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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, 2002
|
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: 0-49910
RBX CORPORATION
(Exact name of Registrant as specified in its charter)
| Delaware |
|
94-3231901 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer 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
¨
Indicate by
check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
YES x
NO
¨
The number of
shares of Common Stock of RBX Corporation, $0.001 per share par value, outstanding as of July 31, 2002 was 1,000,000.
ITEM 1. Financial Statements
RBX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| |
|
December 31, 2001
|
|
|
June 30, 2002
|
|
| ASSETS |
|
|
|
|
(unaudited) |
|
| |
| Cash and cash equivalents |
|
$ |
1,154 |
|
|
$ |
724 |
|
| Accounts receivable, less allowance for doubtful accounts of $2,060 and $1,719, respectively |
|
|
21,369 |
|
|
|
27,932 |
|
| Inventories |
|
|
17,225 |
|
|
|
17,080 |
|
| Prepaid and other current assets |
|
|
1,874 |
|
|
|
1,900 |
|
| |
|
|
|
|
|
|
|
|
| Total current assets |
|
|
41,622 |
|
|
|
47,636 |
|
| Property, plant and equipment, net |
|
|
53,113 |
|
|
|
52,207 |
|
| Intangible assets |
|
|
18,058 |
|
|
|
18,058 |
|
| Other noncurrent assets |
|
|
6,780 |
|
|
|
6,437 |
|
| |
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
119,573 |
|
|
$ |
124,338 |
|
| |
|
|
|
|
|
|
|
|
| |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| |
| Accounts payable |
|
$ |
9,003 |
|
|
$ |
11,849 |
|
| Accrued liabilities |
|
|
15,974 |
|
|
|
11,402 |
|
| Current portion of postretirement benefit obligation |
|
|
2,780 |
|
|
|
2,780 |
|
| Current portion of long-term debt |
|
|
2,000 |
|
|
|
2,000 |
|
| |
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
29,757 |
|
|
|
28,031 |
|
| Long-term debt |
|
|
38,163 |
|
|
|
45,178 |
|
| Postretirement benefit obligation |
|
|
28,256 |
|
|
|
24,689 |
|
| Pension benefit obligation |
|
|
15,337 |
|
|
|
17,002 |
|
| Other liabilities |
|
|
1,704 |
|
|
|
1,704 |
|
| |
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
113,217 |
|
|
|
116,604 |
|
| |
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Common stock, $0.001 par value, 5,000,000 shares authorized, 1,000,000 issued and outstanding |
|
|
1 |
|
|
|
1 |
|
| Additional paid-in capital |
|
|
15,160 |
|
|
|
15,160 |
|
| Accumulated deficit |
|
|
(8,805 |
) |
|
|
(7,427 |
) |
| |
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
6,356 |
|
|
|
7,734 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
119,573 |
|
|
$ |
124,338 |
|
| |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements
1
RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
| |
|
Predecessor 3
Months Ended June 30, 2001
|
|
|
Successor 3
Months Ended June 30, 2002
|
|
|
Predecessor 6
Months Ended June 30, 2001
|
|
|
Successor 6
Months Ended June 30, 2002
|
| Net revenues |
|
$ |
51,296 |
|
|
$ |
42,009 |
|
|
$ |
105,838 |
|
|
$ |
85,708 |
| Cost of goods sold |
|
|
46,012 |
|
|
|
33,521 |
|
|
|
95,120 |
|
|
|
69,761 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
5,284 |
|
|
|
8,488 |
|
|
|
10,718 |
|
|
|
15,947 |
| Selling, general and administrative costs |
|
|
5,569 |
|
|
|
5,812 |
|
|
|
11,321 |
|
|
|
10,977 |
| Reorganization items |
|
|
3,720 |
|
|
|
231 |
|
|
|
5,695 |
|
|
|
865 |
| Other (income) expense |
|
|
– |
|
|
|
(15 |
) |
|
|
– |
|
|
|
371 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
(4,005 |
) |
|
|
2,460 |
|
|
|
(6,298 |
) |
|
|
3,734 |
| Interest expense |
|
|
639 |
|
|
|
1,221 |
|
|
|
1,318 |
|
|
|
2,318 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income taxes |
|
|
(4,644 |
) |
|
|
1,239 |
|
|
|
(7,616 |
) |
|
|
1,416 |
| Income tax expense |
|
|
– |
|
|
|
38 |
|
|
|
– |
|
|
|
38 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
(4,644 |
) |
|
$ |
1,201 |
|
|
$ |
(7,616 |
) |
|
$ |
1,378 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
$ |
NA |
|
|
$ |
1.20 |
|
|
$ |
NA |
|
|
$ |
