<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, 1999
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)
DELAWARE 06-1420850
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4300 BANK OF AMERICA CENTER, 700 LOUISIANA STREET, 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 | |
On April 20, 1999, 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
PIONEER AMERICAS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations--Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows--Three Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</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.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,635 $ 50,593
Accounts receivable, less allowance for doubtful accounts of $1,851 at
March 31, 1999 and $2,017 at December 31, 1998 40,836 46,145
Inventories 27,907 26,360
Prepaid expenses 3,178 2,759
---------- ----------
Total current assets 108,556 125,857
Property, plant and equipment:
Land 10,622 10,727
Buildings and improvements 59,745 60,520
Machinery and equipment 303,551 306,989
Construction in progress 33,410 28,348
---------- ----------
407,328 406,584
Less accumulated depreciation (79,601) (72,525)
---------- ----------
327,727 334,059
Due from affiliates 17,598 16,512
Other assets, net of accumulated amortization of $7,814 at March 31, 1999
and $6,152 at December 31, 1998 49,105 48,327
Excess cost over fair value of net assets acquired, net of accumulated
amortization of $25,236 at March 31, 1999 and $22,950 at December 31, 1998 199,323 201,609
---------- ----------
Total assets $ 702,309 $ 726,364
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 27,003 $ 30,825
Accrued liabilities 32,477 31,384
Current portion of long-term debt 2,688 2,684
---------- ----------
Total current liabilities 62,168 64,893
Long-term debt, less current portion 564,020 564,689
Accrued pension and other employee benefits 13,965 25,836
Other long-term liabilities 18,984 22,063
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 65,483
Retained deficit (22,312) (16,601)
---------- ----------
Total stockholder's equity 43,172 48,883
---------- ----------
Total liabilities and stockholder's equity $ 702,309 $ 726,364
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
PIONEER AMERICAS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 68,039 $ 94,619
Cost of sales 53,750 64,948
---------- ----------
Gross profit 14,289 29,671
Selling, general and administrative expenses 9,407 12,180
---------- ----------
Operating income 4,882 17,491
Equity in net loss of unconsolidated subsidiaries -- (1,136)
Interest expense, net (11,917) (12,448)
Other income (expense), net (1,007) 3,089
---------- ----------
Income (loss) before taxes (8,042) 6,996
Income tax provision (benefit) (2,331) 3,376
---------- ----------
Net income (loss) $ (5,711) $ 3,620
========== ==========
Net income (loss) per share $ (5,711) $ 3,620
========== ==========
Weighted average number of common shares outstanding 1 1
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PIONEER AMERICAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (5,711) $ 3,620
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 12,886 11,383
Equity in net loss of unconsolidated subsidiaries -- 1,136
Net change in deferred taxes (2,331) 3,293
Reduction in post-retirement medical expense (12,530) --
Loss on disposals 1,057 --
Foreign exchange loss (260) (186)
Net effect of changes in operating assets and liabilities (388) (5,021)
---------- ----------
Net cash flows from operating activities (7,277) 14,225
---------- ----------
Investing activities:
Investment in and advances to unconsolidated subsidiaries -- (1,006)
Capital expenditures (7,270) (4,146)
Proceeds received from disposals of assets 1,143 --
---------- ----------
Net cash flows from investing activities (6,127) (5,152)
---------- ----------
Financing activities:
Payments on long-term debt (665) (647)
---------- ----------
Net cash flows from financing activities (665) (647)
---------- ----------
Effect of exchange rate on cash 111 204
---------- ----------
Net change in cash (13,958) 8,630
Cash at beginning of period 50,593 50,995
---------- ----------
Cash at end of period $ 36,635 $ 59,625
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PIONEER AMERICAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet at March 31, 1999 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 1999 are not necessarily indicative of results to be
expected for the year ending December 31, 1999. The consolidated financial
statements include the accounts of Pioneer Americas, Inc. ("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 at December 31, 1998 is derived from the
December 31, 1998 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, 1998.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effects of changes in operating assets and liabilities are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Accounts receivable $ 5,754 $ 11,082
Due from affiliates (1,086) (2,541)
Inventories (1,800) (3,272)
Prepaid expenses (52) 1,366
Other assets (28) (409)
Accounts payable (4,076) (15,380)
Accrued liabilities 814 3,717
Other long-term liabilities 86 416
---------- ----------
Net change in operating assets and liabilities $ (388) $ (5,021)
========== ==========
</TABLE>
Following are supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash payments for:
Interest $ 3,479 $ 4,359
Income taxes $ 351 --
</TABLE>
Non-cash investing activity:
In March 1999, the Company's subsidiary, Kemwater North America Company
("KNA"), sold certain fixed assets. Proceeds received included cash plus a $2.5
million note receivable.
