PONR Pioneer Companies New 2/02 (MM)

HOUSTON, March 15 /PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (NASDAQ:PONR) today reported that, for the fourth quarter of 2006, it had net income of $4.3 million, or $0.36 per diluted share, compared to net income of $11.1 million, or $0.94 per diluted share, in the fourth quarter of 2005. Revenues for the fourth quarter of 2006 were $121.2 million as compared to $131.0 million for the same period in 2005. For the year ended December 31, 2006, Pioneer reported net income of $67.2 million, or $5.67 per diluted share, on revenues of $525.7 million, compared to a net income of $70.3 million, or $5.95 per diluted share, on revenues of $515.7 million for the year ended December 31, 2005. Pioneer had income tax expense in 2006 of $31.5 million, compared to an income tax expense of $10.8 million for the prior year. Pioneer had income tax expense in the fourth quarter of 2006 of $8.1 million, compared to an income tax expense of $2.4 for the fourth quarter of 2005. For 2006, Pioneer's net income included an aggregate gain of $26.4 million from three separate sales of excess properties located in Henderson, Nevada and Pittsburg, California. Pioneer also completed the most recent of its periodic assessments of its environmental remediation liabilities, which resulted in a $6.9 million charge in the fourth quarter of 2006 due to an increase in its environmental liabilities. Pioneer realized an average electrochemical unit, or ECU, netback of $534 in the fourth quarter of 2006, and $571 for the full year, compared to an average ECU netback of $619 in the fourth quarter of 2005 and $581 for all of 2005. Production increased in 2006, with total production of approximately 686,000 ECUs in 2006, representing approximately 95% of production capacity, compared to approximately 671,000 ECUs in 2005, or approximately 93% of production capacity. Revenues improved in 2006 compared to 2005 as a result of increased ECU volumes and higher prices for caustic soda, bleach and hydrochloric acid. Cost of sales increased by $35.8 million, or 10%, to $412.0 million for the year ended December 31, 2006, as compared to the prior year. Pioneer's cost of sales for 2006 compared to 2005 included an increase in variable product costs of $7.2 million, an increase in fixed costs of $16.0 million and higher transportation costs of $12.5 million. The increase in variable product costs of $7.3 million included higher production costs of $10.7 million from increased electricity, salt and steam prices, in addition to increased costs of $3.8 million from higher production volumes, which were offset by lower purchase for resale costs of $3.7 million. Additionally, Pioneer's variable product costs decreased by $1.9 million for non-ECU manufactured products resulting from lower volumes due to the closure of the Cornwall plant in mid-2005. The increase in fixed costs of $16.0 million in 2006 primarily included a fourth quarter charge of $6.9 million for an increased estimate of Pioneer's environmental remediation liabilities based on an updated 2006 environmental study, a $1.7 million increase in the liability for the disposal of brine material at Pioneer's Dalhousie, New Brunswick facility, an expense of $1.1 million for the settlement of certain pension plan obligations related to the Cornwall plant closure in 2005, higher maintenance costs of $2.7 million, and higher employee benefit related costs of $2.7 million. The increase in transportation costs of $12.5 million included higher freight costs due to increased rates, increases for railcar rentals and the costs of our trucking operations conducted by our subsidiary, Pioneer Transportation. Cost of sales increased by $5.3 million for the fourth quarter of 2006, as compared to the year-earlier period, resulting from lower variable costs of $7.1 million, which were offset by higher fixed costs of $10.6 million and higher transportation costs of $1.8 million. The variable cost decrease in the fourth quarter of 2006, compared to the fourth quarter of 2005, included $6.0 million of decreased electricity, salt and other raw materials costs due to lower prices, and lower purchases for resale of $2.2 million. These decreased costs were offset in part by $1.2 million of costs due to higher production volumes. The fixed cost increase of $10.6 million in the fourth quarter of 2006, compared to the fourth quarter of 2005, primarily included a fourth quarter charge of $6.9 million for the increased estimate of Pioneer's environmental remediation liabilities based on its 2006 environmental study, and a $1.1 million expense to settle certain pension plan obligations related to the Cornwall plant closure in 2005. The transportation cost increase of $1.8 million resulted from higher freight costs due to increased rates, increases for railcar rentals and internal costs for our Pioneer Transportation trucking operations. Selling, general and administrative expenses decreased by $5.8 million, or approximately 15%, to $32.4 million for the year ended December 31, 2006, as compared to the prior year. The decrease included lower employee bonus costs of $5.2 million in 2006 as compared to 2005. Pioneer also had decreased bad debt expense of $2.5 million due to improvements in accounts receivables for certain customers within higher risk industries, and had lower professional fees of $0.8 million due to reduced use of outside consultants in 2006 for Sarbanes-Oxley compliance efforts. These decreases were offset by increased costs of $2.7 million primarily resulting from an increase in employee benefit related expenses of $1.6 million, which included stock-based compensation expense of $0.8 million. Selling, general and administrative expenses in the fourth quarters of 2006 and 2005 were $6.8 million and $13.0 million, respectively. The $6.2 million decrease between these periods was primarily related to lower professional fees of $2.2 million related to Sarbanes-Oxley compliance efforts and a $3.8 million decrease in personnel expenses, mainly from a lower employee bonus accrual for 2006 as compared to 2005. Other expense, net of $2.3 million in 2006 primarily reflected the redemption fee for the early redemption of $50.0 million of the Senior Notes in early 2006. Other expense, net of $1.5 million for 2005 reflected currency exchange loss remeasurement. Pioneer's income tax expense in 2006 was $31.5 million, compared to an income tax expense of $10.8 million for the prior year. The effective income tax rate was 32% for the year ended December 31, 2006, and 13% for the year ended December 31, 2005. In 2006, the effective rate varied from the statutory rate of 35% due mainly to the utilization of the majority of Pioneer's net operating loss carryforwards and release of the associated valuation allowance, and a one-time adjustment to net deferred tax liabilities related to a decrease in future Canadian tax rates from a recently enacted law, which was partially offset by foreign and state income tax expenses. In 2005, the effective tax rate varied from the expected statutory rate of 35% due primarily to the partial recognition of the valuation allowance for the Company's U.S. net operating losses, when management concluded that the realization of a substantial portion of the Company's net operating loss carryforwards was probable. Accordingly, management released approximately $32 million of valuation allowance on the Company's net operating loss assets. In addition, the Company is subject to various state and foreign income taxes that contribute to the variance from the expected statutory rate. Interest expense, net for 2006 was $6.9 million (consisting of $10.4 million of interest expense and $3.5 million of interest income) compared to $15.3 million (consisting of $16.2 million of interest expense and $0.9 million of interest income) interest expense, net during the year-earlier period. Interest expense, net for the fourth quarters of 2006 and 2005 were $0.7 million and $3.3 million, respectively. At December 31, 2006, Pioneer had liquidity of $140.7 million, which included cash and cash equivalents of $115.2 million and available borrowings under Pioneer's revolving credit facility of $25.5 million, net of letters of credit outstanding as of such date. Michael Y. McGovern, Pioneer's Chairman, President and Chief Executive Officer, stated, "2006 was another excellent year for Pioneer. Our revenues have been at historically high levels for the past two years due to favorable ECU pricing, which reflects continued strong demand for our chlor-alkali products. We have used our positive cash flow during the past two years to reduce our debt to approximately $103 million at year end, which puts Pioneer in an essentially "debt-free position" given our cash balance of approximately $115 million, also at year end. We further reduced our debt in January 2007 by redeeming an additional $25 million of our Senior Notes. With our prudent approach to managing our debt level over the past few years, we are well positioned financially for the recently announced expansion of our St. Gabriel, Louisiana facility. Our management team is very excited by the challenges and potential benefits of the St. Gabriel project which we expect to complete by the end of 2008." Mr. McGovern continued, "During 2006, we operated at a 95% operating rate, well above the industry average, which is impressive given our sustained high operating rates since 2004. This excellent performance was due to the successful commitment and effort of our operating personnel who manage and run our production facilities. It also reflects the seamless balancing of our customer demands with our production capacities by our sales and marketing, logistics and distribution teams." 