1.38 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements
2
RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| |
|
Predecessor 6
Months Ended June 30, 2001
|
|
|
Successor 6
Months Ended June 30, 2002
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
(7,616 |
) |
|
$ |
1,378 |
|
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
3,018 |
|
|
|
1,800 |
|
| Loss on disposal of equipment |
|
|
– |
|
|
|
371 |
|
| Increase (decrease) in cash from changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(2,553 |
) |
|
|
(6,563 |
) |
| Inventories |
|
|
1,091 |
|
|
|
145 |
|
| Prepaid and other current assets |
|
|
(2,596 |
) |
|
|
(26 |
) |
| Accounts payable |
|
|
(1,071 |
) |
|
|
2,846 |
|
| Accrued liabilities |
|
|
2,711 |
|
|
|
(4,729 |
) |
| Accrued interest |
|
|
– |
|
|
|
1,557 |
|
| Other liabilities |
|
|
456 |
|
|
|
(1,902 |
) |
| Liabilities subject to compromise |
|
|
312 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
| Net cash used in operating activities |
|
|
(6,248 |
) |
|
|
(5,123 |
) |
| |
|
|
|
|
|
|
|
|
| |
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
| Capital expenditures |
|
|
(1,250 |
) |
|
|
(1,192 |
) |
| Proceeds from disposals of property, plant and equipment |
|
|
– |
|
|
|
310 |
|
| Decrease (increase) in restricted cash |
|
|
(427 |
) |
|
|
(40 |
) |
| |
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(1,677 |
) |
|
|
(922 |
) |
| |
|
|
|
|
|
|
|
|
| |
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
| Proceeds from borrowings |
|
|
63,727 |
|
|
|
90,008 |
|
| Principal payments on long-term debt |
|
|
(64,710 |
) |
|
|
(84,393 |
) |
| |
|
|
|
|
|
|
|
|
| Net cash provided by (used in) financing activities |
|
|
(983 |
) |
|
|
5,615 |
|
| |
|
|
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
|
|
(8,908 |
) |
|
|
(430 |
) |
| Cash and cash equivalents: |
|
|
|
|
|
|
|
|
| Beginning of period |
|
|
11,883 |
|
|
|
1,154 |
|
| |
|
|
|
|
|
|
|
|
| End of period |
|
$ |
2,975 |
|
|
$ |
724 |
|
| |
|
|
|
|
|
|
|
|
| |
| Non cash financing activities: |
|
|
|
|
|
|
|
|
| |
| During the six months ended June 30, 2002, the Company paid accrued interest of $1.4 million by issuing additional 12% senior secured notes. |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements
3
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, except as otherwise noted)
1. Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of RBX Group, Inc. (the “Predecessor”) include the accounts of RBX Group, Inc., RBX
Corporation (both non-operating holding companies), and RBX Corporation’s wholly owned subsidiaries. RBX Corporation’s subsidiaries, Rubatex Corporation, Groendyk Mfg Co., Inc., OleTex, 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. RBX Corporation’s subsidiaries also include Waltex Corporation, UPR Disposition, Inc., and
Universal Rubber Company, which are inactive legal entities with no operations.
The accompanying condensed consolidated financial
statements of RBX Corporation (the “Successor”) include the accounts of RBX Corporation and its wholly owned subsidiary, RBX Industries, Inc. When appropriate to the context, the “Company” refers to both the Successor, RBX
Corporation, and the Predecessor, RBX Group, Inc.
The condensed consolidated financial statements have been prepared in accordance with
AICPA Statement of Position 90-7 “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”).
Due to the reorganization and implementation of fresh-start accounting, the condensed consolidated financial statements of the Successor are not comparable to those of the Predecessor. A line has been drawn between the accompanying
condensed consolidated statements of operations and statements of cash flows of the Predecessor for the three and six months ended June 30, 2001 and the accompanying condensed consolidated statements of operations and statements of cash flows of the
Successor for the three and six months ended June 30, 2002 to distinguish between the Predecessor and the Successor.
