10-K
1
1994 FORM 10-K FOR GA GULF CORP
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 (NO FEE REQUIRED) 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 of Incorporation) (I.R.S. Employer 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: (404) 395-4500
Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange, Inc.
15% Senior Subordinated Notes due 2000 New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed using the closing price on the New York Stock Exchange
for the Registrant's common stock on March 20, 1995 was $1,142,000,000.
Indicate the number of common shares outstanding of the Registrant's
common stock as of the latest practicable date.
Class Outstanding at March 20, 1995
Common Stock, $.01 par value 39,899,216 shares
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
1994 Annual Report to Stockholders in Parts II and IV of this Form 10-K.
Proxy Statement for the Annual Meeting of Stockholders to be held on May 16,
1995 in Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
ITEM PAGE NUMBER
1) Business
General Description of Business 1
Electrochemical Products 1-3
Aromatic Chemical Products 3
Natural Gas Product 3-4
Great River Oil & Gas Corporation 4
Georgia-Pacific Contract 4
Marketing 4
Raw Materials 4
Competition 4-5
Employees 5
Environmental Regulation 5
2) Properties 6
3) Legal Proceedings 7
4) Submission of Matters to a Vote of Security Holders 7
PART II
5) Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters 7
6) Selected Financial Data 7
7) Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
8) Financial Statements and Supplementary Data 7
9) Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 7
PART III
10) Directors and Executive Officers of the Registrant 8
11) Executive Compensation 8
12) Security Ownership of Certain Beneficial Owners and
Management 8
13) Certain Relationships and Related Transactions 9
PART IV
14) Exhibits, Financial Statement Schedule and Reports on
Form 8-K 9-11
SIGNATURES
PART I
Item 1. BUSINESS.
General Description of Business
Georgia Gulf Corporation (the "Company") is a leading manufacturer and
marketer of quality chemical and plastic products. The Company's products
are manufactured through two highly integrated lines categorized into
electrochemicals and aromatic chemicals; and also a third product line,
methanol, a natural gas chemical. The Company's electrochemical products
include chlorine, caustic soda, sodium chlorate, vinyl chloride monomer
("VCM"), vinyl resins and compounds; the Company's aromatic chemical products
include cumene, phenol and acetone. The Company also owns a small oil and
gas exploration and production company.
The Company has operated as an independent corporation since its
acquisition on December 31, 1984, of a major portion of the business and
assets of the chemical division of Georgia-Pacific Corporation
("Georgia-Pacific"). The Company's operations include production units at
five locations, several marketing organizations responsible for the sale
of the Company's chemicals, a research and development laboratory and a
purchasing organization responsible for the acquisition of all major raw
materials. In most product areas, the Company's marketing program is
supported by an ongoing technical service effort. At the Company's five
manufacturing locations, it has twelve plants, six of which are at
Plaquemine, Louisiana. The Company also leases storage terminals and
warehouses from which a portion of its products are distributed to customers.
The Company's major capital projects during 1994 were a vinyl resin plant
expansion and the completion of a methanol plant expansion, both located at
the Plaquemine, Louisiana, complex. The Company spends approximately one-
fourth of its capital budget, before capital expansion projects, on
environmental and safety programs, which enables the Company to continue to
meet or exceed various regulatory standards. The remaining expenditures are
typically used to expand, modernize and/or improve the efficiency of existing
facilities.
The Company is currently expanding the vinyl rigid compound plant at its
Gallman, Mississippi, location. The expansion consists of two phases which
combined will add 168 million pounds of capacity. Completion of the first
phase for approximately 50 percent of the expanded capacity is expected by
early 1996. The Company has also begun a modernization and expansion of the
cumene plant at Pasadena, Texas, which is expected to be completed in 1996.
Additionally, a modernization and expansion has been announced for the
Company's VCM plant in Plaquemine, Louisiana. The VCM modernization and
expansion will commence in early 1995 and is expected to be completed by the
end of 1996.
The Company's long-term strategy is to concentrate its efforts on products
and services in the chemical and plastic industries. These efforts include
the continuing investment in maintaining and improving the Company's low cost
position, as well as selective and prudent capacity additions or expansions
that could promote growth in present and closely related product lines.
Electrochemical Products
Chlorine/Caustic Soda/Sodium Chlorate. The Company's facility at
Plaquemine, Louisiana, has the annual capacity to produce 452 thousand tons
of chlorine and 501 thousand tons of chlorine's co-product, caustic soda, as
well as 27 thousand tons of sodium chlorate.
The major raw materials for these products are salt brine and electric
power. The Company has a long-term lease on a salt dome near Plaquemine,
Louisiana, with sufficient reserves of salt to last nearly 50 years at
current rates of production. The lease grants the Company the exclusive use
of the salt dome for the production of salt brine.
Electric power is the most significant cost component in the production of
chlorine, caustic soda and sodium chlorate. The Company's electrical
requirements are supplied by Louisiana Power and Light Company, pursuant to
an agreement that terminates September 1998, at rates that recognize the
lower cost of supplying a very large, high load-factor customer.
Chlorine is used in the production of various chemicals, including those
used to make plastics and vinyl resins. Other applications include drinking
water purification, wastewater disinfection, pulp and paper bleaching,
agricultural products, laundry aids, and pharmaceuticals.
Chlorine is used by the Company in the production of VCM, which is then
used to produce vinyl resins. In 1994, the amount of chlorine consumed in the
production of VCM represented a majority of the Company's chlorine production.
The Company sells the remaining chlorine principally to the pulp and paper and
chemical industries.
The major uses of caustic soda are in the production of pulp and paper,
aluminum, oil, soaps and detergents. Caustic soda also has significant
applications in the production of other chemicals and chemical processes
where caustic is used to control pH levels aiding in waste neutralization.
Another use is in the textile industry where it makes fabrics more absorbent
and improves the strength of dyes. Caustic soda is also used, to a lesser
extent, in food processing and electroplating.
Sodium chlorate has major applications in the bleaching process for pulp
and paper. Sodium chlorate is also an ingredient in blasting agents,
explosives and solid rocket fuels.
Vinyl Chloride Monomer. The Company produces VCM at its Plaquemine,
Louisiana, complex as the feedstock for the production of vinyl resins. The
major raw materials used in VCM production are purchased ethylene and
Company-produced chlorine. The VCM plant's annual capacity is 1.26 billion
pounds. A majority of the VCM production in 1994 was used by the Company's
vinyl resins operations with the remainder being sold to other vinyl resins
producers.
Vinyl Suspension Resins. The Company operates a vinyl suspension resins
plant at Plaquemine, Louisiana. The plant is located adjacent to its major
raw material supplier, the Company's VCM facility, thereby minimizing
transportation and handling costs. The annual production capacity of the
vinyl suspension resins plant is 1.12 billion pounds.
Vinyl suspension resins are some of the most widely used plastics in the
world today. After being formulated to desired properties, vinyl resins are
heated and shaped into finished products by various extrusion, calendaring and
molding processes. Applications are diverse and include pipe, window frames,
siding, flooring, shower curtains, packaging, bottles, film, medical tubing
and business machine housings. Vinyl resins are also important to the
automotive industry for use in seats, trim, floormats and vinyl tops.
Vinyl Emulsion Resins. The Company's Delaware City, Delaware, facility
produces special purpose vinyl emulsion resins with an annual capacity of 48
million pounds. Vinyl emulsion resins, once compounded, are generally
semi-liquid and are processed with heat. Typical applications include filter
gaskets, battery separators, caulking compounds, sealants, surgical gloves,
bottle cap liners and squeeze toys.
Vinyl Rigid Compounds. The Company's vinyl compounding plants, which have
an aggregate of 290 million pounds of annual capacity, are located in
Gallman, Mississippi; Delaware City, Delaware; and Tiptonville, Tennessee.
Vinyl compounds are formulated to provide specific end-use properties that
allow the material to be thermoformed directly into a finished product. All
sales of vinyl compounds are to outside customers. The product line can be
segregated into three major product areas according to the following
fabrication methods:
Blow Molding -- The Company is a supplier of blow molding compounds,
which are primarily used for both food-grade and general purpose bottles.
Supplied in both clear and opaque colors, the materials are used to package
edible oils, cosmetics, shampoos, charcoal lighter fluid and bottled water.
Injection Molding -- The Company supplies compounds used in the
business machine market for computer housings and keyboards. It also
supplies compounds to produce electrical outlet boxes. These proprietary
compounds, with extensive approval procedures by customers or regulatory
bodies, are sold to some of the leading producers of injection molded
products. The Company also manufactures compounds for use in pipe and
furniture fittings.
Profile Extrusion -- The Company supplies profile extrusion markets,
which have applications in window and furniture profiles and extruded sheets for
household fixtures and decorative overlays. Profile extrusions are an
end-product for both pelletized and powder compounds.
Aromatic Chemical Products
Cumene. Cumene is produced at the Company's Pasadena, Texas, facility
located on the Houston ship channel. The Company's cumene plant, the world's
largest, has an annual capacity of 1.42 billion pounds. Cumene is produced
from benzene and propylene, which are purchased from various suppliers under
supply agreements and obtained from the numerous petroleum complexes located
in the surrounding area. A large portion of the Company's 1994 cumene output
was consumed internally in the production of phenol and its co-product acetone.
Phenol/Acetone. Phenol and acetone are produced at the Company's
Plaquemine, Louisiana, plant, which has approximately 440 million pounds of
annual phenol capacity and 270 million pounds of annual acetone capacity, as
well as at the Pasadena, Texas, plant where annual capacity is 160 million
pounds of phenol and 100 million pounds of acetone.
Phenol is a major ingredient in phenolic resins, which are used
extensively as bonding agents and adhesives for wood products such as plywood
and granulated wood panels, as well as in insulation and electrical parts.
Phenol is also a precursor to high performance plastics used in automobiles,
household appliances, electronics and protective coating applications.
Phenol serves as an important building block for other familiar products
such as nylon carpeting, oil additives and pharmaceuticals.
The largest use for acetone is as a key ingredient to methyl methacrylate,
which is used to produce acrylic sheeting and in surface coating resins for
automotive and architectural markets. Acetone is also an intermediate for
the production of engineering plastics and several major industrial solvents.
Other uses range from wash solvents for automotive and industrial
applications to pharmaceuticals and cosmetics.
Also as a result of the phenol/acetone manufacturing process, the Company
produces a by-product, alpha-methylstyrene ("AMS"), which is primarily used
as a polymer modifier and as a chemical intermediate.
