”.
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Under the proposed shareholder resolutions for Proposal No. 1, the proposed reverse stock split would not be effective until the filing of the necessary Articles of Amendment to the Articles of Incorporation of Champion Industries, Inc. are filed with the West Virginia Secretary of State. Copies of the proposed shareholder resolutions including proposed amendments to the Company’s Articles of Incorporation relating to Proposal Number One relating to the proposed reverse stock split are set forth in
Annex 2
of this proxy statement. (See Annex 2.) Those proposed shareholder resolutions also authorize the Board to abandon the reverse stock split, and not file the related Articles of Amendment, if the Board determines that it is no longer in the best interest of the Company to do so. See “Special Factors - Board Discretion”; see also Annex 2.
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The Company presently has 11,299,528 shares of common stock issued and outstanding. All such shares are Class A Common Stock. No Class B Common Stock has been issued. As of January 4, 2016, there were 346 shareholders of record. The Company estimates that after the proposed reverse stock split is effected, the number of shares of Common Stock outstanding will be approximately the equivalent of 11,211,528 pre-split shares in the hands of approximately 215 shareholders of record. The total number of fractional shares to be purchased is estimated to be equivalent to approximately 88,000 shares of Common Stock on a pre-split basis at a cost of approximately $26,400. However, this is only an estimate and the exact number of shares that will be purchased in connection with the proposed reverse stock split will be determined once the proposed stock split is effective. See “Special Factors – Benefits” and “Special Factors - Financial Impact”.
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Greater confidentiality of strategic and competitively sensitive information;
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Streamlining of corporate governance;
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No brokerage fees or other commissions on purchase of fractional shares after the reverse split;
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Shareholders with less than 200 pre-split shares could buy additional shares to get to 200 by the record date and thereby avoid cash-out if they prefer;
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Similarly, shareholders with slightly more than 200 pre-split shares could sell some shares to get under the 200 share level if they prefer;
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The post-reverse-split trading price would appear to be greater than $5 per share, which may have advantages (e.g., the Special Committee understood that shares trading at less than $5 per share are not eligible for margin);
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Stock still could be traded in the over-the-counter market in the Pink Sheets; and
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Estimated transaction costs are estimated not to exceed $150,000, and possibly lower (the Special Committee’s estimate as of its final January 13, 2016 meeting was $111,400), which thus are estimated to be significantly less than the 1st full year’s estimated costs savings ($220,000).
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Review of “going dark” transactions and the advantages and disadvantages of pursuing such a transaction through a possible reverse stock split, which review included the following:
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the main advantages and additional advantages referenced above were identified and discussed, and
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the main disadvantages (in addition to the fact that some shareholders would no longer be shareholders if they ended up with only fractional shares after the potential reverse stock split and those fractional shares were cashed out completely) were identified as the following:
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reduced liquidity of the Company’s common shares (which the Committee believed was mitigated somewhat by the fact that liquidity and average trading volume are very low already);
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risk that later the number of record shareholders might once again go above the 300 threshold, e.g., due to brokerage firms deciding to no longer hold the Company’s street shares and forcing shareholders to go with certificated shares (sometimes referred to as “kickouts”), which would trigger re-registration and resumption of reporting (a risk which the Committee believed could be mitigated somewhat through close monitoring and the Committee’s further belief and anticipation that most likely “kickouts” would not be a major problem but nonetheless should be monitored closely);
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risk of potential litigation (a risk which the Committee believed could be mitigated somewhat through communications with shareholders, including for example in the proxy statement that would describe and explain any potential transaction and could explain the merits of such a transaction);
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Additional disadvantages were identified and reviewed, including the following:
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After deregistration, the Company’s shares would be less attractive as “currency” for potential acquisitions (which the Committee believed was mitigated somewhat by the fact that the Company has not been pursuing any potential acquisitions to any material extent);
