Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
Commission file number 0-15464
RADVA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0715892
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Drawer 2900 First Street Station
Radford, Virginia 24143
(540) 639-2458
------------------------------------------------------------
Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (par. 229.405 of this chapter) 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.
[ ]
Aggregate market value of voting stock held by non-affiliates of the registrant
as of May 1, 2001 (see ITEM 5 for explanation of calculation): $ 312,183
---------
Number of shares of common stock outstanding as of May 1, 2001: 3,987,987
1
2
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant's proxy
statement for its annual meeting of stockholders scheduled for June 28, 2001.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
RADVA Corporation (the "Company") was organized in 1962 as a Virginia
corporation to engage in the production of molded and fabricated products from
expandable polystyrene. Historically, the Company has specialized in the
production of customized expanded polystyrene packaging materials used to
protect products during shipment; however, the Company developed a composite
building panel produced from expanded polystyrene and steel which it sold under
the trademark THERMASTRUCTURE. In November, 1995, The Company sold 80% interest
in its subsidiary, Thermastructure Ltd., which manufactured the building panels
and had rights to market licensing rights to territories in the United States
not previously licensed. During 1997, the Company reacquired 70% of common stock
of Thermastructure, Ltd increasing ownership to 90% of common stock. The Company
acquired the additional stock by giving up certain assets making this entire
transaction a noncash transaction. The Company and minority interest of
Thermastructure, Ltd transferred all of the assets and liabilities into a new
company, Thermastructure XT Corp, while maintaining the same ownership
percentages (90% for Company and 10% for minority interest). Thermastructure XT
Corp is consolidated into Company's financial statements. During 1998, the
Company acquired an additional 5% ownership in its consolidated subsidiary,
Thermastructure XT Corporation. Also, during 1998, the Company and its
subsidiary, Thermastructure XT, sold 95% of their assets and interest in the
composite building panel system. These assets were then transferred to a newly
organized company, ThermaSteel Corporation, which continues to market the system
worldwide. The Company acquired the remaining 5% of Thermastructure XT
Corporation in 1999 and dissolved Thermastructure XT in accordance with terms of
the sale of the building panel system.
PRINCIPAL CLASSES OF PRODUCTS
The following table sets forth the approximate relative percentages of total net
revenues (after intersegment eliminations) generated by the principal classes of
products produced by the Company in each of its principal industry segments for
each of the past three fiscal years.
CLASS OF PRODUCT 2000 1999 1998
- ---------------- ----- ----- -----
PROTECTIVE PACKAGING AND
SIMILAR MATERIALS
Protective packaging 100.0% 100.0% 87.0%
THERMASTRUCTURE Building Panels
License fees & machinery sales 0.0% 0.0% 2.8%
Panel sales & related revenue 0.0% 0.0% 10.2%
----- ----- -----
100.0% 100.0% 100.0%
2
3
PROTECTIVE PACKAGING PRODUCTS
RADVA is an industry leader in the design and manufacture of shape molded and
fabricated foam products for material handling, protective packaging, specialty
designs, point of purchase displays, insulated shipping containers, and a
variety of other needs. RADVA products are used in businesses as varied as
consumer electronics, seafood, and furniture.
RADVA's shape molded product line includes a variety of flexible and rigid,
molded and fabricated items from foam resins. RADVA products are offered as
custom-fabricated solutions to customer needs, and as standard shapes and
containers. All products share the same high quality of manufacture.
More than 400 customers, including many Fortune 500 firms, count on RADVA
solutions to help them meet their own customer's needs in a quick,
cost-effective manner.
When RADVA was incorporated in 1962, its primary production material was
expanded polystyrene (EPS). EPS remains a significant base material because of
its low cost and relatively low environmental impact. However, RADVA products
also use a variety of other materials, depending upon the customer's need.
Common materials include ARCEL(R), GECET(R) R-MER(R), EPP and EPE, PE and PU and
thermoformed PVC and styrene.
RADVA is headquartered in Radford, Virginia, and has manufacturing facilities in
Radford and Portsmouth, Virginia. These locations are within a day's drive of 75
percent of the U.S. market. Each facility includes more than 75,000 square feet
of manufacturing and warehouse space with additional off-site warehousing. More
than 35 molding presses, including new, highly efficient Kurtz & Hirsch machines
enable RADVA to meet strict customer requirements quickly and with consistent
high quality. Complete prototype and drop testing capabilities, a tool and die
shop, and very strong supplier relationships enable the firm to develop
creative, cost-effective solutions for customers.
RADVA employs more than 110 people, and serves as one of the country's largest
three mid-Atlantic EPS recycling drop-off facilities.
RAW MATERIALS AND SUPPLIERS
The principal raw material used by the Company in the production of protective
packaging products is expandable polystyrene resin. This material may be
obtained from several major suppliers. In addition, the Company uses several
copolymer resins in the manufacture of engineered expanded foam protective
packaging. Although the copolymer resins currently used by the Company are only
available from one supplier, similar copolymer resins may be obtained from other
suppliers.
PATENTS AND TRADEMARKS
The Company holds a patent for a new construction material which the Company
plans to market in the future. The Company pursues a policy of filing for
patents on any product development that it considers to be significant.
3
4
SEASONALITY
The Company ordinarily experiences a reduction in the manufacture and sale of
protective packaging products during the winter months after filling holiday
season orders. The demand for building products is affected by the level of
activity in the construction industry and housing market and can be expected to
decrease during the fall and winter seasons when there has historically been a
decrease in construction activity and housing sales.
CUSTOMERS
The Company's protective packaging business has a broad base of customers;
however, one customer accounted for approximately 31.8% of protective packaging
revenues in 2000.
BACKLOG
The Company had approximately $1,236,318 in backlog orders for protective
packaging products as of December 31, 2000, compared to backlog orders of
approximately $1,201,807 as of December 31, 1999. Although the Company believes
that such backlog orders are firm, the purchase orders for protective packaging
products generally may be canceled without cause by the customer. The Company
expects to fill all of these orders during 2001.
COMPETITION
The protective packaging business is highly competitive, and some of the
Company's competitors are large and have greater financial and other resources
than the Company. The Company's competition in protective packaging products is
primarily from four local and regional manufacturers with plants within or close
to the Company's market area. The principal elements of competition in the sale
of protective packaging products are price and the ability to service customers.
The Company believes that its custom mold division and technical design facility
give it an advantage over competitors within its market area who do not have the
capacity to design and produce their own molds for their protective packaging
customers.
RESEARCH AND DEVELOPMENT
The Company maintains two laboratory and testing facilities within its
manufacturing plant in Radford, Virginia. The laboratory and testing facilities,
which consist of 2,000 square feet and 1,800 square feet, respectively, are used
for product testing, development of new products, and quality control
evaluations.
REGULATION
The Company is subject to state and federal laws and regulations affecting its
business, including those promulgated under the Occupational Safety and Health
Act ("OSHA") and by the Environmental Protection Agency. The Company's
manufacturing facilities are subject to compliance with comprehensive OSHA
standards. The Company believes that its manufacturing facilities and processes
are currently in compliance with OSHA and does not anticipate capital
expenditures for environmental control facilities or for compliance with OSHA
standards during 2001. The Company does not believe that its compliance with
federal and state environmental regulations has had or will have a material
effect on its capital expenditures, earnings, or competitive position.
4
5
EMPLOYEES
The Company employs approximately 110 persons. None of the Company's employees
is represented by a labor union, and the Company believes that its employee
relations are good.
EXECUTIVE OFFICERS
The following table identifies and sets forth certain information about the
executive officers of the Company
Name Age Position and Year of Election
---- --- -----------------------------
Luther I. Dickens 68 Chief Executive Officer (1998)
Stephen L. Dickens 43 President (1998)
James M. Hylton 67 Secretary and Treasurer (1969)
William F. Fry 61 Chief Financial Officer (1989)
Michael R. Samples 48 Vice President, Manufacturing (1999)
ITEM 2. PROPERTIES
REAL ESTATE
The real estate owned or leased by the Company and used in the Company's primary
business operations is described below.
