<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ------
Exchange Act of 1934
For the quarterly period ended June 30, 1999
OR
______ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to
Commission File Number: 333-1992
RBX CORPORATION
(Exact name of Registrants as specified in their charters)
---------------------------------------------------------
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
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____
------
The number of shares of Common Stock of RBX Corporation, $0.01 per share par
value, outstanding as of June 30, 1999 was 1,000.
<PAGE>
Index
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<TABLE>
<S> <C>
PART I.............................................................................................. 1
ITEM 1. Financial Statements (unaudited)........................................................ 1
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................................. 7
PART II............................................................................................. 12
ITEM 6. Exhibits and Reports on Form 8-K........................................................ 12
</TABLE>
<PAGE>
PART I
ITEM 1. Financial Statements (unaudited)
RBX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................................ $ 122 $ 200
Accounts receivable, less allowance for doubtful accounts of $1,459 and
$1,570, respectively.................................................... 33,474 35,258
Inventories.............................................................. 25,450 25,801
Prepaid and other current assets......................................... 426 331
---------------- ----------------
Total current assets..................................................... 59,472 61,590
Property, plant and equipment, net....................................... 72,797 70,961
Intangibles and other assets, net........................................ 6,278 5,630
---------------- ----------------
Total assets............................................................. $ 138,547 $ 138,181
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable......................................................... $ 12,726 $ 15,412
Accrued liabilities...................................................... 27,940 27,202
Current portion of postretirement benefit obligation..................... 3,030 3,030
Current portion of long-term debt........................................ 327 327
---------------- ----------------
Total current liabilities................................................ 44,023 45,971
Long-term debt........................................................... 205,745 206,832
Postretirement benefit obligation........................................ 30,083 30,549
Pension benefit obligation............................................... 8,461 8,715
Other liabilities........................................................ 1,704 1,704
Commitments and contingencies............................................ -- --
Stockholder's equity:
Common stock, $0.01 par value, 1,000 shares authorized, issued and
outstanding.......................................................... -- --
Additional paid-in capital............................................ 58,103 58,103
Accumulated deficit................................................... (209,572) (213,693)
---------------- ----------------
Total stockholder's equity............................................... (151,469) (155,590)
---------------- ----------------
Total liabilities and stockholder's equity............................... $ 138,547 $ 138,181
================ ================
</TABLE>
See notes to condensed consolidated financial statements
1
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RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales....................................... $ 66,790 $ 65,135 $ 139,231 $ 129,556
Cost of goods sold.............................. 59,584 54,418 123,836 107,869
-------------- -------------- -------------- --------------
Gross profit.................................... 7,206 10,717 15,395 21,687
Selling, general and administrative costs....... 7,690 6,104 15,253 12,333
Management fees................................. 258 332 509 635
Loss on impairment of long-lived assets......... 11,098 -- 11,098 --
Amortization of goodwill and other intangibles.. 833 -- 1,666 --
Other expense (income).......................... (344) 8 (318) 8
-------------- -------------- -------------- --------------
Operating income (loss)......................... (12,329) 4,273 (12,813) 8,711
Interest expense, including amortization of
deferred financing fees........................ 6,415 6,397 12,734 12,832
-------------- -------------- -------------- --------------
Net loss........................................ $ (18,744) $ (2,124) $ (25,547) $ (4,121)
============== ============== ============== ==============
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................... $ (18,744) $ (2,124) $ (25,547) $ (4,121)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation................................... 2,459 1,963 4,918 3,928
Amortization................................... 1,151 324 2,303 648
Loss on impairment of long-lived assets........ 11,098 - 11,098 -
(Gain) loss on disposal of equipment........... (344) 8 (318) 8
Increase (decrease) in cash from changes in
assets and liabilities:
Accounts receivable.......................... 2,450 1,447 (437) (1,784)
Inventories.................................. 4,933 1,156 2,336 (351)
Prepaid and other current assets............. 289 46 153 95
Accounts payable............................. (5,582) (3,137) (596) 2,686
Accrued liabilities.......................... 2,033 342 6,447 (738)
Other liabilities............................ 108 158 408 720
------------- ------------- ------------- -------------
Net cash provided by (used in) operating
activities....................................... (149) 183 765 1,091
------------- ------------- ------------- -------------
INVESTING ACTIVITIES
Capital expenditures.............................. (877) (1,268) (2,634) (2,101)
Proceeds from disposals of property, plant and
equipment...................................... 1,625 1 1,630 1
Increase in restricted cash....................... (1,492) - (1,492) -
------------- ------------- ------------- -------------
Net cash used in investing activities............. (744) (1,267) (2,496) (2,100)
------------- ------------- ------------- -------------
FINANCING ACTIVITIES
Proceeds from borrowings.......................... 15,500 6,750 16,500 11,750
Principal payments on long-term debt.............. (14,719) (5,581) (14,800) (10,663)
------------- ------------- ------------- -------------
Net cash provided by financing activities......... 781 1,169 1,700 1,087
------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents.................................... (112) 85 (31) 78
Cash and cash equivalents:
Beginning of period............................ 247 115 166 122
------------- ------------- ------------- -------------
End of period.................................. $ 135 $ 200 $ 135 $ 200
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except as otherwise noted)
1. Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include the
accounts of RBX Corporation and its wholly owned subsidiaries (the "Company").