Natural Gas Product
Methanol. Methanol is produced at the Company's plant at Plaquemine,
Louisiana, with an annual capacity of 160 million gallons. Natural gas
represents the majority of the cost of methanol. The Plaquemine facility is
located in the center of Louisiana's oil and gas producing region and has
three separate pipeline systems delivering gas to the plant. The natural
gas is purchased by the Company under long-term contracts at market prices
from gas pipeline companies and directly from gas producers.
A key use for methanol is in the production of methyl tertiary-butyl
ether, or MTBE, a gasoline additive that promotes cleaner burning by adding
oxygen. Methanol is also used as a raw material in the manufacture of
formaldehyde, which is an ingredient in bonding agents for building materials
such as granulated wood panels and plywood. Other applications for methanol
include windshield washer fluid, solvents, and components of acrylic sheeting,
coatings, fibers and household adhesives.
Great River Oil & Gas Corporation
The Company owns Great River Oil & Gas Corporation, a small oil and gas
exploration company, with activities centered in southern Louisiana. This
subsidiary enhances the reliability of a small portion of the natural gas
requirements at the Company's Plaquemine, Louisiana, complex.
Georgia-Pacific Contract
The Company has contracts to supply, subject to certain limitations, a
substantial percentage of Georgia-Pacific's requirements for certain
chemicals at market prices. These supply contracts have various expiration
dates (depending on the product) from 1995 through 1999 and may be extended
year-to-year upon expiration. The sales to Georgia-Pacific under these
supply contracts for the years ended December 31, 1994, 1993 and 1992
amounted to approximately 15%, 15% and 14% of the Company's sales,
respectively.
Marketing
The Company markets its products primarily to industrial customers
throughout the United States. The Company's products are sold by its sales
force, which is organized by product line. The sales organization, which is
located predominantly in the eastern and midwestern United States, is
supported by the Company's technical service staff.
The Company's marketing program has been aimed at expanding and
diversifying its customer base both domestically and internationally. Other
than Georgia-Pacific, no single customer represents more than 10% of the
Company's net sales. Export sales accounted for approximately 13%, 14% and
15% of the Company's net sales for the years ended December 31, 1994, 1993
and 1992, respectively. The principal international markets served by the
Company include Canada, Mexico, Latin America, Europe and Asia.
Raw Materials
The most important raw materials purchased by the Company are salt,
electricity, ethylene, benzene, propylene and natural gas. Raw materials
used for production of the Company's products are usually purchased from
various suppliers under supply contracts. Since raw materials account for a
significant portion of the Company's total production costs, the Company's
ability to pass on increases in these costs to its customers has a significant
impact on operating results which is, to a large extent, related to market
conditions. Management believes the Company has a reliable supply base of
raw materials under normal market conditions. The impact of any future raw
material shortages cannot be accurately predicted.
Competition
The Company experiences competition from numerous manufacturers in all of
its product lines. In some product areas, the Company's competitors have
substantially greater financial resources and are more highly diversified
than the Company. The Company competes on a variety of factors such as
price, product quality, delivery and technical service.
Management believes that the Company is well-positioned to compete as a
result of integrated product lines, the operational efficiency of its plants
and the location of its facilities near major water and rail transportation
terminals.
Employees
As of December 31, 1994, the Company had 1,146 full-time employees. The
Company also utilizes approximately 379 workers supplied by outside
contractors. The Company has one collective bargaining agreement, which
covers 55 employees at its Tiptonville, Tennessee, facility as of December
31, 1994.
Environmental Regulation
The Company's operations are subject to various federal, state and local
laws and regulations relating to environmental quality. These regulations,
which are enforced principally by the United States Environmental Protection
Agency and comparable state agencies, govern the management of solid and
hazardous waste; emissions into the air and discharges into surface and
underground waters; and the manufacture of chemical substances. All of the
plants operated by the Company meet current environmental standards. In
addition, Georgia-Pacific has agreed to indemnify the Company for certain
environmental liabilities. See Item 3 -- "Legal Proceedings."
Management believes that the Company is in material compliance with all
current environmental laws and regulations. The Company estimates that any
expenses incurred in maintaining compliance with these requirements will
not materially affect earnings or cause the Company to exceed its level of
anticipated capital expenditures. However, there can be no assurance that
regulatory requirements will not change, and therefore it is not possible to
accurately predict the aggregate cost of compliance resulting from any such
changes.
Item 2. PROPERTIES
The Company's asset base was established from 1971 to the present with
construction of the Plaquemine, Louisiana, complex, the construction of the
Pasadena, Texas, cumene plant; the purchase of the three vinyl resin and/or
compound plants and the purchase of the Bound Brook, New Jersey,
phenol/acetone facility subsequently relocated to Pasadena, Texas, and
modernized in 1990. The Company continues to explore ways to expand both
its plant capacities and product lines. The Company believes current and
planned capacity will adequately meet anticipated demand requirements. The
average capacity utilization percentage of the Company's production facilities
operating in 1994 was approximately 97%.
The following table sets forth the location of each chemical manufacturing
facility owned by the Company, the products manufactured at each facility and
the approximate processing capability of each, assuming normal plant
operation, as of December 31, 1994:
Location Products Annual Capacity
Delaware City, DE Vinyl Emulsion Resins,
in million pounds 48
Delaware City, DE Vinyl Rigid Compounds,
Gallman, MS in million pounds 290
Tiptonville, TN
Pasadena, TX Cumene, in billion pounds 1.42
Phenol, in million pounds 160
Acetone, in million pounds 100
Plaquemine, LA Chlorine, in thousand tons 452
Caustic Soda, in thousand tons 501
Sodium Chlorate, in thousand tons 27
Vinyl Chloride Monomer,
in billion pounds 1.26
Vinyl Suspension Resins,
in billion pounds 1.12
Phenol, in million pounds 440
Acetone, in million pounds 270
Methanol, in million gallons 160
The Company's manufacturing facilities are located near major water and
rail transportation terminals facilitating efficient delivery of raw
materials and prompt shipment of finished products. In addition, the Company
has a fleet of 2,405 railcars of which 753 are owned and the remainder leased
pursuant to operating leases with varying terms through the year 2010. The
total lease expense for the Company's railcars and other transportation
equipment was approximately $8,408,000 for 1994.
The Company leases office space for its principal executive offices in
Atlanta, Georgia. The Company also leases office space for data processing
in Baton Rouge, Louisiana; sales offices in Houston, Texas; Schaumburg,
Illinois; and Lawrenceville, New Jersey; as well as numerous storage
terminals located across the country.
Item 3. LEGAL PROCEEDINGS.
The Company is subject to claims and legal actions that arise in the
ordinary course of its business. Management believes that the ultimate
liability, if any, with respect to these claims and legal actions will not
have a material effect on the financial position or on the results of
operations of the Company.
Pursuant to the Company's acquisition agreement with Georgia-Pacific,
the Company is entitled to be indemnified by Georgia-Pacific, generally for
liabilities to third parties relating to activities of the chemical division
of Georgia-Pacific prior to October 1, 1984, including environmental
liabilities, liabilities for antitrust claims and similar liabilities. This
indemnification extends to activities prior to December 31, 1984, in the case
of liabilities attributable to claims, including certain claims for
violation of environmental and workplace laws, to the extent not covered by, or
in excess of, insurance coverage. Generally, indemnification under the
acquisition agreement is limited to claims with respect to which notice was
given to Georgia-Pacific before December 31, 1991.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of 1994.
PART II
Item 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information set forth under the captions "Corporate Information-
-Common Stock Data" and Notes 5 and 6 of the "Notes to Consolidated Financial
Statements" of the Company's 1994 Annual Report to Stockholders is hereby
incorporated by reference herein in response to this item.
Item 6. SELECTED FINANCIAL DATA.
The information set forth under the caption "Five-Year Selected
Financial Data" of the Company's 1994 Annual Report to Stockholders is hereby
incorporated by reference herein in response to this item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information set forth under the caption "Management's Discussion and
Analysis" of the Company's 1994 Annual Report to Stockholders is hereby
incorporated by reference herein in response to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information set forth on pages 22 through 35 of the Company's 1994
Annual Report to Stockholders is hereby incorporated by reference herein in
response to this item.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not changed its independent public accountants and has
had no disagreements with its independent public accountants on accounting
and financial disclosure during the Registrant's two most recent fiscal years
prior to, or in any period subsequent to, the date of the most recent
financial statements included herein.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the caption "Election of Directors" in
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held May 16, 1995, is hereby incorporated by reference in response to this
item.
The following is certain information regarding the executive officers of
the Company who are not Directors:
Richard B. Marchese, 53, has served as Vice President --Finance,
Chief Financial Officer and Treasurer of the Company since
May 1989, and prior thereto served as Controller from its inception.
Thomas G. Swanson, 53, has served as Vice President -- Supply and
Corporate Development since August 1993. Mr. Swanson served as
Vice President -- Commodity Chemicals Group from December 1989 to
August 1993; as General Manager -- Commodity Chemicals Group from
November 1988 until December 1989; and as Director of Corporate
Development for the Company from July 1987. Prior thereto, Mr.
Swanson was Manager -- Supply and Distribution for the Company
since its inception.
Mark J. Seal, 43, has served as Vice President -- Polymer Group since
August 1993. Mr. Seal served as Business and Manufacturing
Director -- Vinyl Resins from May 1992 until August 1993 and as
Business Manager PVC Resins and Compounds from May 1989 until May
1992. Prior thereto, Mr. Seal served as Business Manager --
Electrochemicals from January 1987 until May 1989 and as Midwest
Regional Sales Manager for the Company since its inception.
Gary L. Elliott, 50, has served as Vice President -- Marketing and
Sales Commodity Chemicals Group since August 1993. Mr. Elliott
served as Business Manager -- Electrochemicals and Midwest Regional
Sales Manager from June 1989 until August 1993. Prior thereto,
Mr. Elliott served as Northeast Regional Sales Manager from May
1987 until June 1989; as VCM Product Manager from November 1985
to May 1987; and as a Sales Representative for the Company since its
inception.
Edward A. Schmitt, 49, has served as Vice President -- Operations
Commodity Chemicals Group since August 1993. Mr. Schmitt served
as General Manager -- Chemical Operations from March 1992 until
August 1993; as General Manager -- Plaquemine Division from May
1989 until March 1992; and as Plant Manager - Plaquemine Division
from February 1988 until May 1989. Prior thereto, Mr. Schmitt
served as Manufacturing Manager from October 1985 until February
1988 and as VCM Production Manager for the Company since its
inception.
