**Exhibit 99.1**

 

** **

**PQ CORPORATIONUnaudited Condensed Consolidated**

**Financial Statements andFootnotes**

**For thePeriods Ended:   March 31, 2005**

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**EXPLANATORYNOTE**

Theseunaudited condensed consolidated financial statements are being filed torestate previously issued condensed consolidated financial statements includedin Form S-4 as filed with the SEC (“Original Report”) to reflect thecorrection of accounting errors related to purchase accounting. See Note 1 tothe condensed consolidated financial statements for the Successor seven weekperiod ended March 31, 2005 for a discussion of the nature of these errorsand the impact on the restated condensed consolidated financial statements.

Exceptfor matters related to the aforementioned restatement and for changes tofinancial statement footnotes 3, 4, 5, 6, 10, 14 and 15, this amendment doesnot modify or update other disclosures in the Original Report, including thenature and character of such disclosure to reflect events occurring after thefiling date of the Original Report. Accordingly, these unaudited financialstatements and footnotes should be read in conjunction with our filings madesubsequent to the Original Report.

**INDEX**
| Financial Statements                                 |   |
|------------------------------------------------------|--------|
|                                                 |   |
| CONDENSED CONSOLIDATED BALANCE SHEETS                |   |
|                                                 |   |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      |   |
|                                                 |   |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      |   |
|                                                 |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |   |
|                                                 |   |
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**PQ CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)**
| ** **                                              | ** ** | **Successor**            | ** ** | **Predecessor**             | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                              | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
| ** **                                              | ** ** | **(as restated)**   | ** ** | ** **                  | ** ** |
| ASSETS                                                  |       |                     |       |                        |       |
| Cash and cash  equivalents                              |       | $                        | 21,312     |                        | $          | 12,809 |   |
| Receivables, net                                        |       | 93,326                   |       | 89,331                      |       |
| Inventories                                             |       | 92,018                   |       | 62,926                      |       |
| Prepaid and other  current assets                       |       | 25,011                   |       | 15,918                      |       |
| Total current  assets                                   |       | 231,667                  |       | 180,984                     |       |
|                                                    |       |                     |       |                        |       |
| Investments in  affiliated companies                    |       | 72,856                   |       | 27,305                      |       |
| Property, plant and  equipment, net                     |       | 362,628                  |       | 233,986                     |       |
| Goodwill                                                |       | 201,689                  |       | 28,993                      |       |
| Tradenames                                              |       | 53,300                   |       | —                      |       |
| Other intangible  assets, net                           |       | 134,280                  |       | 2,805                       |       |
| Other long-term assets                                  |       | 46,565                   |       | 35,440                      |       |
| Total assets                                            |       | $                        | 1,102,985  |                        | $          | 509,513 |   |
|                                                    |       |                     |       |                        |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY              |       |                     |       |                        |       |
| Notes payable and current  maturities of long-term debt |       | $                        | 4,119      |                        | $          | 17,673 |   |
| Cash overdraft                                          |       | 2,746                    |       | 4,653                       |       |
| Accounts payable                                        |       | 36,596                   |       | 42,993                      |       |
| Accrued liabilities                                     |       | 43,310                   |       | 48,955                      |       |
| Total current  liabilities                              |       | 86,771                   |       | 114,274                     |       |
|                                                    |       |                     |       |                        |       |
| Long-term debt                                          |       | 607,108                  |       | 53,391                      |       |
| Deferred income taxes                                   |       | 181,316                  |       | 5,111                       |       |
| Other long-term  liabilities                            |       | 82,092                   |       | 52,408                      |       |
| Minority interest in  equity of subsidiaries            |       | 5,722                    |       | 4,038                       |       |
| Commitments and  contingencies                          |       |                     |       |                        |       |
| Shares subject to  mandatory redemption                 |       | —                   |       | 6,361                       |       |
| Stockholders’ equity                               |       | 139,976                  |       | 273,930                     |       |
| Total liabilities and  stockholders’ equity        |       | $                        | 1,102,985  |                        | $          | 509,513 |   |

 

See accompanying notes to condensed consolidatedfinancial statements.

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**PQ CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands)(unaudited)**

 
| ** **                                               | ** ** | **Successor**                                     | ** ** | ** ** | ** ** | **Predecessor**                                    | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------|------------|------------|------------|----------------------------------------------------|------------|
| ** **                                               | ** ** | **Seven weeks  ended  March 31,  2005** | ** ** | ** ** | ** ** | **Six weeks  ended  February 11,  2005** | ** ** | **Three months  ended  March 31,  2004** | ** ** |
| ** **                                               | ** ** | **(as restated)**                            | ** ** | ** ** | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Sales                                                    |       | $                                                 | 75,213     |       |       |                                               | $          | 64,195 |   | $ | 139,044 |   |
| Cost of goods  sold                                      |       | 66,181                                            |       |       |       | 48,576                                             |       | 104,524 |   |
| Gross profit                                             |       | 9,032                                             |       |       |       | 15,619                                             |       | 34,520 |   |
|                                                     |       |                                              |       |       |       |                                               |       |   |   |
| Selling, general  and administrative expenses            |       | 16,672                                            |       |       |       | 11,221                                             |       | 22,508 |   |
| Other operating  expense                                 |       | 16,630                                            |       |       |       | 12,267                                             |       | 699 |   |
| Operating (loss) income                                  |       | (24,270                                           | )          |       |       | (7,869                                             | )          | 11,313 |   |
|                                                     |       |                                              |       |       |       |                                               |       |   |   |
| Equity in net  income (loss) of affiliated companies     |       | 4,159                                             |       |       |       | (265                                               | )          | 2,153 |   |
| Interest  expense, net                                   |       | 5,351                                             |       |       |       | 771                                                |       | 1,634 |   |
| Other expense                                            |       | 7,105                                             |       |       |       | 356                                                |       | 923 |   |
| Income (loss) before income taxes and minority  interest |       | (32,567                                           | )          |       |       | (9,261                                             | )          | 10,909 |   |
|                                                     |       |                                              |       |       |       |                                               |       |   |   |
| Provision  (benefit) for income taxes                    |       | (4,482                                            | )          |       |       | (2,522                                             | )          | 3,655 |   |
| Minority  interest                                       |       | 72                                                |       |       |       | 59                                                 |       | 105 |   |
| Net (loss)  income                                       |       | $                                                 | (28,157    | )          |       |                                               | $          | (6,798 | ) | $ | 7,149 |   |

 

See accompanying notes to condensed consolidatedfinancial statements.

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**PQ CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)**

 
| ** **                                          | ** ** | **Successor**                               | ** ** | ** ** | ** ** | **Predecessor **                        | ** ** |
|-----------------------------------------------------|------------|---------------------------------------------|------------|------------|------------|----------------------------------------------|------------|
| ** **                                          | ** ** | **Seven weeks  ended  March 31,** | ** ** | ** ** | ** ** | **Six weeks  ended  February 11,** | ** ** | **Three months  ended  March 31,** | ** ** |
| ** **                                          | ** ** | **2005**                                    | ** ** | ** ** | ** ** | **2005**                                     | ** ** | **2004** | ** ** |
| Net cash (used)  provided by operating activities   |       | $                                           | (33,010    | )          |       |                                         | $          | (6,965 | ) | $ | 5,882 |   |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Cash flows from  investing activities:              |       |                                        |       |       |       |                                         |       |   |   |
| Proceeds from sale of capital assets                |       | —                                      |       |       |       | —                                       |       | 2 |   |
| Purchases of property, plant and equipment          |       | (3,089                                      | )          |       |       | (2,358                                       | )          | (4,303 | ) |
| Merger consideration                                |       | (626,000                                    | )          |       |       | —                                       |       | — |   |
| Merger costs, capitalized                           |       | (6,485                                      | )          |       |       | —                                       |       | — |   |
| Net cash used for investing activities              |       | (635,574                                    | )          |       |       | (2,358                                       | )          | (4,301 | ) |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Cash flows from  financing activities:              |       |                                        |       |       |       |                                         |       |   |   |
| Notes payable and cash overdrafts, net              |       | (1,890                                      | )          |       |       | 44,857                                       |       | (6,814 | ) |
| Issuance of long-term debt                          |       | 335,000                                     |       |       |       | —                                       |       | 6,800 |   |
| Issuance of senior notes                            |       | 275,000                                     |       |       |       | —                                       |       | — |   |
| Debt acquisition costs                              |       | (16,503                                     | )          |       |       | —                                       |       | — |   |
| Repayments of long-term debt                        |       | (114,524                                    | )          |       |       | —                                       |       | (246 | ) |
| Proceeds from issuances of treasury stock           |       | —                                      |       |       |       | 1,161                                        |       | 54 |   |
| Purchases of stock                                  |       | —                                      |       |       |       | (47                                          | )          | (966 | ) |
| Equity contribution                                 |       | 163,600                                     |       |       |       | —                                       |       | — |   |
| Distributions to minority interest                  |       | —                                      |       |       |       | —                                       |       | (75 | ) |
| Dividend distribution                               |       | —                                      |       |       |       | —                                       |       | (2,718 | ) |
| Net cash provided by (used in) financing activities |       | 640,683                                     |       |       |       | 45,971                                       |       | (3,965 | ) |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Effect of  exchange rate changes on cash            |       | 456                                         |       |       |       | (700                                         | )          | (13 | ) |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Net change in  cash and cash equivalents            |       | (27,445                                     | )          |       |       | 35,948                                       |       | (2,397 | ) |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Cash and cash  equivalents at beginning of period   |       | 48,757                                      |       |       |       | 12,809                                       |       | 10,784 |   |
|                                                |       |                                        |       |       |       |                                         |       |   |   |
| Cash and cash equivalents  at end of period         |       | $                                           | 21,312     |       |       |                                         | $          | 48,757 |   | $ | 8,387 |   |

 

See accompanying notes to condensed consolidatedfinancial statements.