RBX Corporation's subsidiaries, Rubatex Corporation, OleTex, Inc., Groendyk Mfg
Co., Inc., Midwest Rubber Custom Mixing Corp., and Hoover-Hanes Rubber Custom
Mixing Corp., operate manufacturing facilities which are located in the
southeastern United States, Ohio, and Illinois. The Company is a wholly owned
subsidiary of RBX Group, Inc. ("RBX Group"), a non-operating holding company.
The interim financial data as of and for the three months and six months ended
June 30, 1999 are unaudited and have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In
management's opinion, all adjustments (consisting of adjustments of a normal
recurring nature) necessary for a fair presentation have been included. The
year-end balance sheet information was derived from audited financial
statements, but excludes certain disclosures included in the Company's annual
report on Form 10-K.
These condensed consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto as well as the other
information included in the Company's annual report on Form 10-K for the year
ended December 31, 1998. The results of operations and cash flows for the
interim periods presented are not necessarily indicative of the results for the
full year or any other interim period.
2. Inventories
Components of inventory are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
---- ----
<S> <C> <C>
Raw materials....................... $10,759 $11,119
Work-in-process..................... 3,539 4,058
Finished goods...................... 11,152 10,624
------- -------
$25,450 $25,801
======= =======
</TABLE>
3. Long-Term Debt
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 Senior Secured Notes and the Senior
Subordinated Notes on a full, unconditional, and joint and several basis.
Indebtedness under the Company's revolving credit facility is guaranteed by RBX
Corporation and its existing and future subsidiaries and is collateralized by a
first-priority lien on all accounts receivable, inventory, and general
intangibles (to the extent related to accounts receivable and inventory).
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.
4
<PAGE>
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. Long-Term Debt, continued
The Company's indebtedness contains certain restrictions which, among other
things, restrict its ability to incur additional indebtedness, issue preferred
stock, incur liens, pay dividends, make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of its assets. In addition,
the Company's indebtedness contains certain financial covenants, including
maintenance of a minimum level of earnings before interest, taxes, depreciation
and amortization ("EBITDA").
In February 1999, as anticipated at the time of the first amendment to the
Credit Agreement, the Company and its lenders entered into a second amendment to
the Credit Agreement which waived the financial covenants to which the Company
was subject through December 31, 1999 and established requirements with respect
to the maintenance of a minimum level of EBITDA for the four consecutive
quarters ending March 31, 1999, June 30, 1999, September 30, 1999, and December
31, 1999. The amendment also provides for a revised limitation on capital
spending. The Company was in compliance with the terms of its indebtedness as
of June 30, 1999.
As of June 30, 1999, the Company had available unused borrowing capacity of
$17.4 million under the revolving credit facility.
4. Contingent Liabilities
The Company is highly leveraged. At June 30, 1999, the Company's indebtedness
was $207.2 million and its stockholder's equity was a deficit of $155.6 million.
