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, 1995
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:(770) 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 October 9, 1995
Common Stock, $0.01 par value................ 37,736,137 shares
<PAGE>
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
INDEX
Page Numbers
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1995 and
December 31, 1994 1
Condensed Consolidated Statements of
Income for the three and nine months
ended September 30, 1995 and 1994 2
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1995 and 1994 3
Notes to Condensed Consolidated Financial
Statements as of September 30, 1995 4-5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<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,
1995 1994
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 3,328 $ 1,216
Receivables 107,102 157,085
Inventories 70,908 70,667
Prepaid expenses 7,954 13,882
Deferred income taxes 7,069 7,069
Total current assets 196,361 249,919
Property, plant and equipment, at cost 500,363 447,986
Less accumulated depreciation 213,504 192,378
Property, plant and equipment, net 286,859 255,608
Other assets 2,993 2,920
Total assets $486,213 $508,447
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 82,468 $ 73,771
Interest payable 1,869 6,424
Accrued income taxes 5,452 21,537
Other accrued liabilities 30,811 21,519
Total current liabilities 120,600 123,251
Long-term debt 275,700 314,081
Deferred income taxes 44,590 39,977
Stockholders' equity
Common stock - $0.01 par value 378 420
Additional paid-in capital 54,090 185,984
Retained earnings (9,145) (155,266)
Total stockholders' equity 45,323 31,138
Total liabilities and
stockholders' equity $486,213 $508,447
Common shares outstanding 37,848,837 42,013,116
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $270,877 $249,044 $860,736 $650,138
Operating costs and expenses
Cost of sales 182,204 176,200 552,116 486,262
Selling and administrative 11,471 13,439 35,327 34,798
Total operating costs and expenses 193,675 189,639 587,443 521,060
Operating income 77,202 59,405 273,293 129,078
Other income (expense)
Interest, net (4,880) (9,347) (20,565) (28,583)
Income before income taxes 72,322 50,058 252,728 100,495
Provision for income taxes 27,840 18,228 97,296 35,983
Net income $ 44,482 $ 31,830 $155,432 $ 64,512
Net income per common share $ 1.15 $ 0.75 $ 3.90 $ 1.52
Weighted average common shares
and equivalents outstanding 38,606,833 42,512,726 39,843,754 42,400,423
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $155,432 $64,512
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 23,921 20,778
Change in assets, liabilities and other 56,710 (11,661)
Net cash provided by operating activities 236,063 73,629
Cash flows from financing activities:
Net change in revolving credit loan 45,700 49,600
Proceeds from issuance of long-term debt 107,000 1,000
Principal payments on long-term debt (191,081) (83,125)
Proceeds from issuance of common stock 1,703 6,180
Purchase and retirement of common stock (135,585) --
Dividends on common stock (9,311) --
Net cash used in financing activities (181,574) (26,345)
Cash flows from investing activities:
Capital expenditures (52,377) (46,842)
Net cash used in investing activities (52,377) (46,842)
Net change in cash and cash equivalents 2,112 442
Cash and cash equivalents at beginning of period 1,216 3,099
Cash and cash equivalents at end of period $ 3,328 $ 3,541
</TABLE>
See notes to condensed consolidated financial statements.
<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 Georgia Gulf Corporation and its subsidiaries
(the "Company") for the three- and nine- month periods ended
September 30, 1995, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report for
the year ended December 31, 1994.
NOTE 2: RECEIVABLES
On May 12, 1995, the Company entered into an agreement, which
allows for the sale, without recourse, of fractional interests in
a defined pool of trade receivables for up to $50,000,000. This
agreement expires May 1996 but may be extended for additional one-
year terms by the mutual consent of the Company and the receivables
purchaser. At September 30, 1995, $50,000,000 had been sold under
this agreement, and the sale is reflected as a reduction of
receivables in the accompanying Condensed Consolidated Balance
Sheet. The cash proceeds were reported as cash flows from
operating activities in the accompanying Condensed Consolidated
Statement of Cash Flows. The costs of this program, which were
$1,261,000 for the nine-month period ended September 30, 1995, are
charged to selling and administrative expense in the accompanying
Condensed Consolidated Statement of Income.
NOTE 3: INVENTORIES
The major classes of inventories are as follows (in thousands):
September 30, December 31,
1995 1994
Raw materials and supplies $ 29,401 $ 25,019
Finished goods 41,507 45,648
$ 70,908 $ 70,667
NOTE 4: LONG-TERM DEBT
On April 15, 1995, the Company redeemed, at par, the $191,081,000
15% Senior Subordinated Notes ("Notes"), which would have been due
April 2000. The redemption of the Notes was funded with
availability under the Company's $350,000,000 revolving credit
agreement dated March 1995. The write-off of the remaining
unamortized debt issuance costs related to the Notes was not
material.
The Company entered into a $100,000,000 unsecured term loan
agreement on June 29, 1995, (the "Term Loan"). The terms and
conditions of the Term Loan are similar to the Company's revolving
credit agreement. Required principal payments under the Term Loan
are $25,000,000 to be paid in June 2001 and $75,000,000 to be paid
in June 2002. The interest rate on the Term Loan has been fixed at
a rate ranging from 6.71 to 7.04 percent using interest rate swap
agreements. The costs incurred in connection with the term loan
financing were not material.
On September 28, 1995, the Company filed a Form S-3 Registration
Statement with the Securities and Exchange Commission to provide
for the issuance of $100,000,000 principal amount of its senior
unsecured notes due 2005. Net proceeds from the anticipated sale
of these notes will be used to reduce indebtedness under the
Company's existing revolving credit facility.
As of September 30, 1995, the Company had availability of up to
$206,000,000 under the terms of its $350,000,000 revolving credit
agreement.
NOTE 5: STOCKHOLDERS' EQUITY
The Company purchased 4,382,900 shares of common stock for
$135,585,000 during the nine months ended September 30, 1995. As
of September 30, 1995, the Company is authorized to purchase up to
an additional 3,587,100 shares under the current common stock
repurchase program announced in May 1995.
NOTE 6: SUBSEQUENT EVENT
In October 1995, the Company announced that a 250 megawatt co-
generation facility will be constructed at the Plaquemine,
Louisiana, complex which will supply, under a long-term lease
agreement, essentially all electricity and steam requirements for
six of the Company's manufacturing plants. Completion of the co-
generation facility is scheduled for the third quarter of 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Third Quarter of 1995 Compared with the Third Quarter of 1994:
For the third quarter ended September 30, 1995, net income per
common share was $1.15 on net income of $44.5 million and net sales
of $270.9 million. This compares to net income per common share of
$0.75, net income of $31.8 million and net sales of $249.0 million
for the third quarter of 1994.
Operating income for the third quarter of 1995 was $77.2 million,
an increase of 30 percent from $59.4 million for the same period in
1994. The increase in operating income was a result of strong
demand for caustic soda and aromatic chemicals, which pushed the
average sales price of products up 6 percent despite a significant
decline in methanol prices. Combining the strengths of caustic
soda and aromatic chemicals with a 3 percent increase in overall
sales volumes, the Company was able to overcome slightly higher raw
material costs resulting in improved margins for the third quarter
of 1995.
Selling and administrative expenses were $11.5 million for the
third quarter of 1995, compared to $13.4 million for the third
quarter of 1994. The decrease resulted primarily from lower
charges relating to the Company's profit sharing program during the
third quarter of 1995, which were partially offset by costs
associated with a new revolving trade receivables sales program.
Net interest expense declined $4.5 million when comparing the third
quarter of 1995 to the third quarter 1994. This decline was
attributable to $71.0 million of debt repayments over the past
twelve months and reduced interest rates in connection with the
redemption of the 15% Senior Subordinated Notes ("Notes") early in
the second quarter of 1995.
The effective income tax rate for the third quarter of 1995 was
38.5 percent, up from 36.4 percent in the third quarter of 1994.
The effective income tax rate increased in 1995 primarily as a
result of higher taxable income, which minimized the effect of
permanent tax differences.
Nine Months Ended September 30, 1995, Compared With Nine Months
Ended September 30, 1994:
For the nine months ended September 30, 1995, net income per common
share was $3.90 on net income of $155.4 million and net sales of
$860.7 million. This compares to net income per common share of
$1.52, net income of $64.5 million and net sales of $650.1 million
for the same period in 1994.