(1) The Company owns approximately 10 acres of land in Radford, Virginia, and a
71,000 square foot building located on the Radford property. The building
includes approximately 5,000 square feet of office space and approximately
66,000 square feet of manufacturing space. The Radford property is subject
to deeds of trust which had outstanding balances as of December 31, 2000
aggregating approximately $2,588,000.
(2) The Company owns approximately 7 acres of land in Portsmouth, Virginia, and
a 74,000 square foot building located on the Portsmouth property. The
building includes approximately 2,000 square feet of office space and
approximately 42,000 square feet of manufacturing space. The Portsmouth
property is subject to the same deed of trust referred to in (1) above
which had an outstanding balance as of December 31, 2000 of approximately
$2,588,000.
(3) The Company rents approximately 6,000 square feet of office space in
Radford, Virginia, under a lease which requires monthly rental payments of
$3,700. The property is rented to the Company by a partnership in which Mr.
Dickens and Dr. Hylton have an interest.
5
6
PERSONAL PROPERTY AND EQUIPMENT
The personal property and equipment at the main Radford plant and the Portsmouth
plant consist principally of machinery and equipment used to produce expanded
polystyrene products. The personal property and equipment at the Custom Mold
Division in Radford consists of machine shop tools and pattern shop tools and
related aluminum foundry equipment.
The Company owns 3 trucks and 12 trailers and leases 2 tractors which it uses to
ship products to customers. The Company owns 1 van and 8 cars which it uses
principally for sales and sales service functions. The Company believes that its
present equipment is adequate, well maintained, and in good operating condition.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
6
7
PART II
STOCK INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET AND PRICE INFORMATION
The Company's common stock, par value $.01 per share (the "Common Stock"), has
been traded in the over-the-counter market since June 1986. The following table
provides the high and low bid quotations with respect to shares of the Common
Stock for the periods indicated as reported by the Dow Jones Historical Stock
Quote Reporter Service.
2000 1999 1998
---- ----- ----
High Low High Low High Low
---- --- ---- --- ---- ---
First
Quarter 17/32 3/8 1 3/4 1/2 7/16
Second
Quarter 15/32 1/4 1 3/16 3/4 1 1/2
Third
Quarter 7/16 3/16 15/16 1/2 1 5/8
Fourth
Quarter 5/8 3/16 3/4 3/8 1 3/8
The foregoing quotations of high and low bid prices represent prices between
dealers and do not include retail mark-up, mark-down, or commissions. They do
not necessarily represent actual transactions. There was no established public
trading market for the Common Stock before June 1986.
The aggregate market value of the voting stock held by non-affiliates of the
Company as of May 1, 2001 shown on the facing page of this report was calculated
as follows: the number of shares beneficially owned by the officers and
directors of the Company as a group as of May 1, 2001 was subtracted from
3,987,987, the total number of shares outstanding on that date, and the
resulting figure was multiplied by $.18, the average of the bid and asked prices
of the Company's stock in the over-the-counter market on May 1, 2001. The
foregoing calculation should not be deemed an admission that any of the officers
or directors of the Company is an "affiliate" of the Company.
NUMBER OF STOCKHOLDERS
As of May 1, 2001, there were 281 record holders of the Common Stock.
7
8
DIVIDENDS
The Company has not declared cash dividends on the Common Stock during its three
most recent fiscal years. The declaration and payment of dividends is entirely
within the discretion of the Board of Directors of the Company and will depend
upon the earnings, capital requirements, and financial condition of the Company.
The Company anticipates that it will retain earnings for the next several years
to finance the development of its business.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED STATEMENTS OF INCOME (LOSS) DATA:
Years Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollar amounts in thousands except per share data)
Net Revenues $ 10,077 $10,186 $13,173 $10,955 $9,720
Income (loss) before
income taxes (1,076) 276 1,517 209 --
Net income (loss) (1,076) 276 1,517 209 --
Net income (loss) per
common share (.27) .07 .37 .05 --
SELECTED BALANCE SHEET DATA:
Years Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollar amounts in thousands)
Working capital $ (800) $ 974 $ 1,051 $ (679) $1,871
Net property, plant,
and equipment 4,844 4,945 4,443 4,688 2,497
Total assets 11,486 11,963 11,890 11,192 7,774
Long-term debt (including
current maturities) 4,202 4,738 4,583 4,371 2,971
Stockholders' equity 4,076 5,177 4,886 3,388 3,180
8
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATION
The following table sets forth the percentage relationship that certain items in
the statements of operations bear to the net revenues of the Company for each
year during the five-year period ended December 31, 2000. Additional financial
information as to the Company's three industry segments is set forth in note 14
to the financial statements.
Year Ended December 31
---------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Manufacturing net revenues 100.0% 100.0% 90.1% 93.7% 97.1%
Licensing & related
machinery sales 0.0% 0.0% 9.9% 6.3% 2.9%
----- ----- ----- ----- -----
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Cost and expense:
Cost of sales 86.4% 74.8% 66.3% 74.1% 75.1%
Shipping and sales 9.2% 7.4% 6.8% 7.7% 8.2%
General and administrative 12.8% 12.6% 12.1% 12.7% 12.9%
Research and development 0.0% 0.0% 0.2% 0.9% 0.%
----- ----- ----- ----- -----
108.4% 94.8% 85.4% 95.4% 96.7%
----- ----- ----- ----- -----
Operating income (loss) (8.4)% 5.2% 14.6% 4.6% 3.3%
----- ----- ----- ----- -----
Other income (deductions)
Interest expense (5.2%) (4.5%) (3.6%) (3.9%) (3.3%)
Interest income 2.2% 1.7% 0.3% 0.3% 0.0%
Other .3% 0.1% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
(2.7%) (2.7%) (3.3%) (3.6%) (3.3%)
----- ----- ----- ----- -----
Income (loss) before income
taxes and minority interest
in subsidiary (10.7)% 2.7% 11.5% 1.6% 0.0%
Income tax expense 0.0% 0.0% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Income (loss) before minority
interest in net loss of
subsidiary (10.7)% 2.7% 11.5% 1.6% 0.0%
Minority interest in net
loss of subsidiary 0.0% 0.0% 0.0% 0.3% 0.0%
----- ----- ----- ----- -----
Net income (loss) (10.7)% 2.7% 11.5% 1.9% 0.0%
===== ===== ===== ===== =====
9
10
2000 COMPARED TO 1999
The Company incurred an operating loss in 2000 of $851,922 compared to operating
income of $528,924 in 1999. This reduction in operating income was a result of a
margin squeeze resulting from competitive pressures and rapidly rising
manufacturing costs.
The cost of expandable polystyrene (EPS) has cycles of ups and downs, but there
was an unusually fast rise in EPS cost during the first half of year 2000.
Interest and depreciation cost increased, partly as a result of our having
expanded capacity in 1999 to accommodate anticipated growth. Also, labor rates
increased due to a shortage of workers and the price of natural gas, which is
one of our major manufacturing cost, escalated rapidly.
Cost of sales and shipping and selling expenses increased, as a percentage of
manufacturing net revenues, by 11.6% and 1.8%, respectively. These increases
were primarily a result of the margin squeeze discussed above.
1999 COMPARED TO 1998
The Company's operating income decreased $1,394,000 from $1,922,000 in 1998 to
$528,000 in 1999. This decrease was the result of decreased manufacturing net
revenues of $1,683,000 and the inclusion in 1998 operating income of a sale of
the Company's THERMASTRUCTURE panel manufacturing and licensing rights,
including equipment, at a profit of approximately $807,000.
Revenues were lower in 1999 as compared to 1998 by $877,000 and $741,000 in the
Company's Radford and Portsmouth, Virginia plants, respectively. Also
contributing to the reduction of manufacturing revenues was the absence of
approximately $411,000 revenues from the Company's THERMASTRUCTURE operations
sold in 1998. These reductions were partly offset by increased revenues from the
Company's Corporate Sales Division of $723,000.
