UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        DC 20549
 
 FORM
        10-K
 
 x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 For
        the
        Fiscal Year Ended October 31, 2007
 
 OR
 
 o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 Commission
        File No. 0-21084
 
 CHAMPION
        INDUSTRIES, INC.
 
 
 (Exact
        name of registrant as specified in its charter)
 
 West
                  Virginia
              
              55-0717455(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification No.)2450
                  First Avenue
                P.O.
                  Box 2968
                Huntington,
                  West Virginia
              
              25728(Address
                  of Principal Executive Offices)
              
              (Zip
                  Code)
 
 Registrant's telephone number, including area
                  code:
                  (304) 528-2700Securities registered pursuant to Section 12(b)
                  of Act:
                  Common Stock, $1.00 par value
              The Nasdaq Stock Market, LLC
                (Name
                  of each exchange on which
                  registered)Securities
                  registered pursuant to Section 12(g) of Act: None
 
 
 
 Indicate
        by check mark if the registrant is a well-known seasoned issuer, as defined
        in
        Rule 405 of the Securities Act.
 YesoNox
  Indicate
        by check mark if the registrant is not required to file reports pursuant
        to
        Section 13 or Section 15(d) of the Exchange Act.
 YesoNox
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for
        such
        shorter period that the registrant was required to file such reports) and
        (2)
        has been subject to such filing requirements for the past 90 days.
 YesxNoo
 
 Indicate
        by check mark if the disclosure of delinquent filers pursuant to Item 405
        of
        Regulation S-K is not contained herein and will not be contained, to the
        best of
        registrant's knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-K or any amendment
        to this
        Form 10-K.
 o
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
 Large
                  accelerated filero
              Accelerated
                  filero
              Non-accelerated
                  filer x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in rule
        12b-2 of the Exchange Act).
 YesoNox
 
 As
        of
        April 30, 2007, the aggregate market value of the registrant’s common stock held
        by non-affiliates of the registrant was $38,300,218 based on the closing
        price
        as reported on the National Association of Securities Dealers Automated
        Quotation System Global Market.
 2
 The
        outstanding common stock of the Registrant at the close of business on January
        4, 2008 consisted of 9,987,913 shares of Common Stock, $1.00 par
        value.
  Total
        number of pages including cover page 102.
 
 DOCUMENTS
        INCORPORATED BY REFERENCE: Portions of the Registrant’s definitive proxy
        statement expected to be dated February 15, 2008 with respect to its Annual
        Meeting of Shareholders to be held on March 17, 2008 are incorporated by
        reference into Part III, Items 10-14. Exhibit Index located in Part IV Item
        15.
 
 SPECIAL
        NOTE REGARDING
        FORWARD-LOOKING STATEMENTS
 
 Certain
        statements contained in this Annual Report or in documents incorporated herein
        by reference, including without limitation statements including the word
        “believes,” “anticipates,” “intends,” “expects” or words of similar import,
        constitute “forward-looking statements” within the meaning of section 21E of the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such
        forward-looking statements involve known and unknown risks, uncertainties
        and
        other factors that may cause the actual results, performance or achievements
        of
        the Company to be materially different from any future results, performance
        or
        achievements of the Company expressed or implied by such forward-looking
        statements. Such factors include, among others, general economic and business
        conditions, general economic and business conditions in the Company’s market
        areas affected by Hurricane Katrina, changes in business strategy or development
        plans and other factors referenced in this Annual Report, including without
        limitations under the captions “Management’s Discussion and Analysis of
        Financial Condition and Results of Operations” and “Business.” Given these
        uncertainties, prospective investors are cautioned not to place undue reliance
        on such forward-looking statements. The Company disclaims any obligation
        to
        update any such factors or to publicly announce the results of any revisions
        to
        any of the forward-looking statements contained herein to reflect future
        events
        or developments.
  PART
        I
 
 ITEM
        1 - BUSINESS
 
 HISTORY
 
 Champion
        Industries, Inc. (“Champion” or the “Company”) is a major commercial printer,
        business forms manufacturer and office products and office furniture supplier
        in
        regional markets east of the Mississippi River. The Company also publishes
        The
        Herald-Dispatch daily newspaper in Huntington, WV with a total daily and
        Sunday
        circulation of approximately 27,000 and 32,000, respectively. The Company's
        sales offices and production facilities are located in Huntington, Charleston,
        Parkersburg, Clarksburg, Wheeling and Morgantown, West Virginia; Lexington
        and
        Owensboro, Kentucky; Baton Rouge and New Orleans, Louisiana; Cincinnati,
        Ohio;
        Kingsport and Knoxville, Tennessee; Evansville, Indiana; Bridgeville and
        Altoona, Pennsylvania; and Asheville, North Carolina. The Company's sales
        force
        of approximately 140 salespeople sells printing services, business forms management services,
        office
        products, office furniture and newspaper advertising.
 3
 The
        Company was chartered as a West Virginia corporation on July 1, 1992. Prior
        to
        the public offering of the Company's Common Stock on January 28, 1993 (the
        “Offering”), the Company's business was operated by The Harrah and Reynolds
        Corporation (“Harrah and Reynolds”), doing business as Chapman Printing Company,
        together with its wholly-owned subsidiaries, The Chapman Printing Company,
        Inc.
        and Stationers, Inc. Incident to the Offering, Harrah and Reynolds and the
        Company entered into an Exchange Agreement, pursuant to which, upon the closing
        date of the Offering: (i) Harrah and Reynolds contributed to the Company
        substantially all of the operating assets of its printing division, including
        all inventory and equipment (but excluding any real estate and vehicles)
        and all
        issued and outstanding capital stock of its subsidiaries, The Chapman Printing
        Company, Inc. and Stationers, Inc.; (ii) the Company assumed certain of the
        liabilities relating to the operations of the printing divisions of Harrah
        and
        Reynolds and its subsidiaries, The Chapman Printing Company, Inc. and
        Stationers, Inc., excluding debts associated with real estate, certain accounts
        payable to affiliates and certain other liabilities; and (iii) Harrah and
        Reynolds was issued 2,000,000 shares of Common Stock of the
        Company.
 
 The
        Company and its predecessors have been headquartered in Huntington since
        1922.
        Full scale printing facilities, including web presses for manufacturing business
        forms, and sales and customer service operations are located in Huntington.
        The
        Company's Charleston division was established in 1974 through the acquisition
        of
        the printing operations of Rose City Press. Sales and customer service
        operations, as well as the pre-press departments, are located in Charleston.
        The
        Parkersburg division opened in 1977 and was expanded by the acquisitions
        of Park
        Press and McGlothlin Printing Company. In addition to sales and customer
        service
        operations, this division houses a large full-color printing facility and
        a
        state-of-the-art studio, with scanners, electronic color retouching equipment
        and 4-, 5- and 6-color presses.
 
 The
        Lexington division commenced operations in 1983 upon the acquisition of the
        Transylvania Company. This location includes a pre-press department,
        computerized composition facilities, as well as sales and customer service
        operations.
 
 The
        Company acquired Stationers, Inc. (“Stationers”), an office product, office
        furniture and retail bookstore operation located in Huntington, in 1987 and
        consolidated its own office products and office furniture operations with
        Stationers. On August 30, 1991, Stationers, Inc. sold the assets, primarily
        inventory and fixtures, of its retail bookstore operation. In July 1993,
        Stationers expanded through acquisition and began operations in Marietta,
        Ohio,
        under the name “Garrison Brewer.” The Company’s Garrison Brewer operation was
        relocated across the Ohio river to the nearby Chapman Printing Parkersburg
        location in 2002.
 
 The
        Bourque Printing division (“Bourque” or “Champion Graphic Communications -
        Baton Rouge”) commenced operations in June 1993, upon the acquisition of Bourque
        Printing, Inc. in Baton Rouge, Louisiana. This location includes a pre-press
        department, computerized composition facilities, a pressroom with up to 6-color
        presses and a bindery department, as well as sales and customer service
        operations. Bourque was expanded through the acquisition of Strother
        Forms/Printing in Baton Rouge in 1993, through the acquisition of the assets
        of
        E. S. Upton Printing Company, Inc. (“Upton” or "Champion Graphic
        Communications - New Orleans”) in New Orleans in 1996 and through the
        acquisition of Transdata Systems, Inc. in Baton Rouge and New Orleans in
        2001.
        The Upton production operations were relocated to Baton Rouge in the fourth
        quarter of 2005 as a result of Hurricane Katrina. However, the sales and
        customer service staff continue to operate in New Orleans.
 4
 The
        Dallas Printing division (“Dallas” or “Champion Jackson”) commenced operations
        in September 1993, upon the acquisition of Dallas Printing Company, Inc.
        in
        Jackson, Mississippi. This location includes a pre-press department,
        computerized composition facilities, as well as sales and customer service
        operations. The operations of Dallas were moved to Baton Rouge, Louisiana
        in
        August 2005 and consolidated into an existing facility.
 
 On
        November 2, 1993, a wholly-owned subsidiary of the Company chartered to effect
        such acquisition purchased selected assets of Tri-Star Printing, Inc., a
        Delaware corporation doing business as “Carolina Cut Sheets”  in
        the
        manufacture and sale of business forms in Timmonsville, South Carolina. The
        Company's subsidiary has changed its name to “Carolina Cut Sheets, Inc.”
Carolina Cut Sheets manufactures single-part business forms for sale to dealers
        and through the Company's other divisions. Carolina Cut Sheets was relocated
        to
        Huntington, West Virginia in 2001.
 
 On
        February 25, 1994, Bourque acquired certain assets of Spectrum Press Inc.
        (“Spectrum”), a commercial printer located in Baton Rouge, Louisiana.
 
 On
        June
        1, 1994, the Company acquired certain assets of Premier Data Graphics, a
        distributor of business forms and data supplies located in Clarksburg, West
        Virginia.
 
 On
        August
        30, 1994, Dallas acquired certain assets of Premier Printing Company, Inc.
        (“Premier Printing”) of Jackson, Mississippi. This operation was moved to Baton
        Rouge, Louisiana with the Dallas relocation.
 
 On
        June
        1, 1995, in exchange for issuance of 52,383 shares of its common stock, the
        Company acquired U.S. Tag & Ticket Company, Inc. (“U.S. Tag”), a Baltimore,
        Maryland based manufacturer of tags used in the manufacturing, shipping,
        postal,
        airline and cruise industries. The operations of U.S. Tag were moved to
        Huntington, West Virginia in August 2003 and they were consolidated into
        an
        existing facility.
 
 On
        November 13, 1995, the Company acquired Donihe Graphics, Inc. (“Donihe”), a
        high-volume color printer based in Kingsport, Tennessee.
 
 On
        July
        1, 1996, the Company acquired Smith & Butterfield Co., Inc. (“Smith &
Butterfield”), an office products company located in Evansville, Indiana and
        Owensboro, Kentucky. Smith & Butterfield is operated as a division of
        Stationers, Inc.
 
 On
        August
        21, 1996, the Company purchased the assets of The Merten Company (“Merten”), a
        commercial printer headquartered in Cincinnati, Ohio.
 
 On
        December 31, 1996, the Company acquired all outstanding capital stock of
        Interform Corporation (“Interform”), a business form manufacturer in
        Bridgeville, Pennsylvania.
 
 On
        May
        21, 1997, the Company acquired all outstanding common shares of Blue Ridge
        Printing Co., Inc. of Asheville, North Carolina and Knoxville, Tennessee
        (“Blue
        Ridge”). During the second quarter of 2004, the Blue Ridge Knoxville plant was
        consolidated into the Asheville plant. The Company continues to maintain
        a sales
        office in Knoxville.
 5
 On
        February 2, 1998, the Company acquired all outstanding common shares of Rose
        City Press (“Rose City”) of Charleston, West Virginia.
 
 On
        May
        18, 1998, the Company acquired all outstanding common shares of Capitol Business
        Equipment, Inc. (“Capitol”), doing business as Capitol Business Interiors, of
        Charleston, West Virginia.
 
 On
        May
        29, 1998, the Company acquired all outstanding common shares of Thompson’s of
        Morgantown, Inc. and Thompson’s of Barbour County, Inc. (collectively,
“Thompson’s” or “Champion Morgantown”) of Morgantown, West Virginia.
 
 Rose
        City, Capitol and Thompson’s are operated as divisions of
        Stationers.
 
 On
        June
        1, 1999, the Company acquired all of the issued and outstanding common stock
        of
        Independent Printing Service, Inc. (“IPS”) of Evansville, Indiana. IPS is
        operated as a division of Smith & Butterfield.
 
 On
        July
        16, 1999, the Company’s Blue Ridge subsidiary acquired certain assets and
        assumed certain liabilities of AIM Printing (“AIM”) of Knoxville, Tennessee.
 
 On
        November 30, 1999, the Company acquired all of the issued and outstanding
        common
        stock of Diez Business Machines (“Diez”) of Gonzales, Louisiana. Diez was
        operated as a subsidiary of Stationers until 2004 when it was relocated to
        the
        Bourque facility in Baton Rouge, Louisiana.
 
 On
        November 6, 2000, the Company acquired certain assets of the Huntington,
        West
        Virginia paper distribution division of the Cincinnati Cordage Paper Company
        (“Cordage”). On April 30, 2001, the Company entered into a strategic alliance
        with Xpedx resulting in the assumption by Xpedx of the Cordage customer list
        and
        the sale of certain inventory items.
 
 On
        October 10, 2001, the Company acquired Transdata Systems, Inc. (“ Transdata”) of Baton
        Rouge and New Orleans, Louisiana. In 2004, Transdata was relocated to existing
        facilities in New Orleans and Baton Rouge. In 2005, Transdata New Orleans
        operations were relocated to Baton Rouge.
 
 On
        June
        18, 2003, the Company acquired certain assets of Contract Business Interiors
        ("CBI") of Wheeling, West Virginia 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.
 
 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
        May
        13, 2004, the Company acquired certain assets of Cincinnati, Ohio Westerman
        Print Company (“Westerman”). The assets of Westerman were moved to the Company’s
        Merten operation in Cincinnati, Ohio.
 6
 On
        September 7, 2004, the Company acquired all the issued and outstanding capital
        stock of Syscan Corporation (“Syscan”), a West Virginia corporation, for a gross
        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.  At closing, after considering the cash received in the
        transaction, the acquisition of a building and acquisition costs, the net
        assets
        acquired totaled approximately $2,688,000. On December 14, 2006, the Company
        satisfied the contingent purchase price for a payment of
        $1,350,725.
 
 On
        September 14, 2007, the Company completed, pursuant to an asset purchase
        agreement, the acquisition of The Herald-Dispatch daily newspaper in Huntington,
        WV through a newly formed subsidiary Champion Publishing, Inc. The purchase
        price was $77.0 million and subject to a working capital payment of $837,554
        plus or minus any change in working capital from the index working capital
        base
        of $1,675,107 at the closing date of September 14, 2007. The working capital
        payment totaled approximately $1.6 million.
  All
        acquisitions have been accounted for using the purchase method of accounting
        except for U.S. Tag, Blue Ridge, Capitol and Thompson’s, which utilized the
“pooling-of-interest” method of accounting.
 
 BUSINESS
 
 Champion
        is engaged in the commercial printing and office products and furniture supply
        business in regional markets east of the Mississippi River. The
        Company also publishes The Herald-Dispatch daily newspaper in Huntington,
        WV
        with a total daily and Sunday circulation of approximately 27,000 and 32,000.The Company's sales force markets a full range of printing services,
        business forms, office products and office furniture. Management views these
        sales activities as complementary since frequent customer sales calls required
        for one of its products or services provide opportunities to cross-sell other
        products and services. The Company believes it benefits from significant
        customer loyalty and customer referrals because it provides personal service,
        quality products, convenience and selection with one-stop shopping.
 
 The
        Company's printing services range from the simplest to the most complex jobs,
        including business cards, books, tags, labels, brochures, posters, 4- to
        6-color process printing and multi-part, continuous and snap-out business
        forms.
        The Company's state-of-the-art equipment enables it to provide computerized
        composition, art design, paste-up, stripping, film assembly and color scanner
        separations. Included within our print segment are fulfillment services to
        our
        customers which encompasses warehousing, distribution, and reporting services.
        The Company also offers complete bindery and letterpress services. The printing
        operations contributed $101.7 million, $106.4 million and $98.5 million or
        69.8%, 73.3% and 73.0% of the Company's total revenues for the fiscal years
        ended October 31, 2007, 2006 and 2005.
 
 The
        Company provides a full range of office products and office furniture primarily
        in the budget and middle price ranges, and also offers office design services.
        The Company publishes a catalog of high volume, frequently ordered items
        purchased directly from manufacturers. These catalog sales account for the
        bulk
        of sales volume and afford sales personnel flexibility in product selection
        and
        pricing. Medium to large volume customers are offered levels of pricing
        discounts. In addition, the Company offers a broad line of general office
        products through major wholesalers' national catalogs. The Company has
        implemented Internet e-commerce sites, which allow customers to order office
        products, furniture and forms online. The e-commerce sites include the office
        products and office furniture catalog, which is customized specifically for
        each
        customer requesting Internet e-commerce access. In addition, the Company
        offers
        customized on-line forms management solutions through www.cgc1.com .
        The
        Company believes that its e-commerce sites will allow customers to access
        data
        concerning their company’s purchase habits so as to better control expenditures
        for office products and business forms and eliminate large in-house inventories.
        The Company is a member of a major office products purchasing organization.
        Members benefit from volume discounts, which permit them to offer competitive
        prices and improve margins. The Company's office furniture business focuses
        on
        the budget to middle price range lines, although upscale lines are offered
        as
        well. Office products, office furniture and office design operations contributed
        $41.4 million, $38.8 million and $36.5 million, or 28.5%, 26.7% and 27.0%
        of the
        Company's total revenues for the fiscal years ended October 31, 2007, 2006
        and
        2005.
 7
 The
          Company operates a daily newspaper in Huntington, WV. The Company entered
          the
          newspaper business by purchasing the assets of The Herald-Dispatch from
          Gatehouse Media, Inc. The Herald-Dispatch was previously owned by Gannett,
          Inc.
          since 1971 and was sold to Gatehouse Media, Inc. in May of 2007.
  The
          Herald-Dispatch serves a regional market area in southwestern West Virginia
          covering Cabell County and portions of neighboring Wayne County and eastern
          Lawrence County, Ohio. The Herald-Dispatch is the primary print advertising
          medium for the region, which centers on Huntington and draws business from
          across the border into Ohio and Kentucky. The Herald-Dispatch has circulation
          of
          27,239 Monday through Friday mornings, 27,108 on Saturday, and 31,872 on
          Sunday,
          according to the latest Audit Bureau of Circulations (ABC) Newspaper
          Publisher's Statement for the 26 weeks ended September 30, 2007.
          The Herald-Dispatch faces a very limited amount of print competition from
          other daily newspapers in its home county. It is estimated, based
          on research performed by Scarborough Management, the designated market
          area readership (DMA) is approximately 110,000 on Sunday and 88,670 for
          weekdays. The website has attracted approximately 277,000 unique visitors
          per
          month and approximately 4.4 million page views per month. The historical
          on-line
          revenues for The Herald-Dispatch have increased from approximately $1.1
          million
          in calendar year 2005 to approximately $1.3 million in calendar year 2006.
          The
          six weeks of 2007 from the acquisition on September 14, 2007 to the Company's
          fiscal calendar year ending on October 31, 2007 represented approximately
          $200,000 of online revenues. The Company will disclose The Herald-Dispatch
          commercial printing as a component of the Company's printing segment. The
          operations also publish the Putnam Herald serving Putnam county, West
          Virginia, one of the fastest-growing counties in the state, and the
          Lawrence Herald in Lawrence County, Ohio. The Putnam Herald and Lawrence
          Herald are distributed free via mail on Saturday and Thursday,
          respectively.
  The
          Huntington area has been heavily affected by the de-industrialization
          experienced in the Upper Midwest since the 1970s. Huntington
          has sought to recast itself as a university town home to 16,000
          students. Downtown Huntington was recently revitalized with a $60
          million retail/mixed use project; and new industries such as call
          centers are opening and expanding their locations. The area is also a regional
          shopping hub and growing medical and research center.
  Marshall University
          borders the downtown area of Huntington. Marshall is 170 years old and
          is the
          second largest university in West Virginia. The university currently enrolls
          12,000 undergraduate and 4,000 graduate students and offers a full range
          of
          programs. Marshall's positive effect on the local economy goes beyond being
          one
          of Huntington's top two employers. The university's research corporation,
          medical school and graduate programs are dedicated to bringing research
          and
          development dollars into the community. The university's medical school
          is a
          nationwide leader for rural healthcare delivery.
  Huntington
          has experienced several positive industrial developments in the last 10
          years. According
          to the Huntington Area Development Council, 9,000 new jobs have been
          brought to the Huntington area in the last ten years and 1.7 million square
          feet
          of building space has been leased, sold or built. In 2005 the $60 million
          Pullman Square open-air retail, restaurant and entertainment project was
          completed to rejuvenate the downtown "Superblock" area, immediately increasing
          downtown usage. The Harris Riverfront Park promenade that stretches
          along the Ohio River and downtown is also a target of revitalization
          efforts.
 8
 
 KineticPark was another major development to open for business in
                2005. This
                95-acre site was developed to become a business and technology
                park/retail area. Early tenants included professional service firms
                and a
                restaurant. In addition, Marshall University and the Huntington Area
                Development Council, both committed to promoting the biotech industry
                in the
                area, have teamed
                up to plan to develop the Velocity Center in KineticPark. The
                Velocity Center is envisioned as a technology business incubator that will
                work with the Robert C. Byrd Biotechnology Center at
                Marshall University to explore and expand commercial applications to
                technology innovations. The 60,000-square-foot building is also projected
                to
                house other technology businesses, including AFB­TECH, the American
                Foundation for the Blind Employment and Technology Center in
                Huntington.
  Other
                developments in the area include the opening of two call centers.
                Amazon.com opened a call center in 2000 that employs 350. Global
                Contact
                Services opened a call center in 1998 and recently announced an investment
                of
                $1.9 million to expand their facility by 12,000 square feet and 300
                employees.
                The expansion will make them one of the larger employers in the
                area.
  The
                Huntington area also serves as a regional shopping center. The Huntington
                Mall,
                the largest mall in the state, houses over 150 stores, restaurants and
                boutiques. It is anchored by Sears, Macy's, JC Penney, Elder Beerman
                and Dick's
                Sporting Goods. Many retail stores surround the mall including Goody's,
                Kohl's, Walmart and Value City. Only a few minutes west on U.S.
                60 from the Huntington Mall is another growing shopping plaza, Merritt
                Creek
                Farm. This plaza of 30-plus shops includes Home Depot, Target, Marshall's,
                and
                the state's first freestanding Starbucks. River Place, a bustling
                shopping
                center located near the entrance to downtown Barboursville, is just
                another few
                miles down the road. This area features many locally owned restaurants
                and
                stores.
  Huntington's medical community provides health care for the region,
              which also
              includes portions of Ohio and Kentucky. St. Mary's Hospital is the
              second-largest health care
              facility in West Virginia with 393 beds, and has recently completed
              a $28
              million regional heart center and expanded emergency medicine department.
              Cabell-Huntington Hospital, with 322 beds, recently opened its $84 million
              North Patient Tower, and shares its campus with the Marshall University
              Medical
              Center and the $44 million Edwards Comprehensive Cancer Center,
              which opened in 2006. The two hospitals are jointly designated as a
              Level II trauma center. The third area hospital, the Huntington VA Medical
              Center, is an 80-bed medical and surgical facility. In 1998 the hospital
              completed a $10 million research facility. These hospitals are three
              of the top
              employers in the region.
  Huntington's historic roots as an industrial hub remain alive today.
              Located
              along the Ohio River, Huntington was founded as the western terminus
              of the
              C&O Railroad. CSX, the successor to C&O, still maintains a headquarters
              and rail yard in the city. Huntington's inland port along the Ohio
              River is the
              largest in the United States in terms of total tonnage and ton­ miles, and
              much of the coal mined in southern West Virginia is brought to Huntington
              via
              train to be transported by river barges to industrial centers in other
              parts of
              the country. Several heavy industrial plants still line the Ohio River
              and the
              Guyandotte River.
 9
 ORGANIZATION
 
 Champion’s
        three lines of business are comprised of eighteen operating divisions. The
        Huntington headquarters provides centralized financial management and
        administrative services to all of its business segments.
 
