-----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, RHQYEbzgElN4K4quxeSr6yWEuRlWMOjl/yY0vw17fC/wP4LTJgr8MTC/lwynmbt3 By9EFDZHeURY5Jav7L0Ghg== 0000950129-98-001751.txt : 19980428 0000950129-98-001751.hdr.sgml : 19980428 ACCESSION NUMBER: 0000950129-98-001751 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980427 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER AMERICAS ACQUISITION CORP CENTRAL INDEX KEY: 0000944649 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 061420850 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-91702 FILM NUMBER: 98601792 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 PIONEER AMERICAS ACQUISITION CORP. - 03/31/98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO __________ COMMISSION FILE NUMBER 33-98828 PIONEER AMERICAS ACQUISITION CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1215192 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4300 NATIONSBANK CENTER, 700 LOUISIANA STREET HOUSTON, TEXAS 77002 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (713) 570-3200 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] On April 17, 1998, there were outstanding 1,000 shares of the Registrant's Common Stock, $.01 par value. All of such shares are owned by Pioneer Companies, Inc. The Registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the reduced disclosure format permitted by General Instruction (H)(2) of Form 10-Q. 2 TABLE OF CONTENTS PART I--FINANCIAL INFORMATION
Page ---- Item 1. Consolidated Financial Statements Consolidated Balance Sheets--March 31, 1998 and December 31, 1997 3 Consolidated Statements of Operations--Three Months Ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows--Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 PART II--OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9
Certain statements in this Form 10-Q regarding future expectations of the Company's business and the Company's results of operations may be regarded as "forward looking statements" within the meaning of the Securities Litigation Reform Act. Such statements are subject to various risks, including the Company's high financial leverage, the cyclical nature of the markets for many of the Company's products and raw materials and other risks discussed in detail. Actual outcomes may vary materially. 3 PART I --FINANCIAL INFORMATION PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
MARCH 31, DECEMBER 31, 1998 1997 ------------------ ------------------- ASSETS Current assets: Cash and cash equivalents $ 59,625 $ 50,995 Accounts receivable, less allowance for doubtful accounts of $1,792 at March 31, 1998 and $2,002 at December 31, 1997 54,206 65,189 Due from parent 5,351 2,810 Inventories 25,946 22,625 Prepaid expenses 47 1,372 --------- --------- Total current assets 145,175 142,991 Property, plant and equipment: Land 9,092 9,092 Buildings and improvements 55,855 55,589 Machinery and equipment 268,013 263,838 Construction in progress 31,574 31,836 --------- --------- 364,534 360,355 Less accumulated depreciation (42,632) (34,130) --------- --------- 321,902 326,225 Investment in and advances to unconsolidated subsidiary 28,420 28,551 Other assets, net of accumulated amortization of $2,583 at March 31, 1998 and $2,990 at December 31, 1997 46,430 48,560 Excess cost over fair value of net assets acquired, net of accumulated amortization of $15,504 at March 31, 1998 and $13,319 at December 31, 1997 199,295 201,032 --------- --------- Total assets $ 741,222 $ 747,359 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 30,429 $ 45,711 Accrued liabilities 37,536 33,745 Current portion of long-term debt 2,570 2,570 --------- --------- Total current liabilities 70,535 82,026 Long-term debt, less current portion 566,512 567,160 Accrued pension and other employee benefits 21,576 21,068 Other long-term liabilities 19,098 17,224 Commitments and contingencies Stockholder's equity: Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding 1 1 Additional paid-in capital 66,169 66,169 Retained deficit (2,669) (6,289) --------- --------- Total stockholder's equity 63,501 59,881 --------- --------- Total liabilities and stockholder's equity $ 741,222 $ 747,359 ========= =========
See notes to consolidated financial statements. 3 4 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------------------------- 1998 1997 --------- --------- Revenues $ 94,619 $ 38,743 Cost of sales 64,948 29,003 --------- --------- Gross profit 29,671 9,740 Selling, general and administrative expenses 12,180 6,170 --------- --------- Operating income 17,491 3,570 Equity in net loss of unconsolidated subsidiary (1,136) (1,055) Interest expense, net (12,448) (4,458) Other income, net 3,089 231 --------- --------- Income (loss) before taxes 6,996 (1,712) Income tax provision 3,376 178 --------- --------- Net income (loss) $ 3,620 $ (1,890) ========== ========= Net income (loss) per share $ 3,620 $ (1,890) ========== ========= Weighted average number of common shares outstanding 1 1 ========== =========
