##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For Quarterly Period Ended March 31, 2010
 OR
 o
    
    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 001-01982
 
 Constar International Inc.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    13-1889304(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification Number)One Crown Way, Philadelphia, PA
    
    19154(Address of principal executive offices)
    
    (Zip Code)
 (215) 552-3700
(Registrants telephone number, including area code)
 
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ
 Yes þ No o




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##### 



TABLE OF CONTENTS
 PageNumberPART IFINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    28Item 4. Controls and Procedures
    
    
    37PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    38Item 6. Exhibits
    
    
    39Signatures
    
    
    40Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Constar International Inc.
 
 Condensed Consolidated Balance Sheets
(In thousands, except par value)
 (Unaudited)
 SuccessorMarch 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    2,214
    
    
    $
    2,469Accounts receivable, net
    
    
    48,011
    
    
    
    39,054Inventories, net
    
    
    47,707
    
    
    
    44,058Prepaid expenses and other current assets
    
    
    7,971
    
    
    
    7,896Restricted cash
    
    
    1,490
    
    
    
    7,589Total current assets
    
    
    107,393
    
    
    
    101,066Property, plant and equipment, net
    
    
    143,236
    
    
    
    151,526Goodwill and intangible assets, net
    
    
    149,702
    
    
    
    150,080Other assets
    
    
    5,460
    
    
    
    3,592Total assets
    
    $
    405,791
    
    
    $
    406,264LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term debt
    
    $
    9,065
    
    
    $
    5,000Accounts payable (includes book overdrafts of $12,768 and $10,269 at
March 31, 2010 and December 31, 2009, respectively)
    
    
    67,697
    
    
    
    59,128Accrued expenses and other current liabilities
    
    
    22,715
    
    
    
    25,253Deferred income taxes
    
    
    1,222
    
    
    
    1,222Total current liabilities
    
    
    100,699
    
    
    
    90,603Long-term debt
    
    
    173,341
    
    
    
    167,919Pension and postretirement liabilities
    
    
    29,663
    
    
    
    31,105Deferred income taxes
    
    
    17,984
    
    
    
    23,531Other liabilities
    
    
    15,009
    
    
    
    14,503Total liabilities
    
    
    336,696
    
    
    
    327,661Commitments and contingencies (Note 10)Stockholders Equity:Common stock, $.01 par value, 75,000 shares authorized, 1,750 shares
issued and outstanding at March 31, 2010 and December 31, 2009
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    101,466
    
    
    
    101,466Accumulated other comprehensive loss, net of tax
    
    
    (1,701
    )
    
    
    (1,769
    )Accumulated deficit
    
    
    (30,688
    )
    
    
    (21,112
    )Total stockholders equity
    
    
    69,095
    
    
    
    78,603Total liabilities and stockholders equity
    
    $
    405,791
    
    
    $
    406,264
   3




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Constar International Inc.
 
 Condensed Consolidated Statements of Operations
 (In thousands, except per share data)
 (Unaudited)
 Successor
    
    
    
    PredecessorThree Months
    
    
    
    Three MonthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,2010
    
    
    
    2009Net customer sales
    
    $
    133,591
    
    
    
    $
    156,870Net affiliate sales
    
    
    
    
    
    
    
    2,580Net sales
    
    
    133,591
    
    
    
    
    159,450Cost of products sold, excluding depreciation
    
    
    122,786
    
    
    
    
    141,921Depreciation and amortization
    
    
    9,791
    
    
    
    
    7,256Gross profit
    
    
    1,014
    
    
    
    
    10,273Selling and administrative expenses
    
    
    4,557
    
    
    
    
    5,173Research and technology expenses
    
    
    1,701
    
    
    
    
    1,866Provision for restructuring
    
    
    365
    
    
    
    
    515Gain on disposal of assets
    
    
    (546
    )
    
    
    
    (320
    )Total operating expenses
    
    
    6,077
    
    
    
    
    7,234Operating income (loss)
    
    
    (5,063
    )
    
    
    
    3,039Interest expense
    
    
    (9,127
    )
    
    
    
    (4,257
    )Interest expense  related party
    
    
    
    
    
    
    
    (39
    )Reorganization items, net
    
    
    
    
    
    
    
    (3,555
    )Other income (expense), net
    
    
    (786
    )
    
    
    
    161Loss from continuing operations before income taxes
    
    
    (14,976
    )
    
    
    
    (4,651
    )Benefit from income taxes
    
    
    5,371
    
    
    
    
    18Loss from continuing operations
    
    
    (9,605
    )
    
    
    
    (4,633
    )Income (loss) from discontinued operations, net of taxes
    
    
    29
    
    
    
    
    (77
    )Net loss
    
    $
    (9,576
    )
    
    
    $
    (4,710
    )Basic and diluted loss per common share:Continuing operations
    
    $
    (5.49
    )
    
    
    $
    (0.37
    )Discontinued operations
    
    
    0.02
    
    
    
    
    (0.01
    )Net loss per share
    
    $
    (5.47
    )
    
    
    $
    (0.38
    )Weighted average common shares outstanding:Basic and diluted
    
    
    1,750
    
    
    
    
    12,455
   4




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Constar International Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (In thousands)
 (Unaudited)
 Successor
    
    
    
    PredecessorThree Months
    
    
    
    Three MonthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,2010
    
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (9,576
    )
    
    
    $
    (4,710
    )Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    9,990
    
    
    
    
    7,487Debt accretion expense
    
    
    5,422
    
    
    
    
    Bad debt recoveries
    
    
    (44
    )
    
    
    
    (421
    )Stock-based compensation
    
    
    
    
    
    
    
    129Gain on disposal of assets
    
    
    (546
    )
    
    
    
    (320
    )Deferred income taxes
    
    
    (5,295
    )
    
    
    
    Loss on interest rate swap
    
    
    74
    
    
    
    
    Changes in working capital and other
    
    
    (6,368
    )
    
    
    
    6,068Reorganization items, net
    
    
    
    
    
    
    
    1,125Net cash provided by (used in) operating activities
    
    
    (6,343
    )
    
    
    
