Market Overview

Georgia Gulf Reports 2011 Financial Results

ATLANTA--(BUSINESS WIRE)--

Georgia Gulf Corporation (NYSE: GGC) today announced financial results for its full year and fourth quarter ended December 31, 2011.

The company reported net sales of $3.2 billion for the full year 2011, 14 percent higher than the net sales of $2.8 billion reported for the full year 2010. Georgia Gulf reported net income of $57.8 million, or $1.66 per diluted share for 2011, compared to net income of $42.7 million, or $1.22 per diluted share, for the previous year. Net income for 2011 includes an $8.3 million asset impairment charge, a $3.3 million restructuring expense, a $4.9 million loss on the early redemption of debt, a $1.2 million gain on sale of assets and a benefit to income tax expense from the reversal of $22.1 million of tax reserves.

“Our financial performance in 2011 exceeded our 2010 results as industry conditions continue to improve, driven by North America's advantaged natural gas position,” said Paul Carrico, president and chief executive officer. “We generated $121.1 million of free cash flow, exceeding our goal for 2011. We reduced debt by $82.1 million in 2011 and ended the year with $408.9 million of debt net of cash and cash equivalents.

“We are confident that our integrated chemicals and building products business is well positioned to take advantage of our access to low-cost natural gas and to benefit from continuing growth in global demand and the recovery of the U.S. housing market as it occurs,” Carrico said.

The company reported net sales of $673.6 million for the fourth quarter of 2011, compared to net sales of $692.8 million reported for the fourth quarter of 2010. Georgia Gulf reported a net loss of $3.3 million, or $0.10 per diluted share, for the fourth quarter of 2011, compared to net income of $15.1 million, or $0.43 per diluted share, for the same quarter of the previous year. The net loss in the fourth quarter of 2011 includes an $8.3 million asset impairment charge, a $2.2 million restructuring expense, a $3.8 million loss on the early redemption of debt and a benefit to income tax expense from the reversal of $11.7 million of tax reserves.

Chlorovinyls

In the Chlorovinyls segment, fourth quarter 2011 net sales increased to $321.5 million from $319.5 million during the fourth quarter of 2010. The segment posted operating income of $21.5 million, compared to operating income of $41.5 million for the same quarter in the prior year. The decrease in operating income was primarily due to lower sales volumes for PVC and caustic soda and higher raw material costs, partially offset by higher caustic soda sales prices compared to the fourth quarter of 2010.

Building Products

In the Building Products segment, net sales were $189.7 million for the fourth quarter of 2011, increasing 9 percent on a reported and constant currency basis compared to $174.4 million recorded for the same quarter in the prior year. This sales increase was primarily driven by the benefit of the sales volumes resulting from the Exterior Portfolio acquisition in February 2011. The segment's operating loss was $11.6 million for the fourth quarter of 2011, compared to $6.1 million of operating loss during the same quarter of the prior year. The increase in operating loss was due to a $10.7 million restructuring charge from the company's decision to exit its fence product line resulting in the closure of its Milford, Indiana, facility. In addition, the company will consolidate two window and door facilities and one small pipe facility, all located in Canada. These consolidations will reduce overhead costs going forward but not materially reduce production capacity.

Aromatics

In the Aromatics segment, net sales decreased to $162.4 million for the fourth quarter of 2011 from $199.0 million during the fourth quarter of 2010. The decrease was primarily due to lower sales volumes. During the fourth quarter of 2011, the segment recorded an operating loss of $3.7 million, compared to operating income of $9.4 million during the same quarter in 2010. The decrease in operating income was primarily due to lower sales volumes and lower margins driven by a sharp decline in benzene and propylene prices in the fourth quarter of 2011 compared to the fourth quarter of 2010.

Liquidity and Debt Reduction

As of December 31, 2011, the company had $88.6 million of cash on hand as well as $284.2 million of borrowing capacity available under its asset-based loan (ABL) facility. In the fourth quarter of 2011, Georgia Gulf redeemed and repaid $59.9 million of debt. For the full year 2011, the company reduced debt by $82.1 million.

Conference Call

The company will discuss fourth-quarter financial results and business developments via conference call and webcast on Thursday, February 16, at 11:00 a.m. Eastern time. To access the company's fourth-quarter conference call, please dial (888) 552-7928 (domestic) or (706) 679-9856 (international). The conference call ID number is 45054331. To access the conference call via webcast, log on to http://phx.corporate-ir.net/phoenix.zhtml?c=112207&p=irol-EventDetails&EventId=4720374. Playbacks will be available from 1:00 p.m. Eastern time on Thursday, Feb. 16, until 11:59 p.m. Eastern time Thursday, March 1, by dialing (855) 859-2056.