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**PQ CORPORATION & SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSS(in thousands)(unaudited)**

**1. Statement ofInformation Furnished:**

On December 15,2004, PQ Corporation (“Company”) and Niagara Acquisition, Inc. and itsparent company, Niagara Holdings, Inc. (“Holdings”), entered into anAgreement and Plan of Merger, pursuant to which Niagara Acquisition, Inc. mergedwith and into PQ Corporation, with PQ Corporation as the surviving entity and awholly owned subsidiary of Holdings (the “Merger”). Holdings is a newly formedDelaware corporation, a substantial majority of the outstanding capital stockof which is owned by JPMorgan Partners LP and certain affiliated funds (“Sponsor”).The Merger was consummated on February 11, 2005. The total mergerconsideration paid, excluding fees and expenses, consists of the statedpurchase price of $626,000 and capitalized acquisition costs of $6,485.

In connection with theMerger, substantially all existing debt as of February 11, 2005 was repaidin the amount of $120,849, including interest and make-whole payments of $5,185for the early retirement of debt. The Merger was financed through borrowingsunder a $335,000 term loan, the issuance of $275,000 of seniorsubordinated notes, a $163,600 equity contribution from the Sponsors andexisting cash on hand.

The Company refers to theMerger and the related financing described above, collectively, as theTransactions. For purposes of identification and description, the Company isreferred to as the Predecessor for the period prior to the Transactions on February 11,2005, and the Successor for the period subsequent to the Transactions.

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information. In the opinion of management, alladjustments of a normal and recurring nature necessary to present fairly thefinancial position and results of operations have been included. The results ofoperations are not necessarily indicative of the results to be expected for thefull year. The accompanying condensed consolidated financial statements shouldbe read in conjunction with the audited consolidated financial statements andnotes thereto for the year ended December 31, 2004.

***Restatement***

In connection with ouryear-end close, the Company determined a portion of the amount allocated toinventory through our initial purchase accounting for inventory acquired in theTransactions was incorrectly charged to cost of goods sold in the Successor’sCondensed Consolidated Statement of Operations. Given the Company accounts forcertain of its inventory under the last-in, first-out (“LIFO”) method ofinventory accounting, the portion of the fair value allocation relating to LIFOinventory should not have been charged to the Statement of Operations but instead,should have remained on the Company’s Balance Sheet.

The primary effects ofthe restatement on the March 31, 2005 financial statements are summarizedbelow:

On the ConsolidatedBalance Sheet inventory was understated by $7,499, total current assets wasunderstated by $7,499, retained earnings was understated by $4,631 and totalstockholders’ equity was understated by $4,631.

On the ConsolidatedStatement of Operations for seven weeks ended March 31, 2005, cost of goodsold was overstated by $7,499, benefit for income taxes was overstated by$2,868, and net loss was overstated by $4,631.

In addition, inconnection with the preparation of its year end 2005 financial statements, theCompany determined that its deferred tax liability on the undistributed earningsof non-U.S. subsidiaries was not properly calculated for the prior interimperiods during 2005. Given that the Successor’s management does not considerthe earnings of non-U.S. subsidiaries to be permanently reinvested, as had thePredecessor, the impact of this change is being recorded as a purchaseaccounting adjustment to the February 11, 2005 opening balance sheet. Theimpact of this restatement on the March 31, 2005 financial statements isan increase to deferred income taxes and goodwill of $35,768 compared to theamounts previously recorded. Also, in the Consolidated Statement of Operationsfor the seven weeks ended March 31, 2005, the benefit for income taxes wasoverstated and net loss was understated by $1,310.

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In addition, the Companymade certain other immaterial reclassifications and purchase accounting relatedadjustments to the restated financial statements. There is no impact on the netcash used in operating activities, net cash used for investing activities, oron net cash provided by financing activities as reported on the condensedconsolidated statements of cash flows.

The following schedulesreconcile the amount originally reported in the Company’s financial statements includedin Form S-4 to corresponding amounts which have been revised toreflect the matters described above.

 
| ** **                                           | ** ** | **Successor**                                             | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                           | ** ** | **Seven weeks ended  March 31, 2005** | ** ** |
| ** **                                           | ** ** | **As Reported**                                      | ** ** | **As Restated** | ** ** |
| Cost of goods  sold                                  |       | $                                                         | 72,665     |   | $ | 66,181 |   |
| Gross profit                                         |       | 1,533                                                     |       | 9,032 |   |
| Operating (loss)  income                             |       | (31,769                                                   | )          | (24,270 | ) |
| Equity in net  income (loss) of affiliated companies |       | 4,287                                                     |       | 4,159 |   |
| Interest  expense, net                               |       | 6,441                                                     |       | 5,351 |   |
| Income before  income taxes and minority interest    |       | (41,028                                                   | )          | (32,567 | ) |
| Provision  (benefit) for income taxes                |       | (9,642                                                    | )          | (4,482 | ) |
| Net (loss)  income                                   |       | (31,458                                                   | )          | (28,157 | ) |
|                                                 |       |                                                      |       |   |   |
|                                                      |            |                                                           |            |  |  |  |  |

 

 
| ** **                                       | ** ** | **Successor**                | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|
| ** **                                       | ** ** | **March 31, 2005** | ** ** |
| ** **                                       | ** ** | **As Reported**         | ** ** | **As Restated** | ** ** |
| Inventories                                      |       | $                            | 84,519     |   | $ | 92,018 |   |
| Total current  assets                            |       | 224,168                      |       | 231,667 |   |
| Investments in  affiliated companies             |       | 72,984                       |       | 72,856 |   |
| Goodwill                                         |       | 164,831                      |       | 201,689 |   |
| Total assets                                     |       | 1,058,756                    |       | 1,102,985 |   |
| Accrued  liabilities                             |       | 41,386                       |       | 43,310 |   |
| Total current  liabilities                       |       | 84,847                       |       | 86,771 |   |
| Deferred income  taxes                           |       | 142,312                      |       | 181,316 |   |
| Total  liabilities                               |       | 916,359                      |       | 957,287 |   |
| Stockholders’  equity                       |       | 136,675                      |       | 139,976 |   |
| Total liabilities and  stockholders’ equity |       | 1,058,756                    |       | 1,102,985 |   |
|                                                  |            |                              |            |  |  |  |  |

 

In accordance with theEmerging Issues Task Force (“EITF”) No. 00-10 “Accounting forShipping and Handling Revenues and Costs,” costs related to shipping andhandling of products shipped to customers are classified as cost of goods sold.The Company reclassed freight costs which were previously netted against salesto cost of goods sold of $1,015 for the Successor seven weeks ended March 31,2005, $780 for the Predecessor six weeks ended February 11, 2005 and$1,402 for the Predecessor thirteen weeks ended March 31, 2004 in order topresent sales for all periods shown on a consistent basis.

**2. Recently IssuedAccounting Standards:**

In December 2004,Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-BasedPayment”, was issued. The amendment requires companies to recognize in theincome statement the grant-date fair value of stock options and otherequity-based compensation to employees. It also provides guidance fordetermining whether an award is a liability-classified award or anequity-classified award, and determining grant-date fair value. This 

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statement is effectivefor most public companies’ interim or annual periods beginning after June 15,2005. However, in April 2005, the Securities and Exchange Commission (“SEC”)approved a rule that delayed the effective date of adoption for theCompany until the first quarter of 2006. In March 2005, the SEC issuedStaff Accounting Bulletin (“SAB”) No. 107 which expressed the views of theSEC regarding the interaction between SFAS No. 123(R) and certain SECrules and regulations. SAB No. 107 provides guidance related to thevaluation of share-based payment arrangements for public companies, includingassumptions such as expected volatility and expected term. Management isexamining its shared-based-programs and is still evaluating the impact ofadopting SFAS No. 123 (R) and SAB No. 107, if any.

In November 2004,SFAS No. 151, “Inventory Costs — an amendment of ARB No. 43,Chapter 4,” was issued. SFAS No. 151 is the result of efforts toconverge U.S. accounting standards for inventories with InternationalAccounting Standards. SFAS No. 151 requires abnormal amounts of idlefacility expense, freight, handling costs and spoilage to be recognized ascurrent-period charges. It also requires that allocation of fixed productionoverheads to the costs of conversion be based on the normal capacity of theproduction facilities. SFAS No. 151 will be effective for inventory costsincurred during fiscal years beginning after June 15, 2005. The Company isin the process of evaluating the impact, if any, of SFAS No. 151.

