Pioneer Announces 2004 Results HOUSTON, March 28
/PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (OTC:PONR)
(BULLETIN BOARD: PONR) today reported that for the fourth quarter
of 2004 it had net income of $4.5 million, or $0.41 per diluted
share, compared to a net loss of $5.2 million, or $0.52 per diluted
share, in the fourth quarter of 2003. Revenues for the fourth
quarter of 2004 were $115.0 million as compared to $93.3 million
for the same period in 2003. For the year ended December 31, 2004,
Pioneer reported a net loss of $1.2 million, or $0.12 per diluted
share, on revenues of $407.1 million, compared to net income of
$18.2 million, or $1.79 per diluted share, on revenues of $378.7
million for the year ended December 31, 2003. Comparisons between
the calendar year periods are affected by certain charges related
to the settlement of derivatives-related litigation in early 2003.
Pioneer realized average electrochemical unit, or ECU, netbacks of
$480 in the fourth quarter of 2004 and $393 for the full year,
compared to average ECU netbacks of $366 in the fourth quarter of
2003 and $382 for all of 2003. Production also increased in 2004,
with total production of 704,000 ECUs in 2004, representing
approximately 97% of Pioneer's production capacity, compared to
671,000 ECUs in 2003, representing approximately 93% of production
capacity. Revenues also improved in the 2004 periods as compared to
2003 as a result of higher volumes and prices for sales of
Pioneer's other products. A $12.7 million increase in cost of sales
- products for 2004 resulted from higher variable costs during the
year, primarily attributable to $10.8 million of increased
electricity and salt costs resulting from higher prices for both
raw materials and increased production levels, $3.5 million of
increased costs related to purchases of caustic soda for resale,
and an $8.8 million increase in freight costs resulting from higher
volumes and fuel surcharges. Depreciation in 2004 was also $3.9
million higher than in 2003, resulting from a charge relating to
the decision in the first quarter of 2004 to discontinue
chlor-alkali production in Tacoma. The increase in variable costs
was offset to an extent by lower fixed costs, including a $3.3
million decrease in personnel costs as a result of an
organizational efficiency project that was implemented during the
year and that Pioneer refers to as Project STAR, the absence of
$3.5 million in maintenance projects that were completed in 2003
and the absence of a $9.5 million environmental charge recorded in
2003. A fourth quarter increase in cost of sales - product of $3.4
million as compared to the year-earlier period resulted from higher
variable costs and lower fixed costs in the same categories.
Selling, general and administrative expenses in 2004 were $4.4
million higher than in 2003, resulting from higher consulting fees
of $4.1 million attributable to Project STAR and a $2.4 million
increase in employee benefit costs in 2004, partially offset by
$1.8 million of decreased bad debt expense. Fourth quarter selling,
general and administrative expenses were $7.2 million and $3.2
million in 2004 and 2003, respectively. The $4.0 million increase
was primarily related to higher employee benefit costs of $3.1
million and higher professional fees of $0.9 million in 2004.
Significant charges and credits, not specifically related to plant
operating and maintenance activities and which affect the
comparability of operating income between periods, are as follows
(amounts in millions): Three Months Ended Year Ended December 31,
December 31, 2004 2003 2004 2003 Operating income (loss) $14.8 $0.3
$22.1 $39.8 Charges (credits) Cost of sales - products $--- $---
$--- $9.5 Cost of sales - derivatives --- --- --- 21.0 Change in
fair value of derivatives --- --- --- (87.3) Asset impairment ---
--- --- 40.8 Other items 0.5 0.8 4.0 0.3 Charges and credits noted
above are detailed as follows: * In the first quarter of 2003, cost
of sales - products included $9.5 million in Pioneer's reserves for
environmental remediation liabilities, based on an analysis of
environmental concerns at all of Pioneer's plants. * In the first
quarter of 2003, Pioneer and the Colorado River Commission settled
their dispute over certain derivative positions relating to the
supply of power to Pioneer's Henderson facility. As a result, the
receivable of $21.0 million that Pioneer had recorded for estimated
net proceeds from matured derivatives was reversed, and the net
liability of $87.3 million that had been recorded for the net
mark-to-market loss on outstanding derivative positions was also
reversed. * Pioneer recorded an impairment charge of $40.8 million
in the first quarter of 2003, since the settlement with the
Colorado River Commission resulted in the use of higher-cost power
at the Henderson facility, and recognition of an impairment of the
facility's asset value. * Pioneer recognized employee severance and
related benefits costs in 2004 of $4.0 million related to Project
STAR and the transfer of bleach production from Cornwall, Ontario
to Becancour, Quebec. Pioneer reported other expense of $2.8
million in 2004, consisting of currency exchange loss, compared to
$5.8 million of currency exchange loss in 2003. For the three
months ended December 31, 2004, other expense included $1.7 million
of currency exchange loss as compared to $1.3 million of currency
exchange loss in the comparable period in the prior year. Pioneer's
income tax expense in 2004 was $2.1 million, compared to an income
tax benefit of $3.3 million in 2003. In 2004 there was a benefit
from the net loss of Canadian operations, but a valuation allowance
in a greater amount was recorded against Pioneer's Canadian capital
loss carryforward as a result of a determination that it is
unlikely that the carryforward will be applied against future
capital gains. At December 31, 2004, Pioneer had liquidity of $43.0
million, which included cash and cash equivalents of $16.2 million
and available borrowings under Pioneer's revolving credit facility