6
<PAGE> 7
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Raw materials, supplies and parts $ 16,563 $ 17,014
Finished goods and work-in-process 9,456 9,045
Inventories under exchange agreements 1,888 301
---------- ----------
$ 27,907 $ 26,360
========== ==========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company and its operations are subject to extensive United States and
Canadian federal, state, provincial and local laws, regulations, rules and
ordinances relating to pollution, the protection of the environment and the
release or disposal of regulated materials. The operation of any chemical
manufacturing plant and the distribution of chemical products entail certain
obligations under current environmental laws. Present or future laws may affect
the Company's capital and operating costs relating to compliance, may impose
cleanup requirements with respect to site contamination resulting from past,
present or future spills and releases and may affect the markets for the
Company's products. The Company believes that its operations are currently in
general compliance with environmental laws and regulations, the violation of
which could result in a material adverse effect on the Company's business,
properties or results of operations on a consolidated basis. There can be no
assurance, however, that material costs will not be incurred as a result of
instances of noncompliance or new regulatory requirements.
The Company relies on indemnification from 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 arrangements, in which case the
Company would be required to incur significant expenses for environmental
liabilities, which would have a material adverse effect on the Company.
The Company is subject to various legal proceedings and potential claims
arising in the ordinary course of its business. In the opinion of management,
the Company has adequate legal defenses and/or insurance coverage with respect
to these matters and management does not believe that they will materially
affect the Company's operations or financial position.
5. PCI CHEMICALS CANADA INC.
Pioneer is a holding company with no operating assets or operations. A
subsidiary of Pioneer, PCI Chemicals Canada Inc. ("PCICC"), 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,
PCICC and the subsidiary note guarantors comprise all of the direct and indirect
subsidiaries of Pioneer. Summarized financial information of PCICC and the
guarantors of these notes are as follows:
<TABLE>
<CAPTION>
NOTE CONSOLIDATED NOTE CONSOLIDATED
PCICC GUARANTORS COMPANY PCICC GUARANTORS COMPANY
------------- ------------- ------------- ------------- ------------- --------------
AS OF MARCH 31, 1999 AS OF DECEMBER 31, 1998
----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 34,915 $ 73,641 $108,556 $ 29,962 $ 95,895 $ 125,857
Non-current assets 182,468 411,285 593,753 191,004 409,503 600,507
Current liabilities 22,570 39,598 62,168 22,103 42,790 64,893
Non-current liabilities 182,690 414,279 596,969 185,031 427,557 612,588
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999 FOR THE THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 26,406 $ 41,633 $ 68,039 $ 34,907 $ 59,712 $ 94,619
Gross profit 4,212 10,077 14,289 11,765 17,906 29,671
Net income (loss) (1,709) (4,002) (5,711) 2,866 754 3,620
</TABLE>
Separate financial statements of PCICC and the guarantors of the PCICC
notes are not included as management has determined that separate financial
statements of these entities are not material to investors.
7
<PAGE> 8
6. RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenues. Revenues decreased by $26.6 million, or approximately 28%, to
$68.0 million for the three months ended March 31, 1999, as compared to the
three months ended March 31, 1998. The decrease in revenues was primarily
attributable to lower electrochemical unit ("ECU") prices. ECU prices were
approximately 36% lower during the first quarter of 1999, versus the first
quarter of 1998. Partially offsetting this decrease was a slight increase in
chlor-alkali sales volumes in 1999, as 1998 production volumes were negatively
impacted by three failed transformers, which are now fully operational.
Total revenues at the Company's downstream subsidiaries did not materially
change during the first quarter of 1999 compared to the first quarter of 1998.
KNA became a wholly-owned subsidiary of the Company on September 30, 1998 and
its results are included in the Company's consolidated financial statements
since that date; this increased reported revenues during the quarter ended March
31, 1999 by $3.6 million. However, the majority of this increase was offset by
decreases resulting from the disposition of the household bleach operations
during the third quarter of 1998 and the pool chemicals business in the fourth
quarter of 1998. These businesses were considered non-strategic and the Company
retained supply agreements with the purchasers.
