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Georgia Gulf Reports Third-Quarter 2012 Financial Results

  Georgia Gulf Reports Third-Quarter 2012 Financial Results

Business Wire

ATLANTA -- November 06, 2012

Georgia Gulf Corporation (NYSE: GGC) today announced financial results for the
quarter ended September 30, 2012.

The company reported net sales of $813.5 million for the third quarter of
2012, 12 percent lower than the net sales of $929.6 million reported for the
third quarter of 2011. Georgia Gulf reported net income of $39.3 million, or
$1.12 per diluted share, for the third quarter of 2012, compared to net income
of $34.4 million, or $0.99 per diluted share, for the third quarter of the
previous year. Net income for the third quarter of 2012 includes $14.8 million
of pre-tax expense from transaction related costs, restructuring, and other
expenses, a $1.1 million release of tax reserves related to the Royal Group
prior to its acquisition by Georgia Gulf in 2006, and a $1.9 million pre-tax
gain on sale of assets. Net income for the third quarter of 2011 includes an
$8.1 million release of tax reserves related to the Royal Group prior to its
acquisition by Georgia Gulf in 2006. Excluding these items, adjusted net
income was $48.4 million, or $1.38 per diluted share for the third quarter of
2012 compared to adjusted net income of $26.3 million, or $0.75 per diluted
share for the third quarter of 2011.

“We are very pleased with the resultsfor the third quarter as the
performance, when combined with the first two quarters, exceeded our
expectations in all business segmentsfor the first nine months of the year,”
said Paul Carrico, president and chief executive officer.“I would like to
express my congratulations and thanks to all the employees who made this
happen by their dedicated efforts, particularly in the areas of safety,
operations and superior customer service.

“Going forward, we believe low-cost natural gas in North America will remain
globally advantaged as a source of energy. We expect this to place the Gulf
Coast chlorovinyls producers in a strong position to supply domestic and
export customers,” Carrico said. “We believe our pending merger with PPG’s
commodity chemicals business will create a chemicals and building products
leader that is well positioned to benefit from this cost advantage and
expanding global demand for our products.”

Chlorovinyls

In the Chlorovinyls segment, third quarter 2012 net sales were $329.1 million
compared to $347.2 million during the third quarter of 2011. The decline in
net sales was driven by lower vinyl resin sales prices, partially offset by
higher vinyl resin sales volumes and higher caustic prices. The segment posted
operating income of $73.8 million in the third quarter of 2012, compared to
operating income of $46.3 million for the same quarter in the prior year. The
$27.5 million increase in operating income was primarily due to lower
feedstock costs, higher vinyl resin sales volumes and higher caustic sales
prices, partially offset by lower vinyl resin sales prices.

Building Products

In the Building Products segment, net sales were $246.2 million for the third
quarter of 2012, compared to $262.5 million recorded for the same quarter in
the prior year. Net sales for the third quarter of 2011 include $4.6 million
of sales from the fence product line that was discontinued in March 2012. The
net sales decrease was driven by lower sales volume in the U.S. and the
discontinued fence product line, partially offset by increased Canadian sales
volume. On a constant currency basis and excluding the sales from the
discontinued fence product line, net sales decreased 4 percent. The segment's
operating income was $14.7 million for the third quarter of 2012, compared to
$14.3 million of operating income during the same quarter of the prior year.
The increase in operating income was due to lower raw materials costs,
partially offset by higher selling, general and administrative costs.

Aromatics

In the Aromatics segment, net sales decreased to $238.2 million for the third
quarter of 2012 from $319.9 million during the third quarter of 2011, due
primarily to lower export sales volumes for phenol and acetone and lower sales
prices for cumene, phenol and acetone, partially offset by higher cumene sales
volumes. During the third quarter of 2012, the segment recorded operating
income of $11.1 million, compared to operating income of $1.7 million during
the same quarter in 2011. The increase in operating income was primarily due
to a small inventory holding gain in the third quarter of 2012 compared to a
large inventory holding loss in the third quarter of 2011, partially offset by
lower sales volumes.

Liquidity and Debt Reduction

As of September 30, 2012, the company had $118.5 million of cash on hand as
well as approximately $288 million of borrowing capacity available under its
asset-based loan (ABL) facility.

