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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, 2003 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
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At July 31, 2003, 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 ACCOUNTANTS' REPORT 3
Item 1. Financial Statements
Balance Sheets,
December 31, 2002 and June 30, 2003 4
Statements of Operations, Three Months
and Six Months Ended June 30, 2002 and
June 30, 2003 5
Statements of Cash Flows, Six Months
Ended June 30, 2002 and June 30, 2003 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
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PERSINGER & COMPANY, L.L.C.
Certified Public Accountants
203 W. Grayson Street
PO Box 797
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 June 30, 2003, and the related consolidated
statements of income and cash flows for the six-month period ended June 30,
2003. 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.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of RADVA Corporation and subsidiary as
of December 31, 2002, and the related consolidated statement of income,
stockholders? equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 22, 2003, 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, 2002 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
Persinger & Co. LLC
Galax, Virginia
August 12, 2002
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RADVA CORPORATION
Balance Sheets
(In Thousands)
June 30 December 31
ASSETS 2003 2002
-------- -----------
Current assets:
Cash .................................. $ 257 $ 108
-------- --------
Accounts and notes receivable ......... 1,221 1,581
Other accounts receivable ............. 110 171
Less allowance for doubtful accounts .. 72 57
-------- --------
Net receivables ....................... 1,259 1,695
-------- --------
Inventories:
Finished goods ...................... 865 782
Raw materials and supplies .......... 387 259
-------- --------
Total inventories ................... 1,252 1,041
-------- --------
Prepaid expenses ...................... 2 78
-------- --------
Total current assets ............ 2,770 2,922
-------- --------
Property, plant & equipment, at cost ..... 9,600 9,404
Less accumulated depreciation ......... 5,897 5,639
-------- --------
Net property, plant & equip ..... 3,703 3,765
-------- --------
Investment in Thermasteel Corporation .... 558 558
Patents and other intangibles ............ 573 70
Trademark, manufacturing, and marketing
rights ................................ -- 395
Note receivable-noncurrent ............... 2,613 2,550
Other assets ............................. 208 312
-------- --------
$ 10,425 $ 10,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 153 $ 165
Notes payable ......................... 1,344 1,475
Accounts payable ...................... 674 852
Accrued expenses ...................... 204 164
-------- --------
Total current liabilities ...... 2,375 2,656
--------
Accrue long-term expenses ................ 63 63
Long-term debt, excluding current
installments .......................... 3,055 3,128
-------- --------
Total Liabilities ............... 5,493 5,847
-------- --------
Minority interest ........................ 160 --
-------- --------
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 .......... 124 40
Additional paid-in capital ............ 4,735 4,735
Retained earnings ..................... (93) (56)
-------- --------
Total stockholders' equity ... 4,772 4,725
-------- --------
$ 10,425 $ 10,572
======== ========
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
------------------------- -------------------------
2003 2002 2003 2002
------- ------- ------- -------
Net Revenues:
Manufacturing net revenues ... $ 2,253 2,380 5,039 4,616
------- ------- ------- -------
Cost and expenses:
Cost of sales ................ 1,677 1,614 3,766 3,198
Shipping and selling ......... 265 243 570 455
General and administrative ... 313 328 600 644
R&D .......................... 34 22 53 22
------- ------- ------- -------
2,289 2,207 4,989 4,319
------- ------- ------- -------
Operating income (loss) ...... (36) 173 50 297
------- ------- ------- -------
Other income (deductions):
Interest expense ............. (73) (94) (149) (199)
Interest income .............. 32 32 63 69
Other ........................ 9 16 11 19
------- ------- ------- -------
(32) (46) (75) (111)
------- ------- ------- -------
Earnings (loss) before income tax
and minority interest ........ (68) 127 (25) 186
Minority interest ............... 6 -- 6 --
Income tax expense .............. -- -- -- --
------- ------- ------- -------
Net earnings (loss) ............. (62) 127 (19) 186
======= ======= ======= =======
Earnings (loss) per common share (.02) .03 -- .05
======= ======= ======= =======
See accountants' report and accompanying notes to financial statements.
