<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 MARCH 31, 1997
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 33-98828
PIONEER AMERICAS ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1420850
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4200 NATIONSBANK CENTER, 700 LOUISIANA STREET, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 225-3831
(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 | |
On May 2, 1997, there were outstanding 1,000 shares of the Registrant's
Common Stock, $.01 par value. All of such shares are owned by Pioneer
Companies, Inc.
The Registrant meets the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the
reduced disclosure format permitted by General Instruction (H)(2) of Form 10-Q.
<PAGE> 2
TABLE OF CONTENTS
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations--Three Months Ended March 31,
1997 and 1996 4
Consolidated Statements of Cash Flows--Three Months Ended March 31,
1997 and 1996 5
Notes to Consolidated Financial Statements 6
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
2
<PAGE> 3
PART I --FINANCIAL INFORMATION
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,640 $ 14,417
Accounts receivable, less allowance for doubtful accounts of $1,440 at
March 31, 1997 and $1,311 at December 31, 1996 18,438 18,830
Due from parent 2,840 2,547
Inventories 8,896 6,247
Prepaid expenses 806 1,156
----------- -----------
Total current assets 45,620 43,197
Property, plant and equipment:
Land 3,735 3,735
Buildings and improvements 17,218 17,062
Machinery and equipment 73,194 71,704
Cylinders and tanks 4,583 4,540
Construction in progress 12,501 11,871
----------- -----------
111,231 108,912
Less accumulated depreciation (19,007) (16,429)
----------- -----------
92,224 92,483
Investment in and advances to unconsolidated subsidiary 28,553 28,586
Other assets, net of accumulated amortization of $2,803 at March 31, 1997
and $2,458 at December 31, 1996 19,268 19,621
Excess cost over fair value of net assets acquired, net of accumulated
amortization of $8,749 at March 31, 1997 and $7,556 at December 31, 1996 105,930 107,123
----------- -----------
Total assets $ 291,595 $ 291,010
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,677 $ 17,221
Accrued liabilities 21,614 19,276
Returnable deposits 3,175 3,238
Current portion of long-term debt 128 128
----------- -----------
Total current liabilities 42,594 39,863
Long-term debt 141,629 141,629
Returnable deposits 3,272 3,272
Accrued pension and other employee benefits 14,555 14,100
Other long-term liabilities 17,112 17,823
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, authorized 1,000 shares, issued and
outstanding 1,000 shares 1 1
Additional paid-in capital 61,124 61,124
Retained earnings 11,308 13,198
----------- -----------
Total stockholders' equity 72,433 74,323
----------- -----------
Total liabilities and stockholders' equity $ 291,595 $ 291,010
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues $ 38,743 $ 44,292
Cost of sales 29,003 30,797
---------- ----------
Gross profit 9,740 13,495
Selling, general and administrative expense 6,170 6,090
---------- ----------
Operating income 3,570 7,405
Equity in net loss of unconsolidated subsidiary (1,055) (110)
Interest expense, net (4,458) (3,944)
Other income, net 231 89
---------- ----------
Income (loss) before taxes (1,712) 3,440
Income tax provision 178 2,028
---------- ----------
Net income (loss) $ (1,890) $ 1,412
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (1,890) $ 1,411
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,080 4,217
Equity in net loss of unconsolidated subsidiaries 1,055 110
Net change in deferred taxes (42) 1,425
Net effect of changes in operating assets and liabilities (net of
acquisitions) 379 (2,088)
---------- ----------
Net cash flows from operating activities 3,582 5,075
---------- ----------
Investing activities:
Investment in and advances to unconsolidated subsidiary (1,022) (600)
Capital expenditures (2,337) (3,907)
---------- ----------
Net cash flows from investing activities (3,359) (4,507)
---------- ----------
Net increase in cash 223 568
Cash acquired in purchase -- 505
Cash at beginning of period 14,417 11,218
---------- ----------
Cash at end of period $ 14,640 $ 12,291
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet as of March 31, 1997 and the consolidated
statements of operations and cash flows for all 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 three months of 1997 are not necessarily indicative of results to be
expected for the year ending December 31, 1997. The consolidated financial
statements include the accounts of Pioneer Americas Acquisition Corp. and its
consolidated 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
financial statements are stated in thousands of dollars unless otherwise
indicated.