In December 2004,two FASB Staff Positions (“FSPs”) were issued to address accounting issuesresulting from the enactment of the American Jobs Creation Act of 2004 (“JobsCreation Act”), which occurred on October 22, 2004. The first, FSP 109-1,“Application of FASB Statement No. 109, ‘Accounting for Income Taxes,’ tothe Tax Deduction on Qualified Production Activities Provided by the American JobsCreation Act of 2004,” was issued to address whether a deduction for qualifiedproduction activities income should be accounted for as a deduction under SFAS No. 109or as a tax rate reduction. This FSP is not expected to have a material impacton the Company’s financial position or results of operations. The second, FSP109-2, “Accounting and Disclosure Guidance for the Foreign EarningsRepatriation Provision within the American Jobs Creation Act of 2004,”addresses whether an enterprise should be allowed additional time beyond the2004 financial reporting period to evaluate the impact of the Jobs Creation Actand plans for unremitted foreign earnings repatriation. The FSP provides anentity with additional time to evaluate the effect of the Jobs Creation Act,which is an exception to the provisions of SFAS No. 109 that require anentity to adjust its deferred tax assets and liabilities for the effects of achange in tax laws or rates in the period that includes the enactment date. Aprovision of the Act allows United States companies to repatriate foreignearnings at a substantially reduced tax rate until October 2005. TheCompany has decided to avail itself of this provision of the Act. However, itis still in the process of determining to what extent the Act will be utilizedand the total amount of funds to be repatriated. Refer to the income taxesfootnote for additional discussion.

In March 2005, FASBInterpretation No. 47, “Accounting for Conditional Asset RetirementObligations” (“FIN 47”), was issued. This statement clarifies the termconditional asset retirement obligation**asused in SFAS No. 143, “Accounting for Asset Retirement Obligations” whichrefers to a legal obligation to perform an asset retirement activity in whichthe timing and/or method of settlement are conditional on a future event thatmay or may not be within the control of the entity. FIN 47 requires an entityto recognize a liability for the fair value of a conditional asset retirementobligation if the fair value of the liability can be reasonably estimated. FIN47 will be effective for the fourth quarter of 2005. The Company is assessingthe impact that FIN 47 will have on the financialcondition, results of operations and statements of cash flows.

**3.  Business Combination:**

SFAS No. 141, “BusinessCombinations,” and SFAS No. 142, “Goodwill and Other IntangibleAssets,” govern the accounting and reporting for business combinations. SFAS No. 141requires all business combinations be accounted for using the purchase methodof accounting. SFAS No. 142 provides that goodwill and otherintangible assets with indefinite lives will not be amortized, but will betested for impairment on at least an annual basis. The Successor has accountedfor the Transactions in accordance with these standards. The merger of PQCorporation with Niagara Acquisition, Inc. is being treated as a purchasewith Holdings (whose sole asset is its investment in the common stock of theCompany) as the accounting acquirer in accordance with SFAS No. 141.

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Immediately prior to closing, pursuant to theiroriginal terms, all of the Predecessor’s outstanding stock options and awardsvested and the Predecessor exercised its purchase option to purchase, at fairvalue, all of the shares of common stock to be acquired by exercise of optionsand awards held by employees pursuant to the Stock Option and Award Plan. As aresult, immediately before the Transactions, compensation expense ofapproximately $2,400 was recorded in selling, general and administrative expensesin the Consolidated Statement of Operations for the six weeks ended February 11,2005 for the unvested portion of the options and awards.

The closing of the Transactions represented a changein control under certain executives’ employment agreements. As a result, theCompany recorded a charge in other expense of approximately $5,600 forseverance provided to certain executives terminated before the closing of theTransactions in the Predecessor’s Statement of Operations. In addition, theSuccessor is required to pay $3,891 pursuant to these agreements to executiveswho resigned subsequent to the Transactions and recorded a charge for suchamount in the Successor’s Consolidated Statement of Operations.

The Company incurred other costs relating to theTransactions, primarily for sponsor fees, broker fees, legal and consulting ofapproximately $26,900 that were recorded in other operating expense.

The table below summarizes the preliminary allocationof the total cost of the Merger to the assets acquired and liabilities assumed.The purchase price was allocated first to tangible and identifiable intangibleassets acquired and liabilities assumed based upon their estimated fair values.The remaining excess of the purchase price over the fair value of assets acquiredand liabilities assumed was then recorded as goodwill. The allocation ofpurchase price is based on a preliminary study performed by a valuationspecialist and is subject to further analysis and completion. Any revision tothe estimated fair values of assets acquired and liabilities assumed willresult in an adjustment to goodwill. The Company anticipates that the studyperformed by the valuation specialist will be completed in the third quarter of2005.
| ** **                                                  | ** ** | **(as restated)** | ** ** | ** ** |
|-------------------------------------------------------------|------------|------------------------|------------|------------|
| Net cash paid to  acquire stock                             |       | $                      | 626,000    |       |   |
| Transaction  costs, capitalized                             |       | 6,485                  |       |       |
| Total purchase price                                        |       | $                      | 632,485    |       |   |
|                                                        |       |                   |       |       |
| The purchase price was  preliminarily allocated as follows: |       |                   |       |       |
| Cash                                                        |       | $                      | 48,756     |       |   |
| Receivables                                                 |       | 91,813                 |       |       |
| Inventories                                                 |       | 99,483                 |       |       |
| Prepaid and  other current assets                           |       | 16,385                 |       |       |
| Property, plant  and equipment                              |       | 366,707                |       |       |
| Investments in  affiliated companies                        |       | 68,742                 |       |       |
| Goodwill                                                    |       | 201,689                |       |       |
| Other intangible  assets                                    |       | 192,397                |       |       |
| Other assets                                                |       | 30,888                 |       |       |
| Fair value of  assets acquired                              |       | 1,116,860              |       |       |
| Current liabilities                                         |       | (134,106               | )          |       |
| Long-term debt                                              |       | (80,665                | )          |       |
| Deferred income  taxes                                      |       | (182,348               | )          |       |
| Other  liabilities                                          |       | (87,256                | )          |       |
| Purchase price                                              |       | $                      | 632,485    |       |   |

 

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The total intangibleassets amounted to $192,397, of which $53,300 was assigned to trade names thatare not subject to amortization. In addition, total intangible assets included$3,338 of capitalized in-process research and development that was immediatelywritten off to selling, general and administrative expenses in the Successor’sStatement of Operations.

In accordance with the requirements of the purchasemethod of accounting for acquisitions, inventories as of February 11, 2005were recorded at net realizable value (which is defined as estimated sellingprices less the sum of (a) costs of disposal and (b) a reasonableprofit allowance for the selling effort of the acquiring entity) which, in thecase of finished products, was $24,555 higher than the Predecessor’s historicalmanufacturing cost. The Successor’s cost of products sold for theseven weeks ended March 31, 2005 includes a pre-tax charge of $6,812for the portion of finished product sold during the period.

In addition, certain raw material inventory purchasedunder favorable supply agreements were revalued to fair market value, which was$2,473 higher than historical cost. The Successor’s cost of products sold forthe seven weeks ended March 31, 2005 included a pre-tax charge of $888 forthe portion of raw materials used in finished products that were sold duringthe period.

The management team of the Successor will finalizeplans to involuntarily terminate certain employees and rationalize certainplant locations during the second quarter of 2005. Although the intent torestructure has been announced, the details including employees to be affected andlocations which may be closed are still being finalized. The cost and expectedfuture savings of the restructuring program are currently in the process ofbeing estimated and are not available at this time. The result of this plannedrestructuring program will be an increase in accrued liabilities acquired andan increase in goodwill. Subsequent cash expenditures toward this program willbe charged to accrued liabilities when they are incurred.

**4.  Pro formaInformation:**

The following schedule includes statements ofoperations data for the unaudited results for the three months ended March 31,2005 and March 31, 2004 as if the Transactions had occurred as of January 1of each respective year. The pro forma information includes the actual resultswith adjustments for the pro forma effect of the change in interest expenserelated to the changes in capital structure resulting from the financingsdiscussed in Note 9, purchase accounting adjustments resulting in changes todepreciation and amortization expenses, the revaluation of inventory to fairmarket value, and the reduction in pension and postretirement benefit expenseresulting from the elimination of the unamortized actuarial losses and priorservice costs and the unamortized transition obligation.

The unaudited pro forma information is provided forillustrative purposes only. It does not purport to represent what the resultsof operations would have been had the Transactions occurred on the datesindicated above, nor does it purport to project the results of operations forany future period. 
| ** ** | ** ** | **Pro forma three months ended  March 31,** | ** ** |
|------------|------------|----------------------------------------------------------------------|------------|
| ** ** | ** ** | **2005**                                                             | ** ** | **2004** | ** ** |
| ** ** | ** ** | **(as restated)**                                               | ** ** | **(as restated)** | ** ** |
| ** ** | ** ** | ** **                                                           | ** ** | ** ** | ** ** |
| Net sales  |       | $                                                                    | 139,408    |   | $ | 139,044 |   |
| Net loss   |       | (13,562                                                              | )          | (12,343 | ) |
|            |            |                                                                      |            |  |  |  |  |

 

The pro forma adjustments are primarily based on apreliminary assessment of the fair market value of assets acquired andliabilities assumed that was performed by an independent appraisal firm. Whenthe appraisals are finalized, the allocation of the excess of the considerationpaid over the net book value of assets acquired and 

8

----

 

liabilities assumed will be revised as required. Thetable in Note 3 summarizes the total acquisition consideration and theestimated allocations paid to the assets acquired and liabilities assumed.

