UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to _____

Commission File Number: 333-134089

CPG International Inc.

(Exact name of registrant as specified in its charter)

	Delaware		20-2779385
	(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

801 Corey Street, Scranton, PA		18505
(address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (570) 558-8000

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data

File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [x] (Do not check if a smaller reporting company)		Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [ ] No[x]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

There is no public market for the registrant’s common stock. As of November 5, 2010 the number of units of the registrant’s common stock, par value $0.01 per share, outstanding was 10, all of which are held by CPG International Holdings LP, the registrant’s direct parent company.

CPG INTERNATIONAL INC.
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 2010

TABLE OF CONTENTS

PART I- FINANCIAL INFORMATION	PAGE

Item 1. Condensed Consolidated Financial Statements (unaudited).

Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009.	3

Condensed Consolidated Statements of Operations for the three months ended September 30, 2010 and 2009.	4

Condensed Consolidated Statements of Operations for the nine months ended September 30, 2010 and 2009.	5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009.	6

Notes to Condensed Consolidated Financial Statements.	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	47

Item 4. Controls and Procedures.	48

PART II- OTHER INFORMATION
Item 1. Legal Proceedings.	48

Item 1A. Risk Factors.	49

Item 6. Exhibits.	49

SIGNATURES.

CPG International Inc.

And Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2010 and December 31, 2009

(unaudited)

(dollars in thousands)

	September 30,			December 31,
		2010			2009
ASSETS:
Current assets:
Cash and cash equivalents	$	51,744		$	44,501
Receivables:
Trade, less allowance for doubtful accounts of $1,341 and $964 in 2010 and 2009, respectively		31,081			14,219
Inventories		36,025			45,922
Deferred income taxes—current		4,212			2,414
Prepaid expenses and other		1,974			3,097
Total current assets		125,036			110,153
Property and equipment—net		81,190			84,332
Goodwill		247,037			246,842
Intangible assets —net		89,279			92,699
Deferred financing costs—net		3,554			5,079
Other assets		260			299
Total assets	$	546,356		$	539,404

LIABILITIES AND SHAREHOLDER’S EQUITY:
Current liabilities:
Accounts payable	$	25,139		$	24,263
Current portion of capital lease		1,440			1,747
Current portion of long-term debt obligations		250			250
Accrued interest		6,366			13,049
Accrued rebates		4,762			3,916
Accrued expenses		13,553			14,527
Total current liabilities		51,510			57,752
Deferred income taxes		40,696			35,067
Capital lease obligation—less current portion		2,273			3,316
Long-term debt—less current portion		302,008			302,042
Accrued warranty		2,937			3,183
Other liabilities		35			35
Commitments and contingencies
Shareholder’s equity:
Common shares, $0.01 par value: 1,000 shares authorized; 10 issued and outstanding at September 30,
2010 and December 31, 2009		—			—
Additional paid-in capital		212,250			212,152
Accumulated deficit		(49,448	)		(62,899	)
Note receivable – CPG Holdings		(13,928	)		(8,872	)
Accumulated other comprehensive loss		(1,977	)		(2,372	)
Total shareholder’s equity		146,897			138,009
Total liabilities and shareholder’s equity	$	546,356		$	539,404

See notes to unaudited condensed consolidated financial statements.

CPG International Inc.

and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

		Three Months			Three Months
		Ended			Ended
		September 30,			September 30,
		2010			2009
Net sales	$	96,606		$	78,404
Cost of sales		(66,507	)		(50,304	)
Gross margin		30,099			28,100
Selling, general and administrative expenses		(14,421	)		(14,147	)
Loss on disposal of property		(88	)		(19	)
Operating income		15,590			13,934

Other income (expenses):
Interest expense		(7,460	)		(7,659	)
Interest income		—			23
Foreign currency gain		34			224
Miscellaneous – net		1			7
Total other expenses-net		(7,425	)		(7,405	)

Income before income taxes		8,165			6,529
Income tax expense		(670	)		(553	)
Net income	$	7,495		$	5,976

See notes to unaudited condensed consolidated financial statements.

CPG International Inc.

and Subsidiaries

Condensed Consolidated Statements of Operations

For the Nine Months Ended September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2010			2009
Net sales	$	277,003		$	222,178
Cost of sales		(190,831	)		(143,881	)
Gross margin		86,172			78,297
Selling, general and administrative expenses		(43,656	)		(41,050	)
Impairment of goodwill and long-lived assets		(599	)		(14,408	)
Loss on disposal of property		(340	)		(143	)
Operating income		41,577			22,696

Other income (expenses):
Interest expense		(23,204	)		(23,798	)
Interest income		—			76
Foreign currency gain		12			350
Miscellaneous – net		9			(14	)
Total other expenses-net		(23,183	)		(23,386	)

Income (loss) before income taxes		18,394			(690	)
Income tax expense		(4,943	)		(285	)
Net income (loss)	$	13,451		$	(975	)

See notes to unaudited condensed consolidated financial statements.

CPG International Inc.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

		Nine Months			Nine Months
		Ended			Ended
		September 30,			September 30,
(Dollars in thousands)		2010			2009
Cash flow from operating activities:
Net income (loss)	$	13,451		$	(975	)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization		15,965			15,996
Non-cash interest charges		1,810			1,961
Deferred income tax provision (benefit)		3,803			185
Share based compensation		24			50
Impairment of goodwill and long-lived assets		599			14,408
Unrealized loss (gain) on foreign currency exchange		(85	)		(358	)
Loss on disposal of property		340			143
Bad debt provision		599			645
Changes in certain assets and liabilities:
Trade receivables		(17,453	)		(10,876	)
Inventories		9,897			6,076
Prepaid expenses and other current assets		1,126			3,222
Accounts payable		777			7,791
Accrued expenses and interest		(7,152	)		(4,515	)
Other liabilities and assets		120			(189	)
Net cash provided by operating activities		23,821			33,564
Cash flows used in investing activities:
Acquisition of Composatron, net of cash received		—			(921	)
Purchases of property and equipment		(9,973	)		(4,085	)
Net cash used in investing activities		(9,973	)		(5,006	)
Cash flows from financing activities:
Proceeds under revolving credit facility		10,000			—
Payment on revolving credit facility		(10,000	)		(5,000	)
Payment on long-term obligations		(1,550	)		(1,632	)
Payments on behalf of CPG Holdings equity		(4,981	)		(1,415	)
Payment of financing fees		(119	)		—
Net cash used in financing activities		(6,650	)		(8,047	)
Impact of foreign currency on cash and cash equivalents		45			272
Net increase in cash and cash equivalents		7,243			20,783
Cash and cash equivalents – Beginning of period		44,501			22,586
Cash and cash equivalents – End of period	$	51,744		$	43,369
Supplemental disclosures:
Cash paid for interest	$	28,077		$	29,773
Federal, state and local taxes paid (refunded)	$	209		$	(107	)
Supplemental disclosures of non-cash investing and financing activities:
Capital expenditures in accounts payable at end of period	$	1,977		$	744

See notes to unaudited condensed consolidated financial statements.

