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 March 31, 1996
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 May 6, 1996
Common Stock, $0.01 par value................36,554,642 shares
<PAGE>
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 1996
INDEX
Page Numbers
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 1996 and
December 31, 1995 1
Condensed Consolidated Statements of
Income for the three months ended
March 31, 1996 and 1995 2
Condensed Consolidated Statements of
Cash Flows for the three months
ended March 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial
Statements as of March 31, 1996 4-5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
<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)
March 31, December 31,
1996 1995
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 3,450 $ 2,530
Receivables 67,870 89,414
Inventories 79,239 75,049
Prepaid expenses 13,181 12,108
Deferred income taxes 8,115 8,115
Total current assets 171,855 187,216
Property, plant and equipment, at cost 573,645 534,264
Less accumulated depreciation 230,291 221,728
Property, plant and equipment,
net 343,354 312,536
Other assets 6,008 7,580
_________ ________
Total assets $521,217 $507,332
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 92,515 $ 78,861
Interest payable 4,575 2,737
Accrued income taxes 10,408 3,296
Other accrued liabilities 19,167 28,952
Total current liabilities 126,665 113,846
Long-term debt 298,400 292,400
Deferred income taxes 50,458 50,458
Stockholders' equity
Common stock - $0.01 par value 368 372
Additional paid-in capital 13,534 31,312
Retained earnings 31,792 18,944
Total stockholders' equity 45,694 50,628
_______ _______
Total liabilities and
stockholders' equity $521,217 $507,332
========= ========
Common shares outstanding 36,796,597 37,240,252
=========== ==========
</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
March 31,
1996 1995
<S> <C> <C>
Net sales $208,036 $314,026
________ ___________
Operating costs and expenses
Cost of sales 167,118 195,839
Selling and administrative 10,808 11,583
___________ ___________
Total operating costs
and expenses 177,926 207,422
___________ ___________
Operating income 30,110 106,604
Other income (expense)
Interest, net (4,642) (8,712)
___________ ___________
Income before income taxes 25,468 97,892
Provision for income taxes 9,662 37,735
___________ ___________
Net income $15,806 $60,157
=========== ===========
Net income per common share $0.42 $1.44
=========== ===========
Weighted average common
shares and equivalents
outstanding 37,636,402 41,856,291
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
1,996 1,995
<S> <C> <C>
Cash flows from operating activities:
Net income $15,806 $60,157
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 8,680 8,179
Change in assets, liabilities
and other 31,905 25,124
Net cash provided by operating
activities 56,391 93,460
Cash flows from financing activities:
Net change in revolving credit loan 6,000 6,400
Proceeds from issuance of common
stock 1,250 609
Purchase and retirement of common
stock (20,382) (78,314)
Dividends paid (2,958) (3,238)
Net cash used in financing
activities (16,090) (74,543)
Cash flows from investing activities:
Capital expenditures (39,381) (17,464)
Net cash used in investing
activities (39,381) (17,464)
Net change in cash and cash
equivalents 920 1,453
Cash and cash equivalents at
beginning of period 2,530 1,216
Cash and cash equivalents at
end of period $3,450 $2,669
</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-month period ended March 31, 1996,
are not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. 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, 1995.
NOTE 2: INVENTORIES
The major classes of inventories were as follows (in thousands):
March 31, December 31,
1996 1995
Raw materials and supplies $ 31,551 $ 23,973
Finished goods 47,688 51,076
$ 79,239 $ 75,049
NOTE 3: STOCKHOLDERS' EQUITY
The Company purchased 607,100 shares of its common stock for
$20,382,000 during the three months ended March 31, 1996. As of
March 31, 1996, the Company had authorization to purchase of up to
2,192,100 additional shares under the current common stock
repurchase program.
NOTE 4: COMMITMENT
In February 1996, the Company entered into an operating lease
agreement for a 250 megawatt co-generation facility, which is being
constructed at the Company's Plaquemine, LA complex. The total
cost of assets to be covered by the lease is limited to
$120,000,000. The co-generation facility, scheduled for completion
during the third quarter of 1997, will supply essentially all
electricity and steam requirements for the Plaquemine complex.
Payments under the lease will be determined and will commence upon
completion of construction and will continue through the initial
lease term of three years. The Company has options to renew the
lease for two one-year periods and to purchase the facility at its
estimated fair market value at any time during the lease term. The
lease provides for substantial residual value guarantees by the
Company at the termination of the lease.
