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Georgia Gulf Corp. Reports Operating Results (10-Q/A)

November 22, 2010 | About:
10qk

10qk

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Georgia Gulf Corp. (GGC) filed Amended Quarterly Report for the period ended 2010-06-30.

Georgia Gulf Corp. has a market cap of $649.69 million; its shares were traded at around $19.13 with and P/S ratio of 0.33. GGC is in the portfolios of Pioneer Investments.

Highlight of Business Operations:

In addition, in 2010, we engaged a different third-party firm of tax professionals to assist us with the preparation of our 2009 U.S. federal income tax return. During the preparation of that tax return we, with the support of our tax advisors, identified certain issues that caused us to re-evaluate the application of the relevant provisions of the IRC relating to the 2009 financial restructuring activities. Consequently, we determined that a manual input error to a spreadsheet used in the tax calculations relating to the tax impact of our 2009 financial restructuring activities had been made and that certain applications of the relevant provisions of the IRC were incorrect. As a result, the reduction in various tax attributes resulting from the CODI we recognized in 2009 was understated. This error caused our provision for income taxes to be understated by $36.4 million and our net income to be overstated by $36.4 million, each for the year ended December 31, 2009. This adjustment did not, however, result in any additional tax liability payable by us to tax authorities in respect of 2009 or earlier periods.

The incorrect statute of limitations period caused our long-term liability for unrecognized income tax benefits to be overstated as of December 31, 2009 by $12.6 million, with a corresponding understatement of our income tax benefit of $5.6 million and $5.8 million for the three and six months ended June 30, 2009, respectively. The other misapplications of ASC Topic 740 that occurred beginning upon adoption on January 1, 2007 related to uncertain tax positions in connection with our acquisition of Royal Group and

As a result of the errors and misapplications described in the preceding paragraphs, (i) as of and for the three months ended June 30, 2009, our benefit from income taxes was understated by $5.6 million and our net income was understated by $5.6 million; (ii) for the six months ended June 30, 2009 our benefit from income taxes was understated by $5.8 million and our net income was also understated by $5.8 million; and (iii) as of December 31, 2009, our prepaid expenses were overstated by $0.3 million, our deferred income tax assets were overstated by $0.9 million, our liability for unrecognized tax benefits was overstated by $17.6 million, our deferred tax liabilities were understated by $33.0 million, and our accumulated deficit was understated by $16.7 million.

The Company has applied certain of the Remediation Steps to, among other things, the process of finalizing its 2009 Tax Return and the preparation of its financial statements for the quarter ended September 30, 2010, a process which included the review of a complex analysis related to stock and partnership tax basis in certain of our subsidiaries and investments, which analysis is used in calculating the amount of CODI recognized for tax purposes. During the process of reviewing that analysis, we, with the support of our third-party tax advisors, re-evaluated that portion of the calculation related to paid-up capital distributions in 2006 relating to a foreign affiliate (the "Affiliate") of Royal Group, Inc. ("Royal"), one of our subsidiaries. That re-evaluation led us to determine that an error in the calculation had been made, which error resulted in the Company moving from having a net unrealized built-in gain (as defined in the IRC), to having a net unrealized built-in loss (as defined in the IRC) which, in turn, resulted in a reduction of our net operating losses for income tax purposes of $54 million. This error and the resulting reduction of net operating losses for income tax purposes caused our unaudited, condensed consolidated financial statements presented in our Original Quarterly Report to be misstated as follows: (i) our deferred tax assets were overstated on our consolidated balance sheet by $19.0 million as of each of June 30, 2010 and December 31, 2009, and (ii) our accumulated deficit was overstated by $19.0 million as of each of June 30, 2010 and December 31, 2009.

In addition, due to the implementation of certain of the Remediation Steps, we have determined that the tax basis of the Affiliate is greater than the book basis, and therefore, we should not have tax effected our cumulative translation adjustment in other comprehensive income for the Affiliate. This error caused our condensed consolidated financial statements presented in our Original Quarterly Report to be misstated as follows: (i) our long-term deferred income tax liability is overstated by $2.1 million as of June 30, 2010 and $1.9 million as of December 31, 2009; (ii) our accumulated other comprehensive loss, net of tax, is overstated by $2.1 million as of June 30, 2010 and $1.9 million as of December 31, 2009; and (iii) our other comprehensive income, net of tax, is understated by $1.9 million and $0.2 million for the three and six months ended June 30, 2010, respectively, and is overstated by $3.5 million and $2.4 million for the three and six months ended June 30, 2009, respectively.

financial restructuring activities that resulted in the incorrect recording of a deferred tax liability in connection with the tax attribute reduction related to the tax basis in the Affiliate. This misapplication caused our deferred tax liabilities to be overstated by $35.6 million on our condensed consolidated balance sheet in our Original Quarterly Report as of each of June 30, 2010 and December 31, 2009 and our liability for unrecognized tax benefits was understated by $1.7 million as of June 30, 2010 and December 31, 2009.

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