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 ~~June~~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 ~~August~~November 25, 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
JUNE 30, 2010
SEPTEMBER 30, 2010
TABLE OF CONTENTS
PART I- FINANCIAL INFORMATION	PAGE
Item 1. Condensed Consolidated Financial Statements (unaudited).
Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009.	3
Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009.	3
Condensed Consolidated Statements of Operations for the three months ended June 30, 2010 and 2009.	4
Condensed Consolidated Statements of Operations for the three months ended September 30, 2010 and 2009.	4
Condensed Consolidated Statements of Operations for the six months ended June 30, 2010 and 2009.	5
Condensed Consolidated Statements of Operations for the nine months ended September 30, 2010 and 2009.	5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009.	6
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.	2927
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	5047
Item 4. Controls and Procedures.	5148
PART II- OTHER INFORMATION
Item 1. Legal Proceedings.	5148
Item 1A. Risk Factors.	5149
Item 5. Other Information.	52
Item 6. Exhibits.	49
Item 6. Exhibits.	52
SIGNATURES.

CPG International Inc.

And Subsidiaries

Condensed Consolidated Balance Sheets

As of ~~June~~ September 30, 2010 and December 31, 2009

(unaudited)

(dollars in thousands~~, except per share amounts~~)

	June 30,			December 31,
	September 30,			December 31,
		2010			2009
ASSETS:
Current assets:
Cash and cash equivalents	$	4851,~~263~~744		$	44,501
Receivables:
Trade, less allowance for doubtful accounts of $1,281 and $964 in 2010 and 2009, respectively		30,381			14,219
Trade, less allowance for doubtful accounts of $1,341 and $964 in 2010 and 2009, respectively		31,081			14,219
Inventories		3736,~~249~~025			45,922
Deferred income taxes—current		24,~~325~~212			2,414
Prepaid expenses and other		21,~~575~~974			3,097
Total current assets		~~120~~125,~~793~~036			110,153
Property and equipment—net		81,~~677~~190			84,332
Goodwill		~~246~~247,~~763~~037			246,842
Intangible assets —net		9089,~~315~~279			92,699
Deferred financing costs—net		3,~~987~~554			5,079
Other assets		~~259~~260			299
Total assets	$	~~543~~546,~~794~~356		$	539,404
LIABILITIES AND SHAREHOLDER’S EQUITY:
Current liabilities:
Accounts payable	$	2725,~~222~~139		$	24,263
Current portion of capital lease		~~825~~1,440			1,747
Current portion of long-term debt obligations		250			250
Accrued interest		136,~~356~~366			13,049
Accrued rebates		34,~~589~~762			3,916
Accrued expenses		1213,~~828~~553			14,527
Total current liabilities		5851,~~070~~510			57,752
Deferred income taxes		3840,~~313~~696			35,067
Capital lease obligation—less current portion		32,~~321~~273			3,316
Long-term debt—less current portion		302,~~019~~008			302,042
Accrued warranty		32,~~167~~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 June 30,
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,~~229~~250			212,152
Accumulated deficit		(5649,~~943~~448	)		(62,899	)
Note receivable – CPG Holdings		(13,~~902~~928	)		(8,872	)
Accumulated other comprehensive loss		(21,~~515~~977	)		(2,372	)
Total shareholder’s equity		~~138~~146,~~869~~897			138,009
Total liabilities and shareholder’s equity	$	~~543~~546,~~794~~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 ~~June~~September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

		Three Months			Three Months
		Ended			Ended
		June 30,			June 30,
		September 30,			September 30,
		2010			2009
Net sales	$	8596,~~730~~606		$	6278,~~358~~404
Cost of sales		(5966,~~225~~507	)		(4050,~~135~~304	)
Gross margin		2630,~~505~~099			2228,~~223~~100
Selling, general and administrative expenses		(14,~~851~~421	)		(14,~~087~~147	)
Loss on disposal of property		(~~240~~88	)		(~~126~~19	)
Operating income		1115,~~414~~590			813,~~010~~934
Other income (expenses):
Interest expense		(87,~~272~~460	)		(7,~~940~~659	)
Interest income		—			3323
Foreign currency (loss) gain		(99	)		143
Foreign currency gain		34			224
Miscellaneous – net		21			~~(27~~7	)
Total other expenses-net		(87,~~369~~425	)		(7,~~791~~405	)
Income before income taxes		38,~~045~~165			~~219~~6,529
Income tax expense		(~~277~~670	)		(~~127~~553	)
Net income	$	27,~~768~~495		$	925,976

See notes to unaudited condensed consolidated financial statements.

CPG International Inc.

and Subsidiaries

Condensed Consolidated Statements of Operations

For the ~~Six~~ Nine Months Ended ~~June~~September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

		Six Months			Six Months
	Nine Months				Nine Months
	Ended	~~Ended~~			Ended
		June 30,			June 30,
	September 30,				September 30,
	2010	~~2010~~			2009
Net sales	$	~~180~~277,~~397~~003		$	~~143,774~~$	222,178
Cost of sales		(~~124~~190,~~324~~831	)		~~(93,579~~	)(143,881	)
Gross margin		5686,~~073~~172			~~50,195~~	78,297
Selling, general and administrative expenses		(2943,~~235~~656	)		~~(26,915~~	)(41,050	)
Impairment of goodwill and long-lived assets		(599	)		~~(14,408~~	)(14,408	)
Loss on disposal of property		(~~251~~340	)		~~(126~~	)(143	)
Operating income		2541,~~988~~577			~~8,746~~	22,696
Other income (expenses):
Interest expense		(1523,~~744~~204	)		~~(16,139~~	)(23,798	)
Interest income		—			53	76
Foreign currency (loss) gain		(21	)		116
Foreign currency gain		12				350
Miscellaneous – net		69			~~(13~~	)(14	)
Total other expenses-net		(1523,~~759~~183	)		~~(15,983~~	)(23,386	)
Income (loss) before income taxes		1018,~~229~~394			~~(7,237~~	)(690	)
Income tax (expense) benefit		(4,273	)		274
Income tax expense		(4,943	)			(285	)
Net income (loss)	$	513,~~956~~451		$	~~(6,963~~$	)(975	)

See notes to unaudited condensed consolidated financial statements.

CPG International Inc.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the ~~Six~~ Nine Months Ended ~~June~~September 30, 2010 and 2009

(unaudited)

(dollars in thousands)

		Six Months			Six Months
		Nine Months			Nine Months
		Ended			Ended
		June 30,			June 30,
		September 30,			September 30,
(Dollars in thousands)		2010			2009
Cash flow from operating activities:
Net income (loss)	$	513,~~956~~451		$	(~~6,963~~975	)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization		1015,~~764~~965			1015,~~665~~996
Non-cash interest charges		1,~~199~~810			1,~~361~~961
Deferred income tax provision (benefit)		3,~~341~~803			~~(308~~185	)
Share based compensation		2724			3550
Impairment of goodwill and long-lived assets		599			14,408
Unrealized loss (gain) on foreign currency exchange		57(85	)		(~~116~~358	)
Loss on disposal of property		~~251~~340			~~126~~143
Bad debt provision		~~476~~599			~~455~~645
Changes in certain assets and liabilities:
Trade receivables		(1617,~~631~~453	)		(1510,~~651~~876	)
Inventories		89,~~673~~897			46,~~299~~076
Prepaid expenses and other current assets		~~523~~1,126			23,~~667~~222
Accounts payable		~~3,677~~777			27,~~547~~791
Accrued expenses and interest		(17,~~819~~152	)		1(4,~~682~~515	)
Other liabilities and assets		120			(54189	)
Net cash provided by operating activities		1723,~~213~~821			1533,~~153~~564
Cash flows used in investing activities:
Acquisition of Composatron, net of cash received		—			(921	)
Purchases of property and equipment		(79,~~352~~973	)		(24,~~061~~085	)
Net cash used in investing activities		(79,~~352~~973	)		(25,~~982~~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,~~046~~550	)		(1,~~080~~632	)
Payments on behalf of CPG Holdings equity		(4,~~980~~981	)		(~~426~~1,415	)
Bank overdraft		—			269
Payment of financing fees		(119	)		—
Net cash used in financing activities		(6,~~026~~650	)		(68,~~237~~047	)
Impact of foreign currency on cash and cash equivalents		~~(73~~45	)		~~128~~272
Net increase in cash and cash equivalents		37,~~762~~243			620,~~062~~783
Cash and cash equivalents – Beginning of period		44,501			22,586
Cash and cash equivalents – End of period	$	4851,~~263~~744		$	2843,~~648~~369
Supplemental disclosures:
Cash paid for interest	$	1428,~~238~~077		$	1529,~~856~~773
Federal, state and local taxes paid (refunded)	$	~~207~~209		$	(34107	)
Supplemental disclosures of non-cash investing and financing activities:
Capital expenditures in accounts payable at end of period	$	1,~~162~~977		$	~~592~~744

See notes to unaudited condensed consolidated financial statements.

~~1. SIGNIFICANT ACCOUNTING POLICIES~~6

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 ~~CPG International Inc. and Subsidiaries (~~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 ~~six~~nine months ended ~~June~~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.

During the quarter ended June 30, 2010, the Company adjusted interest expense by $753,000 related to the calculation of interest on the Term Loan for prior periods. Accordingly, an additional $753,000 was expensed to “interest expense” in the Company’s Statements of Operations for the three and six months ended June 30, 2010 to reflect this adjustment. We concluded that this adjustment was not material to our financial statements for the quarter or six months ended June 30, 2010, or to the financial statements for any prior period and thus have included the adjustment in the current period.

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

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~~			Three Months
	Ended	~~Ended~~			Ended
(Dollars in thousands)	September 30, 2010	~~June 30, 2010~~			~~June~~September 30, 2009
Beginning balance	$	1,~~454~~281		$	~~1,037~~$	1,436
(Decrease) increase for anticipated bad debts		(18	)		428
Increase for anticipated bad debts		123				190
Decrease for accounts written off		(~~155~~63	)		~~(29~~	)(160	)
Ending balance	$	1,~~281~~341		$	~~1,436~~$	1,466

		Six Months			Six Months
	Nine Months				Nine Months
	Ended	~~Ended~~			Ended
(Dollars in thousands)	September 30, 2010	~~June 30, 2010~~			~~June~~September 30, 2009
Beginning balance	$	964		$	~~1,660~~$	1,660
Increase for anticipated bad debts		~~476~~599			~~455~~	645
Decrease for accounts written off		(~~159~~222	)		~~(679~~	)(839	)
Ending balance	$	1,~~281~~341		$	~~1,436~~$	1,466

Product Warranties

The Company provides warranty guarantees on its Scranton Products ~~commercial building products~~ against breakage, corrosion and delamination. Prior to June 1, 2009, the Company had provided a 15-year limited warranty on Scranton Products ~~commercial building products~~. Beginning June 1, 2009, the warranty on Scranton Products ~~commercial building 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 ~~June~~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~~		Three Months	~~Three Months~~
	Ended	~~Ended~~		Ended	~~Ended~~
(Dollars in thousands)	September 30, 2010	~~June 30, 2010~~		September 30, 2009	~~June 30, 2009~~
Beginning balance	$	3,~~642~~675		$	3,~~806~~818
Additions		~~118~~79			~~228~~258
Warranty claims		(8577	)		(~~111~~226	)
Adjustment to reserve		—			(~~105~~78	)
Ending balance		3,~~675~~677			3,~~818~~772
Current portion of accrued warranty		(~~508~~740	)		(~~567~~426	)
Total accrued warranty – less current portion	$	32,~~167~~937		$	3,~~251~~346

		Six Months			Six Months
	Nine Months			Nine Months
	Ended	~~Ended~~		Ended	~~Ended~~
(Dollars in thousands)	September 30, 2010	~~June 30, 2010~~		September 30, 2009	~~June 30, 2009~~
Beginning balance	$	3,596		$	3,853
Additions		~~351~~431			~~372~~630
Warranty claims		(~~184~~235	)		(~~196~~422	)
Adjustment to reserve		(88115	)		(~~211~~289	)
Ending balance		3,~~675~~677			3,~~818~~772
Current portion of accrued warranty		(~~508~~740	)		(~~567~~426	)
Total accrued warranty – less current portion	$	32,~~167~~937		$	3,~~251~~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 ~~Company~~carrying ~~has~~amounts ~~reviewed~~reported ~~its~~in ~~debt~~our ~~and~~condensed ~~believes that~~consolidated ~~the~~balance ~~carrying~~sheets ~~values~~for ~~approximate~~cash ~~fair~~and ~~value. All~~cash ~~other~~equivalents, ~~financial instruments~~accounts ~~are~~receivable, ~~accounted~~accounts ~~for~~payable, onand aaccrued ~~historical~~liabilities ~~cost~~approximate ~~basis~~fair ~~which,~~value due to the ~~nature~~ immediate to short-term maturity of these financial instruments,. ~~approximates~~The ~~fair~~Company ~~value~~has atreviewed its debt and believes that the ~~balance~~carrying ~~sheet dates~~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~~,515,000~~.0 million at ~~June~~September 30, 2010 and $2~~,372,000~~.4 million at December 31, 2009. Other comprehensive ~~loss~~income for the three and ~~six~~nine months ended ~~June~~ September 30, 2010 was $~~804~~538,000 and $~~143~~395,000, respectively. Other comprehensive income for the three and ~~six~~nine months ended ~~June~~September 30, 2009 was approximately $1~~,553,000~~.5 million and $~~963~~2.4 million,~~000,~~ respectively.

~~Foreign Currency Translation~~9

~~The translation~~Recently ofIssued ~~the~~Accounting financial statements of the Company’s Canadian subsidiary whose functional currency is the Canadian Dollar into U.S. Dollar (“USD”) is performed for balance sheet accounts using closing exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during each reporting period. The gains or losses resulting from translation are included in shareholder’s equity separately as accumulated other comprehensive income (loss).Pronouncements

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based upon differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

When applicable, the Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2010 and December 31, 2009, there was no accrual for interest or penalties recorded on the condensed consolidated balance sheet. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction. The Company and its subsidiaries’ federal income tax returns for tax years 2006 and beyond are open tax years subject to examination by the Internal Revenue Service (IRS). The Company and its subsidiaries also file income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. One of the Company’s subsidiaries files federal and provincial income tax returns in Canada. The Canadian subsidiary recently concluded an examination of various short-period income tax returns through February 29, 2008. There were no significant adjustments resulting from this examination.

Recently Adopted 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 ~~includes~~ produces residential building products ~~such as AZEK Trim, AZEK Moulding, AZEK Deck, AZEK Porch and AZEK Rail~~; Scranton Products (“Scranton”), which produces fabricated bathroom partition and locker systems ~~under the Comtec, Santana, Hiny Hiders and TuffTec labels~~ for the commercial market; and Vycom (“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.

Beginning in the third quarter of 2009, the Company realigned its industrial business, previously included in AZEK Building Products and Scranton Products, into a third segment referred to as Vycom to reinforce it as a single, standalone entity, providing non-fabricated branded sheet to national distributors. Segment results for the corresponding three and six month periods ended June 30, 2009 have been updated to conform to this organizational change.

