Axiall 10-Q 2001 Q3 Quarterly report

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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(Mark One)

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File Number 1-9753

GEORGIA GULF CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)	58-1563799 (I.R.S. Employer Identification No.)
400 Perimeter Center Terrace, Suite 595, Atlanta, Georgia (Address of principal executive offices)	30346 (Zip code)

    Registrant's telephone number, including area code:(770) 395-4500

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding as of November 13, 2001
Common Stock, $0.01 par value	31,715,002 shares

GEORGIA GULF CORPORATION FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

INDEX

			Page Numbers
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000	1
		Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2001 and 2000	2
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000	3
		Notes to Condensed Consolidated Financial Statements as of September 30, 2001	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		15
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			20
Item 6. Exhibits and Reports on Form 8-K			20
SIGNATURES			21

ii

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		September 30, 2001		December 31, 2000
ASSETS
Cash and cash equivalents		$	5,241	$	2,042
Receivables, net of allowance for doubtful accounts of $2,407 in 2001 and $2,372 in 2000			145,306		145,789
Inventories			81,601		123,156
Prepaid expenses			4,639		7,607
Deferred income taxes			5,243		5,243
	Total current assets		242,030		283,837
Property, plant and equipment, net			592,761		626,777
Other assets			143,502		135,995
	Total assets	$	978,293	$	1,046,609
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt		$	28,753	$	9,794
Accounts payable			88,836		147,949
Interest payable			12,602		5,388
Accrued compensation			5,621		10,380
Other accrued liabilities			21,429		15,420
	Total current liabilities		157,241		188,931
Long-term debt, net of current portion			597,504		622,541
Deferred income taxes			123,735		116,545
Stockholders' equity			99,813		118,592
	Total liabilities and stockholders' equity	$	978,293	$	1,046,609
Common shares outstanding			31,715		31,714

See notes to condensed consolidated financial statements.

1

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

			Three Months Ended September 30,				Nine Months Ended September 30,
			2001		2000		2001			2000
Net sales			$	267,408	$	366,382	$	973,687		$	1,217,712
Operating costs and expenses
	Cost of sales			238,163		327,518		906,363			1,016,551
	Selling, general and administrative expenses			10,854		10,513		34,458			35,545
		Total operating costs and expenses		249,017		338,031		940,821			1,052,096
Operating income				18,391		28,351		32,866			165,616
	Interest, net			14,489		16,646		43,870			53,606
Income (loss) before income taxes				3,902		11,705		(11,004	)		112,010
Provision (benefit) for income taxes				1,405		4,214		(3,959	)		40,330
Net income (loss)			$	2,497	$	7,491	$	(7,045	)	$	71,680
Earnings (loss) per share:
	Basic		$	0.08	$	0.24	$	(0.22	)	$	2.28
	Diluted		$	0.08	$	0.24	$	(0.22	)	$	2.27
Weighted average common shares:
	Basic			31,715		31,484		31,715			31,384
	Diluted			31,757		31,585		31,715			31,530

See notes to condensed consolidated financial statements.

2

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

			Nine Months Ended September 30,
			2001			2000
Cash flows from operating activities:
	Net (loss) income		$	(7,045	)	$	71,680
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
		Depreciation and amortization		54,264			56,162
		Provision for deferred income taxes		7,190			14,047
		Change in operating assets, liabilities and other		(21,841	)		(856	)
	Net cash provided by continuing operations			32,568			141,033
	Net cash provided by discontinued operation			—			443
	Net cash provided by operating activities			32,568			141,476
	Cash flows from financing activities:
		Long-term debt proceeds		85,713			41,538
		Long-term debt payments		(91,791	)		(165,675	)
		Proceeds from issuance of common stock		11			1,787
		Purchase and retirement of common stock		—			(121	)
		Dividends paid		(7,611	)		(7,535	)
	Net cash used in financing activities			(13,678	)		(130,006	)
	Cash flows from investing activities:
		Capital expenditures		(15,691	)		(15,070	)
	Net change in cash and cash equivalents			3,199			(3,600	)
	Cash and cash equivalents at beginning of period			2,042			4,424
	Cash and cash equivalents at end of period		$	5,241		$	824

See notes to condensed consolidated financial statements.

