<PAGE>
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------


                                  FORM 10-K/A

                                FIRST AMENDMENT
                                       TO

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

     FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NO. 1-9859

                             PIONEER COMPANIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                     06-1215192
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

             700 LOUISIANA STREET, SUITE 4300, HOUSTON, TEXAS 77002
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 570-3200

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

  TITLE OF EACH CLASS                  NAME OF EACH EXCHANGE ON WHICH REGISTERED
  -------------------                  -----------------------------------------
        NONE                                         NOT APPLICABLE


           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)


         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 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 [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

         There were 10,000,000 shares of the registrant's common stock
outstanding on April 15, 2002. The aggregate market value of the voting stock
held by non-affiliates of the registrant on April 15, 2002, based on the last
reported trading price of the registrant's common stock on the OTC Bulletin
Board on that date, was $21.6 million. For purposes of the above statement only,
all directors, executive officers and 10% shareholders are deemed to be
affiliates.


         DOCUMENTS INCORPORATED BY REFERENCE: None.


================================================================================



<PAGE>

                                EXPLANATORY NOTE


     The registrant is filing this Form 10-K/A with the Securities and Exchange
Commission for the sole purpose of revising the Independent Auditors' Report in
Item 8 to correct the omission of the auditors' signature.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     In this report, our consolidated financial statements and supplementary
data appear following the signature page to this report and are hereby
incorporated by reference.

<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                        PIONEER COMPANIES, INC.
                                        (Registrant)


Date: April 17, 2002                    By:     /s/ MICHAEL J. FERRIS
                                           -------------------------------------
                                                    Michael J. Ferris
                                           President and Chief Executive Officer




<PAGE>



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULES


<Table>
<Caption>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
         Independent Auditors' Report.................................................   46

         Consolidated Financial Statements, Pioneer Companies, Inc.
         and subsidiaries:

             Consolidated Balance Sheets as of December 31, 2001
             (Successor Company) and 2000 (Predecessor Company).......................   47

             Consolidated Statements of Operations for the years ended
             December 31, 2001, 2000 and 1999 (Predecessor Company)...................   48

             Consolidated Statements of Stockholders' Equity (Deficiency
             in Assets) for the years ended December 31, 2001(Predecessor Company
             and Successor Company), 2000 and 1999 (Predecessor Company)..............   49

             Consolidated Statements of Cash Flows for the years ended
             December 31, 2001, 2000 and 1999 (Predecessor Company)...................   50

             Notes to Consolidated Financial Statements...............................   51

         Supplemental Schedule:

         Schedule II -- Valuation and Qualifying Accounts.............................   77
</Table>

         All schedules, except the one listed above, have been omitted because
they are not required under the relevant instructions or because the required
information is included in the consolidated financial statements or notes
thereto.


                                       45
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Pioneer Companies, Inc.

         We have audited the accompanying consolidated balance sheets of Pioneer
Companies, Inc. and subsidiaries ("Pioneer") as of December 31, 2001 (Successor
Company balance sheet) and 2000 (Predecessor Company balance sheet), and the
related consolidated statements of operations, stockholders' equity (deficiency
in assets) and of cash flows for each of the three years in the period ended
December 31, 2001 (Predecessor Company operations). Our audits also included the
financial statement schedule listed in the Index referred to in Item 8 of the
Successor Company and Predecessor Company as of the respective dates referred to
above. These financial statements and the financial statement schedule are the
responsibility of Pioneer's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         As discussed in Note 2 to the consolidated financial statements, on
July 31, 2001, Pioneer and each of its direct and indirect wholly owned
subsidiaries filed a petition for relief under Chapter 11 of the U. S.
Bankruptcy Code in Houston, Texas. On the same day, a parallel filing under the
Canadian Companies' Creditors Arrangement Act was filed in Superior Court in
Montreal, Canada. These filings were jointly administered, and on November 28,
2001, the Bankruptcy Court entered an order confirming the plan of
reorganization, which became effective on December 31, 2001. Accordingly, the
accompanying financial statements and the financial statement schedule have been
prepared in conformity with AICPA Statement of Position 90-7, "Financial
Reporting for Entities in Reorganization Under the Bankruptcy Code," for the
Successor Company as a new entity with assets, liabilities, and a capital
structure having carrying values not comparable with prior periods.

         In our opinion, the Successor Company consolidated balance sheet
presents fairly, in all material respects, the financial position of Pioneer as
of December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. Further, in our opinion, the
Predecessor Company financial statements referred to above present fairly, in
all material respects, the financial position of the Predecessor Company as of
December 31, 2000, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein as of December 31,
2001 and 2000 and for each of the three years in the period ended December 31,
2001.

         As discussed in Note 3 to the consolidated financial statements,
Pioneer adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended and interpreted
on January 1, 2001.

         The accompanying consolidated financial statements have been prepared
assuming that Pioneer will continue as a going concern. As discussed in Note 2
to the consolidated financial statements, Pioneer emerged from bankruptcy on
December 31, 2001 with a substantial liability relating to its portfolio of
mark-to-market derivative instruments. In addition, Pioneer's senior secured
debt agreements contain restrictive financial covenants and its revolving credit
facility contains restrictive financial covenants, a subjective precondition to
lending clause and a lock-box arrangement. The financial covenants were
established based on financial projections prepared in connection with Pioneer's
plan of reorganization. Pioneer has not demonstrated that it will be able to
comply with such provisions at future reporting dates. These matters raise
substantial doubt about Pioneer's ability to continue as a going concern.
Management's plans concerning these matters are also discussed in Note 2. The
consolidated financial statements do not include adjustments that might result
from the outcome of these uncertainties.


DELOITTE & TOUCHE LLP


April 16, 2002

HOUSTON, TEXAS

                                       46
<PAGE>

                             PIONEER COMPANIES, INC.

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                               SUCCESSOR    | PREDECESSOR
                                                                                COMPANY     |   COMPANY
                                                                              ------------- | -------------
                                                                               DECEMBER 31, |  DECEMBER 31,
                                                                                  2001      |     2000
                                                                              ------------- | -------------
<S>                                                                           <C>           | <C>
                               ASSETS                                                       |
Current assets:                                                                             |
  Cash and cash equivalents ...............................................   $       3,624 | $       5,935
  Accounts receivable, less allowance for doubtful accounts:                                |
    2001, $2,180;  2000, $1,392 ...........................................          41,568 |        49,571
  Inventories .............................................................          18,148 |        25,067
  Current derivative asset ................................................         178,028 |            --
  Prepaid expenses and other current assets ...............................           5,922 |         2,302
                                                                              ------------- | -------------
         Total current assets .............................................         247,290 |        82,875
Property, plant and equipment:                                                              |
  Land ....................................................................           7,732 |        10,622
  Buildings and improvements ..............................................          41,457 |        61,334
  Machinery and equipment .................................................         220,203 |       348,695
  Construction in progress ................................................           6,725 |        15,138
                                                                              ------------- | -------------
                                                                                    276,117 |       435,789
Less accumulated depreciation .............................................              -- |      (135,405)
                                                                              ------------- | -------------
                                                                                    276,117 |       300,384
Other assets, net of accumulated amortization: 2001, $0; 2000, $12,004 ....          11,816 |        27,218
Non-current derivative asset ..............................................          87,625 |            --
Excess cost over the fair value of net assets acquired, net of                              |
  accumulated amortization of 2001, $0; 2000, $39,945 .....................              -- |       179,560
Excess reorganization value over the fair value of identifiable                             |
  assets ..................................................................          84,064 |            --
                                                                              ------------- | -------------
         Total assets .....................................................   $     706,912 | $     590,037
                                                                              ============= | =============
                                                                                            |
            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)                     |
                                                                                            |
Current liabilities:                                                                        |
  Accounts payable ........................................................   $      24,839 | $      43,738
  Accrued liabilities .....................................................          34,497 |        44,082
  Current derivative liability ............................................         168,865 |            --
  Current portion of long-term debt .......................................           7,375 |       597,715
                                                                              ------------- | -------------
         Total current liabilities ........................................         235,576 |       685,535
Long-term debt, less current portion ......................................         205,223 |         4,086
Accrued pension and other employee benefits ...............................          21,267 |        14,984
Non-current derivative liability ..........................................         207,625 |            --
Other long-term liabilities ...............................................          26,694 |        12,256
Commitments and contingencies (Note 18)                                                     |
Redeemable preferred stock: $.01 par value, authorized 10,000                               |
shares, 55 issued and outstanding .........................................              -- |         5,500
Stockholders' equity (deficiency in assets):                                                |
    Common stock, $.01 par value, authorized 50,000 shares, issued                          |
      and outstanding 10,000 shares .......................................             100 |            --
    Class A Common Stock, $.01 par value, authorized 46,000 shares                          |
      issued and outstanding 10,679 shares ................................              -- |           106
    Class B Common Stock, $.01 par value, authorized 4,000 shares,                          |
      issued and outstanding 859 shares ...................................              -- |             9
Additional paid-in capital ................................................          10,427 |        55,193
Retained earnings (deficit) ...............................................              -- |      (187,556)
Accumulated other comprehensive loss ......................................              -- |           (76)
                                                                              ------------- | -------------
         Total stockholders' equity (deficiency in assets) ................          10,527 |      (132,324)
                                                                              ------------- | -------------
         Total liabilities and stockholders' equity (deficiency in                          |
           assets) ........................................................   $     706,912 | $     590,037
                                                                              ============= | =============
</Table>


                 See notes to consolidated financial statements.



                                       47
<PAGE>


                             PIONEER COMPANIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>
                                                                    PREDECESSOR  COMPANY
                                                          -----------------------------------------
                                                                   YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------
                                                             2001            2000           1999
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
Revenues ..............................................   $   383,482    $   402,908    $   354,421
Cost of sales .........................................       338,336        370,997        343,688
                                                          -----------    -----------    -----------
Gross profit ..........................................        45,146         31,911         10,733
Selling, general and administrative expenses ..........        41,526         43,424         49,580
Change in fair value of derivatives ...................       110,837             --             --
Asset impairment and other charges ....................        12,938             --             --
                                                          -----------    -----------    -----------
Operating loss ........................................      (120,155)       (11,513)       (38,847)
Interest expense, net (contractual interest
expense for 2001: $57,728) ............................       (36,010)       (56,328)       (51,927)
Reorganization items ..................................        (6,499)            --             --
Fresh start adjustments ...............................      (106,919)            --             --
Other income, net .....................................         1,169          3,309         14,176
                                                          -----------    -----------    -----------
Loss before income taxes and extraordinary item .......      (268,414)       (64,532)       (76,598)
Income tax expense (benefit) ..........................         3,123         41,031        (26,214)
                                                          -----------    -----------    -----------
Net loss before extraordinary item ....................      (271,537)      (105,563)       (50,384)
Extraordinary item - net of tax .......................       414,312             --             --
                                                          -----------    -----------    -----------
Net income (loss) .....................................   $   142,775    $  (105,563)   $   (50,384)
                                                          ===========    ===========    ===========
Loss per common share -- basic and diluted:
  Net loss before extraordinary item ..................   $    (23.53)   $     (9.15)   $     (4.38)

  Extraordinary item ..................................   $     35.91    $        --    $        --
                                                          -----------    -----------    -----------
  Net income (loss) ...................................   $     12.38    $     (9.15)   $     (4.38)
                                                          ===========    ===========    ===========

Weighted average number of shares outstanding:
  Basic and diluted ...................................        11,538         11,535         11,515
</Table>


                 See notes to consolidated financial statements.



                                       48
<PAGE>


                             PIONEER COMPANIES, INC.

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                         COMMON STOCK ISSUED
                                           ------------------------------------------------          NEW COMMON
                                                   CLASS A                   CLASS B                   STOCK            ADDITIONAL
                                           ----------------------    ----------------------    ---------------------     PAID-IN
                                             SHARES       AMOUNT       SHARES       AMOUNT       SHARES     AMOUNT       CAPITAL
                                           ---------    ---------    ---------    ---------    ---------   ---------    ----------
<S>                                        <C>          <C>          <C>          <C>          <C>         <C>         <C>
Predecessor Company:
Balance at January 1, 1999 .............       9,927    $      99          803    $       8           --   $      --    $  55,055
  Net loss .............................          --           --           --           --           --          --           --
  Stock issued .........................          32           --           --           --           --          --          129
  Stock dividend issued ................         697            7           56            1           --          --           (8)
                                           ---------    ---------    ---------    ---------    ---------   ---------    ---------
Balance at December 31, 1999 ...........      10,656          106          859            9                                55,176
Comprehensive loss:
  Net loss .............................          --           --           --           --           --          --           --
  Other comprehensive loss, net
  of taxes:
  Additional minimum pension
  liability ............................          --           --           --           --           --          --           --
    Total comprehensive loss ...........
  Stock issued .........................          23           --           --           --           --          --           17
                                           ---------    ---------    ---------    ---------    ---------   ---------    ---------
Balance at December 31, 2000 ...........      10,679          106          859            9                                55,193
Comprehensive income:
  Net income ...........................          --           --           --           --           --          --           --
  Other comprehensive loss, net
  of taxes:
   Additional minimum pension
    liability ..........................          --           --           --           --           --          --           --
    Total comprehensive
    income .............................
    Cancellation of old shares .........     (10,679)        (106)        (859)          (9)          --          --           --
    Reorganization adjustments .........          --           --           --           --           --          --      (44,766)
                                           ---------    ---------    ---------    ---------    ---------   ---------    ---------
Balance at December 31, 2001 ...........          --    $      --           --    $      --           --   $      --    $  10,427
                                           =========    =========    =========    =========    =========   =========    =========

Successor Company:
Stock issued in reorganization .........          --           --           --           --       10,000         100           --
                                           ---------    ---------    ---------    ---------    ---------   ---------    ---------

Balance at December 31, 2001 ...........          --    $      --           --    $      --    $  10,000   $     100    $  10,427
                                           =========    =========    =========    =========    =========   =========    =========

<Caption>

                                                         ACCUMULATED
                                                           OTHER
                                             RETAINED   COMPREHENSIVE
                                             DEFICIT    INCOME (LOSS)   TOTAL
                                            ---------   ------------- ---------
<S>                                         <C>          <C>           <C>
Predecessor Company:
Balance at January 1, 1999 .............    $ (31,609)   $      --    $  23,553
  Net loss .............................      (50,384)          --      (50,384)
  Stock issued .........................           --           --          129
  Stock dividend issued ................           --           --           --
                                            ---------    ---------    ---------
Balance at December 31, 1999 ...........      (81,993)          --      (26,702)
Comprehensive loss:
  Net loss .............................     (105,563)          --
  Other comprehensive loss, net
  of taxes:
    Additional minimum pension
    liability ..........................           --          (76)
    Total comprehensive loss ...........                               (105,639)
  Stock issued .........................           --           --           17
                                            ---------    ---------    ---------
Balance at December 31, 2000 ...........     (187,556)         (76)    (132,324)
Comprehensive income:
  Net income ...........................      142,775           --
  Other comprehensive loss, net
  of taxes:
  Additional minimum pension
  liability ............................           --         (576)
    Total comprehensive
    income .............................                                142,199
    Cancellation of old shares .........           --           --         (115)
    Reorganization adjustments .........       44,781          652          667
                                            ---------    ---------    ---------
Balance at December 31, 2001 ...........    $      --    $      --    $  10,427
                                            =========    =========    =========

Successor Company:
Stock issued in reorganization .........           --           --          100
                                            ---------    ---------    ---------

Balance at December 31, 2001 ...........    $      --    $      --    $  10,527
                                            =========    =========    =========
</Table>


                 See notes to consolidated financial statements.


