Pioneer Announces 2004 Second Quarter Results HOUSTON, Aug. 16
/PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (OTC:PONR)
(BULLETIN BOARD: PONR) today reported a net loss of $2.4 million,
or $0.24 per diluted share, on revenues of $97.1 million for the
three months ended June 30, 2004, as compared to net income of $5.0
million, or $0.50 per diluted share, on revenues of $96.3 million
in the second quarter of 2003. For the six months ended June 30,
2004, Pioneer's net loss was $9.7 million, or $0.97 per diluted
share, on revenues of $187.1 million, as compared to net income of
$21.4 million, or $2.12 per diluted share, on revenues of $185.3
million for the six months ended June 30, 2003. During the quarter
ended June 30, 2004, Pioneer's chlor-alkali plants operated at
capacity, and Pioneer's average ECU netback during the quarter was
$354, or $52 lower than the year-earlier quarter. Revenues were
only slightly higher for three- and six-month periods ended June
30, 2004, as compared to the comparable periods in 2003, with the
increased sales volume in the 204 periods offsetting the higher ECU
prices in the 2003 periods. For the six months ended June 30, 2004,
the average ECU netback was $346, compared to an average of $384
for the year-earlier period. Cost of sales -- product increased by
$3.5 million in the three months ended June 30, 2004, as compared
to the same period in the prior year. Increased sales and
production levels resulted in increased expenditures for salt,
power and freight of $5.4 million, while maintenance costs were
$1.6 million lower in the second quarter of 2004 than in the same
quarter of 2003. Cost of sales -- product increased by $5.3 million
for the six months ended June 30, 2004, as compared to the same
period in the prior year. Included in the increased costs were
higher salt, power and freight costs of $6.2 million, as well as
$2.5 million in additional costs for purchases for resale. Cost of
sales -- product in the first six months of 2004 also included
higher depreciation expense of $3.7 million that resulted primarily
from a charge recorded in the first quarter of 2004 for
non-productive plant assets. Off-setting a portion of the increase
from the prior year was the absence of an environmental charge of
$9.5 million that was recorded in the first quarter of 2003.
Selling, general and administrative expenses in the 2004 second
quarter were $2.7 million higher than in the second quarter of
2003, primarily as a result of consulting fees and expenses of $1.9
million related to Project STAR, an organizational efficiency
project that Pioneer initiated during the first quarter of 2004.
Selling, general and administrative expenses increased by $0.9
million for the six months ended June 30, 2004, as compared to the
six months ended June 30, 2003, primarily due to $2.9 million of
consulting fees and expenses related to Project STAR, partially
offset by decreases of $1.9 million in bad debt expense for the
2004 period. For the three-month and six-month periods ended June
30, 2004, Pioneer recorded under other items a charge of $3.2
million for employee severance and benefits costs related to the
implementation of Project STAR. Michael Y. McGovern, Pioneer's
President and Chief Executive Officer, stated, "It is important to
note that during the first six months of 2004 we implemented
Project STAR, which is expected to produce significant long-term
benefits to our efficiency and cost structure. To date we have
incurred total costs, in the form of consulting fees and expenses
and employee severance and benefit costs, of $6.1 million to
implement the project. The changes to our organizational structure
that have been implemented are expected to reduce annual labor and
benefits costs by more than $8 million, and efficiency measures
that have been identified are expected to result in additional
annual cost savings of approximately $3 million. "We also
anticipate future benefits from the chlorine and caustic soda price
increases that we have announced this year," he continued.
"Furthermore, since the industry is currently operating at
capacity, the outlook for demand is positive, and industry
observers expect further increases during the remainder of 2004."
Significant charges and credits that are not specifically related
to plant operating and maintenance activities and administrative
costs and that affect the comparability of operating income between
the six months ended June 30, 2004, and the six months ended June
30, 2003, are as follows (amounts in millions): Six Months Ended
June 30, 2004 2003 Operating income (loss) $ (1.8) $31.8 Charges
(Credits) Cost of sales - products $ 3.4 $ 9.5 Cost of sales -
derivatives --- 21.0 Change in fair value of derivatives --- (87.3)
Asset impairment --- 40.8 For the six-month periods, charges and
credits noted above are detailed as follows: -- During the first
six months of 2004 depreciation expense of $3.4 million, included
in cost of sales -- product, related to a first-quarter charge with
respect to non-productive assets at Pioneer's Tacoma chlor-alkali
facility. During the six months ended June 30, 2003, cost of sales
-- product included a first-quarter 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 the related electricity derivatives agreements, and CRC
retained all amounts it had received related to the derivatives
agreements. Consequently, during the six months ended June 30,
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 during the first six
months of 2003. There were no other significant charges and
credits, not specifically related to plant operating and
maintenance activities, during the second quarters in 2004 and 2003
that affect the comparability of operating income between those
periods. 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 second quarter of 2004,
Pioneer reported as other income $0.6 million of currency exchange
gain, compared to $2.6 million of other expense from currency
exchange loss in the second quarter of 2003. For the six months
ended June 30, 2004, Pioneer reported as other income a currency
exchange gain of $0.7 million, while a currency exchange loss of
$4.4 million was recognized for the year-earlier period. At June
30, 2004, Pioneer had liquidity of $14.5 million, which included
cash of $6.3 million and available borrowings under Pioneer's
revolving credit facility of $8.2 million, net of letters of credit
outstanding on that date. 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 June 30, 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
Wednesday, August 18, 2004, at 10:00 a.m. Central time in order to
discuss its financial results for the second quarter of 2004.
Individuals who are interested in listening to the teleconference
may call (888) 343-7268 at that time and request to listen to the
Pioneer earnings teleconference. A replay of this teleconference
will be available from 12:00 noon (Central time) on August 18,
2004, until 12:00 noon on August 20, 2004, by dialing (800)
633-8284, reservation number 21205719. 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,
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, the effects of Pioneer's organizational efficiency
project 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 Six Months Ended June 30, June 30, 2004
2003 2004 2003 Revenues $97,072 $96,316 $187,098 $185,347 Cost of
sales - product (84,317) (80,772) (170,628) (165,363) Cost of sales
- derivatives --- --- --- (20,999) Total cost of sales (84,317)
(80,772) (170,628) (186,362) Gross profit (loss) 12,755 15,544
16,470 (1,015) Selling, general and administrative expenses (8,368)
(5,690) (14,957) (14,048) Change in fair value of derivatives ---
--- --- 87,271 Asset impairment --- --- --- (40,818) Other items
(3,178) 422 (3,343) 422 Operating income (loss) 1,209 10,276
(1,830) 31,812 Interest expense, net (4,561) (4,792) (9,203)
(9,603) Other income (expense), net 609 (2,564) 735 (4,444) Income
(loss) before income taxes (2,743) 2,920 (10,298) 17,765 Income tax
benefit 342 2,126 604 3,659 Net income (loss) $(2,401) $ 5,046
$(9,694) $ 21,424 Net income (loss) per share: Basic $ (0.24) $
0.50 $(0.97) $ 2.14 Diluted $ (0.24) $ 0.50 $(0.97) $ 2.12 Weighted
average number of shares outstanding: Basic 10,030 10,003 10,022
10,002 Diluted 10,030 10,171 10,022 10,115 PIONEER COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands)
June 30, December 31, 2004 2003 Assets Current assets $ 66,886 $
61,471 Net property, plant and equipment 179,817 189,534 Other
assets, net 5,008 3,931 Excess reorganization value over the fair
value of identifiable assets 84,064 84,064 Total assets $335,775
$339,000 Liabilities and stockholders' equity Current liabilities
60,716 48,881 Long-term debt, less current portion 202,354 203,803
Accrued pension and other employee benefits 21,676 24,584 Other
long-term liabilities 41,619 42,742 Total stockholders' equity
9,410 18,990 Total liabilities and stockholders' equity $335,775
$339,000 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited, in thousands) Six Months Ended June 30, 2004 2003
Operating activities: Net income (loss) $ (9,694) $ 21,424
Adjustments to reconcile net income (loss) to net cash flows from
operating activities: Depreciation and amortization 14,353 10,554
Provision for (recovery of) losses on accounts receivable (480)
1,492 Deferred tax benefit (604) (3,660) Derivatives - cost of
sales and change in fair value --- (66,272) Gain from early
extinguishments of debt --- (420) Loss on disposals of assets 152
--- Asset impairment --- 40,818 Currency exchange loss (gain) (671)
4,446 Changes in operating assets and liabilities Increase in
accounts receivable (4,213) (2,456) Decrease in inventories,
prepaid expenses and other current assets 3,273 666 (Increase)
decrease in other assets (1,101) 664 Increase (decrease) in
accounts payable and accrued liabilities 12,313 (9,103) Increase
(decrease) in other long-term liabilities (2,488) 8,791 Net cash
flows from operating activities 10,840 6,944 Investing activities:
Capital expenditures (4,810) (3,610) Net cash flows from investing
activities (4,810) (3,610) Financing activities: Net proceeds
(payments) under revolving credit arrangements (434) 7,152 Payments
on debt (1,449) (7,628) Proceeds from issuance of stock 114 7 Net
cash flows from financing activities (1,769) (469) Effect of
exchange rate changes on cash 99 462 Net change in cash and cash
equivalents 4,360 3,327 Cash and cash equivalents at beginning of
period 1,946 2,789 Cash and cash equivalents at end of period $
6,306 $ 6,116 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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