-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FyFHUTKrRwnistOmSUmMDsOIaeWaoTGxGPH8YDWwwhImQsZINY3apR2W9/Q8576u pkIu7S19VX/yELZPGUFWKw== 0000950129-96-002488.txt : 19961015 0000950129-96-002488.hdr.sgml : 19961015 ACCESSION NUMBER: 0000950129-96-002488 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961011 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER AMERICAS ACQUISITION CORP CENTRAL INDEX KEY: 0000944649 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 061420850 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-91702 FILM NUMBER: 96642774 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q/A 1 PIONEER AMERICAS ACQUISITION CORP. - 10-Q AMEND.1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file no. 33-98828 PIONEER AMERICAS ACQUISITION CORP. (Exact name of registrant as specified in its charter) DELAWARE 06-1420850 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4200 NATIONSBANK CENTER 700 LOUISIANA, HOUSTON, TEXAS 77002 (Address of principal executive offices) (Zip Code) 713-225-3831 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Number of Common Shares outstanding at October 11, 1996: 1,000. All of such shares are owned by Pioneer Companies, Inc. 2 Under Item 5 of its Form 10-Q for the quarter ended June 30, 1996, Pioneer Americas Acquisition Corp. ("Pioneer") reported the acquisition of T.C. Products, Inc., a New Mexico corporation. Pioneer stated that at the time of such filing it was impractical to provide the required financial statements of T.C. Products, Inc., the business acquired. Pioneer is amending Item 5 of its Form 10-Q for the quarter ended June 30, 1996, to include such required financial statements. ITEM 5. Other Information. Effective June 30, 1996, All-Pure Chemical Co. ("All-Pure"), an indirect wholly-owned subsidiary of Pioneer, acquired T.C. Products, Inc. ("T.C. Products" or the "Company") through the acquisition of its parent, T.C. Holdings, Inc., from trusts formed by Albert J. Clerc and Richard L. Belveal. Consideration for the acquisition consisted of net cash payments of $5,458,835 and All-Pure subordinated notes with an aggregate principal amount of $4,500,000. The Company's existing cash balances were used to fund the cash portion of the purchase price. T.C. Products is the sole operating asset of T.C. Holdings, Inc. Following the acquisition T.C. Products continues to manufacture and package bleach and related products at its plant in Tacoma, Washington. Mr. Clerc has agreed to continue as an officer of T.C. Products for a period of up to one year following the acquisition; both he and Mr. Belveal have also agreed not to compete with T.C. Products for a period of three years following the acquisition. Following are the required financial statements of T.C. Products, the business acquired, consisting of (i) balance sheets as of September 24, 1995 and September 25, 1995, and the related statements of operations and retained earnings, and of cash flows for each of the three years in the period ended September 24, 1995, and related notes thereto, together with the independent auditors' report of Deloitte & Touche LLP with respect thereto, (ii) unaudited balance sheet as of June 30, 1996 and related statements of operations and of cash flows for each of the nine-month periods ended June 30, 1996 and June 30, 1995, and related notes thereto, and (iii) pro forma financial statements and related notes thereto. -2- 3 INDEPENDENT AUDITORS' REPORT To the Board of Directors of T.C. Products, Inc.: We have audited the accompanying balance sheets of T.C. Products, Inc. (the "Company") as of September 24, 1995 and September 25, 1994, and the related statements of operations and retained earnings, and of cash flows for each of the three years in the period ended September 24, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at September 24, 1995 and September 25, 1994, and the results of its operations and its cash flows for each of the three years in the period ended September 24, 1995 in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Seattle, Washington August 2, 1996 -3- 4 T.C. PRODUCTS, INC. BALANCE SHEETS, SEPTEMBER 24, 1995 AND SEPTEMBER 25, 1994 - -------------------------------------------------------------------------------