 Commercial
        Printing
 
 Eight commercial
        printing divisions are located in Huntington, Charleston and Parkersburg,
        West
        Virginia; Lexington, Kentucky; Baton Rouge, Louisiana; Cincinnati, Ohio;
        Kingsport, Tennessee; and Asheville, North Carolina. Each has a sales force,
        a
        customer service operation and a pre-press department that serve the customers
        in their respective geographic areas. Although each customer's interface
        is
        solely with its local division's personnel, its printing job may be produced
        in
        another division using the equipment most suited to the quality and volume
        requirements of the job. In this way, for example, Champion can effectively
        compete for high quality process color jobs in Lexington by selling in
        Lexington, printing in Cincinnati and binding in Huntington. The full range
        of
        printing resources is available to customers in the entire market area without
        Champion having to duplicate equipment in each area.
 
 Interform
        Corporation, doing business as Interform Solutions and located in Bridgeville,
        Pennsylvania, manufactures business forms and related products, which it
        sells
        through a network of independent distributors concentrated in Eastern
        Pennsylvania, New Jersey and metropolitan New York.
 
 Consolidated
        Graphic Communications division in Bridgeville, Pennsylvania operates as
        a full
        line printing and printing services distributor. The division offers complete
        print management, fulfillment services and B2B e-commerce
        solutions.
 
 Carolina
        Cut Sheets, Inc., located in Huntington, West Virginia, manufactures single
        sheet business forms which are sold to other commercial printers and dealers
        and
        through the Company's other divisions.
 
 The
        Huntington, West Virginia division of Chapman Printing Company manufactures
        single sheet and multi-part, snap-out and continuous business forms for sale
        through many of the Company's commercial printing divisions.
 
 U.S.
        Tag,
        located in Huntington, West Virginia, manufactures and sells tags used in
        the
        manufacturing, shipping, postal, airline and cruise industries throughout
        the
        United States through dealers and the Company's other divisions.
 
 Chapman
        Printing in Charleston, West Virginia operates as a full line printing,
        printing services distributor and office products and office furniture
        distributor. Chapman Printing Charleston offers complete print management,
        fulfillment, mail, digital print, office furniture and print and office products B2B
        e-commerce solutions. The Syscan operation was consolidated into the Chapman
        Printing Charleston division effective November 1, 2005. This division also
        operates a facility in Morgantown, West Virginia providing printing, office
        products and office furniture, distribution and integration services. In
        2007,
        the Chapman Printing Charleston division spun off its print on demand and
        mail
        operations into a new division located in Charleston, West Virginia operating
        under the name Champion Output Solutions.  Champion
        Output Solutions is a comprehensive transactional printing and mail center
        providing statement rendering, check and explanation of benefits variable
        print,
        medical billing and postal optimization.
 10
 River Cities Printing was acquired via the acquisition of The Herald-Dispatch
        and is a commercial printer with sales comprised primarily of stick-on labels
        and other commercial printing.
  Office
        Products, Office
        Furniture and Office Design
 
 Stationers,
        located in Huntington, Clarksburg (doing business as “Champion Clarksburg”),
        Morgantown (through its Chapman Printing Morgantown division) and Parkersburg,
        West Virginia (doing business as “Chapman Printing”), provides office products
        and office furniture primarily to customers in the Company's West Virginia,
        Ohio
        and Kentucky market areas. Products are sold by printing division sales people
        and delivered in bulk daily to each division, or shipped directly to customers.
 
 Smith
        & Butterfield, located in Evansville, Indiana, provides office products and
        office furniture primarily to customers in the Company's Indiana and Kentucky
        market areas. Products are sold by Smith & Butterfield sales personnel and
        delivered to customers daily.
 
 Stationers,
        through its Capitol division, offers office design services throughout West
        Virginia and eastern Kentucky.
  Newspaper
  The
        Herald-Dispatch, located in Huntington, WV, publishes a daily
        newspaper with a daily and Sunday circulation of approximately 27,000 and
        32,000
        respectively.
  PRODUCTS
        AND
        SERVICES
 
 Printing
        Services
 
 Champion's
        primary business is commercial printing and business forms manufacturing.
        The
        Company, unlike most of its regional competitors, offers the full range of
        printing production processes, enabling the Company to provide customers
        a
        one-stop, one-vendor source without the time and service constraints of
        subcontracting one or more aspects of production. Major production areas
        include: (i) printing of business cards, letterhead, envelopes, and one,
        two, or
        three color brochures; (ii) process color manufacturing of brochures, posters,
        advertising sheets and catalogues; (iii) die cutting and foil stamping; (iv)
        bindery services, including trimming, collating, folding and stitching the
        final
        product; (v) forms printing, encompassing roll-to-roll computer forms, checks,
        invoices, purchase orders and similar forms in single-part, multi-part,
        continuous and snap-out formats; (vi) tag and label manufacturing; (vii)
        high volume process color web printing of brochures and catalogs; and (viii)
        output solutions including print on demand, inserting and mailing services.
        The
        capabilities of the Company's various printing divisions are stated
        below.
 11
 Division
              
              Sales
                  & Customer Service
              
              Pre-Press
              
              Sheet
                  Printing
              Rotary
                  Printing
              
              Full
                  Color
              
              High
                  Volume Full Color
              Output
                  SolutionsHuntington
              
              *
              
              *
              
              *
              *Charleston
                  / Morgantown
              
              *
              
              *Champion
                    Output Solutions
              
              *
              
              
              
              
              
              
              
              
              
              *Parkersburg
              
              *
              
              *
              
              *
              
              
              *Lexington
              
              *
              
              *Champion
                  Graphic Communications
                (Baton
                  Rouge)
              
              *
              
              *
              
              *
              
              
              *Champion
                  Graphic Communications
                (New
                  Orleans)
              
              *Carolina
                  Cut Sheets, Inc.
              
              *U.S.
                  Tag & Ticket Company, Inc.
              
              *
              
              *
              
              
              *Donihe
                  Graphics, Inc.
              
              *
              
              *
              
              *
              *
              
              *
              
              *The
                  Merten Company
              
              *
              
              *
              
              *
              
              
              *Interform
                  Corporation
              
              *
              
              *
              
              
              *
              
              *
              
              
              *Consolidated
                  Graphic Communications
              
              *
              
              *Blue
                  Ridge Printing Co., Inc.
              
              *
              
              *
              
              *
              
              
              *River Cities Printing
              
              *
              
              *
              
              
              *
  *  -
        Services Provided
 12
 Office
        Products, Office
        Furniture and Office Design
 
 Champion
        provides its customers with a wide range of product offerings in two major
        categories: supplies, such as file folders, paper products, pens and pencils,
        computer paper and laser cartridges; and furniture, including budget and
        middle
        price range desks, chairs, file cabinets and computer furniture. Office supplies
        are sold primarily by Company salespeople through the Company's own catalogs.
        Office furniture is primarily sold from catalogs and supplied from in-house
        stock. Special orders constitute a small portion of sales. The Capitol division
        of Stationers provides interior design services to commercial customers.
        The
        design services include space planning, purchasing and installation of office
        furniture, and management of design projects.
  Newspaper




The Company provides its customers in the Tri-State regions surrounding
      Huntington, WV with the primary and premier print advertising solutions for
      the
      region.





MANUFACTURING
      AND
      DISTRIBUTION





The
      Company's pre-press facilities have desktop publishing, typesetting, laser
      imagesetting and scanning/retouching equipment, as well as complete layout,
      design, stripping and plate processing operations. Sheet printing equipment
      (for
      printing onto pre-cut, individual sheets)
      includes single color duplicators, single to six color presses and envelope
      presses. Rotary equipment (for printing onto continuous rolls of paper) includes
      multi-color business form web presses, carbon and multi-part collators, and
      a
      high-speed 5-color half-web press.





Binding
      equipment consists of hot-foil, embossing and die cutting equipment,
      perforators, folders, folder-gluers, scoring machines,
      collator/stitcher/trimmers for saddle stitching, automatic and manual perfect
      binders, numbering machines and mailing equipment.





Each
      of
      the Company's offices is linked with overnight distribution of products and
      on-line electronic telecommunications permitting timely transfer of various
      production work from facility to facility as required. While the Company
      maintains a fleet of delivery vehicles for intracompany and customer deliveries,
      it utilizes the most cost effective and expeditious means of delivery, including
      common carriers.





Requirements
      for the Company's press runs are determined shortly before the runs are made
      and, therefore, backlog is not a meaningful measure in connection with the
      Company's printing business.





The
      Company's inventory goal is to have approximately 85% of the office product
      items the Company sells in stock. Another 12% are ordered on a daily basis
      and
      received overnight. The remaining 3% are items that come direct from
      manufacturers and may take one week or more from placement of order to delivery
      to customer. Office furniture sales for mid-line and budget are made primarily
      from the Company's in-house stock. However, special orders from manufacturers
      and project furniture may require 30 to 90 days for delivery.


13


The
      newspaper is produced nightly at its own in-house
      facility. The paper is then distributed via contract haulers between 3:00AM
      and
      4:00AM each morning. The contract haulers then deliver the papers to each of
      the
      route delivery personnel for a targeted delivery of 6:00AM each
      morning.




CUSTOMERS





The
      Company believes that its reputation for quality, service, convenience and
      selection allows it to enjoy significant loyalty from its customers. Champion's
      marketing strategy is to focus on manufacturers, institutions, financial
      services companies and professional firms. Consistent with customary practice
      in
      the commercial printing and office products industries, the Company ordinarily
      does not have long-term contracts with its customers, although a number of
      high
      volume customers issue yearly purchase orders. These purchase orders, which
      are
      typically for office products but may include printing services, are for firm
      prices adjustable for paper price changes. Depending upon customer satisfaction
      with price and service, these purchase orders may be renewed for another year
      or
      up to three years without repeating the full bidding process.





During
      the fiscal years ended October 31, 2007, 2006 and 2005, no single customer
      accounted for more than 3% of the Company’s total revenues. Due to the
      project-oriented nature of customers' printing requirements, sales to particular
      customers may vary significantly from year to year depending upon the number
      and
      size of their projects.





SUPPLIERS





The
      Company has not experienced difficulties in obtaining materials in the past
      and
      does not consider itself dependent on any particular supplier for supplies.
      The
      Company has negotiated company-wide paper purchasing agreements directly with
      paper manufacturers and is a member of a major office products buying group,
      which management believes provides the Company with a competitive advantage.
      The
      Company is also affiliated with a buying group with a national organization
      for
      it's newsprint purchases.





COMPETITION





The
      markets for the Company's printing services and office products are highly
      competitive, with success based primarily on price, quality, production
      capability, capacity for prompt delivery and personal service.





Champion's
      printing competitors are numerous and range in size from very large national
      companies with substantially greater resources than the Company to many smaller
      local companies. In recent years, despite consolidation within the printing
      industry, there has been a substantial increase in technological advances in
      new
      equipment, resulting in excess capacity and highly competitive pricing. The
      Company has remained competitive by maintaining its printing equipment at
      state-of-the-art levels and emphasizing personal attention to
      customers.


14


Large
      national and regional mail order discount operations provide significant
      competition in the office products and office furniture business. The economies
      afforded by membership in a national purchasing association and by purchasing
      directly from manufacturers, and the high level of personal services to
      customers, contribute substantially to the Company's ability to compete in
      the
      office supply and office furniture market segments.




The
      Herald-Dispatch faces limited competition from
      other daily newspapers in its primary market area of Cabell County, West
      Virginia. The Herald-Dispatch competes with other advertising mediums in its
      designated market area including television and radio advertising.





ENVIRONMENTAL
      REGULATION





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 waterways and the generation, handling and disposal of waste
      materials. The Company's 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.





GEOGRAPHIC
      CONCENTRATION AND ECONOMIC
      CONDITIONS





The
      Company's operations and the majority of its customers are located in the United
      States of America, east of the Mississippi River. The Company and its
      profitability may be more susceptible to the effects of unfavorable or adverse
      local or regional economic factors and conditions than a company with a more
      geographically diverse customer base.


The Company's newspaper operations are geographically concentrated and serve
        a
        regional market area in southwestern West Virginia primarily covering Cabell
        County, West Virginia, parts of neighboring Wayne County, West Virginia and
        eastern Lawrence County, Ohio.


On
      August
      29, 2005, Hurricane Katrina made landfall and subsequently caused extensive
      flooding and destruction along the coastal areas of the Gulf of Mexico,
      including New Orleans and other communities in Louisiana and Mississippi in
      which Champion conducts business. Operations in many of the Company’s markets
      were disrupted by both the evacuation of large portions of the population as
      well as damage and/or lack of access to the Company’s operating facility in New
      Orleans.




The
        Company filed insurance claims related to both actual and contingent
        losses. The Company received an advance to claim payment from an insurance
        company of $300,000 in February 2006 and final settlement claims of $278,000
        in
        April and May 2006. The Company recorded the $300,000 payment as an insurance
        recovery and related receivable at January 31, 2006. The Company recorded
        additional charges of approximately $42,000 in the first quarter of 2006
        associated with Hurricane Katrina. The Company received a second advance
        to
        claim check in April of 2006 in the amount of $200,000 and a full settlement
        of
        any and all claims check of $78,000 in May of 2006. The Company recorded
        the
        aggregate amount of these checks as an insurance recovery and the $78,000
        as a
        related receivable at April 30, 2006. The Company incurred additional charges
        of
        $234,000 primarily related to additional inventory valuation reserves and
        costs
        associated with relocation in the second quarter of 2006. During the fourth
        quarter of 2006 the Company successfully negotiated an early lease termination
        related to its New Orleans location resulting in Katrina related recoveries
        of
        approximately $76,000.


15


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.




Our
      business is subject to seasonal fluctuations that
      we expect to continue to be reflected in our operating results in future
      periods. On a historical basis
      The Herald-Dispatch's first and third calendar quarters
      of the year tended to be the weakest because advertising volume is at its lowest
      levels following the holiday season and a seasonal slowdown in the summer
      months. Correspondingly, on a historical basis
      the fourth calendar quarter followed by the second calendar quarter
      tended to be the strongest quarters. The fourth calendar quarter includes
      heavy holiday season advertising. Other factors that affect our quarterly
      revenues and operating results may be beyond our control, including changes
      in
      the pricing policies of our competitors, the hiring and retention of key
      personnel, wage and cost pressures, distribution costs, changes in newsprint
      prices and general economic factors.





EMPLOYEES





On
      October 31, 2007, the Company had approximately 890 employees.





The
      Company's subsidiary, Interform Corporation, is party to a collective bargaining
      agreement with the United Steelworkers of America, AFL-CIO-CLC on behalf of
      its
      Local Union 8263 covering all production and maintenance employees (totaling
      approximately 70 employees
      at October 31, 2007) at its Bridgeville, Pennsylvania facility. This contract
      expires May 31, 2010. As a result of the acquisition of The
      Herald-Dispatch, the Company also is party to a collective bargaining agreement
      with Graphic Communication Conference/ International Brotherhood of
      Teamsters Local 619-M of District Council 3 covering newspaper
      press production employees (totaling approximately 10 employees at October
      31, 2007) at The Herald-Dispatch Huntington, West Virginia location. The
      contract expires December 31, 2010. The Company believes relations with the
      unions and covered employees are good.




EXECUTIVE
        OFFICERS OF
        CHAMPION
 Position
                  and offices with
                  Champion;Name
              Age
              Principal
                  occupation or
                  employment last five yearsMarshall
                  T. Reynolds
              71
              Chief
                  Executive Officer and Chairman of the Board of Directors of the
                  Company
                  from December 1992 to present; President of the Company December
                  1992 to
                  September 2000; President and General Manager of Harrah and Reynolds,
                  predecessor of the Company from 1964 (and sole shareholder from
                  1972 to
                  present) to 1993; Chairman of the Board of Directors of River City
                  Associates Inc. (owner of the Pullman Plaza Hotel) since 1989;
                  Chairman of
                  the Board of Directors of 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 Banc One West Virginia
                  Corporation (formerly Key Centurion Bancshares, Inc.).Toney
                  K. Adkins
              58
              President
                  and Chief Operating Officer of the Company since January 2005;
                  Vice
                  President-Administration of the Company from November 1995 to January
                  2005; President, KYOWVA Corrugated Container Company, Inc. from
                  1991 to
                  1996.J. Mac
                Aldridge
              66
              Senior Vice President of the Company and Division
                  Manager - Stationers since January 2005; Vice President and Division
                  Manager - Stationers from December 1992 to January 2005; Vice President
                  of
                  Company and Division Manager - Huntington from September 1995 to
                  October
                  1997; President and General Manager of Stationers since November
                  1989;
                  Sales Representative of Huntington Division of Harrah and Reynolds
                  from
                  July 1983 to October 1989.
 16
 R.
                  Douglas McElwain
              60
              Senior
                  Vice President and Division Manager - Champion Graphic Communications
                  Division of the Company since January 2005; Vice President and
                  Division
                  Manager - Bourque Printing division of the Company from December
                  1993 to
                  January 2005; General Manager of Bourque Printing from June 1993
                  to
                  December 1993; Sales Representative of Charleston Division of Harrah
                  and
                  Reynolds and Company from 1986 until June 1993.Todd
                  R. Fry
              42
              Senior
                  Vice President and Chief Financial Officer of the Company since
                  January
                  2005; Vice President and Chief Financial Officer of the Company
                  from
                  November 1999 to January 2005; Treasurer and Chief Financial Officer
                  of
                  Broughton Foods Company from September 1997 to June 1999; Coopers
&
                  Lybrand L.L.P. from 1991 to September 1997.Walter
                  R. Sansom
              78
              Secretary
                  of the Company since December 1992; Production Coordinator of the
                  Company
                  since December 1992 and of Harrah and Reynolds from August 1968
                  to
                  December 1992.James
                  A. Rhodes
              51
              Senior
                  Vice President of the Company since January 2005; Vice President
                  of the
                  Company from March 1999 to January 2005; President of Interform
                  since
                  October 2004; President of Consolidated Graphic Communications
                  Division of
                  Interform since February 1999; Vice President of Sales of Consolidated
                  Graphic Communications from 1996 to 1999; General Sales Manager
                  - Eastern
                  Division of Consolidated Graphic Communications from 1995 to
                  1996.
 ITEM
          1A -
          RISK FACTORS
  The Company’s business and results of operations are subject to a number of
            risks, many of which are outside of the Company’s control. In addition to the
            other information in this report, readers should carefully consider that
            the
            following important factors, among others, including risks not presently
            known
            or currently deemed immaterial by us could materially impact the Company’s
            business and future results of operations.
 Dependence
          on
          Marshall T. Reynolds; Control of the Company.
  The
          Company's operations and prospects are dependent in large part on the
          continued efforts of Marshall T. Reynolds.  The loss of Mr. Reynolds could
          have an adverse effect on the Company. In addition, by virtue of Mr. Reynolds'
          ownership of Company common stock, Mr. Reynolds will continue to significantly
          influence our operations. As of October 31, 2007, Marshall T. Reynolds
          and his
          affiliated entities, including The Harrah and Reynolds Corporation ("Harrah
          and
          Reynolds"), held 4,274,127 shares (41.5%) of the common stock of the
          Company. Sales by Mr. Reynolds of common stock could adversely affect the
          prevailing market price of the common stock. The Company is unable to estimate
          the amount of common stock, if any, that may be sold in the future.
 17
 The
            Company operates in a highly
            competitive market that could negatively impact our results of
            operations.
  In the printing segment, there has been an ongoing consolidation resulting
            in
            fewer competitors. This in part has resulted in numerous competitors
            that are
            larger with greater geographic diversity and broader product offerings.
            In
            addition, the office products and office furniture industries are extremely
            competitive and fragmented. The Company competes with numerous large
            and small
            companies that operate in each industry, some of which have greater financial
            resources than the Company. The Company competes on the basis of its
            reputation
            for quality, production capability, prompt delivery, price and strength
            of its
            continuing customer relationships.
  Our supply-chain management services are embedded into our printing and
            office products and office furniture segments. The competitive factors
            faced by
            the Company include customer service, price, distribution
            geography, information technology and the customer's fulfillment and
            distribution needs.
  The
            Company may be adversely impacted
            by the rising costs of critical raw materials such as paper, ink, energy,
            postage and other raw materials.
 Our primary raw material is paper, therefore, the purchase of paper
              and other
              raw materials such as ink, energy, postage and items we distribute such
              as
              office products and office furniture and goods and services represent a
              large portion of our costs. Any increases in the costs of these items
              will also
              increase our costs. Depending on the nature of such increases we may
              not be able
              to pass these costs on to customers through higher prices. Increases
              in the
              costs of these items may also adversely impact our customers’ demand for
              printing and related services as well as for office products and office
              furniture.
  The
              Company has substantial
              investment in the credit worthiness and financial condition of our
              customers.
  The largest current asset on the Company's balance sheet on a net basis
              is our
              accounts receivable balances from our customers. We grant credit to
              substantially all of our customers. A decline in financial condition
              across a
              significant component of our customer base could hinder our ability
              to collect
              amounts owed by customers. In addition, such a decline could result
              in lower
              demand for our services. The potential causes of such a decline include
              national
              or local economic downturns, the fact that many of our customers are
              in
              highly-competitive industries or markets and the impact of regulatory
              actions
              may impact the financial stability of our customers.
  We
                may have difficulty adjusting our
                operating models to meet changing or current market conditions.
  Because the markets in which we compete are highly-competitive, we
                must continue
                to improve our operating efficiency in order to maintain or improve
                our
                profitability. Although we have been able to improve efficiency and
                reduce costs
                in the past, there is no assurance that we will continue to do so
                in the future.
                In addition, the need to reduce ongoing operating costs may result
                in
                significant up-front costs to reduce workforce, close or consolidate
                facilities,
                or upgrade equipment and technology.
  We
                may be unable to grow through
                acquisitions or to successfully integrate acquired businesses.
 18
 The Company has historically grown through a combination of organic
                growth and acquisitions. It is critical that the Company achieve the
                anticipated benefits of acquisitions. The integration of companies
                that have
                previously operated independently may result in significant challenges,
                and we
                may be unable to accomplish the integration smoothly or successfully.
                In
                particular, the coordination of geographically dispersed organizations
                with
                differences in corporate cultures and management philosophies may
                increase the
                difficulties of integration. The integration of acquired businesses
                may also
                require the dedication of significant management resources, which
                may
                temporarily shift senior management’s attention from the other day-to-day
                operations of the Company. Our strategy is, in part, predicated on
                our ability
                to realize cost savings and to increase revenues through the acquisition
                of
                businesses that strategically enhance our capabilities and
                services.
 We
        may have difficulty hiring and
        retaining appropriate employees including senior management.
 Our success depends, in part, on our general ability to attract, develop,
          motivate and retain highly skilled employees. The loss of a significant
          number
          of our employees or the inability to attract, hire, develop, train and
          retain
          additional skilled personnel could have a material adverse effect on us. We
          currently operate in several locations with geographic diversity, individual
          locations may encounter strong competition from other employers for skilled
          labor. In addition, many members of our management have significant industry
          experience and a long track record with us that is important to our continued
          success. If one or more members of our senior management team leave and
          we
          cannot replace them with a suitable candidate quickly, we could experience
          difficulty in managing our business properly, which could harm our business
          and
          results of operations.
  We
            may be negatively impacted by
            strikes or other work stoppages by our employees.
  We employ approximately 80 persons who are covered by collective bargaining
            agreements. If our unionized employees were to engage in a concerted
            strike or
            other work stoppage, or if our other employees were to become unionized,
            we
            could experience a disruption of operations, higher labor costs or both.
 We
          may have increased employee
          benefit costs for health care and other benefits.
  We provide health care and certain other benefits to our employees. In
          recent
          years, costs for health care have increased more rapidly than general inflation
          in the U.S. economy. If this trend in health care costs continues, our
          cost to
          provide such benefits could increase, adversely impacting our business
          and
          results of operations.
  We
          may be negatively impacted by
          declines in general economic conditions or acts of war and terrorism.
  Demand for printing services is highly correlated with general economic
          conditions. A decline in U.S. economic conditions may, therefore, adversely
          impact our business and results of operations. Because such outcomes are
          difficult to predict, the industry may experience excess capacity resulting
          in
          declines in prices for our services. The overall business climate may also
          be
          impacted by foreign wars or domestic or foregin acts of terrorism. Such
          acts may
          have sudden and unpredictable adverse impacts on demand for our services.
 19
 We
          may face adverse pricing pressures
          as a result of operating in a highly competitive market.
  The markets for our services are highly fragmented and we have a large
          number of
          competitors, resulting in a highly competitive market and increasing the
          risk of
          adverse pricing pressures in various circumstances outside of our control,
          including economic downturns.
  We
        are dependent on the markets
        utilizing printed materials in lieu of alternative media. If this changes
        we may
        be adversely affected.
 In
          addition to traditional non-print based marketing and advertising channels,
          online distribution and hosting of media content may gain broad acceptance
          or
          preferred status relative to printed materials among consumers generally
          and
          have an adverse effect on our business. Consumer acceptance of electronic
          delivery as well as the extent that consumers may have previously replaced
          traditional reading of print material with online hosted media contents
          is
          uncertain. We have no ability to predict the likelihood that this may occur.
  We
            may be adversely affected by
            regulatory requirements, tax requirements and The Sarbanes-Oxley
            Act.
 
