FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9753
GEORGIA GULF CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 58-1563799
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Perimeter Center Terrace, Suite 595
Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(404) 395-4500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding as of
Class November 1, 1994
Common Stock, $0.01 par value................41,716,808 shares
<PAGE>
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
INDEX
Page Numbers
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1994 and
December 31, 1993 2
Condensed Consolidated Statements of
Income for the three and nine months ended
September 30, 1994 and 1993 3
Condensed Consolidated Statements of
Cash Flows for the nine months
ended September 30, 1994 and 1993 4
Notes to Condensed Consolidated Financial
Statements as of September 30, 1994 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
1994 1993
_______________ ______________
<S> <C> <C>
Assets
______
Current assets
Cash and cash equivalents $3,541 $3,099
Receivables 129,177 96,068
Inventories 63,648 58,261
Prepaid expenses 10,045 10,350
Deferred income taxes 7,098 9,759
_______________ ______________
Total current assets 213,509 177,537
_______________ ______________
Property, plant and equipment, net 250,173 222,835
_______________ ______________
Other assets 3,947 4,915
_______________ ______________
Total assets $467,629 $405,287
=============== ==============
Liabilities and Stockholders' Equity (Deficit)
_________________________________________
Current liabilities
Current portion of long-term debt $ -- $14,049
Accounts payable 63,787 59,911
Interest payable 14,641 16,824
Accrued income taxes 8,707 3,129
Other accrued liabilities 25,515 15,950
_______________ ______________
Total current liabilities 112,650 109,863
_______________ ______________
Long-term debt 346,681 365,157
_______________ ______________
Deferred income taxes 40,609 40,844
_______________ ______________
Stockholders' equity (deficit) (32,311) (110,577)
_______________ ______________
Total liabilities and
stockholders' equity (deficit) $467,629 $405,287
=============== ==============
Common shares outstanding 41,694,733 40,951,571
=============== ==============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
______________ ______________ ______________ ______________
<S> <C> <C> <C> <C>
Net sales $249,044 $199,635 $650,138 $576,743
______________ ______________ ______________ ______________
Operating costs and expenses
Cost of sales 176,200 162,408 486,262 464,750
Selling and administrative 13,439 9,140 34,798 28,149
______________ ______________ ______________ ______________
Total operating costs and expenses 189,639 171,548 521,060 492,899
______________ ______________ ______________ ______________
Operating income 59,405 28,087 129,078 83,844
Other income (expense)
Interest, net (9,347) (10,844) (28,583) (34,086)
______________ ______________ ______________ ______________
Income before income taxes,
extraordinary charge and cumulative
effect of accounting change 50,058 17,243 100,495 49,758
Provision for income taxes 18,228 7,096 35,983 18,015
______________ ______________ ______________ ______________
Income before extraordinary charge
and cumulative effect of
accounting change 31,830 10,147 64,512 31,743
Extraordinary charge on early
retirement of debt (net of tax -- -- -- (13,267)
benefit of $6,834)
Cumulative effect of accounting change
for income taxes -- -- -- 12,973
______________ ______________ ______________ ______________
Net income $31,830 $10,147 $64,512 $31,449
============== ============== ============== ==============
Income per common share:
Before extraordinary charge
and cumulative effect of
accounting change $0.75 $0.24 $1.52 $0.76
Extraordinary charge on early
retirement of debt -- -- -- (0.32)
Cumulative effect of accounting change
for income taxes -- -- -- 0.32
______________ ______________ ______________ ______________
Net income per common share $0.75 $0.24 $1.52 $0.76
============== ============== ============== ==============
Weighted average common shares
and equivalents outstanding 42,512,726 41,577,329 42,400,423 41,472,067
============== ============== ============== ==============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------
(In thousands)
Nine Months Ended
September 30,
1994 1993
---------- ----------
<S> <C> <S> <C> <C>
Cash flows from operating activities:
Net income $64,512 $31,449
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,778 19,925
Cost associated with early retirement of debt -- 20,101
Cumulative effect of accounting change for income taxes -- (12,973)
Change in assets, liabilities and other (11,661) 15,327
---------- ----------
Net cash provided by operating activities 73,629 73,829
---------- ----------
Cash flows from financing activities:
Net change in revolving credit loan 49,600 33,000
Proceeds from issuance of long-term debt 1,000 150,000
Principal payments on long-term debt (83,125) (238,585)
Proceeds from issuance of common stock 6,180 2,572
---------- ----------
Net cash used in financing activities (26,345) (53,013)
---------- ----------
Cash flows from investing activities:
Capital expenditures (46,842) (20,053)
---------- ----------
Net cash used in investing activities (46,842) (20,053)
---------- ----------
Net change in cash and cash equivalents 442 763
Cash and cash equivalents at beginning of period 3,099 2,904
---------- ----------
Cash and cash equivalents at end of period $3,541 $3,667
========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Operating results for the three- and nine-month periods ended
September 30, 1994, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1994. For
further information, refer to the consolidated financial statements
and footnotes thereto included in Georgia Gulf Corporation and its
subsidiaries' ("the Company") annual report for the year ended
December 31, 1993.
