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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
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
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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
Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934:
Title of each class Name of each exchange on which registered
-------------------- -----------------------------------------
Common Stock, $0.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed using the closing price on the New York Stock Exchange for
the Registrant's common stock on March 18, 1998, was $905,268,000.
Indicate the number of shares outstanding of the Registrant's common
stock as of the latest practicable date.
Class Outstanding at March 18, 1998
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Common Stock, $0.01 par value 32,187,322 shares
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
1997 Annual Report to Stockholders in Parts II and IV of this Form 10-K.
Proxy Statement for the Annual Meeting of Stockholders to be held on May 19,
1998, in Part III of this Form 10-K.
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TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER
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<S> <C>
1) Business
General Description of Business ..................................... 1
Electrochemical Products ............................................ 2 - 3
Aromatic Chemical Products .......................................... 3
Methanol ............................................................ 4
Great River Oil & Gas Corporation ................................... 4
Georgia-Pacific Contract ............................................ 4
Marketing and Sales ................................................. 4
Raw Materials ....................................................... 4
Competition ......................................................... 5
Employees ........................................................... 5
Environmental Regulation ............................................ 5
Year 2000 Conversion ................................................ 5
Forward-Looking Statements .......................................... 5 - 6
2) Properties ..................................................................... 6 - 7
3) Legal Proceedings .............................................................. 7
4) Submission of Matters to a Vote of Security Holders ............................ 7
PART II
5) Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters ..................................... 8
6) Selected Financial Data ........................................................ 8
7) Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................... 8
7A) Quantitative and Qualitative Disclosures about Market Risk ...................... 8
8) Financial Statements and Supplementary Data .................................... 8
9) Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ............................................ 8
PART III
10) Directors and Executive Officers of the Registrant ............................. 9
11) Executive Compensation ......................................................... 10
12) Security Ownership of Certain Beneficial Owners and Management ................. 10
13) Certain Relationships and Related Transactions ................................. 10
PART IV
14) Exhibits, Financial Statement Schedule and Reports on Form 8-K ................. 11 - 14
SIGNATURES ............................................................................ 15
</TABLE>
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PART I
Item 1. BUSINESS.
General Description of Business
Georgia Gulf Corporation (the "Company") is a major manufacturer and
worldwide marketer of quality chemical and plastic products. The Company
manufactures products through two highly integrated lines categorized into
electrochemicals and aromatic chemicals; and also a third product line,
methanol, a natural gas chemical. The Company's electrochemical products include
chlorine, caustic soda, sodium chlorate, vinyl chloride monomer ("VCM"), and
polyvinyl chloride ("PVC") resins and compounds; the Company's aromatic chemical
products include cumene, phenol, acetone and alpha-methylstyrene ("AMS").
The Company has operated as an independent corporation since its
acquisition on December 31, 1984, of a major portion of the business and assets
of the chemical division of Georgia-Pacific Corporation ("Georgia-Pacific"). The
Company's operations include production units at four locations, several
marketing organizations responsible for the sale of the Company's products, a
technical service laboratory and a purchasing organization responsible for the
acquisition of all major raw materials. At the Company's four manufacturing
locations, there are ten plants, six of which are located in Plaquemine,
Louisiana. The Company also owns an air separation plant located in Plaquemine,
Louisiana, which supplies all of the oxygen and nitrogen requirements for the
complex. The Company leases a cogeneration facility that supplies essentially
all of the electricity and steam requirements for the Plaquemine, Louisiana,
complex and also leases storage terminals and warehouses from which a portion of
its products are distributed to customers.
The Company's products are generally intermediate chemicals that are
sold for further processing into a wide variety of end-use applications. Some of
the more significant end-use markets include plastic piping, siding and window
frames made from PVC resins and compounds; bonding agents for wood products and
high quality plastics made from phenol; acrylic sheeting for automotive and
architectural products made from acetone; and MTBE, a gasoline additive produced
from methanol. The following percentages of sales were made in 1997 to
manufacturers in the following industries: 30% housing and construction, 25%
plastics and fibers, 21% solvents and chemicals, 14% consumer products, 3% pulp
and paper and 7% miscellaneous.
The Company's major capital projects during 1997 included the
completion of the expansions of the phenol/acetone and VCM plants in Plaquemine,
Louisiana; the completion of the air separation plant in Plaquemine, Louisiana;
and the completion of the second phase of the PVC compound expansion at Gallman,
Mississippi. The major planned capital expenditures for 1998 will be directed
toward certain environmental projects and increased efficiency of existing
operations.
In the commodity chemical industry, a company's cost position as well
as the balance of overall industry supply (i.e., capacity) and demand for
particular product lines significantly affect pricing of products, and
accordingly, the Company's earnings and cash flow. The Company has invested $608
million in the past five years to maintain, expand and/or improve the efficiency
of its operating facilities. Management believes that with its low-cost position
and integrated product lines, the Company is well-positioned to compete in its
various markets.
The Company's long-term strategy is to continue to concentrate its
efforts on products and services in the chemical and plastic industries,
particularly production additions or enhancements in its core product areas. The
Company will continue to make investments that will improve or maintain its
low-cost position, as well as selective and prudent capacity additions and
expansions, and will consider acquisitions, joint ventures or similar
transactions that management believes will promote profitable growth in present
and closely related product lines.
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Electrochemical Products
Chlorine/Caustic Soda/Sodium Chlorate. The Company's facility at
Plaquemine, Louisiana, has the annual capacity to produce approximately 450
thousand tons of chlorine and 500 thousand tons of chlorine's co-product,
caustic soda, as well as 27 thousand tons of sodium chlorate.
The major raw materials for these products are salt and electric power.
The Company has a long-term lease on a salt dome near the Plaquemine, Louisiana,
facility with sufficient salt reserves to last over thirty years at current
rates of production. Electric power is the most significant cost component in
the production of chlorine, caustic soda and sodium chlorate. During 1997, the
Company completed the construction of a 250-megawatt cogeneration facility
located at the Plaquemine, Louisiana, complex, which supplies, under a long-term
lease agreement, essentially all the electricity and steam requirements for that
site. The primary cost component of producing electricity in the cogeneration
facility is natural gas.
Chlorine is used in the production of various chemicals, including
those used to make plastics and PVC resins. Other applications include water
purification, waste water disinfection, pulp and paper bleaching, agricultural
products, laundry aids and pharmaceuticals. In 1997, approximately 90 percent of
the Company's chlorine production was consumed by the Company in the production
of VCM, which was then used to produce PVC resins. The Company sells the
remaining chlorine principally to the pulp and paper and chemical industries.
The major uses of caustic soda are in the production of pulp and paper,
aluminum, oil, soaps and detergents. Caustic soda also has significant
applications in the production of other chemicals and in chemical processes
where caustic soda is used to control pH levels aiding in waste neutralization.
Another use is in the textile industry where it makes fabrics more absorbent and
improves the strength of dyes. Caustic soda is also used, to a lesser extent, in
food processing and electroplating.
Sodium chlorate is a key chemical used in the bleaching process for
pulp and paper and, to a lesser extent, as an ingredient in blasting agents,
explosives and solid rocket fuels.
Vinyl Chloride Monomer ("VCM"). The Company produces VCM at its
Plaquemine, Louisiana, complex. The major raw materials used to produce VCM are
purchased ethylene and Company-produced chlorine. The VCM plant's annual
capacity is approximately 1.6 billion pounds with the capability of also
producing an additional 400 million pounds of ethylene dichloride ("EDC"), the
precursor to VCM. Approximately 80 percent of the VCM production in 1997 was
used by the Company's PVC resins operations with the remainder being sold to
other PVC resins producers, particularly in the export market.
Polyvinyl Chloride ("PVC") Resins. The Company operates a world-scale
PVC resins plant in Plaquemine, Louisiana. The plant is located adjacent to its
major raw material supplier, the Company's VCM facility, thereby minimizing
transportation and handling costs. The annual production capacity is
approximately 1.12 billion pounds, of which approximately one-fourth was used
internally in 1997 to produce PVC compounds.
PVC resins are one of the most widely used plastics in the world today.
After being formulated to desired properties, PVC resins are heated and shaped
into finished products by various extrusion, calendaring and molding processes.
Applications are diverse and include pipe and fittings, window frames, siding,
flooring, shower curtains, packaging, bottles, film, medical tubing, business
machine housings and credit cards. Vinyl resins are also important to the
automotive industry for use in seats, trim, floormats and wire and cable
insulation.
Polyvinyl Chloride ("PVC") Compounds. The Company's PVC compounding
plants have an aggregate annual capacity of approximately 380 million pounds and
are located in Gallman, Mississippi, and Tiptonville, Tennessee. During the last
half of 1997, the Company completed the second phase of the PVC compound
expansion at Gallman, Mississippi.
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PVC compounds are formulated to provide specific end-use properties
that allow the material to be processed directly into a finished product. All
sales of PVC compounds are to outside customers. The product line can be
segregated into four major product areas according to the following process
applications:
Blow Molding -- The Company is a supplier of blow molding compounds,
which are primarily used for both food-grade and general purpose
bottles. Supplied in both clear and opaque colors, the materials are
used to package cosmetics, shampoos, charcoal lighter fluid, bottled
water and edible oils.
Injection Molding -- The Company supplies various PVC compounds, which
are used in the business machine market for computer housings and
keyboards. It also supplies PVC compounds to produce electrical outlet
boxes. These proprietary compounds, with extensive approval procedures
by customers or regulatory bodies, are sold to some of the leading
international producers of injection molded products. The Company also
manufactures PVC compounds for use in pipe fittings.
Extrusion -- The Company supplies extrusion markets, which have
applications in window and furniture profiles and extruded sheets for
household fixtures and decorative overlays. Extrusions are an
end-product for both pelletized and powder compounds.
Chlorinated Polyvinyl Chloride ("CPVC") -- The Company supplies
Protherm-Registered Trademark- CPVC compounds to the extrusion and
injection molding markets, mainly for pipe and pipe fittings.
Aromatic Chemical Products
Cumene. Cumene is produced at the Company's Pasadena, Texas, facility
located on the Houston ship channel. The Company's cumene plant, one of the
world's largest, has an annual stated capacity of approximately 1.5 billion
pounds. Cumene is produced from benzene and propylene, which are purchased from
various suppliers in the surrounding area. Slightly more than 50 percent of the
Company's 1997 cumene output was consumed internally in the production of phenol
and its co-product, acetone, with the balance being sold into the merchant
market to other phenol and acetone manufacturers.
Phenol/Acetone. Phenol and acetone are produced at the Company's
Plaquemine, Louisiana, facility, which has approximately 500 million pounds of
annual phenol capacity and 308 million pounds of annual acetone capacity, as
well as at the Pasadena, Texas, facility, where annual capacity is 160 million
pounds of phenol and 100 million pounds of acetone. During 1997, the Plaquemine,
Louisiana, phenol/acetone plant was upgraded for product quality and expanded by
sixty million pounds of phenol and thirty-eight million pounds of acetone. The
Company does not consume any phenol or acetone internally.
