MERGER WITH THE PPG CHEMICALS BUSINESS

6 Months Ended

Jun. 30, 2013

MERGER WITH THE PPG CHEMICALS BUSINESS

MERGER WITH THE PPG CHEMICALS BUSINESS

2. MERGER WITH THE PPG CHEMICALS BUSINESS

The Merger created a leading integrated chemicals and building products company with a broad portfolio of downstream products, and greater scale and ability to capitalize on globally advantaged, low cost North American natural gas. The results of the Merged Business are included in our financial statements from January 28, 2013, the closing date of the acquisition of the Merged Business. We issued 35.2 million shares of our common stock, assumed $967.0 million of debt and assumed certain other liabilities including pension liabilities and other postretirement obligations as consideration for the Merged Business. The final purchase price is subject to a settlement with PPG related to the final working capital of the Merged Business as of the date of acquisition. In connection with the Transactions, we have paid approximately $53.6 million in fees and expenses, which included: (i) approximately $30.3 million of debt issuance costs, of which approximately $19.3 million was deferred; and (ii) approximately $23.3 million of related professional and legal fees.

The initial accounting for the Merged Business (including the allocation of the purchase price to acquired assets and liabilities) is preliminary and subject to change, including the working capital settlement between PPG and the Company, as well as changes in the fair value of working capital and other assets, completion of an appraisal of assets acquired and liabilities assumed, and final valuation of intangible assets. Goodwill recognized from the acquisition of the Merged Business is primarily due to the combined companies providing an increase in size and economies of scale, a significant increase in chlorine production flexibility, an increase in natural gas integration and strategic, geographic and product synergies. Approximately $14 million of the goodwill recognized in the Merger is expected to be deductible for tax purposes. The fair value of the noncontrolling interest in TCI was estimated based on the present value of estimated future cash flows from TCI attributable to our minority partner's ownership percentage of TCI. The preliminary allocation of the purchase price to assets acquired and liabilities assumed, is set forth in the table below and is subject to change during the measurement period of up to twelve months.

(In millions)	Revised Preliminary Allocation as of June 30, 2013 (1)
Cash and cash equivalents	$	26.7
Receivables		233.7
Inventories		72.3
Prepaid expenses and other		11.9
Property, plant and equipment		962.8
Goodwill		1,450.2
Intangible assets		1,218.0
Other assets		42.5
Accounts payable		(97.8	)
Income taxes payable		(4.7	)
Accrued compensation		(20.6	)
Other accrued taxes		(10.9	)
Other accrued liabilities		(57.1	)
Deferred income taxes		(616.0	)
Noncurrent pension and other postretirement benefits		(279.8	)
Other non-current liabilities		(61.6	)
Debt assumed		(967.0	)
Noncontrolling interest		(129.3	)
Total net assets acquired	$	1,773.3

⁽¹⁾ Measurement period adjustments recorded during the three months ended June 30, 2013 did not have a significant impact on the unaudited condensed consolidated financial statements.

Summary Pro Forma Information.    The following unaudited pro forma information reflects our consolidated results of operations as if the Transactions had taken place on January 1, 2012. The pro forma information includes primarily adjustments for depreciation based on the estimated fair value of the property, plant and equipment we acquired, amortization of acquired intangibles and interest expense on the debt we incurred to finance the Transactions. The pro forma information is not necessarily indicative of the results of operations that we would have reported had the Transactions actually closed on January 1, 2012, nor is it necessarily indicative of future results.

	Three Months Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2013			2012		2013			2012
Net sales	$	1,272.8		$	1,282.1	$	2,441.7		$	2,553.4
Net income attributable to Axiall	$	74.8	(a)	$	53.4	$	64.0	(b)	$	121.3	(c)
Earnings per share from net income attributable to Axiall:
Basic	$	1.07		$	0.76	$	0.92		$	1.73
Diluted	$	1.06		$	0.76	$	0.91		$	1.73

^(a) In addition to the normal pro forma adjustments associated with the Transactions, this amount excludes $3.2 million related to the inventory fair value purchase accounting adjustment. This amount is excluded from the pro forma amounts for the three months ended June 30, 2013 and a comparable amount is included in the pro forma amounts for the six months ended June 30, 2012 to reflect our consolidated results as if the Transactions had taken place on January 1, 2012.

^(b) In addition to the normal pro forma adjustments associated with the Transactions, this amount excludes: (i) the $23.5 million gain on acquisition of controlling interest in PHH; (ii) $13.4 million related to the inventory fair value purchase accounting adjustment; and (iii) $11.0 million related to the expensing of financing fees related to a $688.0 million bridge loan used in the Transactions. These amounts are excluded from the pro forma amounts for the six months ended June 30, 2013 and comparable amounts are included in the six months ended June 30, 2012 to reflect our consolidated results as if the Transactions had taken place on January 1, 2012.

^(c) In addition to the normal pro forma adjustments associated with the Transactions, this amount includes: (i) the $23.5 million gain on acquisition of controlling interest in PHH; (ii) $13.4 million related to the inventory fair value purchase accounting adjustment; and (iii) $11.0 million related to the expensing of financing fees related to a $688.0 million bridge loan used in the Transactions. These amounts are excluded from the pro forma amounts for the six months ended June 30, 2013 and included in the six months ended June 30, 2012 to reflect our consolidated results as if the Transactions had taken place on January 1, 2012.

Disclosure of revenues and earnings of the Merged Business since January 28, 2013 on a stand-alone basis is not practicable as the Merged Business is not being operated as a stand-alone business.

Increase of Authorized Shares of Common Stock.    In connection with the Transactions and effective January 28, 2013, the Company increased the number of authorized shares of Company common stock from 100 million shares to 200 million shares.