About 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 Building Products and Exterior Portfolio brands, include window and door profiles, mouldings, siding, pipe and pipe fittings, and deck 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 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 and demand 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, 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 filed with the SEC.

Use of Non-GAAP Measures

Georgia Gulf supplemented this earnings release with Free Cash Flow because we believe investors and management commonly use Free Cash Flow to measure the Company's cash generation capabilities. Georgia Gulf excludes cash used to complete acquisitions from its free cash flow measurement because it believes that cash used for these purposes is discretionary and should be considered to be cash available for other purposes, thus part of the company's cash generation. Free Cash Flow is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash provided by operating activities as a measure of liquidity. In addition, our calculation of Free Cash Flow may be different from the calculation used by other companies and, therefore, comparability may be limited.

Georgia Gulf defines Free Cash Flow as cash provided by operating activities, less capital expenditures. Our Free Cash Flow for 2011 was cash flow from operating activities of $187.4 million, minus capital expenditures of $66.4 million, totaling $121.1 million.

Georgia Gulf Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
(In thousands, except share data)   December 31,   December 31,
Assets 2011 2010
Cash and cash equivalents $ 88,575 $ 122,758

Receivables, net of allowance for doubtful accounts of $4,225 at 2011
   and $10,026 at 2010

256,749 267,662
Inventories 287,554 261,235
Prepaid expenses 12,730 16,606
Income tax receivable 3,020 899
Deferred income taxes   14,989     7,266  
Total current assets 663,617 676,426
Property, plant and equipment, net 640,900 653,137
Goodwill 213,608 209,631
Intangible assets, net 46,715 14,351
Deferred income taxes 3,770 8,078
Other assets, net   75,601     104,078  
Total assets $ 1,644,211   $ 1,665,701  
 
Liabilities and Stockholders' Equity
Current portion of long-term debt $ - $ 22,132
Accounts payable 168,187 132,639
Interest payable 20,931 22,558
Income taxes payable 1,202 2,910
Accrued compensation 19,743 38,382
Liability for unrecognized income tax benefits and other tax reserves 598 8,822

Other accrued liabilities

  68,227     48,536  
Total current liabilities 278,888 275,979
Long-term debt 497,464 555,425
Lease financing obligation 109,899 112,385
Liability for unrecognized income tax benefits 23,711 46,884
Deferred income taxes 181,465 189,805
Other non-current liabilities   64,120     40,631  
Total liabilities   1,155,547     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: 34,236,402 at 2011 and 33,962,291 at 2010

342 340
Additional paid-in capital 480,530 476,276
Accumulated other comprehensive loss, net of tax (18,151 ) (210 )
Retained earnings (deficit)   25,943     (31,814 )
Total stockholders' equity   488,664     444,592  
Total liabilities and stockholders' equity $ 1,644,211   $ 1,665,701  
 
Georgia Gulf Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
 
 

Three Months Ended
December 31,

  Year Ended December 31,
(In thousands, except per share data ) 2011   2010 2011   2010
Net sales $ 673,600 $ 692,842 $ 3,222,884 $ 2,818,040
Operating costs and expenses:
Cost of sales 626,863 617,637 2,919,625 2,543,638
Selling, general and administrative expenses 38,141 41,751 168,221 160,031
Long-lived asset impairment charges 8,318 8,318
Restructuring costs (benefits) 2,245 (169 ) 3,271 102
Gain on sale of asset           (1,150 )    
Total operating costs and expenses   675,567     659,219     3,098,285     2,703,771  
Operating (loss) income (1,967 ) 33,624 124,599 114,269
Interest expense (15,357 ) (16,905 ) (65,645 ) (69,795 )
Loss on redemption and other debt costs (3,808 ) (4,908 )
Foreign exchange loss (6 ) (522 ) (786 ) (839 )
Interest income   84     24     280     322  
(Loss) income before income taxes (21,054 ) 16,222 53,540 43,957
(Benefit) provision for income taxes   (17,739 )   1,160     (4,217 )   1,279  
Net (loss) income $ (3,315 ) $ 15,061   $ 57,757   $ 42,678  
(Loss) earnings per share:
Basic $ (0.10 ) $ 0.43 $ 1.66 $ 1.22
Diluted $ (0.10 ) $ 0.43 $ 1.66 $ 1.22
Weighted average common shares outstanding:
Basic 34,236 33,962 34,086 33,825
Diluted 34,236 33,962 34,122 33,825
 
