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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, 2003

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) 528-2700

Securities registered pursuant to Section 12(b) of Act: None

Securities registered pursuant to Section 12(g) of Act: Common Stock, $1.00 par value

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





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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.



| | Yes x       No o
| | ----------------

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 an accelerated filer (as
defined in Rule 12b-2 of the Act).



| | Yes o       No x
| | ----------------

The aggregate market value of the voting stock of the registrant held by
non-affiliates as of January 9, 2004, was $20,867,804 of Common Stock, $1.00
par value. The outstanding common stock of the Registrant at the close of
business on January 9, 2004 consisted of 9,717,913 shares of Common Stock,
$1.00 par value.

Total number of pages including cover page 227

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registration statement on
Form S-2/A No. 333-47585, filed on March 16, 1998, are incorporated by
reference into Part IV, Item 15. Portions of the Registrants definitive proxy
statement dated February 12, 2004 with respect to its Annual Meeting of
Shareholders to be held on March 15, 2004 are incorporated by reference into
Part III, Items 10-13. 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, 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.

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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s sales offices and production facilities are located in Huntington,
Charleston, Parkersburg, Clarksburg, and Morgantown, West Virginia; Lexington
and Owensboro, Kentucky; Baton Rouge, New Orleans and Gonzales, Louisiana;
Cincinnati, Ohio; Jackson, Mississippi; 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
and office furniture.

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.

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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) 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 4-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. in New Orleans
in 1996 and through the acquisition of Transdata Systems, Inc. in Baton Rouge
and New Orleans in 2001.

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.

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.

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.

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, in exchange for $950,000 cash and the issuance of
66,768 shares of its common stock, the Company acquired Donihe Graphics, Inc.
(Donihe), a high-volume color printer based in Kingsport, Tennessee.

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On February 2, 1996, Bourque purchased various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. (Upton) for approximately
$750,000 in cash.

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. The Company issued 66,666 shares of common stock valued at
$1,200,000 in exchange for all of the issued and outstanding shares of common
stock of Smith & Butterfield.

On August 21, 1996, the Company purchased the assets of The Merten Company
(Merten), a commercial printer headquartered in Cincinnati, Ohio, for cash
and assumption of liabilities aggregating $2,535,295.

On December 31, 1996, the Company acquired all outstanding capital stock
of Interform Corporation (Interform), a business form manufacturer in
Bridgeville, Pennsylvania, for $2,500,000 in cash which was financed by a bank.

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) in exchange for 277,775 shares of the Companys common
stock.

On February 2, 1998, the Company acquired all outstanding common shares of
Rose City Press (Rose City) of Charleston, West Virginia, in exchange for
75,722 shares of the Companys common stock valued at $1,250,000.

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, in exchange for 72,202 shares
of the Companys common stock valued at $1,000,000.

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, in exchange for 45,473 shares of the Companys common stock valued at
$600,000.

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 is operated as a subsidiary of Stationers.

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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.

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.

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s sales force sells 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, 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 $96.5 million, $95.2 million and
$98.1 million or 79.0%, 77.5% and 78.4% of the Companys total revenues for the
fiscal years ended October 31, 2003, 2002 and 2001.

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

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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 an Internet
e-commerce site, which allows customers to order office products, furniture and
forms online. The e-commerce site includes 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 $25.6 million, $27.7 million and $27.0 million, or
21.0%, 22.5% and 21.6% of the Companys total revenues for the fiscal years
ended October 31, 2003, 2002 and 2001.

ORGANIZATION

Champions two lines of business are comprised of twenty-three operating
divisions. The Huntington headquarters provides centralized financial
management and administrative services to each of its two business segments.

Commercial Printing

Eleven commercial printing divisions are located in Huntington, Charleston
and Parkersburg, West Virginia; Lexington, Kentucky; Baton Rouge and New
Orleans, Louisiana; Jackson, Mississippi; Cincinnati, Ohio; Kingsport and
Knoxville, 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 Pittsburgh, Pennsylvania
operates as a full line printing and printing services distributor. The
division offers complete print management, fulfillment services and B2B
e-commerce solutions.

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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.

Transdata, located in Baton Rouge and New Orleans, Louisiana, operates as
a subsidiary of Bourque Printing performing sales and customer service
functions including fulfillment services.

Office Products, Office Furniture and Office Design

Stationers, located in Huntington, Clarksburg (doing business as Champion
Clarksburg), Morgantown (through its Champion Morgantown division) and
Parkersburg, West Virginia (doing business as Garrison Brewer), 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 salespeople and delivered in bulk daily to each division, or shipped
directly to customers.

Smith & Butterfield, located in Evansville, Indiana and Owensboro,
Kentucky, 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.

Diez, located in Gonzales, Louisiana, provides office products and office
furniture primarily to customers in the Companys Louisiana market area.

Stationers, through its Capitol division, offers office design services
throughout West Virginia and eastern Kentucky.

Champion Jackson located in Jackson, Mississippi functions as both a
printing sales headquarters with full digital prepress and an office products
sales center.

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PRODUCTS AND SERVICESPrinting 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 manufacturing; and (vii) high volume process color webprinting of brochures
and catalogs.
The capabilities of the Companys various printing divisions are stated below.

|                                                 |  |          |   |           |  |          |   |       |  |       |   |      |  |  |   |        |  |      |   | 
|------------------------------------------------ |  | -------- | - | --------- |  | -------- | - | ----- |  | ----- | - | ---- |  |  | - | ------ |  | ---- | - | 
|                                                 |  |          |   |           |  |          |   |       |  |       |   |      |  |  |   |        |  | High
|                                                 |  | Sales &  |   |           |  |          |   |       |  |       |   |      |  |  |   | Volume
|                                                 |  | Customer |   |           |  |          |   | Sheet |  | Full  |   | Full
|Division                                         |  | Service  |   | Pre-Press |  | Printing |   | Color |  | Color
|                                                 |  |          |   |           |  |          |   |       |  |      
|Huntington                                       |  |          | * |           |  |          | * |       |  |       | * |      |  |  |   |        |  |      |   | 
|Charleston                                       |  |          | * |           |  |          | * |       |  |       |   |      |  |  |   |        |  |      |   | 
|Parkersburg                                      |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      |   | 
|Lexington                                        |  |          | * |           |  |          | * |       |  |       |   |      |  |  |   |        |  |      |   | 
|Bourque Printing, Inc.                           |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      |   | 
|Dallas Printing Company, Inc.
(Champion Jackson) |  |          | * |           |  |          | * |       |  |       |   |      |  |  |   |        |  |      |   | 
|Carolina Cut Sheets, Inc.                        |  |          | * |           |  |          |   |       |  |       |   |      |  |  |   |        |  |      |   | 
|U.S. Tag & Ticket Company, Inc.                  |  |          | * |           |  |          | * |       |  |       | * |      |  |  |   |        |  |      |   | 
|Donihe Graphics, Inc.                            |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      | * | 
|Upton Printing                                   |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      |   | 
|The Merten Company                               |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      |   | 
|Interform Corporation                            |  |          | * |           |  |          | * |       |  |       |   |      |  |  | * |        |  |      |   | 
|Consolidated Graphic Communications              |  |          | * |           |  |          |   |       |  |       |   |      |  |  |   |        |  |      |   | 
|Blue Ridge Printing Co., Inc.                    |  |          | * |           |  |          | * |       |  |       | * |      |  |  | * |        |  |      |   | 
|Transdata                                        |  |          | * |           |  |          |   |       |  |       |   |      |  |  |   |        |  |      |   | 

*  - Services Provided

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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.

MANUFACTURING AND DISTRIBUTION

The Companys pre-press facilities have desktop publishing, typesetting,
laser imagesetting and scanning/retouching equipment, and 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 are made primarily from the Companys
in-house stock. However, special orders from manufacturers may require up to 90
days for delivery.

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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, 2003, 2002 and 2001, no single
customer accounted for more than 2% 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.

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.

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,

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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.

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.

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.

EMPLOYEES

On October 31, 2003, the Company had approximately 775 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 72 employees at October 31, 2003) at its Bridgeville,
Pennsylvania facility. This contract expires May 31, 2006. The Company
believes relations with the union and covered employees are good.

12



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##### 



EXECUTIVE OFFICERS OF CHAMPION

|                     |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------- |  | --- | -- | -------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |     |    |                                                    |  | Position and offices with Champion;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                     |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Name                 |  | Age |    | Principal occupation or employment last five years
|                     |  |     |    |                                                   
|Marshall T. Reynolds |  |     | 67 |                                                    |  | 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 Radisson Hotel Huntington)
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.).                                                                                                                                                                              
|                     |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Kirby J. Taylor      |  |     | 58 |                                                    |  | President and Chief Operating Officer of the
Company since September 2000; President and
Chief Executive Officer of Action Business
Consulting from November 1997 to September
2000 (management consulting firm); President
and Chief Executive Officer of Nexquest,
Inc. from January 1996 to November 1997;
President and Chief Operating Officer of
Addington Resources, Inc. from July 1994 to
January 1996 (mining and waste management
company); Vice President and Chief Financial
Officer of Outboard Marine Corp. from April
1993 to July 1994 (manufacturer and
distributor of boats and motors); Vice
President and Chief Financial Officer of
Tenneco Automotive from August 1990 to April
1993 (manufacturer of auto parts); Senior
Vice President and Chief Financial Officer
of Tenneco Minerals from August 1988 to
August 1990; Vice President and Chief
Financial Officer of Tenneco Minerals from

13



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##### 



|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|------------------- |  | --- | -- | -------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |  |     |    |                                                    |  | Position and offices with Champion;                                                                                                                                                                                                                                                                                                                        
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|Name                |  | Age |    | Principal occupation or employment last five years
|                    |  |     |    |                                                   
|                    |  |     |    |                                                    |  | February 1984 to August 1988; President of
Tenneco International Finance from November
1980 to February 1984.                                                                                                                                                                                                                                              
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|J. Mac Aldridge     |  |     | 62 |                                                    |  | Vice President and Division Manager -
Stationers since December 1992; 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.                 
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|Gary A. Blackshire  |  |     | 51 |                                                    |  | Vice President of the Company since December
1992; Division Manager - Merten September
1998 to April 2001; Division Manager -
Charleston December 1992 to April 2001;
Division Manager - Charleston of Harrah and
Reynolds from April 1992 to December 1992;
Sales Representative of Charleston Division
of Harrah and Reynolds from 1975 until April
1992.
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|R. Douglas McElwain |  |     | 56 |                                                    |  | Vice President and Division Manager - Bourque
Printing division of the Company since
December 1993; 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.                                                                         
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|Toney K. Adkins     |  |     | 54 |                                                    |  | Vice President-Administration of the Company
since November 1995; President, KYOWVA
Corrugated Container Company, Inc. from 1991
to 1996.                                                                                                                                                                                                                  
|                    |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                                            
|Todd R. Fry         |  |     | 38 |                                                    |  | Chief Financial Officer of the Company since
November 1999; 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    |  |     | 74 |                                                    |  | 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.                                                                                                                                                                                      

14



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##### 



|                   |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                            
|------------------ |  | --- | -- | -------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |     |    |                                                    |  | Position and offices with Champion;                                                                                                                                                                                                                                                                                                        
|                   |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                            
|Name               |  | Age |    | Principal occupation or employment last five years
|                   |  |     |    |                                                   
|Theodore J. Nowlen |  |     | 49 |                                                    |  | Vice President of the Company since March
1999; President of Interform since May 1998;
Vice President of Marketing and Technology of
Interform from January 1996 to May 1998;
Vice President of Technology of Interform
from September 1991 to January 1996; Manager
of Information Systems of Interform from
April 1983 to September 1991.
|                   |  |     |    |                                                    |  |                                                                                                                                                                                                                                                                                                                                            
|James A. Rhodes    |  |     | 47 |                                                    |  | Vice President of the Company since March
1999; 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  East of
Consolidated Graphic Communications from 1995
to 1996.                       

15



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##### 



ITEM 2 - PROPERTIES

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

|                                                   |  |                                |  |        |         |        |  |            |         |  |  |  |         | 
|-------------------------------------------------- |  | ------------------------------ |  | ------ | ------- | ------ |  | ---------- | ------- |  |  |  | ------- | 
|                                                   |  | Division Occupying             |  | Square |         | Annual |  | Expiration
|Property                                           |  | Property                       |  | Feet   |         | Rental |  | Of Term   
|                                                   |  |                                |  |        |         |        |  |           
|2450 1st Avenue
Huntington, West Virginia (1)      |  | Chapman Printing-
Huntington   |  |        | 85,000  |        |  | $          | 116,400 |  |  |  | 2008    | 
|1945 5th Avenue
Huntington, West Virginia (1)      |  | Stationers                     |  |        | 37,025  |        |  |            | 60,000  |  |  |  | 2007    | 
|615-619 4th Avenue
Huntington, West Virginia (1)   |  | Stationers                     |  |        | 59,641  |        |  |            | 21,600  |  |  |  | 2008    | 
|405 Ann Street
Parkersburg, West Virginia (1)      |  | Chapman Printing 
Parkersburg |  |        | 36,614  |        |  |            | 57,600  |  |  |  | 2008    | 
|1563 Hansford Street
Charleston, West Virginia (2) |  | Chapman Printing 
Charleston  |  |        | 21,360  |        |  |            | 33,280  |  |  |  | 2008    | 
|890 Russell Cave Road
Lexington, Kentucky (1)      |  | Chapman Printing -
Lexington   |  |        | 20,135  |        |  |            | 57,600  |  |  |  | 2007    | 
|214 Stone Road
Belpre, Ohio (1)                    |  | Stationers -
Garrison Brewer   |  |        | 15,146  |        |  |            | 42,000  |  |  |  | 2004    | 
|2800 Lynch Road
Evansville, Indiana (1)            |  | Smith & Butterfield            |  |        | 42,375  |        |  |            | 116,640 |  |  |  | 2004    | 
|113-117 East Third St.
Owensboro, Kentucky (1)     |  | Smith & Butterfield            |  |        | 8,500   |        |  |            | 14,400  |  |  |  | 2007    | 
|1901 Mayview Road
Bridgeville, Pennsylvania (1)    |  | Interform Corporation          |  |        | 120,000 |        |  |            | 293,503 |  |  |  | 2008    | 
|736 Carondelet Street
New Orleans, Louisiana       |  | Upton Printing                 |  |        | 15,000  |        |  |            | 71,400  |  |  |  | 2008    | 
|5600 Jefferson Highway
Harahan, Louisiana          |  | Upton Printing                 |  |        | 11,250  |        |  |            | 65,248  |  |  |  | 2004    | 
|1515 Central Parkway
Cincinnati, Ohio (1)          |  | The Merten Company             |  |        | 40,000  |        |  |            | 102,060 |  |  |  | 2006    | 
|2217 Robb Street
Baltimore, Maryland (3)           |  | U.S. Tag                       |  |        | 26,000  |        |  |            | 39,996  |  |  |  | 2005    | 
|7868 Anselmo Lane
Baton Rouge, Louisiana           |  | Transdata                      |  |        | 13,300  |        |  |            | 42,000  |  |  |  | Monthly | 

16



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##### 



|                                                        |  |                       |  |        |        |        |  |            |        |  |  |  |         | 
|------------------------------------------------------- |  | --------------------- |  | ------ | ------ | ------ |  | ---------- | ------ |  |  |  | ------- | 
|                                                        |  | Division Occupying    |  | Square |        | Annual |  | Expiration
|Property                                                |  | Property              |  | Feet   |        | Rental |  | Of Term   
|                                                        |  |                       |  |        |        |        |  |           
|2569 University Avenue
Morgantown, West Virginia        |  | Stationers-Thompsons |  |        | 9,000  |        |  |            | 8,400  |  |  |  | 2006    | 
|Route 2, Kyle Industrial Park
Huntington, West Virginia |  | Champion Headquarters |  |        | 9,000  |        |  |            | 78,000 |  |  |  | 2003    | 
|1733 North Airline Highway
Gonzales, Louisiana          |  | Stationers-Diez       |  |        | 5,800  |        |  |            | 12,000 |  |  |  | Monthly | 
|1214 Main Street
Wheeling, West Virginia                |  | CBI - Wheeling        |  |        | 22,000 |        |  |            | 36,000 |  |  |  | 2009    | 

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

(2)  The Company purchased one-third interest in this property in January of
2002. The lease is triple net, whereby the Company pays for all utilities,
insurance, taxes, repairs and maintenance and all other costs associated with
properties.