The Predecessor and
the Successor are holding companies with no assets or operations other than their investments in their subsidiaries. The guarantor subsidiaries are wholly owned by the Predecessor or the Successor, all guarantees are full and unconditional and all
guarantees are joint and several. Therefore, 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 interim financial data as of and for the three and six months ended June 30, 2001 and 2002 are unaudited
and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by
GAAP 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 December 31, 2001 year-end balance sheet
information was derived from audited financial statements. 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.
4
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 report for the year ended
December 31, 2001 included in the Company’s Form S-1 registration statement.
2. Inventories
Components of inventory are as follows:
| |
|
December 31, 2001
|
|
June 30, 2002
|
| Raw materials |
|
$ |
7,688 |
|
|
6,256 |
| Work-in-process |
|
|
1,891 |
|
|
2,044 |
| Finished goods |
|
|
7,646 |
|
|
8,780 |
| |
|
|
|
|
|
|
| |
|
$ |
17,225 |
|
$ |
17,080 |
| |
|
|
|
|
|
|
3. Net Income Per Share
(in thousands, except per share data)
Basic net income per share excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. The following is a reconciliation of the numerators and denominators of the net income per common share computations for the
periods presented:
| Successor: Three Months Ended June 30, 2002
|
|
Net Income (Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
| Basic net income per share |
|
$ |
1,201 |
|
1,000 |
|
$ |
1.20 |
| |
|
|
|
|
|
|
|
|
| Effect of dilutive warrants |
|
|
– |
|
– |
|
|
|
| |
|
|
|
|
|
|
|
|
| Diluted net income per share |
|
$ |
1,201 |
|
1,000 |
|
$ |
1.20 |
| |
|
|
|
|
|
|
|
|
| |
| Successor: Six Months Ended June 30, 2002
|
|
Net Income (Numerator)
|
|
Shares (Denominator)
|
|
Per Share Amount
|
| Basic net income per share |
|
$ |
1,378 |
|
1,000 |
|
$ |
1.38 |
| |
|
|
|
|
|
|
|
|
| Effect of dilutive warrants |
|
|
— |
|
— |
|
|
|
| |
|
|
|
|
|
|
|
|
| Diluted net income per share |
|
$ |
1,378 |
|
1,000 |
|
$ |
1.38 |
| |
|
|
|
|
|
|
|
|
Warrants that could potentially dilute net income in the future that were not included in
the computation of diluted net income per share (because to do so would have been antidilutive for the periods presented) totaled 67.416 for the three months and six months ended June 30, 2002.
5
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
4. Segment Information
Summarized financial information for the Company’s reportable
segments follows. The information designated as “Other” represents corporate related items that are not allocated to reportable segments.
| |
|
Predecessor 3
Months Ended June 30, 2001
|
|
|
Successor 3
Months Ended June 30, 2002
|
|
|
Predecessor 6
Months Ended June 30, 2001
|
|
|
Successor 6
Months Ended June 30, 2002
|
|
| |
| Foam Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
37,357 |
|
|
$ |
32,774 |
|
|
$ |
76,776 |
|
|
$ |
67,423 |
|
| Segment profits (losses) |
|
|
(764 |
) |
|
|
2,022 |
|
|
|
(1,517 |
) |
|
|
3,599 |
|
| Total assets |
|
|
78,794 |
|
|
|
80,721 |
|
|
|
78,794 |
|
|
|
80,721 |
|
| Capital expenditures |
|
|
369 |
|
|
|
681 |
|
|
|
788 |
|
|
|
1,170 |
|
| Depreciation and amortization |
|
|
1,006 |
|
|
|
771 |
|
|
|
2,549 |
|
|
|
1,542 |
|
| |
| Mixing Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
|
13,939 |
|
|
|
9,235 |
|
|
|
29,062 |
|
|
|
18,285 |
|
| Segment profits |
|
|
479 |
|
|
|
669 |
|
|
|
914 |
|
|
|
1,000 |
|
| Total assets |
|
|
24,269 |
|
|
|
19,162 |
|
|
|
24,269 |
|
|
|
19,162 |
|
| Capital expenditures |
|
|
83 |
|
|
|
15 |
|
|
|
462 |
|
|
|
22 |
|
| Depreciation and amortization |
|
|
239 |
|
|
|
129 |
|
|
|
469 |
|
|
|
258 |
|
| |
| Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment loss |
|
|
(4,359 |
) |
|
|
(1,490 |
) |
|
|
(7,013 |
) |
|
|
(3,221 |
) |
| Total assets |
|
|
4,592 |
|
|
|
24,455 |
|
|
|
4,592 |
|
|
|
24,455 |
|
| |
| Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
|
51,296 |
|
|
|
42,009 |
|
|
|
105,838 |
|
|
|
85,708 |
|
| Net income (loss) |
|
|
(4,644 |
) |
|
|
1,201 |
|
|
|
(7,616 |
) |
|
|
1,378 |
|
| Total assets |
|
|
107,655 |
|
|
|
124,338 |
|
|
|
107,655 |
|
|
|
124,338 |
|
| Capital expenditures |
|
|
452 |
|
|
|
696 |
|
|
|
1,250 |
|
|
|
1,192 |
|
| Depreciation and amortization |
|
|
1,245 |
|
|
|
900 |
|
|
|
3,018 |
|
|
|
1,800 |
|
| |
| The following table presents the details of “Other” segment loss. |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
Predecessor 3
Months Ended June 30, 2001
|
|
|
Successor 3
Months Ended June 30, 2002
|
|
|
Predecessor 6
Months Ended June 30, 2001
|
|
|
Successor 6
Months Ended June 30, 2002
|
|
| Reorganization items |
|
|
3,720 |
|
|
|
231 |
|
|
|
5,695 |
|
|
|
865 |
|
| Interest expense |
|
|
639 |
|
|
|
1,221 |
|
|
|
1,318 |
|
|
|
2,318 |
|
| Income tax expense |
|
|
– |
|
|
|
38 |
|
|
|
– |
|
|
|
38 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
4,359 |
|
|
$ |
1,490 |
|
|
$ |
7,013 |
|
|
$ |
3,221 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. 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
6
RBX CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 may be responsible for the environmental clean-up of property for contamination which occurred prior to the Company’s ownership. The
Company is involved in environmental remediation activities resulting from past operations, including designation as a potentially responsible party (“PRP”), at sites designated for cleanup by state environmental agencies.
The Company is a PRP along with other PRP’s for the environmental clean-up of certain property designated as a state Superfund site in North
Carolina. Based on the allocation method determined by a committee made up of representatives of the Company and other PRP’s, the Company’s share of the liability is considered immaterial.
The Company is also a PRP along with other PRP’s for the environmental clean-up of certain property designated as a state Superfund site in Ohio. Currently
the Federal EPA has designated the site as “No Further Remedial Action Planned;” however, the Ohio EPA has completed a preliminary investigation of the property and requested that the Company conduct a more extensive environmental study.
The Company has accrued approximately $2 million based on a consultant’s estimate but is unable to predict the outcome of this potential liability at the time.
Management believes the estimates discussed above will be sufficient to satisfy anticipated costs of remediation at these two Superfund sites. At June 30, 2002 and December 31, 2001, respectively,
approximately $2.2 million (undiscounted) for estimated environmental remediation costs was accrued of which approximately $1.7 million 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, 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 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.
7
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 subsidiary (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 financial statements for the year ended December 31, 2001 included in the Company’s Form S-1 registration statement.
Overview
We manufacture closed cell rubber foam products, custom mix rubber
polymers and compete in several niche markets, including the manufacturing of cross-linked polyethylene foam.
Results of Operations
The following table sets forth, for the periods shown, net revenues, 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 revenues.
| |
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
| |
|
2001
|
|
|
2002
|
|
|
2001
|
|
|
2002
|
|
| Net revenues |
|
$ |
51.3 |
|
|
100.0 |
% |
|
$ |
42.0 |
|
100.0 |
% |
|
$ |
105.8 |
|
|
100.0 |
% |
|
$ |
85.7 |
|
100.0 |
% |
| Gross profit |
|
|
5.3 |
|
|
10.3 |
|
|
|
8.5 |
|
20.2 |
|
|
|
10.7 |
|
|
10.1 |
|
|
|
15.9 |
|
18.6 |
|
| SG&A |
|
|
5.6 |
|
|
10.9 |
|
|
|
5.8 |
|
13.8 |
|
|
|
11.3 |
|
|
10.7 |
|
|
|
11.0 |
|
12.8 |
|
| Operating income (loss) |
|
|
(4.0 |
) |
|
(7.8 |
) |
|
|
2.5 |
|
5.9 |
|
|
|
(6.3 |
) |
|
(6.0 |
) |
|
|
3.7 |
|
4.4 |
|
| Net income (loss) |
|
|
(4.6 |
) |
|
(9.0 |
) |
|
|
1.2 |
|
2.9 |
|
|
|
(7.6 |
) |
|
(7.2 |
) |
|
|
1.4 |
|
1.6 |
|
Net revenues
Net revenues decreased to $42.0 million for the three months ended June 30, 2002 compared to $51.3 million for the same period in 2001, a decrease of $9.3
million or 18.1%. Net revenues for the six months ended June 30, 2002 were $85.7 million compared to $105.8 million for the six months ended June 30, 2001, a decrease of $20.1 million or 19.0%.