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.	Organization

CPG International Inc. and Subsidiaries referred to in the Notes to the Financial Statements as (the “Company”) is a leading manufacturer of premium, low maintenance building products for residential (AZEK Building Products); commercial (Scranton Products); and industrial (Vycom) markets. The Company’s products include AZEK Trim, AZEK Deck, AZEK Porch, AZEK Moulding and AZEK Rail for residential housing markets; bathroom and locker systems sold under the brand names Comtec Industries, Hiny Hider and TuffTec, used in commercial building markets; and Vycom, which extrudes plastic sheet products under the names of Celtec, Seaboard® and Flametec® and other non-fabricated products for special applications in industrial markets. The Company operates in various locations throughout the United States and Canada.

b.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. These accompanying financial statements include the accounts of the Company on a consolidated basis. The notes to the condensed consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2009 should be read in conjunction with these unaudited condensed consolidated financial statements. The results of operations for the three and nine months ended September 30, 2010 and 2009 are not necessarily indicative of the operating results for the full year. The Company’s condensed consolidated financial statements include all of the assets, liabilities and results of operations of the Company’s subsidiaries. All inter-company transactions among consolidated entities have been eliminated.

The Company has guaranteed debt securities of its direct subsidiary, CPG International I Inc. (“CPG”), and, as a result, although CPG is the issuer of the debt securities, the financial statements included herein for the periods presented are those of the Company. See Note 11 for condensed consolidating financial information for the Company, CPG and its subsidiaries.

Certain revisions in classification have been made to prior years’ data in order to conform to current year presentation.

Allowance for Doubtful Accounts

Credit is extended to commercial, institutional, residential and industrial construction customers based on an evaluation of their financial condition, and collateral is generally not required. The evaluation of the customer’s financial condition is performed to reduce the risk of loss. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Amounts are written-off when they are determined to be uncollectible.

Changes in the Company’s allowance for doubtful accounts are as follows:

	Three Months			Three Months
	Ended			Ended
(Dollars in thousands)	September 30, 2010			September 30, 2009
Beginning balance	$	1,281		$	1,436
Increase for anticipated bad debts		123			190
Decrease for accounts written off		(63	)		(160	)
Ending balance	$	1,341		$	1,466

	Nine Months			Nine Months
	Ended			Ended
(Dollars in thousands)	September 30, 2010			September 30, 2009
Beginning balance	$	964		$	1,660
Increase for anticipated bad debts		599			645
Decrease for accounts written off		(222	)		(839	)
Ending balance	$	1,341		$	1,466

Product Warranties

The Company provides warranty guarantees on its Scranton Products against breakage, corrosion and delamination. Prior to June 1, 2009, the Company had provided a 15-year limited warranty on Scranton Products. Beginning June 1, 2009, the warranty on Scranton Products was extended to 25 years for purchases after that date. The Company provides a 25-year limited warranty on AZEK Trim products and a lifetime limited warranty on AZEK Deck and AZEK Porch products sold for residential use. The warranty period for all other uses of AZEK Deck and AZEK Porch, including commercial use, is 25 years. AZEK Trim products are guaranteed against manufacturing defects that cause the products to rot, corrode, delaminate, or excessively swell from moisture. The AZEK Deck and AZEK Porch warranties guarantee against manufacturing defects in material and workmanship that result in blistering, peeling, flaking, cracking, splitting, cupping, rotting or structural defects from termites or fungal decay. AZEK Rail products have a 20 year limited warranty for white railing and a 10 year limited warranty for AZEK Premier colored railing. The AZEK Rail warranty also guarantees against rotting, cracking, peeling, blistering or structural defects from fungal decay.

Estimating the required warranty reserves requires a high level of judgment as AZEK Trim products have only been on the market for nine years, AZEK Deck has only been on the market for five years, and AZEK Rail has only been on the market for eight years, each of which are early in their product life cycles. Management estimates warranty reserves, based in part upon historical warranty costs, as a proportion of sales by product line. Management also considers various relevant factors, including its stated warranty policies and procedures, as part of its evaluation of its liability. Because warranty issues may surface later in the product life cycle, management continues to review these estimates on a regular basis and considers adjustment to these estimates based on actual experience compared to historical estimates. Although management believes that the warranty reserves at September 30, 2010 are adequate, actual results may vary from these estimates. The Company currently classifies a portion of the warranty reserve as a current liability which appears on the consolidated balance sheet in accrued expenses.

Components of the reserve for warranty costs are as follows:

	Three Months			Three Months
	Ended			Ended
(Dollars in thousands)	September 30, 2010			September 30, 2009
Beginning balance	$	3,675		$	3,818
Additions		79			258
Warranty claims		(77	)		(226	)
Adjustment to reserve		—			(78	)
Ending balance		3,677			3,772
Current portion of accrued warranty		(740	)		(426	)
Total accrued warranty – less current portion	$	2,937		$	3,346

	Nine Months			Nine Months
	Ended			Ended
(Dollars in thousands)	September 30, 2010			September 30, 2009
Beginning balance	$	3,596		$	3,853
Additions		431			630
Warranty claims		(235	)		(422	)
Adjustment to reserve		(115	)		(289	)
Ending balance		3,677			3,772
Current portion of accrued warranty		(740	)		(426	)
Total accrued warranty – less current portion	$	2,937		$	3,346

Estimated Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities and debt. The carrying amounts reported in our condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The Company has reviewed its debt and believes that the carrying values approximate fair value.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as net income (loss) and other changes in equity from transactions unrelated to the Company’s shareholder. The Company’s accumulated other comprehensive loss consists of accumulated foreign currency translation adjustments of approximately $2.0 million at September 30, 2010 and $2.4 million at December 31, 2009. Other comprehensive income for the three and nine months ended September 30, 2010 was $538,000 and $395,000, respectively. Other comprehensive income for the three and nine months ended September 30, 2009 was approximately $1.5 million and $2.4 million, respectively.