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Dissenting shareholders who qualify and properly preserve and exercise such rights, would have statutory appraisal rights under WVBCA Article 13 (see Annex 1) (which the Committee believed could be mitigated somewhat by the fact that, as part of the statutory process, the Company had the option to pay a dissenting shareholder’s claimed per share fair value if doing so would be more cost-effective than pursuing judicial determination of fair value under WVBCA Article 13; in this regard, the Company believes that dissenting shareholders who are Cashed-Out Shareholders and would have all their holdings cashed out would be able to pursue statutory appraisal rights if they properly follow all the procedural and other requirements of WVBCA Article 13);
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Transaction costs and the time and expense associated with additional disclosures and SEC filings required to pursue a “going dark” transaction (which the Committee ultimately believed could be mitigated and offset by the anticipated level of annual cost savings from going dark, which, as noted above, were estimated to be greater than the anticipated transaction costs);
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Potential expense of reregistering the shares if someday doing so would be in the best interests of the Company, e.g., to raise capital (which the Committee did not believe was likely in the reasonably foreseeable future);
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Reduced information available to shareholders (which the Committee believed could be mitigated somewhat by continuing to provide shareholders with annual audited financial statements and unaudited quarterly statements along with communications with them as to material events and/or transactions);
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Reduced prestige to the extent that there is a perception of greater prestige in being a public SEC-reporting company (which the Committee believed was a relatively minor disadvantage, given that the Company had delisted from NASDAQ already, had a low trading price and trading volume for the Company’s common shares, and had not reported a profit in the Company’s recent annual and quarterly reports); and
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Continued application of antifraud provisions of federal and state securities laws (which the Committee believed could be mitigated by providing an insider trading policy whereby there would be certain trading windows available for insiders around financial and/or information releases by the Company).
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The limited trading market and liquidity of the Company’s Class A Common Stock.
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The trading and price history of the Company’s Class A Common Stock, including particularly the twenty four cents ($0.24) per share volume-weighted average price (“VWAP”) for the 52 weeks prior to January 8, 2016 (the most recent data available to the Special Committee before it made its recommendations).
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The opportunity presented to potential Cashed-Out Shareholders of even a small number of pre-split shares to receive a cash payment for their holdings without incurring any brokerage commissions or other trading or transaction costs (including without limitation any additional costs normally associated with odd-lot trading).
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The fact that the proposed cash-out price of thirty cents ($0.30) per pre-split share represents a premium of 25.0% to the VWAP of twenty four cents ($0.24) per pre-split share and represents an approximately 42.9% premium to the twenty one cents ($0.21) per share that was at the high end of the valuation range determined by Chaffe in its draft valuation report. It also represents a premium of 20.0% to the last trading price of twenty five cents ($0.25) per share prior to the Special Committee’s recommendation on January 13, 2016.
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The fact that, even counting continuing shareholders’ post-split fractional shares that would be cashed out, only an estimated 88,000 equivalent pre-split shares would be cashed out in connection with the proposed transaction.
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This number of shares (88,000) is less than 1% of the Company’s outstanding common shares -- i.e., it is approximately 0.78% of the 11,299,528 outstanding shares. Consequently, the cash-out of all post-split fractional shares would not have any material impact on existing ownership of the Company’s shares by any one shareholder including the Company’s controlling shareholder and any change in ownership would not exceed 1% of the number or percentage of shares owned prior to the split.
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Projections for the Year Ended October 31, 2016 (1) | |||
Revenues | $ | 65,066,631 | |
Cost of sales | 49,354,537 | ||
Gross profit | 15,712,094 | ||
Selling, general and administrative expenses | 14,723,000 | ||
Income from operations | 989,094 | ||
Other income (expenses) | (566,000 | ) | |
Income before income taxes | 423,094 | ||
Income tax benefit (2) | 857,691 | ||
Net income | $ | 1,280,785 | |
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Public company information derived from Capital IQ
|
·
|
Factset Mergerstat Control Premium Study: R.R. Donnelley and Consolidated Graphics
|
·
|
Morningstar’s 2015 Valuation Yearbook: Size Premium (a component of the discount rate)
|
·
|
Mergerstat review 1983 – 2015: Size Discount
|
§
|
The main benefit and advantage is the Company anticipates that it would eliminate and save an estimated $220,000 per year in costs of SEC reporting
|
§
|
A second main benefit is that the proposed reverse stock split would free management and staff time to focus on long-term business objectives as well as internal financial reporting and analytics to support those objectives.
