Pioneer Announces 2004 First Quarter Results HOUSTON, May 14
/PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (BULLETIN BOARD:
PONR) today reported a net loss of $7.3 million, or $0.73 per
diluted share, on revenues of $90.0 million for the three months
ended March 31, 2004, as compared to net income of $16.4 million,
or $1.63 per diluted share, on revenues of $89.0 million in the
first quarter of 2003. The average ECU netback during the first
quarter of 2004 was $339, which was $27 lower than the preceding
quarter and $23 lower than the first quarter of 2003. The revenue
effect of the lower ECU netback was more than offset by volume
growth in sales of chlorine and caustic soda and increased prices
and volumes of bleach, hydrochloric acid and other downstream
products. While production during the first quarter of 2004 was
reduced as a result of an equipment problem at one plant and rail
service difficulties at another (both of which have been
addressed), drawing down inventory supported the quarter's higher
sales volumes. Pioneer's ECU production was 169,555 tons in the
first quarter of 2004, as compared to 160,071 tons and 175,764 tons
in the preceding quarter and the first quarter of 2003,
respectively. During the quarter ended March 31, 2004, cost of
sales - products was higher than during the first quarter of 2003
as a result of $4.3 million of increased costs related to purchase
for resale volumes and bleach production increases, $1.3 million of
increased freight costs, $2.3 million of higher plant labor and
maintenance costs and $3.4 million higher depreciation expense as
the result of a charge recorded for non-productive plant assets.
Selling, general and administrative expenses in the 2004 first
quarter were $1.8 million lower than during the earlier period as a
result of approximately $2.2 million in reduced bad debt expense
and $0.6 million in lower local taxes, offset by $0.9 million in
increased professional fees. The higher professional fees are
attributable to an organizational efficiency project, Project STAR,
which Pioneer embarked on during the quarter. Other significant
charges and credits, not specifically related to plant operating
and maintenance activities and which affect the comparability of
operating income between periods, are as follows (amounts in
millions): Three Months Ended March 31, 2004 2003 Operating Income
$(3.0) $21.5 Charges (Credits) Cost of sales - product $3.4 $9.5
Cost of sales - derivatives $--- $21.0 Change in fair value of
derivatives $--- $(87.3) Asset impairment $--- $40.8 For the
periods, charges and credits noted above are detailed as follows:
-- During the first quarter of 2004 depreciation expense of $3.4
million, included in cost of sales - product, related to a charge
for non-productive assets at Pioneer's Tacoma chlor-alkali
facility. During the quarter ended March 31, 2003, cost of sales -
product included an increase of $9.5 million in Pioneer's reserves
for environmental remediation liabilities, based on a new analysis
of environmental concerns at all of Pioneer's plants. -- During the
first quarter of 2003, all of the conditions were satisfied with
respect to the settlement of a dispute regarding the supply of
power to Pioneer's Henderson facility. As a result of the
settlement with the Colorado River Commission ("CRC"), Pioneer was
released from all claims for liability with respect to electricity
derivatives agreements, and CRC retained all amounts it had
received related to the derivatives agreements. During the first
quarter of 2003, the receivable of $21.0 million that Pioneer had
recorded related to estimated net proceeds from matured derivatives
was reversed, and the net liability of $87.3 million that had been
recorded for the net mark-to-market loss on outstanding derivative
positions was also reversed. -- In connection with the settlement
of the dispute with CRC, Pioneer entered into a new power agreement
effective as of January 1, 2003. The market rates under the new
agreement are expected to remain at levels higher than the rates
under the long-term hydropower contracts that were assigned as part
of the settlement. Based on an analysis of the effect of the higher
power costs on the value of the Henderson facility, Pioneer
recorded an impairment charge of $40.8 million in the first quarter
of 2003. Pioneer's net income is affected by the remeasurement of
Canadian dollar- denominated account balances in U.S. dollars for
financial reporting purposes. In the first quarter of 2004, Pioneer
reported as other income $0.1 million of currency exchange gain,
compared to a $1.9 million currency exchange loss in the first
quarter of 2003. At March 31, 2004, Pioneer had liquidity of $22.2
million, which included available borrowings under Pioneer's
revolving credit facility of $20.7 million, net of letters of
credit outstanding on that date, and cash of $2.5 million, less
outstanding disbursements of $1.0 million. Michael Y. McGovern,
Pioneer's President and Chief Executive Officer, stated,
"Continuing strong demand for chlorine has resulted in an improved
price level for chlorine so far in 2004, and we have recently
implemented an order control program as we endeavor to maintain an
orderly supply environment for our contract customers. Caustic soda
prices were weak in the first quarter, but we recently announced a
price increase and implemented an order control program for that
product, reflecting an increase in demand since the beginning of
the second quarter. "We are also making progress with Project STAR,
our on-going operational efficiency initiative," McGovern added.
