<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
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
OR
[_] 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>
NOTE -- THE PURPOSE OF THIS FILING IS TO INCLUDE A SECOND REPORT OF INDEPENDENT
AUDITORS AND CERTAIN ADDITIONAL DISCLOSURES IN CONNECTION WITH THE DECEMBER 31,
1994, INFORMATION INCLUDED IN ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
<PAGE>
RBX CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report (Deloitte & Touche LLP)....................... F-2
Report of Independent Auditors (Ernst & Young LLP)......................... F-3
Consolidated Financial Statements
Consolidated Balance Sheets............................................ F-4
Consolidated Statements of Operations.................................. F-5
Consolidated Statements of Cash Flows.................................. F-6
Consolidated Statement of Changes in Stockholder's Equity.............. F-7
Notes to Consolidated Financial Statements............................. F-8
</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, and August 2, 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>
REPORT OF INDEPENDENT AUDITORS
Board of Directors of RBX Investors, Inc.
We have audited the accompanying consolidated statements of operations and
cash flows of RBX Investors, Inc. for the year ended December 31, 1994. Our
audit 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 based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of RBX Investors, Inc. and subsidiaries for the year ended
December 31, 1994, 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.
Ernst & Young LLP
Richmond, Virginia
March 8, 1995
except for the first paragraph of Note 2,
as to which the date is August 2, 1995
F-3
<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-4
<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-5
<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-6
<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-7
<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-8
<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-9
<PAGE>
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. Acquisitions
On August 2, 1995, the Predecessor entered into an agreement and plan of merger
(as amended, the "Acquisition Agreement") with RBX Group, Inc., AEA Investors,
Inc. and the other parties thereto.
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-10
<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-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<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-18
<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-19
<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-20
<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-21
<PAGE>
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
17. Stockholders' Equity and Stock Option Plan of the Predecessor
Changes in consolidated stockholders' equity of the Predecessor for the year
ended December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Stockholders'
----------------------------- Capital Other Earnings Equity
Class A Class B Class C ------- ----- -------- ------
------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993............... $4 $0 $1 $38,899 $(854) $(11,223) $26,827
385 shares sold at $130 per share........ 50 50
Minimum pension liability adjustment..... 854 854
Net income............................... 5,652 5,652
------- ------- ------- ------- ----- -------- -------
Balance at December 31,1994................ $4 $0 $1 $38,949 $ 0 $ (5,571) $33,383
======= ======= ======= ======= ===== ======== =======
</TABLE>
The Predecessor had a non-qualified stock option plan which provided that
options for a maximum of 89,857 shares of Class A common stock could be granted
to directors and key employees of the Predecessor. Such options could be
granted over a period not to exceed 10 years at a price of not less than $100
per share. Options became exercisable over a three year period from the date of
the grant provided, however, that in the event of a change of control
unexercised options would become fully vested. A summary of plan transactions
for 1994 follows:
<TABLE>
<CAPTION>
Number of
Shares
---------
<S> <C>
Outstanding, January 1 at $100 to $130 per share.................. 57,192
Granted at $110 at $130 per share............................... 16,000
Expired at $100................................................. (828)
Exercised at $100............................................... -
---------
Outstanding, December 31 at $100 to $130 per share................ 72,364
=========
</TABLE>
At December 31, 1994, options for 35,929 shares were exercisable and 17,493
shares were reserved for future options.
F-22