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 June 30, 2010:~~ 10

	AZEK
		Building			Scranton
(Dollars in thousands)		Products			Products			Vycom			Corporate			Consolidated
Net sales	$	54,244		$	16,885		$	14,601		$	—		$	85,730
Cost of sales		(37,390	)		(9,563	)		(12,272	)		—			(59,225	)
Gross margin		16,854			7,322			2,329			—			26,505
Selling, general and administrative expenses		(7,449	)		(2,562	)		(1,792	)		(3,048	)		(14,851	)
Loss on disposal of property		(240	)		—			—			—			(240	)
Segment operating income (loss)	$	9,165		$	4,760		$	537		$	(3,048	)	$	11,414
Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	3,140		$	(113	)	$	857		$	—		$	3,884
Selling, general and administrative expense		633			40			567			130			1,370
Total depreciation and amortization	$	3,773		$	(73	)	$	1,424		$	130		$	5,254
Total capital expenditures(1)	$	1,831		$	256		$	190		$	1,550		$	3,827

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 ~~six~~nine months ended ~~June~~September 30, 2010:

	AZEK
	Building	~~Building~~			Scranton
(Dollars in thousands)	Products	~~Products~~			Products			~~Vycom~~	Vycom		~~Corporate~~		Corporate	~~Consolidated~~		Consolidated
Net sales	$	~~123~~187,~~135~~195		$	~~30,028~~$	47,310	$	~~27,234~~	$	$42,498	—		$	~~180,397~~—		$	277,003
Cost of sales		(84127,~~470~~291	)		~~(17,213~~	)(27,917	)	~~(22,641~~	)	(35,623	—)			~~(124,324~~—	)		(190,831	)
Gross margin		3859,~~665~~904			~~12,815~~	19,393		~~4,593~~		6,875	—			~~56,073~~—			86,172
Selling, general and administrative expenses		(1522,~~034~~283	)		~~(4,765~~	)(7,084	)	~~(3,312~~	)	(4,852	~~(6,124~~)	)		(299,~~235~~437	)		(43,656	)
Impairment of long-lived assets		(599	)		—	—		—		—	—			~~(599~~—	)		(599	)
Loss on disposal of property		(~~202~~254	)		~~(49~~	)(49	)	—		(37	—)			~~(251~~—	)		(340	)
Segment operating income (loss)	$	2236,~~830~~768		$	~~8,001~~$	12,260	$	~~1,281~~	$	$1,986	~~(6,124~~	)	$	25(9,~~988~~437	)	$	41,577
Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	68,~~083~~895		$	~~132~~$	347	$	~~1,704~~	$	$2,542	—		$	~~7,919~~—		$	11,784
Selling, general and administrative expense		1,~~264~~895			81	121		~~1,135~~		1,699	~~365~~			~~2,845~~466			4,181
Total depreciation and amortization	$	710,~~347~~790		$	~~213~~$	468	$	~~2,839~~	$	$4,241	~~365~~		$	~~10,764~~466		$	15,965
Total capital expenditures(1)	$	58,~~801~~654		$	~~450~~$	744	$	~~567~~	$	$570	~~1,696~~		$	81,~~514~~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 June 30, 2009:~~ 11

	AZEK
		Building			Scranton
(Dollars in thousands)		Products			Products			Vycom			Corporate			Consolidated
Net sales	$	33,015		$	20,529		$	8,814		$	—		$	62,358
Cost of sales		(22,589	)		(10,611	)		(6,935	)		—			(40,135	)
Gross margin		10,426			9,918			1,879			—			22,223
Selling, general and administrative expenses		(6,804	)		(2,625	)		(1,255	)		(3,403	)		(14,087	)
Loss on disposal of property		—			(126	)		—			—			(126	)
Segment operating income (loss)	$	3,622		$	7,167		$	624		$	(3,403	)	$	8,010
Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	2,755		$	233		$	904		$	—		$	3,892
Selling, general and administrative expense		622			40			553			233			1,448
Total depreciation and amortization	$	3,377		$	273		$	1,457		$	233		$	5,340
Total capital expenditures(1)	$	1,302		$	—		$	25		$	39		$	1,366

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 ~~six~~nine months ended ~~June~~September 30, 2009:

	AZEK
	Building	~~Building~~			Scranton
(Dollars in thousands)	Products	~~Products~~			Products			~~Vycom~~	Vycom		~~Corporate~~		Corporate	~~Consolidated~~		Consolidated
Net sales	$	90139,~~072~~714		$	~~36,496~~$	54,934	$	~~17,206~~	$	$27,530	—		$	~~143,774~~—		$	222,178
Cost of sales		(5992,~~992~~062	)		~~(20,593~~	)(30,398	)	~~(12,994~~	)	(21,421	—)			~~(93,579~~—	)		(143,881	)
Gross margin		3047,~~080~~652			~~15,903~~	24,536		~~4,212~~		6,109	—			~~50,195~~—			78,297
Selling, general and administrative expenses		(1219,~~769~~889	)		~~(4,680~~	)(7,188	)	~~(2,544~~	)	(3,790	~~(6,922~~)	)		(2610,~~915~~183	)		(41,050	)
Impairment of goodwill		(14,912	)		~~3,273~~	3,273		~~(2,769~~	)	(2,769	—)			~~(14,408~~—	)		(14,408	)
Loss on disposal of property		—(17	)		~~(126~~	)(126	)	—		—	—			~~(126~~—	)		(143	)
Segment operating income (loss)	$	212,~~399~~834		$	~~14,370~~$	20,495	$	~~(1,101~~	)$	$(450	~~(6,922~~)	)	$	8(10,~~746~~183	)	$	22,696
Selected financial data:
Depreciation and amortization classified as:
Cost of sales	$	58,~~479~~284		$	~~444~~$	683	$	~~1,907~~	$	$2,769	—		$	~~7,830~~—		$	11,736
Selling, general and administrative expense		1,~~119~~751			80	120		~~1,106~~		1,659	~~530~~			~~2,835~~730			4,260
Total depreciation and amortization	$	610,~~598~~035		$	~~524~~$	803	$	~~3,013~~	$	$4,428	~~530~~		$	~~10,665~~730		$	15,996
Total capital expenditures(1)	$	13,~~949~~208		$	~~449~~$	982	$	~~156~~	$	$433	99		$	~~2,653~~206		$	4,829

______

(1)

Includes capital expenditures in accounts payable.

~~The following table sets forth summarized financial information regarding assets by business segment at June 30, 2010 and December 31, 2009:~~12

(Dollars in thousands)	June 30, 2010		December 31, 2009
Total assets:
AZEK Building Products	$	316,906	$	320,475
Scranton Products		102,978		113,819
Vycom		105,183		99,506
Corporate		18,727		5,604
Total consolidated assets	$	543,794	$	539,404

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

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 six months ended June 30, 2010 and 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

	Three Months				Three Months
	Ended				Ended
	June 30, 2010				June 30, 2009
			% of				% of
	% of		AZEK Building		% of		AZEK Building
	Consolidated		Product		Consolidated		Product
	Sales		Sales		Sales		Sales
Distributor A	20	%	32	%	19	%	36	%
Distributor B	7		11		8		14
Distributor C	6		9		7		13
Total	33	%	52	%	34	%	63	%

Six Months

Three Months

Ended

~~Ended~~

Ended

~~Ended~~

June 30, 2010

June 30, 2009

September 30, 2010

September 30, 2009

% of

~~% of~~

% of

~~% of~~

% of

~~% of~~

AZEK Building

~~AZEK Building~~

% of

~~% of~~

AZEK Building

~~AZEK Building~~

Consolidated

~~Consolidated~~

Product

~~Product~~

Consolidated

~~Consolidated~~

Product

~~Product~~

Sales

~~Sales~~

Sales

~~Sales~~

Sales

~~Sales~~

Sales

~~Sales~~

Distributor A

3638

4342

Distributor B

1215

1822

811

1318

Distributor C

811

1117

108

1613

Total

4551

6577

4546

7273

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

	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	%

(Dollars in thousands)	June 30, 2010		December 31, 2009
Long-lived assets:
United States	$	75,214	$	76,443
Canada		6,463		7,889
Total consolidated long-lived assets	$	81,677	$	84,332

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 ~~June~~September 30, 2010 and December 31, 2009:

(Dollars in thousands)	June 30, 2010		December 31, 2009
	September 30,			December 31,
Raw materials	$	22,875	$	25,695
(Dollars in thousands)	2010			2009
Work in process		—		72
Raw materials	$	21,753		$	25,695
Finished goods		14,374		20,155
Work in process		—			72
Total inventories	$	37,249	$	45,922
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 ~~June~~September 30, 2010 and December 31, 2009:

(Dollars in thousands)	June 30, 2010			December 31, 2009
	September 30,				December 31,
Land and improvements	$	1,701		$	1,701
(Dollars in thousands)	2010				2009
Buildings and improvements		25,198			23,616
Land and improvements	$	1,701			$	1,701
Capital lease – building		1,500			1,500
Buildings and improvements		25,340				23,616
Capital lease – manufacturing equipment		8,594			8,594
Capital lease – building		1,500				1,500
Manufacturing equipment		101,257			100,015
Capital lease – manufacturing equipment		8,594				8,594
Office furniture and equipment		5,271			4,991
Manufacturing equipment		101,623				100,015
Total property and equipment		143,521			140,417
Office furniture and equipment		4,990				4,991
Construction in progress		4,402			2,855
Total property and equipment		143,748				140,417
		147,923			143,272
Construction in progress		5,581				2,855
Accumulated depreciation		(66,246	)		(58,940	)
		149,329				143,272
Total property and equipment – net	$	81,677		$	84,332
Accumulated depreciation		(68,139	)			(58,940	)
Total property and equipment – net	$	81,190			$	84,332

Depreciation expense for the three months ended ~~June~~September 30, 2010 and 2009 was approximately $4~~,083,000~~.0 million and $4.1 million,~~164,000,~~ respectively. Depreciation expense for the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009 was approximately $~~8,412,000~~12.4 million and $812.6 million,~~425,000,~~ respectively.

5. GOODWILL AND INTANGIBLE ASSETS —NET

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

	~~Lives in~~	Lives in		~~June 30,~~		September 30,	~~December 31,~~		December 31,
(Dollars in thousands)	~~Years~~	Years		~~2010~~		2010	~~2009~~		2009
Goodwill	—		$—	~~246,763~~		$	~~246~~247,~~842~~037		$	246,842
Non-amortizable intangibles:
Trademarks				~~67,400~~			67,400			67,400
Other intangibles				~~746~~			~~752~~769			752
Total non-amortizable intangibles				~~68,146~~			68,~~152~~169			68,152
Amortizable intangibles:
Non-compete agreement	5		5	~~2,500~~			2,500			2,500
Accumulated amortization non-compete agreement				~~(1,723~~	)		(1,~~473~~848	)		(1,473	)
Non-compete agreement- net				~~777~~			~~1,027~~652			1,027
Customer relationships	10		10	~~26,194~~			26,~~203~~225			26,203
Accumulated amortization customer relationships				~~(13,374~~	)		(1114,~~981~~084	)		(11,981	)
Customer relationships-net				~~12,820~~			1412,~~222~~141			14,222
Proprietary knowledge	15		15	~~12,783~~			12,~~816~~896			12,816
Accumulated amortization proprietary knowledge				~~(4,562~~	)		(34,~~938~~909	)		(3,938	)
Proprietary knowledge-net				~~8,221~~			87,~~878~~987			8,878
Trade names	5		5	~~354~~			~~357~~365			357
Accumulated amortization trade names				~~(240~~	)		(~~204~~265	)		(204	)
Trade names-net				~~114~~			~~153~~100			153
Royalty license	7		7	~~365~~			~~368~~376			368
Accumulated amortization royalty license				~~(128~~	)		(~~101~~146	)		(101	)
Royalty license-net				~~237~~			~~267~~230			267
Total amortizable intangibles-net				~~22,169~~			2421,~~547~~110			24,547
Intangible assets – net			$	~~90,315~~		$	9289,~~699~~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.~~AZEK

Amortization expense for the three months ended June 30, 2010 and 2009 was approximately $1,171,000 and $1,176,000, respectively. Amortization expense for the six months ended June 30, 2010 and 2009 was approximately $2,352,000 and $2,240,000, respectively.15

~~The~~Building ~~following~~Products, ~~table~~a ~~presents~~reduction of $3.3 million was allocated to the ~~future intangible~~Scranton ~~asset~~Products ~~amortization~~business ~~expense~~segment ~~based~~and on$2.8 ~~existing~~million ~~amortizable~~of ~~intangible assets~~the atadditional ~~June~~impairment 30was allocated to Vycom. At December 31, ~~2010:~~2009, the Company completed its annual impairment of goodwill and trademarks and determined that no impairment existed.

(Dollars in thousands)
2010	$	2,331
2011		4,423
2012		3,804
2013		3,592
2014		3,428
Thereafter		4,591
Total	$	22,169

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 ~~tables~~table ~~summarize~~presents the ~~changes~~ infuture ~~the~~intangible ~~Company’s~~asset ~~goodwill~~amortization ~~for~~expense ~~the~~based ~~six~~on ~~month~~existing ~~period~~amortizable ~~ended~~intangible ~~June~~assets at September 30, 2010:

		AZEK
(Dollars in thousands)
(Dollars in thousands)		Building			Scranton
2010		$	1,170
		Products			Products			Vycom			Consolidated
2011			4,442
Balance at December 31, 2009:
2012			3,820
Goodwill	$	179,791		$	47,384		$	70,075		$	297,250
2013			3,606
Accumulated impairment losses		(25,858	)		(12,164	)		(12,386	)		(50,408	)
2014			3,441
Goodwill at December 31, 2009		153,933			35,220			57,689			246,842
Thereafter			4,631
Currency translation adjustment		(79	)		–			–			(79	)
Total		$	21,110
Balance at June 30, 2010:
Goodwill		179,712			47,384			70,075			297,171
Accumulated impairment losses		(25,858	)		(12,164	)		(12,386	)		(50,408	)
Goodwill at June 30, 2010	$	153,854		$	35,220		$	57,689		$	246,763

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 ~~June~~September 30, 2010 and December 31, 2009:

(Dollars in thousands)		June 30, 2010			December 31, 2009
		September 30,				December 31,
Deferred financing costs	$	13,675		$	13,675
(Dollars in thousands)		2010				2009
Accumulated amortization		(9,688	)		(8,596	)
Deferred financing costs		$	13,794			$	13,675
Total deferred financing costs, net	$	3,987		$	5,079
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 ~~June~~September 30, 2010 and 2009 was approximately $~~546~~552,000 and $546,000, respectively. Amortization of deferred financing costs for the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009 was approximately $1~~,092,000~~.6 million and $1.7 million,~~175,000,~~ 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 ~~June~~September 30, 2010 and December 31, 2009:

(Dollars in thousands)	June 30, 2010		December 31, 2009
	September 30,			December 31,
Senior Unsecured Fixed Rate Notes due 2013—10.5%	$	150,000	$	150,000
(Dollars in thousands)	2010			2009
Senior Unsecured Floating Rate Notes due 2012—LIBOR + 6.75% (7.18% at
Senior Unsecured Fixed Rate Notes due July 1, 2013—10.5%	$	150,000		$	150,000
June 30, 2010 and 7.87% at December 31, 2009) (includes premium of
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
$47 at June 30, 2010 and $59 at December 31, 2009)		128,047		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
Term Loan due 2012 –7.25% at June 30, 2010 and December 31, 2009 (includes discount of $153 at June 30, 2010 and $267 at December 31, 2009)		24,222		24,233
Total		302,258			302,292
Total		302,269		302,292
Less current portion		250			250
Less current portion		250		250
Long-term debt—less current portion	$	302,008		$	302,042
Long-term debt—less current portion	$	302,019	$	302,042

~~CPG International~~As Iof ~~Inc.~~September ~~(“CPG”)~~30, a2010, ~~wholly owned subsidiary of~~ the Company, ~~had approximately~~has ~~$128,000,000~~scheduled ~~aggregate~~debt ~~principal~~payments ~~amount of Senior Unsecured Floating Rate Notes due 2012~~ (~~the~~excluding ~~“Floating Rate Notes”~~interest) ~~and~~of $~~150~~62,~~000,000 aggregate~~500 ~~principal~~in ~~amount of 10½% Senior Unsecured Notes due 2013 (the “Fixed Rate Notes~~2010,” ~~and collectively with the Floating Rate Notes~~$250,000 ~~the~~in ~~“Notes”) outstanding at June 30~~2011, ~~2010~~$152. ~~The~~0 ~~Notes~~million ~~have~~in ~~been~~2012 ~~guaranteed by the Company~~ and ~~all of the domestic subsidiaries of CPG~~$150. ~~The~~0 ~~indenture governing~~million 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~~2013.

