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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarterly Period Commission File
ended June 30, 2004 Number 0-15464
RADVA CORPORATION
(Exact name of small business issuer as specified in its charter)
VIRGINIA 54-0715892
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Drawer 2900 FSS
Radford, Virginia 24143
(Address of principal executive offices)
Issuer's telephone number, including area code (540) 639-2458
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
3,987,987
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Transitional Small Business Disclosure Format: Yes No X
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RADVA CORPORATION
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION:
INDEPENDENT ACCOUNTANTS' REPORT 3
Item 1. Financial Statements
Balance Sheets,
December 31, 2003 and June 30, 2004 4
Statements of Operations, Six Months
Ended June 30, 2003 and June 30, 2004 5
Statements of Cash Flows, Six Months
Ended June 30, 2003 and June 30, 2004 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 9
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PERSINGER & COMPANY, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
203 W. GRAYSON STREET TEL. (276) 236-8135
P.O. BOX 797 FAX (276) 236-0797
GALAX, VA 24333
INDEPENDENT ACCOUNTANTS' REPORT
BOARD OF DIRECTORS
RADVA CORPORATION
RADFORD, VIRGINIA
WE HAVE REVIEWED THE ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET OF RADVA
CORPORATION AND SUBSIDIARY AS OF MARCH 31, 2004, AND THE RELATED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE THREE-MONTH AND
SIX-MONTH PERIODS ENDED JUNE 30, 2004. 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THEM TO BE IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
WE HAVE PREVIOUSLY AUDITED, IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING
STANDARDS, THE CONSOLIDATED BALANCE SHEET OF RADVA CORPORATION AND SUBSIDIARY AS
OF DECEMBER 31, 2003, AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME,
STOCKHOLDERS' EQUITY, AND CASH FLOWS FOR THE YEAR THEN ENDED (NOT PRESENTED
HEREIN); AND IN OUR REPORT DATED FEBRUARY 13, 2004, WE EXPRESSED AN UNQUALIFIED
OPINION ON THOSE CONSOLIDATED FINANCIAL STATEMENTS. IN OUR OPINION, THE
INFORMATION SET FORTH IN THE ACCOMPANYING CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003 IS FAIRLY STATED, IN ALL MATERIAL RESPECTS, IN RELATION
TO THE CONSOLIDATED BALANCE SHEET FROM WHICH IT HAS BEEN DERIVED.
GALAX, VIRGINIA
AUGUST 10, 2004
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RADVA CORPORATION
Balance Sheets
(Unaudited)
(In Thousands)
June 30 December 31
ASSETS 2004 2003
-------- -----------
Current assets:
Cash .................................... $ 107 $ 251
-------- --------
Accounts and notes receivable ........... 767 1,207
Other Accounts Receivable ............... 149 245
Less allowance for doubtful accounts .... 39 113
-------- --------
Net receivables ......................... 877 1,339
-------- --------
Inventories:
Finished goods ........................ 545 723
Raw materials and supplies ............ 291 343
-------- --------
Total inventories ..................... 836 1,066
-------- --------
Prepaid expenses ........................ 48 71
Other current assets .................... 22 --
-------- --------
Total current assets .............. 1,890 2,727
-------- --------
Property, plant & equipment, at cost ....... 9,791 9,709
Less accumulated depreciation ........... 6,370 6,169
-------- --------
Net property, plant & equip ....... 3,421 3,540
-------- --------
Investment in Thermasteel Corporation ...... 558 558
Trademark manufacturing and
marketing rights .......................... 395 395
Note receivable-noncurrent ................. 2,693 2,631
Other assets ............................... 491 456
-------- --------
$ 9,448 $ 10,307
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt .. $ 200 $ 200
Notes payable ........................... 678 1,208
Accounts payable ........................ 774 842
Accrued expenses ........................ 203 121
-------- --------
Total current liabilities ....... 1,855 2,371
Accrued long-term expenses ................. 63 63
Long-term debt, excluding current
installments ............................ 2,944 3,016
-------- --------
Total long-term liabilities ..... 3,007 3,079
-------- --------
Total liabilities ............... 4,862 5,450
-------- --------
Minority interest .......................... 218 232
-------- --------
Stockholders' equity:
Preferred stock, 8% cumulative, par value
.01 600,000 shares outstanding ........ 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 ....................... (413) (156)
-------- --------
Total stockholders' equity ..... 4,368 4,625
-------- --------
$ 9,448 $ 10,307
======== ========
See accountants' report and accompanying notes to financial statements.