Cost of Sales. Cost of sales decreased $11.2 million, or approximately 17%,
for the three months ended March 31, 1999, as compared to the same period in
1998. $10.9 million of this decrease was due to the modification of the
Company's retiree health care benefits. Benefits under the plan to current
retirees were not impacted, but current employees will no longer receive
benefits under this plan. The inclusion of KNA in the consolidated cost of sales
increased the Company's cost of sales. This increase was offset by lower cost of
sales as a result of the disposal of the operations discussed above.
Gross Profit. Gross profit margin decreased to 21% in 1999 from 31% in 1998
primarily as a result of the ECU pricing decrease and the other items discussed
above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $2.8 million, or approximately 23%, for the
three months ended March 31, 1999. $1.6 million of this decrease was due to the
modification of the Company's retiree health care benefits discussed above. The
remaining decrease is primarily due to the absence of incentive compensation
accruals during 1999. The inclusion of KNA in the 1999 consolidated results
increased selling, general and administrative expenses, partially offsetting
these decreases.
Equity in Net Loss of Unconsolidated Subsidiary. Equity in net loss of
unconsolidated subsidiaries represented the Company's 50% ownership in KNA prior
to September 30, 1998. Before September 30, 1998, Pioneer owned 50% of KNA,
which owned 100% of KWT, Inc. ("KWT"). The remaining 50% of KNA was owned
indirectly by Pioneer's parent, Pioneer Companies, Inc. ("PCI"). On September
30, 1998, KNA exchanged its ownership in KWT for the remaining 50% of KNA held
by PCI. No gain or loss was recognized on this exchange. Following this
transaction, KNA's results of operations are reflected in the consolidated
results of operations of the Company.
Interest Expense, Net. Interest expense, net decreased slightly in 1999 as
a result of lower interest rates in 1999 compared to 1998.
Other Income (Expense), Net. Other income (expense), net decreased from an
income amount of $3.1 million for the quarter ended March 31, 1998 to an expense
of $1.0 million for the quarter ended March 31, 1999. Other income in 1998
included a gain from the settlement of a lawsuit, an insurance recovery and a
state franchise tax refund. The 1999 amount was primarily a loss resulting from
the sale of the iron chlorides business in the first quarter of 1999 of $1.0
million.
Net Income (Loss). Due to the factors described above, net loss for the
three months ended March 31, 1999 was $5.7 million, compared to net income of
$3.6 million for the same period in 1998.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Amendment No. 1, dated March 29, 1999, to Amended and
Restated Loan and Security Agreement dated as of May
29, 1998, among Pioneer Americas, Inc., PCI Chemicals
Canada Inc., the lenders party thereto, Bank of
America National Trust and Savings Association, as
Administrative Agent and U.S. Funding Agent, and Bank
America Robertson Stephens, as Arranger.
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, 1999.
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.
April 27, 1999 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>
10 Amendment No. 1, dated March 29, 1999, to Amended and
Restated Loan and Security Agreement dated as of May
29, 1998, among Pioneer Americas, Inc., PCI Chemicals
Canada Inc., the lenders party thereto, Bank of
America National Trust and Savings Association, as
Administrative Agent and U.S. Funding Agent, and Bank
America Robertson Stephens, as Arranger.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10
AMENDMENT NO. 1 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
March 29, 1999
Pioneer Americas, Inc., formerly known as
Pioneer Americas Acquisition Corp.
700 Louisiana Street
Suite 4300
Houston, Texas 77002
Attn: Chief Financial officer and Corporate Secretary
and
PCI Chemicals Canada Inc./PCI Chimie Canada Inc. ("PCI Canada")
630 Rene-Levesque Boulevard West
31st Floor
Montreal, Quebec
Canada H3B 1S6
Ladies and Gentlemen:
Reference is made to the Amended and Restated Loan and Security
Agreement dated as of May 29, 1998 among Pioneer Americas, Inc., formerly known
as Pioneer Americas Acquisition Corp. ("PAI"), PCI Chemicals Canada Inc./PCI
Chimie Canada Inc. ("PCI Canada"), the lenders from time to time party thereto
(the "Lenders"), Bank of America National Trust and Savings Association,
formerly known as Bank of America Illinois, as Administrative Agent, as U.S.
