RBX CORP, 10-K, 1997-03-27

RBX CORP
10-K, 1997-03-27
FABRICATED RUBBER PRODUCTS, NEC

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996

[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to

Commission file number: 333-1992

RBX CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware 94-3231901
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5221 ValleyPark Drive
Roanoke, Virginia 24019
(Address of principal executive offices)

Registrant's telephone number, including area code: (540) 561-6000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES X NO
------- -------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

As of December 31, 1996, there was no voting stock of the Registrant held by
non-affiliates.

The number of shares of Common Stock of RBX Corporation, $0.01 per share par
value, outstanding as of December 31, 1996 was 1,000.

Registration Statement on Form S-4 File No. 333-1992, filed on March 5, 1996 and
amended on April 15, 1996 and on April 24, 1996, is incorporated herein by
reference.
<PAGE>

RBX CORPORATION

Index
-----

Page
----

PART I.................................................................... 1
ITEM 1. Business................................................... 1
ITEM 2. Properties................................................. 9
ITEM 3. Legal Proceedings.......................................... 10
ITEM 4. Submission of Matters to a Vote of Security Holders........ 11

PART II................................................................... 12
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................ 12
ITEM 6. Selected Financial Data.................................... 13
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 16
ITEM 8. Financial Statements and Supplementary Data................ 24
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 24

PART III.................................................................. 25
ITEM 10. Directors and Executive Officers of the Registrant......... 25
ITEM 11. Executive Compensation..................................... 28
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 33
ITEM 13. Certain Relationships and Related Transactions............. 36

PART IV................................................................... 37
ITEM 14. Exhibits, Financial Statement Schedules, Reports on
Form 8-K................................................... 37
<PAGE>

PART I

RBX CORPORATION

ITEM 1. Business

General

RBX Corporation, a Delaware corporation (the "Company"), is a wholly owned
subsidiary of RBX Group, Inc. ("RBX Group"). The Company and RBX Group were
formed by American Industrial Partners Capital Fund II, L.P. ("AIP-CF") to
purchase RBX Investors, Inc. and its subsidiaries in October 1995 (the
"Acquisition"). The Company is the successor to the business of RBX Investors,
Inc., which began operations in the 1930s. The Company believes that it is the
leading domestic manufacturer of closed cell rubber foam products, a major
competitor in several niche markets, including cross-linked polyethylene foam,
and the second largest domestic custom mixer of rubber polymers. The Company's
products are used in a wide range of applications, including athletic equipment,
sports medicine wraps, neoprene wetsuits, hardware center products (do-it-
yourself insulation, tubing, gardening and construction kneepads), other
consumer products (computer mouse pads, beverage can insulators), insulation for
refrigeration and air conditioning systems, automotive components and other
industrial products. Management estimates that the Company's foam products
operations (the "Foam Group") has a 39% market share in the domestic market for
closed cell rubber foam and related products and a 26% market share in the
domestic market for cross-linked polyethylene foam. The Company's custom rubber
mixing operations (the "Mixing Group") mix a variety of rubber polymers to serve
a wide range of end-use markets. The Company combines purchases of raw materials
for both the Foam Group and Mixing Group to obtain substantial discounts and
rebates from its suppliers. All of the Company's products begin with the same
manufacturing process: the blending of synthetic compounds in a mixer. The
Mixing Group then sells these compounds in uncured sheet or strip form to its
customers. The Foam Group performs additional manufacturing steps, including
curing, extruding, molding, fabrication and lamination, before selling its
products to customers.

The Foam Group contributed approximately 74% of the Company's sales for the
year ended December 31, 1996. Closed cell rubber foam is produced by the
expansion of synthetic rubber polymers through the infusion of millions of gas-
filled cells which are permanently sealed in the material. The closed cell
structure is flexible, resilient and shuts out water, dust and air, which makes
the material ideal for insulating, sealing, shock absorption and a variety of
other uses. The Foam Group designs and manufactures customized foam products for
more than 7,500 active customers. These products are sold in a variety of forms
including sheets, tubes, buns, rolls and extruded and fabricated shapes.

The Mixing Group contributed approximately 26% of the Company's sales for
the year ended December 31, 1996. The Company mixes natural and synthetic
rubbers with various additives and fillers for more than 250 active customers.
The custom-mixed compounds are delivered to customers in sheets or strips of
uncured rubber which the customers then process and fabricate into
<PAGE>

a variety of end-use products, including automobile tires and parts, industrial
belts and hoses, agricultural tools and equipment and roofing materials.

On June 10, 1996, Rubatex Corporation, a wholly owned subsidiary of the
Company, acquired certain assets and assumed certain liabilities of the
Ensolite(R) division ("Ensolite") of Uniroyal Technology Corporation for an
aggregate purchase price of $25.6 million plus direct expenses of approximately
$2.0 million (the "Ensolite Acquisition"). Ensolite is a manufacturer of
certain types of closed-cell foam.

The Foam Group

Products

The Foam Group's products are formulated to provide specific performance
characteristics based on their end-use applications. Closed cell rubber foam is
elastic and impervious to gases and liquids, which makes it an ideal material
for insulation, sealing, shock absorption and waterproofing. Products made with
closed cell rubber foam include residential and industrial building insulation,
plumbing insulation, automotive gaskets, home and hardware center products, such
as grips, handles and foam cushions, and a broad range of consumer products such
as wetsuits, ski masks, knee braces and other sports medicine applications, foam
beverage can insulators and computer mouse pads. Cross-linked polyethylene foam,
which has many of the same physical properties as closed cell rubber foam, is
less elastic but relatively less expensive and is easily thermoformed.
Polyethylene foam is used in such products as athletic mats, marine flotation
buoys, ship fenders, shoe insoles and artificial turf underlay. Silicone rubber
is flame resistant and possesses a number of exceptional physical and chemical
properties which make it suitable for products which are exposed to extreme
temperatures. The Company manufactures silicone-based products for a number of
high-performance applications including commercial lighting, automobile gaskets,
commercial aircraft, aerospace and electronics. The Company also produces a
range of solid rubber products such as tarp straps, pipe gaskets and customized
window glazings.

Products sold in the most basic form include (i) extruded sheets and tubes,
used for insulation in air conditioning, plumbing and refrigeration, and (ii)
molded sheets which are sold to manufacturers who slit, cut, and fabricate the
material into industrial and consumer products ranging from automotive gaskets
to football padding to children's toys. The Company also produces extruded
shapes of closed cell rubber which are sold in various lengths for specialized
sealing or gasket applications that require unusual profiles. In addition, the
Company performs value-added lamination and fabrication processes on its foam
products for many of its customers. The Company can die-cut, thin-slit, apply
adhesive and laminate fabric to the material to render it suitable for light
manufacturing and assembly applications. The Company can also precision-cut
intricate foam products using computer-aided high pressure water jet cutting
technology. The following is a summary of the main product groups produced by
the Foam Group and their principal end-use applications.

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<PAGE>

Product Material Principal Applications
- ------------------- ------------------------------ --------------------------------------------------------------
<S> <C> <C>
Sheets/Rolls Rubber Foam turf underlay, athletic mats, casual footwear, life vests
Cross-linked Polyethylene Form artificial turf underlay, shoe insoles, athletic mats, toys,
novelties, marine
Silicone Rubber commercial lighting gaskets, aerospace gaskets
Buns Rubber Foam automotive gaskets and seals, shock absorbing devices
Extruded Insulation Rubber Foam commercial and residential HVAC insulation
Polyethylene Foam do-it-yourself piping insulation
Extruded Shapes Rubber Foam weather stripping, gaskets, drink cup holders
Rubber commercial glazings
Silicone Rubber marine seals, appliance gaskets
Molded Products Rubber tarp straps, pipe gaskets
Silicone Rubber appliance gaskets, automotive parts
Laminated Sheets Rubber Foam/Fabric wetsuits, knee braces, elbow braces, medical braces, ski masks
Fabricated Products Rubber Foam closure seals, automotive parts, sports helmet padding

</TABLE>

Customers

The Foam Group serves a wide array of industrial and consumer end-user
markets. The Foam Group's base of over 7,500 active customers is comprised of a
large group of core customers who rely on the Company for their ongoing needs
and a smaller number of customers who approach the Company on a project-specific
basis. The Foam Group is able to serve both types of customers because of its
wide range of products, its design and production capabilities and its sales
force which assesses the customers' requirements in order to develop products
which meet their specifications. The size and diversity of the Foam Group's
customer base reduces the Company's reliance on any individual customer or
industry segment.

The Company's products are sold to end product manufacturers, intermediate
fabricators and distributors. End product manufacturers operate in a wide range
of industrial and commercial segments that produce subassemblies and finished
products. Fabricators slice and cut foam into shaped pieces and then sell them
to other manufacturers. Distributors purchase tubes, sheets and buns for resale
to smaller contractors.

Industry

The market for closed cell rubber foam and related products had estimated
annual sales of approximately $450 million in 1996. Industry growth is expected
to come from increased use of closed cell rubber foam in automotive sound and
vibration insulation, new applications in sports and leisure markets and growth
in the consumer and residential housing markets for HVAC insulation. The market
includes rubber foams sold for thermal insulation and for processing into
components or finished parts or products but does not include rubber foams
manufactured by vertically integrated companies exclusively selling finished
products. The overall market is comprised of several segments that are defined
by the product's end use and this market continues to expand as new products and
applications are developed. Some segments, such as insulation, represent a
large share of the overall market and have a large number of customers and
suppliers. A number of other segments represent niche product markets
constituting a small share of the overall market and have relatively few
customers and suppliers. The overall market includes a large number of
customers from a variety of industries, and even established customers in the
larger segments of this market

-3-
<PAGE>

generally represent only a small percentage of the market's total sales. The
Company believes that it has a 39% share of the overall market. The next six
largest producers account for approximately 34% of this market, with a large
number of smaller competitors comprising the remainder.

The market for cross-linked polyethylene foam is believed to represent
approximately a $75 million segment of the $5 billion market for plastic foams
in general. Industry growth is expected to come largely from the continued
development of new applications for cross-linked polyethylene foam. Management
believes that it has the second largest share of this market with an estimated
26% share. Approximately 85% of the Company's 1996 plastic foam sales were for
end-use markets such as automotive, construction, performance packaging, ship
fenders and marine buoys.

The Mixing Group

Products

The Company's Mixing Group mixes rubber polymers and chemical additives to
customer specifications. The various ingredients of a custom formulation are
carefully weighed into a mixer which blends the components and feeds the mixture
onto a large mill. The milled rubber is then pulled off the mill in a wide
ribbon, cooled, and then cut into rough sheets or strips of uncured compound.
These sheets and strips are molded or extruded by the customer into a wide
variety of products including automobile tires and parts, industrial belts and
hoses, agricultural tools and equipment and roofing materials.

Customers

The Company's Mixing Group serves more than 250 active customers from a
variety of industries. In most instances, the Company supplies the raw
materials for a given customer formulation and charges the customer on a "cost-
plus" basis, reflecting raw material costs plus a usage fee for time used on the
mixing line. In cases where a customer supplies the raw materials, the Mixing
Group charges a "tolling" fee for providing the mixing service.

Industry

The domestic custom rubber mixing market is a fragmented $1.2 billion
industry. This market includes custom mixers that mix rubber compounds for
third parties but excludes vertically integrated manufacturers that mix rubber
compounds for their own consumption. There are over 150 companies that mix
rubber based on a customer's specifications or the mixer's own proprietary
formulations. The Company estimates that it is the second largest domestic
custom rubber mixer, with an estimated 7% share of the market. Due to
transportation costs, competition in the custom mixing business is largely
regional. For example, the Company generally does not deliver custom compounds
beyond the range of a one-day truck run (approximately 500 miles).

-4-
<PAGE>

The critical elements in custom compounding are quality, service and
efficiency. The accuracy of the mix is critical to ensure smooth processing
through the customer's manufacturing equipment and the proper performance of the
finished product. While price is important, customers choose suppliers who can
provide rapid turnaround, maximize throughput and minimize waste while
maintaining high quality standards.

Since raw materials represent on average 80% of the manufactured cost of
mixed compound, the product is priced on essentially a "cost-plus" basis. Most
custom compounders effect price changes on 15 to 30 days' notice, effectively
passing through raw material price increases and decreases almost as soon as
they are issued by the primary chemical producers, thereby reducing the mixers'
exposure to raw material price changes.

Sales, Marketing and Distribution

The Company relies on its direct sales force to market and sell the vast
majority of its products. Currently, the Company has 22 field sales personnel
supported by more than 37 internal sales and marketing personnel. The Company's
direct sales force maintains contact with the Company's customers, a large
percentage of which are end product manufacturers. For products targeted to
certain markets, the Company will use independent sales agencies which have the
industry expertise necessary to market and sell the product effectively. For
example, the Company relies on independent sales agencies with automotive
expertise to sell foam products to automotive OEMs. For certain products that
are manufactured in standard configurations, the Company will sell directly to
distributors for resale to end users. For example, insulation tubing (which is
manufactured in a number of standard sizes) is sold to the construction industry
through distributors. Products are distributed either directly to customers or
through one of six distribution warehouses strategically located throughout the
country.

Capacity

Although actual utilization varies depending upon the product line and
manufacturing location, the Foam Group's facilities generally are operating at
approximately 80% of capacity, operating three shifts a day, five days a week,
with occasional Saturday shifts. The Mixing Group's manufacturing facilities
are operating at 80-85% of capacity, operating three shifts a day, generally
five, and occasionally six, days a week.

Competition

The Company believes that it is a leading supplier in most of its principal
product lines. The Company faces domestic and foreign competition across its
product lines ranging from divisions of leading national and international
manufacturers to small, regional competitors.

The Company believes that it is the largest domestic manufacturer of rubber
foam products. The Company believes that it is the second largest domestic
supplier of cross-linked polyethylene

-5-
<PAGE>

foam with an estimated 26% market share. What management estimates to be the
largest domestic supplier of cross-linked polyethylene foam, the Voltek division
of Sekesui America Corporation ("Voltek"), has, in management's estimation, a
market share of 55%; however, due to differences between the Company's and
Voltek's products which make them suitable for different applications,
management believes that the Company's customer base has limited overlap with
that of Voltek.

The Company, with a mixing capacity of approximately 165 million pounds per
year, estimates that it is the second largest domestic custom rubber mixer, with
an estimated 7% share of the market. The Company estimates that there are 150
domestic custom mixers, approximately 20 of which have annual capacity greater
than 35 million pounds. Because transportation costs affect a custom mixer's
ability to compete, competition tends to be focused regionally. The Company
believes that the significant discounts it receives through company wide raw
material purchases, its proprietary formulations, emphasis on quality control
and ability to provide rapid turnaround of unusual formulations and small orders
enable it to compete effectively in mixing.

Raw Materials

The Company's key raw material inputs are synthetic polymers, specialty
chemicals, carbon black, synthetic fabrics, natural rubber and polyethylene,
which represented, respectively, 37%, 17%, 7%, 4%, 3%, and 4% of the Company's
raw material purchases during 1996. Due to the volume of its raw material
purchases, the Company receives substantial discounts and rebates from its
suppliers. Raw material purchases accounted for approximately 50% of the cost
of goods sold by the Foam Group and approximately 80% of the cost of goods sold
by the Mixing Group in 1996. The Company purchases raw materials from a number
of suppliers through short-term purchasing arrangements, and the Company
believes that there are sufficient sources of supply for the foreseeable future.

The Company expects that it will continue to experience raw material price
fluctuations from time to time. Many of the raw materials used by the Company
are petrochemical derivatives, which are subject to periodic price fluctuations.
Historically, the Company has been able to pass along increased raw material
costs to its customers. For approximately 74% of its products, the Company's
pricing strategy is flexible enough to permit cost increases to be passed
through promptly. For the remaining 26% of its products, including those listed
in catalogues or subject to extended firm price quotes, price increases can take
up to a year to implement.

Trademarks and Patents

The Company has numerous trademarks and several patents effective in the
United States and several trademarks effective in several foreign countries for
varying lengths of time. Company trademarks include Insul-Tube(R) and Therma-
Cel(R) under which it markets certain insulation products, ENSOLITE(R) under
which it markets certain rubber foam sheets/rolls and SeaTex(R) under which it
markets wetsuit material. The Company also has a number of applications for
trademarks pending in the United States and abroad. Management considers its
various trademarks, trademark

-6-
<PAGE>

applications and patents to be valuable assets but believes that the loss of any
one trademark or patent would not have a material adverse effect on the
Company's operations.