|
§
|
Additional benefits and advantages would include the following:
|
·
|
Greater confidentiality of strategic and competitively sensitive information
|
·
|
Streamlining of corporate governance
|
·
|
No brokerage fees or commissions or other transaction costs to shareholders whose post-split fractional shares are cashed out after the proposed reverse stock split proposed reverse stock split proposed reverse stock split
|
·
|
Payment of a fair price ($0.30 cents per share) for fractional shares resulting from the proposed reverse stock split
|
·
|
Shareholders with less than 200 pre-split shares could buy additional shares to get to 200 by the record date and thereby avoid cash-out if they prefer
|
·
|
Similarly, shareholders with slightly more than 200 pre-split shares could sell some shares to get under the 200 share level if they prefer
|
·
|
The anticipated post-reverse-split trading price would appear to be greater than $5/share, which may have advantages (e.g., the Committee understands that shares trading at less than $5/share are not eligible for margin)
|
·
|
It is anticipated that the Company’s Class A Common Stock still could be traded in the over-the-counter market in the Pink Sheets
|
·
|
Estimated transaction costs are estimated not to exceed $150,000. If transaction costs do not exceed $150,000 then they will be significantly less than the estimated annual costs savings from no longer being a public SEC-reporting company ($220,000 annually).
|
·
|
If the proposed reverse stock split is approved and implemented, it is estimated that approximately 131 shareholders of record will cease to be shareholders of the Company and will no longer hold an equity interest in the Company. Such shareholders, therefore, will not share in any future increases in the Company’s net assets or stock price, if any, will no longer have the right to vote on any corporate matter, and will not be able to benefit from any net deferred tax assets in the event that the Company returns to profitability and achieves operating income in future years. Such shareholders also will be deprived of the ability to sell their shares of Common Stock at a time and for a price of their choosing. These potential detriments are mitigated somewhat by the ability of shareholders to choose to buy additional shares before the proposed reverse stock split so as to reach a total of 200 shares pre-split, if they wish to do so, and thereby avoid becoming Cashed-Out Shareholders.
|
·
|
Termination of registration of Common Stock under the Exchange Act will reduce substantially the information required to be furnished by the Company to its shareholders and will make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy or information statement in connection with certain shareholder meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of Rule 13E-3 promulgated by the SEC under the Exchange Act with respect to “going private” transactions no longer applicable to the Company and its executive officers and directors. In addition, termination of such registration will deprive “affiliates” of the Company of the ability to dispose of securities of the Company pursuant to Rule 144 promulgated under the Securities Act. However, these detriments are somewhat mitigated by the Company’s plans to provide annual audited financial statements and unaudited quarterly financial statements, and periodic information on material transactions and events (as the same may be identified by the Board from time to time).
|
·
|
Other potential detriments or disadvantages identified by the Special Committee and the Board (and, where applicable, potentially mitigating factors) include the following:
|
o
|
Reduced liquidity of the Company’s Class A Common Stock (mitigated somewhat by the fact that liquidity is already very low)
|
o
|
Risk that record shareholders could increase above 300 again, requiring reregistration. This includes the risk of “kickouts” by brokerage firms (i.e., ending book entry holdings, thereby forcing customers to get stock certificates and thus increasing the number of record shareholders). The Committee felt “kickouts” were unlikely now but could be monitored closely and addressed if the 300 threshold is approached or seems likely to be exceeded.
|
o
|
Common stock would be less attractive for use in acquisitions (mitigated somewhat by the fact that the Company hasn’t been doing material acquisitions in recent years).
|
o
|
Dissenting shareholders with only fractional shares after the reverse split would have statutory dissenters’ rights (mitigated somewhat by the independent valuation, the process, and the recommendation of a premium cash-out price).
