<PAGE> 1
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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, 1998
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, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-1420850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 NATIONSBANK CENTER 77002
700 LOUISIANA STREET (Zip Code)
HOUSTON, TEXAS
(Address of principal executive offices)
</TABLE>
(713) 570-3200
(Registrant's telephone number, including area code)
PIONEER AMERICAS ACQUISITION CORP.
(Former name of registrant)
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 October 26, 1998, 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.
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<PAGE> 2
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- September 30, 1998 and
December 31, 1997........................................... 3
Consolidated Statements of Operations -- Three Months Ended
September 30, 1998 and 1997 and Nine Months Ended September
30, 1998 and 1997........................................... 4
Consolidated Statements of Cash Flows -- Nine Months Ended
September 30, 1998 and 1997................................. 5
Notes to Consolidated Financial Statements.................. 6
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
<PAGE> 3
PART I -- FINANCIAL INFORMATION
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 60,182 $ 50,995
Accounts receivable, less allowance for doubtful accounts
of $1,944 at September 30, 1998 and $2,002 at December
31, 1997............................................... 61,473 65,189
Due from affiliates....................................... 13,166 2,810
Inventories............................................... 27,364 22,625
Prepaid expenses.......................................... 1,603 1,372
-------- --------
Total current assets.............................. 163,788 142,991
Property, plant and equipment:
Land...................................................... 10,726 9,092
Buildings and improvements................................ 57,624 55,589
Machinery and equipment................................... 296,445 263,838
Construction in progress.................................. 31,355 31,836
-------- --------
396,150 360,355
Less accumulated depreciation............................. (64,325) (34,130)
-------- --------
331,825 326,225
Investment in and advances to unconsolidated subsidiaries... -- 28,551
Other assets, net of accumulated amortization of $5,193 at
September 30, 1998 and $2,990 at December 31, 1997........ 41,634 48,560
Excess cost over fair value of net assets acquired, net of
accumulated amortization of $20,649 at September 30, 1998
and $13,319 at December 31, 1997.......................... 203,519 201,032
-------- --------
Total assets...................................... $740,766 $747,359
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 27,817 $ 45,711
Accrued liabilities....................................... 41,210 33,745
Current portion of long-term debt......................... 2,675 2,570
-------- --------
Total current liabilities......................... 71,702 82,026
Long-term debt, less current portion........................ 565,358 567,160
Accrued pension and other employee benefits................. 27,256 21,068
Other long-term liabilities................................. 18,115 17,224
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional paid-in capital................................ 65,483 66,169
Retained deficit.......................................... (7,149) (6,289)
-------- --------
Total stockholder's equity........................ 58,335 59,881
-------- --------
Total liabilities and stockholder's equity........ $740,766 $747,359
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................................ $ 93,083 $65,242 $283,730 $150,073
Cost of sales....................................... 73,373 46,894 209,156 112,553
-------- ------- -------- --------
Gross profit........................................ 19,710 18,348 74,574 37,520
Selling, general and administrative expenses........ 11,067 7,300 35,379 19,580
Unusual charges..................................... 179 -- 410 --
-------- ------- -------- --------
Operating income.................................... 8,464 11,048 38,785 17,940
Equity in net loss of unconsolidated subsidiaries... (67) (779) (2,208) (2,552)
Interest expense, net............................... (12,244) (6,750) (36,486) (16,189)
Other income (expense), net......................... (1,562) 446 1,201 882
-------- ------- -------- --------
Income (loss) before taxes and extraordinary item... (5,409) 3,965 1,292 81
Income tax provision (benefit)...................... (1,072) 2,090 2,152 1,779
-------- ------- -------- --------
Income (loss) before extraordinary item............. (4,337) 1,875 (860) (1,698)
Extraordinary item from early extinguishment of debt
(net of income tax benefit of $12,439)............ -- -- -- (18,658)
-------- ------- -------- --------
Net income (loss)................................... $ (4,337) $ 1,875 $ (860) $(20,356)
======== ======= ======== ========
Earnings per common share:
Income (loss) before extraordinary item........... $ (4,337) $ 1,875 $ (860) $ (1,698)
Extraordinary item, net of income tax benefit..... -- -- -- (18,658)
-------- ------- -------- --------
Net income (loss)................................. $ (4,337) $ 1,875 $ (860) $(20,356)
======== ======= ======== ========
Weighted average number of common shares
outstanding....................................... 1 1 1 1
======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1997
-------- ---------
<S> <C> <C>
Operating activities:
Net loss.................................................. $ (860) $ (20,356)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Extraordinary item (net of income tax)................. -- 18,658
Depreciation and amortization.......................... 34,908 14,792
Equity in net loss of unconsolidated subsidiaries...... 2,208 2,552
Net change in deferred taxes........................... 3,343 1,486
Loss from foreign exchange rate changes................ 1,470 --
Net effect of changes in operating assets and
liabilities (net of acquisitions)..................... (4,161) (6,329)
-------- ---------
Net cash flows from operating activities.................... 36,908 10,803
-------- ---------
Investing activities:
Acquisition of business................................... -- (97,000)
Investment in and advances to unconsolidated
subsidiaries........................................... (4,290) (2,490)
Capital expenditures...................................... (20,708) (10,977)
-------- ---------
Net cash flows used in investing activities................. (24,998) (110,467)
-------- ---------
Financing activities:
Payments on long-term debt................................ (1,931) (162,342)
Proceeds from long-term debt.............................. -- 300,000
Dividends to parent....................................... (685) (250)
Debt issuance and related costs........................... -- (16,362)
-------- ---------
Net cash flows from financing activities.................... (2,616) 121,046
-------- ---------
Effect of exchange rate changes on cash..................... (2,164) --
-------- ---------
Net increase in cash........................................ 7,130 21,382
Cash at beginning of period................................. 50,995 14,417
Cash acquired in acquisition................................ 2,057 --
-------- ---------
Cash at end of period....................................... $ 60,182 $ 35,799
======== =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
During August 1998, Pioneer Americas Acquisition Corp. changed its name to
Pioneer Americas, Inc. ("Pioneer"). The consolidated financial statements
include the accounts of Pioneer 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 as of September 30, 1998 and the 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
nine months of 1998 are not necessarily indicative of results to be expected for
the year ending December 31, 1998.
The consolidated balance sheet at December 31, 1997 is derived from the
December 31, 1997 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, 1997.
During the third quarter of 1998, the Company exchanged its 50% ownership
interest in KWT, Inc. ("KWT") for the remaining 50% ownership interest in
Kemwater North America Company ("KNA"), resulting in 100% ownership of KNA. The
Company had previously owned, directly or indirectly, 50% interest in both of
these companies. As these entities were under common control prior to the
exchange, this transaction was recorded at historical cost.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effect of changes in operating assets and liabilities (net of
acquisitions) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Accounts receivable......................................... $ 6,666 $(17,818)
Due from affiliates......................................... (3,115) (2,456)
Inventories................................................. (2,151) (1,873)
Prepaid expenses............................................ (154) (3,249)
Other assets................................................ (3,842) (187)
Accounts payable............................................ (17,216) 11,755
Accrued liabilities......................................... 12,357 8,070
Other long-term liabilities................................. 3,294 (571)
-------- --------
Net change in operating accounts.................. $ (4,161) $ (6,329)
======== ========
</TABLE>
6
<PAGE> 7
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following are supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1998 1997
------- --------
<S> <C> <C>
Cash payments for:
Interest.................................................. $27,969 $ 15,791
Income taxes.............................................. 227 543
Investing activities, acquisition during the period:
Cash paid for acquisition................................. $ -- $ 97,000
Equity contribution by parent............................. -- 5,500
Liabilities assumed....................................... -- 2,955
------- --------
Fair value of assets acquired............................. $ -- $105,455
======= ========
</TABLE>
Non-cash investing activity:
During the third quarter of 1998, the Company exchanged its 50%
ownership interest in KWT for the remaining 50% ownership interest in KNA.
The Company had previously owned, directly or indirectly, 50% interest in
both of these companies.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Raw materials, supplies and parts........................... $20,629 $18,314
Finished goods and work-in-process.......................... 7,513 7,188
Inventories under exchange agreements....................... (778) (2,877)
------- -------
$27,364 $22,625
======= =======
</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 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 the previous owners in
connection with certain environmental liabilities at 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 arrange-
7
<PAGE> 8
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ments, 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. PCI CHEMICALS CANADA INC.
Pioneer is a holding company with no operating assets or operations. A
subsidiary of Pioneer acquired in October 1997, PCI Chemicals Canada Inc.
