<PAGE> 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 JUNE 30, 2000
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 1-9859
PIONEER COMPANIES, INC.
(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.)
700 LOUISIANA STREET, SUITE 4300, 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
On August 1, 2000, there were outstanding 10,736,809 shares of the
Company's Class A Common Stock and 858,830 shares of Class B Common Stock.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--June 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations--Three Months Ended June 30, 2000 and 1999 and
Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows--Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
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. Actual outcomes may
vary materially.
2
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PART I--FINANCIAL INFORMATION
PIONEER COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10, 433 $ 5,510
Accounts receivable, less allowance for doubtful accounts of $2,662 at
June 30, 2000 and $2,739 at December 31, 1999 51,232 50,185
Inventories 25,391 23,130
Prepaid expenses 6,512 7,468
--------- ---------
Total current assets 93,568 86,293
Property, plant and equipment:
Land 10,622 10,622
Buildings and improvements 64,163 63,949
Machinery and equipment 347,953 338,851
Construction in progress 15,999 19,434
--------- ---------
438,737 432,856
Less accumulated depreciation (124,490) (107,315)
--------- ---------
314,247 325,541
Other assets, net of accumulated amortization of $14,882 at June 30, 2000
and $12,302 at December 31, 1999 77,012 76,308
Excess cost over fair value of net assets acquired, net of accumulated
amortization of $37,150 at June 30, 2000 and $32,526 at December 31, 1999 187,845 192,464
--------- ---------
Total assets $ 672,672 $ 680,606
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable $ 27,001 $ 30,443
Accrued liabilities 35,354 34,517
Current portion of long-term debt 10,626 10,626
--------- ---------
Total current liabilities 72,981 75,586
Long-term debt, less current portion 606,688 594,723
Accrued pension and other employee benefits 15,786 15,091
Other long-term liabilities 13,861 16,408
Commitments and contingencies
Redeemable preferred stock: $.01 par value, authorized 10,000 shares,
55 issued and outstanding 5,500 5,500
Stockholders' equity (deficiency in assets):
Common stock:
Class A, $.01 par value, authorized 46,000 shares, issued and
outstanding: 10,737 at June 30, 2000 and 10,656 at December 31, 1999 107 106
Class B, $.01 par value, authorized 4,000 shares, issued and outstanding:
859 at June 30, 2000 and December 31, 1999, convertible
share-for-share into Class A shares 9 9
Additional paid-in capital 55,193 55,176
Retained deficit (97,453) (81,993)
--------- ---------
Total stockholders' equity (deficiency in assets) (42,144) (26,702)
--------- ---------
Total liabilities and stockholders' equity (deficiency in assets) $ 672,672 $ 680,606
========= =========
</TABLE>
See notes to consolidated financial statements.
3
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PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ------------------------
2000 1999 2000 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 89,157 $ 69,030 $ 173,461 $ 139,979
Cost of sales 77,095 71,430 150,063 127,700
-------- -------- --------- ---------
Gross profit (loss) 12,062 (2,400) 23,398 12,279
Selling, general and administrative expenses 11,341 12,222 22,612 22,133
Unusual items (86) -- 786 1,017
-------- -------- --------- ---------
Operating income (loss) 807 (14,622) -- (10,871)
Interest expense, net (13,311) (12,671) (26,803) (24,996)
Other income, net 3,812 46 3,940 67
-------- -------- --------- ---------
Loss before taxes (8,692) (27,247) (22,863) (35,800)
Income tax provision (benefit) (2,817) (8,899) (7,402) (11,419)
-------- -------- --------- ---------
Net loss $ (5,875) $(18,348) $ (15,461) $ (24,381)
======== ======== ========= =========
Per Share Information:
Basic $ (0.51) $ (1.59) $ (1.34) $ (2.12)
Diluted $ (0.51) $ (1.59) $ (1.34) $ (2.12)
Weighted average number of common shares outstanding:
Basic 11,538 11,515 11,533 11,513
Diluted 11,538 11,515 11,533 11,513
</TABLE>
See notes to consolidated financial statements.
