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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1996
Commission file number 333-1992
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RBX CORPORATION
(Exact name of registrant as specified in its charter)
94-3231901
Delaware (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
5225 ValleyPark Drive, Roanoke, Virginia 24019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 561-6000
Indicate by check mark whether each 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 each
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of June 30, 1996, RBX Corporation had 1,000 shares of Common Stock
outstanding.
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RBX CORPORATION
QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
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Page No.
PART I. FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 2
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PART I. FINANCIAL INFORMATION
Item 2 of the Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996 of RBX Corporation, as filed with the Securities and Exchange
Commission on August 14, 1996, hereby is amended by deleting such item in its
entirety and replacing it as follows:
ITEM 2.
RBX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
As further discussed in Note 2 to the Company's Consolidated Financial
statements, pursuant to a plan of merger, the Company acquired RBX Investors Inc
(the "Predecessor") on October 16, 1995, (the "Acquisition Transactions"). In
addition, the Predecessor acquired OleTex on September 30, 1994, Halstead on
December 30, 1994 and the Company purchased Ensolite on June 10, 1996. All such
acquisitions (the "Acquisitions") were accounted for using the purchase method
of accounting and accordingly, the operating results of the Predecessor and the
Company reflect the operations of OleTex, Halstead and Ensolite subsequent to
the dates of their respective acquisitions.
The Company experienced a decline in sales and operating profits in the last
half of 1995 compared to results for the same period in 1994, pro forma for the
Halstead and OleTex acquisitions. This decline continued into the first quarter
of 1996 but a recovery began in the second quarter of 1996. The Company
attributes the performance decline to an overall decrease in demand for rubber
foam in the second half of 1995 paired with quality and service problems at the
Company's Bedford, Virginia operation. In addressing these problems, management
has undertaken or expects to undertake a number of manufacturing and service
improvement initiatives. In connection with these initiatives, the Company hired
a new general manager for the Bedford plant in January of 1996. Programs have
been initiated to improve work practices and operating procedures. Capital
projects are being developed to improve process controls and production flow.
The recovery of sales in the second quarter reflects the benefit of these
initiatives. As Bedford's quality and service issues continue to be addressed,
the Company anticipates sales and operating profits will continue to recover.
BASIS OF PRESENTATION
The following table sets forth, for the periods shown, net sales, cost of goods
sold, gross profit, selling, general and administrative expense, operating
income in millions of dollars and as a percentage of net sales.
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Three months ended June 30 Six Months Ended June 30
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1995 1996 1995 1996
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$ % $ % $ % $ %
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Net Sales 70.0 100.0 70.6 100.0 143.7 100.0 138.5 100.0
Cost of goods sold 56.6 80.9 60.0 85.0 116.8 81.3 117.9 85.1
Gross profit 13.4 19.1 10.6 15.0 26.9 18.7 20.6 14.9
SG&A 6.8 9.7 6.9 9.8 13.8 9.6 13.8 10.0
Operating Income 5.7 8.1 2.6 3.7 12.0 8.4 4.4 3.2
Net Income 2.6 3.7 -1.7 -2.4 5.0 3.5 -3.8 -2.7
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COMPARISON OF RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net Sales. Net sales increased to $70.6 million for the three months ended June
30, 1996 from $70.0 million for the comparable period in 1995 an increase of
$0.6 million or 0.9%. Ensolite added $1.3 million since its acquisition. Without
Ensolite sales would have decreased by $0.7 million or 1%. Sales for the Foam
group increased to $52.8 million from $50.6 million, an increase of $2.2 million
or 4.3%. Excluding Ensolite, sales increased $0.9 million or 1.8%. Sales
increased at Rubatex, Groendyk and Universal Polymer. The increase at Rubatex
represents a reversal of the trend over the last three quarters of unfavorable
comparisons with sales from the prior periods and is a 7.8% increase over the
1996 first quarter's sales. Increases over the prior year have been in sheets,
extruded shapes, drink cup holders and fabricated parts. OleTex sales continued
their recovery in comparison to the levels experienced at the end of 1995, and
represent a 14.4% increase over the 1996 first quarter's sales. Sales of the
Mixing Group decreased to $19.7 million from $21.0 million in the second quarter
of 1995, a decrease of $1.3 million or 6.2% due to a general overall economic
slowdown in their markets.