It should be noted that the potential additional transaction costs that could be associated with the exercise of statutory dissenters’ rights would constitute a detriment to the Company and continuing shareholders, but not to Cashed-Out Shareholders.
|
o
|
Time and expense of the proposed transactions is significant (mitigated somewhat by estimated transaction costs being significantly lower than anticipated annual savings from no longer being an SEC-reporting company).
|
o
|
There is a potential decrease in perceived prestige from no longer being a public company.
|
o
|
There would be a potential expense of reregistering if that became necessary to raise capital.
|
o
|
There is reduced information to shareholders and others about the Company (this can be mitigated somewhat by providing quarterly/annual financial reports and updates to continuing shareholders as discussed above).
|
o
|
There would be continued application of anti-fraud provisions (which can be mitigated to some extent, e.g., by imposing trading windows for insiders and providing shareholders with updates for material events). That is, the Company intends to continue to provide periodic financial statements and information concerning material events to its shareholders after the proposed reverse stock split, assuming it is approved and implemented; accordingly, the continuing costs associated with such disclosures could be viewed as a potential detriment. On the other hand, this is somewhat mitigated by the Company’s intent to provide periodic financial statements and information concerning material events, coupled with imposing trading windows for insiders in conjunction therewith.
|
o
|
There is a risk of litigation (mitigated somewhat in the Committee’s view by several factors here, including the process used which included the Special Committee to review the potential transactions, the identified benefits to the Company of going dark, the Committee’s and the Board’s premium price recommendation for purchasing fractional shares after the reverse split, and the degree of shareholder choice noted above in the advantages of the proposed transactions).
|
·
|
While the Company and its transfer agent (Broadridge Corporate Issuer Solutions, Inc.) will attempt to consolidate holdings of the same shareholder, it must be noted that (a) the Company and its transfer agent may not be able to do so, for example if they do not have the necessary information to compare and/or consolidate all of a single shareholder’s registered record holdings (if any) with any shares that same stockholder may hold in street name in a brokerage account (if any), and (b) the various banks, brokers and other nominees who hold shares in street names for various beneficial holders may have different procedures for processing the reverse stock split and the cash-out of fractional shares. Therefore, it is very important that each stockholder review his or her own holdings to determine if any shares are held through a nominee that holds shares in street name, and, if some are so held, it is very important to contact the bank, broker or other nominee holding any of the stockholder’s shares in street name. See “Special Factors – Beneficial Owners of the Company’s Common Stock”.
|
·
|
Where the form must be sent and where certificates for certificated shares must be deposited and the date by which those certificates must be deposited;
|
·
|
A date by which the Company must receive the form which date may not be fewer than forty (40) nor more than sixty (60) days after the date the appraisal notice and form are sent and state that the stockholder is deemed to have waived the right to demand appraisal unless the form is received by the Company by the specified date;
|
·
|
The Company’s estimate of the fair value of the shares;
|
·
|
That, if requested in writing, the Company will provide to the stockholder requesting, within ten (10) days after the date upon which the Company must receive the form, the number of stockholders who return the forms and the number of shares owned by them; and
|
·
|
The date by which a stockholder may provide notice to withdraw his or her request for appraisal rights.
|
·
|
The Company’s financial statements, consisting of a balance sheet as of the end of the most recent fiscal year, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any;
|
·
|
A statement of the Company’s estimate of the fair value of the shares, which must equal or exceed the Company’s estimate given in the appraisal notice; and
|
·
|
A statement that dissenting stockholders have the right to demand further payment and that if any dissenting stockholder does not make a demand for further payment within the time period specified, the dissenting stockholder is deemed to have accepted the payment in full satisfaction of the Company’s obligations under WVBCA Article 13.