Cost of sales, as a percent of manufacturing net revenues, was 74.8% in 1999 as
compared to 73.6% in 1998. Among the many factors contributing to this 1.2%
increase in costs were rising material prices and a changing sales mix.
Shipping and selling expenses, as a percent of manufacturing net revenues held
fairly constant from the prior year, decreasing .1% from 7.5% in 1998 to 7.4% in
1999. General and administration expenses were down in 1999 as compared to 1998
by $308,405 or .8% of manufacturing net revenues. This reduction was primarily
the result of the sale the THERMASTRUCTURE operations in 1998 and reduced
management bonuses on reduced income.
A significant contribution to net income in 1999 was made by an increase in
interest income of $125,000. Interest income was accrued on non-interest bearing
notes received on the sale of the THERMASTRUCTURE operations which were
discounted in 1998 to their net present value.
1998 COMPARED TO 1997
The Company's operating income was $1,922,000 for 1998 compared to $508,000 for
1997. This $1,414,000 increase in operating income was primarily the result of
the Company's sale of its THERMASTRUCTURE panel manufacturing and licensing
rights, including equipment, at a profit of approximately $807,000 in May, 1998,
and increased profits in its shape molding operations before interest
allocations of approximately $950,000.
The Company retained a 5% ownership position in the company newly formed to hold
and operate the THERMASTRUCTURE assets, and has reported the $807,000 profit
from the sale as net licensing and machinery sales.
10
11
Manufacturing net revenues increased $1,602,000 for 1998 compared to 1997. This
increase was the result of strong sales growth in shape molding operations,
especially at the Company's plant in Portsmouth, Virginia, which accounted for
$1,662,000 of increased sales.
Cost of sales, as a percent of manufacturing net revenues, was 73.6% for 1998 as
compared to 79.1% for 1997. However, these percentages are effected greatly by
cost relationships in the THERMASTRUCTURE building product line sold in May,
1998. The cost of sale percentages within the remaining shape molding operations
for comparable period comparisons decreased from 75.7% in 1997 to 70.2% in 1998.
This reduction in cost percentages primarily resulted from manufacturing
efficiencies within the Company's shape molding operations. Labor rates in the
Radford and Portsmouth, Virginia plants were down 2.3% and 5.2%, respectively.
These increased manufacturing efficiencies were aided by the installation of new
and more modern equipment.
Shipping and selling expenses decreased .7% for 1998 as compared to 1997.
General and administrative expenses decreased as a percent of manufacturing net
revenues .1% for the same period comparisons. The largest factor contributing to
the decreased shipping and selling expense percentage of manufacturing net
revenues was a large increase in sales at the Portsmouth plant not subject to
shipping cost.
IMPACT OF INFLATION
The Company's standard purchase order form allows it to increase the price of
its protective packaging products on 30 days' notice and, therefore, to pass on
increases in the cost of raw materials. A significant increase in the rate of
inflation and a concomitant increase in interest rates could adversely affect
the Company since a large portion of the Company's indebtedness is linked to the
prime interest rate.
LIQUIDITY AND CAPITAL RESOURCES
A major refinancing of the Company was accomplished in 1998 under more favorable
terms. The new financing resulted in a $500,000 increase in the Company's
operating line to $1,500,000. At year-end, the balance available on this line of
credit was $188,883 however the Company had a negative net working capital of
$799,592. The Company was not in compliance with certain financial and reporting
requirements of the line of credit agreement as of December 31, 2000; however,
waivers from the bank were granted until June 1, 2001. The Company is pursuing
new sources of bank and equity financing.
YEAR 2000 ISSUE
Most of RADVA processes utilize the Windows 95 platform and can handle the
Century 2000 date format presently without problems. We have upgraded our
environment to Windows NT Server and Workstations. Our server for EDI is Century
2000 date format compliant and our Accounting Department, which currently uses a
UNIX based system became Century 2000 date compliant during 1999.
11
12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Reports.............................................. 13
Balance Sheets as of December 31, 2000 and 1999............................ 14-15
Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998....................................... 16
Statements of Stockholders' Equity for the Years
Ended December 31, 2000, 1999, and 1998................................. 17
Statements of Cash Flows for the Years
Ended December 31, 2000, 1999, and 1998................................. 18-19
Notes to Financial Statements as of December 31,
2000, 1999, and 1998.................................................... 20-31
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule V - Property, Plant and Equipment................................ 32
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant, and Equipment.......................... 33
Schedule VIII - Valuation and Qualifying Accounts.......................... 34
12
13
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
RADVA Corporation
We have audited the consolidated financial statements and the consolidated
financial statement schedules of RADVA Corporation and subsidiary as of and for
the years ended December 31, 2000 and 1999 as listed in the accompanying index.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RADVA Corporation
and subsidiary as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the 2000 and 1999 financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
The accompanying financial statements and the financial statement schedules have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 17 to the financial statements, the Company's significant
operating loss raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Galax, Virginia
February 6, 2001
13
14
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents (Notes 2 and 3) $ 11,048 $ 41,812
----------- -----------
Accounts and notes receivable (Notes 7 and 8) 2,076,326 2,644,977
Receivable - other (Notes 3 and 15) 233,896 222,512
Less allowance for doubtful accounts 83,574 125,932
----------- -----------
Net receivables 2,226,648 2,741,557
----------- -----------
Inventories (Notes 7 and 8):
Finished goods 614,335 544,035
Work-in-process 3,333 5,121
Raw materials and supplies 246,056 270,295
----------- -----------
Total inventories 863,724 819,451
----------- -----------
Prepaid expenses 100,177 48,111
Other current assets -- 40,784
----------- -----------
Total current assets 3,201,597 3,691,715
----------- -----------
Property, plant and equipment, at cost (Notes 5, 7 and 8) 9,724,483 9,166,099
Less accumulated depreciation and amortization 4,880,072 4,220,646
----------- -----------
Net property, plant and equipment 4,844,411 4,945,453
----------- -----------
Other assets, at cost, less accumulated amortization:
Investment in Thermasteel (Note 15) 261,925 261,925
Trademark, marketing and manufacturing rights 450,669 478,497
Note receivable - long-term 2,432,349 2,334,290
Other (Note 16) 295,296 251,151
----------- -----------
3,440,239 3,325,863
----------- -----------
$11,486,247 $11,963,031
=========== ===========
continued
14
15
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
2000 1999
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (Notes 3 and 8) $ 792,663 $ 669,950
Notes payable (Note 7) 1,311,117 878,204
Accounts payable 1,615,356 898,305
Accrued expenses (Note 6) 282,053 271,024
------------ ------------
Total current liabilities 4,001,189 2,717,483
------------ ------------
Long-term debt, excluding current installments
(Notes 3 and 8) 3,409,007 4,068,357
------------ ------------
Total liabilities 7,410,196 6,785,840
------------ ------------
Commitments, contingencies and other matters
(Notes 8, 12, 15, 16 and 17)
Stockholders' equity:
Common stock, par value $.01 per share; authorized
10,000,000 shares; issued 3,987,987 and 4,047,227
shares in 2000 and 1999 39,880 40,473
Additional paid-in capital 4,483,506 4,508,141
Retained earnings (deficit) (447,335) 628,577
------------ ------------
Total stockholders' equity 4,076,051 5,177,191
------------ ------------
$ 11,486,247 $ 11,963,031
============ ============
See notes to consolidated financial statements.