("PCICCI"), has outstanding $175.0 million of 9 1/4% Senior Secured Notes, due
October 15, 2007. These notes are fully and unconditionally guaranteed on a
joint and several basis by Pioneer and Pioneer's other direct and indirect
wholly-owned subsidiaries. Together, PCICCI and the subsidiary note guarantors
comprise all of the direct and indirect subsidiaries of Pioneer. Summarized
financial information of PCICCI and the guarantors of these notes are as
follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998 AS OF DECEMBER 31, 1997
------------------------------------ ------------------------------------
NOTE CONSOLIDATED NOTE CONSOLIDATED
PCICCI GUARANTORS COMPANY PCICCI GUARANTORS COMPANY
-------- ---------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets................... $ 57,811 $105,977 $163,788 $ 39,211 $103,780 $142,991
Non-current assets............... 177,597 399,381 576,978 187,009 417,359 604,368
Current liabilities.............. 24,021 47,681 71,702 24,465 57,561 82,026
Non-current liabilities.......... 198,307 412,422 610,729 193,121 412,331 605,452
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 33,753 $ 59,330 $ 93,083
Gross profit..................... 10,088 9,622 19,710
Net income (loss)................ 1,196 (5,533) (4,337)
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $102,200 $181,530 $283,730
Gross profit..................... 30,448 44,126 74,574
Net income (loss)................ 4,446 (5,306) (860)
</TABLE>
Separate financial statements of PCICCI and the guarantors of the PCICCI
notes are not included as management has determined that separate financial
statements of these entities are not material to investors.
6. ACCOUNTING CHANGES
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, Accounting for Costs of Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
a framework for determining the accounting treatment of costs incurred to obtain
or develop computer software. The Company is required to adopt the provisions of
SOP 98-1 beginning in 1999, without adjustment to previously reported amounts.
In April 1998, the AICPA issued Statement of Position 98-5, Reporting on
the Costs of Start-Up Activities ("SOP 98-5"), which requires immediate
expensing of certain organization costs and start-up costs. The Company is
required to adopt the provisions of SOP 98-5 in 1999.
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").
8
<PAGE> 9
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. The Company is required to adopt the
provisions of SFAS No. 133 in the third quarter of 1999.
Management does not believe the adoption of the above-mentioned accounting
changes will have a material effect on the Company's financial statements.
7. RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
Revenues
Revenues increased by $27.8 million or approximately 43% for the three
months ended September 30, 1998, as compared to the same period in 1997. The
increase in revenues was primarily attributable to additional sales volumes from
the acquisition of the business of PCI Chemicals Canada Inc. and PCI Carolina,
Inc. (together "PCI Canada") in October 1997. Partially offsetting this increase
were decreases in the average electrochemical unit ("ECU") prices during this
period, as compared to the same three-month period in 1997. Chlorine prices
decreased approximately 40% because of weakening vinyl industry demand, while
caustic soda prices rose, but not to the extent necessary to offset the chlorine
decrease. Revenues at the downstream operations of All-Pure Chemical Company,
Inc. ("All-Pure") decreased as the Company leased out its packaged household
bleach operations to focus on the bulk bleach business.
Cost of Sales
Cost of sales increased approximately $26.5 million or 56% for the first
three months ended September 30, 1998, as compared to the three months ended
September 30, 1997. The primary factor behind this increase was the sales
volumes of the acquired PCI Canada operations. Also, power costs rose at the
Company's chlor-alkali facility in Tacoma, Washington. Partially offsetting
these increases was lower cost of sales at All-Pure due to lower sales volumes.
Gross Profit
Gross profit margin decreased to approximately 21% from 28%, primarily due
to the lower ECU sales prices and the increased power costs at the Tacoma
facility, partially offset by the profitability of the acquired PCI Canada
business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $3.8 million for the
three-month period ended September 30, 1998 as compared to the same period in
1997, primarily as a result of the acquisition of the business of PCI Canada.
Offsetting this increase were lower profit sharing bonus accruals and lower
expenses at All-Pure resulting from cost-savings and consolidation efforts.
Equity in Net Loss of Unconsolidated Subsidiaries
Equity in net loss of unconsolidated subsidiaries has represented the
Company's 50% ownership in Kemwater North America Company ("KNA") and the
Company's 50% ownership in KWT, Inc. ("KWT"). The loss decreased to $67,000 for
the three months ended September 30, 1998, as a result of certain cost-savings
and consolidation efforts at these companies. As of September 30, 1998, the
Company exchanged its 50% ownership in KWT for the remaining 50% ownership in
KNA, resulting in 100% ownership of KNA.
9
<PAGE> 10
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Expense, Net
Interest expense, net increased $5.5 million to $12.2 million during the
three months ended September 30, 1998 as compared to 1997. This increase was the
result of the debt incurred for the acquisition of the business of PCI Canada.