As previously disclosed, on October 12 Georgia Gulf redeemed $50 million of
face value of its 9 percent senior secured notes due in 2017. Since the
company’s restructuring in July 2009, it has repaid approximately $220 million
of debt.

Update on announced Merger with PPG’s Commodity Chemicals Business

On July 19, 2012, PPG Industries, Inc. (“PPG”) and Georgia Gulf announced that
the boards of directors of both companies had approved definitive agreements
under which PPG will separate its commodity chemicals business and then merge
it with Georgia Gulf.

The terms of the transaction call for PPG to form a new company by separating
its commodity chemicals business through a spinoff or split off, and then
immediately merging the business with Georgia Gulf or a Georgia Gulf
subsidiary in a Reverse Morris Trust transaction. The merger will result in
PPG shareholders receiving approximately 50.5 percent of the shares of the
merged company (“The Newly Merged Company”), with existing Georgia Gulf
shareholders owning approximately 49.5 percent of The Newly Merged Company.

Additionally, The Newly Merged Company will assume approximately $95 million
of debt, about $87 million of non-controlling interest, and related
environmental liabilities, pension assets and liabilities and other
post-employment benefits obligations from PPG.

The transaction is subject to approval by Georgia Gulf shareholders and
customary closing conditions, relevant tax authority rulings and regulatory
approvals and is expected to be completed by early 2013. As of November 6,
2012, the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act
had expired, and the company had received a no-action letter from the Canadian
Competition Bureau, together with a waiver of the notification and waiting
period requirements in respect to the merger.

Conference Call

The company will discuss third-quarter financial results and business
developments via conference call and webcast on Wednesday, November 7, at
10:00 a.m. Eastern time. To access the company's third-quarter conference
call, please dial (877) 312-5406 (domestic) or (706) 679-9856 (international).
A webcast of the conference call is available on the company’s website,
www.ggc.com. Playbacks will be available from 1:00 p.m. Eastern time on
Wednesday, November 7, until 11:59 p.m. Eastern time on Wednesday, November
21. Playback numbers are (855) 859-2056 (domestic) or (706) 679-9856
(international). The conference call ID number is 47846886.

About Georgia Gulf

Georgia Gulf Corporation is a leading, integrated North American manufacturer
of two chemical lines, chlorovinyls and aromatics, and manufactures
vinyl-based building and home improvement products. The company's vinyl-based
building and home improvement products, marketed under the Royal Building
Products and Exterior Portfolio brands, include window and door profiles,
mouldings, siding, pipe and pipe fittings, and deck products. Georgia Gulf,
headquartered in Atlanta, Georgia, has manufacturing facilities located
throughout North America to provide industry-leading service to customers. For
more information, visit www.ggc.com.

Use of Non-GAAP Measures

Georgia Gulf supplemented the financial statements prepared in accordance with
U.S. Generally Accepted Accounting Principles (GAAP) and shown in this press
release with adjusted net income because investors commonly use adjusted net
income as a main component of valuation analysis of cyclical companies such as
Georgia Gulf. Adjusted net income is not a measurement of financial
performance under U.S. GAAP and should not be considered as an alternative to
net income (loss) as a measure of performance. In addition, our calculation of
adjusted net income may be different from the calculation used by other
companies and, therefore, comparability may be limited.

A reconciliation of net income (loss) determined in accordance with U.S. GAAP
to Adjusted net income is provided in the table below:

(in millions)                                            3Q 2012   3Q 2011
Net Income                                                 $39.3     $34.4
a) Gain on sale of assets                                  (1.9)       -
b) Transaction related costs, restructuring and other,     14.8        -
net
c) Tax impact of above items a) & b)                       (2.7)       -
d) Release of tax reserves related to Royal Group          (1.1)     (8.1)
prior to its acquisition by Georgia Gulf
Adjusted Net Income                                        $48.4     $26.3

(Note: table above may not foot due to rounding)

