-----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, MC+CKSD4jbGiODfLab2zqp7H6shd10yj90JTxHjdRHGFkvBqIukjraND2EgI7Eja j9M1EJsrskzbu2oE06SYIw== 0000950129-98-004485.txt : 19981104 0000950129-98-004485.hdr.sgml : 19981104 ACCESSION NUMBER: 0000950129-98-004485 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981103 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 SEC ACT: SEC FILE NUMBER: 033-91702 FILM NUMBER: 98736841 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 PIONEER AMERICAS, INC. - DATED 9/30/98 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 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 NUMBER 33-98828 PIONEER AMERICAS, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1420850 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4300 NATIONSBANK CENTER 77002 700 LOUISIANA STREET (Zip Code) HOUSTON, TEXAS (Address of principal executive offices)
(713) 570-3200 (Registrant's telephone number, including area code) PIONEER AMERICAS ACQUISITION CORP. (Former name of registrant) 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 [ ] On October 26, 1998, there were outstanding 1,000 shares of the Registrant's Common Stock, $.01 par value. All of such shares are owned by Pioneer Companies, Inc. The Registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the reduced disclosure format permitted by General Instruction (H)(2) of Form 10-Q. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS PART I -- FINANCIAL INFORMATION
PAGE ---- Item 1. Consolidated Financial Statements Consolidated Balance Sheets -- September 30, 1998 and December 31, 1997........................................... 3 Consolidated Statements of Operations -- Three Months Ended September 30, 1998 and 1997 and Nine Months Ended September 30, 1998 and 1997........................................... 4 Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1998 and 1997................................. 5 Notes to Consolidated Financial Statements.................. 6 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................ 12
Certain statements in this Form 10-Q regarding future expectations of the Company's business and the Company's results of operations may be regarded as "forward looking statements" within the meaning of the Securities Litigation Reform Act. Such statements are subject to various risks, including the Company's high financial leverage, the cyclical nature of the markets for many of the Company's products and raw materials and other risks. Actual outcomes may vary materially. 2 3 PART I -- FINANCIAL INFORMATION PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ Current assets: Cash and cash equivalents................................. $ 60,182 $ 50,995 Accounts receivable, less allowance for doubtful accounts of $1,944 at September 30, 1998 and $2,002 at December 31, 1997............................................... 61,473 65,189 Due from affiliates....................................... 13,166 2,810 Inventories............................................... 27,364 22,625 Prepaid expenses.......................................... 1,603 1,372 -------- -------- Total current assets.............................. 163,788 142,991 Property, plant and equipment: Land...................................................... 10,726 9,092 Buildings and improvements................................ 57,624 55,589 Machinery and equipment................................... 296,445 263,838 Construction in progress.................................. 31,355 31,836 -------- -------- 396,150 360,355 Less accumulated depreciation............................. (64,325) (34,130) -------- -------- 331,825 326,225 Investment in and advances to unconsolidated subsidiaries... -- 28,551 Other assets, net of accumulated amortization of $5,193 at September 30, 1998 and $2,990 at December 31, 1997........ 41,634 48,560 Excess cost over fair value of net assets acquired, net of accumulated amortization of $20,649 at September 30, 1998 and $13,319 at December 31, 1997.......................... 203,519 201,032 -------- -------- Total assets...................................... $740,766 $747,359 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable.......................................... $ 27,817 $ 45,711 Accrued liabilities....................................... 41,210 33,745 Current portion of long-term debt......................... 2,675 2,570 -------- -------- Total current liabilities......................... 71,702 82,026 Long-term debt, less current portion........................ 565,358 567,160 Accrued pension and other employee benefits................. 27,256 21,068 Other long-term liabilities................................. 18,115 17,224 Commitments and contingencies Stockholder's equity: Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding................................. 1 1 Additional paid-in capital................................ 65,483 66,169 Retained deficit.......................................... (7,149) (6,289) -------- -------- Total stockholder's equity........................ 58,335 59,881 -------- -------- Total liabilities and stockholder's equity........ $740,766 $747,359 ======== ========