Recently Issued Accounting Pronouncements

In January 2010 we adopted amendments to ASC 810-10, “Consolidation” (ASC 810-10). Companies are required to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a Variable Interest Entity (VIE). The guidance requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The provisions of this guidance were effective as of January 1, 2010, and the adoption of this guidance did not have any impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06) which requires new disclosures and clarifies existing disclosure requirements. The purpose of these amendments is to provide a greater level of disaggregated information as well as more disclosure around valuation techniques and inputs to fair value measurements. The provisions of this guidance were effective as of January 1, 2010, and the adoption of this guidance is limited to disclosures in the Company’s consolidated financial statements. Certain provisions of this guidance are required for annual reporting periods beginning after December 15, 2010 and for interim periods. The amendment is not expected to have an impact on our consolidated financial statement disclosures for the periods beginning after December 15, 2010.

2. SEGMENT INFORMATION

The Company operates the following three reportable segments: AZEK Building Products (“AZEK”), which produces residential building products; Scranton Products (“Scranton”), which produces fabricated bathroom partition and locker systems for the commercial market; and Vycom (“Vycom”), which extrudes plastic sheet products and other non-fabricated products for special applications in industrial markets.

The Company’s chief operating decision makers (which consists of the Company’s Chief Executive Officer and Chief Financial Officer), regularly review financial information about each of these segments in deciding how to allocate resources and evaluate performance. The Company evaluates each segment’s performance based on gross margin and operating income. The accounting policies for the reportable segments are the same as those for the Company. Certain assets are shared by more than one business segment and have been allocated for reporting purposes based on either percentage of revenue or asset usage. Corporate costs, which include corporate salary and employee benefit costs, information technology and corporate related professional fees (including accounting and legal fees), are not allocated to segments.

The following table sets forth summarized financial information for the Company by business segment for the three months ended September 30, 2010:

	AZEK
	Building			Scranton
(Dollars in thousands)	Products			Products			Vycom			Corporate			Consolidated
Net sales	$	64,060		$	17,282		$	15,264		$	—		$	96,606
Cost of sales		(42,819	)		(10,705	)		(12,983	)		—			(66,507	)
Gross margin		21,241			6,577			2,281			—			30,099
Selling, general and administrative expenses		(7,251	)		(2,318	)		(1,540	)		(3,312	)		(14,421	)
Loss on disposal of property		(51	)		—			(37	)		—			(88	)
Segment operating income (loss)	$	13,939		$	4,259		$	704		$	(3,312	)	$	15,590

Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	2,813		$	215		$	838		$	—		$	3,866
Selling, general and administrative expense		630			40			564			101			1,335
Total depreciation and amortization	$	3,443		$	255		$	1,402		$	101		$	5,201
Total capital expenditures(1)	$	2,891		$	207		$	52		$	286		$	3,436

(1)

Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information for the Company by business segment for the nine months ended September 30, 2010:

	AZEK
	Building			Scranton
(Dollars in thousands)	Products			Products			Vycom			Corporate			Consolidated
Net sales	$	187,195		$	47,310		$	42,498		$	—		$	277,003
Cost of sales		(127,291	)		(27,917	)		(35,623	)		—			(190,831	)
Gross margin		59,904			19,393			6,875			—			86,172
Selling, general and administrative expenses		(22,283	)		(7,084	)		(4,852	)		(9,437	)		(43,656	)
Impairment of long-lived assets		(599	)		—			—			—			(599	)
Loss on disposal of property		(254	)		(49	)		(37	)		—			(340	)
Segment operating income (loss)	$	36,768		$	12,260		$	1,986		$	(9,437	)	$	41,577

Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	8,895		$	347		$	2,542		$	—		$	11,784
Selling, general and administrative expense		1,895			121			1,699			466			4,181
Total depreciation and amortization	$	10,790		$	468		$	4,241		$	466		$	15,965
Total capital expenditures(1)	$	8,654		$	744		$	570		$	1,982		$	11,950

(1)

Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information for the Company by business segment for the three months ended September 30, 2009:

	AZEK
	Building			Scranton
(Dollars in thousands)	Products			Products			Vycom			Corporate			Consolidated
Net sales	$	49,643		$	18,437		$	10,324		$	—		$	78,404
Cost of sales		(32,069	)		(9,805	)		(8,430	)		—			(50,304	)
Gross margin		17,574			8,632			1,894			—			28,100
Selling, general and administrative expenses		(7,130	)		(2,508	)		(1,247	)		(3,262	)		(14,147	)
Loss on disposal of property		(19	)		—			—			—			(19	)
Segment operating income (loss)	$	10,425		$	6,124		$	647		$	(3,262	)	$	13,934

Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	2,803		$	238		$	863		$	—		$	3,904
Selling, general and administrative expense		636			40			553			199			1,428
Total depreciation and amortization	$	3,439		$	278		$	1,416		$	199		$	5,332
Total capital expenditures(1)	$	1,259		$	677		$	133		$	107		$	2,176

(1)

Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information for the Company by business segment for the nine months ended September 30, 2009:

	AZEK
	Building			Scranton
(Dollars in thousands)	Products			Products			Vycom			Corporate			Consolidated
Net sales	$	139,714		$	54,934		$	27,530		$	—		$	222,178
Cost of sales		(92,062	)		(30,398	)		(21,421	)		—			(143,881	)
Gross margin		47,652			24,536			6,109			—			78,297
Selling, general and administrative expenses		(19,889	)		(7,188	)		(3,790	)		(10,183	)		(41,050	)
Impairment of goodwill		(14,912	)		3,273			(2,769	)		—			(14,408	)
Loss on disposal of property		(17	)		(126	)		—			—			(143	)
Segment operating income (loss)	$	12,834		$	20,495		$	(450	)	$	(10,183	)	$	22,696

Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	8,284		$	683		$	2,769		$	—		$	11,736
Selling, general and administrative expense		1,751			120			1,659			730			4,260
Total depreciation and amortization	$	10,035		$	803		$	4,428		$	730		$	15,996
Total capital expenditures(1)	$	3,208		$	982		$	433		$	206		$	4,829

