10-Q 1 j0391001e10vq.txt RADVA CORP. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------- Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------------------------- For Quarter Ended Commission File September 30, 2003 Number 0-15464 RADVA CORPORATION (Exact name of registrant as specified in its charter) VIRGINIA 54-0715892 (State of Incorporation) (IRS Employer Identification Number) Drawer 2900 FSS Radford, Virginia 24143 (Address of principal executive offices) Registrant's telephone number, including area code (540) 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 ----- ----- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- At November 11, 2003, there were 3,987,987 shares of Registrant's Common Stock, $.01 par value per share, outstanding. RADVA CORPORATION INDEX Page Number ------ PART I. FINANCIAL INFORMATION: INDEPENDENT AUDITOR'S REPORT 3 Item 1. Financial Statements Balance Sheets, December 31, 2002 and September 30, 2003 4 Statements of Operations, Three Months and Nine Months Ended September 30, 2002 and September 30, 2003 5 Statements of Cash Flows, Nine Months Ended September 30, 2002 and September 30, 2003 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION 9 - 2 - PERSINGER & COMPANY, L.L.C. Certified Public Accountants 203 W. Grayson Street Tel (276) 236-8135 P.o. Box 797 Fax (276) 236-0797 Galax, Va 24333 Independent Accountant's Report Board of Directors Radva Corporation Radford, Virginia We have reviewed the accompanying condensed consolidated balance sheet of RADVA corporation and subsidiary as of September 30, 2003, and the related consolidated statements of income and cash flows for the nine-month period ended September 30, 2003. these financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of RADVA corporation and subsidiary as of December 31, 2002, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 22, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set fourth in the accompanying condensed consolidated balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Galax, Virginia November 12, 2003 - 3 - RADVA CORPORATION BALANCE SHEETS (IN THOUSANDS)

See accompanying notes to financial statements. - 4 - RADVA CORPORATION Statements of Operations Three Months and Nine Months Ended September 30 (In Thousands, except per share data)

See accompanying notes to financial statements. - 5 - RADVA CORPORATION Statements of Cash Flows Nine Months Ended September 30 (In Thousands)

See accompanying notes to financial statements. - 6 - RADVA CORPORATION Notes to Financial Statements September 30, 2003 (1) General The financial statements conform to generally accepted accounting principles and to general industry practices. The financial statements are unaudited. However, in the opinion of management, all adjustments which are normal and necessary for a fair presentation of the financial statements have been included. (2) Property, Plant and Equipment A summary of property, plant and equipment follows: Land and improvements............................. $ 169,565 Buildings and improvements........................ 3,140,772 Machinery and equipment........................... 5,615,264 Transportation equipment.......................... 372,130 Office equipment.................................. 319,173 ---------- $9,616,904 ========== (3) Accrued Expenses Accrued expenses are comprised of the following: Payroll and employment benefits................... $ 144,366 Other............................................. 92,000 ---------- $ 236,366 ========== (4) Notes Payable Demand notes payable to officers.................. 19,643 Demand note, collateralized by certain accounts receivable and inventory, interest at prime plus 2%........................ $1,294,518 ---------- $1,314,161 ========== (5) Long-term Debt A summary of long-term debt follows: Installment note payable to bank, due in variable monthly installments, including interest at prime plus 1.5% 99,717 Installment note payable to bank, due in variable monthly installments, including interest at prime plus 2.25%; collateralized by all of the company's assets. 1,918,663 Installment note payable to bank, due in monthly installment of $17,402, including interest at prime plus 2.25%; collateralized by all of the company's assets. 1,239,923 Installment note payable to bank, due in monthly installments of $527, including interest at 9.5%; collateralized by equipment. 6,485 ---------- Total long-term debt 3,264,788 Less current installments of long-term debt 153,284 ---------- Long-term debt, excluding current installments $3,111,504 ========== - 7 - Item 2 - Management's Discussion and Analysis of Financial Conditions and Results of Operations Results of Operations - Nine months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2003 The Company incurred a net loss of $212,000 in the first nine months of 2003 compared to net loss of $8,000 in the first nine months of 2002. This deterioration in operating results occurred in spite of a $484,000 increase in revenues from $6,801,000 for the nine months ended September 30, 2002 to $7,285,000 for the nine months ended September 30, 2003. The Company wrote down finished goods inventories by approximately $65,000 in September, 2003. Half of this reduction was to eliminate obsolete inventory and the remainder was a price-reduction on proprietary items on which cost is estimated. Another major factor in depressing September 2003 operations was hurricane Isabel, which resulted in a loss of power at the Portsmouth plant for ten days. Cost of sales, as a percent of manufacturing revenues, was up 4.3% from 72.8% for the nine months ended September 30, 2002 to 77.1% for the nine months ended September 30, 2003. The most significant factors contributing to this increase in cost of sales were a 6.0% increase in raw material costs and a 2.4% increase in the cost of gas and oil as a percent of production. Shipping and selling expenses were up $131,000 for the first three quarters of 2003. This increase was due to a combination of factors, including: 1) increased freight out costs of $68,485 at the Portsmouth plant resulting from a change from FOB shipping point to FOB destination terms, 2) increased cost of warehouse labor of $51,000 and 3) increased cost of truck lease and gasoline cost at the Radford plant of $24,727 due to additional leased equipment. The $82,000 decrease in general and administrative expenses primarily resulted from reduced amortization expenses due to a change in generally accepted accounting principals. Interest was down $69,000 as a result of reductions in the prime interest rate on which virtually all the Company's notes payable are based and reduced note balances on which interest is assessed. Results of Operations - Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2003 The factors noted above in the nine month comparisons were also the factors largely contributing to differences in results for the three months ended September 30, 2002 compared to the three months ended September 30, 2003. Cost of sales, as a percentage of manufacturing revenues, was up 2.3% from 80.2% for the quarter ended September 20, 2002 to 82.5% for the quarter ended September 30, 2003. This increase was primarily a result of an increase in the cost of natural gas and raw materials and the inventory write down mentioned above. Funding of New Subsidiary The most significant development in 2003 has been the funding of a new subsidiary, Triter Corporation. In March 2003, the Company's new subsidiary, Triter Corporation, received $250,000 for 20% minority interest in that corporation. Radva Corporation transferred $586,349 in patents and other intangible assets, in addition to $12,156 in inventories and equipment, for its remaining 80% interest in Triter Corporation. - 8 - Liquidity and Capital Resources At September 30, 2003, the balance available on the Company's $1,500,000 line of credit was $205,482 and working capital was $302,000. Management believes that cash flow will be adequate to satisfy 2003 needs. PART II: OTHER INFORMATION Item 1. Legal Proceedings See item 3 of the Company's Form 10-K for the fiscal year ended December 31, 2002. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Securities Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K Not applicable. 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, 2003 - 9 -

RADVA CORP 10-Q