As filed with the Securities and Exchange Commission on April 25, 2002
Registration No. 333-82630
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------------
RBX Corporation*
(Exact Name of Registrant as Specified in Its Charter)
Delaware 3060 94-3231901
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
------------------------------------
5221 ValleyPark Drive, Roanoke, Virginia 24019
Telephone: (540) 561-6000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Eugene I. Davis
5221 ValleyPark Drive, Roanoke, Virginia 24019
Telephone: (540) 561-6000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------------
With a copy to:
Stephen E. Older, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Telephone: (212) 872-1000
Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
================================================== =============== ====================== ================ =========================
Proposed Maximum Proposed Maximum
Amount to be Aggregate Offering Aggregate Amount of
Title of Each Class of Securities to be Registered Registered Price Per Security Offering Price Registration Fee(1)
- -------------------------------------------------- --------------- ---------------------- ---------------- -------------------------
Warrants to acquire shares of Common Stock,
expiring 2008 11,563 $48.00(2) $555,024 $133
- -------------------------------------------------- --------------- ---------------------- ---------------- -------------------------
Common Stock, par value $0.001 per share 635,576 $14.89(3) $9,463,727 $2,262
- -------------------------------------------------- --------------- ---------------------- ---------------- -------------------------
Common Stock, par value $0.001 per share,
issuable upon exercise of the Warrants 11,563 - - -(5)
- -------------------------------------------------- --------------- ---------------------- ---------------- -------------------------
12% Senior Secured Notes due 2006 $16,500,000 100%(4) $16,500,000 $3,944
- -------------------------------------------------- --------------- ---------------------- ---------------- -------------------------
Guarantees of the 12% Senior
Secured Notes due 2006 $16,500,000 100% $16,500.000 (6)
================================================== =============== ====================== ================ =========================
(1) Previously paid.
(2) Estimated solely for the purpose of calculating the registration fee. Based
on the exercise price of the warrants as of the date of this registration
statement.
(3) No exchange or over-the-counter market exists for RBX Corporation's common
stock. To the best of RBX Corporation's knowledge, no shares of common
stock of RBX Corporation have been sold from one investor to another since
the shares were issued by RBX Corporation on August 27, 2001 in connection
with its emergence from bankruptcy proceedings. RBX Corporation believes
that the price set forth for its common stock represents a bona fide
estimate of the maximum offering price solely for the purpose of
calculating the registration fee pursuant to Rule 457(a) of the Securities
Act of 1933, as amended (the "Securities Act").
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act.
(5) No registration fee is required pursuant to Rule 457(g) of the Securities
Act.
(6) No consideration will be received for the Guarantees. Pursuant to Rule 457
(a) under the Securities Act, no separate fee is payable for the
Guarantees.
* Includes RBX Industries, Inc., a subsidiary of RBX Corporation as
identified on the following page.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
RBX Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 3060 54-1563245
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
- --------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
- --------------------------------------------------------------------------------
PROSPECTUS (Subject to Completion)
Issued April 25, 2002
[LOGO]
RBX Corporation
635,576 Shares of Common Stock
11,563 Warrants to acquire 11,563 Shares of Common Stock
$16,500,000 12% Senior Secured Notes due 2006
-------------------
Shares of common stock, warrants and 12% senior secured notes due 2006 of RBX
Corporation are being offered from time to time by the selling holders named in
this prospectus under the caption "Principal and Selling Holders." We will not
receive any proceeds from the sale of shares of common stock or notes by the
selling holders but we will receive proceeds from the exercise of warrants held
by the selling holders.
Upon effectiveness of the registration statement, our common stock, warrants and
notes will not immediately be listed on any national or regional securities
exchange or inter-dealer quotation service.
--------------------
Investing in our common stock, warrants and notes involves risks. See "Risk
Factors" beginning on page 8.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2002
TABLE OF CONTENTS
Page
----
Prospectus Summary ........................................................ 1
Risk Factors .............................................................. 8
Use of Proceeds ........................................................... 14
Dividend Policy ........................................................... 14
Selected Consolidated Financial Data ...................................... 15
Pro Forma Financial Data .................................................. 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................................... 18
Business .................................................................. 27
Management ................................................................ 34
Principal and Selling Holders ............................................. 40
Certain Relationships and Related Transactions ............................ 43
Description of Securities ................................................. 44
Plan of Distribution ...................................................... 80
Legal Matters ............................................................. 82
Experts ................................................................... 82
Where You Can Find More Information ....................................... 82
Index to Consolidated Financial Statements ................................ F-1
i
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the following summary together with the more detailed
information and our consolidated financial statements and the notes to these
statements appearing elsewhere in this prospectus. In this prospectus, "we,"
"us," "our company" and "our" refer to RBX Corporation and our consolidated
subsidiary, RBX Industries, Inc., unless the context otherwise requires.
We manufacture closed cell rubber foam products and custom mix rubber
polymers. We compete in several niche markets, including the manufacturing of
cross-linked polyethylene foam. Our products are used in a range of
applications, including:
o athletic equipment;
o sports medicine wraps;
o neoprene, or synthetic rubber wetsuits;
o hardware center products, such as do-it-yourself insulation, tubing,
gardening and construction kneepads;
o other consumer products, such as computer mouse pads and beverage can
insulators;
o insulation for refrigeration and air conditioning systems;
o automotive components; and
o other industrial products.
Our foam products operations, or foam group, consist of the manufacture of
closed cell rubber foam and related products and cross-linked polyethylene foam.
The foam group contributed approximately 72% and 73% of our net sales for the
years ended December 31, 2000 and 2001, respectively. Our custom rubber mixing
operations, or mixing group, mixes a variety of rubber polymers to serve a wide
range of end-use markets. The mixing group contributed approximately 28% and 27%
of our net sales for the years ended December 31, 2000 and 2001, respectively.
We combine purchases of raw materials for both the foam group and mixing group
to obtain volume discounts from our suppliers.
The manufacturing of all of our products begins with the blending of
synthetic compounds in a mixer. Our mixing group sells these compounds in
uncured sheet or strip form to our customers. Our foam group performs additional
manufacturing steps, including extruding, molding and curing, before selling
products to our customers.
1
Our History and Chapter 11 Bankruptcy Reorganization
We are the surviving corporation of a recent corporate reorganization
implemented in connection with the consummation of our Chapter 11 bankruptcy
proceedings in August 2001. Prior to the effective date of our corporate
reorganization, we were a wholly owned subsidiary of RBX Group, Inc. We are
currently a holding company with no business operations and own all of the
issued and outstanding stock of RBX Industries, Inc., through which all of our
manufacturing and distribution activities are conducted.
Our company and our former parent company, RBX Group, Inc. were formed by
American Industrial Partners, or AIP, in October 1995 in connection with AIP's
leveraged acquisition of RBX Investors Inc. and its subsidiaries for
approximately $210 million. Following the RBX Investors acquisition, our company
and our affiliates acquired the Ensolite division of Uniroyal Technologies for
approximately $26 million.
On December 5, 2000, certain unsecured creditors of our company filed an
involuntary bankruptcy petition for reorganization of our company under Chapter
11 of Title 11 of the U.S. Code in the U.S. Bankruptcy Court for the District of
Delaware, which we refer to in this prospectus as the Delaware Bankruptcy Court.
On December 7, 2000, our company, RBX Group, Inc. and eight of our subsidiaries
(Rubatex Corporation, Groendyk Manufacturing Company, Inc., OleTex Inc., Midwest
Rubber Custom Mixing Corp., Hoover-Hanes Rubber Custom Mixing Corp., Waltex
Corporation and UPR Disposition, Inc.), as debtors, each filed voluntary
petitions with the Delaware Bankruptcy Court for relief under Chapter 11.
By order dated as of February 2, 2001, the Delaware Bankruptcy Court
transferred the cases to the U.S. Bankruptcy Court for the Western District of
Virginia, Roanoke Division, or the Virginia Bankruptcy Court, where the cases
were consolidated for purposes of joint administration. In July 2001, the
Virginia Bankruptcy Court confirmed our second amended joint plan of
reorganization. In connection with our corporate reorganization, RBX Group, Inc.
merged into our company and our eight subsidiaries that also filed for relief
under Chapter 11 were merged into one company, Rubatex Corporation, which was
renamed RBX Industries, Inc. On August 27, 2001, which was the effective date of
the plan of reorganization, our company and RBX Industries, Inc. emerged from
our Chapter 11 proceedings. On that date, we entered into a $45 million secured
credit facility with Congress Financial Corporation to replace our
debtor-in-possession financing. In addition, we cancelled all of our equity
securities that were outstanding immediately before the effective date and we
issued:
o 950,000 new shares of our common stock, representing a 95% equity
interest in our company and new 12% secured notes in the aggregate
principal amount of $25 million, to persons having a beneficial
interest in our old 12% notes as of the record date determined by the
Virginia Bankruptcy Court; and
o 50,000 new shares of our common stock, representing a 5% equity
interest in our company and 67,416 new warrants to holders of general
unsecured claims against our company. As of April 15, 2002, the
warrants represented the right to acquire 67,416 shares of our common
stock (subject to anti-dilution adjustment) and the exercise price was
$48.00 per share. The warrants are exercisable at any time on or
before August 27, 2008.
Our principal executive offices are located at 5221 ValleyPark Drive,
Roanoke, Virginia 24019, and our telephone number at that location is (540)
561-6000. Our web site is located at www.rbxcorp.com.
2
The Offerings
Common Stock and Warrants
-------------------------
Common stock offered by the selling holders ......... Up to 635,576 shares
Warrants offered by the selling holders ............. Up to 11,563 warrants representing the right to acquire
11,563 shares of common stock
Exercise price for the warrants ..................... Each warrant entitles the holder to purchase one share of
our common stock at an exercise price of $48.00 per share,
subject to adjustment as provided in the warrant agreement
Exercise period for the warrants .................... The warrants may be exercised at any time on or before
August 27, 2008. Warrants that are not exercised by
August 27, 2008 will expire.
Common stock to be outstanding after the offerings .. 1,067,416 shares, assuming the full exercise of all
warrants for shares of common stock issued by the company,
including the warrants offered by this prospectus
Notes
-----
Notes offered by the selling holders ................ Up to $16,500,000 aggregate principal amount of senior
secured notes
Maturity date ....................................... August 15, 2006
Interest payment dates .............................. February 15 and August 15
Ranking ............................................. The notes rank equally in right of payment, except with
respect to collateral, with all indebtedness of our
company that is not subordinated to the notes, including
borrowings under our new credit agreement. The notes rank
senior to any indebtedness of our company that is
subordinated to the notes. The amount of indebtedness of our
company that is not subordinated to the notes as of April 15,
2002 is $21,576,000.
Guarantee ........................................... All amounts payable on the notes, including principal and
interest, are guaranteed by our wholly owned subsidiary,
RBX Industries, Inc., and may be guaranteed in the future
by other subsidiaries of our company. RBX Industries,
Inc.'s guarantee ranks equally in right of payment with
all indebtedness of RBX Industries, Inc. that is not
3
subordinated to the guarantee, including guarantees of
borrowings under our new credit agreement. RBX Industries,
Inc.'s guarantee of the notes is senior to any
indebtedness of RBX Industries, Inc. that is subordinated
to the guarantee. The amount of our indebtedness not
subordinated to the guarantee as of April 15, 2002 is $21,576,000.
Security .......................................... The notes and RBX Industries, Inc.'s guarantee are secured
by second priority liens on substantially all of the
assets of our company and RBX Industries, Inc. and
proceeds thereof, whether now owned or acquired in the
future.
Optional redemption ............................... We may redeem the notes at any time at our option, in
whole or in part, at any time and from time to time, upon
not less than 30 days but not more than 60 days notice, at
101% of the principal amount plus accrued and unpaid
interest thereon to the applicable redemption date.
Change of control ................................. In the event of a "Change of Control" (as defined in the
indenture) of our company, our company is required to
repurchase the notes at 101% of their principal amount,
plus accrued and unpaid interest up to the date of
repurchase.
Certain covenants ................................ The indenture, among other things, restricts, with certain
exceptions, the ability of our company and our
subsidiaries to:
o sell assets;
o incur indebtedness;
o create or incur liens;
o pay dividends on, redeem or repurchase our
or their capital stock, or make
investments; and
o engage in transactions with affiliates.
Use of proceeds ................................... We will not receive any of the proceeds from the sale of
the shares of common stock and notes offered by the
selling holders but we will receive proceeds from the
exercise of the warrants held by the selling holders if
the warrants are in fact exercised. We intend to use any
proceeds received from the exercise of warrants held by
the selling holders to reduce our existing indebtedness.
4
As of the date of this prospectus, we had 1,000,000 shares of common stock
outstanding. This amount does not take into account any shares of common stock
issuable upon exercise of 67,416 warrants that are currently outstanding.
------------
You should rely only on the information contained in this prospectus. We
have not, and the selling holders have not, authorized any other person to
provide you with information that is different from that contained in this
prospectus. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock, warrants or notes.
Risk Factors
You should carefully consider all the information contained in this
prospectus before making an investment in our common stock, warrants or notes.
In particular, you should consider the risk factors described under "Risk
Factors" beginning on page 8.
5
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table provides summary consolidated financial data for the
periods indicated. You should read the summary financial data set forth below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and with the consolidated financial statements and
the related notes thereto of our company and RBX Group, Inc. appearing elsewhere
in this prospectus. The statement of operations and other data for the fiscal
years ended 1999 and 2000, the statement of operations and other data for the
eight months ended August 27, 2001, the four months ended December 31, 2001 and
the balance sheet data as of December 31, 2000 and 2001 are derived from, and
are qualified by reference to, the consolidated financial statements and related
notes of RBX Group, Inc. or RBX Corporation appearing elsewhere in this
prospectus which have been audited by Deloitte & Touche LLP as stated in the
report of Deloitte & Touche LLP presented elsewhere in this prospectus. The
balance sheet data as of December 31, 1999 is derived from, and is qualified by
reference to, the consolidated financial statements of RBX Group, Inc. not
appearing in this prospectus which have been audited by Deloitte & Touche LLP.
Historical results are not necessarily indicative of results that may be
expected for any future period.
| RBX
RBX Group, Inc. | Corporation
----------------------------------------| ------------
Eight months| Four months
ended | ended
Year ended December 31, August 27, | December 31,
1999 2000 2001 (2) | 2001 (3)
--------- --------- --------- | -------------
(As Restated)
(in thousands, except per share data)
Statement of operations data (1):
Net sales ......................... $ 246,963 $ 231,503 134,097 | $ 55,683
Gross profit ...................... 37,133 20,203 12,013 | 2,578
Selling, general and |
administrative costs ........... 21,614 20,950 13,875 | 3,910
Operating income (loss) ........... 14,428 (30,749) 17,912 | (7,246)
Income (loss) before extraordinary |
item ........................... (11,808) (56,718) 16,223 | (8,805)
|
Net income (loss) (4) ............. (11,808) (50,514) 234,539 | (8,805)
Basic and diluted net loss |
per common share .................. NA NA NA | $ (8.81)
|
Balance sheet data: |
Net working capital ............... 16,778 25,664 | 11,865
Property, plant and |
equipment, net ................. 68,432 46,740 | 53,113
Total assets ...................... 133,856 113,846 | 119,573
Total debt ........................ 220,495 -- | 40,163
Liabilities subject to compromise . -- 253,863 | --
Redeemable preferred stock ........ 7,634 8,534 | --
Stockholders' equity (deficit) .... (176,498) (227,912) | 6,356
|
Other data: |
Net cash provided by (used in) |
operating activities ........... (6,259) 7,672 (238) | (1,575)
Net cash used in investing |
activities ..................... (3,192) (3,888) (1,968) | (1,511)
6
| RBX
RBX Group, Inc. | Corporation
-------------------------------------- | -----------
Eight months | Four months
ended | ended
Year ended December 31, August 27, | December 31,
1999 2000 2001 (2) | 2001 (3)
---------- --------- --------- -----------
(in thousands, except per share data)
Other data (continued)
Net cash provided by (used in)
financing activities .......... 9,423 8,005 (9,110) | 523
Capital expenditures ............. 4,985 3,085 1,973 | 1,542
Depreciation ..................... 7,561 7,991 3,794 | 1,037
Amortization ..................... 1,296 1,223 -- | --
Ratio of earnings to fixed charges |
(unaudited) (5) ............... -- -- 8.2x | --
- ----------------
(1) The statement of operations data of RBX Group, Inc. for the years ended
December 31, 1999 and 2000 and for the eight months ended August 27, 2001
have been restated as discussed in Note 21 to the consolidated financial
statements of RBX Group, Inc. included elsewhere in this prospectus.
(2) The statement of operations data and other data of RBX Group, Inc. for the
period from January 1, 2001 through August 27, 2001 have been referred to
herein as the statement of operations data and other data for the eight
months ended August 27, 2001 for ease of reference.
(3) The statement of operations data and other data of RBX Corporation for the
period from August 28, 2001 through December 31, 2001 have been referred
to herein as the statement of operations data and other data for the four
months ended December 31, 2001 for ease of reference.
(4) Net loss for the four months ended December 31, 2001 included special
adjustments totaling $5.9 million. These adjustments were comprised of
plant shut-down costs totaling $5.0 million, and reorganization expense
items totaling $0.9 million. Net income for the eight months ended August
27, 2001 included special adjustments totaling $238.1 million. These
adjustments were comprised of a gain on cancellation of debt in the amount
of $218.3 million, a gain from fresh-start revaluation in the amount of
$28.4 million and net reorganization expense items totaling $8.6 million.
Net loss for 2000 included reorganization items totaling $27.8 million.
Reorganization items for 2000 were comprised of losses on impairment of
long-lived assets of $16.2 million, professional fees related to the
reorganization of $4.0 million, a write-off of deferred financing fees of
$3.8 million, a provision to reserve for an equity investment of $1.6
million and other charges of $2.2 million related primarily to contractual
obligations associated with the abandonment of certain construction
projects.
(5) In computing the ratio of earnings to fixed charges, "earnings" represent
income (loss) before income taxes, extraordinary items and changes in
accounting principles plus "fixed charges," less redeemable preferred stock
dividends and accretion for original issue discount. "Fixed charges"
consist of interest expense, amortization of deferred financing fees, an
estimate of interest within rental expense and redeemable preferred stock
dividends and accretion for original issue discount. For the years ended
December 31, 1999 and 2000 and for the four months ended December 31, 2001
earnings were insufficient to cover fixed charges by $12.9 million, $57.6
million and $8.8 million, respectively.
7
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this prospectus. You should be prepared to
accept any or all of the risks associated with purchasing shares, warrants or
notes, including a loss of all of your investment.
Deterioration of the industries into which we sell our products may reduce
demand for our products thereby adversely affecting our future business
prospects.
We cannot assure you that the industry conditions under which we
operate will enable us to achieve the revenues or the gross margins which we
have relied upon in the past to project future business prospects. Demand for
some of our products is affected by, among other things, the relative
strength or weakness of our customers, relevant industry events, such as
regulatory requirements, trade agreements and labor disputes. In particular,
many of the end users of our products typically experience cyclical
fluctuations in revenues and earnings. Such downturns may adversely affect
the demand for certain of our products, and general recessionary or slow
growth economic conditions would likely have an adverse effect on our sales.
Further, a prolonged downturn in the U.S. economy could result in a decline
in the results of our operations or a worsening of our financial condition.
If demand changes and we fail to respond accordingly, our results of
operations could be adversely affected in any given quarter.
Our mixing group depends heavily on a limited number of customers, the loss of
any of which would adversely affect our operating results.
Our mixing group has derived and we believe that it will continue to
derive, a significant portion of its revenues from a limited number of
customers. For example, in 2001, one customer of the mixing group accounted
for approximately 26% of its revenues. In addition, revenues from a large
customer may constitute a significant portion of our total revenues in a
particular quarter. The loss of any large customer for any reason could
adversely affect our results of operations because we might not be able to
generate sufficient revenues to offset the loss in business. In addition, any
delay or failure by a large customer to make payments due to us could harm
our financial condition.
Our reorganization may negatively impact some of our relationships with
customers, suppliers and employees.
The effect, if any, which our Chapter 11 case and plan of
reorganization may have upon the continued operations of our company cannot
be accurately predicted or quantified. Some entities may be uncomfortable
doing business with a company that has recently emerged from bankruptcy
relief. Our Chapter 11 case could adversely affect our relationships with our
customers, suppliers and employees.
We may be unable to service our indebtedness and may have difficulty accessing
credit or pursuing business opportunities because of our substantial
indebtedness.
After giving effect to the transactions contemplated by our plan of
reorganization, we have a substantial amount of outstanding indebtedness. As
of December 31, 2001, we had total liabilities of approximately $113.2
million. We must generate sufficient cash to pay the principal, interest and
other amounts due under our indebtedness and we cannot assure you that we
will be able to meet our obligations. Our leverage could have negative
consequences, including:
o requiring the dedication of a substantial portion of our cash flow
from operations to service indebtedness, thereby reducing the amount
of cash flow available for other purposes, including capital
expenditures, marketing efforts and future growth plans;
8
o limiting our ability to obtain additional financing or to refinance
existing indebtedness;
o placing us at a possible competitive disadvantage relative to less
leveraged competitors and competitors with greater access to capital
resources;
o increasing our vulnerability to downturns in our business or the U.S.
economy generally; and
o limiting our flexibility in planning for, or reacting to, changes in
our business and the industry in which we compete.
If we cannot make scheduled payments on our debt, we will be in default
under the terms of our indebtedness and, as a result:
o our debt holders could declare all outstanding principal and interest
on the notes to be due and payable;
o our lenders could terminate their commitments and commence foreclosure
proceedings against our assets that have been pledged as collateral;
and
o we could be forced into bankruptcy or liquidation.
Covenants in our indenture restrict our ability to borrow and invest, which
could impair our ability to expand or finance our future operations.
The indenture governing our notes contains a number of covenants that
impose significant operating and financial restrictions on us and our
subsidiaries. These restrictions significantly limit, and in some cases
prohibit, among other things, our and certain of our subsidiaries' ability to
incur more debt, create liens on assets, enter into business combinations or
engage in certain activities with our subsidiaries. A failure to comply with
these restrictions, if not cured or waived, would constitute a default under
the indenture governing the notes and the notes could become immediately due
and payable, which would seriously adversely affect our business and our
shareholders' equity.
We may need additional capital and if we are unable to raise it, we may be
unable to take advantage of opportunities or meet unexpected financial
requirements.
We expect that cash flows from our operations and financing from
our credit facility will provide sufficient funds for capital expenditures,
working capital and debt service for the next 12 months.
We may need or want to acquire additional capital for a variety of
reasons, such as to:
o improve our manufacturing infrastructure;
o comply with regulatory developments;
o take advantage of new business opportunities; and
o implement changes in our business strategy.
Due to a variety of factors, including perceived risks related to our
operational performance, and our recent emergence from Chapter 11, we may not
be able to raise additional capital on acceptable terms. We may have to sell
stock at prices lower than those paid by a portion of our current
shareholders, leading to dilution, or we may have to sell stock or debt
instruments with rights superior to those of holders of our common stock. If
we cannot obtain adequate financing on acceptable terms, we may be unable to
take advantage of opportunities or to meet unexpected financial requirements.
This could
9
cause us to delay or abandon anticipated expenditures or otherwise limit
operations, which could adversely affect our business.
Your right to receive payments on the notes is structurally subordinated to
indebtedness of our subsidiary, RBX Industries, Inc.
We are a holding company that conducts all of its operations through RBX
Industries, Inc. In general, claims of a subsidiary's creditors, including
trade creditors, secured creditors and unsecured creditors holding
indebtedness and guarantees issued by such subsidiary, will have priority with
respect to the assets and earnings of that subsidiary over the claims of the
creditors of its parent company as a shareholder. The notes, therefore, will
effectively be subordinated to creditors, including trade creditors, of RBX
Industries, Inc. and those of any other subsidiaries created or acquired in
the future.
Fraudulent conveyance laws may result in the subordination or avoidance of RBX
Industries, Inc.'s guarantee of the notes.
Our obligations under the notes will be guaranteed to the extent
described in this prospectus by RBX Industries, Inc. Various federal and state
fraudulent conveyance laws have been enacted for the protection of creditors
and may be utilized by a court of competent jurisdiction to subordinate or
avoid all or part of the guarantee issued by RBX Industries, Inc.
To the extent that a court of competent jurisdiction were to find that
RBX Industries, Inc. incurred a guarantee with the intent to hinder, delay or
defraud any present or future creditor or did not receive fair consideration
or reasonably equivalent value for issuing its guarantee and:
o was insolvent or rendered insolvent because of the issuance of its
guarantee;
o was engaged or about to engage in a business or transaction for which
its remaining assets constituted unreasonably small capital to carry
on its business; or
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, then
the court could subordinate or avoid all or part of its guarantee in favor of
its other creditors. To the extent that the guarantee issued by RBX
Industries, Inc. is voided as a fraudulent conveyance or held unenforceable
for any other reason, the holders of the notes guaranteed by RBX Industries,
Inc. may no longer have a claim against RBX Industries, Inc., and would only
be creditors of our company.
We are subject to intense competition and narrow profit margins in the industry
in which we operate and actions by our competitors could adversely affect our
net income and cash generated from operations.
The industry in which we operate is highly competitive and generally
characterized by narrow profit margins. We face domestic and foreign
competition across our product lines ranging from divisions of leading
national and international manufacturers to small, regional competitors. We
face intense competition from a number of manufacturers located in Asia that
have lower operating and labor costs than we do, which in certain instances
allow these manufacturers to sell their products for lower prices. In
addition, some of our other competitors have greater financial, distribution,
purchasing and marketing resources than we do. Our profitability could be
impacted by the pricing, purchasing, financing, advertising or promotional
decisions made by competitors. To the extent that we reduce prices to maintain
or grow our market share in the face of competition, our net income and cash
generated from operations could be adversely affected.
10
Environmental regulation of our company may result in future clean up costs and
other environmental liabilities.
We are subject to a wide variety of federal, state and local
environmental laws and regulations that govern activities and operations that
may have adverse environmental effects and impose liability for the costs of
cleaning up, and certain damages arising from, sites of past spills, disposals
or other releases of hazardous materials. As a result, we are involved from
time to time in administrative and judicial proceedings and inquiries relating
to environmental matters. These include currently pending investigations at
some of our plants and at sites at which we may have disposed of hazardous
substances. Under applicable environmental laws, we may be responsible for the
remediation of environmental conditions and may be subject to associated
liabilities relating to our manufacturing and warehouse facilities and offices
and the land on which our manufacturing and warehouse facilities and offices
are situated, regardless of whether we lease, sublease or own the
manufacturing and warehouse facilities or offices in question, and regardless
of whether such environmental conditions were created by our company or by a
prior owner or tenant. Although we maintain reserves on our balance sheet for
environmental liabilities, we do not maintain insurance coverage for
environmental matters. We cannot assure you that environmental conditions
relating to prior, existing or future manufacturing and warehouse sites will
not harm our company. We cannot assure you that the aggregate amount of future
clean up costs and other environmental liabilities will not be material.
Our failure to retain members of our senior management and key personnel may
adversely affect our ability to conduct our business.
Our success depends in large part upon the abilities and continued
service of our senior management and other key employees. We cannot be sure
that their services will continue to be available to us. Our senior management
and key employees are particularly important to our company because of their
experience and knowledge of the foam products and custom rubber mixing
industries. The loss or unavailability to us of any of our key technical,
engineering or management personnel could have significant negative effects.
To the extent that the services of our executive officers would be unavailable
to us for any reason, we would be required to hire other personnel to manage
and operate our company. There may be a limited number of persons with the
requisite skills to serve in these positions, particularly in the markets
where we operate our business. We cannot assure you that we would be able to
locate or employ such qualified personnel on acceptable terms.
We have experienced in the past, and we may experience in the future,
disruptions in our labor force which could negatively impair our business.
As of December 31, 2001, we employed approximately 1,200 persons and
approximately 73% of this workforce was represented by labor unions. In
September 1999, over 400 production workers at our Bedford, Virginia plant
stopped work. In June 2000, the employees conditionally returned to work,
subject to the parties' ongoing negotiations. Our company and our employees
reached a consensual resolution and on or about March 28, 2001, the workers at
the Bedford plant agreed to the terms of a new collective bargaining
agreement. We negotiated an extension of the collective bargaining agreement
that we have entered into with employees at our plant in Georgia. The new
agreement was ratified on February 28, 2002 and has a term of five years. We
cannot assure you that we will be able to renew or extend any of our
collective bargaining agreements prior to their expiration, and we cannot
assure you that we will not experience work stoppages or strikes in the
future. Any such disruptions may cause our financial position and results of
operations to suffer.
11
We supply products to some of our customers through a new sourcing arrangement
which is unproven and may be unprofitable.
In October 2001, we discontinued our extrusion and fabrication operations
in Bedford, Virginia and our custom rubber mixing operations in Barberton,
Ohio. We plan to supply some of our customers who formerly purchased the
products of these operations from our other locations and through domestic and
foreign sourcing arrangements. We cannot assure you that we will be successful
in transferring the production of these products to our other locations or be
able to provide them to our customers through sourcing arrangements that will
ultimately prove to be profitable. If these activities are not profitable, our
financial position and results of operations will suffer.
Following the offerings, there will not be a public market for our warrants and
notes.
We cannot assure you that an active public trading market for the notes
will develop or be sustained. We do not intend to apply to list our warrants
and notes on any national and/or regional securities exchange or inter-dealer
quotation service and as a result, your ability to dispose of notes and
warrants may be limited.
As a result of the adoption of "fresh-start" accounting, you will not be able to
compare our historical financial statements with the financial results disclosed
in this prospectus.
As a result of the consummation of our plan of reorganization and the
transactions contemplated thereby, we are operating our business under a new
capital structure. In addition, our company became subject to the fresh-start
accounting rules upon emerging from bankruptcy. Accordingly, the financial
condition and results of operations of our company disclosed in future filings
with the SEC will not be comparable to the financial condition or results of
operations reflected in our historical financial statements contained in this
prospectus.
We may be unable to adequately provide funding for our pension benefit
obligation in the event that we do not achieve assumed long-term rates of return
on plan assets.
Our pension benefit obligation represents a material liability on our
balance sheet. We have assumed a 9.5% rate of return on plan assets for
purposes of determination of the pension benefit obligation. The expected
long-term rate of return on plan assets reflects the average rate of earnings
expected on the funds invested or to be invested to provide for the benefits
included in the projected benefit obligation. We cannot assure you that we
will be able to achieve this assumed long-term rate of return. If the plan's
investments do not achieve this assumed long-term rate of return we may be
unable to provide adequate funding to support the liability as participants in
the plan retire. Our inability to provide adequate funding to support the
liability through return on plan assets could adversely impact our net income
and our cash flows in future periods.
12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains both historical and forward-looking statements.
All statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements. These forward-looking statements are not based
on historical facts, but rather reflect our current expectations concerning
future results and events. These forward-looking statements generally can be
identified by the use of statements that include phrases such as "believe,"
"expect," "anticipate," "intend," "plan," "foresee," "likely," "will" or other
similar words or phrases. Similarly, statements that describe our objectives,
plans or goals are or may be forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be different
from any future results, performance and achievements expressed or implied by
these statements. You should carefully review all information, including the
financial statements and the notes to the financial statements, included or
incorporated by reference into this prospectus.
In addition to the risk factors described in "Risk Factors" beginning on
page 8 of this prospectus, the following important factors could affect future
results, causing these results to differ materially from those expressed in our
forward-looking statements:
o changes in the general economy or in the primary markets of our
company;
o our future operating results or our ability to generate revenues,
income or cash flow to service our debt;
o competitive factors;
o an adverse determination with respect to litigation or other claims;
o increased governmental regulation that affects our business and
operations;
o stability of product and manufacturing costs; and
o supply or quality control problems.
These factors and the other risk factors described in this prospectus are
not necessarily all of the important factors that could cause actual results to
differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could harm our future results. The
forward-looking statements included in this prospectus are made only as of the
date of this prospectus and we cannot assure you that projected results or
events will be achieved.
13
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock and notes offered by the selling holders but we will receive
proceeds from the exercise of the warrants held by the selling holders if the
warrants are in fact exercised. We intend to use any proceeds received from the
exercise of warrants held by the selling holders to reduce our existing
indebtedness. Specifically, we plan to use any proceeds from the exercise of
warrants to reduce our indebtedness under our revolving credit facility, which
bears interest at an annual rate of prime plus 0.5%, which was 5.5% as of
December 31, 2001. Our revolving credit facility expires in August 2004.
DIVIDEND POLICY
We have not historically paid dividends, and we do not anticipate paying
any cash dividends in the foreseeable future. We currently intend to retain
future earnings, if any, to finance operations and the expansion of our
business. Any future determination to pay cash dividends will be at the
discretion of our board of directors and will be dependent upon our financial
condition, operating results, capital requirements and other factors that the
board deems relevant. In addition, the indenture for our notes restricts our
ability to pay dividends.
14
SELECTED CONSOLIDATED FINANCIAL DATA
The following table provides selected financial data for the periods
indicated. You should read the selected financial data set forth below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and with the consolidated financial statements and
related notes thereto of our company and RBX Group, Inc. appearing elsewhere in
this prospectus. The statement of operations and other data for the fiscal years
ended 1999 and 2000, the statement of operations and other data for the eight
months ended August 27, 2001, the four months ended December 31, 2001 and the
balance sheet data as of December 31, 2000 and 2001 are derived from, and are
qualified by reference to, the consolidated financial statements and related
notes of RBX Group, Inc. or RBX Corporation appearing elsewhere in this
prospectus which have been audited by Deloitte & Touche LLP as stated in the
report of Deloitte & Touche LLP presented elsewhere in this prospectus. The
statement of operations data and other data for the fiscal years ended December
31, 1997 and 1998 and the balance sheet data as of December 31, 1997 and 1998
are derived from the unaudited financial statements of RBX Group, Inc., our
former parent company, and from the audited consolidated financial statements of
our company not appearing in this prospectus and combined for comparative
purposes. In the opinion of management, all necessary adjustments, consisting
only of normal recurring adjustments other than those made for fresh-start
accounting purposes, have been included to present fairly the unaudited results
when read in conjunction with the audited consolidated financial statements and
notes thereto appearing elsewhere in this prospectus. Historical results are not
necessarily indicative of results that may be expected for any future period.
| RBX
RBX Group, Inc. | Corporation
--------------------------------------------------------------- | -------------
Eight months | Four months
Year ended December 31, ended | ended
------------------------------------------------ August 27, | December 31,
1997 1998 1999 2000 2001(2) | 2001(3)
--------- --------- --------- --------- --------- | -------------
(As Restated)
(in thousands, except per share data) |
Statement of operations data (1):
Net sales ...................... $ 281,662 $ 263,250 $ 246,963 $ 231,503 $ 134,097 | $ 55,683
Gross profit ................... 38,279 21,615 37,133 20,203 12,013 | 2,578
Selling, general and |
administrative costs ....... 28,265 28,375 21,614 20,950 13,875 | 3,910
Operating income (loss) ........ 5,503 (111,717) 14,428 (30,749) 17,912 | (7,246)
Income (loss) before |
extraordinary item and |
cumulative effect adjustment (27,791) (137,840) (11,808) (56,718) 16,223 | (8,805)
Net income (loss) (4) .......... (29,577) (142,792) (11,808) (50,514) 234,539 | (8,805)
Basic and diluted net loss per |
common share ............... NA NA NA NA NA | $ (8.81)
Balance sheet data: |
Net working capital ............ 43,722 14,862 16,778 25,664 | 11,865
Property, plant and |
equipment, net ............. 97,374 72,797 68,432 46,740 | 53,113
Total assets ................... 275,921 138,547 133,856 113,846 | 119,573
Total debt ..................... 211,037 211,072 220,495 -- | 40,163
Liabilities subject to ......... -- -- -- 253,863 | --
compromise |
Redeemable preferred stock ..... 5,800 6,702 7,634 8,534 | --
Stockholders' equity (deficit) . (20,064) (163,758) (176,498) (227,912) | 6,356
15
| RBX
RBX Group, Inc. | Corporation
-------------------------------------------------------------- | ------------
Eight months| Four months
Year ended December 31, ended | ended
------------------------------------------------ August 27, | December 31,
1997 1998 1999 2000 2001(2) | 2001(3)
--------- --------- --------- --------- --------- | -------------
(in thousands, except per share data)
Other data:
Net cash provided by (used in)
operating activities ......... (2,398) (1,483) (6,259) 7,672 (238) | 1,575
Net cash provided by (used in) |
investing activities ......... (16,698) 1,404 (3,192) (3,888) (1,968) | (1,511)
Net cash provided by (used in) |
financing activities ......... 15,969 35 9,423 8,005 (9,110) | 523
Capital expenditures ............ 15,582 4,286 4,985 3,085 1,973 | 1,542
Depreciation .................... 8,370 10,431 7,561 7,991 3,794 | 1,037
Amortization .................... 3,332 3,700 1,296 1,223 -- | --
Ratio of earnings to |
fixed charges (unaudited) (5) -- -- -- -- 8.2x | --
(1) The statement of operations data of RBX Group, Inc. for each of the four
years ended December 31, 2000 and for the eight months ended August 27,
2001 have been restated as discussed in Note 21 to the consolidated
financial statements of RBX Group, Inc. included elsewhere in this
prospectus. A summary of the significant effects of the restatement for the
years ended December 31, 1997 and 1998 is as follows:
1997 1998
---------------------- -----------------------
As As
Previously As Previously As
Reported Restated Reported Restated
---------- -------- ---------- --------
Net Sales................ $172,450 $281,662 $157,012 $263,250
Gross profit............. 27,923 38,279 10,404 21,615
Selling, general
and administrative
costs.................. 26,444 28,265 26,725 28,375
Operating income (loss).. (3,032) 5,503 (121,278) (111,717)
Loss before extraordinary
item and cumulative
effect adjustment...... (36,326) (27,791) (147,401) (137,840)
(2) The statement of operations data and other data of RBX Group, Inc. for the
period from January 1, 2001 through August 27, 2001 have been referred to
herein as the statement of operations data and other data for the eight
months ended August 27, 2001 for ease of reference.
(3) The statement of operations data and other data of RBX Corporation for the
period from August 28, 2001 through December 31, 2001 have been referred
to herein as the statement of operations data and other data for the four
months ended December 31, 2001 for ease of reference.
(4) Net loss for the four months ended December 31, 2001 included special
adjustments totaling $5.9 million. These adjustments were comprised of
plant shut-down costs totaling $5.0 million and reorganization expense
items totaling $0.9 million. Net income for the eight months ended August
27, 2001 included special adjustments totaling $238.1 million. These
adjustments were comprised of a gain on cancellation of debt in the amount
of $218.3 million, a gain from fresh-start revaluation in the amount of
$28.4 million and net reorganization expense items totaling $8.6 million.
Net loss for 2000 included reorganization items totaling $27.8 million.
Reorganization items for 2000 were comprised of losses on impairment of
long-lived assets of $16.2 million, professional fees related to the
reorganization of $4.0 million, a write-off of deferred financing fees of
$3.8 million, a provision to reserve for an equity investment of $1.6
million and other charges of $2.2 million related primarily to contractual
obligations associated with the abandonment of certain construction
projects. Net loss for 1998 includes special charges totaling $119.9
million. Such charges were comprised of losses on impairment of
long-lived assets of $101.4 million, inventory write downs, severance,
other personnel related costs of $13.5 million and write-off of start-up
costs of $5.0 million. Net loss for 1997 includes extraordinary losses of
$1.8 million for the early extinguishment of debt.
(5) In computing the ratio of earnings to fixed charges, "earnings" represent
income (loss) before income taxes, extraordinary items and changes in
accounting principles plus "fixed charges," less redeemable preferred stock
dividends and accretion for original issue discount. "Fixed charges"
consist of interest expense, amortization of deferred financing fees, an
estimate of interest within rental expense and redeemable preferred stock
dividends and accretion for original issue discount. For the years ended
December 31, 1997, 1998, 1999 and 2000 and for the four months ended
December 31, 2001 earnings were insufficient to cover fixed charges by
$16.2 million, $138.7 million, $12.9 million, $57.6 million and $8.8
million, respectively.
16
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data has been derived by the
application of pro forma adjustments to the financial statements included
elsewhere in this prospectus. The unaudited pro forma condensed consolidated
statements of operations for the period presented give effect to the
reorganization as if it had occurred on January 1, 2001. The adjustments
are described in the accompanying notes. The pro forma financial data does not
purport to represent what our results of operations actually would have been if
the reorganization had been consummated on the date or for the periods
indicated, or what such results will be for any future date or for any future
period. The unaudited pro forma financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the notes thereto included
elsewhere in this prospectus.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2001
(in thousands)
Pro Forma
Historical (1) Adjustments Pro Forma
---------- ----------- ---------
Net sales $ 189,780 - $189,780
Cost of goods sold 175,189 - 175,189
---------- ----------- ---------
Gross profit 14,591 - 14,591
Selling, general and administrative costs 17,785 - 17,785
Reorganization items (income) (13,854) 19,786 (2) 5,932
Other income (6) - (6)
---------- ----------- ---------
Operating income (loss) 10,666 (19,786) (9,120)
Interest expense 3,248 2,000 (3) 5,248
---------- ----------- ---------
Income (loss) before income taxes 7,418 (21,786) (14,368)
Income tax expense - - -
---------- ----------- ---------
Income (loss) before extraordinary item 7,418 (21,786) (14,368)
Extraordinary item 218,316 (218,316) (4) -
---------- ----------- ---------
Net income (loss) $ 225,734 (240,102) $(14,368)
========== =========== =========
- -----------
(1) For purposes of presenting this pro forma financial data, 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 our company for the period from August 28, 2001 through
December 31, 2001, referred to as the four months ended December 31, 2001,
have been combined.
(2) Represents reorganization items which would not have been incurred had the
reorganization occurred on January 1, 2001 consisting of a fresh - start
revaluation gain of $28,431 and other reorganization costs, including
professional fees, of $8,645.
(3) Represents an adjustment to include interest expense related to our senior
secured notes for the period from January 1, 2001 through August 27, 2001,
that would have been incurred if the reorganization had occurred on January
1, 2001.
(4) Represents gain on cancellation of debt that would not have been incurred
had the reorganization taken place on January 1, 2001.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and the accompanying notes and "Selected Consolidated
Financial Data" included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of numerous factors, including the risks discussed in
"Risk Factors" and elsewhere in this prospectus.
Introduction
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.
We are the surviving corporation of a recent corporate reorganization
implemented in connection with the consummation of our Chapter 11 bankruptcy
proceedings in August 2001. Prior to the effective date of our corporate
reorganization, we were a wholly owned subsidiary of RBX Group, Inc. In
connection with our corporate reorganization, RBX Group, Inc. merged into our
company and eight of our subsidiaries were merged into one company, Rubatex
Corporation, which was renamed RBX Industries, Inc. We are currently a holding
company with no business operations and own all of the issued and outstanding
stock of RBX Industries, Inc., through which all of our manufacturing and
distribution activities are conducted.
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 August 28, 2001 through
December 31, 2001, referred to as the four months ended December 31, 2001, have
been combined.
Implementation of fresh-start accounting resulted in material changes to
our financial statements, including valuation of assets at fair value in
accordance with principles of the purchase method of accounting, valuations of
liabilities pursuant to provisions of the plan of reorganization and valuation
of equity based on a valuation of the business prepared by the independent
financial advisors of our company.
As discussed in Note 21 to the consoldated financial statements, we have
restated our financial statements for the years ended December 31, 1999 and 2000
and for the eight months ended August 27, 2001 to present the results of
operations of certain plants closed in October 2001 in continuing operations.
The following discussion and analysis give effect to that restatement.
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 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. 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 $23.8 million as
of December 31, 2001 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 tradename 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 tradename 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 described
in Note 11 to the consolidated financial statements and include, 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 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.
Revenues
We derive revenues from the sale of products manufactured by our company.
Our foam segment revenues consist of sales of closed cell rubber foam and
cross-linked polyethylene foam. Our mixing segment revenues consist of sales of
custom-mixed rubber polymers in uncured form. A substantial part of the mixing
segment's business is conducted with a limited number of customers.
We recognize revenues when products are shipped to our 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.
18
Expenses
Cost of goods sold consists of the cost of materials, compensation costs
and overhead related to the manufacturing process associated with the products
that we sell.
Selling, general and administrative expenses consist of the compensation
costs for sales and marketing personnel, travel expenses, customer support
expenses, advertising, bad debt expense, the compensation costs for
administration, finance and general management personnel, as well as
professional fees.
Results of Operations
The following table sets forth, for the periods shown, certain statement of
operations data in millions of dollars and as a percentage of net sales.
Years Ended December 31,
------------------------
1999 2000 2001
---- ---- ----
(dollars in millions)
Net sales..................................... $247.0 100.0% $231.5 100.0% $189.8 100.0%
Gross profit ................................. 37.1 15.0 20.2 8.7 14.6 7.7
Selling, general and administrative costs .... 21.6 8.7 21.0 9.1 17.8 9.4
Management fees .............................. 1.1 .4 1.3 .6 -- --
Reorganization items (income) ................ -- -- 27.8 12.0 (13.8) (7.3)
Operating income (loss) ...................... 14.4 5.8 (30.7) (13.3) 10.7 5.6
Net income (loss) ............................ (11.8) (4.8) (50.5) (21.8) 225.7 118.9
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Net sales
Net sales decreased to $189.8 million in 2001 from $231.5 million in 2000,
a decrease of $41.7 million or 18.0%. Our foam segment and our mixing segment
contributed approximately 73% and 27%, respectively, of our net sales for the
year ended December 31, 2001. Our foam segment and our mixing segment
contributed approximately 72% and 28%, respectively, of our net sales for the
year ended December 31, 2000. The decrease in sales in both segments is
representative of a significant decline in unit volume.
Foam Segment. Net sales for our foam segment decreased to $137.7 million in
2001 from $167.4 million in 2000, a decrease of $29.7 million or 17.7%. This
decrease was primarily attributable to the softening of demand for our
cross-linked polyethylene foam products and reduced unit volume in our Bedford,
Virginia plant, which lost business due to a prolonged strike and attendant
quality problems. In September 1999, laborers at our Bedford plant went on
strike. We began hiring and training replacement workers as quickly as possible;
however, the disruption caused by the strike had a significant negative impact
on operating results. The plant was not able to return to profitability and, as
a result, the extrusion and fabrication operations in Bedford were closed during
October 2001.
Mixing Segment. Net sales for our mixing segment decreased to $52.0 million
in 2001 from $64.1 million in 2000, a decrease of $12.1 million or 18.9%. This
decrease was primarily attributable to our Barberton, Ohio plant, or Midwest,
which faced increased local competition. As a result of continued declining
profitability at Midwest, the custom
19
rubber mixing plant was closed in October 2001.
Gross profit
Gross profit decreased to $14.6 million in 2001 from $20.2 million in
2000, a decrease of $5.6 million or 27.7%. As a percentage of net sales, gross
profit in 2001 decreased to 7.7% from 8.7% in 2000. Due to the prevailing
conditions in the industry, we experienced declining raw material costs in 2001
compared to 2000. Had we not had the benefit of such raw material cost
decreases, the aforementioned decrease in gross profit would have been greater.
Foam Segment. Gross profit for our foam segment decreased to $11.5
million in 2001 from $12.8 million in 2000, a decrease of $1.3 million or 10.2%.
This decrease was primarily attributable to productivity and scrap issues at our
Bedford, Virginia plant which ultimately led to the closure of the extrusion and
fabrication operations at that plant in October 2001.
Mixing Segment. Gross profit for our mixing segment decreased to $3.3
million in 2001 from $7.7 million in 2000, a decrease of $4.4 million or 57.1%.
The decrease resulted primarily from the local competitive conditions mentioned
above, eventually resulting in the closing of Midwest in October 2001.
Selling, general and administrative costs
Selling, general and administrative costs decreased to $17.8 million in
2001 from $21.0 million in 2000, a decrease of $3.2 million or 15.2%. This
decrease was primarily due to cost reduction efforts and reduced commission
expense on the lower sales volumes referred to previously. As a percentage of
net sales, selling, general and administrative costs increased to 9.4% in 2001
from 9.1% in 2000.
Management fees
Management fees included management and consulting fees and related
out-of-pocket expenses associated with financial and management services from
American Industrial Partners, or AIP, an affiliate of the majority owners of the
Predecessor's stockholder. Such management fees totaled $1.3 million in 2000. No
such fees were incurred during 2001.
Reorganization items (income)
Reorganization items include income of $28.4 million associated with
revaluation of certain assets and liabilities to comply with fresh-start
accounting procedures, offset by $14.6 million of reorganization costs in 2001.
Such reorganization costs in 2001 were comprised of professional fees of $7.3
million, plant shut-down costs of $5.0 million and other reorganization costs
totaling $2.3 million. In 2000, reorganization costs of $27.8 million were
comprised of loss on impairment of long-lived assets of $16.2 million, write
20
off of deferred financing fees of $3.8 million, professional fees of $4.0
million, reserve for equity investment of $1.6 million and other reorganization
costs of $2.2 million.
Operating income (loss)
We reported operating income in 2001 of $10.7 million compared to
operating loss in 2000 of $30.7 million. Fluctuations in our operating income
(loss) were driven primarily by the factors impacting gross profit, selling,
general and administrative costs, management fees and reorganization items
discussed above.
Net income (loss)
We reported net income of $225.7 million in 2001 compared to net loss
of $50.5 million in 2000. In addition to the factors impacting operating income
(loss) discussed above, fluctuations in net income were impacted by gains on
cancellation of debt in 2001 and 2000 in the amounts of $218.3 million and $6.2
million, respectively. The decrease in interest expense to $3.2 million in 2001
compared to $25.9 million in 2000 also contributed to the fluctuation in net
income.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Net sales
Net sales decreased to $231.5 million in 2000 from $247.0 million in
1999, a decrease of $15.5 million or 6.3%. Our foam segment and our mixing
segment contributed approximately 72% and 28%, respectively, of our net sales
for the years ended December 31, 2000 and 1999. The decrease in sales noted in
both segments was representative of a significant decline in unit volume.
Foam Segment. Net sales for our foam segment decreased to $167.4
million in 2000 from $177.2 million in 1999, a decrease of $9.8 million or 5.5%.
This decrease was primarily attributable to the softening of demand for our
cross-linked polyethylene foam products and reduced volume in our Bedford,
Virginia plant, which lost business due to the prolonged strike, referred to
above, and attendant quality problems.
Mixing Segment. Net sales for our mixing segment decreased to $64.1
million in 2000 compared to $69.8 million in 1999, a decrease of $5.7 million or
8.2%. This decrease was primarily attributable to our Midwest operations, which
faced intensified local competition.
21
Gross profit
Gross profit decreased to $20.2 million in 2000 from $37.1 million in
1999, a decrease of $16.9 million or 45.6%. As a percentage of net sales, gross
profit in 2000 decreased to 8.7% from 15.0% in 1999. Due to the prevailing
conditions in the industry, we experienced declining raw material costs in 2000
compared to 1999. Had we not had the benefit of such raw material cost
decreases, the aforementioned decrease in gross profit would have been greater.
Foam Segment. Gross profit for our foam segment decreased to $12.8
million in 2000 from $27.2 million in 1999, a decrease of $14.4 million or
52.9%. This decrease was primarily attributable to cost and quality issues
surrounding the strike at our Bedford, Virginia plant. However, increased scrap
and lower productivity in our operations in Colt, Arkansas made a significant
contribution to the decrease as well. The decline in volume related to
cross-linked polyethylene foam products was also a contributor.
Mixing Segment. Gross profit for our mixing group decreased to $7.7
million in 2000 from $10.2 million in 1999, a decrease of $2.5 million or 24.5%.
This decrease resulted primarily from the local competitive conditions mentioned
above.
Selling, general and administrative costs
Selling, general and administrative costs decreased to $21.0 million in
2000 from $21.6 million in 1999, a decrease of $0.6 million or 2.8%. This
decrease was primarily due to cost reduction efforts and reduced commission
expense on the lower sales volumes referred to previously. As a percentage of
net sales, selling, general and administrative costs increased to 9.1% in 2000
from 8.7% in 1999.
Management Fees
Management fees increased to $1.3 million in 2000 from $1.1 million in
1999.
Reorganization items (income)
In 2000 reorganization costs of $27.8 million were comprised of loss on
impairment of long-lived assets of $16.2 million, write off of deferred
financing fees of $3.8 million, professional fees of $4.0 million, reserve for
equity investment of $1.6 million and other reorganization costs of $2.2
million. There were no reorganization items incurred during 1999.
Operating income (loss)
We reported an operating loss in 2000 of $30.7 million compared to
operating income in 1999 of $14.4 million. Fluctuations in our operating income
(loss) were driven primarily by the factors impacting gross profit, selling,
general and administrative costs, management fees and reorganization items
discussed above.
Net loss
22
We reported net losses of $50.5 million and $11.8 million in 2000 and
1999, respectively. In addition to the factors impacting operating income (loss)
discussed above, fluctuations in net income were impacted by the gain on
cancellation of debt in 2000 in the amount of $6.2 million and the decrease in
interest expense to $25.9 million in 2000 compared to $26.4 million in 1999.
Liquidity and Capital Resources
Cash provided by operating activities was $1.3 million during 2001
compared to $7.7 million during 2000.
Cash used in investing activities was $3.5 million during 2001 compared
to $3.9 million during 2000. Cash used in investing activities was mainly for
expenditures related to capital improvements during 2001 and 2000.
Cash used in financing activities was $8.6 million during 2001 compared
to cash provided by financing activities of $8.0 million during 2000.
We are dependent on cash from operations and available borrowings on
our revolver to support our capital requirements. We believe minimum capital
expenditures for 2002 to be approximately $5.0 million and we believe minimum
capital requirements to support the Company's operating working capital for 2002
to be $4.0 million. We believe that cash flows from operations combined with
available borrowings on our revolver will be sufficient to fund the Company's
capital requirements throughout 2002 and into 2003.
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 as of December 31, 2001) and maintenance of a minimum
level of earnings before interest, taxes, depreciation and amortization
("EBIDTA") (not less than $7.25 million for the year ended December 31, 2001).
We were in compliance with the terms of our indebtedness as of December 31,
2001.
We are 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, we may be responsible for the environmental clean-up
of property for contamination which occurred prior to our ownership, We are
involved in environmental remediation activities resulting from past operations,
including designation as a potentially responsible party, or PRP, at sites
designated for cleanup by state environmental agencies.
We are a PRP along with other PRPs 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
us and other PRPs our share of the liability is considered immaterial.
We are also a PRP along with other PRPs 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 we conduct a more extensive environmental study. We have
accrued approximately $2 million based on a consultant's estimate but are unable
to predict the outcome of this potential liability at this time.
Management believes the estimates discussed above will be sufficient to
satisfy anticipated costs of remediation at these two Superfund sites. At
December 31, 2001, approximately $2.2 million for estimated environmental
remediation costs was accrued and substantially the entire amount is included in
long-term liabilities. Expenditures relating to costs currently accrued are
expected to be made over the next 5 to 10 years. As a result of factors such as
the continuing evolution of environmental laws and regulatory requirements, the
availability and application of technology, and the identification of presently
unknown remediation sites, estimated costs for future environmental compliance
and remediation are necessarily imprecise, and it is not possible to predict the
amount or timing of future costs of environmental remediation requirements which
may subsequently be determined. Based upon information presently available, such
future costs are not expected to have a material adverse effect on our
competitive or financial position or our ongoing results of operations. However,
such costs could be material to results of operations in a future period.
23
Financing Activities
On April 20, 2001, we reached an agreement on new debtor-in-possession
financing with Congress Financial Corporation. The proceeds of this credit
facility were used to repay amounts outstanding under our old revolving credit
facility. Additional amounts were drawn as needed to fund our operations during
the reorganization period. This credit facility provided for a $35 million
limit, subject to a borrowing base formula applied to eligible receivables and
inventory.
On August 27, 2001, our company and our wholly owned subsidiary, RBX
Industries, Inc., entered into a credit agreement with Congress Financial
Corporation which provides for a $45 million credit facility. The credit
facility is comprised of:
o a revolving line of credit not to exceed $35 million which is subject
to a borrowing base formula applied to eligible receivables and
inventory; and
o a term loan in the principal amount of $10 million.
RBX Industries, Inc.'s indebtedness under the new credit agreement is
guaranteed by our company and is secured by a first priority security interest
in all of our present and future properties and interests in real or personal
property and proceeds of the foregoing.
Indebtedness under our revolving credit facility bears interest at the rate
publicly announced by First Union National Bank as its prime rate plus one-half
percent (1/2%) per annum (5.25% as of April 15, 2002).
The term loan bears interest at the rate publicly announced by First Union
National Bank as its prime rate plus one percent (1.0%) per annum (5.75% as of
April 15, 2002).
The revolving credit facility matures on August 27, 2004, which is the
third anniversary of the new credit agreement and is subject to consecutive one
year extensions. Loans made under the revolving credit facility may be borrowed,
repaid and reborrowed from time to time, subject to borrowing base limitations
and the satisfaction of certain conditions on the date of any such borrowing,
until the third anniversary of the new credit agreement. The borrowing base at
any time is comprised of the sum of a
24
percentage of our eligible accounts receivable and a percentage of our eligible
inventory at such time less any reserves required.
As of December 31, 2001, the interest rate on our revolving credit facility
was 5.5%. As of December 31, 2001, the amount drawn on the new revolving credit
facility was $5.9 million.
Future Capital Requirements
As of December 31, 2001, we have contractual obligations due in future
periods as follows:
Payments Due by Period
Less than 1 to 3 4 to 5 After 5
Contractual Obligations Total 1 Year Years Years Years
- ----------------------- ------- ------ ------- ------- -------
Revolving credit facility $ 5,865 $ -- $ 5,865 $ -- $ --
Senior secured notes 25,000 -- -- 25,000 --
Term loan 9,298 2,000 4,000 3,298 --
Operating leases 5,846 1,477 2,377 975 1,017
Postretirement benefit obligation 31,036 2,780 2,863 2,949 22,444
Pension benefit obligation 15,337 -- -- -- 15,337
Letters of credit 1,129 129 1,000 -- --
------- ------ ------- ------- -------
Total contractual obligations $93,511 $6,386 $16,105 $32,222 $38,798
======= ====== ======= ======= =======
As of December 31, 2001, we had no material commitments for capital
expenditures. We anticipate that the funds necessary to meet our current capital
requirements and those to be incurred in the foreseeable future will come from
operating cash flows and our credit facility. We believe that funds from a
number of these sources, coupled with cash on hand, will be sufficient to meet
our projected capital requirements for the near term.
Our pension benefit obligation is calculated based on an assumed 9.5% rate
of return on plan assets. The expected long-term rate of return on plan assets
reflects the average rate of earnings expected on the funds invested or to be
invested to provide for the benefits included in the projected benefit
obligation. We typically attempt to maintain a balanced investment portfolio
consisting of 50% equity instruments and 50% fixed income assets in order to
mitigate the impact of short-term highs and lows in the capital markets. An
analysis of the impact of a 1% change (i.e., if the actual long-term rate of
return was 8.5% instead of 9.5%) in the expected long-term rate of return on
plan assets would have increased or decreased our pension benefit obligation by
approximately $40,000 in 2001, depending on whether the actual long-term rate of
return was higher or lower by 1%.
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
25
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.
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 2002 earnings of approximately $150,000 of higher or lower
earnings, depending on whether the short-term rates rise or fall by 1%.
26
BUSINESS
General
We manufacture closed cell rubber foam products and custom mix rubber
polymers. We compete in several niche markets, including the manufacturing of
cross-linked polyethylene foam. Our products are used in a range of
applications, including:
o athletic equipment;
o sports medicine wraps;
o neoprene, or synthetic rubber wetsuits;
o hardware center products, such as do-it-yourself insulation, tubing,
gardening and construction kneepads;
o other consumer products, such as computer mouse pads and beverage can
insulators;
o insulation for refrigeration and air conditioning systems;
o automotive components; and
o other industrial products.
Our foam products operations, or foam group, consist of the manufacture of
closed cell rubber foam and related products and cross-linked polyethylene foam.
The foam group contributed approximately 72% and 73% of our net sales for the
years ended December 31, 2000 and 2001, respectively. Our custom rubber mixing
operations, or mixing group, mixes a variety of rubber polymers to serve a wide
range of end-use markets. The mixing group contributed approximately 28% and 27%
of our net sales for the years ended December 31, 2000 and 2001, respectively.
We combine purchases of raw materials for both the foam group and mixing group
to obtain volume discounts from our suppliers.
The manufacturing of all of our products begins with the blending of
synthetic compounds in a mixer. Our mixing group sells these compounds in
uncured sheet or strip form to our customers. Our foam group performs additional
manufacturing steps, including extruding, molding and curing, before selling
products to our customers.
Our History and Chapter 11 Bankruptcy Reorganization
We are the surviving corporation of a recent corporate reorganization
implemented in connection with the consummation of our Chapter 11 bankruptcy
proceedings in August 2001. Prior to the effective date of our corporate
reorganization, we were a wholly owned subsidiary of RBX Group, Inc. We are
currently a holding company with no business operations and own all of the
issued and outstanding stock of RBX Industries, Inc., through which all of our
manufacturing and distribution activities are conducted.
Our company and our former parent company, RBX Group, Inc. were formed by
AIP in October 1995 in connection with AIP's leveraged acquisition of RBX
Investors Inc. and its subsidiaries for approximately $210 million. Following
the RBX Investors acquisition, our company and our affiliates acquired the
Ensolite division of Uniroyal Technologies for approximately $26 million.
