Exhibit 99.1
| | NEWS |
Georgia Gulf Reports First Quarter 2009 Financial Results
ATLANTA, GEORGIA — May 15, 2009 — Georgia Gulf Corporation (NYSE: GGC) today announced financial results for its first quarter ended March 31, 2009.
Georgia Gulf reported net sales of $407.3 million for the first quarter of 2009 compared to net sales of $712.5 million for the first quarter of 2008. The decrease in sales is primarily due to lower prices driven by lower feedstock and energy costs and lower volumes due to extremely difficult North American housing and construction market conditions, partially offset by higher Electrochemical Unit (ECU) values.
Georgia Gulf reported net income of $48.3 million or $1.39 per diluted share for the first quarter of 2009, compared to a net loss of $69.5 million or $2.08 loss per diluted share during the same quarter in the previous year. The first quarter of 2009 net income includes a $121.0 million pre-tax gain for the substantial modification of the Company’s $349.5 million term loan as a result of the fifth amendment to the senior secured credit agreement. The Company also recorded $8.0 million of restructuring costs during the quarter ended March 31, 2009. The net loss in the first quarter of 2008 includes a write-down for the closing of the Oklahoma City, Oklahoma PVC resin plant, costs related to the sale of the outdoor storage buildings business, and other restructuring actions totaling $26.1 million. Excluding these items, the net loss for the first quarter of 2009 was $35.2 million compared to a net loss of $49.3 million in the first quarter of 2008.
“As we are all aware, market conditions in both the U.S. and Canada deteriorated further and led to lower sales volumes in most of our businesses in the quarter. We largely offset the negative impact to first quarter operating income through the aggressive cost reduction actions we took in 2008. In addition, we implemented additional cost reduction actions in the first quarter of 2009 and will aggressively pursue further cost reductions throughout the year” commented Paul Carrico, Georgia Gulf’s President and CEO. “I am appreciative of, and want to acknowledge, our employees for their continued cost reduction efforts and their focus on serving the needs of our customers.”
Chlorovinyls
In the Chlorovinyls segment, first quarter 2009 sales decreased to $241.7 million from $341.2 million during the first quarter of 2008. The segment posted operating income of $20.5 million compared to an operating loss of $2.1 million during the same quarter in the prior year. The increase in operating income was primarily due to higher ECU values and lower raw material costs, and shut down costs of approximately $15.6 million related to the closure of the Oklahoma City, OK facility recognized in the same period last year, partially offset by lower sales volumes and a scheduled caustic/chlorine plant turnaround in the first quarter of 2009.
Window & Door Profiles and Mouldings
In the Window & Door Profiles and Mouldings segment, sales were $50.7 million for the first quarter of 2009, compared to $85.8 million during the same quarter in the prior year. Sales on a constant currency basis declined 35 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 loss was $17.6 million for the first quarter of 2009, compared to an operating loss of $13.8 million during the same quarter in the prior year. The decrease in operating income is primarily the result of lower sales volumes, partially offset by cost reductions.
Outdoor Building Products
In the Outdoor Building Products segment, sales were $63.4 million for the first quarter of 2009, compared to $97.5 million during the same quarter in the prior year. Sales on a constant currency basis declined 27 percent. The decrease in sales reflects the extremely difficult conditions in the North American housing and construction markets and the sales associated with the outdoor storage buildings business recognized in the same quarter last year prior to the sale of that business in March 2008. The segment reported an operating loss of $16.7 million for the first quarter of 2009, compared to an operating loss of $20.0 million during the same quarter in the prior year. The reduction in the operating loss is due to the exit costs of $4.6 million primarily related to the sale of the outdoor storage buildings business recognized in the same period last year, partially offset by lower sales volumes.