Joel I. Beerman, 45, has served as Vice President, General Counsel
and Secretary since February 1994 and as General Counsel since
February 1992. Prior thereto, Mr. Beerman served as Associate
General Counsel for the Company since its inception.
Executive officers are elected by, and serve at the pleasure of, the
Board of Directors.
Item 11. EXECUTIVE COMPENSATION.
The information set forth under the captions "Election of Directors" and
"Executive Compensation" in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 16, 1995, is hereby incorporated by
reference in response to this item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the captions "Principal Stockholders" and
"Security Ownership of Management" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 16, 1995, is hereby
incorporated by reference in response to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has not had any transactions required to be reported under
this item for the calendar year 1994, or for the period from January 1, 1995,
to the date of this report.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual Report
for Georgia Gulf Corporation:
(1) The Consolidated Financial Statements, the Notes to Consolidated
Financial Statements, the Report of Management and the Report
of Independent Public Accountants listed below are
incorporated herein by reference from pages 22 through 35 of
the Company's 1994 Annual Report to Stockholders:
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the years ended December 31, 1994, 1993 and
1992
Notes to Consolidated Financial Statements
Report of Management
Report of Independent Public Accountants.
(2) Financial Statement Schedules:
Report of Independent Public Accountants on Financial
Statement Schedule
The following financial statement schedule is for the years
ended December 31, 1994, 1993 and 1992:
II Valuation and Qualifying Accounts
Schedules other than the one listed above are omitted
because they are not required and are inapplicable or the
information is otherwise shown in the Consolidated
Financial Statements or notes thereto.
(3) Exhibits. Each management contract or compensatory plan or
arrangement is preceded by an asterisk.
The following exhibits are filed as part of this Form 10-K Annual Report:
EXHIBIT
NO. DESCRIPTION
10 Georgia Gulf Corporation 1995 Employee Stock Purchase Plan
13 Portions of the 1994 Annual Report to Stockholders
23 Consent of Independent Public Accountants
The following exhibit is incorporated by reference to the Company's 1994
Form 10-Q Quarterly Report for the period ending March 31, 1994 filed
May 12, 1994.
EXHIBIT
NO. DESCRIPTION
10 Credit Agreement, dated April 27, 1994, between the Company and
The Chase Manhattan Bank (National Association) as
Administrative Agent.
The following exhibits are incorporated herein by reference to the
Company's 1991 Form 10-K Annual Report filed March 30, 1992.
EXHIBIT
NO. DESCRIPTION
22 Subsidiaries of the Registrant
3(a) Certificate of Amendment of Certificate of Incorporation
3(b) Amended and Restated By-Laws
*10 Georgia Gulf Corporation 1990 Incentive Equity Plan
The following exhibit is incorporated herein by reference to Exhibit 2 to
the Company's Registration Statement on Form 8-A filed May 11, 1990, as amended:
EXHIBIT
NO. DESCRIPTION
4 Amended and Restated Rights Agreement effective as of August 31,
1990
The following exhibit is incorporated herein by reference to Amendment 3 to
the Company's Rule 13e-3 Transaction Statement filed March 16, 1990:
EXHIBIT
NO. DESCRIPTION
4 Indenture, dated April 25, 1990, between the Company and LaSalle
National Bank, as trustee.
The following exhibits are incorporated herein by reference to the
Company's Registration Statement on Form S-1 (file No. 33-9902) declared
effective on December 17, 1986:
EXHIBIT
NO. DESCRIPTION
3(a) Certificate of Agreement of Merger, with Certificate of
Incorporation of Company as Exhibit A thereto, dated
December 31, 1984, and amendments thereto
10(e) Stock Purchase Agreement between the Company and Georgia-Pacific
dated December 31, 1984, and Letter re: Stock Purchase
Agreement dated December 31, 1984
10(f) Chemical Sales Agreement between the Company and Georgia-Pacific
dated December 31, 1984 and Letter re: Chemical Sales Agreement
dated December 31, 1984
10(g) Agreement re: Liabilities among Georgia-Pacific, Georgia-Pacific
Chemicals, Inc. and others dated December 31, 1984
10(o) Georgia Gulf Savings and Capital Growth Plan
10(p) Georgia Gulf Salaried Employees Retirement Plan
10(q) Georgia Gulf Hourly Employees Retirement Plan
*10(u) Executive Retirement Agreements
10(v) Salt Contract
(b) Reports on Form 8-K
No report on Form 8-K was filed with the Securities and Exchange
Commission during the last quarter of 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 31 , 1995 By: /s/ Jerry R. Satrum
Jerry R. Satrum, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Jerry R. Satrum
Jerry R. Satrum President, Chief Executive Officer March 31, 1995
and Director
(Principal Executive Officer)
/s/ Richard B. Marchese
Richard B. Marchese Vice President - Finance,
Chief Financial Officer March 31, 1995
and Treasurer (Principal Financial
and Accounting Officer)
/s/ James R. Kuse
James R. Kuse Chairman of the Board and Director March 31, 1995
/s/ John D. Bryan
John D. Bryan Director March 31, 1995
/s/ Dennis M. Chorba
Dennis M. Chorba Director March 31, 1995
/s/ Alfred C. Eckert III
Alfred C. Eckert III Director March 31, 1995
/s/ Robert E. Flowerree
Robert E. Flowerree Director March 31, 1995
/s/ Holcombe T. Green, Jr.
Holcombe T. Green, Jr. Director March 31, 1995
/s/ Edward S. Smith
Edward S. Smith Director March 31, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To Georgia Gulf Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Georgia Gulf Corporation's Annual Report
to Stockholders incorporated by reference in this Form 10-K, and have issued
our report thereon dated February 14, 1995. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule listed in Item 14 of this Form 10-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 14, 1995
GEORGIA GULF CORPORATION AND SUBSIDIARIES
SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Additions
Charged
Balance at Charged to to other Balance at
beginning costs and accounts-- Deductions end of
Description of period expenses describe --describe period
1992
Allowance for
doubtful accounts $3,200 $--- $--- $--- $3,200
1993
Allowance for
doubtful accounts $3,200 $1,900 $--- $(1,900) (1) $3,200
1994
Allowance for
doubtful accounts $3,200 $1,800 $--- $(2,600) (1) $2,400
NOTES:
(1) Accounts receivable balances written off during the period.
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION PAGE (1)
10 Georgia Gulf Corporation 1995 Employee Stock Purchase Plan . ___
13 Portions of the 1994 Annual Report to Stockholders . . . . ___
23 Consent of Independent Public Accountants . . . . . . . . . . ___
(1) Page numbers appear on the manually signed Form 10-K's only.
EXHIBIT 10
GEORGIA GULF CORPORATION
1994 Employee Stock Purchase Plan
1. The Plan. This Plan dated as of November 1, 1993 shall be known as the
"1994 Employee Stock Purchase Plan." The purpose of this Plan is to permit
certain employees of Georgia Gulf Corporation (the "Company") to obtain or
increase a proprietary interest in the Company by permitting them to purchase
shares of the Company's Common Stock on a discount basis.
2. The Offering. The Company shall offer an aggregate of 300,000 shares
of its Common Stock, of the par value of $0.01 each, for subscription in the
manner and on the terms hereinafter provided by those persons who are
Eligible Employees on November 1, 1993 (the "Offering Date"). The purchase
price per share shall be the lower of
(i) 85% of the mean between the high and low sales prices of the Common
Stock (as reported in the record of Composite Transactions for New York Stock
Exchange listed securities and printed in The Wall Street Journal) on the
Offering Date (or on the next regular business date on which shares of the
Common Stock of the Company shall be traded in the event that no shares of
the Common Stock shall have been traded on the Offering Date); or
(ii) 85% of the mean between the high and low sales prices of the Common
Stock (as reported in the record of Composite Transactions for New York Stock
Exchange listed securities and printed in The Wall Street Journal) on
December 30, 1994 (or on the preceding regular business date on which shares of
the Common Stock shall be traded in the event that no shares of the Common Stock
shall have been traded on such date).
The purchase price per share shall be subject to adjustment in
accordance with the provisions of Section 11(a). The shares of Common Stock
that may be purchased under this Plan may be authorized but unissued shares,
treasury shares or shares acquired on the open market.
3. Eligible Employees. The "Eligible Employees" shall be those
persons, and only those persons, who are employees of the Company on the
Offering Date, and whose customary employment is more than 20 hours per week,
with the exception of any person who immediately prior to the Offering Date
would be deemed for purposes of Section 423(b)(3) of the Internal Revenue
Code of 1986 (the "Code") to own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company. The
term "employees of the Company" in the immediately preceding sentence shall
include employees of any corporation in which the Company owns, directly or
indirectly, 50% or more of the combined voting power of all classes of stock
and which has been designated by the Board of Directors of the Company as a
corporation whose employees may participate in the Plan. Notwithstanding
anything to the contrary in this Section 3, no officer of the Company subject
to Section 16 of the Securities Exchange Act of 1934 who is a "highly
compensated employee" within the meaning of Section 414(q) of the Code shall be
eligible to participate in this Plan.
4. Subscriptions. (a) As soon as practicable after the Company has
satisfied the requirements of the applicable federal and state securities
laws relating to the offer and sale of Common Stock to Eligible Employees
pursuant to this Plan, each Eligible Employee shall (subject to the terms of
this Plan) be entitled to subscribe, in the manner and on the terms herein
provided, for the number of whole shares of Common Stock of the Company
designated by him which can be purchased, at the purchase price on the Offering
Date, with equal installments of not less than $10 nor more than 15% of his
periodic rate of compensation (weekly or semi-monthly, as the case may be),
determined as hereinafter provided.
(b) In the case of all Eligible Employees, the periodic rate of
compensation (excluding any bonus or other special compensation) shall be
computed on the basis of the rate of compensation in effect immediately prior
to the Offering Date.
