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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
Commission file number 0-15464
RADVA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0715892
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Drawer 2900 First Street Station
Radford, Virginia 24143
(540) 639-2458
--------------------------------------------------
Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
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 (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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (par. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
[ ]
Indicate by check mark whether the registration is an accelerated filer (as
defined in Exchange Act Rule 12b-2)
Yes No X
--- ---
Aggregate market value of voting stock held by non-affiliates of the registrant
as of March 18, 2005 (see ITEM 5 for explanation of calculation): $ 577,816
----------
Number of shares of common stock outstanding as of March 18, 2005: 3,987,987
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant's proxy
statement for its annual meeting of stockholders scheduled for May 26, 2005.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
RADVA Corporation (the "Company") was organized in 1962 as a Virginia
corporation to engage in the production of molded and fabricated products from
expandable polystyrene. Historically, the Company has specialized in the
production of customized expanded polystyrene packaging materials used to
protect products during shipment; however, the Company developed a composite
building panel produced from expanded polystyrene and steel which it sold under
the trademark THERMASTRUCTURE. During 1998, the Company sold 95% of its assets
and interest in the composite building panel system. These assets were then
transferred to a newly organized company, ThermaSteel Corporation, which
continues to market the system worldwide. During 2002, the Company reacquired an
additional 5% interest in Thermasteel Corporation, bringing its interest in
Thermasteel Corporation to 10%. The Company also has a subsidiary, Triter
Corporation, which was formed for the purpose of making the triterine. In March
2003, the Company transferred its patents into Triter Corporation and sold 20%
interest in Triter Corporation for $250,000 for the purpose of obtaining funds
necessary for the continued development of the product.
PROTECTIVE PACKAGING PRODUCTS
RADVA is an industry leader in the design and manufacture of shape molded and
fabricated foam products for material handling, protective packaging, specialty
designs, point of purchase displays, insulated shipping containers, and a
variety of other needs. RADVA products are used in businesses as varied as
consumer electronics, seafood, and furniture.
RADVA's shape molded product line includes a variety of flexible and rigid,
molded and fabricated items from foam resins. RADVA products are offered as
custom-fabricated solutions to customer needs, and as standard shapes and
containers. All products share the same high quality of manufacture.
More than 400 customers, including many Fortune 500 firms, count on RADVA
solutions to help them meet their own customer's needs in a quick,
cost-effective manner.
When RADVA was incorporated in 1962, its primary production material was
expanded polystyrene (EPS). EPS remains a significant base material because of
its low cost and relatively low environmental impact. However, RADVA products
also use a variety of other materials, depending upon the customer's need.
Common materials include ARCEL (R), GECET(R), R-MER(R), EPP and EPE, PE and PU
and thermoformed PVC and styrene.
RADVA is headquartered in Radford, Virginia, and has manufacturing facilities in
Radford and Portsmouth, Virginia. These locations are within a day's drive of 75
percent of the U.S. market. Each facility includes more than 75,000 square feet
of manufacturing and warehouse space with additional off-site warehousing. More
than 30 molding presses, including new, highly efficient Kurtz & Hirsch machines
enable RADVA to meet strict customer requirements quickly and with consistent
high quality. Complete prototype and drop testing capabilities, a tool and die
shop, and very strong supplier relationships enable the firm to develop
creative, cost-effective solutions for customers.
RAW MATERIALS AND SUPPLIERS
The principal raw material used by the Company in the production of protective
packaging products is expandable polystyrene resin. This material may be
obtained from several major suppliers. In addition, the Company uses several
copolymer resins in the manufacture of engineered expanded foam protective
packaging. Although the copolymer resins currently used by the Company are only
available from one supplier, similar copolymer resins may be obtained from other
suppliers.
2
PATENTS AND TRADEMARKS
The Company holds a patent for a new construction material which the Company
plans to market in the future. The Company pursues a policy of filing for
patents on any product development that it considers to be significant.
SEASONALITY
The Company ordinarily experiences a reduction in the manufacture and sale of
protective packaging products during the winter months after filling holiday
season orders. The demand for building products is affected by the level of
activity in the construction industry and housing market and can be expected to
decrease during the fall and winter seasons when there has historically been a
decrease in construction activity and housing sales.
CUSTOMERS
The Company's protective packaging business has a broad base of customers;
however, one customer accounted for approximately 11.7% of protective packaging
revenues in 2004.
BACKLOG
The Company had approximately $872,000 in backlog orders for protective
packaging products as of December 31, 2004, compared to backlog orders of
approximately $781,000 as of December 31, 2003. Although the Company believes
that such backlog orders are firm, the purchase orders for protective packaging
products generally may be canceled without cause by the customer. The Company
expects to fill all of these orders during 2005.
COMPETITION
The protective packaging business is highly competitive, and some of the
Company's competitors are large and have greater financial and other resources
than the Company. The Company's competition in protective packaging products is
primarily from four local and regional manufacturers with plants within or close
to the Company's market area. The principal elements of competition in the sale
of protective packaging products are price and the ability to service customers.
The Company believes that its technical design facility gives it an advantage
over competitors within its market area.
RESEARCH AND DEVELOPMENT
The Company maintains a laboratory and testing facility within its manufacturing
plant in Radford, Virginia. The laboratory and testing facilities, which consist
of 2,000 square feet is used for product testing, development of new products,
and quality control evaluations.
REGULATION
The Company is subject to state and federal laws and regulations affecting its
business, including those promulgated under the Occupational Safety and Health
Act ("OSHA") and by the Environmental Protection Agency. The Company's
manufacturing facilities are subject to compliance with comprehensive OSHA
standards. The Company believes that its manufacturing facilities and processes
are currently in compliance with OSHA and does not anticipate capital
expenditures for environmental control facilities or for compliance with OSHA
standards during 2005. The Company does not believe that its compliance with
federal and state environmental regulations has had or will have a material
effect on its capital expenditures, earnings, or competitive position.
EMPLOYEES
The Company employs approximately 85 persons. None of the Company's employees is
represented by a labor union, and the Company believes that its employee
relations are good.
3
EXECUTIVE OFFICERS
The following table identifies and sets forth certain information about the
executive officers of the Company
NAME AGE POSITION AND YEAR OF ELECTION
---- --- -----------------------------
Luther I. Dickens 72 Chief Executive Officer (1998)
Stephen L. Dickens 47 President and Chief Operations Officer (1998)
William F. Fry 65 Chief Financial Officer (1989)
Michael R. Samples 52 Vice President, Manufacturing (1999)
ITEM 2. PROPERTIES
REAL ESTATE
The real estate owned or leased by the Company and used in the Company's primary
business operations is described below.
(1) The Company owns approximately 10 acres of land in Radford, Virginia, and a
71,000 square foot building located on the Radford property. The building
includes approximately 5,000 square feet of office space and approximately
66,000 square feet of manufacturing space. The Radford property is subject to
deeds of trust which had outstanding balances as of December 31, 2004
aggregating approximately $2,941,994.
(2) The Company owns approximately 7 acres of land in Portsmouth, Virginia, and
a 74,000 square foot building located on the Portsmouth property. The building
includes approximately 2,000 square feet of office space and approximately
42,000 square feet of manufacturing space. The Portsmouth property is subject to
the same deed of trust referred to in (1) above which had an outstanding balance
as of December 31, 2003 of approximately $2,941,994.
(3) The Company rents approximately 6,000 square feet of office space in
Radford, Virginia, under a lease which requires monthly rental payments of
$3,700.
PERSONAL PROPERTY AND EQUIPMENT
The personal property and equipment at the main Radford plant and the Portsmouth
plant consist principally of machinery and equipment used to produce expanded
polystyrene products.
The Company owns 2 trucks and 14 trailers and leases 2 tractors which are used
to ship products to customers. The Company owns 1 van and 7 cars which it uses
principally for sales and sales service functions. The Company believes that its
present equipment is adequate, well maintained, and in good operating condition.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
4
PART II
STOCK INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET AND PRICE INFORMATION
The Company's common stock, par value $.01 per share (the "Common Stock"), has
been traded in the over-the-counter market since June 1986. The following table
provides the high and low bid quotations with respect to shares of the Common
Stock for the periods indicated as reported by the Dow Jones Historical Stock
Quote Reporter Service.