ASSETS 1995 1994 CURRENT ASSETS: Cash $ 102,630 $ 183,550 Accounts receivable 622,987 586,833 Inventories 569,471 561,985 Prepaid expenses and other 34,792 77,558 ----------- ----------- Total current assets 1,329,880 1,409,926 PROPERTY, PLANT AND EQUIPMENT: Land 900,000 Building 2,450,283 529,463 Machinery and equipment 2,152,204 1,480,237 Construction in progress 183,815 200,284 ----------- ----------- 5,686,302 2,209,984 Accumulated depreciation (1,252,115) (916,822) ----------- ----------- Total property, plant and equipment 4,434,187 1,293,162 ----------- ----------- TOTAL $ 5,764,067 $ 2,703,088 =========== ===========
See notes to financial statements. -4- 5 - -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994 CURRENT LIABILITIES: Accounts payable $ 374,970 $ 417,087 Accrued liabilities 261,240 335,960 Federal income taxes payable to Parent Company 298,334 Current portion of long-term debt 150,000 150,000 ---------- ---------- Total current liabilities 1,084,544 903,047 OTHER LIABILITY 74,227 LONG-TERM DEBT 2,795,489 531,001 NOTE PAYABLE TO PARENT COMPANY 208,696 550,932 STOCKHOLDER'S EQUITY: Common stock, $1 par value - Authorized 1,000,000 shares; issued and outstanding 300,000 shares 437,357 437,357 Retained earnings 1,163,754 280,751 ---------- ---------- Total stockholder's equity 1,601,111 718,108 ---------- ---------- TOTAL $5,764,067 $2,703,088 ========== ==========
See notes to financial statements. -5- 6 T.C. PRODUCTS, INC. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE YEARS ENDED SEPTEMBER 24, 1995, SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 - -------------------------------------------------------------------------------
1995 1994 1993 NET SALES $ 8,423,600 $ 6,202,510 $ 4,202,165 COST OF GOODS SOLD 5,395,389 3,896,461 2,766,822 ----------- ----------- ----------- Gross profit 3,028,211 2,306,049 1,435,343 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,546,427 2,015,196 1,165,379 ----------- ----------- ----------- INCOME FROM OPERATIONS 1,481,784 290,853 269,964 OTHER INCOME (EXPENSE): Interest expense (200,696) (92,930) (121,326) Interest income 68,798 3,458 1,780 Other (753) (1,359) 2,127 ----------- ----------- ----------- Total other expense, net 132,651 90,831 117,419 ----------- ----------- ----------- INCOME BEFORE PROVISION FOR FEDERAL INCOME TAXES 1,349,133 200,022 152,545 PROVISION FOR FEDERAL INCOME TAXES 466,130 68,401 52,045 ----------- ----------- ----------- NET INCOME 883,003 131,621 100,500 RETAINED EARNINGS: Beginning of year 280,751 149,130 48,630 ----------- ----------- ----------- End of year $ 1,163,754 $ 280,751 $ 149,130 =========== =========== ===========
See notes to financial statements. -6- 7 T.C. PRODUCTS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 24, 1995, SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 - -------------------------------------------------------------------------------
1995 1994 1993 OPERATING ACTIVITIES: Net income $ 883,003 $ 131,621 $ 100,500 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 456,199 484,178 320,500 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (36,154) (132,260) (114,852) Inventory (7,486) (144,329) (76,817) Prepaid expenses and other 42,766 (35,073) (3,149) Accounts payable (42,117) 57,769 (34,953) Accrued expenses 297,841 224,786 27,337 ----------- ----------- ----------- Net cash provided by operating activities 1,594,052 586,692 218,566 INVESTING ACTIVITIES - Purchase of property, plant and equipment (3,597,224) (302,327) (415,025) FINANCING ACTIVITIES: Repayments of notes payable to Parent Company, net (342,236) (48,004) (595,567) Repayments of notes payable (135,512) (68,999) Proceeds from notes payable 2,400,000 750,000 ----------- ----------- ----------- Net cash provided (used) by financing activities 1,922,252 (117,003) 154,433 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH (80,920) 167,362 (42,026) CASH: Beginning of year 183,550 16,188 58,214 ----------- ----------- ----------- End of year $ 102,630 $ 183,550 $ 16,188 =========== =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION - Cash paid during the year for interest $ 204,880 $ 181,508 $ 5,814 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTMENT ACTIVITIES - Contribution of property, plant and equipment by Parent Company 137,357