Cautionary Statements Regarding Forward-Looking Information

This communication contains certain statements relating to future events and
our intentions, beliefs, expectations, and predictions for the future. Any
such statements other than statements of historical fact are forward-looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934. Words or phrases such as “will likely result,” “are
expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,”
“estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,”
“forecast,” “would” or “could” (including the negative or variations thereof)
or similar terminology used in connection with any discussion of future plans,
actions, or events, including with respect to the proposed separation of PPG’s
commodity chemicals business from PPG and the merger of the PPG commodity
chemicals business and Georgia Gulf (the “Transaction”), generally identify
forward-looking statements. These forward-looking statements include, but are
not limited to, statements regarding the expected benefits of the Transaction,
and the expected timing of completion of the Transaction, and Georgia Gulf’s
anticipated future financial and operating performance and results, including
its respective estimates for growth. These statements are based on the current
expectations of the management of Georgia Gulf. There are a number of risks
and uncertainties that could cause Georgia Gulf’s actual results to differ
materially from the forward-looking statements included in this communication.
These risks and uncertainties include risks relating to (i) Georgia Gulf's
ability to obtain requisite shareholder approval to complete the Transaction,
(ii) PPG being unable to obtain necessary tax authority and other regulatory
approvals required to complete the Transaction, or such required approvals
delaying the Transaction or resulting in the imposition of conditions that
could have a material adverse effect on the combined company or causing the
companies to abandon the Transaction, (iii) other conditions to the closing of
the Transaction not being satisfied, (iv) a material adverse change, event or
occurrence affecting Georgia Gulf or the PPG commodity chemicals business
prior to the closing of the Transaction delaying the Transaction or causing
the companies to abandon the Transaction, (v) problems arising in successfully
integrating the businesses of the PPG commodity chemicals business and Georgia
Gulf, which may result in the combined company not operating as effectively
and efficiently as expected, (vi) the possibility that the Transaction may
involve other unexpected costs, liabilities or delays, (vii) the businesses of
each respective company being negatively impacted as a result of uncertainty
surrounding the Transaction, (viii) disruptions from the Transaction harming
relationships with customers, employees or suppliers, and (ix) uncertainties
regarding future prices, industry capacity levels and demand for Georgia
Gulf’s products, raw materials and energy costs and availability, feedstock
availability and prices, changes in governmental and environmental
regulations, the adoption of new laws or regulations that may make it more
difficult or expensive to operate Georgia Gulf’s businesses or manufacture its
products before or after the Transaction, Georgia Gulf’s ability to generate
sufficient cash flows from its business before and after the Transaction,
future economic conditions in the specific industries to which its products
are sold, and global economic conditions.

In light of these risks, uncertainties, assumptions, and factors, the
forward-looking events discussed in this communication may not occur. Other
unknown or unpredictable factors could also have a material adverse effect on
Georgia Gulf’s actual future results, performance, or achievements. For a
further discussion of these and other risks and uncertainties applicable to
Georgia Gulf and its business, see Georgia Gulf's Annual Report on Form 10-K
for the fiscal year ended December 31, 2011 and subsequent filings with the
Securities and Exchange Commission (the “SEC”). As a result of the foregoing,
readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this communication. Georgia
Gulf does not undertake, and expressly disclaims, any duty to update any
forward-looking statement whether as a result of new information, future
events, or changes in its expectations, except as required by law.

Additional Information and Where to Find it

This communication does not constitute an offer to buy, or solicitation of an
offer to sell, any securities of Georgia Gulf, and no offer or sale of such
securities will be made in any jurisdiction where it would be unlawful to do
so. In connection with the Transaction, Georgia Gulf has filed with the
Securities and Exchange Commission (“SEC”) a preliminary proxy statement on
Schedule 14A and a registration statement on Form S-4 relating to the
Transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT AND THE PROSPECTUS FORMING PART OF THE REGISTRATION STATEMENT, AND
ANY OTHER RELEVANT DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT
GEORGIA GULF, PPG’S COMMODITY CHEMICALS BUSINESS AND THE TRANSACTION.
Investors and security holders will be able to obtain these materials and
other documents filed with the SEC free of charge at the SEC’s website,
www.sec.gov. In addition, copies of the registration statement and proxy
statement may be obtained free of charge by accessing Georgia Gulf’s website
at www.GGC.com by clicking on the “Investors” link and then clicking on the
“SEC Filings” link, or upon written request to Georgia Gulf at 115 Perimeter
Center Place, Suite 460, Atlanta, Georgia 30346, Attention: Investor
Relations. Shareholders may also read and copy any reports, statements and
other information filed by Georgia Gulf with the SEC, at the SEC public
reference room at 100 F Street, N.E., Washington D.C. 20549. Please call the
SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on
its public reference room.

