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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
--------------------------------------------
For Quarter Ended Commission File
June 30, 1998 Number 0-15464
RADVA CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0715892
(State of Incorporation) (IRS Employer
Identification Number)
Drawer 2900 FSS
Radford, Virginia 24143
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 639-2458
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
At August 5, 1998, there were 4,104,727 shares of Registrant's Common Stock,
$.01 par value per share, outstanding.
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RADVA CORPORATION
INDEX
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Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets,
December 31, 1997 and June 30, 1998 3
Statements of Operations, Three Months
and Six Months Ended June 30, 1997 and
June 30, 1998 4
Statements of Cash Flows, Six Months
Ended June 30, 1997 and June 30, 1998 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION 10
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RADVA CORPORATION
Balance Sheets
(In Thousands)
June 30 December 31
ASSETS 1998 1997
--------- --------
Current assets:
Cash ................................. $ 138 $ 79
-------- --------
Accounts and notes receivable ........ 2,282 1,755
Less allowance for doubtful accounts . 97 106
-------- --------
Net receivables ...................... 2,185 1,649
-------- --------
Inventories:
Finished goods ..................... 431 592
Work in process .................... 29 23
Raw materials and supplies ......... 383 395
Machinery inventory ................ 269 275
-------- --------
Total inventories .................. 1,112 1,285
-------- --------
Prepaid expenses ..................... 34 106
Other current assets ................. 69 30
-------- --------
Total current assets ........... 3,538 3,149
-------- --------
Property, plant & equipment, at cost .... 7,193 8,084
Less accumulated depreciation ........ 3,443 3,396
-------- --------
Net property, plant & equip .... 3,750 4,688
-------- --------
Investment in RADOSLAV Joint Venture .... -- 336
Trademark, manufacturing, and marketing
rights ............................... 517 1,354
Note receivable-noncurrent .............. 2,874 322
Other assets ............................ 448 1,343
-------- --------
$ 11,127 $ 11,192
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 528 $ 528
Notes payable ........................ 439 569
Accounts payable ..................... 1,415 2,151
Accrued expenses ..................... 587 580
-------- --------
Total current liabilities ..... 2,969 3,828
-------- --------
Long-term debt, excluding current
installments ......................... 3,521 3,844
Other long-term debt .................... 61 --
Minority interest in consolidated
subsidiary ........................... 135 132
-------- --------
Total Liabilities .............. 6,686 7,804
-------- --------
Stockholders' equity:
Common stock of $.01 par value .......
Authorized 10,000,000 shares; issued
and outstanding 4,104,727 ......... 41 41
Additional paid-in capital ........... 4,503 4,512
Retained earnings .................... (103) (1,165)
-------- --------
Total stockholders' equity .. 4,441 3,388
-------- --------
$ 11,127 $ 11,192
======== ========
See 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
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
Net Revenues:
Manufacturing net revenues ... $ 2,760 2,433 6,192 5,065
Licensing & machinery sales .. 875 -- 1,031 --
------- ------ ------ ------
Net revenues ................. 3,635 2,433 7,223 5,065
------- ------ ------ ------
Cost and expenses:
Cost of sales ................ 2,065 1,891 4,536 3,817
Shipping and selling ......... 232 201 497 395
General and administrative ... 437 388 840 596
Research and development ..... 10 33 23 65
------- ------ ------ ------
2,744 2,513 5,896 4,873
------- ------ ------ ------
Operating income ............. 891 (80) 1,327 192
------- ------ ------ ------
Other income (deductions):
Interest expense ............. (135) (100) (268) (188)
Other ........................ 2 56 3 88
------- ------ ------ ------
(133) (44) (265) (100)
------- ------ ------ ------
Earnings (loss) before minority
interest in net income (loss)
of subsidiary ................ 758 (124) 1,062 92
Minority interest in net income
(loss) of subsidiary ......... 19 (15) -- (15)
Earnings (loss) before income tax 739 (109) 1,062 107