2004 2003 2002
---- ---- ----
High Low High Low High Low
---- --- ---- --- ---- ---
First
Quarter .42 .25 .22 .18 .30 .20
Second
Quarter .55 .31 .30 .15 .30 .22
Third
Quarter .50 .43 .24 .18 .35 .20
Fourth
Quarter .55 .35 .45 .23 .22 .15
The foregoing quotations of high and low bid prices represent prices between
dealers and do not include retail mark-up, mark-down, or commissions. They do
not necessarily represent actual transactions. There was no established public
trading market for the Common Stock before June 1986.
The aggregate market value of the voting stock held by non-affiliates of the
Company as of March 18, 2005 shown on the facing page of this report was
calculated as follows: the number of shares beneficially owned by the officers
and directors of the Company as a group as of March 18, 2005 was subtracted from
3,987,987, the total number of shares outstanding on that date, and the
resulting figure was multiplied by $.33, the average of the bid and asked prices
of the Company's stock in the over-the-counter market on March 18, 2005. The
foregoing calculation should not be deemed an admission that any of the officers
or directors of the Company is an "affiliate" of the Company.
NUMBER OF STOCKHOLDERS
As of March 18, 2005 there were 277 record holders of the Common Stock.
DIVIDENDS
The Company has not declared cash dividends on the Common Stock during its three
most recent fiscal years. The declaration and payment of dividends is entirely
within the discretion of the Board of Directors of the Company and will depend
upon the earnings, capital requirements, and financial condition of the Company.
The Company anticipates that it will retain earnings for the next several years
to finance the development of its business.
5
ITEM 6. SELECTED FINANCIAL DATA
SELECTED STATEMENTS OF
OPERATIONS DATA:
Years Ended December 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(Dollar amounts in thousands except per share data)
Net Revenues $ 8,236 $ 9,618 $ 9,352 $ 9,629 $ 10,077
Income (loss) before
income taxes,
extraordinary items,
and minority interest (849) (145) 170 (24) (1,035)
Minority interest in subsidiary 26 28 -- -- --
Net income (loss) (822) (117) 170 321 (1,035)
Net income (loss) per
common share (.21) (.03) .04 .08 (.26)
SELECTED BALANCE
SHEET DATA:
Years Ended December 31,
-------------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(Dollar amounts in thousands)
Working capital $ 9 $ 356 $ 266 $ 158 $ (800)
Net property, plant,
and equipment 3,238 3,540 3,765 4,242 4,844
Total assets 9,450 9,791 10,116 10,063 10,943
Long-term debt (including
current maturities) 3,074 3,216 3,292 3,454 4,202
Stockholders' equity 3,667 4,119 4,270 4,112 3,533
SELECTED QUARTERLY
INCOME(LOSS) DATA:
Quarters Ended in 2004
--------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- ------
(Dollar amounts in thousands)
Net sales $ 2,411 $ 1,613 $ 1,987 $ 2,225
Gross profit 493 232 165 409
Earnings (loss) per share .01 (.06) (.08) (.07)
Quarters Ended in 2003
--------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- ------
(Dollar amounts in thousands)
Net sales $ 2,786 $ 2,253 $ 2,246 $ 2,333
Gross profit 697 576 394 581
Earnings (loss) per share .01 (.02) (.05) .03
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that certain items in
the statements of operations bear to the net revenues of the Company for each
year during the five-year period ended December 31, 2004.
Year Ended December 31
------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Manufacturing net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Cost and expense:
Cost of sales 84.2% 76.6% 72.0% 75.5% 86.4%
Shipping and sales 10.7% 11.2% 10.4% 8.7% 9.2%
General and administrative 13.0% 11.4% 13.3% 13.0% 12.4%
Research and development 1.1% 1.4% 1.2% 1.1% 0.0%
----- ----- ----- ----- -----
109.0% 100.6% 96.9% 98.3% 108.0%
----- ----- ----- ----- -----
Operating income (loss) (9.0%) (0.6%) 3.1% 1.7% (8.0%)
----- ----- ----- ----- -----
Other income (deductions)
Interest expense (3.1%) (3.2%) (4.0%) (4.9%) (5.2%)
Interest income 1.7% 1.4% 1.4 % 1.9% 2.2%
Loss on worthless investment (0.7%) 0.0% 0.0% 0.0% 0.0%
Other .8% 0.9% 1.2% 0.4% 0.3%
----- ----- ----- ----- -----
(1.3%) (0.9%) (1.4%) (2.6%) (2.7%)
----- ----- ----- ----- -----
Income (loss) before income
taxes, extraordinary gain,
and minority interest in subsidiary (10.3%) (1.5%) 1.8% (0.3%) (10.3%)
Income tax expense 0.0% 0.0% 0.0 % 0.0% 0.0%
Minority interest in subsidiary 0.3% 0.3% 0.0% 0.0% 0.0%
Extraordinary gain 0.0% 0.0% 0.0% 3.6% 0.0%
----- ----- ----- ----- -----
Net income (loss) (10.0%) (1.2%) 1.8% 3.3% (10.3%)
===== ===== ===== ===== =====
7
2004 COMPARED TO 2003
In the past, the Company reported capitalized amounts on its audited financial
statements as trademark, marketing and manufacturing rights of $395,000, net of
accumulated amortization. Although management felt strongly that these costs had
been treated properly, the Securities and Exchange Commission took a position
this year that these costs should have been expensed in 1998. Accordingly, these
costs are shown as a prior period adjustment for purposes of providing
comparative financial data to the Company's 2004 financial statements.
The Securities and Exchange Commission also took the position that $121,000
capitalized and reported on the Company's prior financial statements as other
non-current assets should have been expensed. Even though management also felt
that its treatment of these costs had been proper, these amounts are treated in
the same manner as the $395,000 noted above.
The above costs capitalized in prior years, but now being expensed, relate to a
new product transferred to the Company's 80% owned subsidiary, Triter
Corporation, created in 2003. Triter Corporation has successfully completed the
development stage of this product, evidenced by building code approvals obtained
in 2004 and management is very optimistic regarding the Company's ability to
begin successfully marketing this product in the near future.
Revenues decreased $1,382,000, from $9,618,000 in 2003 to $8,236,000 in 2004.
This reduction of revenues of 14.4% was the result of the Company having lost
its largest customer, which had accounted for 37.8% of revenues in 2003. Note
that the reduction would have been far larger had the Company not been able to
replace some of these lost sales. The customer was lost due to that customer
having closed its operations being serviced by the Company. This loss of
revenue, coupled with rapidly rising cost of energy and raw materials was the
primary cause of the increased loss of $822,000 in 2004 compared to a loss of
$117,000 in 2003.
Cost of sales, as a percent of revenues, was up 7.6% from 76.6% in 2003 to 84.2%
in 2004. The primary cause of this increased cost percentage was the sharp
reduction in revenues in relation to fixed cost. For example, the Portsmouth,
Virginia plant, which suffered the loss of the major customer, had an increased
depreciation component of cost of sales by 2.9%, even though actual depreciation
in Portsmouth decreased by $26,000. The cost of natural gas, which the Company
uses to fire its boilers, increased from 4.8% of production to 8.0% of
production at the Portsmouth plant. The sharp increase in the cost of raw
materials contributed to a 6.7% increased cost of production at the Company's
Radford, Virginia plant.
Shipping and selling expense was little changed at the Company's Radford plant
even though sales increased at the Radford plant by $733,000. Selling expense at
the Portsmouth plant increased only by $5,000, however shipping expenses at this
plant increased by $210,000. The large reduction in sales at the Portsmouth
plant was due to the loss of a major customer for which the Company paid no
sales commission, therefore having little effect on total selling expense. The
sharp increase in shipping cost at the Portsmouth plant, however, was primarily
due to shipping greater distances during the phase out of sales to the major
customer. The Company elected to pay the increased shipping cost to continue
these sales longer than would have otherwise been possible.
General and administrative expenses were reduced $29,000, from $1,098,000 in
2003 to $1,069,000 in 2004. The most significant changes within general and
administrative expenses were the write off of loan cost of $40,000 and an
account receivable of $50,000 offset by salary reductions of $83,000 and reduced
cost of officer's life insurance of $21,000 in 2004. The write off of loan cost
resulted from the Company's change of banks for the source of its line of
credit.
The loss reported for 2004 and the failure to meet the credit line covenants
have resulted in the opinion letter of our audit firm, according to audit
guidelines, adding the statement that these conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management believes
that, as the result of a strong first quarter in both sales and profits, the
Company is a viable going concern.