"We anticipate that after the project is implemented in June of
this year we will have at least 12% fewer Pioneer employees than
the 648 employees we had on December 31, 2003, with a resulting
annual payroll and benefits savings of more than $6.3 million. We
expect to incur a severance expense of at least $3.1 million in
June, but the severance payments will be made in 2004 and 2005 in
accordance with applicable severance arrangements, so the savings
that will result from Project STAR will really be realized
beginning in 2005. However, we feel that our current operating
environment and the prospective savings and efficiencies from
Project STAR, taken as a whole, provide some cautious optimism
about Pioneer's future prospects." Pioneer, based in Houston,
manufactures chlorine, caustic soda, bleach, hydrochloric acid and
related products used in a variety of applications, including water
treatment, plastics, pulp and paper, detergents, agricultural
chemicals, pharmaceuticals and medical disinfectants. Pioneer owns
and operates four chlor-alkali plants and several downstream
manufacturing facilities in North America. Pioneer has filed its
quarterly report on Form 10-Q for the quarter ended March 31, 2004,
and has posted it to its Internet web site, so it is readily
accessible. Other information and press releases of Pioneer
Companies, Inc. can also be obtained from its Internet web site at
http://www.piona.com/ . Pioneer will conduct a teleconference on
May 21, 2004, at 10:30 a.m. Central time in order to discuss its
financial results for the first quarter of 2004. Individuals who
are interested in listening to the teleconference may call (888)
497-4617 at that time and request to listen to the Pioneer earnings
teleconference. A replay of this teleconference will be available
from 1 p.m. (Central time) on May 21, 2004, until 12:30 p.m. on May
25, 2004, by dialing (800) 633-8284, reservation #21195639. Certain
statements in this news release are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act.
Forward- looking statements relate to matters that are not
historical facts. Such statements involve risks and uncertainties,
including, but not limited to, Pioneer's high financial leverage,
global political and economic conditions, the demand and prices for
Pioneer's products and raw materials, Pioneer and industry
production volumes, competitive prices, the cyclical nature of the
markets for many of Pioneer's products and raw materials, the
effect of Pioneer's results of operations on its debt agreements,
and other risks and uncertainties described in Pioneer's filings
with the Securities and Exchange Commission. Actual outcomes may
vary materially from those indicated by the forward-looking
statements. PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited, in thousands, except per share data) Three
Months Ended March 31, 2004 2003 Revenues $90,026 $89,031 Cost of
sales - product (86,311) (84,591) Cost of sales - derivatives ---
(20,999) Total cost of sales (86,311) (105,590) Gross profit (loss)
3,715 (16,559) Selling, general and administrative expenses (6,589)
(8,358) Change in fair value of derivatives --- 87,271 Asset
impairment and other items (165) (40,818) Operating income (loss)
(3,039) 21,536 Interest expense, net (4,642) (4,811) Other income
(expense), net 126 (1,880) Income (loss) before income taxes
(7,555) 14,845 Income tax benefit 262 1,533 Net income (loss)
$(7,293) $16,378 Net Income (loss) per share: Basic $(0.73) $1.64
Diluted $(0.73) $1.63 Weighted average number of shares
outstanding: Basic 10,006 10,000 Diluted 10,006 10,029 PIONEER
COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
thousands) March 31, December 31, 2004 2003 Assets (Unaudited)
Current assets $58,957 $61,471 Net property, plant and equipment
182,797 189,534 Other assets, net 4,288 3,931 Excess reorganization
value over the fair value of identifiable assets 84,064 84,064
Total assets $330,106 $339,000 Liabilities and stockholders' equity
Current liabilities $48,465 $48,881 Long-term debt, less current
portion 202,669 203,803 Other long-term liabilities 67,257 67,326
Total stockholders' equity 11,715 18,990 Total liabilities and
stockholders' equity $330,106 $339,000 PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Three Months Ended March 31, 2004 2003 Operating activities: Net
income (loss) $(7,293) $16,378 Adjustments to reconcile net income
(loss) to net cash flows from operating activities: Depreciation
and amortization 8,884 5,194 Provision for (recovery of) losses on
accounts Receivable (653) 1,754 Deferred tax benefit (262) (1,533)
Derivatives - cost of sales and change in fair value --- (66,272)
Asset impairment --- 40,818 Loss on disposal of assets 175 ---
Currency exchange loss (gain) (129) 1,883 Net effect of changes in
operating assets and Liabilities 13,481 9,646 Net cash flows from
operating activities 14,203 7,868 Investing activities: Capital
expenditures (2,325) (1,724) Net cash flows from investing
activities (2,325) (1,724) Financing activities: Net Payments under
revolving credit arrangements (10,209) (244) Payments on debt
(1,166) (2,025) Proceeds from issuance of stock 18 --- Net cash
flows from financing activities (11,357) (2,269) Effect of exchange
rate changes on cash and cash equivalents 35 359 Net decrease in
cash and cash equivalents 556 4,234 Cash and cash equivalents at
beginning of period 1,946 2,789 Cash and cash equivalents at end of
period $2,502 $7,023 DATASOURCE: Pioneer Companies, Inc. CONTACT:
Gary Pittman of Pioneer Companies, Inc., +1-713-570-3200 Web site:
http://www.piona.com/
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