 We are subject to numerous rules and regulations, including, but not
            limited to,
            environmental and health and welfare benefit regulations as well as those
            associated with being a public company as well as numerous federal, state,
            and
            local tax rules and regulations. These rules and regulations and associated
            interpretations may be changed by local, state or federal governments
            or
            agencies. Changes in these regulations may result in a significant increase
            in
            our compliance costs. Compliance with changes in rules and regulations
            could
            require increases to our workforce, increased cost for services, compensation
            and benefits, or investments in new or upgraded equipment. In addition,
            audits
            and examinations of prior years may result in liabilities and additional
            financial burdens. The Company currently has not been required by the
            United
            States Securities and Exchange Commission to report on the effectiveness
            of its
            internal controls in accordance with Section 404 of The Sarbanes-Oxley
            Act.
            Under current regulations the Company will be required to comply with
            such
            requirements under revised compliance dates and final rules regarding
            the
            internal control over financial reporting requirements commencing with
            managements report for fiscal years ending on or after December 15, 2007
            and for
            auditors attestation for fiscal years end on or after December 15,
            2008 .
            The
            Company is currently unable to predict the cost or difficulties required
            to
            complete such certifications.
  We
            are highly dependent on
            information technology. If our systems fail or are unreliable our operations
            may
            be adversely impacted.
 
 The efficient operation of our business depends on our information
            technology infrastructure and our management information systems. In
            addition,
            production technology in the printing industry has continued to evolve
            specifically related to the pre-press component of production. We rely on
            our management information systems to effectively manage accounting and
            financial functions, job entry, tracking and cost accumulation and certain
            purchasing functions as well as fulfillment and inventory management
            including
            e-commerce activities. Our information technology infrastructure includes
            both
            third party solutions and applications designed and maintained internally.
            Since
            our Company operates on multiple platforms, the failure of our information
            technology infrastructure and/or our management information systems to
            perform
            could severely disrupt our business and adversely affect our results
            of
            operation. In addition, our information technology infrastructure and/or
            our
            management information systems are vulnerable to damage or interruption
            from
            natural or man-made disasters, terrorist attacks, computer viruses or
            hackers,
            power loss, or other computer systems, Internet telecommunications or
            data
            network failures. Any such interruption could adversely affect our business
            and
            results of operations.
 20
 Competition
              from alternative forms of
              media may impair our ability to achieve revenue growth
  Advertising produces the predominant share of our newspaper revenues.
              With the
              continued development of alternative forms of media, particularly those
              based on
              the Internet, our traditional print business faces increased competition.
              Alternative media sources also affect our ability to increase our circulation
              revenues. This competition could make it difficult for us to grow our
              advertising and circulation revenues, which we believe will challenge
              us to
              expand the contributions of our online business.
 If
              there is a significant increase in
              the price of newsprint or a reduction in the availability of newsprint,
              our
              results of operations and financial condition may suffer.
 
 Newsprint is the major component of our cost of raw materials associated
              with
              production of the newspaper. Accordingly, our earnings are sensitive
              to changes
              in newsprint prices. We have not attempted to hedge fluctuations in
              the normal
              purchases of newsprint or enter into contracts with embedded derivatives
              for the
              purchase of newsprint. If the price of newsprint increases materially,
              our
              operating results could be adversely affected. If our newsprint suppliers
              experience labor unrest, transportation difficulties or other supply
              disruptions, our ability to produce and deliver newspapers could be
              impaired
              and/or the cost of the newsprint could increase, both of which would
              negatively
              affect our operating results.
  Our
              indebtedness could adversely
              affect our financial health and reduce the funds available to us for
              other
              purposes, including dividend payments.
  We
              have a significant amount of indebtedness. At October 31, 2007, we had
              total indebtedness of $84.4 million under our credit facilities. Our
              pro forma
              interest expense for the year ended October 31, 2007 was approximately $6.6
              million. At October 31, 2007, the borrowings under our credit facility
              were
              subject to a floating interest rate of LIBOR plus 275 basis points
              or the prime
              rate plus 75 basis points. The borrowings under our credit facility were
              hedged through the execution of interest rate hedge agreements that
              convert the
              floating interest rate component to an effective interest rate of 4.78%
              plus the
              applicable LIBOR margin on $25.0 million of these borrowings through
              October 29, 2010. The pro forma interest expense included historical
              interest
              expense of the Company and pro forma expense as if the acquisition
              of The
              Herald-Dispatch occured as of November 1, 2006. The pro forma interest
              rates
              included the contractual swap rate and an assumed LIBOR rate of
              4.80%
  We
              may not be able to pay or maintain
              dividends and the failure to do so may negatively affect our share
              price.
  We have historically paid regular quarterly dividends to the holders
              of our common stock. Our ability to pay dividends, if any, will depend
              on, among
              other things, our cash flows, our cash requirements, our financial
              condition,
              the degree to which we are or become leveraged, contractual restrictions
              binding
              on us, provisions of applicable law and other factors that our board
              of
              directors may deem relevant. There can be no assurance that we will
              generate
              sufficient cash from continuing operations in the future, or have sufficient
              surplus or net profits to pay dividends on our common stock. Our dividend
              policy
              is based upon our directors’ current assessment of our business and the
              environment in which we operate and that assessment could change based
              on
              competitive or technological developments (which could, for example,
              increase
              our need for capital expenditures) or new growth opportunities. Our
              board of
              directors may, in its discretion, amend or repeal our dividend policy
              to
              decrease the level of dividends or entirely discontinue the payment
              of
              dividends. The reduction or elimination of dividends may negatively
              affect the
              market price of our common stock.
 21
 Our
              newspaper business is subject to
              seasonal and other fluctuations, which affects our revenues and operating
              results.
  Our business is subject to seasonal fluctuations that we expect to
              continue to
              be reflected in our operating results in future periods. On a historical
              basis The Herald-Dispatch's first and third calendar quarters of the year
              tended to be the weakest because advertising volume is at its lowest
              levels
              following the holiday season and a seasonal slow down in the summer
              months. Correspondingly, on a historical basis
              the fourth calendar quarter followed by the second calendar quarter
              tended to be the strongest quarters. The fourth calendar quarter includes
              heavy holiday season advertising. Other factors that affect our quarterly
              revenues and operating results may be beyond our control, including
              changes in
              the pricing policies of our competitors, the hiring and retention of
              key
              personnel, wage and cost pressures, distribution costs, changes in
              newsprint
              prices and general economic factors.
  We
              could be adversely affected by
              declining newspaper circulation.
 
 According to the Newspaper Association of America, overall daily newspaper
              circulation, including national and urban newspapers, has declined
              at an average
              annual rate of 0.8% during the three-year period from 2002 to 2004.
              There can be
              no assurance that our circulation will not decline in the future. Further
              declines in circulation could impair our ability to maintain or increase
              our
              advertising prices, cause purchasers of advertising in our publications
              to
              reduce or discontinue those purchases and discourage potential new
              advertising
              customers which could have a material adverse effect on our business,
              financial
              condition, results of operations or cash flows.
  ITEM
                2 -
                PROPERTIES
 The Company conducts its operations primarily from twenty-one
                (21) different physical locations, fourteen (14) of which are leased
                and seven (7) of which are owned in fee simple by Company subsidiaries. 
The Company also owns two facilities of which the operations have
                been
                consolidated into other Champion facilities.  The Company also leases other
                facilities primarily as sales and customer service locations, these
                operations
                and locations are not included as core operating facilities.  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 and may be subject to periodic adjustments based on the
                consumer price index:
 Property
                          
                          Division
                              Occupying
                              Property
                          
                          Square
                              Feet
                          
                          Annual
                              Rental
                          
                          Expiration
                              Of
                              Term2450
                              1stAvenue
                            Huntington,
                              West Virginia (1)
                          
                          Chapman
                              Printing- Huntington
                          
                          85,000
                          
                          $116,400
                          
                          20131945
                              5thAvenue
                            Huntington,
                              West Virginia (1)
                          
                          Stationers
                          
                          37,025
                          
                          30,000
                          
                          2013
 22
 Property
                  
                  Division
                      Occupying
                      Property
                  
                  Square
                      Feet
                  
                  Annual
                      Rental
                  
                  Expiration
                      Of
                      Term615-619
                      4thAvenue
                    Huntington,
                      West Virginia (1)
                  
                  Stationers
                  
                  59,641
                  
                  21,600
                  
                  2013405
                      Ann Street
                    Parkersburg,
                      West Virginia (1)
                  
                  Chapman
                      Printing - Parkersburg
                  
                  36,614
                  
                  57,600
                  
                  2013890
                      Russell Cave Road
                    Lexington,
                      Kentucky (1)
                  
                  Chapman
                      Printing - Lexington
                  
                  20,135
                  
                  57,600
                  
                  20132800
                      Lynch Road
                    Evansville,
                      Indiana (1)
                  
                  Smith
                      & Butterfield
                  
                  42,375
                  
                  121,640
                  
                  20091901
                      Mayview Road
                    Bridgeville,
                      Pennsylvania (1)
                  
                  Interform
                      Corporation
                  
                  120,000
                  
                  293,503
                  
                  20081515
                      Central Parkway
                    Cincinnati,
                      Ohio (1)
                  
                  The
                      Merten Company
                  
                  40,000
                  
                  107,163
                  
                  20111214
                      Main Street
                    Wheeling,
                      West Virginia
                  
                  CBI
                      - Wheeling
                  
                  22,000
                  
                  36,000
                  
                  20093000
                      Washington St.
                    Charleston,
                      West Virginia (2)
                  
                  Chapman
                      Printing-Charleston
                  
                  37,710
                  
                  147,240
                  
                  2009951
                      Point Marion Rd.
                    Morgantown,
                      West Virginia (1)
                  
                  Chapman
                      Printing-Charleston
                  
                  5,850
                  
                  42,000
                  
                  2010120
                        Hills Plaza
                      Charleston,
                        West Virginia (4)
                  
                  Champion
                    Output Solutions
                  
                  22,523
                  
                  115,992
                  
                  20111539-A River Oaks Rd.
                    New Orleans, Louisiana (3)
                  
                  Champion
                    Graphic Communications
                  
                  3,000
                  
                  36,000
                  
                  20091639-51
                      7th Ave.
                    Huntington, West Virginia (1)
                  
                  The
                    Herald-Dispatch
                  
                  14,000
                  
                  39,600
                  
                  2008
 23
 (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)  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.
 
 (3) 
Lease
        is gross to the extent it excludes
        taxes and insurance during the lease term.
  (4)  Lease
        is gross to the extent it
        excludes taxes and insurance during the initial lease term. The Company has
        renewal options through 2024 at various rates and the lease essentially converts
        to a triple net lease in the renewal period.  The Company has entered into
        a sublease agreement with an anticipated start date of January 2007, through June 30, 2011, at an annual sublease of $44,370, representing
        approximately 8,500 square feet.
 
 The
        Dallas Printing subsidiary owns, and previously operated from, a single-story
        masonry structure of approximately 19,600 square feet at 321-323 East Hamilton
        Street, Jackson, Mississippi. This building was vacated during the fourth
        quarter of 2005. The Company is currently evaluating its options regarding
        this
        facility.
 
 The
        Chapman Printing Charleston operation previously conducted business from
        a
        single story masonry building of approximately 21,360 square feet owned by
        the
        Company at 1563 Hansford Street, Charleston, West Virginia. This building
        was
        vacated during the second quarter of 2005. The Company is currently evaluating
        its facility needs in Charleston and the future use, if any, of this building.
        The Company also owns a structure in Charleston, WV that was purchased as
        a
        result of the Syscan acquisition. This building is located at 811 Virginia
        Street West and is a three-story block building.
 
 The
        Bourque Printing subsidiary owns, and operates from, a single-story building
        of
        approximately 42,693 square feet at 10848 Airline Highway, Baton Rouge,
        Louisiana. The Company also owns a warehouse and storage 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, 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.
 24
 The
        Capitol subsidiary of Stationers owns and operates from a 22,000 square foot
        building at 711 Indiana Avenue, Charleston, West Virginia.
 The
          Herald-Dispatch owns and operates from a five-story masonry building
          of approximately 65,000 square feet at 946 5th Avenue, Huntington, 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 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.
  
 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 (now Global
        Market) 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.
 25
 Fiscal
                  Year 2007
              
              Fiscal
                  Year 2006High
              Low
              
              High
              LowFirst
                  quarter
              $
                      8.87
              $
                      6.45
              
              $
                  4.50
              $
                  4.25Second
                  quarter
              9.99
              7.56
              
              6.49
              4.27Third
                  quarter
              8.22
              6.61
              
              9.98
              6.05Fourth
                  quarter
              6.45
              5.30
              
              7.93
              6.30
 
 At
        the close of business on January 4 ,
        2008,
        there were 418 shareholders of record of Champion common stock. The
        shareholders of record are determined by the Company’s transfer
        agent.
 
 The
        following table sets forth the quarterly dividends per share declared on
        Champion common stock.
  Fiscal
                  Year
                  2008
              
              
              Fiscal
                  Year
                  2007
              
              
              Fiscal
                  Year
                  2006First
                  quarter
              
              $
              0.06
              
              
              $
              0.06
              
              
              $
              0.05Second
                  quarter
              
              
              -
              
              
              
              0.06
              
              
              
              0.05Third
                  quarter
              
              
              -
              
              
              
              0.06
              
              
              
              0.05Fourth
                  quarter
              
              
              -
              
              
              
              0.06
              
              
              
              0.05
 26
 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, 2007, 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.
  Year
                    Ended October
                    31,2007
(2)
                
                
                2006 (1)
                
                
                2005
(1)
                
                
                2004
                
                
                2003(In
                    thousands, except share and
                    per share data)OPERATING
                    STATEMENT
                    DATA:Revenues:Printing
                
                $
                101,653
                
                
                $
                106,414
                
                
                $
                98,458
                
                
                $
                95,325
                
                
                $
                96,537Office
                    products and office furniture
                
                
                41,449
                
                
                
                38,774
                
                
                
                36,467
                
                
                
                29,077
                
                
                
                25,646Newspaper
                
                
                2,540
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
                    revenues
                
                
                145,642
                
                
                
                145,188
                
                
                
                134,925
                
                
                
                124,402
                
                
                
                122,183Cost
                    of sales & newspaper
                    operating costs:Printing
                
                
                72,769
                
                
                
                75,016
                
                
                
                70,978
                
                
                
                69,746
                
                
                
                69,889Office
                    products and office furniture
                
                
                28,835
                
                
                
                26,778
                
                
                
                25,694
                
                
                
                20,260
                
                
                
                17,963Newspaper
                  cost of sales & operating costs
                
                
                1,188
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
                    cost of sales & newspaper operating costs
                
                
                102,792
                
                
                
                101,794
                
                
                
                96,672
                
                
                
                90,006
                
                
                
                87,852Gross
                    profit
                
                
                42,850
                
                
                
                43,394
                
                
                
                38,253
                
                
                
                34,396
                
                
                
                34,331Selling,
                    general and administrative expense
                
                
                32,336
                
                
                
                34,018
                
                
                
                34,797
                
                
                
                33,058
                
                
                
                31,175Hurricane
                    and relocation costs, net of recoveries
                
                
                -
                
                
                
                (377
                )
                
                
                1,021
                
                
                
                -
                
                
                
                -Income
                    from
                    operations
                
                
                10,514
                
                
                
                9,753
                
                
                
                2,435
                
                
                
                1,338
                
                
                
                3,156Interest
                    income
                
                
                45
                
                
                
                28
                
                
                
                18
                
                
                
                7
                
                
                
                4Interest
                    expense
                
                
                (1,455
                )
                
                
                (610
                )
                
                
                (610
                )
                
                
                (301
                )
                
                
                (167
                )Other
                    income
                
                
                179
                
                
                
                32
                
                
                
                120
                
                
                
                288
                
                
                
                10Income before
                    income
                    taxes
                
                
                9,283
                
                
                
                9,203
                
                
                
                1,963
                
                
                
                1,332
                
                
                
                3,003Income
                    tax
                
                
                (3,203
                )
                
                
                (3,729
                )
                
                
                (846
                )
                
                
                (582
                )
                
                
                (1,235
                )Net
                    income
                
                $
                6,080
                
                
                $
                5,474
                
                
                $
                1,117
                
                
                $
                750
                
                
                $
                1,768Earnings
                    per
                    share:Basic
                
                $
                0.61
                
                
                $
                0.56
                
                
                $
                0.11
                
                
                $
                0.08
                
                
                $
                0.18Diluted
                
                
                0.60
                
                
                
                0.55
                
                
                
                0.11
                
                
                
                0.08
                
                
                
                0.18Dividends
                  per share
                
                $
                0.24
                
                
                $
                0.20
                
                
                $
                0.20
                
                
                $
                0.20
                
                
                $
                0.20Weighted
                    average common shares
                    outstanding:Basic
                
                
                9,957,000
                
                
                
                9,818,000
                
                
                
                9,735,000
                
                
                
                9,729,000
                
                
                
                9,714,000Diluted
                
                
                10,103,000
                
                
                
                9,972,000
                
                
                
                9,809,000
                
                
                
                9,825,000
                
                
                
                9,761,000
 27
  (1)
                During
                    the fourth quarter of 2005, the Company incurred various charges
                    resulting
                    from Hurricane Katrina. As a result of the hurricane, the Company
                    recorded
                    a pre-tax charge of $1,021,000 or $581,000 net of tax or $0.06 per
                    share on a basic and diluted basis. In 2006, the Company recorded
                    recoveries of approximately $377,000, or $224,000 net of tax
                    or $0.02 per
                    share on a basic and diluted basis.  (2)
                The
                  revenues associated with the acquisition of The Herald-Dispatch
                  are
                  primarily composed of advertising, circulation and commercial printing
                  revenues. The advertising and circulation revenues are included
                  as a
                  component of the newspaper segment and the commercial printing
                  revenues
                  are recorded as a component of the printing segment. Approximately
                  six weeks of the operations of The Herald-Dispatch are included
                  in the
                  Company's Statement of Operations commencing concurrent with the
                  acquisition in 2007.
  At
                    October
                    31,2007
                
                
                2006
                
                
                2005
                
                
                2004
                
                
                2003(in
                    thousands)BALANCE
                    SHEET
                    DATA:Cash
                    and cash equivalents
                
                $
                5,793
                
                
                $
                5,487
                
                
                $
                3,662
                
                
                $
                1,745
                
                
                $
                2,172Working
                    capital
                
                
                25,308
                
                
                
                25,955
                
                
                
                26,081
                
                
                
                26,913
                
                
                
                26,977Total
                    assets
                
                
                149,212
                
                
                
                65,989
                
                
                
                61,645
                
                
                
                64,150
                
                
                
                58,469Long-term
                    debt (net of current portion)(1)
                
                
                79,378
                
                
                
                4,220
                
                
                
                6,761
                
                
                
                8,257
                
                
                
                3,966Shareholders'
                    equity
                
                
                48,727
                
                
                
                44,777
                
                
                
                40,752
                
                
                
                41,551
                
                
                
                42,691
 
 (1)
          Includes non-current
          borrowings under the Company’s credit facilities.
 
 28
 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 also publishes The
          Herald-Dispatch daily newspaper in Huntington, WV with a total daily and
          Sunday
          circulation of approximately 27,000 and 32,000, respectively. 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, a paper distribution division (which was
          subsequently sold in 2001) and a daily newspaper 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, document output solutions
          including rendering, inserting and mailing, office supplies, office furniture,
          data products and office design services as well as newspaper revenues
          primarily
          from advertising and circulation. The Company recognizes revenues when
          products are shipped or ownership is transferred and when services are
          rendered
          to the customer. Newspaper advertising revenues are recognized, net of
          agency commissions, in the period when advertising is printed or placed
          on web
          sites. Circulation revenues are recognized when purchased newspapers are
          distributed. 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 printing, office supplies and the newspaper operations,
          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.
 
 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.
 29
 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 (SFAS) No. 144, “ Accounting
          for the Impairment or
          Disposal of Long-Lived Assets ”
(SFAS
          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 SFAS No. 142, “ Goodwill
          and Other Intangible
          Assets .”
(SFAS
          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 and other intangibles. 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.
 
 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 SFAS 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 the 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, SFAS 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.
 30
 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
          2007, 2006 and 2005, $492,000, $979,000 and $421,000 of bad debt expense
          was
          incurred and the allowance for doubtful accounts was $1,511,000, $1,558,000
          and
          $1,410,000 as of
          October 31, 2007, 2006 and 2005. The actual write-offs for the periods
          were
          $657,000, $832,000 and $407,000 during 2007, 2006 and 2005. 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.
 
 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.
 