(c) This Plan shall be submitted for approval by the stockholders of
the Company prior to September 1, 1994. Subscriptions shall be subject to
the condition that prior to such date this Plan shall be approved by the
stockholders of the Company in the manner contemplated by Section 423(b)(2) of
the Internal Revenue Code of 1986. If not so approved prior to such date,
this Plan shall terminate, all subscriptions hereunder shall be canceled and
be of no further force and effect, and all persons who shall have subscribed
for shares pursuant to this Plan shall be entitled to the prompt refund in
cash of all sums withheld from or paid by them pursuant to this Plan and
subscriptions hereunder, together with simple interest, also in cash, on the
amount of such refund computed from the respective dates of withholding, at
the rate of 6% per annum.
(d) Subscriptions pursuant to this Plan shall be evidenced by the
completion and execution of a subscription agreement in the form provided by
the Company and the delivery thereof to the Company, at the place designated
by the Company, prior to December 31, 1993. Subscription agreements shall
not be subject to termination or reduction after the full purchase price of
all shares covered by such agreement has been withheld or paid as provided
herein.
(e) In the event that upon the termination of the subscription period
under this Plan the aggregate number of shares subscribed for pursuant to
this Plan shall exceed 300,000, then all subscriptions shall be reduced
proportionately, but disregarding fractions of shares, to the extent
necessary so that the aggregate number of shares covered by all such
subscriptions pursuant to this Plan will not exceed 300,000.
5. Payment of Purchase Price. Except to the extent provided in
Sections 7, 8, 9, and 10, the purchase price of all shares purchased pursuant
to this Plan shall be paid in equal installments withheld from the
subscribing employee's compensation (weekly or semi-monthly, as the case may
be) during the period of 12 consecutive calendar months commencing with
January 1994.
In the event of a change in an employee's payment schedule, an
appropriate change shall be made in the schedule of installments to be
withheld so that the portion of the purchase price not theretofore withheld
will be withheld in equal installments over the remainder of such 12 month
period. No amount shall be withheld or paid after December 30, 1994.
6. Issuance of Shares; Delivery of Stock Certificates. Shares covered
by a subscription agreement entered into pursuant to this Plan shall, except
to the extent set forth in Section 8(a), be deemed to have been issued and
sold on December 30, 1994. Prior to that time, no person shall have any
rights as a holder of any shares covered by such a subscription agreement.
No adjustment shall be made for dividends or other rights for which the
record date is prior to that time except as provided in Section 11(a).
Promptly after the full purchase price of all shares covered by a
subscription agreement shall have been so withheld or paid, the Company shall
issue and deliver a stock certificate or certificates therefor. In the event
the amount of accumulated payroll deductions is greater than the full
purchase price of all shares covered by a subscription agreement, such
excess shall be promptly returned in cash (without interest) to the
subscribing employee.
7. Right to Terminate Subscription or to Reduce Number of Shares
Subscribed For. (a) Subject to the provisions of Section 4(d), each
subscribing employee shall have the right, at any time before the full
purchase price of all shares then covered by his subscription agreement shall
have been withheld or paid, to terminate his subscription agreement or to
reduce the number of shares covered thereby by notice in writing delivered
to the Company.
(b) A subscribing employee who shall terminate his subscription
agreement shall be entitled to request the prompt refund, in cash, of the
full amount theretofore withheld from and paid by him pursuant to this Plan
and such subscription agreement.
(c) A subscribing employee who shall reduce the number of shares
covered by his subscription agreement shall be entitled, at his option (i)
to the prompt refund, in cash, of the amount by which the amount theretofore
withheld from and paid by him pursuant to this Plan and such subscription
agreement exceeds that which would have been so withheld and paid if the
number of shares originally subscribed for had been the number to which he
has reduced his subscription or (ii) to apply such excess in equal amounts
to the reduction of future installments of the purchase price of the reduced
number of shares covered by the subscription agreement.
8(a). Retirement. If a subscribing employee shall retire from the
employ of his employer and be eligible at such time to commence, and actually
commences, receiving early or normal retirement benefits from the employer's
qualified defined benefit plan covering such employee (if no employer-sponsored
qualified defined benefit plan covers the employee, then a qualified defined
contribution plan), he shall have, during the period of three months
following the date of termination (but in no event after December 30, 1994),
the right provided in Section 7(b), and if the Plan shall have been approved
by the stockholders of the Company pursuant to Section 4(c) prior to the
expiration of such three month period, the additional right to receive the
number of whole shares which can be purchased at the purchase price on the
Offering Date with the full amount theretofore withheld from and paid by him
pursuant to this Plan and his subscription agreement, together with cash in
an amount equal to any balance of the amount so withheld and paid (without
interest on such cash). Such shares shall be delivered to the employee
within a reasonable period of time after the employee has notified the
Company of his election to exercise this right. Any such retired employee
who shall not make a timely election to exercise the foregoing rights shall
be deemed to have elected to receive cash in an amount equal to the full
amount theretofore withheld pursuant to his subscription agreement.
8(b). Death or Disability. In the event of the death or disability of
a subscribing employee prior to the payment in full of the purchase price of
the shares subscribed for by him pursuant to this Plan, the disabled
employee or the personal representative of the decedent, as the case may be,
shall have the rights provided or referred to in Section 8(a). Any such
disabled employee or personal representative who shall not make a timely
election to exercise such rights shall be deemed to have elected to exercise the
right to receive cash as described in Section 8(a). For purposes of this
subsection (b), a subscribing employee shall be deemed "disabled" if the
employee would be "disabled" pursuant to the standards set forth in the Georgia
Gulf Corporation Salaried Long-Term Disability Plan whether or not he or she
is covered under that plan.
8(c). Termination of Employment Other Than by Reason of Retirement,
Death or Disability. In the event of the voluntary or involuntary
termination of employment with the Company of a subscribing employee other
than by reason of retirement, death or disability, the employee shall be
entitled only to the prompt refund, in cash, of the full amount theretofore
withheld from and paid by him pursuant to this Plan (without interest on
such cash).
9. Temporary Layoff and Authorized Leave of Absence. (a) Installment
payments shall be suspended during a period of inactive service due to temporary
layoff or authorized leave of absence without pay. If the subscribing employee
shall return to active service prior to December 30, 1994, installment
payments shall be commenced or resumed, and he shall be entitled to elect,
within 10 days after return to active service but in no event after December 30,
1994, either (i) to make up the deficiency in his account by an immediate
lump sum cash payment equal to the aggregate of the installments which would
have been withheld had he not been absent, or (ii) to have future installments
uniformly increased (to the maximum possible extent) to adjust for such
deficiency, or (iii) not to make up such deficiency and to reduce the number
of shares under subscription by the number (increased to the next highest
whole number) arrived at by dividing the amount of the deficiency by the
purchase price per share on the Offering Date. An employee who does not
make a timely election pursuant to this Section 9(a) shall be deemed to have
elected the alternative described in clause (iii) hereof.
(b) For the purpose of this Plan, a subscribing employee shall be
deemed to be terminated from his or her employment with the Company if such
layoff or leave of absence exceeds a period of 90 consecutive days, and, in
such case, such employee shall have, effective as of the expiration of such
90-day period, only those rights provided in Section 8(c) hereof.
10. Insufficiency of Pay to Permit Withholding of Installment. (a) If
in any payroll period, for any reason other than temporary layoff or
authorized leave of absence without pay, a subscribing employee shall receive
no pay or his pay shall be insufficient (after all other proper deductions)
to permit withholding of his installment payment, the employee may make
payment of such installment in cash when due.
(b) In the event of any failure by a subscribing employee to make
timely payment in cash of any installment which cannot be withheld because of
the circumstances contemplated by Section 10(a), the Company shall mail a
notice of deficiency to such employee at his last known business or home
address. If the employee does not make payment in cash of such deficiency
within 10 days after the mailing of such notice, such employee shall forfeit
his right to make cash payment of installments under Section 10(a) and his
rights thereafter shall be limited to the right to receive the number of
whole shares which can be purchased at the purchase price on the Offering
Date with the full amount of payroll withholdings (including the amount
theretofore withheld and any amounts subsequently withheld from available
earnings), together with cash in the amount of the balance of such employee's
withholdings (without interest on such cash).
11. Definition of Common Stock; Effect of Certain Transactions. (a)
The term "Common Stock" as used in this Plan refers to shares of the Common
Stock of the Company as presently constituted and any shares of Common Stock
which may be issued by the Company in exchange for or reclassification
thereof. If, and whenever, at any time after the Offering Date and prior to
the issue and sale by the Company of all of the shares of Common Stock
covered by subscription agreements entered into pursuant to this Plan, the
Company shall effect a subdivision of shares of Common Stock or other
increase (by stock dividend or otherwise) of the number of shares of Common
Stock outstanding, without the receipt of consideration by the Company or
another corporation in which the Company is financially interested and
otherwise than in discharge of the Company's obligation to make further
payment for assets theretofore acquired by it or such other corporation or
upon conversion of stock or other securities issued for consideration, or
shall reduce the number of shares of Common Stock outstanding by a
consolidation of shares, then (i) in the event of such an increase in the
number of shares outstanding, the number of shares of Common Stock then
subject to subscription agreements entered into pursuant to this Plan shall
be proportionately increased and the purchase price per share shall be
proportionately reduced, and (ii) in the event of such a reduction in the
number of such shares outstanding, the number of shares of Common Stock then
subject to subscription agreements entered into pursuant to this Plan shall
be proportionately reduced and the purchase price per share shall be
proportionately increased. Except as provided in this Section 11(a), no
adjustment shall be made under this Plan or any subscription agreement
entered into pursuant to this Plan by reason of any dividend or other
distribution declared or paid by the Company.
(b) Anything in this Plan or in any subscription agreement entered into
pursuant hereto to the contrary notwithstanding (except as provided in
Section 12), each subscribing employee shall have the right immediately prior
to any merger or consolidation of which the Company is not to be the
survivor, or the liquidation or dissolution of the Company, to elect (i) to
receive the number of whole shares which can be purchased at the purchase
price under this Plan with the full amount theretofore withheld from or paid by
him pursuant to this Plan and his subscription agreement, together with cash
in an amount equal to any balance of the amount so withheld and paid (without
interest on such cash), (ii) to prepay in cash in a lump sum the unpaid
balance of the purchase price of the shares covered by his subscription
agreement or (iii) to receive a refund, in cash, of the full amount
theretofore withheld, together with simple interest, also in cash, on the
amount of such refund computed from the respective dates of withholding, at the
rate of 6% per annum. The subscription agreement of any subscribing
employee who shall not make such an election shall terminate upon such
merger, consolidation, liquidation or dissolution and his rights shall be those
provided in clause (i) of this Section 11(b), unless the surviving
corporation in its absolute and uncontrolled discretion shall offer such
subscribing employee the right to purchase its shares in substitution for his
rights under such subscription and he shall accept such offer.