Phenol is a major ingredient in phenolic resins, which are used
extensively as bonding agents and adhesives for wood products such as plywood
and granulated wood panels, as well as in insulation, electrical parts, nylon
carpeting, oil additives and pharmaceuticals. Phenol is also a precursor to high
performance plastics used in automobiles, household appliances, electronics and
protective coating applications.
The primary uses for acetone are as a key ingredient to methyl
methacrylate, which is used to produce acrylic sheeting, and as an ingredient
for surface coating resins for automotive and architectural markets. Acetone is
also an intermediate for the production of engineering plastics and several
major industrial solvents. Other uses range from wash solvents for automotive
and industrial applications to pharmaceuticals and cosmetics.
As a result of the phenol/acetone manufacturing process, the Company
also produces and markets small amounts of a by-product, AMS, which is primarily
used as a polymer modifier and as a chemical intermediate.
3
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Methanol
Methanol is produced at the Company's facility at Plaquemine,
Louisiana, which has an annual capacity of approximately 160 million gallons.
Natural gas represents the majority of the cost of the production of methanol.
The Plaquemine facility is in the center of Louisiana's oil and gas producing
region and has two separate pipeline systems delivering gas to the plant.
Natural gas is purchased by the Company under contracts at market prices from
both producers and gas pipeline suppliers.
A key use for methanol is in the production of methyl tertiary-butyl
ether, or MTBE, an additive that promotes cleaner burning gasoline by adding
oxygen. Methanol is also used as a raw material in the manufacture of
formaldehyde, which is an ingredient in bonding agents for building materials
such as granulated wood panels and plywood. Other applications for methanol
include windshield washer fluid, solvents, and components of acrylic sheeting,
coatings, fibers and household adhesives.
Great River Oil & Gas Corporation
In July 1997, the Company completed the sale of certain oil and gas
properties representing substantially all of the assets of Great River Oil & Gas
Corporation ("GROG"), a subsidiary of the Company. Net proceeds from this sale
were $16,477,000, on which the Company recorded a pretax gain of $8,600,000
($5,300,000, net of income taxes). GROG is a small oil and gas exploration
company with activities centered in southern Louisiana. Historically, the
operating results for this subsidiary have not been material to the operating
results or financial condition of the Company.
Georgia-Pacific Contract
The Company has supply contracts, subject to certain limitations, for
substantial percentages of Georgia-Pacific's requirements for caustic soda,
methanol and phenol at prices approximating the market. These supply contracts
have various expiration dates (depending on the product) from 1998 through 2003
and may be extended year-to-year upon expiration. Total sales to Georgia-Pacific
for the years ended December 31, 1997, 1996 and 1995 amounted to approximately
12%, 15% and 14% of the Company's sales, respectively.
Marketing and Sales
The Company's marketing program is aimed at expanding and diversifying
its customer base both domestically and internationally. Other than
Georgia-Pacific, no single customer represents more than 10% of the Company's
net sales. Export sales accounted for approximately 15%, 12% and 15% of the
Company's net sales for the years ended December 31, 1997, 1996 and 1995,
respectively. The principal international markets served by the Company include
Canada, Mexico, Latin America, Europe and Asia.
The Company markets its products primarily to industrial customers. The
Company's products are sold by its sales force, which is organized by product
line. The sales organization, located predominantly in the southeastern and
midwestern United States, is supported by the Company's technical service staff.
Raw Materials
The most important raw materials purchased by the Company are natural
gas, ethylene, benzene, propylene, electricity and salt. Raw materials used for
production of the Company's products are usually purchased from various
suppliers at market prices under supply contracts, some of which are long-term
take or pay agreements. Since raw materials account for a significant portion of
the Company's total production cost, the Company's ability to pass on increases
in these costs to its customers has a significant impact on operating results
which is, to a large extent, related to industry capacity and market demand.
Additionally, due to the completion of the cogeneration plant in 1997, the
Company substantially increased its natural gas requirements. Management
believes the Company has a reliable supply base of raw materials under normal
market conditions. The impact of any future raw material shortages cannot be
accurately predicted.
4
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Competition
The Company experiences competition from numerous manufacturers in all
of its product lines. Some of the Company's competitors have substantially
greater financial resources and are more highly diversified than the Company.
The Company competes on a variety of factors such as price, product quality,
delivery and technical service.
Management believes that the Company is well-positioned to compete as a
result of integrated product lines, the operational efficiency of its plants and
the location of its facilities near major water and/or rail transportation
terminals.
Employees
As of December 31, 1997, the Company had 1,041 full-time employees. The
Company has one collective bargaining agreement, which covered fifty-six
employees at the Tiptonville, Tennessee, facility as of December 31, 1997.
Environmental Regulation
The Company's operations are subject to increasingly stringent federal,
state and local laws and regulations relating to environmental quality. These
regulations, which are enforced principally by the United States Environmental
Protection Agency and comparable state agencies, govern the management of solid
hazardous waste, emissions into the air and discharges into surface and
underground waters, and the manufacture of chemical substances.
Management believes that the Company is in material compliance with all
current environmental laws and regulations. The Company estimates that any
expenses incurred in maintaining compliance with these requirements will not
materially effect earnings or cause the Company to exceed its level of
anticipated capital expenditures. However, there can be no assurance that
regulatory requirements will not change, and therefore it is not possible to
accurately predict the aggregate cost of compliance resulting from any such
changes.
Year 2000 Conversion
The Company recognizes the need to ensure its operations will not be
adversely impacted by the year 2000 date conversion problem common in many
processing systems. Georgia Gulf's information processing systems are believed
to be year 2000 compliant. The Company continues to review and analyze other
areas with exposure to potential year 2000 risks, including operational process
control systems. Based upon current information, the Company believes all
significant software systems within its control will be year 2000 compliant by
the end of 1998. The costs associated with compliance with year 2000 conversion
are not expected to be material.
Forward-Looking Statements
This Form 10-K and other communications to stockholders, as well as
oral statements made by representatives of the Company, may contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to, among other things,
the Company's outlook for future periods, supply and demand, pricing trends and
market forces within the chemical industry, cost reduction strategies and their
results, planned capital expenditures, long-term objectives of management and
other statements of expectations concerning matters that are not historical
facts.
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Predictions of future results contain a measure of uncertainty and,
accordingly, actual results could differ materially due to various factors.
Factors that could change forward-looking statements are, among others, changes
in the general economy, changes in demand for the Company's products or
increases in overall industry capacity that could affect production volumes
and/or pricing, changes and/or cyclicality in the industries to which the
Company's products are sold, availability and pricing of raw materials,
technological changes affecting production, difficulty in plant operations and
product transportation, governmental and environmental regulations and other
unforseen circumstances. A number of these factors are discussed in this Form
10-K.
Item 2. PROPERTIES.
The Company's asset base was established from 1971 to the present with
construction of the Plaquemine, Louisiana, complex; the construction of the
Pasadena, Texas, cumene plant; the purchase of the PVC compound plants and the
purchase of the Bound Brook, New Jersey, phenol/acetone facility subsequently
relocated to Pasadena, Texas, and modernized in 1990. In 1996, the Company sold
its vinyl emulsion business including the property and buildings at the Delaware
City location. In 1997, the Company completed construction of cogeneration and
air separation plants in Plaquemine, Louisiana, in order to supply all of its
requirements for electricity, oxygen and nitrogen at that location. The
cogeneration plant is leased under an operating lease agreement. The Company
continues to explore ways to expand both its plant capacities and product lines.
The Company believes current and additional planned capacity will adequately
meet anticipated demand requirements. Average capacity utilization of the
Company's production facilities in 1997 was 93%.
The following table sets forth the location of each chemical
manufacturing facility owned by the Company, the products manufactured at each
facility and the approximate processing capability of each, assuming normal
plant operations, as of December 31, 1997:
<TABLE>
<CAPTION>
Locations Products Annual Capacity
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<S> <C> <C>
Gallman, MS Polyvinyl Chloride Compounds 380 million pounds
Tiptonville, TN
Pasadena, TX Cumene 1.5 billion pounds
Phenol 160 million pounds
Acetone 100 million pounds
Plaquemine, LA Chlorine 450 thousand tons
Caustic Soda 500 thousand tons
Sodium Chlorate 27 thousand tons
Vinyl Chloride Monomer 1.6 billion pounds
Polyvinyl Chloride Resins 1.12 billion pounds
Phenol 500 million pounds
Acetone 308 million pounds
Methanol 160 million gallons
</TABLE>
The Company's manufacturing facilities are located near major water
and/or rail transportation terminals, facilitating efficient delivery of raw
materials and prompt shipment of finished products. In addition, the Company has
a fleet of 2,348 railcars of which 713 are owned and the remainder leased
pursuant to operating leases with varying terms through the year 2010. The total
lease expense for the Company's railcars and other transportation equipment was
approximately $9,849,000 for 1997.
In October 1997, the Company began making lease payments under an
operating lease agreement for the 250-megawatt cogeneration facility at the
Company's Plaquemine, Louisiana, complex. The lease expense under the operating
lease agreement for 1997 was $3,025,000.
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The Company leases office space for its principal executive offices in
Atlanta, Georgia, and for information services in Baton Rouge, Louisiana. Space
is leased for sales and marketing offices in Houston, Texas, Schaumburg,
Illinois, and Lawrenceville, New Jersey. Space for numerous storage terminals is
leased throughout the United States, and in the Netherlands, Canada and New
Zealand.
Item 3. LEGAL PROCEEDINGS .
The Company is a party to numerous individual and several class-action
lawsuits filed against the Company, among other parties, arising out of an
incident that occurred in September 1996 in which workers were exposed to a
chemical substance on the Company's premises in Plaquemine, Louisiana. The
substance was later identified to be a form of mustard agent, a chemical which
is not manufactured as part of the Company's ordinary operations and which
apparently resulted from the unexpected introduction into the Company's
feedstocks of one or more impurities from sources unknown.
The lawsuits are pending in the 18th Judicial District, Iberville
Parish. The Company has filed answers in the cases in which it has been served.
Discovery also has been served in the cases. All of the actions claim one or
more forms of compensable damages, including past and future lost wages and past
and future physical and emotional pain and suffering.
At the present time, the Company does not know, and it is not possible
to estimate, the number of persons making claims, the merit of any such claims,
the nature or extent of damages that will be sought, the defenses available to
the Company, or the liability of other persons, or to make a factual or legal
assessment of the Company's ultimate exposure. Notwithstanding the foregoing,
the Company believes it has meritorious defenses to the claims asserted and
intends to assert and pursue those defenses vigorously; further, the Company
believes any liability ultimately imposed would be covered by its liability
insurance.
