<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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_________TO__________
COMMISSION FILE NUMBER 33-98828
PIONEER CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 06-1420850
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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700 LOUISIANA STREET, SUITE 4300, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 570-3200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
On April 30, 2000, 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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PIONEER CORPORATION OF AMERICA
TABLE OF CONTENTS
PART I--FINANCIAL INFORMATION
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<CAPTION>
Page
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Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations--Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows--Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
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PART II--OTHER INFORMATION
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<S> <C>
Item 6. Exhibits and Reports on Form 8-K 9
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Certain statements in this Form 10-Q regarding future expectations of the
Company's business and the Company's results of operations may be regarded as
"forward looking statements" within the meaning of the Securities Litigation
Reform Act. Such statements are subject to various risks, including the
Company's high financial leverage, the cyclical nature of the markets for many
of the Company's products and raw materials and other risks. Actual outcomes may
vary materially.
2
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PART I --FINANCIAL INFORMATION
PIONEER CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------------ -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,003 $ 2,903
Accounts receivable, net of allowance for doubtful accounts of $1,521 at
March 31, 2000 and $1,592 at December 31, 1999 47,965 50,063
Inventories 24,492 23,130
Prepaid expenses 5,108 5,730
-------- --------
Total current assets 83,568 81,826
Property, plant and equipment:
Land 10,622 10,622
Buildings and improvements 60,821 61,014
Machinery and equipment 332,993 333,094
Construction in progress 21,161 19,435
-------- --------
425,597 424,165
Less: accumulated depreciation (110,940) (103,096)
-------- --------
314,657 321,069
Due from affiliates 15,567 15,231
Other assets, net of accumulated amortization of $10,567 at March 31, 2000
and $9,206 at December 31, 1999 71,869 66,965
Excess cost over fair value of net assets acquired, net of accumulated
amortization 190,180 192,464
-------- --------
of $34,382 at March 31, 2000 and $32,095 at December 31, 1999
Total assets $675,841 $677,555
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS) Current
liabilities:
Accounts payable $ 25,929 $ 28,796
Accrued liabilities 35,383 30,716
Current portion of long-term debt 2,609 2,609
-------- --------
Total current liabilities 63,921 62,121
Long-term debt, less current portion 588,210 583,260
Accrued pension and other employee benefits 15,482 15,091
Other long-term liabilities 16,577 16,140
Commitments and contingencies (Note 4) 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 (73,833) (64,541)
-------- --------
Total stockholder's equity (deficiency in assets) (8,349) 943
Total liabilities and stockholder's equity (deficiency in assets) $675,841 $677,555
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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PIONEER CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
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<S> <C> <C>
Revenues $ 81,687 $ 68,039
Cost of sales 70,717 53,750
Gross profit 10,970 14,289
Selling, general and administrative expenses 10,828 9,408
Unusual charges 872 1,017
------- --------
Operating income (730) 3,864
Interest expense, net (13,102) (11,917)
Other income, net
128 11
Loss before taxes (13,704) (8,042)
Income tax benefit (4,412) (2,331)
Net loss $ (9,292) $ (5,711)
======== ========
Net loss per share $ (9,292) $ (5,711)
======== ========
Weighted average number of common shares outstanding
1 1
======== ========
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See notes to consolidated financial statements.
4
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PIONEER CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
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<S> <C> <C>
Operating activities:
Net loss $ (9,292) $ (5,711)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 12,387 12,886
Net change in deferred taxes (4,590) (2,331)
Reduction in post-retirement medical expense -- (12,530)
Loss on disposal of assets 872 1,057
Foreign exchange loss (gain) 25 (260)
Net effect of changes in operating assets and liabilities 2,195 (388)
------- --------
Net cash flows from operating activities 1,597 (7,277)
------- --------
Investing activities:
Capital expenditures (3,802) (7,270)
Proceeds received from disposals of assets 529 1,143
------- ---------
Net cash flows from investing activities (3,273) (6,127)
------- ---------
Financing activities:
Net proceeds under revolving credit arrangements 5,538 --
Payments on long-term debt (589) (665)
------- --------
Net cash flows from financing activities 4,949 (665)
------- --------
Effect of exchange rate on cash (173) 111
------- --------
Net change in cash 3,100 (13,958)
Cash at beginning of period 2,903 50,593
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Cash at end of period $ 6,003 $ 36,635
======= ========
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See notes to consolidated financial statements.
5
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PIONEER CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet at March 31, 2000 and the consolidated
statements of operations and cash flows for the periods presented are unaudited
and reflect all adjustments, consisting of normal recurring items, which
management considers necessary for a fair presentation. Operating results for
the first three months of 2000 are not necessarily indicative of results to be
expected for the year ending December 31, 2000. The consolidated financial
statements include the accounts of Pioneer Corporation of America ("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. Certain amounts have been reclassified in prior years to conform to
the current year presentation.
