Georgia Gulf Corporation (NYSE: GGC) today announced financial results
for its second quarter ended June 30, 2011.
The company reported net sales of $831.7 million for the second quarter
of 2011, 13 percent higher than the net sales of $735.7 million reported
in the second quarter of 2010. Georgia Gulf reported operating income of
$35.5 million for the second quarter of 2011 compared to operating
income of $37.9 million for the second quarter of 2010. Operating income
was reduced primarily by lower chlorovinyls sales volumes and higher raw
materials costs, partially offset by higher ECU values.
Georgia Gulf reported net income of $14.6 million, or $0.42 per diluted
share, for the second quarter of 2011, compared to net income of $21.7
million, or $0.62 per diluted share, during the same quarter in the
previous year.
"Our operating income improved more than $44 million for the first half
of 2011 compared to the same period in 2010. These results were achieved
despite the challenges presented by the unplanned chloralkali outage as
well as the logistical and production issues due to high water on the
Mississippi River System in the second quarter," said Paul Carrico,
president and chief executive officer.
"With these unplanned events behind us, we expect our results for the
second half of 2011 to reflect the broader North American chemicals
industry recovery that is being driven by North America's natural gas
advantage and global demand," Carrico said. "The macroeconomic
expectations that led us to increase our 2011 adjusted EBITDA guidance
to a range of $275-295 million remain intact. Longer term, we also
believe that our building products business is well positioned to take
advantage of the eventual recovery in both the economy and housing."
Chlorovinyls
In the Chlorovinyls segment, second quarter 2011 net sales increased to
$323.7 million from $300.8 million during the second quarter of 2010.
The segment posted operating income of $37.8 million, compared to
operating income of $36.2 million during the same quarter in the prior
year. The increase in net sales and operating income was primarily due
to higher caustic soda and resin sales prices compared to the second
quarter of 2010, mostly offset by lower caustic soda and PVC sales
volumes resulting from the unplanned chloralkali outage and resulting
PVC force majeure, and logistical issues due to high water on the
Mississippi River System. The company's chloralkali production returned
to full capacity in June and the PVC force majeure announced in
mid-April was lifted in early July. Operating income for the second
quarter of 2011 includes a $1.2 million restructuring benefit from the
disposition of equipment at the Oklahoma City PVC plant that was closed
in 2008.
Building Products
In the Building Products segment, net sales were $274.2 million for the
second quarter of 2011 compared to the $243.2 million recorded during
the same quarter in the prior year. Net sales on a constant currency
basis increased 9 percent. This sales increase was driven by the benefit
of the sales volumes resulting from the Exterior Portfolio acquisition
in February 2011. The segment's operating income was $16.9 million for
the second quarter of 2011, compared to $18.7 million of operating
income during the same quarter the prior year. The decrease in operating
income was primarily due to a less favorable geographic and product
sales mix, a second quarter 2010 non-income tax benefit which did not
re-occur in the second quarter of 2011, and higher SG&A costs primarily
related to new product introductions. Operating income for the second
quarter of 2011 includes a $0.4 million restructuring expense related to
the Exterior Portfolio acquisition.
Aromatics
In the Aromatics segment, net sales increased to $233.9 million for the
second quarter of 2011 from $191.6 million during the second quarter of
2010. The increase was primarily due to higher sales prices, partially
offset by lower sales volumes. During the second quarter of 2011, the
segment recorded an operating loss of $7.4 million, compared to an
operating loss of $7.8 million during the same quarter in 2010. The
decrease in operating loss was primarily due to improved margins, mostly
offset by lower sales volumes, inventory holding losses and higher
maintenance expense due to the two planned turnarounds during the
quarter and logistical issues due to high water on the Mississippi River
System.
Liquidity
As of June 30, 2011, the company had $41.7 million of cash on hand as
well as $173.2 million of borrowing capacity available under its
asset-backed loan (ABL) facility. As of the end of the second quarter of
2011, liquidity had decreased by approximately $31.6 million compared to
the end of the first quarter of 2011 primarily due to the seasonal
increase in working capital needs of the business and rising raw
materials costs.
Conference Call
The company will discuss second quarter financial results and business
developments via conference call and webcast on Thursday, August 4, at
10:00 a.m. Eastern time. To access the company's second-quarter
conference call, please dial (877) 312-5406 (domestic) or (706) 679-9856
(international). To access the conference call via webcast, log on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=112207&eventID=4162624.
Playbacks will be available from 1:00 p.m. Eastern time on Thursday,
August 4, until 11:59 p.m. Eastern time on Thursday, August 18. Playback
numbers are (855) 859-2056 (domestic) or (706) 679-9856 (international).