In addition, the Company is subject to other claims and legal actions
that arise in the ordinary course of business. Management believes that the
ultimate liability, if any, with respect to these other claims and legal
actions, will not have a material effect on the financial position or on results
of operations of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
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PART II
Item 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information set forth under the captions "Corporate
Information--Common Stock Data and Dividend Policy" and in Notes 6, 7, 8 and 16
of the "Notes to Consolidated Financial Statements" of the Company's 1997 Annual
Report to Stockholders is hereby incorporated by reference herein in response to
this item.
Item 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Ten-Year Selected
Financial Data" of the Company's 1997 Annual Report to Stockholders is hereby
incorporated by reference herein in response to this item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption "Management's Discussion
and Analysis" of the Company's 1997 Annual Report to Stockholders is hereby
incorporated by reference herein in response to this item.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information for this item will be required for the Company
commencing in the fiscal year ending December 31, 1998, due to the Company's
market capitalization being below $2.5 billion.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information set forth on pages 23 through 37 of the Company's 1997
Annual Report to Stockholders is hereby incorporated by reference herein in
response to this item.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed its independent public accountants and has
had no disagreements with its independent public accountants on accounting and
financial disclosure during the Registrant's two most recent fiscal years prior
to, or in any period subsequent to, the date of the most recent financial
statements included herein.
8
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the captions "Election of Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held May 19, 1998,
is hereby incorporated by reference in response to this item.
The following is certain information regarding the executive officers
of the Company who are not Directors:
Richard B. Marchese, 56, has served as Vice President Finance, Chief
Financial Officer and Treasurer of the Company since May 1989, and
prior thereto served as Corporate Controller from its inception.
Joel I. Beerman, 48, has served as Vice President, General Counsel and
Secretary since February 1994 and as General Counsel since February
1992. Prior thereto, Mr. Beerman served as Associate General Counsel
for the Company since its inception.
Gary L. Elliott, 53, has served as Vice President, Marketing and Sales
Commodity Chemicals Group since August 1993. Mr. Elliott served as
Business Manager -- Electrochemicals and Midwest Regional Sales Manager
from June 1989 until August 1993. Prior thereto, Mr. Elliott served as
Northeast Regional Sales Manager from May 1987 until June 1989; as VCM
Product Manager from November 1985 to May 1987; and as a Sales
Representative for the Company from its inception until November 1985.
Mark J. Seal, 46, has served as Vice President, Polymer Group since
August 1993. Mr. Seal served as Business and Manufacturing Director --
PVC Resins from May 1992 until August 1993 and as Business Manager --
PVC Resins and Compounds from May 1989 until May 1992. Prior thereto,
Mr. Seal served as Business Manager -- Electrochemicals from January
1987 until May 1989 and as Midwest Regional Sales Manager for the
Company from its inception until January 1987.
Thomas G. Swanson, 56, has served as Vice President Supply and
Corporate Development since August 1993. Mr. Swanson served as Vice
President -- Commodity Chemicals Group from December 1989 to August
1993; as General Manager -- Commodity Chemicals Group from November
1988 until December 1989; as Director of Corporate Development for the
Company from July 1987; and prior thereto, was Manager -- Supply and
Distribution for the Company since its inception.
Executive officers are elected by, and serve at the pleasure of, the
Board of Directors.
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Item 11. EXECUTIVE COMPENSATION.
The information set forth under the captions "Election of Directors"
and "Executive Compensation" in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 19, 1998, is hereby incorporated by
reference in response to this item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the captions "Principal Stockholders"
and "Security Ownership of Management" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 19, 1998, is hereby
incorporated by reference in response to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has not had any transactions required to be reported under
this item for the calendar year 1997, or for the period from January 1, 1998, to
the date of this report.
10
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this 1997 Annual
Report for Georgia Gulf Corporation:
(1) The Consolidated Financial Statements, the Notes to
Consolidated Financial Statements, the Report of Management
and the Report of Independent Public Accountants listed below
are incorporated herein by reference from pages 23 through 37
of the Company's 1997 Annual Report to Stockholders:
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Management
Report of Independent Public Accountants
(2) Financial Statement Schedules:
Report of Independent Public Accountants on Financial
Statement Schedule
The following financial statement schedule is for the years
ended December 31, 1997, 1996 and 1995:
II Valuation and Qualifying Accounts
Schedules other than the one listed above are omitted
because they are not required and are inapplicable or the
information is otherwise shown in the Consolidated Financial
Statements or notes thereto.
(3) Exhibits. Each management contract or compensatory
plan or arrangement is preceded by an asterisk.
11
<PAGE>
The following exhibits are filed as part of this Form 10-K Annual Report:
EXHIBIT
NO. DESCRIPTION
-------- -----------
13 1997 Annual Report to Stockholders
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
The following exhibit is incorporated herein by reference to the Company's 1996
Form 10-K Annual Report filed March 28, 1997:
EXHIBIT
NO. DESCRIPTION
-------- -----------
10(i) Receivables Transfer Agreement dated December 4, 1996,
between the Company, as Transferor, and Dynamic Funding
Corporation.
The following exhibits are incorporated herein by reference to the Company's
1995 Form 10-K Annual Report filed March 28, 1996:
EXHIBIT
NO. DESCRIPTION
-------- -----------
The following exhibits relate to the Company's operating lease agreement
for its cogeneration project:
10(a) Trust Agreement dated February 6, 1996, between NationsBanc
Leasing Corporation of North Carolina and First Security
Bank of Utah, N.A.
10(b) Leasehold Mortgage, Assignment of Leases, Security Agreement
and Financing Statement dated February 16, 1996, between the
Company, First Security Bank of Utah, N.A., and Val T.
Orton.
10(c) Participation Agreement dated February 6, 1996, between the
Company, First Security Bank of Utah, N.A., NationsBanc
Leasing Corporation of North Carolina, NationsBank, N.A.
(South), ABN AMRO Bank N.V., Bank of Montreal, Bank of New
York, Bank of Nova Scotia, Bank of Tokyo Trust Company,
Chase Manhattan Bank, The Dai-Ichi Kangyo Bank, Limited,
Atlanta Agency, The Fuji Bank, Ltd., The Industrial Bank of
Japan, Limited, the Sakura Bank Limited, Atlanta Agency,
Rabobank Nederland, New York Branch, The Tokai Bank,
Limited, Atlanta Agency, Wachovia Bank of Georgia, N.A., and
Val T. Orton.
10(d) Lease Agreement (Tax Retention Operating Lease) dated
February 6, 1996, between the Company and First Security
Bank of Utah, N.A.
10(e) Credit Agreement dated February 6, 1996, between First
Security Bank of Utah, N.A. and NationsBank, N.A. (South).
12
<PAGE>
10(f) Security Agreement dated February 6, 1996, between First
Security Bank of Utah, N.A., Val T. Orton, NationsBank, N.A.
(South), and NationsBanc Leasing Corporation of North
Carolina.
10(g) Ground Lease Agreement dated February 16, 1996, between the
Company and First Security Bank of Utah, N.A.
The following exhibit is incorporated herein by reference to the Company's Form
S-8 (File No. 33-64749) filed December 5, 1995:
EXHIBIT
NO. DESCRIPTION
-------- -----------
10 Georgia Gulf Corporation Employee Stock Purchase Plan
The following exhibit is incorporated herein by reference to the Company's Form
S-3 (File No. 33-63051) filed September 28, 1995:
EXHIBIT
NO. DESCRIPTION
-------- -----------
4 Indenture, dated as of November 15, 1995, between the
Company and LaSalle National Bank, as trustee (including
form of Notes).
The following exhibit is incorporated by reference to the Company's 1995 Form
10-Q Quarterly Report for the period ending June 30, 1995, filed August 2, 1995.
EXHIBIT
NO. DESCRIPTION
-------- -----------
10(i) Term Loan Agreement, dated June 29, 1995, between the
Company and The Industrial Bank of Japan, Limited as
Administrative Agent.
The following exhibit is incorporated by reference to the Company's 1995 Form
10-Q Quarterly Report for the period ending March 31, 1995, filed May 15, 1995.
EXHIBIT
NO. DESCRIPTION
-------- -----------
10 Credit Agreement, dated March 30, 1995, between the Company
and The Chase Manhattan Bank (National Association) as
Administrative Agent.
13
<PAGE>
The following exhibits are incorporated herein by reference to the Company's
1991 Form 10-K Annual Report filed March 30, 1992.
EXHIBIT
NO. DESCRIPTION
-------- -----------
3(a) Certificate of Amendment of Certificate of Incorporation
3(b) Amended and Restated By-Laws
*10 Georgia Gulf Corporation 1990 Incentive Equity Plan
The following exhibit is incorporated herein by reference to Exhibit 2 to the
Company's Registration Statement on Form 8-A filed May 11, 1990, as amended:
EXHIBIT
NO. DESCRIPTION
-------- -----------
4 Amended and Restated Rights Agreement effective as of August
31, 1990
The following exhibits are incorporated herein by reference to the Company's
Registration Statement on Form S-1 (File No. 33-9902) declared effective on
December 17, 1986:
EXHIBIT
NO. DESCRIPTION
-------- -----------
3(a) Certificate of Agreement of Merger, with Certificate of
Incorporation of Company as Exhibit A thereto, dated
December 31, 1984, and amendments thereto
10(f) Chemical Sales Agreement between the Company and
Georgia-Pacific dated December 31, 1984, and Letter re:
Chemical Sales Agreement dated December 31, 1984
10(g) Agreement re: Liabilities among Georgia-Pacific,
Georgia-Pacific Chemicals, Inc., and others dated, December
31, 1984
10(o) Georgia Gulf Savings and Capital Growth Plan
10(p) Georgia Gulf Salaried Employees Retirement Plan
10(q) Georgia Gulf Hourly Employees Retirement Plan
*10(u) Executive Retirement Agreements
10(v) Salt Contract
(b) Reports on Form 8-K
No report on Form 8-K was filed with the Securities and Exchange
Commission during the last quarter of 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 20, 1998 By: /s/ Jerry R. Satrum
-------------------- --------------------
Jerry R. Satrum,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ------ -----
<S> <C> <C>
/s/ Jerry R. Satrum
- -----------------------------
Jerry R. Satrum Chief Executive Officer and Director March 20, 1998
(Principal Executive Officer)
/s/ Edward A. Schmitt
- -----------------------------
Edward A. Schmitt President, Chief Operating Officer March 20, 1998
and Director
/s/ Richard B. Marchese
- -----------------------------
Richard B. Marchese Vice President Finance, Chief Financial March 20, 1998
Officer and Treasurer (Principal Financial
and Accounting Officer)
/s/ James R. Kuse
- -----------------------------
James R. Kuse Chairman of the Board and Director March 20, 1998
/s/ John D. Bryan
- -----------------------------
John D. Bryan Director March 20, 1998
/s/ Dennis M. Chorba
- -----------------------------
Dennis M. Chorba Director March 20, 1998
/s/ Alfred C. Eckert III
- -----------------------------
Alfred C. Eckert III Director March 20, 1998
/s/ Robert E. Flowerree
- -----------------------------
Robert E. Flowerree Director March 20, 1998
/s/ Edward S. Smith
- -----------------------------
Edward S. Smith Director March 20, 1998
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To Georgia Gulf Corporation:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Georgia Gulf Corporation's
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 12, 1998. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in Item 14 of this Form 10-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 12, 1998
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Charged
Balance at Charged to to other Balance at
beginning costs and accounts-- Deductions end of
Description of period expenses describe --describe period
- ----------- --------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995
Allowance for
doubtful accounts $2,400 $1,000 $-- $(1,000)(1) $2,400
------- ------ --- ----------- ------
------- ------ --- ----------- ------
1996
Allowance for
doubtful accounts $2,400 $ 300 $-- $(300)(1) $2,400
------- ------ --- ----------- ------
------- ------ --- ----------- ------
1997
Allowance for
doubtful accounts $2,400 $ 184 $-- $(184)(1) $2,400
------- ------ --- ----------- ------
------- ------ --- ----------- ------
</TABLE>
NOTES:
(1) Accounts receivable balances written off during the period.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE(1)
- ------- ------------ -------
<S> <C> <C>
13 1997 Annual Report to Stockholders ___
21 Subsidiaries of the Registrant ___
23 Consent of Independent Public Accountants ___
</TABLE>
(1) Page numbers appear on the manually signed Form 10-K's only.