15
16
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
Net revenues:
Manufacturing net revenues $ 10,076,832 $ 10,185,809 $ 11,868,780
Licensing and related machinery sales (Note 15) -- -- 1,303,971
------------ ------------ ------------
10,076,832 10,185,809 13,172,751
------------ ------------ ------------
Costs and expenses:
Cost of sales 8,705,360 7,615,767 8,731,761
Shipping and selling expenses 930,941 749,242 894,938
General and administrative expenses 1,292,453 1,288,645 1,597,050
Research and development expenses -- 3,861 27,119
------------ ------------ ------------
10,928,754 9,657,515 11,250,868
------------ ------------ ------------
Operating income (851,922) 528,294 1,921,883
------------ ------------ ------------
Other income (expense):
Interest expense (529,135) (461,236) (484,211)
Interest income 226,175 169,341 44,105
Other 26,743 16,200 4,200
------------ ------------ ------------
(276,217) (275,695) (435,906)
------------ ------------ ------------
(1,128,139) 252,599 1,485,977
------------ ------------ ------------
Gain (loss) on sale of assets:
Equipment (2,000) 23,653 --
Real estate 54,227 -- 32,857
------------ ------------ ------------
52,227 23,653 32,857
------------ ------------ ------------
Minority interest in net (income) loss of subsidiary -- -- (1,927)
------------ ------------ ------------
Income before income taxes (1,075,912) 276,252 1,516,907
Provision for income taxes (Note 9) -- -- --
------------ ------------ ------------
Net income $ (1,075,912) $ 276,252 $ 1,516,907
============ ============ ============
Income per common share (Note 18):
Basic $ (.27) $ .07 $ .37
============ ============ ============
Diluted $ (.27) $ .07 $ N/A
============ ============ ============
Weighted average number of shares outstanding:
Basic 4,005,360 4,059,352 4,091,560
Diluted 4,005,360 4,059,352 N/A
See notes to consolidated financial statements.
16
17
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ADDITIONAL RETAINED TOTAL
COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) EQUITY
------- ---------- ----------- -----------
Balance at December 31, 1997 $41,047 $4,511,939 $(1,164,582) $ 3,388,404
Treasury stock (190) (18,810) -- (19,000)
Net income -- -- 1,516,907 1,516,907
------- ---------- ----------- -----------
Balance at December 31, 1998 40,857 4,493,129 352,325 4,886,311
Treasury stock (384) (36,492) -- (36,876)
Purchase of subsidiary -- 51,504 -- 51,504
Net income -- -- 276,252 276,252
------- ---------- ----------- -----------
Balance at December 31, 1999 40,473 4,508,141 628,577 5,177,191
Treasury stock (593) (24,635) -- (25,228)
Net income -- -- (1,075,912) (1,075,912)
------- ---------- ----------- -----------
Balance at December 31, 2000 $39,880 $4,483,506 $ (447,335) $ 4,076,051
======= ========== =========== ===========
See notes to consolidated financial statements.
17
18
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------- ----------- -----------
Cash flows from operating activities:
Net income $(1,075,912) $ 276,252 $ 1,516,907
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 670,003 596,566 480,341
Amortization 46,875 41,721 137,904
Allowance for doubtful accounts (42,358) 12,792 6,717
(Gain) loss on sale of assets (52,227) (23,653) (32,857)
(Gain) loss on sale of assets included in
operating revenues -- -- (806,796)
Minority interest in net income (loss) of
consolidated subsidiaries -- -- 1,927
Changes in assets and liabilities:
Decrease (increase) in accounts and notes receivable 568,651 (295,091) (923,779)
Decrease (increase) in receivable - other (11,384) 259,377 (152,469)
Decrease (increase) in inventories (44,273) 113,269 352,189
Decrease (increase) in prepaid expenses (52,066) (12,979) 70,975
Decrease (increase) in other current assets 40,784 (1,646) (8,900)
Decrease (increase) in note receivable - noncurrent (98,059) 147,674 (2,160,051)
Increase in investment in Thermasteel Corp. -- -- (261,925)
Decrease in Radoslav Joint Venture -- -- 336,103
Decrease (increase) in trademark -- -- 847,803
Decrease (increase) in other assets (63,192) (40,043) 1,255,737
Increase in cash overdraft 105,913 -- --
Increase (decrease) in accounts payable 717,051 (166,092) (1,086,791)
Increase (decrease) in accrued expenses 11,029 (137,157) (171,672)
Net effect of sale of assets to Thermasteel Corp. -- -- 379,487
----------- ----------- -----------
Net cash provided by (used in) operating activities 720,835 770,990 (219,150)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 69,776 23,653 1,835,000
Company manufactured equipment and buildings -- -- (15,995)
Capital expenditures on equipment (586,510) (1,099,022) (1,910,112)
Purchase minority interest in subsidiary -- (42,813) --
----------- ----------- -----------
Net cash used in investing activities (516,734) (1,118,182) (91,107)
----------- ----------- -----------
continued
18
19
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
2000 1999 1998
--------- --------- -----------
Cash flows from financing activities:
Net proceeds (payments) on notes payable 327,000 24,000 285,092
Proceeds from issuance of long-term debt 170,990 806,904 4,684,284
Principal payments under long-term debt (707,627) (651,404) (4,472,702)
Purchase of Treasury stock (25,228) (36,876) (19,000)
--------- --------- -----------
Net cash provided by financing activities (234,865) 142,624 477,674
--------- --------- -----------
Net increase (decrease) in cash $ (30,764) $(204,568) $ 167,417
Cash and cash equivalents at beginning of year 41,812 246,380 78,963
--------- --------- -----------
Cash and cash equivalents at end of year $ 11,048 $ 41,812 $ 246,380
========= ========= ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 525,600 $ 465,086 $ 505,215
========= ========= ===========
Cash paid during the year for income taxes $ 8,370 $ 4,407 $ --
========= ========= ===========
Supplemental disclosure of noncash investing activities:
During 1998 Radva transferred certain assets and liabilities for $6,200,000
(discounted to $4,976,585) which has been treated as disposal of a portion of a
line of business in which gain has been included in income from operations since
sale did not constitute a sale of a segment of business. This resulted in
transfer of the following assets and liabilities:
Assets and liabilities transferred:
Property, plant and equipment $1,525,483
Accounts receivable 516,460
Prepaid expenses 66,111
Inventory 151,519
Notes receivable 603,158
Licenses and trademarks 1,226,104
Patents 23,770
Manufacturing and marketing rights 635,744
Investments 406,199
Liabilities assumed (50,587)
Debt assumed (672,247)
Investment retained (5%) (261,925)
----------
$4,169,789
See notes to consolidated financial statements.
19
20
RADVA CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
RADVA Corporation and subsidiary (the Company) produce and sell molded and
fabricated expanded polystyrene foam products such as packaging materials and
containers. The Company operates facilities in Radford and Portsmouth, Virginia.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiary, Thermastructure XT Corp. All significant inter-company accounts
and transactions have been eliminated in consolidation (see Note 21).
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of demand deposits. For purposes of
the statements of cash flows, the Company considers all highly liquid
investments with an original maturity of less than three months to be cash
equivalents. The Company includes cash meeting this criteria whose use is
limited by restrictions contained in loan covenants.
Accounts Receivable
Accounts receivable are stated at cost less allowance for doubtful accounts. The
allowance for doubtful accounts is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated.
Inventories
Inventories are stated at the lower of cost or market. Cost of raw materials,
supplies, work-in process and finished goods is determined by the first-in,
first-out method.
Investment in Radoslav Joint Venture
During 1998 Radva sold this investment (see Note 15). Prior to sale the Company
accounted for its investment in Radoslav, a 31% owned affiliate, by the equity
method of accounting under which the Company's proportionate results of the
affiliate's operations are recognized in the Company's statement of operations
and added to or taken from the investment account. Distributions received from
the affiliate are treated as a reduction of the investment account.
Investment in Thermasteel Corp.
As part of a transferring certain assets and liabilities to Thermasteel Corp.,
Radva retained a 5% ownership interest. Company accounts for this investment on
the cost basis.
20
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other assets
Included in other assets are patents, loan costs and marketing and manufacturing
rights, which are amortized over their respective estimated lives, and trademark
rights, which are amortized over 12 years. Accumulated amortization was
$1,382,636 and $1,335,761 as of December 31, 2000 and 1999, respectively.