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 are not expected to have a material adverse effect on the
financial position, 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, the Company is responsible for the environmental
clean-up of certain property for contamination which occurred prior to the
Company's ownership. 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, risk-based assessments of the
contamination, and estimates developed by independent environmental consultants.
The Company does not maintain insurance coverage for environmental matters.
Reserves have been recorded which, in management's estimate, will be sufficient
to satisfy anticipated costs of known remediation requirements. As a result of
factors such as the continuing evolution of environmental laws and regulatory
requirements, the availability and application of technology, and the
identification of presently unknown RBX remediation sites, estimated costs for
future environmental compliance and remediation are necessarily imprecise, and
it is not possible to predict the amount or timing
5
<PAGE>
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 ongoing results of operations. However, such costs
could be material to results of operations in a future period.
5. Segment Information
Summarized financial information for the Company's reportable segments follows.
The information designated as "Other" represents corporate related items which
are not allocated to reportable segments.
<TABLE>
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Foam Group:
Revenues......................... $ 49,450 $ 47,826 $103,874 $ 92,617
Segment profits.................. (947) 3,932 (1,246) 7,714
Total assets..................... 122,406 107,250 122,406 107,250
Mixing Group:
Revenues......................... 17,340 17,309 35,357 36,939
Segment profits.................. 1,646 2,005 3,684 4,269
Total assets..................... 20,826 25,178 20,826 25,178
Other:
Revenues......................... -- -- -- --
Segment loss..................... (19,443) (8,061) (27,985) (16,104)
Total assets..................... 117,959 5,753 117,959 5,753
Total:
Revenues......................... 66,790 65,135 139,231 129,556
Net loss......................... (18,744) (2,124) (25,547) (4,121)
Total assets..................... 261,191 138,181 261,191 138,181
</TABLE>
The following table presents the details of "Other" segment loss.
<TABLE>
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Corporate expenses................. $ 461 $1,332 $ 1,222 $ 2,637
Management fees.................... 258 332 509 635
Depreciation and amortization...... 1,529 324 3,059 648
Interest expense................... 6,097 6,073 12,097 12,184
Impairment loss.................... 11,098 -- 11,098 --
------- ------ ------- -------
$19,443 $8,061 $27,985 $16,104
======= ====== ======= =======
</TABLE>
6
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The following discussion and analysis provides information which management
believes is relevant to an understanding of the operations and financial
condition of RBX Corporation and subsidiaries (the "Company"). This discussion
and analysis should be read in conjunction with the condensed consolidated
financial statements and notes thereto included in this Form 10-Q as well as the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Basis of Presentation
The following table sets forth, for the periods shown, net sales, gross profit,
selling, general and administrative costs ("SG&A"), operating income (loss) and
net loss in millions of dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------------------
1998 1999 1998 1999
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 66.8 100.0% $65.1 100.0% $139.2 100.0% $129.6 100.0%
Gross profit............. 7.2 10.8 10.7 16.4 15.4 11.1 21.7 16.7
SG&A..................... 7.7 11.5 6.1 9.4 15.3 11.0 12.3 9.5
Operating income (loss).. (12.3) (18.4) 4.3 6.6 (12.8) (9.2) 8.7 6.7
Net loss................. (18.7) (28.0) (2.1) (3.2) (25.5) (18.3) (4.1) (3.2)
</TABLE>
Results of Operations
Net Sales
- ---------
Net sales decreased to $65.1 million for the three months ended June 30, 1999
compared to $66.8 million for the same period in 1998, a decrease of $1.7
million or 2.5%. Net sales decreased to $129.6 million for the six months ended
June 30, 1999 from $139.2 million for the comparable period in 1998, a decrease
of $9.6 million or 6.9%.
Net sales for the Company's foam product operations (the "Foam Group") decreased
to $47.8 million for the quarter ended June 30, 1999 from $49.5 million for the
quarter ended June 30, 1998, a decrease of $1.7 million or 3.4%. The Foam
Group's net sales decreased to $92.6 million for the six months ended June 30,
1999 from $103.9 million for the six months ended June 30, 1998, a decrease of
$11.3 million or 10.9%.