Funding Agent and as a Lender and Bank America Robertson Stephens, as Arranger
(the "Loan Agreement"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such temps in the Loan Agreement.
1. Background. On or about August 20, 1998, Pioneer Americas, Inc.
merged with and into Pioneer Americas Acquisition Corp., with Pioneer Americas
Acquisition Corp. being the surviving entity and changing its name to "Pioneer
Americas, Inc." (the "Merger"). As a consequence of the Merger, "Pioneer
Americas, Inc." became the name of one of the Borrowers under the Loan
Agreement. Borrowers have requested that Agents and Lenders agree to amend the
Loan Agreement to reflect the foregoing transactions. In addition, Borrowers
have requested that Agents and Lenders agree to amend the Loan Agreement in
certain other respects, all as set forth herein.
Agents and Lenders have agreed to the foregoing, on the terms and
conditions described herein.
2. Amendments. The Loan Agreement is hereby amended as follows:
(a) To the extent required by the context, references in the Loan
Agreement to each of "PAAC" and "PAI" are hereby deemed to be references to
"Pioneer Americas, Inc., formerly known as Pioneer Americas Acquisition Corp."
<PAGE> 2
(b) All references to PAI as a "Designated Subsidiary" are hereby
deleted from the Loan Agreement.
(c) BankAmerica Robertson Stephens has been replaced as Arranger by
NationsBanc Montgomery Securities. Consequently, all references in the Loan
Agreement to "Bank America Robertson Stephens" as the "Arranger" are hereby
deleted and replaced with references to "NationsBanc Montgomery Securities".
(d) The definition of the term "Borrowing Base" contained in Section
1.l of the Loan Agreement is hereby amended and restated in its entirety, as
follows:
"'Borrowing Base" means an amount equal to 85% of the U.S. Dollar
Equivalent of the net amount (after deduction of such reserves and allowances as
Administrative Agent deems proper and necessary in its reasonable business
judgment) of Eligible Account Receivable of each Borrower and each Designated
Subsidiary.'"
(e) The definition of the term "Kemwater" contained in Section 1.1 of
the Loan Agreement is hereby amended and restated in its entirety, as follows:
"'Kemwater means KWT, Inc., a Delaware corporation and a Subsidiary of
Parent.'"
(f) The definition of the term "Loan Limit" contained in Section 1.1 of
the Loan Agreement is hereby amended and restated in its entirety, as follows:
"'Loan Limit' at any time means with respect to (a) PAAC, an amount
equal to US$27,000,000 (the "PAAC Maximum") and (b) PCI Canada, an amount equal
to the U.S. Dollar Equivalent of $23,000,000 (the "PCI Canada Maximum"), in each
case, minus any permanent reductions in such amounts made pursuant to Section
2.1.2, provided, that the PAAC Maximum and the PCI Canada Maximum may be
reallocated by Borrowers two times during each 12 month period hereafter, by
means of a written notice executed by Borrowers and received by Administrative
Agent at least thirty (30) days prior to the effective date of such
reallocation, so long as (i) the aggregate amount of the PAAC Maximum and the
PCI Maximum does not at any time exceed the U.S. Dollar Equivalent of
$50,000,000 minus any permanent reductions in such amount made pursuant to
Section 2.1.2, (ii) the PAAC Maximum is not at any time less than US$25,000,000
or greater than the sum of the Maximum Loan Amounts of the U.S. Lenders, (iii)
the PCI Canada Maximum is not at any time greater than the U.S. Dollar
Equivalent of the sum of the Maximum Loan Amounts of the Canadian Lenders and
(iv) at the effective date of each reallocation, Borrowers deliver to
Administrative Agent such amended and restated Notes as Administrative Agent
shall reasonably request in order to evidence the reallocated Loan Limits."
(g) The definition of the term "Revolving Credit Amount" contained in
Section 1.1 of the Loan Agreement is hereby amended and restated in its
entirety, as follows:
"'Revolving Credit Amount' means an amount equal to US$50,000,000, as
such amount may be reduced from time to time pursuant to this Agreement."
(h) A new definition of the term "TCP" is hereby inserted into Section
1.1 of the Loan Agreement, in appropriate alphabetical order, as follows:
"'TCP' means T.C. Products, Inc., a Washington corporation and a
Subsidiary of TCH.