Environmental Matters

The Company is subject to a wide variety of federal, state and local
environmental laws and regulations ("Environmental Laws") which continue to be
adopted and amended. These Environmental Laws regulate, among other things, air
and water emissions and discharges at the Company's manufacturing facilities;
the generation, storage, treatment, transportation and disposal of solid and
hazardous waste by the Company, the release of hazardous substances, pollutants
and contaminants into the environment at properties operated by the Company and
at other sites; and, in some circumstances, the environmental condition of
property prior to transfer or sale to the Company. Risks of significant
environmental costs and liabilities are inherent in the operations and
facilities of the Company, as well as other participants in the industry. The
Company believes, however, that its current operations are in substantial
compliance with Environmental Laws.

The Company anticipates capital expenditures of approximately $0.3 million
in the aggregate over the next three to five years relating to environmental
matters. These expenditures include, among other things, making improvements in
the Company's underground storage tank systems, designing and installing air
emission control equipment and implementing spill control plans. As a result of
internal evaluations and discussions with its advisors and consultants, the
Company estimates that the cost of the Company's known potential environmental
liabilities ranges from $1.8 million to $2.9 million. Based on the reasonably
expected amount of such liabilities, the Company has established a reserve on
its balance sheet for environmental liabilities, which as of December 31, 1996
was approximately $2.0 million, of which $0.9 million relates to estimated costs
to remove underground storage tanks. Management believes such amounts, under
existing laws and regulations, are adequate to cover presently identified
environmental liabilities, but no assurance can be given that such amounts will
be adequate to cover the ultimate costs of these liabilities, or the cost of
environmental liabilities that may arise or be identified in the future.
Although management expects that any cash outlays with respect to such matters
would be made over a number of years, the timing of any such expenditures cannot
be determined.

The Company has been named as a "potentially responsible party" at two
federal "Superfund" sites and one other site where its wastes are alleged to
have been disposed of. Based upon information known to the Company concerning
the size of these sites, their years of operation, the number of past users and
the characteristics of the Company's waste streams, management believes that the
Company's proportionate share of the cost of the necessary investigation and
eventual remedial work that may need to be performed at such sites will not be
material. A"potentially responsible party" under applicable federal regulations
would have joint and several liability for the total costs of any cleanup or
other remediation. The Company does not presently have any cost sharing
arrangements with any other potentially responsible parties. However, the
Company has no reasonable basis to believe that any other potentially
responsible party will be unable to make its pro rata contribution with respect
to any cleanup or other remediation.

-7-
<PAGE>

In 1996, the Company's Bedford, Virginia facility conducted an inventory of
its air emissions sources and evaluated its current and future compliance with
the federal Clean Air Act Amendments of 1990 and related Environmental Laws.
The Company believes that any costs associated with such compliance will not be
material.

The Company's leased Barberton, Ohio facility was listed in the
Comprehensive Environmental Response, Compensation and Liability Information
System ("CERCLIS") index with the designation "No Further Remedial Action
Planned." However, such facility was delisted from the CERCLIS index on August
31, 1995. The United States Environmental Protection Agency ("U.S. EPA")
conducted a site investigation and issued a report in 1990 and a follow-up site
investigation was conducted by a U.S. EPA contractor in April 1995. Although
some further investigation or cleanup of the site may be required, the Company
does not expect that the costs of those activities would have a material adverse
effect on the Company's financial condition, operations or liquidity. Any such
costs would likely be incurred over several years. The property is also
identified on the Ohio 1994 Master Sites List, with a designation of "medium
priority." The Ohio EPA issued a complaint with respect to the Barberton
facility in 1991 and, although such complaint remains open, the Company believes
that all noted items have been corrected.

Employees and Employee Relations

At December 31, 1996, the Company employed 2,036 persons, of whom
approximately 28% were salaried employees, and 72% were hourly employees.
Approximately 75% of the Company's hourly employees are represented by labor
unions pursuant to collective bargaining agreements that expire between February
1997 and November 1999. The Company believes its relations with both union and
non-union employees are good.

Seasonal Nature of Business

The Company participates in a number of markets, some of which have slight
seasonalities, but this wide market participation insulates against significant
seasonal business fluctuations.

-8-
<PAGE>

ITEM 2. Properties

In addition to its leased 24,000 square foot headquarters in Roanoke,
Virginia, the Company operates eight manufacturing facilities, the majority of
which are located in the southeastern United States. The Company also owns or
leases warehouse facilities throughout the U.S. The size and location of the
Company's significant facilities are summarized below:

<TABLE>
<CAPTION>
Size Leased/
Location (Sq. Ft.) Owned
- ------------------------- --------- ---------
<S> <C> <C>
Manufacturing:
Bedford, VA 813,000 Owned
Colt, AK 223,000 Leased(a)
Barberton, OH 197,000 Leased
Conover, NC 276,000 Owned
Tallapoosa, GA 165,000 Leased(a)
South Holland, IL 164,000 Leased
Middlefield, OH 119,000 Owned
Buchanan, VA 77,000 Owned
Dawsonville, GA 26,000 Owned(b)

Warehouse:
Conover, NC 94,000 Leased
Santa Fe Springs, CA 44,000 Owned
Decatur, GA 37,000 Owned
St. Louis, MO 23,000 Leased
Houston, TX 20,000 Leased
Denver, CO 19,000 Leased
Kent, WA 14,000 Leased
LaSalle Bristoll, TN 5,000 Leased

</TABLE>

- -------------
(a) Subject to a bond lease with nominal lease payments. The Company has
the option to purchase this property for a nominal amount.

(b) During 1996, the Universal Rubber Company operations previously
located at Dawsonville were relocated to and consolidated with
Universal Polymer & Rubber Inc.'s operations in Middlefield, Ohio. The
remaining building and real estate at Dawsonville is currently being
offered for sale.

-9-
<PAGE>

ITEM 3. Legal Proceedings

From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. Management believes that none of
the matters in which the Company is currently involved, either individually or
in the aggregate, is expected to have a material adverse effect on the Company's
business or financial condition.

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<PAGE>

ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of 1996.

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<PAGE>

PART II

RBX CORPORATION

ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

There is no established public trading market for the Registrant's common
equity. There was no unregistered sale of the Registrant's common equity in
1996.

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<PAGE>

ITEM 6. Selected Financial Data

The following selected historical financial data were derived from the
audited historical consolidated financial statements of the Company. The
historical consolidated financial data of the Company as of and for each of the
years ended December 31, 1992, 1993 and 1994 and for the nine and one-half month
period ended October 16, 1995 were derived from the consolidated financial
statements of the Predecessor and represent the results of operations of the
Predecessor through the date of the Acquisition. The historical consolidated
financial data of the Company as of and for the two and one-half month period
ended December 31, 1995, and for the year ended December 31, 1996, were derived
from the consolidated financial statements of the Company and represent the
results of operations of the Company subsequent to the Acquisition. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
Predecessor Company
--------------------------------------------- -----------------------
Year Year Year 9 1/2 Months | 2 1/2 Months Year
Ended Ended Ended Ended | Ended Ended
Dec. 31, Dec. 31, Dec. 31, Oct. 16, | Dec. 31, Dec. 31,
1992 1993 1994 1995 | 1995 1996
-------- -------- -------- ------------ | ------------ --------
(dollars in thousands) | (dollars in thousands)
<S> <C> <C> <C> <C> | <C> <C>
Operating Data: |
Net sales $164,458 $175,777 $197,913 $220,321 | $ 51,646 $275,715
Gross profit (a) 30,356 27,337 32,171 39,644 | 4,735 37,350
Selling general and administrative |
costs (a) 14,300 17,313 18,478 21,112 | 5,193 30,474
Operating income (loss) 13,339 8,486 13,317 16,878 | (1,303) (24,626)
Net income (loss)(b)(c) 6,509 (22,905) 5,652 6,021 | (3,321) (35,056)
|
Balance Sheet Data: |
Net working capital 34,557 35,062 45,817 -- | 61,055 44,671
Fixed assets, net 64,289 61,685 93,420 -- | 81,277 91,068
Total assets 129,354 143,946 206,268 -- | 285,736 280,700
Total long-term debt (including |
current portion) 60,554 50,204 95,795 -- | 171,745 184,892
Stockholders' equity 50,085 26,827 33,383 -- | 40,574 20,313
|
Other Data: |
Capital expenditures 2,630 3,390 5,817 6,323 | 823 11,818
Depreciation 4,409 4,608 5,121 5,820 | 1,310 7,124
Amortization of goodwill and other |
intangibles 292 276 319 565 | 733 3,943
Amortization of deferred financing |
fees 411 239 140 289 | 190 882
Cash flows provided by (used in): |
Operating activities 7,511 12,441 9,291 8,440 | 1,785 9,137
Investing activities (2,630) (3,305) (54,660) (7,291) | (199,838) (33,829)
Financing activities (9,927) (9,849) 43,547 (1,916) | 203,876 22,162
Earnings to fixed charges (d) 2.5x 2.4x 3.6x 2.3x | -- --
EBITDA (e) 18,040 13,370 18,757 23,263 | 740 (13,559)

</TABLE>

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<PAGE>

(a) Certain amounts from prior periods have been reclassified to conform to the
current period presentation.

(b) Net loss for 1993 and net income for 1994 include extraordinary losses of
$1.2 million and $0.4 million, respectively, for the early extinguishment
of debt.

(c) Net income for 1992 includes a gain of $1.1 million for the cumulative
effect of a change in accounting principle for the adoption of SFAS No.
109, "Accounting for Income Taxes" and net loss in 1993 includes a $24.9
million loss from the cumulative effect of a change in accounting principle
for the adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions." Net loss for 1996 includes a loss on
impairment of long-lived assets of $26.5 million and additional charges of
$8.7 million in the aggregate, primarily relating to a reassessment of
inventory carrying values and liabilities incurred in connection with
severance and certain other personnel related costs.

(d) In computing the ratio of earnings to fixed charges, "earnings" represent
income (loss) before income taxes, extraordinary items and changes in
accounting principles plus "fixed charges." "Fixed charges" consist of
interest expense, amortization of deferred financing fees and one-third of
rental expenses attributable to interest. For the two and one-half month
period ended December 31, 1995, earnings were insufficient to cover fixed
charges by $5.2 million. For the year ended December 31, 1996, earnings
were insufficient to cover fixed charges by $43.3 million.

(e) EBITDA represents the sum of income before income taxes, extraordinary
items and changes in accounting principles, interest expense, depreciation
and amortization. EBITDA as defined by the Credit Agreement (included for
financial covenant calculation purposes) includes additional adjustments
from EBITDA including the add-back of amortization of purchase accounting
write-ups of inventories and other non-cash items as defined in the Credit
Agreement. Pursuant to the terms of the Credit Agreement and the Indenture,
management fees are subordinated to payments owed under the Credit
Agreement and Indenture. EBITDA as defined in the Credit Agreement prior to
subordinated management fees was $20,965, $17,863, $20,106 for the years
1992, 1993 and 1994, respectively, $25,607 and $3,826 for the 9 1/2 and
2 1/2 months of 1995, respectively, and $29,433 and $24,800 for the years
1995 and 1996, respectively. 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. EBITDA and
EBITDA as defined by the Credit Agreement are calculated as follows:

-14-
<PAGE>

<TABLE>
<CAPTION>
Predecessor Company
------------------------------------------------- --------------------------
Year Year Year |
Ended Ended Ended 9 1/2 Months | 2 1/2 Months Year Ended
Dec. 31, Dec. 31, Dec. 31, Ended Oct. | Ended Dec. Dec. 31,
1992 1993 1994 16, 1995 | 31, 1995 1996
-------- -------- -------- ------------ | ------------ ----------
<S> <C> <C> <C> <C> | <C> <C>
Net income (loss) $ 6,509 $(22,905) $ 5,652 $ 6,021 | $(3,321) $(35,056)
Income taxes (benefit) 2,824 1,981 3,865 3,979 | (1,849) (8,255)
Early extinguishment of debt -- 1,176 466 -- | -- --
Effect of changes in |
accounting principle (1,078) 24,853 -- -- | -- --
Interest expense, including |
amortization of deferred |
financing fees 5,084 3,381 3,334 6,878 | 3,867 18,685
Depreciation 4,409 4,608 5,121 5,820 | 1,310 7,124
Amortization of intangibles 292 276 319 565 | 733 3,943
------- -------- ------- ------- | ------- --------
|
EBITDA 18,040 13,370 18,757 23,263 | 740 (13,559)
Non-cash portion of |
management fees -- -- -- -- | 180 (65)
Amortization of purchase |
accounting inventory |
adjustment -- -- 230 817 | 2,671 140
Unusual item -- -- -- 620 | -- --
Loss on impairment of long- |
lived assets -- -- -- -- | -- 26,498
Special fourth-quarter |
charges as allowed by the |
Credit Agreement -- -- -- -- | -- 8,000
Pro forma impact of Ensolite -- -- -- -- | -- 1,921
Non-cash items as defined in |
the Credit Agreement 2,425 3,793 619 489 | 235 805
------- -------- ------- ------- | ------- --------
EBITDA, as defined by the |
Credit Agreement 20,465 17,163 19,606 25,189 | 3,826 23,740
Management fees, subordinated |
to the Indenture 500 700 500 418 | -- 1,060
------- -------- ------- ------- | ------- --------
EBITDA, as defined by the |
Credit Agreement prior to |
subordinated management fees $20,965 $ 17,863 $20,106 $25,607 | $ 3,826 $ 24,800
======= ======== ======= ======= | ======= ========
</TABLE>

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 statement of operations
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 working capital. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements.

-15-
<PAGE>

ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following should be read in conjunction with the Financial Statements
and Notes thereto and "Selected Financial Data" included elsewhere in this
Annual Report on Form 10-K.

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") and Ensolite on
June 10, 1996. In addition, the Predecessor had acquired OleTex on September 30,
1994 and Halstead on December 30, 1994. 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 following discussion provides an assessment of the consolidated results
of operations and liquidity and capital resources for the Company and the
Predecessor. Unless otherwise indicated, 1995 historical results represent the
combined operating results of the Predecessor for the nine and one-half month
period through the date of the Acquisition, and the Company for the two and one-
half month period subsequent to the Acquisition.

Excluding the impact of the Ensolite Acquisition, the Company has
experienced a decline in sales and operating profits in fiscal 1996 compared to
fiscal 1995. The decline is primarily related to lower sales volumes and lower
price realizations in the Mixing Group and certain foam markets and to continued
operating difficulties at the Bedford, Virginia plant of the Company's Rubatex
subsidiary. The decline at the Bedford plant began in the last half of 1995,
and, although there was some improvement in the first and second quarters of
1996, the third and fourth quarter results were lower than the previous quarters
in 1996 and the comparable quarters of 1995. The earlier decline in sales was
attributed to an overall decrease in demand for rubber foam products in the
second half of 1995 paired with quality and service problems at Bedford.
Although management believes efforts in the first half of 1996 were
substantially successful at improving quality and service, a return to the
higher sales levels has not yet materialized. Management's emphasis has been re-
focused on cost reductions in light of the current sales levels. Programs are
underway to improve substantially the Bedford manufacturing management
information systems to better identify and control the cost of the production
processes. Management also undertook reviews of inventory valuations in light
of: (i) low inventory turnover, (ii) the costs carried in inventory related to
the higher manufacturing cost structures in place prior to full implementation
of cost reductions; and (iii) how inventory levels are being maintained to
service various markets. In addition, management reviewed the impact of lower
cash flows on the valuation of long-lived assets at the Bedford plant. As
further discussed in Note 15 to the Company's Consolidated Financial Statements,
in connection with the decline in profitability and the resulting decrease in
expected future cash flows, management reassessed the carrying value of the
long-lived assets related to the Bedford operations and recorded an impairment

-16-
<PAGE>

loss of $26.5 million in the fourth quarter of 1996. The Company also recorded
additional fourth-quarter charges of $8.7 million in the aggregate. Such charges
include $4.9 million related to a reassessment of inventory carrying values,
$2.5 million for liabilities incurred in connection with severance and certain
other personnel related costs, $0.8 million related to the reassessment of the
future value of on-going capital projects and $0.5 million for other items.