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

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

The Bourque Printing subsidiary owns, and operates from, a single-story
building of approximately 18,501 square feet at 13112 South Choctaw Drive,
Baton Rouge, Louisiana. The Company also owns a warehouse of approximately
5,000 square feet at 13214 South Choctaw Drive, Baton Rouge, Louisiana. In
2003, the Bourque Printing subsidiary purchased a 42,693 square foot building
at 10848 Airline Highway, Baton Rouge, Louisiana.

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

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

Blue Ridge owns, and operates from, (i) a two-story masonry building of
approximately 9,066 square feet and a contiguous 1,692 square foot former
residential structure at 544 and 560 Haywood Road, Asheville, North Carolina,
and (ii) a two-story steel building of approximately 12,500 square feet on
approximately three acres at 1485 Amherst Road, Knoxville, Tennessee.

The Capitol subsidiary of Stationers owns and operates from a 22,000
square foot building at 711 Indiana Avenue, Charleston, West Virginia. This
building, formerly leased, was purchased by the Company in December 2001.

17



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##### 



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

ITEM 3 - LEGAL PROCEEDINGS

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

On February 16, 2002, a jury verdict was rendered against the Company in a
civil action brought against the Company in state court in Jackson,
Mississippi. The civil action is styled 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; Circuit Court
of the First Judicial District of Hinds County, Mississippi; Case No.
251-11-942-CIV.

The plaintiffs in this civil action asserted that the Company and its
Dallas Printing Company, Inc. subsidiary had engaged in unfair competition and
other wrongful acts in hiring certain of its employees. The jury awarded the
plaintiffs $1,745,000 in actual damages and $750,000 in punitive damages.

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

On July 17, 2002, the Company filed a notice of appeal from the jury
verdict. The appeal involves both the jury award and the attorneys fee and
expense award. If the Company is not successful on appeal, Mississippi law
provides that it is liable for an additional 15% of the total award. The case
was referenced to the Mississippi Court of Appeals which has not yet announced
a decision in this case.

The Company has been advised that it has no insurance coverage for this
award. The Company under Mississippi law has a guaranteed right to appeal.
The Company has been advised by counsel that it has multiple grounds for an
appeal and a reasonable basis for believing that an appeal would be successful
in eliminating the jury award. However, there can be no assurance that the
jury award will be overturned upon appeal. If the verdict is not overturned,
the impact on the operating results of the Company could be material.

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

None.

18



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##### 



PART II

ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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

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

|               |  |                  |      |                  |  |      |      |     |  |   |      |  |  |   |      | 
|-------------- |  | ---------------- | ---- | ---------------- |  | ---- | ---- | --- |  | - | ---- |  |  | - | ---- | 
|               |  | Fiscal Year 2003 |      | Fiscal Year 2002
|               |  | High             |      | Low              |  | High |      | Low
|               |  |                  |      |                  |  |      |      |    
|First quarter  |  | $                | 3.35 |                  |  | $    | 2.45 |     |  | $ | 3.15 |  |  | $ | 2.28 | 
|Second quarter |  |                  | 3.31 |                  |  |      | 2.77 |     |  |   | 3.25 |  |  |   | 2.82 | 
|Third quarter  |  |                  | 3.88 |                  |  |      | 2.70 |     |  |   | 3.04 |  |  |   | 2.30 | 
|Fourth quarter |  |                  | 5.05 |                  |  |      | 3.68 |     |  |   | 2.84 |  |  |   | 2.25 | 

At the close of business on January 9, 2004, there were 519 shareholders
of record of Champion common stock.

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

|               |  |             |      |             |  |             |      |  |  |   |      | 
|-------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- |  |  | - | ---- | 
|               |  | Fiscal Year |      | Fiscal Year |  | Fiscal Year
|               |  | 2004        |      | 2003        |  | 2002       
|               |  |             |      |             |  |            
|First quarter  |  | $           | 0.05 |             |  | $           | 0.05 |  |  | $ | 0.05 | 
|Second quarter |  |             |     |             |  |             | 0.05 |  |  |   | 0.05 | 
|Third quarter  |  |             |     |             |  |             | 0.05 |  |  |   | 0.05 | 
|Fourth quarter |  |             |     |             |  |             | 0.05 |  |  |   | 0.05 | 

ITEM 6  SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for each of the five
years in the period ended October 31, 2003 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.

19



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##### 



|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|------------------------------------------- |  | ----------------------------------------------- | --------- | ---- |  | -------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                            |  | Year Ended October 31,                         
|                                            |  |                                                
|                                            |  | 2003                                            |           | 2002 |  | 2001 (1) |           | 2000 |  | 1999
|                                            |  |                                                 |           |      |  |          |           |      |  |     
|                                            |  | (In thousands, except share and per share data)
|OPERATING STATEMENT DATA:                   |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Revenues:                                   |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Printing                                    |  | $                                               | 96,537    |      |  | $        | 95,194    |      |  | $    | 98,146    |   |  | $ | 96,657    |   |  | $ | 92,405    |  
|Office products and office furniture        |  |                                                 | 25,646    |      |  |          | 27,690    |      |  |      | 26,998    |   |  |   | 29,672    |   |  |   | 31,954    |  
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Total revenues                              |  |                                                 | 122,183   |      |  |          | 122,884   |      |  |      | 125,144   |   |  |   | 126,329   |   |  |   | 124,359   |  
|Cost of sales:                              |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Printing                                    |  |                                                 | 70,352    |      |  |          | 68,771    |      |  |      | 71,816    |   |  |   | 69,376    |   |  |   | 65,021    |  
|Office products and office furniture        |  |                                                 | 17,453    |      |  |          | 19,480    |      |  |      | 18,661    |   |  |   | 19,927    |   |  |   | 21,764    |  
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Total cost of sales                         |  |                                                 | 87,805    |      |  |          | 88,251    |      |  |      | 90,477    |   |  |   | 89,303    |   |  |   | 86,785    |  
|Gross profit                                |  |                                                 | 34,378    |      |  |          | 34,633    |      |  |      | 34,667    |   |  |   | 37,026    |   |  |   | 37,574    |  
|Selling, general and administrative expense |  |                                                 | 31,222    |      |  |          | 30,560    |      |  |      | 31,800    |   |  |   | 32,621    |   |  |   | 31,387    |  
|Restructuring costs                         |  |                                                 |          |      |  |          |          |      |  |      | 2,052     |   |  |   |          |   |  |   |          |  
|Asset impairment costs                      |  |                                                 |          |      |  |          |          |      |  |      | 3,061     |   |  |   |          |   |  |   |          |  
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Income (loss) from operations               |  |                                                 | 3,156     |      |  |          | 4,073     |      |  |      | (2,246    | ) |  |   | 4,405     |   |  |   | 6,187     |  
|Interest income                             |  |                                                 | 4         |      |  |          | 14        |      |  |      | 64        |   |  |   | 71        |   |  |   | 157       |  
|Interest expense                            |  |                                                 | (167      | )    |  |          | (386      | )    |  |      | (891      | ) |  |   | (1,018    | ) |  |   | (1,228    | )
|Other income                                |  |                                                 | 10        |      |  |          | 73        |      |  |      | 528       |   |  |   | 114       |   |  |   | 211       |  
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Income (loss) before income taxes           |  |                                                 | 3,003     |      |  |          | 3,774     |      |  |      | (2,545    | ) |  |   | 3,572     |   |  |   | 5,327     |  
|Income tax (expense) benefit                |  |                                                 | (1,235    | )    |  |          | (1,566    | )    |  |      | 363       |   |  |   | (1,463    | ) |  |   | (2,134    | )
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Net income (loss)                           |  | $                                               | 1,768     |      |  | $        | 2,208     |      |  | $    | (2,182    | ) |  | $ | 2,109     |   |  | $ | 3,193     |  
|                                            |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Earnings (loss) per share:                  |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Basic                                       |  | $                                               | 0.18      |      |  | $        | 0.23      |      |  | $    | (0.22     | ) |  | $ | 0.22      |   |  | $ | 0.33      |  
|Diluted                                     |  |                                                 | 0.18      |      |  |          | 0.23      |      |  |      | (0.22     | ) |  |   | 0.22      |   |  |   | 0.33      |  
|Dividends per share                         |  | $                                               | 0.20      |      |  | $        | 0.20      |      |  | $    | 0.20      |   |  | $ | 0.20      |   |  | $ | 0.20      |  
|Weighted average common shares
outstanding: |  |                                                 |           |      |  |          |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Basic                                       |  |                                                 | 9,714,000 |      |  |          | 9,714,000 |      |  |      | 9,714,000 |   |  |   | 9,714,000 |   |  |   | 9,714,000 |  
|Diluted                                     |  |                                                 | 9,761,000 |      |  |          | 9,726,000 |      |  |      | 9,714,000 |   |  |   | 9,714,000 |   |  |   | 9,714,000 |  



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

20



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##### 



|                                        |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|--------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                        |  | At October 31,
|                                        |  |               
|                                        |  | 2003           |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                        |  |                |        |      |  |      |        |      |  |     
|                                        |  | (In Thousands)
|BALANCE SHEET DATA:                     |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|Cash and cash equivalents               |  | $              | 2,172  |      |  | $    | 4,507  |      |  | $    | 5,765  |  |  | $ | 3,174  |  |  | $ | 2,464  | 
|Working capital                         |  |                | 26,977 |      |  |      | 26,072 |      |  |      | 26,041 |  |  |   | 29,070 |  |  |   | 30,333 | 
|Total assets                            |  |                | 58,469 |      |  |      | 59,508 |      |  |      | 63,950 |  |  |   | 71,559 |  |  |   | 73,642 | 
|Long-term debt (net of current portion) |  |                | 3,966  |      |  |      | 1,805  |      |  |      | 4,549  |  |  |   | 8,070  |  |  |   | 9,933  | 
|Shareholders equity                    |  |                | 42,691 |      |  |      | 42,866 |      |  |      | 42,601 |  |  |   | 46,726 |  |  |   | 46,560 | 

ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

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

The Companys net revenues consist primarily of sales of commercial
printing, business forms, tags, other printed products, office supplies, office
furniture, data products and office design services. The Company recognizes
revenues when products are shipped or ownership is transferred and when
services are rendered to the customer. The Companys revenues are subject to
seasonal fluctuations caused by variations in demand for its products.

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

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

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CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

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

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

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

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

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is then compared to the carrying value of goodwill. 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 is
recorded at the adjusted book value and was analyzed for impairment with the
implementation of Statement No. 142. The fair value of the Companys goodwill
was estimated using discounted cash flow methodologies. Based on the analysis,
the Company determined that fair value relating to goodwill resulted in an
implied fair value greater than the book value recorded for the corresponding
goodwill, and therefore no impairment was recognized in either year since the
adoption of this statement.

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

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

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

During 2003, 2002, and 2001 $336,000, $363,000 and $1,215,000 of bad debt
expense was incurred and the allowance for doubtful accounts was $1,191,000,
$1,397,000 and $1,432,000 as of October 31, 2003, 2002 and 2001. The actual
write-offs for the periods were $543,000, $398,000 and $1,356,000 during 2003,
2002 and 2001. General economic conditions and

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specific geographic 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.

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)      
|                                             |                                      |                     |        |                       
|                                             |                                      |                     |        | 2003                   |         | 2002 |      | 2001
|                                             |                                      |                     |        |                        |         |      |      |     
|Revenues:                                    |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |     
|                                             | Printing                             |                     | $      | 96,537                 |         |      |      | 79.0 | %     |   | $      | 95,194 |         |   |      | 77.5 | %     |   | $      | 98,146 |         |   |      | 78.4 | %    
|                                             | Office products and office furniture |                     |        | 25,646                 |         |      |      | 21.0 |       |   |        | 27,690 |         |   |      | 22.5 |       |   |        | 26,998 |         |   |      | 21.6 |      
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|                                             |                                      | Total revenues      |        |                        | 122,183 |      |      |      | 100.0 |   |        |        | 122,884 |   |      |      | 100.0 |   |        |        | 125,144 |   |      |      | 100.0 |  
|Cost of sales:                               |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |     
|                                             | Printing                             |                     |        | 70,352                 |         |      |      | 57.6 |       |   |        | 68,771 |         |   |      | 56.0 |       |   |        | 71,816 |         |   |      | 57.4 |      
|                                             | Office products and office furniture |                     |        | 17,453                 |         |      |      | 14.3 |       |   |        | 19,480 |         |   |      | 15.8 |       |   |        | 18,661 |         |   |      | 14.9 |      
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|                                             |                                      | Total cost of sales |        |                        | 87,805  |      |      |      | 71.9  |   |        |        | 88,251  |   |      |      | 71.8  |   |        |        | 90,477  |   |      |      | 72.3  |  
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|Gross Profit                                 |                                      |                     | 34,378 |                        |         |      | 28.1 |      |       |   | 34,633 |        |         |   | 28.2 |      |       |   | 34,667 |        |         |   | 27.7 |     
|Selling, general and administrative expenses |                                      |                     | 31,222 |                        |         |      | 25.6 |      |       |   | 30,560 |        |         |   | 24.9 |      |       |   | 31,800 |        |         |   | 25.4 |     
|Restructuring charges                        |                                      |                     |       |                        |         |      |     |      |       |   |       |        |         |   |     |      |       |   | 2,052  |        |         |   | 1.6  |     
|Asset impairment charges                     |                                      |                     |       |                        |         |      |     |      |       |   |       |        |         |   |     |      |       |   | 3,061  |        |         |   | 2.5  |     
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|Income (loss) from operations                |                                      |                     | 3,156  |                        |         |      | 2.5  |      |       |   | 4,073  |        |         |   | 3.3  |      |       |   | (2,246 | )      |         |   | (1.8 | )   
|Other income (expense):                      |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |     
|                                             |                                      | Interest income     |        |                        | 4       |      |      |      | 0.0   |   |        |        | 14      |   |      |      | 0.0   |   |        |        | 64      |   |      |      | 0.1   |  
|                                             |                                      | Interest expense    |        |                        | (167    | )    |      |      | (0.1  | ) |        |        | (386    | ) |      |      | (0.3  | ) |        |        | (891    | ) |      |      | (0.7  | )
|                                             |                                      | Other income        |        |                        | 10      |      |      |      | 0.0   |   |        |        | 73      |   |      |      | 0.1   |   |        |        | 528     |   |      |      | 0.4   |  
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|Income (loss) before income taxes            |                                      |                     | 3,003  |                        |         |      | 2.4  |      |       |   | 3,774  |        |         |   | 3.1  |      |       |   | (2,545 | )      |         |   | (2.0 | )   
|                                             | Income tax (expense) benefit         |                     |        | (1,235                 | )       |      |      | (1.0 | )     |   |        | (1,566 | )       |   |      | (1.3 | )     |   |        | 363    |         |   |      | 0.3  |      
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      
|Net income (loss)                            |                                      | $                   | 1,768  |                        |         |      | 1.4  | %    |       | $ | 2,208  |        |         |   | 1.8  | %    |       | $ | (2,182 | )      |         |   | (1.7 | %)  
|                                             |                                      |                     |        |                        |         |      |      |      |       |   |        |        |         |   |      |      |       |   |        |        |         |   |      |      |      