As CPG, ~~of June~~a ~~30,~~wholly ~~2010,~~owned subsidiary of the Company, ~~has~~had ~~scheduled~~approximately ~~debt~~$128.0 ~~payments~~million aggregate principal amount of Senior Unsecured Floating Rate Notes due July 1, 2012 (~~excluding~~the ~~interest~~“Floating Rate Notes”) of and $~~125~~150.0 million aggregate principal amount of 10½% Senior Unsecured Notes due July 1,~~000~~ in2013 ~~2010~~(the “Fixed Rate Notes,” ~~$250~~and collectively with the Floating Rate Notes,~~000~~ inthe ~~2011~~“Notes”) outstanding at September 30, ~~$152~~2010.0 The ~~million~~Notes inhave ~~2012~~been guaranteed by the Company and ~~$150~~all of the domestic subsidiaries of CPG.0 The ~~million~~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 ~~2013~~ 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~~,000,000~~.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.

~~The Company~~No ~~and~~amounts ~~its~~were ~~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. The Term~~ Loan Agreement ~~requires~~during the ~~borrowers thereunder~~three tomonths ~~repay~~ended ~~the~~September ~~outstanding principal of the Term Loan in quarterly installments of $62~~30,~~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 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 ~~June~~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 ~~June~~ 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 ~~rental~~lease payments at ~~June~~ 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~~	Operating
2010	$	~~1,289~~548		$	~~804~~$	402
2011		1,~~906~~904			~~1,289~~	1,296
2012		~~950~~949			~~894~~	901
2013		~~559~~557			~~735~~	742
2014		~~539~~537			~~551~~	556
Thereafter		58,~~695~~316			~~1,012~~	1,012
Total		1012,~~938~~811		$	~~5,285~~$	4,909
Less amount representing interest		(69,~~792~~098	)
Present value of minimum capital lease payments		43,~~146~~713
Less current installments of obligations under capital leases		(~~825~~1,440	)
Obligations under capital leases—excluding current installments	$	32,~~321~~273

Total rent expense for the three months ended ~~June~~September 30, 2010 and 2009 was approximately $~~369~~435,000 and $~~424~~375,000, respectively. Total rent expense was approximately $1.2 million for each of the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009 ~~was approximately $735,000 and $862,000, respectively~~.

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,~~500,000,~~ payable on a monthly basis pursuant to a management agreement with AEA Investors. Management fees of $375,000 and $~~750,000~~1.1 million are included in selling, general and administrative expenses for each of the three and ~~six~~nine months ended ~~June~~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 six months ended June 30, 2010 were $129,000 and $259,000, respectively. Total lease payments for the three and six months ended June 30, 2009 were $128,000 and $256,000, respectively.19

InThe ~~2007, the~~ Company ~~entered~~leases ~~into~~one anof ~~amended~~its ~~lease agreement related to an office and~~ manufacturing facilities ~~location~~from ~~with~~an ~~North~~affiliate ~~Alabama Property Leasing, Inc. The lessor~~ of ~~the property is~~ an ~~entity whose sole shareholder is now an~~ equity holder ~~in Holdings as a result~~ of ~~the Procell Acquisition, an acquisition by the Company in 2007~~Holdings. Total lease ~~expense~~payments for the three and ~~six~~nine months ended ~~June~~September 30, 2010 were ~~approximately~~ $~~144~~129,000 and $~~287~~388,000, respectively. Total lease payments for the three and ~~six~~nine months ended ~~June~~ September 30, 2009 were ~~approximately~~ $~~149~~128,000 and $~~334~~385,000, ~~respectively. The~~ ~~Company has also paid storage and other fees to the lessor in the amount of approximately $4,000 and $12,000 for the three and six months ended June 30, 2010,~~ respectively. ~~The Company has also paid storage and other fees to the lessor in the amount of approximately $6,000 and $12,000 for the three and six months ended June 30, 2009, respectively.~~

~~The former~~In ~~owners~~2007, ofthe ~~Composatron~~Company ~~conducted~~entered ~~business~~into ~~for~~an ~~finished~~amended ~~goods~~lease asagreement ~~well~~related ~~as machinery~~to ~~repairs~~an office and ~~parts~~manufacturing facilities location with ~~various~~North ~~companies~~Alabama ~~that~~Property ~~are~~Leasing, ~~affiliated~~Inc. The ~~with~~lessor of the ~~former~~ ~~owners~~property is an entity whose sole shareholder was an equity holder in Holdings through May 2010 as a result of ~~Composatron~~the Procell Acquisition, an acquisition by the Company in 2007. Total ~~costs~~lease ~~paid~~expense ~~after~~for the ~~acquisition to~~three ~~these~~and ~~affiliated~~nine ~~companies~~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 $0144,000 and $7477,000, 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 ~~six~~ three and nine months ended ~~June~~September 30, 2010, and September 30, 2009, respectively.

The ~~Company~~ ~~also~~former ~~has~~owners ~~long-term~~of ~~notes~~Composatron inare ~~the~~engaged ~~amount~~in ofselling ~~$13,902,000~~finished ~~due~~goods ~~from~~as ~~Holdings for~~well ~~the~~as ~~payment~~providing ~~made~~machinery onrepairs ~~behalf~~and ofparts ~~Holdings~~to ~~related~~various tocompanies ~~repurchase~~that ofare ~~ownership units~~affiliated inwith ~~Holdings~~them. ~~Included~~ The inCompany ~~the~~engages ~~$13,902,000~~in isbusiness ~~approximately $3,000,000~~with ~~related~~Composatron toaffiliates. ~~the~~Total ~~repurchase~~costs ofpaid ~~Class~~after Athe ~~limited~~acquisition ~~partnership units and Class B Units pursuant~~ to aComposatron ~~separation~~affiliated ~~agreement~~companies ~~with~~were ~~Mr.~~approximately ~~James Keisling~~$1,000 ~~the former~~and ~~chairman~~$0 offor ~~our~~the ~~board~~three ofmonths ~~directors. Also~~ended ~~included~~September ~~in the $13~~30,~~902,000~~ is2010 ~~approximately~~and $42009,~~000,000~~ ~~related~~respectively. Total tocosts ~~the~~paid ~~repurchase~~after ofthe ~~Class~~acquisition ~~A limited partnership units pursuant~~ to ~~the~~these ~~contribution~~affiliated ~~agreement~~companies ~~with~~were ~~Mr.~~approximately ~~Larry Sloan~~$1,000 ~~one~~and ~~of the sellers of Procell. Currently~~$7,000 nofor ~~repayment schedule~~the ~~has~~nine ~~been~~months ~~established~~ended ~~for~~September ~~these~~30, ~~notes. The~~2010 ~~notes~~and ~~have~~2009, ~~been classified in shareholder’s equity~~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 ~~June~~September 30, 2010 and December 31, 2009 and for the three and ~~six~~ nine months ended ~~June~~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.

		June 30, 2010
(Dollars in thousands)		CPG
		International
Condensed Consolidating		Inc.		CPG		Guarantor		Non-Guarantor
Balance Sheet		(Parent)		(Issuer)		Subsidiaries		Subsidiary			Eliminations			Consolidated
Cash	$	—	$	—	$	47,430	$	833		$	—		$	48,263
Net receivables		—		—		30,365		16			—			30,381
Inventory		—		—		37,249		—			—			37,249
Other current assets		—		—		4,713		187			—			4,900
Total current assets		—		—		119,757		1,036			—			120,793
Net property and equipment		—		—		75,214		6,463			—			81,677
Goodwill		—		—		237,913		8,850			—			246,763
Net intangible assets		—		—		85,956		4,359			—			90,315
Deferred financing costs, net		—		—		3,987		—			—			3,987
Other assets		—		—		209		50			—			259
Notes receivable - intercompany		—		315,625		15,822		—			(331,447	)		—
Investment in subsidiary		139,834		139,834		7,346		—			(287,014	)		—
Intercompany receivables		—		—		5		3,071			(3,076	)		—
Total assets	$	139,834	$	455,459	$	546,209	$	23,829		$	(621,537	)	$	543,794
Accounts payable	$	—	$	—	$	27,170	$	52		$	—		$	27,222
Accrued interest		—		13,356		—		—			—			13,356
Current portion-long term debt		—		250		—		—			—			250
Accrued expenses		—		—		16,060			357		—			16,417
Current portion of capital lease		—		—		825		—			—			825
Total current liabilities		—		13,606		44,055		409			—			58,070
Deferred income taxes		—		—		37,101		1,212			—			38,313
Long-term debt		—		302,019		—		—			—			302,019
Intercompany debt		—		—		315,625		15,822			(331,447	)		—
Other non-current liabilities		—		—		6,523		—			—			6,523
Intercompany payable		—		—		3,071		5			(3,076	)		—
Equity		139,834		139,834		139,834		6,381			(287,014	)		138,869
Total liabilities and equity	$	139,834	$	455,459	$	546,209	$	23,829		$	(621,537	)	$	543,794

		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 June 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	$	—	$	—		$	83,404		$	2,326		$	—		$	85,730
Cost of sales		—		—			(57,546	)		(1,679	)		—			(59,225	)
Gross margin		—		—			25,858			647			—			26,505
Selling, general and administrative expenses		—		—			(14,444	)		(407	)		—			(14,851	)
Loss on disposal of property		—		—			(240	)		—			—			(240	)
Operating income (loss)		—		—			11,174			240			—			11,414
Intercompany income		—		7,669			433			(433	)		(7,669	)		—
Interest expense, net of interest income		—		(7,669	)		(8,272	)		—			7,669			(8,272	)
Miscellaneous, net		—		—			(4	)		6			—			2
Foreign currency loss		—		—			(99	)		—			—			(99	)
Income tax (expense) benefit		—		—			(329	)		52			—			(277	)
Equity in net (loss) income from subsidiary		2,768		2,768			(135	)		—			(5,401	)		—
Net income (loss)	$	2,768	$	2,768		$	2,768		$	(135	)	$	(5,401	)	$	2,768

		Six Months Ended June 30, 2010
	Three Months Ended September 30, 2010
(Dollars in thousands)	CPG	~~CPG~~
	International	~~International~~								~~Non-~~		Non-
	Inc.	~~Inc.~~		CPG			~~Guarantor~~	Guarantor		~~Guarantor~~		Guarantor
Condensed Consolidating	(Parent)	~~(Parent)~~		(Issuer)			~~Subsidiaries~~	Subsidiaries		~~Subsidiary~~		Subsidiary		~~Eliminations~~		Eliminations	~~Consolidated~~		Consolidated
Statement of Operations
Net sales	$	—	$	—$	—	$	~~175,708~~	$	$94,236	~~4,689~~		$	$2,370	—		$	~~180,397~~—		$	96,606
Cost of sales		—		—	—		~~(120,932~~	)	(64,770	~~(3,392~~)	)		(1,737	—)			~~(124,324~~—	)		(66,507	)
Gross margin		—		—	—		~~54,776~~		29,466	~~1,297~~			633	—			~~56,073~~—			30,099
Selling, general and administrative expenses		—		—	—		~~(28,395~~	)	(14,030	~~(840~~)	)		(391	—)			~~(29,235~~—	)		(14,421	)
Impairment of long-lived assets		—		—			—			(599	)			—			(599	)
Loss on disposal of property		—			—				(88	)			—				—			(88	)
Loss on disposal of property		—		—			(251	)		—				—			(251	)
Operating income (loss)		—			—				15,348				242				—			15,590
Operating income		—		—			26,130			(142	)			—			25,988
Intercompany income		—			6,822				431				(431	)			(6,822	)		—
Intercompany income		—		14,485			816			(816	)			(14,485	)		—
Interest expense, net of interest income		—			(6,822	)			(7,460	)			—				6,822			(7,460	)
Interest expense, net of interest income		—		(14,485	)		(15,744	)		—				14,485			(15,744	)
Miscellaneous, net		—			—				1				—				—			1
Miscellaneous, net		—		—			9			(3	)			—			6
Foreign currency gain		—			—				34				—				—			34
Foreign currency loss		—		—			(21	)		—				—			(21	)
Income tax (expense) benefit		—			—				(740	)			70				—			(670	)
Income tax benefit (expense)		—		—			(4,534	)		261				—			(4,273	)
Equity in net (loss) income from subsidiary		7,495			7,495				(119	)			—				(14,871	)		—
Equity in net (loss) income from subsidiary		5,956		5,956			(700	)		—				(11,212	)		—
Net income (loss)	$	7,495		$	7,495			$	7,495			$	(119	)		$	(14,871	)	$	7,495
Net income (loss)	$	5,956	$	5,956		$	5,956		$	(700	)		$	(11,212	)	$	5,956

