Pioneer Announces 2004 Third Quarter Results HOUSTON, Nov. 1
/PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (OTC:PONR)
(BULLETIN BOARD: PONR) today reported net income of $3.9 million,
or $0.38 per diluted share, on revenues of $105.0 million for the
three months ended September 30, 2004, as compared to net income of
$2.0 million, or $0.19 per diluted share, on revenues of $100.0
million in the third quarter of 2003. For the nine months ended
September 30, 2004, Pioneer's net loss was $5.8 million, or $0.58
per diluted share, on revenues of $292.1 million, as compared to
net income of $23.4 million, or $2.31 per diluted share, on
revenues of $285.3 million for the nine months ended September 30,
2003. During the quarter ended September 30, 2004, Pioneer's
chlor-alkali plants operated at 97% of capacity, and Pioneer's
average ECU netback during the quarter was $409, $17 higher than
its average of $392 during the 2003 quarter. For the nine months
ended September 30, 2004, the average ECU netback was $366,
compared to an average of $387 for the year-earlier period.
Revenues were only slightly higher for three- and nine-month
periods ended September 30, 2004, as compared to the comparable
periods in 2003. For the third quarter of 2004 and the
year-to-date, Pioneer's sales volumes were greater than during the
comparable 2003 periods. Cost of sales - product increased by $3.9
million in the three months ended September 30, 2004, as compared
to the same period in the prior year. Higher production levels
resulted in increased expenditures for salt, power and freight of
$3.2 million and Pioneer's purchase-for-resale costs were $1.7
million higher, while personnel-related expenses and maintenance
costs were $0.8 million and $1.4 million lower, respectively, in
the third quarter of 2004 than in the same quarter of 2003. Cost of
sales - product increased by $9.2 million for the nine months ended
September 30, 2004, as compared to the same period in the prior
year. Included in the increased costs were higher salt, power and
freight costs of $9.5 million, as well as $4.3 million in
additional costs for purchases for resale. Cost of sales -- product
in the first nine months of 2004 also included higher depreciation
expense of $3.7 million that resulted primarily from a charge
recorded in the first quarter of 2004 for non-productive plant
assets. Off-setting a portion of the increase from the prior year
was the absence of an environmental charge of $9.5 million that was
recorded in the first quarter of 2003. Selling, general and
administrative expenses in the 2004 third quarter were $0.6 million
lower than in the third quarter of 2003, with lower
personnel-related expenses of $0.8 million being partially offset
by higher consulting fees and expenses of $0.5 million. The
personnel-related savings and the consulting fees and expenses were
related to Project STAR, an organizational efficiency project that
Pioneer initiated during the first quarter of 2004. Selling,
general and administrative expenses increased by $0.3 million for
the nine months ended September 30, 2004, as compared to the nine
months ended September 30, 2003, primarily due to $3.8 million of
consulting fees and expenses related to Project STAR, partially
offset by decreases of $2.0 million in bad debt expense and $0.6
million in personnel- related expenses for the 2004 period.