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

Revenues

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

Cost of Sales

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

Operating Expenses and Income

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

Other Income (Expense)

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

Income Taxes

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

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

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

Year Ended October 31, 2002 Compared to Year Ended October 31, 2001

Revenues

Consolidated net revenues were $122.9 million for the year ended October
31, 2002 compared to $125.1 million in the prior fiscal year. This change
represents a decrease in revenues of $2.3 million or 1.8%. Printing revenues
decreased by $3.0 million or 3.0% from $98.1 million in 2001 to $95.2 million
in 2002. The decrease in printing sales was primarily the result of an overall
sluggish market in most of the geographic regions served by the Company
partially offset by additional printing sales from the Companys acquisition of
Transdata for a full year in 2002. Office products and office furniture revenue
increased $691,000 or 2.6% from $27.0 million in 2001 to $27.7 million in 2002.
The increase in revenues for the office products and office furniture segment
was primarily attributable to higher furniture sales, primarily in one of the
Companys geographic regions. Gross margin dollars declined in office products
and office furniture divisions while the printing divisions posted an increase
in gross margin dollars. This increase relates to the prior year gross margin
dollars being reduced by charges taken as part of the restructuring and
profitability enhancement plan that were not present in the current year.

Cost of Sales

Total cost of sales for the year ended October 31, 2002 totaled $88.3
million compared to $90.5 million in the previous year. This change represented
a decrease of $2.2 million or 2.5% in cost of sales. Printing cost of sales
decreased $3.0 million or 4.2% to $68.8 million in 2002 compared to $71.8
million in 2001. Printing cost of sales were lower due to an overall decrease
in printing sales and inventory related charges in the prior year due to the
restructuring and profitability enhancement plan (See Note 10 of the
Consolidated Financial Statements). Office products and office furniture cost
of sales increased $800,000 or 4.4% to $19.5 million from $18.7 million in
2001, primarily due to higher furniture sales.

Operating Expenses and Income

Selling, general and administrative (S,G&A) expenses decreased $1.2
million to $30.6 million in 2002 from $31.8 million in 2001. S,G&A as a
percentage of net sales represented 24.9% of net sales in 2002 compared with
25.4% of net sales in 2001. This decrease is related, in part, to decreases in
corporate overhead expenses including rent and utilities as well as a decrease
in bad debt expense and other benefits resulting from the Companys adoption of
a restructuring and profitability enhancement plan in the third quarter of 2001
partially offset by increased legal related expenses in 2002 including legal
fees associated with a civil action brought against the Company in state court
in Jackson, Mississippi (See Note 7 of the

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Consolidated Financial Statements). In addition, the Company adopted SFAS No.
142, which resulted in the elimination of goodwill amortization of
approximately $50,000 net of tax annually.

The Company initiated a corporate-wide restructuring and profitability
enhancement plan in the third quarter of 2001.  The plan was implemented to effectuate certain key initiatives including plant and office consolidations, headcount reductions, asset impairment issues and a general response to a deteriorating economic environment.
 The Company followed the applicable provisions of Financial Accounting Standards Board No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, to compute the tangible and intangible impairment portions of the restructuring charges.  As a result of the restructuring plan, the Company recorded a pre-tax charge of $6.1 million or $4.3 million net of tax or $0.44 per share.
 The charges were composed of the following components: write-down of goodwill, facilities and equipment of $3,060,000; employee severance and termination benefits of $55,000 and restructuring and other charges of $2,976,000.  The restructuring and other charges included charges related to increases and related write-offs in the allowance for doubtful accounts, inventory
obsolescence reserves and inventory valuation modifications related to excess quantities, costs related to duplicative facility leases, computer systems related charges, termination fees of a pension plan of an acquired company, and other general charges to implement the above mentioned plan.

The charges are classified on the statement of operations as components of income from operations.  Inventory obsolescence and valuation reserves are classified as a component of cost of sales in the amount of $978,000.

Other Income (Expense)

Interest expense decreased $504,000 to $387,000 in 2002 from $891,000 in
2001 primarily as a result of a decrease in interest rates and lower
outstanding borrowings.

Other income decreased approximately $450,000 primarily due to a gain
resulting from the strategic alliance with Xpedx recorded in 2001.

Income Taxes

Income taxes as a percentage of income before taxes resulted in a benefit
of 14.3% in 2001 compared with income tax expense of 41.5% in 2002.

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

The Company recorded a tax benefit in the third quarter of 2001 as a
result of restructuring and asset impairment charges. The effective income tax
rate in 2001 is reflective of certain tax attributes of non-deductible goodwill
resulting from asset impairment charges.

Net Income (Loss)

For reasons set forth above, net income for 2002 increased $4.4 million to
$2.2 million, or $0.23 per share on a basic and diluted basis, from a net loss
of $(2.2) million for 2001, or $(0.22) per share on a basic and diluted basis.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 2003, the Company had $2.2 million of cash and cash
equivalents, a decrease of $2.3 million from the prior year. Working capital as
of October 31, 2003 was $27.0 million, a 3.5% increase from $26.1 million at
October 31, 2002. The decrease in cash and cash equivalents is primarily
attributable to a decrease in cash provided from operations due primarily to an
increase of $1.6 million in accounts receivable, on a net basis.

The Company has historically used cash generated from operating activities
and debt to finance capital expenditures and the cash portion of the purchase
price of acquisitions. Management plans to continue making significant
investments in equipment and to seek appropriate acquisition candidates.
However, to fund the Companys continued expansion of

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operations, additional financing may be necessary. The Company has two
available lines of credit totaling $11.0 million (See Note 3 of the
Consolidated Financial Statements). For the foreseeable future including
through Fiscal 2004, 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.

Even though the Company believes that the legal contingency (See Note 7 of
the Consolidated Financial Statements) that it faces will be resolved
favorably, the possibility for an adverse decision on appeal is also inherent
in the legal process. The Company believes that adequate liquidity is
available to fund this contingency, if required.

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 has no
significant off balance sheet arrangements at October 31, 2003.

Cash Flows from Operating Activities

Cash flows from operating activities for the years ended October 31, 2003,
2002 and 2001 were $4.6 million, $5.8 million and $11.5 million. Cash flows
from operating activities for the fiscal year 2003 compared to 2002 decreased
primarily due to a change in cash flow from accounts receivable.

Cash Flows from Investing Activities

Cash used in investing activities was ($3.7) million, ($1.1) million and
($2.7) million for the years ended October 31, 2003, 2002 and 2001. Cash flows
used in investing activities increased in 2003 compared to 2002 due to the
purchase of a building in Baton Rouge, Louisiana and the purchase of additional
equipment including several new presses, coupled with a decrease in proceeds
from asset sales in 2003. In 2002 the Company sold two buildings which were
reflected as proceeds from the sale of fixed assets.

Cash Flows from Financing Activities

Net cash flows used in financing activities for the years ended October
31, 2003, 2002, and 2001 were ($3.2) million, ($6.0) million and ($6.1)
million. Net cash flows used in financing activities decreased in 2003 compared
to 2002 due to an increase in borrowings. Dividends paid in 2003, 2002 and 2001
were $1.9 million per year.

INFLATION AND ECONOMIC CONDITIONS

Management believes that the effect of inflation on the Companys
operations has not been material and will continue to be immaterial for the
foreseeable future. The Company does not have long-term contracts; therefore,
to the extent permitted by competition, it has the ability to pass through to
its customers most cost increases resulting from inflation, if any. In
addition, the Company is not particularly energy dependent; therefore, an
increase in energy costs should not have a significant impact on the Company.

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SEASONALITY

Historically, the Company has experienced a greater portion of its
profitability in the second and fourth quarters than in the first and third
quarters. The second quarter generally reflects increased orders for printing
of corporate annual reports and proxy statements. A post-Labor Day increase in
demand for printing services and office products coincides with the Companys
fourth quarter.

NEWLY ISSUED ACCOUNTING STANDARDS

See Note 1 of the Consolidated 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

None.

ITEM 9A  CONTROLS AND PROCEDURES

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

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PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the directors of the Company is contained under
the captions Elections of Directors, Director Meetings, Committees and
Attendance, Section 16a Beneficial Ownership Reporting Compliance and Code
of Ethics in the Companys definitive Proxy Statement, expected to be dated
February 12, 2004, with respect to the Annual Meeting of Shareholders to be
held on March 15, 2004, which will be filed pursuant to regulation 14(a) of the
Securities Exchange Act of 1934 and which is incorporated herein by reference.
Certain information concerning executive officers of the Company appear in
EXECUTIVE OFFICERS OF CHAMPION at Part I of this report.

ITEM 11 - EXECUTIVE COMPENSATION

The information called for by this Item is contained under the captions
Compensation of Directors and Officers, Compensation Committee Report on
Executive Compensation and Stock Performance Graph in the Companys
definitive Proxy Statement, expected to be dated February 12, 2004, with
respect to the Annual Meeting of Shareholders to be held on March 15, 2004,
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 12, 2004,
with respect to the Annual Meeting of Shareholders to be held on March 15,
2004, which will be filed pursuant to regulation 14(a) of the Securities
Exchange Act of 1934 and which is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this Item is contained under the caption
Transactions with Directors, Officers and Principle Shareholders in the
Companys definitive Proxy Statement, expected to be dated February 12, 2004,
with respect to the Annual Meeting of Shareholders to be held on March 15,
2004, 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 12, 2004, with respect to the Annual Meeting of Shareholders
to be held on March 15, 2004, which will be filed pursuant to regulation 14(a)
of the Securities Exchange Act of 1934 and which is incorporated herein by
reference.

30



---



##### 



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

|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|------- |  | -------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description                                                                |  | Reference                                                                                                                                                                                                                                                               
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|(3) 3.1 |  | Articles of
Incorporation                                                  |  | Filed as Exhibit 3.1 to
Form 10-Q dated June
16, 1997, filed on June
16, 1997, incorporated
herein by reference.                                                                                                                                                        
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|3.2     |  | Bylaws                                                                     |  | Filed as Exhibit 3.2 to
Registration Statement
on Form S-1, File No.
33-54454, filed on
November 10, 1992,
incorporated herein by
reference.                                                                                                                            
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|(4)     |  | Instruments defining
the rights of
security holders,
including debentures. |  | See Exhibit 3.1 above.                                                                                                                                                                                                                                                  
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|(10)    |  | Material Contracts                                                         |  | Realty Lease dated
January 28, 1993
between ADJ Corp. and
Company regarding 2450
1st Avenue, Huntington,
West Virginia, filed as
Exhibit 10.1 to Form
10-K dated January 27,
1994, filed January 31,
1994, is incorporated
herein by reference.                         
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|        |  |                                                                            |  | Realty Lease dated
January 28, 1993
between The Harrah and
Reynolds Corporation
and Company regarding
615 4th Avenue,
Huntington, West
Virginia, filed as
Exhibit 10.2 to Form
10-K dated January 27,
1994, filed January 31,
1994, is incorporated
herein by reference.
|        |  |                                                                            |  |                                                                                                                                                                                                                                                                         
|        |  |                                                                            |  | Realty Lease dated
January 28, 1993
between ADJ Corp. and
Company regarding
617-619 4th Avenue,
Huntington, West
Virginia, filed as                                                                                                                                     

31



---



##### 



|       |  |             |  |                                                                                                                                                                                                                                                                          
|------ |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description |  | Reference                                                                                                                                                                                                                                                                
|       |  |             |  |                                                                                                                                                                                                                                                                          
|       |  |             |  | 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, Kentucky,
filed as Exhibit 10.6
to Form 10-K dated
January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.            
|       |  |             |  |                                                                                                                                                                                                                                                                          
|       |  |             |  | Realty Lease dated
January 28, 1993
between BCM Company,
Ltd. and Company
regarding 1563 Hansford
Street, Charleston,
West Virginia, filed as
Exhibit 10.7 to Form
10-K dated January 27,
1994, filed January 31,
1994, is incorporated
herein by reference.             
|       |  |             |  |                                                                                                                                                                                                                                                                          
|       |  |             |  | Lease dated April 11,
1994 between Terry and
Anis Wyatt and
Stationers Inc.
regarding 214 Stone
Road, Belpre, Ohio,
filed as Exhibit 10.1
to Form 10-K dated
January 26, 1995, filed
January 27, 1995, is
incorporated herein by
reference.                              
|       |  |             |  |                                                                                                                                                                                                                                                                          
|       |  |             |  | Form of Indemnification
Agreement between
Company and all
directors and executive
officers, filed as
Exhibit 10.4 to
Registration Statement
on Form S-1, File No.
33-54454, filed on
November 10, 1992, is
incorporated herein by
reference.                             
|       |  |             |  |                                                                                                                                                                                                                                                                          
|       |  |             |  | Lease Agreement dated
June 1, 1995 between
Owl Investors Joint
Venture and U.S. Tag &
Ticket Company, Inc.
regarding 2217 Robb
Street,                                                                                                                                   

32



---



##### 



|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|------ |  | --------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                   |  | Reference                                                                                                                                                                                                                                                                                                                                                                          
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | Baltimore,
Maryland filed as
Exhibit 10.1 to Form
10-K dated January 26,
1996, filed January 26,
1996, is incorporated
herein by reference.                                                                                                                                                                                                                                        
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | Lease Agreement dated
June 1, 1972 between
Earl H. and Elaine D.
Seibert and Smith &