The consolidated balance sheet at December 31, 1999 is derived from the
December 31, 1999 audited consolidated financial statements, but does not
include all disclosures required by 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, 1999.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effects of changes in operating assets and liabilities are as follows:
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THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Accounts receivable $ 2,052 $ 5,754
Due from affiliates (446) (1,086)
Inventories (1,405) (1,800)
Prepaid expenses 510 (52)
Other assets 825 (28)
Accounts payable (2,526) (4,076)
Accrued liabilities 4,562 814
Other long-term liabilities (1,377) 86
------- -------
Net change in operating assets and liabilities $ 2,195 $ (388)
======= =======
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Following are supplemental disclosures of cash flow information:
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
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<S> <C> <C>
Cash payments for:
Interest $ 4,862 $ 3,479
Income taxes $ 59 $ 351
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3. INVENTORIES
Inventories consist of the following:
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<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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<S> <C> <C>
Raw materials, supplies and parts $ 15,086 $ 16,822
Finished goods and work-in-process 7,056 5,350
Inventories under exchange agreements 2,350 958
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$ 24,492 $ 23,130
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6
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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. ("PCI Canada"), 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, PCI
Canada and the subsidiary note guarantors comprise all of the direct and
indirect subsidiaries of Pioneer. Summarized financial information of PCI Canada
and the guarantors of these notes are as follows:
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<CAPTION>
PCI NOTE CONSOLIDATED PCI NOTE CONSOLIDATED
CANADA GUARANTORS COMPANY CANADA GUARANTORS COMPANY
------------- ------------- ------------- ------------- ------------- --------------
AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999
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<S> <C> <C> <C> <C> <C> <C>
Current assets $ 19,463 $ 64,105 $ 83,568 $ 22,073 $ 59,753 $ 81,826
Non-current assets 158,986 433,287 592,273 160,415 435,314 595,729
Current liabilities 26,112 37,809 63,921 23,961 38,160 62,121
Non-current liabilities 189,878 430,391 620,269 184,565 429,926 614,491
FOR THE THREE MONTHS ENDED MARCH 31, 2000 FOR THE THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------- -----------------------------------------------
Revenues $ 31,892 $ 49,795 $ 81,687 $ 26,406 $ 41,633 $ 68,039
Gross profit 5,232 5,738 10,970 4,212 10,077 14,289
Net loss (1,742) (7,550) (9,292) (1,709) (4,002) (5,711)
</TABLE>
Separate financial statements of PCI Canada and the guarantors of the PCI
Canada notes are not included as management believes that separate financial
statements of these entities are not material to investors.
7
<PAGE> 8
6. RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues. Revenues increased by $13.6 million, or approximately 20%, to
$81.7 million for the three months ended March 31, 2000, as compared to the
three months ended March 31, 1999. The increase in revenues was primarily
attributable to higher electrochemical unit ("ECU") prices and greater volume.
Cost of Sales. Cost of sales increased $17.0 million, or approximately
32%, for the three months ended March 31, 2000, as compared to the same period
in 1999. $10.9 million of this increase was due to the absence of the gain on
modification of the Company's retiree health care benefits during the first
quarter of 1999. The remaining increase in cost of sales was principally due to
greater volume and higher power costs.
Gross Profit. Gross profit margin decreased to 13% in 2000 from 21% in
1999 primarily as a result of the cost of sales increase discussed above,
partially offset by the ECU pricing increase.
Unusual Charges. Unusual charges for the three months ended March 31, 2000
included a $0.9 million loss related to the Company's alum coagulant business in
Antioch, California. Unusual charges in 1999 were primarily a loss of $1.0
million resulting from the sale of the Company's iron chlorides business in the
first quarter of 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.4 million, or approximately 15%, for the
three months ended March 31, 2000. This increase was due to the absence of the
gain on modification of the Company's retiree health care benefits discussed
above of $1.6 million. Without this item, such expense would have experienced a
slight decrease.
Interest Expense, Net. Interest expense increased in 2000 as a result of
interest incurred on revolving credit balances and higher variable interest
rates in 2000 as compared to 1999.
Net Loss. Due to the factors described above, net loss for the three
months ended March 31, 2000 was $9.3 million, compared to a net loss of $5.7
million for the same period in 1999.
8
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER AMERICAS, INC.
May 10, 2000 By: /s/ Philip J. Ablove
------------------------------
Philip J. Ablove
Executive Vice President and
Chief Financial Officer
9
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,003
<SECURITIES> 0
<RECEIVABLES> 49,486
<ALLOWANCES> 1,521
<INVENTORY> 24,492
<CURRENT-ASSETS> 83,568
<PP&E> 425,597
<DEPRECIATION> 110,940
<TOTAL-ASSETS> 675,841
<CURRENT-LIABILITIES> 63,921
<BONDS> 588,210
0
0
<COMMON> 1
<OTHER-SE> (8,350)
<TOTAL-LIABILITY-AND-EQUITY> 675,841
<SALES> 81,687
<TOTAL-REVENUES> 81,687
<CGS> 70,717
<TOTAL-COSTS> 70,717
<OTHER-EXPENSES> 10,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,102
<INCOME-PRETAX> (13,704)
<INCOME-TAX> (4,412)
<INCOME-CONTINUING> (9,292)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,292)
<EPS-BASIC> (9,292)
<EPS-DILUTED> (9,292)
</TABLE>