8
Failure to meet the covenant terms of our credit line has resulted in a default;
however, if payment in full is requested, Radva's present accounts receivable
balance is sufficient to reduce the credit line to a zero balance in a
reasonable period by the normal collection of the receivables. The time would be
even shorter than that if the CD pledged as collateral was applied to the credit
line balance. This situation, should it occur, would leave RADVA with a more
than adequate collateral base to secure a credit line with another entity,
although it may be at a higher interest rate.
2003 COMPARED TO 2002
Although revenue increased $266,000 from $9,352,000 in 2002 to $9,618,000 in
2003, the Company incurred a loss of $66,000 in 2003 compared to having reported
a net profit of $126,000 for 2002. This deterioration in operations in 2003 was
primarily the result of a write down of inventories of approximately $65,000 and
rising costs of natural gas and raw materials without a commensurate increase in
sales prices.
Cost of sales, as a percent of revenues, was up 4.6% from 72.0% in 2002 to 76.6%
in 2003. As stated above, inventories were written down approximately $65,000
and natural gas and raw material prices were up sharply. Natural gas cost for
the Company's Radford and Portsmouth plants increased $148,000 and $113,000,
respectively, accounting for approximately one half of the percentage increase
in cost of sales. Direct materials accounted for approximately another 5.8%
increase in cost of sales, offset by a reduction of labor and supervision cost
on increased sales, reducing the percentage increase in cost of sales by
approximately two percent.
Shipping and selling expenses increased $100,000 or from 10.4% of revenues in
2002 to 11.2% in 2003. This increase was due to a combination of factors,
primarily increased freight out costs of $53,000 at the Portsmouth plant
resulting from a change in sales mix and a change in shipping terms and
increased cost of warehouse labor of $75,000.
General and administrative expenses decreased $202,000 as a result of many
factors. Amortization decreased by $48,000 due to a change in generally accepted
accounting principles. Bad debts, salaries, depreciation and travel were down a
total of $81,000, all about equally.
2002 COMPARED TO 2001
Although net income in 2001, aided by an extraordinary gain of $345,000, was
higher than 2002 by $151,000, the Company's operating income doubled in 2002,
from $124,000 in 2001 to $246,000 in 2002. This increase in operating income was
achieved in spite of a decrease in sales of $278,000. Other income increased due
to the Company having provided $100,000 in managerial services to Thermasteel
Corporation in which the Company has a ten percent ownership interest.
Cost of sales, as a percentage of manufacturing revenues, decreased 3.5%, from
75.5% in 2001 to 72.0% in 2002. The most significant factor contributing to this
decrease in cost percentage was a reduction of the cost of gas and oil of
$309,000.
Shipping and selling expenses, as a percentage of manufacturing revenues,
increased 1.7%, from 8.7% in 2001 to 10.4% in 2002. Freight costs were greater
in 2002 by $239,000 due to a change in some shipping terms from FOB shipping
point to FOB destination. Partly offsetting the increase in freight costs were
reductions in sales salaries and commissions at the Company's Portsmouth plant
of $40,000 and a reduction of driver and shipping labor at the Company's Radford
plant by $51,000.
General and administrative and research and development expenses were little
changed from 2001 to 2002. The research and development expenses are incurred in
the development of a new product, triterine, referenced in the Annual Report
letter which is unrelated to the Company's primary packaging business.
IMPACT OF INFLATION
A significant increase in the rate of inflation and a concomitant increase in
interest rates could adversely affect the Company since a large portion of the
Company's indebtedness is linked to the prime interest rate.
9
LIQUIDITY AND CAPITAL RESOURCES
A major refinancing of the Company was accomplished in 2001 which resulted in
longer amortization of the Company's long-term debt. Working capital decreased
$347,000 from $356,000 at December 31, 2003 to $9,000 at December 31, 2004. The
Company had $96,000 available on its line of credit at year-end.
The following table aggregates the Company's material expected contractual
obligations and commitments as of December 31, 2004:
Obligations by period (in thousands)
Contractual obligations 2005 2006-2007 2008-2009 Beyond 2009 Total
- ----------------------- ---- --------- --------- ----------- -----
Principal on long-term debt(1) 202 451 451 1,970 3,074
Interest on long-term debt 222 398 331 1,098 2,049
Operating lease commitments 44 89 44 -- 177
--- --- --- ----- -----
Total 468 938 826 3,068 5,300
(1)Includes current maturities
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Reports........................................... 15
Balance Sheets as of December 31, 2003 and 2002......................... 16-17
Statements of Operations for the Years Ended
December 31, 2003, 2002, and 2001.................................... 18-19
Statements of Stockholders' Equity for the Years
Ended December 31, 2003, 2002, and 2001.............................. 20
Statements of Cash Flows for the Years
Ended December 31, 2003, 2002, and 2001.............................. 21-22
Notes to Financial Statements as of December 31,
2003, 2002, and 2001................................................. 23-37
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule V - Property, Plant and Equipment............................. 38
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant, and Equipment....................... 39
Schedule VIII - Valuation and Qualifying Accounts....................... 40
11
PERSINGER & COMPANY, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
203 W. GRAYSON STREET TEL. (276) 236-8135
PO BOX 797 FAX (276) 236-0797
GALAX, VA 24333
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and
Stockholders of RADVA Corporation
We have audited the consolidated financial statements and the consolidated
financial statement schedules of RADVA Corporation and subsidiary as of December
31, 2004 and 2003, and for the each of the years in the three-year period ended
December 31, 2004 as listed in the accompanying index. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 22 to the consolidated financial statements, the Company
has restated its 2003 and 2002 financial statements to conform with accounting
principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RADVA Corporation
and subsidiary as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company incurred a net loss of $822,382 during the
year ended December 31, 2004, and, as of that date, had depleted its working
capital down to $9,023. As described more fully in Note 9 to the consolidated
financial statements, the Company is in violation of the financial covenants in
its line of credit of agreement, which causes the balance to become due on
demand. Those conditions raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Galax, Virginia
January 28, 2005
12
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
---------- ----------
(RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ 88,182 $ 251,456
---------- ----------
Restricted cash due to line of credit agreement 250,801 --
---------- ----------
Accounts receivable 1,207,643 1,157,452
Note receivable - current 100,000 50,000
Receivable - other 67,957 244,560
Less allowance for doubtful accounts 44,295 112,552
---------- ----------
Net receivables 1,331,305 1,339,460
---------- ----------
Inventories:
Finished goods 593,586 722,637
Work-in-process 3,980 --
Raw materials and supplies 352,678 343,367
---------- ----------
Total inventories 950,244 1,066,004
---------- ----------
Prepaid expenses 41,270 70,569
---------- ----------
Total current assets 2,661,802 2,727,489
---------- ----------
Property, plant and equipment, at cost 9,874,080 9,708,634
Less accumulated depreciation and amortization 6,636,184 6,168,566
---------- ----------
Net property, plant and equipment 3,237,896 3,540,068
---------- ----------
Other assets:
Investment in Thermasteel 558,065 558,065
Note receivable - long-term 2,714,843 2,630,803
Other 277,533 334,762
---------- ----------
3,550,441 3,523,630
---------- ----------
$9,450,139 $9,791,187
========== ==========
continued
13
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
2004 2003
----------- -----------
(RESTATED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 202,206 $ 200,084
Notes payable:
Line of credit 903,653 1,186,360
Related parties 224,012 21,308
Accounts payable 1,204,215 841,948
Accrued expenses 118,693 121,347
----------- -----------
Total current liabilities 2,652,779 2,371,047
----------- -----------
Long-term liabilities:
Long-term debt, excluding current installments 2,871,977 3,016,024
Accrued expenses 63,055 63,055
----------- -----------
Total long-term liabilities 2,935,032 3,079,079
----------- -----------
Total liabilities 5,587,811 5,450,126
----------- -----------
Commitments, contingencies and other matters
Minority interest in Triter Corporation 195,154 221,634
----------- -----------
Stockholders' equity:
Preferred stock, Series A, 8% cumulative convertible,
par value $.01 per share ($300,000 aggregate liquidation
preference); authorized 1,000,000 shares; issued and
outstanding 600,000 shares in 2004 and 2003 6,000 6,000
Preferred stock, Series B, 8% cumulative convertible,
par value $.01 per share ($400,000 aggregate liquidation
preference); authorized 2,000,000 shares; issued and
outstanding 800,000 shares in 2004 8,000 --
Common stock, par value $.01 per share; authorized
10,000,000 shares; issued and outstanding 3,987,987 and
3,988,146 shares in 2004 and 2003 39,881 39,880
Additional paid-in capital 5,124,435 4,735,305
Retained earnings (deficit) (1,511,142) (661,758)
----------- -----------
Total stockholders' equity 3,667,174 4,119,427
----------- -----------
$ 9,450,139 $ 9,791,187
=========== ===========
See notes to consolidated financial statements.