Butterfield Co., Inc.
regarding 113-117 East
Third Street,
Owensboro, Kentucky,
filed as Exhibit 10.3
to Form 10-K dated
January 28, 1997, filed
January 28, 1997, is
incorporated herein by
reference.                                                                                      
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | $12,500,000 Term Loan
Credit Agreement by and
among Champion
Industries, Inc. and
the Banks Party thereto
and PNC Bank, National
Association, as Agent,
dated as of March 31,
1997, as amended by
Amendment No. 1 to
Credit Agreement dated
August 1, 1997, filed
as Exhibit 10.1 to Form
10-K dated January 29,
1998, filed January 29,
1998, is incorporated
herein by reference.
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | $5,600,000 Term Loan
Credit Agreement by and
among the Company and
its subsidiaries and
PNC Bank, National
Association, dated as
of March 13, 1998,
together with
promissory note and
representative security
agreement attendant
thereto, filed as
Exhibit 10.1 to Form
10-K dated January 25,
1999 is incorporated
herein by reference.                                          
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | Agreement of Lease
between Mildred
Thompson and Thompsons
of Morgantown, Inc.
dated May 28, 1998,
regarding Kirk and
Chestnut Streets,
Morgantown, West
Virginia, filed as
Exhibit 10.3 to Form
10-K dated January 25,
1999, is incorporated
herein by reference.                                                                                                                 
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  | Executive Compensation
Plans and Arrangements |  | Companys 1993 Stock
Option Plan, effective
March 22, 1994, filed
as Exhibit 10.14 to
Form 10-K dated January
27, 1994, filed January
31, 1994, is
incorporated herein by
reference.                                                                                                                                                                                               
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | Deferred Compensation
Agreement dated July 1,
1993 between Blue Ridge
Printing Co., Inc. and
Glenn W. Wilcox, Sr.,
filed as Exhibit 10.4
to Form 10-K dated
January 29, 1998, filed

January 29, 1998, is
incorporated herein by
reference.                                                                                                                                        
|       |  |                                               |  |                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |                                               |  | Split Dollar Life
Insurance Agreement
dated July                                                                                                                                                                                                                                                                                                                                   

33



---



##### 



|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description |  | Reference                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |  |             |  | 1, 1993
between Blue Ridge
Printing Co., Inc. and
Glenn W. Wilcox, Sr.,
filed as Exhibit 10.5
to Form 10-K dated
January 29, 1998, filed
January 29, 1998, is
incorporated herein by
reference.
Agreement of Lease
between ADJ Corp and
Champion Industries,
Inc. dated January 1,
1999, regarding
Industrial Lane in Kyle
Industrial filed
Exhibit 10.1 to Form
10-K dated January 25,
2000, filed January 28,
2000, is incorporated
herein by reference.
|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |  |             |  | $10,000,000 revolving
credit agreement by and
among the Company and
its subsidiaries and
National City Bank
dated as of April 1,
1999, filed as Exhibit
10.2 to Form 10-K dated
January 25, 2000, filed
January 28, 2000, is
incorporated herein by
reference.                                                                                                                                                                                            
|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |  |             |  | Lease Agreement dated
November 1, 1999
between Randall M.
Schulz, successor
trustee of The
Butterfield Family
Trust No. 2 and Smith &
Butterfield Co., Inc.
regarding 2800 Lynch
Road, Evansville,
Indiana, filed as
Exhibit 10.3 to Form
10-K dated January 25,
2000, filed January 28,
2000, is incorporated
herein by reference.                                                                                                                       
|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |  |             |  | Agreement of Lease
dated September 25,
1998 between Ronald H.
Scott and Frank J.
Scott dba St. Clair
Leasing Co. and
Interform Corporation,
regarding 1901 Mayview
Road, Bridgeville,
Pennsylvania, filed as
Exhibit 10.4 to Form
10-K dated January 25,
2000, filed January 28,
2000, is incorporated
herein by reference.                                                                                                                               
|       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |  |             |  | $1,000,000 revolving
line of credit between
Stationers, Inc. and
First Sentry Bank dated
as of October 17, 2000,
filed as Exhibit 10.1
to form 10-K dated
January 22, 2001, filed
January 26, 2001, is
incorporated herein by
reference.                                                                                                                                                                                                                  

34



---



##### 



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

35



---



##### 



|       |  |             |  |                                                                                                                                                                                                                                                                                       
|------ |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description |  | Reference                                                                                                                                                                                                                                                                             
|       |  |             |  |                                                                                                                                                                                                                                                                                       
|       |  |             |  | 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.

|       |  |                                                                                                                                                                                                
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10.1) |  | 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.Page Exhibit (10.1)-p1
|       |  |                                                                                                                                                                                                
|(10.2) |  | Commercial Security Agreement, $450,050 commercial loan between Champion
Industries, Inc. and First Century Bank dated as of March 2, 2003.Page Exhibit (10.2)-p1                              
|       |  |                                                                                                                                                                                                
|(10.3) |  | 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.Page Exhibit (10.3)-p1    
|       |  |                                                                                                                                                                                                
|(10.4) |  | Revolving Credit Agreement, $10,000,000 revolving line of credit between
Champion Industries, Inc. and United Bank, Inc. dated as of August 1,
2003.Page Exhibit (10.4)-p1                     
|       |  |                                                                                                                                                                                                
|(10.5) |  | Agreement Amending and Extending term of lease dated May 9, 2003 between
Champion Industries, Inc. DBA, Upton Printing and AMB Property, L.P.Page Exhibit (10.5)-p1                            
|       |  |                                                                                                                                                                                                
|(10.6) |  | Agreement Amending and Extending term of lease dated October 1, 2003
between Bourque Printing DBA, Upton Printing and M. Field Gomila Et. Al..Page Exhibit (10.6)-p1                           
|       |  |                                                                                                                                                                                                
|(10.7) |  | Promissory Note, $122,500 between Champion Industries, Inc. and
Community Trust Bank dated as of January 9, 2003.Page Exhibit (10.7)-p1                                                        
|       |  |                                                                                                                                                                                                
|(14.1) |  | Code of Ethics for the Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and Chief Accounting Officer.                                                                 
|       |  |                                                                                                                                                                                                
|(14.2) |  | Code of Business Conduct and Ethics.                                                                                                                                                           

36



---



##### 



|       |  |                                                                                                                                                                             |  |              |  |                     
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | --------------------
|(21)   |  | Subsidiaries of the
Registrant                                                                                                                                              |  | Exhibit 21   |  | Page Exhibit 21-p1  
|       |  |                                                                                                                                                                             |  |              |  |                     
|(23)   |  | Consent of Ernst &
Young LLP                                                                                                                                                |  | Exhibit 23   |  | Page Exhibit 23-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 33.1-p1
|       |  |                                                                                                                                                                             |  |              |  |                     
|(31.2) |  | Principal Executive
Officer
Certification
Pursuant to Section
302 of the
Sarbanes-Oxley act
of 2002  Todd R.
Fry                                                           |  | Exhibit 31.2 |  | Page Exhibit 31.2-p1
|       |  |                                                                                                                                                                             |  |              |  |                     
|(31.3) |  | Principal Operating
Officer
Certification
Pursuant to Section
302 of the
Sarbanes-Oxley act
of 2002  Kirby J.
Taylor                                                       |  | Exhibit 31.3 |  | Page Exhibit 31.3-p1
|       |  |                                                                                                                                                                             |  |              |  |                     
|(32)   |  | Marshall T.
Reynolds, Todd R.
Fry and Kirby J.
Taylor
Certification
Pursuant to 18
U.S.C. Section 1350
as Adopted Pursuant
to Section 906 of
the Sarbanes-Oxley
act of 2002 |  | Exhibit 32   |  | Page Exhibit 32-p1  



|(b) |  | Champion filed the following reports on Form 8-K during the last quarter
of the period covered by this report:                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Form 8-K dated August 23, 2003, filed August 23, 2003 regarding Champions
press release titled CHAMPION ANNOUNCES EARNINGS AND DIVIDEND FOR THIRD
QUARTER 2003.
|   
|(c) |  | Exhibits  Exhibits are filed as a separate section of this report.                                                                                               
|   
|(d) |  | Financial Statement Schedules  Filed as separate section on page F-28.                                                                                           

37



---



##### 



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. Reynolds                           
| |  |                                                       
| |  | Marshall T. Reynolds
Chief Executive Officer          
| |  |                                                       
| |  | By /s/ Kirby J. Taylor                                
| |  |                                                       
| |  | Kirby J. Taylor
President and Chief Operating Officer 
| |  |                                                       
| |  | By /s/ Todd R. Fry                                    
| |  |                                                       
| |  | Todd R. Fry
Vice President and Chief Financial Officer
| |  |                                                       
| |  | Date: January 19, 2004                                

38



---



##### 



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/ Robert H. Beymer

Robert H. Beymer, Director           |  | January 19, 2004
|                                                           |  |                 
|/s/ Philip E. Cline

Philip E. Cline, Director             |  | January 19, 2004
|                                                           |  |                 
|/s/ Harley F. Mooney, Jr.

Harley F. Mooney, Jr., Director |  | January 19, 2004
|                                                           |  |                 
|/s/ Todd L. Parchman

Todd L. Parchman, Director           |  | January 19, 2004
|                                                           |  |                 
|/s/ A. Michael Perry

A. Michael Perry, Director           |  | January 19, 2004
|                                                           |  |                 
|/s/ Marshall T. Reynolds

Marshall T. Reynolds, Director   |  | January 19, 2004
|                                                           |  |                 
|/s/ Neal W. Scaggs

Neal W. Scaggs, Director               |  | January 19, 2004
|                                                           |  |                 
|/s/ Glenn W. Wilcox, Sr.

Glenn W. Wilcox, Sr., Director   |  | January 19, 2004

39



---



##### 



Champion Industries, Inc.

Audited Consolidated Financial Statements and Schedule

October 31, 2003

|                                                |                                                                                                     |  |      |     | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|Contents                                        |                                                                                                     |  |      |    
|Report of Independent Auditors                  |                                                                                                     |  | F-2  |    
|Audited Consolidated Financial Statements:      |                                                                                                     |  |      |    
|                                                | Consolidated Balance Sheets as of October 31, 2003 and 2002                                         |  |      | F-3 | 
|                                                | Consolidated Statements of Operations for the years ended October 31, 2003, 2002 and
2001           |  |      | F-5 | 
|                                                | Consolidated Statements of Shareholders Equity for the years ended October 31, 2003,
2002 and 2001 |  |      | F-6 | 
|                                                | Consolidated Statements of Cash Flows for the years ended October 31, 2003, 2002 and
2001           |  |      | F-7 | 
|                                                | Notes to Consolidated Financial Statements as of October 31, 2003                                   |  |      | F-8 | 
|Schedule II  Valuation and Qualifying Accounts |                                                                                                     |  | F-28 |    





---



##### 



Report of Independent Auditors

The Board of Directors and Shareholders
Champion Industries, Inc.

We have audited the accompanying consolidated balance sheets of Champion
Industries, Inc. and Subsidiaries as of October 31, 2003 and 2002, and the
related consolidated statements of operations, shareholders equity, and cash
flows for each of the three years in the period ended October 31, 2003. 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 upon our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the 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 consolidated financial position of
Champion Industries, Inc. and Subsidiaries at October 31, 2003 and 2002, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended October 31, 2003, in conformity with
accounting principles generally accepted in the United States. 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/ Ernst &
Young LLP

Charleston, West Virginia
December 31, 2003

F-2



---



##### 



Champion Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

|       |                                                                 |                                                                    |            |             |            |      |            |             |            | 
|------ | --------------------------------------------------------------- | ------------------------------------------------------------------ | ---------- | ----------- | ---------- | ---- | ---------- | ----------- | ---------- | 
|       |                                                                 |                                                                    |            | October 31,
|       |                                                                 |                                                                    |            | 2003        |            | 2002
|       |                                                                 |                                                                    |            |             |            |     
|Assets |                                                                 |                                                                    |            |             |            |      |            |            
|       | Current assets:                                                 |                                                                    |            |             |            |      |            |             |           
|       |                                                                 | Cash and cash equivalents                                          |            | $           | 2,171,713  |      |            | $           | 4,507,139  | 
|       |                                                                 | Accounts receivable, net of allowance of
$1,191,000 and $1,397,000 |            |             | 20,142,812 |      |            |             | 18,546,989 | 
|       |                                                                 | Inventories                                                        |            |             | 11,349,929 |      |            |             | 11,427,581 | 
|       |                                                                 | Other current assets                                               |            |             | 739,560    |      |            |             | 1,745,563  | 
|       |                                                                 | Deferred income tax assets                                         |            |             | 1,059,520  |      |            |             | 1,027,059  | 
|       |                                                                 |                                                                    |            |             |            |      |            |            
|       | Total current assets                                            |                                                                    |            | 35,463,534  |            |      |            | 37,254,331  |           
|       | Property and equipment, at cost:                                |                                                                    |            |             |            |      |            |             |           
|       |                                                                 | Land                                                               |            |             | 2,063,373  |      |            |             | 1,028,372  | 
|       |                                                                 | Buildings and improvements                                         |            |             | 7,445,219  |      |            |             | 6,120,122  | 
|       |                                                                 | Machinery and equipment                                            |            |             | 37,682,530 |      |            |             | 36,362,178 | 
|       |                                                                 | Equipment under capital leases                                     |            |             | 983,407    |      |            |             | 983,407    | 
|       |                                                                 | Furniture and fixtures                                             |            |             | 2,965,389  |      |            |             | 2,872,212  | 
|       |                                                                 | Vehicles                                                           |            |             | 3,262,861  |      |            |             | 3,082,258  | 
|       |                                                                 |                                                                    |            |             |            |      |            |            
|       |                                                                 |                                                                    | 54,402,779 |             |            |      | 50,448,549 |            
|       | Less accumulated depreciation                                   |                                                                    |            | (34,964,006 | )          |      |            | (31,442,360 | )         
|       |                                                                 |                                                                    |            |             |            |      |            |            
|       |                                                                 |                                                                    | 19,438,773 |             |            |      | 19,006,189 |            
|       | Cash surrender value of officers life insurance                |                                                                    |            | 1,020,795   |            |      |            | 947,955     |           
|       | Goodwill and other intangibles, net of accumulated
amortization |                                                                    |            | 2,114,390   |            |      |            | 1,725,941   |           
|       | Other assets                                                    |                                                                    |            | 431,343     |            |      |            | 573,087     |           
|       |                                                                 |                                                                    |            |             |            |      |            |            
|       |                                                                 |                                                                    | 3,566,528  |             |            |      | 3,246,983  |            
|       |                                                                 |                                                                    |            |             |            |      |            |            
|       | Total assets                                                    |                                                                    | $          | 58,468,835  |            |      | $          | 59,507,503  |           
|       |                                                                 |                                                                    |            |             |            |      |            |            

See notes to consolidated financial statements.

