<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 1996
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 no. 33-98828
PIONEER AMERICAS ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1420850
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4200 NATIONSBANK CENTER
700 LOUISIANA, HOUSTON, TEXAS 77002
(Address of principal executive offices)
(Zip Code)
713-225-3831
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
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:
Number of Common Shares outstanding at October 11, 1996: 1,000. All of such
shares are owned by Pioneer Companies, Inc.
<PAGE> 2
Under Item 5 of its Form 10-Q for the quarter ended June 30, 1996,
Pioneer Americas Acquisition Corp. ("Pioneer") reported the acquisition of
T.C. Products, Inc., a New Mexico corporation. Pioneer stated that at the time
of such filing it was impractical to provide the required financial statements
of T.C. Products, Inc., the business acquired.
Pioneer is amending Item 5 of its Form 10-Q for the quarter ended June
30, 1996, to include such required financial statements.
ITEM 5. Other Information.
Effective June 30, 1996, All-Pure Chemical Co. ("All-Pure"), an
indirect wholly-owned subsidiary of Pioneer, acquired T.C. Products, Inc. ("T.C.
Products" or the "Company") through the acquisition of its parent, T.C.
Holdings, Inc., from trusts formed by Albert J. Clerc and Richard L. Belveal.
Consideration for the acquisition consisted of net cash payments of $5,458,835
and All-Pure subordinated notes with an aggregate principal amount of
$4,500,000. The Company's existing cash balances were used to fund the cash
portion of the purchase price.
T.C. Products is the sole operating asset of T.C. Holdings, Inc.
Following the acquisition T.C. Products continues to manufacture and package
bleach and related products at its plant in Tacoma, Washington. Mr. Clerc has
agreed to continue as an officer of T.C. Products for a period of up to one
year following the acquisition; both he and Mr. Belveal have also agreed not to
compete with T.C. Products for a period of three years following the
acquisition.
Following are the required financial statements of T.C. Products, the
business acquired, consisting of (i) balance sheets as of September 24, 1995
and September 25, 1995, and the related statements of operations and retained
earnings, and of cash flows for each of the three years in the period ended
September 24, 1995, and related notes thereto, together with the independent
auditors' report of Deloitte & Touche LLP with respect thereto, (ii) unaudited
balance sheet as of June 30, 1996 and related statements of operations and of
cash flows for each of the nine-month periods ended June 30, 1996 and June 30,
1995, and related notes thereto, and (iii) pro forma financial statements and
related notes thereto.
-2-
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
T.C. Products, Inc.:
We have audited the accompanying balance sheets of T.C. Products, Inc. (the
"Company") as of September 24, 1995 and September 25, 1994, and the related
statements of operations and retained earnings, and of cash flows for each of
the three years in the period ended September 24, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 24, 1995 and
September 25, 1994, and the results of its operations and its cash flows for
each of the three years in the period ended September 24, 1995 in conformity
with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
August 2, 1996
-3-
<PAGE> 4
T.C. PRODUCTS, INC.
BALANCE SHEETS,
SEPTEMBER 24, 1995 AND SEPTEMBER 25, 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 102,630 $ 183,550
Accounts receivable 622,987 586,833
Inventories 569,471 561,985
Prepaid expenses and other 34,792 77,558
----------- -----------
Total current assets 1,329,880 1,409,926
PROPERTY, PLANT AND EQUIPMENT:
Land 900,000
Building 2,450,283 529,463
Machinery and equipment 2,152,204 1,480,237
Construction in progress 183,815 200,284
----------- -----------
5,686,302 2,209,984
Accumulated depreciation (1,252,115) (916,822)
----------- -----------
Total property, plant and equipment 4,434,187 1,293,162
----------- -----------
TOTAL $ 5,764,067 $ 2,703,088
=========== ===========
</TABLE>
See notes to financial statements.
