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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended Commission File
June 30, 2002 Number 0-15464
RADVA CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0715892
(State of Incorporation) (IRS Employer
Identification Number)
Drawer 2900 FSS
Radford, Virginia 24143
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 639-2458
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
At July 31, 2002, there were 3,987,987 shares of Registrant's Common Stock, $.01
par value per share, outstanding.
RADVA CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
INDEPENDENT ACCOUNTANTS' REPORT 3
Item 1. Financial Statements
Balance Sheets,
December 31, 2001 and June 30, 2002 4
Statements of Operations, Three Months
and Six Months Ended June 30, 2001 and
June 30, 2002 5
Statements of Cash Flows, Six Months
Ended June 30, 2001 and June 30, 2002 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 10
- 2 -
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
RADVA Corporation
Radford, Virginia
We have reviewed the accompanying consolidated balance sheet of RADVA
Corporation and subsidiary as of June 30, 2002, and the related consolidated
statements of income and cash flows for the three-month and six-month periods
ended June 30, 2002 and 2001. These financial statements are the responsibility
of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
Persinger & Co. LLC
Galax, Virginia
August 12, 2002
- 3 -
RADVA CORPORATION
Balance Sheets
(In Thousands)
June 30 December 31
ASSETS 2002 2001
------- -----------
Current assets:
Cash ..................................... $ 73 $ 70
-------- --------
Accounts and notes receivable ............ 1,115 1,469
Other accounts receivable ................ 106 83
Less allowance for doubtful accounts ..... 101 81
-------- --------
Net receivables .......................... 1,120 1,471
-------- --------
Inventories:
Finished goods ......................... 810 795
Work in process ........................ 13 5
Raw materials and supplies ............. 278 255
-------- --------
Total inventories ...................... 1,101 1,055
-------- --------
Prepaid expenses ......................... 96 154
Other current assets ..................... 2 --
-------- --------
Total current assets ............... 2,392 2,750
-------- --------
Property, plant & equipment, at cost ........ 9,341 9,289
Less accumulated depreciation ............ 5,339 5,047
-------- --------
Net property, plant & equip ........ 4,002 4,242
-------- --------
Investment in Thermasteel Corporation ....... 558 262
Trademark, manufacturing, and marketing
rights ................................... 409 423
Note receivable-noncurrent .................. 2,540 2,476
Other assets ................................ 396 409
-------- --------
$ 10,297 $ 10,562
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt ... $ 153 $ 153
Notes payable ............................ 1,193 1,179
Accounts payable ......................... 741 1,068
Accrued expenses ......................... 197 250
-------- --------
Total current liabilities ......... 2,284 2,650
-------- --------
Long-term debt, excluding current
installments ............................. 3,216 3,301
-------- --------
Total Liabilities .................. 5,500 5,951
-------- --------
Stockholders' equity:
Preferred stock, 8% cumulative,
$.01 par .............................. 6 6
Common stock of $.01 par value.
Authorized 10,000,000 shares; issued
and outstanding 3,998,027 ............. 40 40
Additional paid-in capital ............... 4,735 4,735
Retained earnings ........................ 16 (170)
-------- --------
Total stockholders' equity ...... 4,797 4,611
-------- --------
$ 10,297 $ 10,562
======== ========
See accountants' report and accompanying notes to financial statements.
- 4 -
RADVA CORPORATION
Statements of Operations
Three Months and Six Months Ended June 30
(In Thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- ----------------------
2002 2001 2002 2001
------- ------ ------ -------
Net Revenues:
Manufacturing net revenues ... $ 2,380 2,303 4,616 4,969
------- ------ ------ -------
Cost and expenses:
Cost of sales ................ 1,614 1,696 3,198 3,753
Shipping and selling ......... 243 198 455 420
General and administrative ... 328 309 644 619
R&D .......................... 22 -- 22 --
------- ------ ------ -------
2,207 2,203 4,319 4,792
------- ------ ------ -------
Operating income (loss) ...... 173 100 297 177
------- ------ ------ -------
Other income (deductions):
Interest expense ............. (94) (133) (199) (255)
Interest income .............. 32 55 69 125
Other ........................ 16 19 19 45
------- ------ ------ -------
(46) (59) (111) (85)
------- ------ ------ -------
Earnings (loss) before income tax 127 41 186 92
Income tax expense .............. -- -- -- --
------- ------ ------ -------
Net earnings (loss) ............. 127 41 186 92
======= ====== ====== =======
Earnings (loss) per common share .03 .01 .05 .02
======= ====== ====== =======
See accountants' report and accompanying notes to financial statements.
- 5 -
RADVA CORPORATION
Statements of Cash Flows
Six Months Ended June 30
(In Thousands)
2002 2001
----- -----
Cash flows from operating activities:
Net income ................................... $ 186 $ 92
----- -----
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation .............................. 292 334
Amortization .............................. 28 25
Loss (Gain) on sale of land ............... (11) (36)
Change in assets and liabilities:
Decrease (Increase) in net receivables ... 351 407
Decrease (Increase) in inventories ....... (46) (45)
Decrease (Increase) in prepaid expenses .. 58 4
Decrease (Increase) in other current
assets ................................ (2) (9)
Decrease (Increase) in other assets ...... (361) (202)
Increase (Decrease) in accounts payable .. (327) (334)
Increase (Decrease) in accrued expenses .. (53) (29)
Total adjustments ..................... (71) 115
----- -----
Net cash from operating activities ..... 115 207
----- -----
Cash flows from investing activities:
Purchase of Treasury Stock ................... -- --
Proceeds from sale of property and equipment . 57 59
Capital expenditures for equipment and other
long-term assets ........................... (98) (15)
----- -----
Net cash from investing activities ..... (41) 44
----- -----
Cash flows from financing activities:
Proceeds from notes payable .................. 14 189
Principal payments under long-term debt ...... (85) (463)
----- -----
Net cash from financing activities ..... (71) (274)
----- -----
Net increase (decrease) in cash ................. 3 (23)
Cash at January 1 ............................... 70 11
----- -----
Cash at June 30 ................................. $ 73 $ (12)
===== =====
See accountants' report and accompanying notes to financial statements.