NOTE 2: INVENTORIES
The major classes of inventories were as follows (in thousands):
September 30, December 31,
1994 1993
Raw materials and supplies $ 27,105 $ 20,819
Finished goods 36,543 37,442
----------- -----------
$ 63,648 $ 58,261
=========== ===========
NOTE 3: LONG-TERM DEBT AND INTEREST RATE SWAP AGREEMENTS
The Company refinanced its senior debt on April 27, 1994, replacing
an existing revolving credit facility and $79,613,000 term loan
with an unsecured revolving credit facility permitting borrowings
of up to $250,000,000 through April 1999 (the "New Credit
Agreement"). The terms and conditions of the New Credit Agreement
provide for reduced interest rates, less restrictive covenants and
increased financial flexibility. The new revolving credit facility
matures in April 1999, at which time any amounts outstanding
thereunder are payable in full. The costs incurred in connection
with the refinancing, including both the unamortized debt issuance
costs associated with the terminated credit agreement and the costs
related to the New Credit Agreement, were not material. As of
September 30, 1994, the Company had availability of up to
$93,335,000 under the terms of the new revolving credit facility.
On June 6, 1994, the Company entered into various agreements
providing for the issuance of $17,000,000 of industrial development
revenue bonds to finance an expansion of its compounding plant in
Gallman, Mississippi. Under these agreements, $1,000,000 of the
bonds were sold and the proceeds were used to reimburse the Company
for expenditures relating to the expansion. The remaining bonds
were delivered to the trustee and will be sold at the Company's
request by a placement agent as construction of the expansion
project progresses. The bonds are collateralized by property,
plant and equipment at the Gallman facility, unexpended funds and
an irrevocable letter of credit for $17,737,000. The bonds are
callable at par by the Company on any date prior to the maturity of
the entire bond issue on May 1, 2009. The outstanding bonds bear
interest at a variable rate (5.0% at September 30, 1994). In
addition, the Company is required to pay annual letter of credit
and remarketing fees ranging from .20% to .775% depending on the
amount of bonds issued and outstanding.
During the second quarter of 1994, the Company paid $6,131,000 to
terminate its two outstanding interest rate swap agreements
totalling a notional amount of $100,000,000. The interest rate
swap agreements were being carried in the financial statements at
their fair value; accordingly, the termination payment resulted in
a reduction to interest payable, and no gain or loss was recorded
on the transaction.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Third Quarter of 1994 Compared with the Third Quarter of 1993:
For the third quarter ended September 30, 1994, net income per
common share was $0.75 on net income of $31.8 million and net sales
of $249.0 million. This compares to net income per common share of
$0.24, net income of $10.1 million and net sales of $199.6 million
for the third quarter of 1993.
Operating income for the third quarter of 1994 was $59.4 million,
an increase of 112 percent from $28.1 million for the same period
in 1993. The average product sales price was up 21 percent while
sales volumes increased slightly. The increase in sales prices
outpaced higher raw material costs, which in turn resulted in
improved gross margins for the quarter-to-quarter comparison.
Selling and administrative expenses were $13.4 million for the
third quarter of 1994, compared to $9.1 million for the same period
in 1993. The increase resulted primarily from charges relating to
the Company's incentive program and stock option plan of $2.0
million and $1.8 million, respectively, in the third quarter of
1994.
Interest expense declined $1.5 million when comparing the third
quarter of 1994 to the same period in 1993. This decline was
attributable to $42.2 million of debt repayments over the past
twelve months from funds generated by operating activities and
reduced interest rates in connection with a debt refinancing early
in the second quarter of 1994.
