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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 SEPTEMBER 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 November 1, 2000, there were outstanding 10,678,898 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>
PART I -- FINANCIAL INFORMATION
Page
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -- Three Months Ended September 30, 2000
and 1999 and Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 2000 5
and 1999
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 11
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,022 $ 5,510
Accounts receivable, less allowance for doubtful accounts of $1,335 at
September 30, 2000 and $2,739 at December 31, 1999 48,492 50,185
Inventories 25,144 23,130
Prepaid expenses 6,342 7,468
------------ ------------
Total current assets 85,000 86,293
Property, plant and equipment:
Land 10,622 10,622
Buildings and improvements 61,248 63,949
Machinery and equipment 341,069 338,851
Construction in progress 17,003 19,434
------------ ------------
429,942 432,856
Less accumulated depreciation (126,827) (107,315)
------------ ------------
303,115 325,541
Other assets, net of accumulated amortization of $10,765 at September 30, 2000
and $12,052 at December 31, 1999 80,785 76,308
Excess cost over fair value of net assets acquired, net of accumulated
amortization of $37,754 at September 30, 2000 and $32,526 at
December 31, 1999 181,750 192,464
------------ ------------
Total assets $ 650,650 $ 680,606
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable $ 32,725 $ 30,443
Accrued liabilities 39,215 34,517
Current portion of long-term debt 7,109 10,626
------------ ------------
Total current liabilities 79,049 75,586
Long-term debt, less current portion 593,864 594,723
Accrued pension and other employee benefits 15,270 15,091
Other long-term liabilities 12,470 16,408
Commitments and contingencies (see Note 4)
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: 10,679 at September 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 September 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 (110,812) (81,993)
------------ ------------
Total stockholders' equity (deficiency in assets) (55,503) (26,702)
------------ ------------
Total liabilities and stockholders' equity (deficiency in assets) $ 650,650 $ 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 87,363 $ 74,872 $ 260,824 $ 214,851
Cost of sales 83,840 75,014 233,903 202,714
---------- ---------- ---------- ----------
Gross profit (loss) 3,523 (142) 26,921 12,137
Selling, general and administrative expenses 9,766 12,457 33,164 34,590
---------- ---------- ---------- ----------
Operating loss (6,243) (12,599) (6,243) (22,453)
Interest expense, net (14,922) (13,194) (41,725) (38,190)
Other income (expense), net (38) 2,592 3,902 1,642
---------- ---------- ---------- ----------
Loss before taxes (21,203) (23,201) (44,066) (59,001)
Income tax benefit (7,845) (8,634) (15,247) (20,053)
---------- ---------- ---------- ----------
Net loss $ (13,358) $ (14,567) $ (28,819) $ (38,948)
========== ========== ========== ==========
Per Share Information:
Basic and diluted $ (1.16) $ (1.27) $ (2.50) $ (3.38)
Weighted average number of common shares outstanding:
Basic and diluted 11,538 11,515 11,534 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>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Operating activities:
Net loss $ (28,819) $ (38,948)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization 38,111 39,786
Net change in deferred taxes (14,841) (19,787)
Reduction in post-retirement medical expense -- (12,530)
Loss (gain) on disposals of assets (2,258) 1,061
Loss (gain) from foreign exchange rate fluctuations 768 (769)
Net effect of changes in operating assets and liabilities 14,829 4,775
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Net cash flows from operating activities 7,790 (26,412)
---------- ----------
Investing activities:
Capital expenditures (12,746) (23,513)
Net proceeds received from disposals of assets 2,878 1,145
---------- ----------
Net cash flows from investing activities (9,868) (22,368)
---------- ----------
Financing activities:
Net proceeds under revolving credit arrangements 4,997 3,315
Repayments on long-term debt (1,855) (2,004)
Issuance of common stock 18 129
---------- ----------
Net cash flows from financing activities 3,160 1,440
---------- ----------
Effect of exchange rate changes on cash (1,570) 1,148
---------- ----------
Net decrease in cash (488) (46,192)
Cash at beginning of period 5,510 53,822
---------- ----------
Cash at end of period $ 5,022 $ 7,630
========== ==========
</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 September 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 nine 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 accounting principles generally accepted in
the United States of America, 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>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
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<S> <C> <C>
Accounts receivable $ 1,866 $ 2,801
Inventories (2,138) 316
Prepaid expenses 1,046 197
Other assets 5,092 (2,717)
Accounts payable 5,214 478
Accrued liabilities 8,575 5,152
Other long-term liabilities (4,826) (1,452)
---------- ----------
Net change in operating assets and liabilities $ 14,829 $ 4,775
========== ==========
</TABLE>
Following are supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash payments for:
Interest $ 35,438 $ 30,686
Income taxes 11 178
</TABLE>
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3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
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<S> <C> <C>
Raw materials, supplies and parts $ 14,118 $ 16,822
Finished goods and work-in-process 8,165 5,350
Inventories under exchange agreements 2,861 958
------------ ------------
$ 25,144 $ 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.
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.
The Company relies on indemnification from certain of the previous owners
of acquired businesses 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 agreements 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.
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.
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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.
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss $ (13,358) $ (14,567) $ (28,819) $ (38,948)
========== ========== ========== ==========
Earnings per Share - Basic and Diluted:
Weighted average number of common shares outstanding 11,538 11,515 11,534 11,513
---------- ---------- ---------- ----------
Net loss per share $ (1.16) $ (1.27) $ (2.50) $ (3.38)
========== ========== ========== ==========
</TABLE>
6. DISPOSITION OF COAGULANT CHEMICALS BUSINESS
On August 21, 2000, the Company sold its coagulant business and transferred
to the buyer fixed assets, including plants in Spokane, Washington and Savannah,
Georgia, certain technology-related assets and liabilities associated with the
Spokane operations, and all assets and liabilities of the Savannah operations,
including $1.9 million of cash and notes payable of $8.0 million. The Company
received cash of $0.9 million as payment for Spokane. This transaction did not
have a material impact on the Company's statements of operations or cash flows.