14
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
2004 2003 2002
----------- ----------- -----------
(RESTATED) (RESTATED)
Net revenues:
Manufacturing net revenues $ 8,236,134 $ 9,618,185 $ 9,351,621
----------- ----------- -----------
Costs and expenses:
Cost of sales 6,936,751 7,370,110 6,732,897
Shipping and selling expenses 878,793 1,075,204 975,188
General and administrative expenses 1,068,858 1,097,733 1,243,940
Research and development expenses 95,610 134,291 109,394
----------- ----------- -----------
8,980,012 9,677,338 9,061,419
----------- ----------- -----------
Operating income (loss) (743,878) (59,153) 290,202
----------- ----------- -----------
Other income (expense):
Interest expense (257,266) (304,023) (375,770)
Interest income 135,408 131,739 130,401
Loss on worthless investment (55,000) -- --
Other 68,372 86,110 112,656
----------- ----------- -----------
(108,486) (86,174) (132,713)
----------- ----------- -----------
(852,364) (145,327) 157,489
----------- ----------- -----------
Gain (loss) on sale of assets:
Equipment 3,500 -- 1,000
Real estate -- -- 11,739
----------- ----------- -----------
3,500 -- 12,739
----------- ----------- -----------
Income (loss) before income taxes and minority interest (848,864) (145,327) 170,228
Provision for income taxes -- -- --
----------- ----------- -----------
Net income (loss) before minority interest (848,864) (145,327) 170,228
Minority interest in Triter Corporation 26,480 28,366 --
----------- ----------- -----------
Net income (loss) $ (822,384) $ (116,961) $ 170,228
=========== =========== ===========
continued
15
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
2004 2003 2002
---------- ---------- ----------
(RESTATED) (RESTATED)
Income per common share:
Basic earnings per share:
Income (loss) before minority interest $ (.21) $ (.04) $ .04
========== ========== ==========
Minority interest $ .01 $ .01 $ --
========== ========== ==========
Net income (loss) $ (.21) $ (.03) $ .04
========== ========== ==========
Diluted earnings per share:
Income (loss) before minority interest $ (.18) $ (.03) $ .04
========== ========== ==========
Minority interest $ .01 $ .01 $ --
========== ========== ==========
Net income (loss) $ (.17) $ (.03) $ .04
========== ========== ==========
Weighted average number of shares outstanding:
Basic 3,988,000 3,987,987 3,987,987
Diluted 4,788,673 4,587,987 4,587,987
See notes to consolidated financial statements.
16
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
ADDITIONAL RETAINED TOTAL
PREFERRED COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) EQUITY
----------- ----------- ----------- ----------- -----------
Balance at January 1, 2002,
as previously reported $ 6,000 $ 39,880 $ 4,735,305 $ (170,143) $ 4,611,042
Prior period adjustment -- -- -- (499,205) (499,205)
----------- ----------- ----------- ----------- -----------
Balance at January 1, 2002,
as restated 6,000 39,880 4,735,305 (669,348) 4,111,837
Net income, as restated -- -- -- 170,228 170,228
Dividends paid -- -- -- (12,266) (12,266)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2002,
as restated 6,000 39,880 4,735,305 (511,386) 4,269,799
Net loss, as restated -- -- -- (116,961) (116,961)
Dividends paid -- -- -- (33,411) (33,411)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2003,
as restated 6,000 39,880 4,735,305 (661,758) 4,119,427
Issued stock 8,000 -- 389,130 -- 397,130
Treasury stock -- 1 -- -- 1
Net loss -- -- -- (822,384) (822,384)
Dividends paid -- -- -- (27,000) (27,000)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2004 $ 14,000 $ 39,881 $ 5,124,435 $(1,511,142) $ 3,667,174
=========== =========== =========== =========== ===========
Summary of preferred stock:
Series A Preferred $ 6,000
Series B Preferred $ 8,000
-----------
$ 14,000
===========
See notes to consolidated financial statements.
17
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
2004 2003 2002
--------- --------- ---------
(RESTATED) (RESTATED)
Cash flows from operating activities:
Net income (loss) $(822,384) $(116,961) $ 170,228
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 509,234 529,108 592,154
Amortization 60,632 15,457 11,257
Allowance for doubtful accounts (68,257) 55,393 (23,519)
Minority interest in net loss of Triter Corporation (26,480) (28,366)
Gain on sale of assets (3,500) -- (12,739)
Loss on worthless investment 55,000 -- --
Changes in assets and liabilities:
Increase in restricted cash (250,801) -- --
Decrease (increase) in accounts receivable (50,191) 373,277 (849,206)
Decrease (increase) in notes receivable - current (50,000) -- 440,814
Decrease (increase) in receivable - other 176,603 (72,950) (88,212)
Decrease (increase) in inventories 115,760 (24,921) 13,917
Decrease (increase) in prepaid expenses 29,299 6,993 76,678
Increase in note receivable - noncurrent (84,040) (80,189) (74,598)
Decrease (increase) in other assets (58,403) (29,200) 533
Increase (decrease) in accounts payable 362,267 (10,654) (215,148)
Decrease in accrued expenses (2,654) (43,013) (23,074)
--------- --------- ---------
Net cash provided by (used in) operating activities (107,915) 573,974 19,085
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of assets 3,500 -- 58,739
Capital expenditures on equipment (207,062) (304,629) (160,894)
--------- --------- ---------
Net cash provided by (used in) investing activities (203,562) (304,629) (102,155)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds (payments) on notes payable (80,003) (266,967) 295,775
Proceeds from issuance of long-term debt 65,408 106,840 --
Principal payments on long-term debt (207,333) (182,657) (161,818)
Minority interest in Triter Corporation contributions -- 250,000 --
Issuance of Series B 8.00% preferred stock 397,131 -- --
Preferred dividend paid (27,000) (33,411) (12,266)
--------- --------- ---------
Net cash provided by (used in) financing activities 148,203 (126,195) 121,691
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (163,274) 143,150 38,621
Cash and cash equivalents at beginning of year 251,456 108,306 69,685
--------- --------- ---------
Cash and cash equivalents at end of year $ 88,182 $ 251,456 $ 108,306
========= ========= =========
continued
18
RADVA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
2004 2003 2002
--------- --------- --------
(RESTATED) (RESTATED)
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 257,266 $ 305,988 $392,646
========= ========= ========
Cash paid during the year for income taxes $ -- $ -- $ 1,500
========= ========= ========
Supplemental disclosure of non-cash investing activities:
During 2002 Radva acquired an additional 5% interest in Thermasteel Corporation
by forgiveness of a certain portion of debt receivable from Thermasteel which
resulted in a transfer of the following assets:
Assets transferred:
Notes receivable $ 296,140
Investment retained (5%) (296,140)
---------
$ --
=========
See notes to consolidated financial statements.
19
RADVA CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004, 2003 AND 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
RADVA Corporation and subsidiary (the Company) are custom designers of material
handling solutions and manufacturers of protective packaging materials and
containers. The Company operates facilities in Radford and Portsmouth, Virginia.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its 80 % owned subsidiary, Triter Corporation. All material inter-company
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of demand deposits. For purposes of
the statements of cash flows, the Company considers all highly liquid
investments with an original maturity of less than three months to be cash
equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at cost less allowance for doubtful accounts. The
allowance for doubtful accounts is maintained at a level considered adequate to
provide for losses that can be reasonably anticipated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost of raw materials,
supplies, work-in process and finished goods is determined by the first-in,
first-out method.
INVESTMENT IN THERMASTEEL CORP.
As part of transferring certain assets and liabilities to Thermasteel Corp.,
Radva retained a 10% ownership interest. Company accounts for this investment on
the cost basis.
PROPERTY, PLANT AND EQUIPMENT
Depreciation of plant and equipment is provided on the straight-line basis over
the estimated useful lives of the respective assets as follows:
Buildings and improvements 5 to 30 years
Machinery and equipment 5 to 15 years
Automotive equipment 3 to 5 years
Office equipment 3 to 10 years
Leasehold improvements are amortized on a straight-line basis over the terms of
the respective leases.