Property, Plant and Equipment
Depreciation of plant and equipment is provided on the straight-line basis over
the estimated useful lives of the respective assets as follows:
Buildings and improvements 5 to 30 years
Machinery and equipment 5 to 15 years
Automotive equipment 3 to 5 years
Office equipment 3 to 10 years
Leasehold improvements are amortized on a straight-line basis over the terms of
the respective leases.
Additions to property, plant and equipment are recorded at cost. All
expenditures for repairs, renewals and replacements which do not materially
extend the useful life of the property are charged to expense. Other
improvements and betterments are capitalized. With respect to dispositions, the
asset and accumulated depreciation accounts are relieved of cost and accumulated
depreciation with any resulting gain or loss credited or charged to earnings.
Revenue Recognition
Net revenues represent sales of fabricated foam products, machines and fees from
licensing agreements. Revenues from sales and the licensing agreements are
recognized upon completion of the transaction.
Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Investment tax credits are accounted for by the flow-through method whereby they
reduce income taxes currently payable and the provision for income taxes in the
period the assets giving rise to such credits are placed in service. To the
extent such credits are not currently utilized on the Company's tax return,
deferred tax assets, subject to considerations about the need for a valuation
allowance, are recognized for the carryforward amount.
21
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure about the fair value of
certain instruments. Cash, receivables, accounts payable and accrued liabilities
are reflected in the financial instruments at fair value because of the
short-term maturity of these instruments. The estimated fair values of the
company's financial instruments are disclosed in Note 3.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could vary from the estimates that were used.
Reclassification
Certain reclassifications have been made to prior years' financial statements to
place them on a comparable basis with the current year.
NOTE 2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
2000 1999 1998
------- ------- --------
Petty cash and non-interest bearing accounts $11,048 $41,812 $246,380
======= ======= ========
NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and cash equivalents:
The carrying amount approximates fair value because of the short maturity of
those instruments.
Receivable - other:
The carrying amount is a reasonable estimate of fair value since entire amount
is due within one year.
22
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Long-term debt:
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities with similar collateral
requirements.
The estimated fair values of the Company's financial instruments as of
December 31, 2000 are as follows:
2000
----------------------------
Carrying Amount Fair Value
--------------- ----------
Cash and cash equivalents $ 11,048 $ 11,048
Receivable - other 233,896 233,896
Long-term debt 4,201,670 4,213,013
NOTE 4. RECEIVABLES
Information about impaired receivables as of and for the years
ended December 31, 2000 and 1999 is as follows:
2000 1999
---------- ----------
Receivables for which there is a related
allowance for bad debts $ 48,000 $ 48,000
Receivables for which there is no related
allowance for bad debts -- --
---------- ----------
Total impaired receivables $ 48,000 $ 48,000
========== ==========
Related allowance for possible bad debts $ 24,000 $ 12,000
========== ==========
Average balance (based on beginning and
ending of year) $ 48,000 $ 48,000
========== ==========
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
2000 1999
Land and improvements $ 171,846 $ 184,395
Buildings and improvements 3,120,520 3,111,953
Machinery and equipment 5,758,819 5,213,965
Transportation equipment 372,129 365,960
Office equipment 301,169 289,826
---------- ----------
$9,724,483 $9,166,099
========== ==========
23
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ACCRUED EXPENSES
Accrued expenses are composed of the following:
2000 1999
---------- ----------
Payroll and employee benefits $ 203,723 $ 203,587
Interest 4,851 1,316
Customer deposits 794 794
Insurance -- 36,482
Other 72,685 28,845
---------- ----------
$ 282,053 $ 271,024
========== ==========
NOTE 7. NOTES PAYABLE
A summary of notes payable follows:
2000 1999
---------- ----------
Line of credit with commercial bank, $1,500,000
limit, interest at prime (9.5% at December 31, 2000) $1,311,117 $ 878,204
========== ==========
The Company was not in compliance with certain financial and reporting
requirements of the line of credit agreement as of December 31, 2000; however,
waivers from the bank were granted until June 1, 2001
NOTE 8. LONG-TERM DEBT
A summary of long-term debt follows:
2000 1999
---------- ----------
Installment note payable due in monthly installments of $329,
including interest, with various at 3.9%; collateralized by equipment $ 1,953 $ 5,746
Installment notes payable with financing company, due in monthly installments
of $16,404, including interest at 7.295%; collateralized
by equipment 258,918 352,844
Installment note payable, due in monthly installments of $500, including
interest at 10.625%; collateralized by a deed of trust on
certain real estate 20,029 23,687
Installment note payable, due in monthly installments of $428,
including interest at 8.5%; collateralized by equipment 846 5,682
Installment note payable to bank, due in monthly installments of $11,905,
including interest at prime (9.5% at December 31, 1999);
collateralized by equipment.(*) 606,642 749,502
24
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. LONG-TERM DEBT (CONTINUED)
2000 1999
---------- ----------
Installment note payable to bank, due in monthly installments of $27,533,
including interest at prime (9.5% at December 31, 1999);
collateralized by real estate.(*) 2,588,133 2,918,533
Installment note payable to bank, due in monthly installments of $4,762,
including interest at prime (9.5% at December 31, 1999);
collateralized by equipment.(*) 220,535 282,313
Installment note payable to bank, due in monthly installments of $5,556,
including interest at prime (9.5% at December 31, 1999);
collateralized by equipment.(*) 366,667 400,000
Installment note payable, due in monthly installments of $23,100,
including interest at 19.5%; collateralized by equipment 117,683 --
Installment note payable to bank, due in monthly installments of
$527, including interest at 9.5%; collateralized by equipment 20,264 --
---------- ----------
Total long-term debt 4,201,670 4,738,307
Less current installments of long-term debt 792,663 669,950
---------- ----------
Long-term debt, excluding current installments $3,409,007 $4,068,357
========== ==========
Substantially all real property, equipment, accounts receivable and inventory
are pledged as collateral on various debt instruments.
The Company was not in compliance with certain financial and reporting
requirements of certain notes payable to bank, indicated above by (*), as of
December 31, 2000; however, waivers from the bank were granted until June 1,
2001.
The aggregate principal maturities of long-term debt during each of the five
years subsequent to December 31, 2000 follows:
Years Ended December 31,
2001 $ 792,663
2002 769,498
2003 636,989
2004 600,386
2005 432,673
Thereafter 969,461
----------
$4,201,670
25
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. INCOME TAX MATTERS
Net deferred tax assets and liabilities consist of the following components as
of December 31, 2000 and 1999:
2000 1999
-------- --------
Deferred tax assets:
Bad debt allowance $ 31,758 $ 47,854
Accrued expenses 27,495 25,505
Bonuses 2,193 5,798
Inventory allowance 15,258 15,241
Contributions carryover 8,175 --
Loss carryforward 884,286 330,179
Investment tax credit carryforward -- 48,084
Minimum tax credit carryforward 24,285 20,073
-------- --------
993,450 492,734
Less valuation allowance 688,433 198,785
-------- --------
$305,017 $293,949
======== ========
Deferred tax liabilities:
Property and equipment $305,017 $293,949
======== ========
$ -- $ --
======== ========
As noted, the deferred tax assets equal the deferred tax liabilities resulting
in no effect on the income statement or stockholders' equity for the year.
The income tax provision differs from the amount of income tax determined by
applying the U.S. Federal income tax rate to pretax income for the years ended
December 31, 2000, 1999 and 1998 due to the following:
2000 1999 1998
--------- --------- ---------
Computed "expected" tax benefit $ -- $ 90,988 $ 515,748
Non-deductible expenses 150 18,090 21,562
State income taxes, net of federal income tax benefit -- 13,047 52,250
Benefit of operating loss carryforward (150) (122,125) (500,863)
Other -- -- (88,697)
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
NOTE 10. RETIREMENT PLANS
The Company has a profit sharing plan (the Plan) which covers all full-time
officers and employees who have at least one year of service and attained the
age of 21. Contributions to its profit sharing plan are at Company's discretion.
The Plan is a qualified plan under applicable sections of the Internal Revenue
Code. Profit sharing expense for the period ended December 31, 2000, 1999 and
1998 was $ -0-.