2
<PAGE> 3
(i) Section 4.29 of the Loan Agreement is hereby amended and restated
in its entirety, as follows:
"4.29 Holding Companies: Licensing Companies.
As of March 29, 1999, each of Parent, PAI, BMPC, TCH and Imperial is a
holding company without material assets, operations or business, other than the
ownership by (a) Parent of the common stock of PAI and Pioneer Water
Technologies, Inc., (b) PAI of the common stock of its Subsidiaries, (c) TCH of
the common stock of TCP and (d) Imperial of the common stock of Kemwater North
America Company. As of March 29, 1999, neither of East or Pioneer Licensing,
Inc. has any material assets, operations or business, other than the ownership
of certain intellectual property held for license to the other Companies in the
ordinary course of business. As of March 29, 1999, none of Parent, PAI, BMPC,
East, TCH, Imperial or Pioneer Licensing, Inc. has any Indebtedness or other
obligations other than Indebtedness of each of them in respect of the Seller
Notes, the Senior Secured Loans, the Term Loans and this Agreement."
(j) Section 5.32 of the Loan Agreement is hereby amended and restated
in its entirety, as follows:
"5.32 Interest Coverage Ratio.
Not permit the Interest Coverage Ratio (a) measured on the last day of
any calendar month for the preceding twelve (12) month period or for the period
from the beginning of the then current Fiscal Year through such measurement
date, whichever yields the higher ratio, (a) to be less than 1.1:1.0 for more
than one period of consecutive measurement dates, such period not to exceed
fifteen (15) months, OR (b) within such period, to be less than 0.7:1.0 on any
measurement date (except as provided in clause (c) below) OR (c) to be less than
0.6:1.0 on any measurement date between October 1, 1999 and March 31, 2000,
inclusive. For purposes of this Section 5.32. interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases."
(k) Section 6.1(n)(iii) of the Loan Agreement is hereby amended to
delete therefrom the reference to "PAAC" and replace it with a reference to
"Parent".
(l) The Maximum Loan Amounts of the Lenders set forth in the signature
pages to the Loan Agreement are hereby amended and restated in their entirety,
as follows:
<TABLE>
<CAPTION>
US Lender Maximum Loan Amount
--------- -------------------
<S> <C>
Bank of America National Trust and US $ 3,858,000
Savings Association
Transamerica Business Credit Corporation US $11,571,000
Sanwa Business Credit Corporation US $11,571,000
--------------
Total US $27,000,000
</TABLE>
<TABLE>
<CAPTION>
Canadian Lender Maximum Loan Amount
--------------- -------------------
<S> <C>
Bank of America Canada US Dollar Equivalent of $15,333,000
Credit Lyonnais Canada US Dollar Equivalent of $ 7,667,000
-----------------------------------
Total US Dollar Equivalent of $23,000,000
</TABLE>
(m) This Amendment No. 1 to Amended and Restated Loan and Security
Agreement (the
3
<PAGE> 4
"Amendment") shall have the effect of amending the Loan Agreement and the
Related Agreements as appropriate to express the agreements contained herein. In
all other respects, the Loan Agreement and the Related Agreements shall remain
in full force and effect in accordance with their respective terms.
3. Conditions to Effectiveness. This Amendment shall be effective upon
delivery of this Amendment to Administrative Agent, executed by each Agent and
each Lender and accepted by each Borrower and each other Obligor, together with
the following, all in form and substance satisfactory to Administrative Agent:
(a) A new Note payable to each Lender and executed by the applicable
Borrower, reflecting its revised Maximum Loan Amount;
(b) A certificate executed by each Borrower to the effect that no Event
of Default or Unmatured Event of Default has occurred and is continuing and that
all representations and warranties contained in Section 4 of the Loan Agreement
remain true and correct in all material respects as through made on the date
thereof, except for those representations and warranties which were expressly
made as of a specific date; and
(c) a $125,000 amendment fee paid by Borrowers to Administrative Agent,
for distribution to the Lenders in accordance with their respective Pro Rata
Shares.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, formerly
known as BANK OF AMERICA ILLINOIS, as
Administrative Agent and U.S. Funding Agent
By:
------------------------------------
Its:
-----------------------------------
BANK OF AMERICA CANADA, as Canadian
Funding Agent
By:
------------------------------------
Its:
-----------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, formerly
known as BANK OF AMERICA ILLINOIS, as
a U.S. Lender
By:
------------------------------------
Its:
-----------------------------------
TRANSAMERIA BUSINESS CREDIT
CORPORATION, as a U.S. Lender
By:
------------------------------------
Its:
-----------------------------------
4
<PAGE> 5
FLEET BUSINESS CREDIT CORPORATION,
formerly known as SANWA BUSINESS
CREDIT CORPORATION, as a U.S. Lender
By:
------------------------------------
Its:
-----------------------------------
BANK OF AMERICA CANADA,
as a Canadian Lender
By:
------------------------------------
Its:
-----------------------------------
By:
------------------------------------
Its:
-----------------------------------
Acknowledged and agreed to this
____ day of March, 1999
PIONEER AMERICA, INC.,
formerly known as PIONEER
AMERICAS ACQUISITION CORP.