Additions to property, plant and equipment are recorded at cost. All
expenditures for repairs, renewals and replacements which do not materially
extend the useful life of the property are charged to expense. Other
improvements and betterments are capitalized. With respect to dispositions, the
asset and accumulated depreciation accounts are relieved of cost and accumulated
depreciation with any resulting gain or loss credited or charged to earnings.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Included in other assets are patents, loan costs and materials rights, which are
amortized over their respective estimated lives, and trademark rights. Under
Financial Accounting Standards Board Statement No. 142, "Goodwill and Other
Intangible Assets", goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized, but will be subject to periodic impairment
tests in accordance with the statement. In accordance with Statement No. 142,
the company no longer amortizes intangible assets with indefinite lives.
Accumulated amortization was $98,206 and $63,230 as of December 31, 2004 and
2003, respectively.
REVENUE RECOGNITION
Net revenues represent sales of protective packaging materials and containers.
Revenues from sales are recognized upon shipment of merchandise to customers.
Sales returns, rebates, and discounts are recorded as a component of net sales.
ADVERTISING
Advertising costs are expensed as incurred and included in shipping and selling
expenses. Advertising expense amounted to $399, $4,692, and $12,128 for the
years ended December 31, 2004, 2003, and 2002, respectively.
SHIPPING
Shipping costs are expensed as incurred and are included in cost of goods sold
and shipping and selling expenses. Shipping costs include freight costs and
shipping supplies. Shipping expense amounted to $558,061, $690,387, and $666,533
for the years ended December 31, 2004, 2003, and 2002, respectively.
INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Investment tax credits are accounted for by the flow-through method whereby they
reduce income taxes currently payable and the provision for income taxes in the
period the assets giving rise to such credits are placed in service. To the
extent such credits are not currently utilized on the Company's tax return,
deferred tax assets, subject to considerations about the need for a valuation
allowance, are recognized for the carryforward amount.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure about the fair value of
certain instruments. Cash, receivables, accounts payable and accrued liabilities
are reflected in the financial instruments at fair value because of the
short-term maturity of these instruments. The estimated fair values of the
company's financial instruments are disclosed in Note 3.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from the estimates that
were used.
RECLASSIFICATION
Certain reclassifications have been made to prior years' financial statements to
place them on a comparable basis with the current year.
NOTE 2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
2004 2003 2002
-------- --------- ---------
Petty cash and non-interest bearing accounts $ 88,182 $ 251,456 $ 108,306
======== ========= =========
NOTE 3. RESTRICTED CASH
As of December 31, 2004, the Company has $250,801 of restricted cash which is
classified as a current asset. The restricted cash serves as collateral for the
Company's line of credit. The cash is held in custody by the issuing bank, is
restricted as to withdrawal or use, and is currently invested in a certificate
of deposit.
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and cash equivalents:
The carrying amount approximates fair value because of the short maturity of
those instruments.
Restricted cash:
The carrying amount approximates fair value because of the short maturity of
those instruments.
Receivable - other:
The carrying amount is a reasonable estimate of fair value since entire amount
is due within one year.
Long-term debt:
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities with similar collateral
requirements.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments as of December
31, 2004 are as follows:
2004
--------------------------------
Carrying Amount Fair Value
--------------- ----------
Cash and cash equivalents $ 88,182 $ 88,182
Restricted cash 250,801 250,801
Receivable - other 67,957 67,957
Notes payable 1,127,665 1,127,665
Long-term debt 3,074,183 3,520,004
NOTE 5. NOTE RECEIVABLE
During 1998, the Company transferred certain assets and liabilities to
Thermasteel Corporation. All notes receivable under this agreement have been
satisfied except of the "earn out payment". The "earn out payment" amounts to
$3,200,000 payable annually in an amount equal to ten percent (10%) of the
after-tax earnings of Thermasteel Corporation or $50,000, whichever is greater,
until such payments have reached the "earn out payment". The "earn out payment"
had no stated interest rate. The note was recorded at the present value of the
estimated future cash flows, utilizing an imputed interest rate of 5%, which
equals $2,148,867. Payments under the "earn out payment" provision began in
2001. As of December 31, 2004, the Company had not received the required payment
for 2004, however, the majority of the 2004 payment had been received by March
31, 2005. In management's opinion, the remaining balance is collectible.
A summary of the note receivable follows:
2004 2003
----------- -----------
Installment note receivable, due in annual installments
of $50,000 including interest at 5%; secured by assets
of the borrower $ 2,814,843 $ 2,680,803
Less current maturities of note receivable (100,000) (50,000)
----------- -----------
Note receivable, excluding current maturities $ 2,714,843 $ 2,630,803
=========== ===========
The maturities of the note receivable during each of the next five years
subsequent to December 31, 2004 follows:
Years Ended December 31,
2005 $ 100,000
2006 50,000
2007 50,000
2008 50,000
2009 50,000
Thereafter 2,514,843
----------
$2,814,843
==========
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
2004 2003
----------- -----------
Land and improvements $ 172,190 $ 169,565
Buildings and improvements 3,144,642 3,140,772
Machinery and equipment 5,833,247 5,705,017
Transportation equipment 399,521 372,129
Office equipment 324,480 321,151
----------- -----------
$ 9,874,080 $ 9,708,634
=========== ===========
NOTE 7. ACCRUED EXPENSES
Current accrued expenses are composed of the following:
2004 2003
----------- -----------
Payroll and employee benefits $ 94,362 $ 91,361
Commissions 8,353 7,816
Customer deposits 794 794
Other 15,184 21,376
----------- -----------
$ 118,693 $ 121,347
=========== ===========
Long-term accrued expenses are composed of the following:
Commissions $ 63,055 $ 63,055
=========== ===========
NOTE 8. INTANGIBLE ASSETS
Information about intangible assets as of December 31,
2004 and 2003 is as follows:
2004 2003
----------- -----------
Loan costs
Cost $ 177,102 $ 169,550
Less accumulated amortization (45,050) (15,708)
----------- -----------
Net loan costs $ 132,052 $ 153,842
=========== ===========
Patents
Cost $ 120,537 $ 119,514
Less accumulated amortization (38,476) (34,242)
----------- -----------
Net patents $ 82,061 $ 85,272
=========== ===========
Material rights (amortization ceased due to SFAS No. 142)
Cost $ 43,433 $ 43,433
Less accumulated amortization (9,080) (9,080)
----------- -----------
Net material rights $ 34,353 $ 34,353
=========== ===========
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INTANGIBLE ASSETS (CONTINUED)
2004 2003
----------- -----------
Evaluation report costs
Cost $ 5,600 $ 5,600
Less accumulated amortization (5,600) (4,200)
----------- -----------
Net evaluation report costs $ -- $ 1,400
=========== ===========
During the year ended December 31, 2004, the following intangibles were acquired
with the stated amortization periods and costs:
Amortization
Intangible Asset Period Cost
---------------- ------------ ----
Patent 17 years $ 1,023
Loan costs 27 months $ 33,207
The estimated annual amortization expense during each of the next five years
subsequent to December 31, 2004 follows:
Years Ended December 31,
2005 $ 30,020
2006 17,522
2007 8,594
2008 8,594
2009 8,594
Amortization expense was $60,632 and $15,457 for the years ended December 31,
2004 and 2003, respectively.
NOTE 9. NOTES PAYABLE
A summary of notes payable follows:
2004 2003
---------- ----------
Related parties, interest at 6%, unsecured $ 201,000 $ --
Related party, interest at 8%, unsecured 23,012 21,308
Line of credit with commercial lender, $1,500,000 limit, interest at
prime plus 2.25%, secured by all of
the Company's assets -- 1,186,360
Line of credit with commercial lender, $1,500,000
limit, interest at prime secured by all of
the Company's assets 903,653 --
---------- ----------
$1,127,665 $1,207,668
========== ==========
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. NOTES PAYABLE (CONTINUED)
Event of Default
As a result of its inability to maintain certain financial ratios, the Company
was unable to remain in compliance with the financial covenants of its line of
credit agreement. The creditor has not waived the financial covenant
requirements. The outstanding balance of this line of credit agreement as of
December 31, 2004 is $903,653. This amount is classified as a current liability
in the accompanying balance sheet.