3

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. Certain prior year balances have been reclassified to conform to the 2001 presentation. 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, 2000.

    Our operating results for the three- and nine-month period ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

    During June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for by a single method—the purchase method. SFAS No. 142 requires companies to cease amortizing existing (as of June 30, 2001) goodwill on December 31, 2001. SFAS No. 142 also prohibits the amortization of goodwill resulting from acquisitions completed after June 30, 2001. Additionally, SFAS No. 142 specifies that companies will be required to periodically test existing goodwill and some intangible assets for asset impairment. The Company is currently evaluating the financial statement impact of SFAS No. 142.

    During June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that a liability for an asset retirement obligation be recognized in the period incurred at fair value, if a reasonable estimate of fair value can be made. Any associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company will adopt SFAS No. 143 on January 1, 2003. Management does not believe the adoption of SFAS 143 will have a material effect on our consolidated financial statements.

    During August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 clarifies financial accounting and reporting for assets held for sale, scheduled for abandonment or other disposal, and recognition of impairment losses related to the carrying value of long-lived assets. The Company will adopt SFAS 144 on January 1, 2002. Management does not believe the adoption of SFAS 144 will have a material effect on our consolidated financial statements.

NOTE 3: DERIVATIVE TRANSACTIONS

    On January 1, 2001, we adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 requires that we recognize all derivative instruments on the balance sheet at fair value, and changes in the derivative's fair value must be currently recognized in earnings or comprehensive income, depending on the designation of the derivative. If the derivative is designated a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in comprehensive income and is recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings currently.

4

    On November 30, 2000, we entered into an interest rate swap agreement for a notional amount of $100 million, which has been designated as a cash flow hedge to effectively convert a portion of our outstanding senior credit facility from a variable rate basis to a fixed rate basis, thus reducing the impact of interest rate changes on future income.

    Upon adoption of SFAS No. 133 on January 1, 2001, we recognized an unrealized loss of approximately $1.1 million related to the interest rate swap, which was recorded as part of long-term liabilities and accumulated comprehensive income. The reclassification of any gains or losses associated with the interest rate swap is anticipated to occur through the maturity date of the interest rate swap, which expires on November 29, 2002.

NOTE 4: OTHER COMPREHENSIVE LOSS

    Accumulated other comprehensive loss includes unrealized gains and losses in the fair value of certain derivative instruments which qualify for hedge accounting. As of September 30, 2001, accumulated other comprehensive loss was $4.1 million. The change in fair value of the interest rate swap from January 1, 2001 to September 30, 2001 was $3.0 million.

NOTE 5: RECEIVABLES

    As noted in our 10-K for the year ended December 31, 2000, we had entered into an agreement pursuant to which we sold an undivided ownership interest in a pool of our trade receivables through a wholly owned subsidiary to a third party (the "Securitization" or "asset securitization program"). As collections satisfied accounts receivable in the pool, we distributed the proceeds to the purchaser and sold ownership interests in new receivables. On July 17, 2001 the sale of additional accounts receivable was restricted pursuant to a provision contained in our indenture governing our senior subordinated notes. Therefore, we repurchased the outstanding interest ($60,000,000 as of July 17, 2001) in our receivables by utilizing the availability of the revolving portion of our senior credit facility. On July 20, 2001 GGRC Corp., as Seller, and Georgia Gulf Corporation and Georgia Gulf Chemicals and Vinyls, LLC, as Initial Servicers, and Blue Ridge Funding Corporation, as Purchaser, and Wachovia Bank, N.A., as Administrative Agent terminated the Securitization. Pursuant to the termination agreement, we are permitted to request that the Securitization be reinstated (the "New Securitization") with identical terms and conditions upon written notice to, and subject to acceptance by, the administrative agent.

NOTE 6: INVENTORIES

    The major classes of inventories were as follows:

	September 30, 2001		December 31, 2000
	(In thousands)
Raw materials and supplies	$	28,393	$	45,662
Finished goods		53,208		77,494
	$	81,601	$	123,156

NOTE 7: 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.