 31
 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)2007
                
                
                2006
                
                
                2005Revenues:Printing
                
                $
                101,653
                
                
                69.8
                %
                
                $
                106,414
                
                
                73.3
                %
                
                $
                98,458
                
                
                73.0
                %Office
                    products and office furniture
                
                
                41,449
                
                
                28.5
                %
                
                
                38,774
                
                
                26.7
                %
                
                
                36,467
                
                
                27.0
                %Newspaper
                
                
                2,540
                
                
                1.7
                %
                
                
                -
                
                
                -
                
                
                
                -
                
                
                -Total
                    revenues
                
                
                145,642
                
                
                100.0
                %
                
                
                145,188
                
                
                100.0
                %
                
                
                134,925
                
                
                100.0
                %Cost
                    of sales & newspaper
                    operating costs:Printing
                
                
                72,769
                
                
                50.0
                %
                
                
                75,016
                
                
                51.7
                %
                
                
                70,978
                
                
                52.6
                %Office
                    products and office furniture
                
                
                28,835
                
                
                19.8
                %
                
                
                26,778
                
                
                18.4
                %
                
                
                25,694
                
                
                19.0
                %Newspaper cost of sales & operating costs
                
                
                1,188
                
                
                0.8
                %
                
                
                -
                
                
                -
                
                
                
                -
                
                
                -Total
                    cost of sales and newspaper operating costs
                
                
                102,792
                
                
                70.6
                %
                
                
                101,794
                
                
                70.1
                %
                
                
                96,672
                
                
                71.6
                %Gross
                    profit
                
                
                42,850
                
                
                29.4
                %
                
                
                43,394
                
                
                29.9
                %
                
                
                38,253
                
                
                28.4
                %Selling,
                    general and administrativeexpenses
                
                
                32,336
                
                
                22.2
                %
                
                
                34,018
                
                
                23.5
                %
                
                
                34,797
                
                
                25.8
                %Hurricane
                    and relocation costs, net of recoveries
                
                
                -
                
                
                -
                
                
                
                (377
                )
                
                -0.3
                %
                
                
                1,021
                
                
                0.8
                %Income
                    from operations
                
                
                10,514
                
                
                7.2
                %
                
                
                9,753
                
                
                6.7
                %
                
                
                2,435
                
                
                1.8
                %Other
                    income
                    (expense):Interest
                    income
                
                
                45
                
                
                0.0
                %
                
                
                28
                
                
                0.0
                %
                
                
                18
                
                
                0.0
                %Interest
                    expense
                
                
                (1,455
                )
                
                -1.0
                %
                
                
                (610
                )
                
                -0.4
                %
                
                
                (610
                )
                
                -0.4
                %Other
                    income
                
                
                179
                
                
                0.2
                %
                
                
                32
                
                
                0.0
                %
                
                
                120
                
                
                0.1
                %Income
                    before income taxes
                
                
                9,283
                
                
                6.4
                %
                
                
                9,203
                
                
                6.3
                %
                
                
                1,963
                
                
                1.5
                %Income
                    tax expense
                
                
                (3,203
                )
                
                -2.2
                %
                
                
                (3,729
                )
                
                -2.5
                %
                
                
                (846
                )
                
                -0.7
                %Net
                    income
                
                $
                6,080
                
                
                4.2
                %
                
                $
                5,474
                
                
                3.8
                %
                
                $
                1,117
                
                
                0.8
                %
 32
 The
            following table is a reconciliation of net income as reported to core net
            income, which is defined as generally accepted accounting principles
            (GAAP) net
            income adjusted for recoveries, net of expenses (Hurricane and
            relocation expenses), net of tax associated with Hurricane Katrina. The
            Company believes that events associated with Hurricane Katrina require
            additional disclosure and therefore, the Company has disclosed additional
            non-GAAP financial measures in an effort to make the quarterly and annual
            financial statements more useful to investors.
  Three
                      Months Ended October
                      31,
                  Year
                      Ended October
                      31,2007
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2006Net
                      income
                  
                  $
                  2,391,000
                  
                  $
                  1,973,000
                  
                  $
                  6,080,000
                  
                  $
                  5,474,000Recoveries,
                      net of expenses (Hurricane and relocation expenses),net
                      of tax
                  
                  
                  -
                  
                  
                  46,000
                  
                  
                  -
                  
                  
                  224,000Core
                      net income
                  
                  $
                  2,391,000
                  
                  $
                  1,927,000
                  
                  $
                  6,080,000
                  
                  $
                  5,250,000
 Year
          Ended October 31, 2007 Compared
          to Year Ended October 31, 2006
 
 Revenues
 
 Consolidated
          net revenues were $145.6 million for the year ended October 31, 2007 compared
          to
          $145.2 million in the prior fiscal year. This change represents an increase
          in
          revenues of approximately $0.5 million, or 0.3%. Printing revenues decreased
          by
          $4.8 million or 4.5% from $106.4 million in 2006 to $101.7 million in 2007.
          The
          decrease in printing sales was primarily due to sales declines in
          several of our commercial plants that primarily operate in the sheetfed
          arena. Office products and office furniture revenue increased $2.7 million
          or
          6.9% from $38.8 million in 2006 to $41.4 million in 2007. The increase
          in
          revenues for the office products and office furniture segment was primarily
          attributable to robust office furniture sales in 2007 compared to 2006,
          as well
          as slight increases in office products sales. During the period in which
          the
          Company owned The Herald-Dispatch, approximately six weeks, the newspaper
          revenues were composed of approximately $2.0 million in advertising revenue
          and
          $0.6 million in circulation revenues.
  Cost
          of Sales
 
 Total
          cost of sales for the year ended October 31, 2007 totaled $102.8 million
          compared to $101.8 million in the previous year. This change represented
          an
          increase of $1.0 million or 1.0% in cost of sales. Printing cost of sales
          decreased $2.2 million, or 3.0% to $72.8 million in 2007 compared to $75.0
          million in 2006. Printing cost of sales were lower due to an overall
          decrease in printing sales. Printing cost of sales as a percentage of printing
          sales increased to 71.6% as a percent of printing sales in 2007 from 70.5%
          in
          2006. This increase was primarily the result of higher payroll costs as
          a
          percent of sales. Office
          products and office furniture cost of sales increased $2.1 million to $28.8
          million in 2007 from $26.8 million in 2006. The increase in office products
          and
          office furniture cost of sales is attributable to an increase in office
          products
          and office furniture sales. The increase in office products and office
          furniture
          cost of sales as a percent of office products and office furniture sales
          is
          primarily reflective of higher furniture costs as a percent of furniture
          sales.
 33
 Operating
          Expenses and
          Income
 
 Selling,
          general and administrative (S,G&A) expenses decreased $1.7 million to
          $32.3 million in 2007 from $34.0 million in 2006. S,G&A as a percentage of
          net sales represented 22.2% of net sales in 2007 compared with 23.5% of
          net
          sales in 2006. This decrease in selling, general and administrative costs
          is due to reductions in payroll, lower selling related expenses and a
          decrease in bad debt expense, as well as reductions in several other S,G&A
          line items partially offset by additional expenses from the acquisition
          of The
          Herald-Dispatch.
  Other
          Income
          (Expense)
 
 Other
          expense increased approximately $681,000 from $550,000 in 2006 to $1,231,000
          in
          2007. This was primarily due to an increase in interest expense of $846,000
          from $610,000 in 2006 to $1,455,000 in 2007 partially offset by higher
          other
          income. The increase in interest expense was attributed to the acquisition
          of
          The Herald-Dispatch which was completed on September 14,
          2007.
 Income
          Taxes
 
 Income
          taxes as a percentage of income before taxes were 34.5% in 2007 compared
          with
          40.5% in 2006. The decrease in income taxes as a percentage of income before
          taxes is primarily related to lower state tax rates based on multi-state
          apportionment factors, amended state returns, and amortization expense
          deductions recorded as a permanent difference due to the acquisition of
          The
          Herald-Dispatch.
 
 The
          effective income tax rate in 2007 and 2006 approximates the combined federal
          and
          state, net of federal benefit, statutory income tax rate.
 
 Net
          Income
 
 For
          reasons set forth above, net income for 2007 increased approximately $0.6
          million to $6.1 million, or $0.61 per share on a basic and $0.60 per share
          on a
          diluted basis, from net income of $5.5 million for 2006, or $0.56 per share
          on a
          basic basis and $0.55 on a diluted basis.
 34
 Year
            Ended October 31, 2006 Compared
            to Year Ended October 31, 2005
 
 Revenues
 
 Consolidated
            net revenues were $145.2 million for the year ended October 31, 2006
            compared to
            $134.9 million in the prior fiscal year. This change represents an increase
            in
            revenues of approximately $10.3 million, or 7.6%. Printing revenues increased
            by
            $8.0 million or 8.1% from $98.5 million in 2005 to $106.4 million in
            2006. The
            increase in printing sales was primarily due to organic growth since
            there were
            no new acquisitions since the fourth quarter of 2004. Office products
            and office
            furniture revenue increased $2.3 million or 6.3% from $36.5 million in
            2005 to
            $38.8 million in 2006. The increase in revenues for the office products
            and
            office furniture segment was primarily attributable to robust office
            furniture
            sales in 2006 compared to 2005.
 
 Cost
            of Sales
 
 Total
            cost of sales for the year ended October 31, 2006 totaled $101.8 million
            compared to $96.7 million in the previous year. This change represented
            an
            increase of $5.1 million or 5.3% in cost of sales. Printing cost of sales
            increased $4.0 million, or 5.7% to $75.0 million in 2006 compared to
            $71.0
            million in 2005. Printing cost of sales was higher due to an overall
            increase in printing sales. This increase was partially offset with an
            improved
            gross margin percentage due to lower material and outside purchase costs
            as a
            percentage of sales coupled with improved labor and overhead
            absorption. Office
            products and office furniture cost of sales increased $1.1 million to
            $26.8
            million in 2006 from $25.7 million in 2005. The increase in office products
            and
            office furniture cost of sales is attributable to an increase in office
            products
            and office furniture sales. The decrease in office products and office
            furniture
            cost of sales as a percent of office products and office furniture sales
            is
            primarily reflective of lower furniture costs as a percent of furniture
            sales
            and improvements in wholesale pricing factors at Syscan for office
            supplies.
 
 Operating
            Expenses and
            Income
 
 Selling,
            general and administrative (S,G&A) expenses decreased $779,000 to $34.0
            million in 2006 from $34.8 million in 2005. S,G&A as a percentage of net
            sales represented 23.5% of net sales in 2006 compared with 25.8% of net
            sales in
            2005. This decrease is primarily related to approximately $800,000 in legal
            related costs associated with various legal settlement accruals and expenses,
            including a $440,000 settlement related to a Mississippi lawsuit that
            was
            present in 2005. The decrease in selling, general and administrative
            expenses as
            a percent of sales is primarily a result of higher overall sales coupled
            with
            associated cost savings related to personnel adjustments and facility
            consolidations, as well as the aforementioned legal related costs in
            2005 that
            were not present in 2006.
 
 On
            August
            29, 2005, Hurricane Katrina made landfall and subsequently caused extensive
            flooding and destruction along the coastal areas of the Gulf of Mexico,
            including New Orleans and other communities in Louisiana and Mississippi
            in
            which Champion conducts business. Operations in many of the Company’s markets
            were disrupted by both the evacuation of large portions of the population
            as
            well as damage and/or lack of access to the Company’s operating facility in New
            Orleans.
 35
 The Company filed insurance claims related to both actual and contingent
                losses. The Company received an advance to claim payment from an insurance
                company of $300,000 in February 2006 and final settlement claims
                of $278,000 in
                April and May 2006. The Company recorded the $300,000 payment as
                an insurance
                recovery and related receivable at January 31, 2006. The Company
                recorded
                additional charges of approximately $42,000 in the first quarter
                of 2006
                associated with Hurricane Katrina. The Company received a second
                advance to
                claim check in April 2006 in the amount of $200,000 and a full settlement
                of any
                and all claims check of $78,000 in May 2006. The Company recorded
                the aggregate
                amount of these checks as an insurance recovery and the $78,000 as
                a related
                receivable at April 30, 2006. The Company incurred additional charges
                of
                $234,000 primarily related to additional inventory valuation reserves
                and costs
                associated with relocation in the second quarter of 2006. During
                the fourth
                quarter of 2006, the Company successfully negotiated an early lease
                termination
                related to its New Orleans location resulting in Katrina related
                recoveries of
                approximately $76,000.
  Other
              Income
              (Expense)
 
 Other
              expense increased approximately $78,000 from ($472,000) in 2005 to
              ($550,000) in
              2006 due to a reduction in other income of $89,000. The interest expense
              was flat on a year to year basis.
  Income
              Taxes
 
 Income
              taxes as a percentage of income before taxes were 40.5% in 2006 compared
              with
              43.1% in 2005. The decrease in income taxes as a percentage of income
              before
              taxes is primarily related to improved absorption regarding the nondeductibility
              of certain selling related expenses.
 
 The
              effective income tax rate in 2006 and 2005 approximates the combined
              federal and
              state, net of federal benefit, statutory income tax rate.
 
 Net
              Income
 
 For
              reasons set forth above, net income for 2006 increased approximately
              $4.4
              million to $5.5 million, or $0.56 per share on a basic and $0.55 per
              share on a
              diluted basis, from net income of $1.1 million for 2005, or $0.11 per
              share on a
              basic and diluted basis.
 LIQUIDITY
          AND CAPITAL
          RESOURCES
 
 As
          of
          October 31, 2007, the Company had $5.8 million of cash and cash equivalents,
          an
          increase of $0.3 million from the prior year. Working capital as of October
          31,
          2007 was $25.3 million, a 2.5% decrease from $26.0 million at October 31,
          2006.
 36
 The
          Company had 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 up to
          $31.0
          million, of which $30.0 million is subject to borrowing base
          limitations (See Note 3 of the Consolidated Financial Statements). For
          the foreseeable future including through Fiscal 2008, 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.
 
 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, 2007 relate to the Syscan acquisition and are associated with
          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.
  The
          Company had borrowed under its $30.0 million line of
          credit approximately $15.5 million at October 31, 2007 which encompassed
          refinancing of existing indebtedness prior to The Herald-Dispatch acquisition
          and to partially fund the purchase of The Herald-Dispatch. Pursuant to
          the
          borrowing base calculation the Company had $8.8 million in additional
          availability under its $30.0 million revolving credit line and $1.0 million
          available under an unsecured line of credit at October 31, 2007.
 
 As
          of October 31, 2007, the Company had contractual obligations in the form
          of
          leases, debt and a contingent acquisition payment as
          follows:
 
 Payments
                    Due by Fiscal
                    YearContractual
                    Obligations
                
                2008
                
                
                2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                Residual
                
                
                TotalNon-cancelable
                  operating leases
                
                $
                1,184,662
                
                
                $
                839,739
                
                
                $
                542,912
                
                
                $
                440,242
                
                
                $
                283,200
                
                
                $
                206,800
                
                
                $
                3,497,555Term
                  debt
                
                
                5,033,637
                
                
                
                4,937,402
                
                
                
                4,900,000
                
                
                
                4,900,000
                
                
                
                4,900,000
                
                
                
                44,200,000
                
                
                
                68,871,039Line
                  of credit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,540,496
                
                
                
                -
                
                
                
                15,540,496Working
                  capital due to Gatehouse Media, Inc.
                
                
                1,616,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,616,000$
                7,834,299
                
                
                $
                5,777,141
                
                
                $
                5,442,912
                
                
                $
                5,340,242
                
                
                $
                20,723,696
                
                
                $
                44,406,800
                
                
                $
                89,525,090
 37
 The company has accrued $1,616,000 for a final payment due to Gatehouse
          Media,
          Inc. regarding the working capital settlement for the acquisition of The
          Herald-Dispatch. The payment is contractually due to Gatehouse Media,
          Inc. in the company's first quarter of 2008.
  Cash
          Flows from Operating
          Activities
 
 Cash
          flows from operating activities for the years ended October 31, 2007, 2006
          and
          2005 were $8.7 million,
          $10.2 million and $8.3 million. The decrease in cash flows from operating
          activities for the fiscal year 2007 compared to 2006 was primarily reflective
          of
          cash paid for taxes of which a refund has been recorded in 2007 and a liability
          was recorded in 2006, primarily due to the timing of tax payments and a
          cash
          payment under a deferred compensation plan. These items were partially
          offset by
          additional cash generated by changes in the remaining assets and liabilities
          and
          an increase in net income. The increase in cash flows from operating activities
          for the fiscal year 2006 compared to 2005 was primarily reflective of additional
          cash generated in 2006 from higher net income.
  Cash
          Flows from Investing
          Activities
 
 Cash
            used
            in investing activities was ($4.1) million, ($3.0) million and ($2.7)
            million
            for the years ended October 31, 2007, 2006 and 2005. Cash flows used
            in
            investing activities increased in 2007 compared to 2006 primarily due to
            the contingent earn-out paid for the acquisition of Syscan, higher capital
            expenditures, partially offset by cash net of certain acquisition related
            expenditures for The Herald-Dispatch.  Cash flows used in investing
            activities increased slightly in 2006 compared to 2005 due to higher
            capital expenditures.
  Cash
            Flows from Financing
            Activities
 
 Net
            cash
            flows used in financing activities for the years ended October 31, 2007,
            2006 and 2005 were ($4.2) million, ($5.4) million and ($3.7) million.
            The $4.2
            million utilized for financing activities in 2007 was primarily
            reflective of net payments on debt, dividends and financing costs
            paid, partially offset by stock option proceeds.  During 2006, the
            Company reduced net borrowings by approximately $2.6 million and, after
            adjusting for non-cash investing and financing activities, reduced net
            borrowings by $3.9 million. This coupled with dividend payments of $2.0
            million,
            partially offset by stock option proceeds, was reflective of net cash
            used in
            financing activities during 2006. Dividends paid in 2007 were
            $2.4 million, $2.0 million in 2006 and $1.9 million in
            2005.
 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.
 38
 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.
  Our business is subject to seasonal fluctuations that we expect to continue
            to
            be reflected in our operating results in future periods. On a historical
            basis the Herald-Dispatch's first and third calendar quarters of
            the year tended to be the weakest because advertising volume is at its
            lowest
            levels following the holiday season and a seasonal slowdown in the summer
            months. Correspondingly, on a historical basis
            the fourth calendar quarter followed by the second calendar quarter
            tended to be the strongest quarters. The fourth calendar quarter includes
            heavy holiday season advertising. Other factors that affect our quarterly
            revenues and operating results may be beyond our control, including changes
            in
            the pricing policies of our competitors, the hiring and retention of
            key
            personnel, wage and cost pressures, distribution costs, changes in newsprint
            prices and general economic factors.
 
 NEWLY
            ISSUED ACCOUNTING
            STANDARDS
  SAB
              108
 
 In
              September 2006, the SEC Staff issued Staff Accounting Bulletin (SAB)
              No. 108,
“Considering the
              Effects of
              Prior Year Misstatements when Quantifying Misstatements in Current
              Year
              Financial Statements” (SAB 108). SAB 108 was issued in order to
              eliminate the diversity of practice surrounding how public companies
              quantify
              financial statement misstatements.
 
 Traditionally, there have been two widely-recognized methods for quantifying
              the
              effects of financial statement misstatements: the “rollover” method and the
“iron curtain” method. The rollover method focuses primarily on the impact of a
              misstatement on the income statement-including the reversing effect
              of prior
              year misstatements- but its use can lead to the accumulation of misstatements
              in
              the balance sheet. The iron curtain method, on the other hand, focuses
              primarily
              on the effect of correcting the period-end balance sheet with less
              emphasis on
              the reversing effects of prior year errors on the income statement.
              We currently
              use the rollover method for quantifying identified financial statement
              misstatements.
 
 In
              SAB 108, the SEC Staff established an approach that requires quantification
              of
              financial statement misstatements based on the effects of the misstatements
              on
              each of the Company’s financial statements and the related financial statement
              disclosures. This model is commonly referred to as a “dual approach” because it
              requires quantification of errors under both the iron curtain and the
              rollover
              methods.
 
 SAB 108 permits existing public companies to initially apply its provisions
              by
              (i) restating prior financial statements as if the “dual approach” had always
              been used or (ii) recording the cumulative effect of initially applying
              the
“dual approach” as adjustments to the carrying value of assets and liabilities
              as of November 1, 2006 with an offsetting adjustment recorded to the
              opening balance of retained earnings. Use of the “cumulative effect” transition
              method requires detailed disclosure of the nature and amount of each
              individual
              error being corrected through the cumulative adjustment and how and
              when it
              arose.
 
 We adopted the provisions of SAB 108 using the cumulative effect transition
              method in connection with the preparation of our annual financial statements
              for
              the year ended October 31, 2007. As a result of the adoption of SAB
              108, the Company recorded an increase in net fixed assets of
              approximately $95,000, an increase in accounts receivable of approximately
              $101,000, a decrease in accrued payroll of approximately $68,000, a
              decrease in accrued professional fees of approximately $83,000, reductions
              in
              accounts receivable and inventory of approximately $65,000, other accrual
              increases of $68,000 and an increase in retained earnings of approximately
              $128,000, net of tax, as of November 1, 2006. The accompanying financial
              statements reflect these adjustments.
 39
 EITF
                06-3
 
 In
                June 2006, the FASB Emerging Issues Tax Force (EITF) issued EITF
                06-3 "How Sales Taxes
                Collected from
                Customers and Remitted to Governmental Authorities Should be Presented
                in the
                Income Statement" (That is, Gross Versus Net Presentation) to clarify
                diversity in practice on the presentation of different types of taxes
                in the
                financial statements. The task force concluded that, for taxes within
                the scope
                of the issue, a company may adopt a policy of presenting taxes either
                gross
                within revenue or net. That is, it may include charges to customers
                for taxes
                within revenues and the charges for the taxes from the taxing authority
                within
                cost of sales, or alternatively, it may net the charge to the customer
                and the
                charge from the taxing authority. If taxes subject to EITF 06-3 are
                significant,
                a company is required to disclose its accounting policy for presenting
                taxes and
                the amounts of such taxes that are recognized on a gross basis. The
                guidance in
                this consensus is effective for the first interim reporting period
                beginning
                after December 15, 2006 (the second quarter of our fiscal year 2007).
                We
                adopted EITF 06-3 on February 1, 2007 and we record sales tax on a net
                basis. The adoption of EITF 06-3 did not have a material impact on our
                results of operations, financial position or cash flows.
  FIN
              48
  In
              June 2006, the Financial Accounting Standards Board (FASB) issued FASB
              Interpretation No. 48 (FIN 48), this interpretation clarifies the accounting
              for
              uncertainty in income taxes recognized in an enterprise's financial
              statements
              in accordance with SFAS No. 109, "Accounting for
              Income Taxes"
              (SFAS 109). This interpretation is effective for fiscal years beginning
              after December 15, 2006. The Company is currently evaluating the impact
              of this
              standard on the financial statements.
 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
            April 16, 2007, the Company dismissed BKD, LLP and engaged the firm of
            Arnett
            and Foster, PLLC as its independent accountants for the fiscal year ended
            October 31, 2007. During the Company's two most recent fiscal years and
            through
            the date of discharge of BKD, LLP, there were no disagreements with BKD,
            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 BKD, LLP would have caused BKD, LLP to make reference
            to the
            matter in its report. The reports of BKD, LLP on the Company's financial
            statements for the fiscal years ended October 31, 2005 and 2006, contained
            no
            adverse opinion or disclaimer of opinion and were not qualified or modified
            as
            to uncertainty, audit scope or accounting principles. The Company requested
            BKD,
            LLP to furnish to the Company a letter addressed to the Securities and
            Exchange Commission stating whether it agrees with the above statements.
            Such letter, received by the Company on April 18, 2007, was filed as
            an exhibit
            to Form 8-K by the Company with the Securities and Exchange Commission
            on April
            20, 2007. 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.
 40
 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.
  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”, “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 15, 2008, with
            respect
            to the Annual Meeting of Shareholders to be held on March 17, 2008, 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
            " Executive
            Compensation" including "Compensation Discussion and Analysis", "Compensation
            Committee Report", "Summary Compensation Table", "Outstanding Equity
            Awards at
            Fiscal Year-End" and "Director Compensation" in the
            Company’s definitive Proxy Statement, expected to be dated February 15, 2008,
            with respect to the Annual Meeting of Shareholders to be held on March
            17, 2008,
            which will be filed pursuant to regulation 14(a) of the Securities Exchange
            Act
            of 1934 and which is incorporated herein by reference.
 