4
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PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net loss $(15,461) $(24,381)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 25,460 26,576
Net change in deferred taxes (7,320) (11,782)
Reduction in post-retirement medical expense -- (12,530)
Loss (gain) on disposals of assets (2,516) 1,061
Loss (gain) from foreign exchange rate change fluctuations 417 (769)
Net effect of changes in operating assets and liabilities (2,291) (2,989)
-------- --------
Net cash flows used in operating activities (1,711) (24,814)
-------- --------
Investing activities:
Capital expenditures (8,420) (16,704)
Proceeds received from disposals of assets 3,896 1,145
-------- --------
Net cash flows used in investing activities (4,524) (15,559)
-------- --------
Financing activities:
Net proceeds under revolving credit arrangements 13,185 --
Repayments on long-term debt (1,220) (1,334)
Issuance of common stock 18 129
-------- --------
Net cash flows provided by (used in) financing activities 11,983 (1,205)
-------- --------
Effect of exchange rate changes on cash (825) 1,122
-------- --------
Net increase (decrease) in cash 4,923 (40,456)
Cash at beginning of period 5,510 53,822
-------- --------
Cash at end of period $ 10,433 $ 13,366
======== ========
</TABLE>
See notes to consolidated financial statements.
5
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PIONEER COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet at June 30, 2000 and the consolidated
statements of operations and cash flows for the 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 six months of 2000 are not necessarily indicative of results to be
expected for the year ending December 31, 2000. The consolidated financial
statements include the accounts of Pioneer Companies, Inc. ("PCI") and its
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 consolidated financial
statements are stated in thousands of dollars unless otherwise indicated.
The consolidated balance sheet at December 31, 1999 is derived from the
December 31, 1999 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, 1999.
Net loss per common share is computed using the weighted average number
of common shares outstanding during the period. Per share information for 1999
has been computed after giving retroactive effect to a 7% stock dividend on
Class A and Class B Common Stock to stockholders of record in December 1999.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effect of changes in operating assets and liabilities are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Accounts receivable $ (1,290) $ 5,836
Inventories (2,292) (2,036)
Prepaid expenses 515 901
Other assets 6,545 (488)
Accounts payable (3,054) (598)
Accrued liabilities 1,140 (6,251)
Other long-term liabilities (3,855) (353)
--------- --------
Net change in operating assets and liabilities $ (2,291) $ (2,989)
========= ========
</TABLE>
Following are supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
2000 1999
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<S> <C> <C>
Cash payments for:
Interest $ 28,177 $ 26,067
Income taxes 11 168
</TABLE>
6
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3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
Raw materials, supplies and parts $15,677 $16,822
Finished goods and work-in-process 6,871 5,350
Inventories under exchange agreements 2,843 958
------- -------
$25,391 $23,130
======= =======
</TABLE>
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 certain
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 certain of the previous
owners of acquired business in connection with certain environmental liabilities
at certain of its chlor-alkali plants and other facilities. There can be no
assurance, however, that such indemnification arrangements 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. EARNINGS PER SHARE
Computational amounts for earnings per share are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss $ (5,875) $ (18,348) $ (15,461) $ (24,381)
========= ========== =========== ==========
Basic Earnings per Share:
Weighted average number of common shares
outstanding
11,538 11,515 11,533 11,513
========= ========== =========== ==========
Net loss per share $ (0.51) $ (1.59) $ (1.34) $ (2.12)
========= ========== =========== ==========
Diluted Earnings per Share:
Weighted average number of common shares
outstanding
11,538 11,515 11,533 11,513
========= ========== =========== ==========
Net loss per share $ (0.51) $ (1.59) $ (1.34) $ (2.12)
========= ========== =========== ==========
</TABLE>
7
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6. OTHER LONG-TERM LIABILITIES -- ENVIRONMENTAL
The Company's operations are subject to extensive environmental laws
and regulations related to protection of the environment, including those
applicable to waste management, discharge of materials into the air and water,
clean-up liability from historical waste disposal practices, and employee health
and safety. At several of the Company's facilities, investigations or
remediation is underway, and at some of these locations regulatory agencies are
considering whether additional actions are necessary to protect or remediate
surface or groundwater resources. The Company could be required to incur
additional costs to construct and operate remediation systems in the future.