F-3



---



##### 



Champion Industries, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |           |  |  |  |  | 
|------------------------------------ | ------------------------------------------ | ------------------------------------------------------------------------------------------------- | ------------------------- | ---------- | ----------- | ------- | ---- | ---------- | ---------- | --------- |  |  |  |  | 
|                                     |                                            |                                                                                                   |                           |            | October 31,
|                                     |                                            |                                                                                                   |                           |            | 2003        |         | 2002 |            |            |           | 
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |           | 
|Liabilities and shareholders equity |                                            |                                                                                                   |                           |            |             |         |      |           
|                                     | Current liabilities:                       |                                                                                                   |                           |            |             |         |      |            |           
|                                     |                                            | Accounts payable                                                                                  |                           | $          | 3,283,222   |         |      | $          | 3,258,095  |          
|                                     |                                            | Accrued payroll and commissions                                                                   |                           |            | 1,500,165   |         |      |            | 2,004,046  |          
|                                     |                                            | Taxes accrued and withheld                                                                        |                           |            | 1,259,853   |         |      |            | 1,416,900  |          
|                                     |                                            | Accrued income taxes                                                                              |                           |            | 707,119     |         |      |            | 873,136    |          
|                                     |                                            | Accrued expenses                                                                                  |                           |            | 789,676     |         |      |            | 819,234    |          
|                                     |                                            | Current portion of long-term debt:                                                                |                           |            |             |         |      |            |            |          
|                                     |                                            |                                                                                                   | Notes payable             |            |             | 744,662 |      |            |            | 2,615,422 | 
|                                     |                                            |                                                                                                   | Capital lease obligations |            |             | 202,309 |      |            |            | 195,035   | 
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |          
|                                     | Total current liabilities                  |                                                                                                   |                           | 8,487,006  |             |         |      | 11,181,868 |           
|                                     | Long-term debt, net of current portion:    |                                                                                                   |                           |            |             |         |      |            |           
|                                     |                                            | Line of credit                                                                                    |                           |            | 1,705,668   |         |      |            |           |          
|                                     |                                            | Notes payable                                                                                     |                           |            | 2,103,569   |         |      |            | 1,445,837  |          
|                                     |                                            | Capital lease obligations                                                                         |                           |            | 156,718     |         |      |            | 359,027    |          
|                                     | Deferred income tax liabilities            |                                                                                                   |                           | 2,900,807  |             |         |      | 3,225,119  |           
|                                     | Other liabilities                          |                                                                                                   |                           | 424,233    |             |         |      | 429,842    |           
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |          
|                                     | Total liabilities                          |                                                                                                   |                           | 15,778,001 |             |         |      | 16,641,693 |           
|                                     | Commitments and contingencies              |                                                                                                   |                           |            |             |         |      |            |           
|                                     | Shareholders equity:                      |                                                                                                   |                           |            |             |         |      |            |           
|                                     |                                            | Common stock, $1 par value, 20,000,000 shares authorized;
9,713,913 shares issued and outstanding |                           |            | 9,713,913   |         |      |            | 9,713,913  |          
|                                     |                                            | Additional paid-in capital                                                                        |                           |            | 22,242,047  |         |      |            | 22,242,047 |          
|                                     |                                            | Retained earnings                                                                                 |                           |            | 10,734,874  |         |      |            | 10,909,850 |          
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |          
|                                     | Total shareholders equity                 |                                                                                                   |                           | 42,690,834 |             |         |      | 42,865,810 |           
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |          
|                                     | Total liabilities and shareholders equity |                                                                                                   | $                         | 58,468,835 |             |         | $    | 59,507,503 |           
|                                     |                                            |                                                                                                   |                           |            |             |         |      |            |            |          

See notes to consolidated financial statements.

F-4



---



##### 



Champion Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|-------------------------------------------- | ------------------------------------ | - | ---------------------- | ----------- | ---- | - | ---------- | ----------- | - | - | ---------- | ----------- | -
|                                             |                                      |   | Year Ended October 31,
|                                             |                                      |   | 2003                   |             | 2002 |   | 2001      
|                                             |                                      |   |                        |             |      |   |           
|Revenues:                                    |                                      |   |                        |             |      |   |            |             |   |   |            |            
|                                             | Printing                             |   | $                      | 96,536,601  |      |   | $          | 95,194,288  |   |   | $          | 98,146,114  |  
|                                             | Office products and office furniture |   |                        | 25,646,031  |      |   |            | 27,689,621  |   |   |            | 26,998,196  |  
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|                                             | Total revenues                       |   |                        | 122,182,632 |      |   |            | 122,883,909 |   |   |            | 125,144,310 |  
|Cost of sales:                               |                                      |   |                        |             |      |   |            |             |   |   |            |            
|                                             | Printing                             |   |                        | 70,351,496  |      |   |            | 68,770,628  |   |   |            | 71,815,872  |  
|                                             | Office products and office furniture |   |                        | 17,453,228  |      |   |            | 19,480,400  |   |   |            | 18,661,472  |  
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|                                             | Total cost of sales                  |   |                        | 87,804,724  |      |   |            | 88,251,028  |   |   |            | 90,477,344  |  
|Gross profit                                 |                                      |   | 34,377,908             |             |      |   | 34,632,881 |             |   |   | 34,666,966 |            
|Selling, general and administrative expenses |                                      |   | 31,221,692             |             |      |   | 30,560,289 |             |   |   | 31,799,557 |            
|Restructuring costs                          |                                      |   |                       |             |      |   |           |             |   |   | 2,052,692  |            
|Asset impairment costs                       |                                      |   |                       |             |      |   |           |             |   |   | 3,060,706  |            
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|Income (loss) from operations                |                                      |   | 3,156,216              |             |      |   | 4,072,592  |             |   |   | (2,245,989 | )          
|Other income (expense):                      |                                      |   |                        |             |      |   |            |             |   |   |            |            
|                                             | Interest income                      |   |                        | 3,899       |      |   |            | 14,376      |   |   |            | 63,700      |  
|                                             | Interest expense                     |   |                        | (167,442    | )    |   |            | (386,699    | ) |   |            | (890,787    | )
|                                             | Other                                |   |                        | 10,216      |      |   |            | 73,326      |   |   |            | 528,013     |  
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|                                             |                                      |   | (153,327               | )           |      |   | (298,997   | )           |   |   | (299,074   | )          
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|Income (loss) before income taxes            |                                      |   | 3,002,889              |             |      |   | 3,773,595  |             |   |   | (2,545,063 | )          
|Income tax (expense) benefit                 |                                      |   | (1,235,086             | )           |      |   | (1,565,891 | )           |   |   | 362,974    |            
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|Net income (loss)                            |                                      | $ | 1,767,803              |             |      | $ | 2,207,704  |             |   | $ | (2,182,089 | )          
|                                             |                                      |   |                        |             |      |   |            |             |   |   |            |             |  
|Earnings (loss) per share:                   |                                      |   |                        |             |      |   |            |             |   |   |            |            
|                                             | Basic                                |   | $                      | 0.18        |      |   | $          | 0.23        |   |   | $          | (0.22       | )
|                                             | Diluted                              |   |                        | 0.18        |      |   |            | 0.23        |   |   |            | (0.22       | )
|Dividends paid per share                     |                                      |   | 0.20                   |             |      |   | 0.20       |             |   |   | 0.20       |            
|Weighted average shares outstanding:         |                                      |   |                        |             |      |   |            |             |   |   |            |            
|                                             | Basic                                |   |                        | 9,714,000   |      |   |            | 9,714,000   |   |   |            | 9,714,000   |  
|                                             | Diluted                              |   |                        | 9,761,000   |      |   |            | 9,726,000   |   |   |            | 9,714,000   |  

See notes to consolidated financial statements.

F-5



---



##### 



Champion Industries, Inc. and Subsidiaries

Consolidated Statements of Shareholders Equity

|                          |                             |  |              |   |            |   |           |   |          |   |            |   |  |   |            |            |   |   |            |            |  
|------------------------- | --------------------------- |  | ------------ | - | ---------- | - | --------- | - | -------- | - | ---------- | - |  | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                          |                             |  | Common Stock |   | Additional |   |           |   |          |   |            |   | 
|                          |                             |  |              |   | Paid-In    |   | Retained  |   |          |   |           
|                          |                             |  | Shares       |   | Amount     |   | Capital   |   | Earnings |   | Total     
|Balance, October 31, 2000 |                             |  | 9,713,913    |   |            | $ | 9,713,913 |   |          | $ | 22,242,047 |   |  | $ | 14,769,798 |            |   | $ | 46,725,758 |           
|                          | Net loss for 2001           |  |              |  |            |   |           |  |          |   |            |  |  |   |            | (2,182,089 | ) |   |            | (2,182,089 | )
|                          | Dividends ($0.20 per share) |  |              |  |            |   |           |  |          |   |            |  |  |   |            | (1,942,783 | ) |   |            | (1,942,783 | )
|                          |                             |  |              |   |            |   |           |   |          |   |            |   |  |   |            |            |   |   |            |           
|Balance, October 31, 2001 |                             |  | 9,713,913    |   |            |   | 9,713,913 |   |          |   | 22,242,047 |   |  |   | 10,644,926 |            |   |   | 42,600,886 |           
|                          | Net income for 2002         |  |              |  |            |   |           |  |          |   |            |  |  |   |            | 2,207,704  |   |   |            | 2,207,704  |  
|                          | Dividends ($0.20 per share) |  |              |  |            |   |           |  |          |   |            |  |  |   |            | (1,942,780 | ) |   |            | (1,942,780 | )
|                          |                             |  |              |   |            |   |           |   |          |   |            |   |  |   |            |            |   |   |            |           
|Balance, October 31, 2002 |                             |  | 9,713,913    |   |            |   | 9,713,913 |   |          |   | 22,242,047 |   |  |   | 10,909,850 |            |   |   | 42,865,810 |           
|                          | Net income for 2003         |  |              |  |            |   |           |  |          |   |            |  |  |   |            | 1,767,803  |   |   |            | 1,767,803  |  
|                          | Dividends ($0.20 per share) |  |              |  |            |   |           |  |          |   |            |  |  |   |            | (1,942,779 | ) |   |            | (1,942,779 | )
|                          |                             |  |              |   |            |   |           |   |          |   |            |   |  |   |            |            |   |   |            |           
|Balance, October 31, 2003 |                             |  | 9,713,913    |   |            | $ | 9,713,913 |   |          | $ | 22,242,047 |   |  | $ | 10,734,874 |            |   | $ | 42,690,834 |           
|                          |                             |  |              |   |            |   |           |   |          |   |            |   |  |   |            |            |   |   |            |           

See notes to consolidated financial statements.

F-6



---



##### 



Champion Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |            |            |   |            |  
|------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------------------------------------- | ---------------------------------- | ----------------------------------------- | ---------- | ---------------------- | ---------- | --------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | -
|                                      |                                                                                      |                                                       |                                    |                                           |            | Year Ended October 31,
|                                      |                                                                                      |                                                       |                                    |                                           |            | 2003                   |            | 2002      |            | 2001
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |     
|Cash flows from operating activities: |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      | Net income (loss)                                                                    |                                                       | $                                  | 1,767,803                                 |            |                        | $          | 2,207,704 |            |      | $          | (2,182,089 | )         
|                                      | Adjustments to reconcile net income (loss) to cash
provided by operating activities: |                                                       |                                    |                                           |            |                        |            |           |            |      |            |            |           
|                                      |                                                                                      | Depreciation and amortization                         |                                    |                                           | 4,288,407  |                        |            |           | 4,182,253  |      |            |            | 4,507,165  |  
|                                      |                                                                                      | Loss (gain) on sale of assets                         |                                    |                                           | 16,014     |                        |            |           | 47,426     |      |            |            | (12,584    | )
|                                      |                                                                                      | Gain on sale of division                              |                                    |                                           |           |                        |            |           |           |      |            |            | (407,515   | )
|                                      |                                                                                      | Deferred income taxes                                 |                                    |                                           | (356,773   | )                      |            |           | (245,091   | )    |            |            | (814,020   | )
|                                      |                                                                                      | Deferred compensation                                 |                                    |                                           | 14,297     |                        |            |           | 17,872     |      |            |            | 21,446     |  
|                                      |                                                                                      | Bad debt expense                                      |                                    |                                           | 336,291    |                        |            |           | 363,328    |      |            |            | 705,742    |  
|                                      |                                                                                      | Restructuring, asset impairment and other charges     |                                    |                                           |           |                        |            |           |           |      |            |            | 6,091,298  |  
|                                      |                                                                                      |                                                       | Changes in assets and liabilities: |                                           |            |                        |            |           |            |      |            |            |            |   |           
|                                      |                                                                                      |                                                       |                                    | Accounts receivable                       |            |                        | (1,932,114 | )         |            |      | 255,456    |            |            |   | 2,992,168  |  
|                                      |                                                                                      |                                                       |                                    | Inventories                               |            |                        | 315,535    |           |            |      | 336,614    |            |            |   | 1,049,516  |  
|                                      |                                                                                      |                                                       |                                    | Other current assets                      |            |                        | 1,006,003  |           |            |      | (991,445   | )          |            |   | 255,797    |  
|                                      |                                                                                      |                                                       |                                    | Accounts payable                          |            |                        | 25,129     |           |            |      | (1,085,196 | )          |            |   | (219,276   | )
|                                      |                                                                                      |                                                       |                                    | Accrued payroll and commissions           |            |                        | (503,881   | )         |            |      | (103,331   | )          |            |   | (190,106   | )
|                                      |                                                                                      |                                                       |                                    | Taxes accrued and withheld                |            |                        | (157,047   | )         |            |      | 127,340    |            |            |   | 65,525     |  
|                                      |                                                                                      |                                                       |                                    | Accrued income taxes                      |            |                        | (166,017   | )         |            |      | 1,152,407  |            |            |   | (503,790   | )
|                                      |                                                                                      |                                                       |                                    | Accrued expenses                          |            |                        | (73,277    | )         |            |      | (399,341   | )          |            |   | 115,478    |  
|                                      |                                                                                      |                                                       |                                    | Other liabilities                         |            |                        | (19,906    | )         |            |      | (21,074    | )          |            |   | (22,176    | )
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      |                                                       |                                    | Net cash provided by operating activities |            |                        | 4,560,464  |           |            |      | 5,844,922  |            |            |   | 11,452,579 |  
|Cash flows from investing activities: |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Purchase of property and equipment                    |                                    |                                           | (3,162,658 | )                      |            |           | (1,885,111 | )    |            |            | (1,806,122 | )
|                                      |                                                                                      | Proceeds from sale of fixed assets                    |                                    |                                           | 185,534    |                        |            |           | 1,198,720  |      |            |            | 247,829    |  
|                                      |                                                                                      | Proceeds from sale of division                        |                                    |                                           |           |                        |            |           |           |      |            |            | 264,700    |  
|                                      |                                                                                      | Businesses acquired, net of cash received             |                                    |                                           | (630,460   | )                      |            |           | (376,842   | )    |            |            | (1,588,040 | )
|                                      |                                                                                      | Change in other assets                                |                                    |                                           | (33,825    | )                      |            |           | (21,067    | )    |            |            | 141,919    |  
|                                      |                                                                                      | Cash surrender value                                  |                                    |                                           | (72,840    | )                      |            |           |           |      |            |            |           |  
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Net cash used in investing activities                 |                                    |                                           | (3,714,249 | )                      |            |           | (1,084,300 | )    |            |            | (2,739,714 | )
|Cash flows from financing activities: |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Borrowings on line of credit                          |                                    |                                           | 3,192,271  |                        |            |           | 1,000,000  |      |            |            | 1,500,000  |  
|                                      |                                                                                      | Payments on line of credit                            |                                    |                                           | (1,500,000 | )                      |            |           | (1,000,000 | )    |            |            | (1,500,000 | )
|                                      |                                                                                      | Proceeds from long-term debt                          |                                    |                                           | 923,451    |                        |            |           |           |      |            |            | 1,192,397  |  
|                                      |                                                                                      | Principal payments on long-term debt                  |                                    |                                           | (3,854,584 | )                      |            |           | (4,075,419 | )    |            |            | (5,371,350 | )
|                                      |                                                                                      | Dividends paid                                        |                                    |                                           | (1,942,779 | )                      |            |           | (1,942,780 | )    |            |            | (1,942,783 | )
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Net cash used in financing activities                 |                                    |                                           | (3,181,641 | )                      |            |           | (6,018,199 | )    |            |            | (6,121,736 | )
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Net (decrease) increase  in cash and cash equivalents |                                    |                                           | (2,335,426 | )                      |            |           | (1,257,577 | )    |            |            | 2,591,129  |  
|                                      |                                                                                      | Cash and cash equivalents at beginning of year        |                                    |                                           | 4,507,139  |                        |            |           | 5,764,716  |      |            |            | 3,173,587  |  
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           
|                                      |                                                                                      | Cash and cash equivalents at end of year              |                                    | $                                         | 2,171,713  |                        |            | $         | 4,507,139  |      |            | $          | 5,764,716  |  
|                                      |                                                                                      |                                                       |                                    |                                           |            |                        |            |           |            |      |            |           