-4-
<PAGE> 5
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 374,970 $ 417,087
Accrued liabilities 261,240 335,960
Federal income taxes payable to Parent Company 298,334
Current portion of long-term debt 150,000 150,000
---------- ----------
Total current liabilities 1,084,544 903,047
OTHER LIABILITY 74,227
LONG-TERM DEBT 2,795,489 531,001
NOTE PAYABLE TO PARENT COMPANY 208,696 550,932
STOCKHOLDER'S EQUITY:
Common stock, $1 par value - Authorized 1,000,000 shares;
issued and outstanding 300,000 shares 437,357 437,357
Retained earnings 1,163,754 280,751
---------- ----------
Total stockholder's equity 1,601,111 718,108
---------- ----------
TOTAL $5,764,067 $2,703,088
========== ==========
</TABLE>
See notes to financial statements.
-5-
<PAGE> 6
T.C. PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 24, 1995,
SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES $ 8,423,600 $ 6,202,510 $ 4,202,165
COST OF GOODS SOLD 5,395,389 3,896,461 2,766,822
----------- ----------- -----------
Gross profit 3,028,211 2,306,049 1,435,343
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,546,427 2,015,196 1,165,379
----------- ----------- -----------
INCOME FROM OPERATIONS 1,481,784 290,853 269,964
OTHER INCOME (EXPENSE):
Interest expense (200,696) (92,930) (121,326)
Interest income 68,798 3,458 1,780
Other (753) (1,359) 2,127
----------- ----------- -----------
Total other expense, net 132,651 90,831 117,419
----------- ----------- -----------
INCOME BEFORE PROVISION FOR FEDERAL
INCOME TAXES 1,349,133 200,022 152,545
PROVISION FOR FEDERAL INCOME TAXES 466,130 68,401 52,045
----------- ----------- -----------
NET INCOME 883,003 131,621 100,500
RETAINED EARNINGS:
Beginning of year 280,751 149,130 48,630
----------- ----------- -----------
End of year $ 1,163,754 $ 280,751 $ 149,130
=========== =========== ===========
</TABLE>
See notes to financial statements.
-6-
<PAGE> 7
T.C. PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 24, 1995,
SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 883,003 $ 131,621 $ 100,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 456,199 484,178 320,500
Cash provided (used) by changes in operating
assets and liabilities:
Accounts receivable (36,154) (132,260) (114,852)
Inventory (7,486) (144,329) (76,817)
Prepaid expenses and other 42,766 (35,073) (3,149)
Accounts payable (42,117) 57,769 (34,953)
Accrued expenses 297,841 224,786 27,337
----------- ----------- -----------
Net cash provided by operating activities 1,594,052 586,692 218,566
INVESTING ACTIVITIES - Purchase of property,
plant and equipment (3,597,224) (302,327) (415,025)
FINANCING ACTIVITIES:
Repayments of notes payable to Parent Company, net (342,236) (48,004) (595,567)
Repayments of notes payable (135,512) (68,999)
Proceeds from notes payable 2,400,000 750,000
----------- ----------- -----------
Net cash provided (used) by financing activities 1,922,252 (117,003) 154,433
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (80,920) 167,362 (42,026)
CASH:
Beginning of year 183,550 16,188 58,214
----------- ----------- -----------
End of year $ 102,630 $ 183,550 $ 16,188
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid during the year for interest $ 204,880 $ 181,508 $ 5,814
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTMENT ACTIVITIES - Contribution of
property, plant and equipment by Parent Company 137,357
</TABLE>
See notes to financial statements.
-7-
<PAGE> 8
T.C. PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS SEPTEMBER 24, 1995,
SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T.C. Products, Inc. (the "Company") is a wholly-owned subsidiary of
Western States Chemical Supply Corp. ("Parent Company"). The Company
manufactures household chemicals, primarily bleach, fabric softener, and
ammonia for a number of different distributors under private brand
labels.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Fiscal Year - The Company operates within a conventional 52/53 week
accounting fiscal year. The Company's fiscal year ends on the Sunday
closest to September 30th.