Net revenues for the foam segment decreased to $32.8 million for the quarter ended June 30, 2002 from $37.4 million for the quarter ended June 30, 2001, a decrease of $4.6 million or 12.3%.
Foam segment net revenues for the six months ended June 30, 2002 were $67.4 million compared to $76.8 million for the six months ended June 30, 2001, a decrease of $9.4 million or 12.2%. These decreases were primarily attributable to the closure of
our Bedford, Virginia plant’s extrusion and fabrication operations in October 2001. The plant’s extrusion and fabrication operations had decreases in net revenues of $5.5 million and $11.5 million comparing the three and six month periods
of 2002 to 2001.
Net revenues for the mixing segment decreased to $9.2 million in the second quarter of 2002 compared to $13.9 million
in the first quarter of 2001, a decrease of $4.7 million or 33.8%. For the six months ended June 30, 2002, net revenues for the mixing segment were $18.3 million compared to $29.1 million for the same period in 2001, a decrease of $10.8 million or
37.1%. These decreases were primarily attributable to the closing of our Midwest plant in Barberton, Ohio in October 2001. The Midwest plant had net revenues of $5.9 million and $12.9 million for the three and six months ended June 30, 2001.
8
Gross Profit
Gross profit increased to $8.5 million for the three months ended June 30, 2002 from $5.3 million for the three months ended June 30, 2001, an increase of $3.2 million or 60.4%. Gross profit increased to $15.9 million for
the six months ended June 30, 2002 from $10.7 million for the six months ended June 30, 2001, an increase of $5.2 million or 48.6%. The improvement in gross profit for both the three and six months ended June 30, 2002 was primarily a result of the
closure of the extrusion and fabrication operations at the Bedford, Virginia plant, the closure of the Midwest plant in Barberton, Ohio and the recording of a curtailment gain of $3.8 million related to the postretirement benefit obligation and a
curtailment loss of $0.6 million related to the pension benefit obligation.
Gross profit for the foam segment increased to $7.4 million
in the second quarter of 2002 from $4.3 million in the second quarter of 2001, an increase of $3.1 million or 72.1%. Gross profit increased to $14.0 million for the six months ended June 30, 2002 from $8.5 million for the six months ended June 30,
2001, an increase of $5.5 million or 64.7%. These increases for the three and six months ended June 30, 2002 were primarily a result of the improvements associated with the Bedford plant closure.
Mixing segment gross profit increased to $1.1 million in the second quarter of 2002 from $1.0 million in the second quarter of 2001, an increase of $0.1 million or 10.0%. For the six months
ended June 30, 2002 gross profit decreased to $1.9 million from $2.2 million for the six months ended June 30, 2001, a decrease of $0.3 million or 13.6%. Gross profit was negatively impacted by lower margin business that was accepted to minimize the
impact of low volumes experienced as a result of the economic conditions prevailing in the custom rubber mixing industry.
Selling,
general and administrative costs
Selling, general and administrative costs were $5.8 million for the quarter ended June 30, 2002
compared to $5.6 million for the quarter ended June 30, 2001, an increase of $0.2 million or 3.6%. Selling, general and administrative costs decreased to $11.0 million for the six months ended June 30, 2002 from $11.3 million for the six months
ended June 30, 2001, a decrease of $0.3 million or 2.7%. This decrease was primarily a result of decreased sales commissions due to the lower sales volume.
Reorganization Items
Reorganization items were $0.2 million and $3.7 million for the second quarter of 2002 and
the second quarter of 2001, respectively. For the six months ended June 30, 2002 and the six months ended June 30, 2001, reorganization items were $0.9 million and $5.7 million, respectively. These reorganization items were comprised of severance
costs and professional fees related to the implementation of our plan of reorganization.