**5.  Comprehensive (Loss) Income:**

 

The following tablesummarizes comprehensive (loss) income:
| ** **                                                | ** ** | **Successor**        | ** ** | **Predecessor**       | ** ** |
|-----------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|
| ** **                                                | ** ** | **Seven weeks** | ** ** | **Six weeks**    | ** ** | **Three months** | ** ** |
| ** **                                                | ** ** | **ended**            | ** ** | **ended**             | ** ** | **ended** | ** ** |
| ** **                                                | ** ** | **March 31,**   | ** ** | **February 11,** | ** ** | **March 31,** | ** ** |
| ** **                                                | ** ** | **2005**             | ** ** | **2005**              | ** ** | **2004** | ** ** |
| ** **                                                | ** ** | **(as retated)**     | ** ** | ** **            | ** ** | ** ** | ** ** |
|                                                      |       |                 |       |                  |       |   |   |
| Net income  (loss)                                        |       | $                    | (28,157    | )                     | $          | (6,798 | ) | $ | 7,149 |   |
| Gains in fair values of derivatives qualifying as  hedges |       | 6,497                |       | 785                   |       | 2,266 |   |
| Foreign currency translation adjustments, net of tax      |       | (1,963               | )          | (4,676                | )          | (1,029 | ) |
|                                                      |       |                 |       |                  |       |   |   |
| Comprehensive (loss)  income                              |       | $                    | (23,623    | )                     | $          | (10,689 | ) | $ | 8,386 |   |

 

**6. Inventories:**

 

Inventories were classified and valued asfollows:
| ** **                            | ** ** | **Successor**          | ** ** | **Predecessor**       | ** ** |
|---------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                            | ** ** | **March 31,**     | ** ** | **December 31,** | ** ** |
| ** **                            | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| ** **                            | ** ** | **(as restated)** | ** ** | ** **            | ** ** |
| By type:                              |       |                   |       |                  |       |
| Finished products and work in process |       | $                      | 73,885     |                  | $          | 47,493 |   |
| Raw materials and containers          |       | 18,133                 |       | 15,433                |       |
|                                  |       |                   |       |                  |       |
|                                  |       | $                      | 92,018     |                  | $          | 62,926 |   |
|                                  |       |                   |       |                  |       |
| Valued at lower of cost  or market:   |       |                   |       |                  |       |
| LIFO basis                            |       | $                      | 53,919     |                  | $          | 30,675 |   |
| FIFO basis                            |       | 4,990                  |       | 5,218                 |       |
| Average cost basis                    |       | 33,109                 |       | 27,033                |       |
|                                  |       |                   |       |                  |       |
|                                  |       | $                      | 92,018     |                  | $          | 62,926 |   |

 

9

----

 

**7. Property, Plant and Equipment:**

 

A summary of property, plant and equipment, atcost, related accumulated depreciation and depreciation expense is as follows:
| ** **                      | ** ** | **Successor**      | ** ** | **Predecessor**       | ** ** |
|---------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                      | ** ** | **2005**           | ** ** | **2004**              | ** ** |
|                            |       |               |       |                  |       |
| Land                            |       | $                  | 55,227     |                  | $          | 26,406 |   |
| Buildings                       |       | 79,817             |       | 122,216               |       |
| Machinery and  equipment        |       | 222,797            |       | 517,799               |       |
| Construction in  progress       |       | 11,771             |       | 10,911                |       |
|                            |       | 369,612            |       | 677,332               |       |
| Less:  accumulated depreciation |       | 6,984              |       | 443,346               |       |
|                            |       |               |       |                  |       |
|                            |       | $                  | 362,628    |                  | $          | 233,986 |   |

 

Depreciation expense was $6,984 for the sevenweeks ended March 31, 2005, $4,290 for the six weeks ended February 11,2005, and $8,812 for the three months ended March 31, 2004.

**8.  Other Intangible Assets:**

 

Gross carrying amounts andaccumulated amortization for intangible assets with estimable useful lives areas follows:

 
| ** **                           | ** ** | **Gross Amounts** | ** ** | **Accumulated Amortization** | ** ** |
|--------------------------------------|------------|------------------------|------------|-----------------------------------|------------|
| ** **                           | ** ** | **Successor**          | ** ** | **Predecessor**                   | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                           | ** ** | **March 31,**     | ** ** | **December 31,**             | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                           | ** ** | **2005**               | ** ** | **2004**                          | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                 |       |                   |       |                              |       |   |   |   |   |
| Customer lists  and rights to sell   |       | $                      | 1,462      |                              | $          | 2,631 |   | $ | (74 | ) | $ | (1,074 | ) |
| Formulations and  product technology |       | 79,758                 |       | 1,570                             |       | (907 | ) | (722 | ) |
| Non compete  agreements              |       | 10,388                 |       | 1,150                             |       | (457 | ) | (750 | ) |
| Raw material  contracts              |       | 43,648                 |       | —                            |       | — |   | — |   |
| Railcar leases                       |       | 509                    |       | —                            |       | (47 | ) | — |   |
| Total                                |       | $                      | 135,765    |                              | $          | 5,351 |   | $ | (1,485 | ) | $ | (2,546 | ) |

 

10

----

 

**9.  Long-term Debt:**

 

The summary of long-term debt is as follows:
| ** **                                                                                                          | ** ** | **Successor**      | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                          | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                          | ** ** | **2005**           | ** ** | **2004**              | ** ** |
| Senior secured  term loans with interest at 5.25% as of March 31, 2005                                         |       | $                  | 335,000    |                  | $          | — |   |
| 7.50% Senior  subordinated notes due 2013                                                                           |       | 275,000            |       | —                |       |
| Senior notes  Series B with interest at 7.06% as of December 31, 2004                                     |       | —             |       | 32,727                |       |
| Senior notes due  2007 with interest at 7.84% as of December 31, 2004                                          |       | —             |       | 21,428                |       |
| Revolving credit  agreements                                                                                        |       | —             |       | 5,078                 |       |
| Adjustable  Tender Industrial Refunding Revenue Bonds due 2015 with interest at 1.36% as  of December 31, 2004 |       | —             |       | 9,600                 |       |
| Other                                                                                                               |       | 1,227              |       | 2,231                 |       |
|                                                                                                                |       | 611,227            |       | 71,064                |       |
| Less: current  portion                                                                                              |       | (4,119             | )          | (17,673               | )          |
|                                                                                                                |       | $                  | 607,108    |                  | $          | 53,391 |   |

 

In connection with the Transactions, substantially allexisting debt as of February 11, 2005 was repaid in the amount of $120,849including interest and make whole payments.

On February 11, 2005, the Company issued $275,000of 7.5% senior subordinated notes due 2013 in a Rule 144A privateplacement and received cash proceeds of $267,781 after deduction forunderwriting fees and expenses. The notes are senior subordinated obligationsof the Company and rank junior to all other senior indebtedness of the Companythat does not contain similar subordination provisions. The indenture relatingto the notes contains various limitations on the Company’s ability to incuradditional indebtedness, pay dividends, sell assets and create liens, amongother things. Interest on the notes is payable on February 15 and August 15of each year. No principal payments are required with respect to the notesprior to their final maturity date. The Company has agreed to file aregistration statement with the Securities and Exchange Commission relating toan exchange offer to exchange the notes for registered notes havingsubstantially identical terms.

On February 11,2005, the Company entered into a senior secured credit facility (“Senior CreditFacility”) having a term loan in the amount of $335,000 with a maturity date ofFebruary 11, 2012, and received cash proceeds of approximately $324,950after deducting underwriting fees and expenses. Interest on the term loan isvariable and is equal to LIBOR plus a margin of 2.0%. The Senior CreditFacility requires minimum quarterly principal payments of $838 on the termloan, as well as prepayments from all “net proceeds” received and “excess cashflow,” if applicable. In accordance with the Senior Credit Facility, netproceeds generally relate to proceeds received from the issuance or incurrenceof certain indebtedness or proceeds received on the disposition of assets,adjusted for certain costs and expenses, and are payable promptly upon receiptsubject, in the case of net proceeds from asset dispositions, to meeting thethresholds described below. Net proceeds prepayments in respect of assetdispositions are not payable unless they are in excess of certain minimumamounts, both on an individual basis for any given disposition and in theaggregate for dispositions that, individually, would not meet the threshold.Excess cash flow is to be calculated annually and is defined as EBITDA adjustedfor various expenditures and/or proceeds commencing with the 2005 fiscal year.Prepayments with respect to excess cash flow, if any, are to be made on anannual basis, with the first payment due March 31, 2006. The detailedcalculations supporting those two prepayments are defined in the creditagreement. The remaining principal balance of the term loan is due uponmaturity.

 

The Senior CreditFacility also provides for up to $100,000 in revolving credit borrowings.Borrowings under the revolver bear interest at a rate equal to the base orLIBOR rate elected by the Company at the time plus a margin which can rangefrom 0.75% to 2.25%, based on the rate elected and the consolidated leverageratio of the 

11

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Company. Inaddition, there is an annual maintenance fee equal to 0.5% of the unusedrevolving credit borrowings available under the Senior Credit Facility.Revolving credit borrowings are payable at the option of the Company throughoutthe term of the Senior Credit Facility with the balance due February 11,2011. There were no outstanding revolving credit borrowings under the SeniorCredit Facility as of March 31, 2005.