Basis of Presentation

The following table sets forth, for the periods shown, net sales, cost of
goods sold, gross profit, selling, general and administrative costs ("SG&A"),
operating income (loss) and net income (loss) in millions of dollars and as a
percentage of net sales:

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1994 1995 1996
-------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $197.9 100.0% $272.0 100.0% $275.7 100.0%
Cost of goods sold 165.7 83.7 227.6 83.7 238.3 86.4
Gross profit 32.2 16.3 44.4 16.3 37.4 13.6
SG&A (including
management fees) 18.5 9.3 26.9 9.9 31.5 11.4
Operating income (loss) 13.3 6.7 15.6 5.7 (24.6) -8.9
Net Income (loss) 5.7 2.9 2.7 1.0 (35.1) -12.7

</TABLE>

Results of Operations

1996 Compared to 1995

Net Sales. Net sales increased to $275.7 million in 1996 from $272.0
million in 1995, an increase of $3.7 million or 1.4%. Ensolite added $13.9
million in net sales for 1996. Without Ensolite, net sales would have decreased
by $10.2 million or 3.8%. Net sales for the Foam Group, excluding Ensolite,
decreased to $190.6 in 1996 from $192.8 million in 1995, a decrease of $2.2
million or 1.1%. The decline in net sales of the Foam Group is primarily
attributable to a decrease in net sales of 6.2% at the Bedford, Virginia
operations of Rubatex. This decrease is the result of quality and service
problems at the plant which began in the second half of 1995 and continued into
1996. The Company undertook a number of manufacturing and service improvements
in 1996 that substantially improved quality and service but a return to the
higher sales levels has not yet materialized. Net sales for the Mixing Group
decreased to $78.4 million in 1996 from $86.2 million in 1995, a decrease of
$7.8 million or 9.0% due to a general economic slow down in their markets,
resulting in lower sales volumes and lower price realizations. Additionally, the
decline in net sales in 1996 for the Mixing Group reflects the loss of sales at
a major tire manufacturer who began mixing with his own equipment in 1996.

Gross Profit. Gross profit decreased to $37.4 million in 1996 from $44.4
million in 1995, a decrease of $7.0 million or 15.8%. As a percentage of net
sales, gross profit decreased to 13.6%

-17-
<PAGE>

in 1996 from 16.3% in 1995. Ensolite added $3.2 million in gross profit for
1996. Without Ensolite, gross profit would have decreased by $10.2 million or
23.0%. Each of the Company's subsidiaries experienced decreases in gross profit
except for OleTex which realized an improvement of 9.4%. Gross profit at
Rubatex's Bedford, Virginia operations declined by $8.5 million or 83.3% of the
overall decline in 1996 gross profit (excluding Ensolite). Decreases in gross
profit resulted from lower sales volumes, downward pressure on margins due to
competitive markets, and increased costs associated with addressing the quality
problems at Bedford. Additionally, gross profit was impacted by a fourth-quarter
charge of $4.9 million in connection with a reassessment of inventory carrying
values primarily at Bedford in light of: (i) low inventory turnover; (ii) the
costs carried in inventory related to higher manufacturing cost structures in
place prior to full implementation of cost reductions; and (iii) how inventory
levels are being maintained to service various markets. Gross profit in 1996 was
also affected by $0.4 million of fourth-quarter charges for liabilities incurred
in connection with certain personnel related costs, reassessment of the future
value of on-going capital projects and certain other items. Excluding the
fourth-quarter charges and including Ensolite, gross profit decreased to $42.7
million, a decrease of $1.7 million or 3.8%.

SG&A. SG&A increased to $31.5 million in 1996 from $26.9 million in 1995,
an increase of $4.6 million or 17.1%. As a percentage of net sales, SG&A
increased to 11.4% in 1996 from 9.9% in 1995. The increase in SG&A includes $3.4
million of fourth-quarter charges for liabilities incurred in connection with
severance and certain other personnel related costs, reassessment of the future
value of on-going capital projects and certain other items. Excluding these
charges, SG&A would have been $28.1 million or 10.2% of net sales in 1996, which
represents an increase of $1.2 million or 4.5% over 1995. Increased management
and professional fees account for $0.8 million of the increase in 1996.

Operating Income/Loss. Operating income/loss decreased to an operating
loss of $24.6 million in 1996 from operating income of $15.6 million in 1995, a
decrease of $40.2 million. In the fourth quarter of 1996, the Company recorded a
loss on impairment of long-lived assets of $26.5 million related to the Bedford
operations. Exclusive of the effects of all of the aforementioned fourth-quarter
charges, operating income decreased to $10.6 million in 1996 from $15.6 million
in 1995, a decrease of $5.0 million or 32.1%.

Net Income/Loss. Net income/loss decreased to a net loss of $35.1 million
in 1996 from net income of $2.7 million in 1995, a decrease of $37.8 million. In
addition to the effects of the matters referred to above, net income/loss was
effected by an increase in interest expense of $8.0 million as a result of: (i)
1996 reflecting a full year of interest expense related to additional debt
incurred in connection with the Acquisition; (ii) increased borrowings in
connection with the Ensolite Acquisition; (iii) increased borrowings under the
revolving credit agreement; and (iv) increased interest rates. An income tax
benefit of $8.2 million in 1996 partially mitigates the net income effect of the
lower profits, fourth-quarter charges and higher interest expense.

-18-
<PAGE>

1995 Compared to 1994

Historical sales and operating results for 1995 were significantly higher
than those for 1994 due largely to the OleTex and Halstead acquisitions. To
provide a basis for comparing sales and operating results for the two periods in
the discussion which follows, the Company has combined Halstead's historical
results for 1994 and OleTex's historical results for the first nine months of
1994 ("Acquired Companies"). The following table reflects (in millions of
dollars) the effect of such combination and all of the results discussed below
are on a comparable basis.

<TABLE>
<CAPTION>
Year Ended
Year Ended December 31, 1994 December 31, 1995
----------------------------------- -----------------
Company Acquired
Historical Companies Combined
---------- --------- --------
<S> <C> <C> <C> <C>
Net sales $197.9 $71.7 $269.6 $272.0
Cost of goods sold 165.7 54.7 220.4 227.6
Gross profit 32.2 17.0 49.2 44.4
SG&A (including management fees) 18.5 10.2 28.7 26.9
Operating income 13.3 6.9 20.2 15.6
Net income 5.7 4.1 9.8 2.7

</TABLE>

Net Sales. Net sales increased to $272.0 million in 1995 from $269.6
million in 1994, an increase of $2.4 million or 0.9%. Sales for the Foam Group
decreased to $192.8 million from $194.4 million a decrease of $1.6 million or
0.8%. The decrease was confined to Rubatex which experienced a 3.7% decline
primarily related to lower volumes for extruded sheets and shapes and plastic
products. These declines reflect lower volumes realized in the last six months
of 1995 due to softer overall economic conditions and service and quality
problems at the Company's Bedford, Virginia operations. All other operations in
the Foam Group realized a 6.7% increase in sales. Sales of the Mixing Group
increased to $86.2 million in 1995 from $82.5 million, an increase of $3.7
million or 4.5%. This growth reflected continued strong industry-wide demand and
price increases effected to pass along higher raw material costs.

Gross Profit. Gross Profit decreased to $44.4 million in 1995 from $49.2
million in 1994, a decrease of $4.8 million or 9.8%. As a percentage of net
sales, gross profit decreased to 16.3% in 1995 from 18.2% in 1994. Non-recurring
charges required under purchase accounting for the Acquisitions, primarily
related to the adjustment of inventory to fair value and the resulting increase
in cost of goods sold upon the turnover of the acquired inventory (which
turnover was completed by December 31, 1995), accounted for $3.1 million of the
decrease. The rest of the decline was at Rubatex and in particular the Bedford
plant of Rubatex where lower volumes coupled with quality and service problems
resulted in gross profits declining by $4.8 million in 1995 compared to 1994.
Management undertook steps to reverse this trend. For example, a new plant
manager was hired January 2, 1996, and programs were initiated to improve work
practices and operating procedures. Capital projects are being developed to
improve process controls and production flow. Excluding Rubatex, the rest of the
operations realized a 5.4% increase in gross profit.

-19-
<PAGE>

SG&A. SG&A decreased to $26.9 million in 1995 from $28.7 million in 1994,
a decrease of $1.8 million or 6.3%. As a percentage of net sales, SG&A decreased
to 9.9% in 1995 from 10.6% in 1994. SG&A expenses decreased by $1.7 million
resulting from the reduction in salaried personnel and other overhead costs
achieved by the consolidation of Halstead's and the Company's SG&A operations.

Operating Income. Operating income decreased to $15.6 million in 1995 from
$20.2 million in 1994, a decrease of $4.6 million or 22.8%. As a percentage of
net sales, operating income decreased to 5.7% in 1995 from 7.5% in 1994. In
addition to the changes to gross profit and SG&A discussed previously, 1995
operating income included an unusual charge of $0.6 million reflecting a
settlement of disputed insurance claims arising prior to December 1990 and
increased amortization expenses of $1.0 million related to increases in goodwill
and other intangibles related to the Acquisitions.

Net Income. Net income decreased to $2.7 million in 1995 from $9.8 million
in 1994, a decrease of $7.1 million. In addition to the above-mentioned decline
in operating income, interest expense increased by $7.4 million. This increase
in interest expense is due to the higher debt levels related to the
Acquisitions, and the corresponding increase in interest rates primarily related
to the newly incurred $100 million subordinated notes at 11 1/4% compared to the
interest rate on the Predecessor's senior debt. A $4.5 million decrease in
income taxes mitigated the net income effect of the lower profits and higher
interest expense. Net income in 1994 included a loss on early extinguishment of
debt of $0.4 million.

Liquidity and Capital Resources

The Company's primary source of liquidity is cash flow from operations,
supplemented by borrowings under the Revolving Credit Agreement.

Cash Flow From Operating Activities. Cash flow from operations was $9.1
million and $10.2 million in 1996 and 1995, respectively. Accounts receivable
and inventory decreased by a total of $13.8 million during 1996 compared to an
increase of $4.0 million in 1995. This reduction in accounts receivable and
inventory reflects the Company's focus on managing its working capital.

Cash Flow From Investing Activities. Cash flow used in investing
activities was $33.8 million in 1996 compared to $207.1 million in 1995. Cash
used in connection with the Ensolite Acquisition was $22.0 million in 1996. Cash
used in investing activities in 1995 reflects cash used of $199.0 million in
connection with the Acquisition. Capital expenditures were $11.8 million and
$7.1 million in 1996 and 1995, respectively. Included in 1996 was $5.7 million
in capital spending to relocate the Ensolite operations to Rubatex's Conover,
North Carolina plant. Major projects over the next twelve to eighteen months
include completion of the Ensolite project and modernization of the Groendyk and
Bedford facilities. Capital spending in 1997 is estimated to be in the range of
$15.0 million to $16.0 million.

-20-
<PAGE>

Cash Flow From Financing Activities. Cash flow from financing activities
was $22.2 million in 1996 and $202.0 million in 1995. In 1996, a cash
contribution to capital of $10.0 million, along with proceeds from borrowings
under the Credit Agreement of $10.0 million, were used to help finance the
Ensolite Acquisition. Cash from financing activities in 1995 reflects $170.0
million of proceeds from borrowings in connection with the Acquisition. In 1996,
proceeds from borrowings under the Revolving Credit Agreement of $17.0 million
were used to finance capital expenditures and make interest payments. Available
cash was used to repay $9.5 million on the Revolving Credit Agreement and $4.0
million on the term loan during 1996.

The Company is highly leveraged. At December 31, 1996, the Company's
indebtedness was $184.9 million and its stockholder's equity was $20.3 million.
For the two and one-half month period ended December 31, 1995 and the year ended
December 31, 1996, the Company's earnings were insufficient to cover fixed
charges by $5.2 million and $43.3 million, respectively. However, depreciation,
amortization and the loss on impairment of long-lived assets, which are noncash
charges to earnings, totaled $4.9 million and $38.6 million for the two and one-
half months and the year ended December 31, 1995 and 1996, respectively.

The Company has a $30.0 million line of credit under a Revolving Credit
Agreement, $2.2 million of which is used for an irrevocable standby letter of
credit. As of December 31, 1996, borrowings under the Revolving Credit Agreement
were $7.5 million. Unused borrowing capacity under the Revolving Credit
Agreement was $20.3 million at December 31, 1996.

The Company believes that it will generate sufficient cash flow from
operations, as supplemented by its available borrowings under the Revolving
Credit Agreement, to meet required principal and interest payments and to meet
working capital and capital expenditure requirements through December 31, 1997
and for the foreseeable future.

EBITDA. Earnings before interest, taxes, depreciation and amortization
(EBITDA), as defined by the Credit Agreement, prior to subordinated management
fees, was $24.8 million in 1996 compared to $29.4 million in 1995, a decrease of
$4.6 million or 15.6%.

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
statement of operations 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 working capital.

-21-
<PAGE>

The Company's Credit Agreement includes certain financial covenants
including leverage ratios, interest expense ratios, and minimum levels of
EBITDA. As further described in Note 7 to the consolidated financial statements,
the Company entered into certain amendments to the Credit Agreement during 1996.
These amendments modified certain covenants and restrictions contained in the
Credit Agreement in order to provide the Company with greater flexibility and
provide for the Ensolite Acquisition. In connection with the amendments to the
Credit Agreement, the Company incurred additional finance fees of $0.7 million
and agreed to increases in the interest rates of 0.125% on Tranche A ABR and
Eurodollar loans and .025% on Tranche B ABR and Eurodollar loans. As of December
31, 1996, the Company was in compliance with all of the covenants as modified by
the Credit Agreement amendments.

Environmental Matters

It should be recognized that a number of the Company's facilities have been
in operation for many years, and it is possible that additional environmental
issues that could be material may arise in the future. The ultimate extent of
the Company's liability for compliance costs of on-site or off-site
investigation and cleanup, remediation costs, claims and litigation relating to
Environmental Laws and health and safety matters and the future capital
expenditures associated with Environmental Laws cannot be determined at this
time. The total cost of environmental assessment and remediation depends on a
variety of regulatory, technical and factual issues, some of which cannot be
anticipated. Future regulations and changes in the text or interpretation of
existing Environmental Laws may subject the Company's operations to increasingly
stringent standards. While the precise effect of these changes on the Company
cannot be estimated, compliance with such requirements may make it necessary, at
costs which may be substantial, to retrofit existing facilities with additional
pollution control equipment, to further upgrade existing underground storage
tanks, and to undertake new measures in connection with the storage,
transportation, treatment and disposal of by-products and wastes.

-22-
<PAGE>

a result of internal evaluations and discussions with its advisors and
consultants, the Company estimates that the cost of the Company's known
potential environmental liabilities ranges from $1.8 million to $2.9 million.
Based on the reasonably expected amount of such liabilities, the Company has
established a reserve on its balance sheet for environmental liabilities, which
as of December 31, 1996 was approximately $2.0 million, of which $0.9 million
relates to estimated costs to remove underground storage tanks. Management
believes such amounts, under existing laws and regulations, are adequate to
cover presently identified environmental liabilities, but no assurance can be
given that such amounts will be adequate to cover the ultimate costs of these
liabilities, or the cost of environmental liabilities that may arise or be
identified in the future. Although management expects that any cash outlays with
respect to such matters would be made over a number of years, the timing of any
such expenditures cannot be determined. The Company does not maintain insurance
coverage for environmental matters.

In 1996, the Company's Bedford, Virginia facility conducted an inventory of
its air emissions sources and evaluated its current and future compliance with
the federal Clean Air Act Amendments of 1990 and related Environmental Laws. The
Company believes that any costs associated with such compliance will not be
material.

-23-
<PAGE>

Impact of Inflation

The Company believes that inflation has not had a significant effect on its
results of operations over the periods presented. Many of the Company's raw
materials are petrochemical derivatives. Substantial increases in costs of such
materials could adversely affect the operations of the Company, although the
Company believes such cost increases could be passed onto customers in less than
a one year period.

Disclosure Regarding Forward-Looking Statements

The information herein may include "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934. All statements, other than statements of
historical facts included herein, regarding the Company's financial position,
business strategy and cost cutting plans may constitute forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Actual results could differ
materially from the Company's expectations. Information on significant potential
risks and uncertainties not discussed herein may be found in the Company's
filings with the Securities and Exchange Commission including its Prospectus
dated May 2, 1996.

ITEM 8. Financial Statements and Supplementary Data

The Company's 1996 consolidated financial statements are presented on pages
F-1 through F-20 of this Annual Report on Form 10K.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

-24-
<PAGE>

PART III

RBX CORPORATION

ITEM 10. Directors and Executive Officers of the Registrant

Set forth below is the name, age as of December 31, 1996, and a brief
account of the business experience of each person who is, or was at December 31,
1996, a director or executive officer of the Company.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Frank H. Roland 61 President, Chief Executive Officer and Director
Thomas F. Lemker 48 Vice President, Chief Financial Officer and Treasurer
Mark T. Dobbins 51 Vice President - Human Resources
Roger G. Dickson 53 Vice President - Sales and Marketing
John D. Fisher 54 Vice President - Manufacturing & Technical Services
Harry L. Schickling 58 Vice President and Secretary
Tom H. Barrett 66 Chairman of the Board and Director
W. Richard Bingham 61 Director
Theodore C. Rogers 62 Director
Lawrence W. Ward, Jr. 44 Director
Robert J. Klein 32 Director
Steven W. Schaefer 60 Director

</TABLE>

Mr. Roland has been the President and Chief Executive Officer of the
Company since October 1996. He became President of Rubatex Corporation, a
subsidiary of the Company, in April 1995. The former President of Halstead
Industries, Inc. ("Halstead"), Mr. Roland joined the Company in January 1995
upon the Company's acquisition of Halstead Corporation, a subsidiary of
Halstead. Mr. Roland joined Halstead in May 1989 as Chief Financial Officer and
Treasurer and was promoted to President in April 1992. Prior to his employment
with Halstead, he served in various executive capacities with H. H. Roberston
Co. and United Dominion Industries, Inc.

Mr. Lemker has been a Vice President of the Company since April 1993.
Between 1977 and 1993, Mr. Lemker held a variety of positions at Carlisle
Companies, Inc., including Vice President, Finance and Administration of
Carlisle Tire & Rubber Company. Prior to 1977, Mr. Lemker was an audit manager
at KPMG Peat Marwick.

Mr. Dobbins has been a Vice President of the Company since November 1996.
Between 1991 and 1996, Mr. Dobbins was Vice President - Human Resources for
Halstead Industries, Inc. Prior to 1991, Mr. Dobbins spent 7 years as Director
of Training and Industrial Relations as well as Director International Human
Resources for ICI Americas Corporation. Prior experience included Vice
President - Human Resources Engineered Products/ITT Grinnell and various human
resource assignments with Cutler-Hammer Corporation and Masonite Corporation.

Mr. Dickson was Vice President of the Company from January 1994 to January
1997. Between 1990 and 1994, Mr. Dickson was President and Chief Operating
Officer of Chemline Inc., a producer and marketer of calcium oxide and
derivatives. Between 1986 and 1990, Mr. Dickson

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<PAGE>

was General Manager of Desoto Chemical Specialities. Prior to 1986, Mr. Dickson
spent 15 years in a variety of management positions at Hoescht Celanese Chemical
Company. Effective January 31, 1997, Mr. Dickson has resigned from the Company
as Vice President.

Mr. Fisher has been a Vice President of the Company since January 1993.
From 1988 to 1993, Mr. Fisher was Director of Chemical Production with Goodyear
Tire and Rubber Company ("Goodyear"). Prior to that, Mr. Fisher held a variety
of plant management and engineering positions at Goodyear.

Mr. Schickling has been a Vice President of the Company since 1990. He
joined the Company in 1980 as Manager of Software Systems and also held the
position of Environmental and Legal Director before his promotion to Vice
President. Immediately before coming to the Company, Mr. Schickling headed the
Navy Field Engineering Office in Charleston, SC. Prior to that he held various
positions with Honeywell, Inc., Sears Roebuck & Company and the U.S. Navy.

Mr. Barrett is the former Chairman, President and Chief Executive Officer
of Goodyear Tire & Rubber Company, where he also served in various executive
capacities from 1953 to 1991. Mr. Barrett joined American Industrial Partners
("AIP") in 1992 and is a limited partner of American Industrial Partners II,
L.P. ("AIP-LP"), the general partner of AIP-CF and is a director and officer of
American Industrial Partners Corporation ("AIPCorp."), and a director of AO
Smith Corporation, Rubbermaid Inc., Air Products & Chemicals, Inc., and Easco,
Inc. ("Easco"). He is also a trustee of Mutual Life Insurance Company of New
York.

Mr. Bingham co-founded AIP and has been a director and officer of the firm
since 1989. He is also a limited partner of AIP-LP and an officer and director
of AIPCorp. Prior to co-founding AIP, Mr. Bingham was a Managing Director of
Shearson Lehman Brothers Inc. from 1984 until late 1987. Prior to joining
Shearson Lehman Brothers, Mr. Bingham was director of the Corporate Finance
Department, member of the Board, and, most recently, head of Mergers and
Acquisitions at Lehman Brothers Kuhn Loeb Inc. Prior thereto, he directed
investment banking operations at Kuhn Loeb & Company where he was a partner and
member of the Board and Executive Committee. Mr. Bingham is currently a director
of Sweetheart Holdings Inc. ("Sweetheart"), Day International Group, Inc.
("Day"), and Easco. He formerly served on the boards of Avis, Inc., ITT Life
Insurance Corporation and Valero Energy Corporation.

Mr. Rogers co-founded AIP and has been a director and officer of the firm
since 1989. He is also a limited partner of AIP-LP and an officer and director
of AIPCorp. From 1980 to 1987, he served as Chairman, President and Chief
Executive Officer of NL Industries, Inc., a petroleum service and chemical
company. Mr. Rogers is a former director of Allied Stores Corporation, Allied-
Signal Inc., Parsons Corporation, MCorp and Southwest Bancshares Inc. He is
currently a director of Easco, Sweetheart, Day, and Derby International.

Mr. Ward has been an employee of AIP since 1992. From 1989 to 1992, he was
Vice President and Chief Financial Officer of Plantronics, Inc., a
telecommunications equipment

-26-
<PAGE>

company, and from 1980 to 1989, he held several investment banking positions at
Kidder, Peabody & Co., Incorporated, including Senior Vice President. Mr. Ward
is a director of Easco and Day.

Mr. Klein has been an employee of AIP since 1992. From 1991 to 1992, he was
an associate at The First Boston Corporation and prior thereto was an associate
with Acadia Partners, L.P. From 1986 to 1988, he served as a financial analyst
in the mergers and acquisitions department of Morgan Stanley & Co. Incorporated.
Mr. Klein is a director of Easco.

Mr. Schaefer is the former President and Chief Executive Officer of the
Company, where he served from April 1993 to October 1996. Between 1983 and 1993,
Mr. Schaefer was employed at Occidental Petroleum Corporation in a variety of
officer positions, including Vice President, Occidental Petroleum Corp.;
Executive Vice President, Polymers and Plastics Division; and Senior Vice
President, PVC Products Division. Prior to 1983, Mr. Schaefer held a variety of
line and senior management positions at Diamond Shamrock, most recently as
Corporate Director, Human Resources and Vice President and General Manager,
Plastics Division.

-27-
<PAGE>

ITEM 11. Executive Compensation

Summary Compensation Table. The following table sets forth information
concerning the compensation for 1996 for Mr. Roland and the four other most
highly compensated officers of the Company.

Summary Compensation Table
<TABLE>
<CAPTION>
Securities
1996 Annual Compensation Underlying
------------------------ Options All Other
Salary($) Bonus($) (1) Granted(#) Compensation($) (2)
--------- ------------ ------------ -------------------
<S> <C> <C> <C> <C>
Frank H. Roland, President
and Chief Executive Officer $288,919 -- -- $4,134

John D. Fisher, Vice
President $177,595 -- -- $4,134

Roger C. Dickson, Vice
President (3) $168,329 -- -- $4,134

Thomas F. Lemker, Vice
President, Chief Financial
Officer and Treasurer $179,586 -- -- $4,134

Steven W. Schaefer,
Director (4) $341,195 -- -- $4,134

</TABLE>

- ------------
(1) No performance bonuses were paid to such executive officers based upon
operating results achieved in 1996.

(2) Reflects term life insurance premiums paid by the Company and amounts
contributed under the Company's 401(k) plan for each executive.

(3) Mr. Dickson resigned as an officer of the Company in January 1997.

(4) Mr. Schaefer served as President and Chief Executive Officer of the Company
until October 1996.

Options/SAR Grants. No options to acquire common stock, $.01 par value, of
RBX Group (the "Common Stock") or stock appreciation rights ("SARs") were
granted to any named executive officer of the Company during the last fiscal
year.

Option/SAR Exercises. The following table provides information on options
exercised during 1996 for Mr. Roland and the four other most highly compensated
officers of the Company and the value of such officer's unexercised options as
of the end of such year. No SARs were outstanding in 1996.

-28-
<PAGE>

Aggregated Option Exercises for 1996
and Option Values as of December 31, 1996 Table(1)

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options as of In-the-Money Options as
Acquired on Value December 31, 1996 (#) of December 31, 1996($)
Exercise Realized($) Exercisable/Unexercisable (1) Exercisable/Unexercisable(2)
----------- ----------- ------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Frank H. Roland 0 0 5,223 / 5,100 $391,725 / $0

John D. Fisher 0 0 5,333 / 1,500 $399,975 / $0

Roger C. Dickson 0 0 6,000 / 2,400 $450,000 / $0

Thomas F. Lemker 0 0 3,333 / 3,000 $249,975 / $0

Steven W. Schaefer 0 0 4,666 / 0 $349,950 / $0

</TABLE>

- ----------

(1) Information is provided with respect to both (i) the Incentive Options and
(ii) the Rollover Options.

(2) Amounts shown are based on the estimated fair market value of the Common
Stock as of December 31, 1996 at $100 per share.

Management Stock Option Plan. On October 16, 1995, the Board of Directors
of RBX Group adopted the Management Stock Option Plan (the "Management Stock
Option Plan"). The purposes of the Management Stock Option Plan are to motivate
and retain certain management employees of the Company and its subsidiaries and
attract and retain talented individuals as employees by allowing them to acquire
an ownership interest. The Management Stock Option Plan provides for the grant
of up to 40,000 stock options, subject to adjustment for stock splits and
similar capital changes. As of December 31, 1996, 26,000 Incentive Options were
granted and outstanding and 14,000 Incentive Options were available for future
grants.

The Chief Executive Officer administers the Management Stock Option Plan
subject to the review and approval of the Board of Directors. On October 16,
1995, awards of Incentive Options were granted to certain management employees
of the Company as determined by the Chief Executive Officer (and approved by the
Board of Directors) who administers the Management Stock Option Plan. The term
of any Incentive Option shall not exceed ten years. Options under the Management
Stock Option Plan are not intended to be "incentive stock options" within the
meaning of Section 422A of the Internal Revenue Code or any successor
provisions.

The Board of Directors selects the participants and establishes the terms
and conditions of each Incentive Option. As of December 31, 1996, 14,000
Incentive Options were available for future grant.

-29-
<PAGE>

Pension Plans. The Company maintains a noncontributory defined benefit
pension plan (the "Plan") covering certain of the Company's employees, including
the executive officers listed in the foregoing tables. The accrued monthly
benefit ordinarily payable under the Plan is equal to 1/12 multiplied by: (i)
0.5% of the average compensation (including merit bonuses) received by a
participant during the five consecutive calendar years of employment that would
produce the highest such average (the "Final Average Compensation") times the
years of service of the participant with the Company and certain related or
predecessor employers not in excess of 35 years ("Years of Benefit Service")
plus (ii) 0.5% of the Final Average Compensation that is in excess of the Social
Security taxable wage base times Years of Benefit Service.

The compensation covered by the Plan generally corresponds to the annual
salary and merit bonus amounts reported in the preceding summary compensation
table. For calendar years starting on and after January 1, 1994, the total
compensation that can be considered for any purpose under the Plan (the "Pay
Limit") is limited to $150,000 pursuant to requirements imposed by the Internal
Revenue Code of 1986, as amended (the "Code"). The Code also places certain
other limitations on the annual benefits that may be paid under the Plan.
However, the benefits payable under the Plan are not reduced for any Social
Security payments that may be received by a participant.

The Company has also adopted an unfunded supplemental retirement plan for
certain designated employees (including Messrs. Fisher and Lemker) (the "SERP")
which is designed to supplement the benefits payable to participants under the
Plan and certain other plans of the Company. The annual benefit ordinarily
payable under the SERP is equal to 50% of the participant's Final Average
Compensation (as determined under the Plan), calculated based on a maximum
compensation of $235,840 (or, if greater, the amount of the Pay Limit then in
effect), but reduced by (i) the sum of all benefits under the Plan and any other
qualified plans maintained by the Company, (ii) the amount of monthly Social
Security benefit payments received by the participant, and (iii) the amount of
any long-term disability payments to the participant. The SERP has the effect of
establishing a minimum pension level for participating executives, regardless of
participation in the Qualified Plans.

Based on the above formula (assuming (i) the annual Social Security
payments to be $14,976 which is the maximum payable to a participant age 65,
(ii) the annual qualified plan benefit to be the amount under the Plan and (iii)
Final Average Compensations are equal to compensations for 1996), Messrs. Fisher
and Lemker would be entitled under the Plan and the SERP to aggregate annual
pension benefits commencing at age 65 of $71,607 and $63,315, respectively.

The estimated annual benefits payable under the Plan (as a straight life
annuity commencing at age 65) for employees not covered by the SERP are
illustrated below:

-30-
<PAGE>

<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Final Average Compensation(1) 15 20 25 30 35
- ----------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $16,682 $22,242 $27,803 $33,364 $38,924
150,000 and above 20,432 27,242 34,053 40,864 47,674

</TABLE>

- --------------

(1) Annual covered compensation is assumed to be $27,576, the 1996 value for a
participant age 65. All pay is assumed to be capped at the 401(a)(17) pay
limit of $150,000. No grandfathered benefits are included in the
calculations for past pay cap levels.

Director Compensation

Mr. Barrett receives an annual fee of $150,000 for his service as Chairman
of the Board of Directors. Mr. Schaefer, beginning in 1997, receives an annual
retainer of $15,000, plus $1,000 per meeting of the Board of the Directors. All
other Directors currently do not receive a fee or an annual retainer for their
services as Directors. Each of the Directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings.

Compensation Committee Interlocks and Insider Participation

There is currently no compensation committee of the Board of Directors. The
Board of Directors make compensation decisions for executive officers. In
general, the principal decisions respecting compensation of executive officers
are made by the Board of Directors. Mr. Roland is a Director but does not
participate in any vote regarding his own compensation.

Employment Agreements

Mr. Schaefer's previous employment agreement with the Company expired on
March 31, 1996. The Company entered into a new agreement with Mr. Schaefer for
his continued employment with the Company through December 31, 1996. Under this
new agreement: (i) commencing July 1, 1996, Mr. Schaefer began to devote less
than full-time to the Company, and (ii) Mr. Schaefer received an annual salary
of $300,000 through July 1, 1996, but thereafter, his salary was, on an annual
basis, reduced to $150,000.

Mr. Lemker is a party to an employment agreement with the Company which
expires on June 1, 1997. The term of this agreement is automatically renewed for
successive one-year periods, unless either party elects not to renew the
agreement at least 90 days before the end of each term. The Company has elected
not to renew the agreement beyond June 1, 1997. The agreement provides for a
minimum annual salary of $140,000 and bonuses based on achievement of certain
operating income and cash flow targets established by the Board of Directors in
consultation with the Chief Executive Officer. Subject to certain exceptions, in
the event Mr. Lemker is terminated by the Company prior to the expiration of the
term of the agreement, Mr. Lemker will be entitled to receive

-31-
<PAGE>

his salary for the remainder of such term and the pro rata portion of his bonus
for the year in which termination occurs.

Mr. Roland is party to an employment arrangement which remains in effect at
least until December 31, 1997, unless terminated earlier for cause. The
arrangement provides for an annual base salary of $225,000 and an incentive
compensation plan under which Mr. Roland may earn up to 40% of his base salary.

Mr. Fisher's employment agreement with the Company was terminated on
December 31, 1996. He is currently employed at will.

-32-
<PAGE>

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

As of December 31, 1996, RBX Group was the only holder of record of shares
of the Company's common stock, par value $.01 per share. As of December 31,
1996, there were 16 holders of record of shares of common stock (the "Common
Stock"), par value $.01 per share of RBX Group. The following table sets forth
certain information regarding beneficial ownership of Common Stock as of March
14, 1997, assuming the exercise of stock options exercisable within 60 days of
the date hereof, by (i) each person who is known by the Company to be the
beneficial owner of more than 5% of the Common Stock, (ii) each of the Company's
directors and the named executive officers in the Summary Compensation Table and
(iii) all directors and executive officers as a group. To the knowledge of the
Company, each stockholder has sole voting and investment power as to the shares
of Common Stock shown unless otherwise noted. Except as indicated below, the
address for each such person is c/o RBX Corporation, 5221 ValleyPark Drive,
Roanoke, Virginia 24019.

Name Number (1) Percentage (2)
------------------------------------ ---------- ---------------
<S> <C> <C>
American Industrial Partners Capital
Fund II, L.P. (3)(4).............. 394,275 98.94%

American Industrial Partners Capital
Fund, L.P. (3)(4)................. 100,000 98.94%

Frank H. Roland (5)................. 5,223 1.03%

Steven W. Schaefer (5).............. 4,666 0.93%

John D. Fisher (5).................. 5,333 1.06%

Roger G. Dickson (5)................ 6,000 1.19%

Thomas F. Lemker (5)................ 3,333 *

Tom H. Barrett...................... 1,000 *

W. Richard Bingham (4).............. 494,275 98.94%

Theodore C. Rogers (4).............. 494,275 98.94%

Lawrence W. Ward, Jr................ 100 *

Robert J. Klein..................... 150 *

All directors and executive officers
as a group (12 persons) (6)....... 31,411 5.93%

</TABLE>

--------------

* Represents less than 1%.

(1) Beneficial ownership is determined in accordance with Rule 13d-3 of
the Securities and Exchange Commission. In computing the number of
shares of Common Stock beneficially owned by a person and the
percentage of beneficial ownership of that person, shares of Common
Stock subject to options held by that person that are currently
exercisable or exercisable within 60 days are deemed outstanding. Such
shares, however, are not

-33-
<PAGE>

deemed outstanding for the purposes of computing the percentage
ownership of each other person. The persons named in this table have
sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community
property laws where applicable and except as indicated in the other
footnotes to this table.

(2) Based upon 499,575 shares of Common Stock outstanding as of March 14,
1997.

(3) The address of such entities is One Maritime Plaza, Suite 2525, San
Francisco, CA 94111.

(4) Messrs. Bingham and Rogers share investment and voting power with
respect to the securities owned by AIP-CF and American Industrial
Partners Capital Fund, L.P., but each disclaims beneficial ownership
of any shares of Common Stock. The business address of Mr. Bingham is
One Maritime Plaza, Suite 2525, San Francisco, CA 94111, and the
business address of Mr. Rogers is 551 Fifth Avenue, Suite 3800, New
York, NY 10176.

(5) Represents shares of Common Stock which are issuable upon exercise of
options within 60 days of the date hereof.

(6) Includes aggregate of 29,436 shares of Common Stock held by directors
and executive officers which are issuable upon exercise of options
exercisable within 60 days of the date hereof.

The total amount of authorized capital stock of the Company is 1,000 shares
of Common Stock, $0.01 par value per share, and no shares of preferred stock.
The total amount of authorized capital stock of the RBX Group is 1,000,000
shares of Common Stock, $0.01 par value per share, 100,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock") and 90,000 shares of
Series A preferred stock, par value $0.01 per share (the "Series A Preferred
Stock"). As of March 14, 1997, 1,000 shares of the Company's Common Stock were
issued and outstanding, 499,575 shares of RBX Group's Common Stock were issued
and outstanding and 90,000 shares of RBX Group's Series A Preferred Stock were
issued and outstanding.

The issued and outstanding shares of the Company's common stock are validly
issued, fully paid and nonassessable. The holders of outstanding shares of the
Company's common stock are entitled to receive dividends out of assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine. The shares of the Company's common stock are
neither redeemable nor convertible, and the holders thereof have no preemptive
or subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of the
Company's common stock are entitled to receive pro rata the assets of the
Company which are legally available for distribution, after payment of all debts

-34-
<PAGE>

and other liabilities and subject to the prior rights of any holders of any
preferred stock then outstanding. Each outstanding share of the Company's common
stock is entitled to one vote on all matters submitted to a vote of
stockholders.

-35-
<PAGE>

ITEM 13. Certain Relationships and Related Transactions

Acquisition Arrangements

In connection with the Acquisition, RBX Group, AIP-CF, certain related
investors and management investors have entered into a stockholders' agreement
(the "Stockholders' Agreement") pursuant to which such persons were granted
certain registration rights and participation rights. Pursuant to the
Stockholders' Agreement, AIP-CF has the right to elect the majority of the
directors of RBX Group.

At the close of the Acquisition, American Industrial Partners ("AIP"), a
Delaware general partnership and affiliate of AIP-CF, was paid a fee of $2.0
million and reimbursed for out-of-pocket expenses in connection with the
negotiation of the acquisition agreement and for providing certain investment
banking services to the Company including the arrangement and negotiation of the
terms of the acquisition financing and for other financial advisory and
management consulting services.

Upon the closing of the Ensolite Acquisition, the Company paid a fee of
$400,000 to AIP and reimbursed AIP for its out-of-pocket expenses in connection
with the negotiation of the Ensolite Acquisition and for providing certain
investment banking services to the Company, including the arrangement and
negotiation of the terms of the related agreements and financing.

Management Services Agreement

AIP has provided, and expects to provide, substantial ongoing financial and
management services to the Company utilizing the extensive operating and
financial experience of AIP's principals. AIP receives an annual fee of $850,000
for providing general management, financial and other corporate advisory
services to the Company, payable semiannually, and is reimbursed for out-of-
pocket expenses. The fees are paid to AIP pursuant to a management services
agreement among AIP, RBX Group, the Company and the Company's subsidiaries and
are subordinated in right of payment to the Company's 11.25% Senior Subordinated
Notes.

-36-
<PAGE>

PART IV

ITEM 14. Exhibits, Financial Statement Schedules, Reports on Form 8-K

(a)(1) Financial Statements

See Part II

(a)(2) Financial Statement Schedules

RBX Corporation
Schedule II - Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>

Balance at Charged to Balance at
Description Beginning of Year Costs and Expenses Deductions (a) End of Year
- ----------- ----------------- ------------------ -------------- -----------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts:

1996 $1,678 $531 $ 872 $1,337

1995(b) 2,436 417 1,175 1,678

1994(c) 1,841 968 373 2,436
</TABLE>
(a) Accounts charged off during the year, net of recoveries of accounts
previously charged off.

(b) 1995 amounts have been combined for the Company and the Predecessor as
defined in Note 1 to the consolidated financial statements.

(a)(3) Exhibits

Exhibit No. Item
- ---------------- --------------------------------------------------------------
3.1 Certificate of Incorporation of RBX Corporation.*

3.2 By-laws of RBX Corporation.*

4.1 Indenture, dated as of October 16, 1995, among RBX
Corporation, each Subsidiary Guarantor and United States Trust
Company of New York, as Trustee.*

</TABLE>

-37-
<PAGE>

4.2 Forms of Series A and Series B 11 1/4% Senior Subordinated Notes
including the Form of Subsidiary Guarantees.*

4.3 Purchase Agreement, dated as of October 6, 1995, among RBX
Corporation, each Subsidiary Guarantor (effective as of October 16,
1995), Donaldson, Lufkin & Jenrette Securities Corporation and
Chemical Securities Inc.*

4.4 Registration Rights Agreement, dated as of October 16, 1995, by and
among RBX Corporation, each Subsidiary Guarantor, Donaldson, Lufkin &
Jenrette Securities Corporation and Chemical Securities Inc.*

4.5 Stockholders Agreement, dated as of October 16, 1995, among RBX Group,
Inc., American Industrial Partners Capital Fund II, L.P. and certain
other signatories thereto.*

4.6 Securities Purchase Agreement, dated as of June 10, 1996, among RBX
Group, Inc. and American Industrial Partners Capital Fund, L.P.**

4.7 Stockholders Agreement, dated as of June 10, 1996, among RBX Group,
Inc. and American Industrial Partners Capital Fund, L.P.**

10.1 Credit Agreement (the "Credit Agreement"), dated as of October 16,
1995, among RBX Corporation, RBX Group, Inc., the several banks and
other financial institutions from time to time parties thereto (the
"Lenders") and Chemical Bank (the "Agent").*

10.2 Amendment No. 1, dated as of February 28, 1995, to the Credit
Agreement among RBX Corporation, RBX Group, Inc., the Lenders and the
Agent.*

10.3 Amendment No. 2, dated as of April 15, 1996, to the Credit Agreement
among RBX Corporation, RBX Group, Inc., the Lenders and the Agent.**

10.4 Amendment No. 3, dated as of December 3, 1996, to the Credit Agreement
among RBX Corporation, RBX Group, Inc., the Lenders and the Agent.

10.5 Security Agreement, dated as of October 16, 1995, made by RBX
Corporation, in favor of the Agent.*

10.6 Pledge Agreement, dated as of October 16, 1995, made by RBX
Corporation in favor of the Agent.*

10.7 Form of Security Agreement, dated as of October 16, 1995, made by each
Subsidiary Guarantor in favor of the Agent.*

10.8 Form of Pledge Agreement, dated as of October 16, 1995, made by each
Subsidiary Guarantor in favor of the Agent.*

-38-
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.9 Form of Subsidiaries' Guarantee, dated as of October 16, 1995, made by each
Subsidiary Guarantor in favor of the Agent.*
10.10 Agreement and Plan of Merger, dated as of August 2, 1995, by and among
RBX Investors, Inc., RBX Group, Inc., RBX-AIP Acquisition, Inc. and AEA
Investors, Inc.*
10.11 Amendment to Agreement and Plan of Merger, dated as of September 25, 1995,
by and among RBX Investors, Inc., RBX Group, Inc., RBX-AIP Acquisition,
Inc. and AEA Investors, Inc.*
10.12 Management Services Agreement, dated as of October 16, 1996, by and among
RBX Group, Inc., RBX Corporation, each of the Subsidiary Guarantors, and
American Industrial Partners.*
10.13 Management Stock Option Plan Adopted by the Board of Directors of RBX
Group, Inc. as of October 16, 1995.*
10.14 Employment Agreement between RBX Corporation and Steven W. Schaefer.*
10.15 Employment Agreement between RBX Corporation and John D. Fisher.*
10.16 Employment Agreement between RBX Corporation and Thomas F. Lemker.*
10.17 Employment Agreement between RBX Corporation and Frank H. Roland.*
10.18 Employment Agreement between RBX Corporation and Gerald J. Kirschke.*
10.19 Executive Employees Supplemental Retirement Plan as Amended and Restated
December 15, 1993.*
10.20 Pension Plan effective as of January 1, 1991.*
12.1 Computation of earnings to fixed charges.
21.1 Subsidiaries of RBX Corporation.
27.1 Financial Data Schedule.
-------------
</TABLE>
*Incorporated by reference to Registration Statement on Form S-4,
File No. 333-1992, filed on March 5, 1996 and amended on April 15,
1996 and on April 24, 1996.

**Incorporated by reference to RBX Corporation's Quarterly Report on
Form 10-Q for the period ended June 30, 1996, filed on August 14,
1996 and amended on August 20, 1996.

(b) Reports Filed on Form 8-K

No reports on Form 8-K were filed during the quarter ending December 31,
1996.

-39-
<PAGE>

RBX CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report............................................... F-2

Consolidated Financial Statements

Consolidated Balance Sheets............................................ F-3

Consolidated Statements of Operations.................................. F-4

Consolidated Statements of Cash Flows.................................. F-5

Consolidated Statement of Changes in Stockholder's Equity.............. F-6

Notes to Consolidated Financial Statements............................. F-7

</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholder of
RBX Corporation
Roanoke, Virginia

We have audited the accompanying consolidated balance sheets of RBX
Corporation and subsidiaries (the Company) as of December 31, 1995 and 1996, and
the related consolidated statements of operations, stockholder's equity, and
cash flows for the two and one-half month period and the year ended December 31,
1995 and 1996, respectively. We have also audited the consolidated statements of
operations and cash flows of RBX Investors Inc. and subsidiaries (the
Predecessor Company) for the nine and one-half month period ended October 16,
1995. Our audits also included the financial statement schedule listed in the
index at Item 14 (a)(2). These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits. The Consolidated statements of
operations and cash flows and the financial statement schedule of the
Predecessor Company for the year ended December 31, 1994, were audited by other
auditors whose report thereon, dated March 8, 1995, expressed an unqualified
opinion.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 1995 and 1996 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of RBX Corporation and its subsidiaries as of December 31, 1995 and
1996 and the results of their operations and their cash flows for the two and
one-half month period and the year ended December 31, 1995 and 1996,
respectively, in conformity with generally accepted accounting principles.
Further, in our opinion, the Predecessor Company financial statements for the
nine and one-half month period ended October 16, 1995, present fairly, in all
material respects, the results of operations and cash flows of the Predecessor
Company and its subsidiaries in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedule, considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As more fully described in Notes 1 and 2 to the consolidated financial
statements, the Company acquired the Predecessor Company as of October 16, 1995
in a business combination accounted for as a purchase. The financial statements
of the Predecessor Company are not directly comparable to those of the Company
due to the accounting for the acquisition.

DELOITTE & TOUCHE LLP

Richmond, Virginia
March 7, 1997

F-2
<PAGE>

RBX CORPORATION

CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1996
(in thousands, except share data)

<TABLE>
<CAPTION>
ASSETS
1995 1996
-------- --------
<S> <C> <C>
Cash and cash equivalents............................... $ 5,823 $ 3,293
Accounts receivable, less allowance for doubtful
accounts of $1,678 and $1,337 in 1995 and 1996,
respectively.......................................... 38,198 33,740
Inventories............................................. 42,364 38,635
Deferred income taxes................................... 3,129 1,112
Prepaid and other current assets........................ 2,000 2,130
-------- --------

Total current assets............................... 91,514 78,910

Property, plant and equipment, net...................... 81,277 91,068
Deferred income taxes, non-current...................... 1,411 11,096
Intangibles and other assets, net....................... 111,534 99,626
-------- --------
Total assets....................................... $285,736 $280,700
======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Accounts payable........................................ $ 13,886 $ 12,867
Accrued liabilities..................................... 14,367 17,342
Current portion of postretirement benefit obligation.... 1,850 2,302
Current portion of long-term debt....................... 356 1,728
-------- --------
Total current liabilities.......................... 30,459 34,239

Long-term debt.......................................... 171,389 183,164
Postretirement benefit obligation....................... 31,745 32,032
Pension benefit obligation.............................. 9,561 9,228
Other liabilities....................................... 2,008 1,724

Commitments and contingencies........................... - -

Stockholder's equity:
Common stock, $0.01 par value, 1,000 shares
authorized, issued and outstanding.................. - -
Additional paid-in-capital............................ 43,895 58,690
Accumulated deficit................................... (3,321) (38,377)
-------- --------
Total stockholder's equity......................... 40,574 20,313
-------- --------
Total liabilities and stockholder's equity......... $285,736 $280,700
======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

RBX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
Predecessor Company
---------------------------- ----------------------------
Year 9 1/2 Months 2 1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................................... $197,913 $220,321 $51,646 $275,715
Cost of goods sold.......................... 165,742 180,677 46,911 238,365
-------- -------- ------- --------
Gross profit................................ 32,171 39,644 4,735 37,350
Selling, general and administrative
costs...................................... 18,478 21,112 5,193 30,474
Management fees............................. -- 418 180 995
Loss on impairment of long-lived assets..... -- -- -- 26,498
Unusual item................................ -- 620 -- --
Amortization of goodwill and other
intangibles................................ 319 565 733 3,943
Other expense (income)...................... 57 51 (68) 66
-------- -------- ------- --------
Operating income (loss)..................... 13,317 16,878 (1,303) (24,626)
Interest expense, including amortization
of deferred financing fees................. 3,334 6,878 3,867 18,685
-------- -------- ------- --------
Income (loss) before income taxes........... 9,983 10,000 (5,170) (43,311)
Income taxes (benefit)...................... 3,865 3,979 (1,849) (8,255)
-------- -------- ------- --------
Income (loss) before extraordinary item..... 6,118 6,021 (3,321) (35,056)
Extraordinary item: early extinguishment
of debt, net of $289 income tax benefit.... (466) -- -- --
-------- -------- ------- --------
Net income (loss)........................... $ 5,652 $ 6,021 $(3,321) $(35,056)
======== ======== ======= ========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

