Georgia Gulf Reports Third Quarter 2009 Financial Results

November 4, 2009 5:02 PM EST

ATLANTA--(BUSINESS WIRE)-- Georgia Gulf Corporation (NYSE: GGC) today announced financial results for its third quarter ended September 30, 2009.

Georgia Gulf reported net sales of $556.3 million for the third quarter of 2009 compared to net sales of $818.6 million for the third quarter of 2008. The decrease in sales is primarily due to lower prices resulting from lower feedstock and energy costs partially offset by higher volumes compared to the third quarter of 2008, which was impacted by two gulf coast hurricanes.

Georgia Gulf reported net income of $230.2 million for the third quarter of 2009, compared to a net loss of $17.4 million during the same quarter in the previous year. In the third quarter of 2009, Georgia Gulf successfully exchanged $736 million of its outstanding notes for 1.3 million shares of its common stock and 30.2 million shares of its convertible preferred stock. The debt exchange resulted in a $400.8 million pre-tax gain.

The Company reported operating income of $38.6 million for the third quarter of 2009, compared to operating income of $14.2 million for the third quarter of 2008. The third quarter of 2009 includes a pre-tax net benefit of $1.8 million primarily resulting from credit adjustments to true up restructuring costs booked in prior quarters. The third quarter of 2008 includes a pre-tax asset impairment and restructuring charge of $3.7 million. Excluding these items, operating income for the third quarter of 2009 was $36.8 million compared to operating income of $17.9 million in the third quarter of 2008.

"Our results for the quarter reflect our successful efforts to match our cost structure to the market," commented Paul Carrico, Georgia Gulf's President and CEO. "We generated stronger operating income compared to both the same quarter last year and the second quarter of 2009 despite a dramatic decline in caustic soda prices and continued softness in building and construction markets. Completing the debt-for-equity exchange reduced our debt by more than 50 percent and reduced our annual cash interest costs by nearly $70 million, and our long-term bank amendment provides adjusted covenants until the end of 2011."

Chlorovinyls

In the Chlorovinyls segment, third quarter 2009 sales decreased to $229.1 million from $365.5 million during the third quarter of 2008. The segment posted operating income of $30.6 million compared to operating income of $28.0 million during the same quarter in the prior year. The increase in operating income was primarily due to higher caustic and PVC sales volumes partially offset by lower caustic and PVC prices compared to the same quarter in the prior year. The third quarter of 2008 was impacted by two gulf coast hurricanes.

Window & Door Profiles and Mouldings

In the Window & Door Profiles and Mouldings segment, sales were $98.6 million for the third quarter of 2009, compared to $124.0 million during the same quarter in the prior year. Sales on a constant currency basis declined 18 percent. The decline in sales reflects extremely difficult conditions in the North American housing and construction markets, particularly related to new home construction. The segment's operating income was $2.0 million for the third quarter of 2009, compared to an operating loss of $0.6 million during the same quarter in the prior year. The increase in operating income is primarily due to cost reduction actions, partially offset by lower sales volumes.

Outdoor Building Products

In the Outdoor Building Products segment, sales were $128.1 million for the third quarter of 2009, compared to $163.6 million during the same quarter in the prior year. Sales on a constant currency basis declined 19 percent. The decrease in sales reflects the extremely difficult conditions in the North American housing and construction markets. The segment reported operating income of $14.7 million for the third quarter of 2009, compared to operating income of $0.5 million during the same quarter in the prior year. The increase in operating income is due to cost reduction actions, partially offset by lower sales volumes.

Aromatics

In the Aromatics segment, sales decreased to $100.5 million for the third quarter of 2009 from $165.5 million during the third quarter of 2008. The decrease in sales was driven by a 31 percent decline in sales prices and lower phenol and acetone sales volumes. The phenol and acetone sales volume decrease is due to extremely difficult conditions in the North American housing and construction markets. During the third quarter of 2009, the segment recorded operating income of $9.3 million, compared to an operating loss of $4.5 million during the same quarter last year. The increase in operating income was driven by stronger margins resulting from raw material inventory holding gains and cost reductions, partially offset by lower volumes than the same quarter last year.

Liquidity Update

As of September 30, 2009, the Company had $168.4 million of liquidity, consisting of $28.3 million of cash on hand as well as $140.1 million of borrowing capacity available under its revolving credit facility.

Conference Call

The Company will discuss third quarter 2009 financial results and business developments via conference call and Webcast on Thursday, November 5, 2009 at 10:00 a.m. EST. To access the Company's third quarter conference call, please dial 888-552-7928 (domestic) or 706-679-6164 (international). To access the conference call via Webcast, log on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=112207&eventID=2512740. Playbacks will be available from 11:00 AM ET Thursday, November 5, to midnight ET Thursday, November 12. Playback numbers are 800-642-1687 (domestic) or 706-645-9291 (international). The conference call ID number is 38134507.

Georgia Gulf

Georgia Gulf Corporation is a leading, integrated North American manufacturer of two chemical lines, chlorovinyls and aromatics, and manufactures vinyl-based building and home improvement products. The Company's vinyl-based building and home improvement products, marketed under Royal Group brands, include window and door profiles, mouldings, siding, pipe and pipe fittings, and deck, fence and rail products. Georgia Gulf, headquartered in Atlanta, Georgia, has manufacturing facilities located throughout North America to provide industry-leading service to customers.

Safe Harbor

This news release contains forward-looking statements subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's assumptions regarding business conditions, and actual results may be materially different. Risks and uncertainties inherent in these assumptions include, but are not limited to, future global economic conditions, economic conditions in the industries to which our products are sold, uncertainties regarding asset sales, synergies, potential sale-leaseback arrangements, operating efficiencies and competitive conditions, industry production capacity, raw materials and energy costs, and other factors discussed in the Securities and Exchange Commission filings of Georgia Gulf Corporation, including our annual report on Form 10-K for the year ended December 31, 2008 and our quarterly report on Form 10-Q for the quarter ended June 30, 2009.

GEORGIA GULF CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)                  September 30,   December 31,
                                                   2009            2008

ASSETS

Cash and cash equivalents                          $ 28,339        $ 89,975

Receivables, net of allowance for doubtful
accounts of $15,922 in 2009                          172,350         117,287
and $12,307 in 2008

Inventories                                          238,715         240,199

Prepaid expenses                                     31,544          21,360

Income tax receivables                               3,796           2,264

Deferred income taxes                                21,009          22,505

Total current assets                                 495,753         493,590

Property, plant and equipment, net                   701,205         760,760

Goodwill                                             201,331         189,003

Intangible assets, net of accumulated
amortization of $10,745 in 2009                      15,420          15,905
and $9,988 in 2008

Other assets, net                                    132,639         150,643

Non-current assets held for sale                     14,227          500

Total assets                                       $ 1,560,575     $ 1,610,401

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current portion of long-term debt                  $ 23,609        $ 56,843

Accounts payable                                     121,339         105,052

Interest payable                                     5,052           16,115

Income taxes payable                                 1,635           3,476

Accrued compensation                                 14,525          9,890

Liability for unrecognized income tax benefits       9,448           27,334
and other tax reserves

Other accrued liabilities                            52,025          49,693

Total current liabilities                            227,633         268,403

Long-term debt                                       478,318         1,337,307

Liability for unrecognized income tax benefits       61,613          34,592

Deferred income taxes                                237,065         70,141

Other non-current liabilities                        36,075          39,886

Total liabilities                                    1,040,704       1,750,329

Stockholders' equity:

Preferred stock--$0.01 par value; 75,000,000
shares authorized; no                                --              --
shares issued

Common stock--$0.01 par value; 100,000,000 shares
authorized; shares                                   330             14
issued and outstanding: 32,967,546 in 2009 and
1,379,273 in 2008

Additional paid-in capital                           472,028         105,815

Retained earnings (accumulated deficit)              56,981          (218,502  )

Accumulated other comprehensive loss, net of tax     (9,468    )     (27,255   )

Total stockholders' equity (deficit)                 519,871         (139,928  )

Total liabilities and stockholders' equity         $ 1,560,575     $ 1,610,401
(deficit)

GEORGIA GULF CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

                         Three Months Ended        Nine Months Ended
                                                   September 30,
                         September 30,

(In thousands, except      2009         2008         2009           2008
per share data)

Net sales                $ 556,342    $ 818,564    $ 1,488,016    $ 2,380,868

Operating costs and
expenses:

Cost of sales              472,643      756,503      1,313,924      2,217,656

Selling, general and       46,864       44,095       129,724        130,459
administrative expenses

Long-lived asset           4,167        2,516        20,357         18,695
impairment charges

Restructuring (gain)       (5,928  )    1,169        5,927          8,758
costs, net

Loss (gain) on sale of     -            33           62             (27,282   )
assets, net

Total operating costs      517,746      804,316      1,469,994      2,348,286
and expenses

Operating income           38,596       14,248       18,022         32,582

Gain on substantial        -            -            121,033        -
modification of debt

Gain on debt exchange      400,835      -            400,835        -

Interest expense, net      (30,709 )    (32,280 )    (107,229  )    (98,157   )

Foreign exchange loss      (48     )    (1,864  )    (981      )    (585      )

Income (loss) before       408,674      (19,896 )    431,680        (66,160   )
income taxes

Provision (benefit) for    178,523      (2,494  )    156,196        (7,205    )
income taxes

Net income (loss)        $ 230,151    $ (17,402 )  $ 275,484      $ (58,955   )

Earnings (loss) per
share:

Basic                    $ 9.21       $ (14.64  )  $ 29.49        $ (48.86    )

Diluted                  $ 9.20       $ (14.64  )  $ 29.47        $ (48.86    )

Weighted average common
shares:

Basic                      23,355       1,379        8,788          1,378

Diluted                    25,006       1,379        9,349          1,378

GEORGIA GULF CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

                            Three Months Ended         Nine Months Ended
                            September 30,              September 30,

(In thousands)                2009          2008         2009          2008

Cash flows from operating
activities:

Net (loss) income           $ 230,151     $ (17,402 )  $ 275,484    $  (58,955 )

Adjustments to reconcile
net income (loss) to net
cash provided
by (used in) operating
activities:

Depreciation and              29,695        36,471       89,147        112,495
amortization

Loan fair value gain          4,288         --           8,888         --
amortization

Gain on substantial           --            --           (121,033 )    --
modification of debt

Gain on debt exchange         (400,835 )    --           (400,835 )    --

Foreign exchange gain         (1,293   )    --           (627     )    --

Deferred income taxes         179,329       (13,336 )    154,938       (13,089 )

Tax deficiency related to     (23      )    (15     )    (1,414   )    (861    )
stock plans

Stock based compensation      8,813         804          10,212        2,493

Long-lived asset
impairment charges and        4,167         2,444        20,419        21,872
loss on sale of assets

Net gain on sale of
property, plant and           --            (825    )    --            (27,125 )
equipment, and assets
held for sale

Payment of Quebec trust       --            --           --            (20,073 )
tax settlement

Other non-cash items          (533     )    3,813        1,844         1,608

Change in operating
assets, liabilities and       15,138        60,575       11,845        (25,752 )
other

Net cash provided by (used    68,897        72,529       48,868        (7,387  )
in) operating activities

Cash flows from investing
activities:

Capital expenditures          (6,573   )    (12,344 )    (24,958  )    (44,023 )

Proceeds from sale of
property, plant and           1,022         301          1,900         78,095
equipment, and assets
held-for sale

Proceeds from insurance
recoveries related to         --            --           1,980         --
property, plant and
equipment

Net cash (used in)
provided by investing         (5,551   )    (12,043 )    (21,078  )    34,072
activities

Cash flows from financing
activities:

Net change in revolving       (127,561 )    (7,649  )    (29,411  )    107,718
line of credit

Repayment of long-term        (909     )    (1,016  )    (19,727  )    (73,094 )
debt

Purchases and retirement      --            --           (25      )    (110    )
of common stock

Fees paid to amend and        (13,595  )    (9,823  )    (43,256  )    (9,823  )
exchange debt

Dividends paid                --            (2,790  )    --            (8,379  )

Net cash (used in)
provided by financing         (142,065 )    (21,278 )    (92,419  )    16,312
activities

Effect of exchange rate
changes on cash and cash      2,758         927          2,993         496
equivalents

Net change in cash and        (75,961  )    40,136       (61,636  )    43,493
cash equivalents

Cash and cash equivalents     104,300       12,585       89,975        9,227
at beginning of period

Cash and cash equivalents   $ 28,339      $ 52,720     $ 28,339     $  52,720
at end of period

GEORGIA GULF CORPORATION AND SUBSIDARIES

SEGMENT INFORMATION

(Unaudited)

                  Three Months Ended             Nine Months Ended

                  September 30,                  September 30,

In Thousands        2009           2008            2009              2008

Segment net
sales:

    Chlorovinyls  $ 229,132      $ 365,501       $ 702,915         $ 1,108,471

    Window and
    door
    profiles and
    mouldings

     products       98,617         124,027         241,691           328,104

    Outdoor
    building        128,071        163,579         315,431           428,175
    products

    Aromatics       100,521        165,457         227,979           516,118

Net Sales         $ 556,341      $ 818,564       $ 1,488,016       $ 2,380,868

Segment
operating income
(loss):

    Chlorovinyls  $ 30,573    1) $ 27,982    5)  $ 75,466          $ 64,673      11)

    Window and
    door
    profiles and
    mouldings

     products       2,008     2)   (561    ) 6)    (31,528   ) 8)    (15,943   ) 12)

    Outdoor
    building        14,650    3)   516       7)    6,304       9)    (14,295   )
    products

    Aromatics       9,347          (4,547  )       17,709            (7,373    )

    Unallocated     (17,982 ) 4)   (9,142  )       (49,929   ) 10)   5,520       13)
    corporate

Total operating   $ 38,596       $ 14,248        $ 18,022          $ 32,582
income (loss)

1)   Includes income of $3.8 million primarily from a $4.0 million credit from the
     wind up of the Canadian pension plans.

2)   Includes $4.1 million related to plant closing costs and restructuring costs

3)
     Includes $1.0 million of severance costs and income of $3.1 million associated
     with the favorable settlement of a legal claim for less than the reserved
     amount.


4)
     Includes $7.7 million of additional stock compensation expense related to the
     2009 Equity and Performance Incentive Plan. Also includes $2.0 million in legal
     and professional fees related to the debt amendments, contingency planning and
     process improvement initiatives.


5)
     Includes $1.4 million in severance, restructuring and other exit costs
     primarily related to the closure of the Oklahoma City facility


6)   Includes $2.0 million related to plant closing costs and severance costs and
     $1.8 million for asset impairments.

7)   Includes $0.3 million related to plant closing costs and severance costs

8)   Includes $3.0 million of severance, restructuring and other exit costs and
     $20.2 million of asset impairments.

9)
     Includes $1.7 million of severance costs offset by income of $1.2 million
     associated with other exit costs, including income of $3.1 million associated
     with the favorable settlement of a legal claim.


10)  Includes $2.5 million in consulting fees related to process improvement
     initiatives.

11)
     Includes $20.0 million in costs related to the shutdown of the Oklahoma City
     facility, writedowns and other exit costs and a $2.2 million gain related to
     the sale and lease back of equipment


12)  Includes $1.9 million for asset impairments.

13)  Includes $28.8 million gain on sale of idle land in Pasadena, Texas.

    Source: Georgia Gulf Corporation

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