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's common stock trades on the NASDAQ Global Market under the symbol "PONR". Pioneer has filed its annual report on Form 10-K for the year ended December 31, 2006, and has posted it to its Internet website. Other information and press releases of Pioneer Companies, Inc. can also be obtained from its Internet website at http://www.piona.com/ . Pioneer will conduct a teleconference on Friday, March 16, 2007, at 10:00 a.m. CDT in order to discuss its financial results for the year ended December 31, 2006. Individuals who are interested in listening to the teleconference may call (800) 395-0708 at that time and request to listen to the Pioneer earnings teleconference. A telephonic replay will be available from 1:00 p.m. CDT on Friday, March 16, 2007, until 11:59 p.m. CDT on Wednesday, March 21, 2007, by dialing (888) 203-1112, passcode #4739165. To access the webcast of the conference call, please log on to http://www.piona.com/ and go to Investors and then to Conference Calls. To listen to the live webcast, please go to this website approximately fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. 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, the cyclical nature of the markets for Pioneer's products and raw materials, the fluctuations in demand and prices for Pioneer's products and raw materials, increases in energy prices, Pioneer's access to and the cost of rail transportation, Pioneer and industry production volumes, competitive prices, increases in costs and delays in the completion of the St. Gabriel expansion project, whether financing for the St. Gabriel project will be available on favorable terms, environmental risks, litigation, governmental regulations, 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 (in thousands, except per share data) Three Months Ended Year Ended December 31, December 31, 2006 2005 2006 2005 Revenues $121,190 $130,993 $525,705 $515,715 Cost of sales (105,278) (99,933) (412,030) (376,225) Gross profit 15,912 31,060 113,675 139,490 Selling, general and administrative expenses (6,826) (12,975) (32,373) (38,187) Gain (loss) on asset dispositions and other, net 1,906 1,263 26,642 (1,222) Operating income 10,992 19,348 107,944 100,081 Interest expense, net (672) (3,300) (6,947) (15,267) Other income (expense), net 2,041 (414) (2,289) (1,543) Income before income taxes 12,361 15,634 98,708 83,271 Income tax expense (8,095) (2,355) (31,463) (10,781) Income before cumulative effect of change in accounting principle 4,266 13,279 67,245 72,490 Cumulative effect of change in accounting principle, net of tax --- (2,194) --- (2,194) Net income $4,266 $11,085 $67,245 $70,296 Income per share: Basic: Income before cumulative effect of change in accounting principle $.36 $1.14 $5.71 $6.37 Cumulative effect of change in accounting principle, net of tax --- (0.19) --- (0.19) Net income $.36 $0.95 $5.71 $6.18 Diluted: Income before cumulative effect of change in accounting principle $.36 $1.12 $5.67 $6.14 Cumulative effect of change in accounting principle, net of tax --- (0.18) --- (0.19) Net income $.36 $0.94 $5.67 $5.95 Weighted average number of shares outstanding: Basic 11,796 11,636 11,781 11,379 Diluted 11,868 11,853 11,866 11,808 PIONEER COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) December 31, December 31, 2006 2005 Assets Current assets $204,125 $151,603 Net property, plant and equipment 152,784 158,960 Other assets, net 1,850 4,310 Excess reorganization value over the fair value of identifiable assets 84,064 84,064 Total assets $442,823 $398,937 Liabilities and stockholders' equity Current liabilities $60,572 $59,932 Long-term debt, less current portion 101,761 152,739 Other long-term liabilities and accrued pension and other employment benefits 95,670 81,276 Total stockholders' equity 184,820 104,990 Total liabilities and stockholders' equity $442,823 $398,937 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2006 2005 Operating activities: Net income $67,245 $70,296 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 24,335 24,564 (Reduction of) provision for allowance for doubtful accounts (1,513) 1,185 Deferred tax expense 15,465 8,636 (Gain) loss on disposal of assets (26,275) 316 Currency exchange (gain) loss (9) 1,470 Loss on early debt extinguishment 2,500 --- Stock-based compensation expense 815 --- Accretion of asset retirement obligations 304 --- Cumulative effect of change in accounting principle --- 2,194 Net effect of changes in operating assets and liabilities 8,443 (5,713) Net cash flows from operating activities 91,310 102,948 Investing activities: Capital expenditures (12,314) (12,605) Proceeds from disposal of assets 27,548 2,255 Net cash flows from (used in) investing activities 15,234 (10,350) Financing activities: Payment of premium on early debt extinguishment (2,500) --- Repayments of long-term debt (51,880) (48,320) Proceeds from issuance of stock, net 412 2,226 Net cash flows used in financing activities (53,968) (46,094) Effect of exchange rate changes on cash (150) 95 Net change in cash and cash equivalents 52,426 46,599 Cash and cash equivalents at beginning of period 62,790 16,191 Cash and cash equivalents at end of period $115,216 $62,790 DATASOURCE: Pioneer Companies, Inc. CONTACT: Gary Pittman of Pioneer Companies, Inc., +1-713-570-3200 Web site: http://www.piona.com/

Copyright