In connection with the 1995 transaction pursuant to which the Company
acquired all of the outstanding common stock and other equity interests of an
acquired company from the holders of those interests (the "Sellers"), the
Sellers agreed to indemnify the Company and its affiliates for certain
environmental remediation obligations, arising prior to the closing date from or
relating to certain plant sites or arising before or after the closing date with
respect to certain environmental liabilities relating to certain properties and
interests held by the Company for the benefit of the Sellers (the "Contingent
Payment Properties"). Amounts payable in respect of such liabilities would
generally be payable as follows: (i) out of certain reserves established on the
Company's balance sheet at December 31, 1994; (ii) either by offset against the
amounts payable under the $11.5 million in notes payable by the Company to the
Sellers or from amounts held in an account (the "Contingent Payment Account")
established for the deposit of proceeds from the Contingent Payment Properties;
and (iii) in certain circumstances and subject to specified limitations, out of
the personal assets of the Sellers. To the extent that liabilities exceed
proceeds from the Contingent Payment Properties, the Company would be limited,
for a ten-year period, principally to its rights of offset against the Seller's
notes to cover such liabilities.
During June 2000, the Company and the Sellers effected an agreement,
pursuant to which the Company, in exchange for cash and other consideration,
relieved the Sellers from their environmental indemnity obligations and agreed
to transfer to the Sellers the record title to the Contingent Payment Properties
and the $800,000 remaining cash balance in the Contingent Payment Account that
was determined to be in excess of anticipated environmental liability. The cash
balance in the Contingent Payment Account at the time of this transaction was
$6.1 million. This cash balance was not previously reflected on the Company's
balance sheet since a right of setoff existed.
As part of this transaction, a third-party environmental analysis was
performed on all of the Company's sites subject to the indemnity. The Company
then adjusted the remediation reserve on its balance sheet to the discounted
future cash flows for estimated environmental remediation. As a result of the
above transaction and the new environmental analysis, the Company reported a
pre-tax gain of $1.8 million during the second quarter of 2000 which is
reflected as a reduction of cost of sales.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and the related notes thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues. Revenues increased by $20.1 million or approximately 29% to
$89.2 million for the three months ended June 30, 2000, as compared to the three
months ended June 30, 1999. The increase in revenues was primarily attributable
to higher electrochemical unit ("ECU") prices. ECU prices were approximately 39%
higher during the second quarter of 2000 versus the second quarter of 1999.
Cost of Sales. Cost of sales increased $5.7 million or approximately
8%, for the three months ended June 30, 2000, as compared to the same period in
1999, principally due to a $5.2 million increase in power costs and an increase
in sales volume. This increase was partially offset by a $1.8 million reduction
in environmental remediation expense in connection with the environmental
analysis conducted during the quarter.
Gross Profit (Loss). During the second quarter of 2000, gross profit
increased by $14.5 million as a result of higher ECU sales prices, partially
offset by the cost of sales increase discussed above. Gross profit margin for
the second quarter of 2000 was 14%, as compared to a negative margin of 3% in
the same period of 1999.
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $0.9 million, or approximately 7%, for the
three months ended June 30, 2000, primarily as a result of overhead expense
reductions.
Interest Expense, Net. Interest expense, net increased in 2000,
primarily as a result of interest incurred on revolving credit balances and
higher variable interest rates in 2000 as compared to 1999.
Other Income, Net. Other income, net for the quarter ended June 30,
2000 was $3.8 million, which consisted primarily of a $3.3 million gain from the
sale of certain excess property.
Net Loss. Due to the factors described above, net loss for the three
months ended June 30, 2000 was $5.9 million, compared to a net loss of $18.3
million for the same period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenues. Revenues increased by $33.5 million or approximately 24% to
$173.5 million for the six months ended June 30, 2000, as compared to the six
months ended June 30, 1999. ECU prices were approximately 30% higher during the
first half of 2000 versus the same period in 1999.