Cash and Cash Equivalents - Cash and cash equivalents generally consist of
cash and certificates of deposit. For the purpose of the statement of cash
flows, the Company considers all short-term debt securities purchased with
a maturity at the time of purchase of three months or less to be cash
equivalents.
Inventories - Inventories consist primarily of raw materials, work in
process and finished goods and are stated at the lower of cost (using the
first-in, first-out method) or market.
Concentration of Customers - The Company currently sells a majority of its
products to one commercial and three retail distribution customers.
Aggregate sales to these four customers represent 51%, 48% and 63% of net
sales for the years ended September 24, 1995, September 25, 1994 and
September 26, 1993, respectively.
Property, Plant and Equipment - Property, plant and equipment are carried
at cost, less accumulated depreciation. Depreciation is based on
straight-line and accelerated methods over estimated useful lives, which
are as follows:
Buildings 39 years
Machinery and equipment 3-15 years
Furniture and fixtures 5-7 years
Expenditures for major renewals and betterment that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are expensed as incurred.
The Company periodically reviews property, plant and equipment for
impairment to determine whether events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. No
such events or circumstances have occurred during the three year period
ended September 24, 1995.
-8-
<PAGE> 9
Income Taxes - The provision for income taxes is computed on the pretax
income of the consolidated group at the Parent Company level. This
amount is then allocated to the Company based on its proportionate share
of income. Current income taxes payable are either paid currently or
added to the note payable to the Parent Company, depending on available
cash flow. There are no significant temporary differences between
amounts reported for tax and financial reporting purposes.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 25,
1995 1994
<S> <C> <C>
Raw materials $307,617 $349,880
Work in process 15,355 7,619
Finished goods 246,499 204,486
-------- --------
$569,471 $561,985
======== ========
</TABLE>
3. LONG-TERM DEBT AND NOTE PAYABLE TO PARENT COMPANY
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 25,
1995 1994
<S> <C> <C>
Tax-exempt bond financed through the Economic
Development Corporation of Pierce County,
Washington, principal payments due in annual
installments from $75,000 to $185,000, beginning
October 1, 1996 through October 1, 2014, bonds
have a variable stated interest rate based on
current market rates for comparable securities
(4.5% at September 24, 1995), interest is paid monthly $ 2,400,000
Note payable to U.S. Bank, payable in monthly
installments of $16,000 including interest at 1%
above the bank's prime rate (8.75% at September 24,
1995), final payment due January 1999,
collateralized by equipment 532,892 $ 664,920
Other 12,597 16,081
----------- -----------
2,945,489 681,001
Less current portion (150,000) (150,000)
----------- -----------
$ 2,795,489 $ 531,001
=========== ===========
</TABLE>
-9-
<PAGE> 10
The Company has a note payable to the Parent Company. The note bears
interest at 10% and is subordinate to all other debt. Payments of
principal and interest are based on available cash flow and the note is
due December 1, 1998.
The tax-exempt bond is secured by a $2,400,000 letter of credit with U.S.
Bank, with an annual fee of 1.125% of the outstanding principal of the
bond. The agreements with U.S. Bank are collateralized by a deed of
trust on a warehouse facility and equipment and have financial covenants
including cash flow, current ratio, debt to net worth, subordinated debt,
and capital expenditures.
The carrying value of substantially all long-term debt instruments
approximates fair value because of the variable interest rates.
Maturities of long-term debt including the note payable to the Parent
Company are as follows:
<TABLE>
<S> <C>
1996 $ 150,000
1997 278,000
1998 313,000
1999 465,000
2000 188,000
Thereafter 1,760,185
-----------
$ 3,154,185
===========
</TABLE>
4. RELATED PARTY TRANSACTIONS
Transactions with the Parent Company for the last three fiscal years are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Purchases of raw materials $1,737,481 $1,119,861 $ 669,136
Interest expense on note payable 22,750 26,934 115,512
Management consulting fees 482,531
</TABLE>
In July 1995, the Company purchased land and production facilities for
$2,450,000 from a company related through common ownership. Prior to
this purchase, these facilities were leased by the Company. Total lease
payments for the three fiscal years ended 1995, 1994 and 1993 were
$115,682, $207,367 and $195,998, respectively.