5

    Earnings of industry segments exclude interest income and expense, unallocated corporate expenses and general plant services, and provision for income taxes. Intersegment sales and transfers are insignificant.

		Three Months Ended September 30,						Nine Months Ended September 30,
		2001			2000			2001			2000
		(In thousands)
Segment net sales:
	Chlorovinyls	$	220,622		$	287,712		$	780,996		$	984,534
	Aromatics		46,786			78,670			192,691			233,178
Net sales		$	267,408		$	366,382		$	973,687		$	1,217,712
Segment operating income:
	Chlorovinyls	$	23,376		$	33,055		$	55,954		$	187,802
	Aromatics		(1,296	)		(1,285	)		(10,444	)		(10,668	)
	Corporate and general plant services		(3,689	)		(3,419	)		(12,644	)		(11,518	)
Total operating income		$	18,391		$	28,351		$	32,866		$	165,616

NOTE 8: EARNINGS PER SHARE

    There are no adjustments to "Net income (loss)" or "Income (loss) before income taxes" 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:

		Three Months Ended September 30,		Nine Months Ended September 30,
		2001	2000	2001	2000
		(In thousands)
Weighted average common shares—basic		31,715	31,484	31,715	31,384
Plus incremental shares from assumed conversions:
	Options	11	—	—	—
	Employee stock purchase plan rights	31	101	—	146
Weighted average common shares—diluted		31,757	31,585	31,715	31,530

NOTE 9: SUPPLEMENTAL GUARANTOR INFORMATION

    Our payment obligations under our 10³/8 percent senior subordinated notes are guaranteed by GG Terminal Management Corporation, Great River Oil & Gas Corporation, North America 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.

6

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Balance Sheet
September 30, 2001
(In thousands)

		Parent Company		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents		$	—	$	5,233		$	8		$	—		$	5,241
Receivables, net			361,994		145,821			58,453			(420,962	)		145,306
Inventories			—		81,601			—			—			81,601
Prepaid expenses			—		4,639			—			—			4,639
Deferred income taxes			—		5,243			—			—			5,243
	Total current assets		361,994		242,537			58,461			(420,962	)		242,030
Property, plant and equipment, net			251		592,510			—			—			592,761
Other assets, net			16,355		127,147			—			—			143,502
Investment in subsidiaries			136,038		58,501			—			(194,539	)		—
Total assets		$	514,638	$	1,020,695		$	58,461		$	(615,501	)	$	978,293
Current portion of long-term debt		$	—	$	28,753		$	—		$	—		$	28,753
Account payable			61,505		448,269			24			(420,962	)		88,836
Interest payable			12,435		167			—			—			12,602
Accrued compensation			—		5,621			—			—			5,621
Accrued pension			5,664		1,801			—			—			7,465
Other accrued liabilities			—		14,014			(50	)		—			13,964
	Total current liabilities		79,604		498,625			(26	)		(420,962	)		157,241
Long-term debt, net of current portion			335,221		262,283			—			—			597,504
Deferred income taxes			—		123,735			—			—			123,735
Stockholders' equity			99,813		136,053			58,486			(194,539	)		99,813
Rounding					(1	)		1
Total liabilities and stockholders' equity		$	514,638	$	1,020,695		$	58,461		$	(615,501	)	$	978,293

7

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Balance Sheet
December 31, 2000
(In thousands)

		Parent Company		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents		$	—	$	1,982	$	60	$	—		$	2,042
Receivables, net			347,076		114,213		59,110		(374,610	)		145,789
Inventories			—		123,156		—		—			123,156
Prepaid expenses			2,698		4,696		213		—			7,607
Deferred income taxes			—		5,243		—		—			5,243
	Total current assets		349,774		249,290		59,383		(374,610	)		283,837
Property, plant and equipment, net			321		626,456		—		—			626,777
Other assets, net			14,431		121,518		46		—			135,995
Investment in subsidiaries			128,775		57,869		—		(186,644	)		—
Total assets		$	493,301	$	1,055,133	$	59,429	$	(561,254	)	$	1,046,609
Current portion of long-term debt		$	—	$	9,794	$	—	$	—		$	9,794
Accounts payable			30,054		492,475		30		(374,610	)		147,949
Interest payable			4,971		417		—		—			5,388
Accrued compensation			—		10,380		—		—			10,380
Accrued pension			—		296		—		—			5,522
Other accrued liabilities			5,226		9,898		—		—			9,898
	Total current liabilities		40,251		523,260		30		(374,610	)		188,931
Long-term debt, net of current portion			334,458		288,083		—		—			622,541
Deferred income taxes			—		116,545		—		—			116,545
Stockholders' equity			118,592		127,245		59,399		(186,644	)		118,592
Total liabilities and stockholders' equity		$	493,301	$	1,055,133	$	59,429	$	(561,254	)	$	1,046,609