See notes to financial statements. -7- 8 T.C. PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS SEPTEMBER 24, 1995, SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 - ------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES T.C. Products, Inc. (the "Company") is a wholly-owned subsidiary of Western States Chemical Supply Corp. ("Parent Company"). The Company manufactures household chemicals, primarily bleach, fabric softener, and ammonia for a number of different distributors under private brand labels. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fiscal Year - The Company operates within a conventional 52/53 week accounting fiscal year. The Company's fiscal year ends on the Sunday closest to September 30th. Cash and Cash Equivalents - Cash and cash equivalents generally consist of cash and certificates of deposit. For the purpose of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity at the time of purchase of three months or less to be cash equivalents. Inventories - Inventories consist primarily of raw materials, work in process and finished goods and are stated at the lower of cost (using the first-in, first-out method) or market. Concentration of Customers - The Company currently sells a majority of its products to one commercial and three retail distribution customers. Aggregate sales to these four customers represent 51%, 48% and 63% of net sales for the years ended September 24, 1995, September 25, 1994 and September 26, 1993, respectively. Property, Plant and Equipment - Property, plant and equipment are carried at cost, less accumulated depreciation. Depreciation is based on straight-line and accelerated methods over estimated useful lives, which are as follows: Buildings 39 years Machinery and equipment 3-15 years Furniture and fixtures 5-7 years Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are expensed as incurred. The Company periodically reviews property, plant and equipment for impairment to determine whether events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. No such events or circumstances have occurred during the three year period ended September 24, 1995. -8- 9 Income Taxes - The provision for income taxes is computed on the pretax income of the consolidated group at the Parent Company level. This amount is then allocated to the Company based on its proportionate share of income. Current income taxes payable are either paid currently or added to the note payable to the Parent Company, depending on available cash flow. There are no significant temporary differences between amounts reported for tax and financial reporting purposes. 2. INVENTORIES Inventories consisted of the following:
SEPTEMBER 24, SEPTEMBER 25, 1995 1994 Raw materials $307,617 $349,880 Work in process 15,355 7,619 Finished goods 246,499 204,486 -------- -------- $569,471 $561,985 ======== ========
3. LONG-TERM DEBT AND NOTE PAYABLE TO PARENT COMPANY Long-term debt consisted of the following:
SEPTEMBER 24, SEPTEMBER 25, 1995 1994 Tax-exempt bond financed through the Economic Development Corporation of Pierce County, Washington, principal payments due in annual installments from $75,000 to $185,000, beginning October 1, 1996 through October 1, 2014, bonds have a variable stated interest rate based on current market rates for comparable securities (4.5% at September 24, 1995), interest is paid monthly $ 2,400,000 Note payable to U.S. Bank, payable in monthly installments of $16,000 including interest at 1% above the bank's prime rate (8.75% at September 24, 1995), final payment due January 1999, collateralized by equipment 532,892 $ 664,920 Other 12,597 16,081 ----------- ----------- 2,945,489 681,001 Less current portion (150,000) (150,000) ----------- ----------- $ 2,795,489 $ 531,001 =========== ===========
