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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2002

OR

For the transition period __________ to __________

Commission File Number: 0-49910

RBX CORPORATION
(Exact name of Registrant as specified in its charter)

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:

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.

The number of shares of Common Stock of RBX Corporation, $0.001 per share par value, outstanding as of October 31, 2002 was 1,000,000.

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Index

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PART I

ITEM 1.      Financial Statements

RBX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

See notes to condensed consolidated financial statements

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RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)

See notes to condensed consolidated financial statements

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RBX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

See notes to condensed consolidated financial statements

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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 two and eight months ended August 27, 2001 and the accompanying condensed consolidated statements of operations and statements of cash flows of the Successor for the one month ended September 30, 2001 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 two and eight months ended August 27, 2001, the month ended September 30, 2001 and the three and nine months ended September 30, 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.

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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:

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:

Warrants and options 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 and 47.733, respectively, for the three months and nine months ended September 30, 2002.

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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.

The following table presents the details of “Other” segment profits (loss).

5.     Commission Revenue

Effective June 2002, the Company began operating under a joint manufacturing, marketing and sales agreement with Nomaco Corporation and Nomaco K-Flex LLC (jointly referred to as Nomaco).  Under the terms of the agreement, Nomaco will manufacture insulation products which will be sold by the Company

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RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

throughout North America on a commissioned basis.  During a transition period which extends through the first quarter of 2003, it is anticipated that Nomaco production will ramp up and, ultimately, production of the Company’s own insulation products will be discontinued.  The Company will also buy and resell certain Nomaco products during the transition period.  The Company does not record commissioned sales in its consolidated financial statements; however, the related commission revenue is recorded as it is earned.

Commissioned sales and related commission revenue is as follows:

6.     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 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 ultimate outcome of this potential liability.

Management believes the estimates discussed above will be sufficient to satisfy anticipated costs of remediation at these two Superfund sites. At September 30, 2002 and December 31, 2001 approximately $2.2 million (undiscounted) for estimated environmental remediation costs was accrued, of which approximately $1.7 million is included in other 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.

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RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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.

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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. 

On August 27, 2001, which was the effective date of the plan of reorganization, we emerged from Chapter 11 proceedings. As a result of the reorganization and the recording of the related reorganization transactions and the implementation of fresh-start accounting, our results of operations after August 27, 2001 are not comparable to results reported in prior periods. However, for purposes of this management’s discussion and analysis, the results of operations of RBX Group, Inc. for the period from January 1, 2001 through August 27, 2001, referred to as the eight months ended August 27, 2001, and the results of operations of our company for the period from September 1, 2001 through September 30, 2001, referred to as the month ended September 30, 2001, have been combined.

Results of Operations

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 income (loss) in millions of dollars and as a percentage of net sales.  

Net sales

Net sales decreased to $41.9 million for the three months ended September 30, 2002 compared to $46.7 million for the same period in 2001, a decrease of $4.8 million or 10.3%. Net sales for the nine months ended September 30, 2002 were $127.6 million compared to $152.6 million for the nine months ended September 30, 2001, a decrease of $25.0 million or 16.4%. 

Net sales for the foam segment decreased to $32.7 million for the quarter ended September 30, 2002 from $33.5 million for the quarter ended September 30, 2001, a decrease of $0.8 million or 2.4%.  Foam segment net sales for the nine months ended September 30, 2002 were $100.0 million compared to $110.2 million for the nine months ended September 30, 2001, a decrease of $10.2 million or 9.3%. 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 sales of $4.7 million and $16.2 million comparing the three and nine month periods of 2002 to 2001.

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Net sales for the mixing segment decreased to $9.2 million in the third quarter of 2002 compared to $13.2 million in the third quarter of 2001, a decrease of $4.0 million or 30.3%.  For the nine months ended September 30, 2002, net sales for the mixing segment were $27.6 million compared to $42.4 million for the same period in 2001, a decrease of $14.8 million or 34.9%.  These decreases were primarily attributable to the closing of our Midwest plant in Barberton, Ohio in October 2001.  The Midwest plant had net sales of $5.0 million and $17.9 million for the three and nine months ended September 30, 2001. 

Gross Profit

Gross profit increased to $6.5 million for the three months ended September 30, 2002 from $1.3 million for the three months ended September 30, 2001, an increase of $5.2 million or 400.0%.  Gross profit increased to $22.5 million for the nine months ended September 30, 2002 from $12.0 million for the nine months ended September 30, 2001, an increase of $10.5 million or 87.5%.  The improvement in gross profit for the three months ended September 30, 2002 was primarily a result of the closure of the extrusion and fabrication operations at the Bedford, Virginia plant and the closure of the Midwest plant in Barberton, Ohio. During the 2002 third quarter the Company recognized severance expense of approximately $0.6 million for a reduction in its workforce.  This expense was offset by the reversal of the remaining amount accrued for the shutdown of the Bedford and Midwest operations.  It was determined during the 2002 third quarter that the amount remaining in the shutdown accrual of approximately $0.6 million was no longer needed for this accrual that had been established at the end of 2001.  For the nine months ended September 30, 2002 the improvement in gross profit was due to the factors mentioned previously and the recording of a curtailment gain of $3.8 million related to the postretirement benefit obligation, offset by a curtailment loss of $0.6 million related to the pension benefit obligation. 