See notes to consolidated financial statements. 4 5 PIONEER AMERICAS ACQUISITION CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------------- 1998 1997 -------- -------- Operating activities: Net income (loss) $ 3,620 $ (1,890) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation and amortization 11,383 4,080 Equity in net loss of unconsolidated subsidiaries 1,136 1,055 Net change in deferred taxes 3,293 (42) Foreign exchange loss (186) -- Net effect of changes in operating assets and liabilities (5,021) 379 -------- -------- Net cash flows from operating activities 14,225 3,582 -------- -------- Investing activities: Investment in and advances to unconsolidated subsidiary (1,006) (1,022) Capital expenditures (4,146) (2,337) -------- -------- Net cash flows from investing activities (5,152) (3,359) -------- -------- Financing activities: Payments on long-term debt (647) -- -------- -------- Net cash flows from financing activities (647) -- -------- -------- Effect of exchange rate on cash 204 -- -------- -------- Net increase in cash 8,630 223 Cash at beginning of period 50,995 14,417 -------- -------- Cash at end of period $ 59,625 $ 14,640 ======== ========
See notes to consolidated financial statements. 5 6 PIONEER AMERICAS ACQUISITION CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION The consolidated balance sheet as of March 31, 1998 and the statements of operations and cash flows for all periods presented are unaudited and reflect all adjustments, consisting of normal recurring items, which management considers necessary for a fair presentation. Operating results for the first three months of 1998 are not necessarily indicative of results to be expected for the year ending December 31, 1998. The consolidated financial statements include the accounts of Pioneer Americas Acquisition Corp. ("Pioneer") and its consolidated subsidiaries (collectively referred to as the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. All dollar amounts in the tabulations in the notes to the financial statements are stated in thousands of dollars unless otherwise indicated. The consolidated balance sheet at December 31, 1997 is derived from the December 31, 1997 audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles, since certain information and disclosures normally included in the notes to the financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission. The accompanying unaudited financial statements should be read in conjunction with the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1997. 2. SUPPLEMENTAL CASH FLOW INFORMATION Net effects of changes in operating assets and liabilities are as follows:
THREE MONTHS ENDED MARCH 31, -------------------------- 1998 1997 --------- -------- Accounts receivable $ 11,082 $ 392 Due from parent (2,541) (293) Inventories (3,272) (2,649) Prepaid expenses 1,366 350 Other assets (409) 97 Accounts payable (15,380) 456 Accrued liabilities 3,717 2,282 Other long-term liabilities 416 (256) --------- -------- Net change in operating assets and liabilities $ (5,021) $ 379 ========= ========
Following are supplemental disclosures of cash flow information:
THREE MONTHS ENDED MARCH 31, -------------------------- 1998 1997 --------- -------- Cash payments for: Interest $ 4,359 $ 605 Income taxes -- 135
6 7 3. INVENTORIES Inventories consist of the following:
MARCH 31, DECEMBER 31, 1998 1997 ----------- ------------ Raw materials, supplies and parts $ 17,413 $ 18,314 Finished goods and work-in-process 10,292 7,188 Inventories under exchange agreements (1,759) (2,877) ----------- ----------- $ 25,946 $ 22,625 =========== ===========
4. COMMITMENTS AND CONTINGENCIES The Company and its operations are subject to extensive United States and Canadian federal, state, provincial and local laws, regulations, rules and ordinances relating to pollution, the protection of the environment and the release or disposal of regulated materials. The operation of any chemical manufacturing plant and the distribution of chemical products entail obligations under current environmental laws. Present or future laws may affect the Company's capital and operating costs relating to compliance, may impose cleanup requirements with respect to site contamination resulting from past, present or future spills and releases and may affect the markets for the Company's products. The Company believes that its operations are currently in general compliance with environmental laws and regulations, the violation of which could result in a material adverse effect on the Company's business, properties or results of operations on a consolidated basis. There can be no assurance, however, that material costs will not be incurred as a result of instances of noncompliance or new regulatory requirements. The Company relies on indemnification from the previous owners in connection with certain environmental liabilities at its chlor-alkali plants and other facilities. There can be no assurance, however, that such indemnification agreements will be adequate to protect the Company from environmental liabilities at these sites or that such third parties will perform their obligations under the respective indemnification arrangements, in which case the Company would be required to incur significant expenses for environmental liabilities, which would have a material adverse effect on the Company. The Company is subject to various legal proceedings and potential claims arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses and/or insurance coverage with respect to these matters and management does not believe that they will materially affect the Company's operations or financial position. 