Included in other items for the nine-month period ended September
30, 2004, was a charge of $3.2 million that Pioneer recorded during
the second quarter for employee severance and benefits costs
related to the implementation of Project STAR. Michael Y. McGovern,
Pioneer's President and Chief Executive Officer, stated, "We are
beginning to realize the benefits of the chlorine and caustic soda
price increases that we have announced this year. The industry is
currently operating at or near capacity rates and industry
observers indicate that the outlook for demand is positive for the
balance of 2004 and into 2005." Significant charges and credits
that are not specifically related to plant operating and
maintenance activities and administrative costs and that affect the
comparability of operating income between the nine months ended
September 30, 2004, and the nine months ended September 30, 2003,
are as follows (amounts in millions): Nine Months Ended September
30, 2004 2003 Operating income $ 7.3 $39.5 Charges (Credits) Cost
of sales - products $ 3.4 $ 9.5 Cost of sales - derivatives ---
21.0 Change in fair value of derivatives --- (87.3) Asset
impairment --- 40.8 For the nine-month periods, charges and credits
noted above are detailed as follows: -- During the first nine
months of 2004 depreciation expense of $3.4 million, included in
cost of sales - product, related to a first-quarter charge with
respect to non-productive assets at Pioneer's Tacoma chlor-alkali
facility. During the nine months ended September 30, 2003, cost of
sales - product included a first-quarter charge of $9.5 million in
Pioneer's reserves for environmental remediation liabilities, based
on an analysis of environmental conditions at all of Pioneer's
properties. -- During the first quarter of 2003 all of the
conditions were satisfied with respect to the settlement of a
dispute regarding the supply of power to Pioneer's Henderson
facility. As a result of the settlement with the Colorado River
Commission ("CRC"), Pioneer was released from all claims for
liability with respect to the related electricity derivatives
agreements, and CRC retained all amounts it had received related to
the derivatives agreements. Consequently, during the nine months
ended September 30, 2003, the receivable of $21.0 million that
Pioneer had recorded related to estimated net proceeds from matured
derivatives was reversed, and the net liability of $87.3 million
that had been recorded for the net mark-to-market loss on
outstanding derivative positions was also reversed. -- In
connection with the settlement of the dispute with CRC, Pioneer
entered into a new power agreement effective as of January 1, 2003.
The market rates under the new agreement are expected to remain at
levels higher than the rates under the long-term hydropower
contracts that were assigned as part of the settlement. Based on an
analysis of the effect of the higher power costs on the value of
the Henderson facility, Pioneer recorded an impairment charge of
$40.8 million during the first nine months of 2003. There were no
other significant charges and credits, not specifically related to
plant operating and maintenance activities, during the third
quarters in 2004 and 2003 that affect the comparability of
operating income between those periods. Pioneer's net income is
affected by the remeasurement of Canadian dollar- denominated
account balances in U.S. dollars for financial reporting purposes.
In the third quarter of 2004, Pioneer reported as other expense
$1.8 million of currency exchange loss, compared to $0.1 million of
other expense from currency exchange loss in the third quarter of
2003. For the nine months ended September 30, 2004, Pioneer
reported as other expense a currency exchange loss of $1.1 million,
while a currency exchange loss of $4.5 million was recognized for
the year-earlier period. At September 30, 2004, Pioneer had
liquidity of $21.0 million, which included cash of $3.3 million and
available borrowings under Pioneer's revolving credit facility of
$17.7 million, net of letters of credit outstanding on that date.
Pioneer, based in Houston, manufactures chlorine, caustic soda,
bleach, hydrochloric acid and related products used in a variety of
applications, including water treatment, plastics, pulp and paper,
detergents, agricultural chemicals, pharmaceuticals and medical
disinfectants. Pioneer owns and operates four chlor-alkali plants
and several downstream manufacturing facilities in North America.
Pioneer has filed its quarterly report on Form 10-Q for the quarter
ended September 30, 2004, and has posted it to its Internet web
site, so it is readily accessible. Other information and press
releases of Pioneer Companies, Inc. can also be obtained from its
Internet web site at http://www.piona.com/ . Pioneer will conduct a
teleconference on Thursday, November 4, 2004, at 9:00 a.m. Central
time in order to discuss its financial results for the third
quarter of 2004. Individuals who are interested in listening to the
teleconference may call (800) 670-3545 at that time and request to
listen to the Pioneer earnings teleconference. A replay of this
teleconference will be available from 11:00 a.m. (Central time) on
November 4, 2004, until 11:00 a.m. on November 6, 2004, by dialing
(800) 633-8284 reservation number 21212847. Certain statements in
this news release are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act. Forward-
looking statements relate to matters that are not historical facts.