The Company adopted a 401K retirement plan during 1998 which covers all
full-time officers and employees who have at least one year of service and
attained the age of 21. Contributions to the plan are made at a rate of 25% of
each employee's contribution up to a maximum of 4% of each employee's earnings
for the year. The plan is a qualified plan under applicable sections of the
Internal Revenue Code. Company contributions for the year ended December 31,
2000 and 1999 was $15,782 and $18,618, respectively.
26
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. RELATED PARTY TRANSACTIONS
The Company has a month-to-month lease on certain operating and warehouse space
with Jalu, a partnership in which the Company's Chief Executive Officer is a
partner. The space is currently rented for $1,000 per month. The Company also
rents on a month-to-month basis certain office space from Chuckatuck, a
partnership in which the Company's Chief Executive Officer is a partner. The
present rental payment is $3,700 per month.
NOTE 12. OPERATING LEASES
The Company leases certain of its manufacturing and office facilities and
equipment. Rental expense for the years ended December 31, 2000, 1999 and 1998
was $155,698, $160,130, and $180,771, respectively. All leases have expired;
however, the Company continues to lease these facilities under the previous
lease schedules for $4,685 per month.
NOTE 13. MAJOR CUSTOMER AND SUPPLIER
The percentage of net revenue attributable to the Company's major customers
(exceeding 10% of total revenues) is 31.8% for 2000, 33.3% for 1999, and 13.0%
for 1998.
The percentage of cost of sales attributable to the Company's major suppliers
(exceeding 10% of total cost of sales) is 31.1% for 2000 and 38.1% for 1999.
27
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. INDUSTRY SEGMENTS
The Company considers its operations to include principally three industry
segments; (1) manufacture of protective packaging and similar materials, (2)
manufacture of THERMASTRUCTURE building products, and (3) licensing and related
machinery sales. Summary data for 2000, 1999, and 1998 is as follows:
2000 1999 1998
----------- ----------- -----------
Net revenues:
Protective packaging and similar material $10,076,832 $10,185,809 $11,458,112
THERMASTRUCTURE products and similar materials -- -- 1,340,631
Licensing and related machinery sales -- -- 374,008
----------- ----------- -----------
Revenue $10,076,832 $10,185,809 $13,172,751
=========== =========== ===========
Operating income (loss):
Protective packaging and similar materials $ 1,371,472 $ 2,618,517 $ 3,799,524
THERMASTRUCTURE products and similar materials -- (48,475) 576,879
Licensing and related machinery sales -- -- 64,587
----------- ----------- -----------
Segment operating income 1,371,472 2,570,042 4,440,990
General corporate expense 2,223,394 2,041,748 2,519,107
----------- ----------- -----------
Operating profit (loss) $ (851,922) $ 528,294 $ 1,921,883
=========== =========== ===========
Capital expenditures:
Protective packaging and similar materials $ 575,167 $ 1,071,927 $ 1,815,983
THERMASTRUCTURE products - U.S. operations -- 63,697
General corporate 11,343 27,095 46,427
----------- ----------- -----------
Capital expenditures $ 586,510 $ 1,099,022 $ 1,926,107
=========== =========== ===========
Depreciation and amortization:
Protective packaging and similar materials $ 639,776 $ 566,695 $ 547,091
THERMASTRUCTURE products 40,850 35,696 45,217
General corporate 36,252 35,896 25,937
----------- ----------- -----------
Depreciation and amortization $ 716,878 $ 638,287 $ 618,245
=========== =========== ===========
Identifiable assets at December 31:
Protective packaging and similar materials $ 5,736,271 $ 5,815,823 $ 5,361,044
THERMASTRUCTURE products 3,979,341 3,827,588 1,577,933
Licensing and related machinery sales 63,715 63,715 63,515
General corporate 1,706,920 2,255,905 4,887,724
----------- ----------- -----------
Assets $11,486,247 $11,963,031 $11,890,216
=========== =========== ===========
28
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. OTHER MATTERS
During 1998, the Company transferred certain assets and liabilities to
Thermasteel Corp. for $6,200,000 (discounted to $4,976,585). Company retained a
5% ownership interest in Thermasteel Corp. Company received $1,250,000 down with
balance to be received in installments. Gain on this transaction ($806,796) has
been included in income from operation for current year. The discounted portion
($1,223,415) of the receivable will be recognized as interest income as future
collections are received. Gain is recognized as income from operations since
transfer is deemed a disposal of a portion of a line of business rather than a
sale of a segment of business.
During 1998, the Company transferred its 100% owned subsidiary, RADVA RU, Inc.
as part of sale to Thermasteel Corp. Restatement of prior periods as a result of
this transfer resulted in no change to prior periods since RADVA RU, Inc. had no
assets, liabilities or activity during the periods presented.
NOTE 16. OTHER ASSETS - OTHER
Other assets - other consist of the following:
2000 1999 1998
-------- -------- --------
Deposits $ 15,600 $ 15,600 $ 15,600
Loan costs 45,371 51,395 57,420
Patent costs 42,343 42,343 42,343
Investment in Pereslav 55,000 55,000 55,000
Material rights 136,835 86,666 54,638
Other 147 147 --
-------- -------- --------
$295,296 $251,151 $225,001
======== ======== ========
NOTE 17. CONTINGENCIES
Debt assumption:
On April 1, 1997 Company reacquired certain real estate of Thermastructure, Ltd.
by assuming obligations owed to the Industrial Development Authority (IDA)
amounting to $775,818.
As of December 31, 2000 Company remains primarily liable on debt assumed as part
of transfer of certain real estate. Outstanding balance on this debt amounted to
$582,083 as of December 31, 2000.
Going concern:
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
As shown in the accompanying financial statements the Company had a significant
loss for the year amounting to $1,075,912. At December 31, 2000 the Company had
an accumulated deficit of $447,335. The company has a negative net working
capital of $799,592. These conditions create an uncertainty as to the Company's
ability to continue as a going concern. Management has taken certain steps to
increase revenue and reduce operating expenses to help restore profitability.
The ability of the Company to continue as a going concern is dependent upon the
success of these actions. The financial statements do not include any
adjustments relating to the recoverability of recorded asset amounts or the
amounts of liabilities that might be necessary should the Company be unable to
continue as a going concern.
29
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. CONTINGENCIES (CONTINUED)
Legal matters:
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Company's
consolidated financial statements.
NOTE 18. NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income by the sum
of the weighted-average number of common shares outstanding for the period and
the number of equivalent shares assumed outstanding under the Company's stock
option plans.
Options held to purchase 400,000 common shares at $.81 were not dilutive and
were outstanding at December 31, 2000 and 1999. These shares are not included in
the diluted earnings per share calculation because the options' exercise price
was greater than the average market price of the common shares. Diluted earnings
per share was calculated as follows:
2000 1999
----------- -----------
Net income to common stockholders $(1,075,912) $ 272,252
=========== ===========
Weighted average common shares outstanding 4,005,360 4,059,352
Share equivalents, due to stock options -- --
----------- -----------
4,005,360 4,059,352
=========== ===========
Net income per share-diluted $ (.27) $ .07
=========== ===========
NOTE 19. STOCK OPTION PLANS
During the year Company approved two Stock Option Plans, the 1998 Stock Option
Plan and the 1998 Non-employee Directors Stock Option Plan. Both Plans contained
retroactive effective dates of July 8, 1998 and September 28, 1998,
respectively.
The Company's 1998 Stock Option Plan (the Plan) authorizes the granting of stock
options, up to a total of 375,000 shares of common stock, to any employee of the
Company. Under the Plan, the exercise price of each option equals fair market
value of the Company's stock on the grant date, and an option's maximum term is
ten years. If the employee is a 10% shareholder the exercise price of each
option shall not be less than 110% of the fair market value on the grant date,
and an option's maximum term is five years.
