-----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, H5lYP98mJrHxYOcAvqN8/ZtwWcWVOevE3g+PSsB837mP6qhq4aJltsBqqIKZkELn L1Lqi5xCYa2EkaRIGQ8ySw== 0000950129-98-001218.txt : 19980326 0000950129-98-001218.hdr.sgml : 19980326 ACCESSION NUMBER: 0000950129-98-001218 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980325 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-K405 SEC ACT: SEC FILE NUMBER: 033-91702 FILM NUMBER: 98573281 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-K405 1 PIONEER AMERICAS ACQUISITION CORP. - 12/31/97 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 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 ACQUISITION CORP. (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 700 LOUISIANA STREET HOUSTON, TEXAS (713) 570-3200 77002 (Address of principal executive offices) (Zip Code)
--------------------- Securities registered pursuant to Section 12(b) of the Act: NONE. Securities registered pursuant to Section 12(g) of the Act: 9 1/4% SENIOR SECURED NOTES DUE JUNE 15, 2007 GUARANTY OF: 9 1/4% SENIOR SECURED NOTES DUE OCTOBER 15, 2007 (Title of class)
On March 10, 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. 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 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] Documents incorporated by reference: NONE. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(a) AND (b) OF FORM 10-K, AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PERMITTED BY GENERAL INSTRUCTION (I)(2) OF FORM 10-K. ================================================================================ 2 PIONEER AMERICAS ACQUISITION CORP. TABLE OF CONTENTS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
PAGE ---- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 8 Item 3. Legal Proceedings........................................... 9 Item 4. Submission of Matters to a Vote of Security Holders......... 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................... 10 Item 6. Selected Financial Data..................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 10 Item 8. Financial Statements and Supplementary Data................. 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 37 PART III Item 10. Directors and Executive Officers of the Registrant.......... 37 Item 11. Executive Compensation...................................... 37 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 37 Item 13. Certain Relationships and Related Transactions.............. 37 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................... 38
2 3 PART I Unless the context otherwise requires, (i) the term "Pioneer" refers to Pioneer Americas Acquisition Corp., (ii) the terms "Pioneer Americas" and "Predecessor Company" refer to Pioneer Americas, Inc. and its subsidiaries, (iii) the term "Company" means Pioneer and its subsidiaries and (iv) the term "PCI" refers to Pioneer Companies, Inc., the parent company of Pioneer. Certain statements in this Form 10-K 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 discussed in detail. Actual outcomes may vary materially. ITEM 1. BUSINESS. The Company manufactures and markets chlorine and caustic soda and several related downstream water treatment products. Pioneer conducts its primary business through its operating subsidiaries: Pioneer Chlor Alkali Company, Inc. ("PCAC"), All-Pure Chemical Co. ("All-Pure") (including T.C. Products, Inc.) and PCI Chemicals Canada Inc. and PCI Carolina, Inc. (together "PCI Canada") (following the October 1997 acquisition of substantially all of the assets and properties of the North American chlor-alkali business of ICI Canada Inc. and ICI Americas Inc.). On April 20, 1995, pursuant to a Stock Purchase Agreement, dated as of March 24, 1995 (the "Pioneer Acquisition Agreement"), by and among PCI, Pioneer and the holders of the outstanding common stock and other common equity interests of Pioneer Americas, Inc. (the "Sellers"), Pioneer acquired all of such stock and interests (the "Pioneer Acquisition"). On June 17, 1997, the Company expanded its presence in the western United States with the acquisition of a chlor-alkali production facility and related business (the "Tacoma Facility") located in Tacoma, Washington (the "Tacoma Acquisition"). The transaction involved the acquisition of the Tacoma Facility by PCAC from OCC Tacoma, Inc. ("OCC Tacoma"), a subsidiary of Occidental Chemical Corporation ("OxyChem"), for a purchase price consisting of (i) $97.0 million, paid in cash, (ii) 55,000 shares of Convertible Redeemable Preferred Stock, par value $.01 per share, of PCI (the "PCI Preferred Stock"), having a liquidation preference of $100 per share, and (iii) the assumption of certain obligations related to the acquired chlor-alkali business. The Tacoma Facility has an aggregate production capacity of 225,000 electrochemical units ("ECUs", each consisting of 1 ton of chlorine and 1.1 tons of caustic soda). On October 31, 1997, the Company expanded into eastern Canadian and eastern United States chlor-alkali markets with the acquisition of the North American chlor-alkali business of ICI Canada, Inc. ("ICI Canada") and ICI Americas, Inc. ("ICI Americas") pursuant to an Asset Purchase Agreement among the Company and its newly-formed subsidiaries, PCI Chemicals Canada Inc. and PCI Carolina, Inc., and Imperial Chemical Industries PLC ("ICI") and its subsidiaries, ICI Canada and ICI Americas. The purchase price for such acquisition (the "PCI Canada Acquisition") consisted of approximately $235.6 million, paid in cash, and the assumption of certain obligations related to the acquired chlor-alkali business. Headquartered in Montreal, Quebec, PCI Canada is now a leading eastern North American merchant chlor-alkali manufacturer, serving primarily the pulp and paper industry. The Company now owns and operates five chlor-alkali production facilities with aggregate production capacity of approximately 950,000 ECUs. Management believes the Company's competitive position has been significantly strengthened by the recent acquisitions, providing the Company with low-cost, well-maintained and efficient production plants. Approximately 60% of the Company's sources of electricity is hydro-power based, the cheapest source in North America. In addition, over 22% of the Company's ECU capacity employs membrane cell technology, the most efficient available technology. Management believes that the Company is one of the six largest chlor-alkali producers in North America, with approximately 6% of North American production capacity. 3 4 Chlorine and caustic soda are co-products, concurrently produced in a ratio of 1 to 1.1, respectively, through electrolysis of salt water. In addition to its chlor-alkali capacity, the Company manufactures hydrochloric acid, bleach, sodium chlorate and other products. Pioneer is a wholly-owned subsidiary of PCI. PCI is a publicly-traded company, which prior to the Pioneer Acquisition was actively seeking acquisitions and had no operations. As of December 31, 1997, the Interlaken Investment Partners, L.P., a Delaware limited partnership (the "Interlaken Partnership") beneficially owned approximately 34.9% of the voting power of PCI and William R. Berkley (who may be deemed to beneficially own all shares of PCI common stock held by the Interlaken Partnership) beneficially owned approximately 59.9% of the voting power of PCI. In February 1996 PCI formed a new company, Kemwater North America Company ("Kemwater"), to continue the business activities previously conducted by Pioneer's subsidiary, Imperial West Chemical Co. ("Imperial West"), and to operate the business acquired through the acquisition of KWT, Inc. ("KWT") from a subsidiary of Kemira Oy of Finland ("Kemira"). Fifty percent of the common stock of Kemwater is held by a subsidiary of Pioneer and fifty percent of the common stock of Kemwater is owned by a subsidiary of PCI. A subsidiary of Pioneer also owns all of the outstanding shares of Kemwater's preferred stock. Fifty percent of the results of Kemwater's operations are included in the Company's equity in net loss of unconsolidated subsidiaries. PCAC. PCAC owns and operates three chlor-alkali production facilities, located in St. Gabriel, Louisiana, Henderson, Nevada and Tacoma, Washington. The facilities in St. Gabriel and Henderson were acquired by the Predecessor Company from Stauffer Chlor Alkali Company, Inc. in 1988. The three facilities produce chlorine and caustic soda for sale in the merchant markets and for use as raw materials by PCAC, All-Pure and Kemwater in the manufacture of downstream products. The Henderson facility also produces hydrochloric acid, and the Tacoma Facility also produces hydrochloric acid and calcium chloride. PCAC also has an indirect 15% equity interest in Saguaro Power Company L.P. ("Saguaro Power"), which owns and operates a 90-megawatt cogeneration facility located on approximately six acres of the Henderson property. All-Pure. All-Pure manufactures bleach, repackages chlorine and hydrochloric acid and distributes these products along with caustic soda and related products to municipalities, swimming pool supply distributors and selected commercial and retail markets in the western United States. Effective July 1, 1996, All-Pure acquired T.C. Products, Inc. ("T.C. Products") through the acquisition of its parent, T.C. Holdings, Inc., from its shareholders. T.C. Products continues to manufacture and package bleach and related products at its plant in Tacoma, Washington. The acquisition of T.C. Products was accounted for as a purchase transaction and, accordingly, the Company's consolidated financial statements subsequent to July 1, 1996 reflect the purchase price, including transaction costs, allocated to tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values as of July 1, 1996, and include the results of T.C. Products subsequent to such date. All-Pure purchases all of its chlorine and caustic soda and a substantial portion of its hydrochloric acid from PCAC. Because bleach contains a high percentage of water, freight costs and logistics are an important competitive factor. All-Pure's production plants and distribution facilities are strategically located in or near most of the largest population centers of the West Coast. In 1997, an unusual charge of $1.0 million was recorded, relating to the closure of certain of All-Pure's plants and the consolidation of their operations to other locations. PCI Canada. PCI Canada operates two chlor-alkali production facilities, at Becancour, Quebec and Dalhousie, New Brunswick, with aggregate production capacity of approximately 376,000 ECUs, as well as additional downstream production units at Cornwall, Ontario. The Becancour facility also produces hydrochloric acid and bleach, and the Dalhousie facility also produces sodium chlorate. The Cornwall facility produces hydrochloric acid, bleach, chlorinated paraffins under the brand name Cereclor(R), and a proprietary pulping additive, PSR 2000(R). PCI Chemicals Canada, Inc.'s affiliate, PCI Carolina, Inc., owns a downstream production unit at Charlotte, North Carolina, which produces a proprietary pulping additive, IMPAQT(R). PCI Carolina, Inc. also purchases the chlor-alkali products manufactured by PCI Chemicals Canada, Inc. for sale to customers in the United States. PCI Chemicals Canada, Inc. and PCI Carolina, Inc. also provide hydrogen 4 5 peroxide and bleaching enzymes to customers pursuant to a hydrogen peroxide resale agreement for eastern Canada and a bleaching enzyme resale agreement for North America. FINANCIAL COVENANTS Pioneer is a holding company with no operating assets or independent operations. As of December 31, 1997, the Company had outstanding $569.7 million of long-term debt, $175.0 million of which was issued by PCI Chemicals Canada, Inc. ("PCICCI"), a subsidiary of Pioneer, in the form of 9 1/4% Senior Secured Notes Due October 15, 2007. There are no restrictions on the ability of PCICCI or Pioneer's other subsidiaries to pay dividends to or make other distributions to Pioneer or PCICCI. The Company's debt agreements, including those relating to PCICCI's indebtedness, contain restrictions, which, among other things, could limit the ability of the Company to incur additional indebtedness, to acquire or dispose of assets or operations and to redeem shares of stock. See Note 12 to the Consolidated Financial Statements included in Item 8 -- Financial Statements and Supplementary Data for summarized financial information on PCICCI. RESULTS OF OPERATIONS The following table sets forth certain operating data for the periods indicated (dollars in thousands and percentage of revenues):
YEAR ENDED DECEMBER 31, -------------------------------- 1997(1) 1996(2) -------------- -------------- Revenues............................................ $241,716 100% $183,326 100% Cost of sales....................................... 178,793 74 126,739 69 -------- --- -------- --- Gross profit........................................ 62,923 26 56,587 31 Selling, general and administrative expense......... 27,976 12 23,528 13 Unusual charges..................................... 2,028 1 -- -- -------- --- -------- --- Operating income.................................... 32,919 13 33,059 18 Equity in net loss of unconsolidated subsidiaries... (6,657) (2) (2,607) (1) Interest expense, net............................... (26,993) (11) (17,290) (9) Other income, net................................... 2,904 1 1,684 -- -------- --- -------- --- Income before income taxes and extraordinary item... 2,173 1 14,846 8 Income tax provision................................ 3,002 1 6,735 4 -------- --- -------- --- Income (loss) before extraordinary item............. (829) -- 8,111 4 Extraordinary item, net of income tax benefit....... (18,658) (8) -- -- -------- --- -------- --- Net income (loss)......................... $(19,487) (8)% $ 8,111 4% ======== === ======== ===