RBX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Predecessor Company
---------------------------------- ----------------------------------
Year Ended 9-1/2 Months Ended 2-1/2 Months Ended Year Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------------ ------------------ -------------
<S> <C> <C> <C> <C>
Operating activities
Net income (loss) ......................................... $ 5,652 $ 6,021 $ (3,321) $(35,056)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Loss on impairment of long-lived assets ............... - - - 26,498
Extraordinary item .................................... 466 - - -
Depreciation .......................................... 5,121 5,820 1,310 7,124
Amortization .......................................... 689 1,671 3,593 4,965
Provision for deferred income taxes ................... 935 274 (667) (7,668)
Loss (gain) on disposal of equipment .................. 57 (17) - 66
Changes in assets and liabilities net of effect of
business acquisition:
(Increase) decrease in receivables ................ (4,746) (3,909) 3,186 8,196
(Increase) decrease in inventories ................ (4,894) (3,380) 136 5,431
(Increase) decrease in prepaid and other current
assets .......................................... 868 (408) (999) (864)
Increase in other assets .......................... (2,533) - - -
Increase (decrease) in accounts payable .......... 546 4,041 (4,315) (1,913)
Increase (decrease) in accrued liabilities ....... 6,439 (2,117) 2,859 2,236
Increase in other liabilities ..................... 691 444 3 122
-------- ------- --------- --------
Net cash provided by operating activities ................. 9,291 8,440 1,785 9,137

Investing activities
Capital expenditures ...................................... (5,817) (6,323) (823) (11,818)
Acquisitions, net of cash acquired ........................ (48,864) (1,069) (199,015) (22,042)
Proceeds from disposals of property, plant and equipment .. 21 101 - 31
-------- ------- --------- --------
Net cash used in investing activities ..................... (54,660) (7,291) (199,838) (33,829)

Financing activities
Contributions to capital .................................. - - 40,000 10,030
Proceeds from borrowings .................................. 111,000 4,000 170,000 27,000
Payments of financing fees ................................ - - (5,988) (780)
Principal payments on long-term debt ...................... (6,953) (5,916) (136) (13,853)
Refinancing of long-term debt ............................. (60,500) - - -
Dividend payment .......................................... - - - (235)
-------- ------- --------- --------
Net cash provided by (used in) financing activities ....... 43,547 (1,916) 203,876 22,162

Net increase (decrease) in cash and cash equivalents ...... (1,822) (767) 5,823 (2,530)
Cash and cash equivalents:
Beginning of period.................................... 2,589 767 - 5,823
-------- ------- --------- --------
End of period ......................................... $ 767 $ - $ 5,823 $ 3,293
======== ======= ========= ========
</TABLE>
See notes to consolidated financial statements.

F-5
<PAGE>
RBX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the Two and One-half Month Period Ended December 31, 1995
and the Year Ended December 31, 1996
(in thousands)

<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholder's
Stock Capital Deficit Equity
-------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Initial capitalization...... $ - $ 43,895 $ - $ 43,895
Net loss.................... - - (3,321) (3,321)
-------- ---------- --------- ----------
Balances at December 31, 1995 - 43,895 (3,321) 40,574
Capital contribution........ - 15,030 - 15,030
Dividend.................... - (235) - (235)
Net loss.................... - - (35,056) (35,056)
-------- ---------- --------- ----------
Balances at December 31, 1995 $ - $ 58,690 $(38,377) $ 20,313
======== ========== ======== ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except as otherwise noted)

1. Significant Accounting Policies

Basis of Presentation

RBX Corporation and subsidiaries (the "Company") is a wholly owned
subsidiary of RBX Group, Inc., ("RBX Group") a non-operating holding company.
Effective October 16, 1995, RBX Investors Inc. (the "Predecessor") was acquired
by the Company. The consolidated financial statements and note disclosures prior
to the date of the Acquisition (as defined, see Note 2) are not comparable due
to the accounting for the Acquisition.

The Company follows the same accounting policies as the Predecessor.

Principles of Consolidation and Business

The Company operates in one business segment, the manufacture of rubber and
plastics products. The Company's products are used in a wide range of
applications including athletic equipment, sports medicine wraps, neoprene
wetsuits, hardware center products, other consumer products, insulation for
refrigeration and air conditioning systems, automotive components and other
industrial products.

The accounts of RBX Corporation and its subsidiaries are included in the
consolidated financial statements after elimination of significant inter-company
transactions and profits and losses.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. The carrying amount
of cash equivalents approximates fair value because of the short maturity of
those investments.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined under
the first-in, first-out (FIFO) method. Inventory cost includes raw materials,
labor and manufacturing overhead.

Property, Plant and Equipment

Property, plant and equipment is stated at cost net of accumulated depreciation.
Depreciation of plant and equipment is provided by the straight-line method over
the estimated useful lives of the related assets, ranging from 20-40 years for
buildings and improvements and 3-14 years for machinery and equipment.

Intangibles and Other Assets

Goodwill - Goodwill, which represents the excess of cost over fair value of
net assets acquired, is amortized on a straight line-basis over 40 years.

F-7
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

1. Significant Accounting Policies - (Continued)

Customer Lists - Customer lists are amortized using the straight-line method
over 21 years.

Deferred Financing Costs - Deferred financing costs are amortized using the
effective interest method over the life of the related debt.

Fair Value of Financial Instruments

The carrying value of the Company's long-term debt, which consists of variable
rate long-term senior debt and 11.25% long-term subordinated debt, approximates
fair value. The carrying amounts of all other current assets and liabilities as
reported in the balance sheets at December 31, 1995 and 1996 and which qualify
as financial instruments, approximate fair value.

Revenue

Revenue is recognized when products are shipped to customers. Sales returns and
allowances are treated as a reduction to sales and are provided based on
historical experience and current estimates.

Research and Development

Research and development expenditures, which are expensed as incurred, were
approximately $1,611 for the year ended December 31, 1994 and $2,695 and $706
for the nine and one-half months ended October 16, 1995 and the two and one-half
months ended December 31, 1995, respectively, and $3,469 for the year ended
December 31, 1996.

Business and Credit Concentrations

The Company's customers are not concentrated in any specific geographic region
or any specific industry. No single customer accounted for a significant amount
of the Company's sales, and there were no significant accounts receivable from a
single customer. The Company reviews a customer's credit history before
extending credit. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other information.

Estimates

The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the balance sheets and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.

The Company assesses impairment of long-lived assets such as property, plant and
equipment and goodwill whenever changes or events indicate that the carrying
value may not be recoverable. Such long lived assets are written down to fair
value if the sum of the expected future undiscounted cash flows is less than the
carrying amount (See Note 15).

Reclassifications

Certain amounts from prior periods have been reclassified to conform to the
current period presentation.

F-8
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2. Acquisitions

On October 16, 1995, pursuant to a plan of merger, the Company acquired the
Predecessor for approximately $201.6 million plus direct expenses of the
acquisition of approximately $3.8 million (the "Acquisition"). The purchase cost
was composed of $94.1 million in cash, $3.9 million in Preferred Stock of RBX
Group (having an aggregate liquidation value of $9.0 million) and assumption of
$95.5 million in debt and $8.1 million in unpaid seller expenses.

The Acquisition was accounted for using the purchase method of accounting,
whereby the excess of the purchase cost over the recorded book value of net
assets acquired was allocated to the fair value of tangible and identifiable
intangible assets acquired and liabilities assumed based on independent
valuations and other studies. The purchase cost was allocated as follows:

Inventory $ 45,171
Working capital, excluding inventory 13,867
Property, plant and equipment 81,320
Identifiable intangible assets 40,191
Goodwill 67,667
Other assets 518
Other liabilities (43,313)
--------

$205,421
========

The acquisition was financed through an equity contribution from RBX Group of
approximately $43.9 million in cash and in-kind payments in exchange for all of
the outstanding shares of the Company's common stock, the sale of $100 million
in 11 1/4% Senior Subordinated Notes, and proceeds of approximately $61.3
million from borrowings under the credit agreement (see note 7). In addition,
certain options to purchase the common stock of the Predecessor that were held
by continuing management employees prior to the time of the Acquisition, were
converted into options to acquire the common stock of RBX Group. The rollover of
such options does not represent a change in the basis of underlying assets or
liabilities in the Acquisition, since RBX Group's basis in the options was
equal to the predecessor option holders basis of zero.

The unaudited consolidated results of operations on a pro forma basis as though
the Acquisition had taken place at the beginning of the periods presented are
as follows:

1994 1995
-------- --------

Net sales $269,607 $271,967
Net loss (5,504) (4,895)

The unaudited pro forma financial information is presented for informational
purposes only and does not purport to represent what the Company's results of
operations would have been if the Acquisition had taken place as of the dates
indicated, or what such results will be for any future period.

On June 10, 1996, Rubatex Corporation, a wholly owned subsidiary of the Company,
acquired certain assets and assumed certain liabilities of the Ensolite(R)
division of Uniroyal Technology Corporation ("Uniroyal") for an aggregate
purchase price of $25.6 million plus direct expenses of approximately $2.0
million ("Ensolite Acquisition"). Ensolite is a manufacturer of certain types of
closed-cell foam. The Company obtained the funds necessary to consummate this
transaction from the proceeds of additional Tranche B Term Loans of $10.0
million and an equity contribution by RBX Group of $15.0 million. The equity
contribution was derived from a $10.0 million cash contribution to RBX Group by
American

F-9
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2. Acquisitions (Continued)

Industrial Partners Capital Fund, L.P. and from a subordinated unsecured note of
$5.0 million issued by RBX Group to Uniroyal, bearing interest at 11.75% per
annum.

The Ensolite Acquisition was accounted for using the purchase method of
accounting. The purchase cost was allocated as follows:

Inventory $ 1,842
Working capital, excluding inventory 2,845
Equipment 5,705
Goodwill 7,953
Identifiable intangible assets 9,262
-------

$27,607
=======

The unaudited consolidated results of operations on a pro forma basis as though
the Ensolite Acquisition had taken place at the beginning of the periods
presented are as follows:

1995 1996
-------- --------

Net sales $296,003 $287,501
Net loss (5,529) (35,474)

3. Inventories

Components of inventory are as follows:

1995 1996
-------- --------

Raw materials $ 15,096 $ 12,661
Work-in-process 4,354 4,347
Finished goods 22,914 21,627
-------- --------

$ 42,364 $ 38,635
======== ========

F-10
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

4. Property, Plant and Equipment

Major classes of property, plant and equipment are as follows:

1995 1996
-------- --------
Land and improvements $ 2,568 $ 2,568
Buildings and improvements 23,952 24,060
Machinery and equipment 51,793 64,175
Construction-in-progress 4,274 8,677
-------- --------
82,587 99,480
Less: accumulated depreciation 1,310 8,412
-------- --------
$ 81,277 $ 91,068
======== ========

5. Intangibles and Other Assets

Major components of intangibles and other assets are as follows:

1995 1996
-------- --------
Goodwill $ 66,278 $ 56,861
Customer lists 35,887 36,050
Deferred financing fees 5,989 6,736
Other 4,303 5,728
-------- --------
112,457 105,375
Less: accumulated amortization 923 5,749
-------- --------
$111,534 $ 99,626
======== ========

6. Accrued Liabilities

Major components of accrued liabilities are as follows:

1995 1996
-------- --------
Interest $ 3,573 $ 3,597
Personnel related costs other than
vacation 3,856 6,481
Vacation 3,507 3,449
Other 3,431 3,815
-------- --------
$ 14,367 $ 17,342
======== ========

F-11
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. Long-Term Debt

Long-term debt of the Company is as follows:

1995 1996
-------- --------
Senior subordinated notes $100,000 $100,000
Term notes payable 70,000 76,000
Revolving credit agreement - 7,500
Industrial revenue bond note 1,555 1,232
Mortgage note payable 180 160
Capitalized lease obligations 10 -
-------- --------
171,745 184,892
Less current portion 356 1,728
-------- --------
$171,389 $183,164
======== ========

Subordinated debt

On October 16, 1995, RBX Corporation sold $100 million in 11.25% Senior
Subordinated Notes (the "Notes") due October 15, 2005, pursuant to Rule 144A
under the Securities Act of 1933. The Notes are general unsecured obligations
subordinated in right of payment to all senior indebtedness of the Company.
Interest is payable on the Notes semi-annually on April 15 and October 15 of
each year, commencing in 1996. The Notes may be redeemed after October 14, 2000
at a redemption premium. Under certain circumstances as defined in the
Indenture, RBX Corporation may redeem, at a premium, up to one-third of the
Notes prior to October 15, 1998.

RBX Corporation is a holding company with no assets or operations other than its
investments in its subsidiaries. All of RBX Corporation's subsidiaries are
wholly owned and have guaranteed the Notes on a full, unconditional, and joint
and several basis. Management has determined that separate financial statements
of the guarantor subsidiaries would not be material to an investor. Accordingly,
separate financial statements of the guarantor subsidiaries have not been
presented.

The Indenture contains certain covenants which, among other things, limit the
ability of RBX Corporation and its subsidiaries to incur additional indebtedness
and issue preferred stock, incur liens, pay dividends or make other
distributions, repurchase equity interests or subordinated indebtedness. The
Company was in compliance with all terms of the Notes at December 31, 1996.

Pursuant to a Registration Rights Agreement (the "Agreement"), RBX Corporation
exchanged the Notes for a new issue of debt securities of RBX Corporation (the
"New Notes") registered under the Securities Act of 1933. The terms of the New
Notes are substantially identical to those of the Notes.

Term Notes and Revolving Credit Agreement

In connection with the Acquisition, all of the Predecessor's debt then
outstanding under an existing credit agreement totaling $92 million was repaid
and the Company entered into a $100 million senior secured credit facility
consisting of $70 million in term notes and a $30 million revolving credit
facility (the "Credit Agreement"). The Company borrowed $70 million under the
term loans to provide a portion of the funds necessary to consummate the
Acquisition. As of December 31, 1996, the Company had an outstanding,
irrevocable standby letter of credit in the principal amount of $2.2 million as
part of its casualty insurance program. At December 31, 1996, the Company had
available unused borrowing capacity under the revolving credit facility of $20.3
million.

F-12
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. Long-Term Debt (Continued)

In connection with the Ensolite Acquisition and the decline in sales and
operating profits experienced during the end of 1995 and first quarter of 1996,
the Company has entered into an amendment of the Credit Agreement dated February
28, 1996 (the "Credit Agreement Amendment"). The Credit Agreement Amendment
modified the financial covenants and restrictions to which the Company is
subject to provide the Company with greater flexibility. In addition, the Credit
Agreement Amendment provided an additional $10 million in term loans in
connection with the Ensolite Acquisition. As a result of the amendment, the
Company incurred $0.2 million in financing fees paid at the effective date of
the amendment. The Company also agreed to pay a 0.125% additional applicable
margin on all Tranche A ABR and Eurodollar loans and 0.25% on all Tranche B ABR
and Eurodollar loans effective with the date of the amendment.

On April 15, 1996, the Company obtained revised loan covenant restrictions by
amending the Credit Agreement ("Credit Agreement Amendment No. 2") due to the
decline in sales and operating profits compared to prior year's quarters. As a
result of Credit Agreement Amendment No. 2 and the additional Tranche B loan
required to complete the Ensolite Acquisition, the Company incurred $0.3 million
in financing fees paid at the consummation of the Ensolite Acquisition.

The Company entered into a third amendment to the Credit Agreement dated
December 3, 1996 ("Credit Agreement Amendment No. 3"). Credit Agreement
Amendment No. 3 modified the financial covenants to which the Company is subject
and revised certain definitions providing for the exclusion of the loss on
impairment of long-lived assets and certain other one-time charges (see Note 15)
from the related financial covenant calculations. In connection with Credit
Agreement Amendment No. 3, the Company paid an amendment fee of $0.2 million.

Indebtedness of the Company under the Credit Agreement is guaranteed by the
Company's subsidiaries on a full, unconditional, and joint and several basis.
Indebtedness under the Credit Agreement is also collateralized by substantially
all of the assets of the Company and its subsidiaries and the capital stock of
each of the Company's subsidiaries.