Such statements involve risks and uncertainties, including, but not
limited to, Pioneer's high financial leverage, global political and
economic conditions, the demand and prices for Pioneer's products,
Pioneer and industry production volumes, competitive prices, the
cyclical nature of the markets for many of Pioneer's products and
raw materials, the effect of Pioneer's results of operations on its
debt agreements, the effects of Pioneer's organizational efficiency
project and other risks and uncertainties described in Pioneer's
filings with the Securities and Exchange Commission. Actual
outcomes may vary materially from those indicated by the
forward-looking statements. PIONEER COMPANIES, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share
data) Three Months Ended Nine Months Ended September 30, September
30, 2004 2003 2004 2003 Revenues $104,979 $100,001 $292,077
$285,348 Cost of sales - product (90,300) (86,351) (260,928)
(251,714) Cost of sales - derivatives --- --- --- (20,999) Total
cost of sales (90,300) (86,351) (260,928) (272,713) Gross profit
14,679 13,650 31,149 12,635 Selling, general and administrative
expenses (5,424) (5,992) (20,381) (20,040) Change in fair value of
derivatives --- --- --- 87,271 Asset impairment --- --- ---
(40,818) Other items (97) 24 (3,440) 446 Operating income 9,158
7,682 7,328 39,494 Interest expense, net (4,578) (4,582) (13,781)
(14,185) Other expense, net (1,848) (90) (1,113) (4,534) Income
(loss) before income taxes 2,732 3,010 (7,566) 20,775 Income tax
benefit (expense) 1,185 (1,057) 1,789 2,602 Net income (loss)
$3,917 $1,953 $(5,777) $23,377 Net income (loss) per share: Basic
$0.39 $0.20 $(0.58) $2.34 Diluted $0.38 $0.19 $(0.58) $2.31
Weighted average number of shares outstanding: Basic 10,038 10,003
10,032 10,002 Diluted 10,426 10,145 10,032 10,126 PIONEER
COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited,
in thousands) September 30, December 31, 2004 2003 Assets Current
assets $69,427 $61,471 Net property, plant and equipment 175,541
189,534 Other assets, net 4,612 3,931 Excess reorganization value
over the fair value of identifiable assets 84,064 84,064 Total
assets $333,644 $339,000 Liabilities and stockholders' equity
Current liabilities 54,392 48,881 Long-term debt, less current
portion 202,239 203,803 Accrued pension and other employee benefits
21,548 24,584 Other long-term liabilities 41,761 42,742 Total
stockholders' equity 13,704 18,990 Total liabilities and
stockholders' equity $333,644 $339,000 PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
Nine Months Ended September 30, 2004 2003 Operating activities: Net
income (loss) $(5,777) $23,377 Adjustments to reconcile net income
(loss) to net cash flows from operating activities: Depreciation
and amortization 19,910 16,051 Provision for (recovery of) losses
on accounts receivable (776) 1,257 Deferred tax benefit (1,789)
(2,603) Derivatives - cost of sales and change in fair value ---
(66,272) Gain from early extinguishments of debt --- (420) Loss on
disposals of assets 258 --- Asset impairment --- 40,818 Currency
exchange loss 1,180 4,536 Changes in operating assets and
liabilities: Increase in accounts receivable (7,157) (3,364)
Decrease in inventories, prepaid expenses and other current assets
1,813 1,818 (Increase) decrease in other assets (728) 831 Increase
(decrease) in accounts payable and accrued liabilities 14,371
(5,414) Increase (decrease) in other long-term liabilities (2,845)
7,120 Other 346 --- Net cash flows from operating activities 18,806
17,735 Investing activities: Capital expenditures (6,179) (6,179)
Proceeds from disposal of assets 35 --- Net cash flows from
investing activities (6,144) (6,179) Financing activities: Net
payments under revolving credit arrangements (9,984) (1,918)
Payments on debt (1,629) (8,418) Proceeds from issuance of stock
145 7 Net cash flows from financing activities (11,468) (10,329)
Effect of exchange rate changes on cash 132 566 Net change in cash
and cash equivalents 1,326 1,793 Cash and cash equivalents at
beginning of period 1,946 2,789 Cash and cash equivalents at end of
period $3,272 $4,582 DATASOURCE: Pioneer Companies, Inc. CONTACT:
Gary Pittman of Pioneer Companies, Inc., +1-713-570-3200 Web site:
http://www.piona.com/
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