Income tax expense .............. -- -- -- --
------- ------ ------ ------
Net earnings (loss) ............. 739 (109) 1,062 107
======= ====== ====== ======
Earnings per common share ....... .18 (.03) .26 .03
======= ====== ====== ======
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RADVA CORPORATION
Statements of Cash Flows
Six Months Ended June 30
(In Thousands)
1998 1997
----- -----
Cash flows from operating activities:
Net income ................................. $ 1,062 $ 107
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ............................ 230 169
Amortization ............................ 67 57
Loss (Gain) on sale of equipment ........ -- (49)
Change in assets and liabilities:
Decrease (Increase) in net receivables . (536) 1,627
Decrease (Increase) in inventories ..... 173 (22)
Decrease (Increase) in prepaid expenses 72 2
Decrease (Increase) in other current
assets .............................. (39) (8)
Decrease (Increase) in other assets .... (551) (1,527)
Increase (Decrease) in accounts payable (736) 105
Increase (Decrease) in accrued expenses 7 29
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Total adjustments ..................... (1,313) 383
------- -------
Net cash from operating activities ... (251) 490
------- -------
Increase in minority interest in consolidated
subsidiary ................................. 3 151
Cash flows from investing activities:
Proceeds from sale of equipment ............ 1,578 129
Capital expenditures for equipment and other
long-term assets ......................... (870) (2,011)
------- -------
Net cash from investing activities ... 708 (1,882)
------- -------
Cash flows from financing activities:
Increase (decrease) in other long term debt 52 --
Proceeds from notes payable ................ 439 75
Principal payments under notes payable ..... (569) (139)
Proceeds from long-term debt ............... 3,571 1,665
Principal payments under long-term debt .... (3,894) (304)
------- -------
Net cash from financing activities ... (401) 1,297
------- -------
Net increase (decrease) in cash ............... 59 56
Cash at January 1 ............................. 79 24
------- -------
Cash at June 30 ............................... $ 138 $ 80
======= =======
See accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
June 30, 1998
(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............................. $ 225,984
Buildings and improvements........................ 2,570,383
Machinery and equipment........................... 3,850,648
Transportation equipment.......................... 324,098
Office equipment.................................. 221,738
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$7,192,851
==========
(3) Accrued Expenses
----------------
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 184,528
Interest.......................................... 22,828
Other............................................. 379,766
----------
$ 587,122
==========
(4) Notes Payable
-------------
Demand note, collateralized by certain
accounts receivable and inventory,
interest at prime plus .25%...................... $ 438,827
=========
$ 438,827
=========
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RADVA CORPORATION
Notes to Financial Statements
June 30, 1998
(5) Long-term Debt
--------------
A summary of long-term debt follows:
Installment note payable to bank, due in
monthly installments of $27,533, including
interest at prime plus .25% $ 3,013,206
Installment notes payable with various
maturities, collateralized by equipment.
Interest rates ranging from 7.25% to 12.50% 49,369
Installment note payable to bank, due in
monthly installments of $11,905, interest
at prime plus .25% 457,023
Installment note payable to financing
company. Interest rate at 8.8% 501,036
Installment note payable due in monthly
installments of $500, including interest at
8.125%, collateralized by a deed of trust on
certain real estate. 28,497
-----------
Total long-term debt 4,049,131
Less current installments of long-term debt 527,793
-----------
Long-term debt, excluding current installments $ 3,521,338
===========
(6) Other Matters
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On April 1, 1997 the Company's 19% owned subsidiary, Thermastructure Ltd.
was dissolved and the Company reacquired the assets of Thermastructure Ltd.,
giving in exchange its right to collect a $1,197,000 note receivable. A new 90%
owned corporation, Thermastructure XT Corporation, was then formed, receiving
all of the purchased assets.
