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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended Commission File
June 30, 1999 Number 0-15464
RADVA CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0715892
(State of Incorporation) (IRS Employer
Identification Number)
Drawer 2900 FSS
Radford, Virginia 24143
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 639-2458
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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At August 4, 1999, there were 4,104,727 shares of Registrant's Common Stock,
$.01 par value per share, outstanding.
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RADVA CORPORATION
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets,
December 31, 1998 and June 30, 1999 3
Statements of Operations, Three Months
and Six Months Ended June 30, 1998 and
June 30, 1999 4
Statements of Cash Flows, Six Months
Ended June 30, 1998 and June 30, 1999 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)
<TABLE>
<CAPTION>
June 30 December 31
ASSETS 1999 1998
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<S> <C> <C>
Current assets:
Cash.................................. $ 95 $ 246
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Accounts and notes receivable......... 2,412 2,832
Less allowance for doubtful accounts.. 131 113
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Net receivables....................... 2,281 2,719
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Inventories:
Finished goods...................... 347 601
Work in process..................... 17 -
Raw materials and supplies.......... 400 332
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Total inventories................... 764 933
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Prepaid expenses...................... 40 35
Other current assets.................. 90 39
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Total current assets............ 3,270 3,972
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Property, plant & equipment, at cost..... 8,710 8,134
Less accumulated depreciation......... 3,939 3,691
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Net property, plant & equip..... 4,771 4,443
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Investment in Thermasteel Corporation.... 262 262
Trademark, manufacturing, and marketing
rights................................ 492 506
Note receivable-noncurrent............... 2,498 2,482
Other assets............................. 161 225
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$ 11,454 $ 11,890
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 638 $ 594
Notes payable......................... 730 854
Accounts payable...................... 732 1,064
Accrued expenses...................... 385 408
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Total current liabilities...... 2,485 2,920
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Long-term debt, excluding current
installments.......................... 4,028 3,989
Minority interest in consolidated
subsidiary............................ - 95
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Total Liabilities............... 6,513 7,004
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Stockholders' equity:
Common stock of $.01 par value.
Authorized 10,000,000 shares; issued
and outstanding 4,104,727.......... 41 41
Additional paid-in capital............ 4,480 4,493
Retained earnings..................... 420 352
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Total stockholders' equity... 4,941 4,886
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$ 11,454 $ 11,890
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</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net Revenues:
Manufacturing net revenues ...... $ 2,409 2,760 5,061 6,192
Licensing & machinery sales ..... - 875 - 1,031
------ ------ ------ ------
Net revenues .................... 2,409 3,635 5,061 7,223
------ ------ ------ ------
Cost and expenses:
Cost of sales ................... 1,827 2,065 3,746 4,536
Shipping and selling............. 161 232 352 497
General and administrative ...... 337 437 672 840
Research and development......... 3 10 5 23
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2,328 2,744 4,775 5,896
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Operating income ................ 81 891 286 1,327
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Other income (deductions):
Interest expense................. (109) (135) (231) (268)
Other............................ 8 2 13 3
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(101) (133) (218) (265)
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Earnings (loss) before minority
interest in net income (loss)
of subsidiary.................... (20) 758 68 1,062
Minority interest in net income
(loss) of subsidiary............. 19 - -
Earnings (loss) before income tax... (20) 739 68 1,062
Income tax expense.................. - - - -
------ ------ ------ ------
Net earnings (loss)................. (20) 739 68 1,062
====== ====== ====== ======
Earnings per common share........... (.00) .18 .02 .26
====== ====== ====== ======
Fully diluted earnings per
common share........................ (.00) .18 .02 .26
====== ====== ====== ======
</TABLE>
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RADVA CORPORATION
Statements of Cash Flows
Six Months Ended June 30
(In Thousands)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 68 $1,062
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Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................... 272 230
Amortization............................... 18 67
Loss (Gain) on sale of equipment........... - -
Change in assets and liabilities:
Decrease (Increase) in net receivables.... 438 (536)
Decrease (Increase) in inventories........ 169 173
Decrease (Increase) in prepaid expenses... (5) 72
Decrease (Increase) in other current
assets................................. (51) (39)
Decrease (Increase) in other assets....... 44 (551)
Increase (Decrease) in accounts payable... (332) (736)
Increase (Decrease) in accrued expenses... (23) 7
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Total adjustments....................... 530 (1,313)
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Net cash from operating activities...... 598 (251)
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Increase in minority interest in consolidated
subsidiary.................................... (95) 3
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Cash flows from investing activities:
Purchase of Treasury Stock.................... (13) -
Proceeds from sale of equipment............... - 1,578
Capital expenditures for equipment and other
long-term assets............................ (600) (870)
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Net cash from investing activities...... (613) 708
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Cash flows from financing activities:
Increase (decrease) in other long term debt... 52
Proceeds from notes payable................... 439
Principal payments under notes payable........ (124) (569)
Proceeds from long-term debt.................. 407 3,571
Principal payments under long-term debt....... (324) (3,894)
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Net cash from financing activities...... (41) (401)
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Net increase (decrease) in cash.................. (151) 59
Cash at January 1................................ 246 79
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Cash at June 30.................................. $ 95 $ 138
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</TABLE>
See accompanying notes to financial statements.