		Three Months Ended June 30, 2009
	Nine Months Ended September 30, 2010
(Dollars in thousands)	CPG	~~CPG~~
	International	~~International~~								~~Non-~~		Non-
	Inc.	~~Inc.~~		CPG			~~Guarantor~~	Guarantor		~~Guarantor~~		Guarantor
Condensed Consolidating	(Parent)	~~(Parent)~~		(Issuer)			~~Subsidiaries~~	Subsidiaries		~~Subsidiary~~		Subsidiary		~~Eliminations~~		Eliminations	~~Consolidated~~		Consolidated
Statement of Operations
Net sales	$	—	$	—$	—	$	~~60,457~~	$	$269,944	~~1,901~~		$	$7,059	—		$	~~62,358~~—		$	277,003
Cost of sales		—		—	—		~~(38,797~~	)	(185,702	~~(1,338~~)	)		(5,129	—)			~~(40,135~~—	)		(190,831	)
Gross margin		—		—	—		~~21,660~~		84,242	~~563~~			1,930	—			~~22,223~~—			86,172
Selling, general and administrative expenses		—		—	—		~~(14,118~~	)	(42,425	31)			(1,231	—)			~~(14,087~~—	)		(43,656	)
Loss on disposal of property		—		—			(126	)		—				—			(126	)
Impairment of long-lived assets		—			—				—				(599	)			—			(599	)
Operating income (loss)		—		—			7,416			594				—			8,010
Loss on disposal of property		—			—				(340	)			—				—			(340	)
Intercompany income		—		7,256			673			(673	)			(7,256	)		—
Operating income (loss)		—			—				41,477				100				—			41,577
Interest expense, net of interest income		—		(7,256	)		(7,907	)		—				7,256			(7,907	)
Intercompany income		—			21,308				1,247				(1,247	)			(21,308	)		—
Miscellaneous, net		—		—			(27	)		—				—			(27	)
Interest expense, net of interest income		—			(21,308	)			(23,204	)			—				21,308			(23,204	)
Foreign currency gain		—		—			143			—				—			143
Miscellaneous, net		—			—				9				—				—			9
Income tax (expense) benefit		—		—			(136	)		9				—			(127	)
Foreign currency gain		—			—				12				—				—			12
Equity in net (loss) income from subsidiary		92		92			(70	)		—				(114	)		—
Income tax (expense) benefit		—			—				(5,274	)			331				—			(4,943	)
Net income (loss)	$	92	$	92		$	92		$	(70	)		$	(114	)	$	92
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

		Six Months Ended June 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	$	—		$	—		$	140,232		$	3,542		$	—		$	143,774
Cost of sales		—			—			(90,939	)		(2,640	)		—			(93,579	)
Gross margin		—			—			49,293			902			—			50,195
Selling, general and administrative expenses		—			—			(26,676	)		(239	)		—			(26,915	)
Impairment of goodwill		—			—			(14,408	)		—			—			(14,408	)
Loss on disposal of property		—			—			(126	)		—			—			(126	)
Operating income		—			—			8,083			663			—			8,746
Intercompany income		—			14,702			1,263			(1,263	)		(14,702	)		—
Interest expense, net of interest income		—			(14,702	)		(16,086	)		—			14,702			(16,086	)
Miscellaneous, net		—			—			(51	)		38			—			(13	)
Foreign currency gain		—			—			116			—			—			116
Income tax benefit (expense)		—			—			114			160			—			274
Equity in net (loss) income from subsidiary		(6,963	)		(6,963	)		(402	)		—			14,328			—
Net (loss) income	$	(6,963	)	$	(6,963	)	$	(6,963	)	$	(402	)	$	14,328		$	(6,963	)

				Six Months Ended June 30, 2010
	Three Months Ended September 30, 2009
(Dollars in thousands)	CPG	~~CPG~~
	International	~~International~~											Non-					~~Non-~~
Condensed Consolidating		Inc.							CPG					Guarantor				Guarantor
	Inc.				CPG				Guarantor				Guarantor
Statement of Cash Flows		(Parent)							(Issuer)					Subsidiaries				Subsidiary					Eliminations				Consolidated
Condensed Consolidating	(Parent)				(Issuer)				Subsidiaries				Subsidiary			Eliminations				Consolidated
Net income	$		5,956					$		5,956		$				5,956			$	(699	)	$		(11,213	)	$		5,956
Statement of Operations
Depreciation and amortization			—							—						9,527				1,237				—				10,764
Net sales	$	—			$	—			$	76,433			$	1,971		$	—			$	78,404
Deferred income tax benefit			—							—						3,606				(265	)			—				3,341
Cost of sales		—				—				(48,779	)			(1,525	)		—				(50,304	)
Share based compensation			—							—						27				—				—				27
Gross margin		—				—				27,654				446			—				28,100
Non-cash interest charges			—							—						1,199				—				—				1,199
Selling, general and administrative expenses		—				—				(13,815	)			(332	)		—				(14,147	)
Unrealized (gain) loss on foreign currency exchange			—							—						(759	)			816				—				57
Loss on disposal of property		—				—				—				(19	)		—				(19	)
Loss on disposition of fixed assets			—							—						251				—				—				251
Operating income (loss)		—				—				13,839				95			—				13,934
Impairment of goodwill and long-lived assets			—							—						—				599				—				599
Intercompany income		—				7,023				681				(681	)		(7,023	)			—
Bad debt provision			—							—						476				—				—				476
Interest expense, net of interest income		—				(7,023	)			(7,636	)			—			7,023				(7,636	)
Equity in net (income) loss from subsidiary			(5,956		)					(5,956	)					699				—				11,213				—
Miscellaneous, net		—				—				26				(19	)		—				7
Trade receivables			—							—						(17,036	)			405				—				(16,631	)
Foreign currency gain		—				—				224				—			—				224
Inventories			—							—						8,673				—				—				8,673
Income tax (expense) benefit		—				—				(742	)			189			—				(553	)
Accounts payable			—							—						3,651				26				—				3,677
Equity in net (loss) income from subsidiary		5,976				5,976				(416	)			—			(11,536	)			—
Accrued expenses and interest			—							—						(1,427	)			(392	)			—				(1,819	)
Net income (loss)	$	5,976			$	5,976			$	5,976			$	(416	)	$	(11,536	)		$	5,976
Prepaid expenses and other current assets			—							—						410				113				—				523
Other changes in working capital			—							—						96				24				—				120
Net cash provided by operating activities			—							—						15,349				1,864				—				17,213
Purchases of property and equipment			—							—						(7,270	)			(82	)			—				(7,352	)
Net cash used in investing activities			—							—						(7,270	)			(82	)			—				(7,352	)
Intercompany payable/receivable			—							—						3,066				(3,066	)			—				—
Proceeds under revolving credit facility			—							—						10,000				—				—				10,000
Payment on revolving credit facility			—							—						(10,000	)			—				—				(10,000	)
Other cash used in financing activities			—							—						(6,026	)			—				—				(6,026	)
Net cash used in financing activities			—							—						(2,960	)			(3,066	)			—				(6,026	)
Cash impact of currency translation adjustment			—							—						—				(73	)			—				(73	)
Net increase (decrease) in cash and cash equivalents			—							—						5,119				(1,357	)			—				3,762
Cash and equivalents - beginning of period			—							—						42,311				2,190				—				44,501
Cash and cash equivalents – end of period	$		—					$		—		$				47,430			$	833		$		—		$		48,263

			Six Months Ended June 30, 2009
	Nine Months Ended September 30, 2009
(Dollars in thousands)	CPG		~~CPG~~
	International		~~International~~									Non-	~~Non-~~
Condensed Consolidating			Inc.				CPG			Guarantor			Guarantor
	Inc.				CPG				Guarantor			Guarantor
Statement of Cash Flows			(Parent)				(Issuer)			Subsidiaries			Subsidiary				Eliminations				Consolidated
Condensed Consolidating	(Parent)				(Issuer)				Subsidiaries			Subsidiary				Eliminations				Consolidated
Net (loss) income	$		(6,963	)			$	(6,963	)	$		(6,963	)	$	(402	)	$		14,328		$		(6,963	)
Statement of Operations
Depreciation and amortization			—					—				9,567			1,098				—				10,665
Net sales	$	—			$	—			$	216,665		$	5,513			$	—			$	222,178
Deferred income tax (benefit) provision			—					—				(148	)		(160	)			—				(308	)
Cost of sales		—				—				(139,718	)		(4,163	)			—				(143,881	)
Impairment charge			—					—				14,408			—				—				14,408
Gross margin		—				—				76,947			1,350				—				78,297
Share based compensation			—					—				35			—				—				35
Selling, general and administrative expenses		—				—				(40,490	)		(560	)			—				(41,050	)
Non-cash interest charges			—					—				1,361			—				—				1,361
Impairment of goodwill		—				—				(14,408	)		—				—				(14,408	)
Unrealized (gain) loss on foreign currency exchange			—					—				(1,090	)		974				—				(116	)
Loss on disposal of property		—				—				(126	)		(17	)			—				(143	)
Loss on disposition of fixed assets			—					—				126			—				—				126
Operating income (loss)		—				—				21,923			773				—				22,696
Bad debt provision			—					—				455			—				—				455
Intercompany income		—				21,725				1,946			(1,946	)			(21,725	)			—
Equity in net (income) loss from subsidiary			6,963					6,963				402			—				(14,328	)			—
Interest expense, net of interest income		—				(21,725	)			(23,722	)		—				21,725				(23,722	)
Trade receivables			—					—				(15,621	)		(30	)			—				(15,651	)
Miscellaneous, net		—				—				(37	)		23				—				(14	)
Inventories			—					—				4,299			—				—				4,299
Foreign currency gain		—				—				350			—				—				350
Accounts payable			—					—				2,591			(44	)			—				2,547
Income tax (expense) benefit		—				—				(628	)		343				—				(285	)
Accrued expenses and interest			—					—				1,739			(57	)			—				1,682
Equity in net (loss) income from subsidiary		(975	)			(975	)			(807	)		—				2,757				—
Prepaid expenses and other current assets			—					—				2,680			(13	)			—				2,667
Net income (loss)	$	(975	)		$	(975	)		$	(975	)	$	(807	)		$	2,757			$	(975	)
Other changes in working capital			—					—				(52	)		(2	)			—				(54	)
Net cash provided by operating activities			—					—				13,789			1,364				—				15,153
Acquisition of Composatron			—					—				—			(921	)			—				(921	)
Purchases of property and equipment			—					—				(2,033	)		(28	)			—				(2,061	)
Net cash used in investing activities			—					—				(2,033	)		(949	)			—				(2,982	)
Intercompany payable/receivable			—					—				2,005			(2,005	)			—				—
Payment on revolving credit facility			—					—				(5,000	)		—				—				(5,000	)
Bank overdraft			—					—				—			269				—				269
Other cash used in financing activities			—					—				(1,506	)		—				—				(1,506	)
Net cash used in financing activities			—					—				(4,501	)		(1,736	)			—				(6,237	)
Cash impact of currency translation adjustment			—					—				—			128				—				128
Net increase (decrease) in cash and cash equivalents			—					—				7,255			(1,193	)			—				6,062
Cash and equivalents- beginning of period			—					—				21,393			1,193				—				22,586
Cash and cash equivalents – end of period	$		—				$	—		$		28,648		$	—		$		—		$		28,648

~~12. SHARE BASED COMPENSATION~~24

The Company’s parent company, Holdings, established a Class B Unit equity program, which offers executive officers and certain key managers and employees the opportunity to purchase limited partnership units in Holdings. These equity units in Holdings are intended to allow each employee participant to share in the value created at the time the current owners sell or otherwise exit the business based upon the number of limited partnership units held in Holdings by the participants when the sale or exit transaction is completed. All of the Class B Units sold to management are generally subject to repurchase at the option of Holdings, at the lower of cost or fair market value upon termination of employment during the first year following their purchase. Thereafter, generally, 75% of such Class B Units are subject to repurchase by Holdings at the lower of cost or fair market value upon termination during the second year following their purchase, 50% during the third year and 25% during the fourth year.

	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

~~A summary of all vested and non-vested Class B Unit activity under the equity program as of June 30, 2010 and 2009, and changes during the six months ended June 30, 2010 and 2009 are presented below:~~25

			Weighted		Aggregate
		Nine Months Ended September 30, 2009
			Average		Intrinsic
(Dollars in thousands)		CPG
(dollars in thousands,	B		Purchase		Value
		International										Non-
except unit and per unit amounts)	Units		Price		($000)
Condensed Consolidating		Inc.				CPG			Guarantor			Guarantor
Outstanding at January 1, 2010	14,285		$10
Statement of Cash Flows		(Parent)				(Issuer)			Subsidiaries			Subsidiary			Eliminations			Consolidated
Granted	85		10
Net loss		$	(975	)		$	(975	)	$	(975	)	$	(817	)	$	2,767		$	(975	)
Repurchased	(187	)	10
Depreciation and amortization			—				—			14,245			1,751			—			15,996
Outstanding at June 30, 2010	14,183		$10		$ 421
Deferred income tax benefit			—				—			528			(343	)		—			185
Impairment charge			—				—			14,408			—			—			14,408
Share based compensation			—				—			50			—			—			50
Non-cash interest charges			—				—			1,961			—			—			1,961
Unrealized (gain) loss on foreign currency exchange			—				—			(1,892	)		1,534			—			(358	)
Loss on disposition of fixed assets			—				—			126			17			—			143
Bad debt provision			—				—			645			—			—			645
Equity in net (income) loss from subsidiary			975				975			817			—			(2,767	)		—
Trade receivables			—				—			(10,764	)		(112	)		—			(10,876	)
Inventories			—				—			6,057			19			—			6,076
Accounts payable			—				—			7,849			(58	)		—			7,791
Accrued expenses and interest			—				—			(4,296	)		(219	)		—			(4,515	)
Prepaid expenses and other current assets			—				—			3,239			(17	)		—			3,222
Other changes in working capital			—				—			(187	)		(2	)		—			(189	)
Net cash provided by operating activities			—				—			31,811			1,753			—			33,564
Acquisition of Composatron			—				—			—			(921	)		—			(921	)
Purchases of property and equipment			—				—			(4,057	)		(28	)		—			(4,085	)
Net cash used in investing activities			—				—			(4,057	)		(949	)		—			(5,006	)
Intercompany payable/receivable			—				5,000			(3,875	)		(1,125	)		—			—
Payment on revolving credit facility			—				(5,000	)		—			—			—			(5,000	)
her cash used in financing activities			—				—			(3,047	)		—			—			(3,047	)
Net cash used in financing activities			—				—			(6,922	)		(1,125	)		—			(8,047	)
Cash impact of currency translation adjustment			—				—			—			272			—			272
Net increase (decrease) in cash and cash equivalents			—				—			20,832			(49	)		—			20,783
Cash and equivalents- beginning of period			—				—			21,393			1,193			—			22,586
Cash and cash equivalents – end of period		$	—			$	—		$	42,225		$	1,144		$	—		$	43,369

			Weighted	Aggregate
			Average	Intrinsic
(dollars in thousands,	B		Purchase	Value
except unit and per unit amounts)	Units		Price	($000)
Outstanding at January 1, 2009	11,353		$10
Granted	3,105		10
Repurchased	(1,025	)	10
Forfeited	(50	)	10
Outstanding at June 30, 2009	13,383		$10	$ 240

A summary of the B Unit Plan’s non-vested B units as of June 30, 2010 and 2009, and changes during the six months ended June 30, 2010 and 2009 are presented below:

			Weighted
			Average
			Grant-Date
Non-vested Units	Units		Fair Value
Non-vested at January 1, 2010	6,534			$ 23.36
Granted	85			28.06
Vested	(1,185	)		28.03
Non-vested at June 30, 2010	5,434			$ 21.72

			Weighted
			Average
			Grant-Date
Non-vested Units	Units		Fair Value
Non-vested at January 1, 2009	4,668			$49.81
Granted	3,105			16.22
Vested	(1,206	)		60.93
Forfeited	(50	)		15.18
Non-vested at June 30, 2009	6,517			$30.28

Total fair value of the shares vested during the six months ended June 30, 2010 and 2009 was approximately $33,000 and $79,000, respectively.