- --------------- (1) On June 17, 1997 the Tacoma Facility was acquired and, accordingly, the results of operations for the year ended December 31, 1997 include its results of operations from the date of acquisition through December 31, 1997. On October 31, 1997 PCI Canada was acquired and, accordingly, the results of operations for the year ended December 31, 1997 include its results of operations from the date of acquisition through December 31, 1997. (2) All-Pure acquired T.C. Products in July 1996 and, accordingly, the results of operations for the year ended December 31, 1996 includes its results of operations since the acquisition date. To continue the business activities previously conducted by Imperial West, Kemwater was formed by PCI in connection with the acquisition of KWT in February 1996. Accordingly, the results of operations for the year ended December 31, 1996 include the results of operations of Imperial West only for the month of January 1996. Fifty percent of Kemwater's results of operations are included as equity in net loss of unconsolidated subsidiaries since the acquisition of KWT. YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Revenues Revenues increased by $58.4 million, or approximately 32% to $241.7 million for 1997, as compared to 1996. $27.7 million of this increase was due to the PCI Canada Acquisition, effective October 31, 1997. 5 6 Revenues for PCAC increased $32.6 million or approximately 25% to $162.2 million. The increase in revenues was primarily attributable to the additional sales volumes from PCAC's Tacoma Facility that was acquired on June 17, 1997. Partially offsetting this increase were lower sales volumes from PCAC's Henderson and St. Gabriel plants and lower ECU pricing. Average ECU prices at PCAC decreased approximately 3%, or $11 per ton. Caustic soda prices fell approximately 22% or $46 per ton, while chlorine pricing rose 25%, or approximately $40 per ton. Caustic soda sales volume from these two plants decreased due to a reduction in exchange activity and lower production rates. The Henderson plant had lower production rates in late 1997 because of a failed transformer and a lack of railcar availability due to the Union Pacific transportation problems experienced in the western United States. Revenues for All-Pure increased $0.5 million in 1997 versus 1996, due to the inclusion of T.C. Products results for the full year of 1997, whereas 1996 results only included this entity since its acquisition date of July 1, 1996. Offsetting the T.C. Products increase was a net sales decrease of $4.2 million for the remainder of All-Pure, caused by competitive pressures, which negatively impacted both sales prices and sales volumes. Offsetting the overall revenue increase was a $2.4 million decrease as a result of the transfer of Imperial West operations to Kemwater in 1996. Cost of Sales Cost of sales increased $52.1 million, or 41% in 1997 versus 1996. PCI Canada accounted for $18.5 million of this increase. PCAC's cost of sales increased $32.2 million, or approximately 33%, primarily the result of the Tacoma Acquisition and higher electrical costs. For All-Pure, cost of sales increased $3.6 million, or approximately 9%, due to the inclusion of T.C. Products results for the full year, offset by a decrease of $0.7 million due to lower sales volume. Offsetting these increases was a $2.2 million decrease as a result of the transfer of Imperial West operations to Kemwater in 1996. Gross Profit Gross profit margin decreased to 26% in 1997 from 31% in 1996 as a result of revenues and cost of sales fluctuations described above. Selling, General and Administrative Expense Selling, general and administrative expenses increased by $4.4 million, or 19%, to $28.0 million. This increase was primarily due to the acquisitions during 1997 and additional "pay-for-performance" awards at PCAC. PCI Canada's expenses were $2.7 million for the two months of its activities after they were acquired. PCAC's expenses increased somewhat as a result of the Tacoma Acquisition, while the July 1996 T.C. Products acquisition added to All-Pure's expenses for the full year of 1997. Unusual Charges Unusual charges include a $1.0 million charge related to the closure of certain of All-Pure's plants and the consolidation of their operations to other locations, plus a $1.0 million charge related to a receivable from KWT. Equity in Net Loss of Unconsolidated Subsidiaries Equity in net loss of unconsolidated subsidiaries represents the Company's 50% ownership in Kemwater. Kemwater's net loss in 1997 increased as a result of worsening operating results from raw material cost increases and sales competition. In addition, during the fourth quarter Kemwater recorded a reserve to reduce the carrying values of certain of its assets, based upon management's expectations of net realizable value. Interest Expense, Net Interest expense, net increased $9.7 million to $27.0 million in 1997 from $17.3 million in 1996. This increase was the result of the debt incurred for the PCI Canada Acquisition and the debt incurred for the Tacoma Acquisition, partially offset by lower interest expense from refinancing $135.0 million of 13 3/8% First Mortgage Notes with 9 1/4% Senior Notes. 6 7 Other Income, Net Other income, net, during 1997 includes a $0.7 million accrual for a business interruption insurance claim at PCAC's Henderson plant. Income Before Taxes and Extraordinary Item As a result of the above, income before income taxes and extraordinary item decreased $12.6 million to $2.2 million versus $14.8 million in 1996. Extraordinary Loss from Early Extinguishment of Debt During the second quarter of 1997, the Company recognized an $18.7 million extraordinary loss as a result of the 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 Income (Loss) Due to the factors described above, the net loss for 1997 was $19.5 million, compared to net income of $8.1 million in 1996. RECENT ACCOUNTING PRONOUNCEMENTS The Company adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), on January 1, 1996. SFAS No. 121 sets forth guidance on how to measure an impairment of long-lived assets and when to recognize such an impairment. The adoption of this standard did not have a material impact on the Company's financial position or results from operations. The Company adopted Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128") during 1997. SFAS No. 128 establishes new standards for computing and presenting earnings per share. The standard also requires the restatement of all prior period earnings per share information presented. The adoption of SFAS No. 128 did not have a material effect on the Company's earnings per share computations or disclosures. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 is effective for fiscal years beginning after December 15, 1997 and establishes standards for reporting and displaying of comprehensive income and its components. SFAS No. 130 is not expected to have a material effect on the Company's financial statements when it is adopted during 1998. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and establishes standards for the way that public business enterprises report information about operating segments. Under the current accounting policies, the Company operates in one business segment. Following the guidance of the new standard, operating segments will generally be defined following the bases used internally for evaluating segment performance and resource allocation decisions. SFAS No. 131 also requires various disclosures about international operations. The statement will have no effect on the Company's results of operations or financial position, but management is currently evaluating what, if any, additional disclosures may be required upon adoption during the fourth quarter of 1998. In February 1998, the Financial Accounting Standards Board issued Statement No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132 is effective for fiscal years beginning after December 15, 1997 and standardizes the disclosure requirements for pensions and other postretirement benefits. The statement will have no effect on the Company's results of 7 8 operations or financial position, but management is currently evaluating what, if any, additional disclosures may be required when it is adopted in 1998. ITEM 2. PROPERTIES. FACILITIES The following table sets forth certain information regarding the Company's principal production, distribution and storage facilities as of February 28, 1998. All property is leased unless otherwise indicated.
LOCATION MANUFACTURED PRODUCTS, TYPE OF FACILITY -------- --------------------------------------- PCAC Facilities St. Gabriel, Louisiana*..................... Chlorine and caustic soda Hydrogen Henderson, Nevada*.......................... Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Tacoma, Washington*......................... Chlorine and caustic soda Calcium chloride Hydrochloric acid Hydrogen Various..................................... Caustic soda storage terminals PCI Canada Facilities Becancour, Quebec*.......................... Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Dalhousie, New Brunswick*................... Chlorine and caustic soda Sodium chlorate Hydrogen Cornwall, Ontario........................... Bleach Hydrochloric acid Cereclor(R) chlorinated paraffin PSR 2000(R) pulping additive IMPAQT(R) pulping additive Charlotte, North Carolina................... IMPAQT(R) pulping additive Various..................................... Caustic soda terminals All-Pure Facilities Tracy, California........................... Bleach Chlorine repackaging Hydrochloric acid repackaging Santa Fe Springs, California................ Bleach Chlorine repackaging Tacoma, Washington*......................... Bleach City of Industry, California................ Bleach Chlorine repackaging Hydrochloric acid repackaging Dry chemical repackaging Various..................................... Distribution
- --------------- * Owned property 8 9 Corporate headquarters for Pioneer and PCAC are located in leased office space in Houston, Texas under a lease terminating in 2002. All-Pure's corporate headquarters are in leased office space in Walnut Creek, California under a lease terminating in 2002. PCI Canada's corporate headquarters are in leased office space in Montreal, Quebec under a lease terminating in 2003. PCI Canada also owns a technology center in Mississauga, located on 1.2 acres of land in the Sheridan Park Research Center near Toronto, Ontario, which conducts applications research, particularly with respect to pulp and paper process technology. The Tacoma Acquisition was financed with the proceeds of a nine and one-half year $100 million term facility provided to PAAC (the "PAAC Term Facility"), and with a portion of the proceeds of a $200 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PAAC (the "PAAC Senior Notes"). The PAAC Senior Notes and obligations outstanding under the PAAC Term Facility are secured by first mortgages on PCAC's St. Gabriel, Henderson and Tacoma facilities. The PCI Canada Acquisition was financed with the proceeds of a nine and one-quarter year $83 million term facility provided to Pioneer Americas (the "PAI Term Facility"), and with the proceeds of a $175 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCI Canada (the "PCI Canada Senior Notes"). The PCI Canada Senior Notes and obligations outstanding under the PAI Term Facility are secured by liens on and security interests in substantially all tangible and intangible property and assets used in PCI Canada's business in Canada. ITEM 3. LEGAL PROCEEDINGS. From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of its business. The Company maintains insurance coverage against potential claims in amounts which it believes to be adequate. In the opinion of management, uninsured losses, if any, resulting from these matters will not have a material adverse effect on the Company's results of operations, cash flow or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. 9 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. All of Pioneer's outstanding Common Stock, which is Pioneer's only class of equity securities, is owned by PCI. No cash dividends have been declared with respect to PCI's Common Stock during the two most recent fiscal years. Pursuant to the terms of certain debt instruments, there are restrictions on the ability of PAAC to transfer funds to Pioneer, resulting in limitations on Pioneer's ability to declare dividends on its Common Stock. See Item 1 -- Business -- "Financial Covenants" and Note 11 to the Consolidated Financial Statements included in Item 8 -- Financial Statements and Supplementary Data. ITEM 6. SELECTED FINANCIAL DATA. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. In accordance with General Instruction (I)(2)(a) of Form 10-K, management's narrative analysis of the results of operations is contained in Item 1 -- Business -- "Results of Operations." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. In accordance with General Instruction (I)(2)(a) of Form 10-K, management's narrative analysis of the results of operations is contained in Item 1 -- Business -- "Results of Operations." 10 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index:
PAGE ---- (1) Consolidated financial statements, Pioneer Americas Acquisition Corp. and subsidiaries: Report of Deloitte & Touche LLP, independent auditors, dated February 17, 1998................... 12 Report of Ernst & Young LLP, independent auditors, dated June 26, 1995................................. 13 Report of Management................................. 14 Consolidated balance sheets as of December 31, 1997 and 1996............................................ 15 Consolidated statements of operations for the years ended December 31, 1997 and 1996 and the period from March 6, 1995 ("Inception") through December 31, 1995 and Predecessor Company for the period from January 1, 1995 through April 20, 1995.............. 16 Consolidated statements of stockholders' equity for the years ended December 31, 1997 and 1996 and the period from Inception through December 31, 1995 and Predecessor Company for the period from January 1, 1995 through April 20, 1995......................... 17 Consolidated statements of cash flows for the years ended December 31, 1997 and 1996 and the period from Inception through December 31, 1995 and Predecessor Company for the period from January 1, 1995 through April 20, 1995...................................... 18 Notes to consolidated financial statements........... 19 (2) Supplemental Schedules: Schedule II -- Valuation and Qualifying Accounts -- Pioneer Americas Acquisition Corp....... 44 Schedule II -- Valuation and Qualifying Accounts -- Pioneer Americas, Inc................... 45
All schedules, except the ones listed above, have been omitted because they are either not applicable, not required, or the information called for therein appears in the consolidated financial statements or notes thereto. 11 12 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Pioneer Americas Acquisition Corp. We have audited the accompanying consolidated balance sheets of Pioneer Americas Acquisition Corp. and its subsidiaries (the "Company"), as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 1997 and 1996 and the period from March 6, 1995 ("Inception") through December 31, 1995. Our audits also included the consolidated financial statement schedule of the Company listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1997 and 1996, and the results of their operations and their cash flows for the years ended December 31, 1997 and 1996 and the period from Inception through December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Houston, Texas February 17, 1998 12 13 INDEPENDENT AUDITORS' REPORT The Board of Directors Pioneer Americas, Inc. We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Pioneer Americas, Inc. (the "Predecessor Company") for the period from January 1, 1995 through April 20, 1995. Our audit also included the related financial statement schedule II. These financial statements and schedule are the responsibility of the Predecessor Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit 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 statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of the Predecessor Company for the period from January 1, 1995 through April 20, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. ERNST & YOUNG LLP Houston, Texas June 26, 1995 13 14 REPORT OF MANAGEMENT Management is responsible for the preparation and content of the financial statements and other information included in this annual report. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate under the circumstances to reflect, in all material respects, the substance of events and transactions that should be included. The financial statements reflect management's judgments and estimates as to the effects of events and transactions that are accounted for or disclosed. Management maintains accounting systems that are supported by internal accounting controls that provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The concept of reasonable assurance is based on the recognition that the cost of a system of internal accounting controls should not exceed the benefits. An independent auditor performed an audit of the Company's financial statements for the purpose of determining that the statements are presented fairly in accordance with generally accepted accounting principles. The independent auditors are appointed by the Board of Directors and meet regularly with the Audit Committee of the Board. The Audit Committee of the Board of Directors is composed solely of outside directors. The Audit Committee meets periodically with the Company's senior officers and independent auditors to review the adequacy and reliability of the Company's accounting, financial reporting and internal controls. Philip J. Ablove Vice President And Chief Financial Officer Principal Financial Officer John R. Beaver Controller Principal Accounting Officer March 10, 1998 14 15 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