The term notes require quarterly principal payments beginning December 31, 1997,
and continuing thereafter through 2003. The revolving credit facility expires on
October 16, 2001.

Periodic prepayments may be made by the Company and mandatory prepayments of 50%
of excess annual cash flows (as defined) are required. At the Company's option,
the term notes payable and borrowings under the revolving credit facility
require interest at the prime rate plus 1.375% to 2% or LIBOR plus 2.375% to 3%.
The interest rate in effect at December 31, 1995 and 1996 was approximately 8.4%
and 8.3%, respectively. The revolving credit facility requires annual commitment
fees of 0.5% of the average daily unused portion of the revolver to be paid
quarterly. The Credit Agreement also requires letter of credit fees and fronting
fees of 2.5% and 0.375%, respectively, of outstanding letters of credit.

In addition to covenants substantially equivalent to the restrictions imposed on
the Company under the terms of the Notes (as discussed above), the Credit
Agreement requires the Company to meet certain financial tests, including
maintenance of a consolidated interest expense coverage ratio, minimum
consolidated net worth, leverage ratio, earnings before interest, taxes,
depreciation and amortization and maximum amounts of capital expenditures. The
Company was in compliance with all terms of the Credit Agreement at December 31,
1995 and 1996.

Other long-term debt

The industrial revenue bond note requires interest at a percentage of the prime
rate (73.32% and 75.76% of the prime rate in 1995 and 1996, respectively). The
prime rate was 8.5% and 8.25% at December 31, 1995 and 1996, respectively. The
note matures in the year 2000 and is collateralized by real property and
equipment at the Company's Conover, North Carolina, manufacturing facility.

F-13
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. Long-Term Debt (Continued)

The mortgage note payable consists of fixed rate debt with a rate of 9% and
requires principal payments through 2002. The note is collateralized by real
property in Santa Fe Springs, California.

At December 31, 1996, the carrying value of long-term debt approximates fair
value.

Required principal repayment of long-term debt is as follows:

1997 $ 1,728
1998 8,229
1999 10,727
2000 13,149
2001 22,906
Thereafter 128,153

8. Income Taxes

The Company accounts for income taxes using the liability method, whereby
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and
liabilities by applying enacted statutory tax rates applicable to future years
in which the differences are expected to reverse.

The Company files a consolidated income tax return with its parent, RBX Group,
Inc. and its tax provision is determined on a separate return basis.

Significant components of income taxes are as follows:
<TABLE>
<CAPTION>
Predecessor Company
---------------------------- ----------------------------
Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Current:
Federal $2,365 $3,118 $ - $ (544)
State 565 590 (15) (43)
---------- ---------- ---------- ----------
2,930 3,708 (15) (587)
---------- ---------- ---------- ----------

Deferred
Federal 901 314 (1,778) (6,336)
State 34 (43) (56) (1,332)
---------- ---------- ---------- ----------

935 271 (1,834) (7,668)
---------- ---------- ---------- ----------

$3,865 $3,979 $(1,849) $(8,255)
========== ========== ========== ==========
</TABLE>

F-14
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

8. Income Taxes (Continued)

Temporary differences which give rise to significant components of the Company's
deferred tax liabilities follows:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax liabilities:
Accumulated depreciation $ 7,210 $ 9,019
Accumulated amortization 12,490 12,178
------- -------
19,700 21,197
------- -------
Deferred tax assets:
Employee benefits 12,531 13,734
Net operating loss carryforwards - 10,176
Alternative minimum tax credit 3,394 3,580
Pension benefits 3,566 3,702
Other 4,749 2,213
------- -------
24,240 33,405
------- -------
Deferred tax asset, net $ 4,540 $12,208
======= =======
</TABLE>
No valuation allowance has been recorded for the realization of the deferred tax
asset resulting from the temporary differences as management believes that it
will, more likely than not, be able to realize the deferred tax asset.

Reconciliation of income taxes computed at the federal statutory tax rate to
actual income tax expense is as follows:
<TABLE>
<CAPTION>
Predecessor Company
---------------------------- ----------------------------
Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0% 34.0%
Effect of:
Loss on impairment of long-lived assets - - - (14.7)
State taxes, net of federal benefit 4.0 3.3 3.3 2.1
Amortization of goodwill 0.9 1.1 (1.9) (1.3)
Other (0.2) 1.4 0.4 (1.0)
------------- ------------- ------------- -------------
38.7% 39.8% 35.8% 19.1%
============= ============= ============= =============
</TABLE>

The Company has net operating loss carryforwards of approximately $25.0 million
which expire through 2011. The Company also has approximately $3.6 million of
alternative minimum tax credits which can be carried forward indefinitely.

F-15
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. Pension Plans

The Company has defined benefit plans covering certain eligible hourly employees
which provide pension benefits that are based on a formula which considers
length of service. Certain salaried employees also participate in the Company's
defined benefit pension plans. Benefits are based upon length of service and
earnings during years of service. Pension costs for hourly and salaried plans
(the "Plans") are funded to the extent permitted by the Internal Revenue Code.

Net pension costs include the following components:
<TABLE>
<CAPTION>
Predecessor Company
---------------------------- ----------------------------
Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Service cost $ 902 $ 832 $ 261 $ 1,257
Interest cost 2,447 2,220 591 2,866
Actual return on plan assets (1,419) (1,934) (509) (3,398)
Amortization and deferrals, net (743) 236 - 794
------------- ------------- ------------- -------------
$ 1,187 $ 1,354 $ 343 $ 1,519
============= ============= ============= =============
</TABLE>

Significant assumptions used in determining net pension costs and funded status
information are as follows:
<TABLE>
<CAPTION>
Predecessor Company
---------------------------- ----------------------------
Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average discount
rate 8.50% 8.50% 7.50% 7.75%
Weighted average rate of
increase in compensation
levels 5.50% 4.50% 4.50% 4.75%
Expected long-term rate
of return on assets 8.50% 8.50% 8.50% 8.66%
</TABLE>

F-16
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. Pension plans (Continued)

The following table sets forth the funded status of the Plans:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Vested benefits $35,189 $35,027
Nonvested benefits 1,916 2,289
------ ------

Accumulated benefit obligation 37,105 37,316
Effect of projected future compensation 2,216 2,466
------ ------

Projected benefit obligation 39,321 39,782
Fair value of Plan assets 30,816 32,847
------ ------
Projected benefit obligation in excess
of plan assets (8,505) (6,935)
Unrecognized prior service cost - 485
Unrecognized net gain (1,056) (2,778)
------ ------
Net pension obligation recognized in
the balance sheet $(9,561) $(9,228)
====== ======
</TABLE>

Certain of the Company's hourly and salaried employees participate in defined
contribution plans to which they contribute each month and which may be matched
in part by the Company in accordance with plan provisions and terms established
in various collective bargaining agreements. Company contributions related to
these plans were approximately $704 for the year ended December 31, 1994, $721
and $177 for the nine and one-half months ended October 16, 1995 and the two and
one-half months ended December 31, 1995, respectively, and $903 for the year
ended December 31, 1996.

10. Postretirement Benefits Other Than Pensions

The Company provides health care and life insurance benefits for certain
eligible active and retired employees, and accrues the estimated costs for such
benefits during the years that the employees have rendered their services to the
Company.

The postretirement health and life benefits are fully paid by the Company after
certain minimum deductibles have been met. The obligation is unfunded. The
Company's annual health obligation is capped at $4 per employee under age 65 and
$2 per employee age 65 and over.

The following table sets forth the Company's postretirement benefits other than
pensions:
<TABLE>
1995 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $18,665 $16,892
Active 14,930 13,003
------ ------
33,595 29,895
Unrecognized net gain - 4,439
------ ------

Accumulated postretirement benefit
obligation 33,595 34,334
Less current portion 1,850 2,302
------ ------

$31,745 $32,032
====== ======
</TABLE>

F-17
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. Postretirement Benefits Other Than Pensions (Continued)

Net periodic postretirement benefit costs include the following components:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Predecessor Company
----------------------------- --------------------------------

Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------ ------------- ------------- -------------

Service costs $ 597 $ 409 $ 131 $ 632
Interest costs 2,395 1,972 509 2,400
Net amortization (691) (664) - (58)
----------- ----------- ------------ -------------

$ 2,301 $ 1,717 $ 640 $ 2,974
=========== =========== ============ =============

</TABLE>
For measurement purposes, an 8% annual rate of increase of covered health care
benefits was assumed for 1996. The rate was assumed to decline gradually to 5%
by 1999. The health care cost trend rate assumption has a significant effect on
the amounts reported. If the assumed health care cost trend rate was increased
by one percentage point the accumulated postretirement benefit obligation would
increase by $2,670 and the aggregate of the service and interest cost components
of net periodic postretirement benefit cost would increase by $282.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% in 1996, 7.5% in 1995 and 8.5% in
1994.

11. Contingent Liabilities

The Company and its subsidiaries are involved in various suits and claims in the
normal course of business. In the opinion of management, after consultation with
counsel, the ultimate liabilities and losses, if any, that may result from such
suits and claims will not have a material effect on the financial position, and
results of operations or liquidity of the Company.

The Company is subject to federal, state and local environmental laws which
regulate air and water emissions and discharges; the generation, storage,
treatment, transportation and disposal of solid and hazardous waste; and, the
release of hazardous substances, pollutants and contaminants into the
environment. In addition, in some circumstances, the Company is responsible for
the environmental condition of the property prior to transfer or sale to the
Company. The Company is involved in various environmental remediation activities
resulting from past operations, including designation as a potentially
responsible party, with others, at various EPA designated Superfund sites. In
developing its estimate of environmental remediation costs, the Company
considers, among other things, currently available technological solutions,
alternative cleanup methods and risk-based assessments of the contamination, and
estimates developed by independent environmental consultants. The Company does
not maintain insurance coverage for environmental matters and does not
anticipate recoveries from other potentially responsible third parties.

Amounts have been recorded which, in management's best estimate, will be
sufficient to satisfy anticipated costs of known remediation requirements. At
December 31, 1996, approximately $2 million for estimated environmental
remediation costs was accrued of which $938 relates to estimated costs to remove
underground storage tanks; substantially all of this amount is included in long-
term liabilities. Expenditures relating to costs currently accrued are expected
to be made over the next 5 to 10 years. As a result of factors such as the
continuing evolution of environmental laws and regulatory requirements, the
availability and application of technology, the identification of presently
unknown remediation sites, estimated costs for future environmental compliance
and remediation are necessarily imprecise, and it is not possible to predict the
amount or timing of future costs of environmental remediation requirements which
may subsequently be determined. Based upon information presently available, such
future costs are not expected to have a material adverse effect on the Company's
competitive or financial position or its

F-18
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11. Contingent Liabilities (Continued)

ongoing results of operations. However, such costs could be material to results
of operations in a future period.

12. Commitments

The Company is obligated under lease agreements, principally relating to the
rental of warehouse facilities and transportation equipment. Future minimum
rental payments required under operating leases for the years ended December 31,
are as follows:

1997 $ 2,332
1998 1,832
1999 1,633
2000 946
2001 806
Thereafter 93

Rental expense for all operating leases was approximately $1,477 for the year
ended December 31, 1994, $2,098 and $549 for the nine and one-half months ended
October 16, 1995, and the two and one-half months ended December 31, 1995,
respectively, and $2,826 for the year ended December 31, 1996.

13. Unusual Item

The Predecessor agreed to settle for $620 a claim by a prior owner over
responsibility for insurance claims for incidents occurring prior to the date of
the purchase of the Predecessor in 1990.

14. Related-Party Transactions

The majority owner of the Predecessor provided Management consulting services to
the Predecessor for Management fees of $250 and $418 for the year ended December
31, 1994, and the nine and one-half months ended October 16, 1995, respectively,
plus reimbursement for out-of-pocket expenses. The Predecessor also paid its
majority owner $1.25 million for investment banking services related to two
acquisitions in 1994. A former owner of the Predecessor provided management
consulting services for a fee of $125 in 1994.

The Company receives substantial ongoing financial and management services from
American Industrial Partners (AIP), an affiliate of the majority owners of the
Company's stockholder. Management and consulting fees to AIP were $180 and $850
for the two and one-half month period and the year ended December 31, 1995 and
1996, respectively, plus reimbursement for out-of-pocket expenses. In 1995, the
Company paid a fee of $2,000 to AIP and reimbursed out-of-pocket expenses for
investment banking services provided by AIP in connection with the Acquisition.
Additionally, in 1996, the Company paid a fee of $400 to AIP and reimbursed out-
of-pocket expenses for investment banking services provided by AIP in connection
with the Ensolite Acquisition.

The Company paid a member of the Board of Directors a fee of $150 in 1996.

15. Fourth-Quarter Adjustments

Beginning in the last half of 1995 and continuing into 1996, the Bedford,
Virginia operations of Rubatex Corporation experienced decreased sales and
operating profits as the result of quality and service problems at the plant.
Although the Company has undertaken a number of manufacturing and service
improvement initiatives, it is presently anticipated that the cash flows
generated by the Bedford operations will be lower

F-19
<PAGE>

RBX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

15. Fourth-Quarter Adjustments (Continued)

than expected at the time of the Acquisition. In connection with the decline in
profitability and the resulting decrease in undiscounted expected future cash
flows, management reassessed the carrying value of the long-lived assets related
to the Bedford operations and determined that there was an impairment;
accordingly, a loss on impairment of $26,498 was recorded in the fourth quarter
of 1996 based on the excess of the carrying value of the Bedford long-lived
assets over its discounted expected future cash flows. The loss on impairment of
long-lived assets is comprised of the following:

Goodwill $ 18,760
Customer lists 6,898
Workforce 774
Property, plant and equipment 66
---------
$ 26,498
=========

The Company also recorded additional fourth-quarter charges of $8.7 million in
the aggregate. Such charges include $4.9 million related to a reassessment of
inventory carrying values in light of: (i) low inventory turnover; (ii) the
costs carried in inventory related to the higher manufacturing cost structures
in place prior to full implementation of cost reductions; and (iii) how
inventory levels are being maintained to service various markets. The remaining
charges are composed of $2.5 million for liabilities incurred in connection with
severance and certain other personnel related costs, $0.8 million related to the
reassessment of the future value of on-going capital projects and $0.5 million
for other items.

16. SUPPLEMENTAL CASH FLOW INFORMATION

Payments for interest and income taxes are as follows:
<TABLE>
<CAPTION>

Prodecessor Company
----------------------------- --------------------------------
Year 9-1/2 Months 2-1/2 Months Year
Ended Ended Ended Ended
Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Interest $ 3,194 $ 6,686 $ 192 $ 18,138
Income taxes 1,466 3,189 149 875
</TABLE>

In connection with the Acquisition, RBX Group made a capital contribution to the
Company of $43,895, of which $3,895 was noncash, and in connection with the
Ensolite Acquisition, RBX Group made a capital contribution to the Company of
$15,000, of which $5,000 was noncash.

F-20
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

RBX CORPORATION

By: /s/ Thomas F. Lemker
-------------------------------------------
Name: Thomas F. Lemker
Title: Vice President, Chief Financial Officer
and Treasurer
Date: March 26, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<C> <C> <S>
/s/ Frank H. Roland March 26, 1997 President and Chief Executive Officer
- --------------------------- (Principal Executive Officer) and Director
Frank H. Roland

/s/ Thomas F. Lemker March 26, 1997 Chief Financial Officer (Principal Financial
- --------------------------- Officer and Principal Accounting Officer)
Thomas F. Lemker

/s/ Tom H. Barrett March 26, 1997 Chairman of the Board and Director
- ---------------------------
Tom H. Barrett

/s/ W. Richard Bingham March 26, 1997 Director
- ---------------------------
W. Richard Bingham

/s/ Theodore C. Rogers March 26, 1997 Director
- ---------------------------
Theodore C. Rogers

/s/ Lawrence W. Ward, Jr. March 26, 1997 Director
- ---------------------------
Lawrence W. Ward, Jr.

/s/ Robert J. Klein March 26, 1997 Director
- ---------------------------
Robert J. Klein

/s/ Steven W. Schaefer March 26, 1997 Director
- ---------------------------
Steven W. Schaefer
</TABLE>

Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act

The registrant has not sent an annual report or proxy material to its
security holders.