Compensation costs represent the excess of fair value over the purchase price paid by the employee for their units. Compensation costs are generally recognized over the four year vesting period. Total compensation recognized in the three months ended June 30, 2010 and 2009 was $13,000 and $4,000, respectively. Total compensation recognized in the six months ended June 30, 2010 and 2009 was $27,000 and $35,000, respectively. The remaining unrecognized compensation costs related to non-vested B units at June 30, 2010 and 2009 was approximately $83,000 and $129,000, respectively, and the weighted-average period of time over which these costs will be recognized is 3.0 years and 3.0 years, respectively.

13. SUBSEQUENT EVENTS

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.

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

The following discussion and analysis should be read in conjunction with and is qualified in its entirety by reference to the unaudited consolidated financial statements and accompanying notes of CPG International Inc., included elsewhere in this report. Except for historical information, the discussions in this section contain forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below. See discussion below under the caption “Cautionary Note Regarding Forward-Looking Statements.” Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Form 10-K for the year ended December 31, 2009 should be read in conjunction with these unaudited condensed consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations discussed below. The results of operations and cash flows for the three and ~~six~~ nine months ended ~~June~~September 30, 2010 are not necessarily indicative of the operating results for the full year.

~~OVERVIEW~~Overview

We are a leading supplier of premium, low maintenance building products designed to replace wood, metal and other materials in the residential, commercial and industrial markets. With a focus on manufacturing excellence, proprietary technologies and quality, we have introduced our products through distribution networks to sizable markets increasingly converting to low maintenance materials. We have developed and acquired a number of branded products including AZEK® Trim, AZEK Moulding, AZEK Deck, AZEK Porch, AZEK Rail, Comtec and Hiny Hiders bathroom partition systems, and TuffTec™ locker systems.

Beginning in the third quarter of 2009, the Company realigned its industrial business, previously included in AZEK Building Products and Scranton Products, into a third segment referred to as Vycom to reinforce it as a single, standalone entity, providing non-fabricated branded sheet to national distributors. Segment results for the three and six month periods ended June 30, 2009 have been updated to conform to this organizational change.

We operate the following three business units:

· AZEK ~~Building Products, or AZEK,~~ manufactures exterior residential building products such as AZEK Trim, AZEK Moulding, AZEK Deck, AZEK Porch and AZEK Rail for the residential and commercial building market.

· Scranton ~~Products, or Scranton,~~ produces fabricated bathroom partition and locker systems under the Comtec, Santana, Hiny Hiders and TuffTec labels for the commercial market.

Vycom manufactures a comprehensive offering of PVC and olefin sheet products including Celtec, Seaboard®, Playboard®, Sanatec®, Corrtec and Flametec® for special applications in industrial markets.

~~OUR BUSINESS~~Our Business

With a focus on manufacturing excellence and quality over the past 26 years, we have been the first to market with a number of premium, low maintenance products that offer superior value propositions relative to alternative materials. With the first mover advantage, we have established leading brands and large distribution networks targeted towards large markets increasingly converting to low maintenance products replacing traditional materials such as wood and metal. Through product development initiatives and acquisitions, we have increased our product offerings and leveraged our distribution channels to further our penetration of the residential, commercial and industrial markets that we serve. We have successfully introduced branded building products such as AZEK Trim, Deck, Porch, Rail and Mouldings, Comtec bathroom partitions, and TuffTec lockers. We believe many of our products are still in the early stages of their product life cycles as the material conversion opportunity expands. We have generally increased our margins through volume growth that has allowed us to self-fund investment in new technology and equipment which has enabled us to lower our manufacturing conversion costs.

Since the introduction of the AZEK brand over ten years ago, AZEK has gained significant market acceptance and brand loyalty as a leader within the non-wood home exterior market. AZEK products have accounted for a majority of our net sales during the first ~~half~~nine months of 2010 and for full year 2009, 2008 and 2007. Through our two-step, dual distribution network, we have established an extensive network of distributors and dealers throughout the United States and Canada. As of June 30, 2010, our distributors were selling our products to approximately 2,000 local stocking dealers who frequently request our products by brand name. Leveraging our extensive distribution network and brand name, we have expanded AZEK through the internal development of additional product offerings as well as through the Procell Acquisition in 2007 and the Composatron Acquisition in 2008. With the introduction of AZEK Moulding and AZEK Deck in 2007 and AZEK Porch and AZEK Rail in 2008, we continued to establish ourselves as a premier provider of branded building products. Our goal is to continue to expand through further geographic penetration, product extensions of our trim, moulding, railing and decking products, and the introduction of additional product lines.

throughout the United States and Canada. As of September 30, 2010, our distributors were selling our products to approximately 2,000 local stocking dealers and over 760 big box retail outlets. Leveraging our extensive distribution network and brand name, we have expanded AZEK through the internal development of additional product offerings as well as through the Procell Acquisition in 2007 and the Composatron Acquisition in 2008. With the introduction of AZEK Moulding and AZEK Deck in 2007 and AZEK Porch and AZEK Rail in 2008, we continued to establish ourselves as a premier provider of branded building products. Our goal is to continue to expand through further geographic penetration, product extensions of our trim, moulding, railing and decking products, and the introduction of additional product lines.

Focused on capitalizing on the functional advantages of our synthetic products relative to competing wood, fiber and metal products, we have developed the leading brands in the plastic bathroom partition and locker markets. The Scranton product offerings include Comtec, Capitol, Hiny Hider and TuffTec brands, and are used in schools, stadiums, prisons, retail locations and other high-traffic environments that value the functional advantage of plastic. Through Scranton’s widely established distribution network, we are able to service customers in all 50 states. We continue to focus on product enhancements and new product offerings such as our new locker products introduced in 2009. Our goals for expansion include continued penetration of existing markets, product enhancements and new product offerings through our existing distribution network.

AWith ~~majority~~the realignment of our ~~raw~~segments ~~material~~in ~~costs and~~the ~~cost~~third quarter of ~~sales~~2009, ~~are~~and ~~represented~~the byintroduction ~~dry~~of ~~petrochemical resins~~Vycom, ~~primarily~~a ~~PVC, HDPE~~new ~~and~~segment ~~PP. Throughout~~that focuses on servicing the ~~Company’s~~industrial ~~history~~markets, ~~resin~~the ~~prices~~Company ~~have~~was ~~been subject~~able to ~~cyclical~~increase ~~price~~its ~~fluctuations. Over~~market ~~the~~penetration ~~past~~by ~~five years,~~offering ~~the~~lower ~~fluctuations~~maintenance, ~~have~~longer ~~become~~lived ~~increasingly~~solutions, ~~significant~~by ~~due~~extruding toolefin aand ~~variety~~PVC ~~of issues~~sheet ~~including~~products ~~constrained~~such ~~supply~~as ~~resulting~~Celtec, ~~from~~Seaboard® ~~natural~~and ~~disasters~~Flametec® and ~~foreign demand~~other ~~and~~branded ~~domestic~~products ~~economic~~for ~~conditions. Our~~special ~~strategy~~applications ~~around~~in ~~managing these~~industrial ~~fluctuations~~markets. Vycom isproducts toare ~~partially~~used ~~offset~~in the ~~impact~~marine ofindustry, ~~significantly~~graphic ~~higher resin~~displays ~~costs~~and ~~through~~signage, ~~increased~~recreation ~~sales~~and ~~volumes~~playground equipment, ~~improved~~food ~~manufacturing~~processing ~~efficiencies~~ and ~~selling~~the ~~price~~chemical ~~increases~~industry.

~~Through our~~A ~~various~~majority ~~product~~of ~~offerings,~~our weraw ~~have~~material ~~exposure~~costs ~~to residential new construction, residential repair~~ and ~~remodel,~~cost ~~commercial~~of ~~construction~~sales ~~and various industrial markets. AZEK products~~ are ~~sold~~represented inby ~~various~~dry ~~stages~~petrochemical ofresins, ~~the~~primarily ~~home building construction market~~PVC, ~~including~~HDPE ~~remodeling~~ and ~~renovation~~PP ~~and~~as ~~new construction,~~well ~~thereby~~as ~~diversifying~~other ~~sales~~additives. Throughout ~~across~~ the ~~construction cycle. Scranton~~Company’s ~~fabricated~~history, ~~products~~material ~~are~~prices ~~sold~~including toresin, ~~various~~have ~~commercial markets~~been ~~some~~subject ofto ~~which~~cyclical ~~are~~price ~~dependent on tax receipts of municipalities~~fluctuations. ~~Vycom~~Over ~~products~~the ~~are~~past ~~sold~~five ~~to several industrial sectors~~years, ~~thereby diversifying sales across sectors sensitive to differing economic factors. For~~ the ~~six~~fluctuations ~~months~~have ~~ended~~become ~~June~~increasingly ~~30,~~significant ~~2010,~~due weto ~~estimate approximately~~a ~~50%~~variety of ~~our~~issues ~~products~~including ~~were~~constrained ~~sold~~supply ~~for~~resulting ~~residential~~from ~~repair~~natural disasters and ~~remodeling,~~ ~~18%~~foreign ~~new~~demand ~~construction,~~and ~~17%~~domestic ~~were~~economic inconditions. Our ~~the~~strategy ~~commercial~~around ~~building~~managing ~~sector, and~~these ~~15%~~fluctuations ~~sold~~is to ~~various~~partially ~~industrial~~offset ~~end~~the ~~markets. Over~~impact ~~97%~~ of ~~our~~significantly ~~sales for~~higher ~~each~~material ofcosts ~~the~~through ~~six~~improved ~~months~~manufacturing ~~ended~~efficiencies, ~~June~~selling ~~30,~~price ~~2010~~increases and ~~2009~~increased ~~were~~sales ~~in the United States~~volumes.

~~Adverse economic~~Through ~~conditions across~~ our ~~markets~~various ~~significantly~~product ~~impacted our growth in 2008 and 2009~~offerings, ~~and~~ we ~~expect~~have ~~these~~exposure ~~conditions~~ to ~~continue~~residential ~~throughout~~new ~~the~~construction ~~remainder~~and ~~of 2010,~~repair ~~particularly~~and inremodel, ~~the~~ commercial construction ~~market. Our business~~and isvarious ~~affected~~industrial bymarkets. AZEK aproducts ~~number~~are ofsold ~~economic~~in ~~factors,~~various ~~including~~stages of the ~~level~~home ~~of economic~~building ~~activity~~construction inmarket, ~~the~~including ~~markets~~remodeling inand ~~which~~renovation weand ~~operate. The~~new ~~demand~~construction, ~~for our~~thereby ~~products~~diversifying bysales ~~our~~across ~~customers~~the ~~depends,~~construction incycle. Scranton’s ~~part,~~fabricated onproducts ~~general~~are ~~economic~~sold ~~conditions and~~to ~~business~~various ~~confidence~~commercial ~~levels. The~~markets ~~capital~~some ~~and~~of ~~credit~~which ~~markets recently~~are ~~have~~dependent ~~been~~on ~~experiencing~~tax ~~volatility~~receipts ~~and~~of ~~disruption~~municipalities. ~~These conditions,~~Vycom ~~combined~~products ~~with~~are ~~volatile~~sold ~~oil~~to ~~and~~several ~~natural~~industrial ~~gas prices~~sectors, ~~declining business~~thereby ~~and~~diversifying ~~consumer~~sales ~~confidence~~across ~~and~~sectors ~~increased~~sensitive ~~unemployment,~~to ~~have~~differing ~~precipitated an~~ economic ~~slowdown and severe recession~~factors. ~~The~~For ~~difficult conditions in these markets and~~ the ~~overall~~nine ~~economy~~months ~~affect~~ended ~~our~~September ~~business~~30, ~~in a number of ways. For example~~2010, ~~these~~we ~~factors~~estimate ~~combined~~approximately to50% ~~negatively~~of ~~affect~~ our ~~AZEK~~ ~~Business~~products ~~Products,~~were assold ~~dealers~~for ~~and~~residential ~~distributors~~repair ~~lowered~~and ~~inventory~~remodeling, ~~levels~~18% ~~in connection~~new ~~with~~construction, ~~significantly~~17% ~~reduced~~were ~~activity~~ in the ~~residential,~~ commercial ~~and~~ ~~institutional~~building ~~construction~~sector, and ~~housing~~15% ~~markets,~~sold ~~in addition~~ to anvarious ~~overall reduction~~industrial inend ~~demand for our product~~markets. InOver ~~the~~97% ~~first half~~ of ~~2010, we have seen improved volumes in~~ our ~~residential~~sales ~~and~~for ~~industrial~~each ~~markets~~of ~~compared to our prior year due to some improvement in~~ the ~~overall~~nine ~~economy~~months asended ~~well~~September as30, ~~from some~~2010 ofand ~~our~~2009 ~~new~~were ~~product introductions~~ in the ~~residential~~United ~~business~~States.

~~CAUTIONARY NOTE~~ Adverse ~~REGARDING~~economic ~~FORWARD-LOOKING~~conditions ~~STATEMENTS~~across our markets significantly impacted our growth in 2008 and 2009, and we expect these conditions to continue throughout the remainder of 2010, particularly in the commercial construction market. Our business is affected by a number of economic factors, including the level of economic activity in the markets in which we operate. The demand for our products by our customers depends, in part, on general economic conditions and business confidence levels. The capital and credit markets recently have been experiencing volatility and disruption. These conditions, combined with volatile oil and natural gas prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and severe recession. The difficult conditions in these markets and the overall economy affect our business in a number of ways. For example, these factors combined to negatively affect AZEK, as dealers and distributors lowered inventory levels in connection

with significantly reduced activity in the residential, commercial and institutional construction and housing markets, in addition to an overall reduction in demand for our product. In the first nine months of 2010, we have seen improved volumes in our residential and industrial markets compared to our prior year due to some improvement in the overall economy as well as from some of our new product introductions in the residential business.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about (a) our acquisition of Santana Products (the “Santana Acquisition”), our acquisition of Procell Decking SystemsÔ (the “Procell Acquisition”) and our acquisition of Compos-A-Tron Manufacturing Inc. (the “Composatron Acquisition”); (b) the markets in which we operate, including growth of our various markets and growth in the use of synthetic products; and (c) our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this report and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section are forward-looking statements. The forward-looking statements contained herein regarding market share, market sizes and changes in markets are subject to various estimations, uncertainties and risks.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

general economic or business conditions, either nationally, regionally or in the individual markets in which we conduct business, may deteriorate and have an adverse impact on our business strategy, including without limitation, factors relating to interest rates, gross domestic product levels and activity in the residential, commercial and institutional construction market;

volatility in the financial markets;

risks associated with our substantial indebtedness and debt service;

risks of increasing competition in our existing and future markets, including competition from new products introduced by competitors;

risk that projections of increased market size do not materialize as expected;

increases in prices and lack of availability of resin and other raw materials and our ability to pass any

increased costs on to our customers in a timely manner;

risks related to our dependence on the performance of our AZEK products;

changes in governmental laws and regulations, including environmental law, and regulations;

continued increased acceptance of synthetic products as an alternative to wood and metal products;

risks related to acquisitions we may pursue;

our ability to retain management;

our ability to meet future capital requirements and fund our liquidity needs;

our ability to protect our intellectual property rights;

risks related to our relations with our key distributors;

downgrades in our credit ratings; and

other risks and uncertainties.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

~~BASIS~~Critical OFAccounting ~~PRESENTATION~~Policies and Estimates

The ~~accompanying~~preparation of consolidated financial statements ~~have~~ ~~been prepared~~ in ~~accordance~~conformity with accounting principles generally accepted in the United States ofrequires ~~America~~management to make estimates and judgments that affect the ~~rules~~amounts ofreported in the ~~Securities~~financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, inventories, vendor rebates, product warranties and ~~Exchange Commission~~goodwill and intangible assets. ~~Our~~We ~~condensed~~base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 to the consolidated financial statements ~~include~~ contained in the ~~accounts~~Company’s ofAnnual ~~CPG~~Report ~~International~~on ~~Inc.~~Form 10-K for the year ended December 31, 2009 describe the significant accounting estimates and ~~its~~policies ~~wholly~~used ~~owned subsidiaries~~in preparation of the consolidated financial statements. ~~All~~We ~~intercompany~~have ~~accounts~~discussed the application of these critical accounting policies and ~~transactions~~estimates with the Audit Committee of our Board of Directors. There have been ~~eliminated~~ no significant changes in ~~consolidation~~our critical accounting policies during the nine months ended September 30, 2010.

