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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, 2001
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 March 12, 2002 (see ITEM 5 for explanation of calculation): $ 418,900
-----------
Number of shares of common stock outstanding as of March 12, 2002: 3,987,987
1
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant's proxy
statement for its annual meeting of stockholders scheduled for April 25, 2002.
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. The Company also has a subsidiary, Triter
Corporation, which was formed for the purpose of making the triterine referenced
to in the Annual Report letter.
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.
2
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.
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 34.1% of protective packaging
revenues in 2001.
BACKLOG
The Company had approximately $1,160,037 in backlog orders for protective
packaging products as of December 31, 2001, compared to backlog orders of
approximately $1,236,318 as of December 31, 2000. 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 2002.
3
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 technical design facility gives it an advantage
over competitors within its market area.
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 2002. 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.
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 69 Chief Executive Officer (1998)
Stephen L. Dickens 44 President (1998)
William F. Fry 62 Chief Financial Officer (1989)
Michael R. Samples 49 Vice President, Manufacturing (1999)
4
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 $3,438,084.
(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
$3,438,084.
(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 has an interest.
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 2 trucks and 12 trailers and leases 1 tractor which it uses to
ship products to customers. The Company owns 1 van and 7 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.
5
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.
2001 2000 1999
---- ---- ----
High Low High Low High Low
---- --- ---- --- ---- ---
First
Quarter 7/32 13/64 17/32 3/8 1 3/4
Second
Quarter 19/64 11/64 15/32 1/4 1 3/16 3/4
Third
Quarter 21/64 17/64 7/16 3/16 15/16 1/2
Fourth
Quarter 17/64 9/64 5/8 3/16 3/4 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 March 12, 2002 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 March 12, 2002 was subtracted from
3,987,987, the total number of shares outstanding on that date, and the
resulting figure was multiplied by $.235, the average of the bid and asked
prices of the Company's stock in the over-the-counter market on March 12, 2002.
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 March 12, 2002, there were 275 record holders of the Common Stock.
6
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,
------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(Dollar amounts in thousands except per share data)
Net Revenues $ 9,629 $ 10,077 $ 10,186 $ 13,173 $ 10,955
Income (loss) before
income taxes or
extraordinary item (68) (1,076) 276 1,517 209
Net income (loss) 277 (1,076) 276 1,517 209
Net income (loss) per
common share .07 (.27) .07 .37 .05
SELECTED BALANCE
SHEET DATA: Years Ended December 31,
------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(Dollar amounts in thousands)
Working capital $ 100 $ (800) $ 974 $ 1,051 $ (679)
Net property, plant,
and equipment 4,242 4,844 4,945 4,443 4,688
Total assets 10,562 11,486 11,963 11,890 11,192
Long-term debt (including
current maturities) 3,454 4,202 4,738 4,583 4,371
Stockholders' equity 4,611 4,076 5,177 4,886 3,388
7
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, 2001. 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
----------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Manufacturing net revenues 100.0% 100.0% 100.0% 90.1% 93.7%
Licensing & related
machinery sales 0.0% 0.0% 0.0% 9.9% 6.3%
----- ----- ----- ----- -----
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Cost and expense:
Cost of sales 75.5% 86.4% 74.8% 66.3% 74.1%
Shipping and sales 8.7% 9.2% 7.4% 6.8% 7.7%
General and administrative 13.4% 12.8% 12.6% 12.1% 12.7%
Research and development 1.1% 0.0% 0.0% 0.2% 0.9%
----- ----- ----- ----- -----
98.7% 108.4% 94.8% 85.4% 95.4%
----- ----- ----- ----- -----
Operating income (loss) 1.3% (8.4%) 5.2% 14.6% 4.6%
----- ----- ----- ----- -----
Other income (deductions)
Interest expense (4.9%) (5.2%) (4.5%) (3.6%) (3.9%)
Interest income 1.9% 2.2% 1.7% 0.3% 0.3%
Other .4% 0.3% 0.1% 0.0% 0.0%
----- ----- ----- ----- -----
(2.6%) (2.7%) (2.7%) (3.3%) (3.6%)
----- ----- ----- ----- -----
Income (loss) before income
taxes, extraordinary gain,
and minority interest in subsidiary (.7)% (10.7%) 2.7% 11.5% 1.6%
Income tax expense 0.0 % 0.0% 0.0% 0.0% 0.0%
Extraordinary gain 3.6% 0.0% 0.0% 0.0% 0.0%
Minority interest in net
loss of subsidiary 0.0% 0.0% 0.0% 0.0% 0.3%
----- ----- ----- ----- -----
Net income (loss) 2.9% (10.7)% 2.7% 11.5% 1.9%
===== ===== ===== ===== =====
8
2001 COMPARED TO 2000
The Company's operating income was $124,000 in 2001 compared to an operating
loss of $852,000 in 2000. This dramatic improvement in operations was a result
of many factors and was achieved in spite of a $448,000 reduction in revenues
from $10,077,000 in 2000 to $9,629,000 in 2001. Before allocating interest or
corporate overhead cost, the Radford and Portsmouth plants increased operating
income by $623,000 and $598,000, respectively. This improvement in operating
income resulted from a combination of increased sales prices, sharply lower
costs for raw materials and increased labor efficiency.