Operating Income
Operating income increased to $2.5 million for the three months ended June 30, 2002 compared to an operating loss of $4.0 million for the three months ended June
30, 2001, an increase of $6.5 million. Operating income for the six months ended June 30, 2002 was $3.7 million compared to an operating loss of $6.3 million for the six months ended June 30, 2001. an increase of $10.0 million. Fluctuations in our
operating income (loss) were driven primarily by the factors impacting gross profit, selling, general and administrative costs, and reorganization items discussed above. In addition, operating income was reduced by $0.4 million for the six months
ended June 30, 2002 due to losses from sales of equipment.
Net Income
Net income increased to $1.2 million during the second quarter of 2002 compared to a net loss of $4.6 million in the second quarter of 2001. Net income for the six months ended June 30, 2002 was $1.4
million compared to a net loss of $7.6 million for the six months ended June 30, 2001. In addition to the factors impacting operating income (loss) discussed above, fluctuations in net income were impacted by an increase in interest expense.
Interest expense increased by $0.6 million and $1.0 million in the second quarter of
9
2002 and the six months ended June 30, 2002, respectively, compared to the same periods in 2001 due to the fact that the accrual of interest on
certain debt was discontinued as of the bankruptcy petition date.
Liquidity and Capital Resources
Our 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.
Our credit agreement provides for a $35.0 million revolving credit facility, subject to a borrowing base formula, of which $1.0 million is reserved for
irrevocable standby letters of credit. As of June 30, 2002, borrowings on the line of credit were $12.8 million and unused borrowing capacity under the Credit Agreement was $11.1 million. The revolving credit facility matures in August 2004.
Our indebtedness contains certain financial covenants, including maintenance of a minimum level of adjusted tangible net worth (not less
than a $24.5 million deficit). We were in compliance with the terms of our indebtedness as of June 30, 2002.
In July 2002, the
Company’s actuary informed the Company, that the potential minimum funding level for the Company’s defined benefit pension plan for 2003 would be approximately $8.0 million. Management is currently assessing the impact to the
Company’s financial position and strategies for funding this liability.
Cash used in operating activities for the six months ended
June 30, 2002 decreased to $5.1 million compared to $6.2 million for the six months ended June 30, 2001. Net cash used in operating activities during the first six months of 2002 primarily resulted from a $6.6 million increase in accounts receivable
and a $4.7 million decrease in accrued liabilities, partially offset by net income of $1.4 million, depreciation of $1.8 million and a $2.8 million increase in accounts payable. Net cash used by operating activities during the first six months of
2001 primarily resulted from a $7.6 million net loss, a $2.6 million increase in accounts receivable and a $2.6 million increase in prepaid and other current assets, partially offset by a $1.1 million decrease in inventories, a $2.7 million increase
in accrued liabilities and depreciation of $3.0 million.
Cash used in investing activities was $0.9 million for the six months ended
June 30, 2002 compared to $1.7 million for the six months ended June 30, 2001. Cash used in investing activities was primarily attributable to capital expenditures for 2002 and 2001. During the six months ended June 30, 2002, the cash used in
investing activities was partially offset by $0.3 million in proceeds from the sale of equipment.
Cash provided by financing activities
for the six months ended June 30, 2002 was $5.6 million compared to cash used in financing activities of $1.0 million for the six months ended June 30, 2001. For the six months ended June 30, 2002, the Company borrowed $90.0 million and paid back
$84.4 million on the revolving credit and term facility. For the six months ended June 30, 2001, the Company borrowed $63.7 million and paid back $64.7 million on the revolving credit facility.