Operating income for the nine months ended September 30, 1995, was
$273.3 million, an increase of 112 percent from $129.1 million for
the same period in 1994. For this period comparison, overall sales
volumes improved 3 percent, while the average sales price of the
Company's products rose 29 percent. Both of these factors helped
to offset rising raw material costs, which occurred during the
first half of 1995.
Net interest expense declined $8.0 million when comparing the first
nine months of 1995 to the same period in 1994. This decline was
attributable to a lower debt balance during 1995 and reduced
interest rates in connection with the redemption of the Company's
Notes early in the second quarter of 1995.
The effective income tax rate for the nine months ended September
30, 1995, was 38.5 percent, up from 35.8 percent for the same
period in 1994 as a result of higher taxable income, which
minimized the effect of permanent tax differences.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1995, $236.1 million of
cash was generated by operating activities as compared to $73.6
million for nine months ended September 30, 1994. Cash flow
increased due to higher net income in 1995, along with a decrease
in working capital. The majority of the decrease in working
capital in 1995 was attributable to a $50.0 million sale of trade
receivables under the revolving trade receivables sales program.
Debt decreased by $38.4 million during the nine months ended
September 30, 1995, to a level of $275.7 million, which consisted
of revolving credit loans of $167.7 million, a term loan of $100.0
million and other debt of $8.0 million. On April 15, 1995, the
Company used availability under its revolving credit facility to
redeem, at par, the entire outstanding $191.1 million principal
amount of the Notes, which would have been due April 2000. On June
29, 1995, the Company entered into a $100.0 million seven-year term
loan agreement accompanied by interest rate swap agreements, which
fix the interest rate on the term loan between 6.71 and 7.04
percent. Terms and conditions of the term loan are similar to the
current revolving credit facility.
Capital expenditures for the nine months ended September 30, 1995,
were $52.4 million as compared to $46.8 million for the same 1994
period. Previously announced expansions to the Company's cumene,
phenol/acetone, vinyl chloride monomer and vinyl compound plants
are on schedule for completion in 1996.
The Company repurchased approximately 4.4 million shares of common
stock during the first nine months of 1995 at a cost of $135.6
million. The Company is presently authorized to retire an
additional 3.6 million shares of common stock under its stock
repurchase program.
The Company declared an $0.08 per share dividend for each of the
first, second and third quarters of 1995, which totalled $9.3
million.
Management believes that cash provided by operations and the
availability of cash under the Company's current debt agreements
will provide sufficient funds to support planned capital
expenditures, dividends, stock repurchases, working capital
fluctuations and debt service requirements.
OUTLOOK
For the remainder of 1995, early indications point to continued
softening in the demand for certain products, which would lead to
a modest reduction in earnings. While anticipating lower fourth
quarter earnings, management is encouraged by the recent pick-up in
certain housing and automotive sectors of the economy, which will
hopefully strengthen demand for several key products.
<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 1995.
<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 October 19, 1995 /s/ Jerry R. Satrum
Jerry R. Satrum
President and Chief
Executive Officer
(Principal Executive Officer)
Date October 19, 1995 /s/ Richard B. Marchese
Richard B. Marchese
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Georgia Gulf
Corporation's Form 10-Q for the quarter ended September 30, 1995 and is
qualified in tis entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,328
<SECURITIES> 0
<RECEIVABLES> 109,474
<ALLOWANCES> 2,372
<INVENTORY> 70,908
<CURRENT-ASSETS> 196,361
<PP&E> 500,363
<DEPRECIATION> 213,504
<TOTAL-ASSETS> 486,213
<CURRENT-LIABILITIES> 120,600
<BONDS> 275,700
<COMMON> 378
0
0
<OTHER-SE> 44,945
<TOTAL-LIABILITY-AND-EQUITY> 486,213
<SALES> 860,736
<TOTAL-REVENUES> 860,736
<CGS> 552,116
<TOTAL-COSTS> 552,116
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,565
<INCOME-PRETAX> 252,728
<INCOME-TAX> 97,296
<INCOME-CONTINUING> 155,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,432
<EPS-PRIMARY> 3.90
<EPS-DILUTED> 3.90
</TABLE>