Cost of sales, as a percent of manufacturing net revenues, decreased 10.9%, from
86.4% in 2000 to 75.5% in 2001. Among the many factors contributing to this
10.9% reduction in costs were lower raw material prices and increased labor
efficiencies partly offset by increased cost for oil and gas. Raw material costs
percentages decreased from 29.8% in 2000 to 21.9% in 2001 at the Company's
Radford plant and decreased from 43.3% in 2000 to 38.6% in 2001 at the Company's
Portsmouth plant. The higher material cost at the Portsmouth plant results from
the use of a different mix of resins. Labor percentages decreased from 28.0% in
2000 to 25.4% in 2001 at the Company's Radford plant and decreased from 22.5% in
2000 to 18.7% in 2001 at the Company's Portsmouth plant.
Shipping and selling expenses decreased by .5% and general and administrative
expenses increased by .6% in 2001 as compared to 2000. The Company spent
$103,000 on research and development in 2001 in efforts to prepare the Company's
patented new heat resistant building material, Triterine, for production and
marketing which is scheduled for 2002.
The Company negotiated a $400,000 reduction in the amount owed its bank as part
of a successful refinancing effort, resulting in a net extraordinary gain of
$345,000.
2000 COMPARED TO 1999
The Company incurred an operating loss in 2000 of $851,922 compared to operating
income of $528,294 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.
9
1999 COMPARED TO 1998 (CONTINUED)
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 THERMASTRUTURE 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 THERMASTRCUTURE 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.
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 2001 which resulted in
longer amortization of the Company's long-term debt. The current portion of
long-term decreased $640,000, from $793,000 at December 31, 2000 to $153,000 at
December 31, 2001. Working capital increased from a negative $800,000 at
December 31, 2000 to a positive $100,000 at December 31, 2001. The Company had
$155,000 available on its line of credit at year-end.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports..................................... 12
Balance Sheets as of December 31, 2000 and 1999................... 13-14
Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998.............................. 15
Statements of Stockholders' Equity for the Years
Ended December 31, 2000, 1999, and 1998........................ 16
Statements of Cash Flows for the Years
Ended December 31, 2000, 1999, and 1998........................ 17
Notes to Financial Statements as of December 31,
2000, 1999, and 1998........................................... 18-27
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule V - Property, Plant and Equipment....................... 28
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant, and Equipment................. 29
Schedule VIII - Valuation and Qualifying Accounts................. 30
11
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, 2001 and 2000 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, 2001 and 2000, 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 2001 and 2000 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.