Participants in the Solicitation

Georgia Gulf, PPG, and certain of their respective directors, executive
officers and other members of management and employees may be deemed to be
participants in the solicitation of proxies from shareholders in respect of
the Transaction under the rules of the SEC. Information regarding Georgia
Gulf’s directors and executive officers is available in its 2011 Annual Report
on Form 10-K filed with the SEC on February 24, 2012, and in its definitive
proxy statement filed with the SEC on April 16, 2012, in connection with its
2012 annual meeting of stockholders. Information regarding PPG directors and
executive officers is available in its 2011 Annual Report on Form 10-K filed
with the SEC on February 16, 2012, and in its definitive proxy statement filed
with the SEC on March 8, 2012, in connection with its 2012 annual meeting of
stockholders. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise is contained in the registration statement and
the prospectus that is a part thereof and the proxy statement and other
relevant materials filed with the SEC.

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                                             
                                                September 30,     December 31,
(In thousands, except share data)               2012              2011
Assets
Cash and cash equivalents                       $118,469          $88,575
Receivables, net of allowance for doubtful
accounts of $4,066 at 2012 and $4,225 at        389,018           256,749
2011
Inventories                                     297,544           287,554
Prepaid expenses and other                      11,092            15,750
Deferred income taxes                           17,367            14,989
Total current assets                            833,490           663,617
Property, plant and equipment, net              636,832           640,900
Goodwill                                        218,676           213,608
Intangible assets, net                          44,292            46,715
Deferred income taxes                           4,145             3,770
Other assets, net                               63,596            75,601
Total assets                                    $1,801,031        $1,644,211
Liabilities and Stockholders’ Equity
Current portion of long-term debt               $49,841           $—
Accounts payable                                213,433           168,187
Interest payable                                9,650             20,931
Income taxes payable                            14,832            1,202
Accrued compensation                            33,749            19,743
Other accrued liabilities                       64,356            68,825
Total current liabilities                       385,861           278,888
Long-term debt                                  447,929           497,464
Lease financing obligation                      113,773           109,899
Liability for unrecognized income tax           18,755            23,711
benefits
Deferred income taxes                           184,280           181,465
Other non-current liabilities                   65,333            64,120
Total liabilities                               1,215,931         1,155,547
Commitments and contingencies
Stockholders’ equity:
Preferred stock—$0.01 par value; 75,000,000     —                 —
shares authorized; no shares issued
Common stock—$0.01 par value; 100,000,000
shares authorized; issued and outstanding:      345               342
34,538,268 at 2012 and 34,236,402 at 2011
Additional paid-in capital                      486,384           480,530
Accumulated other comprehensive loss, net       (10,183)          (18,151)
of tax
Retained earnings                               108,554           25,943
Total stockholders’ equity                      585,100           488,664
Total liabilities and stockholders’ equity      $1,801,031        $1,644,211
                                                                  
                                                                  

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                                                
                           Three Months Ended        Nine Months Ended
                           September 30,             September 30,
(In thousands, except      2012       2011         2012         2011
per share data)
Net sales                  $813,502     $929,636     $2,541,144     $2,549,284
Operating costs and
expenses:
Cost of sales              673,178      831,808      2,210,515      2,292,761
Selling, general and
administrative             53,476       43,412       152,932        130,080
expenses
Gain on sale of assets     (1,864)      —            (19,250)       (1,150)
Transaction related
costs, restructuring       14,790       1            26,370         1,027
and other, net
Total operating costs      739,580      875,221      2,370,567      2,422,718
and expenses
Operating income           73,922       54,415       170,577        126,566
Interest expense, net      (14,638)     (16,703)     (43,574)       (50,092)
Loss on early              —            —            —              (1,100)
redemption of debt
Foreign exchange           (192)        160          (594)          (780)
(loss) gain
Income before income       59,092       37,872       126,409        74,594
taxes
Provision for income       19,756       3,514        38,141         13,521
taxes
Net income                 $39,336      $34,358      $88,268        $61,073
Earnings per share:
Basic                      $1.13        $0.99        $2.54          $1.75
Diluted                    $1.12        $0.99        $2.53          $1.75
                                                                    
Dividends declared per     $0.08        $-           $0.16          $-
share of common stock
                                                                    
Weighted average
common shares:
Basic                      34,549       34,165       34,413         34,036
Diluted                    34,882       34,211       34,641         34,065
                                                                    