<PAGE>
FINANCIALS
18 Ten-Year Selected Financial Data
20 Management's Discussion and Analysis
23 Consolidated Balance Sheets
24 Consolidated Statements of Income
25 Consolidated Statements of Cash Flows
26 Consolidated Statements of Changes in Stockholders' Equity
27 Notes to Consolidated Financial Statements
37 Report of Management
37 Report of Independent Public Accountants
17
<PAGE>
TEN-YEAR SELECTED FINANCIAL DATA
GEORGIA GULF CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
In Thousands, Except Per Share ---------------------------------------------------------------------------
Data, Ratios & Employees 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Results of Operations
Net sales $ 965,650 $ 896,186 $ 1,081,576 $ 955,305 $ 768,902
Cost of sales 773,129 718,327 705,259 677,919 619,540
Selling and administrative 45,720 41,586 48,371 47,164 38,901
----------- ----------- ----------- ----------- -----------
Operating income 146,801 136,273 327,946 230,222 110,461
Recapitalization expense(1) -- -- -- -- --
Gain on sale of assets 8,600 -- -- -- --
Interest expense (24,693) (20,833) (25,114) (37,557) (44,779)
Interest income 60 67 244 113 106
----------- ----------- ----------- ----------- -----------
Income before income taxes,
extraordinary charge and
cumulative effect
of accounting change 130,768 115,507 303,076 192,778 65,788
Provision for income taxes 49,567 43,887 116,582 70,618 23,560
----------- ----------- ----------- ----------- -----------
Income before extraordinary charge
and cumulative effect of accounting
change 81,201 71,620 186,494 122,160 42,228
Extraordinary charge on early
retirement of debt -- -- -- -- (13,267)
Cumulative effect of accounting
change for income taxes -- -- -- -- 12,973
----------- ----------- ----------- ----------- -----------
Net income $ 81,201 $ 71,620 $ 186,494 $ 122,160 $ 41,934
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic earnings per share $ 2.41 $ 2.00 $ 4.82 $ 2.95 $ 1.04
Diluted earnings per share $ 2.39 $ 1.98 $ 4.73 $ 2.89 $ 1.01
Dividends per common share $ 0.32 $ 0.32 $ 0.32 $ -- $ --
Financial Highlights
Working capital $ 57,472 $ 49,395 $ 73,370 $ 126,668 $ 67,674
Property, plant and equipment, net 410,860 394,737 312,536 255,608 222,835
Total assets 612,703 587,999 507,332 508,447 405,287
Total debt 393,040 395,600 292,400 314,081 379,206
Stockholders' equity (deficit)(1) 35,603 18,570 50,628 31,138 (110,577)
Cash provided by operating activities 109,017 114,689 278,641 111,595 88,268
Cash used in financing activities (67,980) (2,688) (191,049) (54,336) (58,490)
Depreciation and amortization 37,871 39,431 32,068 27,774 27,062
Capital expenditures 56,591 119,895 86,278 59,142 29,583
Maintenance expenditures 58,675 57,064 51,558 46,033 43,141
Other Selected Data
Earnings before interest, taxes,
depreciation and amortization (EBITDA)(2) $ 193,272 $ 175,704 $ 360,014 $ 257,996 $ 137,523
Weighted average common shares 33,629 35,759 38,728 41,427 40,515
Weighted average common shares
and equivalents 33,947 36,248 39,428 42,255 41,476
Common shares outstanding 32,781 34,585 37,240 42,013 40,952
Sales per employee $ 928 $ 870 $ 946 $ 834 $ 684
Current ratio 1.5 1.4 1.6 2.0 1.6
Return on assets 13.5% 13.1% 36.7% 26.7% 10.2%
Return on sales 8.4% 8.0% 17.2% 12.8% 5.5%
Ratio of operating income to
interest expense 5.9 6.5 13.1 6.1 2.5
Employees 1,041 1,030 1,143 1,146 1,124
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
(1) All years subsequent to 1989 include the effects of the recapitalization,
which occurred in April 1990. (See Note 7 to the consolidated financial
statements.)
18
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
In Thousands, Except Per Share ---------------------------------------------------------------------------
Data, Ratios & Employees 1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Results of Operations
Net sales $ 779,455 $ 838,336 $ 932,104 $ 1,104,468 $ 1,060,612
Cost of sales 616,802 626,672 661,448 753,255 698,009
Selling and administrative 33,827 41,129 42,087 52,204 49,489
----------- ----------- ----------- ----------- -----------
Operating income 128,826 170,535 228,569 299,009 313,114
Recapitalization expense(1) -- -- (17,869) -- --
Gain on sale of assets -- -- -- -- --
Interest expense (61,216) (80,772) (63,161) (961) (3,373)
Interest income 73 492 2,505 2,045 2,594
----------- ----------- ----------- ----------- -----------
Income before income taxes,
extraordinary charge and
cumulative effect
of accounting change 67,683 90,255 150,044 300,093 312,335
Provision for income taxes 21,346 28,782 54,700 108,103 118,731
----------- ----------- ----------- ----------- -----------
Income before extraordinary charge
and cumulative effect of accounting
change 46,337 61,473 95,344 191,990 193,604
Extraordinary charge on early
retirement of debt -- -- -- -- --
Cumulative effect of accounting
change for income taxes -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income $ 46,337 $ 61,473 $ 95,344 $ 191,990 $ 193,604
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic earnings per share $ 1.22 $ 1.82 $ 3.11 $ 7.96 $ 7.43
Diluted earnings per share $ 1.18 $ 1.77 $ 3.08 $ 7.58 $ 6.75
Dividends per common share $ -- $ -- $ -- $ 1.00 $ 0.65
Financial Highlights
Working capital $ 57,465 $ 20,676 $ 50,131 $ 132,097 $ 125,642
Property, plant and equipment, net 217,781 226,746 220,851 215,182 175,358
Total assets 419,420 415,585 456,657 472,989 457,327
Total debt 444,416 639,153 726,481 856 42,603
Stockholders' equity (deficit)(1) (161,165) (357,512) (424,476) 330,341 256,083
Cash provided by operating activities 60,385 112,148 127,752 225,255 191,948
Cash used in financing activities (45,729) (86,889) (176,183) (165,118) (83,753)
Depreciation and amortization 29,583 26,447 19,834 18,667 15,589
Capital expenditures 14,261 28,273 58,111 54,159 25,062
Maintenance expenditures 47,664 42,853 42,985 40,400 41,469
Other Selected Data
Earnings before interest, taxes,
depreciation and amortization (EBITDA)(2) $ 158,409 $ 196,982 $ 248,403 $ 317,676 $ 328,703
Weighted average common shares 37,873 33,690 30,676 24,111 26,072
Weighted average common shares
and equivalents 39,215 34,721 30,942 25,327 28,663
Common shares outstanding 40,294 33,711 33,608 24,437 24,523
Sales per employee $ 691 $ 760 $ 868 $ 818 $ 776
Current ratio 1.4 1.1 1.3 2.2 2.0
Return on assets 11.1% 14.1% 20.5% 41.3% 50.6%
Return on sales 5.9% 7.3% 10.2% 17.4% 18.3%
Ratio of operating income to
interest expense 2.1 2.1 3.6 311.1 92.8
Employees 1,128 1,103 1,074 1,350 1,367
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
(2) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is commonly used by certain investors to measure a company's
ability to service its indebtedness. EBITDA is not a measurement of
financial performance under generally accepted accounting principles and
should not be considered as an alternative to net income as a measure of
performance or to cash flow as a measure of liquidity.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Results of Operations
Georgia Gulf is a major manufacturer and worldwide marketer of several
highly integrated lines of commodity chemicals and polymers including aromatic,
natural gas, and electrochemical products. The following discussion and analysis
provides information which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with the Company's
consolidated financial statements and related notes.
1997 Compared with 1996
Net sales in 1997 were $965.7 million, an increase of 8 percent from
$896.2 million in 1996. Operating income also increased 8 percent to $146.8
million in 1997 from $136.3 million in 1996. Diluted earnings per share for 1997
were $2.39 on net income of $81.2 million, compared to diluted earnings per
share and net income for 1996 of $1.98 and $71.6 million, respectively. Results
for 1997 include a pretax gain of $8.6 million from the sale of certain oil and
gas properties, which resulted in an increase to net income of $5.3 million, or
$0.16 per share on a diluted basis.
The Company generated the increase in net sales during 1997 from a 12
percent increase in sales volume, which was partially offset by a 4 percent
reduction in the average sales price of the Company's products. The Company's
recently completed plant expansions in cumene and vinyl chloride monomer ("VCM")
drove the sales volume increase; however, sales volumes also increased for the
Company's other products, except for vinyl resins and compounds where sales
volumes declined. Overall, the Company operated its plants at 93 percent of
capacity in 1997. Stronger demand led to higher pricing for nearly all of the
Company's products, with the exception of caustic soda, which experienced a
significant price decline, resulting in the decrease in the overall average
sales price of the Company's products.
Raw material prices were up in 1997, with the exception of natural gas,
where prices were level with 1996. The Company's new cogeneration facility and
air separation plant, both completed in 1997 and located at the Plaquemine,
Louisiana complex, reduced the cost of previously purchased electricity,
nitrogen and oxygen. Overall, the Company's gross margin increased 8 percent
from $177.9 million in 1996 to $192.5 million in 1997, as the increase in
combined sales volume more than offset the net increase in raw material costs
and the reduction in average sales prices.
Selling and administrative expenses increased $4.1 million in 1997
primarily as a result of higher compensation expense relating to profit sharing
programs and increased legal and environmental expenses.
Interest expense increased $3.9 million in 1997 due to less interest
being capitalized in connection with capital expansion activity and a higher
average outstanding debt balance.