NOTE 5: SUBSEQUENT EVENT - DISPOSITION
In April 1996, the Company completed the sale of its Delaware City,
DE facility, and its emulsion resin business. Under the terms of
the sale agreement, the Company has the right to continue to
operate its vinyl compound assets located at the Delaware City
facility for an eighteen month period. During this period, the
majority of the Delaware City vinyl compound production will be
transitioned to the Company's recently expanded vinyl compound
plant in Gallman, MS. The proceeds from the sale approximated the
net book value of the disposed assets.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
First Quarter of 1996 Compared with the First Quarter of 1995:
For the first quarter ended March 31, 1996, net income per common
share was $0.42 on net income of $15.8 million and net sales of
$208.0 million. This compares to net income per common share of
$1.44, net income of $60.2 million and net sales of $314.0 million
for the first quarter of 1995.
Operating income for the first quarter of 1996 was $30.1 million,
a decrease of 72 percent from $106.6 million for the same period in
1995. Substantial drops in pricing for methanol and vinyl products
were largely responsible for the decline in sales and operating
income. However, a combination of plant shutdowns resulting from
freeze damage at the Company's Plaquemine, LA complex and scheduled
plant shutdowns relating to the tie-in of the new cumene expansion
and modernization project at the Pasadena, TX facility also
significantly impacted the results for the first quarter of 1996.
While prices for methanol and vinyl products were significantly
lower, nearly all of the Company's products experienced declines in
pricing when comparing the first quarter of 1996 to the prior year
first quarter. Overall sales volumes were also down when comparing
the two first quarter periods.
Selling and administrative expenses were $10.8 million for the
first quarter of 1996, compared to $11.6 million for the same
period in 1995. The decrease resulted primarily from higher
charges relating to the Company's profit sharing programs for the
first quarter of 1995 as a result of higher profits, partially
offset by costs associated with the revolving trade receivables
sales program initiated during the second quarter of 1995.
Net interest expense declined $4.1 million when comparing the first
quarter of 1996 to the same period in 1995. This decline was
attributable to a lower debt balance during the first quarter of
1996, as compared to the same period in 1995 and reduced interest
rates in connection with the redemption of the Company's 15% Senior
Subordinated Notes early in the second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1996, $56.4 million of cash
was generated by operating activities as compared to $93.5 million
for the three months ended March 31, 1995. Cash flow decreased due
to lower net income in 1996, partially offset by working capital
fluctuations. The majority of the change in working capital related
to a decrease in receivables resulting from lower sales and an
increase in accounts payable to suppliers.
Debt increased by $6.0 million during the three months ended March
31, 1996, to a level of $298.4 million which consisted of a $100
million ten-year public bond issue, a $100 million seven-year term
loan, a $350 million revolving credit loan with an outstanding
balance of $76.0 million and two additional loans with an aggregate
balance of $22.4 million.
Capital expenditures for the three months ended March 31, 1996,
were $39.4 million as compared to $17.5 million for the same 1995
period. The first half of the vinyl compound expansion in Gallman,
MS was completed in early 1996 with production scheduled to come
on-line during the second quarter. The second half of the
expansion will be added as markets dictate. Also, the
modernization and expansion of the Pasadena, TX cumene plant was
completed in the second quarter of 1996. The vinyl chloride
monomer ("VCM") expansion is scheduled for completion during the
fourth quarter of 1996, while the expansion of the phenol\acetone
plant is scheduled to be completed during 1997. The Company
estimates that capital expenditures for 1996 will approximate
$135.0 million.
The Company declared a dividend of $0.08 per share or $3.0 million
during the first quarter of 1996. The Company also purchased
607.1 thousand shares of its common stock at a cost of $20.4
million under the Company's current stock repurchase program. As
of March 31, 1996, the Company had authorization to purchase of up
to approximately 2.2 million additional shares under the current
stock repurchase program.
Management believes that cash provided by operations and the
availability 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
Looking forward to the second quarter of 1996, management expects
both sales and production volumes to increase as the Company's
plants resume full operation and the new cumene capacity comes on-
line. Demand for vinyl resins has begun to recover and pricing for
vinyl products has increased from the very low levels of the first
quarter of 1996. However, management does anticipate some
continued weakness in certain product lines.
<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 first quarter of 1996.
<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 May 10, 1996 /s/ Jerry R. Satrum
Jerry R. Satrum
President and Chief
Executive Officer
(Principal Executive Officer)
Date May 10, 1996 /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 March 31, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,450
<SECURITIES> 0
<RECEIVABLES> 70,242
<ALLOWANCES> 2,372
<INVENTORY> 79,239
<CURRENT-ASSETS> 171,855
<PP&E> 573,645
<DEPRECIATION> 230,291
<TOTAL-ASSETS> 521,217
<CURRENT-LIABILITIES> 126,665
<BONDS> 298,400
0
0
<COMMON> 368
<OTHER-SE> 45,326
<TOTAL-LIABILITY-AND-EQUITY> 521,217
<SALES> 208,036
<TOTAL-REVENUES> 208,036
<CGS> 167,118
<TOTAL-COSTS> 167,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,642
<INCOME-PRETAX> 25,468
<INCOME-TAX> 9,662
<INCOME-CONTINUING> 15,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,806
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