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RADVA CORPORATION
Statements of Cash Flows
Six Months Ended June 30
(In Thousands)
2003 2002
----- -----
Cash flows from operating activities:
Net income (loss) ............................ $ (19) $ 186
----- -----
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation .............................. 258 292
Amortization .............................. 4 28
Loss (Gain) on sale of land ............... -- (11)
Change in assets and liabilities:
Decrease (Increase) in net receivables ... 436 351
Decrease (Increase) in inventories ....... (211) (46)
Decrease (Increase) in prepaid expenses .. 76 58
Decrease (Increase) in other current
assets ................................ -- (2)
Decrease (Increase) in other assets ...... (71) (361)
Increase (Decrease) in accounts payable .. (178) (327)
Increase (Decrease) in accrued expenses .. 40 (53)
----- -----
Total adjustments ........................ 354 (71)
----- -----
Net cash from operating activities ..... 335 115
----- -----
Cash flows from investing activities:
Increase in minority interest ................ 244 --
Proceeds from sale of property and equipment . -- 57
Capital expenditures for equipment and other
long-term assets ........................... (196) (98)
----- -----
Net cash from investing activities ..... 48 (41)
----- -----
Cash flows from financing activities:
Dividends paid ............................... (18) --
Proceeds from notes payable .................. 107 14
Principal payments under long-term debt ...... (323) (85)
----- -----
Net cash from financing activities ..... (234) (71)
----- -----
Net increase (decrease) in cash ................. 149 3
Cash at January 1 ............................... 108 70
----- -----
Cash at June 30 ................................. $ 257 $ 73
===== =====
See accountants' report and accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
June 30, 2003
(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........................ 3,135,018
Machinery and equipment........................... 5,605,092
Transportation equipment.......................... 372,130
Office equipment.................................. 318,170
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$9,599,975
==========
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits...................... $ 159,478
Other................................................ 44,966
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$ 204,444
==========
(4) Notes Payable
Line of credit with commercial bank, collateralized
by certain accounts receivable and inventory,
interest at prime plus 2 1/4%.................... $1,343,614
==========
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RADVA CORPORATION
Notes to Financial Statements
June 30, 2003
(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 June 30, 2003); collateralized
by all of the company's assets. $1,930,968
Installment note payable to bank, due in monthly
installment of $17,402, including interest at prime
plus 2.25% (6.25% at June 30, 2003); collateralized
by all of the company's assets. 1,269,564
Installment note payable to bank, due in
monthly installments of $527, including
interest at 9.5%; collateralized
by equipment 7,890
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Total long-term debt 3,208,422
Less current installments of long-term debt 153,284
----------
Long-term debt, excluding current installments $3,055,138
==========
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2003
The Company incurred a net loss of $19,000 in the first six months of 2003
compared to net income of $186,000 in the first six months of 2002. This
deterioration in operating results occurred in spite of a $423,000 increase in
revenues from $4,616,000 for the six months ended June 30, 2002 to $5,039,000
for the six months ended June 30, 2003.
Cost of sales, as a percent of manufacturing revenues, was up 5.4%, from 69.3%
for the six months ended June 30, 2002 to 74.7% for the six months ended June
30, 2003. The most significant factors contributing to this increase in cost of
sales were a 6.68% increase in raw material costs and a 2.76% increase in the
cost of gas and oil as a percent of production.
Shipping and selling expenses were up $115,000 for the first half of 2003. This
increase was due to a combination of factors, including: 1)increased freight out
costs of $67,000 at the Portsmouth plant resulting from a change forom FOB
shipping point to FOB destination terms, 2) increased cost of warehouse labor of
$34,000 and 3) increased cost of truck lease and gasoline cost at the Radford
plant of $20,000 due to additional leased equipment.
The $44,000 decrease in general and administrative expenses primarily resulted
from reduced expenses at the company's 80% owned subsidiary, Triter Corporation,
as compared to the Triter Division in 2002.
Interest was down $50,000 as a result of reductions in the prime interest rate
on which virtually all the Company's notes payable are based and reduced note
balances on which interest in assessed.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 2003
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, 2002 compared to the three months ended June 30, 2003. Revenues were down
$127,000 which is felt by management to be a result of continued depressed
conditions in the countries manufacturing sector. However, profits decreased
$189,000 in the second quarter, from $127,000 for the three months ended June
30, 2002 to a loss of $62,000 for the three months ended June 30, 2003.
Cost of sales, as a percentage of manufacturing revenues, was up 5.6%, from
68.8% for the quarter ended June 30, 2002 to 74.4% for the quarter ended June
30, 2003. This increase was primarily a result of a increases in the cost of
natural gas and raw materials of 2.92% and 5.67%, respectively.
FUNDING OF NEW SUBSIDIARY
The most significant development in 2003 has been the funding of a new
subsidiary, Triter Corporation. In March 2003, the Company's new subsidiary,
Triter Corporation, received $250,000 for 20% minority interest in that
corporation. Radva Corporation transferred $586,349 in patents and other
intangible assets, in addition to $12,156 in inventories and equipment, for its
remaining 80% interest in Triter Corporation.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, the balance available on the Company's $1,500,000 line of
credit was $156,386 and working capital was $395,000. Management believes that
cash flow will be adequate to satisfy 2003 needs.
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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, 2002.
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.
(a) Exhibits
31.1 Section 302 Certification of the Chief Executive Officer
31.2 Section 302 Certification of the Vice President-Chief
Financial Officer
32 Section 906 Certification
(b) 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, 2003
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