    9,358Cash flows from investing activities:Restricted cash
    
    
    6,099
    
    
    
    
    (9,327
    )Purchases of property, plant and equipment
    
    
    (2,792
    )
    
    
    
    (4,299
    )Proceeds from sale of property, plant, and equipment
    
    
    570
    
    
    
    
    99Net cash provided by (used in) investing activities
    
    
    3,877
    
    
    
    
    (13,527
    )Cash flows from financing activities:Costs associated with debt financing
    
    
    (1,772
    )
    
    
    
    Proceeds from short-term financing
    
    
    150,265
    
    
    
    
    159,723Repayment of short-term financing
    
    
    (146,200
    )
    
    
    
    (167,459
    )Net cash provided by (used in) financing activities
    
    
    2,293
    
    
    
    
    (7,736
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (82
    )
    
    
    
    (18
    )Net decrease in cash and cash equivalents
    
    
    (255
    )
    
    
    
    (11,923
    )Cash and cash equivalents at beginning of period
    
    
    2,469
    
    
    
    
    14,292Cash and cash equivalents at end of period
    
    $
    2,214
    
    
    
    $
    2,369
   5




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Constar International Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Dollar and share amounts in thousands, unless otherwise noted)
 (Unaudited)
 1. Basis of Presentation
  Reorganizations
  Discontinued Operations
    6




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2. New Pronouncements
 Improving
Disclosures about Fair Value Measurements
 3. Reorganization Items
  Successor
    
    
    
    PredecessorThree Months
    
    
    
    Three MonthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,(In thousands)
    
    2010
    
    
    
    2009Professional fees associated with bankruptcy proceedings
    
    $
    
    
    
    
    $
    (2,715
    )Debtor-in-possession and Exit Financing fees
    
    
    
    
    
    
    
    (100
    )Other, net
    
    
    
    
    
    
    
    (740
    )Total reorganization items, net
    
    $
    
    
    
    
    $
    (3,555
    )
  4. Accounts Receivable
 SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Trade accounts receivable
    
    $
    42,993
    
    
    $
    35,427Less: allowance for doubtful accounts
    
    
    (119
    )
    
    
    (322
    )Net trade accounts receivable
    
    
    42,874
    
    
    
    35,105Value added taxes recoverable
    
    
    3,603
    
    
    
    2,202Miscellaneous receivables
    
    
    1,534
    
    
    
    1,747Accounts receivable, net
    
    $
    48,011
    
    
    $
    39,054
  7




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5. Inventories
 SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Finished goods
    
    $
    31,985
    
    
    $
    28,900Raw materials and supplies
    
    
    16,872
    
    
    
    16,343Total
    
    
    48,857
    
    
    
    45,243Less: reserves for obsolete and slow-moving inventories
    
    
    (1,150
    )
    
    
    (1,185
    )Inventories, net
    
    $
    47,707
    
    
    $
    44,058
 6. Property, Plant and Equipment
 SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Land and improvements
    
    $
    15,518
    
    
    $
    15,812Buildings and improvements
    
    
    49,791
    
    
    
    50,708Machinery and equipment
    
    
    121,717
    
    
    
    121,975187,026
    
    
    
    188,495Less: accumulated depreciation and amortization
    
    
    (49,455
    )
    
    
    (40,303
    )137,571
    
    
    
    148,192Construction in progress
    
    
    5,665
    
    
    
    3,334Property, plant and equipment, net
    
    $
    143,236
    
    
    $
    151,526
  7. Goodwill and Intangible Assets
  1.
    
    Income Approach (discounted cash flow analysis) the discounted cash flow (DCF)
valuation method requires an estimation of future cash flows of an entity and then
discounting those cash flows to their present value using an appropriate discount rate.
The discount rate selected should reflect the risks inherent in the projected cash flows.
The key inputs and assumptions of the DCF method are the projected cash flows, the
terminal value of the entity, and the discount rate. The Company used the Gordon Growth
Model and assumed a 3.0% growth rate to estimate the terminal value of the business. Cash
flows were discounted at a rate of 10.9%.
  8




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2.
    
    Market Approach (market multiples) this method begins with the identification of
a group of peer companies. Peer companies represent a group of companies in the same or
similar industry as the company being valued. A valuation average multiple is then
computed for the peer group based upon a valuation metric. The Company selected a ratio
of enterprise value to projected earnings before interest, taxes, depreciation and
amortization (EBITDA) as an appropriate valuation multiple. Various operating
performance measurements of the company being valued are then benchmarked against the
peer group and a discount or premium is applied to reflect favorable or unfavorable
comparisons. The resulting multiple is then applied to the company being valued to arrive
at an estimate of its fair value. An equity value is then derived by subtracting the fair
value of interest bearing debt from the total enterprise value. A control premium is then
applied to the equity value. The combined value of interest bearing debt plus an equity
value including control premium equals the estimated total, or enterprise value, of the
business. The
Company selected 11 public companies in the packaging industry as its peer group. The
Company
calculated for the peer group an average multiple of 2010 projected EBITDA and a
multiple of projected 2011 EBITDA. The peer group average multiples were then discounted
approximately 10% based upon an unfavorable comparison of the Companys historical growth
and profit margins as compared to the peer group. The result was a market multiple of 5.3
for 2010 and a market multiple of 4.7 for 2011. Weightings of 80% and 20% were assigned to
the 2010 and 2011 valuation multiples, respectively. The company used quoted market prices
to determine the fair value of its debt at March 31, 2010. A control premium of 20% was
assumed to determine the Companys equity value.
   (In millions)Assumed
    
    Decrease inValuation Method
    
    Assumption
    
    Change
    
    Fair ValueDiscounted cash flow
    
    Projected cash flows
    
    10% decrease
    
    $
    (12.1
    )Discounted cash flow
    
    Terminal year growth rate
    
    100 basis point decrease
    
    $
    (14.3
    )Discounted cash flow
    
    Discount rate
    
    100 basis point increase
    
    $
    (7.1
    )Market approach
    
    Projected cash flows
    
    10% decrease
    
    $
    (14.8
    )Market approach
    
    Market multiple
    
    20% discount to peer average
    
    $
    (15.9
    )Market approach
    
    Control premium
    
    10% control premium
    
    $
    (2.3
    )
    9




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Successor
    
    
    