12. Limitation on Right to Purchase. Anything in this Plan to the
contrary notwithstanding, (i) no shares may be purchased under this Plan to
the extent not permitted by Section 423(b)(8) of the Internal Revenue Code of
1986, (ii) if at any time when any person is entitled to complete the purchase
of any shares pursuant to this Plan, after taking into account such person's
rights, if any, to purchase Common Stock of the Company under all other
stock purchase plans of the Company, the result would be that during the then
current calendar year, such person would have become entitled to purchase during
such calendar year under this Plan and all such other plans a number of
shares of Common Stock which would exceed the maximum number of shares
permitted by the provisions of Section 423(b)(8) of the Internal Revenue Code of
1986, then the number of shares which such person shall be entitled to
purchase pursuant to this Plan shall be reduced by the number which is one
more than the number of shares which represents such excess, and (iii) if
any person entitled to subscribe for shares hereunder would be deemed for the
purposes of Section 423(b)(3) of the Code to own stock (including the maximum
number of shares for which such person would be entitled to subscribe
pursuant to the foregoing formula) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company which are issued
and outstanding immediately after the Offering Date, the maximum number of
shares which such person shall be entitled to subscribe for, pursuant to this
Plan shall be reduced to that number which, when added to the number of
shares of Common Stock of the Company which such person is so deemed to own
(excluding the maximum number of shares for which such person would be
entitled to subscribe pursuant to the foregoing formula), is one less than such
5%.
13. Non-Assignability; Personal Representative of Deceased Employees.
(a) None of the rights of an employee under this Plan or any subscription
agreement entered into pursuant thereto shall be transferable by such
employee otherwise than by will or the laws of descent and distribution and,
during the lifetime of such employee, such rights shall be exercisable only
by him. Any such attempted transfer not permitted by this Plan or by the
subscription agreements shall be void, and the Company shall treat such
transfer as cause for termination of the subscription agreements of the
transferor and, if the transferee is then a participant in the Plan, the
transferee. Notice of termination shall be effected as provided in paragraph
10(b), and the rights of such transferees and transferors shall be limited
the right to the prompt refund, in cash, of the full amounts theretofore
withheld and paid by them pursuant to this Plan and their subscription
agreements.
(b) References herein, other than in Section 3, hereof, to employees shall
be deemed to include the personal representative of a deceased employee.
14. Shares not Subscribed for During the Offering Period or Subscribed
for but not Purchased. Shares referred to herein which shall not be subscribed
for, and shares which were subscribed for but thereafter cease to be subject
to a subscription agreement hereunder, shall be free from any reservation for
use in connection with this Plan and shall have the same status as all other
unreserved authorized but unissued shares.
15. Construction; Administration. All questions with respect to the
construction and application of the Plan and subscription agreements entered
into pursuant thereto and the administration of this Plan shall be settled by
the determination of the Board of Directors of the Company or of one or more
other persons designated by it, which determinations shall be final, binding
and conclusive on the Company and all employees and other persons.
16. Notice. Any election or other notice required to be given by a
subscribing employee under this Plan shall be in writing and shall be delivered
personally or by mail, postage prepaid, addressed to the place designated by
the Company for delivery of the subscription agreement. If an election is made
which requires the payment of a sum of money, such sum shall accompany the
written election.
17. Amendment. The Plan may be amended by the Board of Directors in any
way which shall not adversely affect the rights of employees under
subscription agreements theretofore entered into pursuant hereto.
EXHIBIT 13
FIVE-YEAR SELECTED FINANCIAL DATA
Year Ended December 31
1994 1993 1992 1991 1990
Results of Operations
(In thousands, except per share data)
Net sales $955,305 $768,902 $779,455 $838,336 $932,104
Cost of sales 677,919 619,540 616,802 626,672 661,448
Selling and administrative
expenses 47,164 38,901 33,827 41,129 42,087
Operating income 230,222 110,461 128,826 170,535 228,569
Recapitalization expense - - - - (17,869)
Interest expense (37,557) (44,779) (61,216) (80,772) (63,161)
Interest income 113 106 73 492 2,505
Income before income taxes,
extraordinary charge and
cumulative effect of
accounting change 192,778 65,788 67,683 90,255 150,044
Provision for income taxes 70,618 23,560 21,346 28,782 54,700
Income before extraordinary
charge and cumulative
effect of accounting change 122,160 42,228 46,337 61,473 95,344
Extraordinary charge on early
retirement of debt (net of
tax benefit of $6,834) - (13,267) - - -
Cumulative effect of accounting
change for income taxes - 12,973 - - -
Net income $122,160 $ 41,934 $ 46,337 $ 61,473 $ 95,344
Net income per common share $ 2.88 $ 1.01 $ 1.18 $ 1.75 $ 3.07
Financial Highlights (In thousands)
Working capital $126,668 $ 67,674 $ 57,465 $ 20,676 $ 50,131
Property, plant and
equipment, net 255,608 222,835 217,781 226,746 220,851
Total assets 508,447 405,287 419,420 415,585 456,657
Total debt 314,081 379,206 444,416 639,153 726,481
Stockholders' equity
(deficit) 31,138 (110,577) (161,165) (357,512) (424,476)
Cash provided by operating
activities 111,595 88,268 60,385 112,148 127,752
Depreciation and amortization 27,774 27,062 29,583 26,447 19,834
Capital expenditures 59,142 29,583 14,261 28,273 58,111
Maintenance expenditures 46,033 43,141 47,664 42,853 42,985
Sales per employee 834 684 691 760 868
Other Selected Data
Current ratio 2.0 1.6 1.4 1.1 1.3
Return on assets 26.7% 10.2% 11.1% 14.1% 20.5%
Return on sales 12.8% 5.5% 5.9% 7.3% 10.2%
Ratio of operating income to
interest expense 6.1 2.5 2.1 2.1 3.6
Weighted average common shares
and equivalents outstanding
(In thousands) 42,445 41,672 39,227 35,143 31,069
Employees 1,146 1,124 1,128 1,103 1,074
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Georgia Gulf's financial performance for 1994 dramatically exceeded the
results reported for 1993 as the Company took advantage of the
turnaround of several key domestic and international markets. This
turnaround was particularly evident in the rebounding pulp and paper,
automotive and construction markets where demand for the Company's products
resulted in increased sales and margins. Additionally, the expansion of the
gasoline-additive market in response to Clean Air Act requirements spurred
the demand for methanol, which further elevated profits for 1994.
In order to meet the increased demand for its products, Georgia Gulf
operated its facilities at a historically high rate of 97 percent of
stated capacity. Efficiencies achieved from these higher production
rates, coupled with higher sales prices, boosted the return on sales to
12.8 percent in 1994 from 5.5 percent in 1993. The improved 1994
earnings also enabled the Company to return to positive stockholders'
equity, erasing the deficit resulting from the recapitalization of the
Company in 1990.
This discussion of the Company's financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and related notes thereto.
1994 COMPARED WITH 1993
Net income increased 191 percent in 1994 to $122.2 million, or $2.88 per
share, compared to net income of $41.9 million, or $1.01 per share for
1993.
Net sales increased 24 percent to $955. 3 million from $768.9
million in 1993. Sales volumes rose 3 percent, surpassing the previous
sales volume record set in 1993. Additionally, sales prices were up for
nearly all products, with the most significant increases coming from
methanol and vinyl resins, followed by caustic soda. International
sales increased 19 percent over 1993; however, these sales declined as a
percentage of total sales to 13 percent in 1994 from 14 percent in 1993
as a result of stronger growth in domestic sales.
Operating income was $230.2 million in 1994, an increase of 108 percent
over 1993 operating income of $110.5 million. Although the strongest
earnings contributions came from methanol and caustic soda,
substantially all products showed improved results as increases in sales
prices outpaced higher raw material costs. Selling and administrative
expenses increased to $47.2 million for 1994 from $38.9 million in 1993
primarily as a result of higher compensation expense related to profit
sharing programs and stock option plans.
Interest expense continued to decline from prior years to $37.6 million in
1994, a 16 percent decrease from $44.8 million in 1993. The Company's
weighted average interest rate increased slightly due to the rising
interest rate environment. However, significant reductions in debt over
the past couple of years, including a $65.1 million reduction in 1994,
enabled the Company to achieve sizable interest savings.
The effective income tax rate was 36.6 percent for 1994 as compared to 35.8
percent for 1993. The 1993 rate included an adjustment of 1.2 percent to
revalue deferred income tax balances for the increase in the federal
statutory rate during 1993. Excluding the impact of this 1993
adjustment, the tax rate for 1994 increased two percentage points as a
result of higher taxable income, which minimized the effect of permanent
tax differences.
Results for 1993 reflect an extraordinary charge of $13.3 million relating
to an early debt retirement, which was offset by a $13.0 million benefit
from a change in method of accounting for income taxes.
1993 COMPARED WITH 1992
Net income of $41. 9 million in 1993 declined 10 percent from $46.3 million
in 1992.
Net sales decreased slightly to $768.9 million in 1993 from $779.5 million
in 1992 despite overall record sales volume in 1993. The decrease in net
sales resulted primarily from a significant decline in the selling price
of caustic soda throughout the year, which more than offset sales price
increases for other products.
Operating income of $110.5 million in 1993 reflects a decrease of $18.4
million from the amount reported in 1992. This decrease was primarily
attributable to the declining selling price for caustic soda. Raw
material costs were down slightly for 1993; however, overall cost of
sales increased $2.7 million as a result of higher sales volumes.
Selling and administrative expense increased to $38.9 million in 1993
from $33.8 million in 1992. This increase was attributable to a bad debt
write-off of $1.9 million and to the fact that in 1992, selling and
administrative expenses were reduced by approximately $1 million due
to nonrecurring insurance claim settlements received during that year.
Interest expense in 1993 was $44.8 million compared to $61.2 million in
1992. This 27 percent decline was the result of lower interest rates
achieved from a first quarter 1993 debt refinancing and a further $65.2
million reduction in debt during the year. As a result of the debt
refinancing, the Company incurred an extraordinary charge of $13.3
million, net of an income tax benefit of $6.8 million.