See notes to consolidated financial statements.

F-7



---



##### 



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.

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 and Transdata
Systems, Inc.

Significant intercompany transactions have been eliminated in
consolidation.

Cash Equivalents

Cash and cash equivalents consist principally of cash on deposit with
banks, repurchase agreements for government securities, and a money market
account, all highly liquid investments with an original maturity of three
months or less. At October 31, 2003 and 2002, the Company held overnight
repurchase agreements for $1,415,000 and $845,000 of government securities with
stated interest rates of 0.30% and 0.65%.

Inventories

Inventories are principally stated at the lower of first-in, first-out,
cost or market. Manufactured finished goods and work-in-process inventories
include material, direct labor and overhead based on standard costs, which
approximate actual costs.

Property and Equipment

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

F-8



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

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

The Company leases certain equipment under financing
agreements that are classified as capital leases. These leases are for a term
of five years and contain purchase options at the end of the original lease
term. Amortization of assets recorded under capital lease agreements is
included in depreciation expense.

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 $4,090,000, $4,139,000, and
$4,267,000 for the years ended October 31, 2003, 2002 and 2001.

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. Amortization expense
approximated $181,000 for the year ended October 31, 2001. The other
intangible assets are being amortized over 5 years representing the future
benefit of the intangible.

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

F-9



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

The goodwill and other intangibles consisted of the following at October 31:

|     |                   |   |           |           |             |   |         |         |  |   |           |           | 
|---- | ----------------- | - | --------- | --------- | ----------- | - | ------- | ------- |  | - | --------- | --------- | 
|     |                   |   |           |           |             |   |         |         |  |   | Net Book 
|     |                   |   | Cost      |           | Accumulated |   | Value  
|     |                   |   |           |           |             |   |        
|2003 |                   |   |           |           |             |   |         |         |  |   |           |          
|     | Goodwill          |   | $         | 2,437,250 |             |   | $       | 507,278 |  |   | $         | 1,929,972 | 
|     | Other Intangibles |   |           | 196,274   |             |   |         | 11,856  |  |   |           | 184,418   | 
|     |                   |   |           |           |             |   |         |         |  |   |           |          
|     |                   | $ | 2,633,524 |           |             | $ | 519,134 |         |  | $ | 2,114,390 |          
|     |                   |   |           |           |             |   |         |         |  |   |           |          
|2002 |                   |   |           |           |             |   |         |         |  |   |           |          
|     | Goodwill          |   | $         | 2,233,219 |             |   | $       | 507,278 |  |   | $         | 1,725,941 | 
|     | Other Intangibles |   |           |          |             |   |         |        |  |   |           |          | 
|     |                   |   |           |           |             |   |         |         |  |   |           |          
|     |                   | $ | 2,233,219 |           |             | $ | 507,278 |         |  | $ | 1,725,941 |          
|     |                   |   |           |           |             |   |         |         |  |   |           |          

The estimated aggregate amortization expense as of October 31, 2003 for
each of the five succeeding fiscal years is $39,300 for 2004-2007 and $27,400
for 2008. The amortization expense for other intangible assets approximated
$12,000, $0 and $0 for the years ended October 31, 2003, 2002 and 2001.

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets(FAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations for a
disposal of a segment of a business.FAS 144 is effective for fiscal years
beginning after December 15, 2001, with earlier application encouraged. The
Company adopted FAS 144 as of November 1, 2001 and the adoption did not have a
significant impact on the Companys financial position and results of
operations.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense for the
years ended October 31, 2003, 2002 and 2001 approximated $433,000, $549,000 and
$645,000.

Income Taxes

Provisions for income taxes currently payable and deferred income taxes
are based on the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax basis of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.

F-10



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

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 48,000 and 12,000 for the years ended October 31, 2003 and 2002.

Segment Information

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

Accounting for Web Site Development Costs

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

Revenue Recognition

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

Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146 Accounting for Costs
Associated with Exit or Disposal Activities (Statement No. 146), which
supercedes EITF No. 94-3, Liability Recognition for Certain Employment
Termination Benefits and Other Costs to Exit an Activity. Statement 146
requires companies to record liabilities for costs associated with exit or
disposal activities to be recognized only when the liability is incurred
instead of

F-11



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

at the date of commitment to an exit or disposal activity. Adoption of this
standard is effective for exit or disposal activities that are initiated after
December 31, 2002. The Company recognized costs for severance, lease
termination and travel of approximately $123,000 during the Fourth Quarter of
2003, under the requirements of this standard, relating to the consolidation of
the Companys U.S. Tag facility into the Companys existing Huntington, West
Virginia location.

Accounting for Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based
CompensationTransition and Disclosure. Statement 148 amends FASB Statement
No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition to Statement 123s fair value method of accounting for
stock-based employee compensation.

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

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

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

|                                                                                                                                      |  |                       |           |      |  |      |           |  |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | --------- | ---- |  | ---- | --------- |  |  | - | ---------- | -
|                                                                                                                                      |  | Year Ended October 31
|                                                                                                                                      |  |                      
|                                                                                                                                      |  | 2003                  |           | 2002 |  | 2001
|                                                                                                                                      |  |                       |           |      |  |     
|Net Income (loss), as reported                                                                                                        |  | $                     | 1,767,803 |      |  | $    | 2,207,704 |  |  | $ | (2,182,089 | )
|Deduct: Total stock-based
employee compensation expense
determined under fair value
method for all awards, net of
related tax effects |  |                       | 62,250    |      |  |      | 38,704    |  |  |   |           |  
|                                                                                                                                      |  |                       |           |      |  |      |           |  |  |   |            |  
|Pro Forma net income (loss)                                                                                                           |  | $                     | 1,705,553 |      |  | $    | 2,169,000 |  |  | $ | (2,182,089 | )
|                                                                                                                                      |  |                       |           |      |  |      |           |  |  |   |            |  
|Earnings (loss) per share:                                                                                                            |  |                       |           |      |  |      |           |  |  |   |            |  
|Basic, as reported                                                                                                                    |  | $                     | 0.18      |      |  | $    | 0.23      |  |  | $ | (0.22      | )
|Basic, pro forma                                                                                                                      |  | $                     | 0.18      |      |  | $    | 0.22      |  |  | $ | (0.22      | )
|Diluted, as reported                                                                                                                  |  | $                     | 0.18      |      |  | $    | 0.23      |  |  | $ | (0.22      | )
|Diluted, pro forma                                                                                                                    |  | $                     | 0.17      |      |  | $    | 0.22      |  |  | $ | (0.22      | )

F-12



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

FIN 46

In December 2003, the Financial Accounting Standards Board issued the
revised FASB Interpretation No. 46, Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin No. 51(FIN 46).
FIN 46 requires the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a majority of the entitys
expected residual returns, or both, as a result of ownership, contractual or
other financial interests in the entity. Currently entities are generally
consolidated by an enterprise when it has a controlling financial interest
through ownership of a majority voting interest in the entity. The provisions
of FIN 46 are generally effective for existing (prior to January 31, 2003)
variable interest relationships of a public entity no later than the end of the
first reporting period that ends after March 15, 2004. However, prior to the
required application of this interpretation a public entity that is not a small
business issuer shall apply FIN 46 to those entities that are considered to be
special-purpose entities no later than the end of the first reporting period
that ends after December 15, 2003. Management does not believe that FIN 46 will
have a material impact on the Companys financial statements; however,
management continues to review the requirements and the related accounting
implications.

EITF 00-21 Revenue Arrangements With Multiple Deliverables

In May 2003 the Financial Accounting Standards Board Emerging Issues Task Force
issued EITF 00-21 Revenue Arrangements With Multiple Deliverables. This issue
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue generating activities. The guidance in
this issue is effective for revenue arrangements entered into during fiscal
periods beginning after June 15, 2003. The application of this EITF did not
have a material effect during the fourth quarter of 2003. Management does not
believe that EITF 00-21 will have a material prospective impact on the
Companys financial statements. However, management continues to review this
requirement and the related accounting implications.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the
current-year Financial Statement presentation.

F-13



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Inventories

Inventories consisted of the following:

|                                     |                 |   |             |           |      |   |            |           | 
|------------------------------------ | --------------- | - | ----------- | --------- | ---- | - | ---------- | --------- | 
|                                     |                 |   | October 31,
|                                     |                 |   | 2003        |           | 2002
|                                     |                 |   |             |           |     
|Printing:                            |                 |   |             |           |      |   |            |          
|                                     | Raw materials   |   | $           | 2,203,228 |      |   | $          | 2,421,973 | 
|                                     | Work in process |   |             | 2,022,420 |      |   |            | 1,795,796 | 
|                                     | Finished goods  |   |             | 3,680,184 |      |   |            | 3,942,518 | 
|Office products and office furniture |                 |   | 3,444,097   |           |      |   | 3,267,294  |          
|                                     |                 |   |             |           |      |   |            |          
|                                     |                 | $ | 11,349,929  |           |      | $ | 11,427,581 |          
|                                     |                 |   |             |           |      |   |            |          

3. Long-term Debt

Long-term debt consisted of the following:

|                                                                                                                                                                                                                                                                         |  |             |           |      |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                                                                                         |  | October 31,
|                                                                                                                                                                                                                                                                         |  | 2003        |           | 2002
|                                                                                                                                                                                                                                                                         |  |             |           |     
|Unsecured term note payable to a bank,
due in monthly principal installments of
$148,810 plus interest approximating the
prime rate with the last note maturing
April 2004. This note was paid off in
September of 2003.                                                 |  | $           |          |      |  | $ | 2,678,733 | 
|Installment notes payable to banks, due
in monthly installments plus interest at
rates approximating the banks prime rate
maturing in various periods ranging from
July 2004 - February 2010, collateralized
by equipment, vehicles, inventory and accounts receivable. |  |             | 2,848,231 |      |  |   | 1,382,526 | 
|Capital lease obligations, due in monthly
installments totaling $19,116 through
February 2005, with $8,322 due in monthly
installments in periods February 2005
through October 2005 at fixed rates of
interest ranging from 7.0% to 7.75%.                              |  |             | 359,027   |      |  |   | 554,062   | 
|                                                                                                                                                                                                                                                                         |  |             |           |      |  |   |           | 
|                                                                                                                                                                                                                                                                         |  |             | 3,207,258 |      |  |   | 4,615,321 | 
|Less current portion                                                                                                                                                                                                                                                     |  |             | 946,971   |      |  |   | 2,810,457 | 
|                                                                                                                                                                                                                                                                         |  |             |           |      |  |   |           | 
|Long-term debt, net of current portion                                                                                                                                                                                                                                   |  | $           | 2,260,287 |      |  | $ | 1,804,864 | 
|                                                                                                                                                                                                                                                                         |  |             |           |      |  |   |           | 

The unsecured term note agreements contain restrictive financial covenants
requiring the Company to maintain certain financial ratios. The Company was in
compliance with these covenants at October 31, 2003.

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

F-14



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

|           |  |         |           |         |  |       |         |  |  |   |           | 
|---------- |  | ------- | --------- | ------- |  | ----- | ------- |  |  | - | --------- | 
|           |  | Notes   |           | Capital |  |       |         | 
|           |  | Payable |           | Leases  |  | Total
|           |  |         |           |         |  |      
|2004       |  | $       | 744,662   |         |  | $     | 202,309 |  |  | $ | 946,971   | 
|2005       |  |         | 366,646   |         |  |       | 156,718 |  |  |   | 523,364   | 
|2006       |  |         | 283,464   |         |  |       |        |  |  |   | 283,464   | 
|2007       |  |         | 251,565   |         |  |       |        |  |  |   | 251,565   | 
|2008       |  |         | 198,340   |         |  |       |        |  |  |   | 198,340   | 
|Thereafter |  |         | 1,003,554 |         |  |       |        |  |  |   | 1,003,554 | 
|           |  |         |           |         |  |       |         |  |  |   |           | 
|           |  | $       | 2,848,231 |         |  | $     | 359,027 |  |  | $ | 3,207,258 | 
|           |  |         |           |         |  |       |         |  |  |   |           | 

On August 1, 2003 the Company obtained an unsecured revolving line of
credit with a bank for borrowings to a maximum of $10,000,000 with interest
payable monthly at the prime rate of interest. The line of credit expires in
July 2006 and contains certain restrictive financial covenants. The line of
credit essentially replaced a previous $10,000,000 facility with another bank.
The Company had outstanding borrowings of approximately $1.7 million under this
facility at October 31, 2003 of which approximately $1.2 million was used to
pay off an existing term loan prior to maturity. There were no borrowings
outstanding under these facilities at October 31, 2002.