|
·
|
The Company financial statements consisting of a balance sheet as of the end of the most recent fiscal year, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any;
|
·
|
The Company’s estimate of fair value;
|
·
|
That they may accept the Company’s estimate of fair value, plus interest, in full satisfaction of their demands or demand payment under Section 31D-13-1326 of the West Virginia Business Corporation Act;
|
·
|
That those dissenting stockholders who wish to accept the offer must notify the Company within thirty (30) days after receiving the offer; and
|
·
|
That those dissenting stockholders who do not satisfy the requirements for demanding appraisal under Section 31D-13-1326 of the West Virginia Business Corporation Act are deemed to have accepted The Company’s offer. The Company will pay all stockholders who accept the offer within ten (10) days after receiving the stockholder’s acceptance in full satisfaction of the stockholder’s demand. Within forty (40) days after sending notice, the Company must pay in cash the amount it offered to each dissenting stockholder that did not qualify to demand appraisal under Section 31D-13-1326.
|
·
|
Against the Company and in favor of any and all stockholders demanding appraisal if the court finds that the Company did not substantially comply with the requirements of WVBCA Article 13; or
|
·
|
Against either the Company or the stockholder(s) demanding appraisal, in favor of any other party, if the court finds that the party against whom fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith.
|
Fiscal Year 2015
|
Fiscal Year 2014
|
||||||
High
|
Low
|
High
|
Low
|
||||
First quarter
|
$0.37
|
$0.14
|
$0.72
|
$0.35
|
|||
Second quarter
|
0.32
|
0.20
|
0.62
|
0.35
|
|||
Third quarter
|
0.43
|
0.25
|
0.50
|
0.25
|
|||
Fourth quarter
|
0.50
|
0.21
|
0.34
|
0.22
|
|||
Fiscal Year 2016
|
||||
High
|
Low
|
|||
First quarter
|
$0.28
|
$0.12
|
|
January 31, | October 31, | |||||||
2016 | 2015 | 2014 | |||||||
(U naudited) | |||||||||
Current assets:
|
|||||||||
Cash and cash equivalents | $ | 39,381 | $ | 540,909 | $ |
818,438
|
|||
Accounts receivable, net of allowance of $548,000, $531,000 and $688,000
|
9,255,926 | 8,651,745 |
9,512,731
|
||||||
Inventories
|
3,533,084 | 3,568,665 |
3,969,992
|
||||||
Other current assets
|
1,057,153 | 890,165 |
226,307
|
||||||
Current portion assets held for sale | 256,832 | 256,832 | 256,832 | ||||||
Total current assets
|
14,142,376 | 13,908,316 |
14,784,300
|
||||||
Noncurrent assets: | |||||||||
Property and equipment, at cost:
|
|||||||||
Land
|
1,254,195 | 1,254,195 |
1,254,195
|
||||||
Buildings and improvements
|
4,683,225 | 4,676,290 |
4,923,113
|
||||||
Machinery and equipment
|
34,208,104 | 34,130,233 |
33,297,081
|
||||||
Equipment under capital lease | 72,528 | 72,528 | 72,528 | ||||||
Furniture and fixtures
|
3,739,161 | 3,734,959 |
3,639,966
|
||||||
Vehicles
|
2,696,061 | 2,756,086 |
2,488,981
|
||||||
46,653,274 | 46,624,291 |
45,675,864
|
|||||||
Less accumulated depreciation
|
(40,175,916 | ) | (39,911,447 |
)
|
(38,991,652
|
)
|
|||
Net property and equipment
|
6,477,358 | 6,712,844 |
6,684,212
|
||||||
Goodwill
|
1,230,485 | 1,230,485 |
1,230,485
|
||||||
Other intangibles, net of accumulated amortization
|
1,027,320 | 1,057,845 |
1,179,943
|
||||||
Deferred financing costs
|
7,720 | 3,040 |
69,644
|
||||||
Other assets
|
13,315 | 13,996 |
59,809
|
||||||
Total noncurrent assets
|
8,756,198 | 9,018,210 |
9,224,093
|
Current liabilities:
|
|||||||||
Accounts payable
|
4,963,189 | 4,730,286 |
4,518,634
|
||||||
Accrued payroll and commissions
|
441,508 | 528,855 |
583,529
|
||||||
Taxes accrued and withheld
|
655,317 | 635,131 |
666,166
|
||||||
Accrued expenses
|
1,857,392 | 1,763,929 |
1,553,978
|
||||||
Debt discount | - | - | (138,520 | ) | |||||
Notes payable
|
2,140,323 | 1,929,358 |
10,947,218
|
||||||