<PAGE>

EXHIBIT 10.4

AMENDMENT No. 3 dated as of December 3, 1996 (this "Amendment"), to the
Credit Agreement dated as of October 16, 1995, as amended by Amendment No. 1
thereto ("Amendment No. 1") dated as of February 28, 1996, and by Amendment No.
2 thereto ("Amendment No. 2") dated as of April 15, 1996 (as so amended and as
the same may be further amended, restated, supplemented, waived or otherwise
modified from time to time, the "Credit Agreement"), among RBX GROUP, INC., a
Delaware corporation ("RBX Group"), RBX CORPORATION, a Delaware corporation and
a wholly owned subsidiary of RBX Group (the "Borrower"), the several banks and
other financial institutions party to the Credit Agreement (the "Lenders"), and
THE CHASE MANHATTAN BANK (as successor in interest to Chemical Bank), a New York
banking corporation, as agent for the Lenders (in such capacity, the "Agent").

A. The Borrower has requested that Subsection 8(a), Subsection 8(b),
Subsection 8(c), Subsection 8(e) and Section 8.10 of the Credit Agreement be
amended in accordance with the terms and subject to the conditions set forth
herein.

B. The Borrower and the Required Lenders have agreed to the foregoing
amendments, in each case on the terms and subject to the conditions set forth
herein.

C. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Credit Agreement as amended hereby.

Accordingly, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendments to Credit Agreement.

(a) Amendments to Section 1.1

(I) the definition of the term "Consolidated EBIT" shall be deleted
and the following shall be inserted in lieu thereof:

"Consolidated EBIT": of the Borrower and its consolidated
Subsidiaries, for any period. Consolidated Net Income for such period
(a) plus, without duplication and to the extent reflected as a charge
in the statement of such Consolidated Net Income for such period, the
sum of (I) Consolidated Interest Expense and any other interest
expense, (ii) total income tax expense (whether paid, accrued or
deferred), (iii) non-cash provisions for reserves for discontinued
operations, (iv) any non-cash, extraordinary losses (including,
whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on
the Disposition of assets outside of the ordinary course of business)
and (v) charges not in excess of $30,000,000, relating to Financial
Accounting Standards No. 121 and special charges not in excess of
$8,000,000, each as reflected on the Borrower's consolidated financial
statements for the period ended December 31, 1996, and (b) minus, to
the extent reflected as a credit in the statement of such Consolidated
Net Income for such period, any non-cash, extraordinary gains
(including, whether or not otherwise includable as a separate item in
the statement of such Consolidated Net Income for such period, gains
on the Disposition of assets outside of the ordinary course of
business)."

(ii) the definition of "Consolidated Net Worth" shall be amended (x)
deleting the word "or" in clause (ii) thereof and inserting a "," in lieu
thereof and (y) by adding the following provision at the end of such
definition:

<PAGE>

"or (iv) charges not in excess of $30,000,000, relating to Financial
Accounting Standards No. 121 and special charges not in excess of
$8,000,000, each as reflected on the Borrower's consolidated financial
statements for the period ended December 31, 1996."

(b) Amendment to Subsection 8.1(a). Subsection 8.1(a) of the Credit
Agreement shall be amended by deleting the ratio set forth therein opposite each
date set forth below and inserting in place thereof the ratio set forth opposite
such date below:

Consolidated
Interest
Date Expense Ratio
---- --------------
<S> <C>

December 31, 1996 1.20 to 1.00

March 31, 1997 1.25 to 1.00
June 30, 1997 1.30 to 1.00
September 30, 1997 1.35 to 1.00
December 31, 1997 1.40 to 1.00

March 31, 1998 1.40 to 1.00
June 30, 1998 1.45 to 1.00
September 30, 1998 1.60 to 1.00
December 31, 1998 1.65 to 1.00

March 31, 1999 1.80 to 1.00
June 30, 1999 1.85 to 1.00
September 30, 1999 1.90 to 1.00
December 31, 1999 1.95 to 1.00

March 31, 2000 2.00 to 1.00
June 30, 2000 2.10 to 1.00
September 30, 2000 2.15 to 1.00
December 31, 2000 2.20 to 1.00

March 31, 2001 2.30 to 1.00
June 30, 2001 2.35 to 1.00
September 30, 2001 2.40 to 1.00
December 31, 2001 2.50 to 1.00

March 31, 2002 2.60 to 1.00
June 30, 2002 2.65 to 1.00
September 30, 2002 2.75 to 1.00
December 31, 2002 2.80 to 1.00

March 31, 2003 3.00 to 1.00
June 30, 2003 3.10 to 1.00
September 30, 2003 3.20 to 1.00

</TABLE>
(c) Amendment to Subsection 8.1(b). Subsection 8.1(b) of the Credit
Agreement is hereby amended and restated in its entirety as follows:
<PAGE>

"(b) Maintenance of Consolidated EBITDA. Permit for any period of four
consecutive fiscal quarters ending on any fiscal quarter set forth below the
Consolidated EBITDA for the Borrower to be less than the amount set forth below
opposite the applicable fiscal quarter or fiscal year:

<TABLE>
<CAPTION>
Consolidated
Fiscal Year Ending EBITDA
------------------ ------------
<S> <C>
December 31, 1996 $22,000,000

March 31, 1997 23,000,000
June 30, 1997 24,000,000
September 30, 1997 25,000,000
December 31, 1997 26,000,000

March 31, 1998 27,000,000
June 30, 1998 28,500,000
September 30, 1998 31,000,000
December 31, 1998 33,000,000

March 31, 1999 34,500,000
June 30, 1999 35,500,000
September 30, 1999 36,000,000
December 31, 1999 36,500,000

March 31, 2000 36,500,000
June 30, 2000 37,000,000
September 30, 2000 37,500,000
December 31, 2000 38,000,000

March 31, 2001 38,000,000
June 30, 2001 38,500,000
September 30, 2001 38,500,000
December 31, 2001 39,000,000

March 31, 200 39,500,000
June 30, 2002 40,000,000
September 30, 2002 40,500,000
December 31, 2002 40,500,000

March 31, 2003 41,000,000
June 30, 2003 41,000,000
September 30, 2003 41,500,000
</TABLE>

(d) Amendment to Subsection 8.1(c). Subsection 8.1(c) of the Credit
Agreement is hereby amended by deleting the ratio set forth therein opposite
each date set forth below and inserting in place thereof the ratio set forth
opposite such date below:

<TABLE>
<CAPTION>
Fiscal Quarter Ending Leverage Ratio
--------------------- --------------
<S> <C>
December 31, 1996 8.40 to 1.00

March 31, 1997 8.20 to 1.00
June 30, 1997 8.00 to 1.00
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Fiscal Quarter Ending Leverage Ratio
--------------------- ---------------
<S> <C>
September 30, 1997 7.40 to 1.00
December 31, 1997 7.15 to 1.00

March 31, 1998 7.00 to 1.00
June 30, 1998 6.60 to 1.00
September 30, 1998 5.80 to 1.00
December 31, 1998 5.40 to 1.00

March 31, 1999 5.25 to 1.00
June 30, 1999 5.00 to 1.00
September 30, 1999 4.75 to 1.00
December 31, 1999 4.60 to 1.00

March 31, 2000 4.60 to 1.00
June 30, 2000 4.45 to 1.00
September 30, 2000 4.10 to 1.00
December 31, 2000 4.00 to 1.00

March 31, 2001 4.00 to 1.00
June 30, 2001 3.85 to 1.00
September 30, 2001 3.60 to 1.00
December 31, 2001 3.40 to 1.00

March 31, 2002 3.40 to 1.00
June 30, 2002 3.20 to 1.00
September 30, 2002 2.90 to 1.00
December 31, 2002 2.80 to 1.00

March 31, 2003 2.80 to 1.00
June 30, 2003 2.70 to 1.00
September 30, 2003 2.50 to 1.00
</TABLE>
(e) Amendment to Subsection 8.1(e). Subsection 8.1(e) of the Credit
Agreement is hereby amended by deleting the ratio set forth therein opposite
each date set forth below and inserting in place thereof the ratio set forth
opposite such date below:
<TABLE>
<CAPTION>

Fiscal Quarter Ending Leverage Ratio
--------------------- --------------
<S> <C>
December 31, 1996 3.85 to 1.00

March 31, 1997 3.85 to 1.00
June 30, 1997 3.85 to 1.00
September 30, 1997 3.40 to 1.00
December 31, 1997 3.35 to 1.00

March 31, 1998 3.35 to 1.00
June 30, 1998 3.10 to 1.00
September 30, 1998 2.65 to 1.00
December 31, 1998 2.50 to 1.00
</TABLE>
<PAGE>

<TABLE>
Fiscal Quarter Ending Leverage Ratio
--------------------- --------------
<S> <C>
March 31, 1999 2.35 to 1.00
June 30, 1999 2.20 to 1.00
September 30, 1999 2.00 to 1.00
December 31, 1999 1.85 to 1.00
March 31, 2000 1.85 to 1.00
June 30, 2000 1.75 to 1.00
September 30, 2000 1.45 to 1.00
December 31, 2000 1.40 to 1.00

March 31, 2001 1.40 to 1.00
June 30, 2001 1.40 to 1.00
September 30, 2001 1.40 to 1.00
December 31, 2001 1.40 to 1.00

March 31, 2002 1.40 to 1.00
June 30, 2002 1.40 to 1.00
September 30, 2002 1.40 to 1.00
December 31, 2002 1.40 to 1.00

March 31, 2003 1.40 to 1.00
June 30, 2003 1.40 to 1.00
September 30, 2003 1.40 to 1.00
</TABLE>

(f) Amendment to Section 8.10. Section 8.10 of the Credit Agreement is
hereby amended by deleting all references therein to "$10,000,000" and inserting
in lieu thereof "$5,000,000".

SECTION 2. Fees. In consideration of the agreements of the Required
Lenders contained herein, the Borrower agrees to pay to each Lender, through the
Agent, an amendment fee (the "Amendment Fee") to any Lender that shall execute
and deliver this Amendment to the Agent on or prior to December 18, 1996, an
amount equal to 1/5 of 1% of the sum of (I) the outstanding Term Loans of such
Lender and (ii) the Revolving Credit Commitment (whether used or unused) of such
Lender. The Amendment Fee shall be payable in immediately available funds on
the Effective Date (as defined below). Once paid, the Amendment Fee shall not
be refundable under any circumstances.

SECTION 3. Representations and Warranties. To induce the other parties
hereto to enter into this Amendment, the Borrower represents and warrants to
each of the Lenders and the Agent, that, after giving effect to this Amendment,
(a) the representations and warranties set forth in Section 5 of the Credit
Agreement are true and correct in all material respects on and as of the date
hereof with the same effect as though made on and as of the date hereof, except
to the extent such representations and warranties expressly relate to an earlier
date, and (b) no Default or Event of Default has occurred and is continuing.

SECTION 4. Conditions to Effectiveness. This Amendment shall become
effective on the date (the "Effective Date") that the Agent shall have received
counterparts of this Amendment that, when taken together, bear the signatures of
RBX Group, the Borrower and the Required Lenders.

SECTION 5. Effect of Amendment. Except as expressly set forth herein,
this Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of, or otherwise affect the rights and remedies of the Lenders, the
Agent, RBX Group or the Borrower under the Credit Agreement, Amendment No. 1,
Amendment No. 2 or any other Loan Document, and shall not alter, modify, amend
or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement, Amendment No. 1, Amendment No. 2
or
<PAGE>

any other Loan Document, all of which are ratified and affirmed in all respects
and shall continue in full force and effect. Nothing herein shall be deemed to
entitle RBX Group or the Borrower to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement, Amendment No. 1,
Amendment No. 2 or any other Loan Document in similar or different
circumstances.

SECTION 6. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
Delivery of any executed counterpart of a signature page of this Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.

SECTION 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 8. Headings. The headings of this Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the date and year
first above written.

RBX GROUP, INC.,

by /s/ Thomas F. Lemker
----------------------------------
Name: Thomas F. Lemker
Title: VP, CFO & Treasurer

RBX CORPORATION,

by /s/ Thomas F. Lemker
----------------------------------
Name: Thomas F. Lemker
Title: VP, CFO & Treasurer

THE CHASE MANHATTAN BANK,
as Agent and as a Lender,

by /s/ William J. Caggiano
----------------------------------
Name: William J. Caggiano
Title: Managing Director
<PAGE>

CHASE MANHATTAN BANK DELAWARE, as an Issuing
Lender,

by /s/ Michael P. Handago
-----------------------------------------
Name: Michael P. Handago
Title: Vice President

ABN-AMRO BANK N.V.,
San Francisco International Branch,

by -----------------------------------------
Name:
Title:

THE BANK OF NOVA SCOTIA,

by /s/ James York
-----------------------------------------
Name: James York
Title: Office Head

CREDITANSTALT BANKVEREIN,

by /s/ Gregory T. Mathis
-----------------------------------------
Name: Gregory T. Mathis
Title: Vice President

by /s/ Fiona McKone
-----------------------------------------
Name: Fiona McKone
Title: Senior Associate
<PAGE>

CRESTAR BANK,

by /s/ Stuart J. Turille
--------------------------------------------
Name: Stuart J. Turille
Title: Executive Vice President

FIRST NATIONAL BANK OF BOSTON,

by
--------------------------------------------
Name:
Title:

FLEET BANK OF MASSACHUSETTS, N.A.,

by /s/ James C. Silva
--------------------------------------------
Name: James C. Silva
Title: AVP

MIDLAND BANK PLC, New York Branch,

by /s/ Gina Sidorsky
--------------------------------------------
Name: Gina Sidorsky
Title: Director

NATIONSBANK, N.A.,

by /s/ Hugh S. Miles, III
--------------------------------------------
Name: Hugh S. Miles, III
Title: Executive Vice President
<PAGE>

THE PROVIDENT BANK,

by /s/ Alan R. Henning
--------------------------------------------
Name: Alan R. Henning
Title: Vice President

VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,

by /s/ Jeffrey W. Maillet
--------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director

<PAGE>
EXHIBIT NO. 12.1 -- COMPUTATION OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
Year Year Year 9 1/2 Months 2 1/2 Months Year
Ended Ended Ended Ended Ended Ended
Dec. 31, 1992 Dec. 31, 1993 Dec. 31, 1994 Oct. 16, 1995 Dec. 31, 1995 Dec. 31, 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
One-third of rent expense $355 $386 $492 $699 $183 $942
Interest including amortization of
deferred financing fees 5,084 3,381 3,334 6,878 3,867 18,685
-------------- -------------- -------------- -------------- -------------- -------------
Fixed charges 5,439 3,767 3,826 7,577 4,050 19,627
Income (loss) before income taxes 8,255 5,105 9,983 10,000 (5,170) (43,311)
-------------- -------------- -------------- -------------- -------------- -------------
Earnings before fixed charges $13,694 $8,872 $13,809 $17,577 ($1,120) ($23,684)
============== ============== ============== ============== ============== =============
Earnings to fixed charges ratio 2.52X 2.36X 3.61X 2.32X -- --
============== ============== ============== ============== ============== =============
Deficiency of earnings to fixed
charges -- -- -- -- ($5,170) ($43,311)
============== ============== ============== ============== ============== =============
</TABLE>

<PAGE>

Exhibit No. 21.1 -- Subsidiaries of RBX Corporation

RBX Group, Inc.

RBX Corporation

Rubatex Corporation

Groendyk Manufacturing Company, Inc.

OleTex Inc.

Universal Rubber Company

Universal Polymer & Rubber Inc.

Hoover-Hanes Rubber Custom Mixing Corporation

Midwest Rubber Custom Mixing Corporation

Waltex Corporation

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,293
<SECURITIES> 0
<RECEIVABLES> 35,077
<ALLOWANCES> 1,337
<INVENTORY> 38,635
<CURRENT-ASSETS> 78,910
<PP&E> 91,068
<DEPRECIATION> 8,412
<TOTAL-ASSETS> 280,700
<CURRENT-LIABILITIES> 34,239
<BONDS> 183,164
0
0
<COMMON> 0
<OTHER-SE> 20,313
<TOTAL-LIABILITY-AND-EQUITY> 280,700
<SALES> 275,715
<TOTAL-REVENUES> 275,715
<CGS> 238,365
<TOTAL-COSTS> 238,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 531
<INTEREST-EXPENSE> 18,685
<INCOME-PRETAX> (43,311)
<INCOME-TAX> (8,255)
<INCOME-CONTINUING> (35,056)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,056)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>