 

**10.   Income Taxes (as restated):**

 

The effective tax benefit rate of 13.8% and 27.2% on theCompany’s consolidated pre-tax loss for the seven weeks ended March 31,2005 and six weeks ended February 11, 2005, respectively, differs from thestatutory tax rate of 35.0% principally due to non-deductible and partiallydeductible costs incurred related to the purchase of the Company. The Successorperiod is also affected by the U.S. tax effects on the earnings of non-U.S.subsidiaries.

 

The Company has incurred significant expenses relatingto the Transactions and increased interest expense from acquisitionindebtedness in 2005. These expenses are projected to substantially reduce itsdomestic taxable income for the year. These expenses will also significantlylimit the Company’s ability to use foreign tax credits to offset U.S. tax ondividends from foreign affiliates, and may result in the Company’s electing todeduct foreign income and withholding taxes rather than claim them as creditsfor U.S. tax purposes in 2005.

 

The American JobsCreation Act of 2004 (the “Act”) was signed into law in October 2004. Aprovision of the Act allows U.S. companies to repatriate foreign earnings at asubstantially reduced tax rate in 2005. The Company is currently evaluating towhat extent it will use this provision with regard to the repatriation offoreign earnings in 2005, and has not yet completed its evaluation. A finaldetermination on the extent of use of the repatriation provision is likely in thethird quarter of 2005. At that time, the amount of funds to be repatriated andthe financial statement impact should be finalized. The possible range ofunremitted earnings that is being considered under the provision is $10,000 to$30,000. In addition to funds that may be repatriated in 2005 as part of theAct, management now considers other undistributed earnings in non-U.S.subsidiaries to be available for distribution. These same earnings hadpreviously been considered permanently reinvested by management of thePredecessor. The resulting taxes are accounted for as deferred tax liabilitiesin purchase accounting.

 

**11.    Benefit Plans:**

 

Net periodic pension expense is as follows:

 
| ** **                 | ** ** | **U.S. and Canada** | ** ** | **Other**             | ** ** |
|----------------------------|------------|-------------------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **Successor**                 | ** ** | **Predecessor**       | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                 | ** ** | **Seven weeks**          | ** ** | **Six weeks**    | ** ** | **Three months** | ** ** | **Seven weeks** | ** ** | **Six weeks** | ** ** | **Three months** | ** ** |
| ** **                 | ** ** | **ended**                     | ** ** | **ended**             | ** ** | **ended** | ** ** | **ended** | ** ** | **ended** | ** ** | **ended** | ** ** |
| ** **                 | ** ** | **March 31,**            | ** ** | **February 11,** | ** ** | **March 31,** | ** ** | **March 31,** | ** ** | **February 11,** | ** ** | **March 31,** | ** ** |
| ** **                 | ** ** | **2005**                      | ** ** | **2005**              | ** ** | **2004** | ** ** | **2005** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost               |       | $                             | (494       | )                     | $          | (403 | ) | $ | (743 | ) | $ | (471 | ) | $ | (408 | ) | $ | (771 | ) |
| Interest cost              |       | (1,034                        | )          | (890                  | )          | (1,756 | ) | (172 | ) | (154 | ) | (284 | ) |
| Expected return  on assets |       | 1,174                         |       | 1,016                 |       | 2,180 |   | 72 |   | 64 |   | 118 |   |
| Net amortization           |       | —                        |       | (333                  | )          | (675 | ) | — |   | (64 | ) | (134 | ) |
| Net periodic expense       |       | $                             | (354       | )                     | $          | (610 | ) | $ | (994 | ) | $ | (571 | ) | $ | (562 | ) | $ | (1,071 | ) |

 

12

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Net periodicretiree health cost is as follows:

 
| ** **           | ** ** | **Successor**        | ** ** | **Predecessor**       | ** ** |
|----------------------|------------|----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **Seven weeks** | ** ** | **Six weeks**    | ** ** | **Three months** | ** ** |
| ** **           | ** ** | **ended**            | ** ** | **ended**             | ** ** | **ended** | ** ** |
| ** **           | ** ** | **March 31,**   | ** ** | **February 11,** | ** ** | **March 31,** | ** ** |
| ** **           | ** ** | **2005**             | ** ** | **2005**              | ** ** | **2004** | ** ** |
|                 |       |                 |       |                  |       |   |   |
| Service cost         |       | $                    | (93        | )                     | $          | (51 | ) | $ | (104 | ) |
| Interest cost        |       | (144                 | )          | (127                  | )          | (302 | ) |
| Net amortization     |       | —               |       | (28                   | )          | (44 | ) |
|                 |       |                 |       |                  |       |   |   |
| Net periodic expense |       | $                    | (237       | )                     | $          | (206 | ) | $ | (450 | ) |

 

TheCompany made contributions of $164 and $334 to the U.S. and Canadian pensionplans and Other pension plans, respectively, for the three months ended March 31,2005. For the retiree health plan, the Company contributed $14. In addition,the Company made contributions of approximately $350 to the 401(k) savingsplan.

**12.****      ****Commitments and Contingencies:**

There is a risk of environmental impact in chemical manufacturingoperations. The Company’s environmental policies and practices are designed toensure compliance with existing laws and regulations and to minimize thepossibility of significant environmental impact.

The Company is subject to various laws and regulations regardingemissions from its plant locations. These laws and regulations may limit theamount and types of emissions that can be released into the atmosphere. In2003, following an incident at the Kansas City, Kansas plant in which anemission control device failed, we were issued a draft Consent Agreement fromthe Kansas Department of Health and Environment (“KDHE”) for operating theplant without such emission control device in place. The Company currently isin discussions with KDHE regarding historical emissions compliance at thisfacility are awaiting a new draft of the proposed Consent Agreement for furtherdiscussion. Although the final Consent Agreement may impose a fine in excess of$100, the Company does not anticipate that the Consent Agreement will otherwisehave a material impact on its business. The Company has a reserve in the amountof $250 to cover any fines or capital expenditures imposed or required underthe Consent Agreement.

The Company is subject to a cash deficiency agreement related to the$15,000 revolving credit agreement of one of its affiliates, in which it is ageneral partner. This agreement requires the Company to make certaincontributions in order to ensure the affiliate’s compliance with debtcovenants. At March 31, 2005, the affiliate had no outstanding balanceunder their revolving credit agreement and was in compliance with allcovenants.

The Company and its subsidiaries have entered into various leaseagreements for the rental of office and plant facilities and equipment,substantially all of which are classified as operating leases.

The Company and the committee that administers the Profit Sharing Planhave been advised that certain transactions under the plan involving the Commonstock, Series B, held by the plan may have violated certain guidelineswhich govern sales of securities to the Company. As a result, the Company hasrecorded a reserve for contingent liabilities of $319 as of March 31, 2005for the excise tax and applicable interest which may be payable in connectionwith any such transactions. The Company and the committee are investigatingthese matters and are considering possible corrective or remedial action, whichmay require additional cash contributions to the plan and/or plan participants,and payments of penalty taxes under ERISA and the Internal Revenue Code. Basedon the investigation to date, the Company is not able to determine whether anysuch additional liabilities that may be associated with any such corrective actionexist. If a corrective or remedial action is required, the range of suchadditional liabilities is estimated to be between zero and $9,500. As a resultof the uncertainty regarding the outcome of the possible corrective or remedialaction no provision

13

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has been made in its financial statements with respect to thisadditional contingent liability. Because these estimates are based on theCompany’s ongoing investigation, there can be no assurance that actual costswill not materially differ from these estimates.

 

The Company received aletter dated January 14, 2005 from King County, WA and the King CountyInternational Airport (collectively, the “Airport”) reporting that the BoeingCompany (“Boeing”) has alleged that paint and reflective glass beads used bythe Airport in routine taxiway stripe repainting operations on December 2,2004, on a particular taxiway at the airfield, did not bond or became loose andwere ingested into the jet turbine engines of several of Boeing’s new,ready-for-customer delivery, aircraft. The letter further states that Boeingclaimed that as a result of the incident it had replaced engines on fourteenaircraft and there were many more pending. This matter is in a very preliminarystage. No litigation or discovery has commenced. However, there can be noassurance that the Company will not become obligated to contribute significantamounts toward the recovery of losses described in the airport’s letter, orsimilar ones, or that the circumstances described therein would not be materialto its financial position, results of operations or cash flows.

** **

**13. Related Party Transactions:**

 

In connection withthe Transactions, JP Morgan Partners, LLC (“JPMP”) and the Company entered intoa management agreement relating to the provision of certain financial andstrategic advisory services and consulting services. The Company paid aone-time fee in the amount of $10,000 on February 11, 2005 for structuringthe Transactions. In addition, the Company agreed to pay to the Sponsors anannual monitoring fee equal to $2,000 commencing in 2006. The managementagreement will also provide for reimbursement of fees payable by Holdings forthe maintenance of its corporate existence, corporate overhead expenses and forsalaries and other compensation of certain employees who perform services forboth Holdings and the Company.

**14.  Business Segments:**

TheCompany’s reportable segments are organized based on the operating divisionswithin the Company:  Chemicals andPotters. Chemicals develops, manufactures and distributes silicate-basedspecialty chemicals to mainly large industrial and consumer product companies.Potters manufactures highly engineered solid and hollow glass spheres that aremainly sold to contractors, governmental agencies and manufacturing companies.