-9- 10 The Company has a note payable to the Parent Company. The note bears interest at 10% and is subordinate to all other debt. Payments of principal and interest are based on available cash flow and the note is due December 1, 1998. The tax-exempt bond is secured by a $2,400,000 letter of credit with U.S. Bank, with an annual fee of 1.125% of the outstanding principal of the bond. The agreements with U.S. Bank are collateralized by a deed of trust on a warehouse facility and equipment and have financial covenants including cash flow, current ratio, debt to net worth, subordinated debt, and capital expenditures. The carrying value of substantially all long-term debt instruments approximates fair value because of the variable interest rates. Maturities of long-term debt including the note payable to the Parent Company are as follows: 1996 $ 150,000 1997 278,000 1998 313,000 1999 465,000 2000 188,000 Thereafter 1,760,185 ----------- $ 3,154,185 ===========
4. RELATED PARTY TRANSACTIONS Transactions with the Parent Company for the last three fiscal years are as follows:
1995 1994 1993 Purchases of raw materials $1,737,481 $1,119,861 $ 669,136 Interest expense on note payable 22,750 26,934 115,512 Management consulting fees 482,531
In July 1995, the Company purchased land and production facilities for $2,450,000 from a company related through common ownership. Prior to this purchase, these facilities were leased by the Company. Total lease payments for the three fiscal years ended 1995, 1994 and 1993 were $115,682, $207,367 and $195,998, respectively. 5. PENSION PLANS The Company provides a defined contribution pension plan for all salaried employees meeting certain age and years-of-service requirements. The plan is funded by the Company with discretionary contributions up to 15% of the employee's annual salary. Total expense was $52,600, $48,800 and $34,800 for fiscal years 1995, 1994 and 1993, respectively. Under a collective bargaining agreement, the Company is required to contribute to a multi-employer pension trust for eligible employees. Total expense was $49,448, $52,129 and $25,573 for fiscal years 1995, 1994 and 1993, respectively. -10- 11 6. SUBSEQUENT EVENT During 1996, the name of the Parent Company was changed from Western States Chemical Supply Corporation ("WSCSC") to T.C. Holdings, Inc. In addition to the name change, all of the assets, liabilities and operations of WSCSC, except for the stock of the Company, all cash, and the receivables due from the Company, were purchased by a company affiliated through common ownership. Effective June 30, 1996, All Pure Chemical Co. purchased all of the outstanding stock of T.C. Holdings, Inc., which included the stock of the Company, all cash, and the receivables due from the Company. ****** -11- 12 T.C. PRODUCTS, INC. BALANCE SHEETS, JUNE 30, 1996 AND SEPTEMBER 24, 1995 - -------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 24, ASSETS 1996 1995 (Unaudited) CURRENT ASSETS: Cash $ 222,194 $ 102,630 Accounts receivable 826,311 622,987 Inventories 519,123 569,471 Prepaid expenses and other 4,364 34,792 ----------- ----------- Total current assets 1,571,992 1,329,880 PROPERTY, PLANT AND EQUIPMENT: Land 900,000 900,000 Building 2,450,283 2,450,283 Machinery and equipment 2,152,204 2,152,204 Construction in progress 431,912 183,815 ----------- ----------- 5,934,399 5,686,302 Accumulated depreciation (1,543,581) (1,252,115) ----------- ----------- Total property, plant and equipment 4,390,818 4,434,187 ----------- ----------- TOTAL $ 5,962,810 $ 5,764,067 =========== ===========
See notes to unaudited financial statements. -12- 13 - -------------------------------------------------------------------------------
June 30, September 24, LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995 (Unaudited) CURRENT LIABILITIES: Accounts payable $ 313,819 $ 374,970 Accrued liabilities 322,192 261,240 Federal income taxes payable to Parent Company 356,700 298,334 Current portion of long-term debt 128,211 150,000 ---------- ---------- Total current liabilities 1,120,922 1,084,544 OTHER LIABILITY 74,227 74,227 LONG-TERM DEBT 2,198,643 2,795,489 NOTE PAYABLE TO PARENT COMPANY 208,696 STOCKHOLDER'S EQUITY: Common stock, $1 par value - Authorized 1,000,000 shares; issued and outstanding 300,000 shares 437,357 437,357 Retained earnings 2,131,661 1,163,754 ---------- ---------- Total stockholder's equity 2,569,018 1,601,111 ---------- ---------- TOTAL $5,962,810 $5,764,067 ========== ==========
See notes to unaudited financial statements. -13- 14 T.C. PRODUCTS, INC. STATEMENTS OF OPERATIONS NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 (UNAUDITED) - -------------------------------------------------------------------------------