Galax, Virginia
January 24, 2002
12
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
2001 2000
ASSETS
Current assets:
Cash and cash equivalents (Notes 2 and 3) $ 69,685 $ 11,048
----------- -----------
Accounts and notes receivable (Notes 7 and 8) 1,468,477 2,076,326
Receivable - other (Notes 3) 83,398 233,896
Less allowance for doubtful accounts 80,678 83,574
----------- -----------
Net receivables 1,471,197 2,226,648
----------- -----------
Inventories (Notes 7 and 8):
Finished goods 794,914 614,335
Work-in-process 5,210 3,333
Raw materials and supplies 254,876 246,056
----------- -----------
Total inventories 1,055,000 863,724
----------- -----------
Prepaid expenses 154,240 100,177
----------- -----------
Total current assets 2,750,122 3,201,597
----------- -----------
Property, plant and equipment, at cost (Notes 5, 7 and 8) 9,289,112 9,724,483
Less accumulated depreciation and amortization 5,047,304 4,880,072
----------- -----------
Net property, plant and equipment 4,241,808 4,844,411
----------- -----------
Other assets, at cost, less accumulated amortization:
Investment in Thermasteel 261,925 261,925
Trademark, marketing and manufacturing rights 422,841 450,669
Note receivable - long-term 2,476,016 2,432,349
Other (Note 16) 409,173 295,296
----------- -----------
3,569,955 3,440,239
----------- -----------
$10,561,885 $11,486,247
=========== ===========
continued
13
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
2001 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (Notes 3 and 8) $ 152,662 $ 792,663
Notes payable (Note 7) 1,178,860 1,311,117
Accounts payable 1,067,750 1,615,356
Accrued expenses (Note 6) 250,489 282,053
------------ ------------
Total current liabilities 2,649,761 4,001,189
------------ ------------
Long-term debt, excluding current installments
(Notes 3 and 8) 3,301,082 3,409,007
------------ ------------
Total liabilities 5,950,843 7,410,196
------------ ------------
Commitments, contingencies and other matters
(Notes 8, 12, 16 and 17)
Stockholders' equity:
Preferred stock, 8% cumulative convertible, par value $.01 per share
($300,000 aggregate liquidation preference);
authorized 1,000,000 shares; issued 600,000 shares in 2001 6,000 --
Common stock, par value $.01 per share; authorized
10,000,000 shares; issued 3,987,987 and 3,987,987
shares in 2001 and 2000 39,880 39,880
Additional paid-in capital 4,735,305 4,483,506
Retained earnings (deficit) (170,143) (447,335)
------------ ------------
Total stockholders' equity 4,611,042 4,076,051
------------ ------------
$ 10,561,885 $ 11,486,247
============ ============
See notes to consolidated financial statements.
14
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
Net revenues:
Manufacturing net revenues $ 9,629,272 $ 10,076,832 $ 10,185,809
------------ ------------ ------------
Costs and expenses:
Cost of sales 7,269,170 8,705,360 7,615,767
Shipping and selling expenses 838,274 930,941 749,242
General and administrative expenses 1,294,145 1,292,453 1,288,645
Research and development expenses (Note 14) 103,309 -- 3,861
------------ ------------ ------------
9,504,898 10,928,754 9,657,515
------------ ------------ ------------
Operating income (loss) 124,374 (851,922) 528,294
------------ ------------ ------------
Other income (expense):
Interest expense (468,804) (529,135) (461,236)
Interest income 185,138 226,175 169,341
Other 37,291 26,743 16,200
------------ ------------ ------------
(246,375) (276,217) (275,695)
------------ ------------ ------------
(122,001) (1,128,139) 252,599
------------ ------------ ------------
Gain (loss) on sale of assets:
Equipment 6,149 (2,000) 23,653
Real estate 47,761 54,227 --
------------ ------------ ------------
53,910 52,227 23,653
------------ ------------ ------------
Income (loss) before income taxes and extraordinary item (68,091) (1,075,912) 276,252
Provision for income taxes (Note 9) -- -- --
------------ ------------ ------------
Net income (loss) before extraordinary item (68,091) (1,075,912) 276,252
Extraordinary item (Note 15):
Gain on early extinguishment of debt
(less income tax benefit of $-0-) 345,283 -- --
------------ ------------ ------------
Net income (loss) $ 277,192 $ (1,075,912) $ 276,252
============ ============
Income per common share (Note 18): Basic earnings per share:
Income (loss) before extraordinary item $ (.02) $ (.27) $ .07
============ ============ ============
Extraordinary item $ .09 $ -- $ --
============ ============ ============
Net income (loss) $ .07 $ (.27) $ .07
============ ============ ============
Diluted earnings per share:
Income (loss) before extraordinary item $ (.02) $ (.27) $ .07
============ ============ ============
Extraordinary item $ .08 $ -- $ --
============ ============ ============
============
Net income (loss) $ .06 $ (.27) $ .07
============ ============ ============
Weighted average number of shares outstanding:
Basic 3,987,987 4,005,360 4,059,352
Diluted 4,187,987 4,005,360 4,059,352
See notes to consolidated financial statements
15
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
ADDITIONAL RETAINED TOTAL
PREFERRED COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) EQUITY
--------- ------- -------- --------- -------------
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
Issued stock 6,000 -- 251,799 -- 257,799
Treasury stock -- -- -- -- --
Net income -- -- -- 277,192 277,192
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2001 $ 6,000 $ 39,880 $ 4,735,305 $ (170,143) $ 4,611,042
=========== =========== =========== =========== ===========
See notes to consolidated financial statements.