Thetable below presents information about the reported segments:
| ** **                | ** ** | **Successor**          | ** ** | **Predecessor**       | ** ** |
|---------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                | ** ** | **Seven weeks**   | ** ** | **Six weeks**    | ** ** | **Three months** | ** ** |
| ** **                | ** ** | **ended**              | ** ** | **ended**             | ** ** | **ended** | ** ** |
| ** **                | ** ** | **March 31,**     | ** ** | **February 11,** | ** ** | **March 31,** | ** ** |
| ** **                | ** ** | **2005**               | ** ** | **2005**              | ** ** | **2004** | ** ** |
| ** **                | ** ** | **(as restated)** | ** ** | ** **            | ** ** | ** ** | ** ** |
|                      |       |                   |       |                  |       |   |   |
| Net Sales:                |       |                   |       |                  |       |   |   |
| Chemicals                 |       | $                      | 52,701     |                  | $          | 48,264 |   | $ | 100,706 |   |
| Potters                   |       | 22,512                 |       | 15,931                |       | 38,338 |   |
| Total                     |       | $                      | 75,213     |                  | $          | 64,195 |   | $ | 139,044 |   |
|                      |       |                   |       |                  |       |   |   |
| Adjusted EBITDA  (1):     |       |                   |       |                  |       |   |   |
| Chemical Groups           |       | $                      | 14,602     |                  | 10,440     |   | $ | 23,583 |   |
| Potters                   |       | 3,883                  |       | 2,992                 |       | 6,759 |   |
|                      |       |                   |       |                  |       |   |   |
| Segments adjusted  EBITDA |       | $                      | 18,485     |                  | $          | 13,432 |   | $ | 30,342 |   |

----

 

(1) Adjustedearnings before interest, income taxes, depreciation and amortization (“AdjustedEBITDA”) consists of EBITDA adjusted for items such as impairment charges,environmental and other expenses, purchase accounting

14

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impacts,severance and merger related costs. Management evaluates the performance of itssegments and allocates resources based on several factors, of which the primarymeasure is Adjusted EBITDA. Adjusted EBITDA does not represent cash flow forperiods presented and should not be considered as an alternative to net incomeas an indicator of the Company’s operating performance or as an alternative tocash flows as a source of liquidity. Adjusted EBITDA as defined by the Companymay not be comparable with EBITDA or Adjusted EBITDA as defined by othercompanies.

Areconciliation from Segments Adjusted EBITDA to pre-tax income follows:
| ** **                                        | ** ** | **Successor**          | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **Seven weeks**   | ** ** | **Six weeks**    | ** ** | **Three months** | ** ** |
| ** **                                        | ** ** | **ended**              | ** ** | **ended**             | ** ** | **ended** | ** ** |
| ** **                                        | ** ** | **March 31,**     | ** ** | **February 11,** | ** ** | **March 31,** | ** ** |
| ** **                                        | ** ** | **2005**               | ** ** | **2005**              | ** ** | **2004** | ** ** |
| ** **                                        | ** ** | **(as restated)** | ** ** | ** **            | ** ** | ** ** | ** ** |
|                                              |       |                   |       |                  |       |   |   |
| Segments  adjusted EBITDA                         |       | $                      | 18,485     |                  | $          | 13,432 |   | $ | 30,342 |   |
| Less:                                             |       |                   |       |                  |       |   |   |
| Interest expense                                  |       | 5,351                  |       | 771                   |       | 1,634 |   |
| Depreciation and  amortization                    |       | 8,390                  |       | 4,436                 |       | 9,057 |   |
| Impairment/disposal  of long-lived assets         |       | (176                   | )          | —                |       | 700 |   |
| Corporate  expenses                               |       | 3,465                  |       | 3,228                 |       | 7,292 |   |
| Environmental  and other                          |       | 468                    |       | —                |       | (104 | ) |
| Write off of  in-process R&D                  |       | 3,338                  |       | —                |       | — |   |
| Inventory  step-up                                |       | 7,700                  |       | —                |       | 259 |   |
| Severance                                         |       | 3,887                  |       | 5,604                 |       | 700 |   |
| Merger related  costs                             |       | 18,701                 |       | 8,713                 |       | — |   |
| Minority  interest                                |       | (72                    | )          | (59                   | )          | (105 | ) |
| Income (loss) before  taxes and minority interest |       | $                      | (32,567    | )                     | $          | (9,261 | ) | $ | 10,909 |   |

 

**15. Guarantor and NonguarantorStatements:**

In connection with the Transactions described inNote 1 and as a part of the related financings, the Company issued$275,000 of 7.5% senior subordinated notes due 2013 in a private placementpursuant to Rule 144A and Regulation S. The notes are generalunsecured obligations of the Company, subordinated in right of payment to allexisting and future senior indebtedness of the Company, and guaranteed on afull, unconditional, joint and several basis by the Company’s wholly-owneddomestic subsidiaries.

The following consolidating financial informationpresents:

- Consolidating balance sheets as of March 31,2005 for the Successor and December 31, 2004 for the Predecessorand the related statements of operations and cash flows for the sevenweeks ended March 31, 2005 for the Successor and the six weeks ended February 11,2005 and the three months ended March 31, 2004 for the Predecessor.

- Elimination entries necessary to consolidatethe Predecessor and Successor, with their respective guarantor subsidiaries andnonguarantor subsidiaries. The principal elimination entries eliminateinvestments in subsidiaries and intercompany balances and transactions.Intercompany sales were not reported as part of the consolidating statementsand, therefore, do not require elimination.

15

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PQ CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING BALANCE SHEET - SUCCESSORMarch 31, 2005(in thousands)(unaudited)(as restated)

 
| ** **                                              | ** ** | **Parent**  | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------|------------|-------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                                              | ** ** | **company** | ** ** | **subsidiaries** | ** ** | **subsidiaries** | ** ** | **Eliminations** | ** ** | **total**        | ** ** |
| ASSETS                                                  |       |        |       |             |       |             |       |             |       |             |       |
| Cash and cash  equivalents                              |       | $           | 9,142      |             | $          | 519              |       | $                | 11,651     |             | $          | — |   | $ | 21,312 |   |
| Receivables, net                                        |       | 31,062      |       | 10,392           |       | 51,872           |       | —           |       | 93,326           |       |
| Intercompany  receivable                                |       | —      |       | 152,132          |       | —           |       | (152,132         | )          | —           |       |
| Inventories                                             |       | 25,897      |       | 28,020           |       | 38,101           |       | —           |       | 92,018           |       |
| Prepaid and  other current assets                       |       | 15,915      |       | 78               |       | 9,018            |       | —           |       | 25,011           |       |
| Total current assets                                    |       | 82,016      |       | 191,141          |       | 110,642          |       | (152,132         | )          | 231,667          |       |
| Investments in  subsidiaries                            |       | 542,260     |       | 202,307          |       | —           |       | (744,567         | )          | —           |       |
| Investments in  affiliated companies                    |       | 69,883      |       | 2,973            |       | —           |       | —           |       | 72,856           |       |
| Property, plant  and equipment, net                     |       | 134,967     |       | 38,553           |       | 189,108          |       | —           |       | 362,628          |       |
| Goodwill                                                |       | 73,843      |       | 84,463           |       | 43,383           |       | —           |       | 201,689          |       |
| Tradenames                                              |       | 20,700      |       | 32,600           |       | —           |       | —           |       | 53,300           |       |
| Other intangible  assets, net                           |       | 93,555      |       | 30,500           |       | 10,225           |       | —           |       | 134,280          |       |
| Other long-term  assets                                 |       | 33,233      |       | 421              |       | 12,911           |       | —           |       | 46,565           |       |
| Total assets                                            |       | $           | 1,050,457  |             | $          | 582,958          |       | $                | 366,269    |             | $          | (896,699 | ) | $ | 1,102,985 |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY              |       |        |       |             |       |             |       |             |       |             |       |
| Notes payable  and current maturities of long-term debt |       | $           | 3,350      |             | $          | —           |       | $                | 769        |             | $          | — |   | $ | 4,119 |   |
| Cash overdraft                                          |       | 2,271       |       | 475              |       | —           |       | —           |       | 2,746            |       |
| Accounts payable                                        |       | 9,033       |       | 3,612            |       | 23,951           |       | —           |       | 36,596           |       |
| Intercompany  payable                                   |       | 93,917      |       | —           |       | 58,215           |       | (152,132         | )          | —           |       |
| Accrued  liabilities                                    |       | 25,727      |       | 3,024            |       | 14,559           |       | —           |       | 43,310           |       |
| Total current liabilities                               |       | 134,298     |       | 7,111            |       | 97,494           |       | (152,132         | )          | 86,771           |       |
| Long-term debt                                          |       | 606,650     |       | —           |       | 458              |       | —           |       | 607,108          |       |
| Deferrred income  taxes                                 |       | 111,569     |       | 33,587           |       | 36,160           |       | —           |       | 181,316          |       |
| Other long-term  liabilities                            |       | 57,964      |       | —           |       | 24,128           |       | —           |       | 82,092           |       |
| Minority  interest in equity of subsidiaries            |       | —      |       | —           |       | 5,722            |       | —           |       | 5,722            |       |
| Commitments and  contingencies                          |       |        |       |             |       |             |       |             |       |             |       |
| Stockholders’  equity                              |       | 139,976     |       | 542,260          |       | 202,307          |       | (744,567         | )          | 139,976          |       |
| Total  liabilities and stockholders’ equity        |       | $           | 1,050,457  |             | $          | 582,958          |       | $                | 366,269    |             | $          | (896,699 | ) | $ | 1,102,985 |   |