 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 15, 2008, with respect to the Annual Meeting of Shareholders
            to be held
            on March 17, 2008, which will be filed pursuant to regulation 14(a) of
            the
            Securities Exchange Act of 1934 and which is incorporated herein by
            reference.
  41
 ITEM
              13 - CERTAIN RELATIONSHIPS AND
              RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 The
            information called for by this Item is contained under the captions
“Transactions with Directors, Officers and Principal Shareholders” and
            "Meetings, Committees and Attendence" in the Company’s definitive Proxy
            Statement, expected to be dated February 15, 2008, with respect to the
            Annual
            Meeting of Shareholders to be held on March 17, 2008, 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
            Auditors” in the Company’s definitive Proxy Statement, expected to be dated
            February 15, 2008, with respect to the Annual Meeting of Shareholders
            to be held
            on March 17, 2008, 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.
 
 All
            other
            Schedules for which provision is made in the applicable accounting regulation
            of
            the Securities and Exchange Commission are not required under the related
            instructions or are inapplicable and therefore have been omitted.
  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
                    Page
                        Exhibit 3.2-pl(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.
 42
 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.
                          
                          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, filed as
                            Exhibit 10.6 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.
 43
 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.
                            
                            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.
                            
                            $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 Form10-K
                              dated January 25, 2000, filed January 28, 2000, is
                              incorporated herein by
                              reference.
 44
 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.
                                
                                $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.
 45
 $415,000
                                    Commercial Lease Agreementby
                                    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.
                                $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.
                                
                                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.
 46
 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.
 47
 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, filedas
                                      Exhibit 10.5 to Form 8-K dated September 7,
                                      2004, filed September 10,
                                      2004, is incorporated herein by reference.
                                    
                                    Exercise
                                      of Lease renewal option for 2800 Lynch Road
                                      Evansville, Indiana dated as
                                      of September 22, 2003, filed as Exhibit 10.1
                                      to form 10-K dated January
                                      17, 2005 filed January 31, 2005, is incorporated
                                      herein by
                                      reference.
                                    
                                    $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, filed as Exhibit 10.2 to
                                      form 10-K dated January 17, 2005 filed January
                                      31, 2005, is incorporated
                                      herein by reference.
                                    
                                    $1,000,000
                                      revolving line of credit between Stationers,
                                      Inc. and First Sentry Bank
                                      dated as of April 7, 2004, filed as Exhibit
                                      10.3 to form 10-K dated
                                      January 17, 2005 filed January 31, 2005, is
                                      incorporated herein by
                                      reference.
                                    
                                    $600,075
                                      term note between Bourque Printing, Inc. and
                                      First Century Bank dated as
                                      of September 9, 2004, filed as Exhibit 10.4
                                      to form 10-K dated January 17,
                                      2005 filed January 31, 2005, is incorporated
                                      herein by
                                      reference.
                                    
                                    $3,920,000
                                      promissory note and security agreement
                                      between Champion Industries, Inc. and United
                                      Bank, Inc. dated as of
                                      October 26, 2004, filed as Exhibit 10.5 to
                                      Form 10-K dated January 17,
                                      2005 filed January 31, 2005, is incorporated
                                      herein by
                                      reference.
 48
 Modification
                                      letter to promissory note between Bourque Printing
                                      and Hibernia National
                                      Bank, Inc. dated December 28, 2004, filed as
                                      Exhibit 10.6 to Form 10-K
                                      dated January 17, 2005 filed January 31, 2005,
                                      is incorporated herein by
                                      reference.
                                    
                                    First
                                      Amendment to Revolving Credit Agreement between
                                      Champion Industries, Inc.
                                      and United Bank, Inc. Filed as Exhibit 10.1
                                      to Form 8-K dated February 15,
                                      2005, filed February 16, 2005, is incorporated
                                      herein by
                                      reference.
                                    
                                    Release
                                      of Claims and Settlement Agreement between
                                      Defendants Champion Industries,
                                      Inc., Timothy V. Ross and Todd Ross and Plaintiff
                                      National Forms and
                                      Systems Group, Inc. dated May 6, 2005 filed
                                      as Exhibit 10.1 to Form 8-K
                                      dated May 11, 2005, filed May 11, 2005, is
                                      incorporated herein by
                                      reference.
                                    
                                    Second
                                      Amendment to Revolving Credit Agreement between
                                      Champion Industries, Inc.
                                      and United Bank, Inc. Filed as Exhibit 10.1
                                      to form 8-K dated July 11,
                                      2005, filed July 11, 2005, is incorporated
                                      herein by
                                      reference.
                                    
                                    $605,095
                                        term note between Champion Industries, Inc.
                                        and First Century Bank dated
                                        as of July 27, 2005.  Filed as Exhibit 10.1 to Form 10-Q dated
                                        September 9, 2005, filed September 9, 2005,
                                        is incorporated herein by
                                        reference.
                                      
                                      $1,000,000
                                          revolving line of credit between Stationers,
                                          Inc. and First Sentry Bank
                                          dated as of October 7, 2005, filed as exhibit
                                          10.1 to Form 10-K dated
                                          January 16, 2006 filed January 27, 2006,
                                          is incorporated herein by
                                          reference.
                                        
                                        Lease
                                          Agreement dated October 31, 2005, between
                                          SANS LLC and Champion
                                          Industries, Inc. dba Chapman Printing Company regarding
                                          951 Point
                                          Marion Road Morgantown, West Virginia,
                                          filed as Exhibit 10.2 to Form 10-K
                                          dated January 16, 2006, filed January 27,
                                          2006, is incorporated herein by
                                          reference.
                                        
                                        Lease
                                          Agreement dated June 28, 2006, between
                                          White Properties No. II, LLC and
                                          Champion Industries, Inc. regarding 120
                                          Hills Plaza Charleston, West
                                          Virginia, filed as Exhibit 10.1 to Form
                                          8-K dated July 3, 2006, filed July
                                          3, 2006 is incorporated herein by reference.
                                        
                                        $1,200,000
                                          term note between Champion Industries,
                                          Inc. and Community Trust Bank, Inc. dated
                                          as of July 28, 2006, filed as
                                          Exhibit 10.1 to Form 10-K dated January
                                          15, 2007 filed January 28, 2007,
                                          is incorporated herein by reference.
 49
 $642,831.68
                      term note between Champion Industries, Inc. and First Bank
                      of Charleston,
                      Inc. dated as of August 30, 2006, filed as Exhibit 10.1 to
                      Form 10-K dated
                      January 15, 2007 filed January 28, 2007, is incorporated herein
                      by
                      reference.
                    
                    $10,000,000
                      promissory note between Champion
                      Industries, Inc. and United Bank, Inc., filed as Exhibit 10.2
                      to form 8-K
                      dated March 20, 2007 filed March 22, 2007, is
                      incorporated herein by reference.
                    $324,408.00
                          promissory note between Champion Industries, Inc. and First
                          Bank of
                          Charleston, Inc. dated as of March 23, 2007, filed as Exhibit
                          10.1 to Form
                          10-Q dated June 8, 2007 filed June 8, 2007, is incorporated
                          herein by
                          reference.
                        
                        $1,000,000
                            revolving line of credit between Stationers, Inc. and
                            First Sentry Bank
                            dated as of April 7, 2007, filed as exhibit 10.2 to Form
                            10-Q dated June
                            8, 2007 filed June 8, 2007, is incorporated herein by
                            reference.
                          
                          $267,013.
                              master loan agreement between Champion Industries,
                              Inc. and US Bancorp
                              Equipment Finance dated as of May 30, 2007, filed as
                              Exhibit 10.1 to Form
                              10-Q dated September 10, 2007 filed September 11, 2007, is
                              incorporated herein by reference.
                            
                            $1,750,000
                                promissory note between Champion Industries, Inc.
                                and Community Trust
                                Bank, Inc. dated as of June 12, 2007, filed as Exhibit 10.2 to Form
                                10-Q dated September 10, 2007 filed September 11, 2007, is
                                incorporated herein by reference.
                              
                              Credit
                                agreement between Champion Industries, Inc.
                                and Fifth Third Bank, filed as Exhibit 10.1 to Form
                                8-K dated September
                                14, 2007 filed September 19, 2007, is incorporated herein by
                                reference.
 50
 (14)
                            
                            Code
                                of Ethics
                            Code
                                of Ethics for the Chief Executive Officer, Chief
                                Operating 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.(16)
                            
                            
                            Letter
                                of BKD, LLP dated April 20, 2007, filed as Exhibit
                                16 to Form 8-K dated
                                April 20, 2007, filed April 20, 2007, is incorporated
                                herein by
                                reference.(21)
                            
                            Subsidiaries
                                of the Registrant
                            
                            Exhibit
                                21
                            
                            Page
                                Exhibit 21-p1(23.1)
                            
                            Consent
                                of Arnett and Foster, PLLC
                            
                            Exhibit
                                23.1
                            
                            Page
                                Exhibit 23.1-p1(23.2)
                            
                            Consent
                              of BKD, 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 - Toney K. Adkins
                          
                          Exhibit
                              31.3
                          
                          Page
                              Exhibit 31.3-p1(32)
                          
                          Marshall
                              T. Reynolds, Todd R. Fry and Toney K. Adkins 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
 
 51
 (b)  Exhibits
                  - Exhibits are filed as a separate section of this report.
 
 (c) 
                  Financial Statement Schedules - Filed as separate section on page
                  F-38.
 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.
 
 
 Champion
                      Industries,
                      Inc.By/s/ Marshall T.
                      ReynoldsMarshall
                      T. ReynoldsChief
                      Executive OfficerBy/s/ Toney K. AdkinsToney
                      K. AdkinsPresident
                      and Chief Operating OfficerBy/s/ Todd R. FryTodd
                      R. FrySenior
                      Vice President and Chief Financial OfficerDate: 
                      January 21, 2008
 
 
 52
 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
                      21, 2008Lou
                      J. Akers, Director/s/
                      Philip E.
                      Cline
                  
                  January
                      21, 2008Philip
                      E. Cline, Director/s/
                      Harley F. Mooney,
                      Jr.
                  
                  January
                      21, 2008Harley
                      F. Mooney, Jr., Director/s/
                      A. Michael
                      Perry
                  
                  January
                      21, 2008A.
                      Michael Perry, Director/s/
                      Marshall T.
                      Reynolds
                  
                  January
                      21, 2008Marshall
                      T. Reynolds, Director/s/
                      Neal W.
                      Scaggs
                  
                  January
                      21, 2008Neal
                      W. Scaggs, Director/s/
                      Glenn W. Wilcox,
                      Sr.
                  
                  January
                      21, 2008Glenn
                      W. Wilcox, Sr., Director
 
 
 53
 Champion
            Industries,
            Inc.
 
 Audited
            Consolidated Financial Statements and Schedule
 
 October
            31, 2007
 
 
 Contents
 Report
                      of Independent Registered Public Accounting Firm
                  F-2Report
                    of Independent Registered Public Accounting Firm
                  F-3Audited
                      Consolidated Financial Statements:Consolidated
                      Balance Sheets as of October 31, 2007 and 2006
                  F-4Consolidated
                      Statements of Operations for the years ended October 31, 2007,
                      2006 and
                      2005
                  F-6Consolidated
                      Statements of Shareholders’ Equity for the years ended October 31, 2007,
                      2006 and 2005
                  F-7Consolidated
                      Statements of Cash Flows for the years ended October 31, 2007,
                      2006 and
                      2005
                  F-8Notes
                      to Consolidated Financial Statements
                  F-9Schedule
                      II - Valuation and Qualifying Accounts
                  F-38
 
 Report
              of Independent Registered
              Public Accounting Firm
 
 
 Audit
              Committee, Board of Directors and Shareholders
 Champion
              Industries, Inc.
 Huntington,
              West Virginia
 
 We
              have
              audited the accompanying consolidated balance sheet of Champion Industries,
              Inc.
              and Subsidiaries (the “Company”) as of October 31, 2007, and the related
              consolidated statements of operations, shareholders’ equity and cash flows
              for year ended October 31, 2007. Our audit also included the financial
              statement schedule listed in the index at Item 15(a). These financial
              statements
              and financial statement schedule are the responsibility of the Company’s
              management. Our responsibility is to express an opinion on these financial
              statements and schedule based upon our audit.
  We
              conducted our audit in accordance with the standards of the Public
              Company
              Accounting Oversight Board (United States). Those standards require
              that we plan
              and perform the audit to obtain reasonable assurance about whether
              the financial
              statements are free of material misstatement. An audit includes examining,
              on a
              test basis, evidence supporting the amounts and disclosures in the
              financial
              statements. An audit also includes assessing the accounting principles
              used and
              significant estimates made by management, as well as evaluating the
              overall
              financial statement presentation. We believe that our audit provides
              a
              reasonable basis for our opinion.
  In
              our
              opinion, the consolidated financial statements referred to above present
              fairly,
              in all material respects, the financial position of the Company at
              October 31,
              2007, and the results of its operations and its cash flows
              for the year ended October 31, 2007, in conformity with accounting
              principles generally accepted in the United States of America. Also,
              in our
              opinion, the related financial statement schedule, when considered
              in relation
              to the basic financial statements taken as a whole, presents fairly
              in all
              material respects the information set forth therein.
 
 /s/
              Arnett & Foster, PLLC
 
 Charleston,
              West Virginia
 January
              25, 2008
 F-2
 
 Report
            of Independent Registered
            Public Accounting Firm
 
 
 Audit
            Committee, Board of Directors and Shareholders
 Champion
            Industries, Inc.
 Huntington,
            West Virginia
 
 We
            have
            audited the accompanying consolidated balance sheet of Champion Industries,
            Inc.
            and Subsidiaries (the “Company”) as of October 31, 2006 and the related
            consolidated statements of operations, shareholders’ equity and cash flows for
            each of the two years in the period ended October 31, 2006. Our audits also
            included the financial statement schedule listed in the index at Item
            15(a).
            These financial statements and schedule are the responsibility of the
            Company’s
            management. Our responsibility is to express an opinion on these financial
            statements and schedule based on our audits.
  We
            conducted our audits in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            financial
            statements are free of material misstatement. An audit includes examining,
            on a
            test basis, evidence supporting the amounts and disclosures in the financial
            statements. An audit also includes assessing the accounting principles
            used and
            significant estimates made by management, as well as evaluating the overall
            financial statement presentation. We believe that our audits provide
            a
            reasonable basis for our opinion.
  In
            our
            opinion, the consolidated financial statements referred to above present
            fairly,
            in all material respects, the financial position of the Company at October
            31,
            2006, and the results of its operations and its cash flows for each of
            the two years in the period ended October 31, 2006, in conformity with
            accounting principles generally accepted in the United States of America.
            Also,
            in our opinion, the related financial statement schedule, when considered
            in
            relation to the basic financial statements taken as a whole, presents
            fairly in
            all material respects the information set forth therein.
 
 /s/
            BKD,
            LLP
 
 Evansville,
            Indiana
 December
            15, 2006
 F-3
 Champion
            Industries, Inc. and
            Subsidiaries
 
 Consolidated
            Balance Sheets
  October
                      31,2007
                  
                  
                  2006AssetsCurrent
                      assets:Cash
                      and cash equivalents
                  
                  $
                  5,793,120
                  
                  
                  $
                  5,486,577Accounts
                      receivable, net of allowance of $1,511,000 and $1,558,000
                  
                  
                  23,239,103
                  
                  
                  
                  20,638,823Inventories
                  
                  
                  11,504,847
                  
                  
                  
                  10,986,590Income tax refund
                  
                  
                  632,439
                  
                  
                  
                  -Other
                      current assets
                  
                  
                  882,535
                  
                  
                  
                  618,549Deferred
                      income tax assets
                  
                  
                  969,664
                  
                  
                  
                  1,200,037Total
                      current assets
                  
                  
                  43,021,708
                  
                  
                  
                  38,930,576Property
                      and equipment, at cost:Land
                  
                  
                  2,120,689
                  
                  
                  
                  2,023,375Buildings
                      and improvements
                  
                  
                  12,262,229
                  
                  
                  
                  8,731,280Machinery
                      and equipment
                  
                  
                  55,763,920
                  
                  
                  
                  46,757,859Furniture
                      and fixtures
                  
                  
                  4,088,761
                  
                  
                  
                  3,620,783Vehicles
                  
                  
                  3,185,555
                  
                  
                  
                  3,453,41577,421,154
                  
                  
                  
                  64,586,712Less
                      accumulated depreciation
                  
                  
                  (48,164,640
                  )
                  
                  
                  (45,541,027
                  )29,256,514
                  
                  
                  
                  19,045,685Cash
                      surrender value of officers’ life insurance
                  
                  
                  834,106
                  
                  
                  
                  1,202,696Goodwill
                  
                  
                  38,853,657
                  
                  
                  
                  3,411,511Deferred financing costs
                  
                  
                  1,818,140
                  
                  
                  
                  -Other
                      intangibles, net of accumulated amortization
                  
                  
                  16,779,241
                  
                  
                  
                  3,125,691Trademark and masthead
                  
                  
                  18,515,316
                  
                  
                  
                  -Other
                      assets
                  
                  
                  132,909
                  
                  
                  
                  272,56776,933,369
                  
                  
                  
                  8,012,465Total
                      assets
                  
                  $
                  149,211,591
                  
                  
                  $
                  65,988,726
 
 
 
 
 
 
 See
            notes to consolidated financial
            statements.
 
 F-4
 Champion
            Industries, Inc. and
            Subsidiaries
 
 Consolidated
            Balance Sheets (continued)
  October
                      31,2007
                  
                  
                  2006Liabilities
                      and shareholders’
                      equityCurrent
                      liabilities:Accounts
                      payable
                  
                  $
                  5,491,189
                  
                  
                  $
                  5,763,928Accrued
                      payroll and commissions
                  
                  
                  2,460,287
                  
                  
                  
                  2,169,878Taxes
                      accrued and withheld
                  
                  
                  1,294,125
                  
                  
                  
                  1,394,345Accrued
                      income taxes
                  
                  
                  -
                  
                  
                  
                  1,107,837Accrued
                      expenses
                  
                  
                  3,433,971
                  
                  
                  
                  925,070Current
                      portion of long-term debt:Notes
                      payable
                  
                  
                  5,033,637
                  
                  
                  
                  1,614,861Total
                      current liabilities
                  
                  
                  17,713,209
                  
                  
                  
                  12,975,919Long-term
                      debt, net of current portion:Line
                      of credit
                  
                  
                  15,540,496
                  
                  
                  
                  -Notes
                      payable
                  
                  
                  63,837,402
                  
                  
                  
                  4,219,724Deferred
                      income tax liabilities
                  
                  
                  3,382,447
                  
                  
                  
                  3,628,014Other
                      liabilities
                  
                  
                  10,950
                  
                  
                  
                  388,384Total
                      liabilities
                  
                  
                  100,484,504
                  
                  
                  
                  21,212,041Commitments
                      and contingencies-See NoteShareholders’
                      equity:Common
                      stock, $1 par value, 20,000,000 shares authorized;9,968,913
                      and 9,922,913 shares issuedand
                      outstanding
                  
                  
                  9,968,913
                  
                  
                  
                  9,922,913Additional
                      paid-in capital
                  
                  
                  22,733,300
                  
                  
                  
                  22,636,620Retained
                      earnings
                  
                  
                  16,036,224
                  
                  
                  
                  12,217,152Other comprehensive loss
                  
                  
                  (11,350
                  )
                  
                  
                  -Total
                      shareholders’ equity
                  
                  
                  48,727,087
                  
                  
                  
                  44,776,685Total
                      liabilities and shareholders’ equity
                  
                  $
                  149,211,591
                  
                  
                  $
                  65,988,726
 
 
 
 
 See
            notes to consolidated financial
            statements.
 
 F-5
 Champion
            Industries, Inc. and
            Subsidiaries
 
 Consolidated
            Statements of Operations
  Year
                      Ended October
                      31,2007
                  
                  2006
                  
                  2005Revenues:Printing
                  
                  $
                  101,652,835
                  
                  $
                  106,413,663
                  
                  $
                  98,458,017Office
                      products and office furniture
                  
                  
                  41,448,642
                  
                  
                  38,774,213
                  
                  
                  36,467,219Newspaper
                  
                  
                  2,540,377
                  
                  
                  -
                  
                  
                  -Total
                      revenues
                  
                  
                  145,641,854
                  
                  
                  145,187,876
                  
                  
                  134,925,236Cost
                      of sales & newspaper operating costs:Printing
                  
                  
                  72,769,486
                  
                  
                  75,015,978
                  
                  
                  70,978,621Office
                      products and office furniture
                  
                  
                  28,834,642
                  
                  
                  26,777,539
                  
                  
                  25,693,958Newspaper
                    cost of sales & operating costs
                  
                  
                  1,187,444
                  
                  
                  -
                  
                  
                  -Total
                      cost of sales & newspaper operating costs
                  
                  
                  102,791,572
                  
                  
                  101,793,517
                  
                  
                  96,672,579Gross
                      profit
                  
                  
                  42,850,282
                  
                  
                  43,394,359
                  
                  
                  38,252,657Selling,
                      general and administrative expenses
                  
                  
                  32,335,593
                  
                  
                  34,018,288
                  
                  
                  34,796,990Hurricane
                      and relocation costs, net of recoveries
                  
                  
                  -
                  
                  
                  (377,276
                  )
                  
                  1,020,999Income
                      from operations:
                  
                  
                  10,514,689
                  
                  
                  9,753,347
                  
                  
                  2,434,668Other
                      income (expense):Interest
                      income
                  
                  
                  45,021
                  
                  
                  28,251
                  
                  
                  18,472Interest
                      expense
                  
                  
                  (1,455,470
                  )
                  
                  (609,881
                  )
                  
                  (610,787
                  )Other
                  
                  
                  179,126
                  
                  
                  31,694
                  
                  
                  120,436(1,231,323
                  )
                  
                  (549,936
                  )
                  
                  (471,879
                  )Income
                      before income taxes
                  
                  
                  9,283,366
                  
                  
                  9,203,411
                  
                  
                  1,962,789Income
                      tax expense
                  
                  
                  (3,203,226
                  )
                  
                  (3,729,563
                  )
                  
                  (846,155
                  )Net
                      income
                  
                  $
                  6,080,140
                  
                  $
                  5,473,848
                  
                  $
                  1,116,634Earnings
                      per share:Basic
                  
                  $
                  0.61
                  
                  $
                  0.56
                  
                  $
                  0.11Diluted
                  
                  
                  0.60
                  
                  
                  0.55
                  
                  
                  0.11Dividends
                      paid per share
                  
                  
                  0.24
                  
                  
                  0.20
                  
                  
                  0.20Weighted
                      average shares outstanding:Basic
                  
                  
                  9,957,000
                  
                  
                  9,818,000
                  
                  
                  9,735,000Diluted
                  
                  
                  10,103,000
                  
                  
                  9,972,000
                  
                  
                  9,809,000
  
 See
            notes to consolidated financial
            statements.
 