Georgia Gulf Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

(In thousands) 2011   2010 2011   2010
Cash flows from operating activities:
Net (loss) income $ (3,316 ) $15,062 $ 57,757 $ 42,678

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

Depreciation and amortization 23,214 24,168 101,522 99,691
Loss on redemption of debt 3,808 4,908
Foreign exchange (gain) loss (120 ) (307 ) 604 (738 )
Deferred income taxes (8,137 ) (8,012 ) (3,762 ) (1,964 )
Excess tax benefits from share based payment arrangements (1,371 ) (4,001 )
Long lived asset impairment charges 8,318 8,318
Stock based compensation 1,173 1,051 6,658 3,487
Gain on sale of assets (1,150 )
Other non-cash items (3,736 ) 13,193 (2,802 ) 19,646
Change in operating assets and liabilities:
Change in operating assets, liabilities and other   141,902   100,115     16,767     25,000  
Net cash provided by operating activities   163,106   145,270     187,449     183,799  
Cash flows from investing activities:
Capital expenditures (22,134 ) (14,454 ) (66,382 ) (45,714 )
Proceeds from sale of assets 917 15 1,243 1,069
Acquisition, net of cash acquired         (71,371 )    
Net cash used in investing activities   (21,217 ) (14,439 )   (136,510 )   (44,645 )
Cash flows from financing activities:
Net change in ABL revolver (36,503 ) (47,352 ) (56,353 )
Repayment of long-term debt (62,136 ) (4 ) (85,057 ) (37 )
Fees paid related to financing activities (531 ) (2,011 ) (3,185 )
Excess tax benefits from share based payment arrangements 1,371 4,001
Stock compensation plan activity         39     (145 )
Net cash used in financing activities (99,170 ) (47,356 ) (85,658 ) (55,719 )

Effect of exchange rate changes on cash and cash equivalents

  546   633     536     526  
Net change in cash and cash equivalents 43,265 84,108 (34,183 ) 83,961
Cash and cash equivalents at beginning of period   45,310   38,650     122,758     38,797  
Cash and cash equivalents at end of period $ 88,575   $122,758   $ 88,575   $ 122,758  
 

GEORGIA GULF CORPORATION AND SUBSIDIARIES

SEGMENT INFORMATION
(Unaudited)
       
Three Months Ended Year Ended
December 31, December 31,

(In Thousands)

2011 2010 2011 2010
 

Segment net sales:

Chlorovinyls

$ 321,501 $ 319,453 $ 1,318,678 $ 1,224,725
Building Products 189,704 174,433 883,899 793,639
Aromatics   162,395     198,956     1,020,307     799,676  

Net Sales

$ 673,600   $ 692,842   $ 3,222,884   $ 2,818,040  
 
 

Segment operating income (loss):

Chlorovinyls $ 21,477 $ 41,544 $ 143,304 2 ) $ 114,297
Building Products (11,638 ) 1 ) (6,078 ) 7,500 3 ) 14,554
Aromatics (3,653 ) 9,399 10,370 23,335
Unallocated corporate   (8,153 )   (11,241 )   (36,575 )   (37,917 )

Total operating (loss) income

$ (1,967 ) $ 33,624   $ 124,599   $ 114,269  
 
 
 

1) Includes $2.4 million of restructuring costs and $8.3 million of asset impairment charges.

 

2) Includes $1.2 million gain related to sale of assets.

 

3) Includes $2.7 million of restructuring costs, $8.3 million of asset impairment charges, $2.9 million of related costs and inventory purchase accounting adjustments, partially offset by $3.6 million reversal of non-income tax reserve.

 

Georgia Gulf Corporation
Investor Relations
Martin Jarosick, 770-395-4524
or
Innisfree M&A Incorporated
Arthur Crozier, Jennifer Shotwell or Scott Winter, 212-750-5833
or
Media
Alan Chapple, 770-395-4538
chapplea@ggc.com
or
Joele Frank, Wilkinson Brimmer Katcher
Michael Freitag or Eric Bonach, 212-355-4449

 

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