    PredecessorThree Months Ended
    
    
    
    Three Months Ended(In thousands)
    
    March 31, 2010
    
    
    
    March 31, 2009Beginning balance:Goodwill
    
    $
    118,682
    
    
    
    $
    381,872Accumulated impairment losses
    
    
    
    
    
    
    
    (233,059
    )118,682
    
    
    
    
    148,813Adjustments during the period
    
    
    
    
    
    
    
    Ending balance:Goodwill
    
    
    118,682
    
    
    
    
    381,872Accumulated impairment losses
    
    
    
    
    
    
    
    (233,059
    )$
    118,682
    
    
    
    $
    148,813
   SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Trade name
    
    
    25,500
    
    
    
    25,500Accumulated impairment losses
    
    
    (4,000
    )
    
    
    (4,000
    )Total
    
    $
    21,500
    
    
    $
    21,500
  SuccessorMarch 31, 2010
    
    
    December 31, 2009Estimated
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossLife
    
    Carrying
    
    
    Accumulated
    
    
    Net Book
    
    
    Carrying
    
    
    Accumulated
    
    
    Net Book(In thousands)
    
    (in years)
    
    Amount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueTechnology
    
    4 to 12
    
    $
    9,700
    
    
    $
    (1,108
    )
    
    $
    8,592
    
    
    $
    9,700
    
    
    $
    (805
    )
    
    $
    8,895Leasehold interests
    
    4
    
    
    1,204
    
    
    
    (276
    )
    
    
    928
    
    
    
    1,204
    
    
    
    (201
    )
    
    
    1,003Total
    
    
    
    $
    10,904
    
    
    $
    (1,384
    )
    
    $
    9,520
    
    
    $
    10,904
    
    
    $
    (1,006
    )
    
    $
    9,898
   (In thousands)Nine months ended December 31, 2010
    
    $
    1,1322011
    
    
    1,5092012
    
    
    1,5092013
    
    
    9092014
    
    
    608After 2014
    
    
    3,853$
    9,520
  10




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8. Debt
 SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Short-term debt:Credit Facility
    
    $
    9,065
    
    
    $
    Exit Facility
    
    
    
    
    
    
    5,000Total short-term debt
    
    $
    9,065
    
    
    $
    5,000Long-term debt:Secured Notes
    
    $
    173,341
    
    
    $
    167,919
   (a)
    
    up to 85% of the dollar equivalent of the book value of eligible
accounts receivable; plus
 (b)
    
    subject to certain limitations, the lesser of (i) 65% of the dollar
equivalent of the book value of eligible inventory valued at the lower
of cost on a first-in, first-out basis or market, and (ii) up to 85%
of the dollar equivalent of the book value of the net orderly
liquidation value of eligible inventory; minus
 (c)
    
    $2.5 million; minus
 (d)
    
    such reserves as the Agent may from time to time establish in its
discretion in connection with hedging arrangements; minus
 (e)
    
    such reserves as the Agent may from time to time establish in its
discretion.
      11




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12




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9. Restructuring
     2007 Plan
    
    
    2008 PlansSeverance
    
    
    Contractand
    
    
    and LeaseTermination
    
    
    Termination
    
    
    Other(In thousands)
    
    Benefits
    
    
    Costs
    
    
    Costs
    
    
    TotalBalance, January 1, 2010 (Successor)
    
    $
    14
    
    
    $
    46
    
    
    $
    329
    
    
    $
    389Charges to income
    
    
    
    
    
    
    188
    
    
    
    177
    
    
    
    365Payments
    
    
    
    
    
    
    (214
    )
    
    
    (450
    )
    
    
    (664
    )Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, March 31, 2010 (Successor)
    
    $
    14
    
    
    $
    20
    
    
    $
    56
    
    
    $
    90
 10. Commitments and Contingencies
     13




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11. Other Comprehensive Income (Loss)
  Successor
    
    
    
    PredecessorThree Months Ended March 31, 2010
    
    
    
    Three Months Ended March 31, 2009Pre-tax
    
    
    Tax (Expense)
    
    
    After-tax
    
    
    
    Pre-tax
    
    
    Tax (Expense)
    
    
    After-tax(In thousands)
    
    Amount
    
    
    Benefit
    
    
    Amount
    
    
    
    Amount
    
    
    Benefit
    
    
    AmountNet loss
    
    
    
    
    
    
    
    
    
    $
    (9,576
    )
    
    
    
    
    
    
    
    
    
    
    $
    (4,710
    )Other comprehensive Income (loss):Pension curtailment
    
    
    627
    
    
    
    
    
    
    
    627
    
    
    
    
    
    
    
    
    
    
    
    
    Pension remeasurement
    
    
    (128
    )
    
    
    
    
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    
    Pension and postretirement amortization
    
    
    (16
    )
    
    
    (5
    )
    
    
    (21
    )
    
    
    
    1,457
    
    
    
    
    
    
    
    1,457Cash-flow hedge
    
    
    (484
    )
    
    
    186
    
    
    
    (298
    )
    
    
    
    208
    
    
    
    
    
    
    
    208Foreign currency translation adjustments
    
    
    (112
    )
    
    
    
    
    
    
    (112
    )
    
    
    
    (660
    )
    
    
    
    
    
    
    (660
    )Total other
comprehensive
income (loss)
    
    
    (113
    )
    
    
    181
    
    
    
    68
    
    
    
    
    1,005
    
    
    
    
    
    
    
    1,005Comprehensive loss
    
    
    
    
    
    
    
    
    
    $
    (9,508
    )
    
    
    
    
    
    
    
    
    
    
    $
    (3,705
    )
  SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Pension and post-retirement liabilities, net of tax
    
    $
    (1,982
    )
    
    $
    (2,460
    )Cash flow hedge, net of tax
    
    
    364
    
    
    
    662Foreign currency translation adjustments
    
    
    (83
    )
    
    
    29Accumulated other comprehensive loss
    
    $
    (1,701
    )
    
    $
    (1,769
    )
 12. Stock-Based Compensation
   14




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PredecessorThree Months Ended(In thousands)
    
    March 31, 2009Restricted stock
    
    $
    133Restricted stock units
    
    
    (4
    )$
    129
 13. Earnings (Loss) Per Common Share
    14. Pension and Other Postretirement Benefits
 Pension Benefits
  Successor
    
    
    
    PredecessorThree Months Ended
    
    
    
    Three Months EndedMarch 31, 2010
    
    
    
    March 31, 2009(In thousands)
    
    U.S.
    
