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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, 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 October 16, 2002, 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, 2001 and September 30, 2002 4
Statements of Operations, Three Months
and Nine Months Ended September 30, 2001 and
September 30, 2002 5
Statements of Cash Flows, Nine Months
Ended September 30, 2001 and September 30, 2002 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
- 2 -
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 consolidated balance sheet of Radva
Corporation and subsidiary as of September 30, 2002, and the related
consolidated statements of income and cash flows for the three month and nine
month periods ended September 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.
/s/ PERSINGER & COMPANY, L.L.C.
Galax, Virginia
November 6, 2002
A Virginia Limited Liability Company o
Members American Institute of Certified Public Accounts
- 3 -
RADVA CORPORATION
Balance Sheets
(In Thousands)
September 30 December 31
ASSETS 2002 2001
-------- --------
Current assets:
Cash ........................................ $ 53 $ 70
-------- --------
Accounts and notes receivable ............... 1,119 1,469
Other accounts receivable ................... 94 83
Less allowance for doubtful accounts ....... 113 81
-------- --------
Net receivables ............................. 1,100 1,471
-------- --------
Inventories:
Finished goods ............................ 836 795
Work in process ........................... -- 5
Raw materials and supplies ................ 256 255
-------- --------
Total inventories ......................... 1,092 1,055
-------- --------
Prepaid expenses ............................ 91 154
-------- --------
Total current assets ................. 2,336 2,750
-------- --------
Property, plant & equipment, at cost ........... 9,380 9,289
Less accumulated depreciation ............... 5,488 5,047
-------- --------
Net property, plant & equip ........... 3,892 4,242
-------- --------
Investment in Thermasteel Corporation .......... 558 262
Trademark, manufacturing, and marketing
rights ...................................... 402 423
Note receivable-noncurrent ..................... 2,572 2,476
Other assets ................................... 376 409
-------- --------
$ 10,136 $ 10,562
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt ...... $ 153 $ 153
Notes payable ............................... 1,281 1,179
Accounts payable ............................ 690 1,068
Accrued expenses ............................ 230 250
-------- --------
Total current liabilities ............ 2,354 2,650
-------- --------
Long-term debt, excluding current
installments ................................ 3,179 3,301
-------- --------
Total Liabilities ..................... 5,533 5,951
-------- --------
Stockholders' equity:
Preferred stock, 8% cumulative,
Par value $.01 ............................ 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 ........................... (178) (170)
-------- --------
Total stockholders' equity ......... 4,603 4,611
-------- --------
$ 10,136 $ 10,562
======== ========
See accompanying notes to financial statements.
- 4 -
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
--------------------- ---------------------
2002 2001 2002 2001
------- ------- ------- -------
Net Revenues:
Manufacturing net revenues ... $ 2,185 2,250 6,801 7,219
------- ------- ------- -------
Cost and expenses:
Cost of sales ................ 1,753 1,673 4,951 5,426
Shipping and selling ......... 237 190 692 610
General and administrative ... 316 302 960 921
Research and development ..... 18 -- 40 --
------- ------- ------- -------
2,324 2,165 6,643 6,957
------- ------- ------- -------
Operating income (loss) ...... (139) 85 158 262
------- ------- ------- -------
Other income (deductions):
Interest expense ............. (91) (102) (290) (357)
Interest income .............. 32 35 101 160
Other ........................ 4 35 23 80
------- ------- ------- -------
(55) (32) (166) (117)
------- ------- ------- -------
Earnings (loss) before income
tax ........................... (194) 53 (8) 145
Income tax expense .............. -- -- -- --
------- ------- ------- -------
Net earnings (loss) ............. (194) 53 (8) 145
======= ======= ======= =======
Earnings (loss) per common
share ......................... (.05) .01 -- .04
======= ======= ======= =======
See accompanying notes to financial statements.
- 5 -
RADVA CORPORATION
Statements of Cash Flows
Nine Months Ended September 30
(In Thousands)
2002 2001
----- -----
Cash flows from operating activities:
Net income ................................... $ (8) $ 145
----- -----
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation .............................. 441 500
Amortization .............................. 41 38
Loss (Gain) on sale of equipment .......... (12) (32)
Change in assets and liabilities:
Decrease (Increase) in net receivables ... 371 334
Decrease (Increase) in inventories ....... (37) (93)
Decrease (Increase) in prepaid expenses .. 63 (75)
Decrease (Increase) in other current
assets ................................ -- (7)
Decrease (Increase) in other assets ...... (379) (187)
Increase (Decrease) in accounts payable .. (378) (189)
Increase (Decrease) in accrued expenses .. (20) 5
----- -----
Total adjustments ........................ 90 294
----- -----
Net cash from operating activities ..... 82 439
----- -----
Cash flows from investing activities:
Proceeds from sale of property and
equipment .................................. 58 --
Capital expenditures for equipment and other
long-term assets ........................... (137) (27)
----- -----
Net cash from investing activities ..... (79) (27)
----- -----
Cash flows from financing activities:
Proceeds from notes payable .................. 102 335
Principal payments under long-term debt ...... (122) (741)
----- -----
Net cash from financing activities ..... (20) (406)
----- -----
Net increase (decrease) in cash ................. (17) 6
Cash at January 1 ............................... 70 11
----- -----
Cash at September 30 ............................ $ 53 $ 17
===== =====
See accompanying notes to financial statements.