8

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Income
Three Months Ended September 30, 2001
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales		$	2,595		$	267,421		$	109		$	(2,717	)	$	267,408
Operating costs and expenses:
	Cost of sales		—			238,163			—			—			238,163
	Selling, general and administrative expenses		2,213			11,203			155			(2,717	)		10,854
Total operating costs and expenses			2,213			249,366			155			(2,717	)		249,017
Operating income			382			18,055			(46	)		—			18,391
Other (expense) income:
	Interest expense, net		(8,071	)		(6,418	)		—			—			(14,489	)
	Equity in (loss) income of subsidiaries		7,418			(27	)		—			(7,391	)		—
Income (loss) before taxes			(271	)		11,610			(46	)		(7,391	)		3,902
Provision (benefit) for income taxes			(2,768	)		4,188			(15	)		—			1,405
Net income (loss)		$	2,497		$	7,422		$	(31	)	$	(7,391	)	$	2,497

9

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Income
Three Months Ended September 30, 2000
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net sales		$	—		$	366,513		$	1,905	$	(2,036	)	$	366,382
Operating costs and expenses:
	Cost of sales		—			327,518			—		—			327,518
	Selling, general and administrative expenses		2,003			9,062			1,484		(2,036	)		10,513
Total operating costs and expenses			2,003			336,580			1,484		(2,306	)		338,031
Operating income			(2,003	)		29,933			421		—			28,351
Other (expense) income:
	Interest expense, net		(8,144	)		(8,502	)		—		—			(16,646	)
	Equity in income (loss) of subsidiaries		17,638			270			—		(17,908	)		—
Income before taxes			7,491			21,701			421		(17,908	)		11,705
Provision for income taxes			—			4,063			151		—			4,214
Net income		$	7,491		$	17,638		$	270	$	(17,908	)	$	7,491

10

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2001
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net sales		$	7,785		$	973,984		$	3,474	$	(11,556	)	$	973,687
Operating costs and expenses:
	Cost of sales		—			906,363			—		—			906,363
	Selling, general and administrative expenses		6,659			36,847			2,508		(11,556	)		34,458
Total operating costs and expenses			6,659			943,210			2,508		(11,556	)		940,821
Operating income			1,126			30,774			966		—			32,866
Other (expense) income:
	Interest expense, net		(24,231	)		(19,639	)		—		—			(43,870	)
	Equity in (loss) income of subsidiaries		7,743			632			—		(8,375	)		—
(Loss) income before taxes			(15,362	)		11,767			966		(8,375	)		(11,004	)
(Benefit) provision for income taxes			(8,317	)		4,003			355		—			(3,959	)
Net (loss) income		$	(7,045	)	$	7,764		$	611	$	(8,375	)	$	(7,045	)

11

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2000
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net sales		$	—		$	1,218,149		$	5,988	$	(6,425	)	$	1,217,712
Operating costs and expenses:
	Cost of sales		—			1,016,551			—		—			1,016,551
	Selling, general and administrative expenses		4,678			33,649			3,643		(6,425	)		35,545
	Total operating costs and expenses		4,678			1,050,200			3,643		(6,425	)		1,052,096
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
(Benefit) provision for income taxes			(6,813	)		46,296			847		—			40,330
Net income		$	71,680		$	93,947		$	1,498	$	(95,445	)	$	71,680