27
On December 5, 2000, certain unsecured creditors of our company filed an
involuntary bankruptcy petition for reorganization of our company under Chapter
11 of Title 11 of the U.S. Code in the U.S. Bankruptcy Court for the District of
Delaware, which we refer to in this prospectus as the Delaware Bankruptcy Court.
On December 7, 2000, our company, RBX Group, Inc. and eight of our subsidiaries
(Rubatex Corporation, Groendyk Manufacturing Company, Inc., OleTex Inc., Midwest
Rubber Custom Mixing Corp., Hoover-Hanes Rubber Custom Mixing Corp., Waltex
Corporation and UPR Disposition, Inc.), as debtors, each filed voluntary
petitions with the Delaware Bankruptcy Court for relief under Chapter 11.
By order dated as of February 2, 2001, the Delaware Bankruptcy Court
transferred the cases to the U.S. Bankruptcy Court for the Western District of
Virginia, Roanoke Division, or the Virginia Bankruptcy Court, where the cases
were consolidated for purposes of joint administration. In July 2001, the
Virginia Bankruptcy Court confirmed our second amended joint plan of
reorganization. In connection with our corporate reorganization, RBX Group, Inc.
merged into our company and our eight subsidiaries that also filed for relief
under Chapter 11 were merged into one company, Rubatex Corporation, which was
renamed RBX Industries, Inc. On August 27, 2001, which was the effective date of
the plan of reorganization, our company and RBX Industries, Inc. emerged from
our Chapter 11 proceedings. On that date, we entered into a $45 million secured
credit facility with Congress Financial Corporation to replace our
debtor-in-possession financing. In addition, we cancelled all of our equity
securities that were outstanding immediately before the effective date and we
issued:
o 950,000 new shares of our common stock, representing a 95% equity
interest in our company and new 12% secured notes in the aggregate
principal amount of $25 million, to persons having a beneficial
interest in our old 12% notes as of the record date determined by the
Virginia Bankruptcy Court; and
o 50,000 new shares of our common stock, representing a 5% equity
interest in our company and 67,416 new warrants to holders of general
unsecured claims against our company. As of April 15, 2002, the
warrants represented the right to acquire 67,416 shares of our common
stock (subject to anti-dilution adjustment) and the exercise price was
$48.00 per share. The warrants are exercisable at any time on or
before August 27, 2008.
The Foam Group
Products
Our foam group's products are formulated to provide specific performance
characteristics based on their end-use applications. Closed cell rubber foam is
produced by the expansion of synthetic rubber polymers through the infusion of
millions of gas-filled cells that are permanently sealed in the material. The
closed cell structure is flexible, resilient and shuts out water, dust and air,
which makes the material ideal for insulating, sealing, shock absorption and a
variety of other uses. Products made with closed cell rubber foam include:
o residential and industrial building insulation;
o plumbing insulation;
o automotive gaskets;
o home and hardware center products, such as grips, handles and foam
cushions;
o a broad range of consumer products such as wetsuits, ski masks and
knee braces;
28
o other sports medicine applications;
o foam beverage can insulators; and
o computer mouse pads.
Cross-linked polyethylene foam, which has many of the same physical
properties as closed cell rubber foam, is less elastic but relatively less
expensive and is easily thermoformed. Polyethylene foam is used in such products
as athletic mats, marine flotation buoys, ship fenders, shoe insoles and
artificial turf underlay. Silicone rubber is flame resistant and possesses a
number of exceptional physical and chemical properties that make it suitable for
products that are exposed to extreme temperatures. We manufacture silicone-based
products for a number of high-performance applications, including commercial
lighting, automobile gaskets, commercial aircraft, aerospace and electronics.
Products sold in the most basic form include:
o extruded sheets and tubes used for insulation in air conditioning,
plumbing and refrigeration; and
o molded sheets which are sold to manufacturers who slit, cut and
fabricate the material into industrial and consumer products ranging
from automotive gaskets to football padding to children's toys.
We also produce extruded shapes of closed cell rubber that are sold in
various lengths for specialized sealing or gasket applications that require
unusual profiles. Our products are sold in a variety of forms including sheets,
tubes, buns, rolls and extruded shapes.
Customers
The foam group serves a wide array of industrial and consumer end-user
markets. The foam group's base of over 3,000 current customers is comprised of a
large group of core customers who rely on our company for their ongoing needs
and a smaller number of customers who approach our company on a project-specific
basis. The foam group is able to serve both types of customers because of its
wide range of products, its design and production capabilities and its sales
force that is able to assess our customers' requirements in order to develop
products that meet their specifications. The size and diversity of the foam
group's customer base reduces our reliance on any individual customer or
industry segment.
Our foam group's products are sold primarily in the United States to end
product manufacturers, intermediate fabricators and distributors. End product
manufacturers operate in a wide range of industrial and commercial segments that
produce subassemblies and finished products. Fabricators slice and cut foam into
shaped pieces and then sell them to other manufacturers. Distributors purchase
tubes, sheets and buns for resale to smaller contractors.
Industry
Growth in the closed cell rubber foam and related products market is
expected to primarily come from increased use of closed cell rubber foam in
automotive sound and vibration insulation, new applications in sports and
leisure markets and growth in the consumer and residential housing markets for
heating, ventilation and air conditioning, or HVAC, insulation. The market
includes rubber foams sold for thermal insulation and for processing into
components or finished parts or products, but does not include rubber foams
manufactured by vertically integrated companies exclusively selling finished
products. The overall market is comprised of several segments that are defined
by the product's end use
29
and this market continues to expand as new products and applications are
developed. Some segments, such as insulation, represent a large share of the
overall market and have a large number of customers and suppliers. A number of
other segments represent niche product markets constituting a small share of the
overall market and have relatively few customers and suppliers. The overall
market includes a large number of customers from a variety of industries, and
even established customers in the larger segments of this market generally
represent only a small percentage of the market's total sales.
The Mixing Group
Products
Our mixing group mixes natural and synthetic rubbers with various additives
and fillers. The various ingredients of a custom formulation are carefully
weighed into a mixer that blends the components and feeds the mixture onto a
large mill. The milled rubber is then pulled off the mill in a wide ribbon,
cooled, and then cut into rough sheets or strips of uncured compound. These
sheets and strips are molded or extruded by the customer into a wide variety of
products including automobile tires and parts, industrial belts and hoses,
agricultural tools and equipment and roofing materials. The custom-mixed
compounds are delivered to customers in sheets or strips of uncured rubber which
the customers then process and fabricate into a variety of end-use products,
including automobile tires and parts, industrial belts and hoses, agricultural
tools and equipment and roofing materials. The mixing group's mixing lines
enable it to custom mix many different compounds concurrently and to respond
quickly to customers' requests, even for unusual formulations or small orders.
The mixing group included seven mixing lines until the closing of a portion of
our facilities in October 2001 reduced the number of mixing lines to four. We
believe these factors, combined with the mixing group's ability to maintain what
we believe to be a high level of product quality, enable the mixing group to
compete effectively on price, quality and service.
Customers
Our mixing group offers services primarily in the United States and serves
more than 200 current customers from a variety of industries. In most instances,
we supply the raw materials for a given customer formulation and charge the
customer on a "cost-plus" basis, reflecting raw material costs plus a usage fee
for time used on the mixing line. In cases where a customer supplies the raw
materials, the mixing group charges a "tolling" fee for providing the mixing
service. During 2001, sales to one customer accounted for approximately 26% of
the mixing group's net sales, which represents less than 10% of our total net
sales. No other customer accounted for more than 10% of the mixing group's sales
during these periods.
Industry
The critical elements in custom compounding are quality, service and
efficiency. The accuracy of the mix is critical to ensure smooth processing
through the customer's manufacturing equipment and the proper performance of the
finished product. While price is important, customers choose suppliers who can
provide rapid turnaround, maximize throughput and minimize waste while
maintaining high quality standards.
Sales, Marketing and Distribution
We rely on our direct sales force to market and sell the vast majority of
our products. Our direct sales force maintains contact with our customers. For
products targeted to certain markets, we use
30
independent sales agencies that have the industry expertise necessary to market
and sell the product effectively. For example, we rely on independent sales
agencies with automotive expertise to sell foam products to automotive original
equipment manufacturers. For certain products that are manufactured in standard
configurations, we sell directly to distributors for resale to end users. For
example, insulation tubing, which is manufactured in a number of standard sizes,
is sold to the construction industry through distributors. Products are
distributed either directly to customers or through distribution warehouses
strategically located throughout the United States.
Competition
We face domestic and foreign competition across our product lines ranging
from divisions of leading national and international manufacturers to small,
regional competitors. We believe that competition is based primarily on price,
product quality and customer service.
In addition, we face competition from a number of manufacturers located in
Asia that have lower operating and labor costs than we do, which in certain
instances allow these manufacturers to sell their products for lower prices.
We believe that our competitors include companies such as Owens Corning,
Armacell, Monarch Rubber, American National Rubber, Voltek, Sentinal, PolyOne
and Associated Rubber.
Raw Materials
Our key raw material inputs are synthetic polymers, specialty chemicals,
carbon black, synthetic fabrics, natural rubber and polyethylene. Raw material
purchases accounted for approximately 44% of the cost of goods sold by the foam
group and approximately 79% of the cost of goods sold by the mixing group in
2001. We purchase raw materials from a number of suppliers through short-term
purchasing arrangements and we believe that there are sufficient sources of
supply for the foreseeable future.
We expect that we will continue to experience raw material price
fluctuations from time to time. Many of the raw materials used by our company
are petrochemical derivatives, which are subject to periodic price fluctuations.
Trademarks and Patents
We have numerous trademarks and several patents registered in the United
States and several trademarks registered in a number of foreign countries, in
each case, for varying lengths of time. Our registered trademarks include
RBX(R), under which we market the majority of our rubber and insulation
products, Rubatex(R), under which we market a variety of insulation and related
products, Insul-Tube(R) and Therma-Cel(R), under which we market certain other
insulation products, Ensolite(R) under which we market certain cellular plastic
materials, SeaTex(R) under which we market closed cell foam sheets for use in
the manufacture of, among other things, wetsuits, and Comfortex(R) under which
we market closed cell foam laminated to various fabrics for use in the
manufacture of sports medicine/medical devices. We also have a number of
applications for trademarks pending in the United States and abroad. Management
considers its various trademarks, trademark applications and patents to be
valuable assets but believes that the loss of any one trademark or patent would
not materially adversely affect our operations.
Environmental Matters
We are 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, we may be responsible for the environmental clean-up
of property for contamination which occurred prior to our ownership. We are
involved in environmental remediation activities resulting from past operations,
including designation as a potentially responsible party, or PRP, at sites
designated for cleanup by state environmental agencies.
We are a PRP along with other PRPs 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
our company and other PRPs, we consider our share of the liability immaterial.
We are also a PRP along with other PRPs 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 we conduct a more extensive environmental study. We have
accrued approximately $2 million based on a consultant's estimate but are unable
to predict the outcome of this potential liability at this time.
Management believes the estimates discussed above will be sufficient to
satisfy anticipated costs of remediation at these two Superfund sites. At
December 31, 2001, approximately $2.2 million (undiscounted) for estimated
environmental remediation costs was accrued and substantially the entire amount
is included in long-term liabilities. Expenditures relating to costs currently
accrued are expected to be made over the next 5 to 10 years. As a result of
factors such as the continuing evolution of environmental laws and regulatory
requirements, the availability and application of technology, and the
identification of presently unknown remediation sites, estimated costs for
future environmental compliance and remediation are necessarily imprecise, and
it is not possible to predict the amount or timing of future costs of
environmental remediation requirements which may subsequently be determined.
Based upon information presently available, such future costs are not
expected to have a material adverse effect on our competitive or financial
position or our ongoing results of operations. However, such costs could be
material to results of operations in a future period.
31
Employees and Employee Relations
At December 31, 2001, we employed approximately 1,200 persons, of whom
approximately 27% were salaried employees and 73% were hourly employees.
Approximately 73% of our hourly employees are represented by labor unions
pursuant to collective bargaining agreements that expire between February 2002
and October 2005. In September 1999, over 400 production workers at our Bedford,
Virginia plant stopped work. In June 2000, the employees conditionally returned
to work, subject to the parties' ongoing negotiations. Our company and our
employees reached a consensual resolution and on or about March 28, 2001, the
workers at the Bedford plant agreed to the terms of a new collective bargaining
agreement. We believe that our current relations with both union and non-union
employees are good.
32
Seasonal Nature of Business
We participate in a number of markets, some of which have slight
seasonalities, but this wide market participation insulates against significant
seasonal business fluctuations.
Legal Proceedings
From time to time, we are involved in various legal proceedings arising in
the ordinary course of business. Management believes that none of the matters in
which our company is currently involved, either individually or in the
aggregate, should adversely affect our business or financial condition and
operating results.
Properties
In addition to our leased 17,000 square foot headquarters in Roanoke,
Virginia, we currently operate six manufacturing facilities, the majority of
which are located in the southeastern United States. We also lease public
warehouse facilities throughout the United States. Our leased facilities are
occupied under lease agreements that expire in 2009. The size and location of
our significant facilities are summarized below:
Location Size (sq. ft.) Leased/Owned
- -------- -------------- ------------
Bedford, VA ..... 235,000 Owned
Colt, AR ........ 223,000 Owned
Conover, NC ..... 387,000 Owned (1)
Buchanan, VA .... 77,000 Owned
South Holland, IL 165,000 Leased
Tallapoosa, GA .. 165,000 Owned
- -------
(1) Includes approximately 100,000 square feet of leased warehouse space.
We believe these facilities are adequate for our current and foreseeable
purposes and that additional space will be available when needed.
33
MANAGEMENT
Set forth below is the name, age as of April 15, 2002, and a brief
account of the business experience of each person who is, or was at April 15,
2002, a director or executive officer of our company.
Name Age Position
- ---- --- --------
Eugene I. Davis ......... 47 Chief Executive Officer and Chairman of the Board of
Directors of RBX Corporation and RBX Industries, Inc.
Richard W. Detweiler .... 60 Director, RBX Corporation and RBX Industries, Inc.
Eric R. Johnson ......... 41 Director, RBX Corporation and RBX Industries, Inc.
Stephen C. Larson ....... 53 Director, RBX Corporation and RBX Industries, Inc.
Joseph J. Radecki, Jr. .. 43 Director, RBX Corporation and RBX Industries, Inc.
Timothy J. Bernlohr ..... 43 Chief Operating Officer and Vice President of RBX
Corporation and RBX Industries, Inc.
Rodney P. Repka ......... 49 Vice President - Manufacturing, RBX Corporation and RBX
Industries, Inc.
Harry L. Schickling ..... 63 Vice President - Administration and Secretary, RBX
Corporation and RBX Industries, Inc.
Thomas W. Tomlinson ..... 42 Vice President - Finance, RBX Corporation and RBX
Industries, Inc.
Lynn A. Bakker .......... 55 Vice President - Technology, RBX Industries, Inc.
Dan N. Colbert .......... 53 Vice President - Customer Satisfaction and Supply, RBX
Industries, Inc.
William M. Allen ........ 67 Vice President - OleTex Division, RBX Industries, Inc.
Jack D. Williams ........ 66 Vice President - Custom Mixing Group, RBX Industries, Inc.
Eugene I. Davis joined our company as Chief Restructuring Officer in
January 2001 and became Chairman and Chief Executive Officer in September 2001.
Mr. Davis began his career as an attorney for Exxon Corporation and served as an
international attorney/negotiator in the oil industry for several years before
moving to the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. in Dallas,
Texas. From 1990 through 1997, Mr. Davis served in increasing positions of
responsibility at Emerson Radio Corporation, including Chief Financial Officer,
Executive Vice President, President and Vice Chairman of the Board. From 1998
through 1999, Mr. Davis served as Chief Operating Officer of Total-Tel USA
Communications, Inc. Since 1999, Mr. Davis has served as Chief Executive Officer
of Smartalk Teleservices, Inc. and Chairman and Chief Executive Officer of
Pirinate Consulting Group, L.L.C., a privately held consulting firm specializing
in, among other areas, crisis and turn-around management. Mr. Davis also serves
on the board of directors of COHO Energy, Inc., Murdock Communications
34
Corporation, Phonetel Technologies, Inc., Tipperary Corporation and on the
Council of Advisors of PPM America Special Investment Funds.
Richard W. Detweiler has been a director of our company and RBX Industries,
Inc. since August 2001. Mr. Detweiler has 30 years of experience in general
management, manufacturing and finance in a diverse array of product
technologies, service industries and global environments. Since October 1996,
Mr. Detweiler has been a Managing Director at Carlisle Enterprises, LLC. From
February 1990 to October 1996, he was Chairman and CEO of Precision Aerotech,
Inc., where he completed a complicated restructuring and turnaround of a
diversified, publicly traded, manufactured products company. Mr. Detweiler is
currently a director of Treesource Industries, Inc. and Precision Partners, Inc.
Eric R. Johnson has been a director of our company and RBX Industries, Inc.
since August 2001. Since March 1997, Mr. Johnson has been a Vice President at
Conseco Capital Management (CCM). As founder of the Special Assets Unit, he
oversees the management of distressed investments for CCM-managed portfolios.
Over his 17-year career, Mr. Johnson has been involved in the reorganization and
restructuring of numerous companies. Mr. Johnson began his career at
Manufacturers Hanover Trust Company (MHT) and is a graduate of MHT's Credit
Training Program. After several credit-related line assignments at MHT,
including the Special Loan Group and the Merchant Banking Group, Mr. Johnson
joined National Westminster Bank Plc in 1987. During his tenure at National
Westminster Bank, he served in positions of increasing responsibility as a
manager of proprietary high yield/bankruptcy/distressed portfolios. Prior to
joining CCM in March 1997, Mr. Johnson was employed by Havens Advisors, L.L.C,
specializing in bankruptcy and distressed securities.
Stephen C. Larson has been a director of our company and RBX Industries,
Inc. since August 2001. Mr. Larson is now a private investor residing in
Scottsdale, Arizona. Mr. Larson had a 26 year career with International Forest
Product companies. From 1997 to 2000, he worked at Repap Enterprises, leaving as
President and Chief Executive Officer. From 1991 to 1997, he worked at Domtar
Inc. and was the President and Chief Operating Officer. Mr. Larson was employed
by Boise Cascade Corporation from 1976 to 1991, leaving as Senior Vice
President.
Joseph J. Radecki, Jr. has been a director of our company and RBX
Industries, Inc. since August 2001. Since March 1998, Mr. Radecki has been a
Managing Director in the leveraged finance group at CIBC World Markets Corp.,
where he is principally responsible for the firm's financial restructuring and
distressed situation advisory practice. From March 1990 to March 1998, he was
Executive Vice President in charge of the financial restructuring advisory group
at Jefferies & Company, Inc. From 1983 to 1990, Mr. Radecki was First Vice
President in the International Capital Markets Group at Drexel Burnham Lambert,
Inc., where he specialized in financial restructurings and recapitalizations.
Mr. Radecki is also currently a director of Wherehouse Entertainment, Inc.
Timothy J. Bernlohr has been Chief Operating Officer of our company since
September 2001 and a Vice President of our company since July 1997. Prior to
becoming Chief Operating Officer, Mr. Bernlohr received a Senior Vice President
designation in July 1998 and an Executive Vice President designation in July
2000. Prior to joining our company, Mr. Bernlohr spent 16 years with Armstrong
World Industries and spent his last five years at Armstrong as Division Sales &
Market Manager, North America for Armstrong's closed cell rubber and
polyethylene foam businesses.
Rodney P. Repka has been a Vice President of our company since January
2000. From September 1996 to January 2000, Mr. Repka was Director of
Manufacturing for AlliedSignal Specialty Films Division. Mr. Repka's previous
experience includes 12 years with Mobil Chemical Company in
35
various manufacturing positions, including Director of Manufacturing for Mobil's
Tucker Housewares Division.
Harry L. Schickling has been a Vice President of our company since 1990. He
joined our company in 1980 as Manager of Computer Systems & Software and also
held the position of Environmental and Legal Director before his promotion to
Vice President and Secretary. Immediately before coming to our company, Mr.
Schickling headed the Navy Field Engineering Office in Charleston, South
Carolina. Prior to that, he held various positions with Honeywell Aerospace,
Sears Roebuck & Company and the U.S. Navy.
Thomas W. Tomlinson has been a Vice President of our company since 2000. He
joined the company in 1997 as Corporate Accounting Manager and also held the
position of Corporate Controller prior to his promotion to Vice President. Prior
to joining our company, Mr. Tomlinson spent 10 years with PricewaterhouseCoopers
where he held various positions including, most recently, Senior Manager.
Lynn A. Bakker has been a Vice President of our company since July 1998.
Prior to joining our company, Mr. Bakker spent seven years at Perma-Flex N.A.,
first as Vice President & General Manager, then as Executive Vice President and
finally as President. Prior to 1991, Mr. Bakker served as Plant Chemist and
Director of Research & Development for Uniroyal Plastics and as Research Chemist
for American Roller Company.
Dan N. Colbert has been a Vice President of our company since March 2000.
Prior to joining our company, Mr. Colbert spent 27 years with Xerox Corporation.
William M. Allen has been a Vice President of our company since October
1994. Mr. Allen has been the head of our OleTex division for 22 years.
Jack D. Williams has been a Vice President of our company since 1970. From
1957 to 1970, he held various other positions at our company, including
Production Manager and Lab Manager.
Board of Directors
Our directors are elected annually to serve until the next annual meeting
of shareholders or until their successors are duly elected and qualified. Our
board of directors elects our executive officers annually to serve until the
next annual meeting of the board of directors, or until their successors are
duly elected and qualified, or until their earlier death, resignation,
disqualification or removal from office. The current members of our board of
directors were selected in accordance with the terms of our plan of
reorganization and were nominated by the holders of our old 12% notes.
36
Executive Compensation
Summary Compensation Table. The following table sets forth information
concerning the compensation for Mr. Davis, Chief Executive Officer and Chairman
of the Board of Directors of our company, and the four other most highly
compensated officers of our company for the years indicated.
Annual Compensation
-------------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation (2) Compensation (3)
- --------------------------- ---- ------ ----- ---------------- ----------------
Eugene I. Davis (1) 2001 $540,000 $ - $ - $ -
Chief Executive Officer and Chairman 2000 - - - -
1999 - - - -
John C. Cantlin 2001 201,775 50,000 - 2,625
Former Executive Vice President, Chief 2000 210,000 - - 3,063
Financial Officer and Treasurer 1999 210,000 464,205 - 4,000
Timothy J. Bernlohr 2001 185,769 80,000 - 3,433
Chief Operating Officer and Vice President 2000 175,000 - - 3,792
1999 173,667 464,205 - 4,000
Rodney P. Repka 2001 159,946 68,000 - 4,669
Vice President - Manufacturing 2000 160,000 20,000 21,433 -
1999 - - - -
Lynn A. Bakker 2001 163,645 - - 2,675
Vice President - Technology 2000 161,982 15,000 - 3,078
1999 157,329 25,000 20,683 -
- ---------------
(1) Mr. Davis became our Chief Restructuring Officer in January 2001 and was
not employed by our company in 1999 or 2000. In September 2001, Mr. Davis
became our Chief Executive Officer and Chairman.
(2) Reflects payments made by our company for relocation expenses. No other
annual compensation is reported for Mr. Davis, Mr. Cantlin, or Mr. Bernlohr
because perquisites and personal benefits did not exceed the lesser of
$50,000 and 10% of the total annual salary and bonus reported for these
named executive officers.
(3) Reflects our matching contributions to the 401(k) plan of Mr. Cantlin, Mr.
Bernlohr, Mr. Repka and Mr. Bakker.
Stock Options. In connection with our plan of reorganization, all options
to acquire our common stock that were outstanding immediately before the
effective date of the plan were cancelled. On August 27, 2001, pursuant to our
plan of reorganization, our board of directors adopted a stock option plan. The
primary purposes of the management stock option plan are to attract and retain
employees, consultants and directors and provide plan participants with an
ownership interest in our company. The stock option plan provides for the grant
of up to 56,180 stock options, subject to adjustment for stock splits and
similar capital changes. As of December 31, 2001, no stock options had been
granted under this plan.
A committee comprised of five members of our board of directors administers
the stock option plan. Generally, stock options will be exercisable for 10 years
from the date that the option is granted. The committee will select the
participants and establish the terms and conditions of each stock option grant,
including vesting schedules.
37
Pension Plans
We maintain a noncontributory defined benefit pension plan covering certain
of our employees, including the executive officers listed in the foregoing
tables. The accrued monthly benefit ordinarily payable under this plan is equal
to 1/12 multiplied by:
o 0.5% of the average compensation (including merit bonuses) received by
a participant during the five consecutive calendar years of employment
that would produce the highest such average, which we refer to in this
prospectus as the final average compensation, times the years of
service of the participant with our company and certain related or
predecessor employers not in excess of 35 years; plus
o 0.5% of the final average compensation that is in excess of the social
security taxable wage base times years of benefit service.
The compensation covered by this plan generally corresponds to the annual
salary and merit bonus amounts reported in the preceding summary compensation
table. For calendar years starting on and after January 1, 1994, the total
compensation that can be considered for any purpose under the plan is limited to
$150,000 pursuant to requirements imposed by the Internal Revenue Code of 1986,
as amended, which we refer to in this prospectus as the Code. The Code also
places certain other limitations on the annual benefits that may be paid under
the plan. However, the benefits payable under the plan are not reduced for any
social security payments that may be received by a participant.
The estimated annual benefits payable under the plan (as a straight life
annuity commencing at age 65) for employees not covered by the SERP are
illustrated below:
Years of Service
Final Average ------------------------------------------------------------------------------------------------
Compensation 15 20 25 30 35
$125,000 $16,682 $22,242 $27,803 $33,364 $38,924
$150,000 and above 20,432 27,242 34,053 40,864 47,674
We also have an unfunded supplemental retirement plan for certain
designated employees, or SERP, which is designed to supplement the benefits
payable to participants under the plan and certain other plans of our company.
The annual benefit ordinarily payable under the SERP is equal to 50% of the
participant's final average compensation (as determined under the plan),
calculated based on a maximum compensation of $235,840 (or, if greater, the
amount of the pay limit then in effect), but reduced by:
o the sum of all benefits under the plan and any other qualified plans
maintained by our company;
o the amount of monthly social security benefit payments received by the
participant; and
o the amount of any long-term disability payments to the participant.
The SERP has the effect of establishing a minimum pension level for
participating executives, regardless of participation in the qualified plans.
38
Compensation of Directors
We pay directors an annual retainer of $20,000 and a $1,000 per meeting fee
for attendance at meetings of our board of directors or any committee of which
the director is a member. A committee chairman is paid a $2,000 per meeting fee
for attendance at each committee meeting. In addition, directors are reimbursed
for travel expenses and other out-of-pocket costs incurred in connection with
their attendance at meetings at a rate of $500 per day of travel.
Compensation Committee Interlocks and Insider Participation
In 2001, Messrs. Davis, Detweiler, Johnson, Larson and Radecki served on
our compensation committee. In 2001, Mr. Davis was the only member of our
compensation committee who was an officer or employee of our company. The
purpose of our compensation committee is to establish and manage the total
compensation and bonus incentive awards for the officers and directors of our
company.
Employment Agreements
Our wholly owned subsidiary, RBX Industries, Inc., has entered into
employment agreements with each of Timothy J. Bernlohr, our Chief Operating
Officer and Vice President, and Rodney P. Repka, our Vice
President--Manufacturing. Each agreement is dated as of October 24, 2001 and
contains identical terms with the exception of base salary figures. Under the
terms of these employment agreements, employment may be terminated by RBX
Industries, Inc. or the employee at any time. However, if employment is
terminated prior to September 1, 2002 for any reason other than for cause, the
employee is entitled to receive base salary, health insurance, life insurance,
disability benefits and accrued and unused vacation pay through September 1,
2002. Under each employment agreement, the employee is entitled to receive a
bonus based upon RBX Industries, Inc.'s Annual Incentive Plans for 2001 and
2002, retirement benefits based upon RBX Industries, Inc.'s Pension Plan and
401(k) Savings Plan and severance benefits based upon RBX Industries, Inc.'s new
standard severance program, subject to the approval and adoption of the program
by the board of directors of RBX Industries, Inc. Under the terms of the
employment agreements, we currently pay Timothy J. Bernlohr an annual salary of
$210,000 and we pay Rodney P. Repka an annual salary of $175,000. We have not
entered into employment agreements with Eugene I. Davis, our Chief Executive
Officer and Chairman, and Lynn A. Bakker, our Vice President - Technology.
Indemnification of Directors and Executive Officers and Limitation on Liability
Our amended and restated certificate of incorporation and amended and
restated bylaws provide that we indemnify our directors and executive officers
to the fullest extent permitted by Delaware law for damages resulting from
conduct as a director or executive officer. In addition, we carry an insurance
policy for the protection of our directors and executive officers against any
liability asserted against them in their official capacities. To the extent that
indemnification for liabilities under the Securities Act of 1933 may be
permitted to directors or executive officers of our company, we have been
informed that in the opinion of the Securities and Exchange Commission, this
indemnification is against public policy as expressed in the Securities Act, and
is therefore unenforceable.
39
PRINCIPAL AND SELLING HOLDERS
The following table sets forth, as of April 15, 2002, certain information
regarding beneficial ownership of our common stock by each selling holder and
each other person who is known by our company to be the beneficial owner of more
than 5% of the common stock. None of our directors and none of our executive
officers named in the summary compensation table appearing in this prospectus is
the beneficial owner of any of our common stock. The information provided in the
table below with respect to the selling holders has been obtained from the
selling holders.
As of April 15, 2002, we had 1,000,000 shares of common stock issued and
outstanding. To our knowledge, each holder named below has sole voting and
investment power as to the shares of common stock listed below. In calculating
the percentages of ownership, all shares of common stock that each selling
holder had the right to acquire within 60 days of April 15, 2002 upon the
exercise of warrants are deemed to be outstanding for the purpose of computing
the percentage of shares of common stock owned by such holder, but are not
deemed to be outstanding for the purpose of computing the percentage of shares
owned by any other person.
Beneficial Ownership Beneficial Ownership
Prior to the Offerings After the Offerings
------------------------- -------------------------
Number of
---------
Shares of
---------
Number of Common Number of
--------- ------ ---------
Shares of Stock Offered Shares of
--------- ------------- ---------
Common by this Common
Name and Address of ------ ------- -------
Beneficial Owner Stock Percent Prospectus Stock Percent
- ---------------- ----- ------- ---------- ----- -------
Foothill Partners III, L.P. (1)
c/o Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404..... 255,739 (2) 25.57% 255,739 (2) 0 *
The Equitable Life Assurance
Society of the United States (3)
c/o Alliance Capital
Management L.P.
1345 Avenue of the Americas
New York, New York 10105........... 149,625 14.96% 149,625 0 *
PPM American Special Investments (4)
CBO II, L.P.
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606............ 108,300 10.83% 108,300 0 *
40
PPM America Special Investments(5)
Fund, L.P.
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606............ 85,975 8.60% 85,975 0 *
Alliance Capital Investment
Opportunities Fund(6)
c/o Alliance Capital
Management L.P.
1345 Avenue of the Americas
New York, New York 10105........... 47,500 4.75% 47,500 0 *
- --------
(1) The Foothill Group, Inc., a Delaware corporation, Stearns Family Trust
2001, Dennis R. Ascher, Jeffrey T. Nikora Living Trust and John F. Nickoll
Living Trust, each, as the general partners of Foothill Partners III, L.P.
have shared voting and dispositive powers with respect to Foothill Partners
III, L.P.'s shares of the company's common stock.
(2) Includes 11,563 shares of common stock issuable upon exercise of warrants.
(3) The Equitable Life Assurance Society of the United States is a subsidiary
of AXA Financial, Inc. (NYSE: AXA).
(4) PPM America Special Investments CBO II, L.P. is an investment fund. PPM
America CBO II Management Company, as general partner of PPM America
Special Investments CBO II, L.P., and PPM America, Inc., as investment
manager/adviser to PPM America Special Investments CBO II, L.P., have
shared voting and dispositive powers with respect to PPM America Special
Investments CBO II, L.P.'s shares of the company's common stock.
(5) PPM America Special Investments Fund, L.P. is an investment fund. PPM
America Fund Management GP, Inc., as the managing general partner of PPM
America Special Investments Fund, L.P., and PPM America, Inc., as
investment manager/adviser to PPM Americal Special Investments Fund, L.P.,
have shared voting and dispositive powers with respect to PPM America
Special Investments Fund, L.P.'s shares of the company's common stock.
(6) Alliance Capital Management L.P. as managing member of Alliance Capital
Investment Opportunities Fund has shared voting and dispositive powers with
respect to Alliance Capital Investment Opportunities Fund's shares of the
company's common stock. Alliance Capital Management L.P. is a subsidiary of
AXA Financial, Inc. (NYSE: AXA).
* Less than 1%.
The following table sets forth, as of April 15, 2002, certain information
regarding beneficial ownership of our notes by each selling holder. None of our
directors and none of our executive officers named in the summary compensation
table appearing in this prospectus is the beneficial owner of any of our notes.
Beneficial Ownership Beneficial Ownership
Prior to the Offerings After the Offerings
---------------------- -------------------
Aggregate
---------
Principal
---------
Amount of Aggregate
--------- ---------
Aggregate Notes Offered Principal
--------- ------------- ---------
Principal by this Amount of
Name and Address of --------- ------- ---------
Beneficial Owner Amount of Notes Prospectus Notes
- ---------------- --------------- ---------- -----
Foothill Partners III, L.P.
c/o Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404..... $6,200,000 $6,200,000 $0
The Equitable Life Assurance
Society of the United States
c/o Alliance Capital
Management L.P.
1345 Avenue of the Americas
New York, New York 10105........... $3,937,000 $3,937,000 $0
PPM American Special Investments
CBO II, L.P.
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606............ $2,850,000 $2,850,000 $0
41
PPM America Special Investments
Fund, L.P.
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606............ $2,263,000 $2,263,000 $0
Alliance Capital Investment
Opportunities Fund
c/o Alliance Capital
Management L.P.
1345 Avenue of the Americas
New York, New York 10105........... $1,250,000 $1,250,000 $0
42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We describe below some of the transactions we have entered into with
parties that are related to our company.
Registration Rights Agreement
On August 27, 2001, we entered into a registration rights agreement with
The Equitable Life Assurance Society of the United States, Alliance Capital
Investment Opportunities Fund, PPM American Special Investments Fund, L.P., PPM
American Special Investments CBO II, L.P. and Foothill Partners III, L.P. Under
the registration rights agreement, as amended, we agreed to file this
registration statement, on or before February 22, 2002, relating to the offer
and sale by such persons of our notes, warrants and shares of our common stock.
In addition, under the registration rights agreement, we agreed to use our
reasonable best efforts to have this registration statement declared effective
by the SEC as soon as practicable after February 22, 2002, but no later than
April 20, 2002.
We are required to bear all expenses incident to the registration. We
agreed to indemnify the holders of the restricted securities against all
liabilities, whether under the securities laws or otherwise, arising out of
disclosure deficiencies in the registration statement. Our indemnity obligation
does not, however, extend to liability for information pertaining to a holder
and furnished to our company by or on behalf of such holder for inclusion in
this registration statement.
We are obligated to keep this registration statement continuously
effective, supplemented and amended in order to permit the holders of the
restricted securities to lawfully deliver the prospectus included in this
registration statement for a period of four years (subject to adjustment in
certain events). We need not maintain the effectiveness of the registration
statement after all of the restricted securities have been sold or for the
benefit of any holder that holds shares of common stock representing less than
10% of the shares of common stock then outstanding.
Transactions with American Industrial Partners
Historically, we have received substantial ongoing financial and management
services from American Industrial Partners, an affiliate of the majority owners
of our former stockholder. Management and consulting fees expense related to AIP
were $850,000, $850,000 and $795,000 for 1998, 1999 and 2000, respectively, plus
out-of-pocket expenses. Although such management fees were accrued, there were
no cash payments of management fees made in 1998, 1999 and 2000. Out-of-pocket
expenses of $269,000, $289,000 and $191,000 were reimbursed in cash for 1998,
1999 and 2000, respectively.
Transactions with Former Director
We paid Tom H. Barrett, a former member of our Board of Directors, a fee of
$150,000 in 1998 and 1999. Mr. Barrett's fee was paid as compensation associated
with his role as chairman of the boards of directors of our ten corporations
existing at the time. The fee was approved by unanimous vote of the boards of
directors. In his role as Chairman, Mr. Barrett was actively involved in
observing plant operations and administrative matters. Additionally, Mr. Barrett
traveled with our sales force to call on major customers.
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DESCRIPTION OF SECURITIES
Description of Common Stock
Our company is authorized to issue 6,000,000 shares, 5,000,000 of which are
designated as common stock with a par value of $0.001 per share and 1,000,000 of
which are designated as preferred stock with a par value of $0.001 per share. As
of April 15, 2002, 1,000,000 shares of common stock were outstanding and no
shares of preferred stock were outstanding. Our board of directors is
authorized, subject to any limitations prescribed by law and our amended and
restated certificate of incorporation, to provide for the issuance of preferred
stock in one or more series and to fix or alter the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series of preferred stock. The number of authorized shares of preferred
stock may be increased or decreased (but not below the number of shares then
issued and outstanding).
All shares of common stock are identical and entitle the holders thereof to
the same rights and privileges. The issued and outstanding shares of our common
stock are validly issued, fully paid and non-assessable. The holders of
outstanding shares of our common stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the board
of directors may from time to time determine. The shares of our common stock are
neither redeemable nor convertible, and the holders thereof have no preemptive
or subscription rights to purchase any of our securities. Upon liquidation,
dissolution or winding up of our company, the holders of our common stock are
entitled to receive pro rata our assets which are legally available for
distribution, after payment of all debts and other liabilities and subject to
the prior rights of any holders of any preferred stock then outstanding. Each
outstanding share of our common stock is entitled to one vote on all matters
submitted to a vote of stockholders.
Description of Warrants
We issued warrants representing the right to acquire up to 67,416 shares of
our common stock (subject to customary anti-dilution adjustments) under a
warrant agreement that we entered into on August 27, 2001 with The Bank of New
York, as warrant agent. The exercise price of each warrant on April 15, 2002 was
$48.00. This price is subject to adjustment upon stock dividends, splits and
combinations as well as certain anti-dilution adjustments as set forth in the
warrant agreement.
Foothill Partners III, L.P. is currently entitled to 11,563 warrants to
purchase shares of our common stock. All 67,416 of the warrants issuable under
the warrant agreement (including the 11,563 warrants that Foothill is currently
entitled to) are currently held in the name of our company, as distribution
agent under our plan of reorganization, for the benefit of the holders of
Allowed Class 5 Claims within the meaning of the plan of reorganization, pending
final determination of each holder's pro rata entitlement thereto.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock and warrants is The
Bank of New York.
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Description of Notes
General
We issued 12% senior secured notes, which we refer to below as the Notes,
under an indenture dated August 27, 2001 between our company and State Street
Bank and Trust Company, as trustee.
The following discussion summarizes material provisions of the Notes and
the indenture under which the Notes were issued. Because this is only a summary,
it is not complete and does not describe every aspect of the Notes and the
indenture. Whenever there is a reference to particular sections or defined terms
of the indenture, the sections or defined terms are incorporated by reference,
and the statement is qualified in its entirety by that reference. The definition
of certain capitalized terms used in the following summary are set forth below
under "-Certain Definitions." Other capitalized terms are terms that are defined
in the indenture. In this description, we refer to "we" and "our company" as RBX
Corporation and not to our subsidiaries.
Principal
The Notes are limited in aggregate principal amount to $25 million, except
that, during the period beginning August 27, 2001 and ending on August 15, 2004,
so long as no Default or Event of Default is then continuing, we may elect to
pay interest on all or any portion of the outstanding Notes by the issuance of
Additional Notes at a rate of 12% per annum in lieu of cash. Each Additional
Note will be an additional obligation of our company and the Subsidiary
Guarantors and will be governed by, and entitled to the benefits of, the
indenture and will be subject to the terms of the indenture and will rank
equally in right of payment with and be subject to the same rate of interest and
other terms as all other Notes (except, as the case may be, with respect to the
issuance date and aggregate principal amount) and will have the benefit of all
Liens securing Notes.
Maturity and Interest
The Notes mature on August 15, 2006. Interest on the Notes accrues at the
rate of 12% per annum and is payable semi-annually in arrears on February 15 and
August 15, commencing on February 15, 2002, to Holders of record on the
immediately preceding February 1 and August 1. Interest on the Notes accrues
from the most recent date on which interest has been paid or, if no interest has
been paid, from the date of original issuance, or in case of Additional Notes,
from the date of issuance of such Additional Notes. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Notes are payable at our
office or agency maintained for such purpose within the City and State of New
York or, at our option, payment of interest may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, premium, interest
with respect to Notes the Holders of which have given wire transfer instructions
to our company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by our company, our office or agency in New York will be
the office of the trustee maintained for such purpose. The Notes were issued in
denominations of $1,000 and integral multiples thereof, with the exception of
Notes originally issued in such denominations as may be required under our Plan
of Reorganization or the indenture which may be subsequently transferred in such
denominations.
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Ranking and Security
The Notes rank equally in right of payment with all Indebtedness of our
company that is not subordinated to the Notes, including borrowings under the
New Credit Agreement. The Notes rank senior to any Indebtedness of our company
that is subordinated to the Notes.
The Notes are unconditionally guaranteed on a senior secured basis by each
of the Subsidiary Guarantors. See "--Subsidiary Guarantees." The Subsidiary
Guarantees rank equally in right of payment with all Indebtedness of the
Subsidiaries Guarantors that is not subordinated to such Subsidiary Guarantees,
including guarantees of borrowings under the New Credit Agreement. The
Subsidiary Guarantees rank senior to any Indebtedness of the Subsidiary
Guarantors that is subordinated to such Subsidiary Guarantees.
The Notes and the Subsidiary Guarantees are secured by second priority
Liens on substantially all of the assets of our company and the Subsidiary
Guarantors and the proceeds thereof, whether now owned or hereafter acquired.
The Collateral owned by our company includes, without limitation (whether
now owned or hereafter acquired):
o the outstanding Capital Stock of our Subsidiaries;
o our material owned personal property, plant, equipment, furnishings
and fixtures;
o some of our owned manufacturing and warehouse facilities, including
additions and improvements and our leasehold interests in some of our
leased manufacturing facilities;
o our trademarks, patents and copyrights and related intellectual
property; and
o some of our other assets.
The Collateral owned by the Subsidiary Guarantors includes, without
limitation (whether now owned or hereafter acquired):
o the Subsidiary Guarantors' material owned personal property, plant,
equipment, furnishings and fixtures;
o some of the Subsidiary Guarantors' owned manufacturing and warehouse
facilities, including additions and improvements and the Subsidiary
Guarantors' leasehold interests in certain leased manufacturing
facilities;
o the Subsidiary Guarantors' trademarks, patents and copyrights and
related intellectual property; and
o some of the Subsidiary Guarantors' other assets.
The indenture and the Collateral Documents require that our company and our
Subsidiaries pledge all After-Acquired Property of the types described above as
Collateral under the indenture and the Collateral Documents.
Pursuant to the Plan of Reorganization, the trustee, the agent under the
New Credit Agreement, or Agent, our company and the Subsidiary Guarantors
entered into an Intercreditor Agreement, which defines the rights between the
trustee and the Agent with respect to the New Credit Agreement Collateral. Among
other things, the Intercreditor Agreement provides that the Agent will be
entitled to sell or dispose of the New Credit Agreement Collateral without
regard to the Lien of the indenture and
46
the Collateral Documents, except that the Agent is required to promptly deliver
to the trustee any proceeds remaining from such sale, transfer or other
disposition of the New Credit Agreement Collateral after payment and
satisfaction of all Obligations under the New Credit Agreement. Moreover, the
trustee, on behalf of itself and the holders of the Notes, will agree to release
the Lien of the Indenture and the Collateral Documents in the New Credit
Agreement Collateral to allow any sale or disposition of such collateral for the
benefit of the lenders under the New Credit Agreement if such sale or
disposition is made in accordance with the provisions of the Indenture. Under
the Intercreditor Agreement, the trustee will agree, on behalf of itself and the
holders of the Notes, that without the prior written consent of the Agent, it
will not exercise any rights of enforcement with respect to New Credit Agreement
Collateral until the Obligations under the New Credit Agreement have been paid
and satisfied in whole.
The Notes are effectively subordinated to existing and future secured
Indebtedness to the extent of any assets serving as collateral for such
Indebtedness, and each Subsidiary Guarantee likewise is effectively subordinated
to existing and future secured Indebtedness of the respective Subsidiary
Guarantors to the extent of any assets serving as collateral for such
Indebtedness. In that regard, borrowings by our company under the $45 million
New Credit Agreement, and the guarantees thereof by each of the Subsidiary
Guarantors, will be secured by a first priority Lien on the New Credit Agreement
Collateral, and the Notes and the Subsidiary Guarantees are secured by a Lien on
such collateral that is junior to the Lien securing the New Credit Agreement. In
addition, the indenture permits our company and the Subsidiary Guarantors to
create Purchase Money Liens securing Purchase Money Obligations, and the Notes
and the Subsidiary Guarantees are also effectively subordinated to such Purchase
Money Obligations and other obligations secured by such Purchase Money Liens to
the extent of any assets serving as collateral for such Indebtedness.
Upon the occurrence and during the continuance of an Event of Default, the
trustee will have the right to exercise on behalf of the holders of the Notes
such remedies, including, subject to the Intercreditor Agreement, such remedies
with respect to the Collateral as are available under the indenture, the
Collateral Documents and at law. All funds distributed under the Collateral
Documents and received by the trustee for the benefit of the Holders of the
Notes will be distributed by the trustee in accordance with the provisions of
the indenture.
Under the terms of the indenture and the Collateral Documents, the trustee
will determine the circumstances and manner in which to dispose, subject to the
Intercreditor Agreement, of the Collateral, including, but not limited to, the
determination of whether to release all or any portion of such Collateral from
the Liens created by the Collateral Documents and whether to foreclose on such
Collateral following an Event of Default. The right of the trustee to repossess
and dispose of the Collateral upon the occurrence of an Event of Default under
the Indenture is subject to the provisions of the Intercreditor Agreement and,
with respect to any Collateral, likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy case were to be commenced by or
against our company or any of our Subsidiaries prior to the trustee having
repossessed and disposed of the Collateral, and, in the case of real property
Collateral, could also be significantly impaired by restrictions under state
law.
The indenture permits the release of Collateral without the substitution of
additional Collateral under certain circumstances, including in connection with
certain Asset Sales. See "--Possession, Use and Release of Collateral." As
described under "--Certain Covenants--Asset Sales," the Net Proceeds of Asset
Sales may be required to be utilized to make an Asset Sale Offer. To the extent
an Asset Sale Offer is not accepted by Holders, the unutilized Net Proceeds will
be retained by our company or the applicable Subsidiary Guarantor, free and
clear of the Lien of the Indenture and the Collateral Documents. In addition,
the term "Asset Sale," as defined in the indenture, excludes certain sales or
other dispositions of assets. As a result, our company and our Subsidiaries are
permitted to sell certain
47
assets without compliance with the foregoing provisions. The Collateral will
also be released as security for the Notes and the Guarantees upon a legal
defeasance or covenant defeasance of the Notes and, upon the release of any
Subsidiary Guarantor as described in the last paragraph under "--Subsidiary
Guarantees" below, the Collateral pledged by such Subsidiary Guarantor will be
released as security for its Subsidiary Guarantee.
We have not conducted appraisals of the Collateral in connection with the
offering of the Notes pursuant to the Plan of Reorganization. The consolidated
book value of the Collateral as of August 27, 2001 was approximately $127.7
million. The amount realized in respect of the Collateral in the event of a
liquidation will depend upon market and economic conditions, the availability of
buyers and similar factors. In that regard, the New Credit Agreement Collateral
is material to our company and our Subsidiaries and is necessary to operate our
respective businesses. As a result, the trustee and the Holders of the Notes do
not have the benefit of a first priority Lien on all the assets necessary to
continue to operate our business in the ordinary course of business. In
addition, the fact that the lenders under the New Credit Agreement have a first
priority Lien on the Collateral has a material adverse effect on the amount that
would be realized upon a liquidation of the Collateral. Accordingly, we cannot
assure you that proceeds of any sale of the Collateral pursuant to the indenture
and the related Collateral Documents following an Event of Default would be
sufficient to satisfy, or would not be substantially less than, amounts due
under the Notes. If the proceeds of any of the Collateral were not sufficient to
repay all amounts due on the Notes, the holders of the Notes (to the extent not
repaid from the proceeds of the sale of the Collateral) would have only an
unsecured claim against the remaining assets of our company and the Subsidiary
Guarantors. By its nature, some or all of the Collateral will be illiquid and
may have no readily ascertainable market value. Likewise, we cannot assure you
that the Collateral will be saleable, or, if saleable, that there will not be
substantial delays in its liquidation. To the extent that Liens, rights or
easements granted to third parties encumber assets located on property owned by
our company or the Subsidiary Guarantors, including the New Credit Agreement
Collateral, such third parties have or may exercise rights and remedies with
respect to the property subject to such Liens that could adversely affect the
value of the Collateral and the ability of the trustee or the holders of the
Notes to realize or foreclose on Collateral.
Subsidiary Guarantees
Our payment obligations under the Notes will be unconditionally guaranteed
on a joint and several basis by each of the Subsidiary Guarantors. As of the
date of this prospectus, we only have one subsidiary - RBX Industries, Inc. As
used in this description of notes, the term "Subsidiary Guarantor" refers to any
subsidiaries of our company that may become party to the indenture in the future
which agree to guarantee the notes. The obligations of each Subsidiary Guarantor
under its Subsidiary Guarantee, and the grant by each Subsidiary Guarantor of
Liens on the Collateral of each Subsidiary Guarantor to secure its obligations
under its Subsidiary Guarantee, are subject to various laws for the protection
of creditors, including, without limitation, laws governing fraudulent
conveyances and transfers. To the extent that the obligations of the Subsidiary
Guarantor under its Subsidiary Guarantee, or the Lien granted by the Subsidiary
Guarantor on its Collateral, were held to be unenforceable as a fraudulent
conveyance or transfer or for other reasons, the holders of Notes would cease to
have any direct claim against the Subsidiary Guarantor, cease to have any Lien
on the assets of such Subsidiary Guarantor, or both, as appropriate. In an
attempt to avoid this result, the Subsidiary Guarantees provide that the
obligations of each Subsidiary Guarantor thereunder are limited to the maximum
amount as will not constitute a fraudulent conveyance or fraudulent transfer
under applicable law. Such amount could be substantially less than the
obligations on the Notes. In addition, any limitation on the amounts payable by
a Subsidiary Guarantor under the Subsidiary Guarantee pursuant to such provision
will result
48
in a corresponding limitation on the ability of the trustee to realize upon the
Collateral pledged by such Subsidiary Guarantor.
The indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation or other Person, whether or not affiliated with such
Subsidiary Guarantor, unless, among other things set forth in the indenture:
o subject to the indenture, the surviving entity (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee and the indenture pursuant to
a supplemental indenture in form reasonably satisfactory to the
trustee;
o immediately after such transaction, no Default or Event of Default
exists;
o the surviving entity (a) has Consolidated Net Worth immediately after
the transaction equal to or greater than the Consolidated Net Worth of
such Subsidiary Guarantor immediately preceding the transaction and
(b) our company would, at the time of such transaction after giving
pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted, to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the covenant described under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock";
o the Collateral owned by or transferred to the surviving entity will:
o continue to constitute Collateral under the indenture and the
Collateral Documents;
o be subject to a Lien in favor of the trustee for the benefit of
the holders of the Notes; and
o not be subject to any Lien other than Collateral Permitted Liens;
and
o the property and assets of the Person which is merged or consolidated
with or into the surviving entity, to the extent that they are
property or assets of the types which would constitute Collateral
under the Collateral Documents, will be treated as After-Acquired
Property and the surviving entity will take such actions as may be
necessary to cause such property and assets to be made subject to the
Lien of the Collateral Documents in the manner and to the extent
required by the indenture.
The indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Subsidiary Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all or
substantially all of the Capital Stock of any Subsidiary Guarantor, which sale
or other disposition complies with the terms of the indenture, then such
Subsidiary Guarantor (in the event of a sale or other disposition, by way of
such a merger, consolidation or otherwise, of all or substantially all of the
Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Subsidiary Guarantor) will be released and relieved of
any obligations under its Subsidiary Guarantee; provided that the Net Proceeds
of such sale or other disposition are treated in accordance with the provisions
of the indenture described under "--Certain Covenants--Asset Sales."
49
Redemption
We may redeem the notes at any time at our option, in whole or in part at
101% of the principal amount plus accrued and unpaid interest thereon to the
applicable redemption date. We are not required to make mandatory redemption
payments with respect to the Notes.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the trustee considers fair and appropriate. Notices of
redemption will be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any Note is
to be redeemed in part only, the notice of redemption that relates to such Note
will state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. Notes
called for redemption become due on the date fixed for redemption. Upon
fulfillment of certain conditions, on and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
Certain Covenants
The indenture contains certain covenants, including, among others, the
following:
Change of Control. The indenture provides that upon the occurrence of a
Change of Control, our company will offer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes pursuant to
the offer described below at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of purchase. Within 30 days following any Change of Control, we will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. We will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
The Change of Control offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law. No later than five Business Days
after the termination of the offer period, we will purchase all Notes tendered
in response to the Change of Control offer. Payment for any Notes so purchased
will be made in the same manner as interest payments are made.
If the Change of Control purchase date is on or after a Record Date and on
or before the related Interest Payment Date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such Record Date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Change of Control offer.
On the Change of Control Purchase Date, we will, to the extent lawful:
o accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control offer;
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o deposit with the Paying Agent an amount equal to the Change of Control
payment in respect of all Notes or portions thereof so tendered; and
o deliver or cause to be delivered to the trustee the Notes so accepted
together with an Officer's Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by our company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control payment for such Notes, and, upon receipt of an Authentication
Order, the trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any.
We will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the Holders of the Notes to require that our company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
Asset Sales. The indenture provides that our company will not, and will not
permit any of our Subsidiaries to, engage in an Asset Sale in excess of $1.0
million unless the Intercreditor Agreement then in effect does not prohibit the
Asset Sale and expressly provides that the trustee has no right to restrict or
permit or approve or disapprove of such Asset Sale. In all other cases, no Asset
Sale is permitted under the indenture unless:
o our company (or the Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the
fair market value, and in the case of a lease of assets, a lease
providing for rent and other conditions which are no less favorable to
our company (or the Subsidiary, as the case may be) in any material
respect than the then prevailing market conditions (evidenced in each
case by a resolution of the Board of Directors of such entity set
forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests sold or otherwise disposed of;
o at least 75% (100% in the case of lease payments) of the consideration
therefor received by our company or such Subsidiary is in the form of
cash or Cash Equivalents; provided that the amount of any notes or
other obligations received by our company or any such Subsidiary from
such transferee that are promptly, but in no event more than 30 days
after receipt, converted by our company or such Subsidiary into cash
(to the extent of the cash received), will be deemed to be cash for
purposes of this provision;
o subject to the Intercreditor Agreement, if such Asset Sale involves
the disposition of Collateral, our company or such Subsidiary has
complied with applicable provisions of the indenture;
o our company or such Subsidiary, as the case may be, applies the Net
Proceeds as provided below.
Subject to the Intercreditor Agreement, any such Net Proceeds may, at the
option of our company, be applied within 180 days of the related Asset Sale as
follows:
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o to the acquisition of another business or the acquisition of other
long term assets, in each case, in the same or a similar line of
business as our company or any of our Subsidiaries was engaged in on
August 27, 2001 or any reasonable extensions or expansions thereof,
which we refer to as replacement assets; provided, that any
replacement assets will be owned by our company or by the Subsidiary
Guarantor that made the Asset Sale and will not be subject to any
Liens except Collateral Permitted Liens (and our company or such
Subsidiary Guarantor, as the case may be, will execute and deliver to
the trustee such Collateral Documents or other instruments as will be
necessary to cause such Replacement Assets to become subject to a Lien
in favor of the trustee, for the benefit of the holders of the Notes,
securing its obligations under the Notes or its Subsidiary Guarantee,
as the case may be, and otherwise will comply with the provisions of
the Indenture applicable to After-Acquired Property); or
o to reimburse our company or our Subsidiaries for expenditures made,
and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds
consist of Net Insurance Proceeds received on account of such loss,
damage or taking.
Any portion of such Net Proceeds that is not used as described above within
such 180 day period will constitute Excess Proceeds subject to disposition as
provided below. When the aggregate amount of Excess Proceeds exceeds $3.0
million, we will be required to make an offer to all Holders of Notes to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase, in accordance with the procedures set forth in the
indenture. To the extent that the aggregate amount of Notes tendered pursuant to
such an offer is less than the Excess Proceeds, we may use any remaining Excess
Proceeds for general corporate purposes. Upon completion of such an offer, the
amount of Excess Proceeds will be reset at zero.
Subject to the Intercreditor Agreement, all proceeds of Collateral will,
pending their application in accordance with this covenant or the release
thereof in accordance with the provisions described under "--Possession, Use and
Release of Collateral" and "--Use of Trust Monies," be deposited in the
Collateral Account under the indenture.
The term "Asset Sale," as defined in the indenture, excludes certain sales
and other dispositions of assets. As a result, our company and our Subsidiaries
are permitted to sell certain assets without compliance with the foregoing
covenant.
An asset sale offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law. No later than five Business Days after the
termination of the asset sale offer period, we will purchase the principal
amount of Notes required to be purchased pursuant to this covenant or, if less
than the asset sale offer amount has been tendered, all Notes tendered in
response to the asset sale offer. Payment for any Notes so purchased will be
made in the same manner as interest payments are made.
If the asset sale purchase date is on or after a Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest will
be paid to the Person in whose name a Note is registered at the close of
business on such Record Date, and no additional interest will be payable to
Holders who tender Notes pursuant to the asset sale offer.
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On or before the asset sale purchase date, we will, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the asset sale
offer amount of Notes or portions thereof tendered pursuant to the asset sale
offer, or if less than the asset sale offer amount has been tendered, all Notes
tendered, and will deliver to the trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by our company in
accordance with the terms of this covenant. Our company, the Depositary or the
Paying Agent, as the case may be, will promptly (but in any case not later than
five days after the asset sale purchase date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by our company for purchase, and we will promptly issue a
new Note, and the trustee, upon delivery of an Officers' Certificate from our
company, will authenticate and mail or deliver such new Note to such Holder, in
a principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted will be promptly mailed or delivered by our company to the
Holder thereof. We will publicly announce the results of the asset sale offer on
the asset sale purchase date.
Restricted Payments. The indenture provides that we will not, and will not
permit any of our Subsidiaries to, directly or indirectly:
o declare or pay any dividend or make any distribution on account of our
or any of our Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving our company) (other than dividends or distributions payable
in Equity Interests (other than Disqualified Stock) of our company or
dividends or distributions payable to our company or any Wholly Owned
Subsidiary of our company that is a Subsidiary Guarantor);
o purchase, redeem or otherwise acquire or retire for value any Equity
Interests of our company or any direct or indirect parent of our
company or other Affiliate or Subsidiary of our company (other than
any such Equity Interests owned by our company or any Wholly Owned
Subsidiary of our company that is a Subsidiary Guarantor);
o make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is
contractually subordinated to the Notes or any Subsidiary Guarantee,
except at final maturity, other than through the purchase or
acquisition by our company of Indebtedness through the issuance in
exchange therefor of Equity Interests (other than Disqualified Stock);
or
o make any Restricted Investment (all such payments and other actions
set forth in the bullets above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect
to such Restricted Payment:
o no Default or Event of Default will have occurred and be
continuing or would occur as a consequence thereof;
o we would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph
of the covenant entitled "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
o such Restricted Payment, together with the aggregate of all
other Restricted Payments made by our company and our
Subsidiaries after August 27, 2001 (excluding some of the
Restricted Payments permitted below), is less than the sum,
without duplication, of
53
-- $5.0 million; plus
-- 50% of the Consolidated Net Income of our company for the
period (taken as one accounting period) from October 1, 2001
to the end of our company's most recently ended fiscal
quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit,
less 100% of such deficit); plus
-- to the extent not included in the amount described in the
bullet immediately above, 100% of the aggregate net cash
proceeds received after August 27, 2001 by our company from
the issue or sale of, or from additional capital
contributions in respect of, Equity Interests of our company
or of debt securities of our company or any Subsidiary
Guarantor that have been converted into, or canceled in
exchange for, Equity Interests of our company (other than
Equity Interests (or convertible debt securities) sold to a
Subsidiary or an Affiliate of our company and other than
Disqualified Stock or debt securities that have been
converted into Disqualified Stock); plus
-- to the extent that any Restricted Investment that was made
after August 27, 2001 is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the amount
expended by our company and our Subsidiaries to make such
Restricted Investment and (B) the Net Proceeds received by
our company or any Subsidiary Guarantor upon sale or
liquidation of such Restricted Investment.
The foregoing provisions do not prohibit:
o the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration, such payment would
have complied with the provisions of the indenture;
o the redemption, repurchase, retirement or other acquisition of any
Equity Interests of our company or any direct or indirect parent of
our company in exchange for, or out of the net cash proceeds of, the
substantially concurrent sale (other than to a Subsidiary or an
Affiliate of our company) of, or from substantially concurrent
additional capital contributions in respect of, other Equity Interests
of our company (other than any Disqualified Stock); provided that any
net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, will be excluded from the second and third points
of the calculation noted above; and
o the defeasance, redemption or repurchase of Indebtedness that is
contractually subordinated to the Notes or any Subsidiary Guarantee
with the net cash proceeds from an incurrence of Permitted Refinancing
Debt or the substantially concurrent sale (other than to a Subsidiary
or an Affiliate of our company) of, or from substantially concurrent
additional capital contributions in respect of, Equity Interests of
our company (other than Disqualified Stock); provided, that any net
cash proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, will be excluded
from the second and third points of the calculation noted above.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by our company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, we will deliver to the trustee
an Officers' Certificate stating that such Restricted
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Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
our latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock. The indenture
provides we will not, and will not permit any of our Subsidiaries to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to any
Indebtedness (including Acquired Indebtedness) and we will not issue any
Disqualified Stock and will not permit any of our Subsidiaries to issue any
shares of preferred stock; provided, however, that we may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock and our
Subsidiaries that are Subsidiary Guarantors may incur Indebtedness if:
o the Fixed Charge Coverage Ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter
period; and
o no Default or Event of Default will have occurred and be continuing or
would occur as a consequence thereof;
provided, that no Guarantee may be incurred pursuant to this paragraph unless
the guaranteed Indebtedness is incurred by our company or a Subsidiary Guarantor
pursuant to this paragraph.
The foregoing provisions will not apply to:
o the incurrence by our company or a Subsidiary Guarantor of New Senior
Debt (and Guarantees thereof by Subsidiaries that are Subsidiary
Guarantors and by our company, if applicable) in an aggregate
principal amount at any time outstanding (with letters of credit
obligations being deemed to have a principal amount equal to the
maximum potential liability of our company and our Subsidiaries that
are Subsidiary Guarantors with respect thereto) not to exceed an
amount equal to $45.0 million;
o the incurrence by our company of Existing Indebtedness;
o the incurrence by our company of Indebtedness represented by the Notes
and by the Subsidiary Guarantors represented by the Subsidiary
Guarantees;
o the incurrence by our company or any Subsidiary Guarantor of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or Purchase Money Obligations, in each case incurred for
the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property used in the business of our
company or such Subsidiary Guarantor, in an aggregate principal amount
not to exceed $10.0 million at any time outstanding;
o the incurrence by our company or any Subsidiary Guarantor of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the indenture to be incurred;
o the incurrence by our company or any of our Wholly Owned Subsidiaries
of intercompany Indebtedness between or among our company and any of
our Wholly Owned Subsidiaries or
55
between or among any Wholly Owned Subsidiaries; provided, however, that
(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than a
Wholly Owned Subsidiary and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either our company or a Wholly
Owned Subsidiary will be deemed, in each case, to constitute an
incurrence of such Indebtedness by our company or such Subsidiary, as
the case may be;
o the incurrence by our company or any of our Subsidiaries that are
Subsidiary Guarantors of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the Indenture to be
incurred; and
o the incurrence by our company or any of our Subsidiaries that are
Subsidiary Guarantors of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate
principal amount at any time outstanding not to exceed the sum of $2.5
million.
Notwithstanding any other provision of this covenant, a Guarantee of
Indebtedness permitted by the terms of the indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
Liens. The indenture provides that we will not, and will not permit any of
our Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
The indenture also provides that we will not, and will not permit any of
our Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any Collateral now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive income therefrom,
except Collateral Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that we will not, and will not permit any of our Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
to:
o pay dividends or make any other distributions to our company or any of
our Subsidiaries (i) on our company's or our Subsidiaries' Capital
Stock or (ii) with respect to any other interest or participation in,
or measured by, our company's or our Subsidiaries' profits, or pay any
Indebtedness owed to our company or any of our Subsidiaries;
o make loans or advances to our company or any of our Subsidiaries; or
o transfer any of our company's or our Subsidiaries' properties or
assets to our company or any of our Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of:
-- Existing Indebtedness as in effect on August 27, 2001;
-- the New Credit Agreement as in effect as of August 27, 2001,
and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no
more restrictive with respect to such dividend and other
payment
56
restrictions than those contained in the New Credit
Agreement as in effect on August 27, 2001;
-- the indenture and the Notes;
-- applicable law;
-- any instrument governing Acquired Indebtedness or Capital
Stock of a Person acquired by our company or any of our
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Acquired Indebtedness was
incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of
the Person, so acquired, provided that the Consolidated
EBITDA of such Person is not taken into account in
determining whether such acquisition was permitted by the
terms of the Indenture;
-- by reason of customary nonassignment provisions in leases
and licenses entered into in the ordinary course of business
and consistent with past practices;
-- Purchase Money Obligations for property acquired in the
ordinary course of business that impose restrictions of the
nature described in the indenture on the property so
acquired;
-- agreements relating to the financing of the acquisition of
real or tangible personal property acquired after August 27,
2001, provided, that such encumbrance or restriction relates
only to the property which is acquired and in the case of
any encumbrance or restriction that constitutes a Lien, such
Lien constitutes a Purchase Money Lien;
-- any restriction or encumbrance in the nature described above
and contained in contracts for sale of assets permitted by
the indenture in respect of the assets being sold pursuant
to such contract; or
-- Permitted Refinancing Debt, provided that the restrictions
contained in the agreements governing such Permitted
Refinancing Debt are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced.
Transactions with Affiliates. The indenture provides that we will not, and
will not permit any of our Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of our company's or our Subsidiaries' properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate unless:
o such Affiliate Transaction is on terms that are no less favorable to
our company or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by our company or such Subsidiary
with an unrelated Person; and
o we deliver to the Trustee:
-- with respect to any Affiliate Transaction entered into after
the date of the indenture involving aggregate consideration
in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying
that such Affiliate Transaction complies with the first
bullet above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the
Board of Directors; and
57
-- with respect to any Affiliate Transaction involving
aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to our company or such Subsidiary
of such Affiliate Transaction from a financial point of view
issued by an investment banking firm of national standing;
provided that the following will not be deemed to be Affiliate Transactions: (x)
- --------
any employment agreement entered into by our company or any of our Subsidiaries
in the ordinary course of business and consistent with the past practice of our
company or such Subsidiary, (y) transactions between or among our company and/or
our Wholly Owned Subsidiaries that are Subsidiary Guarantors and (z) Restricted
Payments permitted by the indenture.
Additional Subsidiary Guarantees. The indenture provides that all
Subsidiaries of our company will be Subsidiary Guarantors. In addition, the
indenture provides that our company will not permit any Person that is not a
Subsidiary Guarantor to be a Subsidiary, and will cause each Subsidiary that is
not a Subsidiary Guarantor to execute and deliver a supplemental indenture
(which provides for a Subsidiary Guarantee) and deliver an Opinion of Counsel in
accordance with the provisions of the indenture.
Impairment of Security Interests. The indenture provides that neither our
company nor any of our Subsidiaries will take or omit to take any action which
action or omission could reasonably be expected to have the result of adversely
affecting or impairing the Lien in favor of the trustee for the benefit of the
holders of the Notes in the Collateral.
Payments for Consent. The indenture provides that neither our company nor
any of our Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports. The indenture provides that, whether or not required by the rules
and regulations of the SEC, so long as any Notes are outstanding, we will
furnish to the trustee and all Holders of Notes:
o all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if we
were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by our
certified independent accountants;
o monthly financial statements in the same form as the quarterly
financial statements referred to above (but without the Management's
Discussion and Analysis of Financial Condition and Results of
Operations); and
o all current reports that would be required to be filed with the SEC on
Form 8-K if we were required to file such reports.
In addition, whether or not required by the rules and regulations of the
SEC, we will file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and promptly
make such information available to securities analysts and prospective investors
upon request. In addition, we and the Subsidiary Guarantors have agreed that,
for so long as any Transfer Restricted Notes remain outstanding, we and they
will furnish to the trustee, Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
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Merger, Consolidation or Sale of Assets. The indenture provides that we
will not, and will not permit our Subsidiaries to, in a single transaction or
series of related transactions, consolidate or merge with or into (whether or
not our company is the surviving entity), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the properties or
assets of our company or of our company and our Subsidiaries taken as a whole in
one or more related transactions, to another Person unless:
o we are the surviving corporation or the entity or the Person formed by
or surviving any such consolidation or merger (if other than our
company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
o the surviving entity assumes all the obligations of our company under
the Notes, the indenture and the Collateral Documents, and the
surviving entity's Subsidiaries become Subsidiary Guarantors, pursuant
to a supplemental indenture in a form reasonably satisfactory to the
trustee;
o the surviving entity causes such amendments, supplements or other
instruments to be filed and recorded in such jurisdictions as may be
required by applicable law to preserve and protect the Lien of the
Collateral Documents on the Collateral owned by or transferred to the
Surviving Entity, together with such financing statements as may be
required by applicable law to preserve and protect the Lien of the
Collateral Documents in the Collateral owned by or transferred to the
surviving entity and together with such financing statements as may be
required to perfect any security interests in such Collateral which
may be perfected by the filing of a financing statement under the
Uniform Commercial Code of the relevant states;
o the Collateral owned by or transferred to the Surviving Entity will
(1) continue to constitute Collateral under the indenture and the
Collateral Documents, (2) will be subject to the Lien in favor of the
trustee for the benefit of the holders of the Notes and (3) will not
be subject to any Lien other than Collateral Permitted Liens;
o the property and assets of the Person which is merged or consolidated
with or into the Surviving Entity, and of the Surviving Entity's
Subsidiaries, to the extent that they are property or assets of the
types which would constitute Collateral under the Collateral
Documents, will be treated as After-Acquired Property and the
Surviving Entity and its Subsidiaries will take such action as may be
necessary to cause such property and assets to be made subject to the
Lien of the Collateral Documents in the manner and to the extent
required in the Indenture;
o immediately after such transaction no Default or Event of Default
exists;
o the surviving entity (A) will have Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated Net
Worth of our company immediately preceding the transaction and (B)
will, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
o we will have delivered to the trustee an Officers' Certificate and an
Opinion of Counsel addressed to the trustee, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance
or disposition and such supplemental indenture, if any, comply
59
with the Indenture and that such supplemental indenture, and the
Indenture, as amended and supplemented thereby, are enforceable.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
o our default continuing for 15 days in the payment when due of interest
on the Notes;
o our default in payment when due of the principal of or premium, if
any, on the Notes;
o failure by our company or any of our Subsidiaries to comply with the
provisions described under the captions "--Change of Control,"
"--Asset Sales," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock" or "--Additional
Subsidiary Guarantees";
o failure by our company or any of our Subsidiaries, continuing for 30
days after notice, to comply with any of our or its other agreements
in the indenture, the Notes, the Subsidiary Guarantees or the
Collateral Documents;
o default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by our company or any of our
Subsidiaries (or the payment of which is guaranteed by our company or
any of our Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness or (b) results in the
acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness as to which
there has been a payment default or the maturity of which has been so
accelerated, aggregates $2.5 million or more;
o failure by our company or any of our Subsidiaries to pay final
judgments aggregating in excess of $2.5 million, which judgments are
not discharged for a period of 30 days;
o default by our company or any of our Subsidiaries in the performance
of the Collateral Documents which adversely affects the enforceability
or the validity of the Lien on the Collateral or which adversely
affects the condition or value of the Collateral in any material
respect, repudiation or disaffirmation by our company or any
Subsidiary of our obligations under the Collateral Documents or the
determination in a judicial proceeding that any Collateral Document is
unenforceable or invalid against our company or any of our
Subsidiaries for any reason;
o except as permitted by the indenture, any Subsidiary Guarantee will be
held in any judicial proceeding to be unenforceable or invalid or will
cease for any reason to be in full force and effect or any Subsidiary
Guarantor, or any person acting on behalf of any Subsidiary Guarantor,
will deny or disaffirm its obligations under its Subsidiary Guarantee;
and
o certain events of bankruptcy or insolvency with respect to our company
or any of our Subsidiaries.
If any Event of Default occurs and is continuing, the trustee by notice to
our company or the Holders of at least 25% in principal amount of the then
outstanding Notes by written notice to our
60
company may declare the unpaid principal of and any interest accrued on all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency all such amounts will become immediately due and payable without
declaration or other act on the part of the trustee or any Holder of the Notes.
In addition to acceleration of the Notes, if an Event of Default occurs and is
continuing, the trustee will have the right, subject to the Intercreditor
Agreement, to exercise remedies with respect to the Collateral, as are available
under the indenture, the Collateral Documents and at law. Holders of the Notes
may not enforce the indenture or the Notes or exercise remedies with respect to
the Collateral except as provided in the indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the trustee in its exercise of any trust or power. The trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal, premium, if any, or interest) if it determines that withholding
notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest on, premium, if any, or the principal of, the Notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture, and we are required upon becoming aware of any
Default or Event of Default, to deliver to the trustee a statement specifying
such Default or Event of Default.
Possession, Use and Release of Collateral
Subject to and in accordance with the provisions of the Collateral
Documents and the indenture, so long as the trustee has not exercised its rights
with respect to the Collateral upon the occurrence and continuance of an Event
of Default, we and the Subsidiary Guarantors will have the right to remain in
possession and retain exclusive control of the Collateral, to operate the
Collateral, to alter or repair the Collateral and to collect, invest and dispose
of any income thereon, subject to the provisions of the Intercreditor Agreement
and the New Credit Agreement.
Release of Collateral In Connection With Asset Sales. Upon compliance by
our company with the conditions set forth below, the trustee will release the
Released Collateral from the Lien of the relevant Collateral Document. Our
company and the Subsidiary Guarantors, as the case may be, will have the right
to obtain a release of items of Collateral, or Released Collateral, upon
compliance with the condition that we deliver to the trustee the following:
o An order of our company requesting the release of Released Collateral:
o specifically describing the proposed Released Collateral;
o specifying the fair market value of such Released Collateral
on a date within 60 days of such notice;
o stating that the consideration to be received in respect of
the Released Collateral is at least equal to the fair market
value of the Released Collateral,
o stating that the release of such Released Collateral will
not impair the value of the remaining Collateral or
interfere with the trustee's ability to realize such value
and will not impair the maintenance and operation of the
remaining Collateral;
61
o confirming the sale of, or an agreement to sell, such
Released Collateral in a bona fide sale to a person that is
not an Affiliate to our company or, in the event that such
sale is to a person that is an Affiliate, confirming that
such sale is made in compliance with the provisions set
forth in "--Certain Covenants--Transactions with
Affiliates";
o certifying that if the sale of such Released Collateral
constitutes an Asset Sale, such Asset Sale complies with the
terms and conditions of the indenture with respect thereto,
including, without limitation, the provisions set forth in
"--Certain Covenants--Asset Sales"; and
o in the event there is to be a substitution of property for
the Collateral subject to the Asset Sale, specifying the
property intended to be substituted for the Collateral to be
disposed of;
o An officers' certificate of our company stating that:
o such sale covers only the Released Collateral and complies
with the terms and conditions of the indenture;
o all proceeds from the sale of any of the Released Collateral
will be deposited in the Collateral Account, and if the sale
of such Released Collateral constitutes an Asset Sale, all
Net Proceeds from the sale of any of the Released Collateral
will be applied pursuant to the provision of the indenture
regarding Asset Sales;
o there is not and will not be a Default or Event of Default
in effect or continuing on the date thereof, the valuation
date or the date of such Asset Sale;
o the release of the Collateral will not result in a Default
or Event of Default under the indenture and;
o all conditions precedent in the indenture relating to the
release in question have been complied with;
o All documentation required by the Trust Indenture Act, if any,
prior to the release of the Collateral by the trustee and, in the
event that there is to be a substitution of property for the
Collateral subject to the Asset Sale, all documentation necessary
to effect the substitution of such new Collateral and to subject
such new Collateral to the Lien of the relevant Collateral
Documents and all documents otherwise required by the indenture;
and
o An opinion of counsel stating that the documents that have been
or are therewith delivered to the trustee in connection with such
release conform to the requirements of the indenture and that all
conditions precedent in the indenture related to the release have
been complied with.
The indenture provides that we also will be entitled, subject to compliance
with the conditions set forth therein, to obtain the release of Collateral which
has been taken by eminent domain, expropriation or in similar circumstances.
The indenture provides that we will be entitled to obtain a full release of
all of the Collateral following legal defeasance or covenant defeasance of the
Indenture as described below under "--Legal Defeasance and Covenant Defeasance."
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The indenture provides that, upon the release of any Subsidiary Guarantor
from its obligations under the indenture and its Subsidiary Guarantee as
described in the last paragraph under "--Subsidiary Guarantees," such Subsidiary
Guarantor will be entitled to obtain the release of all of its Collateral.
Release of Collateral Permitted by the New Credit Agreement and the
Intercreditor Agreement. The release of the Collateral also will be governed by
the terms of the New Credit Agreement and the Intercreditor Agreement. See
"Description of New Credit Agreement."
Disposition of Collateral Without Release. Notwithstanding the provisions
described above and subject to relevant provisions of the indenture, so long as
no Default or Event of Default will have occurred and be continuing or would
result therefrom, our company and the Subsidiary Guarantors may, among other
things, without any prior release or consent by the trustee, conduct ordinary
course activities with respect to Collateral, which do not individually or in
the aggregate adversely affect the value of the Collateral, including:
o selling or otherwise disposing of, in any transaction or series of
related transactions, any property subject to the Lien of the
indenture or the Collateral Documents which has become worn out or
obsolete and which either has an aggregate fair market value of
$100,000 or less, or which is replaced by property of substantially
equivalent or greater value which becomes subject to the Lien or the
Collateral Documents as After-Acquired Property;
o abandoning, terminating, canceling, releasing or making alterations in
or substitutions of any leases or contracts subject to the Lien of the
Indenture or any of the Collateral Documents;
o surrendering or modifying any franchise, license or permit subject to
the Lien of the Indenture or any of the Collateral Documents which it
may own or under which it may be operating;
o altering, repairing, replacing, changing the location or position of
and adding to its structures, machinery, systems, equipment, fixtures
and appurtenances, provided, however, that no change in the location
of any such Collateral subject to the Lien of any of the Collateral
Documents will be made which (1) removes such property into a
jurisdiction in which any instrument required by law to preserve the
Lien of any of the Collateral Documents on such property, including
all necessary financing statements and continuation statements, has
not been recorded, registered or filed in the manner required by law
to preserve the Lien of and security interest in any of the Collateral
Documents on such property, (2) does not comply with the terms of the
indenture and the Collateral Documents or (3) otherwise impairs the
Lien of the Collateral Documents;
o demolishing, dismantling, tearing down, scrapping or abandoning any
Collateral if, in the good faith opinion of the Board of Directors of
our company (as evidenced by a Board Resolution delivered to the
trustee if it involves Collateral having a fair market value in excess
of $100,000) such demolition, dismantling, tearing down, scrapping or
abandonment is in the best interests of our company and will not
impair the maintenance, operation, fair market value or utility of the
remaining Collateral as an entirety, and the security for the Notes,
will not thereby be otherwise impaired;
o granting a nonexclusive license of any intellectual property; and
o abandoning intellectual property which has become obsolete and not
used in the business of our company or our Subsidiaries.
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Use of Trust Monies
All Trust Monies will be held by the trustee as a part of the Collateral
securing the Notes and, so long as no Event of Default will have occurred and be
continuing, may either:
o be released as contemplated by "--Certain Covenants--Asset Sales" if
such Trust Monies represent proceeds in respect of an Asset Sale; or
o at the direction of our company be applied by the trustee from time to
time to the payment of the principal of, premium, if any, and interest
on any Notes at maturity or upon redemption or retirement, or to the
purchase of Notes upon tender or in the open market or otherwise, in
each case in compliance with the indenture.
We may also withdraw Trust Monies constituting Net Insurance Proceeds to
repair or replace the relevant Collateral, subject to certain conditions set
forth in the indenture.
The trustee will be entitled to apply any Trust Monies to cure any Event of
Default. Trust Monies deposited with the trustee will be invested in Cash
Equivalents pursuant to the direction of our company and, so long as no Default
or Event of Default will have occurred and be continuing, our company will be
entitled to any interest or dividends accrued, earned or paid on such Cash
Equivalents.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of our company,
as such, will have any liability for any obligations of our company under the
Notes, the indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding Notes except for:
o the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
o our obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money
for security payments held in trust;
o the rights, powers, trusts, duties and immunities of the trustee, and
our obligations in connection therewith; and
o the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture and thereafter any omission to comply with such obligations will not
constitute a Default or Event of Default with respect to the Notes. In the event
covenant defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership,
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rehabilitation and insolvency events) described under "Events of Default" above
will no longer constitute an Event of Default with respect to the Notes.
In order to exercise either legal defeasance or covenant defeasance:
o we must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the
case may be, and we must specify whether the Notes are being defeased
to maturity or to a particular redemption date;
o in the case of legal defeasance, we will have delivered to the trustee
an Opinion of Counsel in the United States reasonably acceptable to
the Trustee confirming that (A) we have received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since
August 27, 2001, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel will confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such legal defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such legal
defeasance had not occurred;
o in the case of covenant defeasance, we will have delivered to the
trustee an Opinion of Counsel in the United States reasonably
acceptable to the trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred;
o no Default or Event of Default will have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
o such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which our
company or any of our Subsidiaries is a party or by which our company
or any of our Subsidiaries is bound;
o we must have delivered to the trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
o we must deliver to the trustee an Officers' Certificate stating that
the deposit was not made by our company with the intent of preferring
the Holders of Notes over any other creditors of our company or with
the intent of defeating, hindering, delaying or defrauding any other
creditors of our company; and
o we must deliver to the trustee an Officers' Certificate and an Opinion
of Counsel, each stating that all conditions precedent provided for
relating to the legal defeasance or the covenant defeasance have been
complied with.
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Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the indenture.
The Registrar and the trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and our company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. We are not required to transfer or exchange any Note selected for
redemption. In addition, we are not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture,
the Notes or the Collateral Documents may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a tender offer or exchange offer for the Notes), and, subject to the
indenture, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of the indenture, the
Notes or the Collateral Documents may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes (including,
without limitation, consents obtained in connection with a tender offer or
exchange offer for the Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a nonconsenting Holder):
o reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver of the indenture, Notes or Collateral
Documents;
o reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than the covenants described above under the captions
"--Certain Covenants--Change of Control" (so long as no Change of
Control then exists or is contemplated) or "--Certain Covenants--Asset
Sales" (so long as no Excess Proceeds then exist));
o reduce the rate of or change the time for payment of interest on any
Note;
o waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except, subject to the
indenture, a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes then
outstanding and a waiver of the payment default that resulted from
such acceleration);
o make any Note payable in money other than that stated in the Notes;
o make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
o waive a redemption payment with respect to any Note;
o make any change in the waiver or right to receive payment provisions
of the indenture or the foregoing amendment and waiver provisions; or
o release any Collateral other than pursuant to and in compliance with
the indenture.
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Notwithstanding the foregoing, without the consent of any Holder of
Notes, we, the Subsidiary Guarantors and the trustee may amend or supplement the
indenture, the Notes or the Collateral Documents to cure any ambiguity, defect
or inconsistency, to provide for the assumption of our obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or substantially
all of our assets, to provide for additional Subsidiary Guarantors, or for the
release of a Subsidiary Guarantor, as provided for in the indenture, to make any
change that would provide any additional rights or benefits to the Holders or
that does not adversely affect the legal rights under the indenture of any such
Holder, or to comply with requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The trustee will be permitted to engage in other transactions; however,
if it acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default will
occur (which will not be cured), the trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the trustee will be under no obligation
to exercise any of its rights or powers under the indenture at the request of
any Holder of Notes, unless such Holder will have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
Additional Information
Holders of our securities may obtain a copy of the indenture, the
Registration Rights Agreement and the Collateral Documents without charge by
writing to RBX Corporation, 5221 ValleyPark Drive, Roanoke, Virginia 24019,
Attention: Secretary.
Book-Entry, Delivery and Form
The Notes were initially issued in the form of one or more Global
Notes. Global Notes were deposited on August 27, 2001 with, or on behalf of, The
Depository Trust Company, as Depositary, and registered in the name of Cede &
Co., as nominee of the Depositary.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations and to facilitate the
clearance and settlement of transactions in such securities between participants
through electronic book-entry changes in accounts of its participants. The
Depositary's participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
indirect participants.
Pursuant to procedures established by the Depositary:
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o upon deposit of the Global Note, the Depositary credited the
accounts of participants designated by the initial Holder with
portions of the principal amount of the Global Note and;
o ownership of the Notes evidenced by the Global Note are shown on,
and the transfer of ownership thereof will be affected only
through, records maintained by the Depositary (with respect to
the interests of the Depositary's participants), the Depositary's
participants and the Depositary's indirect participants.
Prospective purchasers are advised that the laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer Notes evidenced by the
Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole Holder under the indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by
the Global Note will not be considered the owners or Holders thereof under the
indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the trustee thereunder. Neither our
company nor the trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of or premium and interest, if
any, on any Notes registered in the name of the Global Note Holder on the
applicable record date will be payable by the trustee to or at the direction of
the Global Note Holder in its capacity as the registered Holder under the
indenture. Under the terms of the indenture, our company and the trustee may
treat the persons in whose names Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither our company nor the trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. We believe, however, that is currently the policy of the Depositary to
immediately credit the accounts of the relevant participants with such payments,
in amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of the Depositary. Payments by the
Depositary's participants and the Depositary's indirect participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
participants or the Depositary's indirect participants.
Exchange of Book-Entry Notes for Certificated Notes. If:
o we notify the trustee in writing that the Depositary is no longer
willing or able to act as a depositary and we are unable to
locate a qualified successor within 120 days; or
o our company, at our option, notifies the trustee in writing that
we elect to cause the issuance of Notes in certificated form,
then, upon surrender by the Global Note Holder of its Global Note, Notes in
certificated form will be issued to each person that the Global Note Holder and
the Depositary identify as being the beneficial owner of the related Notes.
Neither our company nor the trustee will be liable for any delay by the
Depositary in identifying the beneficial owners of New Notes and our company and
the trustee may conclusively rely on, and will be protected in relying on,
instructions from the Depositary for all purposes.
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Same-Day Settlement and Payment. The indenture requires that payments
in respect of the Notes represented by the Global Note (including principal and
premium and interest, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. In contrast, the New Notes represented by the
Global Note are expected to be eligible to trade in the Depositary's Same-Day
Funds Settlement System and any permitted secondary market trading activity in
such New Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. We expect that secondary trading in the
certificated Notes will also be settled in immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means additional Notes issuable by the Company under
the Indenture as payment, at the Company's election, of interest on outstanding
Notes in lieu of cash.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person will be
deemed to be control.
"After-Acquired Property" means assets or property acquired after the
date of the Indenture as such term is defined in the Indenture.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
that does not constitute a Restricted Payment or an Investment by such Person of
any of its non-cash assets (including, without limitation, by way of a sale and
leaseback and including the issuance, sale or other transfer of any of the
capital stock of any Subsidiary of such Person) other than to the Company or to
any of its Wholly Owned Subsidiaries that is a Subsidiary Guarantor (including
the receipt of proceeds of insurance paid on account of the loss of or damage to
any asset and awards of compensation for any asset taken by condemnation,
eminent domain or similar proceeding, and including the receipt of proceeds of
business interruption insurance); and (ii) the issuance of Equity Interests in
any Subsidiaries or the sale of any Equity Interests in any Subsidiaries, in
each case, in one or a series of related transactions, provided, that
notwithstanding the foregoing, the term "Asset Sale" will not include: (a) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company, as permitted pursuant to the covenant entitled
"Merger, Consolidation or Sale of Assets"; (b) the sale or lease of equipment,
inventory, accounts receivable or other assets in the ordinary course of
business consistent with past practice and to the extent that such sales or
leases are not part of the a sale of the business in which such
69
equipment was used or in which such inventory or accounts receivable arose;
(c) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company
or to another Wholly Owned Subsidiary that is a Subsidiary Guarantor; (d) the
grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property; or (e) Permitted Investments.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that, in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated time deposits,
certificates of deposit, Eurodollar time deposits or Eurodollar certificates of
deposit of (i) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (ii) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank being an
"Approved Lender"), in each case with maturities of not more than twelve months
from the date of acquisition, (c) commercial paper and variable or fixed rate
notes issued by any Approved Lender (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation rated
A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent
thereof) or better by Moody's and maturing within twelve months of the date of
acquisition, (d) repurchase agreements with a bank or trust company or
recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America in which the Company will have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of
repurchase obligations, and (e) interests in money market mutual funds which
invest solely in assets or securities of the type described in subparagraphs
(a), (b), (c) or (d) hereof.
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"Change of Control" means the occurrence of any of the following:
(i) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially
all of the properties or assets of the Company and its
Subsidiaries taken as a whole to any "person" or "group" (as such
terms are used in Section 13(d)(3) and 14(d) of the Exchange
Act);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any "person" or "group" (as defined above), becomes the
Beneficial Owner, directly or indirectly, of more than 40% of the
Capital Stock of the Company, measured by voting power rather
than number of shares; or
(iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors
(together with any new directors whose election by the Board of
Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously approved) cease to constitute a majority of the
directors then in office.
This definition of "Change of Control" includes the sale of all or
substantially all of the properties or assets of the Company and our
subsidiaries taken as a whole to any "person" or "group". Although there is a
limited body of case law interpreting the phrase "substantially all" there is no
precise established definition of the phrase under applicable law. Accordingly,
in certain circumstances there may be a degree of uncertainty as to whether a
particular transaction would involve a sale of "substantially all" properties or
assets. As a result, it may be unclear as to whether a Change of Control has
occurred and whether a holder of Notes may require the Company to make an offer
to purchase the Notes as described above.
"Collateral" means any assets of the Company or any Subsidiary
Guarantor defined as "Collateral," "Mortgaged Property," "Trust Property" or the
like in any of the Collateral Documents.
"Collateral Account" means the collateral account established pursuant
to Section 11.01 of the Indenture.
"Collateral Documents" mean, collectively, the Mortgages and Deeds of
Trust, the Security Agreements, the Intercreditor Agreement and all other
pledges, mortgages, deeds of trust, security agreements, collateral agreements,
control agreements, assignments, instruments, financing statements, filings and
other documents that grant, evidence, set forth, provide notice of, govern or
limit the Lien in favor of the Trustee (or a collateral agent for the benefit of
the Trustee) in the Collateral, and all amendments thereto from time to time.
"Collateral Permitted Liens" means Liens of the types described in
clauses (i), (ii) to the extent permitted under the Intercreditor Agreement,
(iv), (v), (viii), (x), (xiii), (xiv) with respect to Collateral acquired after
the Issue Date, (xvi) and (xix) of the definition of the term "Permitted Liens."