The conference call ID number is 86006423.
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 the Royal Group and Exterior Portfolio 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. For more information,
visit www.ggc.com.
Safe Harbor
This news release contains forward-looking statements subject to the
"safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995 and other federal securities laws. These forward looking
statements relate to, among other things, our sales and adjusted EBITDA
guidance for 2011, and expectations of future results. Forward-looking
statements are based on management's assumptions regarding, among other
things, general economic and industry-specific business conditions, as
well as the execution of our business strategy, and actual results may
be materially different. Risks and uncertainties inherent in these
assumptions include, but are not limited to, uncertainties regarding
future prices for our products, industry capacity levels for our
products, raw materials and energy costs and availability, feedstock
availability and prices, changes in governmental and environmental
regulations or the adoption of new laws or regulations that may make it
more difficult or expensive to operate our businesses or manufacture our
products, our ability to generate sufficient cash flows from our
business, future economic conditions in the specific industries to which
our products are sold, global economic conditions, the effectiveness of
certain previously disclosed and recently implemented changes to our
internal control over financial reporting, our ability to successfully
integrate and execute our business plans for acquisitions and other
factors discussed in the Securities and Exchange Commission filings of
Georgia Gulf Corporation from time to time, including our Annual Report
on Form 10-K for the year ended December 31, 2010 and subsequent
quarterly reports on Form 10-Q.
Use of Non-GAAP Measures
Georgia Gulf supplements its financial statements prepared in accordance
with Generally Accepted Accounting Principles (GAAP) with adjusted
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization,
as well as cash and non-cash restructuring charges and certain other
charges, if any, related to financial restructuring and business
improvement initiatives, gains on substantial modification of debt and
sales of certain assets, certain purchase accounting and certain
non-income tax reserve adjustments, and goodwill, intangibles, and other
long-lived asset impairments) because investors commonly use adjusted
EBITDA as a main component of valuation analysis of cyclical companies
such as Georgia Gulf. 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 forecasted 2011 adjusted EBITDA to forecasted 2011
net income determined in accordance with GAAP is included in the table
below.
($ millions)
2011 Adjusted EBITDA Guidance
$
275-295
Depreciation and Amortization
104
Restructuring and Other
2
Interest Expense
68
Tax Expense (30% rate)
30-36
Net Income
$
71-85
Georgia Gulf Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
June 30,
December 31,
Assets
2011
2010
Cash and cash equivalents
$
41,686
$
122,758
Receivables, net of allowance for doubtful accounts of $6,578 in 2011
and $10,026 in 2010
419,629
267,662
Inventories
369,143
261,235
Prepaid expenses
20,231
16,606
Income tax receivable
432
899
Deferred income taxes
10,769
7,266
Total current assets
861,890
676,426
Property, plant and equipment, net
663,873
653,137
Goodwill
215,989
209,631
Intangible assets, net of accumulated amortization of $13,281 in 2011
and $11,873 in 2010
47,419
14,351
Deferred income taxes
8,666
8,078
Other assets, net
95,858
104,078
Total assets
$
1,893,695
$
1,665,701
Liabilities and Stockholders' Equity
Current portion of long-term debt
$
37,557
$
22,132
Accounts payable
228,495
132,639
Interest payable
22,708
22,558
Income taxes payable
1,269
2,910
Accrued compensation
22,328
38,382
Liability for unrecognized income tax benefits and other tax reserves
2,940
8,822
Other accrued liabilities
64,658
48,536
Total current liabilities
379,955
275,979
Long-term debt
744,575
667,810
Liability for unrecognized income tax benefits
46,766
46,884
Deferred income taxes
202,177
189,805
Other non-current liabilities
39,492
40,631
Total liabilities
1,412,965
1,221,109
Commitments and contingencies:
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;
issued and outstanding: 33,983,404 in 2011 and 33,962,291 in 2010
340
340
Additional paid-in capital
480,359
476,276
Accumulated other comprehensive income (loss), net of tax
5,130
(210
)
Accumulated deficit
(5,099
)
(31,814
)
Total stockholders' equity
480,730
444,592
Total liabilities and stockholders' equity
$
1,893,695
$
1,665,701
Georgia Gulf Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
(In thousands, except per share data)
2011
2010
2011
2010
Net sales
$
831,711
$
735,706
$
1,619,648
$
1,367,155
Operating costs and expenses:
Cost of sales
748,725
660,414
1,460,953
1,264,785
Selling, general and administrative expenses
48,183
36,959
86,669
74,817
Restructuring (income) expense
(707
)
439
(125
)
134
Total operating costs and expenses
796,201
697,812
1,547,497
1,339,736
Operating income
35,510
37,894
72,151
27,419
Interest expense, net
(16,919
)
(17,425
)
(33,389
)
(35,260
)
Loss on redemption of debt
(1,100
)
-
(1,100
)
-
Foreign exchange loss
(340
)
(429
)
(940
)
(434
)
Income (loss) before income taxes
17,151
20,040
36,722
(8,275
)
Provision (benefit) for income taxes
2,563
(1,649
)
10,007
(10,933
)
Net income
$
14,588
$
21,689
$
26,715
$
2,658
Earnings per share:
Basic
$
0.42
$
0.62
$
0.77
$
0.08
Diluted
$
0.42
$
0.62
$
0.77
$
0.08
Weighted average common shares:
Basic
33,976
33,722
33,971
33,721
Diluted
34,002
33,722
33,992
33,721
GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
(In thousands)
2011
2010
2011
2010
Cash flows from operating activities:
Net income
$
14,588
$
21,689
$
26,715
$
2,658
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization
26,392
25,223
51,842
50,110
Loss on early redemption of debt
1,100
--
1,100
--
Foreign exchange loss (gain)
130
486
(85
)
(45
)
Deferred income taxes
2,438
4,526
5,194
(7,696
)
Excess tax benefits from share-based payment arrangements
(52
)
(112
)
(65
)
(695
)
Stock based compensation
3,500
836
4,305
1,548
Long lived asset impairment charges and loss on sale of assets
--
--
--
591
Other non-cash items
1,389
5,076
1,232
5,528
Change in operating assets, liabilities and other
(45,323
)
(9,792
)
(162,676
)
(46,076
)
Net cash provided by (used in) operating activities
4,162
47,932
(72,438
)
5,923
Cash flows from investing activities:
Capital expenditures
(12,823
)
(9,827
)
(23,692
)
(20,782
)
Proceeds from sale of property, plant and equipment
131
779
153
1,549
Acquisition, net of cash acquired
--
--
(71,623
)
--
Net cash used in investing activities
(12,692
)
(9,048
)
(95,162
)
(19,233
)
Cash flows from financing activities:
Repayments on ABL revolver
(131,346
)
(171,125
)
(203,646
)
(303,501
)
Borrowings on ABL revolver
171,087
120,010
314,205
313,572
Repayment of long-term debt
(22,913
)
(11
)
(22,917
)
(25
)
Fees paid to amend or issue debt facilities
--
(310
)
(1,480
)
(3,330
)
Stock compensation plan activity
39
--
39
--
Tax benefits from employee share-base exercises
52
--
65
3,328
Net cash provided by (used in) financing activities
16,919
(51,436
)
86,266
10,044
Effect of exchange rate changes on cash and cash equivalents
(201
)
(219
)
262
(368
)
Net change in cash and cash equivalents
8,188
(12,771
)
(81,072
)
(3,634
)
Cash and cash equivalents at beginning of period
33,498
47,934
122,758
38,797
Cash and cash equivalents at end of period
$
41,686
$
35,163
$
41,686
$
35,163
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
(In Thousands)
2011
2010
2011
2010
Segment net sales:
Chlorovinyls
$
323,663
$
300,811
$
649,983
$
588,522
Building Products
274,156
243,249
431,660
396,299
Aromatics
233,892
191,646
538,005
382,334
Net Sales
$
831,711
$
735,706
$
1,619,648
$
1,367,155
Segment operating income (loss):
Chlorovinyls
$
37,826
1)
$
36,196
$
75,565
4)
$
27,544
Building Products
16,891
2)
18,738
3)
4,825
5)
15,065
3)
Aromatics
(7,448
)
(7,782
)
12,334
1,863
Unallocated corporate
(11,759
)
(9,258
)
(20,573
)
(17,053
)
Total operating income
$
35,510
$
37,894
$
72,151
$
27,419
1
)
Includes $1.2 million of restructuring income from the recovery of
previously written down equipment
2
)
Includes $0.4 million of restructuring charges and $0.5 million of
inventory purchase accounting adjustments
3
)
Includes $1.5 million reversal/recovery of non-income tax reserves
4
)
Includes $0.8 million reversal of non-income tax reserve and $1.2
million of restructuring income from
the recovery of previously written down equipment
5
)
Includes $2.9 million of acquisition deal costs and inventory
purchase accounting adjustment,
offset by $3.6 million reversal of non-income tax reserve
Georgia Gulf Corporation Investor Relations Martin
Jarosick, 770-395-4524 or Media Alan
Chapple, 770-395-4538 chapplea@ggc.com
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