The income tax provision for the third quarter of 1993 includes a
charge of $1.3 million to reflect the cumulative effect of the
increase in the statutory federal income tax rate that occurred
last year. Excluding the impact of the 1993 charge, the effective
income tax rate increased in 1994 as a result of higher taxable
income.
Nine Months Ended September 30, 1994, Compared With Nine Months
Ended September 30, 1993:
Net sales for the nine months ended September 30, 1994, increased
to $650.1 million from $576.7 million for the same 1993 period.
Operating income for the nine months ended September 30, 1994, was
$129.1 million, up 54 percent from $83.8 million for the same 1993
period. These increases were primarily attributable to a continued
high level of demand for methanol, accompanied by a strong
performance from the Company's vinyl products.
Selling and administrative expenses increased to $34.8 million for
the nine months ended September 30, 1994, as compared to $28.1
million for the same 1993 period. This increase was largely a
result of higher compensation expense related to stock option plans
and incentive programs.
Net income for the nine months ended September 30, 1994, was $64.5
million as compared to $31.4 million for the same 1993 period.
This increase was principally due to higher operating income and
lower interest expense. Net income for the nine months ended
September 30, 1993 reflects an extraordinary charge of $13.3
million relating to a debt extinguishment, which was offset by a
$13.0 million benefit from a change in the method of accounting for
income taxes. Earnings per share for the nine months ended
September 30, 1994, were $1.52 as compared to $0.76 for the same
1993 period reflecting the higher net income.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1994, $73.6 million of
cash was generated by operating activities as compared to $73.8
million for nine months ended September 30, 1993. An increase to
cash flow from higher net income in 1994 was offset by expanded
working capital requirements, primarily related to a $33.1 million
increase in receivables as a result of higher selling prices in
1994.
Debt was reduced by $32.5 million during the nine months ended
September 30, 1994, to a level of $346.7 million, which consisted
of senior debt of $155.6 million and subordinated notes of $191.1
million.
Capital expenditures for the nine months ended September 30, 1994,
were $46.8 million as compared to $20.1 million for the same 1993
period. The primary capital expenditures during 1994 were for a
methanol plant expansion completed during the latter part of the
third quarter and a vinyl resin plant expansion scheduled for
completion by the end of the year. Capital expenditures for the
fourth quarter of 1994 are expected to be approximately $15
million, with the majority being spent on the vinyl resin plant
expansion.
The Company has not declared a dividend since December 1989. The
terms of the Company's new credit agreement and its outstanding
note indenture limit the amount of cash dividends based on certain
criteria.
Management believes that cash provided by operations and the
availability under the Company's revolving credit facility will
provide sufficient funds to support planned capital expenditures,
working capital and debt service requirements.
OUTLOOK
For the fourth quarter, the Company is experiencing historically
high levels of demand for nearly all of its products and is not
anticipating a seasonal slowdown late in the quarter. These high
levels of demand, along with additional profits from the increased
methanol capacity brought on at the end of the third quarter,
should result in higher earnings potential.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) No exhibits are filed as part of this Form 10-Q Quarterly
Report.
b) No reports on Form 8-K were filed with the Securities and
Exchange Commission during the third quarter of 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GEORGIA GULF CORPORATION
(Registrant)
Date November 10, 1994 /s/ Jerry R. Satrum
Jerry R. Satrum
President and Chief
Executive Officer
(Principal Executive Officer)
Date November 10, 1994 /s/ Richard B. Marchese
Richard B. Marchese
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Georgia Gulf
Corporation's Form 10-Q for the quarter ended September 30, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 3,541
<SECURITIES> 0
<RECEIVABLES> 131,732
<ALLOWANCES> 2,555
<INVENTORY> 63,648
<CURRENT-ASSETS> 213,509
<PP&E> 435,686
<DEPRECIATION> 185,513
<TOTAL-ASSETS> 467,629
<CURRENT-LIABILITIES> 112,650
<BONDS> 346,681
<COMMON> 417
0
0
<OTHER-SE> (32,728)
<TOTAL-LIABILITY-AND-EQUITY> 467,629
<SALES> 650,138
<TOTAL-REVENUES> 650,138
<CGS> 486,262
<TOTAL-COSTS> 486,262
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,583
<INCOME-PRETAX> 100,495
<INCOME-TAX> 35,983
<INCOME-CONTINUING> 64,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,512
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52
</TABLE>