16
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
Cash flows from operating activities:
Net income (loss) $ 277,192 $(1,075,912) $ 276,252
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 654,850 670,003 596,566
Amortization 50,693 46,875 41,721
Allowance for doubtful accounts (2,896) (42,358) 12,792
(Gain) loss on sale of assets (53,910) (52,227) (23,653)
Changes in assets and liabilities:
Decrease (increase) in accounts and notes receivable 607,849 568,651 (295,091)
Decrease (increase) in receivable - other 150,498 (11,384) 259,377
Decrease (increase) in inventories (191,276) (44,273) 113,269
Decrease (increase) in prepaid expenses (54,063) (52,066) (12,979)
Decrease (increase) in other current assets -- 40,784 (1,646)
Decrease (increase) in note receivable - noncurrent (43,667) (98,059) 147,674
Decrease (increase) in other assets (136,742) (63,192) (40,043)
Increase (decrease) in accounts payable (547,606) 717,051 (166,092)
Increase (decrease) in accrued expenses (31,564) 11,029 (137,157)
----------- ----------- -----------
Net cash provided by (used in) operating activities 679,358 614,922 770,990
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 83,473 69,776 23,653
Capital expenditures on equipment (81,810) (586,510) (1,099,022)
Purchase minority interest in subsidiary -- -- (42,813)
----------- ----------- -----------
Net cash provided by (used) in investing activities 1,663 (516,734) (1,118,182)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds (payments) on notes payable (132,257) 432,913 24,000
Proceeds from issuance of long-term debt 3,450,000 170,990 806,904
Principal payments under long-term debt (4,197,926) (707,627) (651,404)
Issuance of Series A 8.00% preferred stock 257,799 -- --
Purchase of Treasury stock -- (25,228) (36,876)
----------- ----------- -----------
Net cash provided by financing activities (622,384) (128,952) 142,624
----------- ----------- -----------
Net increase (decrease) in cash 58,637 (30,764) (204,568)
Cash and cash equivalents at beginning of year 11,048 41,812 246,380
----------- ----------- -----------
Cash and cash equivalents at end of year $ 69,685 $ 11,048 $ 41,812
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 454,814 $ 525,600 $ 465,086
=========== =========== ===========
Cash paid during the year for income taxes $ -- $ 8,370 $ 4,407
=========== =========== ===========
See notes to consolidated financial statements.
17
RADVA CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
RADVA Corporation and subsidiary (the Company) are custom designers of material
handling solutions and manufacturers of protective 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, Triter Corporation. 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 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.
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
$1,433,329 and $1,382,636 as of December 31, 2001 and 2000, 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.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, Plant and Equipment (continued)
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 protective packaging materials and containers.
Revenues from sales 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.
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.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
2001 2000 1999
Petty cash and non-interest bearing accounts $ 69,685 $ 11,048 $ 41,812
======== ======== ========
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.
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, 2001 are as follows:
2001
-----------------------------------
Carrying Amount Fair Value
--------------- ----------
Cash and cash equivalents $ 69,685 $ 69,685
Receivable - other 83,398 83,398
Long-term debt 3,453,744 3,453,744
NOTE 4. RECEIVABLES
Information about impaired receivables as of and for the years ended December
31, 2001 and 2000 is as follows:
2001 2000
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 $ 36,000 $ 24,000
======== =========
Average balance (based on beginning and
ending of year) $ 48,000 $ 48,000
======== =========
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
2001 2000
Land and improvements $ 211,188 $ 171,846
Buildings and improvements 3,085,539 3,120,520
Machinery and equipment 5,308,443 5,758,819
Transportation equipment 372,129 372,129
Office equipment 311,813 301,169
----------- -----------
$ 9,289,112 $ 9,724,483
=========== ===========
NOTE 6. ACCRUED EXPENSES
Accrued expenses are composed of the following:
2001 2000
Payroll and employee benefits $ 205,683 $ 203,723
Interest 18,841 4,851
Customer deposits 794 794
Other 25,171 72,685
----------- -----------
$ 250,489 $ 282,053
=========== ===========
NOTE 7. NOTES PAYABLE
A summary of notes payable follows:
2001 2000
Line of credit with commercial bank, $1,500,000
limit, interest at prime (*) $ -- $ 1,311,117
Line of credit with commercial lender, $1,500,000 limit, interest at
prime plus 2.25%, secured by all of
the Company's assets 1,178,860 --
----------- -----------
$ 1,178,860 $ 1,311,117
=========== ===========
The Company was not in compliance with certain financial and reporting
requirements of the line of credit agreement, indicated above by (*), as of
December 31, 2000; however, waivers from the bank were granted until June 1,
2001.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. LONG-TERM DEBT
A summary of long-term debt follows:
2001 2000
Installment note payable due in monthly installments of $329,
including interest, with various at 3.9%; collateralized by equipment. $ -- $ 1,953
Installment note payable with financing company, due in monthly installments
of $16,404, including interest at 7.295%; collateralized
by equipment. -- 258,918
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
Installment note payable, due in monthly installments of $428,
including interest at 8.5%; collateralized by equipment. -- 846
Installment note payable to bank, due in monthly installments of
$11,905, including interest at prime; collateralized by equipment.(*) -- 606,642
Installment note payable to bank, due in monthly installments of
$27,533, including interest at prime; collateralized by real estate.(*) -- 2,588,133
Installment note payable to bank, due in monthly installments of
$4,762, including interest at prime; collateralized by equipment.(*) -- 220,535
Installment note payable to bank, due in monthly installments of
$5,556, including interest at prime; collateralized by equipment.(*) -- 366,667
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 variable monthly installments,
including interest at prime plus 2.25% (7.75% at
December 31, 2001); collateralized by all of the Company's assets. 1,996,433 --
Installment note payable to bank, due in monthly installments of
$17,402, including interest at prime plus 2.25% (7.75% at
December 31, 2001); collateralized by all of the Company's assets. 1,441,651 --
Installment note payable to bank, due in monthly installments of
$527, including interest at 9.5%; collateralized by equipment. 15,660 20,264
----------- -----------
Total long-term debt 3,453,744 4,201,670
Less current installments of long-term debt 152,662 792,663
----------- -----------
Long-term debt, excluding current installments $ 3,301,082 $ 3,409,007
=========== ===========
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. LONG-TERM DEBT (CONTINUED)
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, 2001 follows:
Years Ended December 31,
2002 $ 152,662
2003 161,299
2004 174,320
2005 182,091
2006 196,715
Thereafter 2,586,657
----------
$3,453,744
NOTE 9. INCOME TAX MATTERS
Net deferred tax assets and liabilities consist of the following components as
of December 31, 2001 and 2000:
2001 2000
Deferred tax assets:
Bad debt allowance $ 30,658 $ 31,758
Accrued expenses 25,857 27,495
Bonuses 3,792 2,193
Inventory allowance 16,226 15,258
Contributions carryover 8,182 8,175
Loss carryforward 757,646 884,286
Minimum tax credit carryforward 32,655 24,285
--------- ---------
875,016 993,450
Less valuation allowance 589,188 688,433
--------- ---------
$ 285,828 $ 305,017
========= =========
Deferred tax liabilities:
Property and equipment $ 285,828 $ 305,017
========= =========
$ -- $ --
========= =========
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.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. INCOME TAX MATTERS (CONTINUED)
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, 2001, 2000 and 1999 due to the following:
2001 2000 1999
Computed "expected" tax benefit $ 91,355 $ -- $ 90,988
Non-deductible expenses 22,882 150 18,090
State income taxes, net of federal income tax benefit 13,305 -- 13,047
Benefit of operating loss carryforward (127,542) (150) (122,125)
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
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, 2001, 2000 and
1999 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,
2001 and 2000 was $14,332 and $15,785, respectively.