of $26.8 million, net of letters of credit outstanding as of such
date. Michael Y. McGovern, Pioneer's President and Chief Executive
Officer, stated, "There were several positive developments for
Pioneer in 2004. Strong demand for both chlorine and caustic soda
during the year resulted in increased production and higher ECU
netbacks, which averaged $480 in the fourth quarter. During the
year we also implemented Project STAR, an important organizational
efficiency project that has provided benefits to our cost
structure. We believe those developments were important factors
that contributed to our ability to sell common stock in an
underwritten public offering in December. The $22.1 million in net
proceeds of the offering were used to reduce our outstanding
indebtedness, with a major portion of that reduction occurring in
January 2005." Pioneer, based in Houston, manufactures chlorine,
caustic soda, bleach, hydrochloric acid and related products used
in a variety of applications, including water treatment, plastics,
pulp and paper, detergents, agricultural chemicals, pharmaceuticals
and medical disinfectants. The Company owns and operates four
chlor-alkali plants and several downstream manufacturing facilities
in North America. The Company has filed its annual report on Form
10-K for the year ended December 31, 2004, and has posted it to its
Internet web site, so it is readily accessible. Other information
and press releases of Pioneer Companies, Inc. can also be obtained
from its Internet web site at http://www.piona.com/ . Pioneer will
conduct a teleconference on March 30, 2005, at 1:00 p.m. Central
time in order to discuss its 2004 financial results. Individuals
who are interested in listening to the teleconference may call
(800) 633-8548 at that time and request to listen to the Pioneer
earnings teleconference. A replay of the teleconference will be
available from 3:00 p.m. (Central time) on March 30, 2005, until
3:00 p.m. on April 1, 2005, by dialing (800) 633-8284, reservation
#21236988. Certain statements in this news release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act. Forward- looking statements
relate to matters that are not historical facts. Such statements
involve risks and uncertainties, including, but not limited to,
Pioneer's high financial leverage, global political and economic
conditions, the effects of our organizational efficiency project,
the demand and prices for Pioneer's products, Pioneer and industry
production volumes, competitive prices, the cyclical nature of the
markets for many of Pioneer's products and raw materials, the
effect of Pioneer's results of operations on its debt agreements,
and other risks and uncertainties described in Pioneer's filings
with the Securities and Exchange Commission. Actual outcomes may
vary materially from those indicated by the forward-looking
statements. PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share data) Three Months Ended
Year Ended December 31, December 31, 2004 2003 2004 2003 Revenues
$115,038 $93,327 $407,115 $378,675 Cost of sales - product (92,526)
(89,090) (353,454) (340,804) Cost of sales - derivatives --- ---
--- (20,999) Total cost of sales (92,526) (89,090) (353,454)
(361,803) Gross profit 22,512 4,237 53,661 16,872 Selling, general
and administrative expenses (7,226) (3,164) (27,608) (23,204)
Change in fair value of derivatives --- --- --- 87,271 Asset
impairment --- --- --- (40,818) Other items (535) (786) (3,974)
(340) Operating income 14,751 287 22,079 39,781 Interest expense,
net (4,575) (4,879) (18,356) (19,064) Other expense, net (1,725)
(1,282) (2,838) (5,816) Income (loss) before income taxes 8,451
(5,874) 885 14,901 Income tax (expense) benefit (3,916) 684 (2,127)
3,286 Net income (loss) $4,535 $(5,190) $(1,242) $18,187 Income
(loss) per share: Basic $0.44 $(0.52) $(0.12) $1.82 Diluted $0.41
$(0.52) $(0.12) $1.79 Weighted average number of shares
outstanding: Basic 10,359 10,003 10,113 10,002 Diluted 10,941
10,327 10,113 10,169 PIONEER COMPANIES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands) December 31, December 31, 2004 2003
Assets Current assets $90,983 $61,471 Net property, plant and
equipment 172,198 189,534 Other assets, net 4,359 3,931 Excess
reorganization value over the fair value of identifiable assets
84,064 84,064 Total assets $351,604 $339,000 Liabilities and
stockholders' equity Current liabilities $42,819 $48,881 Long-term
debt, less current portion 200,797 203,803 Other long-term
liabilities 70,093 67,326 Total stockholders' equity 37,895 18,990
Total liabilities and stockholders' equity $351,604 $339,000
PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands) Year Ended December 31, 2004 2003 Operating activities:
Net income (loss) $(1,242) $18,187 Adjustments to reconcile net
income (loss) to net cash flows from operating activities:
Depreciation and amortization 25,514 21,551 Provision for (recovery
of) loss on accounts receivable (384) 1,296 Deferred tax expense
(benefit) 2,127 (3,142) Derivatives - cost of sales and change in
fair value --- (66,272) Asset impairment --- 40,818 (Gain) loss on
disposal of assets (10) 761 Currency exchange (gain) loss 2,840
5,825 Net effect of changes in operating assets and liabilities
(9,552) (4,763) Other 346 --- Net cash flows from operating
activities 19,639 14,261 Investing activities: Capital expenditures
(8,384) (9,998) Proceeds from disposal of assets 315 --- Net cash
flows used in investing activities (8,069) (9,998) Financing
activities: Net borrowings (payments) under revolving credit
arrangements (16,823) 2,119 Repayments of long-term debt (3,079)
(7,494) Proceeds from issuance of stock, net 22,374 8 Net cash
flows from (used in) financing activities 2,472 (5,367) Effect of
exchange rate changes on cash 203 261 Net change in cash and cash
equivalents 14,245 (843) Cash and cash equivalents at beginning of
period 1,946 2,789 Cash and cash equivalents at end of period
$16,191 $1,946 DATASOURCE: Pioneer Companies, Inc. CONTACT: Gary
Pittman of Pioneer Companies, Inc., +1-713-570-3200 Web site:
http://www.piona.com/
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