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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
----------------------- -----------------------
2004 2003 2004 2003
------- ------- ------- -------
Net Revenues:
Manufacturing net revenues ...... $ 1,613 2,253 4,024 5,039
------- ------- ------- -------
Cost and expenses:
Cost of sales ................... 1,381 1,677 3,299 3,766
Shipping and selling ............ 197 265 449 570
General and administrative ...... 232 313 456 600
R&D ............................. 47 34 71 53
------- ------- ------- -------
1,857 2,289 4,275 4,989
------- ------- ------- -------
Operating income (loss) ......... (244) (36) (251) 50
------- ------- ------- -------
Other income (deductions):
Interest expense ................ (57) (73) (128) (149)
Interest income ................. 31 32 62 63
Other ........................... 3 9 51 11
------- ------- ------- -------
(23) (32) (15) (75)
------- ------- ------- -------
Gain from sale of equipment ........ 4 -- 4 --
------- ------- ------- -------
Earnings (loss) before income tax
and minority interest ........... (263) (68) (262) (25)
Minority interest .................. 7 6 14 6
Income tax expense ................. -- -- -- --
------- ------- ------- -------
Net earnings (loss) ................ (256) (62) (248) (19)
======= ======= ======= =======
Earnings (loss) per common share ... (.06) (.02) (.06) --
======= ======= ======= =======
See accountants' report and accompanying notes to financial statements.
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RADVA CORPORATION
Statements of Cash Flows
Six Months Ended June 30
(Unaudited)
(In Thousands)
2004 2003
----- -----
Cash flows from operating activities:
Net income (loss) ............................. $(248) $ (19)
----- -----
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ............................... 245 258
Amortization ............................... 6 4
Change in assets and liabilities:
Decrease (Increase) in net receivables .... 462 436
Decrease (Increase) in inventories ........ 230 (211)
Decrease (Increase) in prepaid expenses ... 23 76
Decrease (Increase) in other current
assets................................... (22) --
Decrease (Increase) in other assets ....... (103) (71)
Increase (Decrease) in accounts payable ... (68) (178)
Increase (Decrease) in accrued expenses ... 82 40
----- -----
Total adjustments ....................... 855 354
----- -----
Net cash from operating activities ...... 607 335
----- -----
Cash flows from investing activities:
Increase (Decrease) in minority interest ...... (14) 244
Capital expenditures for equipment and other
long-term assets ............................ (124) (196)
----- -----
Net cash from investing activities ...... (138) 48
----- -----
Cash flows from financing activities:
Dividends paid ................................ (11) (18)
Proceeds from issuance of long-term debt ...... -- 107
Principal payments on notes payable ........... (530) --
Principal payments under long-term debt ....... (72) (323)
----- -----
Net cash from financing activities ...... (613) (234)
----- -----
Net increase (decrease) in cash .................. (144) 149
Cash at January 1 ................................ 251 108
----- -----
Cash at March 31 ................................. $ 107 $ 257
===== =====
See accountants' report and accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
June 30, 2004
(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........................ 3,144,643
Machinery and equipment........................... 5,790,548
Transportation equipment.......................... 365,921
Office equipment.................................. 320,711
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$9,791,388
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 149,952
Other............................................. 53,450
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$ 203,402
(4) Notes Payable
Notes payable to related parties.................. 222,160
Line of credit with commercial bank,
$1,500,000 limit, interest variable
(4.25% at June 30, 2004) ......................... $ 456,000
----------
$ 678,160
==========
(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% (6.25% at
March 31, 2004); collateralized by all
of the company's assets. 1,882,248
Installment note payable to bank, due in
monthly installments of $17,402, including
interest at prime plus 2.25% (6.50% at