The fiscal 1993 results were also affected by the Company's adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"), which changed the method of accounting for
income taxes from the deferred method to the liability method. The
adoption of SFAS 109 resulted in a cumulative one-time benefit of $13.0
million.
The effective income tax rate was 35.8 percent in 1993, as compared to
31.5 percent in 1992. The higher effective rate for 1993 was primarily
attributable to the increase in the federal income tax rate of 1 percent
and the resulting one-time charge of $800,000 to revalue deferred income
tax balances.
Net income per common share decreased to $1.01 per share in 1993 from $1.18
per share in 1992. The earnings per share calculations were impacted by
lower net income and the greater number of shares outstanding, which
resulted after the May 1992 common stock offering of 6.1 million shares.
Liquidity and Capital Resources
Georgia Gulf generated $111.6 million from operating activities during
1994, up from $88.3 million in 1993. Cash provided from improved
earnings was offset in part by increased working capital requirements.
As a result of higher sales prices and increased sales volumes,
receivables rose to $157.1 million at December 31, 1994, from $96.1
million at the end of 1993. Although receivables increased
significantly from 1993 levels, the average collection period actually
improved for 1994. Inventories, which had dropped to an abnormally low
level at the end of 1993, increased $12.4 million primarily as a result
of higher raw material costs. Other changes in working capital
components were primarily related to differences in the timing of payments.
Net cash used for financing activities was $54.3 million in 1994, compared
with $58.5 million in 1993, as the Company continued to reduce debt and
further strengthen its financial position. In February 1995, Georgia
Gulf announced it will redeem the Company's $191 million of 15% Senior
Subordinated Notes at par in April 1995. Georgia Gulf intends to finance
the early redemption with proceeds from a new $350 million revolving
credit facility currently being negotiated with the Company's primary
lenders. When finalized, the new revolving credit facility will replace
the Company's existing $250 million credit facility and is expected to
provide more favorable terms and increased financial flexibility.
In late 1994, Georgia Gulf also announced a stock repurchase program to
acquire up to 10 percent of its outstanding shares of common stock, and
in February 1995, the Company declared a cash dividend of $0.08 per
share payable April 7, 1995. The Company's primary focus is to continue
to maintain debt at a level it considers to be manageable, regardless of
the Company's position in the economic cycle, and to invest capital in
incremental expansions of existing product lines.
Cash used for investing activities totaled $59.1 million, up from $29.6
million in 1993. The increase resulted primarily from $33.5 million
spent on a vinyl resin expansion and $7.4 million spent on a methanol
expansion and its related raw material pipeline. The balance of the
expenditures was used to modernize and improve the efficiency of existing
facilities.
The Company estimates that actual capital expenditures for 1995 will
approximate $75 to $85 million. Planned capital expenditures include the
vinyl compound expansion in Gallman, MS, and the cumene upgrade and
expansion project at Pasadena, TX, both of which are currently under
way. The combined cost for these two projects will be approximately $40
million. A portion of these costs was expended in 1994, and the
remaining costs will be spent during 1995 and 1996. An expansion has
also been announced for the vinyl chloride monomer plant in Plaquemine,
LA, to begin in 1995 and to be completed near the end of 1996 at an
estimated cost of $85 million.
Management believes that cash provided by operations of the Company and the
availability of borrowings under either the Company's existing or new
revolving credit facility will provide sufficient funds to support
working capital fluctuations, debt service requirements, equity
transactions and planned capital expenditures.
Inflation
The most significant components of the Company's cost of sales are raw
materials and energy, which consist of basic commodity items. The cost
of raw materials and energy is based primarily on market forces and has
not been significantly affected by inflation. Inflation has not had a
material impact on the Company's sales or income from operations.
Environmental
The Company's operations are subject to various federal, state and local
laws and regulations relating to environmental quality. These
regulations, which are enforced principally by the United States
Environmental Protection Agency and comparable state agencies, govern
the management of solid and hazardous waste; emissions into the air and
discharges into surface and underground waters; and the manufacture of
chemical substances. All of the plants operated by the Company meet
current environmental standards.
Management believes that the Company is in material compliance with all
current environmental laws and regulations. The Company estimates that
any expenses incurred in maintaining compliance with these requirements
will not materially affect earnings or cause the Company to exceed its
level of anticipated capital expenditures. However, there can be no
assurance that regulatory requirements will not change, and therefore it
is not possible to accurately predict the aggregate cost of compliance
resulting from any such changes.
Consolidated Balance Sheets
December 31,
(In thousands, except share data) 1994 1993
Assets
Current assets
Cash and cash equivalents $ 1,216 $ 3,099
Receivables, net of allowance
for doubtful accounts of
$2,400 in 1994 and $3,200
in 1993 157,085 96,068
Inventories 70,667 58,261
Prepaid expenses 13,882 10,350
Deferred income taxes 7,069 9,759
Total current assets 249,919 177,537
Property, plant and equipment,
at cost 447,986 388,844
Less accumulated depreciatio 192,378 166,009
Property, plant and equipment,
net 255,608 222,835
Other assets 2,920 4,915
Total assets $508,447 $405,287
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Current portion of long-term debt $ - $ 14,049
Accounts payable 73,771 59,911
Interest payable 6,424 16,824
Accrued income taxes 21,537 3,129
Accrued compensation 11,724 3,573
Accrued pension 3,276 4,670
Other accrued liabilities 6,519 7,707
Total current liabilities 123,251 109,863
Long-term debt 314,081 365,157
Deferred income taxes 39,977 40,844
Stockholders' equity (deficit)
Preferred stock - $.01 par value;
75,000,000 shares authorized;
no shares issued - -
Common stock - $.01 par value;
75,000,000 shares authorized;
shares issued and outstanding:
42,013,116 in 1994 and 40,951,571
in 1993 420 410
Additional paid-in capital 185,984 166,439
Retained earnings (deficit) (155,266) (277,426)
Total stockholders' equity
(deficit) 31,138 (110,577)
Total liabilities and stockholders'
equity (deficit) $508,447 $405,287
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
(In thousands, except share data) 1994 1993 1992
Net sales $955,305 $768,902 $779,455
Operating costs and expenses
Cost of sales 677,919 619,540 616,802
Selling and administrative 47,164 38,901 33,827
Total operating costs and expenses 725,083 658,441 650,629
Operating income 230,222 110,461 128,826
Other income (expense)
Interest expense (37,557) (44,779) (61,216)
Interest income 113 106 73
Income before income taxes, extraordinary
charge and cumulative effect of accounting
change 192,778 65,788 67,683
Provision for income taxes 70,618 23,560 21,346
Income before extraordinary charge and
cumulative effect of accounting change 122,160 42,228 46,337
Extraordinary charge on early retirement
of debt, net of tax benefit of
$6,834 (Note 4) - (13,267) -
Cumulative effect of accounting change for
income taxes (Note 9) - 12,973 -
Net income $122,160 $ 41,934 $ 46,337
Primary and fully diluted net income per
common share:
Before extraordinary charge and
cumulative effect of accounting change $ 2.88 $ 1.01 $ 1.18
Extraordinary charge on early retirement
of debt - (0.32) -
Cumulative effect of accounting change
for income taxes - 0.32 -
Net income per common share $ 2.88 $ 1.01 $ 1.18
Weighted average common shares and
equivalents outstanding 42,445,499 41,671,903 39,226,832
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Cash Flows
Year Ended December 31,
(In thousands) 1994 1993 1992
Cash flows from operating activities:
Net income $122,160 $ 41,934 $ 46,337
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 27,774 27,062 29,583
Deferred income taxes 1,823 2,486 4,379
Cost associated with early
retirement of debt - 20,101 -
Cumulative effect of accounting
change for income taxes - (12,973) -
Compensation and tax
benefit related to stock plans 8,766 1,934 1,002
Change in assets and liabilities:
Receivables (61,017) 5,800 (13,218)
Inventories (12,406) 13,004 (2,588)
Prepaid expenses (3,532) 705 (1,325)
Accounts payable 13,860 (7,256) 3,637
Interest payable (10,400) (2,678) (699)
Accrued income taxes 18,408 2,952 (1,823)
Accrued compensation 8,151 248 (1,891)
Accrued pension (1,394) (1,418) (332)
Accrued liabilities (1,188) (227) (2,066)
Other 590 (3,406) (611)
Net cash provided by operating activities 111,595 88,268 60,385
Cash flows from financing activities:
Net increase in revolving credit loan 17,000 79,000 4,000
Proceeds from issuance of long-term debt 1,000 150,000 -
Principal payments on long-term debt (83,125) (294,210) (198,737)
Proceeds from issuance of common stock 10,789 6,720 149,008
Net cash used in financing activities (54,336) (58,490) (45,729)
Cash flows from investing activities:
Capital expenditures (59,142) (29,583) (14,261)
Net cash used in investing activities (59,142) (29,583) (14,261)
Net increase (decrease) in cash and
cash equivalents (1,883) 195 395
Cash and cash equivalents at beginning of year 3,099 2,904 2,509
Cash and cash equivalents at end of year $ 1,216 $ 3,099 $ 2,904
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Additional Retained Total
Common Stock Paid-in Earnings Stockholders'
(In thousands, except share data) Shares Amount Capital (Deficit) Equity (Deficit)
Balance, December 31, 1991 33,710,594 $337 $ 7,848 $(365,697) $(357,512)
Net income - - - 46,337 46,337
Tax benefit realized from stock
option plans - - 1,002 - 1,002
Common stock issued in public
offering 6,095,000 61 143,875 - 143,936
Common stock issued upon
exercise of stock options 278,125 3 2,002 - 2,005
Common stock issued under
stock purchase plan 209,920 2 3,065 - 3,067
Balance, December 31, 1992 40,293,639 403 157,792 (319,360) (161,165)
Net income - - - 41,934 41,934
Tax benefit realized from stock
option plans - - 1,934 - 1,934
Common stock issued upon
exercise of stock options 450,425 5 3,474 - 3,479
Common stock issued under
stock purchase plan 207,507 2 3,239 - 3,241
Balance, December 31, 1993 40,951,571 410 166,439 (277,426) (110,577)
Net income - - - 122,160 122,160
Tax benefit realized from stock
option plans - - 6,291 - 6,291
Compensation related to stock
option plans - - 2,475 - 2,475
Common stock issued upon
exercise of stock options 809,605 8 6,753 - 6,761
Common stock issued under
stock purchase plan 251,940 2 4,026 - 4,028
Balance, December 31, 1994 42,013,116 $420 $185,984 $(155,266) $ 31,138
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Georgia Gulf Corporation and its subsidiaries
(the "Company"). All significant intercompany balances and
transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investment instruments with an original maturity of three months or
less to be the equivalent of cash for the purposes of balance sheet
and statement of cash flow presentations.