In September 1998, the Company sold the business and substantially all of the
assets (excluding land and buildings) of Universal Polymer & Rubber, Inc.
("Universal"). Excluding Universal, the Foam Group's net sales increased to
$47.8 million for the three months ended June 30, 1999 from $45.4 million for
the same period in 1998, an increase of $2.4 million or 5.3%. Excluding
Universal, the Foam Group's net sales decreased to $92.6 million for the six
months ended June 30, 1999 from $95.4 million for the comparable period in 1998,
a decrease of $2.8 million or 2.9%.
After elimination of sales to the Foam Group, net sales at the Company's custom
rubber mixing operations (the "Mixing Group") remained unchanged at $17.3
million in the second quarter of 1999 compared to the second quarter of 1998.
The Mixing Group's net sales for the six months ended June 30, 1999 increased to
$36.9 million compared to $35.4 million for the same period in 1998, an increase
of $1.5 million or 4.2%.
7
<PAGE>
Gross Profit
Gross profit increased to $10.7 million for the three months ended June 30, 1999
from $7.2 million for the three months ended June 30, 1998, an increase of $3.5
million or 48.6%. For the six months ended June 30, 1999, gross profit
increased to $21.7 million from $15.4 million for the same period in 1998, an
increase of $6.3 million or 40.9%.
Gross profit for the Foam Group increased to $8.1 million in the second quarter
of 1999 from $5.3 million in the second quarter of 1998, an increase of $2.8
million or 52.8%. For the six months ended June 30, 1999, gross profit
increased to $16.2 million from $11.1 million for the six months ended June 30,
1998, an increase of $5.1 million or 45.9%. This increase is largely
attributable to the cost cutting measures implemented in connection with the
reorganization of the Company's operations, improvements in operating
performance at the Company's Conover, North Carolina facility, and reduced
depreciation.
Mixing Group gross profit increased to $2.6 million in the second quarter of
1999 from $2.3 million in the second quarter of 1998, an increase of $0.3
million or 13.0%. Mixing Group gross profit increased to $5.5 million for the
six months ended June 30, 1999 from $5.0 million for the same period in 1998, an
increase of $0.5 million or 10.0%. This increase resulted primarily from
increased volume at the Mixing Group in the first half of 1999 relative to the
first half of 1998.
SG&A
SG&A decreased to $6.1 million in the second quarter of 1999 from $7.7 million
in the second quarter of 1998, a decrease of $1.6 million or 20.8%. For the
six months ended June 30, 1999, SG&A decreased to $12.3 million from $15.3
million for the same period in 1998, a decrease of $3.0 million or 19.6%. As a
percentage of net sales, SG&A decreased to 9.5% in 1999 from 11.0% in 1998.
This decrease in SG&A is primarily a result of cost cutting measures including
savings associated with headcount reductions. The sale of the Universal business
reduced SG&A by $0.5 million for the second quarter of 1999 compared to the
second quarter of 1998 and $1.2 million for the six months ended June 30, 1999
compared to the same period in the prior year.
Operating Income
Operating income increased to $4.3 million for the three months ended June 30,
1999 compared to an operating loss of $12.3 million for the three months ended
June 30, 1998, an improvement of $16.6 million. The 1998 second-quarter
operating loss includes an impairment loss of $11.1 million. Excluding the
impairment loss, this improvement was $5.5 million. Operating income increased
to $8.7 million for the six months ended June 30, 1999 compared to an operating
loss of $12.8 for the six months ended June 30, 1998, an improvement of $21.5
million. Excluding the impairment loss, this improvement was $10.4 million. The
aforementioned cost cutting measures and improvements in Conover's operating
performance are the primary contributors to the improvement in operating income.
A reduction in depreciation and amortization resulting from impairment losses
recorded in the second and third quarters of 1998 also contributed to the
improvement in operating income in 1999. Depreciation and amortization
decreased by $1.3 million for the second quarter of 1999 compared to the second
quarter of 1998 and $2.6 million for the six months ended June 30, 1999 compared
to the same period in the prior year.
Net Loss
The second-quarter net loss decreased to $2.1 million from $18.7 million in the
prior year. The net loss for the six months ended June 30, 1999 decreased to
$4.1 million from $25.5 million for the comparable period in 1998.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash flow from operations and
borrowings under a revolving credit facility. Pursuant to its operating
strategy, the Company maintains minimal to no cash balances and is substantially
dependent upon, among other things, the availability of adequate working capital
financing to support inventories and accounts receivable.
8
<PAGE>
The Company's credit agreement provides for a $25.0 million revolving credit
facility, subject to a borrowing base formula, $0.9 million of which is reserved
for an irrevocable standby letter of credit. As of June 30, 1999, borrowings on
the line of credit were $6.7 million and unused borrowing capacity under the
Credit Agreement was $17.4 million. The revolving credit facility matures in
December 2002.
The Company is highly leveraged. At June 30, 1999, the Company's indebtedness
was $207.2 million and its stockholder's equity was a deficit of $155.6 million.
The Company's indebtedness contains certain restrictions which, among other
things, restrict its ability to incur additional indebtedness, issue preferred
stock, incur liens, pay dividends, make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of its assets. In addition,
the Company's indebtedness contains certain financial covenants including
maintenance of a minimum level of earnings before interest, taxes, depreciation
and amortization ("EBITDA").
In February 1999, as anticipated at the time of the first amendment to the
Credit Agreement, the Company and its lenders entered into a second amendment to
the Credit Agreement which waived the financial covenants to which the Company
was subject through December 31, 1999 and established requirements with respect
to the maintenance of a minimum level of EBITDA for the four consecutive
quarters ending March 31, 1999, June 30, 1999, September 30, 1999, and December
31, 1999. The amendment also provides for a revised limitation on capital
spending. The Company was in compliance with the terms of its indebtedness as
of June 30, 1999.
Interest payments on the Senior Secured Notes and Senior Subordinated Notes are
required during the remainder of 1999 and the first half of 2000 as follows:
$6.0 million in July 1999; $5.6 million in October 1999; $6.0 million in January
2000; and $5.6 million in April 2000. The Senior Secured Notes and the Senior
Subordinated Notes mature as follows: $100 million in January 2003 and $100
million in October 2005.
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. AIP has deferred cash payments with respect to the
management fees it charges the Company; however, the accrual of such fees will
continue.
Cash Flow From Operating Activities
Cash flow from operating activities for the second quarter of 1999 increased to
$0.2 million from cash used of $0.1 million for the second quarter of 1998.
Cash flow from operating activities for the six months ended June 30, 1999
increased to $1.1 million from $0.8 million for the same period in 1998. These
improvements are due primarily to the decreases in net losses for the same
periods.
Cash Flow From Investing Activities
Cash used in investing activities for the second quarter of 1999 increased to
$1.3 million from $0.7 million in the second quarter of 1998. Cash used in
investing activities was $2.1 million for the six months ended June 30, 1999
compared to $2.5 million for the same period in 1998. This decrease was due
largely to a reduction in capital expenditures in the first six months of 1999
relative to the first six months of 1998.
Cash Flow From Financing Activities
Cash provided by financing activities increased to $1.2 million in the second
quarter of 1999 compared to $0.8 million in the second quarter of 1998. Cash
provided by financing activities decreased to $1.1 million for the six months
ended June 30, 1999 compared to $1.7 million for the six months ended June 30,
1998. In the first six months of 1999, the Company borrowed $11.8 million and
repaid $10.7 million on the revolving credit facility.
9
<PAGE>
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
Adjusted earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA"), increased to $6.8 million for the three months ended June
30, 1999 from $2.4 million for the comparable period in 1998, an increase of
$4.4 million. Adjusted EBITDA increased to $13.7 million for the six months
ended June 30, 1999 from $5.7 million for the comparable period in 1998, an
increase of $8.0 million.
On a twelve-month-trailing basis, Adjusted EBITDA was $26.8 million as of June
30, 1999.
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.
Labor Relations
In December 1998, the Company opened contract negotiations with the union at its
Bedford, Virginia plant seeking a five-year agreement in exchange for a
commitment on the Company's part to move work into the plant. The union
terminated these negotiations in February 1999, thereby deferring any further
discussions. In the past, the Bedford plant has experienced labor stoppages and
the Company can provide no assurance that an agreement can be reached with the
Bedford union prior to the existing contract's expiration in September 1999.