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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Revenues. Revenues increased by $12.5 million or approximately 17% to $87.4
million for the three months ended September 30, 2000, as compared to the three
months ended September 30, 1999. The increase in revenues was primarily
attributable to higher electrochemical unit ("ECU") prices. ECU prices were
approximately 45% higher during the third quarter of 2000 versus the third
quarter of 1999.
Cost of Sales. Cost of sales increased $8.8 million or approximately 12%
for the three months ended September 30, 2000, as compared to the same period in
1999, principally due to an $8.9 million increase in power costs.
Gross Profit (Loss). During the third quarter of 2000, gross profit
increased by $3.7 million as a result of higher ECU sales prices, partially
offset by the cost of sales increase discussed above. Gross profit margin for
the third quarter of 2000 was 4%, as compared to a small negative margin in the
same period of 1999.
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Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $2.7 million for the three months ended
September 30, 2000, primarily as a result of overhead expense reductions and
lower amortization costs.
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 (Expense), Net. Other income (expense), net for the quarter
ended September 30, 2000 was $2.6 million less than the year-ago period. This
reduction was primarily due to one-time refunds and credits received in the
third quarter of 1999.
Net Loss. Due to the factors described above, net loss for the three months
ended September 30, 2000 was $13.4 million, compared to a net loss of $14.6
million for the same period in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Revenues. Revenues increased by $46.0 million, or approximately 21%, to
$260.8 million for the nine months ended September 30, 2000, as compared to the
nine months ended September 30, 1999. ECU prices were approximately 35% higher
during the first nine months of 2000 versus the same period in 1999. Sales
volumes during the first nine months of 2000 were also higher than the same
period in 1999.
Cost of Sales. Cost of sales increased $31.2 million, or approximately 15%,
for the nine months ended September 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 a $15.9 million increase in power costs and
greater sales volume.
Gross Profit (Loss). Gross profit increased $14.8 million, resulting in a
gross profit margin of 10% in 2000 compared to 6% in 1999, primarily as a result
of the ECU pricing increase, partially offset by the cost of sales increase
discussed above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $1.4 million, or approximately 4%, for the
nine months ended September 30, 2000. Decreases related to overhead expense
reductions were partially offset by an increase of $1.6 million due to the
absence of the modification of the Company's retiree health care benefits
referred to above.
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 (Expense), Net. Other income (expense), net increased from
$1.6 million for the nine months ended September 30, 1999 to $3.9 million for
the nine months ended September 30, 2000. The 2000 amount was primarily the
result of 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 nine
months ended September 30, 2000 of $28.8 million, decreased from a net loss of
$38.9 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 September 30, 2000 of $45.6 million was subject to a
reserve of $5.0 million until the Company's ratio of earnings before interest,
taxes, depreciation and amortization ("EBITDA") to fixed charges, as defined,
exceeds 1.15:1 for a period of two consecutive quarters unless Congress
Financial Corporation (Southwest) waives this provision. As of September 30,
2000, there were letters of credit outstanding of $3.7 million and loans
outstanding of $26.2 million.
Financial Leverage and Covenants. As of September 30, 2000, the Company had
$601.0 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
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scheduled payments each year. The degree to which the Company is indebted could
have important consequences including, but not limited to:
o limitations on the ability to obtain additional financing in the
future for working capital, capital expenditures, general corporate
purposes and other purposes, if needed;
o 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
o 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 September 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 $54.0 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. However, if cash flows from higher prices do not
materialize as anticipated, or sales volumes decrease significantly, or power
costs significantly increase from current levels, additional liquidity is likely
to be required. There can be no assurances that the Company would be successful
in acquiring such liquidity.
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 From Operating Activities. During the first nine months of
2000, the Company had cash flow of $7.8 million from operating activities,
primarily attributable to normal operations.
Net Cash Flows Used in Investing Activities. Cash used in investing
activities during the first nine months of 2000 totaled $9.9 million for capital
expenditures related to property, plant and equipment, partially offset by
proceeds received from asset disposals.
Net Cash Flows Provided by Financing Activities. Financing activities
during the first nine months of 2000 generated approximately $3.2 million,
primarily from net borrowings under the Revolving Facility of $5.0 million,
partially offset by scheduled payments on long-term debt.
Working Capital. Working capital decreased $4.7 million to $6.0 million at
September 30, 2000 from $10.7 million at December 31, 1999. This decrease was
primarily due to a $4.7 million increase in accrued liabilities due to the
timing of interest payments and the reclassification to Current Portion of
Long-Term Debt of a $4.5 million note due July 31, 2001
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associated with the purchase of a portion of the Company's downstream bleach
operations in 1996. Partially offsetting the aforementioned changes was an $8.0
million reduction in current portion of long-term debt due to the disposition of
the coagulant chemical businesses discussed in Note 6 of Notes to Consolidated
Financial Statements.
ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and in June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". SFAS No. 133 and SFAS No. 138 establish accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
is required to adopt the provisions of SFAS No. 133 and SFAS No. 138 on January
1, 2001. Management does not believe the adoption of SFAS No. 133 and SFAS No.
138 will have a material effect on the Company's financial position or results
of operations.
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 nine months ended September 30, 2000.
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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 September 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.
November 8, 2000 By: /s/ Philip J. Ablove
--------------------
Philip J. Ablove
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