                                       49
<PAGE>

                             PIONEER COMPANIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                            PREDECESSOR COMPANY
                                                               -----------------------------------------------
                                                                           YEAR ENDED DECEMBER 31,
                                                              ------------------------------------------------
                                                                   2001             2000              1999
                                                               -------------    -------------    -------------
<S>                                                            <C>              <C>             <C>
Operating activities:
  Net income (loss) ........................................   $     142,775    $ (105,563)      $     (50,384)
  Adjustments to reconcile net income (loss) to net
     cash flows from operating activities:
     Fresh start adjustments ...............................         106,919               --               --
     Extraordinary item, net ...............................        (414,312)              --               --
     Reduction in post-retirement medical expense ..........              --               --          (12,530)
     Depreciation and amortization .........................          46,810           50,242           54,713
     Provision for loss on accounts receivable .............           2,848               93              349
     Deferred tax expense (benefit) ........................           3,071           41,255          (26,530)
     Change in fair value of derivatives ...................         110,837               --               --
     Asset impairment ......................................           3,881               --               --
     Loss on disposal of assets ............................             (29)          (2,257)         (10,922)
     Foreign exchange gain (loss) ..........................            (663)             636           (1,025)
     Net effect of changes in operating assets and
       liabilities .........................................          30,769           28,731           (6,020)
                                                               -------------    -------------    -------------
          Net cash flows from operating activities .........          32,906           13,137          (52,349)
                                                               -------------    -------------    -------------
Investing activities:
  Capital expenditures .....................................         (13,112)         (18,697)         (28,318)
  Proceeds from disposal of assets .........................             233            2,878           13,159
                                                               -------------    -------------    -------------
          Net cash flows from investing activities .........         (12,879)         (15,819)         (15,159)
                                                               -------------    -------------    -------------
Financing activities:
  Debtor-in-possession credit facility, net ................           6,663               --               --
  Pre-petition revolving credit borrowings, net ............         (27,581)           6,418           21,163
  Repayments on long-term debt .............................            (571)          (1,950)          (2,666)
  Debt issuance and related costs ..........................              --               --             (968)
  Other ....................................................              --               18              129
                                                               -------------    -------------    -------------
          Net cash flows from financing activities .........         (21,489)           4,486           17,658
                                                               -------------    -------------    -------------
Effect of exchange rate changes on cash and
  cash equivalents..........................................            (849)          (1,379)           1,538
                                                               -------------    -------------    -------------
Net increase (decrease) in cash and cash equivalents........          (2,311)             425          (48,312)
                                                               -------------    -------------    -------------
Cash and cash equivalents at beginning of period ...........           5,935            5,510           53,822
                                                               -------------    -------------    -------------
Cash and cash equivalents at end of period .................   $       3,624    $       5,935    $       5,510
                                                               =============    =============    =============
</Table>


                 See notes to consolidated financial statements.


                                       50
<PAGE>


                             PIONEER COMPANIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

     The consolidated financial statements include the accounts of Pioneer
Companies, Inc. (the "Company" or "PCI") and its consolidated subsidiaries
(collectively, "Pioneer"). The term "Predecessor Company" refers to Pioneer
prior to its emergence from bankruptcy on December 31, 2001. References to
predecessors of Pioneer Americas LLC ("PALLC") include Pioneer Americas, Inc.,
Pioneer Corporation of America and Pioneer Chlor-Alkali Company, Inc. during the
period from 1998 to 2001. All significant intercompany balances and transactions
have been eliminated in consolidation.

     Pioneer operates in one industry segment, the production, marketing and
selling of chlor-alkali and related products. Pioneer operates in one geographic
area, North America. Pioneer conducts its primary business through its operating
subsidiaries: PCI Chemicals Canada Company (formerly known as PCI Chemicals
Canada Inc.) ("PCI Canada") and PALLC.

     In August 2000 Pioneer completed the disposition of substantially all of
the assets of two of its former operating subsidiaries, KNA California, Inc.
(formerly known as Kemwater North America Company and which Pioneer refers to as
KNA) and KWT, Inc. (which Pioneer refers to as KWT and together with KNA, as
Kemwater). Kemwater manufactured and supplied polyaluminum chlorides to certain
potable and waste water markets in the United States. The products were used
primarily to remove solids from waste water streams and to control hydrogen
sulfide emissions. Kemwater also manufactured and marketed aluminum sulfate to
the waste water and pulp and paper industries. Kemwater had revenues of $8.7
million and $22.4 million in 2000 and 1999, respectively.

     Dollar amounts, other than per share amounts, in tabulations in the notes
to the consolidated financial statements are stated in thousands of dollars
unless otherwise indicated.

2. BASIS OF PRESENTATION AND MANAGEMENT PLANS

     In December 2000, due to a lack of sufficient liquidity, Pioneer suspended
payments of interest and principal under various debt agreements which,
following the expiration of any applicable grace periods, resulted in defaults
under those agreements. On July 31, 2001, Pioneer filed a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code") in Houston,
Texas. On the same day, a parallel filing under the Canadian Companies'
Creditors Arrangement Act was filed in Superior Court in Montreal, Canada, by
PCI Canada. The bankruptcies were jointly administered. On November 28, 2001,
Pioneer's proposed plan of reorganization was confirmed by the bankruptcy court,
and became effective on December 31, 2001.

     On December 31, 2001, the Company and each of its direct and indirect
wholly-owned U.S. subsidiaries emerged from protection under the U.S. Bankruptcy
Code, and on the same date PCI Canada emerged from protection under the
provisions of Canada's Companies Creditors' Arrangement Act. Under the plan of
reorganization that was effective on December 31, 2001, the common stock of the
Predecessor Company was cancelled, the holders of the Predecessor Company's
senior secured debt received $200 million in principal amount of new senior
secured debt along with newly issued shares representing 97% of the Company's
common stock with the remaining 3% of the Company's common stock to be
distributed to the Company's unsecured creditors. Trade creditors with small
claims received cash, and other critical vendors will receive payments
determined under individually-negotiated settlements.

     Pioneer has applied the accounting principles provided for in the American
Institute of Certified Public Accountant's Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
including fresh start accounting upon emergence. Accordingly, Pioneer's
financial position, results of operations and cash flows for the periods after
Pioneer's emergence from bankruptcy are not comparable to earlier periods.

     Upon emergence from bankruptcy, Pioneer's senior secured debt outstanding
aggregated $206.7 million consisting of Senior Secured Floating Rate Guaranteed
Notes due 2006 in the aggregate principal amount of $45.4 million (the "Secured
Guaranteed Notes"), Floating Rate Term Notes due 2006 in the aggregate principal
amount of



                                       51
<PAGE>
$4.6 million (the "Senior Floating Notes"), 10% Senior Secured Guaranteed Notes
due 2008 in the aggregate principal amount of $150 million (the "10% Senior
Secured Notes"), and a Revolving Credit Facility with a $30 million commitment
and a borrowing base restriction (the "Revolver"), borrowings under which were
used shortly after the emergence from bankruptcy to replace $6.7 million of
debtor-in-possession financing which was outstanding as of December 31, 2001.
Collectively, the $200 million in Senior Guaranteed Notes, Senior Floating Notes
and 10% Senior Secured Notes are referred to as the Senior Notes and together
with the Revolver are referred to as the Senior Secured Debt. In addition, at
December 31, 2001, we have $5.9 million of other debt outstanding, comprised of
notes maturing in various years through 2014. The Senior Secured Debt requires
payments of interest in cash and contains various covenants including a
financial covenant in the Revolver (which if violated will create a default
under the cross-default provisions of the Senior Notes) which obligates Pioneer
to comply with certain cash flow requirements. The interest payment requirements
of the Senior Secured Debt and the financial covenant in the Revolver were set
at levels based on financial projections prepared in connection with the plan of
reorganization and do not accommodate significant downward variations in
operating results. The plan of reorganization and the related financial
projections were predicated on improvements in the chlorine and caustic soda
markets from the historic lows experienced in the last few years. Those market
improvements, along with the reduced debt levels resulting from the
reorganization, were expected to return the Company to a more sound financial
basis.

     During the short time since Pioneer emerged from bankruptcy, the chlorine
and caustic soda markets have not attained the levels included in the
projections prepared in connection with the plan of reorganization, and Pioneer
does not expect to achieve the results that were included in the projections for
2002. While some increase in chlorine prices is expected to occur during the
second quarter of 2002, caustic soda prices have been decreasing and are at low
levels and are expected to continue at the same or lower levels during the
second quarter. The current low prices have created liquidity that is less than
that which would result from the projections prepared in connection with the
plan of reorganization, and Pioneer has responded by cutting costs and reducing
expenditures, including idling manufacturing capacity and laying off operating
and administrative employees. Unless there is significant improvement in product
prices, Pioneer will not have the liquidity necessary to meet all of its
obligations.

     As discussed in Note 3, Pioneer has a substantial portfolio of
mark-to-market derivative instruments. Changes in the fair value of the
derivatives are reported in the statement of operations in the period of change,
and are included in the Revolver EBITDA covenant discussed below.

     Prior to the amendment to the Revolver discussed below (which amendment
changed, among other things, the method for calculating EBITDA as defined below)
one of the covenants in our Revolver required Pioneer to generate $5.1 million
of net earnings before extraordinary gains, interest, income taxes, depreciation
and amortization (referred to as EBITDA) during the quarter ended March 31,
2002, $10.8 million of EBITDA during the six month period ending June 30, 2002,
$19.6 million of EBITDA during the nine month period ending September 30, 2002,
$32.4 million of EBITDA during the twelve month period ending December 31, 2002
and $32.6 million of EBITDA for each twelve month period ending each fiscal
quarter thereafter. The Revolver also provides that as a condition of borrowings
there shall not have occurred any material adverse change in Pioneer's business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise).

     Pioneer was in compliance with the EBITDA covenant during the quarter ended
March 31, 2002, but only with the inclusion of the effect of the change in fair
value of derivatives (which is discussed in Note 3), and Pioneer may not
generate the required amount of Adjusted EBITDA (defined below) during
subsequent quarters. During March 2002 the lender under Pioneer's Revolver
advised Pioneer that it believed that a material adverse change had occurred,
although it continued to fund loans under the Revolver. In order to address
concerns about adverse changes in Pioneer's financial condition and the
possibility that Pioneer might not comply with the EBITDA covenant during the
remainder of the current year, Pioneer had discussions with the lender on the
proposed terms of an amendment to the Revolver. The lender has now rescinded the
effect of its notice of a material adverse change that may have occurred, and
extended the deadline for the provision of financial statements for the year
ended December 31, 2001 for which Pioneer was not in compliance. In connection
with the waiver, Pioneer has amended the Revolver to (i) revise the definition
of EBITDA to exclude the effects of changes in the fair value of derivative
instruments (as so adjusted, "Adjusted EBITDA"), (ii) eliminate the availability
of interest rates based on LIBOR and (iii) replace the previously applicable
margin over the prime rate (the "Previous Rate") with the Previous Rate plus
2.25% for all loans that are and will be outstanding under the Revolver. Pioneer
paid a forbearance fee of $250,000 in connection with the foregoing waiver and
amendment. Also in connection with the foregoing waiver and amendment, Pioneer
agreed with Pioneer's lender to further amend the terms of the Revolver to
revise the Adjusted EBITDA covenant (which currently contains the same levels of
required EBITDA as the original Revolver) to take into account Pioneer's current
expectations for the amount of Adjusted EBITDA that will be generated during
2002 as agreed to by the lender and to add such other financial covenants to the
Revolver as Pioneer's lender deems necessary to monitor Pioneer's performance in
meeting such projections. Pioneer's failure to effect the additional amendment
to the Revolver by May 10, 2002 will constitute a default under the Revolver and
a cross-default under the Senior Notes, unless agreed otherwise by the lender.

                                       52
<PAGE>
     The Revolver provides for revolving loans in an aggregate amount up to $30
million, subject to borrowing base limitations related to the level of accounts
receivable and inventory, which secure borrowings under the facility. The
Revolver requires a lock-box arrangement, whereby cash receipts are deposited
directly into a lock box controlled by the lender, and are used by the lender to
reduce outstanding borrowing under the Revolver. Because the Revolver requires a
lock-box arrangement and contains a subjective precondition to lending clause,
which allows the lender to stop funding borrowings under the Revolver in the
event of a material adverse change in Pioneer's business, the Revolver must be
classified as current debt.

     If under the Revolver the required Adjusted EBITDA level for any quarter is
not met, Pioneer will be in default under the terms of the Revolver. Moreover,
if conditions constituting a material adverse change occur or have occurred, the
lender can exercise its rights under the Revolver and refuse to make further
advances. The effect of such a refusal to make further advances is that customer
receipts would be applied to borrowings under the Revolver without Pioneer
having the ability to reborrow. This would cause Pioneer to suffer a rapid loss
of liquidity and it would lose the ability to operate on a day-to-day basis. In
addition, a default under the Revolver would allow the lender the right to
accelerate the outstanding indebtedness under the Revolver and would also result
in a cross-default under the Senior Notes which would provide the holders of the
Senior Notes with the right to accelerate their $200 million in outstanding
indebtedness and demand its immediate repayment. In such circumstances, Pioneer
would be required to refinance, restructure or reorganize all or a portion of
its indebtedness, sell assets, obtain additional debt or equity financing or
take other actions, including seeking protection under Chapter 11 of the U.S.
Bankruptcy Code and under Canada's Companies Creditors' Arrangement Act. Pioneer
cannot predict the actions of the lender under the Revolver, or the actions of
that lender or the holders of the Senior Notes and its trade creditors,
including any action to force Pioneer into involuntary bankruptcy proceedings,
in the event the proposed amendment to the Revolver is not effected, or the
outcome of any of the actions that Pioneer may need to take in response to such
actions.

     The uncertainties described above raise concern about Pioneer's ability to
continue as a going concern. The accompanying consolidated financial statements
have been prepared on the going concern basis of accounting, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The consolidated financial statements do not include any
adjustments that may result from the outcome of these uncertainties.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reorganization

     Reorganization items include legal and professional fees and expenses
related to Pioneer's reorganization incurred subsequent to the Chapter 11
filings and executive retention bonuses, offset by gains from
individually-negotiated settlements of critical vendor pre-petition liabilities
prior to confirmation of the plan of reorganization.

Cash and Cash Equivalents

     All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.

Inventories

     Inventories are valued at the lower of cost or market. Finished goods and
work-in-process costs are recorded under the average cost method, which includes
appropriate elements of material, labor and manufacturing overhead costs, while
the first-in, first-out method is utilized for raw materials, supplies and
parts. Pioneer enters into agreements with other companies to exchange
chlor-alkali inventories in order to minimize working capital requirements and
to optimize distribution logistics. Balances related to quantities due to or
payable by Pioneer are included in inventory.


                                       53
<PAGE>


Property, Plant and Equipment

     Property, plant and equipment are recorded at cost. Disposals are removed
at carrying cost less accumulated depreciation with any resulting gain or loss
reflected in operations.

     Depreciation is computed primarily under the straight-line method over the
estimated remaining useful lives of the assets. Asset lives range from 5 to 15
years with a predominant life of 10 years, which include buildings and
improvements with an average life of 15 years and machinery and equipment with
an average life of 9 years.

     Property, plant and equipment was revalued pursuant to fresh start
accounting. See Note 4.

Impairment of Long-Lived Assets

     Long-lived assets and certain identifiable intangible assets to be held and
used are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future
cash flows resulting from the use of the asset or its disposition. Measurement
of an impairment loss for long-lived assets and certain identifiable intangible
assets that management expects to hold and use are based on the fair value of
the asset. Long-lived assets and certain identifiable intangible assets to be
disposed of are reported at the lower of carrying amount or net realizable
value. See Note 16 for discussion of asset impairment charges recorded in 2001.

Other Assets

     Prior to December 31, 2001, other assets included amounts for deferred
financing costs, which were being amortized on a straight-line basis over the
term of the related debt. Amortization of such costs using the interest method
would not have resulted in material differences in the amounts amortized during
the periods presented. At December 31, 2001, unamortized debt issuance costs of
$12.4 million were written-off against the related debt balances in accordance
with SOP 90-7. Amortization expense for other assets for the years ended
December 31, 2001, 2000 and 1999 was approximately $3.8 million, $4.8 million
and $7.7 million, respectively.

