Pioneer Announces 2003 Third Quarter Results HOUSTON, Nov. 14
/PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (BULLETIN BOARD:
PONR) today reported net income of $2.0 million, or $0.20 per
share, on revenues of $100.0 million for the three months ended
September 30, 2003, as compared to net income of $3.3 million, or
$0.33 per share, on revenues of $86.6 million in the third quarter
of 2002. For the nine months ended September 30, 2003, Pioneer's
net income was $23.4 million, or $2.34 per share, on revenues of
$285.3 million, as compared to net income of $6.5 million, or $0.65
per share, on revenues of $232.6 million for the nine months ended
September 30, 2002. Compared to the second quarter of 2003, higher
sales volumes and prices for related products, primarily bleach and
hydrochloric acid, contributed to the overall sales growth in the
third quarter, despite a slight decline in electrochemical unit
(ECU) prices. The average ECU netback during the current quarter
was $392, which was $14 lower than the preceding quarter and $82
higher than the third quarter of 2002. The increase in revenues for
the nine months ended September 30, 2003, as compared to the nine
months ended September 30, 2002, was the result of higher ECU
prices, offset slightly by lower sales volumes. For the most recent
nine-month period, the average ECU netback was $387, compared to an
average of $255 for the nine months ended September 30, 2002. Cost
of sales -- product increased by $8.5 million and $32.5 million in
the three and nine months ended September 30, 2003, as compared to
the same periods in the prior year. Power costs, a component of
cost of sales -- product, accounted for approximately $4.1 million
and $10.2 million, respectively, of the increase reflected in the
three- and nine-month periods ended September 30, 2003. Selling,
general and administrative expenses in the 2003 third quarter were
$0.4 million higher than during the year earlier period as a result
of higher professional fees and depreciation expense. Selling,
general and administrative expenses increased by $3.2 million for
the nine months ended September 30, 2003, as compared to the nine
months ended September 30, 2002, primarily due to an increase of
approximately $1.9 million in bad debt expense and $1.1 million of
personnel-related costs. Depreciation expense was $5.5 million and
$6.4 million, respectively, for the quarters ended September 30,
2003 and 2002, and was $16.1 million and $18.7 million,
respectively, for the nine months ended September 30, 2003 and
2002. 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 Nine Months
Ended September 30, September 30, 2003 2002 2003 2002 Operating
Income $7.7 $7.0 $39.5 $17.2 Charges (Credits) Cost of sales -
products --- --- $9.5 --- Cost of sales - derivatives $--- $(14.1)
$21.0 $(10.7) Change in fair value of derivatives $--- $9.8 $(87.3)
$(13.3) Asset impairment --- --- $40.8 --- For the three- and
nine-month periods, charges and credits noted above are detailed as
follows: -- During the first quarter of 2003 cost of sales --
products 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 the third quarter of 2002 Pioneer
recorded a $14.1 million benefit in cost of sales related to
derivatives positions that had matured during that quarter and a
$9.8 million charge related to the change in the fair market value
of the remaining derivatives positions, while for the nine months
ended September 30, 2002, there was an estimated benefit from
matured derivatives of $10.7 million and a net unrealized gain of
$13.3 million from the change in the fair market value of remaining
derivatives positions. -- 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 third quarter of 2003, Pioneer
reported as other expense $0.1 million of currency exchange loss,
compared to $1.4 million of other income, primarily from a currency
exchange gain in the third quarter of 2002. For the nine months
ended September 30, 2003, Pioneer reported as other expense a
currency exchange loss of $4.5 million, while a slight gain was
recognized for the year-earlier period. At September 30, 2003,
Pioneer had liquidity of $19.2 million, which included cash of $4.6
million and available borrowings under Pioneer's revolving credit
facility of $14.6 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 September 30, 2003, 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 November 19, 2003, at
10:00 a.m. Central time in order to discuss its financial results
for the third quarter of 2003. Individuals who are interested in
listening to the teleconference may call (888) 313-7820 at that
time and request to listen to the Pioneer earnings teleconference.
A replay of this teleconference will be available from 1 pm
(Central time) on November 19, 2003, until 5 pm on November 21,
2003, by dialing (800) 633-8284, reservation #21166136. 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, 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 Nine Months
Ended September 30, September 30, 2003 2002 2003 2002 Revenues
$100,001 $86,579 $285,348 $232,619 Cost of sales - product (86,351)
(77,804) (251,714) (219,233) Cost of sales - derivatives --- 14,149
(20,999) 10,683 Total cost of sales (86,351) (63,655) (272,713)
(208,550) Gross profit 13,650 22,924 12,635 24,069 Selling, general
and administrative expenses (5,992) (5,599) (20,040) (16,828)
Change in fair value of derivatives --- (9,782) 87,271 13,266 Asset
impairment and other 24 (562) (40,372) (3,288) Operating income
7,682 6,981 39,494 17,219 Interest expense (4,582) (4,487) (14,185)
(14,070) Other income (expense), net (90) 1,435 (4,534) 533 Income
before income taxes 3,010 3,929 20,775 3,682 Income tax benefit
(expense) (1,057) (656) 2,602 2,799 Net income $1,953 $3,273
$23,377 $6,481 Net income per share: Basic $0.20 $0.33 $2.34 $0.65
Diluted $0.19 $0.33 $2.31 $0.65 Weighted average number of shares
outstanding: Basic 10,003 10,000 10,002 10,000 Diluted 10,145
10,070 10,126 10,000 PIONEER COMPANIES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited, in thousands) September 30, December 31,
2003 2002 Assets Current assets, excluding derivative asset $68,843
$62,862 Current derivative asset --- 17,834 Net property, plant and
equipment 191,940 242,269 Other assets 3,881 25,755 Non-current
derivative asset --- 41,362 Excess reorganization value over the
fair value of identifiable assets 84,064 84,064 Total assets
$348,728 $474,146 Liabilities and stockholders' equity Current
liabilities, excluding derivative liability 49,837 59,466 Current
derivative liability --- 37,614 Long-term debt, less current
portion 203,918 207,463 Non-current derivative liability ---
108,852 Other long-term liabilities 70,337 59,499 Total
stockholders' equity 24,636 1,252 Total liabilities and
stockholders' equity $348,728 $474,146 PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
Nine Months Ended September 30, 2003 2002 Operating activities: Net
income $23,377 $6,481 Adjustments to reconcile net income to net
cash flows from operating activities: Depreciation and amortization
16,051 18,737 Provision for (recovery of) losses on accounts
receivable 1,257 (653) Net change in deferred taxes (2,603) (2,683)
Change in fair value of derivatives (66,272) (13,266) Gain from
early extinguishment of debt (420) --- Gain on disposals of assets
--- (1,034) Asset impairment 40,818 --- Foreign exchange loss
(gain) 4,536 (6) Net effect of changes in operating assets and
liabilities 991 (5,079) Net cash flows from operating activities
17,735 2,497 Investing activities: Capital expenditures (6,179)
(4,965) Proceeds received from disposals of assets --- 2,047 Net
cash flows from investing activities (6,179) (2,918) Financing
activities: Net proceeds (payments) under revolving credit
arrangements (1,918) 4,047 Payments on debt (8,418) (1,488)
Proceeds from issuance of stock 7 --- Net cash flows from financing
activities (10,329) 2,559 Effect of exchange rate changes on cash
566 249 Net change in cash and cash equivalents 1,793 2,387 Cash
and cash equivalents at beginning of period 2,789 3,624 Cash and
cash equivalents at end of period $4,582 $6,011 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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