Georgia Gulf Corp. Reports Operating Results (10-Q/A)
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: The incorrect statute of limitations period caused our long term liability for unrecognized income tax benefits to be overstated as of December 31, 2009 and March 31, 2010 by $12.6 million and $13.6 million, respectively, with a corresponding overstatement of our provision for income taxes by $0.2 million for the three months ended March 31, 2009, as reported in Amendment No. 1.
The Company 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 Amendment No. 1 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 March 31, 2010 and December 31, 2009, and (ii) our accumulated deficit was overstated by $19.0 million as of each of March 31, 2010 and December 31, 2009.
In addition, due to the implementation of our 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 consolidated financial statements presented in Amendment No. 1 to be misstated as follows: (i) our long-term deferred income tax liability was overstated by $0.3 million as of March 31, 2010 and $1.9 million as of December 31, 2009; (ii) our accumulated other comprehensive loss, net of tax, was overstated by $0.3 million as of March 31, 2010 and $1.9 million as of December 31, 2009; and (iii) our other
comprehensive loss, net of tax, was understated by $1.7 million for the three months ended March 31, 2010 and our other comprehensive income, net of tax was understated by $1.1 million for the three months ended March 31, 2009.
In connection with the implementation of the Remediation Steps, we also determined that in 2009 there was a misapplication of ASC Topic 740 primarily related to the CODI arising from our 2009 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 consolidated balance sheet presented in Amendment No. 1, as of each of March 31, 2010 and December 31, 2009 and our liability for unrecognized tax benefits to be understated by $1.7 million as of each of March 31, 2010 and December 31, 2009.
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