(1)

Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information regarding assets by business segment at September 30, 2010 and December 31, 2009:

(Dollars in thousands)	September 30,		December 31,
	2010		2009
Total assets:
AZEK Building Products	$	321,729	$	320,475
Scranton Products		113,008		113,819
Vycom		106,123		99,506
Corporate		5,496		5,604
Total consolidated assets	$	546,356	$	539,404

The following table sets forth the Company’s significant distributor group sales as a percentage of total consolidated net sales, as well as a percentage of AZEK Building Products net sales as each of these distributors are part of the AZEK Building Products segment for the three and nine months ended September 30, 2010 and 2009:

	Three Months						Three Months
	Ended						Ended
	September 30, 2010						September 30, 2009
				% of						% of
	% of			AZEK Building			% of			AZEK Building
	Consolidated			Product			Consolidated			Product
	Sales			Sales			Sales			Sales
Distributor A		25	%		38	%		27	%		42	%
Distributor B		15			22			11			18
Distributor C		11			17			8			13
Total		51	%		77	%		46	%		73	%

	Nine Months						Nine Months
	Ended						Ended
	September 30, 2010						September 30, 2009
				% of						% of
	% of			AZEK Building			% of			AZEK Building
	Consolidated			Product			Consolidated			Product
	Sales			Sales			Sales			Sales
Distributor A		27	%		40	%		27	%		43	%
Distributor B		11			17			11			17
Distributor C		12			18			8			13
Total		50	%		75	%		46	%		73	%

The Company’s geographic distribution of long-lived assets at September 30, 2010 and December 31, 2009 are as follows:

(Dollars in thousands)	September 30,		December 31,
	2010		2009
Long-lived assets:
United States	$	74,860	$	76,443
Canada		6,330		7,889
Total consolidated long-lived assets	$	81,190	$	84,332

3. INVENTORIES

Inventories consisted of the following at September 30, 2010 and December 31, 2009:

	September 30,		December 31,
(Dollars in thousands)	2010		2009
Raw materials	$	21,753	$	25,695
Work in process		—		72
Finished goods		14,272		20,155
Total inventories	$	36,025	$	45,922

Inventories are valued at the lower of cost or market, determined on a first-in, first-out basis (“FIFO”).

4. PROPERTY AND EQUIPMENT—NET

Property and equipment consisted of the following at September 30, 2010 and December 31, 2009:

	September 30,			December 31,
(Dollars in thousands)	2010			2009
Land and improvements	$	1,701		$	1,701
Buildings and improvements		25,340			23,616
Capital lease – building		1,500			1,500
Capital lease – manufacturing equipment		8,594			8,594
Manufacturing equipment		101,623			100,015
Office furniture and equipment		4,990			4,991
Total property and equipment		143,748			140,417
Construction in progress		5,581			2,855
		149,329			143,272
Accumulated depreciation		(68,139	)		(58,940	)
Total property and equipment – net	$	81,190		$	84,332

Depreciation expense for the three months ended September 30, 2010 and 2009 was approximately $4.0 million and $4.1 million, respectively. Depreciation expense for the nine months ended September 30, 2010 and 2009 was approximately $12.4 million and $12.6 million, respectively.

5. GOODWILL AND INTANGIBLE ASSETS —NET

Goodwill and intangible assets consisted of the following at September 30, 2010 and December 31, 2009:

	Lives in		September 30,			December 31,
(Dollars in thousands)	Years		2010			2009
Goodwill		—	$	247,037		$	246,842

Non-amortizable intangibles:
Trademarks				67,400			67,400
Other intangibles				769			752

Total non-amortizable intangibles				68,169			68,152
Amortizable intangibles:
Non-compete agreement		5		2,500			2,500
Accumulated amortization non-compete agreement				(1,848	)		(1,473	)
Non-compete agreement- net				652			1,027

Customer relationships		10		26,225			26,203
Accumulated amortization customer relationships				(14,084	)		(11,981	)
Customer relationships-net				12,141			14,222

Proprietary knowledge		15		12,896			12,816
Accumulated amortization proprietary knowledge				(4,909	)		(3,938	)
Proprietary knowledge-net				7,987			8,878

Trade names		5		365			357
Accumulated amortization trade names				(265	)		(204	)
Trade names-net				100			153

Royalty license		7		376			368
Accumulated amortization royalty license				(146	)		(101	)
Royalty license-net				230			267

Total amortizable intangibles-net				21,110			24,547
Intangible assets – net			$	89,279		$	92,699

Goodwill and trademarks are tested for impairment annually. Goodwill is tested at the reporting unit level. The customer relationships, non-compete agreement and proprietary knowledge, which are amortizable, are tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. At each reporting period, the assigned useful lives are considered for continued appropriateness.

The Company evaluates Goodwill annually at December 31. As of December 31, 2008, the Company determined that the fair value of each of its reporting units was below their respective carrying amounts. Accordingly, the Company recorded a non-cash Goodwill impairment charge of $36.0 million for the year ended December 31, 2008, representing its best estimate of the impairment charge at the time. Approximately $11.0 million, $15.4 million and $9.6 million of the estimate was allocated to the AZEK Building Products, Scranton Products and Vycom business segments, respectively, for the year ended December 31, 2008. The Company finalized the Goodwill impairment analysis during the first quarter of 2009. An additional non-cash Goodwill impairment charge of $14.4 million was required, which the Company recorded in its condensed consolidated financial statements for the three months ended March 31, 2009. Approximately $14.9 million of the additional impairment was allocated to AZEK

Building Products, a reduction of $3.3 million was allocated to the Scranton Products business segment and $2.8 million of the additional impairment was allocated to Vycom. At December 31, 2009, the Company completed its annual impairment of goodwill and trademarks and determined that no impairment existed.

Amortization expense for the three months ended September 30, 2010 and 2009 was approximately $1.2 million in each year. Amortization expense for the nine months ended September 30, 2010 and 2009 was approximately $3.5 million and $3.4 million, respectively.