INVENTORIES - Inventories are valued at the lower of cost (first-in,
first-out) or market. Costs include raw materials, direct labor and
manufacturing overhead. Market is based on current replacement cost
for raw materials and supplies and on net realizable value for
finished goods.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated
at cost. Maintenance and repairs are charged to expense as incurred,
and major renewals and improvements are capitalized. Interest expense
attributable to funds used in financing the construction of major
plant and equipment is capitalized. Depreciation is computed using
the straight-line method over the estimated useful lives of the
assets for book purposes, with accelerated methods being used for
income tax purposes.
The estimated useful lives of the assets are as follows:
Buildings and land improvements 20-30 years
Machinery and equipment 3-15 years
OTHER ASSETS - Other assets include debt issuance costs which are
amortized to expense using the effective interest method over the
term of the related indebtedness. The amount of debt issuance costs
amortized to interest expense during 1994, 1993, and 1992 was
$792,000, $961,000 and $5,191,000, respectively. Debt issuance costs
of $10,169,000 were written off during 1993 as part of the
extra-ordinary charge on early retirement of debt (note 4).
ENVIRONMENTAL EXPENDITURES - Environmental expenditures related to
current operations or future revenues are expensed or capitalized
consistent with the Company's capitalization policy. Expenditures
that relate to an existing condition caused by past operations and
do not contribute to future revenues are expensed. Liabilities are
recognized when environmental assessments or cleanups are probable
and the costs can be reasonably estimated.
NET INCOME PER COMMON SHARE - Primary and fully diluted net income per
common share is based upon the weighted average common shares and
equivalents outstanding during the year.
Note 2: Inventories
The major classes of inventories are as follows (in thousands):
December 31,
1994 1993
Raw materials and supplies $25,019 $20,819
Finished goods 45,648 37,442
$70,667 $58,261
Note 3: Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
December 31,
1994 1993
Machinery and equipment $390,658 $334,175
Land and improvements 23,350 23,246
Buildings 13,006 9,768
Construction in progress 20,972 21,655
Property, plant and
equipment, at cost $447,986 $388,844
Note 4: Extraordinary Charge - Early Retirement of Debt
The Company refinanced its senior debt during 1993, replacing an
existing term loan and revolving credit facility with a new credit
agreement (note 5). As a result of the refinancing, the Company
incurred an extraordinary charge in 1993 of $13,267,000, net of an
income tax benefit of $6,834,000. The extraordinary charge was
related to the recording of interest rate swap agreements at their
fair value and the write-off of debt issuance costs and interest
rate cap agreements associated with the previous credit agreement.
The recording of the interest swap agreements at fair value was
reflected as an increase of interest payable. The interest rate swap
agreements were terminated in 1994 (note 12).
Note 5: Long-Term Debt
Long-term debt consists of the following (in thousands):
December 31,
1994 1993
Revolving credit loan,
average rates of
5.25% and 4.84% during
1994 and 1993, respectively $122,000 $105,000
Term loan, average rate of
5.14% during 1993 - 83,125
15% Senior Subordinated Notes 191,081 191,081
Other 1,000 -
314,081 379,206
Less current maturities - 14,049
Long-term debt $314,081 $365,157
During 1994, the Company refinanced its credit agreement with a group
of financial institutions (the "Credit Agreement") to allow for reduced
interest rates, less restrictive covenants and increased financial
flexibility. The costs incurred in connection with the refinancing were
not material. The Credit Agreement provides for an unsecured revolving
credit facility which permits borrowings of up to $250,000,000.
The revolving credit facility terminates and related outstanding
loans, if any, are due in April 1999.
As of December 31, 1994, the Company had availability to borrow up to
$128,000,000 under the terms of the revolving credit facility. An annual
commitment fee, which ranges from .20 percent to .375 percent is
required to be paid on the revolving credit facility commitment.
The 15% Senior Subordinated Notes ("Notes") are due April 2000.
Interest on the Notes is payable semiannually. The Notes are
redeemable at par, in whole or in part, at the option of the Company
at any time on or after April 15, 1995. In February 1995, the Company
declared its intent to exercise its option to redeem the Notes at par
on April 15, 1995. The Company plans to finance the early redemption
with proceeds from a new revolving credit facility currently being
negotiated with the Company's primary lenders.
Under the Credit Agreement and Note indenture, the Company is subject
to certain restrictive covenants, the most significant of which
require the Company to maintain certain financial ratios and limit
the amount the Company can pay for dividends and repurchases of
common stock.
Cash payments for interest during 1994, 1993 and 1992 were
$43,045,000, $48,391,000 and $56,474,000, respectively.
Note 6: Stockholders' Equity (Deficit)
In April 1990, the Company's stockholders approved a Plan of
Recapitalization (the "Recapitalization"), which resulted in an
increase of 9,158,660 in the number of outstanding common shares, a
net cash distribution to stockholders of $673,652,000 and a
distribution to stockholders of Notes with an aggregate face value
of $191,081,000. The net distribution for the Recapitalization was
charged against retained earnings.
In May 1992, the Company issued 6,095,000 shares of common stock in a
public offering. The net proceeds of approximately $143,936,000 were
used to retire a portion of the Company's senior debt.
In connection with the stock purchase rights described below,
30,000,000 of the authorized shares of preferred stock are designated
Junior Participating Preferred Stock. If issued, the Junior
Participating Preferred Stock would be entitled, subject to the prior
rights of any senior preferred stock, to a dividend equal to the
greater of $0.01 or that which is paid on the common shares.
Each outstanding share of common stock is accompanied by a preferred
stock purchase right, which entitles the holder to purchase from the
Company 1/100th of a share of Junior Participating Preferred Stock
for $45, subject to adjustment in certain circumstances. The rights
become exercisable only after a person or group acquires beneficial
ownership of 15 percent or more of the Company's outstanding shares
of common stock, or commences a tender or exchange offer that would
result in such person or group beneficially owning 15 percent or more
of the Company's outstanding shares of common stock. The rights
expire on April 27, 2000, and may be redeemed by the Company for
$0.01 per right until ten days following the earlier to occur of the
announcement that a person or group beneficially owns 15 percent or
more of the Company's outstanding shares of common stock, or the
commencement, or announcement by any person or group of an intent to
commence, a tender offer which would result in any person or group
beneficially owning 15 percent or more of the Company's outstanding
shares of common stock. Subject to certain conditions, if a person
or group becomes the beneficial owner of 15 percent or more of the
Company's outstanding shares of common stock, each right will entitle
its holder (other than certain acquiring persons) to receive, upon
exercise, common stock having a value equal to two times the right's
exercise price. In addition, subject to certain conditions, if the
Company is involved in a merger or certain other business combination
transactions, each right will entitle its holder (other than certain
acquiring persons) to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the right's
exercise price.
Note 7: Stock Option and Purchase Plans
STOCK OPTION PLANS - During 1987, the Board of Directors approved a
non-qualified stock option plan that provided for granting key
employees options to purchase up to 484,820 shares of common stock.
All options were granted with related cash awards payable upon
exercise to compensate for tax consequences. All stock options
related to this plan have vested and expire no more than 10 years
after grant. Compensation expense related to the options and
accompanying cash awards was $3,827,000 for the year ended
December 31, 1994, while no compensation expense was recorded
in 1993 or 1992. As of December 31, 1994, 183,580 options under
this plan are outstanding.
The 1990 Incentive Equity Plan was approved by the stockholders of the
Company as a part of the Recapitalization. This plan authorized the
issuance of non-qualified stock options for up to 2,763,027 shares,
of which, options for 1,385,665 shares are outstanding as of December
31, 1994. The option price per share may not be less than the fair
market value of a share of the Company's common stock on the dates
the options are granted. Options vest ratably over a three-year
period from the date of grant and expire no more than 10 years after
grant. The following is a summary of all stock option information:
Year Ended December 31,
1994 1993 1992
Stock options:
Outstanding at beginning of year 2,170,800 2,504,015 2,873,840
Granted at $17.00-$36.50
per share 210,000 179,650 -
Exercised (809,605) (450,425) (278,125)
Forfeited or canceled (1,950) (62,440) (91,700)
Outstanding at end of year 1,569,245 2,170,800 2,504,015
Option exercise price range
per share $3.07-$36.50 $3.07-$18.25 $3.07-$9.25
Options exercisable 1,359,245 1,242,250 913,615
Options available for grant 13,827 221,877 347,627
STOCK PURCHASE PLAN - During 1994, the Board of Directors authorized,
subject to stockholder approval, the 1995 Employee Stock Purchase Plan.
In connection with the stock purchase plan, approximately 250,000
shares of common stock are reserved for issuance at a subscription
price equal to the lower of 85 percent of the fair market price of
the Company's common stock on either November 1, 1994 or December 29,
1995. The subscription price is paid through payroll deductions over
a twelve-month period ending December 1995. Under similar employee
stock purchase plans, 251,940, 207,507 and 209,920 shares of common
stock were issued at $15.99, $15.62 and $14.61 per share during 1994,
1993 and 1992, respectively.
Note 8: Employee Benefit Plans
The Company has certain pension, savings and profit sharing plans
that cover substantially all of its employees. The expense incurred
for these plans was approximately $5,431,000, $5,263,000 and
$5,061,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
Employees are covered by defined contribution plans under which the
Company makes contributions to individual employee accounts and by
defined benefit plans for which the benefits are based on years of
service and the employee's compensation or for which the benefit is
a specific monthly amount for each year of service. The Company's
policy on funding the defined benefit plans is to contribute an
amount within the range of the minimum required and the maximum tax
deductible contribution.
The net pension costs for the defined benefit plans include the
following components (in thousands):
Year ended December 31,
1994 1993 1992
Service cost for benefits
earned during the year $1,853 $1,530 $1,513
Interest cost on projected
benefit obligation 2,229 2,043 1,818
Actual return on assets (304) (1,783) (2,013)
Net amortization and deferrals (1,487) 434 1,008
Net pension cost $2,291 $2,224 $2,326
The pension expense was calculated using assumed discount rates of
7 percent in 1994 and 8 percent in 1993 and 1992; assumed long-term
compensation increase rates of 5.5 percent in 1994 and 6.5 percent in
1993 and 1992; and assumed long-term rates of return on plan assets
of 9 percent in 1994 and 8 percent in 1993 and 1992.
