$430,000 or four cents a share, compared with a year ago when they posted earnings of nearly $1.1 million.

Challenger is a Church Street, Hamilton, holding company that expects to soon complete its sale of sporting firearms company Savage Corporation, after last April acquiring hi-tech Dallas-based telecommunications firm, Intelect Inc.

The definitive agreement for the sale of Savage to its management for $33 million was expected to be signed by the end of the month, with a closing date scheduled for shortly thereafter. The buyers also assume $6 million in Savage-related debt.

Challenger reported net sales of $10.5 million for the third quarter to July 31, compared to almost $8.2 million in the same reporting period for 1994.

Operating income nearly halved from almost $1.6 million in the comparative period last year to $815,000 in this year's third quarter.

Nine month comparative figures from year to year show a rise in net sales $17.5 million to $24.6 million, with a slight dip in operating income from more than $3.1 million to just over $3 million.

The company remains in the black for the three quarter period at $681,000 (six cents per share) in net earnings, compared to 1994's first three quarter profit of $2,059,000 (19 cents per share).

The company said that the third quarter results reflect the interim phenomenon of changing the company's business, and that the results involve the combination of a robust performance by Savage over the nine month period, and the virtual start-up of Intelect following its acquisition. Prior year accounts include only Savage.

Intelect is an international provider of multi-media systems which deliver integrated voice, data and video solutions. In June Challenger described Intelect as a 30-year-old privately-held company that designs, manufactures and installs voice and data switching and fibre-optic digital communications systems for air traffic control, air defence and business communications. It had revenues of $15 million in 1994.

Savage accounted for the significant increase in net sales over the nine month period and Intelect's contribution since their April acquisition amounted to revenues of $1,048,000.

The decreased operating income was put down to about $546,000 of non-recurring transaction costs related to the acquisition of Intelect.