- 6 -
RADVA CORPORATION
Notes to Financial Statements
September 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........................ 3,103,407
Machinery and equipment........................... 5,418,049
Transportation equipment.......................... 372,130
Office equipment.................................. 316,606
----------
$9,379,757
==========
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 146,347
Other............................................. 84,245
----------
$ 230,592
==========
(4) Notes Payable
Demand note, collateralized by certain
accounts receivable and inventory,
interest at prime plus 2%......................... $1,280,565
----------
$1,280,565
==========
(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 September 30, 2002);
collateralized by all of the company's
assets ........................................... 1,964,685
Installment note payable to bank, due in monthly
installment of $17,402, including interest at
prime plus 2.25% (7.00% at September 30, 2002);
collateralized by all of the company's
assets ........................................... 1,354,290
Installment note payable to bank, due in monthly
installments of $527, including interest at 9.5%;
collateralized by
equipment ........................................ 12,342
----------
Total long-term debt ............................. 3,331,317
Less current installments of long-term debt ...... 152,662
----------
Long-term debt, excluding current installments ... $3,178,655
==========
- 7 -
Item 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations - Nine months Ended September 30, 2002
Compared to Nine Months Ended September 30, 2001
The Company incurred a net loss of $8000 for the nine months ended September 30,
2002 compared to having earned $145,000 for the nine months ended September 30,
2001. A significant portion of this $153,000 swing in net income can be
attributed to the development of a new product which management believes will
contribute positive cash flow and income in the near future. Including expensed
research and development costs, the Company incurred losses of $133,000 for the
nine months ended September 30, 2002 compared to losses of $33,000 for the nine
months ended September 30, 2001 in the development of this new product. Interest
and other income were down $116,000, only partly offset by a reduction in
interest expense of $67,000, which can account for another $49,000 swing in net
income for the nine months ended September 30, 2002 compared to the same period
of the prior year.
Cost of sales, as a percentage of manufacturing revenues, decreased 2.4%, from
75.2% for the nine months ended September 30, 2001 to 72.8% for the nine months
ended September 30, 2002. A primary contributor to this reduction is the result
of a change in terms of sales from FOB shipping point to FOB destination. This
change in terms is also the primary cause of a corresponding increase in
shipping and selling expenses of 1.8% of manufacturing revenues.
Results of Operations - Three Months Ended September 30, 2002
Compared to Three Months Ended September 30, 2001
The Company incurred a net loss of $194,000 for the quarter ended September 30,
2002 compared to having earned net income of $53,000 for the quarter ended
September 30, 2001. A significant portion of this $247,000 swing in net income
is attributable to the development of the new product noted in the nine month
comparison above. Including expensed research and development costs, the Company
incurred losses of $92,000 in the third quarter of 2002 compared to losses of
$10,000 in the third quarter of 2001 in the development of this new product.
Interest costs and other income were each reduced in the current quarter
compared to the third quarter of 2001, accounting for $23,000 of the increased
losses. The remainder of the $247,000 swing in net income was the result of
reduced sales and increased cost in the Company 's shape molding operations,
primarily at the Company's Radford Virginia plant.
Cost of sales, as a percentage of manufacturing revenues, increased 5.8%, from
74.4% in the third quarter of 2001 to 80.2% in the third quarter of 2002. This
cost increase was the result of lower sales, increased cost of raw materials,
and a change in sales mix, primarily impacting the Radford Virginia plant.
Shipping and selling expenses increased $47,000 in the current quarter compared
to the third quarter of 2001. This increase is primarily the result of a $57,000
increase in freight out at the Company's Portsmouth plant, offset by increased
sales prices, due to a change in selling terms.
General and administrative expenses increased $14,000, in the current quarter,
compared to the third quarter of 2001. This increase was primarily the result of
non-recurring adjustments reducing costs in August of 2001.
- 8 -
Liquidity and Capital Resources
At September 30, 2002, the balance available on the Company's $1,500,000 line of
credit was $171,217 and working capital was $(18,000). 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, 2000.
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
Assistant Secretary/Treasurer
November 14, 2002
- 9 -
CERTIFICATIONS
--------------
I, Luther I. Dickens, Chief Executive Officer, Radva Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Radva Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date");
(c) and presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
10
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
/s/ Luther I. Dickens
-------------------------------------------
Luther I. Dickens
Chief Executive Officer
11
CERTIFICATIONS
--------------
I, William F. Fry, Vice President-Chief Financial Officer of Radva Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Radva Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(c) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(d) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date");
(c) and presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
12
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
/s/ William F. Fry
-----------------------------------------
William F. Fry
Vice President-Chief Financial Officer
13
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Radva Corporation (the "Company") on
Form 10-Q for the period ended September 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), each of the
undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 19 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: November 14, 2002 /s/ Luther I. Dickens
-------------------------------------------
Luther I. Dickens
Chief Executive Officer
Date: November 14, 2002 /s/ William F. Fry
-----------------------------------------
William F. Fry
Vice President-Chief Financial Officer
14