"Consolidated EBITDA" means, with respect to the Company and its
Subsidiaries for any period, subject to Section 4.12(c) of the Indenture, the
sum of, without duplication, (i) the Consolidated Net Income for such period,
plus (ii) the Fixed Charges for such period, plus (iii) provision for taxes
based on income or profits for such period (to the extent such taxes were
included in computing Consolidated Net Income for such period), plus (iv)
consolidated depreciation, amortization and other non-cash charges of the
Company and its Subsidiaries required to be reflected as expenses on the books
and records of the Company (to the extent such expenses were included in
computing Consolidated Net Income for such period), minus (v) cash payments with
respect to any non-recurring, non-cash charges previously added back pursuant to
clause (iv), and (vi) excluding the impact of foreign currency translations.
Notwithstanding the foregoing, the Fixed Charges of, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of a Person
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will be added to Consolidated Net Income to compute Consolidated EBITDA only to
the extent (and in the same proportion) that the Net Income of such Subsidiary
was included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof that is a
Subsidiary Guarantor, (ii) the Net Income of any Subsidiary will be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition will be excluded, (iv) the
cumulative effect of a change in accounting principles will be excluded, and (v)
all other extraordinary gains and extraordinary losses will be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to the Issue Date in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Global Notes, the Person
specified in Section 2.03 of the Indenture as the Depositary with respect to the
Notes, any and all successors thereto appointed as depositary under the
indenture and having become such Depositary pursuant to the applicable provision
of the Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
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"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means the Indebtedness of the Company (other
than Indebtedness under the New Credit Agreement) in existence on the Issue
Date, as listed on Schedule 1.01(a) attached to the Indenture, until such
amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon), and (iv) the product of (a) all cash dividend payments (and
non-cash dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred stock of such Person payable to a party other than the
Company or a Wholly Owned Subsidiary, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock or Disqualified Stock
subsequent to the commencement of the four-quarter reference period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock or
Disqualified Stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. For purposes of making the computation
referred to above, (i) acquisitions that have been made by the Company or any of
its Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date will
be deemed to have occurred on the first day of the four-quarter reference
period, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded, and (iii) the Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, will be excluded, but only to the extent that the obligations giving rise
to such Fixed Charges will not be obligations of the referent Person or any of
its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such
73
other statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect on the date of the
Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an ordinary course of business accrued
expense or ordinary course of business trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
"Intercreditor Agreement" means the Intercreditor and Collateral Agency
Agreement, dated as of the Issue Date, between the Trustee and Congress
Financial Corporation, individually, as agent for the lenders under the New
Credit Agreement, and in its capacity as collateral agent acting for and on
behalf of such lenders and the Trustee, substantially in the form attached as
Exhibit E to the Indenture, as such may be amended, supplemented or replaced
from time to time.
"Interest Payment Date" means each interest payment date as specified
in the form of Note attached to the Indenture.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company or any direct or indirect parent of the Company will not be deemed to be
an Investment.
"Issue Date" means the closing date for the original issuance of Notes
under the Indenture.
74
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or Hartford, Connecticut or at a place of
payment are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest will accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Moody's" means Moody's Investor Services.
"Mortgages and Deed of Trust" means the Mortgages and Deeds of Trust
listed on Exhibit D to the Indenture, or such other mortgages and deeds of trust
in form and substance satisfactory to the Trustee.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Insurance Proceeds" means the insurance proceeds (excluding
liability insurance proceeds payable to the Trustee for any loss, liability or
expense incurred by it) in respect of damage to, or the loss, destruction or
condemnation of, all or any portion of the Collateral, less collection costs.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than the Notes and the Subsidiary Guarantees) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP (but upon extinguishment or reduction of such reserve, such
amount will constitute Net Proceeds), but, in each case, excluding costs,
expenses and other amounts paid to an Affiliate of the Company.
"New Credit Agreement" means that certain Amended and Restated Loan
Agreement, dated as of the Issue Date, by and among RBX Industries, Inc., the
Company and Congress Financial Corporation, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time and including any such
agreements, documents or instruments with any
75
lender or group of lenders that at any time succeed to or refinance, replace or
substitute for all or any portion of the New Senior Debt.
"New Senior Debt" means Indebtedness in an aggregate principal amount
not to exceed $45,000,000 at any one time outstanding under the New Credit
Agreement as such agreement may be amended, restated, supplemented or otherwise
modified or replaced, in whole or in part, from time to time hereafter, together
with any refunding or replacement of such Indebtedness, including with any other
lender or group of lenders.
"Note Custodian" means the Trustee, as custodian with respect to the
Global Notes, or any successor entity thereto.
"Notes" means all 12% Senior Secured Notes due 2006 issued pursuant to
the Indenture (including, without limitation, any Additional Notes), all of
which will be in the form of Exhibit A attached to the Indenture.
"Obligations" means, when used in connection with any Indebtedness or
with reference to the documents evidencing or entered into with respect to any
Indebtedness (including, in the case of the Notes, the Collateral Documents),
any principal, interest (including, in the case of the Notes, Accrued Bankruptcy
Interest), penalties, premiums, fees, costs, expenses (including attorney's
fees), indemnifications, reimbursement obligations, damages (including
liquidated damages), liabilities (including liabilities for compensation and
contribution obligations and for breach of representations or warranties) and
other amounts (including obligations arising upon the exercise by any Person of
rights of redemption or rescission) payable at any time, and any other
obligations required to be performed at any time, whether now or in the future,
under the documentation governing such Indebtedness or entered into in
connection with or with respect to such Indebtedness or such documentation.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Permitted Investments" means (a) any Investments in the Company or in
a Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor and that
is engaged in the same or a similar line of business as the Company and its
Subsidiaries were engaged in on the Issue Date and reasonable extensions or
expansions thereof; (b) any Investments in Cash Equivalents; (c) Investments by
the Company or any Subsidiary of the Company in a Person if as a result of such
Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company that
is a Subsidiary Guarantor and that is engaged in the same or a similar line of
business as the Company and its Subsidiaries were engaged in on the Issue Date
and reasonable extensions or expansions thereof or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly Owned
Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in
the same or a similar line of business as the Company and its Subsidiaries were
engaged in on the Issue Date and reasonable extensions or expansions thereof;
(d) Investments made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with the covenant
entitled "Asset Sales"; (e) Investments outstanding as of the Issue Date; and
(f)(i) other Investments that do not exceed $5,000,000 in the aggregate at any
time outstanding, and (ii) if the amount specified in clause (f)(i) above has
been fully utilized, other Investments (in addition to those permitted by clause
(f)(i) above) that (A) are each individually approved by the Board of Directors
as evidenced by a Board Resolution delivered to the Trustee contemporaneously
with such Investment and (B) in the aggregate do not exceed $5,000,000 at any
time outstanding.
76
"Permitted Liens" means (i) Liens securing obligations under the
Indenture, the Notes, the Subsidiary Guarantees and the Collateral Documents;
(ii) Liens securing New Senior Debt in an aggregate principal amount at any time
outstanding not to exceed $45,000,000; (iii) Liens in favor of the Company or
any Subsidiary Guarantor; (iv) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company in accordance with the provisions of the Indenture;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (v) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (vi) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vii)
Liens existing on the Issue Date and listed on Schedule 1.01(b) to the
Indenture; (viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as will be required in
conformity with GAAP will have been made therefor; (ix) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, or other similar Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings diligently conducted; (x) Liens of landlords or of mortgagees of
landlords arising by operation of law, provided that the rental payments secured
thereby are not yet due and payable; (xi) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5,000,000 at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; (xii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (xiii) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries; (xiv) Purchase Money Liens
and Capital Lease Obligations (including extensions and renewals thereof)
securing Indebtedness incurred pursuant to (A) the first paragraph of Section
4.10 of the Indenture or (B) clause (iv) of the second paragraph of Section 4.10
of the Indenture; (xv) Liens securing reimbursement obligations with respect to
letters of credit which encumber only documents and other property relating to
such letters of credit and the products and proceeds thereof; (xvi) judgment and
attachment Liens not giving rise to an Event of Default; (xvii) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements; (xviii) Liens arising out of
consignment or similar arrangements for the sale of goods; and (xix) any
interest or title of a lessor in property subject to any operating lease.
"Permitted Refinancing Debt" means any Indebtedness of the Company or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, other Indebtedness
of the Company or any of its Subsidiaries; provided that: (i) the principal
amount of such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased
or refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes
or the Subsidiary Guarantees, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of the Notes, and is
subordinated in right of
77
payment to the Notes or the Subsidiary Guarantees on terms at least as favorable
to the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Plan of Reorganization" means the Second Amended Joint Plan of
Reorganization of RBX Group, Inc. and its Subsidiaries, as confirmed by the
United States Bankruptcy Court, Western District of Virginia, including all
exhibits and other attachments thereto.
"Purchase Money Lien" means a Lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under the Indenture
and incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided, however, that such Lien
encumbers only such asset or property and is granted within 180 days of such
acquisition.
"Purchase Money Obligations" of any Person means any obligations of
such Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such Person or any of its Subsidiaries in
an amount that is not more than 100% of the cost, or fair market value, as
appropriate, of such property, and incurred within 180 days after the date of
such acquisition (excluding accounts payable to trade creditors incurred in the
ordinary course of business).
"Record Date" means each record date as specified in the form of Note
as Exhibit A attached to the Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company, the Subsidiary
Guarantors and the holders of beneficial interests in the Restricted Global
Note, as such agreement may be amended, modified or supplemented from time to
time.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" has the meaning given in clauses (i) through (iv)
of the first paragraph under " - Certain Covenants - Restricted Payments"
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the security agreements listed on Exhibit C
to the Indenture, or other such security agreements in form and substance
satisfactory to the Trustee.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the
78
other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Subsidiary Guarantor" means each Subsidiary of the Company that makes
a Subsidiary Guarantee in accordance with the provisions of the Indenture, and
its successors and assigns.
"S&P" means Standard & Poor's Ratings Services.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which the Indenture is qualified under
the TIA.
"Trust Monies" means, subject to the Intercreditor Agreement, all cash
and Cash Equivalents received by the Trustee (i) upon the release of Collateral
from the Lien of the Indenture or the Collateral Documents, including all
proceeds of Collateral and all moneys received in respect of the principal of
all purchase money, governmental and other obligations; (ii) as Net Insurance
Proceeds; (iii) pursuant to the Collateral Documents; (iv) as proceeds of any
sale or other disposition of all or any part of the Collateral by or on behalf
of the Trustee or any collection, recovery, receipt, appropriation or other
realization of or from all or any part of the Collateral pursuant to the
Indenture or any of the Collateral Documents or otherwise; (v) which constitute
proceeds from any transaction which results in a Subsidiary Guarantor being
released from its Subsidiary Guarantee pursuant to the Indenture; or (vi) for
application as provided in the relevant provisions of the Indenture or any
Collateral Document or which disposition is not otherwise specifically provided
for in the Indenture or in any Collateral Document; provided, however, that
Trust Monies will in no event include any property deposited with the Trustee
for any redemption, legal defeasance or covenant defeasance of Notes, for the
satisfaction and discharge of the Indenture or to pay the purchase price of
Notes pursuant to a Change of Control Offer.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) will at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
79
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock, warrants and
notes on behalf of the selling holders. A selling holder is a person named on
pages 39 through 41 and also includes any donee, pledgee, transferee or other
successor-in-interest selling shares, warrants or notes received after the date
of this prospectus from a selling holder as a gift, pledge, partnership
distribution or other non-sale related transfer. All costs, expenses and fees in
connection with the registration of the shares, warrants and notes offered by
this prospectus will be borne by our company, other than brokerage commissions
and similar selling expenses, if any, attributable to the sale of shares,
warrants and notes, which will be borne by the selling holders. Sales of shares,
warrants and notes may be effected by selling holders from time to time in one
or more types of transactions (which may include block transactions) in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the shares or warrants, through short sales of shares
or warrants, or a combination of these methods of sale, at market prices
prevailing at the time of sale, or at negotiated prices. These transactions may
or may not involve brokers or dealers. We are not aware of any agreements,
understandings or arrangements among the selling holders and any underwriters or
broker-dealers regarding the sale of the securities of the selling holders, nor
is there an underwriter or coordinated broker acting in connection with the
proposed sale of shares, warrants and notes by the selling holders.
The selling holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with these
transactions, broker-dealers or other financial institutions may engage in short
sales of the shares or of securities convertible into or exchangeable for the
shares in the course of hedging positions they assume with selling holders. The
selling holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
these broker-dealers or other financial institutions of shares, warrants and
notes offered by this prospectus, which shares, warrants and notes these
broker-dealer or other financial institution may resell pursuant to this
prospectus (as amended or supplemented to reflect such transaction).
The selling holders may make these transactions by selling shares,
warrants and notes directly to purchasers or to or through broker-dealers, which
may act as agents or principals. These broker-dealers may receive compensation
in the form of discounts, concessions or commissions from selling holders and/or
the purchasers of shares, warrants and notes for whom these broker-dealers may
act as agents or to whom they sell as principal, or both (which compensation as
to a particular broker-dealer might be in excess of customary commissions).
The selling holders and any broker-dealers that act in connection with
the sale of shares, warrants and notes may be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by these
broker-dealers or any profit on the resale of the shares, warrants and notes
sold by them while acting as principals might be deemed to be underwriting
discounts or commissions under the Securities Act. The selling holders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares, warrants and notes against certain
liabilities, including liabilities arising under the Securities Act.
Because selling holders may be "underwriters" within the meaning of
Section 2(11) of the Securities Act, the selling holders may be subject to the
prospectus delivery requirements of the Securities Act. Our company has informed
the selling holders that the anti-manipulative provisions of Regulation M
promulgated under the Exchange Act may apply to their sales in the market.
Selling holders also may resell all or a portion of the shares and
warrants in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144.
80
Upon our company being notified by a selling holder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such selling holder and of the participating
broker-dealer(s);
o the number of shares, warrants and notes involved;
o the initial price at which such shares, warrants and notes were
sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
o other facts material to the transactions.
In addition, upon our company being notified by a selling holder that a
donee, pledgee, transferee or other successor-in-interest intends to sell more
than 500 shares or warrants, a supplement to this prospectus will be filed.
81
LEGAL MATTERS
The validity of the shares of common stock, warrants and notes offered
hereby will be passed upon for our company by Akin, Gump, Strauss, Hauer & Feld,
L.L.P., New York, New York.
EXPERTS
The consolidated financial statments of RBX Corporation included in
this prospectus and the related consolidated financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the registration statement (which reports express an
unqualified opinion and include explanatory paragraphs referring to the
reorganization proceedings under Chapter 11 of the Federal Bankruptcy Code and
the restatement of the consolidated statements of operations of RBX Group, Inc.
for the years ended December 31, 1999 and 2000 and for the eight months ended
August 27, 2001) and have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under
the Securities Act for the common shares, warrants and notes sold in these
offerings. This prospectus constitutes a part of that registration statement.
This prospectus does not contain all of the information set forth in the
registration statement and the accompanying exhibits and schedules because some
parts have been omitted in accordance with the rules and regulations of the SEC.
For further information about us and our common shares, warrants and notes being
sold in these offerings, we refer you to the registration statement and the
accompanying exhibits and schedules. Whenever a reference is made in this
prospectus regarding the contents of any agreement, contract or any other
document, please be aware that the reference is only a summary. In each
instance, reference is made to the copy of the contract or document filed as an
exhibit to the registration statement, and each statement is qualified in all
respects by that reference.
You may read and copy the registration statement, including the
attached exhibits, and any report, statements or other information that we file
at the SEC's public reference facilities located in Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington D.C. 20549 and also at the regional offices
of the SEC located at 233 Broadway, New York, New York 10279 and the Citicorp
Center at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of its public reference facilities. Our SEC filings will also be available to
the public from commercial document retrieval services and at the SEC's web site
at http://www.sec.gov.
In addition, the indenture governing the notes requires that we file
annual, quarterly and current reports, proxy statements and other information
with the SEC under the Exchange Act and provide those reports to the trustee.
82
RBX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 2001
Independent Auditors' Report ........................................................................ F-2
Consolidated Financial Statements:
Consolidated Balance Sheets ..................................................................... F-4
Consolidated Statements of Operations ........................................................... F-5
Consolidated Statements of Cash Flows ........................................................... F-6
Consolidated Statements of Changes in Stockholders' Equity (Deficit) ............................ F-7
Notes to Consolidated Financial Statements ...................................................... F-8
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
RBX Corporation (the "Successor", see Note 1)
Roanoke, Virginia
We have audited the accompanying consolidated balance sheets of RBX Corporation
as of December 31, 2000 (Predecessor Company balance sheet) and 2001 (Successor
Company balance sheet), and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1999, 2000, the eight months ended August 27, 2001, (Predecessor Company
operations), and the four months ended December 31, 2001 (Successor Company
operations). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, on July 17, 2001, the
Virginia Bankruptcy Court entered an order confirming the plan of
reorganization, which became effective after the close of business on August 27,
2001. The accompanying financial statements of the Predecessor, which reflect
the Predecessor's historical cost basis, do not purport to reflect or provide
for the consequences of the bankruptcy proceedings. As further described in
Notes 1 and 2, the Company adopted fresh-start accounting for the preparation of
financial statements subsequent to August 27, 2001 in conformity with AICPA
Statement of Position 90-7, "Financial Reporting for Entities in Reorganization
Under the Bankruptcy Code," for the Successor Company as a new entity with
assets, liabilities, and a capital structure having carrying values not
comparable to those presented in the accompanying consolidated financial
statements, of the Predecessor.
In our opinion, the Predecessor Company financial statements referred to above
present fairly, in all material respects, the financial position of the
Predecessor Company as of December 31, 2000, and the results of its operations
and its cash flows for the years ended December 31, 1999 and 2000, and the eight
months ended August 27, 2001, in conformity with accounting principles generally
accepted in the United States of America. Further, in our opinion, the Successor
Company financial statements present fairly, in all material respects, the
financial position of RBX Corporation as of December 31, 2001, and the results
of its operations and its cash flows for the four months ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.
F-2
As discussed in Note 21 to the financial statements, the Predecessor's
consolidated statements of operations for the years ended December 31, 1999 and
2000 and for the eight months ended August 27, 2001 have been restated.
/s/ Deloitte & Touche LLP
March 27, 2002
F-3
RBX CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 2001
(in thousands, except share data)
Predecessor | Successor
December 31, 2000 | December 31, 2001
----------------- | -----------------
ASSETS |
Cash and cash equivalents ........................................ $ 11,883 | $ 1,154
Accounts receivable, less allowance for doubtful accounts of |
$2,169 and $2,060, respectively .............................. 28,756 | 21,369
Inventories ...................................................... 23,932 | 17,225
Prepaid and other current assets ................................. 2,535 | 1,874
----------- | -----------
Total current assets ............................................. 67,106 | 41,622
|
Property, plant and equipment, net ............................... 46,740 | 53,113
Intangible assets ................................................ - | 18,058
Assets held for sale ............................................. - | 6,780
----------- | -----------
Total assets ..................................................... $ 113,846 | $ 119,573
=========== | ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
Liabilities not subject to compromise: |
Accounts payable ............................................ $ 2,748 | $ 9,003
Accrued liabilities ......................................... 12,134 | 15,974
Current portion of postretirement benefit obligation ........ 2,810 | 2,780
Current portion of long-term debt ........................... - | 2,000
Revolving credit facility ................................... 23,750 | -
----------- | -----------
|
Total current liabilities ................................... 41,442 | 29,757
|
Long-term debt .............................................. - | 38,163
Postretirement benefit obligation ........................... 30,055 | 28,256
Pension benefit obligation .................................. 6,160 | 15,337
Other liabilities ........................................... 1,704 | 1,704
----------- | -----------
|
Total liabilities not subject to compromise ...................... 79,361 | 113,217
Liabilities subject to compromise ................................ 253,863 | -
Commitments and contingencies .................................... - | -
|
Redeemable preferred stock, $0.01 par value, 90,000 shares |
authorized, issued and outstanding, liquidation preference |
of $100 per share ........................................... 8,534 | -
|
Stockholders' equity (deficit): |
Preferred stock, $.001 par value, 1,000,000 shares |
authorized in 2001 ....................................... - | -
Common stock, $0.01 par value, 500,300 shares |
authorized, issued and outstanding in 2000; $0.001 par |
value, 5,000,000 shares authorized, 1,000,000 shares |
issued and outstanding in 2001 ........................... 5 | 1
Additional paid-in capital .................................. 45,386 | 15,160
Accumulated deficit ......................................... (273,303) | (8,805)
----------- | -----------
Stockholders' equity (deficit) ................................... (227,912) | 6,356
----------- | -----------
Total liabilities and stockholders' equity ....................... $ 113,846 | $ 119,573
=========== | ===========
See notes to Consolidated Financial Statements
F-4
RBX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1999 and 2000, the eight months
ended August 27, 2001 and the four months ended December 31, 2001
(in thousands, except per share data)
Predecessor | Successor
Year Ended December 31, 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
(As Restated, See Note 21)
------------------------
Net sales ................................................... $ 246,963 $ 231,503 $ 134,097 | $ 55,683
Cost of goods sold .......................................... 209,830 211,300 122,084 | 53,105
--------- --------- --------- | ---------
|
Gross profit ................................................ 37,133 20,203 12,013 | 2,578
|
Selling, general and administrative costs ................... 21,614 20,950 13,875 | 3,910
Management fees ............................................. 1,119 1,334 - | -
Equity in net loss of affiliate ............................. - 802 - | -
Reorganization items (income) ............................... - 27,806 (19,786) | 5,932
Other expense (income) ...................................... (28) 60 12 | (18)
--------- --------- --------- | ---------
|
Operating income (loss) ..................................... 14,428 (30,749) 17,912 | (7,246)
|
Interest expense, including amortization of deferred |
financing fees .......................................... 26,361 25,943 1,689 | 1,559
--------- --------- --------- | ---------
|
Income (loss) before income taxes and |
extraordinary item ...................................... (11,933) (56,692) 16,223 | (8,805)
|
Income tax expense (benefit) ................................ (125) 26 - | -
--------- --------- --------- | ---------
|
Net income (loss) before extraordinary item ................. (11,808) (56,718) 16,223 | (8,805)
|
Extraordinary item - gain on cancellation of debt ........... - 6,204 218,316 | -
--------- --------- --------- | ---------
|
Net income (loss) ........................................... (11,808) (50,514) 234,539 | (8,805)
|
Less redeemable preferred stock dividends and accretion |
for original issue discount ............................. (932) (900) - | -
--------- --------- --------- | ---------
|
Net income (loss) attributable to common stockholders ....... $ (12,740) $ (51,414) $ 234,539 | $ (8,805)
========= ========= ========= | =========
|
Basic and diluted net loss per common share ................. NA NA NA | $ (8.81)
========= ========= ========= | =========
See notes to Consolidated Financial Statements
F-5
RBX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999 and 2000, the eight months
ended August 27, 2001 and the four months ended December 31, 2001
(in thousands)
Predecessor | Successor
Year Ended December 31, 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | ------------------
OPERATING ACTIVITIES |
|
Net income (loss) ......................................... $ (11,808) $ (50,514) $ 234,539 | $ (8,805)
Adjustments to reconcile net income (loss) to net cash |
provided by (used in) operating activities: |
Gain on cancellation of debt .......................... - (6,204) (218,316) | -
Depreciation .......................................... 7,561 7,991 3,794 | 1,037
Amortization .......................................... 1,296 1,223 - | -
Loss (gain) on disposal of equipment .................. (28) 60 12 | (18)
Equity in net loss of affiliate ....................... - 802 - | -
Reorganization items .................................. - 23,681 (28,431) | -
Change in operating assets and liabilities: |
Accounts receivable ................................ 277 3,437 3,475 | 3,912
Inventories ........................................ (843) 2,240 2,143 | 4,564
Prepaid and other current assets ................... (208) (2,001) (403) | 1,064
Accounts payable ................................... 3,162 9,309 (1,509) | 637
Accrued liabilities ................................ (4,919) 19,448 3,228 | (2,245)
Accrued interest ................................... - - - | 1,035
Other liabilities .................................. (749) (1,800) 1,230 | 394
--------- --------- --------- | ---------
|
Net cash provided by (used in) operating activities ....... (6,259) 7,672 (238) | 1,575
--------- --------- --------- | ---------
INVESTING ACTIVITIES |
|
Capital expenditures ...................................... (4,985) (3,085) (1,973) | (1,542)
Proceeds from disposals of property, plant and |
equipment .............................................. 1,793 117 5 | 31
Contributions to equity investee .......................... - (920) - | -
--------- --------- --------- | ---------
Net cash used in investing activities ..................... (3,192) (3,888) (1,968) | (1,511)
--------- --------- --------- | ---------
FINANCING ACTIVITIES |
|
Proceeds from borrowings .................................. 29,750 11,500 100,448 | 67,238
Principal payments on long-term debt ...................... (20,327) (3,495) (109,558) | (66,715)
--------- --------- --------- | ---------
|
Net cash provided by (used in) financing activities ....... 9,423 8,005 (9,110) | 523
--------- --------- --------- | ---------
|
Net increase (decrease) in cash and cash equivalents ...... (28) 11,789 (11,316) | 587
Cash and cash equivalents: |
Beginning of period ....................................... 122 94 11,883 | 567
--------- --------- --------- | ---------
|
End of period ............................................. $ 94 $ 11,883 $ 567 | $ 1,154
========= ========= ========= | =========
See notes to Consolidated Financial Statements
F-6
RBX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
For the years ended December 31, 1999 and 2000, the eight months
ended August 27, 2001 and the four months ended December 31, 2001
(in thousands, except share data)
Total
Common Stock Additional Stockholders'
------------ Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------ ------ ------- ------- ---------
Balances at December 31, 1998 .................... 500,300 $ 5 $ 47,218 $ (210,981) $ (163,758)
Dividend accrued on preferred stock .............. - - (540) - (540)
Accretion of preferred stock ..................... - - (392) - (392)
Net loss ......................................... - - - (11,808) (11,808)
---------- ---------- --------- ---------- ----------
Balances at December 31, 1999 .................... 500,300 5 46,286 (222,789) (176,498)
Dividend accrued on preferred stock .............. - - (506) - (506)
Accretion of preferred stock ..................... - - (394) - (394)
Net loss ......................................... - - - (50,514) (50,514)
---------- ---------- --------- ---------- ----------
Balances at December 31, 2000 .................... 500,300 5 45,386 (273,303) (227,912)
Net income ....................................... - - - 234,539 234,539
---------- ---------- --------- ---------- ----------
Balances at August 27, 2001 - Predecessor ........ 500,300 5 45,386 (38,764) 6,627
Elimination of Predecessor redeemable
preferred stock ............................. - - - 8,534 8,534
Elimination of Predecessor equity ................ (500,300) (5) (45,386) 30,230 (15,161)
Issuance of Successor stock ...................... 1,000,000 1 14,892 - 14,893
Issuance of Successor warrants ................... - - 268 - 268
---------- ---------- --------- ---------- ----------
Balances at August 27, 2001 - Successor .......... 1,000,000 1 15,160 - 15,161
Net loss ......................................... - - - (8,805) (8,805)
---------- ---------- --------- ---------- ----------
Balances at December 31, 2001 .................... 1,000,000 $ 1 $ 15,160 $ (8,805) $ 6,356
========== ========== ========= ========== ==========
See notes to Consolidated Financial Statements
F-7
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except as otherwise noted)
1. Financial Statement Presentation
The accompanying 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 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.
Through the foam segment of its operating subsidiary, the Company manufactures
foam rubber and foam plastics products which are used in a wide range of
applications including athletic equipment, sports medicine wraps, neoprene
wetsuits, hardware center products, other consumer products, automotive
components, insulation for refrigeration and air conditioning systems, and other
industrial products. Through the mixing segment of its operating subsidiary, the
Company custom mixes rubber compound which is sold to customers for further
processing.
The 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
consolidated financial statements of the Successor are not comparable to those
of the Predecessor. A line has been drawn between the accompanying consolidated
balance sheets as of December 31, 2000 and 2001 to distinguish between the
Successor and the Predecessor.
The results of operations and cash flows of the Predecessor for the period from
January 1, 2001 through August 27, 2001 have been referred to throughout the
consolidated financial statements as the results of operations and cash flows
for the eight months ended August 27, 2001 for ease of reference. In a similar
manner, the results of operations and cash flows of the Successor for the period
from August 28, 2001 through December 31, 2001 have been referred to throughout
the consolidated financial statements as the results of operations and cash
flows for the four months ended December 31, 2001. A line has been drawn between
the accompanying consolidated statements of operations and statements of cash
flows of the Predecessor for the eight months ended August 27, 2001 and the
accompanying consolidated statements of operations and statements of cash flows
of the Successor for the four months ended December 31, 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.
2. Chapter 11 Proceedings
On December 5, 2000, certain unsecured creditors of the Predecessor filed an
involuntary petition for reorganization of RBX Corporation under chapter 11
("Chapter 11") of title 11 of the United States Bankruptcy Code (the
F-8
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Delaware Bankruptcy Court"). On December 7, 2000 (the "Petition
Date"), the Predecessor (also referred to as the "Debtors") filed voluntary
petitions with the Delaware Bankruptcy Court for reorganization under Chapter
11. In connection with the filings, the Delaware Bankruptcy Court assigned the
following case numbers: 00-4468, and 00-4512 through 00-4520 (JJF) (the
"Cases"). Effective February 2, 2001 the Delaware Bankruptcy Court transferred
the Cases to the United States Bankruptcy Court for the Western District of
Virginia (the "Virginia Bankruptcy Court") where the Cases were consolidated for
purposes of joint administration under case number 7-01-00436-WSR-11 (the
"Chapter 11 Case"). On the Petition Date, the Delaware Bankruptcy Court
authorized the Debtors to pay certain prepetition and postpetition obligations,
including employee wages and product warranties. The Debtors operated the
business as debtors-in-possession pursuant to the Bankruptcy Code.
On January 20, 2001, the Debtors filed a plan of reorganization to implement a
financial restructuring, which plan was subsequently amended on March 8, 2001,
on April 4, 2001, and on May 11, 2001 (the "Plan"). The Plan provided that the
Company will emerge from bankruptcy with a deleveraged capital structure. The
Plan further contemplated the following: (i) all claims entitled to priority
under the Bankruptcy Code were paid in full on the effective date unless
otherwise agreed; (ii) new common stock initially representing a 95% interest in
the Company and new 12% notes in the amount of $25 million were issued to the
holders of the Senior Secured Notes; (iii) new common stock initially
representing a 5% interest in the Company and warrants were effectively issued
to the holders of unsecured claims including the holders of the Senior
Subordinated Notes; and (iv) existing common and preferred equity interests did
not receive or retain any interest or property under the Plan.
Pursuant to the plan of reorganization under which the Company emerged from
bankruptcy effective August 27, 2001, RBX Group, Inc. was merged into RBX
Corporation, with RBX Corporation the surviving entity. RBX Corporation's
subsidiaries were merged into one legal entity, Rubatex Corporation, and Rubatex
Corporation's name was changed to RBX Industries, Inc.