By:
------------------------------------
Its:
-----------------------------------
PCI CHEMICALS CANADA INC./
PCI CHIMIE CANADA INC.
By:
------------------------------------
Its:
-----------------------------------
5
<PAGE> 6
Acknowledgement and Acceptance of Subsidiary Guarantors
Each of the undersigned is a party to the Master Corporate Guaranty
dated as of May 29, 1998 in favor of Bank of America National Trust and Savings
Association, formerly known as Bank of America Illinois, as Administrative Agent
for the benefit of Agents and lenders (the "Guaranty"), pursuant to which each
of the undersigned has guaranteed the Liabilities of each Borrower under the
Loan Agreement and the Related Agreements. Each of the undersigned hereby
acknowledges receipt of the foregoing Amendment No. 1 to Amended and Restated
Loan And Security Agreement, accepts and agrees to be bound by the terms
thereof, ratifies and confirms all of its obligations under the Guaranty, and
agrees that the Guaranty shall continue in full force and effect as to it,
notwithstanding such amendment.
Acknowledged and Agreed to
this ____ day of March, 1999.
PIONEER CHLOR ALKALI COMPANY, INC.
IMPERIAL WEST CHEMICAL CO.
ALL-PURE CHEMICAL CO.
BLACK MOUNTAIN POWER COMPANY
PCI CAROLINA, INC.
By:
------------------------------------
---------------------------------------
of each company listed above
6
<PAGE> 7
Acknowledgement and Acceptance of Subsidiary Guarantors
Each of the undersigned is a party to the Master Corporate Guaranty
dated as of May 29, 1998 in favor of Bank of America National Trust and Savings
Association, formerly known as Bank of America Illinois, as Administrative Agent
for the benefit of Agents and lenders (the "Guaranty"), pursuant to which each
of the undersigned has guaranteed the Liabilities of each Borrower under the
Loan Agreement and the Related Agreements. Each of the undersigned hereby
acknowledges receipt of the foregoing Amendment No. 1 to Amended and Restated
Loan And Security Agreement, accepts and agrees to be bound by the terms
thereof, ratifies and confirms all of its obligations under the Guaranty, and
agrees that the Guaranty shall continue in full force and effect as to it,
notwithstanding such amendment.
Acknowledged and Agreed to
this ____ day of March, 1999.
PIONEER AMERICAS, INC. formerly known
as PIONEER AMERICAS ACQUISITION CORP.
By:
------------------------------------
---------------------------------------
of each company listed above
PCI CHEMICALS CANADA INC./
PCI CHIMIE CANADA INC.
By:
------------------------------------
Its:
-----------------------------------
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 36,635
<SECURITIES> 0
<RECEIVABLES> 42,687
<ALLOWANCES> 1,851
<INVENTORY> 27,907
<CURRENT-ASSETS> 108,556
<PP&E> 407,328
<DEPRECIATION> 79,601
<TOTAL-ASSETS> 702,309
<CURRENT-LIABILITIES> 62,168
<BONDS> 564,020
0
0
<COMMON> 1
<OTHER-SE> 43,171
<TOTAL-LIABILITY-AND-EQUITY> 702,309
<SALES> 68,039
<TOTAL-REVENUES> 68,039
<CGS> 53,750
<TOTAL-COSTS> 53,750
<OTHER-EXPENSES> 9,407
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,917
<INCOME-PRETAX> (8,042)
<INCOME-TAX> (2,331)
<INCOME-CONTINUING> (5,711)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,711)
<EPS-PRIMARY> (5,711)
<EPS-DILUTED> (5,711)
</TABLE>