DECEMBER 31, -------------------- 1997 1996 -------- -------- Current assets: Cash...................................................... $ 50,995 $ 14,417 Accounts receivable, less allowance for doubtful accounts: 1997, $2,002; 1996, $1,311............................. 65,189 18,830 Due from parent........................................... 2,810 2,547 Inventories............................................... 22,625 6,247 Prepaid expenses.......................................... 1,372 1,156 -------- -------- Total current assets.............................. 142,991 43,197 Property, plant, and equipment, at cost: Land................................................... 9,092 3,735 Buildings and improvements............................. 55,589 17,062 Machinery and equipment................................ 263,838 76,244 Construction in progress............................... 31,836 11,871 -------- -------- 360,355 108,912 Less accumulated depreciation.......................... (34,130) (16,429) -------- -------- 326,225 92,483 Investment in and advances to unconsolidated subsidiary..... 28,551 28,586 Other assets, net of accumulated amortization: 1997, $2,990; 1996, $2,458.............................................. 48,560 19,621 Excess cost over the fair value of net assets acquired, net of accumulated amortization: 1997, $13,319; 1996, $7,556.................................................... 201,032 107,123 -------- -------- Total assets...................................... $747,359 $291,010 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable.......................................... $ 45,711 $ 17,221 Accrued liabilities....................................... 33,745 22,514 Current portion of long-term debt......................... 2,570 128 -------- -------- Total current liabilities......................... 82,026 39,863 Long-term debt, less current maturities..................... 567,160 141,629 Accrued pension and other employee benefits................. 21,068 14,100 Other long-term liabilities................................. 17,224 21,095 Commitments and contingencies Stockholder's equity: Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding................................. 1 1 Additional paid-in capital................................ 66,169 61,124 Retained earnings (deficit)............................... (6,289) 13,198 -------- -------- Total stockholder's equity........................ 59,881 74,323 -------- -------- Total liabilities and stockholder's equity........ $747,359 $291,010 ======== ========
See notes to consolidated financial statements. 15 16 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
PREDECESSOR COMPANY PERIOD FROM PERIOD FROM YEAR ENDED INCEPTION JANUARY 1, 1995 DECEMBER 31, THROUGH THROUGH -------------------- DECEMBER 31, APRIL 20, 1997 1996 1995 1995 -------- -------- ------------ --------------- Revenues.................................. $241,716 $183,326 $142,908 $57,848 Cost of sales............................. 178,793 126,739 98,175 37,400 -------- -------- -------- ------- Gross profit.............................. 62,923 56,587 44,733 20,448 Selling, general and administrative expenses................................ 27,976 23,528 19,836 7,047 Unusual charges........................... 2,028 -- -- -- -------- -------- -------- ------- Operating income.......................... 32,919 33,059 24,897 13,401 Equity in net loss of unconsolidated subsidiaries............................ (6,657) (2,607) -- -- Interest expense, net..................... (26,993) (17,290) (12,905) (1,665) Other income (expense), net............... 2,904 1,684 637 (115) -------- -------- -------- ------- Income before taxes and extraordinary item.................................... 2,173 14,846 12,629 11,621 Income tax provision...................... 3,002 6,735 6,208 4,809 -------- -------- -------- ------- Income (loss) before extraordinary item... (829) 8,111 6,421 6,812 Extraordinary item, early extinguishment of debt (net of income tax benefit of $12,439 in 1997 and $2,140 in 1995)..... (18,658) -- -- (3,420) -------- -------- -------- ------- Net income (loss)............... $(19,487) $ 8,111 $ 6,421 $ 3,392 ======== ======== ======== ======= Earnings per common share: Income (loss) before extraordinary item................................. $ (829) $ 8,111 $ 6,421 Extraordinary item, net of income tax benefit.............................. (18,658) -- -- -------- -------- -------- Net income (loss)....................... $(19,487) $ 8,111 $ 6,421 ======== ======== ========
See notes to consolidated financial statements. 16 17 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
NUMBER OF COMMON ADDITIONAL RETAINED SHARES COMMON PAID-IN EARNINGS OUTSTANDING STOCK CAPITAL (DEFICIT) TOTAL ----------- ------ ---------- --------- -------- PIONEER AMERICAS ACQUISITION CORP. Balance at Pioneer Acquisition....... 1 $ 1 $46,062 $ -- $ 46,063 Recognition of the NOL benefit..... -- -- 3,590 -- 3,590 Dividend paid to parent............ -- -- -- (647) (647) Net income......................... -- -- -- 6,421 6,421 ----- --- ------- -------- -------- Balance at December 31, 1995......... 1 1 49,652 5,774 55,427 Recognition of the NOL benefit..... -- -- 11,472 -- 11,472 Dividend paid to parent............ -- -- -- (687) (687) Net income......................... -- -- -- 8,111 8,111 ----- --- ------- -------- -------- Balance at December 31, 1996......... 1 1 61,124 13,198 74,323 Capital contribution by parent..... -- -- 5,500 -- 5,500 Dividend paid to parent............ -- -- (455) -- (455) Net loss........................... -- -- -- (19,487) (19,487) ----- --- ------- -------- -------- Balance at December 31, 1997......... 1 $ 1 $66,169 $ (6,289) $ 59,881 ===== === ======= ======== ======== PREDECESSOR COMPANY Balance at January 1, 1995........... 1,509 $15 $ 4,186 $ 18,901 $ 23,102 Accretion of excess redemption value of redeemable preferred stock over carrying value and amount of dividends not declared or paid.......................... -- -- -- (124) (124) Net income......................... -- -- -- 3,392 3,392 ----- --- ------- -------- -------- Balance at April 20, 1995............ 1,509 $15 $ 4,186 $ 22,169 $ 26,370 ===== === ======= ======== ========
See notes to consolidated financial statements. 17 18 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR COMPANY PERIOD FROM PERIOD FROM INCEPTION JANUARY 1, 1995 YEAR ENDED DECEMBER 31, THROUGH THROUGH ----------------------- DECEMBER 31, APRIL 20, 1997 1996 1995 1995 ---------- --------- ------------ --------------- OPERATING ACTIVITIES: Net income (loss)........................ $ (19,487) $ 8,111 $ 6,421 $ 3,392 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary item, net of tax......... 18,658 -- -- 3,420 Depreciation and amortization.......... 24,975 15,695 12,274 4,490 Net change in deferred taxes........... 9,746 4,339 3,590 (2,086) Foreign exchange loss.................. 783 -- -- -- Unusual charges........................ 2,028 -- -- -- Equity in net loss of unconsolidated subsidiaries........................ 6,657 2,607 -- -- Other, net............................. -- -- -- (191) Net effect of changes in operating assets and liabilities (net of acquisitions)..................... (8,622) 1,701 6,003 (6,414) --------- -------- --------- --------- Net cash flows from operating activities................... 34,738 32,453 28,288 2,611 --------- -------- --------- --------- INVESTING ACTIVITIES: Acquisitions of businesses............... (332,571) (5,459) (152,318) -- Investment in and advances to unconsolidated subsidiaries............ (7,638) (6,645) -- -- Capital expenditures, net................ (20,385) (17,121) (13,556) (3,389) --------- -------- --------- --------- Net cash flows from investing activities................... (360,594) (29,225) (165,874) (3,389) --------- -------- --------- --------- FINANCING ACTIVITIES: Proceeds from long-term debt............. 558,000 -- 153,500 106,000 Repayments on long-term debt............. (163,042) (70) (27,269) (103,971) Debt issuance and related costs.......... (32,069) -- -- -- Dividends paid to parent................. (455) (687) (647) -- Dividends paid on preferred stock and purchase of stock put warrant.......... -- -- -- (2,341) Proceeds from issuance of common stock... -- -- 21,000 -- --------- -------- --------- --------- Net cash flows from financing activities............................. 362,434 (757) 146,584 (312) --------- -------- --------- --------- Net increase (decrease) in cash.......... 36,578 2,471 8,998 (1,090) Cash at beginning of period.............. 14,417 11,218 -- 3,310 Cash acquired in acquisitions............ -- 728 2,220 -- --------- -------- --------- --------- Cash at end of period.................... $ 50,995 $ 14,417 $ 11,218 $ 2,220 ========= ======== ========= =========
See notes to consolidated financial statements. 18 19 PIONEER AMERICAS ACQUISITION CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Pioneer Americas Acquisition Corp. ("Pioneer") is a Delaware corporation formed on March 6, 1995 ("Inception"). Pioneer is 100% owned by Pioneer Companies, Inc. ("PCI"). On April 20, 1995, Pioneer acquired Pioneer Americas, Inc. ("Pioneer Americas" or the "Predecessor Company") for approximately $177 million, which included cash paid of $152.3 million, long-term debt issued by PCI of $11.5 million, and net operating loss ("NOL") benefit recognized of $13.6 million (the "Pioneer Acquisition"). Pioneer Americas manufactured chlorine, caustic soda and related products used in a variety of applications including water treatment, plastics, detergents, and agricultural chemicals. The Pioneer Acquisition was accounted for as a purchase; accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their fair market value and the operations of the Predecessor Company were included in the consolidated financial statements from the date acquired. The Pioneer Acquisition resulted in $112 million of excess cost over the fair value of the net assets acquired, which is being amortized on a straight line basis over 25 years. See note 3 for a description of subsequent acquisitions. The consolidated financial statements include the accounts of Pioneer and its consolidated subsidiaries (the "Company"), including Pioneer Americas, Pioneer Chlor Alkali Co., Inc. ("PCAC"), All-Pure Chemical Company, Inc. ("All-Pure"), and PCI Chemicals Canada, Inc. and PCI Carolinas (together "PCI Canada"). All significant intercompany balances and transactions have been eliminated in consolidation. All dollar amounts in tabulations in the notes to the consolidated financial statements are stated in thousands of dollars unless otherwise indicated. Amounts presented in the notes to the consolidated financial statements for the Company from Inception through December 31, 1995, are included under the caption "1995." Amounts presented in the notes to the consolidated financial statements for the Predecessor Company are based upon its historical accounting basis for the periods presented. Such amounts do not include effects of the purchase of the Predecessor Company by Pioneer. Amounts presented in the notes to the consolidated financial statements for the Predecessor Company for the period from January 1, 1995 through April 20, 1995 are included under the captions "Predecessor Company, 1995." The Company operates in one industry segment and two geographic areas. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS All highly liquid investments with an initial maturity of three months or less when purchased are considered to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost or market. Finished goods and work-in-process costs are calculated under the average cost method, which includes appropriate elements of material, labor, and manufacturing overhead costs, while the first-in, first-out method is utilized for raw materials, supplies, and parts. The Company enters into agreements with other companies to exchange chemical inventories in order to minimize working capital requirements and to facilitate distribution logistics. Balances related to quantities due to or payable by the Company are included in inventory. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment are recorded at cost. Disposals are removed at carrying cost less accumulated depreciation with any resulting gain or loss reflected in operations. 19 20 Depreciation for financial reporting purposes is computed primarily under the straight-line method over the estimated remaining useful lives of the assets. Asset lives range from 5 to 15 years with a predominant life of 10 years, which include buildings and improvements with an average life of 15 years and machinery and equipment with an average life of 9 years. OTHER ASSETS Other assets include amounts for deferred financing costs which are being amortized on a straight-line basis over the term of the related debt. Amortization of such costs using the interest method would not result in material differences in the amounts amortized during the periods presented. Amortization expense for other assets for the years ended December 31, 1997, 1996, and the period from Inception through December 31, 1995 was approximately $1.7 million, $1.3 million, and $1.1 million, respectively. The Predecessor Company's amortization expense for other assets was approximately $0.8 million for the period from January 1, 1995 through April 20, 1995. EXCESS COST OVER THE FAIR VALUE OF NET ASSETS ACQUIRED Excess cost over the fair value of net assets acquired of approximately $214.4 million is amortized on a straight-line basis over periods of up to 25 years. The carrying value of excess cost over the fair value of net assets acquired is reviewed annually and if this review indicates that such excess cost will not be recoverable, as determined based on the estimated future undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of excess cost over the fair value of net assets acquired will be reduced by the estimated deficit of discounted cash flows or the fair value of the related entity. Amortization expense for excess cost over the fair value of net assets acquired was approximately $5.8 million and $4.7 million for the years ended December 31, 1997 and 1996, respectively, and $3.3 million for the period from Inception to December 31, 1995. The Predecessor Company's excess cost over the fair value of net assets acquired of approximately $12.8 million and was amortized on a straight-line basis over 20 years. Amortization expense was approximately $0.2 million for the period from January 1, 1995 through April 20, 1995. ENVIRONMENTAL EXPENDITURES Remediation costs are accrued based on estimates of known environmental remediation exposure. Such accruals are based upon management's best estimate of the ultimate cost. Ongoing environmental compliance cost, including maintenance and monitoring costs, are charged to operations as incurred. PER SHARE INFORMATION In 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share." The Company's capital structure only includes common stock outstanding. Weighted average number of shares outstanding was one thousand shares for the years ended December 31, 1997 and 1996 and the period from Inception through December 31, 1995. 