5. PENSION PLANS
The Company provides a defined contribution pension plan for all salaried
employees meeting certain age and years-of-service requirements. The
plan is funded by the Company with discretionary contributions up to 15%
of the employee's annual salary. Total expense was $52,600, $48,800 and
$34,800 for fiscal years 1995, 1994 and 1993, respectively.
Under a collective bargaining agreement, the Company is required to
contribute to a multi-employer pension trust for eligible employees.
Total expense was $49,448, $52,129 and $25,573 for fiscal years 1995,
1994 and 1993, respectively.
-10-
<PAGE> 11
6. SUBSEQUENT EVENT
During 1996, the name of the Parent Company was changed from Western
States Chemical Supply Corporation ("WSCSC") to T.C. Holdings, Inc. In
addition to the name change, all of the assets, liabilities and operations
of WSCSC, except for the stock of the Company, all cash, and the
receivables due from the Company, were purchased by a company affiliated
through common ownership. Effective June 30, 1996, All Pure Chemical Co.
purchased all of the outstanding stock of T.C. Holdings, Inc., which
included the stock of the Company, all cash, and the receivables due from
the Company.
******
-11-
<PAGE> 12
T.C. PRODUCTS, INC.
BALANCE SHEETS,
JUNE 30, 1996 AND SEPTEMBER 24, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 24,
ASSETS 1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 222,194 $ 102,630
Accounts receivable 826,311 622,987
Inventories 519,123 569,471
Prepaid expenses and other 4,364 34,792
----------- -----------
Total current assets 1,571,992 1,329,880
PROPERTY, PLANT AND EQUIPMENT:
Land 900,000 900,000
Building 2,450,283 2,450,283
Machinery and equipment 2,152,204 2,152,204
Construction in progress 431,912 183,815
----------- -----------
5,934,399 5,686,302
Accumulated depreciation (1,543,581) (1,252,115)
----------- -----------
Total property, plant and equipment 4,390,818 4,434,187
----------- -----------
TOTAL $ 5,962,810 $ 5,764,067
=========== ===========
</TABLE>
See notes to unaudited financial statements.
-12-
<PAGE> 13
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, September 24,
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 313,819 $ 374,970
Accrued liabilities 322,192 261,240
Federal income taxes payable to Parent Company 356,700 298,334
Current portion of long-term debt 128,211 150,000
---------- ----------
Total current liabilities 1,120,922 1,084,544
OTHER LIABILITY 74,227 74,227
LONG-TERM DEBT 2,198,643 2,795,489
NOTE PAYABLE TO PARENT COMPANY 208,696
STOCKHOLDER'S EQUITY:
Common stock, $1 par value - Authorized 1,000,000 shares;
issued and outstanding 300,000 shares 437,357 437,357
Retained earnings 2,131,661 1,163,754
---------- ----------
Total stockholder's equity 2,569,018 1,601,111
---------- ----------
TOTAL $5,962,810 $5,764,067
========== ==========
</TABLE>
See notes to unaudited financial statements.
-13-
<PAGE> 14
T.C. PRODUCTS, INC.
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
NET SALES $ 6,350,733 $ 5,968,182
COST OF GOODS SOLD 3,919,584 3,900,105
----------- -----------
Gross profit 2,431,149 2,068,077
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,016,240 935,000
----------- -----------
INCOME FROM OPERATIONS 1,414,909 1,133,077
OTHER INCOME (EXPENSE):
Interest expense (103,973) (136,221)
Interest income 2,390 67,905
Other 11,281 (925)
----------- -----------
Total other expense, net 90,302 69,241
----------- -----------
INCOME BEFORE PROVISION FOR FEDERAL INCOME TAXES 1,324,607 1,063,836
PROVISION FOR FEDERAL INCOME TAXES 356,700 367,559
----------- -----------
NET INCOME $ 967,907 $ 696,277
=========== ===========
</TABLE>
See notes to unaudited financial statements.