Cost of Sales. Cost of sales increased $22.4 million or approximately
18%, for the six months ended June 30, 2000, as compared to the same period in
1999. $10.9 million of this increase was due to the absence of the gain
resulting from the modification of the Company's retiree health care benefits
that occurred during the first quarter of 1999. The remaining increase in cost
of sales was principally due to higher power costs and greater sales volume
partially offset by the reduction in environmental remediation expense during
the three months ended June 30, 2000.
Gross Profit (Loss). Gross profit increased $11.1 million for a gross
margin of 13% in 2000 compared to 9% in 1999, primarily as a result of the ECU
pricing increase, partially offset by the cost of sales increase discussed
above.
Unusual Charges. Unusual charges for the six months ended June 30, 2000
included a $0.9 million loss related to the disposition of the Company's alum
coagulant business at Antioch, California. Unusual charges in 1999 were
primarily due to a loss of $1.0 million resulting from the sale of the Company's
iron chlorides business in the first quarter of 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.5 million, or approximately 2%, for the
six months ended June 30, 2000. An increase of $1.6 million was due to the
absence of the modification of the Company's retiree health care benefits
referred to above, offset by decreases related to overhead expense reductions.
Interest Expense, Net. Interest expense, net increased in 2000,
primarily as a result of interest incurred on revolving credit balances and
higher variable interest rates in 2000 as compared to 1999.
Other Income, Net. Other income, net increased from an expense of $0.1
million for the six months ended June 30, 1999 to income of $3.9 million for the
six months ended June 30, 2000. The 2000 amount was primarily a $3.3 million
gain from the sale of certain excess property.
Net Loss. Due to the factors described above, the net loss for the six
months ended June 30, 2000 of $15.5 million, decreased from a net loss of $24.4
million for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Revolving Facility. In September 1999, the Company entered into a $50.0
million three-year revolving credit facility with Congress Financial Corporation
(Southwest) (the "Revolving Facility") that replaced an existing $50.0 million
revolving credit facility. The Revolving Facility provides for revolving loans
in an aggregate amount up to $50.0 million, subject to borrowing base
limitations related to the level of accounts receivable and inventory, which,
together with certain other collateral, secure borrowings under the facility.
The total borrowing base at June 30, 2000 of $49.0 million was subject to a
reserve of $5.0 million until the Company's ratio of interest to fixed charges,
as defined, exceeds 1.15:1 for a period of two consecutive quarters unless
Southwest waives this provision. As of June 30, 2000, there were letters of
credit outstanding of $3.7 million and loans outstanding of $34.3 million.
Financial Leverage and Covenants. As of June 30, 2000, the Company had
$617.3 million of long-term debt outstanding. While the majority of the
Company's debt is due in 2006 and 2007, the Company is required to make certain
scheduled payments each year. The degree to which the Company is indebted could
have important consequences including, but not
9
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limited to: (i) limitations on the ability to obtain additional financing in the
future for working capital, capital expenditures, general corporate purposes and
other purposes, if needed; (ii) the allocation of a substantial portion of cash
flow from operations to cover cash interest requirements, thereby limiting the
funds available for operations and any future business opportunities; and (iii)
increasing the Company's vulnerability to a downturn in its business or the
economy.
Pioneer's cash requirements include payments of interest on the notes
issued in connection with the acquisition of Pioneer Corporation of America
("PCA") and its subsidiaries as they existed on April 20, 1995, the date they
were acquired by the Company. PCA is restricted in paying dividends to the
Company or funding cash to unrestricted subsidiaries, as defined, to the sum of
$5.0 million plus 50% of the cumulative consolidated net income of PCA since
June 1997. As of June 30, 2000, no distributions were allowable under this
covenant. However, the Company believes that the existing cash balances of
Pioneer and its unrestricted subsidiaries will be sufficient to fund future
required interest payments and other cash requirements until such time that
PCA's cumulative consolidated net income is positive.