Notes payable - related party |
2,500,000
|
2,500,000 | 2,500,000 | ||||||
Capital lease obligations | 16,091 | 15,852 | 14,931 | ||||||
Total current liabilities
|
12,573,820 | 12,103,411 |
20,645,936
|
||||||
Noncurrent liabilities:
|
|||||||||
Notes payable | 8,572,667 | 8,796,542 |
128,690
|
||||||
Capital lease obligations | 8,414 | 12,528 | 28,381 | ||||||
Total noncurrent liabilities
|
8,581,081 | 8,809,070 | 157,071 |
Fiscal First Quarter January 31, | Year Ended October 31, | ||||||||||||||
2016 | 2015 | 2015 |
2014
|
2013
|
|||||||||||
Revenues
|
$ | 15,923,372 | $ | 14,800,260 | $ | 61,285,201 | $ | 63,522,340 | $ |
72,323,175
|
|||||
Cost of sales
|
12,292,200 | 11,051,277 | 46,102,981 | 47,563,370 |
51,416,525
|
||||||||||
Gross profit
|
3,631,172 | 3,748,983 | 15,182,220 | 15,958,970 |
20,906,650
|
||||||||||
Selling, general, and administrative expenses | 3,745,002 | 3,952,923 | 15,393,504 | 16,213,220 | 19,910,369 | ||||||||||
Asset impairment charges | - | - | 2,270,685 | ||||||||||||
Loss from continuing operations | (113,830 | ) | (203,940 | ) | (211,284 | ) | (254,250 | ) | (1,274,404 | ) | |||||
Net (loss) income
|
(270,372 | ) | (467,818 | ) | (1,191,341 | ) |
|
(1,131,634 | ) |
5,714,394
|
|||||
(Loss) earnings per share:
|
|||||||||||||||
Basic (loss) income from continuing
operations
|
$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.11 | ) |
$
|
(0.10 | ) |
$
|
0.50
|
|
|
|||||||||||||||
Total basic (loss) earnings per common share | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | 0.51 | |
Diluted (loss) income from continuing
operations
|
$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | 0.35 | |
Total diluted (loss) earnings per common share | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | 0.36 | |
Fiscal First Quarter January 31, | ||||||
2016 | 2015 | |||||
Ratio of earnings to fixed charges | (0.6 | ) | (0.6 | ) | ||
Book value per common share (1) | $ | 0.11 | $ | 0.15 | ||
Year Ended October 31, | |||||||||||||||
|
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||
Ratio of earnings to fixed charges | (0.4 | ) | (0.1 | ) | 2.3 | 0.1 | 1.2 | ||||||||
Book value per common share (1) | $ | 0.12 | $ | 0.20 | $ | 0.27 | $ | (0.19 | ) | $ | 1.38 | ||||
Name, Age, Position and Offices with Company and Year Became Director | Principal Occupations for Past Five Years |
Louis J. Akers - 64
Director – 2004
|
Director, Huntington West Virginia Sanitary Board since September 11, 2013; President, Metric of West Virginia, August 15, 2012 to Present; Consultant, June 1, 2006 to present; Vice Chairman of Board of Directors, Ferris, Baker Watts, Incorporated from December 2001 to June 1, 2006; Chief Executive Officer, Ferris, Baker Watts, Incorporated, from October 1998 to December 2001.
Mr. Akers' management and financial background provides the Board with expertise in strategic planning and capital and financial management.
|
Philip E. Cline - 82
Director – 1992
|
Interim President, Alderson-Broaddus College from January 2011 to June 1, 2011;
Acting President, Alderson-Broaddus College from November 2010 to January 2011; Consultant, July 1999 to present; President of River City Associates, Inc. and General Manager of Pullman Plaza Hotel (Formerly Radisson Hotel Huntington) from 2001 to May 2010; President, Monumental Concrete Co. August 1996 to July 2005; President, Chief Executive Officer and Director, Broughton Foods Company from January 1997 to June 1999; Interim President and Chief Executive Officer, Broughton Foods Company from November 1996 to December 1996; Consultant from January 1996 to November 1996, Executive Vice President (1995 to 1996), Vice President and Treasurer (1968 to 1995) of J. H. Fletcher& Co. (manufacturer of underground mining equipment); Director of Bank One West Virginia Corporation (formerly Key Centurion Bancshares, Inc.) from 1983 to December 2000.