 
 F-6
 
 Champion
            Industries, Inc. and
            Subsidiaries
 
 Consolidated
            Statements of Shareholders’ Equity
 
 Additional
                  
                  
                  
                  OtherCommon
                      Stock
                  
                  Paid-In
                  
                  Retained
                  
                  ComprehensiveShares
                  
                  Amount
                  
                  Capital
                  
                  Earnings
                  
                  Loss
                  
                  TotalBalance,
                      October 31, 2004
                  
                  
                  9,733,913
                  
                  $
                  9,733,913
                  
                  $
                  22,278,110
                  
                  $
                  9,538,789
                  
                  $
                  -
                  
                  $
                  41,550,812Net
                      income for 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,116,634
                  
                  
                  -
                  
                  
                  1,116,634Dividends
                      ($0.20 per share)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,946,785
                  )
                  
                  -
                  
                  
                  (1,946,785
                  )Stock
                      options exercised
                  
                  
                  12,000
                  
                  
                  12,000
                  
                  
                  19,560
                  
                  
                  -
                  
                  
                  -
                  
                  
                  31,560Balance,
                      October 31, 2005
                  
                  
                  9,745,913
                  
                  
                  9,745,913
                  
                  
                  22,297,670
                  
                  
                  8,708,638
                  
                  
                  -
                  
                  
                  40,752,221Net
                      income for 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,473,848
                  
                  
                  -
                  
                  
                  5,473,848Dividends
                      ($0.20 per share)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,965,334
                  )
                  
                  -
                  
                  
                  (1,965,334
                  )Stock
                      options exercised
                  
                  
                  177,000
                  
                  
                  177,000
                  
                  
                  338,950
                  
                  
                  -
                  
                  
                  -
                  
                  
                  515,950Balance,
                    October 31, 2006
                  
                  
                  9,922,913
                  
                  
                  9,922,913
                  
                  
                  22,636,620
                  
                  
                  12,217,152
                  
                  
                  -
                  
                  
                  44,776,685Net
                    income
                    for 2007
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  6,080,140
                  
                  
                  -
                  
                  
                  6,080,140Dividends
                    ($0.24 per share)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (2,389,417
                  )
                  
                  -
                  
                  
                  (2,389,417
                  )Stock
                    options exercised
                  
                  
                  46,000
                  
                  
                  46,000
                  
                  
                  96,680
                  
                  
                  -
                  
                  
                  -
                  
                  
                  142,680Cumulative
                      effect of adjustment
                      resulting from adoption of SAB 108, net of tax
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  128,349
                  
                  
                  -
                  
                  
                  128,349Other
                      comprehensive
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  
                  
                  
                  (11,350
                  )
                  
                  (11,350
                  )Balance,
                      October 31,
                      2007
                  
                  
                  9,968,913
                  
                  $
                  9,968,913
                  
                  $
                  22,733,300
                  
                  $
                  16,036,224
                  
                  $
                  (11,350
                  )
                  $
                  48,727,087
  See
            notes to consolidated financial
            statements.
 
 
 F-7
 Champion
            Industries, Inc. and
            Subsidiaries
 Consolidated
            Statements of Cash Flows
 Year
                      Ended October
                      31,2007
                  
                  2006
                  
                  2005Cash
                      flows from operating
                      activities:Net
                      income
                  
                  $
                  6,080,140
                  
                  $
                  5,473,848
                  
                  $
                  1,116,634Adjustments
                      to reconcile net income to cash
                    provided
                      by operating activities:Depreciation
                      and amortization
                  
                  
                  3,992,640
                  
                  
                  4,158,748
                  
                  
                  4,696,105Loss
                      (gain) on sale of assets
                  
                  
                  49,758
                  
                  
                  4,409
                  
                  
                  (36,516
                  )Deferred
                      income taxes
                  
                  
                  (15,194
                  )
                  
                  (388,431
                  )
                  
                  (461,308
                  )Deferred
                      compensation
                  
                  
                  -
                  
                  
                  3,574
                  
                  
                  7,149Bad
                      debt expense
                  
                  
                  491,934
                  
                  
                  979,089
                  
                  
                  420,673Hurricane
                      and
                      relocation (recoveries) costs
                  
                  
                  -
                  
                  
                  (377,276
                  )
                  
                  1,020,999Changes
                      in assets and liabilities:Accounts
                      receivable
                  
                  
                  (927,958
                  )
                  
                  (2,239,782
                  )
                  
                  1,413,579Inventories
                  
                  
                  4,232
                  
                  
                  (101,037
                  )
                  
                  135,596Other
                      current assets
                  
                  
                  (166,758
                  )
                  
                  10,832
                  
                  
                  344,451Accounts
                      payable
                  
                  
                  959,552
                  
                  
                  1,533,189
                  
                  
                  (558,876
                  )Accrued
                      payroll and commissions
                  
                  
                  298,569
                  
                  
                  455,799
                  
                  
                  (64,658
                  )Taxes
                      accrued and withheld
                  
                  
                  (132,206
                  )
                  
                  287,435
                  
                  
                  (182,614
                  )Accrued
                      income taxes
                  
                  
                  (1,825,842
                  )
                  
                  426,074
                  
                  
                  546,207Accrued
                      expenses
                  
                  
                  248,251
                  
                  
                  (62,158
                  )
                  
                  (41,018
                  )Other
                      liabilities
                  
                  
                  (377,434
                  )
                  
                  (4,120
                  )
                  
                  (46,585
                  )Net
                      cash provided by operating activities
                  
                  
                  8,679,684
                  
                  
                  10,160,193
                  
                  
                  8,309,818Cash
                      flows from investing
                      activities:Purchase
                      of property and equipment
                  
                  
                  (3,530,050
                  )
                  
                  (2,951,610
                  )
                  
                  (2,736,561
                  )Proceeds
                      from sale of fixed assets
                  
                  
                  146,857
                  
                  
                  135,846
                  
                  
                  301,559Businesses
                      acquired, net of cash received
                  
                  
                  (1,214,283
                  )
                  
                  -
                  
                  
                  -Goodwill
                      and other intangible additions
                  
                  
                  (45,811
                  )
                  
                  -
                  
                  
                  (359,648
                  )Change
                      in other assets
                  
                  
                  127,657
                  
                  
                  (52,362
                  )
                  
                  171,670Cash
                      surrender value proceeds
                  
                  
                  291,836
                  
                  
                  -
                  
                  
                  -Decrease
                        (increase) in cash surrender value
                  
                  
                  76,754
                  
                  
                  (85,212
                  )
                  
                  (77,970
                  )Net
                      cash used in investing activities
                  
                  
                  (4,147,040
                  )
                  
                  (2,953,338
                  )
                  
                  (2,700,950
                  )Cash
                      flows from financing
                      activities:Borrowings
                      on line of credit
                  
                  
                  12,101,000
                  
                  
                  10,884,000
                  
                  
                  7,719,000Payments
                      on line of credit
                  
                  
                  (12,101,000
                  )
                  
                  (12,496,000
                  )
                  
                  (8,407,000
                  )Proceeds
                      from long-term debt
                  
                  
                  2,654,254
                  
                  
                  1,091,843
                  
                  
                  605,000Principal
                      payments on long-term debt
                  
                  
                  (4,313,471
                  )
                  
                  (3,412,359
                  )
                  
                  (1,694,478
                  )Financing
                      costs paid
                  
                  
                  (320,147
                  )
                  
                  -
                  
                  
                  -Proceeds
                      from exercise of stock options
                  
                  
                  142,680
                  
                  
                  515,950
                  
                  
                  31,560Dividends
                      paid
                  
                  
                  (2,389,417
                  )
                  
                  (1,965,334
                  )
                  
                  (1,946,785
                  )Net
                      cash used in financing activities
                  
                  
                  (4,226,101
                  )
                  
                  (5,381,900
                  )
                  
                  (3,692,703
                  )Net
                      increase in cash and cash equivalents
                  
                  
                  306,543
                  
                  
                  1,824,955
                  
                  
                  1,916,165Cash
                      and cash equivalents at beginning of year
                  
                  
                  5,486,577
                  
                  
                  3,661,622
                  
                  
                  1,745,457Cash
                      and cash equivalents at end of year
                  
                  $
                  5,793,120
                  
                  $
                  5,486,577
                  
                  $
                  3,661,622
 
 See
            notes to consolidated financial
            statements.
 F-8
 Champion
            Industries, Inc. and
            Subsidiaries
  Notes
            to
            Consolidated Financial Statements
 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. Champion also publishes The Herald-Dispatch
            daily
            newspaper in Huntington, WV with a total daily and Sunday circulation
            of
            approximately 27,000 and 32,000, respectively.
 
 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., Syscan Corporation and Champion Publishing,
            Inc.
 
 Significant
            intercompany transactions have been eliminated in consolidation.
 
 Cash
            and Cash
            Equivalents
  Cash
            and
            cash equivalents consist principally of cash on deposit with banks
            and repurchase agreements for government securities, all highly liquid
            investments with an original maturity of three months or less. At October
            31, 2007 and 2006, the Company held overnight repurchase agreements for
            $3,589,000 of Eurodollar Sweep Investments and $1,487,000 of
            government securities with stated interest rates of 3.97% and 4.88%,
            respectively. The Company's cash deposits in excess of federally insured
            amounts
            are primarily maintained at a large well-known financial
            institution.
  Accounts
            Receivable
  Accounts
            receivable are stated at the amount billed to customers. Accounts receivable
            are
            ordinarily due 30 days from the invoice date.
 F-9
 Champion
              Industries, Inc. and
              Subsidiaries
  Notes
              to
              Consolidated Financial Statements (continued)
 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 receivable 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.
 
 During
            2007, 2006 and 2005, $492,000, $979,000 and $421,000 of bad debt expense
            was
            incurred and the allowance for doubtful accounts was $1,511,000, $1,558,000
            and
            $1,410,000 as of October 31, 2007, 2006 and 2005. The actual write-offs
            for the
            periods were $657,000, $832,000 and $407,000 during 2007, 2006 and 2005.
            The
            actual write-offs occur when it is determined an account will not be
            collected.
            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.
 
 No
            individual customer represented greater than 6.0% and 5.0% of the gross
            outstanding accounts receivable at October 31, 2007 and 2006. The Company’s ten
            largest accounts receivable balances represented 17.6% and 19.9% of gross
            outstanding accounts receivable at October 31, 2007 and 2006.
 
 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.
 
 In
            November 2004, the FASB issued SFAS No. 151 “ Inventory
            Costs ”
(SFAS
            151), an amendment of ARB No. 43, chapter 4. SFAS 151 clarifies the
            accounting for abnormal amounts of idle facility expense, freight, handling
            cost
            and wasted material. SFAS 151 was effective for inventory costs incurred
            during
            fiscal years beginning after June 15, 2005. The adoption of this standard
            did
            not have a material effect on the Company’s financial
            statements.
 F-10
 Champion
              Industries, Inc. and
              Subsidiaries
  Notes
              to
              Consolidated Financial Statements (continued)
 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 yearsMachinery
                      and equipment
                  3
                      -
                      10 yearsFurniture
                      and fixtures
                  5
                      -
                      10 yearsVehicles
                  3
                      -
                      5 years
  Major renewals, betterments and replacements are capitalized while maintenance
            and repair costs are charged to operations as incurred. Upon the sale
            or
            disposition of assets, the cost and related accumulated depreciation
            are removed
            from the accounts with the resulting gains or losses reflected in income.
            Depreciation expense approximated $3,538,000, $3,786,000 and $4,292,000
            for the
            years ended October 31, 2007, 2006 and 2005.
  Long-lived property and equipment are reviewed for impairment whenever
                events or
                changes in circumstances indicate that the carrying amount of the
                asset may not
                be recoverable. This evaluation includes the review of operating
                performance and
                estimated future undiscounted cash flows of the underlying assets
                or
                businesses.
  Goodwill
                and Other
                Intangibles
  The excess cost over fair value of net assets of acquired businesses,
                goodwill,
                was in years prior to 2002 being amortized by the straight-line method
                over
                periods ranging from 15 to 25 years. The other intangible assets
                are being
                amortized over 5 to 20 years representing the future benefit of the
                intangible.
                The fair values of these intangible assets are estimated based on
                management's
                assessment as well as independent third party appraisals in some
                cases.
 F-11
 Champion
                Industries, Inc. and
                Subsidiaries  Notes
                  to
                  Consolidated Financial Statements (continued)
 In
                June 2001, the FASB issued SFAS No. 141, "Business Combinations"(SFAS
                141), and SFAS No. 142, "Goodwill and Other
                Intangible
                Assets" (SFAS 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 SFAS 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 SFAS 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 each year thereafter. The application of the requirements
                of this
                standard did not result in an impairment charge.
  Advertising
                Costs
  Advertising costs are expensed as incurred. Advertising expense for
                the years
                ended October 31, 2007, 2006 and 2005 approximated $587,000, $647,000,
                and
                $617,000.
  Income
                Taxes
  Provisions
                for income taxes currently payable and deferred income taxes are
                based on the
                libaility 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 146 ,000,
                154,000 and 74,000 for the years ended October 31, 2007, 2006 and
                2005.
 
 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. The Company’s operating segments are more fully
                described in Note 9.
 F-12
 Champion
                  Industries, Inc. and
                  Subsidiaries
 Notes
                      to
                      Consolidated Financial Statements (continued)
 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. 
Advertising revenues are recognized, net of agency commissions, in
                the period
                when advertising is printed or placed on websites. Circulation revenues
                are
                recognized when purchased newspapers are distributed. Amounts received
                from
                customers in advance of revenue recognized are recorded as deferred
                revenue. The
                deferred revenue associated with The Herald-Dispatch approximated
                $424,000 at
                October 31, 2007.
 
 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 ”
(SFAS
                146), which supersedes EITF No. 94-3, “ Liability
                Recognition for Certain
                Employment Termination Benefits and Other Costs to Exit an
                Activity. ”
SFAS
                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 was effective for exit or disposal activities that were
                initiated after December 31, 2002.  During the fourth quarter of 2005, the
                Company recognized costs associated with facility related costs,
                equipment
                costs, operational costs from lost business and uncollectible receivables,
                personnel costs, inventory related costs and relocation costs aggregating
                approximately $1.0 million associated with Hurricane Katrina. In
                2006, the
                Company recognized recoveries, net of expenses associated with Hurricane
                Katrina
                of approximately $377,000.
 F-13
 
 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 ”
(SFAS
                123R). This statement revises SFAS No. 123, “ Accounting
                for Stock-Based
                Compensation ,”
(SFAS
                123) and requires companies to expense the value of employee stock
                options and
                similar awards. The effective date of this standard was interim and annual
                periods beginning after June 15, 2005 . On
                April
                14, 2005, the United States Securities and Exchange Commission amended
                the
                effective date of this standard to the beginning of a company’s fiscal year that
                begins after June 15, 2005. Therefore, the effective date of this
                standard for
                the Company was November 1, 2005. Since the Company’s employee stock options
                vest immediately in the year granted, the initial adoption of this
                standard did not have any affect on the Company’s financial
                statements. However, the Company will be required to expense the
                value of the
                employee stock options when future options are granted.  There were no
                stock option grants in 2007 or 2006.
 
 Before
                the adoption of SFAS 123R, 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 was 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 2005:
                risk-free interest rates of 4.34%; dividend yields of 4.72%; volatility
                factors of the expected market price of the Company's common stock
                of 45.1%; 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 was expensed in the year granted since the options vested
                immediately. The Company's pro forma information for the years ended
                October 31
                are as follows:
 
 
 Year
                          Ended October
                          31,2007
(1)
                      
                      2006(1)
                      
                      2005Net
                          income as reported
                      
                      $
                      6,080,140
                      
                      $
                      5,473,848
                      
                      $
                      1,116,634Deduct:
                          Total stock-based employee compensation expense determined
                          under the fair
                          value method for all awards, net of related tax effects
                      
                      
                      -
                      
                      
                      -
                      
                      
                      296,400Pro
                          forma net income
                      
                      $
                      6,080,140
                      
                      $
                      5,473,848
                      
                      $
                      820,234Earnings
                          per share:Basic,
                          as reported
                      
                      $
                      0.61
                      
                      $
                      0.56
                      
                      $
                      0.11Basic,
                          pro forma
                      
                      $
                      0.61
                      
                      $
                      0.56
                      
                      $
                      0.08Diluted,
                          as reported
                      
                      $
                      0.60
                      
                      $
                      0.55
                      
                      $
                      0.11Diluted,
                          pro forma
                      
                      $
                      0.60
                      
                      $
                      0.55
                      
                      $
                      0.08
  (1)
                  Not applicable, since
                  the Company adopted SFAS 123R on November 1, 2005 and there were
                  no stock
                  options granted during 2006 and 2007.
 F-14
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
  SAB
                  108
 
 In
                  September 2006, the SEC Staff issued SAB No. 108, “Considering
                  the Effects of Prior
                  Year Misstatements when Quantifying Misstatements in Current Year
                  Financial
                  Statements” (SAB 108). SAB 108 was issued in order to eliminate the
                  diversity of practice surrounding how public companies quantify
                  financial
                  statement misstatements.
 
 Traditionally, there have been two widely-recognized methods for
                  quantifying the
                  effects of financial statement misstatements: the “rollover” method and the
“iron curtain” method. The rollover method focuses primarily on the impact of
                  a
                  misstatement on the income statement-including the reversing effect
                  of prior
                  year misstatements- but its use can lead to the accumulation of
                  misstatements in
                  the balance sheet. The iron curtain method, on the other hand,
                  focuses primarily
                  on the effect of correcting the period-end balance sheet with less
                  emphasis on
                  the reversing effects of prior year errors on the income statement.
                  We currently
                  use the rollover method for quantifying identified financial statement
                  misstatements.
 
 In
                  SAB 108, the SEC Staff established an approach that requires quantification
                  of
                  financial statement misstatements based on the effects of the misstatements
                  on
                  each of the company’s financial statements and the related financial statement
                  disclosures. This model is commonly referred to as a “dual approach” because it
                  requires quantification of errors under both the iron curtain and
                  the rollover
                  methods.
 
 SAB 108 permits existing public companies to initially apply its
                  provisions by
                  (i) restating prior financial statements as if the “dual approach” had always
                  been used or (ii) recording the cumulative effect of initially
                  applying the
“dual approach” as adjustments to the carrying value of assets and liabilities
                  as of November 1, 2006, with an offsetting adjustment recorded to the
                  opening balance of retained earnings. Use of the “cumulative effect” transition
                  method requires detailed disclosure of the nature and amount of
                  each individual
                  error being corrected through the cumulative adjustment and how
                  and when it
                  arose.
  We adopted the provisions of SAB 108 using the cumulative effect transition
                  method in connection with the preparation of our annual financial
                  statements for
                  the year ended October 31, 2007.  As a result of the adoption of SAB
                  108, the Company recorded an increase in net fixed assets of
                  approximately $95,000, an increase in accounts receivable of approximately
                  $101,000, a decrease in accrued payroll of approximately $68,000, a
                  decrease in accrued professional fees of approximately $83,000,
                  reductions in
                  accounts receivable and inventory of approximately $65,000, other
                  accrual
                  increases of $68,000 and an increase in retained earnings of approximately
                  $128,000, net of tax, as of November 1, 2006. The accompanying financial
                  statements reflect these adjustments.
 F-15
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 EITF
                  06-3
 
 In
                  June 2006, the FASB Emerging Issues Tax Force (EITF) issued EITF
                  06-3 "How Sales Taxes
                  Collected from
                  Customers and Remitted to Governmental Authorities Should be Presented
                  in the
                  Income Statement" (That is, Gross Versus Net Presentation) to clarify
                  diversity in practice on the presentation of different types of
                  taxes in the
                  financial statements. The task force concluded that, for taxes
                  within the scope
                  of the issue, a company may adopt a policy of presenting taxes
                  either gross
                  within revenue or net. That is, it may include charges to customers
                  for taxes
                  within revenues and the charges for the taxes from the taxing authority
                  within
                  cost of sales, or alternatively, it may net the charge to the customer
                  and the
                  charge from the taxing authority. If taxes subject to EITF 06-3
                  are significant,
                  a company is required to disclose its accounting policy for presenting
                  taxes and
                  the amounts of such taxes that are recognized on a gross basis.
                  The guidance in
                  this consensus is effective for the first interim reporting period
                  beginning
                  after December 15, 2006 (the second quarter of our fiscal year
                  2007). We
                  adopted EITF 06-3 on February 1, 2007 and we record sales tax on a net
                  basis. The adoption of EITF 06-3 did not have a material impact on our
                  results of operations, financial position or cash flows.
 FIN
                    48
  In
                    June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), this
                    interpretation clarifies the accounting for uncertainty in income
                    taxes
                    recognized in an enterprise's financial statements in accordance
                    with SFAS
                    No. 109, "Accounting
                    for
                    Income Taxes" (SFAS 109). This interpretation is effective for
                    fiscal years beginning after December 15, 2006. The Company is
                    currently
                    evaluating the impact of this standard on the financial statements.
 2.
                Inventories
  Inventories
                consisted of the following:
 October
                          31,2007
                      
                      2006Printing
                          and Newspaper:Raw
                          materials
                      
                      $
                      2,401,340
                      
                      $
                      2,121,843Work
                          in process
                      
                      
                      1,906,301
                      
                      
                      1,800,517Finished
                          goods
                      
                      
                      4,003,318
                      
                      
                      4,404,162Office
                          products and office furniture
                      
                      
                      3,193,888
                      
                      
                      2,660,068$
                      11,504,847
                      
                      $
                      10,986,590
 
 F-16
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 3.
                Long-term Debt
  Long-term
                debt consisted of the following:
 October
                          31,2007
                      
                      
                      2006Secured
                          term note payable to a bank, due in monthly principal and
                          interest
                          installments approximating $0 at October 31, 2007 and $53,633
                          at October
                          31, 2006 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.
                      
                      $
                      -
                      
                      
                      $
                      452,386Installment
                          notes payable to banks, due in monthly installments plus
                          interest at rates
                          approximating the bank’s prime rate maturing in various periods ranging
                          from April 2008 - September 2011, collateralized by vehicles
                          in 2007 and
                          equipment, vehicles, inventory and accounts receivable
                          in
                          2006.
                      
                      
                      171,039
                      
                      
                      
                      5,382,199Term
                          loan facility with a bank, due in quarterly installments
                          of $1,225,000
                          plus interest payments equal to the Base Rate plus the
                          applicable margin
                          or the adjusted LIBOR Rate plus the applicable marginmaturing September 2013, collateralized by substantially
                          all of the assets
                          of the Company.
                      
