Georgia Gulf says credit facility amendments provide 'ample' room for challenging conditions

By Jennifer Lanning Drey

Portland, Ore., May 18 - Georgia Gulf Corp. believes amendments made to its senior secured credit facility this month will provide "ample room to deal with market difficulties," chief financial officer James T. Matthews said Friday during the company's first-quarter earnings conference call.

On May 10, the company amended the facility to increase its leverage ratio to a peak of 8.5x in the second quarter and falling to 3.75x in the fourth quarter of 2009.

In addition, Georgia Gulf decreased its interest ratio coverage to 1.5x in the first quarter and increasing to 3.0x in the fourth quarter of 2009.

The company said in a news release that it sought the changes in order to better accommodate its softened outlook for near-term operating results.

Georgia Gulf reported a net loss of $34.6 million for the first quarter, compared to net income of $33.7 million in the same period of 2006. The company recorded an operating loss of $8.0 million in the first quarter, compared to operating income of $58.8 million in the 2006 period.

But Matthews also said Friday that financial trends are encouraging and the company expects to be profitable in the second and third quarters.

That expectation is based on an up-tick in sales seen in the second quarter, price increases and synergies being realized from Georgia Gulf's acquisition of the Royal Group in October, he said.

Georgia Gulf had cash and cash equivalents of $20.04 million at March 31, compared to $9.64 million at Dec. 31.

"While 2007 will continue to be a challenging year due to the construction market conditions, we believe we have turned the corner. We believe the actions we have taken will leave us well positioned in the markets we serve in the months and years to come," Edward A. Schmitt, Georgia Gulf chief executive officer, said.

"When we look at financial results in depth and we reflect on sales trends in the second quarter, we can begin to see encouraging signs for the months going forward."

Georgia Gulf is an Atlanta-based manufacturer of two chemical lines and vinyl-based building and home improvement products.

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