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 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 be 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.
Year 2000
Introduction
The arrival of the Year 2000 poses a unique challenge to all enterprises which
depend on computers, computer software and other equipment including machinery
and equipment utilizing microprocessors in conducting their normal operations.
As the Year 2000 approaches, such systems may become unable to function properly
or may even fail completely as the result of programming which recognizes dates
using only two digits rather than four. Consequently, operations could be
disrupted or temporarily halted if the deficiencies in such systems are not
corrected in a timely manner. Operations could also be disrupted or temporarily
halted if raw materials suppliers or service providers are not prepared and as a
result of Year 2000 become unable to supply materials or provide services.
Additionally, there could be a reduction in demand if customers are not prepared
for the Year 2000.
10
<PAGE>
The Company's State of Readiness
The Company has undertaken a comprehensive assessment and corrective action
program designed to ensure that its essential information technology ("IT")
systems will appropriately recognize the Year 2000. Beginning in 1995, the
Company started a project to replace substantially all of its primary IT
systems. This project has been completed. Corrective action related to the
Company's other essential IT systems is expected to be completed before the end
of the third quarter of 1999.
The Company is also performing an assessment of its non-IT systems. Non-IT
systems include systems utilizing embedded technology such as microcontrollers.
The manufacturing processes employed by the Company do not rely heavily on
embedded technology; however, the Company is working with its suppliers of
machinery and equipment to ensure that the manufacturing process is not halted
by such equipment as the Year 2000 approaches.
The Company is continuing to evaluate the Year 2000 readiness of its raw
materials suppliers and service providers to more fully assess the nature and
magnitude of the risk posed by its business partners. Management estimates that
this assessment will be completed before the end of the third quarter of 1999.
The Costs to Address the Company's Year 2000 Issues
The project to replace the Company's essential IT systems would have occurred
regardless of the existence of Year 2000 issues; however, the replacement
project is expected to provide Year 2000 readiness with respect to such systems.
The Company estimates capital expenditures of approximately $3.0 million in
connection with updating its primary IT systems, $2.9 million of which had been
spent as of June 30, 1999.
The Risks of the Company's Year 2000 Issues
The Company currently believes that its raw materials suppliers, service
providers and customers pose the greatest risk to operations as the Year 2000
approaches. The Company's manufacturing processes could be hampered or halted
altogether if raw materials are not available. Further, demand for the
Company's products could be adversely affected if the Company's customers are
not prepared for the advent of the Year 2000.
The Company's Contingency Plans
The Company believes that the contingency plans it has in place adequately
address the risks associated with the advent of the Year 2000; however, no
assurances can be provided that such plans would prove to be effective in the
event that the arrival of the Year 2000 has a catastrophic impact on the
Company, its customers and vendors, or on the economy as a whole.
Conclusion
The Company's assessment of the impact of Year 2000 issues and the related
timing associated with completion of efforts to resolve Year 2000 issues are
based on management's estimates, which were developed utilizing certain
assumptions with respect to future events. Based on these estimates and
assumptions, management believes it will achieve Year 2000 readiness in a timely
manner for essential IT systems. However, actual circumstances could differ
from those anticipated by management thereby altering the timetable for
completion, the effectiveness of implementation and the related costs of Year
2000 compliance programs.
11
<PAGE>
PART II
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Item
- ----------- --------
27.1 Financial Data Schedule.
___________________
* - Incorporated by reference to RBX Corporation's Annual Report on Form 10-K
for the year ended December 31, 1998, filed on March 31, 1999.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ending June 30, 1999.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, each of the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RBX CORPORATION
---------------
(Registrant)
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John C. Cantlin Senior Vice President, Chief Financial Officer August 16, 1999
- ----------------------------- and Treasurer
JOHN C. CANTLIN
/s/ Thomas W. Tomlinson Corporate Controller August 16, 1999
- -----------------------------
THOMAS W. TOMLINSON
</TABLE>
13
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<PAGE>
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