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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended Commission File
September 30, 1998 Number 0-15464
RADVA CORPORATION
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(Exact name of registrant as specified in its charter)
VIRGINIA 54-0715892
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(State of Incorporation) (IRS Employer
Identification Number)
Drawer 2900 FSS
Radford, Virginia 24143
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(Address of principal executive offices)
Registrant's telephone number, including area code (540) 639-2458
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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At November 11, 1998, there were 4,085,727 shares of Registrant's Common Stock,
$.01 par value per share, outstanding.
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RADVA CORPORATION
INDEX
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<TABLE>
<CAPTION>
Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets,
December 31, 1997 and September 30, 1998 3
Statements of Operations, Three Months
and Nine Months Ended September 30, 1997
and September 30, 1998 4
Statements of Cash Flows, Nine Months
Ended September 30, 1997 and September 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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<TABLE>
RADVA CORPORATION
Balance Sheets
(In Thousands)
<CAPTION>
September 30 December 31
ASSETS 1998 1997
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<S> <C> <C>
Current assets:
Cash $ 64 $ 79
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Accounts and notes receivable 2,676 1,426
Accounts Receivable - Other 121 329
Less allowance for doubtful accounts . 95 106
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Net receivables 2,702 1,649
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Inventories:
Finished goods 450 592
Work in process 20 23
Raw materials and supplies 342 395
Machinery inventory -- 275
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Total inventories 812 1,285
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Prepaid expenses 53 106
Other current assets 101 30
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Total current assets 3,732 3,149
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Property, plant & equipment, at cost 7,925 8,084
Less accumulated depreciation 3,534 3,396
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Net property, plant & equip 4,391 4,688
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Investment in Thermasteel Corp. 262 --
Investment in RADOSLAV Joint Venture -- 336
Trademark rights -- 1,354
Note receivable-noncurrent 2,874 322
Manufacturing and marketing rights 517 --
Other assets 190 1,343
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$11,966 $11,192
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 590 $ 528
Notes payable 855 569
Accounts payable 1,458 2,151
Accrued expenses 444 580
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Total current liabilities 3,347 3,828
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Long-term debt, excluding current
installments 3,792 3,844
Other long-term debt 61 --
Minority interest in consolidated
subsidiary 95 132
Stockholders' equity:
Common stock of $.01 par value
Authorized 10,000,000 shares; issued
and outstanding 4,085,727 41 41
Additional paid-in capital 4,493 4,512
Retained earnings 137 (1,165)
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Total stockholders' equity 4,671 3,388
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$11,966 $11,192
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</TABLE>
See accompanying notes to financial statements
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<TABLE>
RADVA CORPORATION
Statements of Operations
Three Months and Nine Months Ended September 30
(In Thousands, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net Revenues:
Manufacturing net revenues ...... $2,829 2,348 9,021 7,413
Licensing & machinery sales ..... 260 70 1,291 70
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Net revenues .................... 3,089 2,418 10,312 7,483
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Cost and expenses:
Cost of sales ................... 2,192 1,746 6,728 5,563
Shipping and selling............. 211 205 708 600
General and administrative ...... 362 378 1,202 974
Research and development......... - 19 23 84
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2,765 2,348 8,661 7,221
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Operating income ................ 324 70 1,651 262
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Other income (deductions):
Interest expense................. (124) (103) (392) (291)
Other............................ 38 15 41 103
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(86) (88) (351) (188)
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Earnings before minority
interest in net income (loss)
of subsidiary.................... 238 (18) 1,300 74
Minority interest in net income (loss)
of subsidiary.................... (2) (1) (2) (16)
Earnings before income tax.......... 240 (17) 1,302 90
Income tax expense.................. -- -- -- --
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Net earnings........................ 240 (17) 1,302 90
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Earnings per common share........... .06 (.00) .32 .02
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</TABLE>
See accompanying notes to financial statements.
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<TABLE>
RADVA CORPORATION
Statements of Cash Flows
Nine Months Ended September 30
(In Thousands)
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $1,302 $ 90
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................... 335 280
Amortization............................... 70 93
Loss (Gain) on sale of equipment........... -- (57)
Change in assets and liabilities:
Decrease (Increase) in net receivables.... (1,053) 1,612
Decrease (Increase) in inventories........ 473 (215)
Decrease (Increase) in prepaid expenses... 53 15
Increase in other current assets.......... (71) (9)
Decrease (Increase) in other assets....... (558) (1,568)
Increase (Decrease) in accounts payable... (693) 192
Increase (Decrease) in accrued expenses... (136) (7)
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Total adjustments....................... (1,580) 336
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Net cash from operating activities...... (278) 426
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Increase (decrease) in minority interest in
consolidated subsidiary...................... (37) 147
Cash flows from investing activities:
Proceeds from sale of equipment............... 1,578 137
Capital expenditures for equipment and other
long-term assets............................ (1,616) (2,288)
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Net cash from investing activities...... (38) (2,151)
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Cash flows from financing activities:
Increase in other long-term debt.............. 61 --
Payments for repurchase of company stock...... (19) --
Proceeds from notes payable................... 855 185
Principal payments under notes payable........ (569) --
Proceeds from long-term debt.................. 4,047 1,795
Principal payments under long-term debt....... (4,037) (351)
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Net cash from financing activities...... 338 1,629
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Net increase (decrease) in cash.................. (15) 51
Cash at January 1................................ 79 24
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Cash at September 30............................. $ 64 $ 75
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</TABLE>
See accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
September 30, 1998
(1) General
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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
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A summary of property, plant and equipment follows:
Land and improvements............................. $ 225,984
Buildings and improvements........................ 2,936,184
Machinery and equipment........................... 4,195,517
Transportation equipment.......................... 332,779
Office equipment.................................. 235,084
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$7,925,548
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(3) Accrued Expenses
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Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 304,158
Interest.......................................... 22,828
Other............................................. 116,909
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$ 443,895
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(4) Notes Payable
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Demand notes, collateralized by certain
accounts receivable and inventory
Interest at prime plus .25%....................... $ 855,149
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$ 855,149
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RADVA CORPORATION
Notes to Financial Statements
September 30, 1998
(5) Long-term Debt
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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% $ 3,193,867
Installment notes payable with various maturities,
collateralized by equipment.