Diluted earnings per share increased 21 percent in 1997 due to higher
net income and fewer shares outstanding resulting from the Company's share
repurchase program.
1996 Compared with 1995
Net sales of $896.2 million for 1996 were down 17 percent from $1.1
billion in 1995, resulting in a 58 percent decline in operating income to $136.3
million from the record level of $327.9 million reported in 1995. Diluted
earnings per share for 1996 were $1.98 on net income of $71.6 million as
compared to diluted earnings per share and net income for 1995 of $4.73 and
$186.5 million, respectively.
The decline in net sales during 1996 primarily resulted from a 14
percent reduction in the average sales price of the Company's products,
accompanied by a 3 percent decrease in sales volumes. Although generally all
selling prices were below 1995 levels, vinyl products experienced the sharpest
drop, followed by methanol. These sales price declines were primarily related to
increased industry capacity. The decrease in sales volumes was largely
attributable to lower production volumes in 1996 as a result of planned and
unplanned plant downtime, primarily from tie-ins of capacity expansions during
the year and freeze damage during the earlier part of the year.
20
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Overall, raw material prices were lower in 1996 as the Company was able
to offset higher natural gas costs with reductions in other raw materials.
However, the impact of the lower raw material costs was insignificant in
comparison with the declines in selling prices.
Selling and administrative expenses decreased $6.8 million in 1996
primarily as a result of lower compensation expense related to profit-sharing
programs.
Interest expense declined $4.3 million in 1996 due to increased
interest capitalized during 1996 in connection with capital expansion activity
and a lower average interest rate on the Company's debt portfolio.
Diluted earnings per share decreased 58 percent in 1996 due to lower
net income, which was partially offset by fewer shares outstanding resulting
from the Company's share repurchase program.
Liquidity and Capital Resources
Georgia Gulf's primary liquidity focus is to maintain debt at a
manageable level, regardless of the Company's position in the economic
cycle. Management believes that cash provided by operations and the availability
of borrowings under the Company's revolving credit facility will provide
sufficient funds to support planned capital expenditures, dividends, stock
repurchases, working capital fluctuations and debt service requirements.
In 1997, Georgia Gulf generated $109 million from operating activities,
down $5.7 million from 1996. Major sources of cash flow from operating
activities in 1997 were net income of $81.2 million, noncash provisions of $37.9
million for depreciation and amortization and $11.7 million for deferred income
taxes. The items affecting net income are discussed in the "Results of
Operations" section. Total working capital at year-end was $57.5 million versus
$49.4 million at the end of 1996.
The Company expended cash in financing activities in 1997 to repurchase
common stock for $59.3 million and pay dividends of $10.7 million. The Company
invested cash in 1997 in capital expenditures of $56.6 million which were offset
by proceeds of $16.5 million received from the sale of certain oil and gas
properties.
Major capital expenditures for 1997 included $10.1 million for the
completion of the expansion of the phenol/acetone plant in Plaquemine,
Louisiana; $9.6 million for the completion of the air separation plant in
Plaquemine, Louisiana; $4.1 million for the completion of the expansion of the
VCM plant in Plaquemine, Louisiana; and $2 million for the completion of the
second phase of the vinyl compound expansion at Gallman, Mississippi. The
Company estimates that capital expenditures for 1998 will approximate $45
million. Capital expenditures will be directed toward projects increasing the
efficiency of existing operations and certain environmental projects.
Georgia Gulf repurchased and retired 2.1 million shares of its common
stock during 1997. As of December 31, 1997, the Company had authorization to
repurchase an additional one million shares under its stock repurchase program.
In February 1998, the Company's Board of Directors authorized another share
repurchase program for an additional 6.5 million shares.
Debt decreased slightly during 1997 to a level of $393 million. Georgia
Gulf's debt portfolio primarily consists of a $100 million term loan, $100
million principal amount 7 5/8% Notes, $155 million outstanding under its $350
million revolving credit agreement and $38 million in other debt agreements. The
Company has interest rate swap agreements to fix the interest rate on the term
loan at a rate ranging from 6.71 percent to 7.04 percent. The Company does not
use interest rate swap agreements or any other derivatives for trading purposes.
As of December 31, 1997, the Company had availability of $195 million under its
$350 million revolving credit facility.
21
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
In 1996, Georgia Gulf generated $114.7 million from operating
activities, down significantly from $278.6 million in 1995. Cash flow decreased
due to lower earnings in 1996, offset in part by a decrease in working capital.
The majority of the change in working capital in 1996 was attributable to lower
receivables and higher inventory at the end of 1996 resulting from lower sales.
Other changes include higher accounts payable at the end of 1996 due to
increased capital expenditure activity and lower accrued compensation costs as a
result of a reduction in employee profit sharing expense for 1996.
Net cash used in financing activities was $2.7 million in 1996, as
incremental borrowings of $103.2 million were used to fund repurchases of common
stock of $99.6 million and dividends of $11.4 million.
Net cash used in investing activities was $113.8 million in 1996, and
was primarily attributable to capital expenditure requirements of $119.9 million
for several plant expansions.
Inflation
The most significant components of the Company's cost of sales are raw
materials and energy, which consist of basic commodity items. The cost of raw
materials and energy is based primarily on market forces and has not been
significantly affected by inflation. Inflation has not had a material impact on
the Company's sales or income from operations.
Environmental
The Company's operations are subject to increasingly stringent federal,
state and local laws and regulations relating to environmental quality. These
regulations, which are enforced principally by the United States Environmental
Protection Agency and comparable state agencies, govern the management of solid
hazardous waste, emissions into the air and discharges into surface and
underground waters, and the manufacture of chemical substances.
Management believes that the Company is in material compliance with all
current environmental laws and regulations. The Company estimates that any
expenses incurred in maintaining compliance with these requirements will not
materially affect earnings or cause the Company to exceed its level of
anticipated capital expenditures. However, there can be no assurance that
regulatory requirements will not change, and therefore, it is not possible to
accurately predict the aggregate cost of compliance resulting from any such
changes.
22
<PAGE>
CONSOLIDATED BALANCE SHEETS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
-------------------
In Thousands, Except Share Data 1997 1996
-------- --------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,621 $ 698
Receivables, net of allowance for doubtful accounts
of $2,400 in 1997 and 1996 67,553 64,131
Inventories 92,921 89,196
Prepaid expenses 6,508 9,934
Deferred income taxes 7,409 6,410
-------- --------
Total current assets 176,012 170,369
-------- --------
Property, plant and equipment, at cost 650,968 646,144
Less accumulated depreciation 240,108 251,407
-------- --------
Property, plant and equipment, net 410,860 394,737
-------- --------
Other assets 25,831 22,893
-------- --------
Total assets $612,703 $587,999
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Accounts payable $ 92,588 $ 94,767
Interest payable 2,218 2,910
Accrued income taxes 564 2,039
Accrued compensation 7,281 5,637
Accrued pension 2,257 2,139
Other accrued liabilities 13,632 13,482
-------- --------
Total current liabilities 118,540 120,974
-------- --------
Long-term debt 393,040 395,600
-------- --------
Deferred income taxes 65,520 52,855
-------- --------
Stockholders' equity
Preferred stock-$0.01 par value;
75,000,000 shares authorized; no shares issued -- --
Common stock-$0.01 par value; 75,000,000
shares authorized; shares issued and outstanding:
32,781,439 in 1997 and 34,584,800 in 1996 328 346
Retained earnings 35,275 18,224
-------- --------
Total stockholders' equity 35,603 18,570
-------- --------
Total liabilities and stockholders' equity $612,703 $587,999
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
GEORGIA GULF CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
In Thousands, Except Share Data 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 965,650 $ 896,186 $ 1,081,576
------------ ------------ ------------
Operating costs and expenses
Cost of sales 773,129 718,327 705,259
Selling and administrative 45,720 41,586 48,371
------------ ------------ ------------
Total operating costs and expenses 818,849 759,913 753,630
------------ ------------ ------------
Operating income 146,801 136,273 327,946
Other income (expense)
Gain on sale of assets 8,600 -- --
Interest expense (24,693) (20,833) (25,114)
Interest income 60 67 244
------------ ------------ ------------
Income before income taxes 130,768 115,507 303,076
Provision for income taxes 49,567 43,887 116,582
------------ ------------ ------------
Net income $ 81,201 $ 71,620 $ 186,494
------------ ------------ ------------
------------ ------------ ------------
Basic earnings per share $ 2.41 $ 2.00 $ 4.82
------------ ------------ ------------
------------ ------------ ------------
Diluted earnings per share $ 2.39 $ 1.98 $ 4.73
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares 33,628,875 35,758,587 38,728,311
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares and equivalents 33,946,750 36,247,534 39,427,943
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
In Thousands 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 81,201 $ 71,620 $ 186,494
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 37,871 39,431 32,068
Gain on sale of assets (8,600) -- --
Provision for deferred income taxes 11,666 4,102 9,435
Tax benefit related to stock plans 1,252 2,210 2,364
Change in operating assets and liabilities:
Receivables (3,422) 25,283 67,671
Inventories (3,725) (17,408) (4,382)
Prepaid expenses 3,426 2,174 1,774
Accounts payable (2,179) 15,906 5,090
Interest payable (692) 173 (3,687)
Accrued income taxes (1,475) (1,257) (18,241)
Accrued compensation 1,644 (9,078) 2,991
Accrued pension 118 (168) (969)
Accrued liabilities 150 1,552 5,411
Other (8,218) (19,851) (7,378)
--------- --------- ---------
Net cash provided by operating activities 109,017 114,689 278,641
--------- --------- ---------
Cash flows from financing activities:
Long-term debt proceeds 187,440 268,500 559,400
Long-term debt payments (190,000) (165,300) (581,081)
Proceeds from issuance of common stock 4,598 5,084 5,481
Repurchase and retirement of common stock (59,307) (99,586) (162,565)
Dividends paid (10,711) (11,386) (12,284)
--------- --------- ---------
Net cash used in financing activities (67,980) (2,688) (191,049)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (56,591) (119,895) (86,278)
Proceeds from the sale of assets 16,477 6,062 --
--------- --------- ---------
Net cash used in investing activities (40,114) (113,833) (86,278)
--------- --------- ---------
Net change in cash and cash equivalents 923 (1,832) 1,314
Cash and cash equivalents at beginning of year 698 2,530 1,216
--------- --------- ---------
Cash and cash equivalents at end of year $ 1,621 $ 698 $ 2,530
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
GEORGIA GULF CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additional Retained Total
Common Stock Paid-in Earnings Stockholders'
In Thousands, Except Share Data Shares Amount Capital (Deficit) Equity
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 42,013,116 $ 420 $ 185,984 $ (155,266) $ 31,138
Net income -- -- -- 186,494 186,494
Dividends paid -- -- -- (12,284) (12,284)
Tax benefit realized from stock option plans -- -- 2,364 -- 2,364
Common stock issued upon exercise of stock options 270,214 3 2,139 -- 2,142
Common stock issued under stock purchase plan 127,722 1 3,338 -- 3,339
Repurchase and retirement of common stock (5,170,800) (52) (162,513) -- (162,565)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 37,240,252 372 31,312 18,944 50,628
Net income -- -- -- 71,620 71,620
Dividends paid -- -- -- (11,386) (11,386)
Tax benefit realized from stock option plans -- -- 2,210 -- 2,210
Common stock issued upon exercise of stock options 340,770 3 1,662 -- 1,665
Common stock issued under stock purchase plan 152,178 2 3,417 -- 3,419
Repurchase and retirement of common stock (3,148,400) (31) (38,601) (60,954) (99,586)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 34,584,800 346 -- 18,224 18,570
Net income -- -- -- 81,201 81,201
Dividends paid -- -- -- (10,711) (10,711)
Tax benefit realized from stock option plans -- -- 1,252 -- 1,252
Common stock issued upon exercise of stock options 185,045 2 1,435 -- 1,437
Common stock issued under stock purchase plan 140,694 1 3,160 -- 3,161
Repurchase and retirement of common stock (2,129,100) (21) (5,847) (53,439) (59,307)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 32,781,439 $ 328 $ -- $ 35,275 $ 35,603
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial
statements include the accounts of Georgia Gulf Corporation and its subsidiaries
(the "Company"). All significant intercompany balances and transactions are
eliminated in consolidation.