Mr. Cline's financial and managerial background and experience complements the Board's strategic planning and operations management.
|
Marshall T. Reynolds - 79
Chief Executive Officer, Director and Chairman of the Board of Directors - 1992
|
Chairman of the Board of Directors of Company from 1992 to present, Chief Executive Officer of the Company from 1992 until Adam M. Reynolds was named as the President and Chief Executive Officer of the Company effective as of March 1, 2016, and President of Company from December 1992 to September 2000; President and general manager of The Harrah and Reynolds Corporation, predecessor of the Company, from 1964 (and sole shareholder from 1972) to present; Chairman of the Board of River City Associates, Inc. (owner of Pullman Plaza Hotel) since 1989; Chairman of the Board of Directors, Broughton Foods Company from November 1996 to June 1999; Director (from 1983 to November 1993) and Chairman of the Board of Directors (from 1983 to November 1993) of Bank One West Virginia Corporation (formerly Key Centurion Bancshares, Inc.).
As noted, Mr. Reynolds served as chief executive officer of the Company and its predecessors since 1964, until March 1, 2016 when his nephew Adam M. Reynolds was named the Company’s new President and Chief Executive Officer). Mr. Reynolds thus provides in depth experience in the Company’s printing and office products businesses.
|
Title of Class |
Name and Address of
Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|||
Common Stock
|
Marshall T. Reynolds
2450 1st Avenue
Huntington, West Virginia 25703
|
10,910,396 shares
(1)(2)
|
67.6%
(2)
|
|||
(1)
|
Includes 4,238,687 shares owned by The Harrah and Reynolds Corporation and 2,440 shares owned by wife (with respect to which reporting person has no voting or investment power).
|
(2)
|
Also includes presently exercisable warrants owned by Mr. Marshall T. Reynolds to purchase shares of common stock equal to 30% of the then issued and outstanding common stock of the Company on a fully diluted, post-exercise basis. Based on the 11,299,528 shares of Company common stock currently issued and outstanding, exercise in full of the warrants would result in issuance of an additional 4,842,654 shares. The percent of class reflected above as owned by Mr. Marshall T. Reynolds includes common stock attributable to these warrants. Excluding the effect of the warrants, Mr. Marshall T. Reynolds beneficially owns 53.7% of currently outstanding common stock.
|
(3)
|
Joint voting and investment power shared with wife respect to 62,300 shares.
|
(4)
|
Giving effect to warrants. Excluding effect of warrants, percentage of class owned by all directors and executive officers is 56.2%.
|
(5)
|
Effective March 1, 2016 Adam M. Reynolds, age 33, was appointed President and Chief Executive Officer of Champion Industries, Inc. Mr. Adam Reynolds is succeeding his uncle, Marshall T. Reynolds, in this position. Mr. Marshall Reynolds will remain the Company's Chairman of the Board of Directors.
|
Annual
|
Expiration
|
|||
Property
|
Lessor
|
Square Feet
|
Rental
|
of Term
|
2450 1st Avenue
Huntington, West Virginia
|
ADJ Corp.
(1)
|
85,000
|
$116,400
|
Monthly
|
1945 5th Avenue
Huntington, West Virginia
(3)
|
Harrah and Reynolds
|
37,025
|
30,000
|
Monthly
|
615-619 4th Avenue
Huntington, West Virginia
|
ADJ Corp.
(1)
and
Harrah and Reynolds
|
59,641
|
21,600
|
Monthly
|
405 Ann Street
Parkersburg, West Virginia
|
Printing Property Corp.
(2)
|
36,614
|
57,600
|
Monthly
|
Route 2 Industrial Lane
Huntington, West Virginia
|
ADJ Corp.