-14-
<PAGE> 15
T.C. PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 967,907 $ 696,277
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 291,466 260,163
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable (203,324) (165,818)
Inventory 50,348 (101,495)
Prepaid expenses and other 30,428 47,959
Accounts payable (61,151) (73,745)
Accrued expenses 60,952 (154,551)
Federal income taxes payable to Parent Company 58,366 367,559
----------- -----------
Net cash provided by operating activities 1,194,992 876,349
INVESTING ACTIVITIES - Purchase of property, plant and equipment (248,097) (3,324,757)
FINANCING ACTIVITIES:
Repayments of notes payable to Parent Company, net (208,696) (2,976)
Repayments of notes payable (618,635) (50,957)
Proceeds from notes payable 2,400,000
----------- -----------
Net cash provided (used) by financing activities (827,331) 2,346,067
----------- -----------
NET INCREASE (DECREASE) IN CASH 119,564 (102,341)
CASH:
Beginning of period 102,630 183,550
----------- -----------
End of period $ 222,194 $ 81,209
=========== ===========
</TABLE>
See notes to unaudited financial statements.
-15-
<PAGE> 16
T.C. PRODUCTS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. GENERAL
The accompanying unaudited financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X, "Interim Financial
Statements," and do not include all the information and footnotes required
by generally accepted accounting principles for complete financial
statements. The financial statements have been prepared in conformity
with accounting principles and practices reflected in the Company's
audited financial statements for the year ended September 24, 1995
included elsewhere herein, and in the opinion of Pioneer Americas
Acquisition Corp. ("Pioneer"), include all adjustments (which consist only
of normal recurring adjustments) necessary for a fair presentation of the
Company's financial position as of June 30, 1996, and the results of its
operations and its cash flows for the nine months ended June 30, 1996 and
1995. Operating results for the nine months ended June 30, 1996 are not
necessarily indicative of the results that could be expected for a full
year.
2. SUBSEQUENT EVENT
Effective June 30, 1996, the Company was acquired by All Pure Chemical
Co., an indirect wholly-owned subsidiary of Pioneer, through the
acquisition of its parent, T.C. Holdings, Inc., for a total purchase price
of $10.0 million consisting of cash of $5.5 million and the issuance of
subordinated notes with an aggregate principal amount of $4.5 million.
-16-
<PAGE> 17
The following pro forma information is based on certain assumptions as of
October 11, 1996, and does not reflect financial or other information subsequent
to such date with respect to the acquisition of T.C. Holdings, Inc. ("TC
Holdings") by All Pure Chemical Co., an indirect wholly-owned subsididary of
Pioneer Americas Acquisition Corp. ("Pioneer"). T.C. Products, Inc. ("TC
Products") is the sole operating asset of TC Holdings. TC Holdings had no
operations other than those relating to TC Products and audited financial
statements do not exist.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial statements are based on the historical financial
information of Pioneer and TC Products, a wholly owned subsidiary of TC
Holdings, giving effect, under the purchase method of accounting, to certain
adjustments. The pro forma financial statements are derived from Pioneer's and
TC Products' historical financial data for the indicated periods, which, in the
case of the statement of operations of TC Products, differs from those periods
used for presentation of TC Products' financial statements included herein. In
the case of TC Products, the statement of operations for the year ended December
31, 1995 was derived by combining the last nine months of its fiscal year ended
September 24, 1995 with the first three months of the nine months ended June 30,
1996. The pro forma balance sheet was prepared as if the acquisition occurred
on June 30, 1996. The pro forma statements of operations were prepared as if the
acquisition occurred as of January 1, 1995 and do not include the effect of any
modifications in operations that might have occurred had Pioneer owned and
operated the businesses during the periods presented except as described in the
Notes to the Pro Forma Financial Statements.