Nature of Operations - The Company is a manufacturer and worldwide
marketer of chemical and plastic products. The Company's products are primarily
intermediate chemicals sold for further processing into a wide variety of
end-use applications including plastic piping, siding and window frames, bonding
agents for wood products, high-quality plastics, acrylic sheeting and gasoline
additives.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - The Company considers all highly liquid
investment instruments with an original maturity of three months or less to be
the equivalent of cash for the purposes of financial statement presentation.
Inventories - Inventories are valued at the lower of cost (first-in,
first-out) or market. Costs include raw materials, direct labor and
manufacturing overhead. Market is based on current replacement cost for raw
materials and supplies and on net realizable value for finished goods.
Property, Plant and Equipment - Property, plant and equipment are
stated at cost. Maintenance and repairs are charged to expense as incurred, and
major renewals and improvements are capitalized. Interest expense attributable
to funds used in financing the construction of major plant and equipment is
capitalized. Interest expense capitalized during 1997, 1996 and 1995 was
$2,802,000, $4,826,000 and $1,602,000, respectively. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets for
book purposes, with accelerated methods being used for income tax purposes.
The estimated useful lives of the assets are as follows:
<TABLE>
<S> <C>
Buildings and land improvements 20-30 years
Machinery and equipment 3-15 years
</TABLE>
Other Assets - Other assets are comprised primarily of deposits for
long-term raw material purchase contracts and debt issuance costs. In 1997,
deposits began being amortized as additional raw material cost over the
remaining 15-year life of the related contracts in proportion to raw material
delivery. Debt issuance costs are amortized to expense using the effective
interest rate method over the term of the related indebtedness.
Financial Instruments - The Company does not use derivatives for
trading purposes. Interest rate swap agreements, a form of derivative, are used
by the Company to manage interest costs on certain portions of the Company's
long-term debt (see Note 13). These financial statements do not reflect
temporary market gains and losses on derivative financial instruments, although
the estimated fair value is disclosed in Note 13. Amounts paid or received on
the interest rate swap agreements are recorded to interest expense as incurred.
As of December 31, 1997 and 1996, interest rate swap agreements were the only
form of derivative financial instrument outstanding.
Environmental Expenditures - Environmental expenditures related to
current operations or future revenues are expensed or capitalized consistent
with the Company's capitalization policy. Expenditures that relate to an
existing condition caused by past operations and that do not contribute to
future revenues are expensed. Liabilities are recognized when environmental
assessments or cleanups are probable and the costs can be reasonably estimated.
Earnings Per Share - The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," effective December
31, 1997. Basic earnings per share is computed based on the weighted average
number of common shares outstanding during the respective periods. Diluted
earnings per share is computed based on the weighted average number of common
shares outstanding, adjusted for dilutive potential issuances of common stock.
All prior period earnings per share amounts have been restated to comply with
SFAS No. 128.
27
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
2. Receivables
In 1997, the Company adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The impact of
the adoption was not material to the financial statements.
The Company has entered into an agreement pursuant to which it sold a
percentage ownership interest in a defined pool of the Company's trade
receivables. As collections reduce accounts receivable included in the pool, the
Company sells participating interests in new receivables to bring the amount in
the pool up to the $50,000,000 maximum permitted by the agreement. The
receivables are sold at a discount, which approximates the purchaser's financing
cost of issuing its own commercial paper backed by these accounts receivable.
The ongoing costs of this program of $3,045,000, $2,882,000 and $2,003,000 for
1997, 1996 and 1995, respectively, were charged to selling and administrative
expense in the accompanying consolidated statements of income.
3. Inventories
The major classes of inventories were as follows :
<TABLE>
<CAPTION>
December 31,
In Thousands 1997 1996
------- -------
<S> <C> <C>
Raw materials and supplies $34,451 $38,803
Finished goods 58,470 50,393
------- -------
Inventories $92,921 $89,196
------- -------
------- -------
</TABLE>
4. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
In Thousands 1997 1996
-------- --------
<S> <C> <C>
Machinery and equipment $596,974 $470,039
Land and improvements 23,009 23,009
Buildings 20,771 17,365
Construction in progress 10,214 135,731
-------- --------
Property, plant and equipment $650,968 $646,144
-------- --------
-------- --------
</TABLE>
5. Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31,
In Thousands 1997 1996
-------- --------
<S> <C> <C>
Deposits $ 23,473 $ 16,330
Accumulated amortization (2,789) --
-------- --------
20,684 16,330
Debt issuance costs, net of
accumulated amortization 3,035 3,483
Other 2,112 3,080
-------- --------
Other assets $ 25,831 $ 22,893
-------- --------
-------- --------
</TABLE>
Debt issuance costs amortized as interest expense during 1997, 1996 and
1995 were $448,000, $440,000 and $420,000, respectively.
28
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
6. Long-term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
In Thousands 1997 1996
-------- --------
<S> <C> <C>
Revolving credit loan $155,000 $167,000
Term Loan 100,000 100,000
7 5/8% Notes due 2005 100,000 100,000
Other 38,040 28,600
-------- --------
Long-term debt $393,040 $395,600
-------- --------
-------- --------
</TABLE>
The Company's credit agreement (the "Credit Agreement") provides for an
unsecured revolving credit facility, which permits borrowings of up to
$350,000,000. The revolving credit facility terminates and related outstanding
loans, if any, are due in March 2000. As of December 31, 1997, the Company had
availability to borrow up to $195,000,000 under the terms of the revolving
credit facility. An annual commitment fee, which ranges from 0.10 percent to
0.25 percent, is required to be paid on the revolving credit facility
commitment. The interest rate on the revolving credit facility is based on LIBOR
and averaged 5.98 percent and 5.77 percent for 1997 and 1996, respectively.
The Company has a $100,000,000 unsecured term loan agreement (the "Term
Loan") with an average rate of 6.99 percent and 6.88 percent for 1997 and 1996,
respectively. Required principal payments under the Term Loan are $25,000,000 in
June 2001 and $75,000,000 in June 2002. The LIBOR-based variable interest rate
on the Term Loan has been fixed at a rate ranging from 6.71 percent to 7.04
percent using interest rate swap agreements.
The Company has $100,000,000 principal amount of unsecured 7 5/8
percent notes (the "Notes") outstanding, which are due in November 2005.
Interest on the Notes is payable semiannually on May 15 and November 15 of each
year. The Notes are not redeemable prior to maturity.
Under the Credit Agreement, Term Loan and Notes, the Company is subject
to certain restrictive covenants, the most significant of which require the
Company to maintain certain financial ratios and limit the amount the Company
can pay for dividends and repurchases of common stock. The Company's limit for
dividends and repurchases of common stock was $103,240,000 as of December 31,
1997.
Cash payments for interest during 1997, 1996 and 1995 were $27,739,000,
$22,945,000 and $28,336,000, respectively.
7. Stockholders' Equity
In April 1990, the Company's stockholders approved a plan of
recapitalization (the "Recapitalization"), which resulted in a distribution to
stockholders of $864,733,000. The distribution for the Recapitalization, net of
certain tax benefits, was charged against retained earnings.
During 1997 and 1996, the Company repurchased 2,129,100 shares of its
common stock for $59,307,000 and 3,148,400 shares for $99,586,000, respectively.
As of December 31, 1997, the Company had authorization to repurchase up to
1,021,700 additional shares under the current common stock repurchase program.
In connection with the stock purchase rights described below,
30,000,000 of the authorized shares of preferred stock are designated Junior
Participating Preferred Stock. If issued, the Junior Participating Preferred
Stock would be entitled, subject to the prior rights of any senior preferred
stock, to a dividend equal to the greater of $0.01 or that which is paid on the
common shares.
29
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Each outstanding share of common stock is accompanied by a preferred
stock purchase right, which entitles the holder to purchase from the Company
1/100 of a share of Junior Participating Preferred Stock for $45.00, subject to
adjustment in certain circumstances. The rights become exercisable only after a
person or group acquires beneficial ownership of 15 percent or more of the
Company's outstanding shares of common stock, or commences a tender or exchange
offer that would result in such person or group beneficially owning 15 percent
or more of the Company's outstanding shares of common stock. The rights expire
on April 27, 2000, and may be redeemed by the Company for $0.01 per right until
ten days following the earlier to occur of the announcement that a person or
group beneficially owns 15 percent or more of the Company's outstanding shares
of common stock, or the commencement, or announcement by any person or group of
an intent to commence, a tender offer which would result in any person or group
beneficially owning 15 percent or more of the Company's outstanding shares of
common stock. Subject to certain conditions, if a person or group becomes the
beneficial owner of 15 percent or more of the Company's outstanding shares of
common stock, each right will entitle its holder (other than certain acquiring
persons) to receive, upon exercise, common stock having a value equal to two
times the right's exercise price. In addition, subject to certain conditions, if
the Company is involved in a merger or certain other business combination
transactions, each right will entitle its holder (other than certain acquiring
persons) to receive, upon exercise, common stock of the acquiring company having
a value equal to two times the right's exercise price.
8. Stock Option and Purchase Plans
Options to purchase common stock of the Company have been granted to
employees under plans adopted in 1987 and 1990. Option prices are equal to the
closing price of the Company's stock on date of grant. Options vest ratably over
a three- or five-year period from the date of grant and expire no more than ten
years after grant.