1996 1995 NET SALES $ 6,350,733 $ 5,968,182 COST OF GOODS SOLD 3,919,584 3,900,105 ----------- ----------- Gross profit 2,431,149 2,068,077 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,016,240 935,000 ----------- ----------- INCOME FROM OPERATIONS 1,414,909 1,133,077 OTHER INCOME (EXPENSE): Interest expense (103,973) (136,221) Interest income 2,390 67,905 Other 11,281 (925) ----------- ----------- Total other expense, net 90,302 69,241 ----------- ----------- INCOME BEFORE PROVISION FOR FEDERAL INCOME TAXES 1,324,607 1,063,836 PROVISION FOR FEDERAL INCOME TAXES 356,700 367,559 ----------- ----------- NET INCOME $ 967,907 $ 696,277 =========== ===========
See notes to unaudited financial statements. -14- 15 T.C. PRODUCTS, INC. STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 (UNAUDITED) - -------------------------------------------------------------------------------
1996 1995 OPERATING ACTIVITIES: Net income $ 967,907 $ 696,277 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 291,466 260,163 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (203,324) (165,818) Inventory 50,348 (101,495) Prepaid expenses and other 30,428 47,959 Accounts payable (61,151) (73,745) Accrued expenses 60,952 (154,551) Federal income taxes payable to Parent Company 58,366 367,559 ----------- ----------- Net cash provided by operating activities 1,194,992 876,349 INVESTING ACTIVITIES - Purchase of property, plant and equipment (248,097) (3,324,757) FINANCING ACTIVITIES: Repayments of notes payable to Parent Company, net (208,696) (2,976) Repayments of notes payable (618,635) (50,957) Proceeds from notes payable 2,400,000 ----------- ----------- Net cash provided (used) by financing activities (827,331) 2,346,067 ----------- ----------- NET INCREASE (DECREASE) IN CASH 119,564 (102,341) CASH: Beginning of period 102,630 183,550 ----------- ----------- End of period $ 222,194 $ 81,209 =========== ===========
See notes to unaudited financial statements. -15- 16 T.C. PRODUCTS, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. GENERAL The accompanying unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial Statements," and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with accounting principles and practices reflected in the Company's audited financial statements for the year ended September 24, 1995 included elsewhere herein, and in the opinion of Pioneer Americas Acquisition Corp. ("Pioneer"), include all adjustments (which consist only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position as of June 30, 1996, and the results of its operations and its cash flows for the nine months ended June 30, 1996 and 1995. Operating results for the nine months ended June 30, 1996 are not necessarily indicative of the results that could be expected for a full year. 2. SUBSEQUENT EVENT Effective June 30, 1996, the Company was acquired by All Pure Chemical Co., an indirect wholly-owned subsidiary of Pioneer, through the acquisition of its parent, T.C. Holdings, Inc., for a total purchase price of $10.0 million consisting of cash of $5.5 million and the issuance of subordinated notes with an aggregate principal amount of $4.5 million. -16- 17 The following pro forma information is based on certain assumptions as of October 11, 1996, and does not reflect financial or other information subsequent to such date with respect to the acquisition of T.C. Holdings, Inc. ("TC Holdings") by All Pure Chemical Co., an indirect wholly-owned subsididary of Pioneer Americas Acquisition Corp. ("Pioneer"). T.C. Products, Inc. ("TC Products") is the sole operating asset of TC Holdings. TC Holdings had no operations other than those relating to TC Products and audited financial statements do not exist. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The pro forma financial statements are based on the historical financial information of Pioneer and TC Products, a wholly owned subsidiary of TC Holdings, giving effect, under the purchase method of accounting, to certain adjustments. The pro forma financial statements are derived from Pioneer's and TC Products' historical financial data for the indicated periods, which, in the case of the statement of operations of TC Products, differs from those periods used for presentation of TC Products' financial statements included herein. In the case of TC Products, the statement of operations for the year ended December 31, 1995 was derived by combining the last nine months of its fiscal year ended September 24, 1995 with the first three months of the nine months ended June 30, 1996. The pro forma balance sheet was prepared as if the acquisition occurred on June 30, 1996. The pro forma statements of operations were prepared as if the acquisition occurred as of January 1, 1995 and do not include the effect of any modifications in operations that might have occurred had Pioneer owned and operated the businesses during the periods presented except as described in the Notes to the Pro Forma Financial Statements. The pro forma financial statements should be read in conjunction with the Notes to Pro Forma Financial Statements and with the Consolidated Financial Statements of Pioneer and the related notes thereto as previously filed and the Financial Statements of TC Products and the related notes thereto, contained elsewhere herein. The pro forma financial information has been prepared based on assumptions deemed appropriate by management of Pioneer. This information is prepared for informational purposes only and is not necessarily indicative of the actual results or financial condition that would have been achieved had the acquisition occurred at these dates or of future results. Actual results of TC Products' operations will be included with Pioneer's results after June 30, 1996. -17- 18 T.C. PRODUCTS, INC. PRO FORMA BALANCE SHEET, JUNE 30, 1996 (UNAUDITED) (IN THOUSANDS) - -------------------------------------------------------------------------------
HISTORICAL PRO FORMA ---------------------------- ---------------------------------- ASSETS PIONEER TC PRODUCTS ADJUSTMENTS COMBINED CURRENT ASSETS: Cash $ 8,774 $ 223 $ (5,459) (1) $ 3,538 Accounts receivable, net 33,030 826 33,856 Due from Parent 2,449 2,449 Inventory 14,193 519 14,712 Prepaid expenses and other 2,595 4 2,599 ----------- --------- ---------- ---------- Total current assets 61,041 1,572 (5,459) 57,154 PROPERTY, PLANT AND EQUIPMENT, NET 97,943 4,391 102,334 OTHER, NET 13,457 630 (2) 14,087 EXCESS COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET 112,627 7,033 (1) 119,660 ----------- --------- ---------- ---------- TOTAL $ 285,068 $ 5,963 $ 2,204 $ 293,235 =========== ========= ========== ==========
See notes to pro forma financial statements. -18- 19 - -------------------------------------------------------------------------------
LIABILITIES AND HISTORICAL PRO FORMA STOCKHOLDER'S EQUITY --------------------------- ---------------------------------- PIONEER TC PRODUCTS ADJUSTMENTS COMBINED CURRENT LIABILITIES: Accounts payable $ 20,441 $ 314 $ 20,755 Accrued liabilities 24,629 679 $ 630 (2) (357) (1) 25,581 Returnable deposits 3,573 3,573 Current portion of long-term debt 128 128 ----------- ---------- ---------- ----------- Total current liabilities 48,643 1,121 273 50,037 13 3/8% FIRST MORTGAGE NOTES DUE 2005 135,000 135,000 LONG-TERM DEBT 8,017 2,199 4,500 (1) 14,716 RETURNABLE DEPOSITS 3,278 3,278 ACCRUED PENSION AND OTHER EMPLOYEE BENEFITS 13,738 13,738 OTHER LONG-TERM LIABILITIES 15,243 74 15,317 MINORITY INTEREST OWNED BY PARENT 112 112 STOCKHOLDER'S EQUITY 61,037 2,569 (2,569) (1) 61,037 ----------- ---------- ---------- ----------- TOTAL $ 285,068 $ 5,963 $ 2,204 $ 293,235 =========== ========== ========== ===========
See notes to pro forma financial statements. -19- 20 T.C. PRODUCTS, INC. PRO FORMA STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) - --------------------------------------------------------------------------------
HISTORICAL PRO FORMA ------------------------------- ---------------------------------- PIONEER TC PRODUCTS ADJUSTMENTS COMBINED NET SALES $ 103,113 $ 4,255 $ 107,368 COSTS AND EXPENSES: Cost of sales 73,744 2,550 76,294 Selling, general and administrative expense 14,846 700 $ 141 (3) 59 (4) 15,746 Interest expense, net 9,217 63 208 (5) 9,488 ---------- --------- --------- --------- Total costs and expenses 97,807 3,313 408 101,528 MINORITY INTEREST 223 223 OTHER INCOME, NET 93 11 104 ---------- --------- --------- --------- Income before taxes 5,622 953 (408) 6,167 INCOME TAX PROVISION 3,724 357 (116) (6) 3,965 ---------- --------- --------- --------- NET INCOME $ 1,898 $ 596 $ (292) $ 2,202 ========== ========= ========= ========= NET INCOME PER SHARE $ 1,898 $ 2,202 ========== ========= WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 1 1 ========== =========