The pro forma financial statements should be read in conjunction with the Notes
to Pro Forma Financial Statements and with the Consolidated Financial Statements
of Pioneer and the related notes thereto as previously filed and the Financial
Statements of TC Products and the related notes thereto, contained elsewhere
herein. The pro forma financial information has been prepared based on
assumptions deemed appropriate by management of Pioneer. This information is
prepared for informational purposes only and is not necessarily indicative of
the actual results or financial condition that would have been achieved had the
acquisition occurred at these dates or of future results. Actual results of TC
Products' operations will be included with Pioneer's results after June 30,
1996.
-17-
<PAGE> 18
T.C. PRODUCTS, INC.
PRO FORMA BALANCE SHEET,
JUNE 30, 1996 (UNAUDITED) (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- ----------------------------------
ASSETS PIONEER TC PRODUCTS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 8,774 $ 223 $ (5,459) (1) $ 3,538
Accounts receivable, net 33,030 826 33,856
Due from Parent 2,449 2,449
Inventory 14,193 519 14,712
Prepaid expenses and other 2,595 4 2,599
----------- --------- ---------- ----------
Total current assets 61,041 1,572 (5,459) 57,154
PROPERTY, PLANT AND
EQUIPMENT, NET 97,943 4,391 102,334
OTHER, NET 13,457 630 (2) 14,087
EXCESS COST OVER FAIR
VALUE OF NET ASSETS
ACQUIRED, NET 112,627 7,033 (1) 119,660
----------- --------- ---------- ----------
TOTAL $ 285,068 $ 5,963 $ 2,204 $ 293,235
=========== ========= ========== ==========
</TABLE>
See notes to pro forma financial statements.
-18-
<PAGE> 19
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND HISTORICAL PRO FORMA
STOCKHOLDER'S EQUITY --------------------------- ----------------------------------
<S> <C> <C> <C> <C>
PIONEER TC PRODUCTS ADJUSTMENTS COMBINED
CURRENT LIABILITIES:
Accounts payable $ 20,441 $ 314 $ 20,755
Accrued liabilities 24,629 679 $ 630 (2)
(357) (1) 25,581
Returnable deposits 3,573 3,573
Current portion of long-term debt 128 128
----------- ---------- ---------- -----------
Total current liabilities 48,643 1,121 273 50,037
13 3/8% FIRST MORTGAGE
NOTES DUE 2005 135,000 135,000
LONG-TERM DEBT 8,017 2,199 4,500 (1) 14,716
RETURNABLE DEPOSITS 3,278 3,278
ACCRUED PENSION AND
OTHER EMPLOYEE
BENEFITS 13,738 13,738
OTHER LONG-TERM
LIABILITIES 15,243 74 15,317
MINORITY INTEREST OWNED
BY PARENT 112 112
STOCKHOLDER'S EQUITY 61,037 2,569 (2,569) (1) 61,037
----------- ---------- ---------- -----------
TOTAL $ 285,068 $ 5,963 $ 2,204 $ 293,235
=========== ========== ========== ===========
</TABLE>
See notes to pro forma financial statements.
-19-
<PAGE> 20
T.C. PRODUCTS, INC.
PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------- ----------------------------------
PIONEER TC PRODUCTS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
NET SALES $ 103,113 $ 4,255 $ 107,368
COSTS AND EXPENSES:
Cost of sales 73,744 2,550 76,294
Selling, general and
administrative expense 14,846 700 $ 141 (3)
59 (4) 15,746
Interest expense, net 9,217 63 208 (5) 9,488
---------- --------- --------- ---------
Total costs and expenses 97,807 3,313 408 101,528
MINORITY INTEREST 223 223
OTHER INCOME, NET 93 11 104
---------- --------- --------- ---------
Income before taxes 5,622 953 (408) 6,167
INCOME TAX PROVISION 3,724 357 (116) (6) 3,965
---------- --------- --------- ---------
NET INCOME $ 1,898 $ 596 $ (292) $ 2,202
========== ========= ========= =========
NET INCOME PER SHARE $ 1,898 $ 2,202
========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 1 1
========== =========
</TABLE>
See notes to pro forma financial statements.