The following is a summary of all stock option information:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Stock options:
Outstanding at beginning of year 956,561 1,299,031 1,569,245
Exercised (185,045) (340,770) (270,214)
Forfeited or canceled (3,400) (1,700) --
------------ ------------ ------------
Outstanding at year end 768,116 956,561 1,299,031
------------ ------------ ------------
------------ ------------ ------------
Option exercise price per share range $7.75-$36.50 $6.36-$36.50 $3.07-$36.50
Options exercisable 684,116 830,561 1,131,031
Options available for grant 18,927 15,527 13,827
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Company's stockholders have approved a qualified, noncompensatory
employee stock purchase plan, which allows employees to acquire shares of common
stock through payroll deductions over a twelve-month period. The purchase price
is equal to 85 percent of the fair market value of the common stock on either
the first or last day of the subscription period, whichever is lower. Purchases
under the plan are limited to 15 percent of an employee's base salary. In
connection with this stock purchase plan, 507,128 shares of common stock are
reserved for future issuances. Under this plan and similar plans, 140,694,
152,178 and 127,722 shares of common stock were issued at $22.47, $22.47 and
$26.14 per share during 1997, 1996 and 1995, respectively.
The Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and complies with SFAS No. 123, "Accounting for
Stock-Based Compensation," for disclosure purposes. Under these provisions, no
compensation was recognized in 1997, 1996 and 1995 for the Company's stock
option plans or its stock purchase plans. Options issued under the plan adopted
in 1987 were granted with related cash compensation awards. No compensation
expense was recognized subsequent to 1994 relating to options issued under this
1987 plan.
30
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
In accordance with the disclosure requirements of SFAS No. 123, the
Company is required to calculate the pro forma compensation cost of all stock
options and purchase rights granted after December 31, 1994, using an option
pricing model. Since no stock options have been granted since December 31, 1994,
only stock purchase rights granted in connection with the Company's stock
purchase plan are subject to the calculation.
For SFAS No. 123 purposes, the fair value of each stock purchase right
for 1997, 1996 and 1995 has been estimated as of the date of the right using the
Black-Scholes option pricing model with the following weighted average
assumptions for 1997, 1996 and 1995, respectively: risk-free interest rates of
5.66 percent, 5.09 percent and 7.43 percent; dividend yields of 1.20 percent,
1.04 percent and 0.82 percent; expected volatilities of 0.23, 0.30 and 0.32; and
an expected life of one year for each of the three years. Using these
assumptions, the fair values of the stock purchase plan rights for 1997, 1996
and 1995 were $977,000, $1,062,000 and $1,544,000, respectively. Had
compensation cost been determined consistently with SFAS No. 123, utilizing the
assumptions detailed above, the Company's net income and earnings per common
share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
In thousands, Except Year Ended December 31,
Per Share Data 1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Net income
As reported $ 81,201 $ 71,620 $ 186,494
Pro forma 80,594 70,962 185,537
Basic earnings per share
As reported 2.41 2.00 4.82
Pro forma 2.40 1.98 4.79
Diluted earnings per share
As reported 2.39 1.98 4.73
Pro forma 2.37 1.96 4.71
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
9. Employee Benefit Plans
The Company has certain pension, savings and profit sharing plans that
cover substantially all of its employees. The expense incurred for these plans
was approximately $3,798,000, $4,522,000 and $5,551,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Employees are covered by defined contribution plans under which the
Company makes contributions to individual employee accounts and by defined
benefit plans for which the benefits are based on years of service and the
employee's compensation or for which the benefit is a specific monthly amount
for each year of service. The Company's policy on funding the defined benefit
plans is to contribute an amount within the range of the minimum required and
the maximum tax-deductible contribution.
The net pension costs for the defined benefit plans include the
following components:
<TABLE>
<CAPTION>
Year Ended December 31,
In Thousands 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost for benefits earned during the year $ 1,765 $ 2,060 $ 1,776
Interest cost on projected benefit obligation 2,867 2,730 2,527
Actual return on assets (9,176) (5,056) (7,983)
Net amortization and deferrals 5,110 1,814 5,920
------- ------- -------
Net pension cost $ 566 $ 1,548 $ 2,240
------- ------- -------
------- ------- -------
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Pension expenses were calculated using assumed discount rates of 7.25
percent in 1997, 7.0 percent in 1996 and 7.5 percent in 1995; assumed long-term
compensation increase rates of 4.0 percent in 1997 and 5.5 percent in 1996 and
1995; and assumed long-term rates of return on plan assets of 9.0 percent in
1997, 1996 and 1995.
The funded status of the defined benefit plans at December 31, 1997 and
1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ---------------------------
Unfunded Unfunded
Fully Funded Executive Fully Funded Executive
In Thousands Benefit Plans Benefit Plans Benefit Plans Benefit Plans
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $(25,849) $ (5,530) $(22,087) $ (4,607)
Nonvested benefit obligation (356) (170) (372) (621)
-------- -------- -------- --------
Accumulated benefit obligation $(26,205) $ (5,700) $(22,459) $ (5,228)
-------- -------- -------- --------
-------- -------- -------- --------
Projected benefit obligation $(35,168) $ (7,423) $(30,718) $ (7,010)
Plan assets at fair value 53,705 -- 45,093 --
-------- -------- -------- --------
Fair value of assets in excess
of (less than) projected benefit
obligation 18,537 (7,423) 14,375 (7,010)
Unrecognized net (gains) and losses (15,655) (286) (11,786) (518)
Unrecognized prior service cost (696) 1,450 (750) 1,607
Unrecognized transition obligation 1,861 711 2,058 856
Additional minimum liability -- (672) -- (673)
-------- -------- -------- --------
Prepaid pension expense (liability) $ 4,047 $ (6,220) $ 3,897 $ (5,738)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The projected benefit obligations for the defined benefit plans were
determined using assumed discount rates of 7.25 percent in 1997 and 7.0 percent
in 1996 and an assumed long-term compensation increase rate of 4.0 percent in
1997 and 5.5 percent in 1996. The plan assets are invested in a diversified
portfolio that consists primarily of equity and debt securities.
10. Income Taxes
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
In Thousands 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 34,320 $ 35,903 $ 94,068
State 3,581 3,882 13,079
-------- -------- --------
37,901 39,785 107,147
-------- -------- --------
Deferred:
Federal 10,141 2,884 8,812
State 1,525 1,218 623
-------- -------- --------
11,666 4,102 9,435
-------- -------- --------
Provision for income taxes $ 49,567 $ 43,887 $116,582
-------- -------- --------
-------- -------- --------
</TABLE>
32
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
The difference between the statutory federal income tax rate and the
Company's effective income tax rate is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
In Thousands 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.5 2.9 2.9
Other 0.4 0.1 0.6
---- ---- ----
Effective income tax rate 37.9% 38.0% 38.5%
---- ---- ----
---- ---- ----
</TABLE>
Cash payments for income taxes during 1997, 1996 and 1995 were
$38,124,000, $28,685,000 and $133,170,000, respectively.
The Company's net deferred tax liability consisted of the following
major items:
<TABLE>
<CAPTION>
December 31,
In Thousands 1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Receivables $ 858 $ 715
Inventories 1,691 1,323
Vacation accruals 1,393 1,315
Other 3,467 3,057
Total deferred tax assets 7,409 6,410
-------- --------
Deferred tax liability:
Property, plant and equipment (65,520) (52,855)
-------- --------
Net deferred tax liability $(58,111) $(46,445)
-------- --------
-------- --------
</TABLE>
The Company has determined, based on its history of operating earnings
and expectations for the future, that it is more likely than not that future
taxable income will be sufficient to fully utilize the deferred tax assets at
December 31, 1997.
11. Commitments and Contingencies
Leases - The Company leases railcars, storage terminals, computer
equipment, manufacturing facilities and warehouse and office space under
noncancelable operating leases with varying maturities through the year 2010.
Future minimum payments under these noncancelable operating leases as of
December 31, 1997 were $24,045,000 for 1998, $20,916,000 for 1999, $15,347,000
for 2000, $4,952,000 for 2001, $4,006,000 for 2002 and $17,664,000 thereafter.
Total lease expense was approximately $16,414,000, $13,275,000 and $12,465,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
In October 1997, the Company began making lease payments under an
operating lease agreement for a 250-megawatt cogeneration facility at the
Company's Plaquemine, Louisiana complex. The total cost of assets covered by the
lease is $115,000,000. The initial lease term is three years with 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 if the then estimated fair value of the facility is not
recovered by the owner via sale to a third party.
Purchase Commitments - The Company has certain take-or-pay raw material
purchase agreements with various terms extending through 2014. The aggregate
amount of the fixed and determinable portion of the required payments under
these agreements as of December 31, 1997 was $7,143,000 for each of the years
1998 through 2002 and $40,364,000 thereafter.
33
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Legal Proceedings - The Company is a party to numerous individual and
several class-action lawsuits filed against the Company, among other parties,
arising out of an incident that occurred in September 1996 in which workers were
exposed to a chemical substance on the Company's premises in Plaquemine,
Louisiana. The substance was later identified to be a form of mustard agent, a
chemical which is not manufactured as part of the Company's ordinary operations
and which apparently resulted from the unexpected introduction into the
Company's feedstocks of one or more impurities from sources unknown.
The lawsuits are pending in the 18th Judicial District, Iberville
Parish. The Company has filed answers in the cases in which it has been served.
Discovery also has been served in the cases. All of the actions claim one or
more forms of compensable damages, including past and future lost wages and past
and future physical and emotional pain and suffering.
At the present time, the Company does not know, and it is not possible
to estimate, the number of persons making claims, the merit of any such claims,
the nature or extent of damages that will be sought, the defenses available to
the Company, or the liability of other persons, or to make a factual or legal
assessment of the Company's ultimate exposure. Notwithstanding the foregoing,
the Company believes it has meritorious defenses to the claims asserted and
intends to assert and pursue those defenses vigorously.
In addition, the Company is subject to other claims and legal actions
that arise in the ordinary course of business. Management believes that the
ultimate liability, if any, with respect to these other claims and legal
actions, will not have a material effect on the financial position or on results
of operations of the Company.
12. Significant Customer and Export Sales
Significant Customer - The Company has supply contracts, subject to
certain limitations, for a substantial percentage of Georgia-Pacific
Corporation's requirements for certain chemicals at prices approximating market.
These supply contracts have various expiration dates (depending on the product)
from 1998 through 2003 and may be extended year-to-year upon expiration. The
sales to Georgia-Pacific Corporation under these supply contracts for the years
ended December 31, 1997, 1996 and 1995 amounted to approximately 12 percent, 15
percent and 14 percent of net sales, respectively. Receivables outstanding from
these sales were $11,807,000 and $11,226,000 at December 31, 1997 and 1996,
respectively.
Export Sales - Export sales were approximately 15 percent, 12 percent and 15
percent of the Company's net sales for the years ended December 31, 1997, 1996
and 1995, respectively. The principal international markets served by the
Company include Canada, Mexico, Latin America, Europe and Asia.