Other Income (Expense), Net
Other income (expense), net in 1998 includes a foreign currency translation
loss due to fluctuations in the currency exchange rates between the United
States and Canada, plus certain intercompany expenses between the Company and
KNA, prior to its ownership exchange.
Net Income (Loss)
Due to the factors described above, the Company incurred a net loss of $4.3
million for the three months ended September 30, 1998, as compared to net income
of $1.9 million for the same period in 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Revenues
Revenues increased by $133.7 million or approximately 89% for the nine
months ended September 30, 1998, as compared to the same period in 1997. The
principal factors underlying the increase were the acquired operations of PCI
Canada plus the acquired operations of a chlor-alkali facility in Tacoma,
Washington, which was purchased in June 1997. Offsetting these increases were
lower average ECU prices during this period, as compared to the same nine-month
period in 1997. Also, production volumes were impacted negatively by two
factors. First, revenue was hampered as a result of lack of railcar availability
in the western United States due to continued Union Pacific rail transportation
problems. Second, production at the Company's Henderson plant fell slightly in
early 1998 due to a failed transformer, which is now fully operational. Revenues
at the Company's downstream operations decreased as the Company leased out its
packaged household bleach operations during the third quarter. Also, competitive
conditions and adverse weather conditions during the early portion of the year
resulted in revenue decreases in the downstream businesses.
Cost of Sales
Cost of sales increased approximately $96.6 million, or 86% for the nine
months ended September 30, 1998, as compared to the nine months ended September
30, 1997. The primary factor for this increase was the sales volumes of the
acquired operations. In addition, production costs, principally power, were
higher during 1998. Partially offsetting these increases was lower cost of sales
at All-Pure due to lower sales volumes.
Gross Profit
Gross profit margin increased to approximately 26% from 25% primarily due
to the profitability of the acquired businesses, despite lower ECU sales prices
and higher production costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $15.8 million for
the period ending September 30, 1998, primarily as a result of the acquisition
of the business of PCI Canada.
10
<PAGE> 11
PIONEER AMERICAS, INC.
(FORMERLY PIONEER AMERICAS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unusual Charges
Unusual charges totaling $0.4 million in 1998 relate to the consolidation
and downsizing of certain administrative functions of All-Pure.
Interest Expense, Net
Interest expense, net increased $20.3 million to $36.5 million during the
first nine months of 1998. This increase was the result of the debt incurred for
the acquisitions of the Tacoma plant and the business of PCI Canada, partially
offset by lower interest expense from refinancing $135.0 million of the 13 3/8%
First Mortgage Notes at substantially lower interest rates.
Other Income, Net
Other income, net in 1998 includes a gain from the settlement of a lawsuit
for approximately $0.9 million, an accrual for a business interruption insurance
claim at the Henderson plant related to the failed transformer and a state
franchise tax refund.
Extraordinary Item from Early Extinguishment of Debt
During 1997 the Company recognized an $18.7 million extraordinary item from
early extinguishment of the 13 3/8% First Mortgage Notes. The extraordinary loss
consisted primarily of the 20% premium paid on the face value of the notes and
the write-off of debt placement fees related to the notes (net of tax benefit of
$12.4 million).
Net Loss
Net loss for the first nine months of 1998 was $0.9 million, compared to
the $20.4 million loss for the same period in 1997.
11
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
27 -- Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1998.
12
<PAGE> 13
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, INC.
By: /s/ PHILIP J. ABLOVE
----------------------------------
Philip J. Ablove
Vice President and Chief Financial
Officer
November 3, 1998
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27 -- Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 60,182
<SECURITIES> 0
<RECEIVABLES> 63,417
<ALLOWANCES> 1,944
<INVENTORY> 27,364
<CURRENT-ASSETS> 163,788
<PP&E> 396,150
<DEPRECIATION> 64,325
<TOTAL-ASSETS> 740,766
<CURRENT-LIABILITIES> 71,702
<BONDS> 565,358
0
0
<COMMON> 1
<OTHER-SE> 58,334
<TOTAL-LIABILITY-AND-EQUITY> 740,766
<SALES> 283,730
<TOTAL-REVENUES> 283,730
<CGS> 209,156
<TOTAL-COSTS> 209,156
<OTHER-EXPENSES> 35,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,486
<INCOME-PRETAX> 1,292
<INCOME-TAX> 2,152
<INCOME-CONTINUING> (860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (860)
<EPS-PRIMARY> (860)
<EPS-DILUTED> (860)
</TABLE>
