Georgia Gulf Corporation. (GGC)
Q2 2010 Earnings Call
August 06, 2010 10:00 a.m. ET
Martin Jarosick - IR
Paul Carrico - President & CEO
Greg Thomson - CFO
Silke Kueck - JPMorgan
Roger Spitz - Bank of America-Merrill Lynch
Bill Hoffmann - RBC Capital Markets
Sabina Chatterjee - BB&T Capital Markets
Tarek Hamid - JPMorgan
Previous Statements by GGC
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Good morning, my name is Brandy and I will be your conference operator today. At this time I would like to welcome everyone to the Georgia Gulf Second Quarter Financial Results Conference Call, (Operator Instructions).
Thank you. I would now like to turn the conference over to your host Mr. Martin Jarosick. Sir you many begin your conference.
Thank you Brandy and good morning ladies and gentlemen. Thank you for participating in today's conference call to discuss Georgia Gulf's 2010 second quarter financial results. There are slides available to you on the Georgia Gulf website. These slides are for your reference but we will not be speaking directly to the bullets on each slide.
Participating on today call are Paul Carrico, President and CEO and Greg Thompson, CFO. During this call we will be making forward looking statements. As you appreciate any business projections and assumptions about future event are subject to risks and other factors that could cause actual results to differ materially from our current outlook. A listing of factors that could effect future results is included in our 2009, Form 10-K and subsequent filings.
Any forward looking statements made on this call should be considered in light of those factors. In addition, during this conference call we may refer to certain non-GAAP financial measures. We have provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures as an appendix in the slides on our Website.
I will now turn the call over to Paul to begin the review of the second quarter. Paul?
Thank you, Martin and good morning ladies and gentlemen. In reviewing the second quarter results on an adjusted EBITDA basis we delivered $62 million as compared to $59.4 million in the second quarter of 2009.
For the first six months of 2010 we have generated $74.9 million of adjusted EBITDA compared to $70.3 million for the comparable period in 2009. The Chlorovinyl segment in the second quarter generated $51.6 million of adjusted EBITDA compared to $40.7 million in the second quarter of 2009.
The improved results for this quarter were driven by first higher ECU values and second modest improvements in PVC margins due to Ethylene prices falling faster than PVC prices.
The positive effect of these two impacts was partially offset by the unplanned (inaudible) cooling tower outage in May of this year.
On an adjusted EBITDA basis our building products segment generated $27.4 million in the second quarter of 2010 compared to $19.5 million in the second quarter of 2009.
This large improvement was driven by the cost reductions and property building improvements implemented during the past two years and by increased volumes.
Year-to-date our building product segment has reported $35 million adjusted EBITDA than the same period last year. For the trailing four quarters the segment generated $71.1 million of adjusted EBITDA.
This represents a ratio of almost 9% adjusted EBITDA to sales when calculated based on the trailing four quarters. The results are a dramatic improvement when compared to the two previous calendar yea.
On an adjusted EBITDA basis as a percent of sales, calendar year 2008 was approximately 2% and calendar year 2009 was approximately 5%.
For the quarter our aromatics segment reported a negative $70.5 million of adjusted EBITDA compared to a positive $9 million of adjusted EBITDA in the second quarter of 2009.
This decline was driven by maintenance expenses and loss production related to a schedule turnaround in the phenol plant as well as an inventory holding loss created by decreasing benzene and propylene prices across the quarter.
For March 2010 to July 2010 benzene prices fell about 18% and propylene prices fell about 21%. At this time I will turn the call over to Greg to review our financial results in greater detail.
Thank you Paul. Good morning ladies and gentlemen, before we get into the numbers I would like to discuss the 8K we filed last night stating that our previously issued SEC filings could not be relied up due to the errors we discovered in calculations of our income tax expense for the years 2007 through 2009.
We are working very hard to prepare amended reports in the near future and this is the reason you see only selected financial data in the earnings press release instead of more complete unaudited GAAP balance sheet income statement and cash flow statements.
The main restatement issue is driven by income tax accounting for the financial restructuring actions we completed last year.
Due to the highly complex nature of our financial restructuring actions ad the related tax implications we engaged nationally recognized third-party tax professionals to assist us in determining the U.S. federal income tax consequences of these transactions.
During the preparation of our 2009, U.S. federal income tax returns which is in process now, we along with an additional firm of third-party tax professionals and our tax advisors on the financial restructuring actions discovered that a manual input error was made with respect to calculating the reported amount of cancellation of debt income for the year ended December 31, 2009, which in turn had a direct impact on the amount of tax expense and deferred tax liability we reported for that year.