NOTE 10. LONG-TERM DEBT
A summary of long-term debt follows:
2004 2003
---------- ----------
Installment note payable to bank, due in variable monthly installments,
including interest at prime plus 2.25% (7.50% at
December 31, 2004); collateralized by all of the Company's assets $1,860,290 $1,906,850
Installment note payable to bank, due in variable monthly installments
including interest at prime plus 2.25% (7.50% at
December 31, 2004); collateralized by all of the Company's assets 1,081,704 1,209,837
Installment note payable to bank, due in variable monthly installments of
including interest at prime plus 1.25%; (6.50% at
December 31, 2004); collateralized by equipment 73,007 94,375
Installment note payable to bank, due in monthly installments of
$527, including interest at 9.5%; collateralized by equipment -- 5,046
Installment note payable to bank, due in monthly
installments of $798, including interest at 3.9%;
collateralized by equipment 29,182 --
Installment note payable to bank, due in monthly
Installments of $599, including interest at 7.25%;
Collateralized by equipment 30,000 --
---------- ----------
Total long-term debt 3,074,183 3,216,108
Less current installments of long-term debt 202,206 200,084
---------- ----------
Long-term debt, excluding current installments $2,871,977 $3,016,024
========== ==========
Substantially all real property, equipment, accounts receivable and inventory
are pledged as collateral on various debt instruments.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LONG-TERM DEBT (CONTINUED)
The aggregate principal maturities of long-term debt during each of the five
years subsequent to December 31, 2004 follows:
Years Ended December 31,
2005 $ 202,206
2006 217,326
2007 233,595
2008 219,602
2009 231,275
Thereafter 1,970,179
----------
$3,074,183
==========
NOTE 11. INCOME TAX MATTERS
Net deferred tax assets and liabilities consist of the following components as
of December 31, 2004 and 2003:
2004 2003
----------- -----------
Deferred tax assets:
Bad debt allowance $ 16,832 $ 42,770
Accrued expenses 22,077 24,136
Bonuses -- 1,581
Inventory allowance 10,508 13,003
Loss carryforward 1,132,248 623,800
Contribution carryforward 184 --
Minimum tax credit carryforward 34,133 34,133
----------- -----------
1,215,982 739,423
Less valuation allowance (977,350) 511,787
----------- -----------
$ 238,632 $ 227,636
=========== ===========
Deferred tax liabilities:
Property and equipment $ 238,632 $ 227,636
=========== ===========
$ -- $ --
=========== ===========
As noted, the deferred tax assets equal the deferred tax liabilities resulting
in no effect on the income statement or stockholders' equity for the year.
Net operating loss carryforwards for tax purposes as of December 31, 2004 have
the following expiration dates:
Expiration Date Amount
--------------- ------
2005 $ 506,511
2011 60,935
2020 1,075,281
2024 1,336,874
----------
$2,979,601
==========
Minimum tax credit carryforward for tax purposes as of December 31, 2004 amounts
to $34,133 and has no expiration date.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. INCOME TAX MATTERS (CONTINUED)
The income tax provision differs from the amount of income tax determined by
applying the U.S. Federal income tax rate to pretax income for the years ended
December 31, 2004, 2003 and 2002 due to the following:
2004 2003 2002
------- -------- --------
Computed "expected" tax benefit $ -- $ -- $ 49,639
Non-deductible expenses -- -- 22,134
State income taxes, net of federal income tax benefit -- -- 8,308
Benefit of operating loss carryforward -- -- (80,081)
------- -------- --------
$ -- $ -- $ --
======= ======== ========
NOTE 12. RETIREMENT PLANS
The Company has a profit sharing plan (the Plan) which covers all full-time
officers and employees who have at least one year of service and attained the
age of 21. Contributions to its profit sharing plan are at Company's discretion.
The Plan is a qualified plan under applicable sections of the Internal Revenue
Code. Profit sharing expense for the period ended December 31, 2004, 2003 and
2002 was $ -0-.
The Company adopted a 401K retirement plan during 1998 which covers all
full-time officers and employees who have at least one year of service and
attained the age of 21. Contributions to the plan are made at a rate of 25% of
each employee's contribution up to a maximum of 4% of each employee's earnings
for the year. The plan is a qualified plan under applicable sections of the
Internal Revenue Code. Company contributions for the year ended December 31,
2004 and 2003 were $12,338 and $12,890, respectively.
NOTE 13. RELATED PARTY TRANSACTIONS
The Company provides managerial services to Thermasteel Corporation. The Company
has a ten percent ownership interest in Thermasteel Corporation. Revenue
recognized by the Company from these services amounted to $6,000, $66,500, and
$111,680 for the years ended December 31, 2004, 2003, and 2002, respectively.
Occasionally, the Company pays expenses on behalf of Thermasteel Corporation and
is then reimbursed by Thermasteel Corporation at a later date. As of December
31, 2004 and 2003, the amount owed by Thermasteel Corporation is $66,135 and
$89,601, respectively. These amounts are reflected in the accompanying balance
sheet in receivable - other.
The Company's Chief Executive Officer is personally guaranteeing certain notes
payable of the company.
On June 18, 2002, the Company issued a note to a stockholder for $25,000 in
exchange for cash. The note payable is unsecured, bearing interest at 8%
annually and is due on demand. As of December 31, 2004, the balance on this note
is $23,012.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. RELATED PARTY TRANSACTIONS (CONTINUED)
On February 23, 2004, the Company issued a note to a director/stockholder for
$200,000 in exchange for cash. The note payable is unsecured, bearing interest
at 6% annually and is due on April 30, 2005. As of December 31, 2004, the
balance on this note is $201,000.
NOTE 14. OPERATING LEASES
The Company leases certain of its manufacturing and office facilities and
equipment. Rental expense for the years ended December 31, 2004, 2003 and 2002
was $183,255, $158,628, and $142,476, respectively. All leases have expired,
except for the corporate office building; however, the Company continues to
lease these facilities under the previous lease schedules.
The Company leases its corporate office space under a five year lease beginning
January 1, 2004 and ending December 31, 2008. The lease is $3,700 per month and
the minimum lease obligation for 2005 through 2008 is $44,400.
NOTE 15. MAJOR CUSTOMERS AND SUPPLIERS
The percentage of net revenue attributable to the Company's major customers
(exceeding 10% of total revenues) is 11.2% for 2004, 37.8% for 2003, and 37.0%
for 2002.
The percentage of cost of sales attributable to the Company's major suppliers
(exceeding 10% of total cost of sales) is 15.8% for 2004, 22.1% for 2003, and
30.2% for 2002.
NOTE 16. RESEARCH AND DEVELOPMENT
The Company has incurred costs in developing a patented structural material
called Triterine. The Company intends to market this to construction companies
as a fire separation wall system.
NOTE 17. OTHER ASSETS - OTHER
Other assets - other consist of the following:
2004 2003
-------- --------
Deposits $ 6,295 $ 6,295
Loan costs 132,052 153,842
Patent costs 82,061 85,272
Investment in Pereslav - 55,000
Material rights 34,353 34,353
Cash value of life insurance 22,772 -
-------- --------
$277,533 $334,762
======== ========
NOTE 18. NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income by the sum
of the weighted-average number of common shares outstanding for the period and
the number of equivalent shares assumed outstanding under the Company's stock
option plans and convertible preferred stock outstanding.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT (CONTINUED)
Options held to purchase 300,000 common shares at $.81 were not dilutive and
were outstanding at December 31, 2004 and 2003. These shares are not included in
the diluted earnings per share calculation because the options' exercise price
was greater than the average market price of the common shares. Diluted earnings
per share was calculated as follows:
The Company has 600,000 shares of Series A of 8% cumulative convertible
preferred stock outstanding. The preferred stock is convertible into common
stock based on its liquidation amount ($.50 per share of $300,000) plus any
accrued and unpaid dividends (none as of 12/31/04). The conversion price for the
common stock is $0.50 per share which equates to 600,000 shares of common stock
potentially being issued.
The Company has 800,000 shares of Series B of 8% cumulative preferred stock
outstanding. The preferred stock is convertible into common stock based on its
liquidation amount ($.50 per share of $400,000) plus any accrued and unpaid
dividends ($1,345 as of 12/31/04). The conversion price for the common stock is
$0.50 per share which equates to 802,690 shares of common stock potentially
being issued.