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 April 2004 and
contains certain financial covenants. There were no borrowings outstanding
under this facility at October 31, 2003 or 2002.

The prime rate, the base interest rate on the above loans, approximated
4.00% and 4.75% at October 31, 2003 and 2002. Interest paid during the years
ended October 31, 2003, 2002 and 2001 approximated $230,000, $385,000 and
$872,000. The Company capitalized interest of $33,000 during 2003 related to
the purchase of a building in Baton Rouge, Louisiana.

The Companys non-cash activities for 2003, 2002, and 2001 included
equipment purchases of approximately $96,000, $288,000 and $792,000, which were
financed by a bank and the purchase in 2003 of a building in Baton Rouge,
Louisiana of which $1,440,000 of the purchase price was financed by a bank.

4. Employee Benefit Plans

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

F-15



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

January 1, 1998, the Profit Sharing Plan was merged into The Champion
Industries, Inc. 401(k) Plan (the Plan). The Plan covers all eligible
employees who satisfy the age and service requirements. Each participant may
elect to contribute up to 15% of annual compensation, and the Company is
obligated to contribute 100% of the participants contribution not to exceed 2%
of the participants annual compensation. The Company may make discretionary
contributions to the Plan. The Companys expense under these Plans was
approximately $365,000, $346,000 and $369,000 for the years ended October 31,
2003, 2002 and 2001.

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. 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, 2003 ranged from $2.49 to $6.88. 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 3.0 years.

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

|                                                               |  |      |         |       |  |          |       |       |  |      |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|-------------------------------------------------------------- |  | ---- | ------- | ----- |  | -------- | ----- | ----- |  | ---- | ------- | -------- |  | - | ----- |  |  | -------- | ------- | - |  | - | ----- | 
|                                                               |  |      |         |       |  | Weighted |       |       |  |      |         | Weighted |  |   |       |  |  | Weighted
|                                                               |  |      |         |       |  | Average  |       |       |  |      |         | Average  |  |   |       |  |  | Average 
|                                                               |  |      |         |       |  | Exercise |       |       |  |      |         | Exercise |  |   |       |  |  | Exercise
|                                                               |  | 2003 |         | Price |  | 2002     |       | Price |  | 2001 |         | Price   
|                                                               |  |      |         |       |  |          |       |       |  |      |         |         
|Outstanding-beginning of year                                  |  |      | 230,000 |       |  | $        | 5.41  |       |  |      | 130,000 |          |  | $ | 10.63 |  |  |          | 176,317 |   |  | $ | 11.44 | 
|Granted                                                        |  |      | 125,000 |       |  |          | 2.77  |       |  |      | 126,000 |          |  |   | 2.49  |  |  |          |        |   |  |   |      | 
|Exercised                                                      |  |      |        |       |  |          |      |       |  |      |        |          |  |   |      |  |  |          |        |   |  |   |      | 
|Forfeited or expired                                           |  |      | (43,000 | )     |  |          | 13.42 |       |  |      | (26,000 | )        |  |   | 17.38 |  |  |          | (46,317 | ) |  |   | 13.72 | 
|                                                               |  |      |         |       |  |          |       |       |  |      |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|Outstanding-end of year                                        |  |      | 312,000 |       |  |          | 3.25  |       |  |      | 230,000 |          |  |   | 5.41  |  |  |          | 130,000 |   |  |   | 10.63 | 
|                                                               |  |      |         |       |  |          |       |       |  |      |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|Weighted average fair value
of options granted during
the year |  | $    | 0.83    |       |  |          |       |       |  | $    | 0.52    |          |  |   |       |  |  | $        |        |   |  |   |       | 
|                                                               |  |      |         |       |  |          |       |       |  |      |         |          |  |   |       |  |  |          |         |   |  |   |       | 

F-16



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

A summary of stock options outstanding and exercisable at October 31, 2003,
follows:

|         |  |             |         |           |  |  |      | 
|-------- |  | ----------- | ------- | --------- |  |  | ---- | 
|Exercise |  | Number      |         | Remaining
|Price    |  | Outstanding |         | Life     
|         |  |             |         |          
|6.88     |  |             | 30,000  |           |  |  | 0.63 | 
|4.25     |  |             | 40,000  |           |  |  | 1.14 | 
|2.49     |  |             | 120,000 |           |  |  | 3.05 | 
|2.77     |  |             | 122,000 |           |  |  | 4.13 | 

The Company has deferred compensation agreements with two employees of
Blue Ridge Printing Co., Inc. providing for payments totaling approximately
$1,000,000 over a ten year period after retirement. During fiscal 2001, one of
these employees was paid out. The Company had accrued approximately $354,000
and $340,000 at October 31, 2003 and 2002 relating to these agreements. The
amount expensed for these agreements for the years ended October 31, 2003, 2002
and 2001 approximated $14,000, $18,000 and $21,000. To assist in funding the
deferred compensation agreements, the Company has invested in life insurance
policies, which had a cash surrender value of approximately $386,000 and
$364,000 for years 2003 and 2002.

5. Income Taxes

Income tax expense (benefit) consisted of the following:

|                 |         |   |                        |           |      |   |           |           |  |   |          |         | 
|---------------- | ------- | - | ---------------------- | --------- | ---- | - | --------- | --------- |  | - | -------- | ------- | 
|                 |         |   | Year Ended October 31,
|                 |         |   | 2003                   |           | 2002 |   | 2001     
|                 |         |   |                        |           |      |   |          
|Current expense: |         |   |                        |           |      |   |           |           |  |   |          |        
|                 | Federal |   | $                      | 1,270,574 |      |   | $         | 1,460,913 |  |   | $        | 325,728 | 
|                 | State   |   |                        | 321,285   |      |   |           | 350,069   |  |   |          | 125,318 | 
|Deferred benefit |         |   | (356,773               | )         |      |   | (245,091  | )         |  |   | (814,020 | )      
|                 |         |   |                        |           |      |   |           |           |  |   |          |        
|                 |         | $ | 1,235,086              |           |      | $ | 1,565,891 |           |  | $ | (362,974 | )      
|                 |         |   |                        |           |      |   |           |           |  |   |          |        

F-17



---



##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

Deferred tax assets and liabilities are as follows:

|                             |                                                       |   |             |           |      |   |           |           |  
|---------------------------- | ----------------------------------------------------- | - | ----------- | --------- | ---- | - | --------- | --------- | -
|                             |                                                       |   | October 31,
|                             |                                                       |   | 2003        |           | 2002
|                             |                                                       |   |             |           |     
|Assets:                      |                                                       |   |             |           |      |   |           |          
|                             | Allowance for doubtful accounts                       |   | $           | 476,358   |      |   | $         | 560,957   |  
|                             | Deferred compensation                                 |   |             | 142,973   |      |   |           | 135,824   |  
|                             | Net operating loss carryforward of acquired companies |   |             | 604,582   |      |   |           | 642,427   |  
|                             | Accrued vacation                                      |   |             | 278,848   |      |   |           | 219,701   |  
|                             | Other accrued liabilities                             |   |             | 189,492   |      |   |           | 146,649   |  
|                             | Other assets                                          |   |             | 89,240    |      |   |           | 84,229    |  
|                             |                                                       |   |             |           |      |   |           |          
|Gross deferred tax assets    |                                                       |   | 1,781,493   |           |      |   | 1,789,787 |          
|Liabilities:                 |                                                       |   |             |           |      |   |           |          
|                             | Property and equipment                                |   |             | 3,337,530 |      |   |           | 3,443,400 |  
|                             |                                                       |   |             |           |      |   |           |          
|                             | Gross deferred tax liability                          |   |             | 3,337,530 |      |   |           | 3,443,400 |  
|                             |                                                       |   |             |           |      |   |           |          
|                             | Valuation allowance                                   |   |             | (285,250  | )    |   |           | (544,447  | )
|                             |                                                       |   |             |           |      |   |           |          
|Net deferred tax liabilities |                                                       | $ | 1,841,287   |           |      | $ | 2,198,060 |          
|                             |                                                       |   |             |           |      |   |           |          

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

|                                    |  |                        |      |      |  |      |      |   |  |  |       |   
|----------------------------------- |  | ---------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | --
|                                    |  | Year Ended October 31,
|                                    |  | 2003                   |      | 2002 |  | 2001
|                                    |  |                        |      |      |  |     
|Statutory federal income tax rate   |  |                        | 34.0 | %    |  |      | 34.0 | % |  |  | (34.0 | %)
|State taxes, net of federal benefit |  |                        | 7.0  |      |  |      | 6.1  |   |  |  | (1.1  | ) 
|Restructuring permanent differences |  |                        |     |      |  |      |     |   |  |  | 22.1  |   
|Change in valuation allowance       |  |                        | (7.8 | )    |  |      |     |   |  |  |      |   
|Deferred tax adjustments            |  |                        | 6.1  |      |  |      | (0.6 | ) |  |  | (3.2  | ) 
|Selling
          expenses          |  |                        | 2.5  |      |  |      | 2.1  |   |  |  | 2.3   |   
|Other                               |  |                        | (0.7 | )    |  |      | (0.1 | ) |  |  | (0.4  | ) 
|                                    |  |                        |      |      |  |      |      |   |  |  |       |   
|Effective tax rate                  |  |                        | 41.1 | %    |  |      | 41.5 | % |  |  | (14.3 | %)
|                                    |  |                        |      |      |  |      |      |   |  |  |       |   

Income taxes paid during the years ended October 31, 2003, 2002 and 2001
approximated $1,758,000, $659,000 and $959,000.

The Company has available for income tax purposes net operating loss
carryforwards from acquired companies of approximately $1,154,000, of which
$222,000 expires in 2011, $899,000 in 2012 and $33,000 in 2013. The Company has
available for state income tax purposes net operating loss carryforwards from
acquired companies of approximately $2,619,000 of which $144,000 expires in
2012, $108,000 expires in 2013, $435,000 expires in 2014, $1,012,000 expires in
2015, $872,000 expires in 2016 and $48,000 expires in 2018. The Company
established valuation allowances against certain net operating loss

F-18



---



##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

carryforwards during 2003 the valuation allowance decreased by $259,197
resulting from changes in the estimated realizability of an acquired
subsidiarys deferred tax assets.

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. The terms of these leases,
which are accounted for as operating leases, range from five to fifteen years.

A summary of significant related party transactions follows:

|                                                                                        |  |                        |  |  |  |      |         |      |  |      |         |  |  |   |         | 
|--------------------------------------------------------------------------------------- |  | ---------------------- |  |  |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                                                        |  | Year Ended October 31,
|                                                                                        |  |                        |  |  |  | 2003 |         | 2002 |  | 2001
|                                                                                        |  |                        |  |  |  |      |         |      |  |     
|Rent expense paid to affiliated entities for
operating facilities                       |  |                        |  |  |  | $    | 424,000 |      |  | $    | 424,000 |  |  | $ | 441,000 | 
|Sales of office products, office furniture
and printing services to affiliated
entities |  |                        |  |  |  |      | 590,000 |      |  |      | 803,000 |  |  |   | 673,000 | 

In addition, the Company leases property and equipment from unrelated
entities under operating leases. Rent expense amounted to $960,000, $881,000
and $898,000 for the years ended October 31, 2003, 2002 and 2001.

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

Future minimum rental commitments for all noncancelable operating leases
including related party commitments with initial terms of one year or more
consisted of the following at October 31, 2003:

|           |  |   |          
|---------- |  | - | ---------
|2004       |  | $ | 1,091,651
|2005       |  |   | 838,513  
|2006       |  |   | 751,053  
|2007       |  |   | 690,103  
|2008       |  |   | 399,594  
|Thereafter |  |   | 6,000    
|           |  |   |          
|           |  | $ | 3,776,914
|           |  |   |          

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

F-19



---



##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

program for the years ended October 31, 2003, 2002 and 2001 was
approximately $2,999,000, $2,267,000 and $2,842,000.

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

During 2003, 2002 and 2001 the Company utilized this aircraft and
reimbursed the controlled entity for the use of the aircraft, fuel, air crew,
ramp fees and other expenses attendant to the Companys use, in amounts
aggregating $79,000, $118,000 and $106,000. 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

On February 16, 2002, a jury verdict was rendered against the Company in a
civil action brought against the Company in state court in Jackson,
Mississippi.

The plaintiffs in this civil action asserted that the Company and its
Dallas Printing Company, Inc. subsidiary had engaged in unfair competition and
other wrongful acts in hiring certain of its employees. The jury awarded the
plaintiffs $1,745,000 in actual damages and $750,000 in punitive damages.

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

On July 17, 2002, the Company filed a notice of appeal from the jury
verdict. The appeal involves both the jury award and the attorneys fee and
expense award. If the Company is not successful on appeal, Mississippi law
provides that it is liable for an additional 15% of the total award.

The Company has been advised that it has no insurance coverage for this
award. The Company under Mississippi law has a guaranteed right to appeal.
The Company has been advised by counsel that it has multiple grounds for an
appeal and a reasonable basis for believing that an appeal would be successful
in eliminating the jury award. However, there

F-20



---



##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

can be no assurance that the jury award will be overturned upon appeal. If the
verdict is not overturned, the impact on the operating results of the Company
could be material. The case was referenced to the Mississippi Court of Appeals
which has not yet announced a decision in this case.

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. In the
opinion of management, after consulting with legal counsel, the Company
believes that the ultimate resolution of these claims and legal actions will
not have a material effect on the consolidated financial statements of the
Company.

8. Acquisitions

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

On June 18, 2003 the Company acquired certain assets of Contract Business
Interiors (CBI) of Wheeling, WV pursuant to acceptance by 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 October 10, 2001, the Company acquired Transdata Systems, Inc.
(Transdata) of Baton Rouge and New Orleans, 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) for $1.2 million, pursuant to an auction held by the
U.S. Bankruptcy Court for the Southern District of Ohio. 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 certain inventory items.
This strategic alliance has been accounted for as a sale of a division with a
gain recognized of approximately $400,000.

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

F-21



---



##### 



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 two industry segments organized on the
basis of product lines: the production, printing and sale, principally to
commercial customers, of printed materials (including brochures, pamphlets,
reports, tags, continuous and other forms); and the sale of office products and
office furniture including interior design services. The Company employs
approximately 775 people, of whom 72 or approximately 9% are covered by a
collective bargaining agreement, which expires on May 31,
2006.

