<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
<TABLE>
<C> <S>
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9753
------------------------
GEORGIA GULF CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 58-1563799
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 PERIMETER CENTER TERRACE, 30346
SUITE 595, ATLANTA, GEORGIA (Zip code)
(Address of principal executive offices)
</TABLE>
------------------------
Registrant's telephone number, including area code: (770) 395-4500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
OUTSTANDING AS OF
CLASS NOVEMBER 9, 2000
----- -----------------
<S> <C>
Common Stock, $0.01 par value............................. 31,477,327 shares
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBERS
-------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of 1
September 30, 2000
and December 31, 1999.................................
Condensed Consolidated Statements of Income for the 2
Three and Nine Months Ended September 30, 2000 and
1999..................................................
Condensed Consolidated Statements of Cash Flows for the 3
Nine Months Ended September 30, 2000 and 1999.........
Notes to Condensed Consolidated Financial Statements as 4-12
of September 30, 2000.................................
Item 2. Management's Discussion and Analysis of Financial 13-17
Condition and Results of Operations.....................
Item 3. Quantitative and Qualitative Disclosures About 17
Market Risk.............................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings and Environmental Matters....... 18
Item 6. Exhibits and Reports on Form 8-K.................. 18
SIGNATURES.................................................. 19
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 824 $ 4,424
Receivables................................................. 141,731 164,376
Inventories................................................. 132,758 112,844
Prepaid expenses............................................ 7,271 5,440
Deferred income taxes....................................... 6,172 6,172
----------- -----------
Total current assets...................................... 288,756 293,256
----------- -----------
Property, plant and equipment, at cost...................... 1,000,895 985,825
Less accumulated depreciation............................. 362,550 314,275
----------- -----------
Property, plant and equipment, net...................... 638,345 671,550
----------- -----------
Goodwill.................................................... 80,817 82,676
Other assets................................................ 48,826 50,083
Net assets of discontinued operation........................ -- 443
----------- -----------
Total assets................................................ $ 1,056,744 $ 1,098,008
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt........................... $ 12,950 $ 22,000
Accounts payable............................................ 141,767 143,898
Interest payable............................................ 12,904 5,926
Accrued income taxes........................................ -- 494
Accrued compensation........................................ 10,237 7,682
Other accrued liabilities................................... 12,934 17,632
----------- -----------
Total current liabilities................................. 190,792 197,632
----------- -----------
Long-term debt, net of current portion...................... 634,107 749,194
----------- -----------
Deferred income taxes....................................... 107,996 93,949
----------- -----------
Stockholders' equity
Common stock--$0.01 par value............................. 315 313
Additional paid-in capital................................ 7,719 5,250
Retained earnings......................................... 115,815 51,670
----------- -----------
Total stockholders' equity.............................. 123,849 57,233
----------- -----------
Total liabilities and stockholders' equity.................. $ 1,056,744 $ 1,098,088
=========== ===========
Common shares outstanding................................... 31,477,327 31,290,862
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................. $ 352,728 $ 213,277 $ 1,169,805 $ 573,253
----------- ----------- ----------- -----------
Operating costs and expenses
Cost of sales........................... 313,864 175,302 968,644 487,122
Selling and administrative.............. 10,513 9,288 35,545 29,206
----------- ----------- ----------- -----------
Total operating costs and expenses.... 324,377 184,590 1,004,189 516,328
----------- ----------- ----------- -----------
Operating income.......................... 28,351 28,687 165,616 56,925
Other expense
Interest, net........................... 16,646 7,037 53,606 21,719
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes............................ 11,705 21,650 112,010 35,206
Provision for income taxes................ 4,214 7,903 40,330 12,850
----------- ----------- ----------- -----------
Income from continuing operations......... 7,491 13,747 71,680 22,356
Discontinued operation
Loss from discontinued operation, net... -- (520) -- (2,525)
Loss on disposal of discontinued
operation, net........................ -- (7,631) -- (7,631)
----------- ----------- ----------- -----------
Net income................................ $ 7,491 $ 5,596 $ 71,680 $ 12,200
=========== =========== =========== ===========
Earnings / (loss) per share:
Basic
Continuing operations................. $ 0.24 $ 0.44 $ 2.28 $ 0.72
Discontinued operation................ $ -- $ (0.26) $ -- $ (0.33)
----------- ----------- ----------- -----------
$ 0.24 $ 0.18 $ 2.28 $ 0.39
=========== =========== =========== ===========
Weighted average common shares-basic.... 31,484,399 30,936,764 31,383,914 30,919,368
=========== =========== =========== ===========
Diluted
Continuing operations................. $ 0.24 $ 0.44 $ 2.27 $ 0.72
Discontinued operation................ -- (0.26) -- (0.33)
----------- ----------- ----------- -----------
$ 0.24 $ 0.18 $ 2.27 $ 0.39
=========== =========== =========== ===========
Weighted average common
shares-diluted........................ 31,585,437 31,068,452 31,529,858 31,004,457
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 71,680 $ 12,200
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 56,162 34,392
Provision for deferred income taxes..................... 14,047 1,196
Loss on disposal of discontinued operation, net......... -- 7,631
Loss from discontinued operation, net................... -- 2,525
Change in operating assets, liabilities and other....... (856) 24,053
--------- --------
Net cash provided by continuing operations................ 141,033 81,997
Net cash provided by (used in) discontinued operation..... 443 (369)
--------- --------
Net cash provided by operating activities................. 141,476 81,628
--------- --------
Cash flows from financing activities:
Long-term debt proceeds................................. 41,538 115,000
Long-term debt payments................................. (165,675) (177,950)
Proceeds from issuance of common stock.................. 1,787 471
Purchase and retirement of common stock................. (121) --
Dividends paid.......................................... (7,535) (7,422)
--------- --------
Net cash used in financing activities..................... (130,006) (69,901)
--------- --------
Cash flows from investing activities:
Capital expenditures.................................... (15,070) (9,758)
--------- --------
Net change in cash and cash equivalents................... (3,600) 1,969
Cash and cash equivalents at beginning of period.......... 4,424 1,244
--------- --------
Cash and cash equivalents at end of period................ $ 824 $ 3,213
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In our opinion,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. For further information, refer to
our consolidated financial statements and footnotes thereto included in our
Annual Report on Form 10-K for the year ended December 31, 1999.