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. RECLASSIFICATION Certain amounts have been reclassified in prior years to conform to the current year presentation. All reclassifications have been applied consistently for the periods presented. 20 21 3. ACQUISITIONS Pioneer acquired a chlor-alkali plant in Tacoma, Washington (the "Tacoma Facility") in June 1997. Consideration given for the facility was $97.0 million, 55,000 shares of PCI's convertible redeemable preferred stock, par value $.01 per share, and the assumption of certain obligations related to the acquired business. In November 1997, Pioneer acquired substantially all of the assets and properties of the North American chlor-alkali business of ICI Canada, Inc. and ICI Americas, Inc. (the "PCI Canada Acquisition") for $235.6 million and the assumption of certain obligations related to the acquired chlor-alkali business. Both of these acquisitions were accounted for using the purchase method; accordingly, the purchase prices were allocated to the assets acquired and liabilities assumed based upon their fair market value and the operations for the acquired companies were included in the consolidated financial statements from the date acquired. The Tacoma Facility acquisition and the PCI Canada Acquisition resulted in $22.8 million and $77.0 million, respectively, of excess cost over the fair value of the net assets acquired, which is being amortized on a straight-line basis over 25 years. In February 1996, Pioneer acquired an interest in Kemwater North America Company ("Kemwater") for $0.3 million of cash and a contribution of the assets and liabilities of its subsidiary Imperial West Chemical Co. ("Imperial West"). Kemwater was formed to conduct the operations of Imperial West and KWT, Inc. (acquired by PCI in February 1996). Kemwater, which manufactures and supplies iron chlorides that are used to remove solids from water streams and to control hydrogen sulfide emissions by the potable and waste water markets, is owned 50% by Pioneer and 50% by PCI. Since it does not own a controlling interest in Kemwater, Pioneer accounts for Kemwater using the equity method. In the 1997 and 1996 consolidated financial statements, Pioneer's investment in Kemwater is presented as "Investment in and advances to unconsolidated subsidiaries" and its equity in the loss of Kemwater is shown as "Equity in net loss of unconsolidated subsidiaries." In the 1995 consolidated statement of operations of Pioneer, Imperial West is consolidated and includes the following: total revenues of $23.7 million and net loss of $0.6 million. The acquisition did not have a material impact on Pioneer's financial statements, and therefore pro forma information is not presented. Pioneer acquired T.C. Products in July 1996 for $10.0 million. T.C. Products manufactures bleach and related products. This acquisition was accounted for using the purchase method; accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their fair market value and the operations for the acquired company were included in the consolidated financial statements from the date acquired. The acquisition resulted in $7.0 million of excess cost over the fair value of the net assets acquired, which is being amortized on a straight line basis over 25 years. The following presents the pro forma effect of the PCI Canada Acquisition, the acquisition of the Tacoma Facility, and the acquisition of T.C. Products and related financing transactions on the historical results of operations for the years ended December 31, 1997 and 1996, respectively, as if the transactions had occurred on January 1, 1996. The effects of variations, if any, to the purchase price allocations will not materially impact the pro forma financial data depicted.
1997 1996 -------- -------- Revenues.................................................... $413,826 $431,485 Operating income............................................ 73,808 93,446 Net income (loss)........................................... (6,915) 28,052 Earnings (loss) per share................................... (6,915) 28,052
21 22 4. SUPPLEMENTAL CASH FLOW INFORMATION The net effect of changes in operating assets and liabilities (net of acquisitions) is as follows:
PREDECESSOR COMPANY 1997 1996 1995 1995 -------- ------- ------- ----------- Accounts receivable...................... $(21,095) $ 5,228 $ 940 $(3,570) Due from parent.......................... (263) (1,973) 111 -- Inventories.............................. (2,206) 3,151 1,541 (638) Prepaid expenses......................... (2,125) 76 (1,404) 722 Other assets............................. 6,598 (1,254) (3,104) (3,480) Accounts payable......................... 5,449 (4,168) (1,030) 4,899 Accrued liabilities...................... 8,052 (4,656) 8,543 (4,043) Other long-term liabilities.............. (3,684) 4,770 (71) (726) Accrued pension and other employee benefits............................... 652 527 477 422 -------- ------- ------- ------- Net change in operating accounts..................... $ (8,622) $ 1,701 $ 6,003 $(6,414) ======== ======= ======= =======
Following is supplemental cash flow information:
PREDECESSOR COMPANY 1997 1996 1995 1995 -------- ------- -------- ----------- Cash paid during the period for: Interest.............................. $ 28,272 $18,297 $ 8,288 $ 3,067 ======== ======= ======== ======= Income taxes.......................... $ 543 $ 3,556 $ 1,707 $ 1,852 ======== ======= ======== ======= Investing activities of acquisitions during the period: Cash paid for acquisition............. $332,571 $ 5,459 $152,318 $ -- Long-term debt issued................. -- 4,500 -- -- Liabilities assumed................... 21,519 3,994 90,596 -- Contribution by parent................ 5,500 -- 11,463 -- NOL benefit recognized................ -- -- 13,600 -- -------- ------- -------- ------- Fair value of assets acquired......... $359,590 $13,953 $267,977 $ -- ======== ======= ======== =======
Included in the above table are the acquisitions of PCI Canada and the Tacoma Facility in 1997; T.C. Products in 1996; and Pioneer Americas, Inc. in 1995. Non-cash investing and financing activities: In December 1997, the Company purchased a hydrochloric acid manufacturing facility that it had been previously leasing in Henderson, Nevada for $5.9 million, which was financed with a mortgage note. Consideration given during the Tacoma Acquisition included 55,000 shares of PCI redeemable preferred stock. PCI then contributed this interest in the Tacoma Facility to the Company. Shareholders' equity increased by $11.5 million and $3.6 million in 1996 and 1995, respectively, due to recognizing the benefit of the net operating loss carryforward. 22 23 5. INVENTORIES Inventories consisted of the following at December 31:
1997 1996 ------- ------- Raw materials, supplies and parts........................... $18,314 $ 7,512 Finished goods and work-in-process.......................... 7,188 2,668 Inventories under exchange agreements....................... (2,877) (3,933) ------- ------- $22,625 $ 6,247 ======= =======
6. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES KEMWATER Pioneer and PCI each own a 50% interest in Kemwater, which was formed in February 1996 to continue the business activities previously conducted by Pioneer's subsidiary, Imperial West, and to operate the business acquired by PCI through the acquisition of KWT, Inc. Pioneer's investment in and advances to Kemwater aggregated $28.6 million at December 31, 1997 and 1996. Advances to Kemwater are primarily for purchase of product and to fund Kemwater's current operations and capital requirements. During 1997, Kemwater established a $3.3 million reserve related to the reduction in carrying value of certain assets to their net realizable values. Following is a summary of selected items from Kemwater's balance sheets at December 31, 1997 and 1996 and operations for the year ended December 31, 1997 and for the eleven months ended December 31, 1996:
1997 1996 -------- ------- Current assets.............................................. $ 8,342 $13,004 Non-current assets.......................................... 28,681 32,224 Current liabilities......................................... 4,945 7,294 Non-current liabilities..................................... 39,032 40,498 Revenues.................................................... 38,959 36,142 Gross profit (loss)......................................... (78) 1,865 Net loss.................................................... (13,314) (5,214)
BASIC INVESTMENTS, INC. AND VICTORY VALLEY LAND COMPANY, L.P. The Company owns approximately 32% of the common stock of Basic Investments, Inc. ("BII"), which owns and maintains the water and power distribution network within the Henderson, Nevada industrial complex and which is a large landowner in Clark County, Nevada. The remainder of the common stock of BII is owned by other companies located in the industrial complex. Prior to the Pioneer Acquisition, the investment in BII was accounted for by the Predecessor Company under the equity method after adjustment to reflect PCAC's basis. PCAC has an approximate 21% limited partnership interest in Victory Valley Land Company, L.P. ("VVLC"). The purpose of VVLC's business is to receive, hold and develop the lands, water rights, and other assets contributed by the partners for investment. A wholly owned subsidiary of BII, acting as general partner with a 50% interest in VVLC, contributed all rights, title, and interest in and to certain land to VVLC. PCAC assigned certain water rights to VVLC. Prior to the Pioneer Acquisition, the investment in VVLC was accounted for by the Predecessor Company under the equity method. The Company's interests in BII and in VVLC (referred to as the "Basic Ownership") constitute assets that are held for the economic benefit of the previous owners of Pioneer Americas for a period of 20 years. Dividends and distributions received by the Company on account of the Basic Ownership (including amounts payable as a result of sales of land or other assets owned by BII or VVLC) are deposited into a deposit account and may be used to satisfy certain obligations of the sellers under environmental and other obligations in favor of the Company. After payment or provision for payment of such obligations, amounts received by the Company subsequent to April 20, 1995 on account of the Basic Ownership will be remitted to the sellers at the 23 24 end of the 20-year period. The sellers also have certain rights during such period with respect to determinations affecting the Basic Ownership, including the right (subject to certain limited conditions) to direct the sales or disposition of interests constituting the Basic Ownership and the right (with certain limited exceptions) to vote the interests constituting the Basic Ownership, notwithstanding the ownership of such interests by the Company. The Company's investment in Basic Ownership, following the equity method, was $17.1 million and $16.7 million at December 31, 1997 and 1996, respectively, and the balance in the related deposit account was $5.8 million and $2.3 million at December 31, 1997 and 1996, respectively. Within the Company's balance sheets, these assets are offset by liabilities of the same amount because the right of setoff exists, as the Company and the sellers owe determinable amounts, the Company has the right to set off the amount owed by the sellers, the Company intends to set off the amount and the setoff is enforceable by law. 7. OTHER ASSETS Other assets consist of the following at December 31:
1997 1996 ------- ------- Debt financing assets and organizational costs, net......... $19,256 $ 4,362 Deferred tax asset.......................................... 18,316 9,424 Patents, trademarks and other intangibles, net.............. 4,046 7 Indemnification of environmental reserve.................... 3,160 3,160 Investments................................................. 981 250 Other....................................................... 2,801 2,418 ------- ------- Other assets, net................................. $48,560 $19,621 ======= =======
8. ACCRUED LIABILITIES Accrued liabilities consist of the following at December 31:
1997 1996 ------- ------- Payroll, benefits, and pension.............................. $ 7,262 $ 2,371 Interest and bank fees...................................... 4,668 4,595 Returnable deposits......................................... 3,074 3,238 Income taxes................................................ 3,822 2,237 Other accrued liabilities................................... 14,919 10,073 ------- ------- Accrued liabilities............................... $33,745 $22,514 ======= =======
9. EMPLOYEE BENEFITS PENSION PLANS The Company sponsors various non-contributory defined benefit plans covering substantially all union and non-union employees at PCAC and PCI Canada. Pension plan benefits are based primarily on participants' compensation and years of credited service. Annual pension costs and liabilities for the Company under its defined-benefit plans are determined by actuaries using various methods and assumptions. The Company has agreed to contribute such amounts as are necessary to provide assets sufficient to meet the benefits to be paid to its employees. The Company's present intent is to make annual contributions, which are actuarially computed, in amounts not more than the maximum nor less than the minimum allowable under the Internal Revenue Code. For purposes of determining annual expenses and funding contributions, the following assumptions were used for the years ended December 31:
1997 1996 1995 ---- ---- ---- Rate of return on plan assets............................... 8.0% 8.0% 8.0% Discount rate............................................... 7.3% 7.5% 7.5% Annual compensation increase................................ 4.0% 4.0% 4.0%
24 25 Pension expense for all plans was comprised of:
PREDECESSOR COMPANY 1997 1996 1995 1995 ------- ------- ----- ----------- Service cost on benefits earned during the year... $ 994 $ 597 $ 410 $ 178 Interest cost on projected benefit obligation..... 1,596 892 566 260 Return on plan assets............................. (2,334) (1,132) (394) (149) Net amortization and deferral..................... 944 462 56 (7) ------- ------- ----- ----- Total pension expense................... $ 1,200 $ 819 $ 638 $ 282 ======= ======= ===== =====