F-22



---



##### 



Champion Industries, Inc. and
Subsidiaries

Notes to Consolidated Financial
Statements (continued)

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

|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|----------------------------------- |  | -------- | ----------- | ----------- |  | --------------- | ---------- | - |  | - | ----------- | -
|                                    |  |          |             |             |  | Office Products |            |   |  |  
|2003                                |  | Printing |             | & Furniture |  | Total          
|                                    |  |          |             |             |  |                
|Revenues                            |  | $        | 106,540,961 |             |  | $               | 30,771,361 |   |  | $ | 137,312,322 |  
|Elimination of intersegment revenue |  |          | (10,004,360 | )           |  |                 | (5,125,330 | ) |  |   | (15,129,690 | )
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Consolidated revenues               |  | $        | 96,536,601  |             |  | $               | 25,646,031 |   |  | $ | 122,182,632 |  
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Operating income                    |  |          | 3,262,418   |             |  |                 | (106,202   | ) |  |   | 3,156,216   |  
|Depreciation & amortization         |  |          | 4,145,286   |             |  |                 | 143,121    |   |  |   | 4,288,407   |  
|Capital expenditures                |  |          | 4,572,890   |             |  |                 | 126,233    |   |  |   | 4,699,123   |  
|Identifiable assets                 |  |          | 48,387,601  |             |  |                 | 10,081,234 |   |  |   | 58,468,835  |  
|Goodwill                            |  |          | 1,643,530   |             |  |                 | 286,442    |   |  |   | 1,929,972   |  

|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|----------------------------------- |  | -------- | ----------- | ----------- |  | --------------- | ---------- | - |  | - | ----------- | -
|                                    |  |          |             |             |  | Office Products |            |   |  |  
|2002                                |  | Printing |             | & Furniture |  | Total          
|                                    |  |          |             |             |  |                
|Revenues                            |  | $        | 104,767,231 |             |  | $               | 31,529,434 |   |  | $ | 136,296,665 |  
|Elimination of intersegment revenue |  |          | (9,572,943  | )           |  |                 | (3,839,813 | ) |  |   | (13,412,756 | )
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Consolidated revenues               |  | $        | 95,194,288  |             |  | $               | 27,689,621 |   |  | $ | 122,883,909 |  
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Operating income                    |  |          | 3,955,083   |             |  |                 | 117,509    |   |  |   | 4,072,592   |  
|Depreciation & amortization         |  |          | 4,057,772   |             |  |                 | 124,481    |   |  |   | 4,182,253   |  
|Capital expenditures                |  |          | 1,994,255   |             |  |                 | 178,582    |   |  |   | 2,172,837   |  
|Identifiable assets                 |  |          | 49,100,223  |             |  |                 | 10,407,280 |   |  |   | 59,507,503  |  
|Goodwill                            |  |          | 1,439,499   |             |  |                 | 286,442    |   |  |   | 1,725,941   |  

|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|----------------------------------- |  | -------- | ----------- | ----------- |  | --------------- | ---------- | - |  | - | ----------- | -
|                                    |  |          |             |             |  | Office Products |            |   |  |  
|2001                                |  | Printing |             | & Furniture |  | Total          
|                                    |  |          |             |             |  |                
|Revenues                            |  | $        | 107,599,525 |             |  | $               | 29,932,697 |   |  | $ | 137,532,222 |  
|Elimination of intersegment revenue |  |          | (9,453,411  | )           |  |                 | (2,934,501 | ) |  |   | (12,387,912 | )
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Consolidated revenues               |  | $        | 98,146,114  |             |  | $               | 26,998,196 |   |  | $ | 125,144,310 |  
|                                    |  |          |             |             |  |                 |            |   |  |   |             |  
|Operating income (loss)             |  |          | 712,701     |             |  |                 | (2,958,690 | ) |  |   | (2,245,989  | )
|Depreciation & amortization         |  |          | 4,260,419   |             |  |                 | 246,746    |   |  |   | 4,507,165   |  
|Capital expenditures                |  |          | 2,305,369   |             |  |                 | 293,122    |   |  |   | 2,598,491   |  
|Identifiable assets                 |  |          | 55,210,611  |             |  |                 | 8,739,303  |   |  |   | 63,949,914  |  
|Goodwill                            |  |          | 1,047,741   |             |  |                 | 286,442    |   |  |   | 1,334,183   |  

F-23



---



##### 



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, 2003,
2002 and 2001 is as follows:

|                                               |                                       |   |           |             |      |   |           |             |   |   |            |             |  
|---------------------------------------------- | ------------------------------------- | - | --------- | ----------- | ---- | - | --------- | ----------- | - | - | ---------- | ----------- | -
|                                               |                                       |   | 2003      |             | 2002 |   | 2001     
|                                               |                                       |   |           |             |      |   |          
|Revenues:                                      |                                       |   |           |             |      |   |           |             |   |   |            |            
|                                               | Total segment revenues                |   | $         | 137,312,322 |      |   | $         | 136,296,665 |   |   | $          | 137,532,222 |  
|                                               | Elimination of intersegment revenue   |   |           | (15,129,690 | )    |   |           | (13,412,756 | ) |   |            | (12,387,912 | )
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            
|                                               | Consolidated revenue                  |   | $         | 122,182,632 |      |   | $         | 122,883,909 |   |   | $          | 125,144,310 |  
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            
|Operating income (loss):                       |                                       |   |           |             |      |   |           |             |   |   |            |            
|                                               | Total segment operating income (loss) |   | $         | 3,156,216   |      |   | $         | 4,072,592   |   |   | $          | (2,245,989  | )
|                                               | Interest income                       |   |           | 3,899       |      |   |           | 14,376      |   |   |            | 63,700      |  
|                                               | Interest expense                      |   |           | (167,442    | )    |   |           | (386,699    | ) |   |            | (890,787    | )
|                                               | Other income                          |   |           | 10,216      |      |   |           | 73,326      |   |   |            | 528,013     |  
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            
|Consolidated income (loss) before
income taxes |                                       | $ | 3,002,889 |             |      | $ | 3,773,595 |             |   | $ | (2,545,063 | )          
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            
|Identifiable assets:                           |                                       |   |           |             |      |   |           |             |   |   |            |            
|                                               | Total segment identifiable assets     |   | $         | 58,468,835  |      |   | $         | 59,507,503  |   |   | $          | 63,949,914  |  
|                                               | Elimination of intersegment assets    |   |           |            |      |   |           |            |   |   |            |            |  
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            
|                                               | Total consolidated assets             |   | $         | 58,468,835  |      |   | $         | 59,507,503  |   |   | $          | 63,949,914  |  
|                                               |                                       |   |           |             |      |   |           |             |   |   |            |            

10.     Restructuring Charge, Asset Impairment Charge and Other Charges

In the third quarter of 2001, the Company recorded charges related to a
restructuring and profitability enhancement plan. This plan was implemented to
effectuate certain key initiatives including plant and office consolidations,
headcount reductions, asset impairment issues and a general response to a
deteriorating economic environment. The pre-tax charge resulting from these
actions was $6.1 million ($4.3 million after-tax or $0.44 per share on a basic
and diluted basis.) The charge related to approximately $3.1 million from
asset impairments including goodwill, facility and equipment write-downs. The
Company recorded charges for restructuring and other special charges of $3.0
million comprised primarily of severance payments, charge-offs related to
duplicative facility leases, increases in allowance for doubtful accounts and
inventory obsolescence and valuation reserves, costs related to the impairment
of the Companys information systems hardware and software, charges related to
termination and related fees of a pension plan of an acquired Company, and
other charges and expenses related to plant consolidations and restructuring.

As a result of the Companys restructuring plan, approximately 35 employees
were terminated from the Company primarily as a result of plant and office
consolidations at the Companys Carolina Cut Sheets operation, Chapman Printing
Lexington location and the Garrison Brewer division of Stationers. In
addition, the Company anticipated the elimination of additional positions
resulting from retirements and normal attrition within the

F-24



---



##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

twelve to eighteen months following the implementation of the plan. As of
October 31, 2001, 35 employees were notified of their termination and one
retired position was eliminated.

The cash and non-cash elements of the Companys restructuring charge, asset
impairment charge, and other unusual charges approximated $1.5 million in cash
and $4.6 million non-cash. The charges are classified on the statement of
operations as components of operating income. Inventory obsolescence and
related increases to valuation reserves are classified as a component of cost
of sales. The printing segment charges approximated $3.5 million consisting of
goodwill write-downs of $779,000, facilities and equipment write-downs of
$235,000, severance costs of $51,000, inventory obsolescence and valuation
reserves of $978,000 and restructuring and other charges of $1,457,000. The
office products and furniture segment charges approximated $2.6 million
consisting of goodwill write-downs of $1,611,000, facilities write-downs of
$436,000, severance costs of $4,000 and restructuring and other charges of
$541,000. Details of the approximated charges are as follows as of October 31,
2003:

|                                                 |  |          |           |      |  |          |           |                  |  |   |           |            |  |   |        | 
|------------------------------------------------ |  | -------- | --------- | ---- |  | -------- | --------- | ---------------- |  | - | --------- | ---------- |  | - | ------ | 
|                                                 |  |          |           |      |  | Utilized |           |                  |  |  
|                                                 |  |          |           |      |  |          |           |                  |  |  
|                                                 |  | Original |           |      |  |          |           |                  |  |   |           | Balance at
|                                                 |  | Accrual  |           | Cash |  | Noncash  |           | October 31, 2003
|                                                 |  |          |           |      |  |          |           |                 
|Write-down of
goodwill,
facilities and
equipment |  | $        | 3,060,000 |      |  | $        | 168,000   |                  |  | $ | 2,892,000 |            |  | $ |       | 
|Employee severance
and termination
benefits      |  |          | 55,000    |      |  |          | 55,000    |                  |  |   |          |            |  |   |       | 
|Inventory
obsolescence and
valuation reserves    |  |          | 978,000   |      |  |          |          |                  |  |   | 978,000   |            |  |   |       | 
|Restructuring and
other charges                  |  |          | 1,998,000 |      |  |          | 1,155,000 |                  |  |   | 768,000   |            |  |   | 75,000 | 
|                                                 |  |          |           |      |  |          |           |                  |  |   |           |            |  |   |        | 
|Total                                            |  | $        | 6,091,000 |      |  | $        | 1,378,000 |                  |  | $ | 4,638,000 |            |  | $ | 75,000 | 
|                                                 |  |          |           |      |  |          |           |                  |  |   |           |            |  |   |        | 

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

F-25



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

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

11.     Fair Value of Financial Instruments

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

F-26



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##### 



Champion Industries, Inc. and Subsidiaries

Notes to Consolidated Financial
Statements (continued)

12. Quarterly Results of Operations (unaudited)

The following is a summary of the quarterly results of operations for the
years ended October 31, 2003 and 2002.

|                                    |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |            | 
|----------------------------------- | ---- |  | ------- | ---------- | ------- |  | ------- | ---------- | ------- |  | - | ---------- |  |  | - | ---------- | 
|                                    |      |  | First   |            | Second  |  | Third   |            | Fourth 
|                                    |      |  | Quarter |            | Quarter |  | Quarter |            | Quarter
|                                    |      |  |         |            |         |  |         |            |        
|Revenues                            |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  | $       | 28,619,000 |         |  | $       | 29,329,000 |         |  | $ | 30,599,000 |  |  | $ | 33,636,000 | 
|                                    | 2002 |  | $       | 29,791,000 |         |  | $       | 30,669,000 |         |  | $ | 30,848,000 |  |  | $ | 31,576,000 | 
|Gross Profit                        |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  | $       | 7,918,000  |         |  | $       | 8,492,000  |         |  | $ | 8,217,000  |  |  | $ | 9,751,000  | 
|                                    | 2002 |  | $       | 8,303,000  |         |  | $       | 9,034,000  |         |  | $ | 8,441,000  |  |  | $ | 8,855,000  | 
|Net income                          |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  | $       | 254,000    |         |  | $       | 517,000    |         |  | $ | 253,000    |  |  | $ | 744,000    | 
|                                    | 2002 |  | $       | 258,000    |         |  | $       | 751,000    |         |  | $ | 253,000    |  |  | $ | 946,000    | 
|Earnings per share                  |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|Basic                               |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  | $       | 0.03       |         |  | $       | 0.05       |         |  | $ | 0.03       |  |  | $ | 0.08       | 
|                                    | 2002 |  | $       | 0.03       |         |  | $       | 0.08       |         |  | $ | 0.03       |  |  | $ | 0.10       | 
|Diluted                             |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  | $       | 0.03       |         |  | $       | 0.05       |         |  | $ | 0.03       |  |  | $ | 0.08       | 
|                                    | 2002 |  | $       | 0.03       |         |  | $       | 0.08       |         |  | $ | 0.03       |  |  | $ | 0.10       | 
|Weighted Average
Shares
Outstanding |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|Basic                               |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  |         | 9,714,000  |         |  |         | 9,714,000  |         |  |   | 9,714,000  |  |  |   | 9,714,000  | 
|                                    | 2002 |  |         | 9,714,000  |         |  |         | 9,714,000  |         |  |   | 9,714,000  |  |  |   | 9,714,000  | 
|Diluted                             |      |  |         |            |         |  |         |            |         |  |   |            |  |  |   |           
|                                    | 2003 |  |         | 9,730,000  |         |  |         | 9,750,000  |         |  |   | 9,756,000  |  |  |   | 9,810,000  | 
|                                    | 2002 |  |         | 9,725,000  |         |  |         | 9,737,000  |         |  |   | 9,728,000  |  |  |   | 9,716,000  | 

F-27



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##### 



Champion Industries, Inc. and Subsidiaries

Schedule II

Valuation and Qualifying Accounts

Years Ended October 31, 2003, 2002 and 2001

|                                |  |            |           |             |  |              |        |                |  |           |           |         |  |   |            |   |  |   |           | 
|------------------------------- |  | ---------- | --------- | ----------- |  | ------------ | ------ | -------------- |  | --------- | --------- | ------- |  | - | ---------- | - |  | - | --------- | 
|                                |  |            |           |             |  |              |        |                |  | Additions |           |         |  |   |            |   |  |  
|                                |  | Balance at |           | Balances of |  | charged to   |        |                |  |           |           | Balance
|                                |  | Beginning  |           | acquired    |  | costs and    |        |                |  |           |           | at end 
|Description                     |  | of period  |           | Companies   |  | Expenses (2) |        | Deductions (1) |  | of period
|                                |  |            |           |             |  |              |        |                |  |          
|2003                            |  |            |           |             |  |              |        |                |  |           |           |         |  |   |            |   |  |   |           | 
|Allowance for doubtful accounts |  | $          | 1,397,491 |             |  | $            |       |                |  | $         | 336,291   |         |  | $ | (542,786   | ) |  | $ | 1,190,996 | 
|2002                            |  |            |           |             |  |              |        |                |  |           |           |         |  |   |            |   |  |   |           | 
|Allowance for doubtful accounts |  | $          | 1,432,304 |             |  | $            |       |                |  | $         | 363,328   |         |  | $ | (398,141   | ) |  | $ | 1,397,491 | 
|2001                            |  |            |           |             |  |              |        |                |  |           |           |         |  |   |            |   |  |   |           | 
|Allowance for doubtful accounts |  | $          | 1,508,536 |             |  | $            | 65,000 |                |  | $         | 1,214,784 |         |  | $ | (1,356,016 | ) |  | $ | 1,432,304 | 



|(1) |  | Uncollectable accounts written off, net of recoveries                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | In 2001, $509,042 was charged to expense relating to the Companys
restructuring and profitability enhancement plan.

F-28