On July 12, 2001, the Virginia Bankruptcy Court confirmed the Company's plan of
reorganization and such order was signed by the Virginia Bankruptcy Court Judge
on July 17, 2001. The Company emerged from bankruptcy effective August 27, 2001
concurrent with the closing of an exit financing package which provides for a
$35 million revolving credit facility and a $10 million term loan.
Fresh-Start Accounting
As of August 27, 2001, the Successor adopted fresh-start accounting in
accordance with Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code," (SOP 90-7). Implementation of
fresh-start accounting resulted in material changes to the consolidated balance
sheet, including valuation of assets at fair value in accordance with principles
of the purchase method of accounting, valuations of liabilities pursuant to
provisions of the plan of reorganization and valuation of equity based on a
valuation of the business prepared by the independent financial advisors of the
Company. In adopting fresh-start accounting, the Successor was required to
determine its enterprise value, which represents the fair value of the Successor
before considering its non-operating liabilities.
The enterprise value of the Company immediately before the date of confirmation
was less than the total of all postpetition liabilities and allowed claims as
reflected in the following summary:
Postpetition liabilities ................................. $ 112,873
Liabilities subject to compromise ........................ 218,316
---------
Total postpetition liabilities and allowed claims ........ 331,189
Enterprise value ......................................... 100,780
---------
Excess of liabilities over enterprise value .............. $ 230,409
=========
F-9
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The independent financial advisors of the Company used the discounted cash flow
method, incorporating cash flow projections of the Company through 2003, under
the income approach and a guideline company analysis under the market approach
to determine the enterprise value. The "Terminal Value," or the value at the end
of the projection period assuming the Company will maintain operations beyond
the projection period and still have value, was determined using a
capitalization methodology. In determining the value of the Company's tangible
assets the cost approach was incorporated. The trademarks and tradenames were
valued using an income approach, specifically, a relief from royalty method. The
discount rate developed, 13%, was based on the weighted average cost of capital
and an effective tax rate of 40% was used.
The Company's emergence from bankruptcy and the adoption of fresh-start
accounting resulted in the following adjustments to the Company's consolidated
balance sheet as of August 27, 2001:
Reorganization Fresh-Start
Predecessor Adjustments Adjustments Successor
----------- ----------- ----------- -----------
Cash and cash equivalents .................... $ 567 $ - $ - $ 567
Accounts receivable, net ..................... 25,281 - - 25,281
Inventories .................................. 21,789 - - 21,789
Prepaid and other current assets ............. 2,938 - - 2,938
---------- ------------ ------------ -------------
Total current assets ......................... 50,575 - - 50,575
Property, plant and equipment, net ........... 44,902 - 7,719 52,621
Intangible assets ............................ - - 18,058 18,058
Assets held for sale ......................... - - 6,780 6,780
---------- ------------ ------------ -------------
Total assets ................................. $ 95,477 $ - $ 32,557 $ 128,034
========== ============ ============ =============
Accounts payable ............................. $ 8,340 $ - $ - $ 8,340
Accrued liabilities .......................... 17,210 - - 17,210
Current portion of postretirement benefit
obligation .............................. 2,810 - - 2,810
Current portion of long-term debt ............ 2,000 - - 2,000
---------- ------------ ------------ -------------
Total current liabilities .................... 30,360 - - 30,360
Long-term debt ............................... 37,640 - - 37,640
Postretirement benefit obligation ............ 30,164 - (1,993) 28,171
Pension benefit obligation ................... 8,879 - 6,119 14,998
Other liabilities ............................ 1,704 - - 1,704
Liabilities subject to compromise ............ 218,316 (218,316) - -
---------- ------------ ------------ -------------
Total liabilities ............................ 327,063 (218,316) 4,126 112,873
Redeemable preferred stock ................... 8,534 - (8,534) -
Common stock ................................. 5 - (4) 1
Additional paid-in capital ................... 45,386 - (30,226) 15,160
Retained earnings (accumulated deficit) ...... (285,511) 218,316 67,195 -
---------- ------------ ------------ -------------
Total stockholders equity (deficit) .......... (240,120) 218,316 36,965 15,161
---------- ------------ ------------ -------------
Total liabilities and stockholders' equity ... $ 95,477 $ - $ 32,557 $ 128,034
========== ============ ============ =============
F-10
RBX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The "fresh-start adjustments" reflected above as of August 27, 2001 reflect the
valuation of the Company prepared by an independent financial advisor retained
by the Company to prepare a valuation as of that date for the purpose of
fresh-start accounting. This valuation differs from the valuation contained in
the disclosure statement in support of second amended joint plan of
reorganization of RBX Group, Inc. and its subsidiaries (the "Disclosure
Statement") approved by the bankruptcy court which was performed as of an
earlier date. The valuation for fresh-start accounting purposes utilizes
different assumptions which resulted in a higher enterprise value than the
valuation contained in the Disclosure Statement and in an equity value within
the range of equity values contained in the Disclosure Statement.
As a result of the Company's emergence from Chapter 11, all of the federal net
operating loss carryforwards and certain other tax attributes available to the
Company were eliminated by the cancellation of indebtedness income recognized.
Additionally, the state net operating loss carryforwards were reduced to
approximately $61.1 million by the cancellation of indebtedness income
recognized.
The significant reorganization adjustments are discussed in further detail
below:
Liabilities subject to compromise - The Predecessor eliminated $218,316 of
liabilities subject to compromise. These liabilities subject to compromise
included accounts payable and accrued expenses totaling $16,656, subordinated
notes and related accrued interest totaling $112,904, secured notes and related
accrued interest totaling $85,792 and accrued management fees and related
interest totaling $2,964. The elimination of these liabilities subject to
compromise resulted in recognition of gain on cancellation of debt totaling
$218,316 which has been reflected as an extraordinary item in the statement of
operations of the Predecessor for the eight months ended August 27, 2001.
Recurring expenses included in the statement of operations for the year ended
December 31, 2000 that were eliminated as a result of the Company's emergence
from Chapter 11 included reorganization items that would not have been incurred
had the reorganization occurred on January 1, 2000 totaling $27,806, interest
expense on the Predecessor's Indebtedness (other than revolving debt) of $22,030
and interest expense for amortization of associated deferred financing costs of
$1,223.
The significant fresh-start adjustments are discussed in further detail below:
Property, plant and equipment, net - The Successor obtained a third party
valuation for its property, plant and equipment. The property, plant and
equipment adjustment includes a $7,719 fair market value adjustment required to
value the property, plant and equipment of the Successor at the appraised
amount. The adjustment to value the property, plant and equipment at the
appraised amount resulted in recognition of income in the amount of $7,719 which
has been included in reorganization items in the statement of operations of the
Predecessor for the eight months ended August 27, 2001.
Intangible assets - Intangible assets consist of the fair value of
trademark/tradename assets in the amount of $9,800 determined by a third party
valuation. The remaining intangible assets of $8,258 consist of excess
enterprise value after adjusting the identifiable assets to fair value and
considering the present value of long-term debt and other long-term obligations.
The adjustment to record the intangible assets at the appraised amount resulted
in recognition of income in the amount of $18,058 which has been included in
reorganization items in the statement of operations of the Predecessor for the
eight months ended August 27, 2001.
Assets held for sale - Certain assets which will not be used in the Successor's
operations have been classified as assets held for sale. The Successor obtained
a third party valuation of such assets in connection with the aforementioned
valuation of property, plant and equipment. The related adjustment includes a
$6,780 fair market value adjustment required to reflect assets held for sale at
the appraised amount. The adjustment to value the assets held for sale at the
appraised amount resulted in recognition of income in the amount of $6,780 which
has been
F-11
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
included in reorganization items in the statement of operations of the
Predecessor for the eight months ended August 27, 2001 (See Note 20).
Postretirement benefit obligation - The Successor obtained an actuarial
valuation from an independent third party to determine the postretirement
benefit obligation for fresh-start accounting purposes. As a result of the
valuation, an adjustment in the amount of $1,993 was made to reduce the
Company's postretirement benefit obligation as of August 27, 2001. The
adjustment to reduce the postretirement benefit obligation resulted in
recognition of income in the amount of $1,993 which has been included in
reorganization items in the statement of operations of the Predecessor for the
eight months ended August 27, 2001.
Pension benefit obligation - The Successor obtained an actuarial valuation from
an independent third party to determine the pension benefit obligation for
fresh-start accounting purposes. As a result of the valuation an adjustment in
the amount of $6,119 was made to increase the pension benefit obligation as of
August 27, 2001. The adjustment to increase the pension benefit obligation
resulted in recognition of expense in the amount of $6,119 which has been
included in reorganization items in the statement of operations of the
Predecessor for the eight months ended August 27, 2001.
Redeemable preferred stock - The adjustment totaling $8,534 reflects the
elimination of the Predecessor's redeemable preferred stock.
Stockholders' equity (deficit) - The adjustments reflect the elimination of the
Predecessor's common stock, accumulated deficit (after taking into account the
impact of the reorganization adjustments discussed above and the fresh-start
revaluation), and the adjustment to reflect the Successor's total enterprise
value of $100,780.
3. Operations and Financing
As discussed in Note 2 to the financial statements, the Company emerged from
Chapter 11 bankruptcy protection on August 27, 2001. For the four months ended
December 31, 2001 the Company incurred a net loss of $8,805 and has a retained
deficit of $8,805 at December 31, 2001. Based on internally developed cash flow
projections and the Company's planned cost control measures, management believes
that cash flows from operations and the Company's existing revolving line of
credit (see Note 8) will provide sufficient liquidity for the Company to fund
its obligations as they become due during the next 12 months. Ultimately, the
Company must achieve sufficient revenues to support its cost structure.
4. Significant Accounting Policies
Principles of Consolidation - The accounts of the Predecessor and the Successor
and their subsidiaries are included in the consolidated financial statements
after elimination of significant intercompany transactions and profits and
losses.
Business Combinations - During 2001, the Company adopted SFAS 141, "Business
Combinations." SFAS 141 is effective for all business combinations initiated
after June 30, 2001. SFAS 141 also applies to all business combinations
accounted for using the purchase method for which the date of acquisition is
July 1, 2001, or later. As a result, the valuation of assets in accordance with
principles of the purchase method of accounting used for purposes of fresh-start
accounting was performed in accordance with SFAS 141. All business combinations
in the scope of SFAS 141 are to be accounted for using one method - the purchase
method. While SFAS 141 supersedes APB Opinion No. 16, "Business Combinations,"
(APB 16) it carries forward without reconsideration the guidance in APB 16 and
certain of its amendments and interpretations related to the application of the
purchase method of accounting, including allocation of the cost of an acquired
entity to assets acquired and liabilities assumed. The adoption of
F-12
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SFAS 141 did not have a significant impact on the financial position, results of
operations, or cash flows of the Company.
Cash and Cash Equivalents - The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents. The carrying amount of cash equivalents approximates fair value
because of the short maturity of those investments.
Inventories - Inventories are valued at the lower of cost or market. Cost is
determined under the first-in, first-out (FIFO) method and includes material,
labor and overhead. The Company periodically evaluates the need to record
adjustments for impairment of inventory. Inventory in excess of the Company's
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 the Company's future manufacturing schedules, customer
demand, possible alternative uses and ultimate realization of inventory.
Property, Plant and Equipment - In accordance with SOP 90-7, property, plant and
equipment was restated at approximate fair value at August 27, 2001.
Accordingly, property, plant and equipment that was owned prior to August 27,
2001 is stated at approximate fair value as of August 27, 2001 net of
accumulated depreciation since August 27, 2001. Property, plant and equipment
acquired subsequent to August 27, 2001 is stated at cost net of accumulated
depreciation. Depreciation of plant and equipment is provided by the
straight-line method over the estimated useful lives of the related assets,
ranging from 20-40 years for buildings and improvements and 3-14 years for
machinery and equipment.
Goodwill and Other Intangible Assets - During 2001, the Company adopted SFAS
142, "Goodwill and Other Intangible Assets." SFAS 142 states that goodwill and
intangible assets acquired after June 30, 2001, are subject immediately to the
provisions of SFAS 142. SFAS 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets. It addresses how intangible
assets that are acquired individually or with a group of other assets (but not
those acquired in a business combination) should be accounted for in financial
statements upon their acquisition. SFAS 142 also addresses how goodwill and
other intangible assets should be accounted for after they have been initially
recognized in the financial statements. As a result of the implementation of
fresh-start accounting, the accounting for goodwill and other intangible assets
was determined in accordance with SFAS 142. The adoption of SFAS 142 did not
have a significant impact on the financial position, results of operations, or
cash flows of the Company.
The intangible assets created by the adoption of fresh-start accounting consist
of trademark and tradename assets as well as excess enterprise value, or
goodwill, and are not subject to amortization. The Company evaluates the
remaining useful life of the trademark and tradename 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. Goodwill was
assigned to the foam and mixing segments in the amounts of $6,567 and $1,691,
respectively. Goodwill is not expected to be deductible for tax purposes.
Asset Impairment and Disposal of Long-Lived Assets - During 2001, the Company
adopted SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS 144 is effective for fiscal years beginning after December 15,
2001 and interim periods within those fiscal years. The provisions of SFAS 144
generally are to be applied prospectively. SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS 144 supersedes SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of;" however, it retains many of
the fundamental provisions of SFAS 121. SFAS 144 also supersedes the accounting
and reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and
F-13
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Infrequently Occurring Events and Transactions," for the disposal of a segment
of a business. However, it retains the requirement in APB 30 to report
separately discontinued operations and extends that reporting to a component of
an entity that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale. The adoption of SFAS
144 did not have a significant impact on the financial position, results of
operations, or cash flows of the Company.
The Company assesses 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.
Deferred Financing Costs - Deferred financing costs are amortized using the
effective interest method over the life of the related debt.
Fair Value of Financial Instruments - The Company generally uses quoted market
prices to determine the fair value of its indebtedness. If quoted market prices
are not available, management estimates fair value based on the present value of
estimated future cash flows using a discount rate commensurate with the risks
involved. The carrying amounts of other assets and liabilities qualifying as
financial instruments approximate fair value.
Environmental remediation liabilities - The Company is 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. The Company has not used discounting in determining its accrued
liabilities for environmental remediation. In developing its estimate of
environmental remediation costs, the Company considers, among other things,
currently available technological solutions, alternative clean-up methods and
risk-based assessments of the contamination, and estimates developed by
independent environmental consultants. The Company does not maintain insurance
coverage for environmental matters and does not anticipate recoveries from other
potentially responsible parties ("PRP's"); therefore, no claims for possible
recovery from third-party insurers or other parties related to environmental
costs have been recognized in the Company's consolidated financial statements.
The Company adjusts the accruals when new remediation responsibilities are
discovered and probable costs become estimable, or when current remediation
estimates are adjusted to reflect new information.
Revenue - Revenue is recognized 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.
Research and Development - Research and development expenditures, which are
expensed as incurred, were approximately $3,459, $2,995, $1,788 and $1,345 for
the years ended December 31, 1999 and 2000 and for the eight months ended August
27, 2001 and the four months ended December 31, 2001, respectively.
Income Taxes - The Company accounts for income taxes using the liability method,
whereby deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities by applying enacted statutory tax rates applicable to future
years in which the differences are expected to reverse.
Business and Credit Concentrations - The Company's customers are not
concentrated in any specific geographic region or any specific industry. No
single customer accounts for more than 10% of the Company's sales. Generally,
the Company's accounts receivable are not comprised of more than 5% from a
single customer; however, as of December 31, 2001, the Company had accounts
receivable from one customer that comprised approximately 6.5% of
F-14
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
gross accounts receivable. The Company reviews a customer's credit history
before extending credit. The Company establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the balance sheets and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Comprehensive Income - The Company had no items of comprehensive income to
report in 1999, 2000 or 2001.
New Accounting Standards - SFAS 143, "Accounting for Asset Retirement
Obligations," 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 the Company.
Reclassifications - Certain amounts from prior periods have been reclassified to
conform to the current period presentation.
5. Inventories
Components of inventory are as follows:
Predecessor | Successor
2000 | 2001
---- | ----
Raw materials ........................ $10,286 | $ 7,688
Work-in-process ...................... 2,186 | 1,891
Finished goods ....................... 11,460 | 7,646
------- | -------
|
$23,932 | $17,225
======= | =======
F-15
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Property, Plant and Equipment
Major classes of property, plant and equipment are as follows:
Predecessor | Successor
2000 | 2001
---- | ----
Land ................................. $ 1,310 | $ 1,428
Buildings and improvements ........... 18,449 | 15,767
Machinery and equipment .............. 49,752 | 36,229
Construction-in-progress ............. 423 | 726
------- | -------
|
69,934 | 54,150
Less: accumulated depreciation ....... 23,194 | 1,037
------- | -------
|
$46,740 | $53,113
======= | =======
As of December 31, 2000, the Company recognized a loss on impairment of
long-lived assets in connection with Rubatex's Bedford plant (See Note 15 for
discussion of reorganization items).
Implementation of fresh-start accounting resulted in material changes to the
consolidated balance sheet, including valuation of assets at fair value (See
Note 2). As of December 31, 2001 such changes to the Company's property, plant
and equipment have been reflected.
7. Accrued Liabilities
Major components of accrued liabilities are as follows:
Predecessor | Successor
2000 | 2001
---- | ----
Interest ............................. $ 347 | $ 1,035
Personnel related excluding vacation.. 3,731 | 2,456
Vacation ............................. 2,756 | 1,959
Accrued plant shutdown costs ......... - | 4,845
Other ................................ 5,300 | 5,679
------- | -------
|
$12,134 | $15,974
======= | =======
F-16
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. Long-term Debt
Long-term debt of the Company is as follows:
Predecessor | Successor
2000 | 2001
---- | ----
Revolving credit facility ........................................ $23,750 | $ 5,865
|
Senior secured notes (1) ......................................... - | 25,000
Term loan ........................................................ - | 9,298
------- | -------
23,750 | 40,163
Less: current portion ............................................ 23,750 | 2,000
------- | -------
|
$ - | $38,163
======= | =======
(1) Senior secured notes of the Predecessor were reclassified to
liabilities subject to compromise as of the Petition Date (See
Note 9).
Long-term debt of the Predecessor
Revolving Credit Facility - On December 11, 1997, the Company entered into a
credit agreement (the "Credit Agreement") which provided for a $25 million
revolving credit facility (the "Revolving Credit Facility") subject to a
borrowing base formula and scheduled to mature in December 2001. As of December
31, 2000, $1.1 million of the Revolving Credit Facility was reserved for
irrevocable standby letters of credit primarily in connection with the Company's
casualty insurance program relating to worker's compensation. The Company's
indebtedness under the Credit Agreement was guaranteed by RBX Corporation and
its existing and future subsidiaries and was collateralized by a first priority
interest in all accounts receivable, inventory, and general intangibles (to the
extent related to accounts receivable and inventory). Indebtedness under the
Revolving Credit Facility bore interest at market rates. As of December 31,
2000, the interest rate in effect was 11.0%.
In April 2000, the Company exhausted its borrowing capacity under the Revolving
Credit Facility and subsequently relied on operating cash flows to sustain its
operations through December 31, 2000. The Company was in default with respect to
the Revolving Credit Facility because the Company did not maintain certain
covenants and due to cross-default provisions; however, the Company continued to
pay interest and fees in connection with the revolver when due.
The Company believed that there was insufficient collateral to cover the
interest with respect to its note obligations; accordingly, the accrual of such
interest was discontinued for the period subsequent to the Petition Date.
Contractual interest expense on such obligations was $25,940 for the year ended
December 31, 2000 compared to reported interest expense exclusive of
amortization of deferred financing fees of $24,440 for that same period.
Promissory Note - On June 10, 1996, the Company issued a $5,000 unsecured note
in connection with the purchase of certain assets for use in the Company's
manufacturing operations. The note provided for interest to be paid at 11.75% on
a semiannual basis. Due to a dispute with the note holder over, among other
things, the condition of the assets purchased, the Company discontinued making
interest payments after 1997. The $5,000 obligation including accrued interest
thereon of $1,454 was settled in 2000 for $250. An extraordinary gain on
extinguishment of debt of $6,204 was reflected in the 2000 statement of
operations in connection with the settlement of this indebtedness.
F-17
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Long-term debt of the Successor
Revolving Credit Facility - On August 27, 2001 the Company entered into a credit
agreement (the " New Credit Agreement") which provides for a $35 million
revolving credit facility (the "New Revolving Credit Facility") subject to a
borrowing base formula applied to eligible receivables and inventory and
scheduled to mature in August 2004. As of December 31, 2001, $1.1 million of the
New Revolving Credit Facility was reserved for irrevocable standby letters of
credit primarily in connection with the Company's casualty insurance program.
The Company's indebtedness under the New Credit Agreement is guaranteed by RBX
Corporation and its existing and future subsidiaries and is collateralized by a
first priority interest in all of our present and future properties and
interests in real or personal property and proceeds of the foregoing.
Indebtedness under the New Revolving Credit Facility bears interest at the prime
rate plus one-half percent. As of December 31, 2001, the interest rate in effect
was 5.5%. As of December 31, 2001, the Company had available unused borrowing
capacity of $11.3 million under the revolving credit facility.
Senior Secured Notes - On August 27, 2001 RBX Corporation issued $25 million in
12.00% Senior Secured Notes (the "New Senior Secured Notes") due August 15,
2006, to persons having a beneficial interest in our old 12% notes (See Note 9)
as of the record date determined by the Virginia Bankruptcy Court. The New
Senior Secured Notes are collateralized by second priority liens on
substantially all of the assets of the Company . The New Senior Secured Notes
may be redeemed at any time at the Company's option at a redemption premium.
Interest is payable semi-annually on February 15 and August 15 of each year. The
Company may elect at each interest payment date to pay interest on all or any
portion of the outstanding notes by the issuance of additional notes at a rate
of 12% per annum in lieu of cash. On February 15, 2002, the Company paid
interest in the amount of $1,400 in this manner. RBX Industries, Inc. is a
wholly owned subsidiary of RBX Corporation and both RBX Corporation and RBX
Industries, Inc. have guaranteed the Senior Secured Notes on a full,
unconditional, and joint and several basis.
Term Loan - The New Credit Agreement, described above also provides for a term
loan in the principal amount of $10,000. The term loan is payable in sixty (60)
consecutive monthly installments of principal, together with interest, beginning
September 1, 2001. The Company's indebtedness under the New Credit Agreement,
including the term loan, is guaranteed by RBX Corporation and its existing and
future subsidiaries and is collateralized by a first priority interest in all of
our present and future properties and interests in real or personal property and
proceeds of the foregoing. Indebtedness on the term loan bears interest at the
prime rate plus one percent. As of December 31, 2001, the interest rate in
effect was 6.0%.
The Company's indebtedness contains certain restrictions which, among other
things, restrict its ability to incur additional indebtedness, issue capital
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 at a minimum level of adjusted tangible net worth and maintenance of
a minimum level of earnings before interest, taxes, depreciation and
amortization ("EBITDA"). The Company was in compliance with the terms of its
indebtedness as of December 31, 2001.
9. Liabilities Subject to Compromise
Liabilities subject to compromise include certain obligations incurred prior to
the Petition Date. These amounts represent the Company's estimate of known or
potential claims to be resolved in connection with the Chapter 11 Case. The
principal categories of claims classified as liabilities subject to compromise
are identified below. These amounts may be subject to future adjustment
depending on the actions of the bankruptcy court, further developments with
respect to potential disputed claims, determination as to the value of any
collateral securing claims, or other events. Additional liabilities subject to
compromise may arise subsequent to the Petition Date resulting from the
F-18
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Company's rejection of executory contracts. The liabilities subject to
compromise as of December 31, 2000 are as follows:
Senior secured notes ............................ $100,000
Senior subordinated notes ....................... 100,000
Accrued interest ................................ 23,696
Accounts payable ................................ 24,195
Accrued expenses ................................ 5,972
--------
$253,863
========
The significant liabilities subject to compromise are discussed in further
detail below:
Senior Secured Notes - On December 11, 1997, RBX Corporation sold $100 million
in 12.00% Senior Secured Notes (the "Secured Notes") due January 15, 2003,
pursuant to Rule 144A under the Securities Act of 1933. The Secured Notes were
collateralized by (i) a first priority lien on a substantial portion of the
owned and leased manufacturing facilities and on substantially all of the
equipment and general intangibles, including trademarks and patents, (ii) a
second priority lien on inventory, receivables and general intangibles (to the
extent related to inventory and receivables) and (iii) a first priority lien on
all of the capital stock of RBX Corporation's existing and future subsidiaries.
Interest was payable semi-annually on January 15 and July 15 of each year. The
proceeds from the issuance of the Secured Notes were used to repay previously
existing indebtedness and pay issuance costs.
The Company exchanged the Secured Notes for a new issue of debt securities of
RBX Corporation (the "New Secured Notes") registered under the Securities Act of
1933. The terms of the New Secured Notes were substantially identical to those
of the Secured Notes.
The Company discontinued making interest payments in connection with the Secured
Notes beginning with the payment due July 15, 2000; accordingly, the Company was
in default with respect to the Secured Notes.
Accrued but unpaid prepetition interest related to this indebtedness as of the
Petition Date was $10,792 and is classified on the December 31, 2000
consolidated balance sheet as liabilities subject to compromise.
Senior Subordinated Notes - On October 16, 1995, RBX Corporation sold $100
million in 11.25% Senior Subordinated Notes (the "Subordinated Notes") due
October 15, 2005, pursuant to Rule 144A under the Securities Act of 1933. The
Subordinated Notes were general unsecured obligations subordinated in right of
payment to all other senior indebtedness of the Company. Interest was payable
semi-annually on April 15 and October 15 of each year, commencing in 1996.
The Company exchanged the Subordinated Notes for a new issue of debt securities
of RBX Corporation (the "New Subordinated Notes") registered under the
Securities Act of 1933. The terms of the New Subordinated Notes were
substantially identical to those of the Subordinated Notes.
The Company discontinued making interest payments in connection with the
Subordinated Notes beginning with the payment due April 15, 2000; accordingly,
the Company was in default with respect to the Subordinated Notes.
Accrued but unpaid prepetition interest related to this indebtedness as of the
Petition Date was $12,904 and is classified on the December 31, 2000
consolidated balance sheet as liabilities subject to compromise.
F-19
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. Income Taxes
The Company files a consolidated income tax return. The components of income tax
expense (benefit) are as follows:
Predecessor | Successor
Year ended December 31 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
Current: |
Federal ............................... $ - $ - $ - | $ -
State ................................. (125) 26 - | -
---------- ------------ ------------ | -----------
|
(125) 26 - | -
---------- ------------ ------------ | -----------
Deferred: |
Federal ............................... - - - | -
State ................................. - - - | -
---------- ----------- ------------ | -----------
|
|
Income tax expense (benefit) .............. $ (125) $ 26 $ - | $ -
========== =========== ============ | ===========
Temporary differences giving rise to significant components of the Company's
deferred tax assets and liabilities are as follows:
Predecessor | Successor
2000 | 2001
---- | ----
Deferred tax liabilities: |
Accumulated depreciation and revaluation of assets ..... $ 531 | $ 8,269
Contractual interest ................................... 600 | -
----------- | ----------
1,131 | 8,269
----------- | ----------
Deferred tax assets: |
Employee benefits ...................................... 13,320 | 12,937
Net operating loss carryforwards ....................... 46,727 | 3,562
Alternative minimum tax credits ........................ 6,529 | -
Accumulated amortization ............................... 5,191 | 4,816
Pension benefits ....................................... 3,126 | 6,288
Other .................................................. 5,961 | 4,474
----------- | ----------
|
80,854 | 32,077
Valuation allowance ........................................ (79,723) | (23,808)
----------- | ----------
|
1,131 | 8,269
----------- | ----------
|
Deferred income taxes ...................................... $ - | $ -
=========== | ==========
F-20
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that temporary differences and carryforwards are
expected to be available to reduce taxable income. The Company periodically
evaluates its deferred tax asset to determine the need for a valuation allowance
given the Company's expectations with respect to future taxable income as well
as the expiration dates of the Company's net operating loss carryforwards. A
valuation allowance has been established for net deferred tax assets since it is
more likely than not that the net deferred tax assets will not be realized.
The reconciliation of income taxes computed at the Federal statutory tax rate to
actual income tax expense is as follows:
Predecessor | Successor
Year ended December 31 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
Federal statutory rate (34.0)% (34.0)% 35.0% | (35.0)%
Effect of: |
Change in valuation allowance ................... 33.2 31.2 (22.0) | (3.2)
Attribute reduction ............................. - - 21.3 | 14.5
State taxes, net of federal benefit ............. (0.7) - - | -
Cancellation of debt ............................ - - (32.6) | -
Nondeductible reorganization fees ............... - 2.7 (1.4) | 23.7
Other ........................................... 0.4 0.1 (0.3) | -
--------- -------- --------- | ---------
|
(1.1)% -% -% | -%
========= ======== ======== | =========
|
The Company has net operating loss carryforwards of approximately $59.4 million
for state income tax purposes. Such carryforwards expire as follows: 2002 - $3.3
million; 2003 - $8.8 million; 2004 - $4.2 million; 2005 - $9.7 million; 2006 -
$3.8 million; 2008 - $.4 million; 2009 - $.4 million; 2010 - $.8 million; 2011 -
$.2 million; 2012 - $3.2 million; 2013 - $8.2 million; 2014 - $2.8 million; 2015
- - $6.6 million; 2016 - $3.7 million; 2017 - $1.3 million; 2018 - $.7 million;
2019 - $.3 million; 2020 - $.7 million and 2021 - $.3 million. In conjunction
with the implementation of fresh-start accounting, all federal net operating
loss carryforwards and certain other tax attributes available to the Company
were eliminated by the cancellation of indebtedness income recognized. (See Note
2 for further discussion).
F-21
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. Pension and Other Postretirement Benefits
The Company sponsors certain qualified and nonqualified pension plans and other
postretirement benefit plans for employees. The following table provides a
reconciliation of the changes in the plans' benefit obligations and fair value
of assets as well as information with respect to the plans' funded status.