Aromatics
In the Aromatics segment, sales decreased to $51.5 million for the first quarter of 2009 from $188.0 million during the first quarter of 2008. The decrease in sales was driven by a 59 percent decline in sales price and a 66 percent decline in both phenol and acetone sales volumes, partially offset by a 12 percent increase in cumene volumes. The phenol and acetone sales volume decrease is due to extremely difficult conditions in the North American housing and construction markets. During the first quarter of 2009, the segment recorded operating income of $0.5 million, compared to operating income of $0.2 million during the same period last year. The increase in operating income was driven by stronger margins resulting from lower raw materials costs, partially offset by lower sales prices and volumes than the same period last year.
Liquidity Update
As of March 31, 2009, the Company had about $100.9 million of liquidity, consisting of $65.0 million of cash on hand as well as $35.9 million of borrowing capacity available under its revolving credit facility. Additionally, as of March 31, 2009, the Company had $81.4 million, or 47 percent outstanding under the new $175 million accounts receivables securitization facility. On May 11, 2009 the Company announced a bank amendment that allows the Company to continue to withhold certain interest payments until June 15, 2009 without constituting a default under the senior secured credit agreement. On May 13, 2009 the Company announced forbearance agreements were reached with the requisite percentages of note holders for all three issues of unsecured notes in which those parties agree to not seek remedies related to the withheld interest payments until June 15, 2009.
Upon expiration of these forbearances on June 15, 2009, an acceleration of indebtedness under any issue of the notes would constitute cross defaults under the Company’s other note issues and its senior secured credit agreement, permitting the holders of such debt to accelerate. In the event of any such acceleration, the Company would be required to immediately explore alternatives which could include a potential reorganization or restructuring under the bankruptcy laws.
Due to the uncertainty of obtaining adequate future forbearance agreements or acceptable terms for the restructuring of the Company’s indebtedness under the notes and the resulting possibility of the holders of the 2014 notes and 2016 notes accelerating the maturity of those notes and thereby triggering the cross default provisions of the 2013 notes and the senior secured credit agreement, the Company has classified the 2014 notes, 2016 notes, 2013 notes and the senior secured credit facility as current portion of long-term debt.
Gain on Substantial Modification of Debt
The Company reported a $121.0 million gain on substantial modification of debt in accordance with the provisions of EITF No. 96-19, “Debtor ‘s Accounting for a Modification or Exchange of Debt Instruments.” Because the fifth amendment of the senior secured credit agreement received March 17, 2009 was within one year of the fourth amendment received in September 2008, the combination of these amendments resulted in a substantial modification of the Company’s debt as defined in EITF 96-19. The modification resulted in the recording of the newly modified debt at its estimated fair value of $207.1 million and the removal of the original debt carrying value of $349.5 million and the write-off of previously deferred financing costs of $21.4 million, resulting in a gain of $121.0 million. The recording of new debt at its estimated fair value of $207.1 million will result in additional non-cash interest accretion expense of approximately $13.5 million in 2009.
Conference Call
The Company will discuss first quarter 2009 financial results and business developments via conference call and Webcast on Monday, May 18, 2009 at 10:00 a.m. ET. To access the Company’s first 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=2226520. Playbacks will be available from 12:00 p.m. ET Monday, May 18, to midnight ET Monday, May 25. Playback numbers are (800) 642-1687 (domestic) or (706) 645-9291 (international). The conference call ID number is 10356458.
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 our ability to restructure our indebtedness, including our $800 million in outstanding notes, continued compliance with covenants in our credit facility, our ability to negotiate covenant relief and waivers from our lenders under the credit facility and availability of funds thereunder, 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, uncertainties relating to Royal Group’s business and liabilities 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 March 31, 2009.
Use of Non-GAAP Measures
1. Adjusted EBITDA
Georgia Gulf supplements its earnings release with Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization, cash and non-cash restructuring, gain on substantial modification of debt and sales of assets, and goodwill, intangibles, and other long-lived asset impairment) because investors and management commonly use Adjusted EBITDA to measure the Company’s ability to service its indebtedness. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income as a measure of performance or to cash provided by operating activities as a measure of liquidity. In addition, our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.
A reconciliation of operating income (loss) determined in accordance with GAAP to Adjusted EBITDA is included in this release.
CONTACTS:
Georgia Gulf Corporation
Investor Relations:
Martin Jarosick
(770) 395-4524
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data) | | March 31,
2009 | | December 31,
2008 | |
ASSETS | | | | | |
Cash and cash equivalents | | $ | 64,971 | | $ | 89,975 | |
Receivables, net of allowance for doubtful accounts of $14,155 in 2009 and $12,307 in 2008 | | 141,686 | | 117,287 | |
Inventories | | 216,465 | | 240,199 | |
Prepaid expenses | | 31,820 | | 21,360 | |
Income tax receivables | | 4,228 | | 2,264 | |
Deferred income taxes | | 22,100 | | 22,505 | |
Total current assets | | 481,270 | | 493,590 | |
Property, plant and equipment, net | | 738,468 | | 760,760 | |
Goodwill | | 186,110 | | 189,003 | |
Intangible assets, net of accumulated amortization of $10,241 in 2009 and $9,988 in 2008 | | 15,590 | | 15,905 | |
Other assets, net | | 141,039 | | 150,643 | |
Non-current assets held for sale | | 1,625 | | 500 | |
Total assets | | $ | 1,564,102 | | $ | 1,610,401 | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | |
Current portion of long-term debt | | $ | 1,192,072 | | $ | 56,843 | |
Accounts payable | | 92,575 | | 105,052 | |
Interest payable | | 35,137 | | 16,115 | |
Income taxes payable | | 3,206 | | 3,476 | |
Accrued compensation | | 11,818 | | 9,890 | |
Liability for unrecognized income tax benefits and other tax reserves | | 27,189 | | 27,334 | |
Other accrued liabilities | | 49,585 | | 49,693 | |
Total current liabilities | | 1,411,582 | | 268,403 | |
Long-term debt | | 103,577 | | 1,337,307 | |
Liability for unrecognized income tax benefits | | 34,096 | | 34,592 | |
Deferred income taxes | | 76,256 | | 70,141 | |
Other non-current liabilities | | 35,986 | | 39,886 | |
Total liabilities | | 1,661,497 | | 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; 75,000,000 shares authorized; shares issued and outstanding: 34,628,589 in 2009 and 34,481,827 in 2008 | | 346 | | 345 | |
Additional paid-in capital | | 105,303 | | 105,484 | |
Accumulated deficit | | (170,218 | ) | (218,502 | ) |
Accumulated other comprehensive loss, net of tax | | (32,826 | ) | (27,255 | ) |
Total stockholders’ deficit | | (97,395 | ) | (139,928 | ) |
Total liabilities and stockholders’ deficit | | $ | 1,564,102 | | $ | 1,610,401 | |
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended
March 31, | |
(In thousands, except per share data) | | 2009 | | 2008 | |
Net sales | | $ | 407,331 | | $ | 712,460 | |
Operating costs and expenses: | | | | | |
Cost of sales | | 392,322 | | 683,387 | |
Selling, general and administrative expenses | | 32,676 | | 47,757 | |
Long-lived asset impairment charges | | — | | 15,987 | |
Restructuring costs | | 8,037 | | 6,141 | |
Loss on sale of assets, net | | — | | 3,957 | |
Total operating costs and expenses | | 433,035 | | 757,229 | |
Operating loss | | (25,704 | ) | (44,769 | ) |
Gain on substantial modification of debt | | 121,033 | | — | |
Interest expense, net | | (35,172 | ) | (32,640 | ) |
Foreign exchange gain (loss) | | 22 | | (168 | ) |
Income (loss) before income taxes | | 60,179 | | (77,577 | ) |
Provision (benefit) for income taxes | | 11,894 | | (8,082 | ) |
Net income (loss) | | $ | 48,285 | | $ | (69,495 | ) |