The following table presents the future intangible asset amortization expense based on existing amortizable intangible assets at September 30, 2010:

(Dollars in thousands)
2010	$	1,170
2011		4,442
2012		3,820
2013		3,606
2014		3,441
Thereafter		4,631
Total	$	21,110

The following tables summarize the changes in the Company’s goodwill for the nine month period ended September 30, 2010:

	AZEK
(Dollars in thousands)	Building			Scranton
	Products			Products			Vycom			Consolidated
Balance at December 31, 2009:
Goodwill	$	179,791		$	47,384		$	70,075		$	297,250
Accumulated impairment losses		(25,858	)		(12,164	)		(12,386	)		(50,408	)
Goodwill at December 31, 2009		153,933			35,220			57,689			246,842
Currency translation adjustment		195			–			–			195
Goodwill at September 30, 2010	$	154,128		$	35,220		$	57,689		$	247,037

6. DEFERRED FINANCING COSTS, NET

Deferred financing costs consisted of the following at September 30, 2010 and December 31, 2009:

	September 30,			December 31,
(Dollars in thousands)	2010			2009
Deferred financing costs	$	13,794		$	13,675
Accumulated amortization		(10,240	)		(8,596	)
Total deferred financing costs, net	$	3,554		$	5,079

Amortization of deferred financing costs for the three months ended September 30, 2010 and 2009 was approximately $552,000 and $546,000, respectively. Amortization of deferred financing costs for the nine months ended September 30, 2010 and 2009 was approximately $1.6 million and $1.7 million, respectively. Amortization of deferred financing costs is included in interest expense in the consolidated statements of operations.

7. LONG-TERM DEBT

Long-term debt consisted of the following at September 30, 2010 and December 31, 2009:

	September 30,		December 31,
(Dollars in thousands)	2010		2009
Senior Unsecured Fixed Rate Notes due July 1, 2013—10.5%	$	150,000	$	150,000
Senior Unsecured Floating Rate Notes due July 1, 2012—LIBOR + 6.75% (7.50% at September 30, 2010 and 7.87% at December 31, 2009) (includes premium of $41 at September 30, 2010 and $59 at December 31, 2009)		128,041		128,059
Term Loan due April 30, 2012 –7.25% at September 30, 2010 and December 31, 2009 (includes discount of $95 at September 30, 2010 and $267 at December 31, 2009)		24,217		24,233

Total		302,258		302,292
Less current portion		250		250
Long-term debt—less current portion	$	302,008	$	302,042

As of September 30, 2010, the Company has scheduled debt payments (excluding interest) of $62,500 in 2010, $250,000 in 2011, $152.0 million in 2012 and $150.0 million in 2013.

CPG, a wholly owned subsidiary of the Company, had approximately $128.0 million aggregate principal amount of Senior Unsecured Floating Rate Notes due July 1, 2012 (the “Floating Rate Notes”) and $150.0 million aggregate principal amount of 10½% Senior Unsecured Notes due July 1, 2013 (the “Fixed Rate Notes,” and collectively with the Floating Rate Notes, the “Notes”) outstanding at September 30, 2010. The Notes have been guaranteed by the Company and all of the domestic subsidiaries of CPG. The indenture governing the Notes contains a number of covenants that, among other things, restrict CPG’s ability, and the ability of any subsidiary guarantors, subject to certain exceptions, to sell assets, incur additional debt, repay other debt, pay dividends and distributions on CPG’s capital stock or repurchase CPG’s capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations and engage in certain transactions with affiliates.

The Company and its subsidiaries are a party to a Loan and Security Agreement with Wells Fargo Bank, N.A. (the “Loan Agreement”), as administrative agent, and General Electric Capital Corporation, as syndication agent, which was entered into on February 13, 2008. The Loan Agreement provides subsidiaries of the Company with up to $65.0 million in borrowing capacity, with the actual borrowing base limited to a percentage of eligible receivables and inventory, subject to reserves established by the administrative agent in the exercise of its reasonable business judgment. The Loan Agreement requires subsidiaries of the Company to repay the outstanding principal on any loans thereunder at the maturity date as defined therein, but in any case no later than February 13, 2013. Borrowings under the Loan Agreement bear interest, at the Company’s option, at the base rate (prime rate) plus a spread of up to 0.5% or adjusted LIBOR plus a spread of 1.5% to 2.25%, or a combination thereof. The Loan Agreement also provides for a fee ranging between 0.25% and 0.5% of unused commitments. Substantially all of the Company’s and its subsidiaries’ assets (excluding real property and 65% of equity interests of the Company’s first tier foreign Canadian subsidiary) are pledged as collateral for any borrowings under the Loan Agreement.

The Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, in certain circumstances and as defined, minimum ratios or levels of consolidated EBITDA to consolidated fixed charges. The Loan Agreement also imposes certain restrictions on the Company, and its subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness.

The Loan Agreement matures on the earliest of (i) February 13, 2013, (ii) the date which precedes the maturity date of the term loans under the Term Loan Agreement by three months to the extent that obligations thereunder are still outstanding, unless there is excess availability of at least $10.0 million, (iii) 6 months prior to the maturity of the Senior Floating Rate Notes to the extent that obligations thereunder are still outstanding and (iv) 6 months prior to the maturity of the Senior Fixed Rate Notes to the extent that obligations thereunder are still outstanding.

No amounts were borrowed under the Loan Agreement during the three months ended September 30, 2010.

The Company and its subsidiaries are a party to a Term Loan and Security Agreement (“Term Loan Agreement”), which was entered into on February 29, 2008. Subsidiaries of the Company borrowed approximately $25.0 million under the term loan as part of the financing for the Composatron Acquisition (See Note 11). The Term Loan Agreement initially required the borrowers thereunder to repay the outstanding principal of the Term Loan in quarterly installments of $62,500 from March 31, 2008 through December 31, 2010, with the remaining outstanding principal balance of the Term Loan due no later than February 28, 2011. The Term Loan Agreement requires mandatory prepayments of the term loans thereunder from certain debt and equity issuances, asset dispositions (subject to certain reinvestment rights), excess cash flow and extraordinary receipts. The Term Loan Agreement contained a mandatory prepayment based on excess cash flow at December 31, 2009, which was payable on April 5, 2010. The Company applied for and obtained a waiver to release its obligation under this prepayment. In addition, on July 26, 2010, the Company and its subsidiaries entered into an amendment to the Term Loan Agreement, which amended certain provisions of the Term Loan Agreement, including, but not limited to (1) deleting the requirement to mandatorily prepay loans under the Term Loan Agreement with excess cash proceeds, (2) extending the maturity date of the Term Loan Agreement from February 28, 2011 to April 30, 2012 and (3) revising the Term Loan Agreement’s amortization schedule to provide for quarterly installments of $62,500 through March 31, 2012, with the remaining outstanding principal balance of the Term Loan due no later than April 30, 2012.