See notes to consolidated financial statements. 3 4 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------- 1998 1997 1998 1997 -------- ------- -------- -------- Revenues............................................ $ 93,083 $65,242 $283,730 $150,073 Cost of sales....................................... 73,373 46,894 209,156 112,553 -------- ------- -------- -------- Gross profit........................................ 19,710 18,348 74,574 37,520 Selling, general and administrative expenses........ 11,067 7,300 35,379 19,580 Unusual charges..................................... 179 -- 410 -- -------- ------- -------- -------- Operating income.................................... 8,464 11,048 38,785 17,940 Equity in net loss of unconsolidated subsidiaries... (67) (779) (2,208) (2,552) Interest expense, net............................... (12,244) (6,750) (36,486) (16,189) Other income (expense), net......................... (1,562) 446 1,201 882 -------- ------- -------- -------- Income (loss) before taxes and extraordinary item... (5,409) 3,965 1,292 81 Income tax provision (benefit)...................... (1,072) 2,090 2,152 1,779 -------- ------- -------- -------- Income (loss) before extraordinary item............. (4,337) 1,875 (860) (1,698) Extraordinary item from early extinguishment of debt (net of income tax benefit of $12,439)............ -- -- -- (18,658) -------- ------- -------- -------- Net income (loss)................................... $ (4,337) $ 1,875 $ (860) $(20,356) ======== ======= ======== ======== Earnings per common share: Income (loss) before extraordinary item........... $ (4,337) $ 1,875 $ (860) $ (1,698) Extraordinary item, net of income tax benefit..... -- -- -- (18,658) -------- ------- -------- -------- Net income (loss)................................. $ (4,337) $ 1,875 $ (860) $(20,356) ======== ======= ======== ======== Weighted average number of common shares outstanding....................................... 1 1 1 1 ======== ======= ======== ========
See notes to consolidated financial statements. 4 5 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1998 1997 -------- --------- Operating activities: Net loss.................................................. $ (860) $ (20,356) Adjustments to reconcile net loss to net cash provided by operating activities: Extraordinary item (net of income tax)................. -- 18,658 Depreciation and amortization.......................... 34,908 14,792 Equity in net loss of unconsolidated subsidiaries...... 2,208 2,552 Net change in deferred taxes........................... 3,343 1,486 Loss from foreign exchange rate changes................ 1,470 -- Net effect of changes in operating assets and liabilities (net of acquisitions)..................... (4,161) (6,329) -------- --------- Net cash flows from operating activities.................... 36,908 10,803 -------- --------- Investing activities: Acquisition of business................................... -- (97,000) Investment in and advances to unconsolidated subsidiaries........................................... (4,290) (2,490) Capital expenditures...................................... (20,708) (10,977) -------- --------- Net cash flows used in investing activities................. (24,998) (110,467) -------- --------- Financing activities: Payments on long-term debt................................ (1,931) (162,342) Proceeds from long-term debt.............................. -- 300,000 Dividends to parent....................................... (685) (250) Debt issuance and related costs........................... -- (16,362) -------- --------- Net cash flows from financing activities.................... (2,616) 121,046 -------- --------- Effect of exchange rate changes on cash..................... (2,164) -- -------- --------- Net increase in cash........................................ 7,130 21,382 Cash at beginning of period................................. 50,995 14,417 Cash acquired in acquisition................................ 2,057 -- -------- --------- Cash at end of period....................................... $ 60,182 $ 35,799 ======== =========
See notes to consolidated financial statements. 5 6 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND BASIS OF PRESENTATION During August 1998, Pioneer Americas Acquisition Corp. changed its name to Pioneer Americas, Inc. ("Pioneer"). The consolidated financial statements include the accounts of Pioneer and its consolidated subsidiaries (collectively referred to as the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. All dollar amounts in the tabulations in the notes to the financial statements are stated in thousands of dollars unless otherwise indicated. The consolidated balance sheet as of September 30, 1998 and the statements of operations and cash flows for all periods presented are unaudited and reflect all adjustments, consisting of normal recurring items, which management considers necessary for a fair presentation. Operating results for the first nine months of 1998 are not necessarily indicative of results to be expected for the year ending December 31, 1998. The consolidated balance sheet at December 31, 1997 is derived from the December 31, 1997 audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles, since