13. Derivative Financial Instruments and Fair Value of Financial Instruments
The Company entered into two interest rate swap agreements in June 1995, for a
total notional amount of $100,000,000 maturing in June 2000, to fix the interest
rate on the Term Loan. The fixed interest rate paid on the two interest rate
swap agreements was 6.31 percent, while the floating interest rate received
averaged 5.68 percent and 5.57 percent for 1997 and 1996, respectively. The
Company also entered into an interest rate swap agreement for a notional amount
of $100,000,000 as a cash flow hedge for the cogeneration facility operating
lease agreement. This interest rate swap agreement became effective in August
1997 and will mature in August 2002 with a fixed interest rate to be paid of
5.88 percent. The floating interest rate received averaged 5.73 percent for
1997.
34
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
Debt - The fair value of the Notes was based on quoted market prices. The
carrying amounts of the revolving credit loan and the Term Loan were assumed to
approximate fair value due to the floating market interest rates to which the
respective agreements are subject.
Interest Rate Swap Agreements - The fair value of the interest rate swap
agreements was estimated by obtaining quotes from brokers.
The estimated fair value of financial instruments was as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1996
------------------- --------------------
Carrying Fair Carrying Fair
In Thousands Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt:
Revolving credit loan $155,000 $155,000 $167,000 $167,000
Term Loan 100,000 100,000 100,000 100,000
7 5/8% Notes due 2005 100,000 102,419 100,000 100,144
Other 38,040 38,040 28,600 28,600
Interest rate swap
agreements in receivable
(payable) position -- (971) -- 2,741
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
14. Earnings Per Share
Income available to common stockholders, the numerator in the basic and diluted
earnings per share computations, is $81,201,000, $71,620,000 and $186,494,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
The following table reconciles the denominator for the basic and
diluted earnings per share computations shown on the consolidated statements of
income:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
In Thousands 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Weighted average common shares 33,629 35,759 38,728
Plus incremental shares from
assumed conversions:
Options 289 446 674
Employee stock purchase plan rights 29 43 26
------ ------ ------
Weighted average common shares and equivalents 33,947 36,248 39,428
------ ------ ------
------ ------ ------
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
15. Dispositions
In July 1997, the Company completed the sale of certain oil and gas properties
representing substantially all of the assets of Great River Oil & Gas
Corporation, a subsidiary of the Company. Net proceeds from this sale were
$16,477,000, on which the Company recorded a pretax gain of $8,600,000
($5,300,000, net of income taxes). Historically, the operating results for this
subsidiary have not been material to the financial statements of the Company.
In April 1996, the Company completed the sale of its Delaware City,
Delaware facility, and its emulsion resin business. The majority of the Delaware
City vinyl compound production has been transferred to the Company's vinyl
compound plant in Gallman, Mississippi. The proceeds from the sale approximated
the net book value of the disposed assets.
16. Quarterly Financial Data (Unaudited)
The following table sets forth certain quarterly financial data for the periods
indicated:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- -----------------------------------------
In Thousands, Except First Second Third Fourth First Second Third Fourth
Per Share Data Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $239,225 $258,208 $235,915 $232,302 $208,036 $231,387 $237,946 $218,817
Gross margin 35,765 51,778 53,640 51,338 40,918 47,093 47,578 42,270
Operating income 24,667 39,904 42,304 39,926 30,110 36,167 37,601 32,395(2)
Net income 12,061 20,580 27,724(1) 20,836 15,806 19,286 19,871 16,657
Basic earnings per share 0.35 0.61 0.83 0.63 0.43 0.53 0.57 0.48
Diluted earnings per share 0.35 0.60 0.83 0.63 0.42 0.52 0.56 0.48
Dividends per common share 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
(1) Includes a pretax gain of $8,600,000 from the sale of certain oil and gas
properties, which resulted in an increase to net income of $5,300,000.
(2) Includes the reversal of certain environmental tax liabilities accrued
during 1996 for $4,000,000 and the recording of a favorable insurance settlement
claim for $3,200,000.
36
<PAGE>
REPORT OF MANAGEMENT
GEORGIA GULF CORPORATION AND SUBSIDIARIES
To the Stockholders
of Georgia Gulf Corporation:
The accompanying consolidated financial statements of Georgia Gulf Corporation
and subsidiaries are the responsibility of and have been prepared by the Company
in conformity with generally accepted accounting principles. The financial
information displayed in other sections of this 1997 Annual Report is consistent
with the consolidated financial statements.
The integrity and the objectivity of the data in these consolidated
financial statements, including estimates and judgments relating to matters not
concluded by year-end, are the responsibility of management. The Company and its
subsidiaries maintain accounting systems and related internal controls,
including a budgeting and reporting system, to provide reasonable assurance that
financial records are reliable for preparing the consolidated financial
statements and for maintaining accountability for assets. The system of internal
controls also provides reasonable assurance that assets are safeguarded against
loss from unauthorized use or disposition and that transactions are executed in
accordance with management's authorization. Periodic reviews of the systems and
of internal controls are performed by the Company's internal audit department.
The Audit Committee of the Board of Directors, composed solely of
outside directors who are not officers or employees of the Company, has the
responsibility of meeting periodically with management, the Company's internal
auditors and Arthur Andersen LLP, the Company's independent public accountants
that are approved by the stockholders, to review the scope and results of the
annual audit and the general overall effectiveness of the internal accounting
control system. The independent public accountants and the Company's internal
auditors have direct access to the Audit Committee, with or without the presence
of management, to discuss the scope and results of their audits, as well as any
comments they may have related to the adequacy of the internal accounting
control system and the quality of financial reporting.
Richard B. Marchese
Vice President Finance,
Chief Financial Officer and Treasurer
February 12, 1998
REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of Georgia Gulf Corporation:
We have audited the accompanying consolidated balance sheets of Georgia Gulf
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Georgia Gulf
Corporation and subsidiaries as of December 31, 1997 and 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Atlanta, Georgia
February 12, 1998
37
<PAGE>
DIRECTORS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
James R. Kuse
Chairman of the Board, Retired Chief Executive Officer
Georgia Gulf Corporation
Jerry R. Satrum
Chief Executive Officer
Georgia Gulf Corporation
Edward A. Schmitt(1)
President and Chief Operating Officer
Georgia Gulf Corporation
John D. Bryan
Retired Vice President Operations
Georgia Gulf Corporation
Dennis M. Chorba
Retired Vice President, General Counsel
Georgia Gulf Corporation
Alfred C. Eckert III*
President
Greenwich Street Capital Partners, Inc.
Robert E. Flowerree*
Retired Chairman of the Board
Georgia-Pacific Corporation
Holcombe T. Green, Jr.*(2)
Chairman and Chief Executive Officer
Westpoint Stevens, Inc.
Edward S. Smith*
Retired Chairman and Chief Executive Officer
Omark Industries
- -------------------
* Audit Committee
(1) Elected to Board of Directors effective February 10, 1998
(2) Resigned from Board of Directors effective February 10, 1998
OFFICERS
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Jerry R. Satrum
Chief Executive Officer
Edward A. Schmitt
President and Chief Operating Officer
Richard B. Marchese
Vice President Finance, Chief Financial Officer and Treasurer
Joel I. Beerman
Vice President, General Counsel and Secretary
Gary L. Elliott
Vice President Marketing and Sales, Commodity Chemicals Group
Mark J. Seal
Vice President, Polymer Group
Thomas G. Swanson
Vice President Supply and Corporate Development
38
<PAGE>
CORPORATE INFORMATION
GEORGIA GULF CORPORATION AND SUBSIDIARIES
Corporate Headquarters
400 Perimeter Center Terrace
Suite 595
Atlanta, Georgia 30346
(770) 395-4500
Auditors
Arthur Andersen LLP
Atlanta, Georgia
Transfer Agent and Registrar
Wachovia Bank of North Carolina, N.A.
P.O. Box 3001
Winston-Salem, North Carolina 27102
1-800-633-4236
Changes of address, questions regarding lost certificates, requests for changes
in registration and other general correspondence concerning stockholder accounts
should be directed to the Transfer Agent.
Annual Meeting
The Annual Meeting of Stockholders of Georgia Gulf Corporation will be held in
the Conference Center of the South Terraces Building,115 Perimeter Center Place,
Atlanta, Georgia, on Tuesday, May 19, 1998 at 1:30 p.m. Stockholders are
cordially invited to attend.
Dividend Policy
Dividends on Georgia Gulf Corporation's common stock are usually declared
quarterly by the Board of Directors and paid shortly thereafter.
Annual Report on Form 10-K
Form 10-K is a report filed annually with the Securities and Exchange
Commission. Much of the information contained therein is included in this Annual
Report, though the Form 10-K includes some supplementary material.
Upon receipt of a written request from a stockholder to the Investor
Relations Department, Georgia Gulf Corporation, P.O. Box 105197, Atlanta,
Georgia 30348, Georgia Gulf will furnish a copy of its Form 10-K, excluding
exhibits, without charge.
Common Stock Data
Georgia Gulf Corporation's common stock is listed on the New York Stock Exchange
under the symbol "GGC."
At December 31, 1997, there were 1,202 common stockholders of record.
The following table sets forth the New York Stock Exchange high, low
and closing stock prices for the Company's common stock for the years 1997 and
1996.
<TABLE>
<CAPTION>
In Dollars High Low Close
------ ------ ------
<S> <C> <C> <C>
1997
First quarter 29 24 3/4 25 1/4
Second quarter 29 1/2 23 29 1/16
Third quarter 33 1/2 27 3/4 30 5/8
Fourth quarter 32 3/8 28 1/2 30 5/8
1996
First quarter 39 1/2 28 1/4 37 1/2
Second quarter 38 3/4 28 1/2 29 1/4
Third quarter 32 7/8 27 7/8 29 7/8
Fourth quarter 30 1/4 25 3/4 26 7/8
------ ------ ------
------ ------ ------
</TABLE>
39
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
GG Terminal Management Corporation
Georgia Gulf Export Corporation
Great River Oil & Gas Corporation
GGRC Corp.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in this Form
10-K, into the Company's previously filed Registration Statements on Form S-8,
file no. 33-14696, file no. 33-27365, file no. 33-40952, file no. 33-42008 and
file no. 33-64749.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 18, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1998
<CASH> 1,621
<SECURITIES> 0
<RECEIVABLES> 69,953
<ALLOWANCES> 2,400
<INVENTORY> 92,921
<CURRENT-ASSETS> 176,012
<PP&E> 650,968
<DEPRECIATION> 240,108
<TOTAL-ASSETS> 612,703
<CURRENT-LIABILITIES> 118,540
<BONDS> 393,040
0
0
<COMMON> 328
<OTHER-SE> 35,275
<TOTAL-LIABILITY-AND-EQUITY> 612,703
<SALES> 965,650
<TOTAL-REVENUES> 965,650
<CGS> 773,129
<TOTAL-COSTS> 773,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 184
<INTEREST-EXPENSE> 24,693
<INCOME-PRETAX> 130,768
<INCOME-TAX> 49,567
<INCOME-CONTINUING> 81,201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,201
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.39
</TABLE>