    
    Europe
    
    
    Total
    
    
    
    U.S.
    
    
    Europe
    
    
    TotalService cost
    
    $
    159
    
    
    $
    201
    
    
    $
    360
    
    
    
    $
    155
    
    
    $
    137
    
    
    $
    292Interest cost
    
    
    1,303
    
    
    
    189
    
    
    
    1,492
    
    
    
    
    1,315
    
    
    
    140
    
    
    
    1,455Expected return on plan assets
    
    
    (1,360
    )
    
    
    (185
    )
    
    
    (1,545
    )
    
    
    
    (1,128
    )
    
    
    (138
    )
    
    
    (1,266
    )Amortization of net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189
    
    
    
    83
    
    
    
    1,272Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    (10
    )
    
    
    3Total pension expense
    
    $
    102
    
    
    $
    205
    
    
    $
    307
    
    
    
    $
    1,544
    
    
    $
    212
    
    
    $
    1,756
    15




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##### Table of Contents



Other Postretirement Benefits
  Successor
    
    
    
    PredecessorThree Months Ended
    
    
    
    Three Months Ended(In thousands)
    
    March 31, 2010
    
    
    
    March 31, 2009Interest cost
    
    $
    64
    
    
    
    $
    82Amortization of net (gain) loss
    
    
    (16
    )
    
    
    
    196Amortization of prior service cost
    
    
    
    
    
    
    
    (77
    )Total other postretirement benefits expense
    
    $
    48
    
    
    
    $
    201
 15. Income Taxes
     16. Derivative Financial Instruments
    16




---



##### Table of Contents



SuccessorDerivative Liabilities(In thousands)
    
    Balance
    
    Fair ValueDerivatives designated as
    
    Sheet
    
    March 31,
    
    
    December 31,hedging instruments
    
    Location
    
    2010
    
    
    2009Interest rate swap
    
    Other liabilities
    
    $
    7,043
    
    
    $
    6,485
  SuccessorThree Months Ended March 31, 2010Amount of
    
    
    Amount of Pre-taxGain or (Loss)
    
    
    Gain or (Loss)
    
    
    Amount of Pre-taxRecognized in OCI
    
    
    Reclassified from
    
    
    Gain or (Loss)(In thousands)
    
    on Derivative,
    
    
    Accumulated
    
    
    Recognized in IncomeDerivatives in cash flow
    
    Net of Tax
    
    
    OCI into Income
    
    
    on Derivativehedging relationships
    
    (Effective Portion)
    
    
    (Effective Portion) (a)
    
    
    (Ineffective Portion) (a)Interest rate swaps
    
    $
    (298
    )
    
    $
    (1,110
    )
    
    $
    (243
    )
 (a)
    
    Amounts are included included in interest expense on the condensed consolidated statements of operations.  17




---



##### Table of Contents



PredecessorThree Months Ended March 31, 2009Amount ofAmount of
    
    
    Gain or (Loss)Gain or (Loss)
    
    
    ReclassifiedRecognized
    
    
    from(In thousands)
    
    in OCI on
    
    
    AccumulatedDerivatives in cash flow
    
    Derivative
    
    
    OCI into Incomehedging relationships
    
    (Effective Portion)
    
    
    (Effective Portion) (a)Interest rate swap
    
    $
    208
    
    
    $
    700
 (a)
    
    Amounts are included included in interest expense on the condensed consolidated statements of operations.  17. Fair Value Measurements
  SuccessorMarch 31, 2010SignificantQuoted
    
    
    Significant Other
    
    
    Unobservable
    
    
    TotalPrices
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Fair(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueLiabilitiesInterest rate swap
    
    $
    
    
    
    $
    7,043
    
    
    $
    
    
    
    $
    7,043
 PredecessorDecember 31, 2009SignificantQuoted
    
    
    Significant Other
    
    
    Unobservable
    
    
    TotalPrices
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Fair(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueLiabilitiesInterest rate swap
    
    $
    
    
    
    $
    6,485
    
    
    $
    
    
    
    $
    6,485
   18




---



##### Table of Contents



SuccessorMarch 31, 2010
    
    
    December 31, 2009(In thousands)
    
    Carrying
    
    
    
    
    
    CarryingAsset (liability)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueSenior Notes
    
    
    (173,341
    )
    
    
    (192,500
    )
    
    
    (167,919
    )
    
    
    (182,050
    )
 18. Other Income (Expense)
  Successor
    
    
    
    PredecessorThree Months
    
    
    
    Three monthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,(In thousands)
    
    2010
    
    
    
    2009Foreign exchange gains (losses)
    
    $
    (837
    )
    
    
    $
    115Royalty income
    
    
    113
    
    
    
    
    53Royalty expense
    
    
    (69
    )
    
    
    
    (31
    )Interest income
    
    
    14
    
    
    
    
    22Other income (expense)
    
    
    (7
    )
    
    
    
    2Other income (expense), net
    
    $
    (786
    )
    
    
    $
    161
 19. Supplemental Sales Information
   Successor
    
    
    
    PredecessorThree months
    
    
    
    Three monthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,(In thousands)
    
    2010
    
    
    
    2009United States
    
    $
    104,581
    
    
    
    $
    133,303United Kingdom
    
    
    24,187
    
    
    
    
    23,847Holland
    
    
    4,823
    
    
    
    
    2,300Net sales
    
    $
    133,591
    
    
    