The Company's 1998 Non-employee Directors Stock Option Plan (the Plan)
authorizes the granting of stock options, up to a total of 125,000 shares of
common stock, to the directors of the Company who are not otherwise employees of
the Company or any Subsidiary and were not employees for a period of at least
one year before the date of grant of an option under the Plan. Under the Plan,
the exercise price of each option equals fair market value of the Company's
stock on grant date, and an option's maximum term is ten years.
30
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. STOCK OPTION PLANS (CONTINUED)
A summary of the status of the Company's Stock Option Plans as of December 31,
2000, and the changes during the year is presented below:
FIXED OPTIONS SHARES WEIGHTED-AVERAGE EXERCISE PRICE
------------- ------ -------------------------------
January 1, 2000 400,000 $.81
Granted -- --
Exercised -- --
Forfeited -- --
-------
December 31, 2000 400,000 $.81
=======
Exercisable at December 31, 2000 400,000 $.81
Options available for grant at December 31, 2000 100,000 $.81
The range of option prices for options outstanding as of December 31, 2000, was
$.81 with a weighted average remaining contractual life of approximately 8
years.
If the Company had used the fair value based method of accounting for its
Employee Stock Option Plan, as prescribed by Statements of Financial Accounting
Standards No. 123, compensation cost in net income for the year ended December
31, 2000 would have increased by $324,000, resulting in net loss of
$(1,399,912), net of tax. The basic and diluted earnings per share would have
been $(.32).
The fair value of each option grant of $.81 is estimated on the date of grant
using the exercise price since fair value could not be reasonably estimated at
grant date.
NOTE 20. STOCK REPURCHASE PLAN
Board of Directors has authorized the Company to repurchase up to 200,000 shares
of the Company's common stock. The Company purchased 59,240 shares for
approximately $25,000, increasing the total number of shares purchased pursuant
to the Stock Repurchase Plan to 116,740 shares.
NOTE 21. LIQUIDATION OF SUBSIDIARY
During 1999, RADVA Corporation (the Company) acquired the minority interest of
Thermastructure XT Corp. This made Thermastructure XT Corp. a wholly owned
subsidiary of the Company. At December 22, 1999 the Company elected to liquidate
subsidiary and combine the assets and liabilities with the Company's assets and
liabilities. Generally this type of transaction would be accounted for using the
purchase method of accounting, however, with transfers between entities under
common control, a parent company may transfer net assets of a wholly owned
subsidiary to itself and liquidate subsidiary. This type of transfer is
accounted for at historical cost in a manner similar to a pooling of interest.
As a result of this transfer the Company recorded an increase in paid-in capital
of $51,504.
31
32
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
OTHER
BALANCE CHANGES
AT ADD BALANCE
BEGINNING ADDITIONS (DEDUCT) AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS (A) (B) OF YEAR
-------------- ---------- ---------- ----------- -------- ----------
Year ended December 31, 1998:
Land and improvements $ 312,737 $ -- $ 130,229 $ -- $ 182,508
Buildings and improvements 2,830,910 925,148 704,823 -- 3,051,235
Machinery and equipment 4,411,300 859,230 974,047 15,995 4,312,478
Transportation equipment 278,793 79,100 18,978 -- 338,915
Office equipment 249,778 46,634 47,288 -- 249,124
---------- ---------- ---------- ------- ----------
$8,083,518 $1,910,112 $1,875,365 $15,995 $8,134,260
========== ========== ========== ======= ==========
Year ended December 31, 1999:
Land and improvements $ 182,508 $ 1,887 $ -- $ -- $ 184,395
Buildings and improvements 3,051,235 60,718 -- -- 3,111,953
Machinery and equipment 4,312,478 936,125 34,638 -- 5,213,965
Transportation equipment 338,915 59,590 32,545 -- 365,960
Office equipment 249,124 40,702 -- -- 289,826
---------- ---------- ---------- ------- ----------
$8,134,260 $1,099,022 $ 67,183 $ -- $9,166,099
========== ========== ========== ======= ==========
Year ended December 31, 2000:
Land and improvements $ 184,395 $ -- $ 12,549 $ -- $ 171,846
Buildings and improvements 3,111,953 8,567 -- -- 3,120,520
Machinery and equipment 5,213,965 544,854 -- -- 5,758,819
Transportation equipment 365,960 21,746 15,577 -- 372,129
Office equipment 289,826 11,343 -- -- 301,169
---------- ---------- ---------- ------- ----------
$9,166,099 $ 586,510 $ 28,126 $ -- $9,724,483
========== ========== ========== ======= ==========
(A) During 1999, 1998 and 1997, the Company placed in service certain
property which has previously been classified as inventory.
(B) During 1997 the Company acquired ninety (90) percent of
Thermastructure XT Corp. in a noncash transaction.
32
33
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ADDITIONS OTHER
BALANCE CHARGED CHANGES
AT TO COST ADD BALANCE
BEGINNING AND (DEDUCT) AT END
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS (A) OF YEAR
-------------- ---------- --------- ----------- -------- ----------
Year ended December 31, 1998:
Land and improvements $ 24,331 $ -- $ -- $ -- $ 24,331
Buildings and improvements 1,176,341 102,350 27,040 -- 1,251,651
Machinery and equipment 1,889,845 298,193 117,479 -- 2,070,559
Transportation equipment 151,208 51,813 25,113 -- 177,908
Office equipment 153,920 27,985 15,090 -- 166,815
---------- -------- -------- ----- ----------
$3,395,645 $480,341 $184,722 $ -- $3,691,264
========== ======== ======== ===== ==========
Year ended December 31, 1999:
Land and improvements $ 24,331 $ -- $ -- $ -- $ 24,331
Buildings and improvements 1,251,651 111,773 -- -- 1,363,424
Machinery and equipment 2,070,559 384,043 34,638 -- 2,419,964
Transportation equipment 177,908 70,880 32,545 (1) 216,242
Office equipment 166,815 29,870 -- -- 196,685
---------- -------- -------- ----- ----------
$3,691,264 $596,566 $ 67,183 $ (1) $4,220,646
========== ======== ======== ===== ==========
Year ended December 31, 2000:
Land and improvements $ 24,331 $ -- $ -- $ -- $ 24,331
Buildings and improvements 1,363,424 112,596 -- -- 1,476,020
Machinery and equipment 2,419,964 452,095 -- -- 2,872,059
Transportation equipment 216,242 71,282 10,577 -- 276,947
Office equipment 196,685 34,030 -- -- 230,715
---------- -------- -------- ----- ----------
$4,220,646 $670,003 $ 10,577 $ -- $4,880,072
========== ======== ======== ===== ==========
(A) During 2000, 1999 and 1998, the Company placed in service certain
property, which has previously been classified as inventory.
33
34
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ADDITIONS
--------------------
BALANCE CHARGED CHARGED
AT TO TO BALANCE
BEGINNING COST AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS (A) OF YEAR
----------- --------- -------- -------- -------------- --------
Year ended December 31, 1998:
Allowance for doubtful
accounts $106,423 $ 6,717 $ -- $ -- $113,140
======== ======= ====== ======== ========
Year ended December 31, 1999:
Allowance for doubtful
accounts $113,140 $17,957 $ -- $ 5,165 $125,932
======== ======= ====== ======== ========
Year ended December 31, 2000:
Allowance for doubtful
accounts $125,932 $59,982 $ -- $102,340 $ 83,574
======== ======= ====== ======== ========
(A) Represents uncollectible amounts written off, net of recoveries.
34
35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to the Company's directors is incorporated by reference to
material contained under the heading "Election of Directors" in the Company's
proxy statement for its annual meeting of stockholders scheduled for June 28,
2001.