Gross Profit. Gross profit decreased to $10.6 million in the second quarter of
1996 from $13.4 million in the second quarter of 1995, a decrease of $2.8
million or 20.9%. As a percentage of net sales, gross profit decreased to 15.0%
in the second quarter of 1996 from 19.1% in the same period in 1995. Rubatex
profits were hurt by $0.5 million due to losses related to a fire and physical
inventory adjustment at Bedford. Rubatex profits were also affected by $0.7
million due to sale of products that carried the higher costs associated with
less efficient operations from the first quarter of the year. The Groendyk
profits were down $0.2 million due to less favorable sales mix. All other
operations in the Foam Group experienced increases in gross profit for the
second quarter of 1996 in comparison to the year earlier period. The Mixing
Group experienced a decline in gross profit of $1.0 million due to lower volumes
and a more competitive pricing market.
SG&A SG&A was $6.9 million in the quarter ended June 30, 1996, an increase of
$0.1 million, from the second quarter of 1995. As a percentage of sales, SG&A
increased to 9.8% in the quarter from 9.7% in the 1995 period.
Operating Income. Operating income decreased to $2.6 million in the first
quarter of 1996 from $5.7 million in 1995, a decrease of $3.1 million or 63.3%.
As a percentage of net sales, operating income decreased to 3.7% in 1996 from
8.1% in 1995. The decrease is primarily due to the decrease in gross profits.
In addition the combination of a $0.9 million increase in management fees and
increased amortization of goodwill, partially offset by the impact of a $0.6
million settlement with former owners in 1995, reduced operating profit by $0.3
million. Operating income improved by $0.7 million or 36.8% over the 1996 first
quarter.
Net Income. Net income decreased to a net loss of $1.7 million for the three
months ended June 30, 1996 from net income of $2.6 million for the comparable
period in 1995, a decrease of $4.3 million. Interest expense increased $2.4
million in 1996 due to the increased debt related to the Acquisitions.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net Sales. Net sales decreased to $138.5 million for the six months ended June
30, 1996 from $143.7 million for the comparable period in 1995, a decrease of
$5.2 million or 3.6%. Sales for the Foam Group decreased to $101.1 million from
$103.2 million, a decrease of $2.1 million or 2.0%. OleTex sales were down 13.9%
as they had experienced market softness in the last half of 1995 and are in the
process of a gradual recovery in the first half of 1996. Rubatex sales,
excluding the Ensolite acquisition, were down 2.9%, which also represents a
recovery from being down 8.6% in the first quarter. Sales of the Mixing Group
decreased to $41.4 million from $44.2 million, a decrease of $2.8 million or
6.3% due to a general overall economic slowdown in their markets.
Gross Profit. Gross profit decreased to $20.6 million in the first half of 1996
from $26.9 million in the first half of 1995, a decrease of $6.3 million or
23.4%. As a percentage of net sales, gross profit decreased to 14.9% in the
first half of 1996 from 18.7% in the first half of 1995. Rubatex, OleTex and
Groendyk experienced lower profits due to a combination of lower sales volumes
and increased raw material costs. Quality problems also hurt the Bedford
operation early in the year, and Groendyk experienced a non-recurring $0.7
million net reduction in earnings, principally as a result of an inventory
adjustment. Other operations in the Foam Group experienced increases in gross
profit for the first half of 1996 in comparison to the year earlier period. The
Mixing Group experienced a decline in gross profit due to lower volumes and a
more competitive pricing market.
SG&A. SG&A was $13.8 million in the first half of 1996, the same as in the first
half of 1995. As a percentage of sales, SG&A increased to 10.9% in the first
half of 1996 from 9.6% for the same period in 1995.