Earnings (loss) per share: | | | | | |
Basic | | $ | 1.39 | | $ | (2.08 | ) |
Diluted | | $ | 1.39 | | $ | (2.08 | ) |
Weighted average common shares: | | | | | |
Basic | | 34,627 | | 34,401 | |
Diluted | | 34,627 | | 34,401 | |
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Three Months Ended March 31, | |
(In thousands) | | 2009 | | 2008 | |
Cash flows from operating activities: | | | | | |
Net income (loss) | | $ | 48,285 | | $ | (69,495 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | |
Depreciation and amortization | | 31,344 | | 38,802 | |
Gain on substantial modification of debt | | (121,033 | ) | — | |
Foreign exchange loss | | 1,924 | | — | |
Deferred income taxes | | 10,680 | | (2,518 | ) |
Tax deficiency related to stock plans | | (1,032 | ) | (830 | ) |
Stock based compensation | | 878 | | 1,462 | |
Long-lived asset impairment charges and loss on sale of assets | | — | | 19,323 | |
Payment of Quebec trust tax settlement | | — | | (20,073 | ) |
Other non-cash items | | (636 | ) | (241 | ) |
Change in operating assets, liabilities and other | | (8,062 | ) | 2,511 | |
Net cash used in operating activities | | (37,652 | ) | (31,059 | ) |
Cash flows from investing activities: | | | | | |
Capital expenditures | | (12,525 | ) | (17,172 | ) |
Proceeds from sale of property, plant and equipment, and assets held-for sale | | 421 | | 12,285 | |
Proceeds from insurance recoveries related to property, plant and equipment | | 1,958 | | — | |
Deposit on sale of real estate | | — | | 12,583 | |
Net cash (used in) provided by investing activities | | (10,146 | ) | 7,696 | |
Cash flows from financing activities: | | | | | |
Net change in revolving line of credit | | 46,967 | | 30,050 | |
Repayment of long-term debt | | (908 | ) | (1,091 | ) |
Purchases and retirement of common stock | | (25 | ) | (110 | ) |
Fees paid to amend debt | | (22,372 | ) | — | |
Dividends paid | | — | | (2,795 | ) |
Net cash provided by financing activities | | 23,662 | | 26,054 | |
Effect of exchange rate changes on cash and cash equivalents | | (868 | ) | 180 | |
Net change in cash and cash equivalents | | (25,004 | ) | 2,871 | |
Cash and cash equivalents at beginning of period | | 89,975 | | 9,227 | |
Cash and cash equivalents at end of period | | $ | 64,971 | | $ | 12,098 | |
GEORGIA GULF CORPORATION AND SUBSIDARIES
SEGMENT INFORMATION
(Unaudited)
| | Three Months Ended | |
| | March 31, | |
In Thousands | | 2009 | | 2008 | |
| | | | | |
Segment net sales: | | | | | |
Chlorovinyls | | $ | 241,738 | | $ | 341,177 | |
Window and door profiles and mouldings products | | 50,685 | | 85,769 | |
Outdoor building products | | 63,403 | | 97,506 | |
Aromatics | | 51,505 | | 188,008 | |
Net Sales | | $ | 407,331 | | $ | 712,460 | |
| | | | | |
Segment operating income (loss): | | | | | |
Chlorovinyls | | $ | 20,516 | (1) | $ | (2,102 | )(5) |
Window and door profiles and mouldings products | | (17,552 | )(2) | (13,823 | )(6) |
Outdoor building products | | (16,727 | )(3) | (19,977 | )(7) |
Aromatics | | 474 | | 227 | |
Unallocated corporate | | (12,415 | )(4) | (9,094 | ) |
Total operating (loss) income | | $ | (25,704 | ) | $ | (44,769 | ) |