NOTE 11. RELATED PARTY TRANSACTIONS
The Company rents office space from Chuckatuck, a partnership in which the
Company's Chief Executive Officer is a partner. The lease is for a five-year
period which ends December 31, 2003. The present lease payment is $3,700 per
month and the minimum lease obligation for 2002 and 2003 is $44,400 each year.
The Company's Chief Executive Officer is personally guaranteeing the notes
payable of the company.
NOTE 12. OPERATING LEASES
The Company leases certain of its manufacturing and office facilities and
equipment. Rental expense for the years ended December 31, 2001, 2000 and 1999
was $123,719, $155,698, and $160,130, respectively. Other than the lease for
office space (see Note 11) the leases are on a month to month basis. The Company
continues to lease these facilities, including the office space, 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 34.1% for 2001, 31.8% for 2000, and 33.3%
for 1999.
The percentage of cost of sales attributable to the Company's major suppliers
(exceeding 10% of total cost of sales) is 34.7% for 2001, 31.1% for 2000 and
38.1% for 1999.
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. RESEARCH AND DEVELOPMENT
The Company has incurred costs in developing a patented structural material
called Triterine. The Company intends to market this to construction companies
as a load-bearing wall, as roofing material and as flooring material.
NOTE 15. EXTRAORDINARY ITEM
The Company was not in compliance with certain financial and reporting
requirements of certain line of credit agreements and notes payable to the bank
as of December 31, 2000; however, waivers from the bank were granted until June
1, 2001.
During the year the Company extinguished this debt. As part of extinguishing
this debt the Company negotiated a reduction in the amount owed by $400,000.
This resulted in a gain to the Company. The gain is reflected in the income
statement net of related cost.
The Company obtained funds to extinguish this debt by issuing preferred stock
and obtaining additional financing from another commercial lender.
NOTE 16. OTHER ASSETS - OTHER
Other assets - other consist of the following:
2001 2000 1999
Deposits $ 15,600 $ 15,600 $ 15,600
Loan costs 151,159 45,371 51,395
Patent costs 66,760 42,343 42,343
Investment in Pereslav 55,000 55,000 55,000
Material rights 120,654 136,835 136,835
Other -- 147 147
-------- -------- --------
$409,173 $295,296 $251,151
======== ======== ========
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
$532,375 as of December 31, 2001.
25
NOTES TO 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 and convertible preferred stock outstanding.
Options held to purchase 400,000 common shares at $.81 were not dilutive and
were outstanding at December 31, 2000 and 1999. These shares are not included in
the diluted earnings per share calculation because the options' exercise price
was greater than the average market price of the common shares. Diluted earnings
per share was calculated as follows:
The Company has 600,000 shares of 8% cumulative convertible preferred stock
outstanding. The preferred stock is convertible into common stock based on its
liquidation amount ($.50 per share of $300,000) plus any accrued and unpaid
dividends (none as of 12/31/01). The conversion price for the common stock is
$0.50 per share which equates to 600,000 shares of common stock potentially
being issued.