Operating Income. Operating income decreased to $4.4 million in the first half
of 1996 from $12.0 million for the same period in 1995, a decrease of $7.5
million or 62.8%. The decrease is primarily due to the decrease in gross
profits. In addition the combination of a $1.8 million increase in management
fees and increased amortization of goodwill, partially offset by the impact of
$0.6 million settlement in 1995, reduced operating profit by $1.2 million.
Net Income. Net income decreased to a net loss of $3.8 million for the first
half of 1996 from net income of $5.0 million for the comparable period in 1995,
a decrease of $8.8 million. Interest expense increased $4.5 million in 1996 due
to the increased debt related to the Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash flow from operations,
supplemented by borrowings under the Credit Agreement.
Cash Flow From Operating Activities. Cash flows from operations for the three
months ended June 30, 1995 and the three months ended June 30, 1996 was $3.9
million and a negative $0.4 million, respectively. Cash flows from operating
activities are lower than historical levels because of the lower operating
profit and the increased interest expense resulting from the debt incurred in
connection with the Acquisitions.
Cash Flows From Investing Activities. The Company's cash used in investing
activities was $27.0 million in the three months ended June 30, 1996 compared to
$3.3 million in the same period of 1995. The Ensolite acquisition required $20.5
million in the 1996 second quarter whereas in the 1995 second quarter $1.3
million was spent to complete the Halstead acquisition. An additional $1.0
million is expected to be spent in the third quarter in connection with the
Ensolite acquisition and additional $7.3 million is expected over the next three
quarters to relocate the Ensolite assets. The Company anticipates increases in
capital spending of approximately $3.7 million related to the proposed
expansion/modernization project at Groendyk and $2.3 million for the
modernization project at the Rubatex-Bedford facility in the 1996 and 1997 time
frame, and approximately $0.5 million in capital related to the proposed
combining of the Universal Rubber and Rubatex Polymer facilities.
Cash Flows From Financing Activities: Concurrently with the Acquisition
Transactions, the Company entered into the Credit Agreement with certain banks.
The Credit Agreement has a maximum borrowing capacity of $100 million and is
secured by the assets of the Company and its subsidiaries. The Company uses $2.2
million of its line of credit for standby letters of credit as part of its
casualty insurance program which leaves availability under the revolving credit
facility at $27.8 million. At June 30, 1996 $1.5 million had been borrowed
against this facility which was subsequently paid off as of July 10, 1996. The
Company financed the Ensolite Acquisition with a $10 million cash equity
contribution from its parent and a $10 million term loan with payments beginning
on December 31, 1997 and maturing in December 2003. The Company also agreed to
an additional margin on all ABR and Eurodollar loans, modifications to certain
covenant provisions, and incurred $0.3 million in finance fees related to the
second quarter amendment in addition to the $0.2 million related to the first
quarter amendment to the Credit Agreement which allowed the financing for the
Ensolite Acquisition.
EBITDA: Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) as
defined by the Credit Agreement, prior to subordinated management fees,
decreased to $5.8 million for three months ended June 30, 1996 from $8.7 million
for the comparable period in 1995, a decrease of $2.9 million. Reasons for the
decline in EBITDA are the same as those given for the decline in operating
income as discussed above.
Management believes EBITDA is one indicator of a company's liquidity. However,
EBITDA, as presented above, may not be comparable to similarly titled measures
of other companies unless such measures are calculated in substantially the same
fashion. The Company believes that EBITDA, while providing useful information,
does not represent cash available to service debt and that it should not be
considered in isolation or as a substitute for the consolidated income statement
prepared in accordance with generally accepted accounting principles. For
example, EBITDA should not be considered an alternative to net income as an
indicator of operating performance or an alternative to the use of cash flows as
a measure of liquidity. Moreover, EBITDA does not reflect, as does cash flow
from operations, the cash needed to support changes in the working capital.
The Company's Credit Agreement includes certain financial covenants including
leverage ratios, interest expense ratios, and minimum levels of Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA), as defined by the
Credit Agreement. As of June 30, 1996, the Company was in compliance with all of
these covenants.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 20, 1996 RBX CORPORATION
By /s/ Thomas F. Lemker
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Thomas F. Lemker
Vice President, Chief Financial
Officer & Treasurer