The Term Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, as defined, a maximum ratio of consolidated senior secured indebtedness to consolidated EBITDA. The Term Loan Agreement also imposes certain restrictions on the Company and its subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, declare or agree to pay any dividends or other distributions, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness.

The Company is in compliance with the financial and non-financial covenants imposed by the debt agreements as of September 30, 2010.

8. LEASE COMMITMENTS

The Company leases machinery, computer equipment and a manufacturing facility under various capital leases. The Company also leases office equipment, vehicles, a manufacturing facility and an office under operating leases expiring during the next six years.

During 2009, the Company decided to consolidate its administrative offices into one of its manufacturing facilities. On December 22, 2009, the Company gave notice of its intention to terminate the related operating lease to the lessor. In conjunction with the termination in February 2010, the Company paid approximately $244,000 in required termination costs under the terms of the lease. These costs represented six months rent as well as the unamortized portion of prepaid real estate commissions, and were included as a part of operating expenses in the Company’s corporate segment income statement in 2009.

In addition, the Company decided to consolidate its two Canadian manufacturing facilities into one facility. On December 20, 2009, the Company entered into an amended operating lease agreement with its lessor, which amended the original lease to advance the expiration of its term. The Company also recorded a liability of approximately $413,000, which represented the required termination costs under the terms of the lease. These costs represent funds payable directly to the lessor as well as costs to be incurred by the Company before exiting the lease. These costs are also included as a part of operating expense in the Company’s AZEK Building Product’s income statement in 2009.

In connection with the facility consolidation, the Company identified certain machinery and equipment at the Canadian manufacturing facility that no longer had a useful life to the Company. The Company plans on disposing of a majority of the manufacturing equipment by the end of the fourth quarter of 2010 and has written the assets down by approximately $599,000 to the estimated fair value net of any related selling costs. The current carrying value of the assets at September 30, 2010 was approximately $747,000. The asset write-down is included as part of operating expense in the Company’s AZEK Building Product’s income statement in the first quarter of 2010.

Future minimum lease payments at September 30, 2010 for capital and operating leases having non-cancelable lease terms in excess of one year are as follows:

(Dollars in thousands)	Capital			Operating
2010	$	548		$	402
2011		1,904			1,296
2012		949			901
2013		557			742
2014		537			556
Thereafter		8,316			1,012
Total		12,811		$	4,909
Less amount representing interest		(9,098	)
Present value of minimum capital lease payments		3,713
Less current installments of obligations under capital leases		(1,440	)
Obligations under capital leases—excluding current installments	$	2,273

Total rent expense for the three months ended September 30, 2010 and 2009 was approximately $435,000 and $375,000, respectively. Total rent expense was approximately $1.2 million for each of the nine months ended September 30, 2010 and 2009.

9. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to litigation in the ordinary course of business. Currently, there are no claims or proceedings against the Company that it believes would be expected to have a material adverse effect on the Company’s business or financial condition, results of operations or cash flows.

10. RELATED PARTY TRANSACTIONS

AEA Investors, the general partner of CPG International Holdings LP (“Holdings”), the Company’s direct parent company, is entitled to a management fee at an annual rate of $1.5 million, payable on a monthly basis pursuant to a management agreement with AEA Investors. Management fees of $375,000 and $1.1 million are included in selling, general and administrative expenses for each of the three and nine months ended September 30, 2010 and 2009, respectively.

The Company leases one of its manufacturing facilities from an affiliate of an equity holder of Holdings. Total lease payments for the three and nine months ended September 30, 2010 were $129,000 and $388,000, respectively. Total lease payments for the three and nine months ended September 30, 2009 were $128,000 and $385,000, respectively.

In 2007, the Company entered into an amended lease agreement related to an office and manufacturing facilities location with North Alabama Property Leasing, Inc. The lessor of the property is an entity whose sole shareholder was an equity holder in Holdings through May 2010 as a result of the Procell Acquisition, an acquisition by the Company in 2007. Total lease expense for the three and nine months ended September 30, 2010 was approximately $144,000 and $479,000, respectively. Total lease payments for the three and nine months ended September 30, 2009 were approximately $144,000 and $477,000, respectively. The Company has also paid storage and other fees to the lessor in the amount of approximately $8,000 and $20,000 for the three and nine months ended September 30, 2010, and September 30, 2009, respectively.

The former owners of Composatron are engaged in selling finished goods as well as providing machinery repairs and parts to various companies that are affiliated with them. The Company engages in business with Composatron affiliates. Total costs paid after the acquisition to Composatron affiliated companies were approximately $1,000 and $0 for the three months ended September 30, 2010 and 2009, respectively. Total costs paid after the acquisition to these affiliated companies were approximately $1,000 and $7,000 for the nine months ended September 30, 2010 and 2009, respectively.

The Company also has long-term notes in the amount of approximately $13.9 million due from Holdings for the payment made on behalf of Holdings related to repurchase of ownership units in Holdings. Included in the $13.9 million is approximately $3.0 million related to the repurchase of Class A limited partnership units and Class B Units pursuant to a separation agreement with Mr. James Keisling, the former chairman of the Company’s board of directors. Also included in the $13.9 million is approximately $4.0 million related to the repurchase of Class A limited partnership units pursuant to the contribution agreement with Mr. Larry Sloan, one of the sellers of Procell. Currently, no repayment schedule has been established for these notes. The notes have been classified in shareholder’s equity.

11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company conducts its business through its directly and indirectly 100% owned operating subsidiaries. The Company’s 100% owned subsidiary, CPG, is the issuer of the Notes. (See Note 7.) The Company is the direct parent holding company of CPG and a guarantor of the Notes. In addition, all of the domestic subsidiaries of CPG, which are all 100% indirectly owned by the Company, guarantee the Notes. The guarantees are full, unconditional, joint and several. The Company acquired Composatron in February 2008. In connection with the acquisition of Composatron, AZEK Canada Inc., an indirect wholly owned subsidiary of the Company that is incorporated under the laws of the Province of Ontario (“AZEK Canada”) merged with and into Composatron on February 29, 2008, and the entity surviving this merger was AZEK Canada. AZEK Canada does not provide any guarantees on the Notes.