    $
    159,450
 20. Discontinued Operations
   19




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##### Table of Contents



SuccessorMarch 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Assets of Discontinued Operations:Prepaid expenses and other current assets
    
    $
    317
    
    
    $
    337Liabilities of Discontinued Operations:Accounts payable and accrued expenses
    
    $
    57
    
    
    $
    44Total current liabilities of discontinued operations
    
    
    57
    
    
    
    44Other liabilities
    
    
    831
    
    
    
    881Total liabilities of discontinued operations
    
    $
    888
    
    
    $
    925
   Successor
    
    
    
    PredecessorThree Months
    
    
    
    Three MonthsEnded
    
    
    
    EndedMarch 31,
    
    
    
    March 31,(In thousands)
    
    2010
    
    
    
    2009Net sales
    
    $
    
    
    
    
    $
    Income from discontinued
operations before income taxes
    
    
    29
    
    
    
    
    2(Provision for) benefit from income taxes
    
    
    
    
    
    
    
    (79
    )Income (loss) from discontinued operations
    
    $
    29
    
    
    
    $
    (77
    )
 21. Condensed Consolidating Financial Information
   20




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##### Table of Contents



Condensed Consolidating Balance Sheet
March 31, 2010
(In thousands)
(Unaudited)
 SuccessorNon-
    
    
    Reclassifications/
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    CompanyASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    1,436
    
    
    $
    778
    
    
    $
    
    
    
    $
    2,214Intercompany receivables
    
    
    
    
    
    
    182,956
    
    
    
    7,882
    
    
    
    (190,838
    )
    
    
    Accounts receivable, net
    
    
    
    
    
    
    43,448
    
    
    
    4,563
    
    
    
    
    
    
    
    48,011Inventories, net
    
    
    
    
    
    
    43,445
    
    
    
    4,262
    
    
    
    
    
    
    
    47,707Prepaid expenses and other current assets
    
    
    12
    
    
    
    7,274
    
    
    
    685
    
    
    
    
    
    
    
    7,971Deferred income taxes
    
    
    330
    
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    Restricted cash
    
    
    
    
    
    
    1,490
    
    
    
    
    
    
    
    
    
    
    
    1,490Total current assets
    
    
    342
    
    
    
    280,049
    
    
    
    18,170
    
    
    
    (191,168
    )
    
    
    107,393Property, plant and equipment, net
    
    
    
    
    
    
    133,462
    
    
    
    9,774
    
    
    
    
    
    
    
    143,236Goodwill and intangible assets
    
    
    
    
    
    
    149,702
    
    
    
    
    
    
    
    
    
    
    
    149,702Investment in subsidiaries
    
    
    342,383
    
    
    
    19,427
    
    
    
    
    
    
    
    (361,810
    )
    
    
    Deferred income taxes
    
    
    63,066
    
    
    
    
    
    
    
    
    
    
    
    (63,066
    )
    
    
    Other assets
    
    
    
    
    
    
    5,146
    
    
    
    314
    
    
    
    
    
    
    
    5,460Total assets
    
    $
    405,791
    
    
    $
    587,786
    
    
    $
    28,258
    
    
    $
    (616,044
    )
    
    $
    405,791LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current Liabilities:Short-term debt
    
    $
    
    
    
    $
    9,065
    
    
    $
    
    
    
    $
    
    
    
    $
    9,065Accounts payable and accrued liabilities
    
    
    944
    
    
    
    84,080
    
    
    
    5,388
    
    
    
    
    
    
    
    90,412Intercompany payable
    
    
    162,411
    
    
    
    27,847
    
    
    
    580
    
    
    
    (190,838
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    1,222
    
    
    
    
    
    
    
    
    
    
    
    1,222Total current liabilities
    
    
    163,355
    
    
    
    122,214
    
    
    
    5,968
    
    
    
    (190,838
    )
    
    
    100,699Long-term debt
    
    
    173,341
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,341Pension and postretirement liabilities
    
    
    
    
    
    
    28,879
    
    
    
    784
    
    
    
    
    
    
    
    29,663Deferred income taxes
    
    
    
    
    
    
    80,132
    
    
    
    1,248
    
    
    
    (63,396
    )
    
    
    17,984Other liabilities
    
    
    
    
    
    
    14,178
    
    
    
    831
    
    
    
    
    
    
    
    15,009Total liabilities
    
    
    336,696
    
    
    
    245,403
    
    
    
    8,831
    
    
    
    (254,234
    )
    
    
    336,696Commitments and contingenciesStockholders equity (deficit)
    
    
    69,095
    
    
    
    342,383
    
    
    
    19,427
    
    
    
    (361,810
    )
    
    
    69,095Total liabilities and stockholders
equity (deficit)
    
    $
    405,791
    
    
    $
    587,786
    
    
    $
    28,258
    
    
    $
    (616,044
    )
    
    $
    405,791
  21




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##### Table of Contents



Condensed Consolidating Balance Sheet
December 31, 2009
(In thousands)
(Unaudited)
 SuccessorNon-
    
    
    
    
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantor
    
    
    Eliminations
    
    
    CompanyASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    2,022
    
    
    $
    447
    
    
    $
    
    
    
    $
    2,469Intercompany receivables
    
    
    
    
    
    
    216,779
    
    
    
    10,821
    
    
    
    (227,600
    )
    
    
    Accounts receivable, net
    
    
    
    
    
    
    36,785
    
    
    
    2,269
    
    
    
    
    
    
    
    39,054Inventories, net
    
    
    
    
    
    
    40,284
    
    
    
    3,774
    
    
    
    
    
    
    
    44,058Prepaid expenses and other current assets
    
    
    12
    
    
    
    7,218
    
    
    
    666
    
    
    
    
    
    
    
    7,896Restricted cash
    
    
    
    
    
    
    7,589
    
    
    
    
    
    
    
    
    
    
    
    7,589Deferred income taxes
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    (2,098
    )
    
    
    Total current assets
    
    
    2,110
    
    
    
    310,677
    
    
    
    17,977
    
    
    
    (229,698
    )
    
    
    101,066Property, plant and equipment, net
    
    
    
    
    