12

Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2001
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
	Net (loss) income	$	(7,045	)	$	7,764		$	611		$	(8,375	)	$	(7,045	)
	Adjustments to reconcile net income to net cash (used in) provided by operating activities:
	Depreciation and amortization		1,066			53,152			46			—			54,264
	Provision for deferred income taxes		—			7,190			—			—			7,190
	Equity in net income of subsidiaries		(7,743	)		(632	)		—			8,375			—
	Change in operating assets, liabilities and other		19,035			(41,691	)		815			—			(21,841	)
Net cash provided by continuing operations			5,313			25,783			1,472			—			32,568
Cash flows from financing activities:
	Long-term debt proceeds		763			84,950			—			—			85,713
	Long-term debt payments		—			(91,791	)		—			—			(91,791	)
	Proceeds from issuance of common stock		11			—			—			—			11
	Dividends paid		(7,611	)		—			(1,524	)		1,524			(7,611	)
Net cash used in financing activities			(6,837	)		(6,841	)		(1,524	)		1,524			(13,678	)
Cash flows from investing activities:
	Capital expenditures		—			(15,691	)		—			—			(15,691	)
	Dividends received from subsidiary		1,524			—			—			(1,524	)		—
Net cash provided by (used in) investing activities			1,524			(15,691	)		—			(1,524	)		(15,691	)
Net change in cash and cash equivalents			—			3,251			(52	)		—			3,199
Cash and cash equivalents at beginning of period			—			1,982			60			—			2,042
Cash and cash equivalents at end of period		$	—		$	5,233		$	8		$	—		$	5,241

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Georgia Gulf Corporation and Subsidiaries
Supplemental Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2000
(In thousands)

				Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
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
			Provision for deferred income taxes		—			14,047			—			—			14,047
			Equity in net income of subsidiaries		(93,939	)		(1,506	)		—			95,445			—
			Change in operating assets, liabilities and other		21,886			(23,352	)		610			—			(856	)
	Net cash provided by continuing operations				544			138,299			2,190			—			141,033
	Net cash used in discontinued operation				—			443			—			—			443
Net cash 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	)
Net cash used in financing activities					(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

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    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 primary chlorovinyl products include chlorine, caustic soda, vinyl chloride monomer ("VCM"), and vinyl resins and compounds; our primary aromatic chemical products include cumene, phenol and acetone.

Three Months Ended September 30, 2001 Compared with Three Months Ended September 30, 2000

Net Sales.  Net sales for the quarter ended September 30, 2001 were $267.4 million, a decrease of 27 percent compared to $366.4 million for the same period in 2000. This decrease was due to 17 percent lower sales volumes and a decrease in the overall average selling price of 13 percent, largely attributable to the vinyls business.

    Net sales of chlorovinyls for the third quarter of 2001 were $220.6 million, 23 percent lower than net sales for the third quarter of 2000 of $287.7 million. This decrease was the result of a 10 percent decrease in sales prices and 15 percent lower sales volumes. The lower sales prices and volumes resulted from continued soft demand for vinyl products, particularly VCM and vinyl resins, which more than offset a 171 percent increase in caustic soda prices.

    Net sales of aromatics for the third quarter of 2001 were $46.8 million, a decrease of 41 percent compared to $78.7 million for the same period in 2000. This decrease was the result of a 24 percent drop in sales prices and 22 percent lower sales volumes. Sales prices and volumes decreased due to weakness in demand.

Cost of Sales.  Cost of sales for the third quarter of 2001 was $238.2 million, a decrease of 27 percent compared to $327.5 million for the third quarter of 2000. The primary factor for this decrease was lower sales volumes. Also contributing to the decrease were lower prices for all purchased major raw materials. As a percentage of sales, cost of sales were 89 percent in both the third quarter of 2001 and the third quarter of 2000.

Selling and Administrative Expenses.  Selling and administrative expenses were $10.9 million for the three months ended September 30, 2001, an increase of 3 percent from the same period in 2000. This increase is primarily attributable to increased legal and professional fees.

Operating Income.  Operating income in the third quarter of 2001 was $18.4 million, a decrease of 35 percent compared to $28.4 million in the third quarter of 2000. This decrease was primarily the result of lower operating income in chlorovinyls. As a percentage of net sales, operating income decreased to 7 percent of net sales in the third quarter of 2001 compared to 8 percent for the same period in 2000. This decrease in operating income as a percentage of net sales was primarily the result of slightly higher selling and administrative expenses.

    Our chlorovinyls operating income for the third quarter of 2001 was $23.4 million, a decrease of 29 percent compared to $33.1 million for the same period in 2000. The most significant factors that contributed to this decrease were the erosion in VCM and vinyl resin profit margins. Falling VCM and vinyl resin prices outpaced the effects of lower raw material costs and higher selling prices for caustic soda.

    Our aromatics operating loss for the third quarter of 2001 was $1.3 million, equal to the operating loss of $1.3 million in the third quarter of 2000 due to lower sales prices and volumes offsetting decreased raw materials prices and reduced manufacturing costs.

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Net Interest Expense.  Interest expense decreased to $14.5 million for the quarter ended September 30, 2001 compared with $16.6 million for the same period in 2000. This decrease was primarily attributable to lower long-term debt balances and lower interest rates.

Provision for Income Taxes.  The provision for income taxes was $1.4 million for the third quarter of 2001 compared to a provision of $4.2 million for the third quarter of 2000. The decrease in the provision for income taxes was primarily attributable to the lower net income generated for the quarter compared to the same period in 2000. Our effective tax rate was 36 percent for both quarters.

Net (loss) Income.  Net income for the three months ended September 30, 2001 was $2.5 million, a decrease of 67 percent compared to net income of $7.5 million for the three months ended September 30, 2000. This was due to the factors discussed above.

Nine Months Ended September 30, 2001 Compared with Nine Months Ended September 30, 2000

Net Sales.  For the nine months ended September 30, 2001, net sales were $973.7 million, a decrease of 20 percent compared to $1.2 billion for the same period in 2000. This decrease was due to a 10 percent decrease in sales volumes and also an 11 percent lower overall average selling price, largely attributable to the vinyls business.

    Net sales of chlorovinyls for the first nine months of 2001 were $781.0 million, 21 percent lower than net sales for the first nine months of 2000 of $984.5 million. Sales volume decreased by 9 percent primarily as a result of a decrease in demand for vinyl resins and vinyl compounds. Lower average sales prices of 13 percent resulted from softening demand for vinyl products, particularly VCM, vinyl resins and vinyl compounds which more than offset a 168 percent increase in caustic soda prices.

    Net sales of aromatics for the first nine months of 2001 were $192.7 million, a decrease of 17 percent compared to $233.2 million for the same period in 2000. This decrease was primarily the result of a 14 percent deterioration in sales volumes and lower selling prices for cumene and acetone that more than offset higher phenol sales prices.

Cost of Sales.  Cost of sales for the first nine months of 2001 were $906.4 million, a decrease of 9 percent compared to $1.0 billion for the first nine months of 2000. Decreased sales volumes in the vinyls business were the primary cause of this decrease. Also contributing to the decrease were lower prices for propylene and chlorine. As a percentage of sales, cost of sales increased to 93 percent in the first nine months of 2001 compared to 83 percent in the first nine months of 2000. This increase was caused by increased energy costs and overall sales price decreases that outpaced the decreases of certain raw materials costs.

Selling and Administrative Expenses.  Selling and administrative expenses were $34.5 million for the nine months ended September 30, 2001, a decrease of 3 percent from the same period in 2000. This decrease is primarily attributable to lower profit sharing expenses for 2001 based on lowered earnings expectations offsetting increased legal expenses.

Operating Income.  Operating income in the first nine months of 2001 was $32.9 million, a decrease of 80 percent compared to $165.6 million in the first nine months of 2000. Lower operating income in chlorovinyls was the primary factor in the decrease. As a percentage of net sales, operating profit decreased to 3 percent of net sales in the first nine months of 2001 compared to 14 percent for the same period in 2000. Overall sales price decreases and increased energy costs outpaced decreases in raw material costs which primarily caused the decrease in operating profit as a percentage of net sales.

    Our chlorovinyls operating profit for the first nine months of 2001 was $56.0 million, a decrease of 70 percent compared to $187.8 million for the same period in 2000. The most significant factors in this decrease were a decline in vinyl resin sales prices and volume and increased energy costs, which were not offset by lower raw material costs and higher selling prices for caustic soda.

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    Our aromatics operating loss for the first nine months of 2001 was $10.4 million, a decrease of 3 percent compared to an operating loss of $10.7 million in the first nine months of 2000. This slight improvement was the result of phenol sales price increases and lower raw material costs, which were partially offset by lower sales volumes and an increase in natural gas costs.

Net Interest Expense.  Interest expense for the first nine months of 2001 was $43.9 million compared with $53.6 million for the same period in 2000. This decrease was primarily attributable to lower overall debt balances and lower interest rates.

(Benefit) Provision for Income Taxes.  Benefit from income taxes was $4.0 million for the first nine months of 2001 compared to a provision of $40.3 million for the same period of 2000. The benefit from income taxes was primarily attributable to the net loss generated for the first nine months of 2001 compared to net income generated for the first nine months of 2000.

Net (Loss) Income.  Net loss for the first nine months of 2001 was $7.0 million, a decrease of 110 percent from net income of $71.7 million in the first nine months of 2000. This was due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

    For the nine months ended September 30, 2001, we generated $32.6 million in cash flow from operating activities as compared to $141.5 million generated during the same period in 2000. The major source of cash flow for the first nine months of 2001 was the non-cash provision of $54.3 million for depreciation and amortization. Total working capital at September 30, 2001 was $84.8 million versus $94.9 million at December 31, 2000. Significant changes in working capital for the first nine months of 2001 included a decrease in trade accounts receivable, lower inventories and a decrease in accounts payable. The decrease in trade accounts receivable was primarily attributable to the decrease in net sales for the nine months ended September 30, 2001 versus the first nine months of 2000, which more than offset the $60.0 million increase in trade accounts receivable due to the termination of the asset securitization program (see Note 5 in the notes to condensed financial statements). Inventories decreased as a result of lower quantities kept on hand and lower raw material costs. The decrease in accounts payable was attributable to the timing of certain payments and lower trade payable balances related to decreased raw material prices. Significant changes in working capital for the first nine months of 2000 included a decrease in accounts receivable due to the sale of an additional $25.0 million of trade receivables under the asset securitization program, an increase in inventories due to higher raw material costs and higher quantities kept on hand, and an increase in accounts payable attributed 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 of its vinyls business in November 1999.

    Debt decreased by $6.0 million on the balance sheet during the nine months ended September 30, 2001 to $626.3 million. In addition, we satisfied our $60 million obligation in off-balance sheet financing when we terminated the asset securitization program. As of September 30, 2001, we had availability to borrow an additional $95.0 million under the revolving credit facility. Capital expenditures for the nine months ended September 30, 2001 were $15.7 million as compared to $15.1 million for the same 2000 period. Capital expenditures for the remainder of 2001 will be directed toward certain environmental projects and increased efficiency of existing operations. We estimate total capital expenditures for 2001 will be less than $25.0 million.

    We declared dividends of $0.24 per share or $7.6 million during the first nine months of 2001.

    On June 30, 2001, we entered into Amendment No. 2 to the Senior Credit Facility dated as of November 12, 1999. The amendment modified the existing financial covenants relating to leverage ratio

17

and interest coverage ratio through December 31, 2002. The amendment also increased the applicable interest margin in cases where the leverage ratio is greater than 5.0:1 by 25 basis points or .25 percent. We were required to pay an amendment fee equal to .25 percent of the sum of the revolving facility, outstanding term loans, and unused commitments on June 30, 2001.

    As noted in our 10-K for the year ended December 31, 2000, we had entered into an agreement pursuant to which we sold an undivided ownership interest in a pool of our trade receivables through a wholly owned subsidiary to a third party (the "Securitization" or "asset securitization program"). As collections satisfied accounts receivable in the pool, we distributed the proceeds to the purchaser and sold ownership interests in new receivables. On July 17, 2001 the sale of additional accounts receivable was restricted pursuant to a provision contained in our indenture governing our Senior Subordinated Notes. Therefore, we repurchased the outstanding interest ($60,000,000 as of July 17, 2001) in our receivables by utilizing the availability of the revolving portion of our Senior Credit Facility. On July 20, 2001 GGRC Corp., as Seller, and Georgia Gulf Corporation and Georgia Gulf Chemicals and Vinyls, LLC, as Initial Servicers, and Blue Ridge Funding Corporation, as Purchaser, and Wachovia Bank, N.A., as Administrative Agent terminated the Securitization. Pursuant to the termination agreement, we are permitted to request that the Securitization be reinstated (the "New Securitization") with identical terms and conditions upon written notice to, and subject to acceptance by, the administrative agent.

    Under our Senior Credit Facility and the indentures related to the 7⁵/8 percent notes and the 10³/8 percent notes, we are subject to certain restrictive covenants, the most significant of which require us to maintain certain financial ratios. Our ability to meet these covenants, 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 macroeconomic conditions and other factors, some of which are beyond our control. Management believes that based on current and anticipated levels of operations and conditions in our markets, cash flow from operations, together with our cash and cash equivalents of $5.2 million and the availability to borrow an additional $95.0 million under the revolving credit facility, at September 30, 2001, will be adequate for the foreseeable future to make required payments of principal and interest on our debt, meet certain restrictive covenants which require us to maintain certain financial ratios, and fund our working capital and capital expenditure requirements.

    During June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for by a single method—the purchase method. SFAS No. 142 requires companies to cease amortizing existing (as of June 30, 2001) goodwill on December 31, 2001. SFAS No. 142 also prohibits the amortization of goodwill resulting from acquisitions completed after June 30, 2001. Additionally, SFAS No. 142 specifies that companies will be required to periodically test existing goodwill and some intangible assets for asset impairment. The Company is currently evaluating the financial statement impact of SFAS No. 142.

    During June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that a liability for an asset retirement obligation be recognized in the period incurred at fair value, if a reasonable estimate of fair value can be made. Any associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company will adopt SFAS No. 143 on January 1, 2003. Management does not believe the adoption of SFAS 143 will have a material effect on our consolidated financial statements.

    During August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 clarifies financial accounting and reporting for assets held for sale, scheduled for abandonment or other disposal, and recognition of impairment losses related to the

18

carrying value of long-lived assets. The Company will adopt SFAS 144 on January 1, 2002. Management does not believe the adoption of SFAS 144 will have a material effect on our consolidated financial statements.

    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

    Overall, we expect business conditions to worsen further in the fourth quarter compared to the third quarter. We expect our products and performance to be negatively impacted when compared to the third quarter.

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, 2000.

    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, 2000. 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 3 to the financial statements included herein.

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PART II. OTHER INFORMATION.

    Item 1. Legal Proceedings.

    We are involved in certain legal proceedings that are described in our 2000 Annual Report on Form 10-K. During the three months ended September 30, 2001, there were no material developments in the status of those legal proceedings that have not been previously disclosed in our 2000 Annual Report on Form 10-K.

    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 2001.

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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GEORGIA GULF CORPORATION (Registrant)
Date  November 13, 2001	/s/ EDWARD A. SCHMITT   Edward A. Schmitt President and Chief Executive Officer (Principal Executive Officer)
Date  November 13, 2001	/s/ RICHARD B. MARCHESE   Richard B. Marchese Vice President Finance, Chief Financial Officer and Treasurer (Principal Financial Officer)

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QuickLinks

GEORGIA GULF CORPORATION FORM 10-Q QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 INDEX
GEORGIA GULF CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
GEORGIA GULF CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
GEORGIA GULF CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Balance Sheet September 30, 2001 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Balance Sheet December 31, 2000 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Income Three Months Ended September 30, 2001 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Income Three Months Ended September 30, 2000 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Income Nine Months Ended September 30, 2001 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Income Nine Months Ended September 30, 2000 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2001 (In thousands)
Georgia Gulf Corporation and Subsidiaries Supplemental Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2000 (In thousands)

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
OUTLOOK
FORWARD-LOOKING STATEMENTS

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 1. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K.

SIGNATURES