PCA's ability to incur additional indebtedness is, with certain
exceptions, restricted by a debt covenant requiring a minimum interest coverage
ratio (as defined) of at least 2.0 to 1.0 for the prior four fiscal quarters.
Currently, PCA is unable to incur more than $10 million of additional
indebtedness as a result of this covenant, other than borrowings available under
the Revolving Facility. The Company's debt agreements contain other restrictions
on PCA's subsidiaries, including limitations on the acquisition or disposition
of assets or operations.
Annualized cash interest of approximately $54.6 million is payable on
the Company's long-term debt. The Company believes that existing cash balances,
cash flow from current and anticipated future levels of operations, asset
dispositions and the availability under the Revolving Facility should be
adequate to make the required payments of principal and interest on outstanding
indebtedness, as well as to fund its future capital expenditures and working
capital requirements.
Foreign Operations and Exchange Rate Fluctuations. The Company has
operating activities in Canada and engages in export sales to various countries.
International operations and exports to foreign markets are subject to a number
of risks, including currency exchange rate fluctuations, trade barriers,
exchange controls, political risks and risks of increases in duties, taxes and
governmental royalties, as well as changes in laws and policies governing
foreign-based companies. In addition, earnings of foreign subsidiaries and
intracompany payments are subject to foreign taxation rules.
A portion of the Company's sales and expenditures are denominated in
Canadian dollars, and accordingly, the Company's results of operations and cash
flows may be affected by fluctuations in the exchange rate between the United
States dollar and the Canadian dollar. Currently, the Company is not engaged in
forward foreign exchange contracts, but may enter into such hedging activities
in the future.
Net Cash Flows Used in Operating Activities. During the first six
months of 2000, the Company had a negative cash flow of $1.7 million from
operating activities, primarily attributable to the net loss for the period.
Net Cash Flows Used in Investing Activities. Cash used in investing
activities during the first six months of 2000 totaled $4.5 million for capital
expenditures related to property, plant and equipment, partially offset by
proceeds received from asset disposals.
Net Cash Flows Used in Financing Activities. Financing activities
during the first six months of 2000 generated approximately $12.0 million,
primarily from net borrowings under the Revolving Facility of $13.2 million,
partially offset by scheduled payments on long-term debt.
Working Capital. Working capital increased $9.9 million to $20.6
million at June 30, 2000 from $10.7 million at December 31, 1999. This increase
was primarily due to a $4.9 million increase in cash and cash equivalents along
with a decrease in accounts payable caused by the timing of vendor payments.
YEAR 2000 ISSUES
The year 2000 did not have any impact on the processing of
date-sensitive data by the Company's computerized information systems. The
cumulative costs incurred by the Company through March 31, 2000 for year 2000
conversion tasks did not exceed $1.0 million, and were expensed as incurred
unless new software was purchased, in which case certain costs were capitalized.
ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting
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and reporting standards for derivative instruments and for hedging activities.
The Company is required to adopt the provisions of SFAS No. 133 in the first
quarter of 2001. Management does not believe the adoption of SFAS No. 133 will
have a material effect on the Company's financial position or results of
operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk disclosures set forth in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 have not changed
significantly through the six months ended June 30, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the stockholders of the Company was held on May
25, 2000. At the meeting, William R. Berkley and Michael J. Ferris were
re-elected as directors of the Company, with terms of office ending at the
annual meeting of stockholders to be held in 2002. A total of 8,873,857 and
8,874,873 shares, respectively, were voted in favor of the election of Messrs.
Berkley and Ferris.
The stockholders also ratified the selection of Deloitte & Touche LLP
as independent certified public accountants to audit the financial statements of
the Company and its subsidiaries for the fiscal year ending December 31, 2000. A
total of 8,874,511 shares were voted in favor of ratification and 8,973 shares
were voted against ratification.
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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 June 30, 2000.
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 COMPANIES, INC.
August 11, 2000 By: /s/ Philip J. Ablove
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Philip J. Ablove
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