    
    141,521
    
    
    
    10,005
    
    
    
    
    
    
    
    151,526Goodwill and intangible assets
    
    
    
    
    
    
    150,080
    
    
    
    
    
    
    
    
    
    
    
    150,080Investment in subsidiaries
    
    
    405,700
    
    
    
    20,910
    
    
    
    
    
    
    
    (426,610
    )
    
    
    Deferred Income Taxes
    
    
    58,772
    
    
    
    
    
    
    
    
    
    
    
    (58,772
    )
    
    
    Other assets
    
    
    552
    
    
    
    2,728
    
    
    
    312
    
    
    
    
    
    
    
    3,592Total assets
    
    $
    467,134
    
    
    $
    625,916
    
    
    $
    28,294
    
    
    $
    (715,080
    )
    
    $
    406,264LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current Liabilities:Short-term debt
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000Accounts payable and accrued liabilities
    
    
    1,681
    
    
    
    79,325
    
    
    
    3,375
    
    
    
    
    
    
    
    84,381Intercompany payable
    
    
    207,446
    
    
    
    19,325
    
    
    
    829
    
    
    
    (227,600
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    3,320
    
    
    
    
    
    
    
    (2,098
    )
    
    
    1,222Total current liabilities
    
    
    214,127
    
    
    
    101,970
    
    
    
    4,204
    
    
    
    (229,698
    )
    
    
    90,603Long-term debt
    
    
    167,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167,919Pension and postretirement liabilities
    
    
    
    
    
    
    30,053
    
    
    
    1,052
    
    
    
    
    
    
    
    31,105Deferred income taxes
    
    
    
    
    
    
    81,056
    
    
    
    1,247
    
    
    
    (58,772
    )
    
    
    23,531Other liabilities
    
    
    6,485
    
    
    
    7,137
    
    
    
    881
    
    
    
    
    
    
    
    14,503Total liabilities
    
    
    388,531
    
    
    
    220,216
    
    
    
    7,384
    
    
    
    (288,470
    )
    
    
    327,661Commitments and contingenciesStockholders equity (deficit)
    
    
    78,603
    
    
    
    405,700
    
    
    
    20,910
    
    
    
    (426,610
    )
    
    
    78,603Total liabilities and stockholders
equity (deficit)
    
    $
    467,134
    
    
    $
    625,916
    
    
    $
    28,294
    
    
    $
    (715,080
    )
    
    $
    406,264
  22




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the three months ended March 31, 2010
(In thousands)
(Unaudited)
 SuccessorNon-
    
    
    
    
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    CompanyNet sales
    
    $
    
    
    
    $
    128,770
    
    
    $
    4,821
    
    
    $
    
    
    
    $
    133,591Cost of products sold, excluding depreciation
    
    
    
    
    
    
    118,040
    
    
    
    4,746
    
    
    
    
    
    
    
    122,786Depreciation and amortization
    
    
    
    
    
    
    9,620
    
    
    
    171
    
    
    
    
    
    
    
    9,791Gross profit
    
    
    
    
    
    
    1,110
    
    
    
    (96
    )
    
    
    
    
    
    
    1,014Selling and administrative expenses
    
    
    
    
    
    
    4,378
    
    
    
    179
    
    
    
    
    
    
    
    4,557Research and technology expenses
    
    
    
    
    
    
    1,701
    
    
    
    
    
    
    
    
    
    
    
    1,701Provision for restructuring
    
    
    
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    365Gain on disposal of assets
    
    
    
    
    
    
    (546
    )
    
    
    
    
    
    
    
    
    
    
    (546
    )Total operating expenses
    
    
    
    
    
    
    5,898
    
    
    
    179
    
    
    
    
    
    
    
    6,077Operating loss
    
    
    
    
    
    
    (4,788
    )
    
    
    (275
    )
    
    
    
    
    
    
    (5,063
    )Interest expense
    
    
    (7,422
    )
    
    
    (1,864
    )
    
    
    159
    
    
    
    
    
    
    
    (9,127
    )Other income (expense), net
    
    
    
    
    
    
    (664
    )
    
    
    (122
    )
    
    
    
    
    
    
    (786
    )Loss from continuing
operations before income taxes
    
    
    (7,422
    )
    
    
    (7,316
    )
    
    
    (238
    )
    
    
    
    
    
    
    (14,976
    )Benefit from income taxes
    
    
    2,526
    
    
    
    2,778
    
    
    
    67
    
    
    
    
    
    
    
    5,371Loss from continuing operations
    
    
    (4,896
    )
    
    
    (4,538
    )
    
    
    (171
    )
    
    
    
    
    
    
    (9,605
    )Equity earnings
    
    
    (4,680
    )
    
    
    (142
    )
    
    
    
    
    
    
    4,822
    
    
    
    Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    29Net loss
    
    $
    (9,576
    )
    
    $
    (4,680
    )
    
    $
    (142
    )
    
    $
    4,822
    
    
    $
    (9,576
    )
  23




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##### Table of Contents



Condensed Consolidating Statement of Operations
For the three months ended March 31, 2009
(In thousands)
(Unaudited)
 PredecessorNon-
    
    
    
    
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    CompanyNet sales
    
    $
    
    
    
    $
    157,151
    
    
    $
    2,299
    
    
    $
    
    
    
    $
    159,450Cost of products sold, excluding depreciation
    
    
    
    
    
    
    139,209
    
    
    
    2,712
    
    
    
    
    
    
    
    141,921Depreciation
    
    
    
    
    
    
    7,059
    
    
    
    197
    
    
    
    
    
    
    
    7,256Gross profit (loss)
    
    
    
    
    
    
    10,883
    
    
    
    (610
    )
    
    
    
    
    
    
    10,273Selling and administrative expenses
    
    
    
    
    
    
    5,019
    
    
    
    154
    
    
    
    
    
    
    
    5,173Research and technology expenses
    
    
    
    
    
    
    1,866
    
    
    
    
    
    
    
    
    
    
    
    1,866Provision for restructuring
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    515Gain on disposal of assets
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    (320
    )Total operating expenses
    
    
    