~~CRITICAL ACCOUNTING POLICIES~~30

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, inventories, vendor rebates, product warranties and goodwill and intangible assets. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no significant changes in our critical accounting policies during the six months ended June 30, 2010.

~~RESULTS OF~~Three ~~OPERATIONS~~Months Ended September 30, 2010 Compared with Three Months Ended September 30, 2009

~~Three~~The ~~Months~~following ~~Ended~~table ~~June~~summarizes ~~30,~~certain ~~2010~~financial ~~Compared~~information ~~with~~relating ~~Three~~to ~~Months~~the ~~Ended~~Company’s ~~June~~operating results that have been derived from their consolidated financial statements for the three months ended September 30, 2010 and 2009. Also included is certain information relating to the operating results as a percentage of net sales. We believe this presentation is useful to investors in comparing historical results. Certain percentage amounts in the table may not sum due to the rounding of individual components.

The following table summarizes certain financial information relating to the Company’s operating results that have been derived from their consolidated financial statements:

	Three Months Ended September 30,
			%					%
			Of Net					Of Net			$			%
(Dollars in thousands)	2010		Sales			2009		Sales			Variance			Variance
Net sales	$	96,606		100.0	%	$	78,404		100.0	%	$	18,202			23.2	%
Cost of sales		66,507		68.8			50,304		64.2			16,203			32.2
Gross margin		30,099		31.2			28,100		35.8			1,999			7.1
Selling, general and administrative expenses		14,421		14.9			14,147		18.0			274			1.9
Loss on disposal of property		88		0.1			19		—			69			363.2
Interest expense, net		7,460		7.7			7,636		9.7			(176	)		-2.3
Foreign currency gain		34		—			224		0.3			(190	)		-84.8
Miscellaneous - income		1		—			7		—			(6	)		-85.7
Income tax expense		670		0.7			553		0.7			117			21.2
Net income	$	7,495		7.8	%	$	5,976		7.6	%	$	1,519			25.4	%

		Three Months			Three Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	85,730		$	62,358
Cost of sales		(59,225	)		(40,135	)
Gross margin		26,505			22,223
Selling, general and administrative expenses		(14,851	)		(14,087	)
Loss on disposal of property		(240	)		(126	)
Operating income		11,414			8,010
Interest expense, net		(8,272	)		(7,907	)
Foreign currency (loss) gain		(99	)		143
Miscellaneous - net		2			(27	)
Income before income taxes		3,045			219
Income tax expense		(277	)		(127	)
Net income	$	2,768		$	92

Net Sales. Net sales were $96.6 million for the three months ended September 30, 2010, an increase of $18.2 million, or 23.2%, compared to $78.4 million for the same period of 2009. This was attributed to an increase in AZEK Building Products and Vycom net sales by 29.0% and 47.8% respectively, offset by a decrease in Scranton Products net sales of 6.3%. Overall, we sold 63.8 million pounds of product during the three months ended September 30, 2010, which was a 23.4% increase from the amount sold during the three months ended September 30, 2009. Volume growth in AZEK and Vycom more than offset volume declines at Scranton Products. While residential and industrial markets have stabilized relative to the prior year, the commercial building market continues to deteriorate impacting Scranton Products. Average selling price per pound across the Company for the three months ended September 30, 2010 and 2009 remained flat at $1.52.

~~The following~~Cost ~~table~~of ~~summarizes~~Sales. ~~certain~~Cost ~~information~~of ~~relating~~sales toincreased ~~the~~by ~~operating~~$16.2 million, ~~results as~~or a32.2%, ~~percentage~~to of$66.5 ~~net~~million ~~sales~~for ~~and~~the ~~has~~three ~~been~~months ~~derived~~ended September 30, 2010 from $50.3 million for the ~~financial~~same ~~information presented~~period ~~above~~in 2009. WeThe ~~believe~~increase ~~this~~was ~~presentation~~primarily isattributable ~~useful~~ to ~~investors~~ the increase in ~~comparing~~volume ~~historical~~as ~~results~~well as higher average materials costs for the three months ended September 30, 2010 compared to the same period in 2009. ~~Certain~~Average ~~amounts~~resin incosts increased 16.7% for the ~~table~~three ~~may~~months ~~not sum~~ended ~~due~~September 30, 2010 compared to the ~~rounding~~same ofperiod ~~individual~~in ~~components~~2009.

	Three Months		Three Months
	Ended		Ended
	June 30, 2010		June 30, 2009
Net sales	100.0	%	100.0	%
Cost of sales	(69.1	)	(64.4	)
Gross margin	30.9		35.6
Selling, general and administrative expenses	(17.3	)	(22.6	)
Loss on disposal of property	(0.3	)	(0.2	)
Operating income	13.3		12.8
Interest expense, net	(9.6	)	(12.7	)
Miscellaneous—net	—		0.1
Foreign currency (loss) gain	(0.1	)	0.2
Income before income taxes	3.6		0.4
Income tax expense	(0.3	)	(0.2	)
Net income	3.2	%	0.1	%

Gross Margin. Gross margin increased by $2.0 million, or 7.1%, to $30.1 million for the three months ended September 30, 2010 from $28.1 million for the same period of 2009. Gross margin as a percent of net sales decreased to 31.2% for the three months ended September 30, 2010 from 35.8% for the same period in 2009. This decrease was mainly attributable to the increase in material costs.

~~Net~~Selling, ~~Sales.~~General ~~Net~~and ~~sales~~Administrative ~~were $85~~Expenses.~~7 million~~ ~~for~~Selling, ~~the~~general ~~three~~and ~~months~~administrative ~~ended~~expenses ~~June~~increased ~~30,~~by ~~2010, an increase of~~ $230.3 million, or 371.59%, ~~compared~~ to $6214.4 million, ~~for~~or ~~the~~14.9% ~~same~~of ~~period~~net ~~of 2009. For~~sales for the three months ended ~~June~~September 30, 2010, ~~AZEK~~from ~~Building~~$14.1 ~~Products~~million, ~~net sales~~or ~~increased 64~~18.30%, ~~Scranton~~of ~~Products~~ net sales ~~decreased~~for ~~17.8% and Vycom net sales increased 65.7% compared to~~ the same period in 2009. The ~~Overall, we sold 56.4 million pounds of product during the three months ended June 30, 2010, which was a 46.1%~~ increase ~~from~~in ~~the amount sold during the three months ended June 30~~selling, ~~2009. Volume~~general ~~growth in AZEK~~ and ~~Vycom~~administrative ~~more~~was ~~than~~primarily ~~offset volume~~attributable ~~declines at Scranton Products. While residential and industrial markets have stabilized relative~~ to ~~the~~sales ~~prior~~force ~~year,~~expense the commercial building market continues to deteriorate. Average selling price per pound across the Company for the three months ended June 30, 2010 decreased to $1.52 from $1.62 for the same period of 2009 primarily due to ~~changes~~higher ~~in product mix~~sales.

Cost of Sales. Cost of sales increased by $19.1 million, or 47.6%, to $59.2 million for the three months ended June 30, 2010 from $40.1 million for the same period in 2009. The increase was primarily attributable to the increase in volume as well as higher average materials costs for the three months ended June 30, 2010 compared to the same period in 2009. Average resin costs increased 42.9% for the three months ended June 30, 2010 compared to the same period in 2009.31

~~Gross~~Interest ~~Margin~~Expense, net. ~~Gross~~Interest ~~margin increased~~expense, net, decreased by $40.3 1 million, or 192.3%, to $267.5 ~~million~~ ~~for the three months ended June 30, 2010 from $22.2~~ million for the ~~same period of 2009. Gross margin as a percent of net sales decreased to 30.9% for the~~ three months ended ~~June~~September 30, 2010 from 35$7.6% million for the same period in 2009. ~~This decrease was mainly attributable to the increase in material costs.~~

~~Selling,~~Income ~~General and Administrative Expenses~~Taxes. ~~Selling,~~Income ~~general~~taxes ~~and administrative expenses~~ increased by $0.8 1 million, ~~or 5.4%,~~ to $140.97 million, ~~or 17.3% of net sales~~ for the three months ended ~~June~~September 30, 2010 from $140.16 million, orfor 22the same period in 2009.6% Income tax expense of ~~net~~$0.7 ~~sales~~million for the ~~same period~~three inmonths ~~2009~~ended September 30, 2010 was attributable to ordinary income. The ~~increase~~tax inattributable ~~selling,~~to ~~general~~ordinary ~~and~~income ~~administrative was~~is primarily ~~attributable~~impacted toby ~~marketing~~deferred ~~programs~~tax ~~and~~expense ~~sales~~associated with the amortization of goodwill for tax purposes (such goodwill is not amortized for financial reporting purposes), state tax expense, and ~~$0.4 million~~changes ~~received~~to inforecasted ~~2009~~pretax ~~related~~earnings tofrom the ~~settlement~~previous onquarter. The aresulting ~~portion~~deferred oftax ~~escrowed purchase~~liability ~~price~~associated ~~related~~with this goodwill cannot be offset against other net deferred tax assets due to the ~~Composatron~~indefinite ~~Acquisition~~reversal period of the goodwill.

~~Interest~~Net ~~Expense, net~~Loss/Income. ~~Interest~~ ~~expense,~~Net ~~net,~~income increased by $01.45 million, ~~or 4.6%,~~ to $87.3 5 million for the three months ended ~~June~~September 30, 2010 from $76.90 million for the ~~same~~ comparable period in 2009~~. Included~~ inas ~~interest expense is~~ a ~~$0.8~~result ~~million adjustment related to the calculation~~ of ~~interest~~reasons ondescribed ~~the Term Loan related to prior periods, partially offset by lower variable interest rates in 2010~~above.

~~Income~~Nine ~~Taxes.~~Months ~~Income~~Ended ~~taxes increased~~September ~~by $0.2 million to $0.3 million for the three months ended June~~ 30, ~~2010~~ ~~from $0.1 million for the same period in 2009. Income tax expense for the three months ended June 30,~~ 2010 ~~consists~~Compared ~~primarily of tax expense ($0.4 million) attributable to ordinary income. The tax attributable to ordinary income is primarily impacted by deferred tax expense associated~~ with ~~the~~Nine ~~amortization~~Months ofEnded ~~goodwill~~September ~~for tax purposes (such goodwill is not amortized for financial reporting purposes)~~30, state tax expense, and changes to forecasted pretax earnings from the previous quarter. The resulting deferred tax liability associated with this goodwill cannot be offset against other net deferred tax assets due to the indefinite reversal period of the goodwill.2009

~~Net~~The ~~Loss/Income.~~following ~~Net~~table ~~income increased~~summarizes bycertain ~~$2.7~~financial ~~million,~~information relating to ~~$2.8~~the ~~million~~Company’s operating results that have been derived from their consolidated financial statements for the ~~three~~nine months ended ~~June~~September 30, 2010, ~~from~~and $02009.1 Also ~~million~~included ~~for~~is ~~the~~certain ~~comparable~~information ~~period~~relating into ~~2009~~the operating results as a ~~result~~percentage of ~~reasons described~~net ~~above~~sales. We believe this presentation is useful to investors in comparing historical results. Certain percentage amounts in the table may not sum due to the rounding of individual components.

Six Months Ended June 30, 2010 Compared with Six Months Ended June 30, 2009

	Nine Months Ended September 30,
			%						%
			Of Net						Of Net			$			%
(Dollars in thousands)	2010		Sales			2009			Sales			Variance			Variance
Net sales	$	277,003		100.0	%	$	222,178			100.0	%	$	54,825			24.7	%
Cost of sales		190,831		68.9			143,881			64.8			46,950			32.6
Gross margin		86,172		31.1			78,297			35.2			7,875			10.1
Selling, general and administrative expenses		43,656		15.8			41,050			18.5			2,606			6.3
Impairment of goodwill and long-lived assets		599		0.2			14,408			6.5			(13,809	)		-95.8
Loss on disposal of property		340		0.1			143			0.1			197			137.8
Interest expense, net		23,204		8.4			23,722			10.7			(518	)		-2.2
Foreign currency gain		12		—			350			0.2			(338	)		-96.6
Miscellaneous – income (expense)		9		—			(14	)		—			23			-164.3
Income tax expense		4,943		1.8			285			0.1			4,658			1,634.4
Net income (loss)	$	13,451		4.9	%	$	(975	)		-0.4	%	$	14,426			1,479.6	%

~~The following~~Net ~~table~~Sales. ~~summarizes~~Net ~~certain~~sales ~~financial~~were ~~information~~$277.0 million ~~relating~~for the nine months ended September 30, 2010, an increase of $54.8 million, or 24.7%, compared to $222.2 million for the ~~Company’s~~ ~~operating~~same ~~results~~period ~~that~~of 2009. This was attributed to an increase in AZEK Building Products and Vycom net sales by 34.0% and 54.4% respectively, offset by a decrease in Scranton Products net sales of 13.9%. Overall, we sold 186.6 million pounds of product during the nine months ended September 30, 2010, which was a 25.7% increase from the amount sold during the nine months ended September 30, 2009. Volume growth in AZEK and Vycom more than offset volume declines at Scranton Products. While residential and industrial markets have ~~been~~stabilized ~~derived~~relative to the prior year, the commercial building market continues to deteriorate. Average selling price per pound across the Company for the nine months ended September 30, 2010 decreased to $1.48 from ~~their~~$1.50 ~~consolidated financial~~for ~~statements:~~the same period of 2009 primarily due to changes in product mix.

