##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      FORM 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the fiscal year ended
    December 31, 2006
  Commission File
    No. 000-31230
  Pioneer Companies,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

06-1215192(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)700 Louisiana Street,
    Suite 4300,

77002Houston, Texas

(Zip code)(Address of principal executive
    offices)   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 registeredCommon stock, par value
    $.01 per share

NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
  þ o
      DOCUMENTS
    INCORPORATED BY REFERENCE:




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##### 



TABLE OF
    CONTENTS
  
  Page No.PART IItem 1.


Business


1Item 1A.


Risk
    Factors


14Item 1B.


Unresolved Staff
    Comments


21Item 2.


Properties


21Item 3.


Legal
    Proceedings


22Item 4.


Submission of
    Matters to a Vote of Security Holders


23Item 4A.


Executive Officers
    of the Registrant


23PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


25Item 6.


Selected Financial
    Data


27Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


29Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk


51Item 8.


Financial
    Statements and Supplementary Data


51Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


51Item 9A.


Controls and
    Procedures


51Item 9B.


Other
    Information


54PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


54Item 11.


Executive
    Compensation


54Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


54Item 13.


Certain
    Relationships and Related Transactions


54Item 14.


Principal
    Accounting Fees and Services


54PART IVItem 15.


Exhibits and
    Financial Statement Schedules


55Eighth Amendment to Loan and Security AgreementList of SubsidiariesConsent of Independent Registered Public Accounting FirmCertification Required by Rule 13a-14(a)/15d-14(a)Certification Required by Rule 13a-14(a)/15d-14(a)Certification Required by Rule 13a-14(b)/15d-14(b)Certification Required by Rule 13a-14(b)/15d-14(b)Schedule II - Valuation and Qualifying Accounts    Certain statements in this
    Form 10-K
    regarding future expectations of Pioneers business and
    Pioneers results of operations, financial condition and
    liquidity may be regarded as forward-looking
    statements within the meaning of the Private Securities
    Litigation Reform Act. Forward-looking statements relate to
    matters that are not historical facts. Such statements involve
    risks and uncertainties, including, but not limited to, the
    risks and uncertainties described in Item 1A of this
    Form 10-K.
    Actual outcomes may vary materially.




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PART I  ITEM 1.
    BUSINESS  Overview
  Business
    and Products
            Plant
    Locations and Production Capacity
    1




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ProductionLocation

Manufactured Products

CapacityBecancour, Quebec

Chlorine


340,000Caustic soda


383,000Hydrochloric acid


250,000Bleach


236,000St. Gabriel, Louisiana

Chlorine


197,000Caustic soda


216,700Henderson, Nevada

Chlorine


152,000Caustic soda


167,200Hydrochloric acid


130,000Bleach


180,000Dalhousie, New Brunswick

Chlorine


36,000Caustic soda


40,000Sodium chlorate


22,000Tracy, California

Bleach


233,000Santa Fe Springs, California

Bleach


233,000Tacoma, Washington

Bleach


90,000   Planned
    Expansion of St. Gabriel, Louisiana Plant
      
    expanding the sites manufacturing capacity by 49,000 ECUs
    to meet the demand from nearby industrial customers for chlorine
    supplied by pipeline at a competitive delivered price;
    meeting increasing customer demand for high-quality membrane
    caustic soda;
    significantly lower variable and fixed unit costs at the plant,
    due to:  
    improved energy efficiency from the new membrane cells which use
    approximately 29% less energy than the technology currently used
    at the plant; and  
    reduced maintenance and operating costs resulting from the use
    of the newer technology;  
    the incremental gross margin contribution from the additional
    49,000 ECUs of production capacity; and
    eliminating the use of mercury at this plant.   2




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Chlorine
    Products Market; Competition
        Competitive Advantages and Disadvantages.
  
    our Becancour facility is a low cost production facility as a
    result of the availability of low-priced hydropower;
    our St. Gabriel facility is strategically located in one of the
    largest industrial complexes of chlorine buyers in North America
    and has three pipelines that allow us to efficiently transport
    and supply chlorine to customers in the area at a competitive
    delivered price; and
    our Henderson facility is the only currently operating
    chlor-alkali production facility in the southwestern region of
    the United States, providing us with a strong regional presence
    and transportation cost advantages.      
    relatively high power costs at our Henderson and St. Gabriel
    facilities, which costs are largely dependent on the price of
    natural gas which can be volatile;
    our inability to serve some customers in Canada and the United
    States without incurring significant transportation costs,
    especially as the cost of rail transportation becomes more
    expensive and difficult;
    our need to acquire salt from third-party producers, with
    attendant availability, cost and transportation issues;
    our inability to spread our fixed costs over a large
    manufacturing base, like some of our much larger
    competitors; and
    our St. Gabriel and Dalhousie facilities use the mercury cell
    production process, rather than the more efficient membrane cell
    technology used by many of our competitors which requires less
    power, although we 3