    
    
    
    7,080
    
    
    
    154
    
    
    
    
    
    
    
    7,234Operating income (loss)
    
    
    
    
    
    
    3,803
    
    
    
    (764
    )
    
    
    
    
    
    
    3,039Interest expense
    
    
    (3,819
    )
    
    
    (628
    )
    
    
    151
    
    
    
    
    
    
    
    (4,296
    )Reorganization costs
    
    
    (3,555
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,555
    )Other income (expense), net
    
    
    
    
    
    
    166
    
    
    
    (5
    )
    
    
    
    
    
    
    161Income (loss) from continuing
operations before
income taxes
    
    
    (7,374
    )
    
    
    3,341
    
    
    
    (618
    )
    
    
    
    
    
    
    (4,651
    )Benefit from income taxes
    
    
    
    
    
    
    6
    
    
    
    12
    
    
    
    
    
    
    
    18Income (loss) from continuing operations
    
    
    (7,374
    )
    
    
    3,347
    
    
    
    (606
    )
    
    
    
    
    
    
    (4,633
    )Equity earnings
    
    
    2,664
    
    
    
    (683
    )
    
    
    
    
    
    
    (1,981
    )
    
    
    Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    (77
    )Net income (loss)
    
    $
    (4,710
    )
    
    $
    2,664
    
    
    $
    (683
    )
    
    $
    (1,981
    )
    
    $
    (4,710
    )
  24




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2010
(In thousands)
(Unaudited)
 SuccessorNon-
    
    
    
    
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    CompanyCash flows from operating activities:Net income (loss)
    
    $
    (9,576
    )
    
    $
    (4,680
    )
    
    $
    (142
    )
    
    $
    4,822
    
    
    $
    (9,576
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    150
    
    
    
    9,624
    
    
    
    216
    
    
    
    
    
    
    
    9,990Debt accretion
    
    
    5,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,422Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposal of assets
    
    
    
    
    
    
    (546
    )
    
    
    
    
    
    
    
    
    
    
    (546
    )Equity earnings
    
    
    4,680
    
    
    
    142
    
    
    
    
    
    
    
    (4,822
    )
    
    
    Changes in operating assets and liabilities
    
    
    (11,669
    )
    
    
    (1,608
    )
    
    
    1,644
    
    
    
    
    
    
    
    (11,633
    )Net cash provided by (used in) operating activities
    
    
    (10,993
    )
    
    
    2,932
    
    
    
    1,718
    
    
    
    
    
    
    
    (6,343
    )Cash flows from investing activities:Restricted cash
    
    
    
    
    
    
    6,099
    
    
    
    
    
    
    
    
    
    
    
    6,099Purchases of property, plant and equipment
    
    
    
    
    
    
    (2,202
    )
    
    
    (590
    )
    
    
    
    
    
    
    (2,792
    )Proceeds from the sale of property, plant and equipment
    
    
    
    
    
    
    570
    
    
    
    
    
    
    
    
    
    
    
    570Net cash provided by (used in) investing activities
    
    
    
    
    
    
    4,467
    
    
    
    (590
    )
    
    
    
    
    
    
    3,877Cash flows from financing activities:Costs associated with exit facility
    
    
    
    
    
    
    (1,772
    )
    
    
    
    
    
    
    
    
    
    
    (1,772
    )Proceeds from Revolver loan
    
    
    150,265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,265Repayment of Revolver loan
    
    
    (146,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (146,200
    )Net change in intercompany loans
    
    
    6,928
    
    
    
    (6,164
    )
    
    
    (764
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    10,993
    
    
    
    (7,936
    )
    
    
    (764
    )
    
    
    
    
    
    
    2,293Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (49
    )
    
    
    (33
    )
    
    
    
    
    
    
    (82
    )Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (586
    )
    
    
    331
    
    
    
    
    
    
    
    (255
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    2,022
    
    
    
    447
    
    
    
    
    
    
    
    2,469Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    1,436
    
    
    $
    778
    
    
    $
    
    
    
    $
    2,214
  25




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Condensed Consolidating Statement of Cash Flows

For the three months ended March 31, 2009
(In thousands)
(Unaudited)
 PredecessorNon-
    
    
    
    
    
    
    TotalParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    CompanyCash flows from operating activities:Net income (loss)
    
    $
    (4,710
    )
    
    $
    2,664
    
    
    $
    (683
    )
    
    $
    (1,981
    )
    
    $
    (4,710
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    238
    
    
    
    7,076
    
    
    
    173
    
    
    
    
    
    
    
    7,487Stock-based compensation
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    129Gain on disposal of assets
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    (320
    )Equity earnings
    
    
    (2,664
    )
    
    
    683
    
    
    
    
    
    
    
    1,981
    
    
    
    Changes in operating assets and liabilities
    
    
    805
    
    
    
    4,442
    
    
    
    1,525
    
    
    
    
    
    
    
    6,772Net cash provided by (used in)
operating activities
    
    
    (6,331
    )
    
    
    14,674
    
    
    
    1,015
    
    
    
    
    
    
    
    9,358Cash flows from investing activities:Restricted cash
    
    
    
    
    
    
    (9,327
    )
    
    
    
    
    
    
    
    
    
    
    (9,327
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    (4,299
    )
    
    
    
    
    
    
    
    
    
    
    (4,299
    )Proceeds from the sale of property, plant and equipment
    
    
    
    
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    99Net cash used in investing activities
    
    
    
    
    
    
    (13,527
    )
    
    
    
    
    
    
    
    
    
    
    (13,527
    )Cash flows from financing activities:Proceeds from Revolver loan
    
    
    159,723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,723Repayment of Revolver loan
    
    
    (167,459
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,459
    )Net change in intercompany loans
    
    
    14,067
    
    
    
    (13,591
    )
    
    
    (476
    )
    
    
    
    
    
    
    Net cash provided by (used in)
financing activities
    
    
    6,331
    
    
    
    (13,591
    )
    
    
    (476
    )
    
    
    
    
    
    
    (7,736
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    
    
    
    
    (18
    )Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (12,453
    )
    
    
    530
    
    
    