certain information and disclosures normally included in the notes to the financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission. The accompanying unaudited financial statements should be read in conjunction with the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1997. During the third quarter of 1998, the Company exchanged its 50% ownership interest in KWT, Inc. ("KWT") for the remaining 50% ownership interest in Kemwater North America Company ("KNA"), resulting in 100% ownership of KNA. The Company had previously owned, directly or indirectly, 50% interest in both of these companies. As these entities were under common control prior to the exchange, this transaction was recorded at historical cost. 2. SUPPLEMENTAL CASH FLOW INFORMATION Net effect of changes in operating assets and liabilities (net of acquisitions) are as follows:
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1998 1997 -------- -------- Accounts receivable......................................... $ 6,666 $(17,818) Due from affiliates......................................... (3,115) (2,456) Inventories................................................. (2,151) (1,873) Prepaid expenses............................................ (154) (3,249) Other assets................................................ (3,842) (187) Accounts payable............................................ (17,216) 11,755 Accrued liabilities......................................... 12,357 8,070 Other long-term liabilities................................. 3,294 (571) -------- -------- Net change in operating accounts.................. $ (4,161) $ (6,329) ======== ========
6 7 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Following are supplemental disclosures of cash flow information:
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 1998 1997 ------- -------- Cash payments for: Interest.................................................. $27,969 $ 15,791 Income taxes.............................................. 227 543 Investing activities, acquisition during the period: Cash paid for acquisition................................. $ -- $ 97,000 Equity contribution by parent............................. -- 5,500 Liabilities assumed....................................... -- 2,955 ------- -------- Fair value of assets acquired............................. $ -- $105,455 ======= ========
Non-cash investing activity: During the third quarter of 1998, the Company exchanged its 50% ownership interest in KWT for the remaining 50% ownership interest in KNA. The Company had previously owned, directly or indirectly, 50% interest in both of these companies. 3. INVENTORIES Inventories consist of the following:
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ Raw materials, supplies and parts........................... $20,629 $18,314 Finished goods and work-in-process.......................... 7,513 7,188 Inventories under exchange agreements....................... (778) (2,877) ------- ------- $27,364 $22,625 ======= =======
4. COMMITMENTS AND CONTINGENCIES The Company and its operations are subject to extensive United States and Canadian federal, state, provincial and local laws, regulations, rules and ordinances relating to pollution, the protection of the environment and the release or disposal of regulated materials. The operation of any chemical manufacturing plant and the distribution of chemical products entail obligations under current environmental laws. Present or future laws may affect the Company's capital and operating costs relating to compliance, may impose cleanup requirements with respect to site contamination resulting from past, present or future spills and releases and may affect the markets for the Company's products. The Company believes that its operations are currently in general compliance with environmental laws and regulations, the violation of which could result in a material adverse effect on the Company's business, properties or results of operations on a consolidated basis. There can be no assurance, however, that material costs will not be incurred as a result of instances of noncompliance or new regulatory requirements. The Company relies on indemnification from the previous owners in connection with certain environmental liabilities at its chlor-alkali plants and other facilities. There can be no assurance, however, that such indemnification agreements will be adequate to protect the Company from environmental liabilities at these sites or that such third parties will perform their obligations under the respective indemnification arrange- 7 8 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ments, in which case the Company would be required to incur significant expenses for environmental liabilities, which would have a material adverse effect on the Company. The Company is subject to various legal proceedings and potential claims arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses and/or insurance coverage with respect to these matters and management does not believe that they will materially affect the Company's operations or financial position. 5. PCI CHEMICALS CANADA INC. Pioneer is a holding company with no operating assets or operations. A subsidiary of Pioneer acquired in October 1997, PCI Chemicals Canada Inc. ("PCICCI"), has outstanding $175.0 million of 9 1/4% Senior Secured Notes, due October 15, 2007. These notes are fully and unconditionally guaranteed on a joint and several basis by Pioneer and Pioneer's other direct and indirect wholly-owned subsidiaries. Together, PCICCI and the subsidiary note guarantors comprise all of the direct and indirect subsidiaries of Pioneer. Summarized financial information of PCICCI and the guarantors of these notes are as follows:
AS OF SEPTEMBER 30, 1998 AS OF DECEMBER 31, 1997 ------------------------------------ ------------------------------------ NOTE CONSOLIDATED NOTE CONSOLIDATED PCICCI GUARANTORS COMPANY PCICCI GUARANTORS COMPANY -------- ---------- ------------ -------- ---------- ------------ Current assets................... $ 57,811 $105,977 $163,788 $ 39,211 $103,780 $142,991 Non-current assets............... 177,597 399,381 576,978 187,009 417,359 604,368 Current liabilities.............. 24,021 47,681 71,702 24,465 57,561 82,026 Non-current liabilities.......... 198,307 412,422 610,729 193,121 412,331 605,452
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 ------------------------------------ Revenues......................... $ 33,753 $ 59,330 $ 93,083 Gross profit..................... 10,088 9,622 19,710 Net income (loss)................ 1,196 (5,533) (4,337)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ------------------------------------ Revenues......................... $102,200 $181,530 $283,730 Gross profit..................... 30,448 44,126 74,574 Net income (loss)................ 4,446 (5,306) (860)
Separate financial statements of PCICCI and the guarantors of the PCICCI notes are not included as management has determined that separate financial statements of these entities are not material to investors. 6. ACCOUNTING CHANGES In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides a framework for determining the accounting treatment of costs incurred to obtain or develop computer software. The Company is required to adopt the provisions of SOP 98-1 beginning in 1999, without adjustment to previously reported amounts. In April 1998, the AICPA issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"), which requires immediate expensing of certain organization costs and start-up costs. The Company is required to adopt the provisions of SOP 98-5 in 1999. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). 8 9 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. The Company is required to adopt the provisions of SFAS No. 133 in the third quarter of 1999. Management does not believe the adoption of the above-mentioned accounting changes will have a material effect on the Company's financial statements. 7. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 Revenues Revenues increased by $27.8 million or approximately 43% for the three months ended September 30, 1998, as compared to the same period in 1997. The increase in revenues was primarily attributable to additional sales volumes from the acquisition of the business of PCI Chemicals Canada Inc. and PCI Carolina, Inc. (together "PCI Canada") in October 1997. Partially offsetting this increase were decreases in the average electrochemical unit ("ECU") prices during this period, as compared to the same three-month period in 1997. Chlorine prices decreased approximately 40% because of weakening vinyl industry demand, while caustic soda prices rose, but not to the extent necessary to offset the chlorine decrease. Revenues at the downstream operations of All-Pure Chemical Company, Inc. ("All-Pure") decreased as the Company leased out its packaged household bleach operations to focus on the bulk bleach business. Cost of Sales Cost of sales increased approximately $26.5 million or 56% for the first three months ended September 30, 1998, as compared to the three months ended September 30, 1997. The primary factor behind this increase was the sales volumes of the acquired PCI Canada operations. Also, power costs rose at the Company's chlor-alkali facility in Tacoma, Washington. Partially offsetting these increases was lower cost of sales at All-Pure due to lower sales volumes. Gross Profit Gross profit margin decreased to approximately 21% from 28%, primarily due to the lower ECU sales prices and the increased power costs at the Tacoma facility, partially offset by the profitability of the acquired PCI Canada business. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $3.8 million for the three-month period ended September 30, 1998 as compared to the same period in 1997, primarily as a result of the acquisition of the business of PCI Canada. Offsetting this increase were lower profit sharing bonus accruals and lower expenses at All-Pure resulting from cost-savings and consolidation efforts. Equity in Net Loss of Unconsolidated Subsidiaries Equity in net loss of unconsolidated subsidiaries has represented the Company's 50% ownership in Kemwater North America Company ("KNA") and the Company's 50% ownership in KWT, Inc. ("KWT"). The loss decreased to $67,000 for the three months ended September 30, 1998, as a result of certain cost-savings and consolidation efforts at these companies. As of September 30, 1998, the Company exchanged its 50% ownership in KWT for the remaining 50% ownership in KNA, resulting in 100% ownership of KNA. 9 10 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest Expense, Net Interest expense, net increased $5.5 million to $12.2 million during the three months ended September 30, 1998 as compared to 1997. This increase was the result of the debt incurred for the acquisition of the business of PCI Canada. Other Income (Expense), Net Other income (expense), net in 1998 includes a foreign currency translation loss due to fluctuations in the currency exchange rates between the United States and Canada, plus certain intercompany expenses between the Company and KNA, prior to its ownership exchange. Net Income (Loss) Due to the factors described above, the Company incurred a net loss of $4.3 million for the three months ended September 30, 1998, as compared to net income of $1.9 million for the same period in 1997. NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Revenues Revenues increased by $133.7 million or approximately 89% for the nine months ended September 30, 1998, as compared to the same period in 1997. The principal factors underlying the increase were the acquired operations of PCI Canada plus the acquired operations of a chlor-alkali facility in Tacoma, Washington, which was purchased in June 1997. Offsetting these increases were lower average ECU prices during this period, as compared to the same nine-month period in 1997. Also, production volumes were impacted negatively by two factors. First, revenue was hampered as a result of lack of railcar availability in the western United States due to continued Union Pacific rail transportation problems. Second, production at the Company's Henderson plant fell slightly in early 1998 due to a failed transformer, which is now fully operational. Revenues at the Company's downstream operations decreased as the Company leased out its packaged household bleach operations during the third quarter. Also, competitive conditions and adverse weather conditions during the early portion of the year resulted in revenue decreases in the downstream businesses. Cost of Sales Cost of sales increased approximately $96.6 million, or 86% for the nine months ended September 30, 1998, as compared to the nine months ended September 30, 1997. The primary factor for this increase was the sales volumes of the acquired operations. In addition, production costs, principally power, were higher during 1998. Partially offsetting these increases was lower cost of sales at All-Pure due to lower sales volumes. Gross Profit Gross profit margin increased to approximately 26% from 25% primarily due to the profitability of the acquired businesses, despite lower ECU sales prices and higher production costs. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $15.8 million for the period ending September 30, 1998, primarily as a result of the acquisition of the business of PCI Canada. 10 11 PIONEER AMERICAS, INC. (FORMERLY PIONEER AMERICAS ACQUISITION CORP.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Unusual Charges Unusual charges totaling $0.4 million in 1998 relate to the consolidation and downsizing of certain administrative functions of All-Pure. Interest Expense, Net Interest expense, net increased $20.3 million to $36.5 million during the first nine months of 1998. This increase was the result of the debt incurred for the acquisitions of the Tacoma plant and the business of PCI Canada, partially offset by lower interest expense from refinancing $135.0 million of the 13 3/8% First Mortgage Notes at substantially lower interest rates. Other Income, Net Other income, net in 1998 includes a gain from the settlement of a lawsuit for approximately $0.9 million, an accrual for a business interruption insurance claim at the Henderson plant related to the failed transformer and a state franchise tax refund. Extraordinary Item from Early Extinguishment of Debt During 1997 the Company recognized an $18.7 million extraordinary item from early extinguishment of the 13 3/8% First Mortgage Notes. The extraordinary loss consisted primarily of the 20% premium paid on the face value of the notes and the write-off of debt placement fees related to the notes (net of tax benefit of $12.4 million). Net Loss Net loss for the first nine months of 1998 was $0.9 million, compared to the $20.4 million loss for the same period in 1997. 11 12 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 -- Financial Data Schedule.
(b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended September 30, 1998. 12 13 SIGNATURES 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, INC. By: /s/ PHILIP J. ABLOVE ---------------------------------- Philip J. Ablove Vice President and Chief Financial Officer November 3, 1998 13 14 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 -- Financial Data Schedule.
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 60,182 0 63,417 1,944 27,364 163,788 396,150 64,325 740,766 71,702 565,358 0 0 1 58,334 740,766 283,730 283,730 209,156 209,156 35,789 0 36,486 1,292 2,152 (860) 0 0 0 (860) (860) (860)
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