Excess Cost Over The Fair Value of Net Assets Acquired

     Prior to Pioneer's emergence from bankruptcy and application of fresh start
accounting, excess cost over the fair value of net assets acquired ("goodwill")
was amortized on a straight-line basis over 25 years. Amortization expense for
excess cost over the fair value of net assets acquired was approximately $8.9
million, $9.0 million and $9.3 million for the years ended December 31, 2001,
2000 and 1999, respectively.

Excess Reorganization Value Over The Fair Value of Identifiable Assets

     Upon Pioneer's emergence from bankruptcy and application of fresh start
accounting, Pioneer recorded $84.1 million of excess reorganization value over
the fair value of identifiable assets ("goodwill") attributable to its Canadian
operations. In accordance with SFAS 142, "Goodwill and Other Intangible Assets,"
("SFAS 142"), this goodwill will not be amortized. The carrying value of
goodwill will be reviewed at least annually, and if this review indicates that
such excess reorganization value will not be recoverable, as determined based on
the estimated future undiscounted cash flows of the applicable reporting unit,
Pioneer's carrying value of goodwill will be adjusted in accordance with SFAS
142.

Environmental Expenditures

     Remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are based upon management's best estimate of
the ultimate cost. Ongoing environmental compliance costs, including maintenance
and monitoring costs, are charged to operations as incurred. See Note 20.

Revenue Recognition

     Pioneer generates revenues through sales in the open market and long-term
supply contracts. Revenue is recognized when the products are shipped and
collection is reasonably assured. Pioneer classifies amounts billed to



                                       54
<PAGE>



customers for shipping and handling as revenues, with the related shipping and
handling costs included in cost of goods sold.

Research and Development Expenditures

     Research and development expenditures are expensed as incurred. Such costs
totaled $1.0 million in 2001, $1.4 million in 2000 and $1.5 million in 1999.

Per Share Information

     Per share information for all periods presented reflects 7% stock dividends
on the Class A and Class B Common Stock issued in December 1999. All of the
Class A and Class B Common Stock of the Predecessor Company was cancelled upon
emergence from bankruptcy. Accordingly, per share amounts will not be comparable
with future results.

Preferred Stock

     Upon emergence from bankruptcy, all outstanding preferred stock was
cancelled.

Foreign Currency Translation

     Following SFAS 52, "Foreign Currency Translation," the functional
accounting currency for Canadian operations is the U.S. dollar; accordingly,
gains and losses resulting from balance sheet translations are included in the
consolidated statement of operations.

Reclassifications

     Certain amounts have been reclassified in prior years to conform to the
current year presentation. All reclassifications have been applied consistently
for the periods presented.

Estimates and Assumptions

     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.

Derivatives

     Pioneer adopted the accounting and reporting standards of Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments and
Hedging Activities," as interpreted and amended, ("SFAS 133"), as of January 1,
2001. This statement established accounting and reporting standards for
derivative instruments and hedging activities. SFAS 133 requires a company to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The change in
the fair value of derivatives that are not hedges must be recognized currently
as a gain or loss in the statement of operations. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
are either offset against the change in fair value of assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is settled. Under hedge accounting, the ineffective
portion of a derivative's change in fair value will be immediately recognized in
earnings. Based upon the contracts in effect at January 1, 2001, the adoption of
SFAS 133 had no effect on the consolidated financial statements at that date.

     The Colorado River Commission ("CRC") supplies power to Pioneer's Henderson
facility pursuant to contracts covering hydro-generated power, power
requirements in excess of hydropower, and power transmission and supply
balancing services. CRC is a state agency established in 1940 to manage federal
hydropower contracts with utilities and other customers in Southern Nevada,
including Pioneer's Henderson facility. Since the low cost hydropower supplied
by CRC does not entirely meet Henderson's power demands and those of CRC's other
customers, CRC purchases supplemental power from various sources and resells it
to Pioneer and other customers.



                                       55
<PAGE>



     Approximately 50% of the electric power supply for the Henderson facility
is provided under a supplemental supply contract with CRC. The supplemental
supply contract sets forth detailed procedures governing the procurement of
power by CRC on Pioneer's behalf. This agreement is not intended to provide for
speculative power purchases on Pioneer's behalf.

     In the second and third quarters of 2001, Pioneer recorded net unrealized
losses with respect to various derivative positions executed by CRC under the
supplemental supply arrangements with CRC. The derivative positions consist of
contracts for the forward purchase and sale of electricity as well as options
that have been purchased or written for electric power. While a portion of the
net unrealized loss, in the amount of $10.3 million at December 31, 2001,
relates to transactions specifically approved by Pioneer pursuant to the
procedures established by a pre-existing agreement with CRC (the "Approved
Derivatives"), Pioneer is disputing CRC's contention that the other derivatives
(the "Disputed Derivatives") with an additional net liability at December 31,
2001 of $100.5 million are its responsibility. All $110.8 million of such net
unrealized loss has been recorded by Pioneer in the 2001 financial statements,
but the outcome of the dispute is in doubt. CRC has further contended that other
contracts (the "Rejected Derivatives") reflecting an additional net unrealized
loss of $38.4 million as of December 31, 2001, are Pioneer's responsibility
although CRC has not provided any documentation of any relationship of those
contracts to Pioneer. Pioneer has not recorded any unrealized loss with respect
to the Rejected Derivatives, and CRC's contention that Pioneer has any liability
with respect to those derivatives is being contested.

     The derivative positions include many types of contracts with varying
strike prices and maturity dates extending through 2006. The fair value of the
instruments will vary over time based upon market circumstances. The fair value
of the derivative positions was determined for Pioneer by an independent
consultant using available market information and appropriate valuation
methodologies that include current and forward pricing. Considerable judgment,
however, is necessary to interpret market data and develop the related estimates
of fair value. Accordingly, the estimates for the fair value of the derivative
positions are not necessarily indicative of the amounts that could currently be
realized upon disposition of the derivative positions or the ultimate amount
that would be paid or received when the positions are settled. The use of
different market assumptions and/or estimation methodologies would result in
different fair values. Management of Pioneer believes that the market
information, methodologies and assumptions used by the independent consultant to
fair value the derivative positions produces a reasonable estimation of the fair
value of the derivative positions at December 31, 2001.

     The information in the tables below presents the electricity futures and
options positions outstanding as of December 31, 2001 ($ in thousands), whether
approved or disputed.

<Table>
<Caption>
                                                             Approved         Disputed
                                                          ---------------    ---------------
<S>                                                       <C>                <C>
Electricity Futures Contracts:
  Purchases:
  Contract volume (mwh) ...............................                --         12,785,000
  Range of expirations (years) ........................                --       0.25 to 5.00
  Weighted average years until expiration .............                --               3.41
  Weighted average contract price (per mwh) ...........   $            --    $         59.38
  Notional amount .....................................   $            --    $       759,210
  Weighted average fair value (per mwh) ...............   $            --    $         31.00
  Unrealized loss .....................................   $            --    $      (362,821)

  Sales:
  Contract volume (mwh) ...............................           218,600          7,919,200
  Range of expirations (years) ........................      0.50 to 1.00       0.25 to 5.00
  Weighted average years until expiration .............               .72               2.53
  Weighted average contract price (per mwh) ...........   $         38.72    $         62.59
  Notional amount .....................................   $         8,464    $       495,679
  Weighted average fair value (per mwh) ...............   $         51.34    $         94.36
  Unrealized gain .....................................   $         2,758    $       251,553

Electricity Option Contracts:
  Put (purchase):
  Contract volume (mwh) ...............................           614,000                 --
  Notional amount .....................................   $        30,700    $            --
  Range of expirations (years) ........................              5.00                 --
  Weighted average years until expiration .............              5.00                 --
  Weighted average strike price .......................   $         50.00    $            --
  Unrealized loss .....................................   $       (13,375)   $            --

  Calls (sales):
  Contract volume (mwh) ...............................            61,600          4,534,200
  Notional amount .....................................   $         3,080    $       246,549
  Range of expirations (years) ........................              0.25       0.25 to 4.00
  Weighted average years until expiration .............              0.25               2.97
  Weighted average strike price .......................   $         50.00    $         54.38
  Unrealized gain (loss) ..............................   $           271    $        10,777

Total unrealized loss .................................                      $      (110,837)
                                                                             ===============

Current derivative asset ..............................                      $       178,028
Non-current derivative asset ..........................                               87,625
Current derivative liability ..........................                             (168,865)
Non-current derivative liability ......................                             (207,625)
                                                                             ---------------
Net derivative liability ..............................                      $      (110,837)
                                                                             ===============
</Table>


                                       56
<PAGE>


4. REORGANIZATION AND FRESH START ADJUSTMENTS

     On December 31, 2001, the Company and each of its direct and indirect
wholly-owned U.S. subsidiaries emerged from protection under the U.S. Bankruptcy
Code, and on the same date PCI Canada emerged from protection under the
provisions of Canada's Companies Creditors' Arrangement Act.

     Under the plan of reorganization that was effective on December 31, 2001,
the common stock of the Predecessor Company was cancelled, the holders of the
Predecessor Company's senior secured debt received $200 million in principal
amount of new senior secured debt and 97% of the common stock of the reorganized
company and unsecured creditors are entitled to receive the remaining 3% of the
common stock. Trade creditors with small claims received cash, and other
critical vendors will receive payments determined under individually-negotiated
settlements. These share percentages exclude shares issuable upon the exercise
of options to be granted in connection with the Management Equity Incentive Plan
adopted as part of the reorganization proceedings. No options have been granted
under this plan. See Note 11.

     Pioneer has applied fresh start accounting to the consolidated balance
sheet as of December 31, 2001 in accordance with SOP 90-7. Under fresh start
accounting, a new reporting entity is considered to be created and the recorded
amounts of assets and liabilities are adjusted to reflect their estimated fair
values at the date fresh start accounting is applied similar to the procedures
specified in accordance with SFAS 141, "Business Combinations," ("SFAS 141"). In
addition, the accumulated deficit of the Predecessor Company was eliminated and
its common stock was valued based on an enterprise value of $355 million.
Pioneer subsequently adjusted the equity value to include the effects of idling
Tacoma and the net derivative liability, which were not considered in the
initial valuation. Pioneer recorded the effects of the plan of reorganization
and fresh start accounting as of December 31, 2001, as follows (in thousands):


<Table>
<Caption>
                                                           PREDECESSOR                                         SUCCESSOR
                                                            COMPANY                                             COMPANY
                                                          CONSOLIDATED     REORGANIZATION    FRESH START     CONSOLIDATED
                                                          BALANCE SHEET     ADJUSTMENTS      ADJUSTMENTS     BALANCE SHEET
                                                          -------------    -------------    -------------    -------------
<S>                                                       <C>              <C>              <C>              <C>
Current assets ........................................   $     249,103    $      (1,769)   $         (44)   $     247,290
Property, plant and equipment, net ....................         275,457               --              660          276,117
Other assets, net .....................................          13,031               --           (1,215)          11,816
Non-current derivative asset ..........................          87,625               --               --           87,625
Excess reorganization value over the fair
value of identifiable assets ..........................         170,612               --          (86,548)          84,064
                                                          -------------    -------------    -------------    -------------
  Total assets ........................................   $     795,828    $      (1,769)   $     (87,147)   $     706,912
                                                          =============    =============    =============    =============

Current liabilities ...................................   $     293,152    $     (55,350)   $      (2,226)   $     235,576
Long-term debt, net of current portion ................         560,454         (355,231)              --          205,223
Accrued pension and other employee benefits ...........          14,921               --            6,346           21,267
Non-current derivative liability ......................         207,625               --               --          207,625
Other long-term liabilities ...........................          11,694               --           15,000           26,694
Redeemable preferred stock ............................           5,500           (5,500)              --               --
                                                          -------------    -------------    -------------    -------------
  Total liabilities ...................................       1,093,346         (416,081)          19,120          696,385


Old common stock ......................................             115             (115)              --               --
New common stock ......................................              --              100               --              100
Additional paid-in capital ............................          55,193          414,327         (459,093)          10,427
Retained earnings (deficit) ...........................        (352,174)              --          352,174               --
Accumulated other comprehensive income ................            (652)              --              652               --
                                                          -------------    -------------    -------------    -------------
  Total shareholders' equity (deficiency in assets) ...        (297,518)         414,312         (106,267)          10,527
                                                          -------------    -------------    -------------    -------------

  Total liabilities and shareholder's equity
    (deficiency in assets) ............................   $     795,828    $      (1,769)   $     (87,147)   $     706,912
                                                          =============    =============    =============    =============
</Table>


                                       57
<PAGE>


     Reorganization adjustments reflect the forgiveness of debt, including
related accrued interest, and certain prepetition trade payables in
consideration for new debt and new common stock, resulting in an extraordinary
gain of $414.3 million.

5. DIVESTITURES

     In August 2000 Pioneer completed the disposition of Kemwater, which
manufactured and supplied polyaluminum chlorides to certain potable and waste
water markets in the United States. The products were used primarily to remove
solids from waste water streams and to control hydrogen sulfide emissions.
Kemwater also manufactured and marketed aluminum sulfate to the waste water and
pulp and paper industries. No material gain or loss was recognized upon
completion of the sale of the Kemwater assets in 2000.

     Also in 2000, $0.9 million was recorded in asset impairment and other
charges relating to the disposition of Kemwater's alum coagulant business at
Antioch, California.

     In early 1999, Kemwater sold its iron chlorides business, which was located
in the western United States. This disposition resulted in a loss of
approximately $0.9 million.

6. CASH FLOW INFORMATION

     The net effect of changes in operating assets and liabilities are as
follows:

<Table>
<Caption>
                                                        PREDECESSOR COMPANY
                                           --------------------------------------------
                                                      YEAR ENDED DECEMBER 31,
                                           --------------------------------------------
                                               2001            2000             1999
                                           ------------    ------------    ------------
<S>                                        <C>             <C>             <C>
Accounts receivable ....................   $      4,463    $        844    $     (2,800)
Inventories ............................          6,489          (2,019)          3,487
Prepaid expenses .......................         (3,614)          1,054             826
Other assets ...........................         (6,923)          5,145          (1,333)
Accounts payable .......................         (5,636)         16,188          (2,709)
Accrued liabilities ....................         36,709          12,934             189
Other long-term liabilities ............           (279)         (4,406)         (5,229)
Accrued pension and other employee
benefits ...............................           (440)         (1,009)          1,549
                                           ------------    ------------    ------------
Net change in operating accounts .......   $     30,769    $     28,731    $     (6,020)
                                           ============    ============    ============
</Table>


          Following is supplemental cash flow information:

<Table>
<Caption>
                                      PREDECESSOR COMPANY
                                 ------------------------------
                                     YEAR ENDED DECEMBER 31,
                                 ------------------------------
                                   2001       2000       1999
                                 --------   --------   --------
<S>                              <C>        <C>        <C>
Cash payments for:
  Interest ...................   $  3,343   $ 46,613   $ 52,652
  Income taxes ...............        210         11        126
</Table>

7. INVENTORIES

          Inventories consisted of the following at December 31:

<Table>
<Caption>
                                           SUCCESSOR   |  PREDECESSOR
                                            COMPANY    |   COMPANY
                                           ----------  | ----------
                                              2001     |    2000
                                           ----------  | ----------
<S>                                        <C>         |  <C>
Raw materials, supplies and parts ......   $    9,281  | $   14,329
Finished goods and work-in-process .....        9,133  |      9,391
Inventories under exchange                             |
agreements .............................         (266) |      1,347
                                           ----------  | ----------
                                           $   18,148  | $   25,067
                                           ==========  | ==========
</Table>




                                       58
<PAGE>



8. INVESTMENTS IN BASIC MANAGEMENT, INC. AND THE LANDWELL COMPANY, L.P.

     Prior to June 2000 the Company, through its predecessor subsidiary Pioneer
Americas Inc. ("PAI"), was the record owner of approximately 32% of the common
stock of Basic Management, Inc. ("BMI"), which owns and maintains the water and
power distribution network within a Henderson, Nevada industrial complex. BMI is
the general partner of and has a 50% interest in The LandWell Company, L.P.
("LandWell"), which owns land in Henderson and Clark County, Nevada. Prior to
June 2000 PAI also owned an approximate 21% limited partnership interest in
LandWell. The remainder of the common stock of BMI and the partnership interests
in LandWell is owned by other companies with facilities located in the same
industrial complex.

     Pioneer's interests in BMI and LandWell, together with certain other
California and Louisiana real estate interests, constituted assets that were
held for the economic benefit of the previous owners of PAI. Dividends and
distributions received by Pioneer on account of such interests were deposited in
a separate cash account (the "Contingent Payment Account"), the balance of which
was to be applied in satisfaction of certain obligations of such previous owners
under environmental indemnity obligations in favor of Pioneer, provided that any
amounts not so applied prior to April 20, 2015 were to be remitted to such
persons.

     In June 2000 Pioneer and the previous owners effected an agreement pursuant
to which Pioneer agreed to transfer to the previous owners the record title to
the interests in BMI, LandWell and the California and Louisiana real estate
interests, as well as $0.8 million of the cash balance in the Contingent Payment
Account. The remaining $5.3 million balance in the Contingent Payment Account,
which was determined as an amount adequate to pay for future environmental
remediation costs that would be subject to the indemnity obligations of the
previous owners and was unrestricted, was retained by Pioneer, in exchange for
the release of the indemnity obligations. This transaction resulted in a gain of
$1.8 million. The Contingent Payment Account was closed as a consequence of this
transaction and the net proceeds from the settlement of $5.3 million were used
to reduce outstanding obligations under Pioneer's then existing revolving credit
facility.

9. OTHER ASSETS

     Other assets consist of the following at December 31:

<Table>
<Caption>
                                                                     SUCCESSOR | PREDECESSOR
                                                                      COMPANY  |  COMPANY
                                                                    ---------- | ----------
                                                                       2001    |    2000
                                                                    ---------- | ----------
<S>                                                                 <C>        | <C>
Debt issuance costs, net of accumulated amortization of $0 in                  |
2001 and $7,598 in 2000 .........................................   $       -- | $   14,646
Deferred tax asset, net of valuation allowance ..................           -- |      4,631
Patents, trademarks and other intangibles, net of                              |
  accumulated amortization of $0 in 2001 and $4,406 in                         |
  2000 ..........................................................           -- |      3,607
Accounts receivable under indemnification of environmental                     |
   reserve ......................................................        3,200 |      2,367
Receivable for premiums on expired options ......................        8,425 |         --
Other ...........................................................          191 |      1,967
                                                                    ---------- | ----------
          Other assets, net .....................................   $   11,816 | $   27,218
                                                                    ========== | ==========
</Table>

10. ACCRUED LIABILITIES

          Accrued liabilities consist of the following at December 31:

<Table>
<Caption>
                                      SUCCESSOR  | PREDECESSOR
                                       COMPANY   |  COMPANY
                                      ---------- | ----------
                                         2001    |     2000
                                      ---------- | ----------
<S>                                   <C>        | <C>
Payroll, benefits and pension .....   $    8,719 | $    6,234
Interest and bank fees ............           -- |     16,760
Reorganization items ..............        9,468 |         --
Other accrued liabilities .........       16,310 |     21,088
                                      ---------- | ----------
      Accrued liabilities .........   $   34,497 | $   44,082
                                      ========== | ==========
</Table>



                                       59
<PAGE>



11. EMPLOYEE BENEFITS

Pension Plans

     Pioneer sponsors various non-contributory, defined benefit plans covering
substantially all union and non-union employees of PALLC and PCI Canada. Pension
plan benefits are based primarily on participants' compensation and years of
credited service. Annual pension costs and liabilities for Pioneer under its
defined benefit plans are determined by actuaries using various methods and
assumptions. Pioneer intends to contribute such amounts as are necessary to
provide assets sufficient to meet the benefits to be paid to its employees.
Pioneer's present intent is to make annual contributions, which are actuarially
computed, in amounts not more than the maximum nor less than the minimum
allowable under the Internal Revenue Code. Plan assets at December 31, 2001 and
2000 consist primarily of fixed income investments and equity investments.

     The idling of the Tacoma plant in March 2002 resulted in a curtailment, as
defined by FAS 88, "Employers' Accounting for Settlement and Curtailment of
Defined Benefit Plans and for Termination Benefits," of the retirement plan for
Tacoma union employees. Pioneer will record a curtailment gain of approximately
$1.1 million in the first quarter of 2002.

     During 2001, certain employees of PCI Canada were terminated and
transferred to another company. The pension liabilities and assets associated
with the transferred employees amounted to $1.0 million and were transferred out
of Pioneer's plan and into the other company's plan.

     In connection with Pioneer's application of fresh start accounting, Pioneer
has adjusted the amounts recorded for pension and post-retirement benefits other
than pensions liabilities to include all previously unrecognized actuarial gains
and losses, as well as unrecognized prior service costs. Such fresh start
adjustments amounted to $5.8 million.

     Information concerning the pension obligation, plan assets, amounts
recognized in Pioneer's financial statements and underlying actuarial
assumptions is stated below.


<Table>
<Caption>
                                                                2001           2000
                                                             -----------    -----------
<S>                                                          <C>            <C>
Change in benefit obligation:
  Projected benefit obligation, beginning of year ........   $    63,086    $    56,966
  Service cost ...........................................         2,724          2,766
  Interest cost ..........................................         4,556          4,187
  Actuarial (gains)/losses ...............................           486           (270)
  Benefits paid ..........................................        (1,780)        (1,491)
  Net transfer out .......................................        (1,014)            --
  Plan amendments ........................................            --            928
                                                             -----------    -----------
  Projected benefit obligation, end of year ..............   $    68,058    $    63,086
                                                             ===========    ===========
Change in plan assets:
  Market value of assets, beginning of year ..............   $    53,950    $    49,591
  Actual return on plan assets ...........................           (25)         2,465
  Employer contributions .................................         4,044          3,412
  Net transfer out .......................................        (1,014)            --
  Benefits paid ..........................................        (1,780)        (1,491)
  Administrative expenses ................................           (26)           (27)
                                                             -----------    -----------
  Market value of assets, end of year ....................   $    55,149    $    53,950
                                                             ===========    ===========
Development of net amount recognized:
  Funded status ..........................................   $   (12,701)   $    (9,157)
  Unamortized actuarial (gain)/loss ......................         4,292           (428)
  Unrecognized prior service cost ........................         1,233          1,467
                                                             -----------    -----------
  Net amount recognized (Predecessor Company) ............   $    (7,176)   $    (8,118)
                                                                            ===========
  Fresh Start accounting adjustment ......................        (5,370)
                                                             -----------
  Net amount recognized (Successor Company) ..............   $   (12,546)
                                                             ===========
</Table>

<Table>
<Caption>
                                                                SUCCESSOR   |  PREDECESSOR
                                                                 COMPANY    |    COMPANY
                                                                  2001      |     2000
                                                               -----------  |  -----------
<S>                                                            <C>          |  <C>
Amounts recognized in the Consolidated Balance Sheets:                      |
  Accrued pension liability ................................   $   (12,546) |  $    (8,194)
  Accumulated other comprehensive income ...................            --  |           76
                                                               -----------  |  -----------
  Net amount recognized ....................................   $   (12,546) |  $    (8,118)
                                                               ===========  |  ===========
</Table>



                                       60
<PAGE>



<Table>
<Caption>
                                                             2001           2000           1999
                                                          ----------     ----------     ----------
<S>                                                       <C>            <C>            <C>
Components of net periodic benefit cost:
  Service cost ........................................   $    2,724     $    2,766     $    3,042
  Interest cost .......................................        4,556          4,187          3,850
  Expected return on plan assets ......................       (4,273)        (4,109)        (3,311)
  Amortization of prior service cost ..................          196            126            127
                                                          ----------     ----------     ----------
  Net period benefit cost .............................   $    3,203     $    2,970     $    3,708
                                                          ==========     ==========     ==========
Weighted-average assumptions as of December 31:
  Discount rate .......................................          7.1%           7.5%           7.4%
  Expected return on plan assets ......................          8.0%           8.0%           8.0%
  Rate of compensation increase .......................          3.9%           4.4%           4.0%
</Table>

Defined Contribution Plans

     Pioneer offers defined contribution plans under which employees may
generally contribute from 1% to 15% of their compensation. During 1999, 2000 and
2001, Pioneer also contributed funds to the plans in the amount of 50% of
employee contributions up to 4% to 6% of employee compensation, depending on the
plan. Aggregate expense of Pioneer with respect to such plans was $1.0 million,
$1.2 million, and $1.5 million in 2001, 2000, and 1999, respectively. Effective
February 1, 2002, Pioneer has suspended making matching contributions to the
plans in order to reduce fixed costs.

Post-Retirement Benefits Other Than Pensions

     Effective January 1, 1999, Pioneer modified its retiree health care
benefits plan. Employees retiring on or after January 1, 1999 will not receive
company-paid retiree medical benefits. Eligible employees who retired prior to
January 1, 1999 will continue to receive certain company-paid health care
benefits. Pioneer provides certain life insurance benefits for qualifying
retired employees who reached normal retirement age while working for Pioneer.

     Information concerning the plan obligation, the funded status, amounts
recognized in Pioneer's financial statements and underlying actuarial
assumptions is stated below.


<Table>
<Caption>
                                                                  2001          2000
                                                               ----------    ----------
<S>                                                            <C>           <C>
Change in benefit obligation:
  Accumulated post-retirement benefit obligation,
    beginning of year ......................................   $    8,207    $    7,805
  Service cost .............................................          117           122
  Interest cost ............................................          602           579
  Actuarial (gain)/loss ....................................          404           (39)
  Benefits paid ............................................         (363)         (260)
                                                               ----------    ----------
  Accumulated post-retirement benefit obligation, end of
    year ...................................................   $    8,967    $    8,207
                                                               ==========    ==========
  Funded status ............................................   $   (8,967)   $   (8,207)
  Unrecognized net loss ....................................          404            68
                                                               ----------    ----------
  Accrued benefit cost (Predecessor Company) ...............   $   (8,563)   $   (8,139)
                                                                             ==========
  Fresh Start accounting adjustment ........................         (404)
                                                               ----------
  Accrued benefit cost (Successor Company) .................   $   (8,967)
                                                               ==========
</Table>



<Table>
<Caption>
                                                           2001        2000      1999
                                                          -------    -------    -------
<S>                                                       <C>        <C>        <C>
Components of net periodic benefit cost:
  Service cost ........................................   $   117    $   122    $    99
  Interest cost .......................................       602        579        499
  Amortization of net loss ............................        31         37          4
                                                          -------    -------    -------
  Net period benefit cost .............................   $   750    $   738    $   602
                                                          =======    =======    =======
Weighted-average assumptions as of December 31:
  Discount rate .......................................       7.2%       7.6%       8.0%
</Table>

          The weighted-average annual assumed health care trend rate is assumed
to be 8.2% for 2001. The rate is assumed to decrease gradually to 4.5% in 2012
and remain level thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care trend rates would have the
following effects:

<Table>
<Caption>
                                                          1-PERCENTAGE     1-PERCENTAGE
                                                        POINT INCREASE    POINT DECREASE
                                                        --------------    --------------
<S>                                                     <C>               <C>
Effect on total of service and interest cost
  components ..........................................     $      126    $       (103)
Effect on post-retirement benefit obligation ..........          1,237          (1,021)
</Table>

Stock Based Compensation

     Prior to bankruptcy, Pioneer had two stock incentive plans, which provided
key employees the option to purchase shares of common stock. The plans
authorized the issuance of options to purchase up to a total of 2.3 million
shares of common stock, with vesting periods of up to three years and maximum
option terms of ten years. In addition, options for the purchase of 0.3 million
shares had been issued outside the scope of the stock option plans. Pioneer
accounted for the stock option plans in accordance with Accounting Principles
Board Opinion



                                       61
<PAGE>



No. 25, "Accounting for Stock Issued to Employees," under which no compensation
expense has been recognized for stock option awards. Had compensation expense
for the plans been determined consistent with SFAS 123, "Accounting for
Stock-Based Compensation," Pioneer's pro forma net loss and loss per common
share for the three years ended December 31, 2001 would have been as indicated
below:


<Table>
<Caption>
                                                                     PREDECESSOR COMPANY
                                                          -----------------------------------------
                                                              2001           2000           1999
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
Net loss before extraordinary item:
  As reported .........................................   $  (271,537)   $  (105,563)   $   (50,384)
  Pro forma ...........................................      (271,762)      (105,935)       (50,796)
Loss per common share - basic and diluted:
  Net loss before extraordinary item, as reported .....   $    (23.53)   $     (9.15)   $     (4.38)

  Net loss before extraordinary item, pro forma .......        (23.55)         (9.18)         (4.41)
</Table>

          These plans were terminated and all outstanding options were cancelled
pursuant to the plan of reorganization.

          As part of its plan of reorganization, Pioneer adopted an incentive
plan which provides for the granting to management of options to purchase up to
1,000,000 shares of common stock of the reorganized company; to date no options
have been granted.

          The following table summarizes the transactions with respect to the
stock options of the Predecessor Company for the three year period ended
December 31, 2001:

<Table>
<Caption>
                                                                              WEIGHTED AVERAGE
                                             NUMBER OF      EXERCISE PRICE      EXERCISE PRICE         OPTIONS
                                              SHARES           PER SHARE          PER SHARE           EXERCISABLE
                                           ------------     --------------    ----------------        ------------
<S>                                        <C>              <C>               <C>                     <C>
Outstanding at January 1, 1999 .........          1,469      $4.08-$11.12       $       5.10                  338
1999:
  Granted ..............................            176       $4.09-$6.53       $       4.79
  Exercised ............................             --                --                 --
  Forfeited ............................           (101)      $4.69-$4.95       $       4.90
                                                -------
Outstanding at December 31, 1999 .......          1,544      $4.08-$11.12       $       5.08                  520
2000:
  Granted ..............................            102             $5.45       $       5.45
  Exercised ............................             (3)            $4.95       $       4.95
  Forfeited ............................           (204)      $4.09-$7.86       $       5.01
                                                -------
Outstanding at December 31, 2000 .......          1,439      $4.08-$11.12       $       5.11                  773
2001:
  Forfeited ............................            (90)      $4.09-$7.86       $       5.10
  Cancelled ............................         (1,349)     $4.08-$11.12       $       5.03
                                                -------
Outstanding at December 31, 2001 .......             --                --                 --                   --
</Table>

12. LONG-TERM DEBT

          Long-term debt consisted of the following at December 31:

<Table>
<Caption>
                                                                                        SUCCESSOR    | PREDECESSOR
                                                                                         COMPANY     |   COMPANY
                                                                                        -----------  |  -----------
                                                                                            2001     |      2000
                                                                                        -----------  |  -----------
<S>                                                                                     <C>          |  <C>
Senior Secured Debt:                                                                                 |
  Senior Secured Floating Rate Guaranteed Notes, due December 2006, variable                         |
    interest rates based on the three-month LIBOR rate plus 3.5% ....................   $    45,422  |  $        --
  Floating Rate Term Notes, due December 2006, variable interest rates                               |
    based on the three-month LIBOR  rate plus 3.5% ..................................         4,578  |           --
  10% Senior Secured Guaranteed Notes, due December 2008 ............................       150,000  |           --
  9 1/4% Senior Secured Notes, due June 15, 2007 ....................................            --  |      200,000
  9 1/4% Senior Secured Notes, due October 15, 2007 .................................            --  |      175,000
  June 1997 term facility,  due in quarterly  installments  of $250 with                             |
    the balance due 2006; variable interest rate based on LIBOR or base rate ........            --  |       96,750
  November 1997 term facility, due in quarterly installments of $250 with the                        |
  balance due 2006; variable interest rate  based on LIBOR or base rate .............            --  |       80,000
   Other debt:                                                                                       |
  Revolving credit facility; variable interest rates based on U.S. prime                             |
   rate plus 1/2% and Canadian prime rate plus 1 1/4% ...............................         6,663  |       27,581
  Promissory note, interest at 8% per annum and payable quarterly, due                               |
   April 20, 2005 ...................................................................            --  |       11,463
Other notes, maturing in various years through 2014, with various                                    |
   installments, at various interest rates ..........................................         5,935  |       11,007
                                                                                        -----------  |  -----------
     Total ..........................................................................       212,598  |      601,801
Current maturities of long-term debt ................................................        (7,375) |     (597,715)
                                                                                        -----------  |  -----------
     Long-term debt, less current maturities ........................................   $   205,223  |  $     4,086
                                                                                        ===========  |  ===========
</Table>



                                       62
<PAGE>
     Upon emergence from bankruptcy, senior secured debt outstanding under
various debt instruments consisted of the Senior Guaranteed Notes, the Senior
Floating Notes, the 10% Senior Secured Notes and the Revolver which was used
shortly after our emergence from bankruptcy to replace $6.7 million of
debtor-in-possession financing which was outstanding as of December 31, 2001.
Collectively, the $200 million in Senior Guaranteed Notes, Senior Floating Notes
and 10% Senior Secured Notes are referred to as the Senior Notes and together
with the Revolver are referred to as the Senior Secured Debt. In addition, at
December 31, 2001, we have $5.9 million of other debt outstanding, comprised of
notes maturing in various years through 2014. Because the Revolver requires a
lock-box arrangement and contains a clause which allows the lender to refuse to
fund further advances in the event of a material adverse change in Pioneer's
business, the Revolver must be classified as current debt. Since the DIP
Facility was refinanced with the Revolver, the $6.7 million balance outstanding
at December 31, 2001 is classified as current debt.

     The Revolver provides for revolving loans in an aggregate amount up to $30
million, subject to borrowing base limitations related to the level of accounts
receivable and inventory, which secure borrowings under the facility. The
Revolver provides for up to an additional $20.0 million of availability in the
event of successful syndication of additional credit to one or more lenders
acceptable to the lender, but it is not anticipated that such syndication
efforts will be successful in the near future. On January 3, 2002, there was
unused capacity under the Revolver of approximately $11.4 million, although
subsequently that amount increased to $19.9 as a result of the perfection of
certain liens in Canada.

     Borrowings under the Revolver are available through December 31, 2004 so
long as no default exits and all conditions to borrowings are met. Borrowings
under the Revolver accrue interest determined on the basis of the prime rate
plus a margin. Pioneer incurs a fee on the unused amount of the facility at a
rate of .375% per year.

     Prior to the amendment of the Revolver (which amendment changed, among
other things, the method for calculating EBITDA as defined below), one of the
covenants in the Revolver required Pioneer to generate $5.1 million of net
earnings before extraordinary gains, interest, income taxes, depreciation and
amortization (referred to as EBITDA) during the quarter ended March 31, 2002,
$10.8 million of EBITDA during the six month period ending June 30, 2002, $19.6
million of EBITDA during the nine month period ending September 30, 2002, $32.4
million of EBITDA during the twelve month period ending December 31, 2002 and
$32.6 million of EBITDA for each twelve month period ending each fiscal quarter
thereafter. The Revolver also provides that as a condition of borrowings there
shall not have occurred any material adverse change in business, prospects,
operations, results of operations, assets, liabilities or condition (financial
or otherwise). During March 2002 the lender under Pioneer's Revolver advised
Pioneer that it believed that a material adverse change had occurred, although
it continued to fund loans under the Revolver. In order to address concerns
about adverse changes in Pioneer's financial condition and the possibility that
it might not comply with the EBITDA covenant during the remainder of 2002,
Pioneer had discussions with the lender on the proposed terms of an amendment to
the Revolver. The lender has now rescinded the effect of its notice of a
material adverse change that may have occurred, and extended the deadline for
the provision of financial statements for the year ended December 31, 2001 for
which Pioneer was not in compliance. In connection with the waiver, Pioneer has
amended the Revolver to (i) revise the definition of EBITDA to exclude the
effects of changes in the fair value of derivative instruments (as so adjusted,
"Adjusted EBITDA"), (ii) eliminate the availability of interest rates based on
LIBOR and (iii) replace the previously applicable margin over the prime rate
(the "Previous Rate") with the Previous Rate plus 2.25% for all loans that are
and will be outstanding under the Revolver. Pioneer paid a forbearance fee of
$250,000 in connection with the foregoing waiver and amendment. Also in
connection with the foregoing waiver and amendment, Pioneer agreed with
Pioneer's lender to further amend the terms of the Revolver to revise the
Adjusted EBITDA covenant (which currently contains the same levels of required
EBITDA as the original Revolver) to take into account Pioneer's current
expectations for the amount of Adjusted EBITDA that will be generated during
2002 as agreed to by the lender and to add such other financial covenants to the
Revolver as Pioneer's lender deems necessary to monitor Pioneer's performance in
meeting such projections. Pioneer's failure to effect the additional amendment
to the Revolver by May 10, 2002 will constitute a default under the Revolver and
a cross-default under the Senior Notes, unless agreed otherwise by the lender.

     If Pioneer is not successful in effecting the proposed amendment to the
terms of the Revolver or if the required EBITDA level for any quarter is not
met, Pioneer will be in default under the terms of the Revolver. Moreover, if
conditions constituting a material adverse change occur or have occurred, the
lender can exercise its rights under the Revolver and refuse to make further
advances. The effect of such a refusal to make further advances is that customer
receipts would be applied to borrowings under the Revolver without Pioneer
having the ability to reborrow. This would cause Pioneer to suffer a rapid loss
of liquidity and it would lose the ability to operate on a day-to-day basis. In
addition, a default under the Revolver would allow the lender the right to
accelerate the



                                       63
<PAGE>

outstanding indebtedness under the Revolver and would also result in a
cross-default under the Senior Notes which would provide the holders of the
Senior Notes with the right to accelerate their $200 million in outstanding
indebtedness and demand its immediate repayment. In such circumstances, Pioneer
would be required to refinance, restructure or reorganize all or a portion of
its indebtedness, sell assets, obtain additional debt or equity financing or
take other actions, including seeking protection under Chapter 11 of the U.S.
Bankruptcy Code and under Canada's Companies Creditors' Arrangement Act. Pioneer
cannot predict the actions of the lender under the Revolver or the holders of
the Senior Notes and its trade creditors, including any action to force Pioneer
into involuntary bankruptcy proceedings, in the event the proposed amendment to
the Revolver is not effected, or the outcome of any of the actions that Pioneer
may need to take in response to such actions.

     Pioneer is required to make mandatory prepayments of amounts owed on the
Senior Floating Notes and the Senior Guaranteed Notes from net cash proceeds of
certain asset sales, new equity issuances in excess of $5 million and excess
cash flow (as defined in the related agreements). Pioneer is also required to
make mandatory prepayments if certain levels of EBITDA are realized, and if
there is a change of control.

     Pioneer is required to make mandatory payments of amounts owed on the 10%
Senior Secured Notes with net cash proceeds of certain asset sales and of new
equity issuance in excess of $35 million (if there is no indebtedness
outstanding under the Senior Floating Notes and the Senior Guaranteed Notes). In
addition, the holders may require Pioneer to repurchase all or a portion of the
notes upon the occurrence of a change of control.

     Pioneer may prepay amounts owed on the Senior Guaranteed Notes, the 10%
Senior Secured Notes and the Senior Floating Notes in minimum amounts of
$1,000,000 or more, and Pioneer may, at its option, terminate the Revolver. If
the Revolver is terminated early, there will be a premium due that ranges from
1% to 3% depending upon the termination date.

     The obligations under the Revolver are secured by liens on Pioneer's
accounts receivable and inventory, and the obligations under the Senior Notes
are secured by liens on substantially all of Pioneer's other assets, with the
exception of certain assets that secure the obligations outstanding under
certain other long-term liabilities.

     The new debt agreements contain covenants limiting Pioneer's ability to,
among other things, incur additional indebtedness, prepay or modify debt
instruments, grant additional liens, guarantee any obligations, sell assets,
engage in another type of business or suspend or terminate a substantial portion
of business, declare or pay dividends, make investments, make capital
expenditures in excess of certain amounts, or make use of the proceeds of
borrowings for purposes other than those specified in the agreements. The new
agreements also include customary events of default, including a change of
control under the Revolver. Borrowings under the Revolver will generally be
available subject to the accuracy of all representations and warranties,
including the absence of a material adverse change and the absence of any
default or event of default.

     Contractual long-term debt maturities are as follows: $0.7 million in 2002;
$0.7 million in 2003; $7.4 million in 2004; $0.8 million in 2005; $50.8 million
in 2006; and $152.2 million thereafter.

     In September 1999, Pioneer entered into a $50 million three-year revolving
credit facility that replaced an existing $50 million revolving facility. In
connection with the bankruptcy proceedings in 2001, this was replaced with the
DIP Facility which provided for up to $50 million of revolving borrowings. In
connection with the emergence from bankruptcy the DIP Facility was terminated
and replaced with the Revolver. No amounts were drawn on the Revolver at
December 31, 2001, although $6.7 million remained outstanding under the DIP
Facility until it was replaced with proceeds from the Revolver on January 3,
2002. In addition, at December 31, 2001 there were letters of credit outstanding
of $6 million.

     Prior to the reorganization, cash obligations included payment of interest
on the notes issued in connection with the acquisition of the U.S. chlor-alkali
operating company. Those notes were cancelled as part of the implementation of
the plan of reorganization.

13. CONSOLIDATING FINANCIAL STATEMENTS

     PCI Canada (a wholly-owned subsidiary of PCI) is the issuer of the $150
million Senior Secured Notes, which are fully and unconditionally guaranteed on
a joint and several basis by PCI and all of PCI's other direct and indirect
wholly-owned subsidiaries.

     PALLC (a wholly-owned subsidiary of PCI Canada) is the issuer of the $45.4
million of Senior Guaranteed Notes and $4.6 million of Senior Floating Notes,
which are fully and unconditionally guaranteed on a joint and several basis by
PCI and all of PCI's other direct and indirect wholly-owned subsidiaries.
Together, PCI Canada, PALLC and the subsidiary note guarantors, comprise all of
the direct and indirect subsidiaries of PCI.

     Condensed consolidating financial information for PCI and its wholly-owned
subsidiaries is presented below. Information is presented as though the
Successor Company organizational structure had been in place for all periods
presented.



                                       64
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET- SUCCESSOR
COMPANY
DECEMBER 31, 2001
(IN THOUSANDS)

<Table>
<Caption>
                                                                    PCI                        OTHER                      PIONEER
                                                       PCI         CANADA         PALLC     GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                   ----------   ----------    ----------    ----------  -------------  -------------
                    ASSETS
<S>                                                 <C>          <C>           <C>           <C>          <C>           <C>
Current assets:
  Cash and cash equivalents ...................     $       --   $    1,950    $    1,674    $       --   $       --    $    3,624
  Accounts receivable, net ....................             --        8,889        32,561           118           --        41,568
  Inventories .................................             --        6,320        11,828            --           --        18,148
  Current derivative asset ....................             --           --       178,028            --           --       178,028
  Prepaid expenses and other current assets ...          2,202        3,138           582            --           --         5,922
                                                    ----------   ----------    ----------    ----------   ----------    ----------
       Total current assets ...................          2,202       20,297       224,673           118           --       247,290
Property, plant and equipment, net ............             --      132,726       141,863         1,528           --       276,117
 Other assets, net ............................             --           --        11,816            --           --        11,816
 Intercompany receivable ......................             --       68,984            --        54,040     (123,024)           --
 Investment in subsidiaries ...................         16,188           --            --            --      (16,188)           --
 Derivative asset .............................             --           --        87,625            --           --        87,625
 Excess reorganization value over identifiable
   assets .....................................             --       84,064            --            --           --        84,064
                                                    ----------   ----------    ----------    ----------   ----------    ----------

                    Total assets ..............     $   18,390   $  306,071    $  465,977    $   55,686   $ (139,212)   $  706,912
                                                    ==========   ==========    ==========    ==========   ==========    ==========

                          LIABILITIES AND STOCKHOLDERS'
                          EQUITY (DEFICIENCY IN ASSETS)

Current liabilities:
  Accounts payable .............................    $       --   $   11,192    $   13,641    $        6   $       --    $   24,839
  Accrued liabilities ..........................            --       14,760        19,737            --           --        34,497
  Derivative liability .........................            --           --       168,865            --           --       168,865
  Current portion of long-term debt ............            --        5,774         1,574            27           --         7,375
                                                    ----------   ----------    ----------    ----------   ----------    ----------
       Total current liabilities ...............            --       31,726       203,817            33           --       235,576
  Long-term debt, less current portion..........            --      150,000        55,106           117           --       205,223
  Investment in subsidiary .....................            --      139,311            --            --     (139,311)           --
  Intercompany payable .........................         7,863           --       115,160            --     (123,023)           --
  Accrued pension and other employee benefits ..            --        8,378        12,889            --           --        21,267
  Derivative liability .........................            --           --       207,625            --           --       207,625
  Other long-term liabilities ..................            --       14,675        10,693         1,326           --        26,694
  Stockholders' equity (deficiency in assets) ..        10,527      (38,019)     (139,313)       54,210      123,122        10,527
                                                    ----------   ----------    ----------    ----------   ----------    ----------

       Total liabilities and stockholders'
           equity (deficiency in assets) .......    $   18,390   $  306,071    $  465,977    $   55,686   $ (139,212)   $  706,912
                                                    ==========   ==========    ==========    ==========   ==========    ==========
</Table>






CONDENSED CONSOLIDATING BALANCE SHEET - PREDECESSOR
COMPANY
DECEMBER 31, 2000
(IN THOUSANDS)


<Table>
<Caption>
                                                                      PCI                      OTHER                     PIONEER
                                                         PCI         CANADA      PALLC       GUARANTORS  ELIMINATIONS  CONSOLIDATED
                                                      ---------    ---------    ---------    ----------  ------------   ------------
<S>                                                   <C>          <C>          <C>          <C>         <C>          <C>
                       ASSETS
Current assets:
  Cash and cash equivalents ........................   $     668    $   3,753    $   1,142    $     372   $      --    $   5,935
  Accounts receivable, net .........................           4        9,985       38,955          627          --       49,571
  Inventories ......................................          --        8,048       16,983           36          --       25,067
  Prepaid expenses and other current assets ........          --          190        2,112           --          --        2,302
                                                       ---------    ---------    ---------    ---------   ---------    ---------
       Total current assets ........................         672       21,976       59,192        1,035          --       82,875

Property, plant and equipment, net .................          --      108,633      190,223        1,528          --      300,384
Other assets, net ..................................          --       10,725       14,526        1,967          --       27,218
Intercompany receivable ............................          --       43,112           --       47,786     (90,898)          --
Excess cost over the fair value of net assets
acquired, net ......................................          --       32,187      147,373           --          --      179,560
                                                       ---------    ---------    ---------    ---------   ---------    ---------
       Total assets ................................   $     672    $ 216,633    $ 411,314    $  52,316   $ (90,898)   $ 590,037
                                                       =========    =========    =========    =========   =========    =========

               LIABILITIES AND STOCKHOLDERS'
               EQUITY (DEFICIENCY IN ASSETS)
Current liabilities:
  Accounts payable .................................   $     233    $  21,639    $  21,843    $      23   $      --    $  43,738
  Accrued liabilities ..............................          --        8,760       34,619          703          --       44,082
  Current portion of long-term debt ................      11,463      186,737      399,488           27          --      597,715
                                                       ---------    ---------    ---------    ---------   ---------    ---------
       Total current liabilities ...................      11,696      217,136      455,950          753          --      685,535
Long-term debt, less current portion ...............          --           --        3,942          144          --        4,086
Investment in subsidiaries .........................      53,129       13,919           --           --     (67,050)          --
Intercompany payable ...............................       6,276           --       84,622           --     (90,898)          --
Accrued pension and other employee benefits ........          --        4,932       10,052           --          --       14,984
Other long-term liabilities ........................          --           --       10,466        1,790          --       12,256
Redeemable preferred stock: $.01 par value,
 authorized 10,000 shares, 55 issued and outstanding       5,500           --           --           --          --        5,500
Stockholders' equity (deficiency in assets) .......     (75,929)     (19,354)    (153,718)       49,629      67,050     (132,324)
                                                       ---------    ---------    ---------    ---------   ---------    ---------
       Total liabilities and stockholders' equity
             (deficiency in assets) ................   $     672    $ 216,633    $ 411,314    $  52,316   $ (90,898)   $ 590,037
                                                       =========    =========    =========    =========   =========    =========
</Table>




                                       65
<PAGE>

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 2001
(IN THOUSANDS)

<Table>
<Caption>
                                                                PCI                     OTHER                       PIONEER
                                                   PCI         CANADA       PALLC     GUARANTORS  ELIMINATIONS   CONSOLIDATED
                                                 --------    ---------    ---------   ----------  ------------   -------------
<S>                                              <C>         <C>          <C>          <C>         <C>          <C>
Revenues .....................................   $     --    $ 166,300    $ 296,723    $     18    $ (79,559)   $ 383,482
Cost of sales ................................         --      134,996      283,273          36      (79,969)     338,336
                                                 --------    ---------    ---------    --------    ---------    ---------
Gross profit .................................         --       31,304       13,450         (18)         410       45,146
Selling, general and administrative
  expenses ...................................        144       10,065       31,047         270           --       41,526
Change in fair value of derivatives ..........         --           --      110,837          --           --      110,837
Asset impairment and other charges ...........         --        5,459        7,479          --           --       12,938
                                                 --------    ---------    ---------    --------    ---------    ---------
Operating income (loss) ......................       (144)      15,780     (135,913)       (288)         410     (120,155)
Interest expense, net ........................       (514)     (10,416)     (25,173)         93           --      (36,010)
Reorganization items .........................         --           (2)      (6,497)         --           --       (6,499)
Fresh start adjustments ......................     55,235      (64,766)    (180,858)       (607)      84,077     (106,919)
Other income, net ............................         --          604       (4,702)      5,267           --        1,169
                                                 --------    ---------    ---------    --------    ---------    ---------
Income (loss) before income taxes ............     54,577      (58,800)    (353,143)      4,465       84,487     (268,414)
Income tax expense (benefit) .................         --        3,123           --          --           --        3,123
                                                 --------    ---------    ---------    --------    ---------    ---------
Net income (loss) before equity in earnings of
  subsidiary and extraordinary item ..........     54,577      (61,923)    (353,143)      4,465       84,487     (271,537)
Equity in net (earnings) loss of subsidiary ..    (14,084)     (15,497)          --          --       29,581           --
                                                 --------    ---------    ---------    --------    ---------    ---------
Net income (loss) before extraordinary item ..     68,661      (46,426)    (353,143)      4,465       54,906     (271,537)
Extraordinary item - net of tax ..............     17,795       27,761      368,640         116           --      414,312
                                                 --------    ---------    ---------    --------    ---------    ---------
Net income (loss) ............................   $ 86,456    $ (18,665)   $  15,497    $  4,581    $  54,906    $ 142,775
                                                 ========    =========    =========    ========    =========    =========
</Table>



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)

<Table>
<Caption>
                                                                PCI                      OTHER                     PIONEER
                                                    PCI        CANADA        PALLC     GUARANTORS   ELIMINATIONS CONSOLIDATED
                                                 ---------    ---------    ---------   ----------   ------------ ------------
<S>                                              <C>          <C>          <C>          <C>          <C>          <C>
Revenues .....................................   $      --    $ 160,543    $ 302,308    $  10,414    $ (70,357)   $ 402,908
Cost of sales ................................          --      137,875      293,046       10,340      (70,264)     370,997
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Gross profit .................................          --       22,668        9,262           74          (93)      31,911
Selling, general and administrative
  expenses ...................................         541       13,283       27,295        2,305           --       43,424
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Operating income (loss) ......................        (541)       9,385      (18,033)      (2,231)         (93)     (11,513)
Interest expense, net ........................        (858)     (17,229)     (38,018)        (223)          --      (56,328)
Other income (expense), net ..................        (253)         152      (34,738)      38,148           --        3,309
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes ............      (1,652)      (7,692)     (90,789)      35,694          (93)     (64,532)
Income tax expense (benefit) .................       7,929       (2,686)      35,788           --           --       41,031
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Income (loss) before equity in net earnings of
  subsidiaries ...............................      (9,581)      (5,006)    (126,577)      35,694          (93)    (105,563)
Equity in net (earnings) loss of
  subsidiaries ...............................      95,889      126,577           --           --     (222,466)          --
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Net income (loss) ............................   $(105,470)   $(131,583)   $(126,577)   $  35,694    $ 222,373    $(105,563)
                                                 =========    =========    =========    =========    =========    =========
</Table>

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<Table>
<Caption>
                                                                  PCI                     OTHER                     PIONEER
                                                   PCI          CANADA       PALLC      GUARANTORS  ELIMINATIONS  CONSOLIDATED
                                                 ---------    ---------    ---------    ----------  ------------  ------------
<S>                                              <C>          <C>          <C>          <C>          <C>          <C>
Revenues .....................................   $      --    $ 144,659    $ 189,209    $  22,355    $  (1,802)   $ 354,421
Cost of sales ................................          --      129,700      192,290       23,428       (1,730)     343,688
                                                 ---------    ---------    ---------    ---------    ---------    ---------
Gross profit (loss) ..........................          --       14,959       (3,081)      (1,073)         (72)      10,733
Selling, general and administrative
  expenses ...................................         442       16,674       28,326        4,138           --       49,580
                                                 ---------    ---------    ---------    ---------   ------------  ---------

Operating loss ...............................        (442)      (1,715)     (31,407)      (5,211)         (72)     (38,847)
Interest expense, net ........................        (841)     (20,712)     (27,803)      (2,571)          --      (51,927)
Other income (expense), net ..................          --       (1,963)       9,961        6,178           --       14,176
                                                 ---------    ---------    ---------    ---------   ------------  ---------
Loss before income taxes .....................      (1,283)     (24,390)     (49,249)      (1,604)         (72)     (76,598)
Income tax benefit ...........................      (1,435)      (6,973)     (17,806)          --           --      (26,214)
                                                 ---------    ---------    ---------    ---------   ------------  ---------
Income (loss) before equity in net earnings of
  subsidiaries ...............................         152      (17,417)     (31,443)      (1,604)         (72)     (50,384)
Equity in net (earnings) loss of
  subsidiaries ...............................      50,464       31,443           --           --      (81,907)          --
                                                 ---------    ---------    ---------    ---------   ------------  ---------
Net income (loss) ............................   $ (50,312)   $ (48,860)   $ (31,443)   $  (1,604)   $  81,835    $ (50,384)
                                                 =========    =========    =========    =========    =========    =========
</Table>


                                       66
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 2001
(IN THOUSANDS)

<Table>
<Caption>
                                                                             PCI                    OTHER      PIONEER
                                                                  PCI       CANADA      PALLC     GUARANTORS CONSOLIDATED
                                                               --------    --------    --------   ---------- ------------
<S>                                                            <C>         <C>         <C>        <C>        <C>
Cash flows from operating activities:
Net cash flows from operating activities ...................   $   (668)   $  8,764    $ 25,154    $   (344)   $ 32,906
                                                               --------    --------    --------    --------    --------

Cash flows from investing activities:
  Capital expenditures .....................................         --      (3,772)     (9,340)         --     (13,112)
  Proceeds from disposal of assets .........................         --          17         216          --         233
                                                               --------    --------    --------    --------    --------
          Net cash flows from investing activities .........         --      (3,755)     (9,124)         --     (12,879)
                                                               --------    --------    --------    --------    --------

Cash flows from financing activities:
  Debtor-in-possession credit facility, net ................         --       5,774         889          --       6,663
  Pre-petition revolving credit borrowings, net ............         --     (11,737)    (15,844)         --     (27,581)
  Repayments on long-term debt .............................         --          --        (543)        (28)       (571)
                                                               --------    --------    --------    --------    --------
          Net cash flows from financing activities .........         --      (5,963)    (15,498)        (28)    (21,489)

Effect of exchange rate changes on cash and
  cash equivalents..........................................         --        (849)         --          --        (849)
                                                               --------    --------    --------    --------    --------

Net increase (decrease) in cash and cash equivalents........       (668)     (1,803)        532        (372)     (2,311)
Cash and cash equivalents at beginning of period ...........        668       3,753       1,142         372       5,935
                                                               --------    --------    --------    --------    --------
Cash and cash equivalents at end of period .................   $     --    $  1,950    $  1,674    $     --    $  3,624
                                                               ========    ========    ========    ========    ========
</Table>

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)

<Table>
<Caption>
                                                                             PCI                    OTHER      PIONEER
                                                                 PCI        CANADA      PALLC     GUARANTORS CONSOLIDATED
                                                               --------    --------    --------   ---------- ------------
<S>                                                            <C>         <C>         <C>        <C>        <C>
Cash flows from operating activities:
Net cash flows from operating activities ...................   $   (923)   $  2,210    $ 15,295    $ (3,445)   $ 13,137
                                                               --------    --------    --------    --------    --------

Cash flows from investing activities:
  Capital expenditures .....................................         --      (3,944)    (14,753)         --     (18,697)
  Proceeds from disposal of assets .........................         --          --          29       2,849       2,878
                                                               --------    --------    --------    --------    --------
          Net cash flows from investing activities .........         --      (3,944)    (14,724)      2,849     (15,819)
                                                               --------    --------    --------    --------    --------

Cash flows from financing activities:
  Net proceeds under revolving credit arrangements .........         --       4,324       2,094                   6,418
  Repayments on long-term debt .............................         --          --      (1,920)        (30)     (1,950)
  Other ....................................................         18          --          --          --          18
                                                               --------    --------    --------    --------    --------
          Net cash flows from financing activities .........         18       4,324         174         (30)      4,486

Effect of exchange rate changes on cash and
  cash equivalents..........................................         --      (1,379)         --          --      (1,379)
                                                               --------    --------    --------    --------    --------

Net increase (decrease) in cash and cash equivalents........       (905)      1,211         745        (626)        425
Cash and cash equivalents at beginning of period ...........      1,573       2,542         397         998       5,510
                                                               --------    --------    --------    --------    --------
Cash and cash equivalents at end of period .................   $    668    $  3,753    $  1,142    $    372    $  5,935
                                                               ========    ========    ========    ========    ========
</Table>

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -
PREDECESSOR COMPANY
FISCAL YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

<Table>
<Caption>
                                                                             PCI                    OTHER      PIONEER
                                                                 PCI        CANADA      PALLC     GUARANTORS CONSOLIDATED
                                                               --------    --------    --------   ---------- ------------
<S>                                                            <C>         <C>         <C>        <C>        <C>
Cash flows from operating activities:
Net cash flows from operating activities ...................   $   (820)   $(35,963)   $(11,810)   $ (3,756)   $(52,349)
                                                               --------    --------    --------    --------    --------

Cash flows from investing activities:
  Capital expenditures .....................................         --      (2,086)    (25,836)       (396)    (28,318)
  Proceeds from disposal of assets .........................         --          --      12,152       1,007      13,159
                                                               --------    --------    --------    --------    --------
          Net cash flows from investing activities .........         --      (2,086)    (13,684)        611     (15,159)

Cash flows from financing activities:
  Net proceeds under revolving credit arrangements .........         --       7,414      13,749          --      21,163
  Repayments on long-term debt .............................         --          --      (2,641)        (25)     (2,666)
  Debt issuance and related costs ..........................         --          --        (968)         --        (968)
  Other ....................................................        129          --          --          --         129
                                                               --------    --------    --------    --------    --------
          Net cash flows from financing activities .........        129       7,414      10,140         (25)     17,658

Effect of exchange rate changes on cash and
  cash equivalents..........................................         --       1,538          --          --       1,538
                                                               --------    --------    --------    --------    --------

Net decrease in cash and cash equivalents...................       (691)    (29,097)    (15,354)     (3,170)    (48,312)
Cash and cash equivalents at beginning of period ...........      2,264      31,639      15,751       4,168      53,822
                                                               --------    --------    --------    --------    --------

Cash and cash equivalents at end of period .................   $  1,573    $  2,542    $    397    $    998    $  5,510
                                                               ========    ========    ========    ========    ========
</Table>
                                       67
<PAGE>
    Pursuant to the terms of certain debt instruments, there are prohibitions on
the payment of dividends on the new common stock by the Company. Pioneer's
ability to incur additional new indebtedness is restricted, other than borrowing
available under the Revolver. See Note 12.

    The Company did not receive dividends from other subsidiaries for the years
ended December 31, 2001, 2000, and 1999.

14.       FINANCIAL INSTRUMENTS

Concentration of Credit Risk

    Pioneer manufactures and sells its products to companies in diverse
industries. Pioneer performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Pioneer's sales
are primarily to customers throughout the United States and in eastern Canada.
Credit losses relating to these customers have historically been immaterial.

Fair Value of Financial Instruments

    In preparing disclosures about the fair value of financial instruments,
Pioneer has assumed that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings, accounts payable and
certain accrued expenses because of the short maturities of those instruments.
The fair values of debt instruments are estimated based upon quoted market
values (if applicable), or based on debt with similar terms and remaining
maturities. Considerable judgment is required in developing these estimates and,
accordingly, no assurance can be given that the estimated values presented
herein are indicative of the amounts that would be realized in a free market
exchange. The fair value of the derivative positions was determined for Pioneer
by a consultant, using available market information and appropriate valuation
methodologies that include current and forward pricing. Considerable judgement,
however, is necessary to interpret market data and develop the related estimates
of fair value. Accordingly, the estimates for the fair value of the derivative
positions are not necessarily indicative of the amounts that could currently be
realized upon disposition of the derivative positions or the ultimate amount
that would be paid or received when the positions are settled. The use of
different market assumptions and/or estimation methodologies would result in
different fair values. Management believes that the market information,
methodologies and assumptions used to fair value the derivative positions
produces a reasonable estimation of the fair value of the derivative positions
at December 31, 2001. Pioneer held no derivative financial instruments as of
December 31, 2000 and 1999.

    At December 31, 2001, the fair market value of all of Pioneer's financial
instruments approximated the carrying value.

15.       GEOGRAPHIC INFORMATION

     Financial information relating to Pioneer by geographical area is as
follows. Revenues are attributed to countries based on delivery point.


<Table>
<Caption>
                               PREDECESSOR COMPANY
                          ------------------------------
                            2001       2000        1999
                          --------   --------   --------
<S>                       <C>        <C>        <C>
REVENUES
United States .........   $301,917   $302,105   $257,351
Canada ................     80,941     99,086     92,456
Other .................        624      1,717      4,614
                          --------   --------   --------
Consolidated ..........   $383,482   $402,908   $354,421
                          ========   ========   ========
</Table>

<Table>
<Caption>
                     SUCCESSOR | PREDECESSOR
                      COMPANY  |  COMPANY
                     --------- | -----------
                       2001    |    2000
                     --------- | -----------
<S>                  <C>       | <C>
LONG-LIVED ASSETS              |
United States....... $ 242,833 | $ 356,357
Canada..............   216,789 |   146,174
</Table>

         No individual customer constituted 10% or more of the total revenues in
1999, 2000 or 2001.


                                       68
<PAGE>
16.      ASSET IMPAIRMENT AND OTHER CHARGES

    In March 2001, Pioneer announced a 50% curtailment in the capacity of its
Tacoma plant due to an inability to obtain sufficient power at reasonable
prices. The Tacoma curtailment resulted in the termination of 55 employees, for
which $1.9 million of accrued severance expense was recorded in March 2001.
Additionally, in connection with an organizational restructuring undertaken by
Pioneer, $1.6 million of severance expense was recorded in March 2001 relating
to terminations of 19 employees at other locations, all whom were terminated
prior to June 30, 2001. Severance payments of approximately $3.0 million were
made during the year ended December 31, 2001, resulting in accrued severance of
$0.5 million at December 31, 2001.

    In October 2001, Pioneer announced plans to shut down the Pioneer Technical
Center ("PTC"). This shutdown will result in the termination of 23 employees,
for which $1.3 million of accrued severance was recorded as of December 31,
2001. As of December 31, 2001, none of the employees had been terminated, and no
severance had been paid. Pioneer anticipates that the shut-down and sale of the
PTC assets will be completed during 2002. Pioneer performed an impairment
analysis, and determined that the PTC asset was impaired. As a result, Pioneer
measured the asset at current fair market value, based on sales prices for
similar properties, less estimated selling costs, and recorded an impairment
loss of $3.8 million during 2001.

    Of the $12.9 million of asset impairments and other charges recorded during
the year ended December 31, 2001, $9.1 million is primarily comprised of
professional fees related to Pioneer's financial reorganization incurred prior
to the Chapter 11 filing on July 31, 2001.

17.      INTEREST EXPENSE, NET

    Interest expense, net consisted of the following for the indicated
periods:

<Table>
<Caption>
                                            PREDECESSOR COMPANY
                                     --------------------------------
                                           YEAR ENDED DECEMBER 31,
                                     --------------------------------
                                       2001        2000        1999
                                     --------    --------    --------
<S>                                  <C>         <C>         <C>
Interest expense .................   $ 36,077    $ 56,702    $ 52,969
Interest income ..................        (67)       (374)     (1,042)
                                     --------    --------    --------
Interest expense, net ............   $ 36,010    $ 56,328    $ 51,927
                                     ========    ========    ========
</Table>

    Capitalized interest was $0.3 million in 1999. No interest was
capitalized in 2000 or 2001.

18.      COMMITMENTS AND CONTINGENCIES

Letters of Credit

    At December 31, 2001, Pioneer had letters of credit and performance bonds,
including a license bond, outstanding of approximately $6.0 million and $0.5
million, respectively. These letters of credit and performance bonds were issued
for the benefit of municipal customers under sales agreements securing delivery
of products sold, state environmental agencies as required for manufacturers in
the states and holders of Pioneer's tax-exempt bonds. The letters of credit
expire at various dates in 2002 through 2010. No amounts were drawn on the
letters of credit at December 31, 2001.

Purchase Commitments

    Pioneer has various purchase commitments related to its operations.
Pioneer has committed to purchase salt used in its production processes under
contracts which continue through the year 2007 with rates similar to prevailing
market rates. Pioneer also has various commitments related to the purchase of
electricity, which continue through the year 2017. Required purchase quantities
of commitments in excess of one year at December 31, 2001 are as follows:


                                       69
<PAGE>

<Table>
<Caption>
                                              SALT-TONS      ELECTRICITY-MWH
                                              ---------      ---------------
<S>                                          <C>             <C>
2002........................................  1,598,650           516,316
2003........................................  1,223,650           516,316
2004........................................    498,317           516,316
2005........................................    383,883           516,316
2006........................................    360,000           366,316
Thereafter..................................    120,000         1,157,173
                                              ---------        ----------
          Total commitment quantities.......  4,184,500         3,588,753
                                              =========        ==========
</Table>

    The electricity quantities shown in the table above include quantities
expected to be used in operations. See discussion regarding additional purchase
commitments under derivative contracts in Note 3.

    During the years ended December 31, 2001, 2000 and 1999, all required
purchase quantities under the above commitments were consumed during normal
operations.

Operating Leases

    Pioneer leases certain manufacturing and distribution facilities,
computer equipment, and administrative offices under non-cancellable leases.
Minimum future rental payments on such leases with terms in excess of one year
in effect at December 31, 2001 are as follows:

<Table>
<S>                                      <C>
2002.................................... $14,715
2003....................................  11,754
2004....................................   8,647
2005....................................   3,875
2006....................................   2,109
Thereafter..............................   1,627
                                         -------
          Total minimum obligations..... $42,727
                                         =======
</Table>

    Lease expense charged to operations for the years ended December 31,
2001, 2000, and 1999 was approximately $18.4 million, $20.2 million, and $17.7
million, respectively.

Contingent Fees

    If within the 12 months following the termination of Pioneer's
agreement with Wasserstein, Parella & Company, ("WP&Co"), investment bankers
engaged by Pioneer in connection with the bankruptcy, there is a sale involving
aggregate consideration in excess of $10,000,000, WP&Co. will be entitled to a
sale transaction fee, which is calculated as a percentage between 1% and 2% of
the aggregate consideration, as defined. WP&Co. is also entitled to a certain
percentage between 1% and 4% of gross proceeds of any financings Pioneer
consummates within 12 months following the termination of the WP&Co. agreement.
Currently, it is not likely that a sale or a financing will take place within
this time period.

Litigation

    Pioneer is party to various legal proceedings and potential claims
arising in the ordinary course of its business. In the opinion of management,
Pioneer has adequate legal defenses and/or insurance coverage with respect to
these matters and management does not believe that they will materially affect
Pioneer's financial position or results of operations.

19.      INCOME TAXES

    Income taxes are recorded pursuant to SFAS 109, "Accounting for Income
Taxes," under which, deferred income taxes are determined utilizing an asset and
liability approach. This method gives consideration to the future tax
consequences associated with differences between the financial accounting basis
and tax basis of the assets and liabilities, and the ultimate realization of any
deferred tax asset resulting from such differences. Pioneer considers all
foreign earnings as being permanently invested in that country.


                                       70
<PAGE>

    Components of income (loss) before income taxes and income taxes are as
follows:

<Table>
<Caption>
                                                                              PREDECESSOR COMPANY
                                                                       --------------------------------
                                                                          2001       2000        1999
                                                                       --------    --------    --------
<S>                                                                    <C>         <C>         <C>
Current income tax provision (benefit):
  U.S ..............................................................   $     --    $     --    $     --
  Foreign ..........................................................    (13,383)         --          --
                                                                       --------    --------    --------
          Total ....................................................   $(13,383)   $     --    $     --
                                                                       --------    --------    --------
Deferred income tax provision (benefit):
  U.S ..............................................................   $     --    $ 42,353    $(18,010)
  Foreign ..........................................................     16,506      (2,686)     (6,973)
  State ............................................................         --       1,364      (1,231)
                                                                       --------    --------    --------
          Total ....................................................     16,506      41,031     (26,214)
                                                                       --------    --------    --------
          Total income tax expense (benefit) .......................   $  3,123    $ 41,031    $(26,214)
Current tax effect of extraordinary item (reduction of net
  operating loss carryforward) .....................................   $ 23,803    $     --    $     --
Deferred tax expense - COD income- foreign .........................      8,739          --          --
Valuation allowance ................................................    (23,803)         --          --
                                                                       --------    --------    --------
Total tax expense (benefit) ........................................   $ 11,862    $ 41,031    $(26,214)
                                                                       ========    ========    ========
</Table>

    Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of deferred tax liabilities and assets are as follows at December 31:

<Table>
<Caption>
                                                  SUCCESSOR  |  PREDECESSOR
                                                   COMPANY   |    COMPANY
                                                  ---------  |  -----------
                                                     2001    |     2000
                                                  ---------  |  -----------
<S>                                               <C>        |  <C>
Deferred tax liabilities:                                    |
  Property, plant and equipment ...............   $ (45,956) |  $ (33,092)
  Other .......................................      (8,739) |         --
                                                  ---------  |  ---------
       Total deferred tax liabilities .........     (54,695) |    (33,092)
                                                  ---------  |  ---------
Deferred tax assets:                                         |
  Futures contracts ...........................      41,009  |         --
  Goodwill ....................................      13,653  |         --
  Post employment benefits ....................      11,057  |      5,532
  Environmental reserve .......................       3,835  |      3,178
  Tax credit carryovers .......................       3,462  |      3,037
  Other .......................................       6,406  |        711
  Net operating loss carryforward .............      76,485  |     93,099
                                                  ---------  |  ---------
          Total deferred tax assets ...........     155,907  |    105,557
Valuation allowance for deferred tax assets ...    (121,827) |    (67,835)
                                                  ---------  |  ---------
     Net deferred tax assets ..................      34,080  |     37,722
                                                  ---------  |  ---------
     Net deferred taxes .......................   $ (20,615) |  $   4,630
                                                  =========    =========
</Table>

    The reconciliation of income tax computed at the U.S. federal statutory
tax rates to income tax expense (benefit) for the periods presented is as
follows:

<Table>
<Caption>
                                                                     PREDECESSOR COMPANY
                                           ------------------------------------------------------------------------
                                                   2001                      2000                     1999
                                           --------------------     ---------------------     ---------------------
                                            AMOUNT     PERCENT       AMOUNT      PERCENT       AMOUNT      PERCENT
                                           --------    --------     --------     --------     --------     --------
<S>                                        <C>        <C>          <C>          <C>          <C>           <C>
Tax at U.S. statutory rates ............   $(93,304)        (35)%   $(22,586)         (35)%   $(26,809)         (35)%
State and foreign income
  taxes, net of federal tax
  benefit ..............................      1,941           1       (6,068)          (9)      (1,186)          (1)
Nondeductible fresh start adjustment ...     10,544           4           --           --           --           --
Reorganization costs ...................      3,391           1           --           --           --           --
Amortization of non-deductible
  Goodwill .............................      2,756           1        1,850            3        1,781            2
Valuation allowance ....................     77,795          29       67,835          105           --           --
                                           --------    --------     --------     --------     --------     --------
     Total tax expense (benefit) .......   $  3,123           1%    $ 41,031           64%    $(26,214)         (34)%
                                           ========    ========     ========     ========     ========     ========
</Table>

    The valuation allowance reduces deferred tax assets to the amount that
Pioneer believes is most likely to be realized. In 2001, based on the
uncertainties of the effect of the financial restructuring on the net operating
loss carryforwards ("NOLs"), the level of historical taxable income and
projections for the future taxable income over the periods in which the NOLs are
available for use, it was estimated that it is more likely than not that Pioneer
will not realize the full benefit of the deferred tax assets. Accordingly, a
valuation allowance has been recorded as of December 31, 2001.

    At December 31, 2001, Pioneer had for income tax purposes, approximately $.6
million of Canadian NOLs and $190 million of U.S. NOLs. The NOLs are available
for offset against future taxable income generated during carryforward periods
ending in 2008 for the Canadian NOL and 2009 through 2021 for the U.S. NOLs. Net
operating loss carryforwards and certain other tax attributes available to
Pioneer were reduced as a result of the plan of reorganization and the
cancellation of various pre-petition liabilities under the plan. Tax attributes
remaining after the application of the cancellation of indebtedness rules are
subject to limitation-on-utilization rules. The federal tax


                                       71

<PAGE>
code imposes limitation on the utilization of tax attributes, such as NOL
carryovers, after certain changes in the ownership of the company. The income
tax benefit, if any, resulting from any future realization of the NOLs will be
credited to additional paid-in capital.

20.      OTHER LONG-TERM LIABILITIES -- ENVIRONMENTAL

    Pioneer's operations are subject to extensive environmental laws and
regulations related to protection of the environment, including those applicable
to waste management, discharge of materials into the air and water, clean-up
liability from historical waste disposal practices, and employee health and
safety. Pioneer is currently addressing soil and/or groundwater contamination at
several sites through assessment, monitoring and remediation programs with
oversight by the applicable state agency. In some cases, Pioneer is conducting
this work under administrative orders. Pioneer could be required to incur
additional costs to construct and operate remediation systems in the future. In
addition, at several of its facilities Pioneer is in the process of replacing or
closing ponds for the collection of wastewater. Pioneer plans to spend
approximately $3.0 million during the next three years on improvements to
discontinue the use of three chlor-alkali waste water disposal ponds at the
Henderson facility, replacing them with systems to recycle wastewater. Pioneer
believes that it is in substantial compliance with existing government
regulations.

    Pioneer's Henderson facility is located within what is known as the
Black Mountain Industrial Park. Soil and groundwater contamination have been
identified within and adjoining the Black Mountain Industrial Park, including
land owned by Pioneer. A groundwater treatment system was installed at the
facility and, pursuant to a consent agreement with the Nevada Division of
Environmental Protection, studies are being conducted to further evaluate soil
and groundwater contamination at the facility and other properties within the
Black Mountain Industrial Park and to determine whether additional remediation
will be necessary with respect to Pioneer's property.

     In connection with the 1988 acquisition of the St. Gabriel and Henderson
facilities, the sellers agreed to indemnify Pioneer with respect to, among other
things, certain environmental liabilities associated with historical operations
at the Henderson site. ZENECA Delaware Holdings, Inc. and ZENECA Inc.,
(collectively the "ZENECA Companies") have assumed the indemnity obligations,
which benefit Pioneer. In general, the ZENECA Companies agreed to indemnify
Pioneer for environmental costs which arise from or relate to pre-closing
actions which involved disposal, discharge, or release of materials resulting
from the former agricultural chemical and other non-chlor-alkali manufacturing
operations at the Henderson facility. The ZENECA Companies are also responsible
for costs arising out of the pre-closing actions at the Black Mountain
Industrial Park. Under the ZENECA Indemnity, Pioneer may only recover
indemnified amounts for environmental work to the extent that such work is
required to comply with environmental laws or is reasonably required to prevent
an interruption in the production of chlor-alkali products. Pioneer is
responsible for environmental costs relating to the chlor-alkali manufacturing
operations at the Henderson facility, both pre- and post-acquisition, for
certain actions taken without the ZENECA Companies' consent and for certain
operation and maintenance costs of the groundwater treatment system at the
facility.

    Payments for environmental liabilities under the ZENECA Indemnity, together
with other non-environmental liabilities for which the ZENECA Companies agreed
to indemnify Pioneer, cannot exceed approximately $65 million. To date Pioneer
has been reimbursed for approximately $12 million of costs covered by the ZENECA
Indemnity, but the ZENECA Companies may have directly incurred additional costs
that would further reduce the total amount remaining under the ZENECA Indemnity.
In 1994, Pioneer recorded a $3.2 million environmental reserve related to
pre-closing actions at sites that are the responsibility of the ZENECA
Companies. At the same time a receivable was recorded from the ZENECA Companies
for the same amount. It is Pioneer's policy to record such amounts when a
liability can be reasonably estimated. In 2000, based on the results of a
third-party environmental analysis, the $3.2 million environmental reserve and
receivable were adjusted to the discounted future cash flows for estimated
environmental remediation, which was $2 million. In the course of evaluating
future cash flows upon emerging from bankruptcy, it was determined that the
timing of future cash flows for environmental work was uncertain and that those
cash flows no longer qualify for discounting under generally accepted accounting
standards. As a result, Pioneer no longer discounts the environmental
liabilities and related receivables, which are now recorded at their
undiscounted amounts of $3.2 million at December 31, 2001.

    The ZENECA Indemnity continues to cover claims after the April 20, 1999
expiration of the term of the indemnity to the extent that, prior to the
expiration of the indemnity, proper notice to the ZENECA Companies was given and
either the ZENECA Companies have assumed control of such claims or we were
contesting the legal requirements that gave rise to such claims, or had
commenced removal, remedial or maintenance work with respect


                                       72
<PAGE>
to such claims, or commenced an investigation which resulted in the commencement
of such work within ninety days. Management believes proper notice was provided
to the ZENECA Companies with respect to outstanding claims under the ZENECA
Indemnity, but the amount of such claims has not yet been determined given the
ongoing nature of the environmental work at Henderson. Pioneer believes that the
ZENECA Companies will continue to honor their obligations under the ZENECA
Indemnity for claims properly presented. It is possible, however, that disputes
could arise between the parties concerning the effect of contractual language
and that Pioneer would have to subject claims for cleanup expenses, which could
be substantial, to the contractually-established arbitration process.

    In connection with the 1995 transaction pursuant to which all of the
outstanding common stock and other equity interests of a predecessor of PALLC
was acquired from the holders of those interests (the "Sellers"), the Sellers
agreed to indemnify Pioneer and its affiliates for certain environmental
remediation obligations, arising prior to the closing date from or relating to
certain plant sites or arising before or after the closing date with respect to
certain environmental liabilities relating to certain properties and interests
held by Pioneer for the benefit of the Sellers (the "Contingent Payment
Properties"). Amounts payable in respect of such liabilities would generally be
payable as follows: (i) out of specified reserves established on the
predecessor's balance sheet at December 31, 1994; (ii) either by offset against
the amounts payable under the $11.5 million in notes payable to the Sellers, or
from amounts held in an account (the "Contingent Payment Account") established
for the deposit of proceeds from the Contingent Payment Properties; and (iii) in
certain circumstances and subject to specified limitations, out of the personal
assets of the Sellers. To the extent that liabilities exceeded proceeds from the
Contingent Payment Properties, Pioneer would be limited, for a ten-year period,
principally to rights of offset against the Sellers' notes to cover such
liabilities.

    In 1999 disputes arose between Pioneer and the Sellers as to the proper
scope of the indemnity. During June 2000, Pioneer effected an agreement with the
Sellers, pursuant to which Pioneer, in exchange for cash and other
consideration, relieved the Sellers from their environmental indemnity
obligations and agreed to transfer to the Sellers the record title to the
Contingent Payment Properties and the $0.8 million remaining cash balance in the
Contingent Payment Account that Pioneer determined to be in excess of
anticipated environmental liability. The cash balance in the Contingent Payment
Account at the time of this transaction was $6.1 million. This cash balance was
not previously reflected on the balance sheet since a right of setoff existed.

    A third-party environmental analysis that was performed on all of the sites
subject to the indemnity provided the basis for the anticipated environmental
liability. Pioneer then adjusted the remediation reserve on its balance sheet to
the discounted future cash flows for estimated environmental remediation. As a
result of the above transaction and the new environmental analysis, a pre-tax
gain of $1.8 million was reported during the second quarter of 2000, which was
reflected as a reduction of cost of sales. As indicated above, Pioneer is no
longer discounting the environmental liabilities and related receivables, which
are now recorded at their undiscounted amounts of $5.3 million at December 31,
2001.

    Pioneer acquired the chlor-alkali facility in Tacoma from OCC Tacoma, Inc.
("OCC Tacoma"), a subsidiary of OxyChem, in June 1997. In connection with the
acquisition, OCC Tacoma agreed to indemnify Pioneer with respect to certain
environmental matters, which indemnity is guaranteed by OxyChem. In general,
Pioneer will be indemnified against damages incurred for remediation of certain
environmental conditions, for certain environmental violations caused by
pre-closing operations at the site and for certain common law claims. The
conditions subject to the indemnity are sites at which hazardous materials have
been released prior to closing as a result of pre-closing operations at the
site. In addition, OCC Tacoma will indemnify Pioneer for certain costs relating
to releases of hazardous materials from pre-closing operations at the site into
the Hylebos Waterway, site groundwater containing certain volatile organic
compounds that must be remediated under an RCRA permit, and historical disposal
areas on the embankment adjacent to the site for maximum periods of 24 or 30
years from the June 1997 acquisition date, depending upon the particular
condition, after which Pioneer will have full responsibility for any remaining
liabilities with respect to such conditions. OCC Tacoma may obtain an early
expiration date for certain conditions by obtaining a discharge of liability or
an approval letter from a governmental authority. Although there can be no
assurance that presently anticipated remediation work will be completed prior to
the expiration of the indemnity, or that additional remedial requirements will
not be imposed thereafter, we believe that the residual liabilities, if any, can
be managed in a manner that will not have a material adverse effect on Pioneer.

    OCC Tacoma will also indemnify Pioneer against certain other environmental
conditions and environmental violations caused by pre-closing operations that
are identified after the closing. Environmental conditions that are


                                       73
<PAGE>
subject to formal agency action before June 2002 or to an administrative or
court order before June 2007, and environmental violations that are subject to
an administrative or court order before June 2002, will be covered by the
indemnity up to certain dollar amounts and time limits. Pioneer will indemnify
OCC Tacoma for environmental conditions and environmental violations identified
after the closing if (i) an order or agency action is not imposed within the
relevant time frames or (ii) applicable expiration dates or dollar limits are
reached. As of December 31, 2001, no orders or agency actions had been imposed.

    The EPA has recently advised OCC Tacoma and Pioneer that Pioneer has been
named as a "potentially responsible party" in connection with the remediation of
the Hylebos Waterway in Tacoma, by virtue of its current ownership of the Tacoma
site. The state Department of Ecology recently notified OCC Tacoma and Pioneer
of its concern regarding high pH groundwater in the Hylebos Waterway embankment
area and has requested additional studies. OCC Tacoma has acknowledged its
obligation to indemnify Pioneer against liability with respect to the
remediation activities, subject to the limitations included in the indemnity
agreement. Pioneer has reviewed the time frames currently estimated for
remediation of the known environmental conditions associated with the plant and
adjacent areas, including the Hylebos Waterway, and presently believe that it
will have no material liability upon the termination of OCC Tacoma's indemnity.
However, the OCC Tacoma indemnity is subject to limitations as to dollar amount
and duration, as well as certain other conditions, and there can be no assurance
that such indemnity will be adequate to protect Pioneer, that remediation will
proceed on the present schedule, that it will involve the presently anticipated
remedial methods, or that unanticipated conditions will not be identified. If
these or other changes occur, Pioneer could incur a material liability for which
it is not insured or indemnified.

    In connection with the acquisition of the assets of PCI Canada in 1997,
Imperial Chemical Industrials PLC ("ICI") and certain of its affiliates
(together the "ICI Indemnitors") agreed to indemnify Pioneer for certain
liabilities associated with environmental matters arising from pre-closing
operations of the Canadian facilities. In particular, the ICI Indemnitors have
retained unlimited responsibility for environmental liabilities associated with
the Cornwall site, liabilities arising out of the discharge of contaminants into
rivers and marine sediments and liabilities arising out of off-site disposal
sites. The ICI Indemnitors are also subject to a general environmental indemnity
for other pre-closing environmental matters. This general indemnity will
terminate on October 31, 2007, and is subject to a limit of $25 million (Cdn).
Pioneer may not recover under the environmental indemnity until it has incurred
cumulative costs of $1 million (Cdn), at which point Pioneer may recover costs
in excess of $1 million (Cdn). As of December 31, 2001, we had incurred no
cumulative costs towards the $25 million (Cdn) indemnity.

    With respect to the Becancour and Dalhousie facilities, the ICI Indemnitors
will be responsible under the general environmental indemnity for 100% of the
costs incurred in the first five years after October 31, 1997 and for a
decreasing percentage of such costs incurred in the following five years.
Thereafter, Pioneer will be responsible for environmental liabilities at such
facilities (other than liabilities arising out of the discharge of contaminants
into rivers and marine sediments and liabilities arising out of off-site
disposal sites). Pioneer will indemnify ICI for environmental liabilities
arising out of post-closing operations and for liabilities arising out of
pre-closing operations for which Pioneer is not indemnified by the ICI
Indemnitors.

    Pioneer believes that the indemnity provided by ICI will be adequate to
address the known environmental liabilities at the acquired facilities, and that
residual liabilities, if any, incurred by Pioneer will not be material.

    The imposition of more stringent standards or requirements under
environmental laws or regulations, new developments or changes respecting site
cleanup costs, or a determination that Pioneer is potentially responsible for
the release of hazardous substances at other sites could result in expenditures
in excess of amounts currently estimated by Pioneer to be required for such
matters. Further, there can be no assurance that additional environmental
matters will not arise in the future.

21.      RELATED PARTY TRANSACTIONS

    On December 28, 1999, Pioneer sold its 15% partnership interest in Saguaro
Power Company ("Saguaro"), which owns a cogeneration plant located in Henderson,
Nevada. Pioneer's interest in Saguaro was accounted for using the cost method of
accounting. Prior to this sale, Pioneer sold certain products and services to
and purchased steam from Saguaro at market prices. Transactions with Saguaro
prior to the sale were as follows.


                                       74
<PAGE>

<Table>
<Caption>
                                                         PREDECESSOR
                                                           COMPANY
                                                         ------------
                                                            1999
                                                         ------------
<S>                                                       <C>
Sales to Saguaro.........................................  $   874
Purchases from Saguaro...................................    1,585
Partnership cash distribution from Saguaro (included in
  other income, net).....................................    1,020
</Table>

    Accounts receivable from and accounts payable to Saguaro were not
significant to Pioneer's consolidated balance sheet.

    Pioneer is a party to an agreement with BMI for the delivery of Pioneer's
water to the Henderson production facility. The agreement provides for the
delivery of a minimum of eight million gallons of water per day. The agreement
expires on December 31, 2014, unless terminated earlier in accordance with the
provisions of the agreement. In addition, BMI owns the power facilities which
transmit electricity to the Henderson facility. For the years ended December 31,
2001, 2000, and 1999, for its services BMI charged operating expenses to Pioneer
of approximately $1.6 million, $1.5 million, and $1.6 million, respectively.
Amounts due to BMI at December 31, 2001 and 2000 are $.7 million and $.4 million
respectively.

    During 1999, Pioneer entered into arrangements with an affiliate of
Strategic Distribution, Inc. ("Strategic") pursuant to which Strategic's
affiliate provides procurement, handling and data management of maintenance,
repair and operating supplies at Pioneer's facilities in Henderson, Nevada and
St. Gabriel, Louisiana. During 2001, this arrangement was discontinued. William
R. Berkley, Chairman of the Board of Pioneer prior to Pioneer's emergence from
bankruptcy, owns approximately 23% of Strategic's common stock, and serves as
chairman of the board of directors of Strategic. Andrew R. Bursky and Jack
Nusbaum, directors of Pioneer prior to Pioneer's emergence from bankruptcy, are
directors of Strategic. For the years ending December 31, 2001, 2000 and 1999,
for materials and its services, Strategic charged operating expenses to Pioneer
of approximately $3.6 million, $4.6 million and $1.4 million respectively. Of
the $3.6 million charged during 2001, $1.0 million was discharged in bankruptcy.
Amounts due to Strategic at December 31, 2001 and 2000 are zero and $.7 million
respectively.

22.      INCOME (LOSS) PER SHARE

    Pioneer accounts for income (loss) per share in accordance with SFAS 128,
"Earnings Per Share." Basic income (loss) per share are based on the weighted
average number of common shares outstanding during the period. Diluted income
(loss) per share considers, in addition to the above, the dilutive effect of
potentially issuable common shares during the period which include options and
preferred stock. Income (loss) per share for 2001, 2000 and 1999 were not
affected by outstanding options to acquire shares of common stock because their
effect was anti-dilutive and the exercise prices of those options were greater
than the average market price of Pioneer's common stock. Income (loss) per share
for 2001, 2000 and 1999 was not affected by the 55,000 issued and outstanding
preferred shares that could be converted into 539,000 shares of common stock
because their effect was anti-dilutive.

23.      RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board issued SFAS 141 and
SFAS 142. SFAS 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Use of the
pooling-of-interest method will be prohibited. SFAS 142 requires that an
intangible asset that is acquired shall be initially recognized and measured
based on its fair value and was adopted by Pioneer effective December 31, 2001.
The statement also provides that goodwill should not be amortized, but must be
tested for impairment annually, or more frequently if circumstances indicate
potential impairment.

    Pioneer allocated reorganization value in accordance with SOP 90-7 and
SFAS 141. This allocation included the writeoff of $170.6 of prior goodwill and
resulted in reorganization value in excess of fair value of identifiable assets
of $84.1 million, which related to the Canadian operations. In accordance with
SFAS 142, Pioneer will not amortize


                                       75

<PAGE>
the reorganization value in excess of fair value, but will review it for
impairment at least annually. Goodwill amortization expense for the year ended
December 31, 2001 was $8.9 million.

    In June 2001, FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations," which is effective for fiscal years beginning after June 15, 2002.
SFAS 143 addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. The adoption of SFAS 143 is not expected to have a material
impact on Pioneer's financial position, results of operations, or cash flows.

    In August 2001, FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which Pioneer adopted on January 1, 2002. SFAS
144 addresses accounting and reporting for the impairment or disposal of
long-lived assets and the disposal of a segment of a business. The adoption of
SFAS 144 did not have a material impact on Pioneer's financial position, results
of operations or cash flows.

24.      SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
                                             FIRST         SECOND        THIRD       FOURTH
                                            QUARTER       QUARTER       QUARTER     QUARTER
                                            ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>
Predecessor Company:
Year ended December 31, 2001
  Revenues ..............................   $ 101,373    $ 103,272    $  93,303    $  85,534
  Gross profit ..........................      10,612       12,966       13,429        8,139
  Operating loss ........................      (4,232)     (29,174)     (62,408)     (24,341)
  Loss before income taxes and
     extraordinary item..................     (18,592)     (44,295)     (69,068)    (136,459)
  Net loss before extraordinary item ....     (20,130)     (44,932)     (71,880)    (134,595)
  Net income (loss) .....................     (20,130)     (44,932)     (71,880)     279,717
  Per share data
     Basic and diluted net loss
      before extraordinary item .........   $   (1.74)   $   (3.89)   $   (6.23)   $  (11.67)
                                            =========    =========    =========    =========
Year ended December 31, 2000
  Revenues ..............................   $  99,760    $ 105,423    $ 103,786    $  93,939
  Gross profit ..........................      11,336       12,062        3,523        4,990
  Operating income (loss) ...............        (807)         807       (6,243)      (5,270)
  Loss before income taxes ..............     (14,171)      (8,692)     (21,203)     (20,466)
  Net loss ..............................      (9,586)      (5,875)     (13,358)     (76,744)
  Per share data
     Basic and diluted net loss .........   $   (0.83)   $   (0.51)   $   (1.16)   $   (6.65)
                                            =========    =========    =========    =========
</Table>

----------

No cash dividends were declared or paid by the Company in 2001, 2000, or 1999.


                                       76
<PAGE>


                                                                     SCHEDULE II

                             PIONEER COMPANIES, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                             BALANCE AT   CHARGED TO                  BALANCE AT
                                             BEGINNING    COSTS AND                     END OF
          DESCRIPTION                        OF PERIOD     EXPENSE     DEDUCTIONS       PERIOD
          -----------                        ----------   ----------   ----------     ----------
<S>                                         <C>           <C>         <C>             <C>
Year Ended December 31, 2001:
  Allowance for doubtful accounts .........   $ 1,392       $ 2,848   $(2,060)(A)      $ 2,180
Year Ended December 31, 2000:
  Allowance for doubtful accounts .........     2,750            93    (1,451)(A)(B)     1,392
Year Ended December 31, 1999:
  Allowance for doubtful accounts .........     3,122           350      (722)(A)        2,750
</Table>

--------------

(A) Uncollectible accounts written off, net of recoveries.

(B) Includes reversal of $1,158 of KNA allowance in connection with the sale of
    that business.


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