    
    
    
    
    (11,923
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    13,933
    
    
    
    359
    
    
    
    
    
    
    
    14,292Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    1,480
    
    
    $
    889
    
    
    $
    
    
    
    $
    2,369
  26




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##### Table of Contents



22. Subsequent Events
        
    
    a dividend or other distribution from Constar Holland causing its
equity capital to amount to less than 35% of total assets;
 
    
    a breach of a covenant, representation, warranty or certification made
in connection with an ING Credit Agreement, including a default in the
payment of any amount due under the ING Credit Agreements;
 
    
    a default or acceleration with respect to financing or guarantee
agreements of Constar Holland of more than 50,000 or the occurrence
of certain insolvency events; and
 
    
    Constar Holland becoming subject to certain judgments.
    27




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
       28




---



##### Table of Contents



Basis of Presentation
    29




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##### Table of Contents



Results of Operations
 Net Sales
 Three Months Ended March 31, 2010 and 2009
 Three months ended
    
    
    
    
    
    
    %March 31,
    
    
    Increase
    
    
    Increase(dollars in millions)
    
    2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)United States
    
    $
    104.6
    
    
    $
    133.5
    
    
    $
    (28.9
    )
    
    
    (21.6
    )%Europe
    
    
    29.0
    
    
    
    26.0
    
    
    
    3.0
    
    
    
    11.5
    %Total
    
    $
    133.6
    
    
    $
    159.5
    
    
    $
    (25.9
    )
    
    
    (16.2
    )%
   Gross Profit
 Three months endedMarch 31,
    
    
    Increase(dollars in millions)
    
    2010
    
    
    2009
    
    
    (Decrease)United States
    
    $
    0.2
    
    
    $
    10.2
    
    
    $
    (10.0
    )Europe
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.7Total
    
    $
    1.0
    
    
    $
    10.3
    
    
    $
    (9.3
    )Percent of net sales
    
    
    0.7
    %
    
    
    6.5
    %
    30




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##### Table of Contents



Selling and Administrative Expenses
   Research and Technology Expenses
  Provision for Restructuring
  Interest Expense
  Reorganization Items, net
  Other Income (Expense), net
    31




---



##### Table of Contents



Provision for Income Taxes
    Liquidity and Capital Resources
 Three months endedMarch 31,
    
    
    Increase(dollars in millions)
    
    2010
    
    
    2009
    
    
    (Decrease)Net cash provided by (used in) operating activities
    
    $
    (6.3
    )
    
    $
    9.4
    
    
    $
    (15.7
    )Net cash provided by (used in) investing activities
    
    $
    3.9
    
    
    $
    (13.5
    )
    
    $
    17.4Net cash provided by (used in) financing activities
    
    $
    2.3
    
    
    $
    (7.7
    )
    
    $
    10.0
     32




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##### Table of Contents



(a)
    
    up to 85% of the dollar equivalent of the book value of eligible accounts receivable; plus(b)
    
    subject to certain limitations, the lesser of (i) 65% of the dollar equivalent of the
book value of eligible inventory valued at the lower of cost on a first-in, first-out
basis or market, and (ii) up to 85% of the dollar equivalent of the book value of the net
orderly liquidation value of eligible inventory; minus(c)
    
    $2.5 million; minus(d)
    
    such reserves as the Agent may from time to time establish in its discretion in
connection with hedging arrangements; minus(e)
    
    such reserves as the Agent may from time to time establish in its discretion.
       33




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##### Table of Contents




    
    Adjusted EBITDA does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual commitments;
 
    
    Adjusted EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
 
    
    Adjusted EBITDA does not reflect the significant interest expense, or
the cash requirements necessary to service interest or principal
payments, on our debts;
 
    
    although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be replaced
in the future, and Adjusted EBITDA does not reflect any cash
requirements for such replacements;
 
    
    non-cash compensation may be a part of our overall long-term incentive
compensation package, although we exclude it as an expense when
evaluating our ongoing operating performance for a particular period;
 
    
    Adjusted EBITDA does not reflect the impact of certain cash charges;
and
 
    
    other companies may calculate Adjusted EBITDA differently than we do,
limiting its usefulness as a comparative measure.
  34




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##### Table of Contents



Reconciliation of net income to EBITDA
 Four QuartersEnded(in thousands)
    
    March 31, 2010Net income
    
    $
    84,220Interest expense
    
    
    33,676Income taxes
    
    
    20,638Depreciation and amortization
    
    
    45,407EBITDA
    
    $
    183,941
 Reconciliation of EBITDA to Adjusted EBITDA
 Four QuartersEnded(in thousands)
    
    March 31, 2010EBITDA
    
    $
    183,941Cash restructuring charges
    
    
    2,082Cash reorganization charges
    
    
    6,106Gain from discharge of debt
    
    
    (84,745
    )Gain from fresh-start accounting
adjustments
    
    
    (68,109
    )Other non-cash charges (i)
    
    
    1,532Adjusted EBITDA
    
    $
    40,807
 (i)
    
    Includes foreign currency translation gains/losses and non-cash charges    Capital Expenditures
   35




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##### Table of Contents



Pension Funding
   Commitments and Contingent Liabilities
  Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
 Improving Disclosures about Fair Value Measurements
  36




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##### Table of Contents



Forward-Looking Statements
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART IIOther Information
 
 Item 1. Legal Proceedings
   37




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##### Table of Contents



Item 1A. Risk Factors
  Our stock
is not listed on a national securities exchange. It will likely be more difficult for stockholders
and investors to sell our common stock or to obtain accurate quotations of the share price of our
common stock.
  Legislative changes could reduce demand for our products.
   Recent federal health care legislation could increase our expenses.
   38




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##### Table of Contents



Item 6. Exhibits
 31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Executive Vice President and Chief Financial Officer Pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  39




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##### Table of Contents



SIGNATURES
  Constar International Inc.Dated: May 12, 2010
    
    By:
    
    /s/ J. Mark Borseth

J. Mark BorsethExecutive Vice President and Chief Financial Officer(duly authorized officer and principal financial officer)
  40