Information as to the Company's executive officers is set forth under the
heading "Executive Officers" in ITEM 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information as to executive compensation is incorporated by reference to
material contained under the headings "Cash Compensation" and "Compensation
Plans" in the Company's proxy statement for its annual meeting of stockholders
scheduled for June 28, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as to the security ownership of certain beneficial owners and
management is incorporated by reference to material contained under the heading
"Principal Stockholders" in the Company's proxy statement for its annual meeting
of stockholders scheduled for June 28, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to certain relationships and related transactions is incorporated
by reference to material contained under the heading "Certain Relationships and
Related Transactions" in the Company's proxy statement for its annual meeting of
stockholders scheduled for June 28, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements (Included in PART II)
See ITEM 8 in PART II
(a) (2) Financial Statement Schedules (Included in PART II)
See ITEM 8 in PART II
35
36
(a) (3) Exhibits
The exhibits filed with this report and the documents incorporated by reference
as exhibits to this report are described below.
(3)(a) Articles of Incorporation of the Company (Incorporated
by reference to Exhibit B to Registration Statement No. 0-15464 filed with the
Securities and Exchange Commission on March 9, 1987).
(3)(b) Bylaws of the Company (Incorporated by reference to
Exhibit C to Registration Statement No. 0-15464 filed with the Securities and
Exchange Commission on March 9, 1987).
(4)(a) Bond Purchase Agreement dated as of October 1, 1981
among the Industrial Development Authority of the City of Portsmouth, First &
Merchants National Bank, and the Company; Agreement of Sale dated as of October
1, 1981 between the Industrial Development Authority of the City of Portsmouth
and the Company; Assignment Agreement dated as of October 1, 1981 between the
Industrial Development Authority of the City of Portsmouth and First & Merchants
National Bank; $550,000 promissory note of the Company; Deed of Trust dated as
of October 1, 1981 between the Industrial Development Authority of the City of
Portsmouth and Joseph S. Lovering, Jr. and William H. West, as trustees
(Incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-5319
filed with the Securities and Exchange Commission on June 25, 1986).
(4)(b) Letter of Commitment dated October 9, 1984 between the
Company and Sovran Bank, N.A.; $1,000,000 promissory note of the Company; Deed
of Trust dated as of October 10, 1984 between the Company and Joel S. Rhew and
H. Gregory Kilduff, as trustees; Security Agreement dated as of October 10, 1984
between the Company and Sovran Bank, N.A. (Incorporated by reference to Exhibit
4(b) to Registration Statement No. 33-5319 filed with the Securities and
Exchange Commission on June 25, 1986).
(4)(c) Letter of Commitment dated August 25, 1984 between the
Company and Sovran Bank, N.A. and related promissory note of the Company;
Security Agreement dated August 30, 1983 between the Company and First &
Merchants National Bank (*the predecessor to Sovran Bank, N.A.); Accounts
Receivable and Inventory Reporting Service Instructions dated March 18, 1986;
Collateral Services Rate Agreement dated August 17, 1983 between the Company and
First & Merchants National Bank (Incorporated by reference to Exhibit 4(c) to
Registration Statement No. 33-5319 filed with the Securities and Exchange
Commission on June 25, 1986).
(4)(d) Letter of Commitment dated September 16, 1987 between
the Company and Sovran Bank, N.A. relating to a $1,000,000 line of credit.
(Incorporated by reference to Exhibit 4(d) of Registrant's 1987 Form 10-K).
(4)(e) In addition to the matters reported in Exhibits (4)(a)
through (4)(d) above, the long-term debt as shown on the consolidated balance
sheet of the Company at December 31, 1999 included additional obligations each
of which is less than 10% of the total assets of the Company. The documents
evidencing these obligations are omitted pursuant to Item 601(b)(4)(iii) of
Regulation S-K and will be furnished to the Securities and Exchange Commission
upon request.
(4)(f) See Article III, Section 4 of Exhibit 3(a).
36
37
(4)(g) See Articles II, III, VI, VIII and IX of Exhibit
(3)(b).
(4)(h) Form of Stock Purchase Warrant (Incorporated by
reference to Exhibit 4(g) to Registration Statement No. 33-5319 filed with the
Securities and Exchange Commission on June 25, 1986).
(10)(a) Lease Amendment #1 dated August 26, 1989 between the
Company and Gil Gillis, Gwenda Gillis, and Gayla Gillis relating to premises
located at 2500 South Main Street, Highway 293, Kennesaw, Georgia (Incorporated
by reference to Exhibit 10(a) of Registrant's 1987 Form 10-K).
(10)(b) Lease dated February 20, 1986 between Guam Capital
Investment Corporation and the Company relating to premises located at Lot No.
236, Agat, Guam (Incorporated by reference to Exhibit 10(c to Registration
Statement No. 33-5319 filed with the Securities and Exchange Commission on June
25, 1986).
(10)(c) Lease dated April 29, 1986 between Chuckatuck
Partnership and the Company relating to the Company's principal executive office
space in Radford, Virginia (Incorporated by reference to Exhibit 10(d) to
Registration Statement No. 33-5319 filed with the Securities and Exchange
Commission on June 25, 1986).
(10)(d) Lease dated July 1, 1987 between the Atlantic
Richfield Company and James M. Chamberlain and Patsy L. Chamberlain, as trustees
of the Chamberlain Family Trust, relating to premises located at 3802 East
Broadway, Phoenix, Arizona.
(10)(e) Agreement dated March 31, between the Department of
the Army and the Company relating to the construction of U.S. military housing
in Edgewood, Maryland. (Incorporated by reference to Exhibit 10(e) of
Registrant's 1987 Form 10-K).
(10)(f) Agreement dated September 1, 1987 between Zublin
Delaware, Inc. and the Company relating to the construction of U.S. military
housing in Vilseck, West Germany. (Incorporated by reference to Exhibit 10(f) of
Registrant's 1987 Form 10-K.)
(10)(g) Agreement dated as of July 1, 1985 between ARCO
Chemical Company and the Company relating to the sale of various copolymer
resins (Incorporated by reference to Exhibit 10(g) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 25, 1986.)
(10)(h) Agreement dated as of April 11, 1986 between ARCO
Technology, Inc. and the Company relating to a license of certain manufacturing
rights (Incorporated by reference to Exhibit 10(h) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 5, 1986.)
(10)(i) Bank of Virginia Trust Company Prototype Plan and
Trust Agreement and accompanying Joinder Agreement (Incorporated by reference to
Exhibit 10(i) to Registration Statement No. 33-5319 filed with the Securities
and Exchange Commission on June 24, 1986.)
(10)(j) 1986 Stock Option Plan for employees of the Company
(Incorporated by reference to Exhibit 10(j) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 24, 1986.)
(10)(k) Settlement Agreement dated June 19, 1986 among the
Company, Luther I. Dickens, and Great Northern Corporation (Incorporated by
reference to Exhibit 10(k) to Registration Statement No. 33-5319
filed with the Securities and Exchange Commission on June 24, 1986.)
37
38
(10)(l) Purchase Agreement dated December 31, 1987 between the
Company and the Atlantic Richfield Company (Incorporated by reference to Exhibit
10 to the Company's current report on Form 8-K filed with the Securities and
Exchange Commission on January 13, 1988.
(11) Statement recomputation of per share earnings.
(b) Reports on Form 8-K
None
(c) Exhibits
See ITEM 14(a)(3) above.
(d) Financial Statement Schedules
See ITEM 14(a)(2) above.
38
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RADVA Corporation
Dated: May 3, 2001 By /s/ Luther I. Dickens
-------------------------------
Luther I. Dickens
Chief Executive Officer
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 and on the dates indicated.
Dated: May 3, 2001 By /s/ Luther I. Dickens
-------------------------------
Luther I. Dickens
Chief Executive Officer
Dated: May 3, 2001 By /s/ James M. Hylton
-------------------------------
James M. Hylton
Director
Dated: May 3, 2001 By /s/ Rush G. Allen
-------------------------------
Rush G. Allen
Director
Dated: May 3, 2001 By /s/ J. Granger Macfarlane
-------------------------------
J. Granger Macfarlane
Director
Dated: May 3, 2001 By /s/ Stephen L. Dickens
-------------------------------
Stephen L. Dickens
President and Director
Dated: May 3, 2001 By /s/ David B. Kinney
-------------------------------
David B. Kinney
Director
39