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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
September 30, 2004 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 (540) 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
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At November 11, 2004, there were 3,987,987 shares of Registrant's Common Stock,
$.01 par value per share, outstanding.
RADVA CORPORATION
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION:
INDEPENDENT AUDITOR'S REPORT 3
Item 1. Financial Statements
Balance Sheets,
December 31, 2003 and September 30, 2004 4
Statements of Operations, Three Months
and Nine Months Ended September 30, 2003 and
September 30, 2004 5
Statements of Cash Flows, Nine Months
Ended September 30, 2003 and September 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 Accountant's Report
Board of Directors
Radva Corporation
Radford, Virginia
We have reviewed the accompanying condensed consolidated balance sheet of RADVA
Corporation and subsidiary as of September 30, 2004, and the related
consolidated statements of income and cash flows for the three-month and
nine-month periods then ended. These interim financial statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, 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 the accompanying interim consolidated financial statements for them
to be in conformity with U.S. 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 14, 2004, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set fourth 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.
/s/ PERSINGER & COMPANY, L.L.C.
Galax, Virginia
November 11, 2004
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RADVA CORPORATION
Balance Sheets
(In Thousands)
September 30 December 31
ASSETS 2004 2003
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Current assets:
Cash .......................................... $ 43 $ 251
-------- --------
Accounts and notes receivable ................. 999 1,207
Other Accounts Receivable ..................... 148 245
Less allowance for doubtful accounts .......... 36 113
-------- --------
Net receivables ............................... 1,111 1,339
-------- --------
Inventories:
Finished goods .............................. 552 723
Raw materials and supplies .................. 280 343
-------- --------
Total inventories ........................... 832 1,066
-------- --------
Prepaid expenses .............................. 40 71
--------
Other current assets .......................... 20 --
-------- --------
Total current assets .................... 2,046 2,727
-------- --------
Property, plant & equipment, at cost ............. 9,835 9,709
Less accumulated depreciation ................. 6,492 6,169
-------- --------
Net property, plant & equip ............. 3,343 3,540
-------- --------
Investment in Thermasteel Corporation ............ 558 558
Trademark manufacturing and
marketing rights ................................ 395 395
Note receivable-noncurrent ....................... 2,724 2,631
Other assets ..................................... 490 456
-------- --------
$ 9,556 $ 10,307
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt ........ $ 200 $ 200
Notes payable ................................. 866 1,208
Accounts payable .............................. 1,097 842
Accrued expenses .............................. 184 121
-------- --------
Total current liabilities ............. 2,347 2,371
-------- --------
Accrued long-term expenses ....................... 63 63
Long-term debt, excluding current
installments .................................. 2,893 3,016
-------- --------
Total long-term liabilities ........... 2,956 3,079
-------- --------
Total liabilities ..................... 5,303 5,450
-------- --------
Minority interest ................................ 210 232
-------- --------
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 3,987,987 .................. 40 40
Additional paid-in capital .................... 4,735 4,735
Retained earnings ............................. (738) (156)
-------- --------
Total stockholders' equity ........... 4,043 4,625
-------- --------
$ 9,556 $ 10,307
======== ========
See accountants' report and accompanying notes to financial statements.
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RADVA CORPORATION
Statements of Operations
Three Months and Nine Months Ended September 30
(In Thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
2004 2003 2004 2003
------- ------- ------- -------
Net Revenues:
Manufacturing net revenues ... $ 1,987 2,246 6,011 7,285
------- ------- ------- -------
Cost and expenses:
Cost of sales ................ 1,822 1,852 5,121 5,618
Shipping and selling ......... 206 253 655 823
General and administrative ... 228 278 684 878
Research and development ..... 40 29 111 82
------- ------- ------- -------
2,296 2,412 6,571 7,401
------- ------- ------- -------
Operating income (loss) ...... (309) (166) (560) (116)
------- ------- ------- -------
Other income (deductions):
Interest expense ............. (60) (72) (188) (221)
Interest income .............. 32 30 94 93
Other ........................ 10 9 61 20
------- ------- ------- -------
(18) (33) (33) (108)
------- ------- ------- -------
Gain from sale of equipment ..... -- -- 4 --
------- ------- ------- -------
Earnings (loss) before income tax
And minority interest ........... (327) (199) (589) (224)
Minority Interest ............... 7 6 21 12
Income tax expense .............. -- -- -- --
------- ------- ------- -------
Net earnings (loss) ............. (320) (193) (568) (212)
======= ======= ======= =======
Earnings (loss) per common share (.08) (.05) (.14) (.05)
======= ======= ======= =======
See accompanying notes to financial statements.