10
Contractual Obligations and Commitments
The table below sets forth a summary of our contractual obligations and commitments as of June 30, 2002 that will have an impact on our future liquidity:
| |
|
Years Ending December 31,
|
|
|
| Contractual Obligations
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
Thereafter
|
|
Total
|
| Revolving credit facility |
|
$ |
– |
|
$ |
– |
|
$ |
12,816 |
|
$ |
– |
|
$ |
– |
|
$ |
12,816 |
| Senior secured notes |
|
|
– |
|
|
– |
|
|
– |
|
|
26,400 |
|
|
– |
|
|
26,400 |
| Term loan |
|
|
1,000 |
|
|
2,000 |
|
|
2,000 |
|
|
2,962 |
|
|
– |
|
|
7,962 |
| Operating leases |
|
|
715 |
|
|
1,410 |
|
|
939 |
|
|
636 |
|
|
1,354 |
|
|
5,054 |
| Postretirement benefit obligation |
|
|
1,390 |
|
|
2,863 |
|
|
2,949 |
|
|
3,038 |
|
|
17,229 |
|
|
27,469 |
| Pension benefit obligation |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
17,002 |
|
|
17,002 |
| Letters of credit |
|
|
– |
|
|
– |
|
|
1,000 |
|
|
– |
|
|
– |
|
|
1,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual obligations |
|
$ |
3,105 |
|
$ |
6,273 |
|
$ |
19,704 |
|
$ |
32,074 |
|
$ |
36,547 |
|
$ |
97,703 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical Accounting Policies
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions
that we believe are reasonable based upon the information available. These estimates and assumptions 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. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
Revenue Recognition
We
recognize revenue when products are shipped to customers and the customer takes ownership and assumes risk of loss based on shipping terms. Sales returns and allowances and certain volume incentives are treated as a reduction to sales and are
provided based on historical experience and current estimates. Sales returns are typically allowed for quality and service issues only. We monitor and track product returns and we record a provision for the estimated amount of future returns, based
on historical experience and any notification we receive of pending returns. While such returns have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same return
rates that we have in the past. Any significant increase in product quality issues and the resulting credit returns could have a material adverse impact on our operating results for the period or periods in which such returns materialize.
Valuation of Accounts Receivable
We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness accordingly. We continuously monitor collections and payments from our
customers and maintain a provision for bad debts based upon our historical experience and any specific customer collection issues that we have identified. While such bad debts have historically been within our expectations and the provisions
established, we cannot guarantee that we will continue to experience a comparable level of bad debts to what we have experienced in the past. To the extent that our accounts receivable are concentrated in certain customers, a significant change in
the liquidity or financial position of those customers could have a material adverse impact on the collectability of our accounts receivables and our future operating results.
Valuation of Inventories
Inventories are valued at the lower of cost or market and have
been reduced by an allowance for excess and obsolete inventories. We periodically evaluate the need to record adjustments for impairment of inventory.
11
Inventory in excess of our estimated usage requirements is written down to its estimated net realizable value. Inherent in the estimates of net
realizable value are management’s estimates related to our future manufacturing schedules, customer demand, possible alternative uses and ultimate realization of inventory.
Deferred Tax Assets
We account 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. We evaluate our deferred tax assets periodically and determine the likelihood that our deferred tax assets will be recovered from future taxable income. To the extent we believe that recovery is not likely, we establish a
valuation allowance. We have recorded a valuation allowance of $22.1 million and $23.8 million as of June 30, 2002 and December 31, 2001, respectively, due to uncertainties related to our ability to realize or utilize some of our deferred tax
assets, primarily consisting of certain employee benefits and certain state net operating losses carried forward, before they reverse or expire. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate
and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods we may need to adjust our valuation allowance. Such adjustments could
materially impact our financial position and results of operations.
Impairment of Long-lived Assets and Intangible Assets
We assess impairment of long-lived assets such as property, plant and equipment whenever changes or events indicate that the carrying value may not be
recoverable. Long-lived assets are written down to estimated fair value if the sum of the expected future undiscounted cash flows is less than the carrying amount.
The intangible assets created by the adoption of fresh-start accounting on our emergence from bankruptcy consist of trademark and trade name assets as well as excess enterprise value, or goodwill, and
are not subject to amortization. We evaluate the remaining useful life of the trademark and trade name assets at each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Additionally,
goodwill is tested for impairment at least annually and more often if events and circumstances require.
Adjustments to record impairment
of long-lived assets or intangible assets could have a material adverse impact on our financial condition and results of operations in the period or periods in which such impairment is identified.
Pension and Other Postretirement Benefits
The
determination of our obligations and expense for pension and other postretirement benefits is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are, among others, the discount rate,
expected long-term rate of return on plan assets and rates of increase in compensation and healthcare costs. In accordance with accounting principles generally accepted in the United States of America, actual results that differ from our assumptions
are accumulated and amortized over future periods and therefore, generally affect our recognized expense and recorded obligations in such future periods. While we believe that our assumptions are appropriate, significant differences in our actual
experience or significant changes in our assumptions may materially affect our pension and other postretirement obligations and our results of operations.