The following condensed consolidating financial information presents the financial information of the Company (as the parent guarantor of the Notes), CPG (as the issuer of the Notes), the guarantor subsidiaries of the Company on a combined basis (as the subsidiary guarantors of the Notes), and the non-guarantor foreign subsidiary as a separate entity (AZEK Canada), prepared on the equity method of accounting at September 30, 2010 and December 31, 2009 and for the three and nine months ended September 30, 2010 and 2009. The financial information may not necessarily be indicative of the results of operations or financial position had the issuer and the subsidiary guarantors operated as independent entities.

		September 30, 2010
(Dollars in thousands)		CPG
		International
Condensed Consolidating		Inc.		CPG		Guarantor		Non-Guarantor
Balance Sheet		(Parent)		(Issuer)		Subsidiaries		Subsidiary			Eliminations			Consolidated
Cash and cash equivalents	$	—	$	—	$	48,842	$	2,902		$	—		$	51,744
Net receivables		—		—		31,033		48			—			31,081
Inventory		—		—		36,025		—			—			36,025
Other current assets		—		—		5,956		230			—			6,186
Total current assets		—		—		121,856		3,180			—			125,036
Net property and equipment		—		—		74,860		6,330			—			81,190
Goodwill		—		—		237,914		9,123			—			247,037
Net intangible assets		—		—		84,957		4,322			—			89,279
Deferred financing costs, net		—		—		3,554		—			—			3,554
Other assets		—		—		209		51			—			260
Note receivable - intercompany		—		308,624		14,956		—			(323,580	)		—
Investment in subsidiary		147,665		147,665		7,227		—			(302,557	)		—
Total assets	$	147,665	$	456,289	$	545,533	$	23,006		$	(626,137	)	$	546,356
Accounts payable	$	—	$	—	$	25,070	$	69		$	—		$	25,139
Accrued interest		—		6,366		—		—			—			6,366
Current portion-long term debt		—		250		—			—		—			250
Accrued expenses		—		—		18,005			310		—			18,315
Current portion of capital lease		—		—		1,440		—			—			1,440
Total current liabilities		—		6,616		44,515		379			—			51,510
Deferred income taxes		—		—		39,484		1,212			—			40,696
Long-term debt		—		302,008		—		—			—			302,008
Intercompany debt		—		—		308,624		14,956			(323,580	)		—
Other non-current liabilities		—		—		5,245		—			—			5,245
Equity		147,665		147,665		147,665		6,459			(302,557	)		146,897
Total liabilities and equity	$	147,665	$	456,289	$	545,533	$	23,006		$	(626,137	)	$	546,356

		December 31, 2009
(Dollars in thousands)		CPG
		International
Condensed Consolidating		Inc.		CPG		Guarantor		Non-Guarantor
Balance Sheet		(Parent)		(Issuer)		Subsidiaries		Subsidiary			Eliminations			Consolidated
Cash and cash equivalents	$	—	$	—	$	42,311	$	2,190		$	—		$	44,501
Net receivables		—		—		13,805		414			—			14,219
Inventory		—		—		45,922		—			—			45,922
Other current assets		—		—		5,271		240			—			5,511
Total current assets		—		—		107,309		2,844			—			110,153
Net property and equipment		—		—		76,443		7,889			—			84,332
Goodwill		—		—		237,913		8,929			—			246,842
Net intangible assets		—		—		87,953		4,746			—			92,699
Deferred financing costs, net		—		—		5,079		—			—			5,079
Other assets		—		—		225		74			—			299
Note receivable - intercompany		—		315,341		15,162		—			(330,503	)		—
Investment in subsidiary		138,930		138,930		8,045		—			(285,905	)		—
Total assets	$	138,930	$	454,271	$	538,129	$	24,482		$	(616,408	)	$	539,404
Accounts payable	$	—	$	—	$	24,236	$	27		$	—		$	24,263
Accrued interest		—		13,049		—		—			—			13,049
Current portion-long term debt		—		250		—			—		—			250
Accrued expenses		—		—		17,699			744		—			18,443
Other current liabilities		—		—		1,747		—			—			1,747
Total current liabilities		—		13,299		43,682		771			—			57,752
Deferred income taxes		—		—		33,642		1,425			—			35,067
Long-term debt		—		302,042		—		—			—			302,042
Intercompany debt		—		—		315,341		15,162			(330,503	)		—
Other non-current liabilities		—		—		6,534		—			—			6,534
Equity		138,930		138,930		138,930		7,124			(285,905	)		138,009
Total liabilities and equity	$	138,930	$	454,271	$	538,129	$	24,482		$	(616,408	)	$	539,404

	Three Months Ended September 30, 2010
(Dollars in thousands)	CPG
	International								Non-
	Inc.		CPG			Guarantor			Guarantor
Condensed Consolidating	(Parent)		(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Statement of Operations
Net sales	$	—	$	—		$	94,236		$	2,370		$	—		$	96,606
Cost of sales		—		—			(64,770	)		(1,737	)		—			(66,507	)
Gross margin		—		—			29,466			633			—			30,099
Selling, general and administrative expenses		—		—			(14,030	)		(391	)		—			(14,421	)
Loss on disposal of property		—		—			(88	)		—			—			(88	)
Operating income (loss)		—		—			15,348			242			—			15,590
Intercompany income		—		6,822			431			(431	)		(6,822	)		—
Interest expense, net of interest income		—		(6,822	)		(7,460	)		—			6,822			(7,460	)
Miscellaneous, net		—		—			1			—			—			1
Foreign currency gain		—		—			34			—			—			34
Income tax (expense) benefit		—		—			(740	)		70			—			(670	)
Equity in net (loss) income from subsidiary		7,495		7,495			(119	)		—			(14,871	)		—
Net income (loss)	$	7,495	$	7,495		$	7,495		$	(119	)	$	(14,871	)	$	7,495