The consolidated balance sheet at December 31, 1996 is derived from the
December 31, 1996 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, 1996.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effect of changes in operating assets and liabilities (net of
acquisitions) are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Accounts receivable $ 392 $ 1,584
Due from parent (293) (766)
Inventories (2,649) (682)
Prepaid expenses 350 1,659
Other assets 98 (121)
Accounts payable 456 (7,971)
Accrued liabilities 2,345 295
Returnable deposits (63) (120)
Other long-term liabilities (256) 4,034
--------- ---------
Net change in operating accounts $ 379 $ (2,088)
========= =========
</TABLE>
Following is supplemental cash information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash payments for:
Interest $ 605 $ 231
Income taxes 135 2,150
Acquisition of KWT, Inc. during the period:
Cash paid for acquisition $ 1,572
Long-term debt issued 8,017
Liabilities assumed 2,167
---------
Fair value of assets acquired $ 11,756
=========
</TABLE>
Other non-cash items included in the consolidated financial statements
include an increase in shareholder's equity of $1.4 million for the three
months ended March 31, 1996 due to the recognition of the net operating loss
carryforward.
6
<PAGE> 7
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996
--------- ---------
<S> <C> <C>
Raw materials, supplies and parts $ 7,914 $ 7,512
Finished goods and work-in-process 4,407 2,668
Inventories under exchange agreements (3,425) (3,933)
--------- ---------
$ 8,896 $ 6,247
========= =========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
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. RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues $ 38,743 $ 44,292
Cost of sales 29,003 30,797
--------- ---------
Gross profit 9,740 13,495
Selling, general and administrative expense 6,170 6,090
--------- ---------
Operating income 3,570 7,405
Equity in net loss of unconsolidated subsidiary (1,055) (110)
Interest expense, net (4,458) (3,944)
Other income, net 231 89
--------- ---------
Income (loss) before taxes (1,712) 3,440
Income tax provision 178 2,028
--------- ---------
Net income (loss) $ (1,890) $ 1,412
========= =========
</TABLE>
Revenues
Revenues decreased by $5.5 million or approximately 13% to $38.7 million
for the three months ended March 31, 1997. Electrochemical unit ("ECU") prices
decreased approximately 3% while caustic soda and chlorine sales volumes
decreased by 21% and 3%, respectively. The decrease in caustic soda sales was
due to the weather-related delays in Mississippi River barge shipments.
Revenues for All-Pure Chemical Co. ("All-Pure") increased 13% or $1.2 million
in the first quarter of 1997 compared to the same quarter a year ago. This
increase was due to the revenues associated with the acquisition of T.C.
Products, Inc. which the Company acquired in the second quarter of 1996.
Cost of Sales
Cost of sales decreased by $1.8 million or almost 6% to $29.0 million for
the three months ended March 31, 1997. This decrease was the result of lower
cost of sales for caustic soda and chlorine due to lower sales volumes,
partially offset by the acquisitions mentioned above.
Gross Profit
Gross profit margin decreased from 30% during the first quarter of 1996 to
approximately 25% during the first quarter of 1997. This decrease was a result
of lower ECU prices described above along with somewhat higher ECU
manufacturing costs.
Equity in Net Loss of Unconsolidated Subsidiary
Equity in net loss of unconsolidated subsidiary increased by approximately
$0.9 million due to losses sustained by the unconsolidated subsidiary during
the first quarter of 1997. These losses were attributable to decreased gross
margins as a result of higher raw material costs.
7
<PAGE> 8
Income (Loss) Before Taxes
As a result of the above, income (loss) before income taxes decreased $5.1
million to a loss of $1.7 million for the three months ended March 31, 1997
from income of $3.4 million for the three months ended March 31, 1996.
8
<PAGE> 9
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 March 31, 1997.
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 AMERICAS ACQUISITION CORP.
May 13, 1997 By: /s/ Philip J. Ablove
---------------------------------
Philip J. Ablove
Vice President and
Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,640
<SECURITIES> 0
<RECEIVABLES> 19,878
<ALLOWANCES> (1,440)
<INVENTORY> 8,896
<CURRENT-ASSETS> 45,620
<PP&E> 111,231
<DEPRECIATION> (19,007)
<TOTAL-ASSETS> 291,595
<CURRENT-LIABILITIES> 42,594
<BONDS> 141,629
0
0
<COMMON> 1
<OTHER-SE> 72,432
<TOTAL-LIABILITY-AND-EQUITY> 291,595
<SALES> 38,743
<TOTAL-REVENUES> 38,743
<CGS> 29,003
<TOTAL-COSTS> 29,003
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,458
<INCOME-PRETAX> (1,712)
<INCOME-TAX> 178
<INCOME-CONTINUING> (1,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,890)
<EPS-PRIMARY> (1,890)
<EPS-DILUTED> (1,890)
</TABLE>