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recently announced that our St. Gabriel plant will be converted
    to membrane cell technology in a project that is anticipated to
    be completed in the fourth quarter of 2008.  Marketing
      See
        Production
   4




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
    Unexpected Reductions in Customer
    Orders.  Reductions in orders from our customers
    caused by seasonal fluctuations in usage or other factors, such
    as production disruptions at their facilities, can cause us to
    reduce plant production if we are not able to find alternate
    customers to purchase the excess product on short notice.
    Planned and Unplanned Maintenance Outages.  We
    regularly schedule maintenance outages at our plants to perform
    needed maintenance on the equipment. In addition, we may
    experience equipment failures or other problems that require a
    plant to be shut down to fix the problem.
    Rail Transportation Disruptions.  Disruptions
    in rail transportation can interrupt our ability to transport
    our products to our customers.
    Acts of Nature.  Acts of nature, such as
    hurricanes or floods, can disrupt our operations and our ability
    to receive raw materials, such as salt, into our plants.  Technology
    
    Diaphragm cell technology, which is used for approximately 60%
    of our production capacity, employs a coated titanium anode, a
    steel cathode and an asbestos or asbestos/polymer separator.
    While diaphragm cell technology consumes less power than mercury
    cell technology, it produces caustic soda with a relatively
    higher salt content and requires evaporation with steam to reach
    a commercial concentration.
    Mercury cell technology, which is used in approximately 31% of
    our production capacity, employs a coated titanium anode and
    flowing mercury as a cathode. Mercury cell technology produces
    higher-purity caustic soda and does not require evaporation, but
    it consumes relatively more power, and the mercury requires
    heightened handling and control practices.
    Membrane cell technology, which is used in approximately 9% of
    our production capacity and is generally the most energy
    efficient technology, employs a coated titanium anode, a nickel
    cathode and a fluorocarbon membrane separator. Compared to
    diaphragm cell technology, membrane cell technology produces
    higher-purity caustic soda and it requires lower power
    consumption and lower steam consumption. We believe that all of
    the new chlor-alkali plants that have been built in recent years
    use the membrane cell technology.  See
  Environmental
    Health and Safety Practices
    
    complying with legal requirements related to safety, health and
    environmental quality;
    regularly inspecting and maintaining our facilities in a safe
    operating condition;
    providing workplace policies, procedures and training so that
    employees can perform their jobs in a safe, healthy and
    environmentally responsible manner; and 5




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
    providing management leadership and requiring our employees to
    share accountability for ongoing improvement in health, safety
    and environmental performance.  Energy
    and Other Raw Materials
        Transportation
      See
  Environmental
    Regulation
  U.S. Requirements
  General.
 6




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Air Emissions.
        Water.
  clean-up
 7




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Solid Waste.
      Hazardous Substances.
  See See also
  Environmental Remediation. and/or
 8




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OSHA.
  Canadian
    Requirements
  General.
  See
     9




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Environmental
    Remediation Liabilities and Asset Retirement
    Obligations
          Indemnities
  ZENECA Indemnity.
   10




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chlor-alkali
      PCI Canada Acquisition Indemnity.
     11




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OxyChem Indemnity for Tacoma Site. See
  Employees
    Financial
    Information about Geographic Areas
    Access to
    Filings
  Form 10-K, Form 10-Q Form 8-K http://www.piona.com www.sec.gov
  CAUTIONARY
    STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
     12




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
    general economic, business and market conditions, including
    economic instability or a downturn in the markets served by us;
    the cyclical nature of our product markets and operating results;
    competitive pressures affecting selling prices and volumes;
    the supply/demand balance for our products, including the impact
    of excess industry capacity or the construction of new industry
    capacity;
    the occurrence of unexpected manufacturing interruptions and
    outages, including those occurring as a result of production
    hazards or an interruption in the supply of electricity, salt or
    other raw materials;
    failure to comply with financial covenants contained in our debt
    instruments;
    inability to make scheduled payments on or refinance our
    indebtedness;
    loss of key customers or suppliers;
    increased prices for raw materials, including electricity;
    disruption of transportation or higher than expected
    transportation or logistics costs;
    the occurrence of accidents in the manufacturing, handling,
    storage or transportation of chlorine, including chemical spills
    or releases at our facilities or railcar accidents that result
    in a chlorine release;
    environmental costs and other expenditures in excess of those
    projected;
    increased costs for litigation and other claims;
    changes in laws and regulations inside or outside the United
    States;
    uncertainty with respect to interest rates and fluctuations in
    currency exchange rates;
    the outcome of the operational efficiency project that we began
    implementing in the first quarter of 2004;
    the occurrence of extraordinary events, such as Hurricanes
    Katrina and Rita, the attacks on the World Trade Center and the
    Pentagon that occurred on September 11, 2001, or the war in
    Iraq;
    increases in costs and delays in the completion of the St.
    Gabriel project; and 13