Pension Benefits Other Benefits
---------------- --------------
Predecessor | Successor Predecessor | Successor
2000 | 2001 2000 | 2001
---- | ---- ---- | ----
Reconciliation of benefit obligation: | |
Obligation, beginning of year ......................... $ 43,884 | $ 45,173 $ 27,308 | $ 29,518
Service cost .......................................... 1,090 | 885 510 | 540
Interest cost ......................................... 3,309 | 2,576 2,121 | 2,060
Plan amendments ....................................... 8 | 865 - | (773)
Actuarial (gain) loss ................................. 2,553 | (381) 2,410 | 2,674
Benefit payments ...................................... (4,073) | (2,218) (2,831) | (2,215)
Settlement ............................................ - | (18,204) - | -
Effect of settlement .................................. - | 2,400 - | -
Reclassification of supplemental executive | |
retirement plan ................................... (1,598) | 1,598 - | -
-------- | -------- -------- | --------
| |
Obligation, end of year ............................... 45,173 | 32,694 29,518 | 31,804
-------- | -------- -------- | --------
| |
Reconciliation of fair value of plan assets: | |
Fair value of plan assets, beginning of year .......... 42,583 | 39,392 - | -
Actual return on plan assets .......................... 663 | (3,435) - | -
Company contributions ................................. 219 | 186 2,831 | 2,215
Benefit payments ...................................... (4,073) | (2,218) (2,831) | (2,215)
Settlement ............................................ - | (18,204) - | -
-------- | -------- -------- | --------
| |
Fair value of plan assets, end of year ................ 39,392 | 15,721 - | -
-------- | -------- -------- | --------
| |
Funded status: | |
Funded status ......................................... (5,781) | (16,973) (29,518) | (31,804)
Unrecognized net loss (gain) .......................... (1,031) | 1,636 (3,347) | 768
Unrecognized prior service cost ....................... 652 | - - | -
-------- | -------- -------- | --------
| |
Accrued benefit liability ............................. $ (6,160) | $(15,337) $(32,865) | $(31,036)
======== | ======== ======== | ========
F-22
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table provides the components of net periodic benefit cost for the
plans:
Pension Benefits Other Benefits
---------------- --------------
Predecessor | Successor Predecessor | Successor
Year Ended 8 Months | 4 Months Year Ended 8 Months | 4 Months
December 31, Ended | Ended December 31, Ended | Ended
------------ ----- | ----- ------------ ----- | -----
August 27, | December 31, August 27, | December 31,
1999 2000 2001 | 2001 1999 2000 2001 | 2001
---- ---- ---- | ---- ---- ---- ---- | ----
Service cost ............... $ 1,270 $ 1,090 $ 644 | $ 241 $ 564 $ 510 $ 393 | $ 147
Interest cost .............. 3,133 3,309 1,994 | 582 1,969 2,121 1,486 | 574
Expected return on | |
plan assets ............ (3,733) (3,894) (1,946) | (381) - - - | -
Amortization: | |
Unrecognized net | |
(gain) loss ......... (17) (239) - | - (64) (117) (40) | -
Unrecognized | |
prior service | |
cost................. 68 69 94 | - - - - | -
------- ------ ------- | -------- ------- ------- ------- | -------
| |
Net periodic benefit | |
cost.................... $ 721 $ 335 $ 786 | $ 442 $ 2,469 $ 2,514 $ 1,839 | $ 721
======= ======= ======= | ======== ======= ======= ======= | =======
Prior service costs are amortized using the straight line method over the
average remaining service period of employees expected to receive benefits under
the plans. Gains and losses in excess of 10% of the greater of the benefit
obligation and market value of assets are also amortized over the average
remaining service period of employees expected to receive benefits under the
plans.
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
Predecessor | Successor
2000 | 2001
---- | ----
Weighted average assumptions as of December 31: |
Discount rate ......................................... 7.75% | 7.25%
Expected return on plan assets ........................ 9.50% | 9.50%
Rate of compensation increase ......................... 4.75% | 4.25%
For measurement purposes, a 10% annual rate of increase of covered health care
benefits was assumed for 2001. The rate was assumed to decrease gradually to 5%
in 2006 and remain at that level thereafter.
F-23
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
1% Increase 1% Decrease
----------- -----------
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost .......... $ 142 $ (116)
Effect on the health care component of the accumulated
postretirement benefit obligation ............................. 1,244 (1,034)
Certain of the Company's hourly and salaried employees participate in defined
contribution plans to which they contribute each month and which may be matched
in part by the Company in accordance with plan provisions and terms established
in various collective bargaining agreements. Company contributions related to
these plans were approximately $895, $740, $527 and $279 for the years ended
December 31, 1999 and 2000, and for the eight months ended August 27, 2001 and
the four months ended December 31, 2001, respectively.
12. Contingencies
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 consultants estimate but
is unable to predict the outcome of this potential liability at this time.
Management believes the estimates discussed above will be sufficient to satisfy
anticipated costs of remediation at these two Superfund sites. At December 31,
2001, approximately $2.2 million (undiscounted) for estimated environmental
remediation costs was accrued and substantially the entire amount is included in
long-term liabilities. Expenditures relating to costs currently accrued are
expected to be made over the next 5 to 10 years. As a result of factors such as
the continuing evolution of environmental laws and regulatory requirements, the
availability and application of technology, 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.
F-24
RBX CORPORATION
NOTES TO 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.
13. Preferred Stock
The Predecessor's Series A Preferred Stock accrued dividends on a daily basis at
a rate of 6% per annum based on a liquidation value of $100 per share. If not
redeemed earlier, the preferred stock was subject to mandatory redemption at an
amount equal to the liquidation value plus all accrued and unpaid dividends on
November 1, 2006. The preferred stock was subject to accretion over the period
from the date of issuance to the mandatory liquidation date using the interest
method; however, the Company discontinued accretion as of the Petition Date, due
to uncertainty associated with its redemption in connection with the Company's
plan of reorganization. The accrual of the dividend was also discontinued for
the period subsequent to the Petition Date. In accordance with provisions of the
plan of reorganization the preferred stock of the Predecessor was cancelled.
14. Net Loss Per Share (in thousands, except per share data)
Basic net loss 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 loss 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 loss of the Company. The following is a
reconciliation of the numerators and denominators of the net loss per common
share computations for the period presented:
Successor: Net Loss Shares Per Share
Four months ended December 31, 2001 (Numerator) (Denominator) Amount
----------------------------------- ----------- ------------- ------
Basic net loss per share $ 8,805 1,000 $ 8.81
Effect of dilutive warrants - - ==========
--------- --------------
Diluted net loss per share $ 8,805 1,000 $ 8.81
========= ============== ==========
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 period presented) totaled 67,416 for the
four months ended December 31, 2001.
15. Reorganization Items
Reorganization items have been segregated from the results of normal operations
and are presented separately in the
F-25
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
financial statements. For the year ended December 31, 2000 and for the eight
months ended August 27, 2001 and the four months ended December 31, 2001,
reorganization items were comprised of the following:
Predecessor | Successor
8 Months Ended | 4 Months Ended
2000 August 27, 2001 | December 31, 2001
---- --------------- | -----------------
Loss on impairment of long-lived assets ................ $16,173 $ - | $ -
Write off of deferred financing fees ................... 3,759 - | -
Professional fees related to the reorganization ........ 4,050 6,919 | 343
Reserve equity investment .............................. 1,567 - | -
Fresh-start revaluation ................................ - (28,431) | -
Plant shut-down costs .................................. - - | 5,009
Other .................................................. 2,257 1,726 | 580
-------- -------- | ---------
|
$27,806 $(19,786) | $ 5,932
======= ======== | =========
Loss on impairment of long-lived assets - In connection with its plan of
reorganization, the Company reduced manufacturing activities performed at the
Bedford plant. As a result, the Company reassessed the carrying values of the
long-lived assets related to the Bedford plant and determined that there was an
impairment; accordingly, a loss on impairment of the long-lived assets of
$16,173 was recorded as of December 31, 2000.
Deferred financing fees - Deferred financing fees were written off as of the
Petition Date in order to adjust the carrying value of the Company's
indebtedness to the expected allowed amount of the related claim.
Equity investment - Effective December 31, 1999 the Company acquired a
non-controlling financial interest in a venture established to manufacture and
distribute certain extruded foam products. In connection with its plan of
reorganization the Company reassessed the carrying value of the investment in
light of its inability to provide the venture with sufficient funding to
continue its operations. Accordingly, provision was made for a full reserve
against the investment as of December 31, 2000.
Fresh-start revaluation - As of August 27, 2001, the Successor adopted
fresh-start accounting in accordance with Statement of Position 90-7.
Implementation of fresh-start accounting resulted in material changes to the
consolidated balance sheet, including valuation of assets at fair value in
accordance with principles of the purchase method of accounting, valuations of
liabilities pursuant to provisions of the plan of reorganization and valuation
of equity based on a valuation of the business prepared by the independent
financial advisors of the Company (See Note 2). Accordingly, the implementation
of fresh-start accounting resulted in a fresh-start revaluation gain of $28,431.
Plant shut-down costs - During the four months ended December 31, 2001, the
Company incurred expenses associated with the closure of its mixing plant in
Barberton, Ohio and an extrusion and fabrication plant in Bedford, Virginia (see
Note 20).
Other - Other reorganization items are comprised primarily of charges related to
contractual obligations associated with the abandonment of certain construction
projects.
During 2000, the Company made cash payments of $3,251 for professional fees
incurred in connection with the reorganization. During the eight months ended
August 27, 2001 and the four months ended December 31, 2001, the Company made
cash payments of $4,934 and $2,711 for professional fees incurred in connection
with the reorganization, respectively.
F-26
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
16. Commitments
The Company is obligated under lease agreements, principally relating to the
rental of warehouse facilities and transportation equipment. Future minimum
rental payments required under operating leases for the years ended December 31,
are as follows:
2002 ................................................... $ 1,477
2003 ................................................... 1,431
2004 ................................................... 946
2005 ................................................... 636
2006 ................................................... 339
Thereafter ............................................. 1,017
Rental expense for all operating leases was approximately $2,919, $2,666, $1,656
and $686 for the years ended December 31, 1999, 2000 and for the eight months
ended August 27, 2001 and the four months ended December 31, 2001, respectively.
17. Related-Party Transactions
Historically, the Company has received substantial ongoing financial and
management services from American Industrial Partners (AIP), an affiliate of the
majority owners of the Predecessor's stockholder. Management and consulting fees
expense related to AIP were $850, and $795 for 1999, and 2000, respectively,
plus out-of-pocket expenses. Although such management fees were accrued, there
were no cash payments of management fees made in 1999 or 2000. Out-of-pocket
expenses of $289 and $191 were reimbursed in cash for 1999, and 2000,
respectively.
The Company paid a member of the Board of Directors a fee of $150 in 1999.
18. Supplemental Cash Flow Information
Payments for interest and income taxes are as follows:
Predecessor | Successor
Year Ended December 31, 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
Interest ........................ $ 24,467 $ 8,375 $ 1,600 | $ 702
Income taxes .................... 18 29 25 | -
19. Segment and Related Information
The Company has two reportable segments, foam and mixing. Foam products are
supplied to customers of the foam segment from the Company's five
foam-manufacturing facilities and through outsourcing arrangements. Uncured
rubber products are supplied to customers of the mixing segment from one custom
rubber mixing facility.
F-27
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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.
Predecessor | Successor
Year Ended December 31, 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
Foam Group: |
Revenues ....................................... $ 177,182 $ 167,436 $ 96,638 | $ 41,105
Segment profits (losses) ....................... 11,525 (6,241) (2,903) | (1,147)
Total assets ................................... 103,902 77,654 80,852 | 75,895
Capital expenditures ........................... 4,054 2,356 1,172 | 1,296
Depreciation and amortization .................. 6,747 7,122 3,173 | 871
|
Mixing Group: |
Revenues ....................................... 69,781 64,067 37,459 | 14,578
Segment profits (losses) ....................... 6,970 5,145 1,343 | (32)
Total assets ................................... 24,921 23,686 20,819 | 18,840
Capital expenditures ........................... 931 729 801 | 246
Depreciation and amortization .................. 814 869 621 | 166
|
Other: |
Segment profits (loss) ......................... (30,303) (49,418) 236,099 | (7,626)
Total assets ................................... 5,033 12,506 26,363 | 24,838
Depreciation and amortization .................. 1,296 1,223 - | -
|
Total: |
Revenues ....................................... 246,963 231,503 134,097 | 55,683
Net income (loss) .............................. (11,808) (50,514) 234,539 | (8,805)
Total assets ................................... 133,856 113,846 128,034 | 119,573
Capital expenditures ........................... 4,985 3,085 1,973 | 1,542
Depreciation and amortization .................. 8,857 9,214 3,794 | 1,037
The following table presents the details of "Other" segment profits (losses).
Predecessor | Successor
Year Ended December 31, 8 Months Ended | 4 Months Ended
1999 2000 August 27, 2001 | December 31, 2001
---- ---- --------------- | -----------------
Corporate expenses ................................. $ (2,948) $ (513) $ (314) | $ (135)
Management fees .................................... (1,119) (1,334) - | -
Reorganization items ............................... - (27,806) 19,786 | (5,932)
Interest expense ................................... (26,361) (25,943) (1,689) | (1,559)
Income tax benefit (expense) ....................... 125 (26) - | -
Gain on cancellation of debt ....................... - 6,204 218,316 | -
--------- --------- --------- | ---------
|
$ (30,303) $ (49,418) $ 236,099 | $ (7,626)
========= ========= ========= | =========
F-28
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
20. Closed Plants
In October 2001, the Company discontinued its extrusion and fabrication
operations in Bedford, Virginia and its custom rubber mixing operations in
Barberton, Ohio (the "Closed Plants") due to operating losses experienced at
these locations. The Company plans to supply some of its customers who formerly
purchased products that were manufactured at these locations from its other
locations and through domestic and foreign sourcing arrangements. Because the
Company anticipates that it will have continuing involvement with these
businesses in the form of sales to customers who formerly bought products
manufactured at the Closed Plants, they have not been presented as discontinued
operations in the accompanying statements of operations.
During 2001, the Closed Plants had sales and operating losses as follows:
Predecessor | Successor
8 Months Ended | 4 Months Ended
August 27, 2001 | December 31, 2001
--------------- | -----------------
Net sales of closed plants ............................ $ 35,285 | $ 9,001
======== | ========
Operating losses of closed plants ..................... $ (5,445) | $ (4,411)
======== | ========
The assets associated with the Closed Plants which are no longer required in the
Company's operations have been presented in the accompanying balance sheet as of
December 31, 2001 under the caption of assets held for sale.
21. Restatement
Subsequent to the issuance of its financial statements for the years ended
December 31, 1999 and 2000 and for the eight months ended August 27, 2001 that
presented the results of operations of the Closed Plants (see Note 20) for those
periods as discontinued operations, the Company's management determined that the
Closed Plants should not have been presented as discontinued operations. As a
result, the accompanying consolidated statements of operations for the years
ended December 31, 1999 and 2000 and for the eight months ended August 27, 2001
have been restated to present the revenues and expenses of the Closed Plants as
components of continuing operations.
A summary of the significant effects of the restatement is as follows:
1999 2000
As As
Previously As Previously As
Reported Restated Reported Restated
------------ -------- --------------- --------
For the year ended December 31:
Net sales ........................................... $ 149,603 $ 246,963 $ 156,348 $ 231,503
Cost of goods sold .................................. 120,093 209,830 129,700 211,300
Gross profit ........................................ 29,510 37,133 26,648 20,203
Selling, general and administrative costs ........... 19,183 21,614 18,515 20,950
Operating income (loss) ............................. 9,236 14,428 (21,869) (30,749)
F-29
RBX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1999 2000
As As
Previously As Previously As
Reported Restated Reported Restated
--------------- -------- ------------ ---------
Loss from continuing operations before income
taxes and extraordinary item .................... (17,125) (11,933) (47,812) (56,692)
Loss from continuing operations before
extraordinary item .............................. (17,000) (11,808) (47,838) (56,718)
Loss (gain) from discontinued operations ........... (5,192) - 8,880 -
Net loss ........................................... (11,808) (11,808) (50,514) (50,514)
2001
As
Previously As
Reported Restated
------------ ----------
For the eight months ended August 27:
Net sales ............................................................................ $98,812 $134,097
Cost of goods sold ................................................................... 82,924 122,084
Gross profit ......................................................................... 15,888 12,013
Selling, general and administrative costs ............................................ 12,305 13,875
Operating income ..................................................................... 23,357 17,912
Income from continuing operations before income
taxes and extraordinary item ...................................................... 21,668 16,223
Income from continuing operations before
extraordinary item ................................................................ 21,668 16,223
Loss from discontinued operations .................................................... 5,445 -
Net income ........................................................................... 234,539 234,539
F-30
[LOGO]
RBX Corporation
635,576 Shares of Common Stock
11,563 Warrants to acquire 11,563 Shares of Common Stock
$16,500,000 12% Senior Secured Notes due 2006
___________________
PROSPECTUS
___________________
Until [INSERT DATE], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by RBX Corporation
in connection with this registration statement. All of such expenses are
estimates, other than the filing and quotation fees payable to the Securities
and Exchange Commission.
Filing fee--Securities and Exchange Commission .............................................. $ 6,339
Fees and expenses of legal counsel .......................................................... 150,000
Printing expenses ........................................................................... 35,000
Fees and expenses of accountants ............................................................ 230,000
Miscellaneous expenses....................................................................... 20,000
--------
Total ................................................................................... $441,339
========
All of the amounts shown are estimates except for the filing fee
payable to the Securities and Exchange Commission.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware, or GCL,
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she was or is a director, officer, employee or agent of the
corporation, or was or is serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person identified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she was or is a director, officer, employee or
agent of the corporation, or was or is serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
the person identified acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such expenses that the
court shall deem proper. Section 145 further provides that to the extent a
director or officer of a corporation has been successful in
II-1
the defense of any action, suit or proceeding referred to above or in the
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith. The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Our Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws, provide, in effect, that to the full extent and under the
circumstances permitted by Section 145 of the GCL, we shall indemnify any person
who was or is a party or is threatened to be made a party to any action, suit or
proceeding of the type described above by reason of the fact that he or she was
or is a director, officer, employee or agent of our company.
Our Certificate of Incorporation relieves our directors from monetary
damages to our company or our stockholders for breach of such director's
fiduciary duty as a director to the fullest extent permitted by the GCL. Under
Section 102(b)(7) of the GCL, a corporation may relieve its directors from
personal liability to such corporation or its stockholders for monetary damages
for any breach of their fiduciary duty as directors except (i) for any breach of
the director's duty of loyalty to our company or our stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
In addition, we carry an insurance policy for the protection of our
directors and executive officers against any liability asserted against them in
their official capacities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Effective August 27, 2001 all of our issued securities were cancelled
by order of the U.S. Bankruptcy Court and our company, in furtherance of our
bankruptcy plan of reorganization, issued new securities as follows: (i) 950,000
shares of our common stock and $25 million in new 12% notes in consideration for
the cancellation of approximately $110.8 million in claims; and (ii) 50,000
shares of our common stock and warrants for the purchase of 67,416 shares of our
common stock in consideration for the cancellation of approximately $129.9
million in claims.
The foregoing issuances and sales were conducted without registration
of the securities under the Securities Act of 1933, as amended, in reliance upon
the exemption from registration afforded by Section 1145(a)(2) of the Bankruptcy
Code. Section 1145(a)(1) of the U.S. Bankruptcy Code exempts the offer and sale
of securities under a plan of reorganization from registration under the
Securities Act and state laws if:
o the securities are offered and sold under a plan of reorganization;
o the securities are of a debtor, of an affiliate participating
in a joint plan with the debtor, or of a
successor to the debtor under the plan; and
o the recipients of the securities are issued such securities
entirely in exchange for the recipient's claim against or
interest in the debtor or principally in such exchange and
partly for cash or property.
Section 1145(a)(2) of the U.S. Bankruptcy Code exempts the offer of a
security through any warrant, option or right to subscribe that was sold in the
manner specified in Section 1145(a)(1) of the
II-2
U.S. Bankruptcy Code and the sale of a security upon exercise of such a warrant,
option or right to subscribe.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit No. Item
- ----------- -----
2.1 Second Amended Joint Plan of Reorganization of RBX Group, Inc. and its
Subsidiaries, as modified (incorporated by reference to Exhibit T3E-2 of Form
T-3 of RBX Corporation dated as of July 27, 2001)
3.1 Amended and Restated Certificate of Incorporation of RBX Corporation
(incorporated by reference to Exhibit T3A of Amendment No. 1 to
Form T-3 of RBX Corporation dated as of August 20, 2001)
3.2 Amended and Restated By-laws of RBX Corporation (incorporated by reference to
Exhibit T3B of Amendment No. 1 to Form T-3 of RBX Corporation
dated as of August 20, 2001)
4.1 Indenture, dated as of August 27, 2001, among RBX Corporation,
RBX Industries, Inc. and State Street Bank and Trust Company, as Trustee**
4.2 Form of Note and Notation of Subsidiary Guarantee**
4.3 Intercreditor and Collateral Agency Agreement, dated as of August 27, 2001,
between Congress Financial Corporation, State Street Bank and
Trust and RBX Corporation**
4.4 Warrant Agreement, dated August 27, 2001, between RBX Corporation and
The Bank of New York, as Warrant Agent**
4.5 Registration Rights Agreement, dated as of August 27, 2001, by and
among RBX Corporation, RBX Industries, Inc., The Equitable Life
Assurance Society of the United States, Alliance Capital
Investment Opportunities Fund, PPM America Special Investments
Fund, L.P., PPM America Special Investments Fund CBO II, L.P. and
Foothill Partners III, L.P.**
4.6 Amendment No. 1 to the Registration Rights Agreement, dated December 7, 2001,
by and among RBX Corporation, RBX Industries, Inc., The Equitable Life Assurance
Society of the United States, Alliance Capital Investment Opportunities Fund,
PPM America Special Investments Fund, L.P., PPM America Special
Investments Fund CBO II, L.P. and Foothill Partners III, L.P.**
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 Amended and Restated Loan Agreement, dated as of August 27, 2001, among RBX
Industries, Inc., as borrower, RBX Corporation, as guarantor, and Congress
Financial Corporation, as lender
II-3
10.2 Amended and Restated General Security Agreement, dated as of August 27, 2001,
made by RBX Corporation in favor of Congress Financial Corporation**
10.3 General Security Agreement, dated August 27, 2001, made by RBX Industries,
Inc. in favor of Congress Financial Corporation**
10.4 Amended and Restated Pledge and Security Agreement, dated as of August 27, 2001,
made by RBX Corporation in favor of Congress Financial Corporation**
10.5 Amended and Restated Pledge and Security Agreement, dated August 27, 2001,
made by RBX Industries, Inc. in favor of Congress Financial Corporation**
10.6 Amended and Restated Trademark Collateral Assignment and Security Agreement,
dated as of August 27, 2001, made by RBX Corporation in favor of Congress Financial
Corporation**
10.7 Amended and Restated Trademark Collateral Assignment and Security Agreement,
dated as of August 27, 2001, made by RBX Industries, Inc. in favor of Congress
Financial Corporation**
10.8 Amended and Restated Patent Collateral Assignment and Security Agreement,
dated as of August 27, 2001, made by RBX Industries, Inc. in favor of Congress
Financial Corporation**
10.9 Amended and Restated Guarantee, dated as of August 27, 2001, made by RBX
Corporation in favor of Congress Financial Corporation**
10.10 2001 Stock Option Plan of RBX Corporation
10.11 Form of Employment Agreement
10.12 Executive Employees Supplemental Retirement Plan, as amended and restated
December 15, 1993
12.1 Computation of earnings to fixed charges
21.1 Subsidiaries of RBX Corporation**
23.1 Consent of Deloitte & Touche LLP
24 Power of attorney (contained on page II-6)**
25 Statement of eligibility and qualification of the Trustee on Form T-1. (incorporated
by reference to Exhibit T3G of Form T-3 of RBX Corporation dated as of July 27, 2001)
** Previously filed
II-4
(b) Financial Statement Schedule
Page
- ----
Number Description
- ------ -----------
S-1 Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because the information required to be
set forth therein is not applicable or is contained in the Financial Statements
or Notes.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the Registration
Statement. To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Roanoke, Virginia, on the 25th day of April 2002.
RBX CORPORATION
By: /s/ Eugene I. Davis
----------------------------------
Name: Eugene I. Davis
Title: Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the registration statement has been signed below by the
following persons in the capacities and on the dates indicated below.
Name Title Date
---- ----- ----
/s/ Eugene I. Davis Chief Executive Officer and Chairman April 25, 2002
- ------------------------ of the Board of Directors
Eugene I. Davis (principal executive officer)
/s/ Thomas W. Tomlinson Vice President - Finance (principal April 25, 2002
- ------------------------- financial and accounting officer)
Thomas W. Tomlinson
II-6
/s/ Richard W. Detweiler Director April 25, 2002
- -------------------------
Richard W. Detweiler
/s/ Eric R. Johnson Director April 25, 2002
- -------------------------
Eric R. Johnson
/s/ Stephen C. Larson Director April 25, 2002
- -------------------------
Stephen C. Larson
/s/ Joseph J. Radecki, Jr. Director April 25, 2002
- ---------------------------
Joseph J. Radecki, Jr.
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Roanoke, Virginia, on the 25th day of April 2002.
RBX INDUSTRIES, INC.
By: /s/ Eugene I. Davis
----------------------------------
Name: Eugene I. Davis
Title: Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
Know all men by these presents, that the undersigned directors and
officers of RBX Industries, Inc., a Delaware corporation, which is filing a
registration statement on Form S-1 with the Securities and Exchange Commission,
Washington, D.C. 20549 under the provisions of the Securities Act of 1933, as
amended, hereby constitute and appoint Thomas W. Tomlinson, Harry L. Schickling
and Timothy J. Bernlohr and each of them, the individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the person and in his or her name, place and stead, in any
and all capacities, to sign such registration statement and any or all
amendments, including post-effective amendments to the registration statement,
including a prospectus or an amended prospectus therein and any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b)under the Securities Act, and all other documents in connection
therewith to be filed with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the registration statement has been signed below by the
following persons in the capacities and on the dates indicated below.
Name Title Date
---- ----- ----
/s/ Eugene I. Davis Chief Executive Officer and Chairman April 25, 2002
- ------------------------ of the Board of Directors
Eugene I. Davis (principal executive officer)
April 25, 2002
/s/ Thomas W. Tomlinson Vice President - Finance (principal
- ------------------------- financial and accounting officer)
Thomas W. Tomlinson
/s/ Richard W. Detweiler Director April 25, 2002
- -------------------------
Richard W. Detweiler
/s/ Eric R. Johnson Director April 25, 2002
- -------------------------
Eric R. Johnson
/s/ Stephen C. Larson Director April 25, 2002
- -------------------------
Stephen C. Larson
/s/ Joseph J. Radecki, Jr. Director April 25, 2002
- ---------------------------
Joseph J. Radecki, Jr.
II-7
SCHEDULE II
Valuation and Qualifying Accounts
(in thousands)
RBX Group, Inc.
Year ended December 31, RBX Corporation
------------------------------------- -------------------
8 Months Ended 4 Months Ended
1999 2000 August 27, 2001 December 31, 2001
---- ---- --------------- -------------------
Allowance for doubtful accounts:
- -------------------------------
Balance at beginning of period ............ $1,459 $2,076 $2,169 $2,601
Charged to costs and expenses ............. 723 926 655 (886)
Deductions (increases) (a) ................ 106 833 223 (345)
------ ------ ------ ------
Balance at end of period .................. $2,076 $2,169 $2,601 $2,060
====== ====== ====== ======
- -----------------------------
(a) Accounts charged off during the year, net of recoveries of accounts
previously charged off.
S-1
EXHIBITS
Exhibit No. Item
- ----------- ----
2.1 Second Amended Joint Plan of Reorganization of RBX Group, Inc. and its Subsidiaries,
as modified (incorporated by reference to Exhibit T3E-2 of Form T-3 of RBX Corporation dated
as of July 27, 2001)
3.1 Amended and Restated Certificate of Incorporation of RBX Corporation (incorporated by
reference to Exhibit T3A of Amendment No. 1 to Form T-3 of RBX Corporation dated as of August 20, 2001)
3.2 Amended and Restated By-laws of RBX Corporation (incorporated by reference to Exhibit T3B of
Amendment No. 1 to Form T-3 of RBX Corporation dated as of August 20, 2001)
4.1 Indenture, dated as of August 27, 2001, among RBX Corporation, RBX Industries, Inc. and State
Street Bank and Trust Company, as Trustee**
4.2 Form of Note and Notation of Subsidiary Guarantee**
4.3 Intercreditor and Collateral Agency Agreement, dated as of August 27, 2001, between Congress
Financial Corporation, State Street Bank and Trust and RBX Corporation**
4.4 Warrant Agreement, dated August 27, 2001, between RBX Corporation and The Bank of New York, as Warrant Agent**
4.5 Registration Rights Agreement, dated as of August 27, 2001, by and among RBX Corporation, RBX Industries,
Inc., The Equitable Life Assurance Society of the United States, Alliance Capital Investment Opportunities
Fund, PPM America Special Investments Fund, L.P., PPM America Special Investments Fund CBO II, L.P. and Foothill
Partners III, L.P.**
4.6 Amendment No. 1 to the Registration Rights Agreement, dated December 7, 2001, by and among RBX Corporation,
RBX Industries, Inc., The Equitable Life Assurance Society of the United States, Alliance Capital Investment
Opportunities Fund, PPM America Special Investments Fund, L.P., PPM America Special Investments Fund CBO II,
L.P. and Foothill Partners III, L.P.**
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
10.1 Amended and Restated Loan Agreement, dated as of August 27, 2001, among RBX Industries, Inc., as
borrower, RBX Corporation, as guarantor, and Congress Financial Corporation, as lender
10.2 Amended and Restated General Security Agreement, dated as of August 27, 2001, made by RBX Corporation
in favor of Congress Financial Corporation**
10.3 General Security Agreement, dated August 27, 2001, made by RBX Industries, Inc. in favor of
Congress Financial Corporation**
10.4 Amended and Restated Pledge and Security Agreement, dated as of August 27, 2001, made by RBX
Corporation in favor of Congress Financial Corporation**
10.5 Amended and Restated Pledge and Security Agreement, dated August 27, 2001, made by RBX Industries,
Inc. in favor of Congress Financial Corporation**
10.6 Amended and Restated Trademark Collateral Assignment and Security Agreement, dated as of August 27, 2001,
made by RBX Corporation in favor of Congress Financial Corporation**
10.7 Amended and Restated Trademark Collateral Assignment and Security Agreement, dated as of August 27, 2001,
made by RBX Industries, Inc. in favor of Congress Financial Corporation**
10.8 Amended and Restated Patent Collateral Assignment and Security Agreement, dated as of August 27, 2001,
made by RBX Industries, Inc. in favor of Congress Financial Corporation**
10.9 Amended and Restated Guarantee, dated as of August 27, 2001, made by RBX Corporation in favor of
Congress Financial Corporation**
10.10 2001 Stock Option Plan of RBX Corporation
10.11 Form of Employment Agreement
10.12 Executive Employees Supplemental Retirement Plan, as amended and restated December 15, 1993
12.1 Computation of earnings to fixed charges
21.1 Subsidiaries of RBX Corporation**
23.1 Consent of Deloitte & Touche LLP
24 Power of attorney (contained on page II-6)**
25 Statement of eligibility and qualification of the Trustee on Form T-1. (incorporated by reference to Exhibit
T3G of Form T-3 of RBX Corporation dated as of July 27, 2001)
** Previously filed
2