June 30, 2004); collateralized by all
of the company's assets. 1,143,103
Installment note payable to bank, due in
variable monthly installments, including
interest at prime plus 1.25% (5.50% at
June 30, 2004); collateralized by equipment 83,691
Installment note payable to bank, due in
monthly installments of $798, including
interest at 3.9%; collateralized by equipment. 35,420
----------
Total long-term debt 3,144,462
Less current installments of long-term debt 200,085
----------
Long-term debt, excluding current installments $2,944,377
==========
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Item 2 Management's Discussion and Analysis
Financial Condition and Results of Operations
Results of Operations - Six months ended June 30, 2003
Compared to the six months ended June 30, 2004
The Company incurred a net loss of $248,000 in the first six months of 2004
compared to a net loss of $19,000 in the first six months of 2003. For this same
period, revenues were down $1,015,000 from $5,039,000 for the six months ended
June 30, 2003 to $4,024,000 for the six months ended June 30, 2004. The primary
cause of the reduced revenues and increased losses was a result of the Company's
loss of its major customer, which had accounted for 37.8% of Company revenues in
2003.
Cost of sales, as a percent of manufacturing revenues, was up 7.3%, from 74.7%
for the first six months of 2003 to 82.0% for the first six months of 2004. The
increased cost of sales percentage primarily resulted from the effect of the
large reduction in revenues related to fixed manufacturing costs. However, rapid
rises in the cost of the Company's raw materials has also contributed to rising
cost percentages, resulting in an increase of almost 5% of production at the
Company's Radford, Virginia plant.
Shipping and selling expenses were down $121,000 for the six months ended June
30, 2004 compared to the six months ended June 30, 2003. However, due to a
change in sales mix, shipping and selling expenses as a percentage of revenues
was relatively unchanged.
General and administrative expenses were down $144,000 for the six months ended
June 30, 2004 due to cost controls over a wide range of expenses. Some principal
cost reductions were as follows: Office salaries $51,000, travel $11,000, bank
fees $17,000 and bad debts $16,000.
Results of Operations - Three months ended June 30, 2003
Compared to the three months ended June 30, 2004
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, 2003 compared to the three months ended June 30, 2004. Revenues were down
$640,000, largely responsible for increasing losses from $62,000 for the three
months ended June 30, 2003 to $256,000 for the three months ended June 30, 2004.
Cost of sales, as a percentage of manufacturing revenues, was up 11.2%, from
74.4% for the second quarter of 2003 to 85.6% for the second quarter of 2004.
Again, the major factors responsible for the increased percentages were fixed
costs related to sharply reduced revenues and increases in direct material
costs.
Shipping and selling expenses were $81,000 lower in the second quarter of 2004
compared to the second quarter of 2003. However, as a percentage of revenues,
these expenses increased .5%, due to reduced revenues only partly offset by a
changed sales mix.
Liquidity and Capital Resources
At June 30, 2004 the balance available on the Company's line of credit was
$118,804 and working capital was $35,000.
In February 2004 the Company refinanced its line of credit with a new lender,
reducing its interest rate by 2.25% to prime. However, the refinancing did
reduce the Company's availability on its line of credit by the elimination of
inventory from the collateral base on which the line of credit is secured.
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Losses in the second quarter of 2004 have resulted in the Company being out of
compliance with bank covenants related to the Company's credit line. The Company
will work with the bank in an effort to obtain a waiver of noncompliance.
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, 2003.
Item 2. Changes in Securities and Use of Proceeds
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 and is the
Registrant's principal financial officer.
RADVA CORPORATION
/s/ William F. Fry
-------------------------------
William F. Fry
Secretary/Treasurer
August 9, 2004
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