The funded status of the pension plans for which assets exceed accumulated benefits and the plan for which accumulated benefits exceed assets as of the actuarial valuation dates of December 31, 1997 and 1996 were as follows:
1997 1996 ------------------------- ------------------------- ACCUMULATED ASSETS ACCUMULATED ASSETS BENEFITS EXCEED BENEFITS EXCEED EXCEED ACCUMULATED EXCEED ACCUMULATED ASSETS BENEFITS ASSETS BENEFITS ----------- ----------- ----------- ----------- Actuarial present value of benefits based on service to date and present pay levels: Vested benefit obligation............. $ 11,759 $ 21,352 $ 3,823 $ 6,122 Non-vested benefit obligation......... 604 268 212 389 -------- -------- ------- ------- Accumulated benefit obligation........ $ 12,363 $ 21,620 $ 4,035 $ 6,511 Plan assets at fair value............. (11,147) (27,947) (3,318) (6,963) -------- -------- ------- ------- Accumulated benefit obligation in excess (less than) plan assets..... 1,216 (6,327) 717 (452) Additional amounts related to projected salary increases......... 3,250 9,557 737 1,815 -------- -------- ------- ------- Total projected benefit obligation in excess of plan assets.............. 4,466 3,230 1,454 1,363 Unrecognized loss (gain).............. 838 (3,063) 236 1,254 Unrecognized prior service cost....... (103) -- (372) 220 -------- -------- ------- ------- Pension obligation............ $ 5,201 $ 167 $ 1,318 $ 2,837 ======== ======== ======= =======
Plan assets at December 31, 1997 and 1996 consist primarily of fixed income investments and equity investments. DEFINED CONTRIBUTION PLANS The Company offers defined-contributions plans for its employees with the employees generally contributing from 1% to 15% of their compensation. The Company also contributes funds to the plans in the amount of 50% of employee contributions up to 4% to 6% of employee compensation, depending on the plan. Aggregate expense by the Company to such plans was $0.4 million, $0.4 million and $0.2 million in 1997, 1996 and 1995, respectively. Aggregate expense by the Predecessor Company for such plans was $0.1 million for the period from January 1, 1995 through April 20, 1995. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for qualifying retired employees who reach normal retirement age while working for the Company. 25 26 The following table presents the plan's funded status reconciled with amounts recognized in the Company's balance sheet at December 31:
1997 1996 ------- ------- Accumulated post-retirement benefit obligation: Retirees.................................................. $ 5,264 $ 3,737 Fully eligible active plan participants................... 2,606 1,483 Other active plan participants............................ 12,802 4,986 ------- ------- 20,672 10,206 Unrecognized net gain....................................... (4,495) (125) ------- ------- Accrued post-retirement benefit cost...................... $16,177 $10,081 ======= =======
Net periodic post-retirement benefit cost for the periods presented includes the following components:
PREDECESSOR COMPANY 1997 1996 1995 1995 ------ ------ ---- ----------- Service cost.................................. $ 664 $ 369 $243 $109 Interest cost................................. 1,095 693 449 176 Amortization of transition obligation over 20 years....................................... 114 -- 15 8 Other components.............................. -- -- 48 -- ------ ------ ---- ---- Net periodic post-retirement benefit cost.............................. $1,873 $1,062 $755 $293 ====== ====== ==== ====
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is 10.0% for 1997 (the same as the rate previously assumed for 1996 and 1995) and is assumed to decrease gradually to 5% for 2013 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated post- retirement benefit obligation as of December 31, 1997 and 1996 by $4.6 million and $0.8 million, respectively, and the aggregate of the service and interest cost components of the net periodic post-retirement benefit cost for 1997, 1996 and 1995 by $0.4 million, $0.1 million and $0.1 million, respectively. The weighted-average discount rate used in determining the accumulated post-retirement benefit obligation was 7.25% at December 31, 1997 and 7.5% at December 31, 1996 and 1995. As a result of the Pioneer Acquisition, the unrecognized net loss and unrecognized transition obligation amounts as of that date were recognized. 10. BANK CREDIT FACILITY In November 1997, the Company entered into an amended credit agreement which provides for a five-year Bank Credit Facility with Bank of America, Illinois ("BAI"). The Company may borrow up to $65.0 million, subject to certain borrowing base limitations. At December 31, 1997, no amounts were outstanding under the Bank Credit Facility. The revolving loans bear interest at a rate equal to, at the Company's option, (i) the reference rate set by the lenders or (ii) the LIBOR Base Rate. The Bank Credit Facility requires the Company to pay a fee equal to one half of one percent per annum on the total unused balance. Indebtedness outstanding under the Bank Credit Facility is collateralized by a security interest in all of the inventory, accounts receivable and certain other assets of the Company. Up to $20 million of the Borrowing Base, as defined by the Bank Credit Facility, can be utilized for letters of credit. The Borrowing Base at December 31, 1997 was approximately $54.3 million. After consideration of applicable outstanding letters of credit of approximately $2.9 million, the unused availability of the Borrowing Base was approximately $51.4 million at December 31, 1997. The Company also had performance bonds outstanding of approximately $3.1 million at December 31, 1997. These letters of credit and performance bonds were issued for the benefit of: customers under sales agreements securing delivery of products sold, a power company as a 26 27 deposit for the supply of electricity, and state environmental agencies as required for manufacturers in the state. The letters of credit expire at various dates in 1998. No amounts were drawn on the letters of credit at December 31, 1997. The Bank Credit Facility contains restrictive covenants with respect to, among other things, (i) maintenance of certain financial ratios and (ii) limitations on the ability to incur additional indebtedness, to acquire or dispose of assets or operations and to pay dividends or redeem shares of stock. 11. LONG-TERM DEBT Long-term debt consisted of the following at December 31:
1997 1996 -------- -------- 9 1/4% Senior Secured Notes, due June 15, 2007.............. $200,000 9 1/4% Senior Secured Notes, due October 15, 2007........... 175,000 June 1997 term facility, due in quarterly installments of $250 with the balance due 2006; variable interest rate based on LIBOR or an alternate base rate; weighted average interest rate at December 31, 1997 of 8.4%................ 99,500 November 1997 term facility, due in quarterly installments of $250 with the balance due 2006; variable interest rate based on LIBOR or alternate base rate; weighted average interest rate at December 31, 1997 of 8.8%................ 82,750 13 3/8% First Mortgage Notes, due 2005...................... -- $135,000 Other notes, maturing in years through 2014, with various installments, at various interest rates................... 12,480 6,757 -------- -------- Total............................................. 569,730 141,757 Current maturities of long-term debt........................ (2,570) (128) -------- -------- Long-term debt.................................... $567,160 $141,629 ======== ========
Long-term debt matures as follows: $2.6 million in 1998; $2.6 million in 1999: $2.6 million in 2000; $7.1 million in 2001; $2.7 million in 2002; and $552.1 million thereafter. As part of the acquisition of the Tacoma Facility in June 1997, the Company issued and sold $200.0 million of 9 1/4% Senior Secured Notes due June 15, 2007, entered into a nine and one-half year $100.0 million Term Facility and entered into the $35.0 million Revolving Facility (which was subsequently amended during the PCI Canada Acquisition). Concurrent with this, the Company purchased all of its existing 13 3/8% First Mortgage Notes due 2005. As part of the PCI Canada Acquisition in November 1997, a subsidiary of the Company, PCI Chemicals Canada, Inc. ("PCICCI") issued and sold $175.0 million of 9 1/4% Senior Secured Notes due October 15, 2007 (see note 12). The Company also entered into a nine and one-quarter year $83.0 million Term Facility and entered into the $65.0 million Amended Revolving Facility (see note 10). The Senior Secured Notes due June 15, 2007, and the Senior Secured Notes due October 15, 2007 are senior obligations of the Company, ranking pari passu with all existing and future senior indebtedness of the Company. These notes and both term facilities are fully and unconditionally guaranteed on a joint and several basis by all of PAAC's direct and indirect wholly-owned subsidiaries and are secured by first mortgage liens on certain manufacturing facilities. The senior notes are redeemable at the Company's option starting in 2002. Before 2001, the Company may redeem a maximum of 35% of each series at 109.25% of the principal amount due with funds from a public offering of common stock of PCI (to the extent such funds are contributed to the Company). Upon a change of control, as defined in the indenture, the Company is required to offer to purchase the two series of Senior Notes for 101% of the principal due. 27 28 The Company's long-term debt contains various restrictions on the Company, which, among other things, limit the ability of Pioneer to incur additional indebtedness, to acquire or dispose of assets or operations and to pay dividends or redeem shares of stock. 12. PCI CHEMICALS CANADA, INC. Pioneer is a holding company with no operating assets or operations. Summarized financial information of PCICCI, the issuer of the $175.0 million of 9 1/4% Senior Secured Notes, due October 15, 2007, and the guarantors of these notes are as follows:
NOTE CONSOLIDATED PCICCI GUARANTORS COMPANY -------- ---------- ------------ As of December 31, 1997: Current assets.................................. $ 39,211 $103,780 $142,991 Non-current assets.............................. 187,009 417,359 604,368 Current liabilities............................. 24,465 57,561 82,026 Non-current liabilities......................... 193,121 412,331 605,452 For the period ended December 31, 1997 (PCICCI's information includes the results of its operations since October 31, 1997, date of acquisition): Revenues........................................ $ 24,660 $217,056 $241,716 Gross profit.................................... 8,003 54,920 62,923 Income (loss) before extraordinary item......... 2,174 (3,003) (829) Net income (loss)............................... 2,174 (21,661) (19,487)
Separate financial statements of the PCICCI and the guarantors of the PCICCI notes are not included as PAAC and its subsidiaries (other than PCICCI) have fully and unconditionally guaranteed the notes on a joint and several basis and management has determined that separate financial statements of these entities are not material to investors. 13. FINANCIAL INSTRUMENTS CONCENTRATION OF CREDIT RISK The Company manufactures and sells chlorine and caustic-based products to companies in diverse industries. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. The Company's sales are primarily to customers in the western and southeastern regions of the United States. Credit losses relating to these customers have been immaterial. The Company maintains cash deposits with major banks, which from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes that any possible loss is minimal. INVESTMENTS It is the policy of the Company to invest its excess cash in investment instruments or securities whose value is not subject to market fluctuations such as master notes of issuers rated at the time of such investment of at least "A-2" or the equivalent thereof by S&P or at least "P-2" or the equivalent thereof by Moody's or any bank or financial institution party to the Company's Bank Credit Facility. FAIR VALUE OF FINANCIAL INSTRUMENTS In preparing disclosures about the fair value of financial instruments, the Company has assumed that the carrying amount approximates fair value for cash and cash equivalents, receivables, short-term borrowings, accounts payable and certain accrued expenses because of the short maturities of those instruments. The fair values of long-term debt instruments are estimated based upon quoted market values (if applicable), or on the 28 29 current interest rates available to the Company for debt with similar terms and remaining maturities. Considerable judgment is required in developing these estimates and, accordingly, no assurance can be given that the estimated values presented herein are indicative of the amounts that would be realized in a free market exchange. The Company held no derivative financial instruments as of December 31, 1997 and 1996. At December 31, 1997, the fair market value of all the Company's financial instruments approximated the book value with the exceptions of the 9 1/4% Senior Notes due June 15, 2007, and the 9 1/4% Senior Notes due October 15, 2007, which had a book value of $200,000 and $175,000, respectively and a fair value based upon current quoted market price of $201,500 and $175,875, respectively. 14. SEGMENT INFORMATION As a result of the acquisition of PCI Canada in October 1997, the Company began operating in two geographical areas, the U.S. and Canada. Selected geographic region information is presented as follows for 1997:
UNITED STATES CANADA TOTAL ------------- -------- -------- Revenues from unaffiliated customers............. $230,168 $ 11,548 $241,716 Intracompany transfers among regions............. 20 13,112 13,132 Operating income................................. 26,868 6,051 32,919 Identifiable assets.............................. 532,398 214,961 747,359
The Company accounts for intracompany transfers among regions at amounts similar to those in transactions with outside affiliates. During 1997 and 1996, sales to an individual customer in the amounts of $27.7 million and $23.5 million, respectively, exceeded 10% of the consolidated revenues. No individual customer constituted 10% or more of the total revenues in 1995. Net sales of the Predecessor Company included sales to a major customer of approximately $7.5 million for the period from January 1, 1995 through April 20, 1995. 15. UNUSUAL CHARGES AND EXTRAORDINARY LOSSES Unusual charges include a $1.0 million charge related to the closure of certain of All-Pure's plants and the consolidation of their operations to other locations, plus a $1.0 million charge related to a receivable from KWT, Inc. During the second quarter of 1997, the Company recognized an $18.7 million extraordinary loss as a result of the 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). 16. INTEREST EXPENSE, NET Interest expense, net consisted of the following for the indicated periods:
PREDECESSOR COMPANY 1997 1996 1995 1995 ------- ------- ------- ----------- Interest expense.......................... $28,195 $17,999 $13,112 $1,772 Interest income........................... (1,202) (709) (207) (107) ------- ------- ------- ------ Interest expense, net..................... $26,993 $17,290 $12,905 $1,665 ======= ======= ======= ======