-20-
<PAGE> 21
T.C. PRODUCTS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -----------------------------
PIONEER TC PRODUCTS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
NET SALES $ 142,908 $ 8,605 $ 151,513
COSTS AND EXPENSES:
Cost of sales 96,504 5,536 102,040
Cost of sales - acquisition
related inventory step-up 1,671 1,671
Selling, general and
administrative expense 19,836 1,542 $ 281 (3)
117 (4) 21,776
Interest expense, net 12,905 173 416 (5) 13,494
---------- ----------- -------- ----------
Total costs and expenses 130,916 7,251 814 138,981
OTHER INCOME (EXPENSE), NET 637 (1) 636
---------- ----------- -------- ----------
Income before taxes 12,629 1,353 (814) 13,168
INCOME TAX PROVISION 6,208 466 (179) (6) 6,495
---------- ----------- -------- ----------
NET INCOME $ 6,421 $ 887 $ (635) $ 6,673
========== =========== ======== ==========
NET INCOME PER SHARE $ 6,421 $ 6,673
========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 1 1
========== ==========
</TABLE>
See notes to pro forma financial statements.
-21-
<PAGE> 22
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
(1) The pro forma financial statements reflect the purchase of 100% of the
outstanding shares of TC Holdings common stock in exchange for total
consideration of $10.0 million ($33.20 per share), consisting of cash of
$5.5 million and the issuance of subordinated notes with an aggregate
principal amount of $4.5 million. Included in the cash paid was payment
of a liability of TC Holdings totaling $356,700 owed to the previous
owners.
In accordance with purchase accounting, the assets and liabilities of TC
Products will be recorded on Pioneer's books at estimated fair market
value with the remaining purchase price reflected as goodwill. For
purposes of these Pro Forma Financial Statements, the allocation of the
purchase price has been made based upon valuations and other studies
which have not been finalized. Accordingly, the allocation of the
purchase price is preliminary. The following adjustments reflect
management's estimates of the necessary adjustments to TC Products'
historical Balance Sheet to reflect fair market value:
Pioneer consideration paid:
Cash $ 5,458,835
Subordinated notes issued 4,500,000
-------------
9,958,835
Less:
TC Products stockholder's equity 2,569,018
Liability of TC Holdings 356,700
-------------
2,925,718
-------------
Net adjustment $ 7,033,117
=============
Allocation of adjustment -- Goodwill $ 7,033,117
=============
(2) Reflects the recording of $400,000 relating to transaction costs which
are estimated and are expected to be incurred by Pioneer within the
12-month period following the TC Products acquisition and $230,000
relating to noncompete agreements entered into with management of TC
Products following the acquisition. These items have been reflected in
the pro forma statement of financial position as an addition to accrued
liabilities and as an addition to other assets.
(3) Reflects amortization of increase to goodwill over a 25-year period.
(4) Reflects amortization of capitalized transaction costs over an eight year
period and noncompete agreements over periods ranging from three to four
years.
(5) Reflects interest expense on the $4.5 million notes payable issued in
connection with the acquisition at an average assumed interest rate of
9.25%.
(6) Adjustment to reflect 35% effective tax rate for TC Products and the tax
effect of the pro forma adjustments, with the exception of goodwill
amortization.
-22-
<PAGE> 23
SIGNATURE
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 AMERICAS ACQUISITION CORP.
October 11, 1996 By: /s/ PHILIP A. ABLOVE
-------------------------------------
Philip A. Ablove
Vice President and
Chief Financial Officer
-23-