2004 2003
---------- ----------
Net loss to common stockholders $ (822,384) $ (116,961)
========== ==========
Weighted average common shares outstanding 3,988,000 3,987,987
Share equivalents, due to stock options - -
Share equivalents, due to convertible preferred stock 800,673 600,000
---------- ----------
4,788,673 4,587,987
========== ==========
Net loss per share-diluted $ (.17) $ (.03)
========== ==========
NOTE 19. STOCK OPTION PLANS
The Company has two Stock Option Plans, the 1998 Stock Option Plan and the 1998
Non-employee Directors Stock Option Plan. Both Plans contained retroactive
effective dates of July 8, 1998 and September 28, 1998, respectively.
The Company's 1998 Stock Option Plan (the Plan) authorizes the granting of stock
options, up to a total of 275,000 shares of common stock, to any employee of the
Company. Under the Plan, the exercise price of each option equals fair market
value of the Company's stock on the grant date, and an option's maximum term is
ten years. If the employee is a 10% shareholder the exercise price of each
option shall not be less than 110% of the fair market value on the grant date,
and an option's maximum term is five years.
The Company's 1998 Non-employee Directors Stock Option Plan (the Plan)
authorizes the granting of stock options, up to a total of 125,000 shares of
common stock, to the directors of the Company who are not otherwise employees of
the Company or any Subsidiary and were not employees for a period of at least
one year before the date of grant of an option under the Plan. Under the Plan,
the exercise price of each option equals fair market value of the Company's
stock on grant date, and an option's maximum term is ten years.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. STOCK OPTION PLANS (CONTINUED)
A summary of the status of the Company's Stock Option Plans as of December 31,
2004, and the changes during the year is presented below:
FIXED OPTIONS SHARES WEIGHTED-AVERAGE EXERCISE PRICE
------------- ------ -------------------------------
January 1, 2004 300,000 $ .81
Granted - -
Exercised - -
Forfeited - -
---------
December 31, 2004 300,000 $ .81
=========
Exercisable at December 31, 2004 300,000 $ .81
Options available for grant at December 31, 2004 100,000 $ .81
The range of option prices for options outstanding as of December 31, 2004, was
$.81 with a weighted average remaining contractual life of approximately 4
years.
If the Company had used the fair value based method of accounting for its
Employee Stock Option Plan, as prescribed by Statements of Financial Accounting
Standards No. 123, compensation cost in net income for the year ended December
31, 2004 would have increased by $243,000, resulting in a net loss of
$(1,065,384) net of tax. The basic and diluted earnings per share would have
been $(.27) and $(.22), respectively.
The fair value of each option grant of $.81 is estimated on the date of grant
using the exercise price since fair value could not be reasonably estimated at
grant date.
NOTE 20. STOCK REPURCHASE PLAN
Board of Directors has authorized the Company to repurchase up to 200,000 shares
of the Company's common stock. The Company has purchased 187,081 shares pursuant
to the Stock Repurchase Plan.
NOTE 21. INVESTMENT IN THERMASTEEL
During 1998, the Company acquired a 5% interest in Thermasteel Corporation. The
initial 5% interest and promissory notes from Thermasteel were received in
exchange for receivables, inventory, investments, fixed assets, licenses,
patents, and trademarks. The net investment in the 5% interest as a result of
this transaction was $261,925. During 2002, a portion of the promissory notes
from Thermasteel were forgiven in exchange for an additional 5% interest. This
transaction resulted in an increase in the investment in Thermasteel of
$296,140. The total investment in Thermasteel as of December 31, 2004 is
$558,065.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22. PRIOR-PERIOD ADJUSTMENTS
The Company has restated it previously issued 2003 and 2002 consolidated
financial statements for matters related to the following previously reported
items: capitalization of trademark, marketing, manufacturing, and material
rights, and related amortization. The accompanying financial statements for 2003
and 2002 have been restated to reflect the corrections. Also, retained earnings
at January 1, 2002, was reduced by $499,205 as a result of adjustments to
reported capitalized trademark, marketing, manufacturing, and material rights
previous to January 1, 2002.
The following is a summary of the restatements for 2003:
Increase in general and administrative expenses for capitalized items
that should have been expensed $ 11,442
Increase in research and development expenses for capitalized items
that should have been expensed 49,182
Change in minority interest portion of net loss in subsidiary (9,863)
--------
Subtotal 50,761
Income tax effect of restatement -
--------
Total increase in 2003 net loss $ 50,761
========
The effect on the Company's previously issued 2003 financial statements are
summarized as follows:
Consolidated Balance Sheet as of December 31, 2003
PREVIOUSLY INCREASE
REPORTED (DECREASE) RESTATED
------------ ------------ ------------
Other assets $ 4,039,449 $ (515,819) $ 3,523,630
Total assets 10,307,006 (515,819) 9,791,187
Minority interest in Triter Corporation 231,497 (9,863) 221,634
Retained earnings (deficit):
Retained earnings (deficit) - December 31, 2001 (170,143) (499,205) (669,348)
Net income for 2002 126,218 44,010 170,228
Dividends paid in 2002 (12,266) -- (12,266)
Net loss for 2003 (66,200) (50,761) (116,961)
Dividends paid in 2003 (33,411) -- (33,411)
------------ ------------ ------------
Retained earnings (deficit) - December 31, 2003 (155,802) (505,956) (661,758)
------------ ------------ ------------
Total liabilities and stockholders' equity 10,307,006 (515,819) 9,791,187
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22. PRIOR-PERIOD ADJUSTMENTS (CONTINUED)
Consolidated Statement of Operations for the Year Ended December 31, 2003
PREVIOUSLY INCREASE
REPORTED (DECREASE) RESTATED
----------- ---------- --------
General and administrative expenses $1,086,291 $ 11,442 $1,097,733
Research and development expenses 85,109 49,182 134,291
Operating income (loss) 1,471 (60,624) (59,153)
Loss before minority interest (84,703) (60,624) (145,327)
Minority interest in Triter Corporation 18,503 9,863 28,366
Net loss (66,200) (50,761) (116,961)
Income per common share:
Basic earnings per share:
Loss before minority interest $ (.02) $ (.02) $ (.04)
Minority interest - .01 .01
Net loss (.02) (.01) (.03)
Diluted earnings per share:
Loss before minority interest $ (.02) $ (.01) $ (.03)
Minority interest - .01 .01
Net loss (.02) (.01) (.03)
The following is a summary of the restatements for 2002:
Decrease in general and administrative expenses for amortization
on trademark, marketing, manufacturing, and material rights that
have been subsequently written off by prior period adjustment $ 44,010
----------
Subtotal 44,010
Income tax effect of restatement -
----------
Total increase in 2002 net income $ 44,010
==========
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22. PRIOR-PERIOD ADJUSTMENTS (CONTINUED)
The effect on the Company's previously issued 2002 financial statements are
summarized as follows:
Consolidated Statement of Operations for the Year Ended December 31, 2002
PREVIOUSLY INCREASE
REPORTED (DECREASE) RESTATED
----------- ---------- -----------
General and administrative expenses $ 1,287,950 $ (44,010) $ 1,243,940
Operating income 246,192 44,010 290,202
Net income 126,218 44,010 170,228
Income per common share:
Basic earnings per share:
Net income $ .03 $ .01 $ .04
Diluted earnings per share:
Net income $ .03 $ .01 $ .04
NOTE 23. CONTINGENCIES
Going Concern
The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
As shown in the accompanying consolidated financial statements the, the Company
has had two consecutive years of losses with 2004 being significant, $822,384.
At December 31, 2004, the Company had an accumulated deficit of $1,511,142. The
Company is down to $9,023 in net working capital. The Company is also in
violation of the financial covenants in its line of credit agreement, which
causes the balance to become due on demand. The Company lost its major customer
at the end of 2003 and as of December 31, 2004, the Company had not entirely
replaced this loss of revenue. Management has taken steps to increase revenue
and reduce operating expenses to help restore profitability. The Company has
increased sales and has a profit for the first quarter ended March 31, 2005. The
ability of the Company to continue as a going concern is dependent upon the
continued success of these actions. The consolidated financial statements do not
include any adjustments relating to the recoverability of recorded asset amounts
or the amounts of liabilities that might be necessary should the Company be
unable to continue as a going concern.
34
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
BALANCE
AT BALANCE
BEGINNING ADDITIONS AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS OF YEAR
-------------- ---------- ---------- ----------- ----------
Year ended December 31, 2002:
Land and improvements $ 211,188 $ 4,378 $ 46,000 $ 169,566
Buildings and improvements 3,085,539 34,179 -- 3,119,718
Machinery and equipment 5,308,443 117,337 -- 5,425,780
Transportation equipment 372,129 -- -- 372,129
Office equipment 311,813 5,000 -- 316,813
---------- ---------- ---------- ----------
$9,289,112 $ 160,894 $ 46,000 $9,404,006
========== ========== ========== ==========
Year ended December 31, 2003:
Land and improvements $ 169,566 $ -- $ -- $ 169,566
Buildings and improvements 3,119,718 21,054 -- 3,140,772
Machinery and equipment 5,425,780 279,236 -- 5,705,016
Transportation equipment 372,129 -- -- 372,129
Office equipment 316,813 4,338 -- 321,151
---------- ---------- ---------- ----------
$9,404,006 $ 304,628 $ -- $9,708,634
========== ========== ========== ==========
Year ended December 31, 2004:
Land and improvements $ 169,566 $ 2,625 $ -- $ 172,191
Buildings and improvements 3,140,772 3,870 3,144,642
Machinery and equipment 5,705,016 128,230 5,833,246
Transportation equipment 372,129 69,008 41,616 399,521
Office equipment 321,151 3,329 324,480
---------- ---------- ---------- ----------
$9,708,634 $ 207,062 $ 41,616 $9,874,080
========== ========== ========== ==========
35
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
ADDITIONS
BALANCE CHARGED
AT TO COST BALANCE
BEGINNING AND AT END
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS OF YEAR
-------------- ---------- ---------- ----------- ----------
Year ended December 31, 2002:
Land and improvements $ 24,331 $ 86 $ -- $ 24,417
Buildings and improvements 1,557,945 101,310 -- 1,659,255
Machinery and equipment 2,872,372 440,405 -- 3,312,777
Transportation equipment 334,550 26,779 -- 361,329
Office equipment 258,106 23,574 -- 281,680
---------- ---------- ---------- ----------
$5,047,304 $ 592,154 $ -- $5,639,458
========== ========== ========== ==========
Year ended December 31, 2003:
Land and improvements $ 24,417 $ 146 $ -- $ 24,563
Buildings and improvements 1,659,255 98,289 -- 1,757,544
Machinery and equipment 3,312,777 402,829 -- 3,715,606
Transportation equipment 361,329 8,756 -- 370,085
Office equipment 281,680 19,088 -- 300,768
---------- ---------- ---------- ----------
$5,639,458 $ 529,108 $ -- $6,168,566
========== ========== ========== ==========
Year ended December 31, 2004:
Land and improvements $ 24,563 $ 408 $ -- $ 24,971
Buildings and improvements 1,757,544 95,936 -- 1,853,480
Machinery and equipment 3,715,606 393,152 4,108,758
Transportation equipment 370,085 9,465 41,616 337,934
Office equipment 300,768 10,273 311,041
---------- ---------- ---------- ----------
$6,168,566 $ 509,234 $ 41,616 $6,636,184
========== ========== ========== ==========
36
RADVA CORPORATION AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
ADDITIONS
---------------------------
BALANCE CHARGED CHARGED
AT TO TO BALANCE
BEGINNING COST AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS (A) OF YEAR
----------- -------- -------- --------- ------------- --------
Year ended December 31, 2002:
Allowance for doubtful
accounts $ 80,678 $ 34,653 $ -- $ 58,172 $ 57,159
======== ======== ========= ======== ========
Year ended December 31, 2003:
Allowance for doubtful
accounts $ 57,159 $ 73,094 $ -- $ 17,701 $112,552
======== ======== ========= ======== ========
Year ended December 31, 2004:
Allowance for doubtful
accounts $112,552 $ 72,336 $ -- $140,593 $ 44,295
======== ======== ========= ======== ========
(A) Represents uncollactible amounts written off, net of recoveries.
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to the Company's directors is incorporated by reference to
material contained under the heading "Election of Directors" in the Company's
proxy statement for its annual meeting of stockholders scheduled for May 26,
2005.
Information as to the Company's executive officers is set forth under the
heading "Executive Officers" in ITEM 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information as to executive compensation is incorporated by reference to
material contained under the headings "Cash Compensation" and "Compensation
Plans" in the Company's proxy statement for its annual meeting of stockholders
scheduled for May 26, 2005.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as to the security ownership of certain beneficial owners and
management is incorporated by reference to material contained under the heading
"Principal Stockholders" in the Company's proxy statement for its annual meeting
of stockholders scheduled for May 26, 2005.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to certain relationships and related transactions is incorporated
by reference to material contained under the heading "Certain Relationships and
Related Transactions" in the Company's proxy statement for its annual meeting of
stockholders scheduled for May 26, 2005.
ITEM 14. AUDIT FEES
The Company will pay its audit firm an estimated $60,000.00 for the 2004 audit
and an estimated $3,500.00 for the 2004 tax return.
PART IV
ITEM 15. CONTROLS AND PROCEDURES
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 annual period covered by this report.
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements (Included in PART II)
See ITEM 8 in PART II
(a) (2) Financial Statement Schedules (Included in PART II)
See ITEM 8 in PART II
38
(a) (3) Exhibits
The exhibits filed with this report and the documents incorporated by reference
as exhibits to this report are described below.
(3)(a) Articles of Incorporation of the Company (Incorporated by
reference to Exhibit B to Registration Statement No. 0-15464 filed with the
Securities and Exchange Commission on March 9, 1987).
(3)(b) Bylaws of the Company (Incorporated by reference to Exhibit C to
Registration Statement No. 0-15464 filed with the Securities and Exchange
Commission on March 9, 1987).
(4)(f) See Article III, Section 4 of Exhibit 3(a).
(4)(g) See Articles II, III, VI, VIII and IX of Exhibit (3)(b).
(10)(c) Lease dated April 29, 1986 between Chuckatcuk Partnership and
the Company relating to the Company's principal executive office space in
Radford, Virginia (Incorporated by reference to Exhibit 10(d) to Registration
Statement No. 33-5319 filed with the Securities and Exchange Commission on June
25, 1986).
(10)(g) Agreement dated as of July 1, 1985 between ARCO Chemical
Company and the Company relating to the sale of various copolymer resins
(Incorporated by reference to Exhibit 10(g) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 25, 1986.)
(10)(h) Agreement dated as of April 11, 1986 between ARCO Technology,
Inc. and the Company relating to a license of certain manufacturing rights
(Incorporated by reference to Exhibit 10(h) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 5, 1986.)
(10)(i) Bank of Virginia Trust Company Prototype Plan and Trust
Agreement and accompanying Joinder Agreement (Incorporated by reference to
Exhibit 10(i) to Registration Statement No. 33-5319 filed with the Securities
and Exchange Commission on June 24, 1986.)
(10)(j) 1986 Stock Option Plan for employees of the Company
(Incorporated by reference to Exhibit 10(j) to Registration Statement No.
33-5319 filed with the Securities and Exchange Commission on June 24, 1986.)
(10)(l) Purchase Agreement dated December 31, 1987 between the Company
and the Atlantic Richfield Company (Incorporated by reference to Exhibit 10 to
the Company's current report on Form 8-K filed with the Securities and Exchange
Commission on January 13, 1988.
(11) Statement re-computation of per share earnings.
(b) Reports on Form 8-K
None
(c) Exhibits
See ITEM 14(a)(3) above.
(d) Financial Statement Schedules
See ITEM 14(a)(2) above.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RADVA Corporation
Dated: March 18, 2005 By /s/ Luther I. Dickens
---------------------------------
Luther I. Dickens
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: March 18, 2005 By /s/ Luther I. Dickens
---------------------------------
Luther I. Dickens
Chief Executive Officer and
Chairman of the Board
Dated: March 18, 2005 By /s/ Rush G. Allen
---------------------------------
Rush G. Allen
Director
Dated: March 18, 2005 By /s/ J. Granger Macfarlane
---------------------------------
J. Granger Macfarlane
Director
Dated: March 18, 2005 By /s/ Stephen L. Dickens
---------------------------------
Stephen L. Dickens
President and Director
Dated: March 18, 2005 By /s/ Jonathan C. Kinney
---------------------------------
Jonathan C. Kinney
Director
Dated: March 18, 2005 By /s/ Richard W. Frizzell
---------------------------------
Richard W. Frizzell
Director
40