No interest costs were capitalized in any of the above periods. 29 30 17. COMMITMENTS AND CONTINGENCIES PURCHASE COMMITMENTS The Company has various purchase commitments related to its operations. The Company has committed to purchase salt used in its production processes under contracts which continue through the year 2003 with rates similar to prevailing market rates. The Company also has various commitments related to the purchase of electricity, which continue through the year 2008, at rates similar to prevailing market rates. Required purchase quantities on commitments in excess of one year at December 31, 1997 are as follows:
SALT - TONS ELECTRICITY - MWH ----------- ----------------- 1998.................................................... 947.5 1,371.5 1999.................................................... 947.5 1,371.5 2000.................................................... 947.5 1,371.5 2001.................................................... 611.0 543.5 2002.................................................... 225.0 44.0 Thereafter.............................................. 225.0 264.0 ------- ------- Total purchase commitments.................... 3,903.5 4,966.0 ======= =======
OPERATING LEASES The Company leases certain manufacturing and distribution facilities, computer equipment, and administrative offices under noncancelable leases. Minimum future rental payments on such leases with terms in excess of one year in effect at December 31, 1997 are as follows: 1998........................................................ $14,536 1999........................................................ 12,411 2000........................................................ 9,878 2001........................................................ 7,611 2002........................................................ 4,679 Thereafter.................................................. 1,637 ------- Total minimum obligations......................... $50,752 =======
Lease expense charged to operations for the years ended December 31, 1997 and 1996 and for the period from Inception through December 31, 1995 was approximately $14.0 million, $7.8 million and $6.3 million, respectively. Lease expense charged to the Predecessor Company's operations for the period from January 1, 1995 through April 20, was approximately $3.3 million. LITIGATION The Company is party 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. 18. INCOME TAXES The Company files a consolidated tax return with PCI and prepares its income tax provision pursuant to a tax sharing agreement with PCI. Such agreement has the effect of presenting the Company's income tax provision on a separate return basis. For financial reporting purposes, deferred income taxes are determined utilizing an asset and liability approach. This method gives consideration to the future tax consequences associated with differences between the financial accounting basis and tax basis of the assets and liabilities, and the ultimate realization of any 30 31 deferred tax asset resulting from such differences. The Company considers all foreign earnings as being permanently invested in that country. Significant components of income before income taxes and extraordinary item and income taxes are as follows:
PREDECESSOR COMPANY 1997 1996 1995 1995 ------- ------- ------- ----------- Income before taxes and extraordinary item: U.S........................................ $(1,302) $14,846 $12,629 $11,621 Foreign.................................... 3,475 -- -- -- ------- ------- ------- ------- Total.............................. $ 2,173 $14,846 $12,629 $11,621 ======= ======= ======= ======= Current income tax provision: U.S........................................ $ -- $ 614 $ 799 $ 5,938 Foreign.................................... 617 -- -- -- State...................................... 1,066 1,528 1,830 957 ------- ------- ------- ------- Total current...................... 1,683 2,142 2,629 6,895 ------- ------- ------- ------- Deferred income tax provision: U.S........................................ $ 1,437 $ 5,032 $ 4,180 $(1,816) Foreign.................................... 684 -- -- -- State...................................... (802) (439) (601) (270) ------- ------- ------- ------- Total deferred..................... 1,319 4,593 3,579 (2,086) ------- ------- ------- ------- Total income tax provision......... $ 3,002 $ 6,735 $ 6,208 $ 4,809 ======= ======= ======= =======
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax liabilities and assets are as follows at December 31:
1997 1996 -------- -------- Deferred tax liabilities: Tax over book basis -- property, plant and equipment...... $(16,901) $(20,006) Other -- net.............................................. (543) (399) -------- -------- Total deferred tax liabilities.................... (17,444) (20,405) -------- -------- Deferred tax assets: Post employment benefits.................................. 8,421 5,552 Alternative minimum tax credit carryover.................. 671 671 Allowance for doubtful accounts........................... 780 511 Other accrued liabilities................................. 1,342 6,165 Net operating loss carryforward of PCI.................... 23,861 14,391 -------- -------- Total deferred tax assets......................... 35,075 27,290 Valuation allowance for deferred tax assets................. -- -- Net deferred tax assets..................................... 35,075 27,290 -------- -------- Net deferred taxes................................ $ 17,631 $ 6,885 ======== ========
31 32 The reconciliations of income tax computed at the U.S. federal statutory tax rates to income tax expense for the periods presented are as follows:
PREDECESSOR COMPANY ---------------- 1997 1996 1995 1995 ---------------- ---------------- ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- ------ ------- Tax at U.S. statutory rates... $ 761 35% $5,196 35% $4,420 35% $4,068 35% State and foreign income taxes, net of federal tax benefits.................... 289 13 708 5 799 6 407 3 Amortization of excess cost over the fair value of net assets acquired............. 2,033 93 1,591 10 1,159 9 69 1 Other, net.................... (81) (3) (760) (5) (170) (1) 265 2 ------ --- ------ -- ------ -- ------ -- $3,002 138% $6,735 45% $6,208 49% $4,809 41% ====== === ====== == ====== == ====== ==
At December 31, 1997, PCI had available to it on a consolidated tax return basis approximately $47.1 million of NOL for income tax purposes which expires in 2003 through 2010. The NOL is available for offset against future taxable income generated during the carryforward period. A tax sharing agreement provides that the Company will be liable to PCI for its separate tax liability only to the extent the consolidated group has a tax liability. However as long as PCI's NOL is available to the consolidated group to reduce taxable income, the Company's tax liability to PCI will be substantially reduced. As a result of the tax sharing agreement, the NOL is reflected by the Company for financial reporting purposes. Since the Company had no operations before the Pioneer Acquisition, it had no means to generate taxable income; accordingly, the Company established a valuation allowance equal to the full amount of the NOL at Inception. Concurrent with the Pioneer Acquisition, the Company estimated that approximately $13.6 million of the NOL would be utilized; as a result, the valuation allowance was reduced by that amount as part of the purchase price allocation. The Company's taxable income for 1995 exceeded its estimate; the Company, therefore, recognized an additional $3.6 of NOL in 1995. Since it has continued to generate more taxable income than it originally expected, the Company eliminated the valuation allowance in 1996, thereby recognizing the remaining $11.5 million of the NOL. A portion of the Company's NOL originated before it was reorganized in 1995; accordingly, any recognition of the NOL is recorded as an increase in the Company's paid-in capital rather than as a reduction in the provision for income taxes. Thus, the reduction of the valuation allowance for the NOL in 1996 and 1995 had no effect on the Company's provision for income taxes or net income. Any NOL generated after the 1995 reorganization, if deemed to be realizable, will be used to reduce the Company's provision for income taxes. 19. OTHER LONG-TERM LIABILITIES -- ENVIRONMENTAL The Company's operations are subject to extensive environmental laws and regulations related to protection of the environment, including those applicable to waste management, discharge of materials into the air and water, clean-up liability from historical waste disposal practices, and employee health and safety. At several of the Company's facilities, investigations or remediations are underway and at some of these locations regulatory agencies are considering whether additional actions are necessary to protect or remediate surface or groundwater resources. The Company could be required to incur additional costs to construct and operate remediation systems in the future. In addition, at several of its facilities, the Company is in the process of replacing or closing ponds for the collection of wastewater. The Company plans to spend approximately $1.2 million during the next fifteen years for closure of eight chlor-alkali waste water disposal ponds at the Henderson plant. The Company believes that it is in substantial compliance with existing governmental regulations. PCAC's Henderson plant is located within what is known as the "Basic Complex." Soil and groundwater contamination have been identified within and adjoining the Basic Complex, including land owned by PCAC. 32 33 A groundwater treatment system was installed at the facility in 1983 and, pursuant to a Consent Agreement with the Nevada Division of Environmental Protection, a study is being conducted to further evaluate soil and groundwater contamination at the facility and other properties within the Basic Complex and to determine whether additional remediation will be necessary with respect to PCAC's property. In connection with the October 1988 acquisition of the chlor-alkali business by the Predecessor Company, ICI Delaware Holdings, Inc. and ICI Americas, Inc. (such companies or their successors, the "ZENECA Companies") agreed to indemnify the Predecessor Company for certain environmental liabilities (the "ZENECA Indemnity"), including liabilities associated with operations at the Company's plant located in Henderson, Nevada (the "Henderson Plant"). In general, the ZENECA Companies agreed to indemnify the Predecessor Company for environmental costs which arise from or relate to pre-acquisition actions which involved disposal, discharge, or release of materials resulting from non-chlor-alkali manufacturing operations at the Henderson Plant and at other properties within the same industrial complex. Payments under the indemnity cannot exceed approximately $65 million. Due to the change in ownership resulting from the Pioneer Acquisition, the ZENECA Indemnity will terminate on April 20, 1999. The ZENECA Indemnity will continue to cover claims after the expiration of the term of the indemnity provided that, prior to the expiration of the indemnity, proper notice to the ZENECA Companies is given and the Company has taken certain other actions. The Company believes that the ZENECA Companies will continue to honor their obligations under the ZENECA Indemnity for claims properly presented by the Company. It is possible, however, that disputes could arise between the parties and that the Company would have to subject its claims for clean-up expenses, which could be substantial, to the contractually established arbitration process. In the opinion of management, any environmental liability in excess of the amount indemnified and accrued on the consolidated balance sheet, if any, would not have a material adverse affect on the consolidated financial statements. In the agreement relating to the Pioneer Acquisition, the sellers agreed to indemnify the Company for certain environmental liabilities that result from certain discharges of hazardous materials, or violations of environmental laws, arising prior to April 20, 1995 (the "Closing Date") from or relating to the Pioneer Americas plant sites or arising before or after the Closing Date with respect to certain environmental liabilities relating to assets held by the Company for the benefit of the sellers ("Sellers' Indemnity"). Amounts payable pursuant to the Sellers' Indemnity will generally be payable as follows: (i) out of certain reserves established on the Predecessor Company's balance sheet at December 31, 1994; (ii) either by offset against the amounts payable under the notes issued to the sellers or from deposit account balances held by the Company, and (iii) in certain circumstances and subject to specified limitations, out of the personal assets of the sellers. Subject to certain exceptions and limitations set forth in the Pioneer Acquisition Agreement, a claim notice with respect to amounts payable pursuant to the Sellers' Indemnity must generally be given within 15 years of the Closing Date. Pioneer is required to reimburse the sellers for amounts paid under the Sellers' Indemnity with amounts recovered under the ZENECA Indemnity or from other third parties. Pioneer and the sellers agreed that they will cooperate in matters relating to the ZENECA Indemnity. Remediation costs are accrued based on estimates of known environmental remediation exposure. Such accruals are based upon management's best estimate of the ultimate cost. Ongoing environmental compliance cost, including maintenance and monitoring costs, are charged to operations as incurred. The liabilities are based upon all available facts, existing technology, past experience and cost-sharing arrangements, including the viability of other parties. Charges made against income for recurring environmental matters, included in "cost of sales" on the statements of operations, totaled approximately $2.1 million, $1.7 million and $1.2 million for the periods ended December 31, 1997, 1996 and 1995, respectively, and $0.4 million for the Predecessor Company for the period from January 1, 1995 through April 20, 1995. Capital expenditures for environmental-related matters at existing facilities approximated $3.9 million, $4.3 million and $2.2 million for the periods ended December 31, 1997, 1996 and 1995, respectively, and $0.2 million for the Predecessor Company for the period from January 1, 1995 through April 20, 1995. Future environmental-related capital expenditures will depend upon regulatory requirements, as well as timing related to obtaining necessary permits and approvals. 33 34 Estimates of future environmental restoration and remediation costs are inherently imprecise due to currently unknown factors such as the magnitude of possible contamination, the timing and extent of such restoration and remediation, the extent to which such costs are recoverable from third parties, and the extent to which environmental laws and regulations may change in the future. The Predecessor Company established a reserve at the time of its acquisition of its Henderson, Nevada and St. Gabriel, Louisiana facilities with respect to potential remediation costs relating to matters not covered by the ZENECA Indemnity, consisting primarily of remediation costs that may be incurred by the Company for chlor-alkali-related remediation of the Henderson and St. Gabriel facilities. The recorded accrual included certain amounts related to anticipated closure and post-closure actions that may be required in the event that operation of the present chlor-alkali plants ceases. Such accrual in the amount of $7.0 million is recorded in the Company's consolidated balance sheets at December 31, 1997. However, complete analysis and study has not been completed and therefore additional future charges may be recorded at the time a decision for closure is made. In 1994, the Predecessor Company recorded an additional $3.2 million environmental reserve related to pre-closing actions at sites that are the responsibility of the ZENECA Companies. Such accrual is recorded in the Company's consolidated balance sheets at December 31, 1997 and 1996. Other assets include an account receivable of the same amount from the ZENECA Companies. The Company believes it will be reimbursed by the ZENECA Companies for substantially all of such costs that are incurred at the Henderson Plant and other properties within the same industrial complex. Additionally, certain other environmental matters exist which have been assumed directly by the ZENECA Companies. No assurance can be given that actual costs will not exceed accrued amounts or the amounts currently estimated. The imposition of more stringent standards or requirements under environmental laws or regulations, new developments or changes respecting site cleanup costs, or a determination that the Company is potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated by the Company to be required for such matters. Further, there can be no assurance that additional environmental matters will not arise in the future. 20. RELATED PARTY TRANSACTIONS The Company has a 15% partnership interest in Saguaro Power Company ("Saguaro"), which owns a cogeneration plant located in Henderson, Nevada. The Company's interest in Saguaro is accounted for using the cost method of accounting. The Company sells certain products and services to and purchases steam from Saguaro at market prices. Transactions with Saguaro are as follows:
PREDECESSOR COMPANY 1997 1996 1995 1995 ------ ------ ------ ----------- Sales to Saguaro............................. $ 856 $1,005 $ 754 $353 Purchases from Saguaro....................... 1,352 1,840 1,388 616 Partnership distribution from Saguaro (included in other income)................. 1,033 735 637 --
Accounts receivable from and accounts payable to Saguaro are at the Company's normal trade terms and are generally not significant to the Company's consolidated balance sheet. The Company is a party to an agreement negotiated on an arms-length basis with BII for the delivery of the Company's water to the Henderson production facility. The agreement provides for the delivery of a minimum of eight million gallons of water per day. The agreement expires on December 31, 2014, unless terminated earlier in accordance with the provisions of the agreement. For 1997, 1996 and 1995, BII charged expenses to the Company of approximately $0.3 million, $0.2 million and $0.2 million, respectively. For the period from January 1, 1995 through April 20, 1995, BII charged expenses to the Predecessor Company of approximately $0.2 million. As a result of the acquisition of PCI Canada, the Company obtained a one-third interest in Canso Chemicals Limited, a Nova Scotia company ("Canso"). Canso operates a caustic soda storage and transfer facility. The Company's interest in Canso is accounted for using the equity method of accounting. The 34 35 Company sold product totaling $1.6 million to Canso during 1997. Amounts due the Company from Canso totaled $0.9 million at December 31, 1997. The Company sells certain products to Kemwater at market prices. Sales to Kemwater totaled $8.7 million and $8.8 million during the years ended December 31, 1997 and 1996, respectively. Kemwater provides transportation services to the Company at market prices which totaled $1.8 million for each of the years ended December 31, 1997 and 1996. Upon consummation of the Pioneer Acquisition, Interlaken Capital, Inc., an entity controlled by Mr. William R. Berkley, Chairman of the board of PCI, received a fee of approximately $1.6 million from the Company in connection with financial advisory services with respect to the Pioneer Acquisition and related financings. The firm was also paid a fee of $0.3 million plus reimbursement of reasonable out-of-pocket expenses, for services rendered in connection with the KWT transaction. The firm was paid a fee of approximately $1.3 million, plus reimbursement of out-of-pocket expenses, for services rendered in connection with the acquisition of the Tacoma Facility. The firm was paid a fee of approximately $2.36 million, plus reimbursement of reasonable out-of-pocket expenses, for services rendered in connection with the acquisition of PCI Canada. 21. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income," ("SFAS No. 130"). SFAS No. 130 is effective for fiscal years beginning after December 15, 1997 and establishes standards for reporting and displaying of comprehensive income and its components. SFAS No. 130 is not expected to have a material effect on the Company's financial statements when it is adopted during 1998. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information," ("SFAS No. 131"). SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial statements. Under the current accounting policies, the Company operates in one business segment. Following the guidance of the new standard, operating segments will generally be defined following the bases used internally for evaluating segment performance and resource allocation decisions. SFAS No. 131 also requires various disclosures about international operations. The statement will have no effect on the Company's financial position or results of operations, but management is currently evaluating what, if any, additional disclosures may be required upon adoption during the fourth quarter of 1998. In February 1998, the Financial Accounting Standards Board issued Statement No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," ("SFAS No. 132"). SFAS No. 132 is effective for fiscal years beginning after December 15, 1997 and standardizes the disclosure requirements for pensions and other postretirement benefits. The statement will have no effect on the Company's financial position or results of operations, but management is currently evaluating what, if any, additional disclosures may be required when it is adopted in 1998. 35 36 22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- -------- ------- ------- FOR YEAR ENDED DECEMBER 31, 1997 Revenues........................................... $38,743 $ 46,088 $65,242 $91,643 Operating income................................... 3,570 3,321 11,048 14,980 Income (loss) before taxes and extraordinary item............................................. (1,712) (2,172) 3,965 2,092 Extraordinary item, net of income tax benefit...... -- (18,658) -- -- Net income (loss).................................. (1,890) (20,341) 1,875 869 Earnings per common share: Income (loss) before extraordinary item.......... $(1,890) $ (1,683) $ 1,875 $ 869 Extraordinary item, net of income tax benefit.... -- (18,658) -- -- ------- -------- ------- ------- Net income (loss)........................ $(1,890) $(20,341) $ 1,875 $ 869 ======= ======== ======= ======= FOR YEAR ENDED DECEMBER 31, 1996 Revenues........................................... $44,292 $ 47,671 $48,872 $42,491 Operating income................................... 7,405 7,840 7,848 9,966 Income before taxes................................ 3,440 3,338 3,145 4,923 Net income......................................... 1,412 1,479 2,164 3,056 Earnings per common share.......................... 1,412 1,479 2,164 3,056 ------- -------- ------- -------
36 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. This item is omitted in accordance with General Instruction (I)(2) of Form 10-K. 37 38 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) LIST OF DOCUMENTS FILED. (1) The financial statements filed as part of this report are listed in the Index to Financial Statements under Item 8 on page 11 hereof. (2) Additional financial information and schedules included pursuant to the requirements of Form 10-K are listed in the Index to Financial Statements under Item 8 on page 11 hereof. (3) Exhibits The exhibits indicated by an asterisk (*) are incorporated by reference. The exhibits indicated by a plus sign (+) each constitute a management contract or arrangement required to be filed as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K. 38 39
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 2.1* -- Stock Purchase Agreement, dated as of March 24, 1995, by and among Pioneer, PCI and the Sellers parties thereto (incorporated by reference to Exhibit 2 to PCI's Current Report on Form 8-K filed on May 5, 1995). 2.2* -- Asset Purchase Agreement, dated as of May 14, 1997, by and between OCC Tacoma, Inc. and PCI (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on July 1, 1997). 2.3(a)* -- Asset Purchase Agreement, dated as of September 22, 1997, between PCI Chemicals Canada Inc. ("PCICC"), PCI Carolina, Inc. and PCI and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to Pioneer's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 2.3(b)* -- First Amendment to Asset Purchase Agreement, dated as of October 31, 1997, between PCICC, PCI Carolina, Inc. and Pioneer and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on November 17, 1997). 3.1* -- Certificate of Incorporation of Pioneer filed with the Secretary of State of Delaware on March 6, 1995 (incorporated by reference to Exhibit 3.1 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 3.2* -- By-laws of Pioneer (incorporated by reference to Exhibit 3.2 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 4.1* -- Indenture, dated as of June 17, 1997, by and among Pioneer, the Subsidiary Guarantors defined therein and United States Trust Company of New York, as Trustee, relating to $200,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on July 1, 1997). 4.2(a)* -- Deed of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (Tacoma, Washington) (incorporated by reference to Exhibit 4.2(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.2(b)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (St. Gabriel, Louisiana) (incorporated by reference to Exhibit 4.2(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.2(c)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (Henderson, Nevada) (incorporated by reference to Exhibit 4.2(c) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.3(a)* -- Term Loan Agreement, dated as of June 17, 1997, among Pioneer, various financial institutions as Lenders, DLJ Capital Funding, inc., as the Syndication Agent, Salomon Brothers Holding Company Inc, as the Documentation Agent and Bank of America Illinois, as the Administrative Agent (the "Pioneer Term Loan Agreement") (incorporated by reference to Exhibit 4.3(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.3(b)* -- Subsidiary Guaranty, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of the Lenders, guaranteeing the obligations of one another under the Pioneer Term Loan Agreement (incorporated by reference to Exhibit 4.3(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)).
39 40
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.4* -- Security Agreement, dated as of June 17, 1997, among PCAC and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.5* -- Stock Pledge Agreement, dated as of June 17, 1997, among Pioneer Americas and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(a)* -- Loan and Security Agreement, dated as of June 17, 1997, by and among Pioneer, Bank of America Illinois, as Agent and Lender and the other Lenders party thereto (the "Revolving Loan Agreement") (incorporated by reference to Exhibit 4.6(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(b)* -- Master Corporate Guaranty, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of Bank of Americas Illinois, as Agent, for the ratable benefit of the Lenders, guaranteeing the obligations of one another under the Revolving Loan Agreement (incorporated by reference to Exhibit 4.6(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(c)* -- Master Security Agreement, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of Bank of Americas Illinois, as Agent, for the ratable benefit of the Lenders (incorporated by reference to Exhibit 4.6(c) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.7* -- Intercreditor and Collateral Agency Agreement, dated as of June 17, 1977 by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America Illinois, as Agent, Pioneer, Pioneer Americas and PCAC (incorporated by reference to Exhibit 4.7 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.8* -- Indenture, dated as of October 30, 1997, by and among PCICC, the Guarantors defined therein and United States Trust Company of New York, as Trustee, relating to $175,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees (incorporated by reference to Exhibit 4.1 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.9* -- Deed of Hypothec, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.2 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.10* -- Affiliate Security Agreement, dated as of October 30, 1997, among PCICC, PCI Licensing, Inc. and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.3 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.11* -- Borrower (Canadian) Security Agreement, dated as of October 30, 1997, between PCICC and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)).
40 41
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.12(a)* -- Demand Debenture (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.12(b)* -- Demand Debenture (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.12(c)* -- Demand Debenture (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(a)* -- Demand Pledge Agreement (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(b)* -- Demand Pledge Agreement (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(c)* -- Demand Pledge Agreement (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.14* -- Subsidiary Security Agreement, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.7 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.15(a)* -- Term Loan Agreement, dated as of October 30, 1997, among Pioneer, Pioneer Americas, various financial institutions, as Lenders, DLJ Capital Funding, Inc., as the Syndication Agent, Salomon Brothers Holding Company, Inc, as the Documentation Agent, Bank of America National Trust and Savings Association, as the Administrative Agent and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.8(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.15(b)* -- Affiliate Guaranty, dated as of October 30, 1997, by and among PCICC, the Guarantors identified therein and the Initial Purchasers identified therein (incorporated by reference to Exhibit 4.8(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.16* -- Consent and Amendment No. 1, dated November 5, 1997, to Loan and Security Agreement, dated June 17, 1997, among Pioneer, Bank of America National Trust and Savings Association, as Agent and Lender and the other Lenders party thereto (incorporated by reference to Exhibit 4.9 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)).