Gross profit for the foam segment was $5.9 million in the third quarter of 2002 compared to breakeven for the third quarter of 2001. Gross profit increased to $20.3 million for the nine months ended September 30, 2002 from $8.6 million for the nine months ended September 30, 2001, an increase of $11.7 million or 136.0%.  These increases for the three and nine months ended September 30, 2002 were primarily a result of the improvements associated with the Bedford plant closure.

Mixing segment gross profit decreased to $0.6 million in the third quarter of 2002 from $1.3 million in the third quarter of 2001, a decrease of $0.7 million or 53.8%. For the nine months ended September 30, 2002 gross profit decreased to $2.2 million from $3.4 million for the nine months ended September 30, 2001, a decrease of $1.2 million or 35.3%.  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 $4.1 million for the quarter ended September 30, 2002 compared to $4.6 million for the quarter ended September 30, 2001, a decrease of $0.5 million or 10.9%.  These costs were positively impacted during the 2002 third quarter by a $0.5 million recovery of bad debts and the reversal of a $0.3 million reserve established in 2001 in connection with certain prepetition liabilities.  Selling, general and administrative costs were also impacted by the reduction in workforce mentioned above.  During the 2002 third quarter, severance expense of approximately $0.3 was recorded.  Selling, general and administrative costs decreased to $15.1 million for the nine months ended September 30, 2002 from $15.9 million for the nine months ended September 30, 2001, a decrease of $0.8 million or 5.0%. These decreases were primarily a result of the items previously discussed, as well as cost reductions at the administrative level and decreased sales commissions due to the lower sales volume.

Reorganization Items (Income)

Reorganization items were $0.1 million and $1.0 million for the three and nine months ended September 30, 2002, respectively.  These reorganization items were comprised of severance costs and professional fees related to the implementation of our plan of reorganization.  Reorganization income was $24.9 million and $19.2 million for the three and nine months ended September 30, 2001, respectively.  Reorganization items in 2001 include income of $28.4 million associated with revaluation of certain assets and liabilities to comply with fresh-start accounting procedures, offset by professional fees incurred as part of the reorganization.

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Operating Income

Operating income decreased to $2.3 million for the three months ended September 30, 2002 compared to an operating income of $21.6 million for the three months ended September 30, 2001, a decrease of $19.3 million.  Operating income for the nine months ended September 30, 2002 was $6.0 million compared to operating income of $15.3 million for the nine months ended September 30, 2001, a decrease of $9.3 million.  Fluctuations in our operating income were driven primarily by the factors impacting gross profit, reorganization items and selling, general and administrative costs discussed above.

Net Income

Net income decreased to $0.9 million for the third quarter of 2002 compared to net income of $239.0 million in the third quarter of 2001. Net income for the nine months ended September 30, 2002 was $2.2 million compared to net income of $231.4 million for the nine months ended September 30, 2001.  In addition to the factors impacting operating income discussed above, fluctuations in net income were impacted by the gain on cancellation of debt of $218.3 million for the three and nine months ended September 30, 2001.

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 September 30, 2002, borrowings on the line of credit were $13.5 million and unused borrowing capacity under the Credit Agreement was $10.4 million.  The revolving credit facility is subject to renewal 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 September 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. Once the actuarially determined minimum funding requirement becomes known, the company intends to apply for a funding waiver which is expected to provide for the payment of the required amounts over a five year period.

Cash used in operating activities for the nine months ended September 30, 2002 increased to $3.1 million compared to $1.5 million for the nine months ended September 30, 2001.  Net cash used in operating activities during the first nine months of 2002 primarily resulted from a $5.4 million increase in accounts receivable and a $5.2 million decrease in accrued liabilities and other liabilities, partially offset by net income of $2.2 million, depreciation of $2.7 million and a $1.2 million increase in accounts payable.  Net cash used by operating activities during the first nine months of 2001 primarily resulted from the gain on cancellation of debt of $218.3 million and reorganization items of $28.4 million, offset by net income of $231.4 million, depreciation of $4.1 million, a $4.8 million decrease in inventories and a $3.0 million increase in accrued liabilities.

Cash used in investing activities was $2.1 million for the nine months ended September 30, 2002 compared to $2.5 million for the nine months ended September 30, 2001.  Cash used in investing activities was primarily attributable to capital expenditures for 2002 and 2001.  During the nine months ended September 30, 2002, the cash used in investing activities was partially offset by $0.4 million in proceeds from the sale of equipment.

Cash provided by financing activities for the nine months ended September 30, 2002 was $5.8 million compared to cash used in financing activities of $7.6 million for the nine months ended June 30, 2001.   For

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the nine months ended September 30, 2002, the Company borrowed $135.4 million and paid back $129.6 million on the revolving credit and term facility.  For the nine months ended September 30, 2001, the Company borrowed $119.8 million and paid back $127.4 million on the revolving credit facility.

Contractual Obligations and Commitments

The table below sets forth a summary of our contractual obligations and commitments as of September 30, 2002 that will have an impact on our future liquidity: