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 June 30, 1996
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 58-1563799
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Perimeter Center Terrace, Suite 595
Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(770) 395-4500
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.
Outstanding as of
Class August 12, 1996
Common Stock, $0.01 par value................34,908,712 shares
GEORGIA GULF CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
Page Numbers
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 1996 and
December 31, 1995 1
Condensed Consolidated Statements of
Income for the three and six months ended
June 30, 1996 and 1995 2
Condensed Consolidated Statements of
Cash Flows for the six months
ended June 30, 1996 and 1995 3
Notes to Condensed Consolidated Financial
Statements as of June 30, 1996 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5-7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1996 1995
Assets
Current assets
Cash and cash equivalents $807 $2,530
Receivables 101,606 89,414
Inventories 77,878 75,049
Prepaid expenses 15,569 12,108
Deferred income taxes 8,115 8,115
Total current assets 203,975 187,216
Property, plant and equipment, at cost 582,704 534,264
Less accumulated depreciation 234,772 221,728
Property, plant and equipment, net 347,932 312,536
Other assets 6,631 7,580
Total assets $558,538 $507,332
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $99,854 $78,861
Interest payable 2,857 2,737
Accrued income taxes 749 3,296
Accrued compensation 5,899 14,715
Accrued pension 2,640 2,307
Other accrued liabilities 17,937 11,930
Total current liabilities 129,936 113,846
Long-term debt 348,500 292,400
Deferred income taxes 53,010 50,458
Stockholders' equity
Common stock - $0.01 par value 358 372
Additional paid-in capital -- 31,312
Retained earnings 26,734 18,944
Total stockholders' equity 27,092 50,628
Total liabilities and
stockholders' equity $558,538 $507,332
Common shares outstanding 35,804,487 37,240,252
See notes to condensed consolidated financial statements.
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Net sales $231,387 $275,833 $439,423 $589,859
Operating costs and expenses
Cost of sales 184,294 174,073 351,412 369,912
Selling and administrative 10,926 12,273 21,734 23,856
Total operating costs and expenses 195,220 186,346 373,146 393,768
Operating income 36,167 89,487 66,277 196,091
Other income (expense)
Interest, net (5,080) (6,973) (9,722) (15,685)
Income before income taxes 31,087 82,514 56,555 180,406
Provision for income taxes 11,801 31,721 21,463 69,456
Net income $19,286 $50,793 $35,092 $110,950
Net income per common share $0.52 $1.30 $0.94 $2.74
Weighted average common shares
and equivalents outstanding 36,969,074 39,028,538 37,312,728 40,435,708
See notes to condensed consolidated financial statements.
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Six Months Ended
June 30,
1,996 1,995
Cash flows from operating activities:
Net income $35,092 $110,950
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 17,905 16,114
Change in assets, liabilities and other 75 32,248
Net cash provided by operating activities 53,072 159,312
Cash flows from financing activities:
Net change in revolving credit loan 52,100 95,000
Proceeds from issuance of long-term debt 4,000 104,000
Principal payments on long-term debt -- (191,081)
Proceeds from issuance of common stock 1,374 911
Purchase and retirement of common stock (56,134) (128,774)
Dividends paid (5,852) (6,258)
Net cash used in financing activities (4,512) (126,202)
Cash flows from investing activities:
Capital expenditures (56,345) (31,704)
Net proceeds from the sale of assets 6,062 --
Net cash used in investing activities (50,283) (31,704)
Net change in cash and cash equivalents (1,723) 1,406
Cash and cash equivalents at beginning of period 2,530 1,216
Cash and cash equivalents at end of period $807 $2,622
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles 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 generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included.
Operating results for Georgia Gulf Corporation and its subsidiaries
("the Company") for the three- and six-month periods ended June 30,
1996, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report for the year
ended December 31, 1995.
NOTE 2: INVENTORIES
The major classes of inventories were as follows (in thousands):
June 30, December 31,
1996 1995
Raw materials and supplies $ 29,995 $ 23,973
Finished goods 47,883 51,076
$ 77,878 $ 75,049
NOTE 3: STOCKHOLDERS' EQUITY
The Company purchased 1,672,200 shares of its common stock for
$56,134,000 during the six months ended June 30, 1996. As of June 30,
1996, the Company had authorization to purchase up to 1,127,000
additional shares under the current common stock repurchase program.
NOTE 4: DISPOSITION
In April 1996, the Company completed the sale of its Delaware City,
Delaware facility, and its emulsion resin business. Under the terms of
the sale agreement, the Company has the right to continue to operate
its vinyl compound assets located at the Delaware City facility for an
eighteen-month period. During this period, the majority of the
Delaware City vinyl compound production will be transferred to the
Company's recently expanded vinyl compound plant in Gallman,
Mississippi. It is the Company's intention to complete this transition
by the end of the third quarter of 1996. The proceeds from the sale
approximated the net book value of the disposed assets.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Second Quarter of 1996 Compared with the Second Quarter of 1995:
For the second quarter ended June 30, 1996, net income per common share
was $0.52 on net income of $19.3 million and net sales of $231.4
million. This compares to net income per common share of $1.30, net
income of $50.8 million and net sales of $275.8 million for the second
quarter of 1995.
Operating income for the second quarter of 1996 was $36.2 million, a
decrease of 60 percent from $89.5 million for the same period in 1995.
Sales pricing for nearly all of the Company's products was lower for
the second quarter of 1996 as compared to prior year levels with the
sharpest declines occurring in the Company's vinyl products chain.
Sales volumes were slightly lower for the second quarter of 1996 as
compared to the second quarter of 1995 as a result of both scheduled
and unscheduled downtime in operations.
Selling and administrative expenses were $10.9 million for the second
quarter of 1996, compared to $12.3 million for the same period in 1995.
This decrease was primarily attributable to reduced charges relating to
the Company's profit sharing programs for the second quarter of 1996 as
a result of lower profits.
Net interest expense declined $1.9 million when comparing the second
quarter of 1996 to the same period in 1995. This decline was mainly
attributable to reduced interest rates in connection with the
redemption of the Company's 15% Senior Subordinated Notes early in the
second quarter of 1995.
Six Months ended June 30, 1996, Compared with Six Months Ended June 30,
1995
For the six months ended June 30, 1996, net income per common share was
$0.94 on net income of $35.1 million and net sales of $439.4 million.
This compares to net income per common share of $2.74, net income of
$111.0 million, and net sales of $589.9 million for the same period in
1995.
Operating income for the six months ended June 30, 1996 was $66.3
million, a decrease of 66 percent from $196.1 million for the same
period in 1995. This decrease resulted from declines in sales pricing
for nearly all of the Company's products. The sharpest declines
occurred in the Company's vinyl products chain and from the lower
methanol pricing in 1996 as compared to the record high levels during
the early part of 1995. Sales volumes were also lower in 1996 as a
result of scheduled and unscheduled downtime attributable to the tie-in
of the cumene expansion project and weather-related problems.
Selling and administrative expenses were $21.7 million for the six
months ended June 30, 1996, compared to $23.9 million for the same
period in 1995. This decrease resulted primarily from reduced charges
relating to the Company's profit sharing programs for the six months
ended June 30, 1996. These reduced charges were offset in part by
increased costs in 1996 associated with the revolving trade receivables
sales program which began during the second quarter of 1995.
Net interest expense declined $6.0 million when comparing the first six
months of 1996 to the same period in 1995. This decline was
attributable to reduced interest rates in connection with the
redemption of the Company's 15% Senior Subordinated Notes early in the
second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, $53.1 million of cash was
generated by operating activities as compared to $159.3 million for the
six months ended June 30, 1995. This reduction in cash flow resulted
from lower net income in 1996 and working capital fluctuations in 1995.
The majority of the change in working capital in 1995 was attributable
to a $50.0 million sale of trade receivables under the revolving trade
receivables sales program offset in part by a decrease in accrued
income taxes.
Debt increased by $56.1 million during the six months ended June 30,
1996, to a level of $348.5 million which consisted of a $100 million
ten-year public bond issue, a $100 million seven-year term loan, an
outstanding balance of $122.5 million under a $350 million revolving
credit loan and two additional loans with an aggregate balance of $26.0
million.
Capital expenditures for the six months ended June 30, 1996, were $56.3
million as compared to $31.7 million for the same 1995 period. Major
capital projects completed during the first half of 1996 included a
vinyl compound expansion in Gallman, Mississippi and a modernization
and expansion of the Pasadena, Texas cumene plant. Additional projects
currently under construction include a vinyl chloride monomer ("VCM")
expansion scheduled for completion during the fourth quarter of 1996,
an air separation plant also scheduled to come on-line during the
fourth quarter of 1996, and an expansion of the phenol\acetone plant
scheduled to be completed in early 1997. The Company estimates that
capital expenditures for 1996 will approximate $130.0 million.
Although not part of the Company's capital expenditure program, a 250
megawatt co-generation facility is also being constructed at the
Plaquemine, Louisiana complex. The co-generation facility, which will
be leased by the Company under an operating lease agreement, is
scheduled for completion during the third quarter of 1997.
The Company declared dividends of $0.16 per share or $5.9 million
during the first six months of 1996. The Company also purchased 1.672
million shares of its common stock at a cost of $56.1 million. As of
June 30, 1996, the Company had authorization to purchase up to 1.127
million additional shares under the current stock repurchase program.
Management believes that cash provided by operations and the
availability under the Company's current debt agreements will provide
sufficient funds to support planned capital expenditures, dividends,
stock repurchases, working capital fluctuations, and debt service
requirements.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held May 21,
1996, in Atlanta, Georgia, for the following purposes: (I) to elect
three directors to serve for a term of three years; (ii) to consider
and take action to approve and adopt the Company's Employee Stock
Purchase Plan; and (iii) to consider and take action upon the
ratification of the selection of Arthur Andersen LLP to serve as
independent public accountants for the Company for the year ending
December 31, 1996.
The results of the voting by stockholders at the annual meeting
were as follows:
Broker Non-Votes
Director For Withheld or Abstentions
Robert E. Flowerree ..... 32,230,031 1,074,857 0
Holcombe T. Green, Jr. .. 31,904,163 1,400,725 0
James R. Kuse ........... 32,240,049 1,064,839 0
The Company's Employee Stock Purchase Plan was approved and
adopted by the following votes:
For Against Abstain Broker Non-Votes
29,485,048 3,730,504 89,336 0
The selection of Arthur Andersen LLP to serve as independent
public accountants for the Company for the year ending December 31,
1996, was ratified by the following votes:
For Against Abstain Broker Non-Votes
33,253,848 10,590 40,450 0
Item 6. Exhibits and Reports on Form 8-K
a) No exhibits are filed as part of this Form 10-Q Quarterly Report.
b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the second quarter of 1996.
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 August 13, 1996 /s/ Jerry R. Satrum
Jerry R. Satrum
President and Chief
Executive Officer
(Principal Executive Officer)
Date August 13, 1996 /s/ Richard B. Marchese
Richard B. Marchese
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer)