PONR Pioneer Companies New 2/02 (MM)

HOUSTON, Nov. 14 /PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (NASDAQ:PONR) today reported net income of $20.1 million, or $1.70 per diluted share, on revenues of $132.8 million for the three months ended September 30, 2005, as compared to net income of $3.9 million, or $0.38 per diluted share, on revenues of $106.0 million for the third quarter of 2004. For the nine months ended September 30, 2005, our net income was $59.2 million, or $5.02 per diluted share, on revenues of $384.7 million, as compared to a net loss of $5.8 million, or $0.58 per diluted share, on revenues of $295.1 million for the nine months ended September 30, 2004. During the quarter ended September 30, 2005, our average ECU netback was $581, which was $4 higher than the preceding quarter and $172 higher than the third quarter of 2004. For the nine months ended September 30, 2005, the average ECU netback was $569, compared to an average of $366 for the year- earlier period. The increases in revenues during the three and nine months periods ended September 30, 2005, as compared to the same periods in 2004, primarily resulted from the higher ECU netbacks, offset in part by lower ECU sales volumes during the periods, which resulted from reduced production levels and lower levels of purchases of product for resale. Revenues in both the three- and nine-month periods ended September 30, 2005, also reflected higher prices for bleach and our other products. Our chlor-alkali plants operated at approximately 90% of annualized practical capacity during the third quarter of 2005. Our St. Gabriel, Louisiana plant was shut down as a precaution when Hurricanes Katrina and Rita approached the Gulf Coast. The plant sustained only minor wind damage from Hurricane Katrina. We operated our Becancour, Quebec plant at a reduced load during a portion of the third quarter due to railcar shortages and other transportation difficulties brought about by the two storms. Process control difficulties at our Henderson plant and an equipment failure at the St. Gabriel plant also reduced our production during the quarter. Our cost of sales during the quarter ended September 30, 2005, was $4.8 million higher than during the third quarter of 2004. Variable product costs during the third quarter of 2005 were $0.6 million lower than in the 2004 third quarter, with higher prices for salt, electricity and other raw materials resulting in a $5.7 million increase, partially offset by $3.3 million due to lower production volumes and by $2.9 million from a lower volume of product purchased for resale. An additional $3.3 million increase resulted from a reduction of inventory during the period. Other cost increases were attributable to higher maintenance expense ($2.5 million) and depreciation expense ($0.7 million), while freight costs decreased ($0.4 million). Personnel expenses were $0.8 million lower during the most recent quarter due to the absence of employee bonuses paid in the year-earlier period. Our cost of sales increased by $12.4 million for the nine months ended September 30, 2005, as compared to the same period in the prior year. Variable product costs during the 2005 period were $3.3 million higher than in the 2004 nine-month period, with higher prices for salt, electricity and other raw materials resulting in a $12.5 million increase, partially offset by $4.9 million due to lower production volumes and $4.3 million from a lower volume of product purchased for resale. The reduction of inventory during the 2005 period also increased costs by $3.8 million. Cost of sales in the first nine months of 2005 also included $7.4 million of higher maintenance costs and $1.0 million of increased non-variable utility costs. During the nine-month period there was also a $1.6 million reduction in salaries and other employee-related expenses (reflecting the effects of our organizational efficiency project), a $1.4 million net decrease in depreciation expense and a decrease of $0.6 million in logistics expense. Selling, general and administrative expenses in the third quarter of 2005 were $3.3 million higher than during the third quarter of 2004. There was a $0.7 million net increase in consulting fees, with the absence of consulting fees incurred in the year-earlier period for our organizational efficiency project being more than offset by $1.7 million in consulting fees related to Sarbanes Oxley Act compliance during the third quarter of 2005. In the most recent period we also had a $2.4 million increase in personnel expenses, primarily as a result of accruals for employee bonuses. For the nine months ended September 30, 2005, selling, general and administrative expenses increased by $4.8 million, as compared to the nine months ended September 30, 2004, primarily due to increased personnel expenses of $5.0 million attributable to accruals for employee bonuses, as well as a $0.9 million increase in bad debt expense attributable to higher levels of accounts receivable. Offsetting a portion of the increase was a $1.4 million net decrease in consulting fees. We had incurred $3.6 million of consulting fees in the first nine months of 2004 in connection with our organizational efficiency project, while during the 2005 period we incurred $2.4 million in consulting fees for Sarbanes Oxley Act compliance. Other items for the quarter ended September 30, 2005, reflected an increase of $0.4 million when compared to the year-earlier quarter, and for the nine months ended September 30, 2005, other items were $1.0 million lower than in the comparable 2004 period. Interest expense for the three months ended September 30, 2005, and for the nine months ended September 30, 2005, was lower than in the corresponding periods of 2004 by approximately $1.0 million and $1.8 million, respectively. During the first nine months of 2005, we redeemed $46.2 million in principal amount of our senior secured indebtedness and there were no outstanding borrowings under our revolving credit agreement at the end of the period. Income tax expense for the quarter ended September 30, 2005, was $2.1 million, compared to an income tax benefit of $1.2 million in the third quarter of 2004. For the first nine months of 2005 we had income tax expense of $8.4 million, while there was an income tax benefit of $1.8 million for the first nine months of 2004. Available net operating loss carryforward was applied to offset the taxable income in the 2005 periods. Under applicable tax law, the availability of the net operating loss carryforward can be affected by certain changes in ownership of our common stock. While we have continued to benefit from the availability of the net operating loss carryforward that was generated in prior periods, there have been a number of purchases of our common stock resulting in holders owning more than five percent of our shares. Any significant changes in the ownership of our common stock in the future by existing five percent holders or any purchases of more than five percent by additional holders could limit our ability to utilize our net operating loss carryforward in the future. At September 30, 2005, we had liquidity of $79.5 million, which included the amount available for borrowing under our revolving credit facility of $26.0 million, net of letters of credit outstanding on that date, and cash of $53.5 million. Michael Y. McGovern, our President and Chief Executive Officer, stated, "The chlor-alkali industry was affected in various ways by the effects of Hurricanes Katrina and Rita during the third quarter of this year. While our production was reduced only to a small extent as a result of precautionary shut-downs of one of our plants and some minor wind damage, we experienced transportation disruptions and related cost increases as a result of the storms, and we anticipate that the natural gas price increases that followed the hurricanes could lead to additional increases in our electricity rates at the St. Gabriel and Henderson plants in the future. While our ECU netback remains at a high level as a result of continuing strong demand for available supplies of chlorine and caustic soda, our cash flows from operations in the fourth quarter will be affected by necessary maintenance outages, as well as the continuing high electricity prices and higher transportation costs." 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. We own and operate four chlor-alkali plants as well as other downstream manufacturing facilities in North America. We have filed our quarterly report on Form 10-Q for the quarter ended September 30, 2005, and the report has been posted on our Internet web site. Other information and press releases of Pioneer Companies, Inc. can also be obtained from our Internet web site at http://www.piona.com/ . We will conduct a teleconference on Tuesday, November 15, 2005, at 2:00 p.m. Central time in order to discuss our financial results for the third quarter of 2005. Individuals who are interested in listening to the teleconference may call (800) 728-2037 at that time and request to listen to the Pioneer earnings teleconference. A replay of this teleconference will be available from 4:00 p.m. (Central time) on November 15, 2005, until 4:00 p.m. on November 22, 2005, by dialing (800) 633-8284, reservation #21268964. 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, global political and economic conditions, the demand and prices for our products and raw materials, our production volumes and those for our industry, potential disruptions in operations or the availability of transportation, the cyclical nature of the markets for many of our products and raw materials, the results of our organizational efficiency project, our ability to complete the sales of certain excess land, the effect of our results of operations on our debt agreements, and other risks and uncertainties described in our 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 (unaudited, in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Revenues $ 132,773 $ 105,961 $ 384,722 $ 295,075 Cost of sales (96,087) (91,282) (276,292) (263,926) Gross profit 36,686 14,679 108,430 31,149 Selling, general and administrative expenses (8,735) (5,424) (25,212) (20,381) Other items (483) (97) (2,485) (3,440) Operating income 27,468 9,158 80,733 7,328 Interest expense, net (3,597) (4,578) (11,967) (13,781) Other expense, net (1,711) (1,848) (1,129) (1,113) Income (loss) before income taxes 22,160 2,732 67,637 (7,566) Income tax benefit (expense) (2,058) 1,185 (8,426) 1,789 Net income (loss) $20,102 $3,917 $59,211 $(5,777) Net income (loss) per share: Basic $1.76 $0.39 $5.24 $(0.58) Diluted $1.70 $0.38 $5.02 $(0.58) Weighted average number of shares outstanding: Basic 11,412 10,038 11,291 10,032 Diluted 11,814 10,426 11,791 10,032 PIONEER COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) September 30, December 31, 2005 2004 Assets Current assets $136,758 $90,983 Net property, plant and equipment 160,536 172,198 Other assets, net 4,731 4,359 Excess reorganization value over the fair value of identifiable assets 84,064 84,064 Total assets $386,089 $351,604 Liabilities and stockholders' equity Current liabilities $55,332 $42,819 Long-term debt, less current portion 152,948 200,797 Accrued pension and other employee benefits 21,615 23,248 Other long-term liabilities 56,947 46,845 Total stockholders' equity 99,247 37,895 Total liabilities and stockholders' equity $386,089 $351,604 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine Months Ended September 30, 2005 2004 Operating activities: Net income (loss) $ 59,211 $(5,777) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation and amortization 18,582 19,910 Provision for (recovery of) losses on accounts receivable 99 (776) Deferred tax benefit (expense) 7,212 (1,789) Loss on disposals of assets 1,532 258 Currency exchange loss 1,052 1,180 Changes in operating assets and liabilities Increase in accounts receivable (8,402) (7,157) Decrease in inventories, prepaid expenses and other current assets 1,860 1,813 Increase in other assets (440) (728) Increase in accounts payable and accrued liabilities 8,851 14,371 Increase (decrease) in other long-term liabilities 796 (2,845) Other --- 346 Net cash flows from operating activities 90,353 18,806 Investing activities: Capital expenditures (7,496) (6,179) Proceeds from disposal of assets 1,228 35 Net cash flows used in investing activities (6,268) (6,144) Financing activities: Net payments under revolving credit arrangements --- (9,984) Repayments of long-term debt (48,107) (1,629) Proceeds from issuance of stock, net 1,204 145 Net cash flows used in financing activities (46,903) (11,468) Effect of exchange rate changes on cash 95 132 Net change in cash and cash equivalents 37,277 1,326 Cash and cash equivalents at beginning of period 16,191 1,946 Cash and cash equivalents at end of period $ 53,468 $3,272 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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