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RADVA CORPORATION
Notes to Financial Statements
June 30, 1999
(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............................. $ 182,508
Buildings and improvements........................ 3,094,478
Machinery and equipment........................... 4,784,494
Transportation equipment.......................... 373,607
Office equipment.................................. 275,228
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$8,710,315
==========
(3) Accrued Expenses
Accrued expenses are comprised of the following:
Payroll and employment benefits................... $ 173,054
Interest.......................................... 4,531
Other............................................. 207,718
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$ 385,303
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(4) Notes Payable
Demand note, collateralized by certain
accounts receivable and inventory,
interest at prime plus .25%...................... $ 732,204
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$ 732,204
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RADVA CORPORATION
Notes to Financial Statements
June 30, 1999
(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% $ 3,083,733
Installment notes payable with various
maturities, collateralized by equipment.
Interest rates ranging from 7.25% to 12.50% 15,551
Installment note payable to bank, due in
monthly installments of $11,905, interest
at prime plus .25% 820,932
Installment note payable to bank, due in
monthly installments of $4,762, interest
at prime 310,884
Installment note payable to financing
company. Interest rate at 8.8% 409,436
Installment note payable due in monthly
installments of $500, including interest at
8.125%, collateralized by a deed of trust on
certain real estate. 25,376
Total long-term debt 4,665,912
Less current installments of long-term debt 638,013
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Long-term debt, excluding current installments $ 4,027,899
===========
(6) Other Matters
During the first quarter of 1999, Company acquired the remaining 10% minority
interest in Thermastructure XT Corp. resulting in 100% ownership at March 31,
1999. Thermastructure XT Corp is consolidated into Company's financial
statements.
During 1998, the Company transferred certain assets and liabilities to
Thermasteel Corp. for $6,200,000 (discounted to $4,976,585). Company retained a
5% ownership interest in Thermasteel Corp. Company received $1,250,000 down with
balance to be received in installments. Gain on this transaction ($806,796) was
included in income from operation in 1998. The discounted portion ($1,223,,415)
of the receivable will be recognized as interest income as future collections
are received. Gain was recognized as income from operations since transfer was
deemed a disposal of a portion of a line of business rather than a sale of a
segment of business.
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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, 1999
Compared to Six Months Ended June 30, 1998
Net earnings for the six months ended June 30, 1999 were down sharply from
$1,062,000 for the first six months of 1998 to $68,000 for the first six months
of 1999. Included in operating income in May, 1998, was $807,000 gain on the
sale of a portion of a line of business (building panel operations), without any
corresponding sales in 1999. Reductions in shape molded sales of packaging and
agricultural seed trays are responsible for the additional drop in earnings.
Manufacturing net revenues decreased $1,131,000, or 18.3%, from $6,192,000 in
the first six months of 1998 to $5,061,000 for the first six months of 1999.