 

16

----

PQCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING BALANCE SHEET - PREDECESSORDecember 31, 2004(in thousands)(unaudited)

 
| ** **                                              | ** ** | **Parent**  | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------|------------|-------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                                              | ** ** | **company** | ** ** | **subsidiaries** | ** ** | **subsidiaries** | ** ** | **Eliminations** | ** ** | **total**        | ** ** |
| ASSETS                                                  |       |        |       |             |       |             |       |             |       |             |       |
| Cash and cash  equivalents                              |       | $           | 2,035      |             | $          | 348              |       | $                | 10,426     |             | $          | — |   | $ | 12,809 |   |
| Receivables, net                                        |       | 28,519      |       | 11,012           |       | 49,800           |       | —           |       | 89,331           |       |
| Intercompany  receivable                                |       | —      |       | 150,732          |       | —           |       | (150,732         | )          | —           |       |
| Inventories                                             |       | 15,140      |       | 15,535           |       | 32,251           |       | —           |       | 62,926           |       |
| Prepaid and  other current assets                       |       | 8,345       |       | 152              |       | 7,421            |       | —           |       | 15,918           |       |
| Total current assets                                    |       | 54,039      |       | 177,779          |       | 99,898           |       | (150,732         | )          | 180,984          |       |
| Investments in  subsidiaries                            |       | 332,871     |       | 129,240          |       | —           |       | (462,111         | )          | —           |       |
| Investments in  affiliated companies                    |       | 20,765      |       | 4,090            |       | 2,450            |       | —           |       | 27,305           |       |
| Property, plant  and equipment, net                     |       | 100,822     |       | 21,854           |       | 111,310          |       | —           |       | 233,986          |       |
| Goodwill                                                |       | 6,344       |       | 7,000            |       | 15,649           |       | —           |       | 28,993           |       |
| Other intangible  assets, net                           |       | 857         |       | 400              |       | 1,548            |       | —           |       | 2,805            |       |
| Other long-term  assets                                 |       | 15,312      |       | 425              |       | 19,703           |       | —           |       | 35,440           |       |
| Total assets                                            |       | $           | 531,010    |             | $          | 340,788          |       | $                | 250,558    |             | $          | (612,843 | ) | $ | 509,513 |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY              |       |        |       |             |       |             |       |             |       |             |       |
| Notes payable  and current maturities of long-term debt |       | $           | 11,234     |             | $          | —           |       | $                | 6,439      |             | $          | — |   | $ | 17,673 |   |
| Cash overdraft                                          |       | 3,675       |       | 978              |       | —           |       | —           |       | 4,653            |       |
| Accounts payable                                        |       | 12,694      |       | 3,188            |       | 27,111           |       | —           |       | 42,993           |       |
| Intercompany  payable                                   |       | 105,662     |       | —           |       | 45,070           |       | (150,732         | )          | —           |       |
| Accrued liabilities                                     |       | 27,984      |       | 3,327            |       | 17,645           |       | —           |       | 48,955           |       |
| Total current liabilities                               |       | 161,249     |       | 7,493            |       | 96,265           |       | (150,732         | )          | 114,274          |       |
| Long-term debt                                          |       | 52,522      |       | —           |       | 869              |       | —           |       | 53,391           |       |
| Deferred income  taxes                                  |       | 2,870       |       | 424              |       | 1,817            |       | —           |       | 5,111            |       |
| Other long-term  liabilities                            |       | 34,078      |       | —           |       | 18,330           |       | —           |       | 52,408           |       |
| Minority  interest in equity of subsidiaries            |       | —      |       | —           |       | 4,038            |       | —           |       | 4,038            |       |
| Commitments and  contingencies                          |       |        |       |             |       |             |       |             |       |             |       |
| Shares subject  to mandatory redemption                 |       | 6,361       |       | —           |       | —           |       | —           |       | 6,361            |       |
| Stockholders’  equity                              |       | 273,930     |       | 332,871          |       | 129,240          |       | (462,111         | )          | 273,930          |       |
| Total  liabilities and stockholders’ equity        |       | $           | 531,010    |             | $          | 340,788          |       | $                | 250,559    |             | $          | (612,843 | ) | $ | 509,513 |   |

 

17

----

PQCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS - SUCCESSORFor the seven weeks ended March 31, 2005(in thousands)(unaudited)(as restated)

 
| ** **                                           | ** ** | **Parent**  | ** ** | **Guarantor**    | ** ** | **Nonguarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------|------------|-------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **company** | ** ** | **subsidiaries** | ** ** | **subsidiaries** | ** ** | **Eliminations** | ** ** | **total**        | ** ** |
|                                                 |       |        |       |             |       |             |       |             |       |             |       |
| Sales                                                |       | $           | 29,712     |             | $          | 8,685            |       | $                | 36,816     |             | $          | — |   | $ | 75,213 |   |
| Cost of goods  sold                                  |       | 22,908      |       | 6,549            |       | 36,724           |       | —           |       | 66,181           |       |
| Gross profit                                         |       | 6,804       |       | 2,136            |       | 92               |       | —           |       | 9,032            |       |
| Selling, general  and administative expenses         |       | 10,119      |       | 1,983            |       | 4,570            |       | —           |       | 16,672           |       |
| Other operating  expense                             |       | 16,148      |       | 350              |       | 132              |       | —           |       | 16,630           |       |
| Operating income                                     |       | (19,463     | )          | (197             | )          | (4,610           | )          | —           |       | (24,270          | )          |
| Equity in net  income (loss) of affiliated companies |       | 3,105       |       | (3,289           | )          | 87               |       | 4,256            |       | 4,159            |       |
| Interest  expense, net                               |       | 5,169       |       | —           |       | 182              |       | —           |       | 5,351            |       |
| Other expense  (income)                              |       | 8,948       |       | (2,576           | )          | 733              |       | —           |       | 7,105            |       |
| Income (loss) before taxes and minority interest     |       | (30,475     | )          | (910             | )          | (5,438           | )          | 4,256            |       | (32,567          | )          |
| Provision  (benefit) for income taxes                |       | (2,318      | )          | 64               |       | (2,228           | )          | —           |       | (4,482           | )          |
| Minority  interest                                   |       | —      |       | —           |       | 72               |       | —           |       | 72               |       |
| Net (loss)  income                                   |       | $           | (28,157    | )                | $          | (974             | )          | $                | (3,282     | )                | $          | 4,256 |   | $ | (28,157 | ) |

 

18

----

PQCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATINGSTATEMENT OF OPERATIONS - PREDECESSORFor the six weeks ended February 11,2005(in thousands)(unaudited)
| ** **                                           | ** ** | **Parent  company** | ** ** | **Guarantor  subsidiaries** | ** ** | **Nonguarantor  subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  total** | ** ** |
|------------------------------------------------------|------------|---------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
| Sales                                                |       | $                   | 25,193     |                        | $          | 7,445                          |       | $                | 31,557     |                    | $          | — |   | $ | 64,195 |   |
| Cost of goods sold                                   |       | 19,177              |       | 5,526                       |       | 23,873                         |       | —           |       | 48,576                  |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Gross profit                                         |       | 6,016               |       | 1,919                       |       | 7,684                          |       | —           |       | 15,619                  |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Selling, general and  administative expenses         |       | 5,740               |       | 1,689                       |       | 3,792                          |       | —           |       | 11,221                  |       |
| Other operating expense                              |       | 12,142              |       | 12                          |       | 113                            |       | —           |       | 12,267                  |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Operating (loss)  income                             |       | (11,866             | )          | 218                         |       | 3,779                          |       | —           |       | (7,869                  | )          |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Equity in net income  (loss) of affiliated companies |       | 5,048               |       | 2,602                       |       | 74                             |       | (7,989           | )          | (265                    | )          |
| Interest expense, net                                |       | 615                 |       | —                      |       | 156                            |       | —           |       | 771                     |       |
| Other expense (income)                               |       | 3,051               |       | (2,766                      | )          | 71                             |       | —           |       | 356                     |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Income (loss)  before taxes and minority interest    |       | (10,484             | )          | 5,586                       |       | 3,626                          |       | (7,989           | )          | (9,261                  | )          |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Provision (benefit) for  income taxes                |       | (3,686              | )          | 204                         |       | 960                            |       | —           |       | (2,522                  | )          |
| Minority interest                                    |       | —              |       | —                      |       | 59                             |       | —           |       | 59                      |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net (loss) income                                    |       | $                   | (6,798     | )                           | $          | 5,382                          |       | $                | 2,607      |                    | $          | (7,989 | ) | $ | (6,798 | ) |

 