                      
                      68,700,000
                      
                      
                      
                      -68,871,039
                      
                      
                      
                      5,834,585Less
                          current portion
                      
                      
                      5,033,637
                      
                      
                      
                      1,614,861Long-term
                          debt, net of current portion
                      
                      $
                      63,837,402
                      
                      
                      $
                      4,219,724
  The
                secured and unsecured credit facilities contain restrictive financial
                covenants requiring the Company to maintain certain financial ratios.
                The
                Company was in compliance with these covenants at October 31, 2007.
                The Company
                is required to maintain a minimum of $750,000 of compensating balances
                with
                Fifth Third Bank under the terms of its credit agreement. The Company
                is
                permitted to pay dividends under its Credit Agreement as long as
                no default or
                event of default exists or shall exist after giving effect to the
                proposed
                dividend and the Company has delivered to the Credit Agreement's
                administrative
                agent prior to the proposed dividend a pro forma compliance certificate
                evidencing compliance with applicable covenants as defined in the
                Credit
                Agreement.
  The
                Company is required to make certain mandatory
                payments on its credit facilities related to (1) net proceeds received
                from a
                loss subject to applicable thresholds, (2) equity proceeds and (3)
                effective January 31, 2009, the Company is required to prepay its
                credit
                facilities by 75% of excess cash flow for its most recently completed
                fiscal
                year. The excess cash flow for purposes of this calculation is defined
                as
                the difference (if any) between (a) EBITDA for such period and (b)
                federal,
                state and local income taxes paid in cash during such period plus
                capital
                expenditures during such period not financed with indebtedness plus
                interest
                expense paid in cash during such period plus the aggregate amount
                of scheduled
                payments made by the Borrower and its Subsidiaries during such period
                in respect
                of all principal on all indebtedness (whether at maturity, as a result
                of
                mandatory sinking fund redemption, or otherwise), plus restricted
                payments paid
                in cash by the Borrower during such period in compliance with the
                credit
                agreement.
  Maturities
                of long-term debt for each of the next five years follow:
  2008
                      
                      $
                      5,033,6372009
                      
                      
                      4,937,4022010
                      
                      
                      4,900,0002011
                      
                      
                      4,900,0002012
                      
                      
                      4,900,000Residual
                      
                      
                      44,200,000$
                      68,871,039
  F-17
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 Prior
                to
                September 14, 2007, the Company had 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 Company had no outstanding
                borrowings under this facility at October 31, 2006. The line of credit was
                terminated and replaced with a revolving credit agreement with another
                bank.
                Under this revolving note, the Company can borrow a maximum of $30,000,000
                subject to a borrowing base limitation with interest payable monthly at the
                prime rate of interest and/or LIBOR plus a margin. The Company had
                borrowed
                $15,540,496 under this facility at October 31, 2007. Pursuant to its
                borrowing base calculation, the Company had approximately $8.8 million in
                additional availability under its $30.0 million revolving credit line at
                October 31, 2007. The line of credit expires in September 2012 and contains
                certain restrictive financial covenants, is subject to borrowing
                base
                limitations and is collateralized by substantially all of the assets
                of the
                Company.
 
 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 2008 and contains
                certain
                financial covenants. There were no borrowings outstanding under this
                facility at
                October 31, 2007 or 2006.
 The prime rate was the primary interest rate on the above loans prior to
                September 14, 2007. After this date, the primary interest rate consisted
                primarily of LIBOR 30-day and 90-day rates plus 275 basis points.
                Prime rate
                approximated 7.50% and 8.25% at October 31, 2007 and 2006, while
                the 30-day
                LIBOR rate approximated 4.75% at October 31, 2007. The Company has
                entered into
                a hedging arrangement to convert $25.0 million of variable interest
                rate debt to
                fixed interest rate debt (see Note 14). Interest paid during the
                years ended
                October 31, 2007, 2006 and 2005 approximated $1,168,000, $616,000  and
                $615,000. The Company had accrued interest of approximately $302,000
                and $19,000
                at October 31, 2007 and 2006. Deferred financing costs are amortized over
                the life of the related credit facilities and are reported as part
                of interest
                expense. In 2007, $46,000 of deferred financing costs were included as
                interest expense; there were no deferred financing costs in 2006
                or
                2005.
  The
                Company’s non-cash activities for 2007, 2006 and 2005 included equipment
                purchases of approximately $1,738,000, $1,322,000 and $277,000, which
                were
                financed by a bank, and the accrual for the contingent earn out payment
                to
                Syscan of $1,350,725 in 2006. The Company recorded non-cash investing
                and
                financing activities for the acquisition of The Herald-Dispatch of
                approximately
                $78.5 million. The Company also accrued approximately $1.6 million
                for a final
                working capital payment for the acquisition of The Herald-Disptach.
 
 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 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 $428,000, $437,000 and $447,000 for the years ended
                October 31,
                2007, 2006 and 2005.
 
 The
                Company’s accrued vacation liability as of October 31, 2007 and 2006 was
                approximately $597,000 and $605,000. This item is classified as a
                component of
                accrued expenses on the financial statements.
 F-18
 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, 2007 ranged from $2.77
                      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 2.29
                      years.
 
 A
                summary
                of the Company’s stock option activity and related information for the years
                ended October 31 follows:
  Weighted
                      
                      
                      
                      Weighted
                      
                      
                      
                      WeightedAverage
                      
                      
                      
                      Average
                      
                      
                      
                      AverageExercise
                      
                      
                      
                      Exercise
                      
                      
                      
                      Exercise2007
                      
                      Price
                      
                      2006
                      
                      Price
                      
                      2005
                      
                      PriceOutstanding-beginning
                          of year
                      
                      
                      382,000
                      
                      $
                      4.01
                      
                      
                      570,000
                      
                      $
                      3.67
                      
                      
                      379,000
                      
                      $
                      3.33Granted
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      247,000
                      
                      
                      4.26Exercised
                      
                      
                      (46,000
                      )
                      
                      3.10
                      
                      
                      (177,000
                      )
                      
                      2.91
                      
                      
                      (12,000
                      )
                      
                      2.63Forfeited
                          or expired
                      
                      
                      (6,000
                      )
                      
                      2.49
                      
                      
                      (11,000
                      )
                      
                      3.80
                      
                      
                      (44,000
                      )
                      
                      4.26Outstanding-end
                          of year
                      
                      
                      330,000
                      
                      
                      4.18
                      
                      
                      382,000
                      
                      
                      4.01
                      
                      
                      570,000
                      
                      
                      3.67Weighted
                          average fair value of options granted during the year
                      
                      $
                      -
                      
                      
                      
                      
                      $
                      -
                      
                      
                      
                      
                      $
                      1.20
 
 A
                summary
                of stock options outstanding and exercisable at October 31, 2007,
                follows:
 
 
 Exercise
                      
                      Number
                      
                      RemainingPrice
                      
                      Outstanding
                      
                      Life2.77
                      
                      
                      19,000
                      
                      
                      0.124.29
                      
                      
                      91,000
                      
                      
                      1.134.26
                      
                      
                      220,000
                      
                      
                      2.96
 F-19
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 The
                Company had 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. During
                fiscal year 2007, a one-time payment to this employee of $375,000
                was made by
                the Company satisfying its obligation in full. To assist in the
                funding of the payment, the Company had invested in life insurance
                policies
                which were monetized to effectuate this transaction. The amount expensed
                for
                this agreement for the years ended October 31, 2007, 2006 and 2005
                approximated
                $0, $4,000 and $7,000.
  5.
                Income Taxes
  Income
                tax expense consisted of the following:
  Year
                          Ended October
                          31,2007
                      
                      2006
                      
                      2005Current
                          expense:Federal
                      
                      $
                      2,666,371
                      
                      $
                      3,282,566
                      
                      $
                      1,009,920State
                      
                      
                      552,049
                      
                      
                      835,428
                      
                      
                      297,543Deferred
                          benefit
                      
                      
                      (15,194
                      )
                      
                      (388,431
                      )
                      
                      (461,308
                      )$
                      3,203,226
                      
                      $
                      3,729,563
                      
                      $
                      846,155
  Deferred
                tax assets and liabilities are as follows:
  October
                            31,2007
                        
                        
                        2006Deferred
                            tax assets:Allowance
                            for doubtful accounts
                        
                        $
                        561,002
                        
                        
                        $
                        633,118Deferred
                            compensation
                        
                        
                        -
                        
                        
                        
                        150,122Net
                            operating loss carryforward of acquired companies
                        
                        
                        420,261
                        
                        
                        
                        458,519Accrued
                            vacation
                        
                        
                        235,400
                        
                        
                        
                        238,055Other
                            accrued liabilities
                        
                        
                        177,133
                        
                        
                        
                        183,973Other
                            assets
                        
                        
                        -
                        
                        
                        
                        232,422Gross
                            deferred tax assets
                        
                        
                        1,393,796
                        
                        
                        
                        1,896,209Deferred
                            tax liabilities:Property
                            and equipment
                        
                        
                        2,453,341
                        
                        
                        
                        2,669,440Intangible
                            assets
                        
                        
                        1,062,029
                        
                        
                        
                        1,351,429Gross
                            deferred tax liability
                        
                        
                        3,515,370
                        
                        
                        
                        4,020,869Net
                            deferred tax liabilities before valuation allowance
                        
                        
                        2,121,574
                        
                        
                        
                        2,124,660Valuation
                            allowance:Beginning
                            balance
                        
                        
                        303,317
                        
                        
                        
                        303,317Decrease
                            during the period
                        
                        
                        (12,108
                        )
                        
                        
                        -Ending
                            balance
                        
                        
                        291,209
                        
                        
                        
                        303,317Net
                            deferred tax liabilities
                        
                        $
                        2,412,783
                        
                        
                        $
                        2,427,977
 F-20
 Champion
                      Industries, Inc. and
                      Subsidiaries
  Notes
                      to
                      Consolidated Financial Statements (continued)
  The above net deferred tax liability is presented on the balance sheet as
                        follows:
 2007
                        
                        
                        2006Deferred
                            tax asset - current
                        
                        $
                        969,664
                        
                        
                        $
                        1,200,037Deferred
                            tax liability - long-term
                        
                        
                        (3,382,447
                        )
                        
                        
                        (3,628,014
                        )$
                        (2,412,783
                        )
                        
                        $
                        (2,427,977
                        )
  A
                reconciliation of the statutory federal income tax rate to the Company’s
                effective income tax rate is as follows:
  Year
                          Ended October
                          31,2007
                      
                      
                      2006
                      
                      
                      2005Statutory
                          federal income tax rate
                      
                      
                      34.0
                      %
                      
                      
                      34.0
                      %
                      
                      
                      34.0
                      %State
                          taxes, net of federal benefit
                      
                      
                      5.7
                      
                      
                      
                      5.2
                      
                      
                      
                      6.5Change
                          in valuation allowance
                      
                      
                      (0.1
                      )
                      
                      
                      -
                      
                      
                      
                      0.6Selling
                          expenses
                      
                      
                      0.7
                      
                      
                      
                      0.7
                      
                      
                      
                      4.0Cash
                          surrender value of life insurance accretion
                      
                      
                      (0.2
                      )
                      
                      
                      (0.3
                      )
                      
                      
                      (1.4
                      )Amended state
                          returns
                      
                      
                      (0.8
                      )
                      
                      
                      -
                      
                      
                      
                      -State
                          apportionment tax accrual adjustments
                      
                      
                      (1.9
                      )
                      
                      
                      -
                      
                      
                      
                      -Federal
                          tax accrual adjustments
                      
                      
                      (0.7
                      )
                      
                      
                      -
                      
                      
                      
                      -Tax
                          benefits associated with The Herald-Dispatch
                      
                      
                      (1.7
                      )
                      
                      
                      -
                      
                      
                      
                      -Other
                      
                      
                      (0.5
                      )
                      
                      
                      0.9
                      
                      
                      
                      (0.6
                      )Effective
                          tax rate
                      
                      
                      34.5
                      %
                      
                      
                      40.5
                      %
                      
                      
                      43.1
                      %
  Income
                taxes paid during the years ended October 31, 2007, 2006 and 2005
                approximated
                $5,084,000, $3,608,000 and $930,000. The Company recorded an income
                tax refund
                at October 31, 2007 of $632,000 and income taxes payable of $1.1
                million at
                October 31, 2006.
  The
                Company has available for income tax purposes net operating loss
                carryforwards
                from acquired companies of approximately $893,000, of which $860,000
                expires 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 $1,409,000 of which $206,000 expires in 2014, $268,000
                expires in 2015, $478,000 expires in 2016, $48,000 expires in 2018,
                $120,000
                expires in 2019, $281,000 expires in 2020 and $8,000 expires in 2021.
                In 2007,
                the valuation allowance decreased by $12,000, which is primarily
                reflective of
                the usage of net operating losses in the state of Mississippi.  There was
                no change in the valuation allowance in 2006.  During 2005, the valuation
                allowance increased by $18,067 which is primarily reflective of the
                losses
                incurred during 2005 in Mississippi of which the realizability of
                the
                utilization of the resulting net operating losses resulted in an
                increase in the
                valuation allowance.
 F-21
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 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 owned by the former sole owner of Syscan 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
                          31,2007
                      
                      2006
                      
                      2005Rent
                          expense paid to affiliated entitiesfor
                            operating facilities
                      
                      $
                      434,000
                      
                      $
                      449,000
                      
                      $
                      519,000Sales
                          of office products, office furniture and printing services
                          to affiliated
                          entities
                      
                      
                      934,000
                      
                      
                      693,000
                      
                      
                      1,030,000
 
 
 In
                addition, the Company leases property and equipment from unrelated
                entities
                under operating leases. Rent expense amounted to $819,000, $714,000
                and $807,000
                for the years ended October 31, 2007, 2006 and 2005.
 
 Under
                the
                terms and conditions of the above-mentioned leases, the Company is
                primarily responsible for all taxes, assessments, maintenance, repairs
                or
                replacements, utilities and insurance. The Champion Output Solutions'
                lease
                excludes taxes and insurance during the initial lease term. The Company
                has
                renewal options for certain leases covering varying periods.
 F-22
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 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, 2007:
 2008
                      
                      $
                      1,184,6622009
                      
                      
                      839,7392010
                      
                      
                      542,9122011
                      
                      
                      440,2422012
                      
                      
                      283,200Residual
                      
                      
                      206,800$
                      3,497,555
 
 
 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, 2007, 2006 and 2005 was approximately $3,493,000,
                $3,792,000
                and $3,236,000.
 
 During
                2007, 2006 and 2005, the Company utilized an aircraft from an entity
                controlled
                by its Chief Executive Officer and reimbursed the controlled entity
                for the use
                of the aircraft, fuel, aircrew, ramp fees and other expenses attendant
                to the
                Company’s use, in amounts aggregating $91,000, $119,000 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.
 
 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
  As
                reported in Form 8-K filed May 6, 2005, the Company entered into
                an agreement to
                settle all claims in a Mississippi lawsuit asserting that the Company
                and its
                Dallas Printing Company, Inc. subsidiary had engaged in unfair competition
                and
                other wrongful acts in hiring certain employees of National Forms
& Systems
                Group, Inc.
 
 Following
                trial of this matter, titled National Forms & Systems Group Inc. v. Timothy
                V. Ross; Todd Ross and Champion Industries, Inc.; and Timothy V.
                Ross v.
                National Forms & Systems Group, Inc. and Mickey McCardle; in the Circuit
                Court of the First Judicial District of Hinds County, Mississippi;
                Case No.
                251-00-942-CIV, on February 16, 2002, a jury had awarded plaintiff
                $1,745,000 in
                actual damages and $750,000 in punitive damages. Additionally, the
                trial court
                had granted plaintiff $645,119 in attorney fees and expenses, and
                ordered that
                interest on the amount of the jury award accrue from February 22,
                2002.
 F-23
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 The
                Company successfully appealed the jury award and attorney fee and
                expense award
                in both the Court of Appeals of the State of Mississippi and the
                Supreme Court
                of Mississippi, with the appellate courts’ rulings having the effect of
                reversing the jury’s award of damages and the trial court’s award of attorney
                fees and expenses, and granting a new trial on plaintiff’s claims.
 
 Terms
                of
                the settlement called for all parties’ claims to be dismissed with prejudice, as
                fully compromised and released. The Company has paid plaintiff $440,000
                cash and
                did forego collection of and released its $60,276 cost judgment awarded
                as a
                result of the reversal on appeal.
  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 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 as
                well as
                various governmental audits and examinations. In the opinion of management,
                after consulting with legal counsel where applicable, the Company
                believes that
                the ultimate resolution of these claims, audits and legal actions will not
                have a material effect on the consolidated financial statements of
                the
                Company.
 
 8.
                Acquisitions
  On
                  September 14, 2007, the Company completed, pursuant to an asset
                  purchase
                  agreement, the acquisition of The Herald-Dispatch daily newspaper in
                  Huntington, WV. The purchase price was $77.0 million and subject
                  to a working
                  capital payment of $837,554 plus or minus any change in working
                  capital from the
                  index working capital base of $1,675,107 at the closing date of
                  September 14,
                  2007. The working capital payment totaled approximately $1.6 million.
  Approximately
                  six weeks of the operations of The Herald-Dispatch are included
                  in the Company's
                  Statement of Operations commencing concurrent with the acquisition
                  in
                  2007.
 F-24
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 The
                  Company acquired substantially all of the net assets of The Herald-Dispatch
                  for
                  a purchase price of $77.0 million consisting of cash.  The purchase price
                  includes a cash payment of $77.0 million plus acquisition costs
                  of approximately
                  $373,000 and a working capital adjustment of approximately $1,616,000.  The
                  working capital adjustment was recorded under accrued expenses
                  at October 31,
                  2007. The purchase price was financed by the Company through a
                  term debt
                  facility and a revolving credit facility. The purchase of The Herald-Dispatch
                  was consummated based on certain specificly identified synergies
                  due in part to
                  duplicative functions, to achieve cash flow diversity, to capitalize
                  on a unique investment opportunity in the company's core territory,
                  and to
                  provide a platform for future growth and expansion opportunities.
                  The following
                  is a condensed balance sheet indicating the amount assigned to
                  each major asset
                  and liability caption of The Herald-Dispatch at September 14, 2007:
  Current
                          assets, net of cash recieved
                        
                        $
                        2,748,445Property,
                          plant and equipment
                        
                        
                        8,582,200Goodwill
                        
                        
                        35,396,335Trademark
                          & masthead
                        
                        
                        18,515,316Subscriber
                          base asset
                        
                        
                        3,427,755Advertiser
                          base asset
                        
                        
                        10,613,497Total
                          assets
                        
                        $
                        79,283,548Current
                          liabilities
                        
                        $
                        740,395Net
                          assets acquired
                        
                        $
                        78,543,153
 F-25
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 The
                following table summarizes the unaudited
                consolidated pro forma results of operations and pro forma net income
                per share
                for the years ended October 31, 2007 and 2006, assuming The Herald-Dispatch
                acquisition has occurred at the start of the Company's fiscal year
                for each of
                the periods represented below. The pro forma results below were derived
                from The
                Herald-Dispatch internal financial statements representing the periods
                approximating the Company's fiscal year and are reflective of adjustments
                associated with additional interest expense and associated deferred
                financing
                costs not recorded on the Company's financial statements of approximately
                $5.2
                million and $6.2 million for the 2007 and 2006, respectively. The
                Company
                recorded pro forma adjustments resulting from additional amortization
                expense of
                $614,000 and $702,000 for 2007 and 2006, respectively; additional
                depreciation
                of $524,000 and $352,000 for 2007 and 2006 and adjustments associated
                with
                retirement plans and postretirement benefits other than pensions
                which
                were not assumed by the Company totaling $398,000 and $869,000 in 2007
                and
                2006.
  (in
                        millions, except per share data)
                      
                      2007
                      
                      
                      2006Revenues
                      
                      $
                      164.7
                      
                      
                      $
                      168.8Net
                        income
                      
                      $
                      6.9
                      
                      
                      $
                      6.6Earnings
                        per share:Basic
                      
                      $
                      0.69
                      
                      
                      $
                      0.67Diluted
                      
                      $
                      0.68
                      
                      
                      $
                      0.66Weighted
                        average shares outstanding:Basic
                      
                      
                      10.0
                      
                      
                      
                      9.8Diluted
                      
                      
                      10.1
                      
                      
                      
                      10.0
  The
                identifiable intangible assets of The Herald-Dispatch are being amortized
                on a
                straight-line basis over a period of 20 years for both the subscriber
                and
                advertiser base. The weighted average life of the amortizable intangible
                assets
                for the acquisition of The Herald-Dispatch at the acquisition date
                was
                approximately 20 years. The trademarks and masthead for the acquisition
                of The
                Herald-Dispatch was determined to have an indefinite life. The remaining
                allocation of the purchase price of The Herald-Dispatch was assigned
                to
                goodwill. The Company expects to achieve tax deductions associated
                with
                non-amortizing intangibles and goodwill of approximately $3.6 million
                per year
                for a period of 15 years.
  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.  On December
                14, 2006, the Company paid the contingent purchase price in the amount
                of
                $1,350,725. This amount was accrued at October 31, 2006. 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 ending 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.
 F-26
 Champion
                      Industries, Inc. and
                      Subsidiaries
  Notes
                      to
                      Consolidated Financial Statements (continued)
 All
                of
                the above transactions have been accounted for using the purchase
                method of
                accounting.
 