Interest rates ranging from 7.25% to 12.50% 33,359
Installment note payable to bank, due in
monthly installments of $11,905, interest
at prime plus .25% 648,629
Installment note payable to financing
company. Interest rate at 8.8% 478,757
Installment note payable due in monthly
installments of $500, including interest at
8.125%, collateralized by a deed of trust on
certain real estate. 27,747
Total long-term debt 4,382,359
Less current installments of long-term debt 589,817
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Long-term debt, excluding current installments $ 3,792,542
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(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.
On May 20, 1998 the Company sold its building product line. This sale
included certain assets owned by Thermastructure XT Corporation, of which Radva
was a 90% owner, as well as other assets owned by Radva Corporation. Net
earnings reported for the nine months ended September 30, 1998 include profits
from this sale, net of losses incurred in the building products line prior to
the sale, of approximately $482,000.
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Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
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Results of Operations - Nine Months Ended September 30, 1998
Compared to Nine Months Ended September 30, 1997
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The Company's operating income was $1,651,000 for the nine months ended
September 30, 1998 compared to $262,000 for the nine months ended September 30,
1997. This $1,389,000 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 before interest allocations of
approximately $655,000. 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 $1,608,000 for the nine months ended
September 30, 1998 compared to the nine months ended September 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
$1,323,000 of the increased sales.
Cost of sales, as a percent of manufacturing net revenues, was 74.6% for the
nine months ended September 30, 1998 as compared to 75.0% for the nine months
ended September 30, 1997. However, these percentages are effected greatly by
cost relationships in the Thermastructure building product line sold in May,
1998. The cost of sale percentages within the remaining shape molding operations
for comparable period comparisons decreased from 73.8% in 1997 to 69.6% in 1998.
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 2.2% and 3.2%, 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,
decreased .3% for the nine months ended September 30, 1998 as compared to the
nine months ended September 30, 1997. However, general and administrative
expenses increased .2% for the same period comparisons. The largest factor
contributing to the decreased shipping and selling expense percentage of
manufacturing net revenues was a large increase in sales at the Portsmouth plant
not subject to shipping cost. 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 September 30, 1998
Compared to Three Months Ended September 30, 1997
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The Company's net operating income was $324,000 for the three months ended
September 30, 1998 compared to net operating income of $70,000 for the three
months ended September 30, 1997. This $254,000 increase in operating income was
the result of sharply increased sales within the Company's core packaging
operations coupled with manufacturing efficiencies partly attributable to new
state-of-the-art equipment.
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Manufacturing net revenues increased to $2,829,000 for the three months ended
September 30, 1998 compared to $2,348,000 for the three months ended September
30, 1997. This $481,000 increase resulted from increased sales of $758,000 from
the Company's shape molding operations, less a reduction in sales due to the
sale of the Thermastructure panel operations. Sales in the Company's remaining
core business of shape molding operations are expected to remain strong for the
foreseeable future.
Cost of sales, as a percentage of manufacturing net revenues, for the Company's
remaining shape molding operations decreased to 68.2% for the three months ended
September 30, 1998 from 74.2% for the three months ended September 30, 1997.
This sharp decrease in cost resulted from a combination of factors, including
manufacturing efficiencies, new equipment, and reduced material costs.
As a percentage of manufacturing net revenues, shipping, selling and
administrative costs decreased 1.8%, from 13.2% for the third quarter of 1997 to
11.4% for the third quarter of 1998. This reduction was primarily a result of
sharply increased sales not generally subject to shipping charges or sales
commissions.
Liquidity and Capital Resources
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The Company has been profitable in each of the past seven years and had working
capital of $385,000 on September 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 $145,000 on September
30, 1998. Subsequent to September, 1998 the Company's credit line was increased
to $1,500,000.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
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See item 3 of the Company's Form 10-K for the
fiscal year ended December 31, 1997.
Item 2. Changes in Securities
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Not applicable.
Item 3. Defaults Upon Senior Securities
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Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
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Not applicable.
Item 5. Other Information
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Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of
1934,this form 10-Q has been signed on behalf of the Registrant
by its Assistant Secretary/Treasurer who is authorized to sign on
behalf of the Registrant.
RADVA CORPORATION
/s/ William F. Fry
-------------------------------
William F. Fry
Assistant Secretary/Treasurer
November 11, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF SEPTEMBER 30, 1998 AND STATEMENT OF OPERATIONS FOR THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 64
<SECURITIES> 0
<RECEIVABLES> 2,797
<ALLOWANCES> 115
<INVENTORY> 812
<CURRENT-ASSETS> 3,732
<PP&E> 7,925
<DEPRECIATION> 3,534
<TOTAL-ASSETS> 11,966
<CURRENT-LIABILITIES> 3,347
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 4,630
<TOTAL-LIABILITY-AND-EQUITY> 11,966
<SALES> 10,312
<TOTAL-REVENUES> 10,353
<CGS> 6,728
<TOTAL-COSTS> 8,661
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 1,302
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<NET-INCOME> 1,302
<EPS-PRIMARY> .32
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</TABLE>