19

----

PQ CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS - PREDECESSORFor the three months ended March 31, 2004(in thousands)(unaudited)
| ** **                                               | ** ** | **Parent  company** | ** ** | **Guarantor  subsidiaries** | ** ** | **Nonguarantor  subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  total** | ** ** |
|----------------------------------------------------------|------------|---------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Sales                                                    |       | $                   | 58,634     |                        | $          | 16,770                         |       | $                | 63,640     |                    | $          | — |   | $ | 139,044 |   |
| Cost of goods sold                                       |       | 44,645              |       | 12,751                      |       | 47,128                         |       | —           |       | 104,524                 |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Gross profit                                             |       | 13,989              |       | 4,019                       |       | 16,512                         |       | —           |       | 34,520                  |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Selling, general and  administative expenses             |       | 10,900              |       | 3,501                       |       | 8,107                          |       | —           |       | 22,508                  |       |
| Other operating expense                                  |       | 555                 |       | 25                          |       | 119                            |       | —           |       | 699                     |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Operating income                                         |       | 2,534               |       | 493                         |       | 8,286                          |       | —           |       | 11,313                  |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Equity in net income  (loss) of affiliated companies     |       | 7,832               |       | 5,402                       |       | 125                            |       | (11,206          | )          | 2,153                   |       |
| Interest expense, net                                    |       | 1,554               |       | 7                           |       | 73                             |       | —           |       | 1,634                   |       |
| Other expense (income)                                   |       | 397                 |       | (842                        | )          | 1,368                          |       | —           |       | 923                     |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Income (loss) before  income taxes and minority interest |       | 8,415               |       | 6,730                       |       | 6,970                          |       | (11,206          | )          | 10,909                  |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Provision for income  taxes                              |       | 1,266               |       | 833                         |       | 1,556                          |       | —           |       | 3,655                   |       |
| Minority interest                                        |       | —              |       | —                      |       | 105                            |       | —           |       | 105                     |       |
|                                                     |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net income (loss)                                        |       | $                   | 7,149      |                        | $          | 5,897                          |       | $                | 5,309      |                    | $          | (11,206 | ) | $ | 7,149 |   |

 

20

----

PQ CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - SUCCESSORFor the seven weeks ended March 31, 2005(in thousands)(unaudited)
| ** **                                           | ** ** | **Parent  company** | ** ** | **Guarantor  subsidiaries** | ** ** | **Nonguarantor  subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  total** | ** ** |
|------------------------------------------------------|------------|---------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash (used)  provided by operating activities    |       | $                   | (37,761    | )                           | $          | 1,099                          |       | $                | 3,652      |                    | $          | — |   | $ | (33,010 | ) |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  investing activities:               |       |                |       |                        |       |                           |       |             |       |                    |       |
| Purchases of  property, plant and equipment          |       | (1,359              | )          | (423                        | )          | (1,307                         | )          | —           |       | (3,089                  | )          |
| Merger  consideration                                |       | (626,000            | )          | —                      |       | —                         |       | —           |       | (626,000                | )          |
| Merger costs                                         |       | (6,485              | )          | —                      |       | —                         |       | —           |       | (6,485                  | )          |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash used  for investing activities              |       | (633,844            | )          | (423                        | )          | (1,307                         | )          | —           |       | (635,574                | )          |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  financing activities:               |       |                |       |                        |       |                           |       |             |       |                    |       |
| Notes payable  and cash overdrafts, net              |       | 4,960               |       | (503                        | )          | (6,347                         | )          | —           |       | (1,890                  | )          |
| Issuance of  long-term debt                          |       | 335,000             |       | —                      |       | —                         |       | —           |       | 335,000                 |       |
| Issuance of  senior notes                            |       | 275,000             |       | —                      |       | —                         |       | —           |       | 275,000                 |       |
| Debt acquisition  costs                              |       | (16,503             | )          | —                      |       | —                         |       | —           |       | (16,503                 | )          |
| Repayments of  long-term debt                        |       | (114,524            | )          | —                      |       | —                         |       | —           |       | (114,524                | )          |
| Equity  contribution                                 |       | 163,600             |       | —                      |       | —                         |       | —           |       | 163,600                 |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash  provided by (used in) financing activities |       | 647,533             |       | (503                        | )          | (6,347                         | )          | —           |       | 640,683                 |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Effect of exchange rate  changes on cash             |       | —              |       | —                      |       | 456                            |       | —           |       | 456                     |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net change in cash and  cash equivalents             |       | (24,072             | )          | 173                         |       | (3,546                         | )          | —           |       | (27,445                 | )          |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash  equivalents at beginning of period    |       | 33,214              |       | 346                         |       | 15,197                         |       | —           |       | 48,757                  |       |
|                                                 |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash equivalents at end of period           |       | $                   | 9,142      |                        | $          | 519                            |       | $                | 11,651     |                    | $          | — |   | $ | 21,312 |   |

 

21

----

PQ CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - PREDECESSORFor the six weeks ended February 11, 2005(in thousands)(unaudited)
| ** **                                          | ** ** | **Parent  company** | ** ** | **Guarantor  subsidiaries** | ** ** | **Nonguarantor  subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  total** | ** ** |
|-----------------------------------------------------|------------|---------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash (used)  provided by operating activities   |       | $                   | (13,627    | )                           | $          | 71                             |       | $                | 6,591      |                    | $          | — |   | $ | (6,965 | ) |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  investing activities:              |       |                |       |                        |       |                           |       |             |       |                    |       |
| Purchases of property, plant and equipment          |       | (1,165              | )          | (73                         | )          | (1,120                         | )          | —           |       | (2,358                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash used for investing activities              |       | (1,165              | )          | (73                         | )          | (1,120                         | )          | —           |       | (2,358                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  financing activities:              |       |                |       |                        |       |                           |       |             |       |                    |       |
| Notes payable and cash overdrafts, net              |       | 44,857              |       | —                      |       | —                         |       | —           |       | 44,857                  |       |
| Proceeds from issuance of treasury stock            |       | 1,161               |       | —                      |       | —                         |       | —           |       | 1,161                   |       |
| Purchase of stock                                   |       | (47                 | )          | —                      |       | —                         |       | —           |       | (47                     | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash provided by (used in) financing activities |       | 45,971              |       | —                      |       | —                         |       | —           |       | 45,971                  |       |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Effect of  exchange rate changes on cash            |       | —              |       | —                      |       | (700                           | )          | —           |       | (700                    | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net change in  cash and cash equivalents            |       | 31,179              |       | (2                          | )          | 4,771                          |       | —           |       | 35,948                  |       |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash  equivalents at beginning of period   |       | 2,035               |       | 348                         |       | 10,426                         |       | —           |       | 12,809                  |       |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash  equivalents at end of period         |       | $                   | 33,214     |                        | $          | 346                            |       | $                | 15,197     |                    | $          | — |   | $ | 48,757 |   |

 

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PQ CORPORATION ANDSUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - PREDECESSORFor the three months ended March 31, 2004(in thousands)(unaudited)
| ** **                                          | ** ** | **Parent  company** | ** ** | **Guarantor  subsidiaries** | ** ** | **Nonguarantor  subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  total** | ** ** |
|-----------------------------------------------------|------------|---------------------|------------|-----------------------------|------------|--------------------------------|------------|------------------|------------|-------------------------|------------|
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash (used)  provided by operating activities   |       | $                   | (2,379     | )                           | $          | (7,497                         | )          | $                | 15,758     |                    | $          | — |   | $ | 5,882 |   |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  investing activities:              |       |                |       |                        |       |                           |       |             |       |                    |       |
| Proceeds from sale of capital assets                |       | —              |       | —                      |       | 2                              |       | —           |       | 2                       |       |
| Purchases of property, plant and equipment          |       | (1,494              | )          | (752                        | )          | (2,057                         | )          | —           |       | (4,303                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash used for investing activities              |       | (1,494              | )          | (752                        | )          | (2,055                         | )          | —           |       | (4,301                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash flows from  financing activities:              |       |                |       |                        |       |                           |       |             |       |                    |       |
| Notes payable and cash overdrafts, net              |       | (4,700              | )          | —                      |       | (2,114                         | )          | —           |       | (6,814                  | )          |
| Issuance of long-term debt                          |       | 11,500              |       | —                      |       | (4,700                         | )          | —           |       | 6,800                   |       |
| Repayments of long-term debt                        |       | —              |       | —                      |       | (246                           | )          | —           |       | (246                    | )          |
| Proceeds from issuance of treasury stock            |       | 54                  |       | —                      |       | —                         |       | —           |       | 54                      |       |
| Purchase of stock                                   |       | (966                | )          | —                      |       | —                         |       | —           |       | (966                    | )          |
| Distributions to minority interest                  |       | —              |       | —                      |       | (75                            | )          | —           |       | (75                     | )          |
| Cash dividends                                      |       | (2,718              | )          | 8,300                       |       | (8,300                         | )          | —           |       | (2,718                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net cash provided by (used in) financing activities |       | 3,170               |       | 8,300                       |       | (15,435                        | )          | —           |       | (3,965                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Effect of  exchange rate changes on cash            |       | —              |       | —                      |       | (13                            | )          | —           |       | (13                     | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Net change in  cash and cash equivalents            |       | (703                | )          | 51                          |       | (1,745                         | )          | —           |       | (2,397                  | )          |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash  equivalents at beginning of year     |       | 1,377               |       | 64                          |       | 9,343                          |       | —           |       | 10,784                  |       |
|                                                |       |                |       |                        |       |                           |       |             |       |                    |       |
| Cash and cash  equivalents at end of year           |       | $                   | 674        |                        | $          | 115                            |       | $                | 7,598      |                    | $          | — |   | $ | 8,387 |   |

 

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