2001 2000
----------- -----------
Net income (loss) to common stockholders $ 277,192 $(1,075,912)
=========== ===========
Weighted average common shares outstanding 3,987,987 4,005,360
Share equivalents, due to stock options -- --
Share equivalents, due to convertible preferred stock 200,000 --
----------- -----------
4,187,987 4,005,360
=========== ===========
Net income per share-diluted $ .06 $ (.27)
=========== ===========
NOTE 19. STOCK OPTION PLANS
The Company has 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.
26
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,
2001, and the changes during the year is presented below:
FIXED OPTIONS SHARES WEIGHTED-AVERAGE EXERCISE PRICE
------------------------------------------------- --------- -------------------------------
January 1, 2001 400,000 $ .81
Granted -- --
Exercised -- --
Forfeited -- --
---------
December 31, 2001 400,000 $ .81
=========
Exercisable at December 31, 2001 400,000 $ .81
Options available for grant at December 31, 2001 100,000 $ .81
The range of option prices for options outstanding as of December 31, 2001, was
$.81 with a weighted average remaining contractual life of approximately 7
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, 2001 would have increased by $324,000, resulting in net loss of $(46,808),
net of tax. The basic and diluted earnings per share would have been $(.01).
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 has purchased 187,240 shares pursuant
to the Stock Repurchase Plan.
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.
27
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
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, 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
=========== =========== =========== =========== ===========
Year ended December 31, 2001:
Land and improvements $ 171,846 $ 46,000 $ 6,658 $ -- $ 211,188
Buildings and improvements 3,120,520 10,333 45,314 -- 3,085,539
Machinery and equipment 5,758,819 14,833 -- (465,209) 5,308,443
Transportation equipment 372,129 -- -- -- 372,129
Office equipment 301,169 10,644 -- -- 311,813
----------- ----------- ----------- ----------- -----------
$ 9,724,483 $ 81,810 $ 51,972 $ (465,209) $ 9,289,112
=========== =========== =========== =========== ===========
(A) During 2001, the Company removed fully depreciated assets that were no
longer in service.
28
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
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, 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
=========== =========== =========== =========== ===========
Year ended December 31, 2001:
Land and improvements $ 24,331 $ -- $ -- $ -- $ 24,331
Buildings and improvements 1,476,020 104,334 22,409 -- 1,557,945
Machinery and equipment 2,872,059 465,522 -- (465,209) 2,872,372
Transportation equipment 276,947 57,603 -- -- 334,550
Office equipment 230,715 27,391 -- -- 258,106
----------- ----------- ----------- ----------- -----------
$ 4,880,072 $ 654,850 $ 22,409 $ (465,209) $ 5,047,304
=========== =========== =========== =========== ===========
(A) During 2001, the Company removed fully depreciated assets that were no
longer in service.
29
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
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, 1999:
Allowance for doubtful
accounts $113,140 $ 17,957 $ -- $ 5,165 $1,125,932
======== ======== ========= ======== ==========
Year ended December 31, 2000:
Allowance for doubtful
accounts $125,932 $ 59,982 $ -- $102,340 $ 83,574
======== ======== ========= ======== ==========
Year ended December 31, 2001:
Allowance for doubtful
accounts $ 83,574 $ 79,187 $ -- $ 82,083 $ 80,678
======== ======== ========= ======== ==========
(A) Represents uncollectible amounts written off, net of recoveries.
30
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 April 25,
2002.
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 April 25, 2002.
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 April 25, 2002.
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 April 25, 2002.
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
31
(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).
(4)(g) See Articles II, III, VI, VIII and IX of Exhibit
(3)(b).
32
(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.)
33
(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.
34
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: March 25, 2002 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: March 25, 2002 By /s/ Luther I. Dickens
----------------------------------
Luther I. Dickens
Chief Executive Officer
Dated: March 25, 2002 By /s/ Rush G. Allen
----------------------------------
Rush G. Allen
Director
Dated: March 25, 2002 By /s/ J. Granger Macfarlane
----------------------------------
J. Granger Macfarlane
Director
Dated: March 25, 2002 By /s/ Stephen L. Dickens
----------------------------------
Stephen L. Dickens
President and Director
Dated: March 25, 2002 By /s/ David B. Kinney
----------------------------------
David B. Kinney
Director
35