- 6 -
RADVA CORPORATION
Notes to Financial Statements
June 30, 2002
(1) General
The financial statements conform to generally accepted accounting principles and
to general industry practices. The financial statements are unaudited. However,
in the opinion of management, all adjustments which are normal and necessary for
a fair presentation of the financial statements have been included.
(2) Property, Plant and Equipment
A summary of property, plant and equipment follows:
Land and improvements............................. $ 169,565
Buildings and improvements........................ 3,106,876
Machinery and equipment........................... 5,376,119
Transportation equipment.......................... 372,130
Office equipment.................................. 315,904
----------
$9,340,594
==========
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 142,447
Other............................................. 54,424
----------
$ 196,871
==========
(4) Notes Payable
Line of credit with commercial bank, collateralized
by certain accounts receivable and inventory,
interest at prime plus 2 1/4%.................... $1,192,932
==========
- 7 -
RADVA CORPORATION
Notes to Financial Statements
June 30, 2002
(5) Long-term Debt
A summary of long-term debt follows:
Installment note payable to bank, due in
variable monthly installments, including
interest at prime plus 2.25% (7.00% at
June 30, 2002); collateralized by all
of the company's assets. $ 1,974,108
Installment note payable to bank, due in
monthly installment of $17,402, including
interest at prime plus 2.25% (7.00% at
June 30, 2002); collateralized by all
of the company's assets. 1,381,073
Installment note payable to bank, due in
monthly installments of $527, including
interest at 9.5%; collateralized
by equipment 13,191
-----------
Total long-term debt 3,368,372
Less current installments of long-term debt 152,662
-----------
Long-term debt, excluding current installments $ 3,215,710
===========
- 8 -
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations - Six months ended June 30, 2001
Compared to the six months ended June 30, 2002
The Company earned a net profit of $186,000 in the first six months of 2002
compared to net income of $92,000 in the first six months of 2001. This
improvement in operations was achieved in spite of a $353,000 reduction in
revenues from $4,969,000 for the six months ended June 30, 2001 to $4,616,000
for the six months ended June 30, 2002.
Cost of sales, as a percent of manufacturing revenues, was down 6.2%, from 75.5%
for the six months ended June 30, 2001 to 69.3% for the six months ended June
30, 2002. The most significant factors contributing to this reduction in cost of
sales were reduced costs of manufacturing labor of $75,000 and gas and oil costs
of $233,000 at the Company's Radford and Portsmouth plants.
Shipping and selling expenses were up $35,000 for the first half of 2002. This
increase was primarily due to increased freight out costs of $76,000, offset in
reductions in wages, advertising and other expense categories. The increase in
freight out costs resulted from a changing mix of sales increasing sales to
customers on FOB destination terms.
The $25,000 increase in general and administrative expenses resulted from a
combination of several relatively small factors. Research and development costs
were up $22,000 as a result of the Company being quicker to write off these cost
in 2002 than in 2001.
Interest cost was down $56,000 as a result of reductions in the prime interest
rate on which virtually all the Company's notes payable are based.
Results of Operations - Three months ended June 30, 2001 Compared to the three
months ended June 30, 2002
The factors noted above in the six month comparisons were also the factors
largely contributing to differences in results for the three months ended June
30, 2001 compared to the six months ended June 30, 2002. Revenues were down
$77,000 which is felt by management to be a result of generally depressed
conditions in the countries manufacturing sector. However, profits increased
$86,000 in the second quarter, from $41,000 for the three months ended june 30,
2001 to $127,000 for the three months ended June 30, 2002.
Cost of sales, as a percentage of manufacturing revenues, was down 5.8%, from
73.6% for the quarter ended June 30, 2001 to 67.8% for the quarter ended June
30, 2002. This reduction was primarily a result of a reduction in the cost of
oil and gas of $93,000.
Shipping and selling expenses were up $45,000 primarily as a result of an
increase in freight out costs due to changes in sales mix and terms. Research
and development cost were up $22,000 due to quicker expensing of these
activities in 2002 as compared to 2001. Interest cost was down $39,000 due to
reductions in the prime interest rate on which virtually all of the Company's
notes payable are based.
- 9 -
Liquidity and Capital Resources
At June 30, 2002, the balance available on the Company's $1,500,000 line of
credit was $146,843 and working capital was $108,000. Management believes that
cash flow will be adequate to satisfy 2002 needs.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
See item 3 of the Company's Form 10-K for the fiscal year ended
December 31, 2001.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of
1934,this form 10-Q has been signed on behalf of the Registrant by its
Assistant Secretary/Treasurer who is authorized to sign on behalf of
the Registrant.
RADVA CORPORATION
/s/ William F. Fry
-------------------------------
William F. Fry
Secretary/Treasurer
July 31, 2002
- 10 -
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Radva Corporation
(the "Company"), hereby certifies that the Company's Quarterly complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934 and that the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Luther I. Dickens Dated: August 14, 2002
Chief Executive Officer
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Radva Corporation
(the "Company"), hereby certifies that the Company's Quarterly complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934 and that the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ William Fry Dated: August 14, 2002
Chief Financial Officer