See notes to pro forma financial statements. -20- 21 T.C. PRODUCTS, INC. PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED) - --------------------------------------------------------------------------------
HISTORICAL PRO FORMA ---------------------------- ----------------------------- PIONEER TC PRODUCTS ADJUSTMENTS COMBINED NET SALES $ 142,908 $ 8,605 $ 151,513 COSTS AND EXPENSES: Cost of sales 96,504 5,536 102,040 Cost of sales - acquisition related inventory step-up 1,671 1,671 Selling, general and administrative expense 19,836 1,542 $ 281 (3) 117 (4) 21,776 Interest expense, net 12,905 173 416 (5) 13,494 ---------- ----------- -------- ---------- Total costs and expenses 130,916 7,251 814 138,981 OTHER INCOME (EXPENSE), NET 637 (1) 636 ---------- ----------- -------- ---------- Income before taxes 12,629 1,353 (814) 13,168 INCOME TAX PROVISION 6,208 466 (179) (6) 6,495 ---------- ----------- -------- ---------- NET INCOME $ 6,421 $ 887 $ (635) $ 6,673 ========== =========== ======== ========== NET INCOME PER SHARE $ 6,421 $ 6,673 ========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 1 1 ========== ==========
See notes to pro forma financial statements. -21- 22 NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) (1) The pro forma financial statements reflect the purchase of 100% of the outstanding shares of TC Holdings common stock in exchange for total consideration of $10.0 million ($33.20 per share), consisting of cash of $5.5 million and the issuance of subordinated notes with an aggregate principal amount of $4.5 million. Included in the cash paid was payment of a liability of TC Holdings totaling $356,700 owed to the previous owners. In accordance with purchase accounting, the assets and liabilities of TC Products will be recorded on Pioneer's books at estimated fair market value with the remaining purchase price reflected as goodwill. For purposes of these Pro Forma Financial Statements, the allocation of the purchase price has been made based upon valuations and other studies which have not been finalized. Accordingly, the allocation of the purchase price is preliminary. The following adjustments reflect management's estimates of the necessary adjustments to TC Products' historical Balance Sheet to reflect fair market value: Pioneer consideration paid: Cash $ 5,458,835 Subordinated notes issued 4,500,000 ------------- 9,958,835 Less: TC Products stockholder's equity 2,569,018 Liability of TC Holdings 356,700 ------------- 2,925,718 ------------- Net adjustment $ 7,033,117 ============= Allocation of adjustment -- Goodwill $ 7,033,117 ============= (2) Reflects the recording of $400,000 relating to transaction costs which are estimated and are expected to be incurred by Pioneer within the 12-month period following the TC Products acquisition and $230,000 relating to noncompete agreements entered into with management of TC Products following the acquisition. These items have been reflected in the pro forma statement of financial position as an addition to accrued liabilities and as an addition to other assets. (3) Reflects amortization of increase to goodwill over a 25-year period. (4) Reflects amortization of capitalized transaction costs over an eight year period and noncompete agreements over periods ranging from three to four years. (5) Reflects interest expense on the $4.5 million notes payable issued in connection with the acquisition at an average assumed interest rate of 9.25%. (6) Adjustment to reflect 35% effective tax rate for TC Products and the tax effect of the pro forma adjustments, with the exception of goodwill amortization. -22- 23 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PIONEER AMERICAS ACQUISITION CORP. October 11, 1996 By: /s/ PHILIP A. ABLOVE ------------------------------------- Philip A. Ablove Vice President and Chief Financial Officer -23- -----END PRIVACY-ENHANCED MESSAGE-----