(1)
|
35,000
|
144,000
|
Monthly
|
3000 Washington Street, West
Charleston, West Virginia
|
ADJ Corp
(1)
|
37,710 | 150,000 | Monthly |
(1)
|
ADJ Corp. is a West Virginia corporation. Two-thirds of the outstanding capital stock of ADJ Corp.
is owned by Marshall T. Reynolds’ two sons. One-third of the outstanding capital stock is owned
by the son of former director A. Michael Perry.
|
(2)
|
Printing Property Corp. is a West Virginia corporation wholly-owned by Mr. Marshall T. Reynolds.
|
(3)
|
Stationer’s Inc. relocated from the 1945 5
th
Avenue property in April 2015, only occupying this site for six months before moving to Route 2 Industrial Lane. This has raised the annual rental of the Route 2 Industrial Lane from $84,000 to $144,000 or an additional $60,000.
|
·
|
The proposed Preferred Series A shares would be non-voting shares.
|
·
|
The voting power for the election of directors and for all other voting purposes would be vested exclusively in the holders of the Class A common shares and, except as otherwise required by law, the holders of the proposed Preferred Series A shares would not have any voting power or be entitled to receive any notice of meetings of shareholders.
|
·
|
The proposed Preferred Series A shares would be issued in consideration of the conversion by a stockholder of $2,500,000.00 principal amount of debt owed to such shareholder by the Company, and shall be issued on the date of the Conversion upon surrender and cancellation of such debt by such stockholder (the “Conversion Date”).
|
·
|
The proposed Preferred Series A shares would be entitled to a preference in the event of liquidation as to proceeds thereof, over the common shares.
|
·
|
The proposed Preferred Series A shares would be entitled to a contingent dividend (as described below) and a preference as to dividends, and no dividends would be paid by the Company to any holders of any class of common shares unless and until such dividends as are required to be paid to the proposed Preferred Series A shares have in fact been declared and paid to the holders of the proposed Preferred Series A shares.
|
·
|
The proposed Preferred Series A shares would be entitled to receive a contingent dividend, at the rate of six percent (6.00%) per annum on the par value thereof, to be paid in the first quarter of the next ensuing fiscal year, following any fiscal year in which the net income of the Company after taxes is at least $1,000,000.00 or greater;
provided, however
, that no dividend would be permitted to be paid on the proposed Preferred Series A shares, and such shares would have a zero percent (0.00%) dividend rate, unless the corporation earned at least $1,000,000.00 in net income after taxes in the prior fiscal year.
|
·
|
On each anniversary of the Conversion Date (each, an “
Anniversary Date
”), the Company would have the option and right to redeem, in whole or in part, Preferred Series A shares at the redemption price of $1,000 per share (par), at the option of the Company.
|
·
|
The proposed Preferred Series A shares do
not
have a conversion right to convert the proposed Preferred Series A shares to any class of common shares.
|
|
Annex 1
|
West Virginia Business Corporation Act, Statutory Dissenters’ and Appraisal Rights (WV Code Chapter 31D, Article 13)
|
|
Annex 2
|
Proposed Shareholders Resolutions Relating to Proposal Number One (1:200 Reverse Stock Split) and Related Transactions, Including Forms of Proposed Articles of Amendment to the Articles of Incorporation of Champion Industries, Inc.*
|
|
Annex 3
|
Proposed Shareholders Resolutions Relating to Proposal Number Two (Authorization of New Class of Capital Stock Consisting of 2,500 Shares of Preferred Series A Having a Par Value of $1,000.00 Per Share, and Related Transactions), Including Forms of Proposed Articles of Amendment to the Articles of Incorporation of Champion Industries, Inc.*
|
Please sign exactly as your name(s) appear(s) on this proxy. When shares are held by joint tenants, both should sign. When signing as attorney-in-fact, executor, administrator, trustee, committee, personal representative or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
|
Signature | Signature if held jointly | |
Dated | Dated |
1 Year Champion Industries (CE) Chart |
1 Month Champion Industries (CE) Chart |
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