Although sales were down over a broad range of products, one customer accounted
for $321,000 of the reduced sales due to our Company's inability to manufacture
enough product during a relatively short shipping season. Management is
currently investigating sources and costs of storage space that may allow the
manufacture and storage of greater quantities of product in advance of the
shipping season.
Cost of sales, as a percentage of manufacturing net revenues, increased from
73.3% in 1998 to 74.0% in 1999. This increase in cost is a result of fixed cost
being spread over reduced manufacturing revenues. The percentage cost increase
was held to a minimum by the absence of the panel operations sold in May, 1998
which carried a higher cost percentage in relation to revenues.
Shipping and selling expenses, as a percentage of manufacturing net revenues,
was down 1% from 8% for the first six months of 1998 to 7% for the first six
months of 1999. The reduction in manufacturing revenues occurred primarily from
sales requiring greater shipping cost and sales commissions than average,
resulting in an improvement in this cost percentage.
General and administrative expenses were down .3% of manufacturing net revenues
to 13.3% for the first six months of 1999. The fixed nature of many of these
expenses would normally cause the expense as a percentage of manufacturing net
revenues to rise on greatly reduced revenues. However, this tendency was more
than offset by the sale of the panel system in May, 1998, resulting in large
reductions in general and administrative expenses in relation to sales.
Results of Operations - Three Months Ended June 30, 1999
Compared to Three Months Ended June 30, 1998
Manufacturing net revenues were down $351,000, or 12.7%, for the three months
ended June 30, 1999 as compared to the three months ended June 30, 1998. The
reduction in sales has occurred primarily at the Company's Radford, Virginia,
plant. In addition to the search for additional storage space mentioned above,
the Company has added one new salesman, and is taking other measures in an
attempt to reverse the slow down in sales.
Cost of sales, as a percentage of manufacturing net revenues, increased from
74.8% for the three months ended June 30, 1998 to 75.8% for the three months
ended June 30, 1999. The causes of this increase are the same as was discussed
above for the increased percentages for the full six months ended June 30, 1999.
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Shipping and selling expenses, and general and administrative expenses decreased
1.7% and 1.8%, respectively, as a percentage of manufacturing net revenues, for
the three months ended June 30, 1999. Again, these changes were caused by the
factors discussed above for similar changes for the full six months ended June
30, 1999.
Liquidity and Capital Resources
The Company had one of its most profitable years in 1998. In addition, a major
refinancing of the Company was accomplished in 1998 under more favorable terms.
The new financing resulted in a $500,000 increase in the Company's operating
line to $1,500,000. At June 30, 1999, the balance available on this line of
credit was $768,000 and working capital was $785,000.
Year 2000 Issue
Most of Radva processes utilize the Windows 95 platform and can handle the
Century 2000 date format presently without problems. We have upgraded our
environment to Windows NT Server and Workstations. Our server for EDI is Century
2000 date format compliant and our Accounting Department, which currently uses a
UNIX based system, became Y2K compliant in May 1999 with the purchase and
installation of new software and hardware.
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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, 1998.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K Not applicable.
Pursuant to the requirements of the Securities Exchange Act of
1934,this form 10-Q has been signed on behalf of the
Registrant by its Assistant Secretary/Treasurer who is
authorized to sign on behalf of the Registrant.
RADVA CORPORATION
/s/ WILLIAM F. FRY
-------------------------------
William F. Fry
Assistant Secretary/Treasurer
August 4, 1999
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF 6/30/99 AND INCOME AND CASH FLOW STATEMENTS FOR THE SIX MONTHS THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 2,412
<ALLOWANCES> 131
<INVENTORY> 2,281
<CURRENT-ASSETS> 3,270
<PP&E> 8,710
<DEPRECIATION> 3,939
<TOTAL-ASSETS> 11,454
<CURRENT-LIABILITIES> 2,485
<BONDS> 4,028
0
0
<COMMON> 41
<OTHER-SE> 4,900
<TOTAL-LIABILITY-AND-EQUITY> 11,454
<SALES> 5,061
<TOTAL-REVENUES> 5,061
<CGS> 3,746
<TOTAL-COSTS> 4,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 68
<INCOME-TAX> 0
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