Our operating results for the three- and nine-month periods ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
NOTE 2: NEW ACCOUNTING PRONOUNCEMENT
During June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value and that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows derivative gains and losses to offset
related results on the hedged item in the income statement, and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. As amended, SFAS No. 133 is
effective for fiscal quarters of all fiscal years beginning after June 15, 2000,
although earlier adoption is permitted. SFAS No. 133 cannot be applied
retroactively. We believe the only derivative instruments or hedging activities
we have that are subject to SFAS No. 133 are the interest rate swap agreements
disclosed in Note 7. At September 30, 2000, these swaps had a fair market value
of $1,681,000 in our favor. Presently, we are evaluating our options with
regards to these swap agreements which may include terminating these agreements
prior to the effective date of SFAS No. 133.
NOTE 3: ACQUISITION
On November 12, 1999, we completed the acquisition of the assets of the
vinyls business of CONDEA Vista Company. The purchase included substantially all
of the assets and net working capital of the vinyls business as of the date of
acquisition. The acquisition was accounted for as a purchase, and the results of
the vinyls business's operations have been included in our consolidated
financial statements from the date of acquisition. The initial purchase price,
including related fees and expenses, consisted of $263,000,000 of cash and the
issuance of a $10,000,000 two-year, non-interest-bearing note payable to CONDEA
Vista Company. The note was recorded at its net present value of $7,750,000 at
the date of acquisition. The initial purchase price was subject to an adjustment
for actual working capital acquired. During the second quarter of 2000, we paid
CONDEA Vista Company approximately $16,286,000 representing the adjustment for
working capital. The purchase price approximated the fair market value of the
net assets acquired.
NOTE 4: DISCONTINUED OPERATION
On September 2, 1999, we announced our decision to exit the methanol
business at the end of 1999. In connection with the discontinuance of the
methanol business, we incurred a one-time charge
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4: DISCONTINUED OPERATION (CONTINUED)
of $7,631,000, net of income tax benefits, related to the write-off of the
methanol plant assets, net of expected proceeds, and an accrual for estimated
losses during the phase-out period. The disposition of the methanol operation
represented the disposal of a business segment under Accounting Principles Board
("APB") Opinion No. 30. Accordingly, results of the methanol operation were
classified as discontinued, and prior periods were restated, including the
reallocation of fixed overhead charges to other business segments. For business
segment reporting purposes, the methanol business results were previously
classified as the segment "Gas Chemicals."
Net sales and income from the discontinued operation were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ ------------------
IN THOUSANDS
<S> <C> <C>
Net sales................................ $ 9,710 $ 26,181
======== ========
Pretax loss from discontinued
operation.............................. $ (819) $ (3,976)
Loss on disposal of business segment..... (12,017) (12,017)
Income tax benefit....................... 4,685 5,837
-------- --------
Net loss from discontinued operation..... $ (8,151) $(10,156)
======== ========
</TABLE>
Assets and liabilities of the discontinued operation were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
IN THOUSANDS
<S> <C>
Current assets.............................................. $ 3,553
Current liabilities......................................... (3,110)
-------
Net assets of discontinued operation........................ $ 443
=======
</TABLE>
NOTE 5: RECEIVABLES
In May 2000, we amended our receivables transfer agreement pursuant to which
we sell a percentage ownership interest in a defined pool of our trade
receivables. As a result of this amendment, we increased the amount of
participating interest in new receivables we sell from $50,000,000 to
$75,000,000.
NOTE 6: INVENTORIES
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
IN THOUSANDS
<S> <C> <C>
Raw materials and supplies.......................... $ 51,861 $ 48,868
Finished goods...................................... 80,897 63,976
-------- --------
$132,758 $112,844
======== ========
</TABLE>
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS
We have two interest rate swap agreements for a total notional amount of
$100,000,000 maturing in June 2002. We also have an interest rate swap agreement
for a notional amount of $100,000,000 maturing August 2002. We have designated
all of our interest rate swaps as hedges against our senior credit facility
floating rate debt.
We do not use derivatives for trading purposes. Interest rate swap
agreements, a form of derivative, are used to manage interest costs on certain
portions of our long-term debt. These financial statements do not reflect
temporary market gains and losses on derivative financial instruments. Amounts
paid or received on the interest rate swap agreements are recorded to interest
expense as incurred. As of September 30, 2000, and December 31, 1999, interest
rate swap agreements were the only form of derivative financial instruments
outstanding. The fair values of these swap agreements as of September 30, 2000
and December 31, 1999 were $1,681,000 and $3,405,000 (in our favor),
respectively.
NOTE 8: EARNINGS PER SHARE
There are no adjustments to "Net income" or "Income from continuing
operations" for the diluted earnings per share computations.
The following table reconciles the denominator for the basic and diluted
earnings per share computations shown on the condensed consolidated statements
of income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
IN THOUSANDS
<S> <C> <C> <C> <C>
Weighted average common shares--basic...... 31,484 30,936 31,384 30,919
Plus incremental shares from assumed
conversions:
Options.................................. -- 99 -- 61
Employee stock purchase plan rights...... 101 33 146 24
------ ------ ------ ------
Weighted average common shares--diluted.... 31,585 31,068 31,530 31,004
====== ====== ====== ======
</TABLE>
NOTE 9: SEGMENT INFORMATION
We have identified two reportable segments through which we conduct our
operating activities: chlorovinyls and aromatics. These two segments reflect the
organization which we use for internal reporting. The chlorovinyls segment is a
highly integrated chain of products which includes chlorine, caustic soda, vinyl
chloride monomer and vinyl resins and compounds. The aromatics segment is also
vertically integrated and includes cumene and the co-products phenol and
acetone. A third product segment, gas chemicals, which included methanol, was
discontinued in the third quarter of 1999. See Note 4 for a discussion of the
discontinuance of our methanol operation.
Earnings of industry segments exclude interest income and expense,
unallocated corporate expenses and general plant services, provision for income
taxes, and income and expense items
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: SEGMENT INFORMATION (CONTINUED)
reflected as "other income (expense)" on our consolidated statements of income.
Intersegment sales and transfers are insignificant.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
IN THOUSANDS
<S> <C> <C> <C> <C>
Segment net sales:
Chlorovinyls............................ $275,587 $155,121 $ 943,525 $408,391
Aromatics............................... 77,141 58,156 226,280 164,862
-------- -------- ---------- --------
Net sales................................. $352,728 $213,277 $1,169,805 $573,253
======== ======== ========== ========
Segment operating income:
Chlorovinyls............................ $ 33,055 $ 28,414 $ 187,802 $ 52,796
Aromatics............................... (1,285) 3,682 (10,668) 12,899
Corporate and general plant services.... (3,419) (3,409) (11,518) (8,770)
-------- -------- ---------- --------
Total operating income.................... $ 28,351 $ 28,687 $ 165,616 $ 56,925
======== ======== ========== ========
</TABLE>
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION
Our payment obligations under our 10 3/8% senior subordinated notes are
guaranteed by GG Terminal Management Corporation, Great River Oil & Gas
Corporation, North American Plastics, LLC, Georgia Gulf Lake Charles, LLC and
Georgia Gulf Chemicals & Vinyls, LLC, some of our wholly owned subsidiaries (the
"Guarantor Subsidiaries"). The guarantees are full, unconditional and joint and
several. The following unaudited condensed consolidating balance sheets,
statements of income and statements of cash flows present the financial
statements of the parent company, and the combined financial statements of our
Guarantor Subsidiaries and our remaining subsidiaries (the "Non-Guarantor
Subsidiaries").
In connection with the acquisition of the vinyls business from CONDEA Vista
Company on November 12, 1999, we essentially became a holding company by
transferring our operating assets and employees to our wholly owned subsidiary,
Georgia Gulf Chemicals & Vinyls LLC. Provisions in our senior credit facility
limit payment of dividends, distributions, loans and advances to us by our
subsidiaries.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 646 $ 167 $ 11 $ -- $ 824
Receivables....................... 53,527 288,548 60,088 (260,432) 141,731
Inventories....................... -- 132,758 -- -- 132,758
Prepaid expenses.................. -- 7,014 257 -- 7,271
Deferred income taxes............. -- 6,172 -- -- 6,172
-------- ---------- ------- --------- ----------
Total current assets............ 54,173 434,659 60,356 (260,432) 288,756
-------- ---------- ------- --------- ----------
Plant, property and equipment, at
cost............................ 1,418 999,477 -- -- 1,000,895
Less accumulated depreciation... 1,048 361,502 -- -- 362,550
-------- ---------- ------- --------- ----------
Plant, property and equipment,
net......................... 370 637,975 -- -- 638,345
-------- ---------- ------- --------- ----------
Goodwill.......................... -- 80,817 -- -- 80,817
Other assets...................... 7,590 41,157 79 -- 48,826
Investment in subsidiaries........ 604,739 57,094 -- (661,833) --
-------- ---------- ------- --------- ----------
Total assets...................... $666,872 $1,251,702 $60,435 $(922,265) $1,056,744
======== ========== ======= ========= ==========
Current portion of long-term
debt............................ $ -- $ 12,950 $ -- $ -- $ 12,950
Account payable................... 196,779 202,289 3,131 (260,432) 141,767
Interest payable.................. 12,512 392 -- -- 12,904
Accrued compensation.............. -- 10,237 -- -- 10,237
Other accrued liabilities......... -- 12,138 796 -- 12,934
-------- ---------- ------- --------- ----------
Total current liabilities....... 209,291 238,006 3,927 (260,432) 190,792
-------- ---------- ------- --------- ----------
Long-term debt.................... 333,732 300,375 -- -- 634,107
-------- ---------- ------- --------- ----------
Deferred income taxes............. -- 107,996 -- -- 107,996
-------- ---------- ------- --------- ----------
Stockholder's equity
Common Stock.................... 315 6 20 (26) 315
Additional paid-in-capital...... 7,719 467,322 55,587 (522,909) 7,719
Retained earnings............... 115,815 137,997 901 (138,898) 115,815
-------- ---------- ------- --------- ----------
Total stockholders' equity...... 123,849 605,325 56,508 (661,833) 123,849
-------- ---------- ------- --------- ----------
Total liabilities and
stockholders' equity............ $666,872 $1,251,702 $60,435 $(922,265) $1,056,744
======== ========== ======= ========= ==========
</TABLE>
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 4,151 $ 252 $ 21 $ -- $ 4,424
Receivables....................... 70,008 239,225 125,453 (270,310) 164,376
Inventories....................... -- 112,844 -- -- 112,844
Prepaid expenses.................. -- 4,786 654 -- 5,440
Deferred income taxes............. -- 6,172 -- -- 6,172
-------- ---------- -------- --------- ----------
Total current assets............ 74,159 363,279 126,128 (270,310) 293,256
-------- ---------- -------- --------- ----------
Plant, property and equipment, at
cost............................ -- 985,825 -- -- 985,825
Less accumulated depreciation... -- 314,275 -- -- 314,275
-------- ---------- -------- --------- ----------
Plant, property and equipment,
net........................... -- 671,550 -- -- 671,550
-------- ---------- -------- --------- ----------
Goodwill.......................... -- 82,676 -- -- 82,676
Other assets...................... 7,906 42,128 49 -- 50,083
Investment in subsidiaries........ 513,000 55,588 -- (568,588) --
Net assets of discontinued
operation....................... -- 443 -- -- 443
-------- ---------- -------- --------- ----------
Total assets...................... $595,065 $1,215,664 $126,177 $(838,898) $1,098,008
======== ========== ======== ========= ==========
Current portion of long-term
debt............................ $ -- $ 22,000 $ -- $ -- $ 22,000
Accounts payable.................. 200,302 149,019 64,887 (270,310) 143,898
Interest payable.................. 4,336 1,590 -- -- 5,926
Accrued compensation.............. -- 7,682 -- -- 7,682
Other accrued liabilities......... -- 14,046 4,080 -- 18,126
-------- ---------- -------- --------- ----------
Total current liabilities....... 204,638 194,337 68,967 (270,310) 197,632
-------- ---------- -------- --------- ----------
Long-term debt, net of current
portion......................... 333,194 416,000 -- -- 749,194
-------- ---------- -------- --------- ----------
Deferred income taxes............. -- 93,949 -- -- 93,949
-------- ---------- -------- --------- ----------
Stockholders' equity
Common stock.................... 313 6 20 (26) 313
Additional paid-in capital...... 5,250 467,322 55,587 (522,909) 5,250
Retained earnings............... 51,670 44,050 1,603 (45,653) 51,670
-------- ---------- -------- --------- ----------
Total stockholders' equity...... 57,233 511,378 57,210 (568,588) 57,233
-------- ---------- -------- --------- ----------
Total liabilities and
stockholders' equity............ $595,065 $1,215,664 $126,177 $(838,898) $1,098,008
======== ========== ======== ========= ==========
</TABLE>
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $ -- $1,170,242 $5,988 $ (6,425) $1,169,805
Operating costs and expenses
Cost of sales................... -- 968,644 -- -- 968,644
Selling and administrative...... 4,678 33,649 3,643 (6,425) 35,545
-------- ---------- ------ -------- ----------
Total operating costs and
expenses........................ 4,678 1,002,293 3,643 (6,425) 1,004,189
-------- ---------- ------ -------- ----------
Operating income.................. (4,678) 167,949 2,345 -- 165,616
Other income (expense)
Interest expense, net........... (24,394) (29,212) -- -- (53,606)
Equity in income of
subsidiaries.................. 93,939 1,506 -- (95,445) --
-------- ---------- ------ -------- ----------
Income before taxes............... 64,867 140,243 2,345 (95,445) 112,010
Provision for income taxes........ (6,813) 46,296 847 -- 40,330
-------- ---------- ------ -------- ----------
Net income........................ $ 71,680 $ 93,947 $1,498 $(95,445) $ 71,680
======== ========== ====== ======== ==========
</TABLE>
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues........................... $506,672 $66,806 $2,558 $ (2,783) $ 573,253
Operating costs and expenses
Cost of sales.................... 438,622 48,500 -- -- 487,122
Selling and administrative....... 27,980 1,737 2,272 (2,783) 29,206
-------- ------- ------ -------- ----------
Total operating costs and
expenses......................... 466,602 50,237 2,272 (2,783) 516,328
-------- ------- ------ -------- ----------
Operating income................... 40,070 16,569 286 -- 56,925
Other income (expense)
Interest expense, net............ (21,719) -- -- -- (21,719)
Equity in income of
subsidiaries..................... 12,934 -- -- (12,934) --
-------- ------- ------ -------- ----------
Income from continuing operations
before taxes..................... 31,285 16,569 286 (12,934) 35,206
Provision for income taxes......... 8,929 3,921 -- -- 12,850
-------- ------- ------ -------- ----------
Income from continuing
operations....................... 22,356 12,648 286 (12,934) 22,356
Loss from discontinued operation,
net.............................. (2,525) -- -- -- (2,525)
Loss on disposal of discontinued
operation, net................... (7,631) -- -- -- (7,631)
-------- ------- ------ -------- ----------
Net income......................... $ 12,200 $12,648 $ 286 $(12,934) $ 12,200
======== ======= ====== ======== ==========
</TABLE>
10
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $71,680 $ 93,947 $ 1,498 $(95,445) $ 71,680
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization................ 917 55,163 82 -- 56,162
Equity in net income of
subsidiaries................ (93,939) (1,506) -- 95,445 --
Change in operating assets,
liabilities and other....... 21,886 (9,305) 610 -- 13,191
------- --------- ------- -------- ---------
Net cash (used in) provided by
continuing operations........... 544 138,299 2,190 -- 141,033
Net cash used in discontinued
operation....................... -- 443 -- -- 443
------- --------- ------- -------- ---------
Net cash (used in) provided by
operating activities.............. 544 138,742 2,190 -- 141,476
------- --------- ------- -------- ---------
Cash flows from financing
activities:
Long-term debt proceeds........... -- 41,538 -- -- 41,538
Long-term debt payments........... -- (165,675) -- -- (165,675)
Purchase and retirement of common
stock........................... (121) -- -- -- (121)
Proceeds from issuance of common
stock........................... 1,787 -- -- -- 1,787
Dividends paid.................... (7,535) -- (2,200) 2,200 (7,535)
------- --------- ------- -------- ---------
(5,869) (124,137) (2,200) 2,200 (130,006)
------- --------- ------- -------- ---------
Cash flows from investing
activities:
Capital expenditures.............. (380) (14,690) -- -- (15,070)
Dividends received from
subsidiary...................... 2,200 -- -- (2,200) --
------- --------- ------- -------- ---------
Net cash flow used in investing
activities........................ 1,820 (14,690) -- (2,200) (15,070)
------- --------- ------- -------- ---------
Net change in cash and cash
equivalents....................... (3,505) (85) (10) -- (3,600)
Cash and cash equivalents at
beginning of period............... 4,151 252 21 -- 4,424
------- --------- ------- -------- ---------
Cash and cash equivalents at end of
period............................ $ 646 $ 167 $ 11 $ -- $ 824
======= ========= ======= ======== =========
</TABLE>
11
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10: SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $ 12,200 $ 12,648 $ 286 $(12,934) $ 12,200
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization.............. 33,904 488 -- -- 34,392
Loss on discontinued
operation, net............ 2,525 -- -- -- 2,525
Loss on disposal of
discontinued operation,
net....................... 7,631 -- -- -- 7,631
Equity in net income of
subsidiaries.............. (12,934) -- -- 12,934 --
Change in operating assets,
liabilities and other..... 34,597 (11,748) 2,400 -- 25,249
--------- -------- ------ -------- ---------
Net cash (used in) provided by
continuing operations......... 77,923 1,388 2,686 -- 81,997
Net cash used in discontinued
operation..................... (369) -- -- -- (369)
--------- -------- ------ -------- ---------
Net cash (used in) provided by
operating activities............ 77,554 1,388 2,686 -- 81,628
--------- -------- ------ -------- ---------
Cash flows from financing
activities:
Long-term debt proceeds......... 115,000 -- -- -- 115,000
Long-term debt payments......... (177,450) (500) -- -- (177,950)
Proceeds from issuance of common
stock......................... 471 -- -- -- 471
Dividends paid.................. (7,422) -- (2,694) 2,694 (7,422)
--------- -------- ------ -------- ---------
(69,401) (500) (2,694) 2,694 (69,901)
--------- -------- ------ -------- ---------
Cash flows from investing
activities:
Capital expenditures............ (9,030) (728) -- -- (9,758)
Dividends received from
subsidiary.................... 2,694 -- -- (2,694) --
--------- -------- ------ -------- ---------
Net cash flow used in investing
activities...................... (6,336) (728) -- (2,694) (9,758)
--------- -------- ------ -------- ---------
Net change in cash and cash
equivalents..................... 1,817 160 (8) -- 1,969
Cash and cash equivalents at
beginning of period............. 788 428 28 -- 1,244
--------- -------- ------ -------- ---------
Cash and cash equivalents at end
of period....................... $ 2,605 $ 588 $ 20 $ -- $ 3,213
========= ======== ====== ======== =========
</TABLE>
12
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Georgia Gulf manufactures and markets products through two highly integrated
lines categorized into chlorovinyls and aromatic chemicals. Our chlorovinyl
products include chlorine, caustic soda, sodium chlorate, vinyl chloride monomer
("VCM"), and polyvinyl chloride ("PVC") resins and compounds; our primary
aromatic chemical products include cumene, phenol and acetone. During 1999, we
announced our decision to exit the methanol business and had ceased operations
at the end of the year. Additionally, on November 12, 1999, we completed the
purchase of all the assets of the vinyls business of CONDEA Vista Company. The
vinyls business is an integrated producer of VCM, PVC resins and PVC compounds.