The funded status of the defined benefit plans at December 31, 1994
and 1993 is as follows (in thousands):
1994 1993
Unfunded Unfunded
Fully Funded Executive Fully Funded Executive
Benefit Plans Benefit Plan Benefit Plans Benefit Plan
Actuarial present value of:
Vested benefit obligation $(16,963) $(4,420) $(15,347) $(3,410)
Non-vested benefit obligation (367) (390) (438) -
Accumulated benefit obligation $(17,330) $(4,810) $(15,785) $(3,410)
Projected benefit obligation $(24,783) $(7,933) $(24,351) $(6,092)
Plan assets at fair value 28,046 - 24,576 -
Fair value of assets in excess of
(less than) projected benefit
obligation 3,263 (7,933) 225 (6,092)
Unrecognized net (gains)
and losses (3,414) 900 (3,269) 1,242
Unrecognized prior service cost (858) 1,920 (293) 328
Unrecognized transition
obligation 2,454 1,147 2,652 1,293
Additional minimum liability - (1,069) - (756)
Prepaid pension expense
(pension liability) $ 1,445 $(5,035) $ (685) $(3,985)
The projected benefit obligation for the defined benefit plans was
determined using assumed discount rates of 7.5 and 7 percent in 1994
and 1993, respectively, and an assumed long-term compensation increase
rate of 5.5 percent in 1994 and 1993. The plan assets are invested in
a diversified portfolio that consists primarily of equity and debt
securities.
Note 9: Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which changed the Company's method of accounting for income taxes
from the deferred method to the liability method. Under the liability
method, deferred tax balances are determined based on the estimated
future tax effects of differences between the financial statement and
tax bases of assets and liabilities under currently enacted tax laws.
As a result of the adoption of SFAS No. 109, the Company recorded a
cumulative adjustment at January 1, 1993, of $12,973,000. This
adjustment represents a net decrease in the deferred tax liability as
of that date and is reflected in the accompanying consolidated
statements of income as the cumulative effect of accounting change.
The provision for income taxes is as follows (in thousands):
Year Ended December 31,
1994 1993 1992
Current:
Federal $59,825 $18,955 $15,008
State 8,970 2,119 1,959
68,795 21,074 16,967
Deferred:
Federal 2,123 2,050 3,863
State (300) 436 516
1,823 2,486 4,379
Provision for income taxes $70,618 $23,560 $21,346
The difference between the statutory federal income tax rate and the
Company's effective income tax rate is summarized as follows:
Year Ended December 31,
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal benefit 2.8 2.5 2.4
Percentage depletion ( .7) (2.9) (2.3)
Revalue deferred tax balances for increase in
federal statutory rate - 1.2 -
Other (.5) - (2.6)
Effective income tax rate 36.6% 35.8% 31.5%
Cash payments for income taxes during 1994, 1993 and 1992 were
$44,096,000, $9,355,000 and $16,591,000, respectively.
After having given effect to SFAS No. 109, the Company's net deferred
tax liability consists of the following major items (in thousands):
December 31, December 31, January 1,
1994 1993 1993
Deferred tax assets:
Receivables $ 1,005 $ 1,203 $ 1,168
Inventories 945 980 1,153
Vacation accruals 1,291 1,288 1,172
Pension accruals 1,641 1,144 1,397
Stock options 3,023 2,990 2,975
Interest rate cap accrual - 2,662 -
Other 3,552 2,406 3,436
Total deferred tax assets 11,457 12,673 11,301
Deferred tax liability:
Property, plant and equipment (44,365) (43,758) (39,900)
Net deferred tax liability $(32,908) $(31,085) $(28,599)
The Company has determined, based on its history of operating earnings
and expectations for the future, that it is more likely than not that
future taxable income will be sufficient to fully utilize the
deferred tax assets at December 31, 1994.
Note 10: Commitments and Contingencies
LEASES - The Company leases railcars, storage terminals, warehouse
and office space under non-cancelable operating leases with varying
maturities through the year 2010.
Future minimum payments under non-cancelable operating leases as of
December 31, 1994, are as follows (in thousands):
1995 $12,230
1996 9,972
1997 7,948
1998 5,718
1999 5,454
2000 and thereafter 24,406
Total $65,728
Total lease expense was approximately $10,767,000, $12,316,000 and
$12,979,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
LEGAL PROCEEDINGS - The Company is subject to claims and legal actions
that arise in the ordinary course of its business. Management
believes that the ultimate liability, if any, with respect to these
claims and legal actions, will not have a material effect on the
financial position or on results of operations of the Company.
Note 11: Significant Customer and Export Sales
SIGNIFICANT CUSTOMER - The Company has supply contracts, subject to
certain limitations, for a substantial percentage of Georgia-Pacific
Corporation's requirements for certain chemicals at market prices.
These supply contracts have various expiration dates (depending on the
product) from 1995 through 1999 and may be extended year-to-year
upon expiration. The sales to Georgia-Pacific Corporation under these
supply contracts for the years ended December 31, 1994, 1993 and 1992
amounted to approximately 15 percent, 15 percent and 14 percent of
net sales, respectively. Receivables outstanding from these sales were
$16,939,000, $12,661,000 and $10,850,000 at December 31, 1994, 1993
and 1992, respectively.
EXPORT SALES - Export sales were approximately 13 percent, 14 percent
and 15 percent of the Company's net sales for the years ended
December 31, 1994, 1993 and 1992, respectively. The principal
international markets served by the Company include Canada, Mexico,
Latin America, Europe and Asia.
Note 12: Derivative Financial Instruments and Fair Value of Financial
Instruments
In April 1994, the Company paid $6,131,000 to terminate its two
outstanding interest rate swap agreements totalling a notional amount
of $100,000,000. The swap agreements were being carried at their fair
value; accordingly, the termination payment resulted in a reduction
of interest payable, and no gain or loss was recorded on the
transaction. The Company had no derivative financial instruments at
December 31, 1994.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
DEBT - The fair value of the Notes is based on quoted market prices
and the term loan, which was outstanding in 1993, on an estimate of
fair value obtained from financial industry sources. The carrying
amount of the revolving credit facility is assumed to approximate
fair value due to the floating market interest rates to which the
facility is subject.
INTEREST RATE AGREEMENTS - The fair value of interest rate agreements
in 1993 was estimated by obtaining quotes from brokers.
The estimated fair value of financial instruments is as follows
(in thousands):
December 31, December 31,
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Debt:
Revolving credit loan $122,000 $122,000 $105,000 $105,000
Notes 191,081 195,858 191,081 212,339
Term loan - - 83,125 83,125
Other 1,000 1,000 - -
Liabilities for interest
rate agreements - - 7,548 7,548
Note 13: Quarterly Financial Data (Unaudited)
The following table sets forth certain quarterly financial data for the
periods indicated (in thousands, except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Net sales $192,906 $208,188 $249,044 $305,167
Gross margin 39,186 51,846 72,844 113,510
Operating income 29,299 40,374 59,405 101,144
Net income 12,730 19,952 31,830 57,648
Net income per
common share 0.30 0.47 0.75 1.35
1993
Net sales $181,906 $195,202 $199,635 $192,159
Gross margin 36,826 37,940 37,227 37,369
Operating income 27,109 28,648 28,087 26,617
Net income 9,826 11,476 10,147 10,485
Net income per
common share 0.24 0.28 0.24 0.25
During the first quarter of 1993, the Company recorded an
extraordinary charge on early retirement of debt of $(13,267,000),
or $(0.32) per share, and also recorded a benefit from the
cumulative effect of accounting change for income taxes of
$12,973,000, or $0.32 per share.
REPORT OF MANAGEMENT
To the Stockholders of Georgia Gulf Corporation:
The accompanying consolidated financial statements of Georgia Gulf
Corporation and subsidiaries are the responsibility of and have been
prepared by the Company in conformity with generally accepted accounting
principles. The financial information displayed in other sections of
this Annual Report is consistent with the consolidated financial
statements.
The integrity and the objectivity of the data in these consolidated
financial statements, including estimates and judgments relating to
matters not concluded by year-end, are the responsibility of
management. The Company and its subsidiaries maintain accounting
systems and related internal controls, including a detailed budget
and reporting system, to provide reasonable assurance that financial
records are reliable for preparing the consolidated financial
statements and for maintaining accountability for assets. The system
of internal controls also provides reasonable assurance that assets
are safeguarded against loss from unauthorized use or disposition
and that transactions are executed in accordance with management's
authorization. Periodic reviews of the systems and of internal
controls are performed by the Company's internal audit department.
The Audit Committee of the Board of Directors, composed solely of
outside directors who are not officers or employees of the Company,
has the responsibility of meeting periodically with management, the
Company's internal auditors and Arthur Andersen LLP, the Company's
independent public accountants that are approved by the stockholders,
to review the scope and results of the annual audit, quarterly
reviews and the general overall effectiveness of the internal
accounting control system. The independent public accountants and the
Company's internal auditors have direct access to the Audit
Committee, with or without the presence of management, to discuss the
scope and results of their audits as well as any comments they may
have related to the adequacy of the internal accounting control
system and the quality of financial reporting.
RICHARD B. MARCHESE
Vice President-Finance, Chief Financial Officer and Treasurer
February 14, 1995
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Georgia Gulf Corporation:
We have audited the accompanying consolidated balance sheets of
Georgia Gulf Corporation (a Delaware corporation) and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated
statements of income, changes in stockholders' equity (deficit) and
cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Georgia
Gulf Corporation and subsidiaries as of December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in note 9 of the Notes to Consolidated Financial
Statements, effective January 1, 1993, the Company changed its
method of accounting for income taxes.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 14, 1995
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements on Form S-8, file no.
33-14696, file no. 33-27365, file no. 33-40952, file no. 33-42008, file no.
33-42190 and file no. 33-56711.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 27, 1995
EX-27
2
FINANCIAL DATA SCHEDULE
5
1000
YEAR
DEC-31-1994
DEC-31-1994
1,216
0
159,485
2,400
70,667
249,919
447,986
192,378
508,447
123,251
314,081
420
0
0
30,718
508,447
955,305
955,305
677,919
677,919
0
0
37,444
192,778
70,618
122,160
0
0
0
122,160
2.88
2.88