		Six Months			Six Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	180,397		$	143,774
Cost of sales		(124,324	)		(93,579	)
Gross margin		56,073			50,195
Selling, general and administrative expenses		(29,235	)		(26,915	)
Impairment of goodwill and long-lived assets		(599	)		(14,408	)
Loss on disposal of property		(251	)		(126	)
Operating income		25,988			8,746
Interest expense, net		(15,744	)		(16,086	)
Foreign currency (loss) gain		(21	)		116
Miscellaneous – net		6			(13	)
Income (loss) before income taxes		10,229			(7,237	)
Income tax (expense) benefit		(4,273	)		274
Net income (loss)	$	5,956		$	(6,963	)

~~The following~~Cost ~~table~~of ~~summarizes~~Sales. ~~certain~~Cost ~~information~~of ~~relating~~sales toincreased ~~the~~by ~~operating~~$46.9 million, ~~results as~~or a32.6%, ~~percentage~~to of$190.8 ~~net~~million ~~sales~~for ~~and~~the ~~has~~nine ~~been~~months ~~derived~~ended September 30, 2010 from $143.9 million for the ~~financial~~same ~~information presented~~period ~~above~~in 2009. WeThe ~~believe~~increase ~~this~~was ~~presentation~~primarily isattributable ~~useful~~ to ~~investors~~ the increase in ~~comparing~~volume ~~historical~~as ~~results~~well as higher average materials costs for the nine months ended September 30, 2010 compared to the same period in 2009. ~~Certain~~Average ~~amounts~~resin incosts increased 33.6% for the ~~table~~nine ~~may~~months ~~not sum~~ended ~~due~~September 30, 2010 compared to the ~~rounding~~same ofperiod ~~individual~~in ~~components~~2009.

	Six Months		Six Months
	Ended		Ended
	June 30, 2010		June 30, 2009
Net sales	100.0	%	100.0	%
Cost of sales	(68.9	)	(65.1	)
Gross margin	31.1		34.9
Selling, general and administrative expenses	(16.2	)	(18.7	)
Impairment of goodwill and long-lived assets	(0.3	)	(10.0	)
Loss on disposal of property	(0.1	)	(0.1	)
Operating income	14.4		6.1
Interest expense, net	(8.7	)	(11.2	)
Miscellaneous—net	—		—
Foreign currency gain (loss)	—		0.1
Income (loss) before income taxes	5.7		(5.0	)
Income tax (expense) benefit	(2.4	)	0.2
Net income (loss)	3.3	%	(4.8	)%

Gross Margin. Gross margin increased by $7.9 million, or 10.1%, to $86.2 million for the nine months ended September 30, 2010 from $78.3 million for the same period of 2009. Gross margin as a percent of net sales decreased to 31.1% for the nine months ended September 30, 2010 from 35.2% for the same period in 2009. This decrease was mainly attributable to the increase in material costs.

~~Net~~Selling, ~~Sales.~~General ~~Net~~and ~~sales~~Administrative ~~were $180~~Expenses.~~4 million~~ ~~for~~Selling, ~~the~~general ~~six~~and ~~months~~administrative ~~ended~~expenses ~~June~~increased ~~30,~~by ~~2010, an increase of~~ $362.6 million, or 256.53%, ~~compared~~ to $~~143~~43.87 million, ~~for~~or ~~the~~15.8% ~~same~~of ~~period~~net ~~of 2009. For~~sales for the ~~six~~nine months ended ~~June~~September 30, 2010, ~~AZEK~~from ~~Building~~$41.1 ~~Products~~million ~~net sales~~or ~~increased 36~~18.75%, ~~Scranton~~of ~~Products~~ net sales ~~decreased~~for ~~17.7% and Vycom net sales increased 58.3% compared to~~ the same period in 2009. The ~~Overall, we sold 122.8 million pounds of product during the six months ended June 30, 2010, which was a 26.9%~~ increase ~~from~~in ~~the amount sold during the six months ended June 30~~selling, ~~2009. Volume~~general ~~growth in AZEK~~ and ~~Vycom~~administrative ~~more~~expense ~~than~~was ~~offset~~primarily ~~volume declines~~attributable atto ~~Scranton~~marketing ~~Products. While~~programs ~~residential~~ and ~~industrial markets~~sales ~~have~~force ~~stabilized~~expense ~~relative~~driven toby ~~the~~higher ~~prior~~sales ~~year~~in 2010, ~~the~~coupled ~~commercial~~with ~~building market~~the ~~continues~~fact tothat ~~deteriorate. Average~~in ~~selling~~2009 ~~price per pound across~~ the Company ~~for~~incurred ~~the~~a ~~six~~one-time ~~months~~reduction ~~ended~~of ~~June~~$0.4 ~~30,~~million ~~2010~~relating ~~decreased~~ to ~~$1.47 from~~the ~~$1.49~~settlement ~~for~~on ~~the~~a ~~same~~portion ~~period~~ of ~~2009~~escrowed ~~primarily~~purchase ~~due~~price toassociated ~~changes~~with inthe ~~product mix~~Composatron Acquisition.

~~Cost~~Impairment of ~~Sales.~~Goodwill ~~Cost~~and ofLong-Lived ~~sales increased~~Assets. byImpairment ~~$30.7 million,~~of orlong-lived ~~32.9%,~~assets towas $~~124~~0.36 million for the ~~six~~nine months ended ~~June~~September 30, 2010, resulting from ~~$93.6 million for~~ the ~~same~~planned ~~period~~disposition ~~in 2009. The~~of ~~increase~~manufacturing ~~was~~equipment ~~primarily~~related ~~attributable~~ to the ~~increase~~Canadian ~~in volume~~manufacturing asfacility ~~well~~consolidation. Impairment asof ~~higher~~goodwill ~~average~~was ~~materials~~$14.4 ~~costs~~million for the ~~six~~nine months ended ~~June~~ September 30, ~~2010 compared to the same period in~~ 2009~~. Average~~, ~~resin~~resulting ~~costs increased~~from ~~43.8% for~~ the ~~six~~finalization ~~months~~of ~~ended~~our ~~June~~step ~~30,~~2 ~~2010~~goodwill ~~compared~~impairment toanalysis during the ~~same period~~first inquarter of 2009.

~~Gross~~Interest ~~Margin~~Expense, net. ~~Gross~~Interest ~~margin increased~~expense, net, decreased by $50.9 5 million, or 112.72 %, to $5623.1 2 million for the ~~six~~ nine months ended ~~June~~September 30, 2010 from $5023.2 7 million for the same period of in 2009. ~~Gross~~Interest ~~margin~~expense asdeclined adue ~~percent~~to oflower ~~net~~variable ~~sales~~interest ~~decreased~~rates toin ~~31.1%~~2010 ~~for the~~from ~~six~~2009, ~~months~~partially ~~ended~~offset ~~June~~by ~~30,~~a ~~2010 from 34~~$0.9%5 ~~for~~million ~~the~~adjustment ~~same~~during ~~period~~2010 ~~in 2009. This~~related ~~decrease~~to ~~was~~the ~~mainly~~calculation ~~attributable~~of tointerest on the ~~increase~~Term ~~in material~~Loan ~~costs~~related to prior periods.

~~Selling,~~Income ~~General and Administrative Expenses~~Taxes. ~~Selling,~~Income ~~general~~taxes ~~and administrative expenses~~ increased by $24.3 6 million, orto 8$4.6%9 million for the nine months ended September 30, to2010 from $290.23 million, orfor ~~16.2%~~the ofsame ~~net~~period ~~sales~~in 2009. Income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2010 ~~from~~consists ~~$26.9~~primarily ~~million,~~of ortax ~~18.7%~~expense of ~~net~~$5.2 ~~sales~~million ~~for~~attributable ~~the~~to ~~same period~~ordinary ~~in 2009~~income. The ~~increase~~tax inattributable ~~selling,~~to ~~general~~ordinary ~~and~~income ~~administrative was~~is primarily ~~attributable~~impacted toby ~~marketing~~deferred ~~programs~~tax ~~and~~expense ~~sales~~associated ~~expense~~with the amortization of goodwill for tax purposes (such goodwill is not amortized for financial reporting purposes), ~~bad~~state ~~debt~~ tax expense, and $0forecasted pretax earnings.4 The ~~million~~resulting ~~received~~deferred intax ~~2009~~liability ~~related~~associated towith ~~the~~this ~~settlement~~goodwill oncannot abe ~~portion of~~offset ~~escrowed~~against ~~purchase~~other ~~price~~net ~~related~~deferred tax assets due to the ~~Composatron~~indefinite ~~Acquisition~~reversal period of the goodwill.

~~Impairment~~Net ofLoss/Income. ~~Goodwill~~Net ~~and Long-Lived~~income ~~Assets~~increased by $14.5 ~~Impairment~~million ofto ~~long-lived~~net ~~assets~~income ~~was~~of $013.65 million for the ~~six~~nine months ended ~~June~~September 30, 2010, ~~resulting~~ from ~~the~~a ~~planned~~net ~~disposition~~loss of ~~manufacturing~~ ~~equipment~~$1.0 ~~related~~million tofor the ~~Canadian~~comparable ~~manufacturing~~period ~~facility consolidation. Impairment~~in of2009 ~~goodwill~~as ~~was~~a ~~$14.4~~result ~~million~~of ~~for~~reasons ~~the~~described ~~six months ended June 30~~above, ~~2009,~~most ~~resulting~~notably from the ~~finalization~~goodwill ofimpairment ~~our~~expense ~~step~~that ~~2 impairment~~did ~~analysis~~not recur in 2010.

Interest Expense, net. Interest expense, net, decreased by $0.4 million, or 2.1%, to $15.7 million for the six months ended June 30, 2010 from $16.1 million for the same period in 2009. Interest expense declined due to lower variable interest rates in 2010 from 2009, partially offset by a $0.8 million adjustment related to the calculation of interest on the Term Loan related to prior periods.

Income Taxes. Income taxes increased by $4.6 million to $4.3 million for the six months ended June 30, 2010 from a benefit of $0.3 million for the same period in 2009. Income tax expense for the six months ended June 30, 2010 consists primarily of tax expense ($4.5 million) attributable to ordinary income. The tax attributable to ordinary income is primarily impacted by deferred tax expense associated with the amortization of goodwill for tax purposes (such goodwill is not amortized for financial reporting purposes), state tax expense, and forecasted pretax earnings. The resulting deferred tax liability associated with this goodwill cannot be offset against other net deferred tax assets due to the indefinite reversal period of the goodwill.

Net Loss/Income. Net income increased by $13.0 million, to net income of $6.0 million for the six months ended June 30, 2010 from a net loss of $7.0 million for the comparable period in 2009 as a result of reasons described above,

most notably fron the goodwill impairment expense that did not recur in 2010.

Segment Results of Operations

The following discussion provides a review of results for our three business segments: AZEK Building Products, which includes products such as AZEK, as well as other branded highly engineered, metal and wood replacement products; Scranton Products, which includes highly engineered fabricated products such as Comtec and Santana bathroom products and locker systems; and Vycom, which includes Celtec and Flametec® and other non-fabricated products for special applications in the industrial markets. The components of each segment are based on similarities in product line, production processes and methods of distribution and are considered reportable segments. Corporate overhead costs, which include corporate payroll costs and corporate related professional fees, are not allocated to segments, and as such are discussed separately.

~~AZEK Building Products – Three Months Ended June 30, 2010 Compared With Three Months Ended June 30, 2009~~33

~~The following table summarizes certain financial information relating to the~~ AZEK Building Products ~~segment results that have been derived from the Company’s consolidated financial statements:~~

		Three Months			Three Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	54,244		$	33,015
Cost of sales		(37,390	)		(22,589	)
Gross margin		16,854			10,426
Selling, general and administrative expenses		(7,449	)		(6,804	)
Loss on sale of property		(240	)		—
Segment operating income	$	9,165		$	3,622

Three Months Ended September 30, 2010 Compared With Three Months Ended September 30, 2009

~~Net~~The ~~Sales.~~following ~~Net~~table ~~sales increased~~summarizes bycertain ~~$21.2 million~~financial orinformation ~~64.3%,~~relating to ~~$54.2 million for~~ the ~~three~~AZEK ~~months ended~~Building ~~June~~Products ~~30,~~segment ~~2010~~results ~~from $33.0 million~~ for the ~~same period in 2009. Average selling price per pound for the~~ three months ended ~~June~~ September 30, 2010 ~~was~~and ~~$1.44 as compared to $1.41 for the same period of~~ 2009 ~~primarily due~~that tohave ~~changes~~been inderived ~~product mix. We sold 37.7 million pounds of product during the three months ended June 30, 2010, which was a 61.0% increase across all business lines~~ from the ~~23.4~~Company’s ~~million~~consolidated ~~pounds~~financial ~~sold during the comparable period in 2009.~~statements:

Cost of Sales. Cost of sales increased by $14.8 million, or 65.5%, to $37.4 million for the three months ended June 30, 2010 from $22.6 million for the same period of 2009. The increase was primarily attributable to higher volumes as well as an increase in average material costs of 42.9% for the three months ended June 30, 2010 compared to the same period in 2009.

	Three Months		Three Months
	Ended		Ended
	September 30,		September 30,		$		%
(Dollars in thousands)	2010		2009		Variance		Variance
Net sales	$	64,060	$	49,643	$	14,417		29.0	%
Cost of sales		42,819		32,069		10,750		33.5
Gross margin		21,241		17,574		3,667		20.9
Selling, general and administrative expenses		7,251		7,130		121		1.7
Loss on sale of property		51		19		32		168.4
Segment operating income	$	13,939	$	10,425	$	3,514		33.7	%

~~Gross~~Net ~~Margin~~Sales. ~~Gross~~Net ~~margin~~ sales increased by $614.5 million, or 6129.70%, to $1664.91 million for the three months ended ~~June~~September 30, 2010 from $1049.4 6 million for the same period in 2009. ~~Gross~~Average ~~margin~~selling asprice aper ~~percent~~pound ~~of net sales was 31.1%~~ for the three months ended ~~June~~September 30, 2010 was $1.44 as compared to 31$1.6%37 for the same period in of 2009 primarily due to changes in product mix. ~~This~~We ~~decrease~~sold 44.5 million pounds of product during the three months ended September 30, 2010, which was ~~primarily~~a ~~attributable~~23.0% toincrease ~~increased~~driven ~~material costs~~by all business lines from the 36.2 million pounds sold during the comparable period in 2009.

~~Selling,~~Cost ~~General~~of ~~and Administrative Expenses~~Sales. ~~Selling,~~Cost ~~general~~of ~~and~~sales ~~administrative expenses~~ increased by $010.6 7 million, or 933.5%, to $742.48 million, ~~or 13.7% of net sales~~ for the three months ended ~~June~~September 30, 2010 from $632.8 1 million, ~~or 20.6% of net sales~~ for the same period in of 2009. The increase ~~in selling, general and administrative expenses~~ was primarily ~~related~~attributable to ~~marketing~~higher ~~programs~~volumes ~~and~~as ~~sales~~well ~~expense~~as ~~and~~an ~~$0.4~~increase ~~million received~~ in ~~2009~~average ~~related~~material tocosts ~~the settlement on a portion~~ of ~~escrowed~~16.7% ~~purchase price~~for ~~related to~~ the ~~Composatron~~three ~~Acquisition,~~months ~~partially~~ended ~~offset~~September by30, ~~lower~~2010 ~~bad~~compared ~~debt expense~~to ~~and~~the ~~$0.3~~same ~~million~~period ~~of severance costs incurred~~ in 2009.