 9.
                Industry Segment
                Information
  The
                Company operates principally in three 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 forms); the sale of office products and office
                furniture including interior design services; and publishes The
                Herald-Dispatch daily newspaper in Huntington, West Virginia with
                a total daily
                and Sunday circulation of approximately 27,000 and 32,000,
                respectively. Approximately
                six weeks of the operations of The Herald-Dispatch are included in
                the Company's
                Statement of Operations commencing concurrent with the acquisition
                in 2007.The Company employs approximately 89 0 people,
                of whom approximately 80, or 9%, are covered by collective bargaining
                agreements, which expire on May 31, 2010 and December 31, 2010, respectively.
 F-27
 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:
 2007
                      
                      Printing
                      
                      Office
                          Products &
                          Furniture
                      
                      
                      Newspaper
                      
                      
                      TotalRevenues
                      
                      $
                      114,394,118
                      
                      
                      $
                      49,881,702
                      
                      
                      $
                      2,540,377
                      
                      
                      $
                      166,816,197Elimination
                          of intersegment
                          revenue
                      
                      
                      (12,741,283
                      )
                      
                      
                      (8,433,060
                      )
                      
                      
                      -
                      
                      
                      
                      (21,174,343
                      )Consolidated
                          revenues
                      
                      $
                      101,652,835
                      
                      
                      $
                      41,448,642
                      
                      
                      $
                      2,540,377
                      
                      
                      $
                      145,641,854Operating
                          income
                      
                      
                      6,416,551
                      
                      
                      
                      3,438,459
                      
                      
                      
                      659,679
                      
                      
                      
                      10,514,689Depreciation
&
                          amortization
                      
                      
                      3,576,975
                      
                      
                      
                      211,167
                      
                      
                      
                      204,498
                      
                      
                      
                      3,992,640Capital
                          expenditures
                      
                      
                      4,919,357
                      
                      
                      
                      145,471
                      
                      
                      
                      203,086
                      
                      
                      
                      5,267,914Identifiable
                          assets
                      
                      
                      57,020,668
                      
                      
                      
                      10,339,686
                      
                      
                      
                      81,851,237
                      
                      
                      
                      149,211,591Goodwill
                      
                      
                      2,226,837
                      
                      
                      
                      1,230,485
                      
                      
                      
                      35,396,335
                      
                      
                      
                      38,853,6572006
                      
                      Printing
                      
                      Office
                          Products & Furniture
                      
                      
                      Newspaper
                      
                      
                      TotalRevenues
                      
                      $
                      120,891,348
                      
                      
                      $
                      47,758,730
                      
                      
                      $
                      -
                      
                      
                      $
                      168,650,078Elimination
                          of intersegment revenue
                      
                      
                      (14,477,685
                      )
                      
                      
                      (8,984,517
                      )
                      
                      
                      -
                      
                      
                      
                      (23,462,202
                      )Consolidated
                          revenues
                      
                      $
                      106,413,663
                      
                      
                      $
                      38,774,213
                      
                      
                      $
                      -
                      
                      
                      $
                      145,187,876Operating
                          income
                      
                      
                      6,804,181
                      
                      
                      
                      2,949,166
                      
                      
                      
                      -
                      
                      
                      
                      9,753,347Depreciation
                          & amortization
                      
                      
                      3,975,850
                      
                      
                      
                      182,898
                      
                      
                      
                      -
                      
                      
                      
                      4,158,748Capital
                          expenditures
                      
                      
                      3,995,745
                      
                      
                      
                      278,184
                      
                      
                      
                      -
                      
                      
                      
                      4,273,929Identifiable
                          assets
                      
                      
                      53,714,643
                      
                      
                      
                      12,274,083
                      
                      
                      
                      -
                      
                      
                      
                      65,988,726Goodwill
                      
                      
                      2,226,837
                      
                      
                      
                      1,184,674
                      
                      
                      
                      -
                      
                      
                      
                      3,411,5112005
                      
                      Printing
                      
                      Office
                          Products & Furniture
                      
                      
                      Newspaper
                      
                      
                      TotalRevenues
                      
                      $
                      112,680,275
                      
                      
                      $
                      44,931,089
                      
                      
                      
                      -
                      
                      
                      $
                      157,611,364Elimination
                          of intersegment revenue
                      
                      
                      (14,222,258
                      )
                      
                      
                      (8,463,870
                      )
                      
                      
                      -
                      
                      
                      
                      (22,686,128
                      )Consolidated
                          revenues
                      
                      $
                      98,458,017
                      
                      
                      $
                      36,467,219
                      
                      
                      
                      -
                      
                      
                      $
                      134,925,236Operating
                          income
                      
                      
                      779,790
                      
                      
                      
                      1,654,878
                      
                      
                      
                      -
                      
                      
                      
                      2,434,668Depreciation
                          & amortization
                      
                      
                      4,546,612
                      
                      
                      
                      149,493
                      
                      
                      
                      -
                      
                      
                      
                      4,696,105Capital
                          expenditures
                      
                      
                      2,821,379
                      
                      
                      
                      192,207
                      
                      
                      
                      -
                      
                      
                      
                      3,013,586Identifiable
                          assets
                      
                      
                      51,014,174
                      
                      
                      
                      10,630,996
                      
                      
                      
                      -
                      
                      
                      
                      61,645,170Goodwill
                      
                      
                      1,774,344
                      
                      
                      
                      286,442
                      
                      
                      
                      -
                      
                      
                      
                      2,060,786
 F-28
 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, 2007,
                2006 and 2005 is as follows:
  2007
                      
                      
                      2006
                      
                      
                      2005Revenues:Total
                          segment revenues
                      
                      $
                      166,816,197
                      
                      
                      $
                      168,650,078
                      
                      
                      $
                      157,611,364Elimination
                          of intersegment revenue
                      
                      
                      (21,174,343
                      )
                      
                      
                      (23,462,202
                      )
                      
                      
                      (22,686,128
                      )Consolidated
                          revenue
                      
                      $
                      145,641,854
                      
                      
                      $
                      145,187,876
                      
                      
                      $
                      134,925,236Operating
                          income:Total
                          segment operating income
                      
                      $
                      10,514,689
                      
                      
                      $
                      9,753,347
                      
                      
                      $
                      2,434,668Interest
                          income
                      
                      
                      45,021
                      
                      
                      
                      28,251
                      
                      
                      
                      18,472Interest
                          expense
                      
                      
                      (1,455,470
                      )
                      
                      
                      (609,881
                      )
                      
                      
                      (610,787
                      )Other
                          income
                      
                      
                      179,126
                      
                      
                      
                      31,694
                      
                      
                      
                      120,436Consolidated
                          income before income taxes
                      
                      $
                      9,283,366
                      
                      
                      $
                      9,203,411
                      
                      
                      $
                      1,962,789Identifiable
                          assets:Total
                          segment identifiable assets
                      
                      $
                      149,211,591
                      
                      
                      $
                      65,988,726
                      
                      
                      $
                      61,645,170Elimination
                          of intersegment assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
                          consolidated assets
                      
                      $
                      149,211,591
                      
                      
                      $
                      65,988,726
                      
                      
                      $
                      61,645,170
 F-29
 Champion
                      Industries, Inc. and
                      Subsidiaries
  Notes
                      to
                      Consolidated Financial Statements (continued)
 10.Accounting
                    for Costs Associated with
                    Exit or Disposal Activities and Impact of Hurricane
                    Katrina
 During
                the second quarter of 2005, the Company relocated its Chapman Printing
                Company
                Charleston division to a facility leased by the Company as a result
                of the
                acquisition of Syscan. The Company is currently evaluating its facility
                needs in
                Charleston, West Virginia and the future use, if any, of this
                building.
 
 The
                Company moved its Dallas Printing operations to an existing facility
                in Baton
                Rouge, Louisiana in August 2005. The Company is currently evaluating
                its options
                regarding this facility.
  On
                August
                29, 2005, Hurricane Katrina made landfall and subsequently caused
                extensive
                flooding and destruction along the coastal areas of the Gulf of Mexico,
                including New Orleans and other communities in Louisiana and Mississippi
                in
                which Champion conducts business. Operations in many of the Company’s markets
                were disrupted by both the evacuation of large portions of the population
                as
                well as damage and/or lack of access to the Company’s operating facility in New
                Orleans.
  The
                Company filed insurance claims related to both actual and contingent
                losses. The
                Company received an advance to claim from an insurance company of
                $300,000 in
                February 2006. A second advance to claim of $200,000 was received
                in April 2006
                and a check in the amount of $78,000 in full settlement of any and
                all claims
                was received in May 2006. The Company recorded all of the payments
                as insurance
                recoveries for the year ended October 31, 2006.
 The
                  Company has categorized the costs associated with Hurricane Katrina
                  as
                  follows:
  1.)
                      Personnel
                          costs representing costs associated with payment of personnel
                          primarily in
                          New Orleans during the time
                        period
                          the city was essentially shut down; 2.)
                      Plant
                          costs represent all facilities, equipment and inventory
                          charges incurred
                          as a result of the hurricane using the
                        most
                          current available information; 3.)
                      The
                          allowance for doubtful accounts charge represents accounts
                          receivable
                          specifically reserved based on a
                        collectibility
                          analysis performed by the Company using the most current available
                          information for customers
                        located
                          in the New Orleans area at that time; 4.)
                      The
                          relocation costs represent costs of closing the New Orleans
                          production
                          facility and associated costs
                        of
                          moving equipment.  F-30
 The
                  following table summarizes the cumulative costs incurred as of
                  October 31, 2007
                  relating to Hurricane Katrina.
 Personnel
                          
                          $
                          88,423Plant
                          
                          
                          745,035Allowance
                              for doubtful accounts
                          
                          
                          208,310Moving
                              and relocation costs
                          
                          
                          255,215Total
                              pre-tax hurricane expense
                          
                          
                          1,296,983Lease
                              settlement recovery
                          
                          
                          75,583Insurance
                              recoveries
                          
                          
                          577,677Total
                              recoveries
                          
                          
                          653,260Cumulative
                              impact of Hurricane Katrina, net
                          
                          $
                          643,723
 The Company recorded costs of $1,020,999 for the three months
                    ended October, 31
                    2005 and costs of $275,984 and recoveries of $653,260 for the
                    year ended October
                    31, 2006 relating to Hurricane Katrina. There were no costs or
                    recoveries
                    associated with Hurricane Katrina recorded in 2007.
  The costs and recoveries associated with Hurricane Katrina are
                    reflected in the
                    consolidated statements of operations in the category “Hurricane and relocation
                    costs, net of recoveries” 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.
 F-31
 Champion
                  Industries, Inc. and
                  Subsidiaries
  Notes
                  to
                  Consolidated Financial Statements (continued)
 12.
                Acquired Intangible Assets and
                Goodwill
  2007
                      
                      
                      2006Gross
                      
                      
                      
                      
                      
                      GrossCarrying
                      
                      
                      Accumulated
                      
                      
                      Carrying
                      
                      
                      AccumulatedAmount
                      
                      
                      Amortization
                      
                      
                      Amount
                      
                      
                      AmortizationAmortizableintangible
                          assets:Non-compete
                          agreement
                      
                      $
                      1,000,000
                      
                      
                      $
                      452,381
                      
                      
                      $
                      1,000,000
                      
                      
                      $
                      309,524Customer
                          relationships
                      
                      
                      2,451,073
                      
                      
                      
                      416,446
                      
                      
                      
                      2,451,073
                      
                      
                      
                      294,348Advertising and subscriber base
                      
                      
                      14,041,252
                      
                      
                      
                      87,758
                      
                      
                      
                      -
                      
                      
                      
                      -Other
                      
                      
                      564,946
                      
                      
                      
                      321,445
                      
                      
                      
                      509,946
                      
                      
                      
                      231,45618,057,271
                      
                      
                      
                      1,278,030
                      
                      
                      
                      3,961,019
                      
                      
                      
                      835,328Unamortizableintangible
                          assets:Goodwill
                      
                      
                      39,360,935
                      
                      
                      
                      507,278
                      
                      
                      
                      3,918,789
                      
                      
                      
                      507,278Trademark and masthead
                      
                      
                      18,515,316
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -57,876,251
                      
                      
                      
                      507,278
                      
                      
                      
                      3,918,789
                      
                      
                      
                      507,278Total
                        goodwill and other intangibles
                      
                      $
                      75,933,522
                      
                      
                      $
                      1,785,308
                      
                      
                      $
                      7,879,808
                      
                      
                      $
                      1,342,606
 F-32
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 Amortization
                expense for the years ended October 31, 2007, 2006 and 2005 was $443,000,
                $361,000 and $358,000 respectively. The non-compete agreement is
                being amortized
                over a period of seven years and the customer relationships are being
                amortized
                over a period of 20 years. These items are both related to the acquisition
                of
                Syscan in 2004. The advertising and subscribers bases related to the
                acquisition of The Herald-Dispatch are being amortized over 20 years.
                The
                trademark and masthead associated with the acquisition of The Herald-Dispatch
                are non-amortizing assets. The weighted average remaining life of
                the Company's
                amortizable intangible assets was approximately 16 years. Estimated
                amortization
                expense for each of the following years is:
  2008
                      
                      $
                      1,057,4002009
                      
                      
                      1,016,4282010
                      
                      
                      995,5182011
                      
                      
                      971,7082012
                      
                      
                      847,160Thereafter
                      
                      
                      11,891,027$
                      16,779,241
 
 
 The
                changes in the carrying amount of goodwill for the years ended October
                31, 2007
                and 2006 were:
  2007
                      
                      
                      2006Balance
                          as of November 1, 2006 and 2005
                      
                      $
                      3,411,511
                      
                      
                      $
                      2,060,786Goodwill
                            acquired during the year additions
                      
                      
                      35,442,146
                      
                      
                      
                      1,350,725Balance
                          as of October 31, 2007 and 2006
                      
                      $
                      38,853,657
                      
                      
                      $
                      3,411,511
 F-33
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 The
                changes in the carrying amounts of goodwill and other intangibles
                attributed to
                each segment at October 31, 2007 and 2006 are as follows:
 GOODWILLOctober
                          31,2006
                      
                      
                      Amortization
                              Expense
                      
                      
                      Other
                      
                      
                      October
                          31,
                          2007Printing
                      
                      $
                      2,226,837
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,226,837Office
                          products & furniture
                      
                      
                      1,184,674
                      
                      
                      
                      -
                      
                      
                      
                      45,811
                      
                      
                      
                      1,230,485Newspaper
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      35,396,335
                      
                      
                      
                      35,396,335Total
                      
                      $
                      3,411,511
                      
                      
                      $
                      -
                      
                      
                      $
                      35,442,146
                      
                      
                      $
                      38,853,657October
                          31, 2005
                      
                      
                      Amortization
                                  Expense
                      
                      
                      Other
                      
                      
                      October
                          31,
                          2006Printing
                      
                      $
                      1,774,344
                      
                      
                      $
                      -
                      
                      
                      $
                      452,493
                      
                      
                      $
                      2,226,837Office
                          products & furniture
                      
                      
                      286,442
                      
                      
                      
                      -
                      
                      
                      
                      898,232
                      
                      
                      
                      1,184,674Newspaper
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      2,060,786
                      
                      
                      $
                      -
                      
                      
                      $
                      1,350,725
                      
                      
                      $
                      3,411,511OTHER
                          INTANGIBLESOctober
                            31,2006
                      
                      
                      Amortization
                          Expense
                      
                      
                      Other
                      
                      
                      October
                          31,
                          2007Printing
                      
                      $
                      1,212,899
                      
                      
                      $
                      342,689
                      
                      
                      $
                      55,000
                      
                      
                      $
                      925,210Office
                          products & furniture
                      
                      
                      1,912,792
                      
                      
                      
                      12,255
                      
                      
                      
                      -
                      
                      
                      
                      1,900,537Newspaper
                      
                      
                      -
                      
                      
                      
                      87,758
                      
                      
                      
                      32,556,568
                      
                      
                      
                      32,468,810Total
                      
                      $
                      3,125,691
                      
                      
                      $
                      442,702
                      
                      
                      $
                      32,611,568
                      
                      
                      $
                      35,294,557October
                          31, 2005
                      
                      
                      Amortization
                          Expense
                      
                      
                      Other
                      
                      
                      October
                          31,
                          2006Printing
                      
                      $
                      1,448,342
                      
                      
                      $
                      164,912
                      
                      
                      $
                      (70,531
                      )
                      
                      $
                      1,212,899Office
                          products & furniture
                      
                      
                      2,249,026
                      
                      
                      
                      196,228
                      
                      
                      
                      (140,006
                      )
                      
                      
                      1,912,792Newspaper
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      3,697,368
                      
                      
                      $
                      361,140
                      
                      
                      $
                      (210,537
                      )
                      
                      $
                      3,125,691
  F-34
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
 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 Intangible
                Assets
 
 We
                evaluate the recoverability of the goodwill and intangible assets
                of each of our
                reporting units as required under SFAS 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.
 
 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.
  Financial
                  Instruments
  In
                  managing interest rate risk exposure, the Company enters into interest
                  rate swap
                  agreements. An interest rate swap is a contractual exchange of
                  interest payments
                  between two parties. A standard interest rate swap involves the
                  payment of a
                  fixed rate times a notional amount by one party in exchange for
                  a floating rate
                  times the same notional amount from another party. As interest
                  rates change, the
                  difference to be paid or received is accrued and recognized as
                  interest expense
                  or income over the life of the agreement. These instruments are
                  not entered into
                  for trading purposes. Counterparties to the Company’s interest rate swap
                  agreements are major financial institutions. In accordance with
                  SFAS No. 133 ,
“Accounting for
                  Derivative
                  Instruments and Certain Hedging Activities”, as amended by SFAS No. 137
                  and 138, the Company recognizes interest rate swap agreements on
                  the balance
                  sheet at fair value. The interest rate swap agreements are marked
                  to market with
                  changes in fair value recognized in other comprehensive income
                  (loss).
 F-35
 Champion
                    Industries, Inc. and
                    Subsidiaries
  Notes
                    to
                    Consolidated Financial Statements (continued)
  14.
                      Derivative Instruments and
                      Hedging Activities
  The Company manages exposure to changes in market interest
                      rates. The Company’s
                      use of derivative instruments is limited to highly effective
                      fixed and floating
                      interest rate swap agreements used to manage well-defined interest
                      rate risk
                      exposures. The Company monitors its positions and the credit
                      ratings of its
                      counterparties and does not anticipate non-performance by the
                      counterparties.
                      Interest rate swap agreements are not entered into for trading
                      purposes.
  At September 28, 2007, the Company was party to an interest
                      rate swap agreement
                      which terminates on October 29, 2010. The swap agreement is
                      with a major
                      financial institution and aggregates $25 million in notional
                      principal amount.
                      This swap agreement effectively converted $25 million of variable
                      interest rate
                      debt to fixed rate debt. The swap agreement requires the Company
                      to make fixed
                      interest payments based on an average effective rate of 4.78%
                      and receive
                      variable interest payments from its counterparties based on
                      one-month LIBOR
                      (actual rate of 4.7525% at October 31, 2007). The remaining
                      term of this swap
                      agreement is approximately three years. In fiscal 2007, the
                      Company recorded a
                      net change in the fair value of the fixed interest rate swap
                      agreement in the
                      amount of $11,350, net of income tax as other comprehensive
                      loss. The net
                      additional interest payments made or received under this swap
                      agreement are
                      recognized in interest expense.
  15.
                      Earnings Per
                      Share
 
 Earnings
                      per share (EPS) were computed as follows:
  Income
                            
                            Weighted
                              Average
                              Shares
                            
                            Per
                              Share
                              AmountYear
                                Ended October 31,
                                2007Net
                                income
                            
                            $
                            6,080,140Basic
                                earnings per shareIncome
                                available to common shareholders
                            
                            
                            6,080,140
                            
                            
                            9,957,000
                            
                            $
                            0.61Effect
                                of dilutive securities stock options
                            
                            
                            
                            
                            
                            146,000Diluted
                                earnings per shareIncome
                                  available to common shareholders and assumed
                                  conversions
                            
                            $
                            6,080,140
                            
                            
                            10,103,000
                            
                            $
                            0.60Year
                                Ended October 31,
                                2006Net
                                income
                            
                            $
                            5,473,848Basic
                                earnings per shareIncome
                                available to common shareholders
                            
                            
                            5,473,848
                            
                            
                            9,818,000
                            
                            $
                            0.56Effect
                                of dilutive securities stock options
                            
                            
                            
                            
                            
                            154,000Diluted
                                earnings per shareIncome
                                available to common shareholders and assumed conversions
                            
                            $
                            5,473,848
                            
                            
                            9,972,000
                            
                            $
                            0.55Year
                                Ended October 31,
                                2005Net
                                income
                            
                            $
                            1,116,634Basic
                                earnings per shareIncome
                                available to common shareholders
                            
                            
                            1,116,634
                            
                            
                            9,735,000
                            
                            $
                            0.11Effect
                                of dilutive securities stock options
                            
                            
                            
                            
                            
                            74,000Diluted
                                earnings per shareIncome
                                available to common shareholders and assumed conversions
                            
                            $
                            1,116,634
                            
                            
                            9,809,000
                            
                            $
                            0.11
 F-36
 Champion
                          Industries, Inc. and
                          Subsidiaries
  Notes
                          to
                          Consolidated Financial Statements (continued)
 16.
                      Quarterly Results of Operations
                      (unaudited)
 
 The
                      following is a summary of the quarterly results of operations
                      for the years
                      ended October 31, 2007 and 2006.
 First
                              Quarter
                                (1)
                            
                            Second
                              Quarter
                                (2)
                            
                            Third
                              Quarter
                            
                            Fourth
                              Quarter(3)Revenues2007
                            
                            $
                            34,939,000
                            
                            $
                            33,814,000
                            
                            $
                            35,592,000
                            
                            $
                            41,297,0002006
                            
                            $
                            36,292,000
                            
                            $
                            37,421,000
                            
                            $
                            34,510,000
                            
                            $
                            36,965,000Gross
                                profit2007
                            
                            $
                            10,351,000
                            
                            $
                            10,191,000
                            
                            $
                            9,752,000
                            
                            $
                            12,556,0002006
                            
                            $
                            10,597,000
                            
                            $
                            11,512,000
                            
                            $
                            9,758,000
                            
                            $
                            11,527,000Net
                                income2007
                            
                            $
                            1,268,000
                            
                            $
                            1,390,000
                            
                            $
                            1,031,000
                            
                            $
                            2,391,0002006
                            
                            $
                            1,146,000
                            
                            $
                            1,578,000
                            
                            $
                            777,000
                            
                            $
                            1,973,000Earnings per
                                shareBasic2007
                            
                            $
                            0.13
                            
                            $
                            0.14
                            
                            $
                            0.10
                            
                            $
                            0.242006
                            
                            $
                            0.12
                            
                            $
                            0.16
                            
                            $
                            0.08
                            
                            $
                            0.20Diluted2007
                            
                            $
                            0.13
                            
                            $
                            0.14
                            
                            $
                            0.10
                            
                            $
                            0.242006
                            
                            $
                            0.12
                            
                            $
                            0.16
                            
                            $
                            0.08
                            
                            $
                            0.20Weighted
                                average shares
                                outstandingBasic2007
                            
                            
                            9,939,000
                            
                            
                            9,962,000
                            
                            
                            9,963,000
                            
                            
                            9,963,0002006
                            
                            
                            9,746,000
                            
                            
                            9,746,000
                            
                            
                            9,865,000
                            
                            
                            9,916,000Diluted2007
                            
                            
                            10,110,000
                            
                            
                            10,133,000
                            
                            
                            10,106,000
                            
                            
                            10,064,0002006
                            
                            
                            9,831,000
                            
                            
                            9,947,000
                            
                            
                            10,089,000
                            
                            
                            10,087,000
  (1)
                      Includes in
                      2006, approximately $258,000 of pre-tax recoveries, net of
                      expenses, associated with Hurricane Katrina. (See Note 10 of the
                      Consolidated Financial Statements.)
 
 (2) Includes
                      in
                      2006, pre-tax recoveries, net of expenses, associated with Hurricane
                      Katrina of $44,000. (See Note 10 of the Consolidated Financial
                      Statements.)
  (3) Includes
                      in 2006,
                      approximately $76,000 in pre-tax recoveries associated with
                      Hurricane Katrina.
                      (See Note 10 of the Consolidated Financial Statements.) Includes
                      in 2007,
                      certain tax benefits associated with the acquisition of The
                      Herald-Dispatch, tax
                      benefits associated with multi-state apportionment factors
                      and benefits
                      associated with amended state returns.
 F-37
 Champion
                          Industries, Inc. and
                          Subsidiaries
  Schedule
                          II
  Valuation
                      and Qualifying Accounts
  Years
                      Ended October 31, 2007, 2006 and 2005
  
 Description
                            
                            Balance
                                at beginning of
                                period
                            
                            
                            Balances
                                of acquired
                                companies
                            
                            
                            Additions
                                charged to costs and
                                expense
                            
                            
                            Deductions(1)
                            
                            
                            Balance
                                at end of
                                period2007Allowance
                                for doubtful accounts
                            
                            $
                            1,557,895
                            
                            
                            $
                            117,768
                            
                            
                            $
                            491,934
                            
                            
                            $
                            (656,560
                            )
                            
                            $
                            1,511,0372006Allowance
                                for doubtful accounts
                            
                            $
                            1,410,308
                            
                            
                            $
                            -
                            
                            
                            $
                            979,089
                            
                            
                            $
                            (831,502
                            )
                            
                            $
                            1,557,8952005Allowance
                                for doubtful accounts
                            
                            $
                            1,421,922
                            
                            
                            $
                            (25,000
                            )
                            
                            $
                            420,673
                            
                            
                            $
                            (407,287
                            )
                            
                            
                            1,410,308
  (1)
                      Uncollectible accounts
                      written off, net of recoveries.
  F-38