	Nine Months Ended September 30, 2010
(Dollars in thousands)	CPG
	International								Non-
	Inc.		CPG			Guarantor			Guarantor
Condensed Consolidating	(Parent)		(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Statement of Operations
Net sales	$	—	$	—		$	269,944		$	7,059		$	—		$	277,003
Cost of sales		—		—			(185,702	)		(5,129	)		—			(190,831	)
Gross margin		—		—			84,242			1,930			—			86,172
Selling, general and administrative expenses		—		—			(42,425	)		(1,231	)		—			(43,656	)
Impairment of long-lived assets		—		—			—			(599	)		—			(599	)
Loss on disposal of property		—		—			(340	)		—			—			(340	)
Operating income (loss)		—		—			41,477			100			—			41,577
Intercompany income		—		21,308			1,247			(1,247	)		(21,308	)		—
Interest expense, net of interest income		—		(21,308	)		(23,204	)		—			21,308			(23,204	)
Miscellaneous, net		—		—			9			—			—			9
Foreign currency gain		—		—			12			—			—			12
Income tax (expense) benefit		—		—			(5,274	)		331			—			(4,943	)
Equity in net (loss) income from subsidiary		13,451		13,451			(816	)		—			(26,086	)		—
Net income (loss)	$	13,451	$	13,451		$	13,451		$	(816	)	$	(26,086	)	$	13,451

	Three Months Ended September 30, 2009
(Dollars in thousands)	CPG
	International								Non-
	Inc.		CPG			Guarantor			Guarantor
Condensed Consolidating	(Parent)		(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Statement of Operations
Net sales	$	—	$	—		$	76,433		$	1,971		$	—		$	78,404
Cost of sales		—		—			(48,779	)		(1,525	)		—			(50,304	)
Gross margin		—		—			27,654			446			—			28,100
Selling, general and administrative expenses		—		—			(13,815	)		(332	)		—			(14,147	)
Loss on disposal of property		—		—			—			(19	)		—			(19	)
Operating income (loss)		—		—			13,839			95			—			13,934
Intercompany income		—		7,023			681			(681	)		(7,023	)		—
Interest expense, net of interest income		—		(7,023	)		(7,636	)		—			7,023			(7,636	)
Miscellaneous, net		—		—			26			(19	)		—			7
Foreign currency gain		—		—			224			—			—			224
Income tax (expense) benefit		—		—			(742	)		189			—			(553	)
Equity in net (loss) income from subsidiary		5,976		5,976			(416	)		—			(11,536	)		—
Net income (loss)	$	5,976	$	5,976		$	5,976		$	(416	)	$	(11,536	)	$	5,976

	Nine Months Ended September 30, 2009
(Dollars in thousands)	CPG
	International									Non-
	Inc.			CPG			Guarantor			Guarantor
Condensed Consolidating	(Parent)			(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	—		$	216,665		$	5,513		$	—		$	222,178
Cost of sales		—			—			(139,718	)		(4,163	)		—			(143,881	)
Gross margin		—			—			76,947			1,350			—			78,297
Selling, general and administrative expenses		—			—			(40,490	)		(560	)		—			(41,050	)
Impairment of goodwill		—			—			(14,408	)		—			—			(14,408	)
Loss on disposal of property		—			—			(126	)		(17	)		—			(143	)
Operating income (loss)		—			—			21,923			773			—			22,696
Intercompany income		—			21,725			1,946			(1,946	)		(21,725	)		—
Interest expense, net of interest income		—			(21,725	)		(23,722	)		—			21,725			(23,722	)
Miscellaneous, net		—			—			(37	)		23			—			(14	)
Foreign currency gain		—			—			350			—			—			350
Income tax (expense) benefit		—			—			(628	)		343			—			(285	)
Equity in net (loss) income from subsidiary		(975	)		(975	)		(807	)		—			2,757			—
Net income (loss)	$	(975	)	$	(975	)	$	(975	)	$	(807	)	$	2,757		$	(975	)

	Nine Months Ended September 30, 2010
(Dollars in thousands)	CPG
	International									Non-
Condensed Consolidating	Inc.			CPG			Guarantor			Guarantor
Statement of Cash Flows	(Parent)			(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Net (loss) income	$	13,451		$	13,451		$	13,451		$	(817	)	$	(26,085	)	$	13,451
Depreciation and amortization		—			—			14,173			1,792			—			15,965
Deferred income tax (benefit) provision		—			—			4,139			(336	)		—			3,803
Share based compensation		—			—			24			—			—			24
Non-cash interest charges		—			—			1,810			—			—			1,810
Unrealized (gain) loss on foreign currency exchange		—			—			448			(533	)		—			(85	)
Loss on disposition of fixed assets		—			—			340			—			—			340
Impairment of goodwill and long-lived assets		—			—			—			599			—			599
Bad debt provision		—			—			599			—			—			599
Equity in net (income) loss from subsidiary		(13,451	)		(13,451	)		817			—			26,085			—
Trade receivables		—			—			(17,826	)		373			—			(17,453	)
Inventories		—			—			9,897			—			—			9,897
Accounts payable		—			—			736			41			—			777
Accrued expenses and interest		—			—			(6,704	)		(448	)		—			(7,152	)
Prepaid expenses and other current assets		—			—			1,017			109			—			1,126
Other changes in working capital		—			—			96			24			—			120
Net cash provided by operating activities		—			—			23,017			804			—			23,821
Purchases of property and equipment		—			—			(9,836	)		(137	)		—			(9,973	)
Net cash used in investing activities		—			—			(9,836	)		(137	)		—			(9,973	)
Proceeds under revolving credit facility		—			—			10,000			—			—			10,000
Payment on revolving credit facility		—			—			(10,000	)		—			—			(10,000	)
Other cash used in financing activities		—			—			(6,531	)		—			—			(6,531	)
Payment of financing fee		—			—			(119	)		—			—			(119	)
Net cash used in financing activities		—			—			(6,650	)		—			—			(6,650	)
Cash impact of currency translation adjustment		—			—			—			45			—			45
Net increase (decrease) in cash and cash equivalents		—			—			6,531			712			—			7,243
Cash and equivalents- beginning of period		—			—			42,311			2,190			—			44,501
Cash and cash equivalents – end of period	$	—		$	—		$	48,842		$	2,902		$	—		$	51,744

Nine Months Ended September 30, 2009

(Dollars in thousands)

CPG

International

Non-

Condensed Consolidating

Inc.

CPG

Guarantor

Statement of Cash Flows

(Parent)

(Issuer)

Subsidiaries

Subsidiary

Eliminations

Consolidated

Net loss

(975

)

(975

)

(975

)

CPG INTERNATIONAL INC. 10-Q