Environmental Remediation Liabilities
We are subject to certain laws and regulations relating to environmental
remediation activities such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, accruals have been established when reasonable
estimates are possible. Such accruals primarily include estimated costs associated with remediation. We have not used discounting in determining our accrued liabilities for environmental remediation. In developing our estimate of environmental
remediation costs, we consider, among other things, currently
12
available technological solutions, alternative clean-up methods and risk-based assessments of the contamination, and estimates developed by
independent environmental consultants. We do not maintain insurance coverage for environmental matters and do not anticipate recoveries from other potentially responsible parities, or PRPs; therefore, no claims for possible recovery from third-party
insurers or other parties related to environmental costs have been recognized in our consolidated financial statements. We adjust the accrual when new remediation responsibilities are discovered and probable costs become estimable, or when current
remediation estimates are adjusted to reflect new information. To the extent that adjustments are necessary to revise estimates in future periods our financial position and results of operations may be materially impacted.
Impact of Inflation
We believe that
inflation has not had a significant effect on our results of operations over the periods presented. Many of our raw materials are petrochemical derivatives. Substantial increases in costs of such materials could adversely affect our operations.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 143, or SFAS 143, “Accounting for Asset Retirement Obligations.” SFAS 143 is effective for fiscal years
beginning after June 15, 2002. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal use of the asset. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized
in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, an entity would recognize a gain or loss on settlement. Management
does not expect the adoption of SFAS 143 to have a significant impact on the financial position, results of operations, or cash flows of our company.
In July 2002, the Financial Accounting Standards Board, or FASB issued Statement of Financial Accounting Standards No. 146, or SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses
financial accounting and reporting for costs associated with exit or disposal activities. It nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring).” The principal difference between SFAS 146 and Issue 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability be recognized
for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. In contrast, under Issue 94-3, a company recognized a liability for an exit cost when it committed to
an exit plan. SFAS 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. Thus, the Statement affirms the FASB’s view that fair value is the most relevant and faithful
representation of the economics of a transaction. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. Management does not expect the adoption of SFAS 146 to have a significant impact on the financial
position, results of operations, or cash flows of our company.
Disclosure Regarding Forward-Looking Statements
This Form10-Q contains 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. The Company intends that the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 apply to these forward-looking statements. Forward-looking statements are not statements of historical fact
but rather reflect the Company’s current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “predict,” “project” and similar expressions as they relate to the Company or the Company’s management. When the Company makes forward-looking statements, it is basing them on management’s beliefs
and assumptions,
13
using information currently available to it. These forward-looking statements are subject to risks, uncertainties and assumptions. Information
on significant risks, uncertainties and assumptions not discussed herein may be found in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. If one or more risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may vary materially from what
the Company projected. Any forward-looking statements in this report reflect the Company’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company’s
operations, results of operations and liquidity. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on the Company’s behalf are expressly qualified in their entirety by this paragraph.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Under our credit
facility, both the term loan and borrowings under the line of credit bear interest at fluctuating market rates. An analysis of the impact of our interest rate sensitive financial instruments of a 1% change (i.e., if the interest rate increases from
5% to 6%) in short-term interest rates shows an impact on expected annual earnings of approximately $200,000 of higher or lower earnings, depending on whether the short-term rates rise or fall by 1%.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
| Exhibit No.
|
|
Item
|
| |
| 10.1 |
|
Employment Agreement, dated June 17, 2002 between RBX Industries, Inc. and Rodney P. Repka |
| |
| 10.2 |
|
Employment Agreement, dated June 17, 2002 between RBX Industries, Inc. and Timothy J. Bernlohr |
| |
| 10.3 |
|
Employment Agreement, dated June 17, 2002 between RBX Industries, Inc. and Thomas W. Tomlinson |
| |
| 99.1 |
|
Certification of Chief Executive Officer |
| |
| 99.2 |
|
Certification of Vice-President – Finance |
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ending June 30, 2002.
14
SIGNATURES
Pursuant to the requirements 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
(Registrant)
| Signature
|
|
Title
|
|
Date
|
| |
| /S/ EUGENE I.
DAVIS
EUGENE I. DAVIS |
|
Chief Executive Officer |
|
August 21, 2002 |
| |
|
|
|
|
| |
| /S/ THOMAS W. TOMLINSON
THOMAS W. TOMLINSON |
|
Vice President – Finance |
|
August 21, 2002 |
15