41 42
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.17* -- Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997, by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America National Trust and Savings Association, as Agent, PCICC, Pioneer and Pioneer Americas (incorporated by reference to Exhibit 4.10 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 10.1* -- Contingent Payment Agreement, dated as of April 20, 1995, by and among Pioneer, PCI and the Sellers party thereto (incorporated by reference to Exhibit 10.2 to Pioneer's Current Report on Form 8-K filed on May 5, 1995). 10.2* -- Tax Sharing Agreement, dated as of April 20, 1995, by and among Pioneer, PCI and the Subsidiary Guarantors (incorporated by reference to Exhibit 10.3 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 10.3*+ -- Pioneer Companies, Inc. 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 10.4*+ -- Pioneer Companies, Inc. Key Executive Stock Grant Plan (incorporated by reference to Exhibit 10.2 to Pioneer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996). 10.5*+ -- Pioneer Chlor Alkali Company, Inc. Supplemental Retirement Plan (incorporated by reference to Exhibit 10.5 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.6*+ -- Employment Agreement, dated April 20, 1995, between PCI and Richard C. Kellogg, Jr. (incorporated by reference to Exhibit 10.1 to PCI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (file no. 1-9859)). 10.7*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and James E. Glattly (incorporated by reference to Exhibit 10.8 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.8*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Verrill M. Norwood, Jr. (incorporated by reference to Exhibit 10.9 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.9*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Kent R. Stephenson (incorporated by reference to Exhibit 10.10 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.10*+ -- Executive Employment Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.10 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.11*+ -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.11 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.12*+ -- Non-Qualified Stock Option Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.12 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.13*+ -- Non-Qualified Stock Option Agreement, dated May 15, 1997, between Pioneer and Andrew M. Bursky (incorporated by reference to Exhibit 10.11 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 27 -- Financial Data Schedule.
42 43 (B) REPORTS ON FORM 8-K. On November 17, 1997, Pioneer filed a report on Form 8-K, reporting under Item 2, "Acquisition or Disposition of Assets," the completion of the acquisition of the forest products business of ICI Canada and ICI Americas by PCI Canada on November 5, 1997, but with effect as of October 31, 1997. Included with the filing with respect to the acquired business were audited financial statements for the years ended December 31, 1996, 1995 and 1994 and unaudited financial statements for the nine months ended September 30, 1997 and 1996. Included with respect to the Company were a pro forma balance sheet as of September 30, 1997 and pro forma statements of operations for the nine months ended September 30, 1997 and 1996 and the year ended December 31, 1996. (C) FINANCIAL STATEMENT SCHEDULE. Filed herewith as a financial statement schedule is Schedule II with respect to Valuation and Qualifying Accounts. All other schedules have been omitted because they are not applicable, not required, or the required information is included in the financial statements or notes thereto. 43 44 SCHEDULE II PIONEER AMERICAS ACQUISITION CORP. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD ----------- ---------- ---------- --------- ---------- ---------- YEAR ENDED DECEMBER 31, 1997: Allowance for doubtful accounts.... $1,311 $123 $ 604(B) $ (36)(A) $2,002 YEAR ENDED DECEMBER 31, 1996: Allowance for doubtful accounts.... 1,424 -- -- (113)(A) 1,311 PERIOD FROM MARCH 6, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995: Allowance for doubtful accounts.... -- 138 1,416(C) (130)(A) 1,424
- --------------- (A) Uncollectible accounts written off, net of recoveries. (B) Allowance balance established in 1997 in connection with the acquisition of PCI Canada. (C) Allowance balance established on April 20, 1995 in connection with the acquisition of Pioneer Americas, Inc. 44 45 SCHEDULE II PIONEER AMERICAS, INC. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD ----------- ---------- ---------- --------- ---------- ---------- PERIOD FROM JANUARY 1, 1995 THROUGH APRIL 20, 1995: Allowance for doubtful accounts.......... $2,038 $47 $-- $(169)(A) $1,916
- --------------- (A) Uncollectible accounts written off, net of recoveries. 45 46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PIONEER AMERICAS ACQUISITION CORP. By: /s/ MICHAEL J. FERRIS ---------------------------------- Michael J. Ferris, President and Chief Executive Officer March 25, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ MICHAEL J. FERRIS President and Chief Executive March 25, 1998 - ----------------------------------------------------- Officer (Principal (Michael J. Ferris) Executive Officer) and Director /s/ PHILIP J. ABLOVE Vice President and Chief March 25, 1998 - ----------------------------------------------------- Financial Officer and (Philip J. Ablove) Director (Principal Financial Officer) /s/ JOHN R. BEAVER Controller (Principal March 25, 1998 - ----------------------------------------------------- Accounting Officer) (John R. Beaver) /s/ WILLIAM R. BERKLEY Chairman of the Board March 25, 1998 - ----------------------------------------------------- (William R. Berkley) /s/ ANDREW M. BURSKY Director March 25, 1998 - ----------------------------------------------------- (Andrew M. Bursky) /s/ DONALD J. DONAHUE Director March 25, 1998 - ----------------------------------------------------- (Donald J. Donahue) /s/ RICHARD C. KELLOGG, JR. Director March 25, 1998 - ----------------------------------------------------- (Richard C. Kellogg, Jr.) /s/ JACK H. NUSBAUM Director March 25, 1998 - ----------------------------------------------------- (Jack H. Nusbaum) /s/ THOMAS H. SCHNITZIUS Director March 25, 1998 - ----------------------------------------------------- (Thomas H. Schnitzius)
46 47 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 2.1* -- Stock Purchase Agreement, dated as of March 24, 1995, by and among Pioneer, PCI and the Sellers parties thereto (incorporated by reference to Exhibit 2 to PCI's Current Report on Form 8-K filed on May 5, 1995). 2.2* -- Asset Purchase Agreement, dated as of May 14, 1997, by and between OCC Tacoma, Inc. and PCI (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on July 1, 1997). 2.3(a)* -- Asset Purchase Agreement, dated as of September 22, 1997, between PCI Chemicals Canada Inc. ("PCICC"), PCI Carolina, Inc. and PCI and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to Pioneer's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 2.3(b)* -- First Amendment to Asset Purchase Agreement, dated as of October 31, 1997, between PCICC, PCI Carolina, Inc. and Pioneer and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on November 17, 1997). 3.1* -- Certificate of Incorporation of Pioneer filed with the Secretary of State of Delaware on March 6, 1995 (incorporated by reference to Exhibit 3.1 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 3.2* -- By-laws of Pioneer (incorporated by reference to Exhibit 3.2 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 4.1* -- Indenture, dated as of June 17, 1997, by and among Pioneer, the Subsidiary Guarantors defined therein and United States Trust Company of New York, as Trustee, relating to $200,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on July 1, 1997). 4.2(a)* -- Deed of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (Tacoma, Washington) (incorporated by reference to Exhibit 4.2(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.2(b)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (St. Gabriel, Louisiana) (incorporated by reference to Exhibit 4.2(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.2(c)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PCAC (Henderson, Nevada) (incorporated by reference to Exhibit 4.2(c) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.3(a)* -- Term Loan Agreement, dated as of June 17, 1997, among Pioneer, various financial institutions as Lenders, DLJ Capital Funding, inc., as the Syndication Agent, Salomon Brothers Holding Company Inc, as the Documentation Agent and Bank of America Illinois, as the Administrative Agent (the "Pioneer Term Loan Agreement") (incorporated by reference to Exhibit 4.3(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)).
48
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.3(b)* -- Subsidiary Guaranty, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of the Lenders, guaranteeing the obligations of one another under the Pioneer Term Loan Agreement (incorporated by reference to Exhibit 4.3(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.4* -- Security Agreement, dated as of June 17, 1997, among PCAC and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.5* -- Stock Pledge Agreement, dated as of June 17, 1997, among Pioneer Americas and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(a)* -- Loan and Security Agreement, dated as of June 17, 1997, by and among Pioneer, Bank of America Illinois, as Agent and Lender and the other Lenders party thereto (the "Revolving Loan Agreement") (incorporated by reference to Exhibit 4.6(a) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(b)* -- Master Corporate Guaranty, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of Bank of Americas Illinois, as Agent, for the ratable benefit of the Lenders, guaranteeing the obligations of one another under the Revolving Loan Agreement (incorporated by reference to Exhibit 4.6(b) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.6(c)* -- Master Security Agreement, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of Bank of Americas Illinois, as Agent, for the ratable benefit of the Lenders (incorporated by reference to Exhibit 4.6(c) to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.7* -- Intercreditor and Collateral Agency Agreement, dated as of June 17, 1977 by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America Illinois, as Agent, Pioneer, Pioneer Americas and PCAC (incorporated by reference to Exhibit 4.7 to Pioneer's Registration Statement on Form S-4, as amended (file no. 333-30683)). 4.8* -- Indenture, dated as of October 30, 1997, by and among PCICC, the Guarantors defined therein and United States Trust Company of New York, as Trustee, relating to $175,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees (incorporated by reference to Exhibit 4.1 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.9* -- Deed of Hypothec, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.2 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.10* -- Affiliate Security Agreement, dated as of October 30, 1997, among PCICC, PCI Licensing, Inc. and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.3 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)).
49
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.11* -- Borrower (Canadian) Security Agreement, dated as of October 30, 1997, between PCICC and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.12(a)* -- Demand Debenture (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.12(b)* -- Demand Debenture (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.12(c)* -- Demand Debenture (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(a)* -- Demand Pledge Agreement (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(b)* -- Demand Pledge Agreement (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.13(c)* -- Demand Pledge Agreement (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.14* -- Subsidiary Security Agreement, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.7 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.15(a)* -- Term Loan Agreement, dated as of October 30, 1997, among Pioneer, Pioneer Americas, various financial institutions, as Lenders, DLJ Capital Funding, Inc., as the Syndication Agent, Salomon Brothers Holding Company, Inc, as the Documentation Agent, Bank of America National Trust and Savings Association, as the Administrative Agent and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.8(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.15(b)* -- Affiliate Guaranty, dated as of October 30, 1997, by and among PCICC, the Guarantors identified therein and the Initial Purchasers identified therein (incorporated by reference to Exhibit 4.8(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 4.16* -- Consent and Amendment No. 1, dated November 5, 1997, to Loan and Security Agreement, dated June 17, 1997, among Pioneer, Bank of America National Trust and Savings Association, as Agent and Lender and the other Lenders party thereto (incorporated by reference to Exhibit 4.9 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)).
50
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.17* -- Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997, by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America National Trust and Savings Association, as Agent, PCICC, Pioneer and Pioneer Americas (incorporated by reference to Exhibit 4.10 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 10.1* -- Contingent Payment Agreement, dated as of April 20, 1995, by and among Pioneer, PCI and the Sellers party thereto (incorporated by reference to Exhibit 10.2 to Pioneer's Current Report on Form 8-K filed on May 5, 1995). 10.2* -- Tax Sharing Agreement, dated as of April 20, 1995, by and among Pioneer, PCI and the Subsidiary Guarantors (incorporated by reference to Exhibit 10.3 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 10.3*+ -- Pioneer Companies, Inc. 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Pioneer's Registration Statement on Form S-4, as amended (file no. 33-98828)). 10.4*+ -- Pioneer Companies, Inc. Key Executive Stock Grant Plan (incorporated by reference to Exhibit 10.2 to Pioneer's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996). 10.5*+ -- Pioneer Chlor Alkali Company, Inc. Supplemental Retirement Plan (incorporated by reference to Exhibit 10.5 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.6*+ -- Employment Agreement, dated April 20, 1995, between PCI and Richard C. Kellogg, Jr. (incorporated by reference to Exhibit 10.1 to PCI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (file no. 1-9859)). 10.7*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and James E. Glattly (incorporated by reference to Exhibit 10.8 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.8*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Verrill M. Norwood, Jr. (incorporated by reference to Exhibit 10.9 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.9*+ -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Kent R. Stephenson (incorporated by reference to Exhibit 10.10 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). 10.10*+ -- Executive Employment Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.10 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.11*+ -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.11 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.12*+ -- Non-Qualified Stock Option Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.12 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1996). 10.13*+ -- Non-Qualified Stock Option Agreement, dated May 15, 1997, between Pioneer and Andrew M. Bursky (incorporated by reference to Exhibit 10.11 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)). 27 -- Financial Data Schedule.
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 50,995 0 67,191 2,002 22,625 142,991 360,355 34,130 747,359 82,026 567,160 0 0 1 59,880 747,359 241,716 241,716 178,793 178,793 30,004 0 26,993 2,173 3,002 (829) 0 (18,658) 0 (19,487) (19,487) (19,487)
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