                                                                    

GEORGIA GULF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                  
                            Three Months Ended         Nine Months Ended
                            September 30,              September 30,
(In thousands)              2012       2011          2012        2011
Cash flows from
operating activities:
Net income                  $39,336      $34,357       $88,268       $61,073
Adjustments to
reconcile net income to
net cash provided by
operating activities:
Depreciation and            22,988       26,463        67,963        78,305
amortization
Loss on early               —            —             —             1,100
redemption of debt
Foreign exchange (gain)     (556)        809           (533)         724
loss
Deferred income taxes       (201)        (507)         (3,013)       4,686
Excess tax benefits
from share- based           (3,196)      (3,490)       (3,301)       (3,555)
payment arrangements
Share-based                 1,593        1,180         7,669         5,485
compensation
Gain on sale of assets      (1,864)      —             (19,250)      (1,150)
Other non-cash items        1,902        (3,710)       3,745         (1,328)
Change in operating
assets, liabilities and     20,690       37,541        (75,844)      (125,135)
other
Net cash provided by        80,692       92,643        65,704        20,205
operating activities
Cash flows from
investing activities:
Capital expenditures        (15,150)     (20,555)      (55,819)      (44,247)
Proceeds from sale of
property, plant and         1,864        174           23,579        326
equipment
Acquisition, net of         —            252           —             (71,371)
cash acquired
Net cash used in            (13,286)     (20,129)      (32,240)      (115,292)
investing activities
Cash flows from
financing activities:
Repayments on asset         —            (211,921)     (183,400)     (415,567)
based lending revolver
Borrowings on asset         —            138,300       183,400       452,505
based lending revolver
Repayment of long-term      —            —             —             (22,917)
debt
Fees paid related to        (625)        —             (625)         (1,480)
financing activities
Excess tax benefits
from share- based           3,196        3,490         3,301         3,555
payment arrangements
Stock compensation plan     (4,724)      —             (5,096)       39
activity
Dividends Paid              (2,778)      —             (2,778)       —
Net cash (used in)
provided by financing       (4,931)      (70,131)      (5,198)       16,135
activities
Effect of exchange rate
changes on cash and         605          1,241         1,628         1,504
cash equivalents
Net change in cash and      63,080       3,624         29,894        (77,448)
cash equivalents
Cash and cash
equivalents at              55,389       41,686        88,575        122,758
beginning of period
Cash and cash
equivalents at end of       $118,469     $45,310       $118,469      $45,310
period
                                                                     
                                                                     

GEORGIA GULF CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
                                                                                    
                   Three Months Ended                      Nine Months Ended
                   September 30,                           September 30,
(In Thousands)     2012               2011                 2012                   2011
                                                                                                  
Segment net
sales:
  Chlorovinyls     $ 329,101          $ 347,195            $ 998,475              $ 997,177
  Building           246,214            262,535              685,826                694,195
  Products
  Aromatics         238,187          319,906            856,843              857,912   
Net Sales          $ 813,502         $ 929,636           $ 2,541,144           $ 2,549,284 
                                                                                                  
                                                                                                  
Segment
operating
income (loss):
  Chlorovinyls     $ 73,791           $ 46,261      2)     $ 160,168       3)     $ 121,826       5)
  Building           14,711             14,313               23,715                 19,138        6)
  Products
  Aromatics          11,074             1,689                46,239                 14,024
  Unallocated       (25,654 )   1)    (7,848  )           (59,545   )   4)      (28,422   )
  corporate
Total
operating          $ 73,922          $ 54,415            $ 170,577             $ 126,566   
income

1)  Includes $13.1 million of transaction related costs
2)   Includes $1.9 million gain on sale of asset, offset by $1.3 million
     restructuring charge
3)   Includes gain on sale of assets of $19.3 million
4)   Includes $25.1 million of transaction related costs
5)   Includes $0.8 million reversal of non-income tax reserve and $1.2 million
     gain on the sale of asset
6)   Includes $3.0 million of transaction related costs and inventory purchase
     accounting adjustment, offset by $3.6 million reversal of non-income tax
     reserve.

Contact:

Georgia Gulf Corporation
Investor Relations
Martin Jarosick
770-395-4524
or
Media
Alan Chapple
770-395-4538
chapplea@ggc.com
 
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