5. PCI CHEMICALS CANADA INC. Pioneer is a holding company with no operating assets or operations. A subsidiary of Pioneer acquired in October 1997, PCI Chemicals Canada Inc. ("PCICCI"), has outstanding $175.0 million of 9 1/4% Senior Secured Notes, due October 15, 2007. These notes are fully and unconditionally guaranteed on a joint and several basis by Pioneer and Pioneer's other direct and indirect wholly-owned subsidiaries. Together, PCICCI and the subsidiary note guarantors comprise all of the direct and indirect subsidiaries of Pioneer. Summarized financial information of PCICCI and the guarantors of these notes are as follows:
NOTE CONSOLIDATED NOTE CONSOLIDATED PCICCI GUARANTORS COMPANY PCICCI GUARANTORS COMPANY ------------- ------------- ------------- ------------- ------------- ------------- AS OF MARCH 31, 1998 AS OF DECEMBER 31, 1997 ---------------------------------------------- ----------------------------------------------- Current assets $ 53,896 $ 91,279 $ 145,175 $ 39,211 $ 103,780 $ 142,991 Non-current assets 228,417 367,630 596,047 187,009 417,359 604,368 Current liabilities 25,259 45,276 70,535 24,465 57,561 82,026 Non-current liabilities 195,569 411,617 607,186 193,121 412,331 605,452
FOR THE THREE MONTHS ENDED MARCH 31, 1998 ---------------------------------------------- Revenues $ 39,249 $ 55,370 $ 94,619 Gross profit 13,834 15,837 29,671 Net income (loss) 3,781 (161) 3,620
Separate financial statements of PCICCI and the guarantors of the PCICCI notes are not included as management has determined that separate financial statements of these entities are not material to investors. 7 8 6. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 Revenues Revenues increased by $55.9 million or approximately 144% to $94.6 million for the three months ended March 31, 1998. The increase in revenues was primarily attributable to additional sales volumes from the Pioneer Chlor Alkali Co., Inc. ("PCAC") acquisition of a chlor-alkali plant in Tacoma, Washington in June 1997 and the acquisition of business of PCI Chemicals Canada Inc. and PCI Carolina, Inc. (together "PCI Canada") in October 1997. In addition, PCAC average electrochemical unit ("ECU") prices increased approximately 11%. Partially offsetting these increases were decreased sales due to lower production volumes at PCAC's Henderson and Tacoma plants in early 1998, due to a failed transformer at Henderson, which is now fully operational, and a lack of railcar availability in the western United States due to Union Pacific rail transportation problems. Revenues at All-Pure Chemical Company, Inc. ("All-Pure") decreased slightly due to the adverse weather conditions on the West Coast. Cost of Sales Cost of sales increased $35.9 million, or 124%, for the three months ended March 31, 1998, principally because of the sales volumes of the acquired operations. Cost of sales at All-Pure decreased somewhat as a result of decreased sales volumes. Gross Profit Gross profit margin increased to 31% in 1998 from 25% as a result of the revenues and cost of sales fluctuations described above. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $6.0 million for the three months ended March 31, 1998, primarily due to the acquisition of PCI Canada. Also, during 1998 "pay-for-performance" accruals were made in excess of the 1997 first quarter accruals. Equity in Net Loss of Unconsolidated Subsidiary Equity in net loss of unconsolidated subsidiary increased slightly due to losses sustained by the unconsolidated subsidiary during the first quarter of 1998. These losses were attributable to decreased sales and decreased gross margins. Interest Expense, Net Interest expense, net increased $8.0 million to $12.4 million for the first three months of 1998. This increase was the result of the debt incurred for the acquisitions of the Tacoma plant and the business of PCI Canada, partially offset by lower interest expense from refinancing $135.0 million of 13 3/8% First Mortgage Notes at substantially lower interest rates. Other Income, Net Other income for the first three months of 1998 includes a gain from the settlement of a lawsuit of approximately $0.9 million, an accrual for a business interruption insurance claim at PCAC's Henderson plant related to the failed transformer, and a state franchise tax refund. Net Income Due to the factors described above, net income for the first quarter of 1998 was $3.6 million, compared to a net loss of $1.9 million for the same period of 1997. 8 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended March 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PIONEER AMERICAS ACQUISITION CORP. April 27, 1998 By: /s/ Philip J. Ablove --------------------------- Philip J. Ablove Vice President and Chief Financial Officer 9 10 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-1-1998 MAR-31-1998 59,625 0 55,998 1,792 25,946 145,175 364,534 42,632 741,222 70,535 566,512 0 0 1 65,500 741,222 94,619 94,619 64,948 64,948 12,180 0 12,448 6,996 3,376 0 0 0 0 3,620 3,620 3,620
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