~~Operating~~Gross ~~Income~~Margin. ~~Operating income~~Gross margin increased by $53.6 million, or 20.9% to $921.2 million for the three months ended ~~June~~ September 30, 2010 from $317.6 million infor the ~~comparable~~same period in 2009. Gross margin as a percent of net sales was 33.2% for the three months ended September 30, 2010 compared to 35.4% for the same period in 2009. This decrease was primarily ~~due~~attributable to ~~higher~~ ~~sales~~increased inmaterial ~~2010~~costs.

~~AZEK Building~~Selling, ~~Products~~General ~~–Six~~and ~~Months~~Administrative ~~Ended~~Expenses. ~~June~~Selling, 30general and administrative expenses increased by $0.2 million, ~~2010~~or ~~Compared~~1.7% ~~With~~to ~~Six~~$7.3 ~~Months~~million, ~~Ended June~~or 11.3% of net sales for the three months ended September 30, 2010 from $7.1 million, or 14.4% of net sales for the same period in 2009. The increase in selling, general and administrative expenses was primarily related to increased sales force expense driven by higher sales and an increase in marketing expense.

~~The following~~Operating ~~table~~Income. ~~summarizes~~Operating ~~certain~~income ~~financial~~increased ~~information~~by ~~relating~~$3.5 million to ~~the~~$13.9 ~~AZEK Building~~million ~~Products~~for ~~segment~~the ~~results~~three ~~that~~months ~~have~~ended ~~been~~September ~~derived~~30, 2010 from $10.4 million in the ~~Company’s consolidated~~comparable ~~financial~~period ~~statements:~~of 2009 primarily due to higher sales in 2010.

		Six Months			Six Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	123,135		$	90,072
Cost of sales		(84,470	)		(59,992	)
Gross margin		38,665			30,080
Selling, general and administrative expenses		(15,034	)		(12,769	)
Impairment of goodwill and long-lived assets		(599	)		(14,912	)
Loss on sale of property		(202	)		—
Segment operating income	$	22,830		$	2,399

~~Net~~Nine ~~Sales.~~Months ~~Net~~Ended ~~sales increased~~September ~~by $33.0 million or 36.7%, to $123.1 million for the six months ended June~~ 30, 2010 ~~from~~Compared ~~$90.1~~With ~~million~~Nine ~~for~~Months ~~the~~Ended ~~same~~September ~~period in 2009. Average selling price per pound for the six months ended June~~ 30, ~~2010 was $1.40 as compared to $1.32 for the same period of~~ 2009 primarily due to changes in product mix. We sold 88.2 million pounds of product during the six months ended June 30, 2010, which was a 29.0% increase from the 68.4 million pounds sold during the comparable period in 2009. AZEK Deck and AZEK Rail product lines were the primary drivers of the increase in pounds sold.

~~Cost~~The offollowing ~~Sales.~~table ~~Cost~~summarizes ofcertain ~~sales increased~~financial byinformation ~~$24.5 million,~~relating orto ~~40.8%,~~the toAZEK ~~$84.5~~Building ~~million~~Products segment results for the ~~six~~nine months ended ~~June~~September 30, 2010 ~~from~~and ~~$60.0 million for the same period of~~ 2009~~. The~~ ~~increase~~that ~~was~~have ~~primarily~~been ~~attributable~~derived tofrom ~~higher volumes as well as an increase in average material costs of 43.8% for~~ the ~~six~~Company’s ~~months~~consolidated ~~ended June~~financial ~~30, 2010 compared to the same period in 2009.~~statements:

Gross Margin. Gross margin increased by $8.6 million, or 28.5% to $38.7 million for the six months ended June 30, 2010 from $30.1 million for the same period in 2009. Gross margin as a percent of net sales was 31.4% for the six months ended June 30, 2010 compared to 33.4% for the same period in 2009. This decrease was primarily attributable to increased material costs.

	Nine Months		Nine Months
	Ended		Ended
	September 30,		September 30,		$			%
(Dollars in thousands)	2010		2009		Variance			Variance
Net sales	$	187,195	$	139,714	$	47,481			34.0	%
Cost of sales		127,291		92,062		35,229			38.3
Gross margin		59,904		47,652		12,252			25.7
Selling, general and administrative expenses		22,283		19,889		2,394			12.0
Impairment of goodwill and long-lived assets		599		14,912		(14,313	)		-96.0
Loss on sale of property		254		17		237			1,394.1
Segment operating income	$	36,768	$	12,834	$	23,934			186.5	%

~~Selling,~~Net ~~General and Administrative Expenses~~Sales. ~~Selling,~~Net ~~general~~sales ~~and administrative expenses~~ increased by $247.2 5 million, or 1734.70%, to $15187.02 million, ~~or 12.2% of net sales~~ for the ~~six~~nine months ended ~~June~~September 30, 2010 from $12139.87 million, ~~or 14.2% of net sales~~ for the same period in 2009. ~~The~~Average ~~increase in~~ selling, ~~general~~price ~~and~~per ~~administrative expenses~~pound ~~was~~for ~~primarily~~the ~~related~~nine tomonths ~~marketing~~ended ~~programs~~September ~~and~~30, ~~sales~~2010 ~~expense,~~was ~~higher bad~~$1.41 ~~debt~~as ~~expense~~compared ~~and~~to $01.434 ~~million~~for ~~received~~the insame period of 2009 ~~related~~primarily due to ~~the~~changes ~~settlement~~in ~~on a~~product ~~portion~~mix. We ofsold ~~escrowed~~132.7 ~~purchase~~million ~~price~~pounds ~~related~~of toproduct during the ~~Composatron~~nine ~~Acquisition~~months ended September 30, ~~partially~~ ~~offset~~2010, bywhich $was a 27.0% increase from the 104.35 million ofpounds ~~severance~~sold ~~costs~~during ~~incurred~~the comparable period in 2009. AZEK Deck and AZEK Rail product lines were the primary drivers of the increase in pounds sold.

~~Operating~~Cost ~~Income~~of Sales. ~~Operating income~~Cost of sales increased by $2035.4 2 million, or 38.3%, to $22127.83 million for the ~~six~~nine months ended ~~June~~ September 30, 2010 from $292.4 1 million infor the ~~comparable~~same period of 2009. The increase was primarily ~~due~~attributable to ~~the goodwill~~higher ~~impairment~~volumes ~~expense~~as ~~that~~well ~~did~~as ~~not~~an ~~recur~~increase in average material costs of 33.6% for the nine months ended September 30, 2010 compared to the same period in 2009.

~~Scranton Products~~Gross –Margin. ~~Three~~Gross ~~Months~~margin ~~Ended~~increased ~~June~~by $12.2 million, or 25.7% to $59.9 million for the nine months ended September 30, 2010 ~~Compared~~from ~~With~~$47.7 million ~~Three~~for ~~Months~~the ~~Ended June~~same period in 2009. Gross margin as a percent of net sales was 32.0% for the nine months ended September 30, 2010 compared to 34.1% for the same period in 2009. This decrease was primarily attributable to increased material costs.

~~The following~~Selling, ~~table~~General ~~summarizes~~and ~~certain~~Administrative ~~financial~~Expenses. ~~information~~Selling, ~~relating~~general and administrative expenses increased by $2.4 million, or 12.0% to ~~the Scranton~~$22.3 ~~Products~~million, ~~segment~~or ~~results~~11.9% ~~that~~of ~~have~~net ~~been~~sales ~~derived~~for the nine months ended September 30, 2010 from ~~its~~$19.9 ~~consolidated financial~~million, ~~statements:~~or 14.2% of net sales for the same period in 2009. The increase in selling, general and administrative expense was primarily attributable to marketing programs and sales force expense.

		Three Months			Three Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	16,885		$	20,529
Cost of sales		(9,563	)		(10,611	)
Gross margin		7,322			9,918
Selling, general and administrative expenses		(2,562	)		(2,625	)
Loss on disposal of property		—			(126	)
Segment operating income	$	4,760		$	7,167

Operating Income. Operating income increased by $24.0 million to $36.8 million for the nine months ended September 30, 2010 from $12.8 million in the comparable period of 2009 primarily due to the goodwill impairment expense that did not recur in 2010 and increased sales.

Net Sales. Net sales decreased by $3.6 million or 17.8% to $16.9 million for the three months ended June 30, 2010 from $20.5 million for the same period in 2009. Overall, we sold 6.4 million pounds of product in the three months ended June 30, 2010, which is a decrease of 21.6% from the 8.1 million pounds sold during the comparable period in 2009. Softness in the commercial construction market impacted volumes in the second quarter of 2010. Average selling price per pound for the three months ended June 30, 2010 was $2.65 compared to $2.53 for the same period of 2009 due to higher selling prices as well as lighter product materials.35

~~Cost~~Scranton of Sales. Cost of sales decreased by $1.0 million, or 9.9%, to $9.6 million for the three months ended June 30, 2010 from $10.6 million for the same period of 2009. The decrease was primarily attributable to a decrease in volumes for the three months ended June 30, 2010 compared to the same period in 2009. Average resin costs increased 42.9% for the three months ended June 30, 2010 compared to the same period in 2009.Products

~~Gross Margin. Gross margin decreased by $2.6~~ ~~million,~~Three orMonths ~~26.2%~~Ended toSeptember ~~$7.3 million for the three months ended June~~ 30, 2010 ~~from~~Compared ~~$9.9~~With ~~million~~Three ~~for~~Months ~~the~~Ended ~~same~~September ~~period in 2009. Gross margin as a percent of net sales decreased to 43.4% for the three months ended June~~ 30, ~~2010 from 48.3% for the same period in~~ 2009 ~~due to higher material costs.~~

~~Selling,~~The ~~General~~following ~~and~~table ~~Administrative Expenses.~~summarizes ~~Selling,~~certain ~~general~~financial ~~and~~information ~~administrative~~relating ~~expenses decreased by $0.1 million, or 2.4%~~ to ~~$2.5~~the ~~million,~~Scranton orProducts ~~15.2%~~segment ofresults ~~net sales~~ for the three months ended ~~June~~September 30, 2010 ~~from~~and ~~$2.6~~2009 ~~million,~~that orhave ~~12.8%~~been ofderived ~~net~~from ~~sales~~its ~~for~~consolidated ~~the~~financial ~~same period in 2009.~~statements:

Operating Income. Operating income decreased by $2.4 million, or 33.6%, to $4.8 million for the three months ended June 30, 2010 from $7.2 million for the comparable period in 2009, primarily due to the decrease in sales.

	Three Months		Three Months
	Ended		Ended
	September 30,		September 30,		$			%
(Dollars in thousands)	2010		2009		Variance			Variance
Net sales	$	17,282	$	18,437	$	(1,155	)		-6.3	%
Cost of sales		10,705		9,805		900			9.2
Gross margin		6,577		8,632		(2,055	)		-23.8
Selling, general and administrative expenses		2,318		2,508		(190	)		-7.6
Segment operating income	$	4,259	$	6,124	$	(1,865	)		-30.5	%

~~Scranton Products~~Net ~~–Six~~Sales. ~~Months~~Net ~~Ended~~sales ~~June~~decreased by $1.1 million or 6.3% to $17.3 million for the three months ended September 30, 2010 ~~Compared~~from ~~With~~$18.4 ~~Six~~million ~~Months~~for ~~Ended~~the ~~June~~same period in 2009. Overall, we sold 6.6 million pounds of product in the three months ended September 30, 2010, which is a decrease of 5.8% from the 7.0 million pounds sold during the comparable period in 2009. Softness in the commercial construction market impacted volumes in the third quarter of 2010. Average selling price per pound for the three months ended September 30, 2010 was $2.63 compared to $2.64 for the same period of 2009.

~~The following~~Cost ~~table~~of ~~summarizes~~Sales. ~~certain~~Cost ~~financial~~of ~~information~~sales ~~relating~~increased by $0.9 million, or 9.2%, to ~~the Scranton~~$10.7 ~~Products~~million ~~segment~~for ~~results~~the ~~that~~three ~~have~~months ~~been~~ended ~~derived~~September 30, 2010 from ~~its~~$9.8 million ~~consolidated financial~~for ~~statements:~~the same period of 2009. The increase was primarily attributable to an increase in average material costs of 16.7% for the three months ended September 30, 2010 compared to the same period in 2009.

		Six Months			Six Months
		Ended			Ended
(Dollars in thousands)		June 30, 2010			June 30, 2009
Net sales	$	30,028		$	36,496
Cost of sales		(17,213	)		(20,593	)
Gross margin		12,815			15,903
Selling, general and administrative expenses		(4,765	)		(4,680	)
Impairment of goodwill and long-lived assets		—			3,273
Loss on disposal of property		(49	)		(126	)
Segment operating income	$	8,001		$	14,370

Gross Margin. Gross margin decreased by $2.0 million, or 23.8% to $6.6 million for the three months ended September 30, 2010 from $8.6 million for the same period in 2009. Gross margin as a percent of net sales decreased to 38.1% for the three months ended September 30, 2010 from 46.8% for the same period in 2009 due to higher material costs.

~~Net~~Selling, ~~Sales~~General and Administrative Expenses. ~~Net~~Selling, ~~sales~~ general and administrative expenses decreased by $60.52 million, or ~~17.~~7.6% to $302.03 million, or 13.4% of net sales for the ~~six~~three months ended ~~June~~ September 30, 2010 from $362.5 million ~~for the same period in 2009. Overall~~, weor ~~sold 11~~13.36% ~~million pounds~~ of ~~product~~net insales ~~the~~for ~~six months ended June 30, 2010, which is a decrease of 23.0% from~~ the ~~14.7~~same ~~million pounds sold during the comparable~~ period in 2009. ~~Softness~~The indecrease ~~the commercial construction market impacted volumes~~ in ~~the first half of 2010. Average~~ selling, ~~price~~general ~~per~~and ~~pound~~administrative ~~for~~expenses ~~the six months ended June 30, 2010~~ was ~~$2.65~~primarily ~~compared~~related to ~~$2.48~~a ~~for~~decrease ~~the~~bad ~~same~~debt ~~period in 2009 due to lighter product materials~~expense.

~~Cost~~Operating ~~of Sales~~Income. ~~Cost~~Operating ofincome ~~sales~~ decreased by $31.4 8 million, or 1630.45%, to $174.23 million for the ~~six~~three months ended ~~June~~September 30, 2010 from $~~20.~~6 ~~million for the same period of 2009~~. ~~The~~1 ~~decrease~~million ~~was primarily attributable to a decrease in volumes~~ for the ~~six~~comparable ~~months ended June 30, 2010 compared to the same~~ period in 2009~~. Average resin costs increased 43.8% for the six months ended June 30~~, ~~2010~~primarily ~~compared~~due to the ~~same period~~decrease in ~~2009~~sales.

Filing Compare · CPG INTERNATIONAL INC.