We have included the results of operations for the vinyls business in our
consolidated financial statements since the date of acquisition.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1999
NET SALES. Net sales for the quarter ended September 30, 2000 were
$352.7 million, an increase of 65 percent compared to $213.3 million for the
same period in 1999. This increase was due to 24 percent higher sales volumes,
largely attributable to the acquisition of the vinyls business, and an increase
in the overall average selling price of 33 percent.
Net sales of chlorovinyls for the third quarter of 2000 were
$275.6 million, 78 percent higher than net sales for third quarter of 1999 of
$155.1 million. This increase was the result of a 41 percent increase in sales
volume and a 26 percent increase in sales prices. Sales volume increases were
primarily attributable to the vinyls business acquired during the fourth quarter
of 1999, which nearly doubled our sales of vinyl resins. The higher sales prices
resulted from stronger demand for vinyl products, particularly vinyl resins and
compounds.
Net sales of aromatics for the third quarter of 2000 were $77.1 million, an
increase of 33 percent compared to $58.2 million for the same period in 1999.
This increase was the result of a 44 percent improvement in sales prices, offset
in part by 8 percent lower sales volumes. Sales prices for aromatic products all
increased primarily as a result of continued strong demand.
COST OF SALES. Cost of sales for the third quarter of 2000 was
$313.9 million, an increase of 79 percent compared to $175.3 million for the
third quarter of 1999. The primary reason for this increase was the additional
sales volumes from the acquired vinyls business. Also contributing to the
increase were higher costs for all major raw materials and energy. As a
percentage of sales, cost of sales increased to 89 percent in the third quarter
of 2000 compared to 82 percent in the third quarter of 1999. This increase was
caused by higher raw material and energy costs outpacing overall sales price
increases and also a decrease in overall capacity utilization rates.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $10.5 million for the three months ended September 30, 2000, an increase of
13 percent from the same period in 1999. This increase is primarily attributable
to an increase in the ongoing costs of a revolving trade receivables sales
program after we sold an additional $25.0 million of trade receivables during
the second quarter of 2000. Additionally, we incurred expenses of approximately
$0.5 million to terminate certain contracts for services during the third
quarter of 2000.
OPERATING INCOME. Operating income in the third quarter of 2000 was
$28.4 million, a slight decrease from $28.7 million in the third quarter of
1999. Higher operating income in chlorovinyls was more than offset by decreased
operating income in aromatics. As a percentage of net sales, operating profit
decreased to 8 percent of net sales in the third quarter of 2000 compared to
13 percent for the same period in 1999. This decrease in operating profit as a
percentage of net sales was the result of increases in raw material costs
outpacing overall sales price increases.
13
<PAGE>
Our chlorovinyls operating profit for the third quarter of 2000 was
$33.1 million, an increase of 16 percent compared to $28.4 million for the same
period in 1999. The most significant factors in this increase were higher
selling prices for caustic soda and vinyl resins and compounds, and additional
profits and sales volume from the acquisition, which more than offset higher
energy and raw material costs.
Our aromatics operating loss for the third quarter of 2000 was
$1.3 million, a decrease of 135 percent compared to operating profit of
$3.7 million in the third quarter 1999. Aromatic sales price increases were
unable to compensate for the significantly higher raw material costs of benzene
and propylene.
NET INTEREST EXPENSE. Interest expense increased to $16.6 million for the
quarter ended September 30, 2000 compared with $7.0 million for the same period
in 1999. This increase was primarily attributable to higher debt balances
related to both the acquisition of the vinyls business and the purchase of the
previously leased cogeneration facility during the fourth quarter of 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes was $4.2 million for
the third quarter of 2000 compared to $7.9 million for the third quarter of
1999. Our effective tax rate in the second quarter of 2000 was 36.0 percent
compared to 36.5 percent for the same period in 1999.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
the three months ended September 30, 2000 was $7.5 million, a decrease of
46 percent compared to $13.7 million for the three months ended September 30,
1999. Income from continuing operations decreased as a result of higher interest
expense.
LOSS FROM DISCONTINUED OPERATION. The discontinued methanol operation
incurred a net loss of $0.5 million in the third quarter of 1999. Additionally,
during the third quarter of 1999, we recognized a one-time charge of
$7.6 million, net of taxes, in connection with the write-off of certain methanol
assets and estimated future losses on servicing the remaining methanol contracts
through the end of 1999.
NET INCOME. Net income for the third quarter of 2000 was $7.5 million, a
34 percent increase from $5.6 million in the third quarter of 1999. This
increase was due to the one time charge in 1999 discussed above, offset in part
by higher interest expense in the third quarter of this year.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999
NET SALES. For the nine months ended September 30, 2000, net sales were
$1,169.8 million, an increase of 104 percent compared to $573.3 million for the
same period in 1999. This increase was due to a 41 percent increase in sales
volumes, largely attributable to the acquisition of the vinyls business, and
also a 45 percent higher overall average selling price.
Net sales of chlorovinyls for the first nine months of 2000 were
$943.5 million, 131 percent higher than net sales for first nine months of 1999
of $408.4 million. Sales volume increased by 65 percent primarily as a result of
the vinyls business acquired during the fourth quarter of 1999, which more than
doubled our sales of vinyl resins from the prior year period. Higher average
sales prices of 40 percent resulted from stronger demand for vinyl products,
particularly VCM and vinyl resins and compounds.
Net sales of aromatics for the first nine months of 2000 were
$226.3 million, an increase of 37 percent compared to $164.9 million for the
same period in 1999. This increase was primarily the result of a 40 percent
improvement in sales prices as overall sales volumes remained basically the
same. Aromatic sales prices increased primarily as a result of continued strong
demand.
COST OF SALES. Cost of sales for the first nine months of 2000 was
$968.6 million, an increase of 99 percent compared to $487.1 million for the
first nine months of 1999. Increased sales volumes from
14
<PAGE>
the acquired vinyls business were the primary cause of this increase. Also
contributing to the increase were higher costs for all major raw materials and
energy. As a percentage of sales, cost of sales decreased to 83 percent in the
first nine months of 2000 compared to 85 percent in the first nine months of
1999. This decrease was a result of overall sales price increases outpacing
higher raw material costs and our plants operating at higher capacity
utilization rates.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $35.5 million for the nine months ended September 30, 2000, an increase of
22 percent from the same period in 1999. This increase is primarily attributable
to the effects of the acquired vinyls business and higher profit sharing
expense. During the first quarter of 2000, we incurred transition charges
associated with the acquisition of approximately $0.8 million.
OPERATING INCOME. Operating income in the first nine months of 2000 was
$165.6 million, an increase of 191 percent compared to $56.9 million in the
first nine months of 1999. Higher operating income in chlorovinyls was offset in
part by decreased operating profit in aromatics. As a percentage of net sales,
operating profit increased to 14 percent of net sales in the first nine months
of 2000 compared to 10 percent for the same period in 1999. Overall sales price
increases outpaced increases in raw material costs which caused the increase in
operating profit as a percentage of net sales.
Our chlorovinyls operating profit for the first nine months of 2000 was
$187.8 million, an increase of 256 percent compared to $52.8 million for the
same period in 1999. The most significant factors in this increase are operating
income from the acquired vinyls business and the improvements in VCM and vinyl
resin profit margins.
Our aromatics operating loss for the first nine months of 2000 was
$10.7 million, a decrease of 183 percent compared to operating profit of
$12.9 million in the first nine months 1999. This decrease was a result of
significant increases in the cost of benzene and propylene that outpaced selling
price increases for aromatic products.
NET INTEREST EXPENSE. Interest expense for the nine months ended
September 30, 2000 was $53.6 million compared with $21.7 million for the same
period in 1999. This increase was primarily attributable to higher debt balances
related to both the acquisition of the vinyls business and the purchase of the
previously leased cogeneration facility during the fourth quarter of 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes was $40.3 million
for the first nine months of 2000 compared to $12.9 million for the same period
of 1999. This increase was caused by higher taxable income. Our effective tax
rate for the nine months ended September 30, 2000 was 36.0 percent compared to
36.5 percent for the same period in 1999.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
the nine months ended September 30, 2000 was $71.7 million, an increase of
221 percent compared to $22.4 million for the nine months ended September 30,
1999. Income from continuing operations increased significantly as a result of
both overall sales volume and price increases that more than offset higher raw
material costs and additional interest expense.
LOSS FROM DISCONTINUED OPERATION. The discontinued methanol operation
incurred a net loss of $2.5 million in the nine months ended September 30, 1999.
Additionally, during the third quarter of 1999, we recognized a one-time charge
of $7.6 million, net of taxes, in connection with the write-off of certain
methanol assets and estimated future losses on servicing the remaining methanol
contracts through the end of 1999.
NET INCOME. Net income for the first nine months of 2000 was
$71.7 million, an increase of 488 percent from $12.2 million in the first nine
months of 1999. This increase was due to the factors discussed above.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2000, we generated $141.5 million in
cash flow from operating activities as compared to $81.6 million generated
during the same 1999 period. Major sources of cash flow for the first nine
months of 2000 were net income of $71.7 million and non-cash provisions of $56.2
for depreciation and amortization. Total working capital at September 30, 2000
was $98.0 million versus $95.6 million at December 31, 1999. Significant changes
in working capital for the first nine months of 2000 included a decrease in
accounts receivable, higher inventories, a lower current portion of long-term
debt, an increase in interest payable and a decrease in other accrued
liabilities. The decrease in accounts receivable was primarily attributable to
the sale of $25.0 million of trade receivables under a revolving trade
receivables sales program. Inventories increased as a result of higher raw
material costs and quantities. Increases in accounts payable were attributable
to the timing of certain payments and higher trade payable balances related to
increased raw material prices. Accounts payable increases were partially offset
by the payment of $16.3 million to CONDEA Vista Company representing a working
capital adjustment related to our acquisition in November 1999. Decreases in
other accrued liabilities were attributable to the timing of certain payments.
Significant working capital changes for the first nine months of 1999 included
the net receipt of $8.6 million for litigation expenses which were reimbursed by
our insurance carriers and an increase in accounts payable and accrued
liabilities due to the timing of payments.
Debt decreased by $124.1 million during the nine months ended September 30,
2000 to $647.1 million. As of September 30, 2000, we had availability to borrow
an additional $89.1 million under the revolving credit facility. Capital
expenditures for the nine months ended September 30, 2000 were $15.1 million as
compared to $9.8 million for the same 1999 period. Capital expenditures for 2000
are being directed toward normal repairs and maintenance, certain environmental
projects and increased efficiency of existing operations. We estimate total
capital expenditures for 2000 will approximate $20.0 million to $25.0 million.
We declared dividends of $0.24 per share or $7.5 million during the first
nine months of 2000. As of September 30, 2000, we had authorization to
repurchase up to 5.2 million shares under a common stock repurchase program.
Our ability to satisfy our debt obligations and to pay principal and
interest on our debt, fund working capital, and make anticipated capital
expenditures will depend on our future performance, which is subject to general
economic conditions and other factors, some of which are beyond our control. We
believe that based on current and anticipated levels of operations and
conditions in our markets, cash flow from operations will be adequate for the
foreseeable future to make required payments of principal and interest on our
debt and fund our working capital and capital expenditure requirements.
We are essentially a holding company and, accordingly, must rely on
distributions, loans and other intercompany cash flows from our wholly owned
subsidiaries to generate the funds necessary to satisfy the repayment of our
existing debt. Provisions in our senior credit facility limit payments of
dividends, distributions, loans or advances to us by our subsidiaries.
OUTLOOK
For the fourth quarter, we are seeing an increase in sales volumes for vinyl
products over the depressed third quarter levels; however, not to the levels
seen in the first half of 2000. Raw material costs have begun to fall, but not
as rapidly as selling prices resulting in lower margins. This, coupled with the
continuing high costs for energy, is expected to result in lower earnings for
the fourth quarter when compared to the third quarter.
16
<PAGE>
YEAR 2000 ISSUE UPDATE
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
ongoing business as a result of the year 2000 issue. However, it is possible
that the full impact of the date change has not been fully recognized. We
believe that any such problems are likely to be minor and correctable. In
addition, we could still be negatively affected if year 2000 or similar issues
adversely affect our customers or suppliers. Currently we are not aware of any
significant year 2000 or similar problems that have arisen for our customers and
suppliers. Expenditures related to year 2000 compliance efforts were not
material.
FORWARD-LOOKING STATEMENTS
This Form 10-Q and other communications to stockholders may contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to, among other things,
our 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. 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 our products or increases in overall industry
capacity that could affect production volumes and/or pricing;
- changes and/or cyclicality in the industries to which our 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 unforeseen circumstances.
A number of these factors are discussed in this Form 10-Q and in our other
periodic filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of certain market risks related to Georgia Gulf, see
Part I, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk",
in our Annual Report on Form 10-K for the year ended December 31, 1999. There
have been no significant developments with respect to our exposure to market
risk except for the change in the fair value of interest rate swaps disclosed in
Note 7 to the financial statements included herein.
17
<PAGE>
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings and Environmental Matters.
On June 22, 2000, the United States Environmental Protection Agency,
Region 6 (the "EPA") issued an Administrative Complaint against Georgia Gulf,
alleging we had violated parts of the United States Clean Water Act by
discharging pollutants in quantities in excess of amounts allowed under our
permit and had violated certain conditions of our water discharge permit at our
Pasadena, TX facility. We have settled the claim by entering into a Consent
Agreement and Final Order, which required us to pay a penalty of $101,250.
On July 31, 2000, Georgia Gulf Lakes Charles, LLC, received a Complaint,
Compliance Order and Notice of Opportunity for a Hearing from the EPA, which
arose from an inspection conducted by the EPA at the Lake Charles facility on
December 6-8, 1999. The EPA is seeking to assess a fine of $701,605 and to
require certain corrective actions to be taken as a result of various alleged
violations of the United States Resource Conservation and Recovery Act,
including failure to make adequate hazardous waste determinations, failure to
adequately characterize wastes before disposal, and failure to obtain permits
for operations of alleged hazardous waste facilities. We have filed an Answer
and Request for Hearing, and we are participating in ongoing settlement
discussions with the EPA.
We have accrued a liability in prior periods for these and other
environmental matters.
We are also involved in certain legal proceedings that are described in our
1999 Annual Report on Form 10-K and our quarterly report on Form 10-Q for the
period ending March 31, 2000. During the three months ended September 30, 2000,
there were no material developments in the status of those legal proceedings
that have not been previously disclosed in our 1999 Annual Report on Form 10-K
or in our quarterly report on Form 10-Q for the period ending March 31, 2000.
Item 6. Exhibits and Reports on Form 8-K.
a) No exhibits are required to be filed as part of this Form 10-Q.
b) No reports on Form 8-K were filed with Securities and Exchange
Commission during the third quarter of 2000.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
GEORGIA GULF CORPORATION
(Registrant)
Date November 14, 2000 /s/ EDWARD A. SCHMITT
------------------------ -------------------------------------------
Edward A. Schmitt
President and Chief Executive Officer
(Principal Executive Officer)
Date November 14, 2000 /s/ RICHARD B. MARCHESE
------------------------ -------------------------------------------
Richard B. Marchese
Vice President Finance, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
</TABLE>
19
