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

November 22, 2010 | About:
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10qk

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Georgia Gulf Corp. (GGC) filed Amended Annual Report for the period ended 2009-12-31.

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, 2007, 2008 and 2009 by $3.1 million, $4.7 million and $12.6 million, respectively, with an overstatement of our income tax expense by $1.0 million, $1.7 million and $6.7 million for the same periods, respectively.

Also, in the fourth quarter of 2007, management determined that our deferred tax assets in Canada were not more likely than not to be realized and we recorded a valuation allowance against our deferred tax assets in Canada of $52.1 million. At the time we recorded this initial valuation allowance we did not take into account approximately $9.0 million of uncertain tax positions that should have been evaluated in this analysis. Consequently, the valuation allowance against the deferred tax assets was overstated by $9.0 million and income tax expense was overstated by $9.0 million for the year ended December 31, 2007.

The other misapplication of ASC Topic 740 that occurred upon adoption on January 1, 2007 related to uncertain tax positions in connection with our acquisition of Royal Group, Inc., one of our subsidiaries ("Royal"), and resulted in a net overstatement of our long-term liability for unrecognized income tax benefits of approximately $5.0 million as of December 31, 2007, 2008 and 2009, with a corresponding understatement of goodwill by $1.2 million as of March 31, 2007 that was subsequently impaired, and an understatement of our net deferred tax liabilities of approximately $6.2 million. In addition, as a result of using the incorrect statute of limitations period described above, $0.7 million and $0.8 million of uncertain tax positions should have been reversed in 2007 and 2008, respectively, which would have resulted in a corresponding decrease in goodwill by the same amounts. In the fourth quarter of 2007 and 2008, we recorded impairment charges of $159.0 million and $176.0 million, respectively, to write our assets down to their estimated fair value. Consequently, the impairment charges for the years ended December 31, 2007 and 2008 were overstated by $0.7 million and $0.8 million, respectively.

income tax purposes of $54 million. This error and the resulting reduction of net operating losses for income tax purposes caused our restated consolidated financial statements presented in Amendment No. 1 to our quarterly report for the quarter ended September 30, 2009 and in Amendment No. 1 to our Original Annual Report to be misstated as follows: (i) our deferred tax assets were overstated on our consolidated balance sheet by $19.0 million as of December 31, 2009; and (ii) our income tax expense on our consolidated statement of operations was understated by $19.0 million for the year ended 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 restated consolidated financial statements presented in Amendment No. 1 to be misstated as follows: (i) our long-term deferred income tax liability was understated by $7.6 million as of January 1, 2007, overstated by $8.6 million as of December 31, 2007, overstated by $8.9 million as of December 31, 2008 and overstated by $1.9 million as of December 31, 2009; (ii) our accumulated other comprehensive loss, net of tax, was understated by $7.6 million as of January 1, 2007, our accumulated other comprehensive income was understated by $8.6 million as of December 31, 2007, our accumulated other comprehensive loss was overstated by $8.9 million as of December 31, 2008 and overstated by $1.9 million as of December 31, 2009; and (iii) our other comprehensive loss, net of tax, was overstated by $16.1 million for the year ended December 31, 2007, overstated by $0.4 million for the year ended December 31, 2008 and our other comprehensive income was overstated by $7.0 million for the year ended December 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 related to the CODI arising from our 2009 financial restructuring activities that resulted in the incorrect recording of deferred tax liabilities associated with the tax attribute reduction related to the tax basis in the Affiliate, and incorrect accounting for liabilities for unrecognized income tax benefits relating to our 2009 financial restructuring. This misapplication caused our restated consolidated financial statements presented in Amendment No. 1 to be misstated as follows: (i) our deferred tax liabilities were overstated by $35.6 million as of December 31, 2009; (ii) our liabilities for unrecognized income tax benefits were understated by $1.7 million as of December 31, 2009; and (iii) our income tax expense on our consolidated statements of operations was overstated by $33.9 million for the year ended December 31, 2009.

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