(1) Includes $2.0 million of restructuring costs
(2) Includes $1.2 million of restructuring costs
(3) Includes $2.3 million of restructuring costs
(4) Includes $2.5 million of restructuring costs
(5) Includes $16.0 million of long-lived asset impairment charges
(6) Includes $1.1 million of restructuring costs and $1.2 million of losses on sale of assets
(7) Includes $4.6 million of restructuring costs and $2.1 million of losses on sale of assets
Reconciliation of Operating Income (Loss) to Adjusted EBITDA
Three months ended March 31, 2009
| | Q1’09 | | | | | | | | Depreciation | | Long | | | | | | Operating | |
| | Adjusted | | Gain on debt | | Cash | | Q1’09 | | and | | Lived Asset | | Non-Cash | | | | Income | |
(In Millions) | | EBITDA | | modification | | Restructuring | | EBITDA | | Amortization | | Impairment | | Restructuring | | Other | | (Loss) | |
| | | | | | | | | | | | | | | | | | | |
Chlorovinyls | | $ | 38.7 | | $ | — | | $ | (2.0 | ) | $ | 36.7 | | $ | (16.2 | ) | $ | 0.0 | | $ | 0.0 | | $ | 0.0 | | $ | 20.5 | |
Window & Door and Mouldings | | $ | (9.6 | ) | — | | (1.2 | ) | (10.8 | ) | (6.8 | ) | 0.0 | | 0.0 | | 0.0 | | (17.6 | ) |
Outdoor Building Products | | $ | (11.8 | ) | — | | (2.3 | ) | (14.1 | ) | (2.6 | ) | 0.0 | | 0.0 | | 0.0 | | (16.7 | ) |
Aromatics | | $ | 1.5 | | — | | 0.0 | | 1.5 | | (1.1 | ) | 0.0 | | 0.0 | | 0.0 | | 0.4 | |
Unallocated Corporate & Non-operating expenses, net | | (7.9 | ) | 121.0 | | (2.5 | ) | 110.6 | | (4.0 | ) | 0.0 | | 0.0 | | (119.0 | )(a) | (12.4 | ) |
Total | | $ | 10.9 | | $ | 121.0 | | $ | (8.0 | ) | $ | 123.9 | | $ | (30.7 | ) | $ | 0.0 | | $ | 0.0 | | $ | (119.0 | )(a) | $ | (25.8 | ) |
(a) “Other” amount includes $2.0 million for debt cost amortization plus $121.0 million for gain on Term B fair value adjustment.
Three months ended March 31, 2008
| | Q1’08 | | | | | | | | Depreciation | | Long | | | | | | Operating | |
| | Adjusted | | Gain on debt | | Cash | | Q1’08 | | and | | Lived Asset | | Non-Cash | | | | Income | |
(In Millions) | | EBITDA | | modification | | Restructuring | | EBITDA | | Amortization | | Impairment | | Restructuring | | Other | | (Loss) | |
| | | | | | | | | | | | | | | | | | | |
Chlorovinyls | | $ | 34.5 | | $ | — | | $ | (0.4 | ) | $ | 34.1 | | $ | (19.6 | ) | $ | (16.0 | ) | $ | 0.0 | | $ | (0.6 | ) | $ | (2.1 | ) |
Window & Door and Mouldings | | $ | 0.2 | | — | | (1.1 | ) | (0.9 | ) | (11.7 | ) | 0.0 | | 0.0 | | (1.2 | ) | (13.8 | ) |
Outdoor Building Products | | $ | (9.2 | ) | — | | (0.7 | ) | (9.9 | ) | (4.1 | ) | 0.0 | | (3.9 | ) | (2.1 | ) | (20.0 | ) |
Aromatics | | $ | 1.9 | | — | | 0.0 | | 1.9 | | (1.7 | ) | 0.0 | | 0.0 | | 0.0 | | 0.2 | |
Unallocated Corporate & Non-operating expenses, net | | $ | (9.0 | ) | — | | 0.0 | | (9.0 | ) | (1.6 | ) | 0.0 | | 0.0 | | 1.5 | | (9.1 | ) |
Total | | $ | 18.4 | | — | | $ | (2.2 | ) | $ | 16.2 | | $ | (38.7 | ) | $ | (16.0 | ) | $ | (3.9 | ) | $ | (2.4 | )(b) | $ | (44.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) “Other” amount includes $1.5 million for debt cost amortization netted with $3.9 million loss on sale of fixed assets.
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