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RADVA CORPORATION
Statements of Cash Flows
Nine Months Ended September 30
(In Thousands)
2004 2003
------- -------
Cash flows from operating activities:
Net income ................................. $ (568) $ (212)
------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ............................ 366 387
Amortization ............................ 9 6
Change in assets and liabilities:
Decrease (Increase) in net receivables . 228 278
Decrease (Increase) in inventories ..... 234 (23)
Decrease (Increase) in prepaid expenses 31 73
Decrease (Increase) in other current
assets .............................. (20) --
Decrease (Increase) in other assets .... (136) (136)
Increase (Decrease) in accounts payable 255 (127)
Increase (Decrease) in accrued expenses 63 73
------- -------
Total adjustments ............................. 1,030 531
------- -------
Net cash from operating activities ... 462 319
------- -------
Cash flows from investing activities:
Increase (Decrease) in minority interest ... (22) 238
Proceeds from sale of property and equipment .. -- --
Capital expenditures for equipment and other
long-term assets ......................... (167) (213)
------- -------
Net cash from investing activities ... (189) 25
------- -------
Cash flows from financing activities:
Dividends paid ............................. (15) (18)
Proceeds (payments) on notes payable ....... (343) (161)
Proceeds on long-term debt ................. -- 107
Principal payments under long-term debt .... (123) (135)
------- -------
Net cash from financing activities ... (481) (207)
------- -------
Net increase (decrease) in cash ............... (208) 137
Cash at January 1 ............................. 251 108
------- -------
Cash at September 30 .......................... $ 43 $ 245
======= =======
See accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
September 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............................. $ 172,190
Buildings and improvements........................ 3,144,642
Machinery and equipment........................... 5,828,646
Transportation equipment.......................... 365,922
Office equipment.................................. 323,162
------------
$ 9,834,562
============
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 118,107
Other............................................. 66,160
------------
$ 184,267
============
(4) Notes Payable
Demand notes payable to related parties........... 222,586
Line of credit, with commercial bank,
$1,500,000 limit, interest at prime............... $ 642,833
------------
$ 865,419
============
(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 1.5% 78,349
Installment note payable to bank, due in variable
monthly installments, including interest at prime
plus 2.25%; collateralized by all of the company's
assets. 1,869,787
Installment note payable to bank, due in monthly
installment of $17,402, including interest at prime
plus 2.25%; collateralized by all of the company's
assets. 1,112,210
Installment note payable to bank, due in
monthly installments of $527, including
interest at 9.5%; collateralized by equipment. 33,013
------------
Total long-term debt 3,093,359
Less current installments of long-term debt 200,000
------------
Long-term debt, excluding current installments $ 2,893,359
============
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Item 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations - Nine months Ended September 30, 2003
Compared to Nine Months Ended September 30, 2004
The Company incurred a net loss of $568,000 in the first nine months of 2004
compared to a net loss of $212,000 in the first nine months of 2003. For this
same period, revenues were down $1,274,000 from $7,285,000 for the nine months
ended September 30, 2003 to $6,011,000 for the nine months ended September 30,
2004. The primary cause of the reduced revenues and increased losses was a
result of the Company's loss of its major customer in early April 2004, which
had accounted for 37.8% of Company revenues in 2003.
Cost of sales, as a percent of manufacturing revenues, was up 8.1%, from 77.1%
for the first nine months of 2003 to 85.2% for the first nine 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 5.3% of production at the
Company's Radford, Virginia plant.
Shipping and selling expenses were down $168,000 for the nine months ended
September 30, 2004 compared to the nine months ended September 30, 2003.
However, due to a change in sales mix, shipping and selling expenses only
decreased .4% as a percentage of revenues.
General and Administrative expenses were down $194,000 for the nine months ended
September 30, 2004 due to cost controls over a wide range of expenses.
Results of Operations - Three Months Ended September 30, 2003
Compared to Three Months Ended September 30, 2004
The factors noted above in the nine month comparisons were also the factors
largely contributing to differences in results for the three months ended
September 30, 2003 compared to the three months ended September 30, 2004.
Revenues were down $259,000, largely responsible for increasing losses from
$193,000 for the three months ended September 30, 2003 to $320,000 for the three
months ended September 30, 2004.
Cost of sales, as a percentage of manufacturing revenues, was up 9.2% from 82.5%
for the third quarter of 2003 to 91.7% for the third 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 $47,000 lower in the third quarter of 2004
compared to the third quarter of 2003. However, as a percentage of revenues,
these expenses decreased .9%, due to reduced revenues having been more than
offset by a changed sales mix.
Liquidity and Capital Resources
At September 30, 2004, the balance available on the Company's line of credit was
$100,977 and working capital was negative $301,000. The Company raised $400,000
of needed working capital by selling 8% Preferred Stock to related parties in
October, 2004.
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 and third quarter of 2004 have resulted in the Company
being out of compliance with bank covenants related to the Company's credit
line. The Company received a waiver regarding this non-compliance in October,
2004 until December 31, 2004. However, in order to receive the waiver, the
Company purchased and assigned a $250,000 certificate of deposit to the bank and
the Company's line of credit was reduced from $1,500,000 to $1,000,000.
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
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
The Company's chief executive officer and chief financial officer
have concluded that the company's "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) are effective at the end of the
quarterly period covered by this report.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
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31.1 Rule 13a - 14(a) / 15d - 14(a) Certification of Principal
Executive Officer
31.2 Rule 13a - 14(a) / 15d - 14(a) Certification of Principal
Financial Officer
32 Section 1350 Certifications
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
Assistant Secretary/Treasurer
November 11, 2004
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