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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, 1998
- ------------------------------------------------------
Compared to Six Months Ended June 30, 1997
------------------------------------------
The Company's operating income was $1,327,000 for the six months ended June 30,
1998 compared to $192,000 for the six months ended June 30, 1997. This
$1,135,000 increase in operating income was primarily the result of the
Company's sale of its Thermastructure panel manufacturing and licensing rights,
including equipment, at a profit of $875,000 in May, 1998, and increased profits
in its shape molding operations of approximately $336,000. The increase in
operating income would have been greater had the Company not received a one time
profit of $108,000 in March, 1997 from a medical insurance rebate.
The Company retained a 5% ownership position in the company newly formed to hold
and operate the Thermastructure assets, and has reported the $875,000 profit
from the sale as net licensing and machinery sales.
Manufacturing net revenues increased $1,127,000 for the six months ended June
30, 1998 compared to the six months ended June 30, 1997. This increase was the
result of strong sales growth in shape molding operations, especially at the
Company's plant in Portsmouth, Virginia, which accounted for $869,000 of the
increased sales.
Cost of sales, as a percent of manufacturing net revenues, was 73.3% for the six
months ended June 30, 1998 as compared to 75.4% for the six months ended June
30, 1997. This reduction in cost percentages primarily resulted from
manufacturing efficiencies within the Company's shape molding operations. Labor
rates in the Radford and Portsmouth, Virginia plants were down 2.1% and 1%,
respectively. These increased manufacturing efficiencies were made possible by
the installation of new and more modern equipment.
Shipping and selling expense, as a percent of manufacturing net revenues,
remained fairly constant, increasing only .2% for the six months ended June 30,
1998 as compared to the six months ended June 30, 1997. However, general and
administrative expenses increased 1.8% for the same period comparisons. The
increased general and administrative cost percentage was primarily a result of
the Company's having received a one time medical insurance rebate of $108,000 in
March, 1997, not repeated in 1998.
Results of Operations - Three Months Ended June 30, 1998
- --------------------------------------------------------
Compared to Three Months Ended June 30, 1997
--------------------------------------------
The Company's net operating income was $891,000 for the three months ended June
30, 1998 compared to an operating loss of $80,000 for the three months ended
June 30, 1997. This $971,000 increase in operating income was primarily the
result of a $875,000 profit from the sale of the Thermastructure panel assets,
noted above, and reduced losses in Thermastructure panel operation of
approximately $70,000.
Manufacturing net revenues increased to $2,760,000 for the three months ended
June 30, 1998 compared to $2,433,000 for the three months ended June 30, 1997.
This $327,000 increase resulted from increased sales of $410,000 from the
Company's Portsmouth, Virginia shape molding operations, offset by reduced sales
of $126,000 from the Company's Radford, Virginia shape molding operations. Sales
at the Portsmouth plant are expected to remain strong for the foreseeable
future, however sales from the Radford plant may remain slow through the third
quarter.
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Cost of sales, as a percent of manufacturing net revenues, were 74.8% for the
three months ended June 30, 1998 compared to 77.7% for the three months ended
June 30, 1997. This 2.9% reduction in cost resulted from increased manufacturing
efficiencies, noted above.
Shipping and selling expenses, as a percent of manufacturing net revenues,
remained constant for the second quarter of 1998, compared to the second quarter
of 1997. General and administrative expenses also remained constant, as a
percent of manufacturing net revenues, for the second quarter of 1998 compared
to the second quarter of 1997.
Liquidity and Capital Resources
- -------------------------------
The Company has been profitable in each of the past seven years and had working
capital of $569,000 on June 30, 1998. Management concluded a major refinancing
of the Company under more favorable terms in May, 1998 and has a $1,000,000
credit line which had an available balance of $561,000 on June 30, 1998.
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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, 1997.
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
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Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of
1934,this form 10-Q has been signed on behalf of the
Registrant by its Assistant Secretary/Treasurer who is
authorized to sign on behalf of the Registrant.
RADVA CORPORATION
/s/ WILLIAM F. FRY
-------------------------------
William F. Fry
Assistant Secretary/Treasurer
August 6, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF JUNE 30, 1998 AND STATEMENT OF OPERATIONS FOR THREE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<INVENTORY> 1,112
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<CURRENT-LIABILITIES> 2,969
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