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
    availability of appropriate financing or financing on terms that
    are unfavorable to us for the St. Gabriel project.    ITEM 1A.
    RISK
    FACTORS  The
    chlor-alkali industry is cyclical and subject to periodic
    downturns, so accordingly, our operating results should be
    expected to be cyclical and subject to periodic
    downturns.
  See
    
    Sensitivity to cyclical demand from our customers and general
    economic conditions.  The businesses of most of
    our customers are, to varying degrees, cyclical and have
    historically experienced periodic downturns. These economic and
    industry downturns have been characterized by diminished product
    demand, excess manufacturing capacity and, in most cases, lower
    average sales prices. Therefore, any significant downturn in our
    customers markets or in global or domestic economic
    conditions could result in a reduction in demand for our
    products and could materially adversely affect our results of
    operations and financial condition. In addition, while we only
    sell a small percentage of our products overseas, our business
    is affected by general economic conditions outside of North
    America since many of our customers sell a portion of their
    products outside of North America. While demand for both
    chlorine and caustic soda has been strong during the past year,
    a decline in domestic and global economic conditions could
    materially adversely affect demand for our products in the
    future.
    Cyclical imbalances in chlorine and caustic soda demand and
    production constraints.  Because chlorine and
    caustic soda are produced in a fixed ratio, the supply of one
    product can be constrained both by the physical capacity of the
    production facilities and the ability to sell and store the
    co-product. When chlorine demand is high and production
    increases as a result, the price of caustic soda may be
    depressed if there is insufficient demand for the increased
    supply. This imbalance may have the effect of reducing our
    operating profits, or even creating operating losses, as
    declining margins in caustic soda may partially or totally
    offset or even exceed improving margins in chlorine. On the
    other hand, when chlorine demand declines so that available
    storage is filled, production operations must be curtailed, even
    if demand for caustic soda has increased. This imbalance may
    also have the effect of reducing our operating profits or even
    creating operating losses because the improving margins for
    caustic soda may be partially or totally offset or even exceeded
    by both declining margins in chlorine and the reduced production
    of both products. When substantial imbalances occur, we will
    often be forced to reduce prices or take actions that could have
    a material adverse effect on our results of operations and
    financial condition. 14




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
    New industry production capacity is added in large
    increments.  In 2006, a competitor began
    production at a new chlor-alkali plant in the Northwestern
    U.S. with an estimated production capacity of approximately
    80,000 ECUs. This may impact the market served by our Henderson
    plant and overall pricing. In addition, another competitor has
    announced a new chlor-alkali facility in Louisiana with an
    estimated ultimate production capacity of 450,000 ECUs. This new
    plant is expected to commence operations in two stages, with the
    first stage of 300,000 ECUs estimated to occur during late 2007
    and the timing of the second stage has not yet been announced.
    While we anticipate that the chlorine produced by this new
    Louisiana facility will be used internally by the competitor to
    produce other products, the added production of caustic soda is
    expected to put downward pressure on caustic soda prices in the
    markets served by our St. Gabriel plant and elsewhere. These
    capacity additions will be offset by other plant reductions, as
    Dow shuts down its Fort Saskatchewan, Alberta plant
    (490,000 ECUs) in late 2006 and OxyChem has announced it will
    shut down its Muscle Shoals, Alabama plant (132,000 ECUs) in the
    first half of 2008.
    Limited ability to control selling
    prices.  Most of our customers consider price one
    of the most significant factors when choosing among the various
    suppliers of chlor-alkali products. We have limited ability to
    influence prices in this large commodity market. Decreases in
    the average selling prices of our products could have a material
    adverse effect on our profitability. While we strive to maintain
    or increase our profitability by reducing costs through
    improving production efficiency, emphasizing higher margin
    products, and controlling selling and administration expenses,
    these efforts are usually not sufficient to offset fully the
    effect of any decline in ECU prices on operating results.  Our
    profitability could decrease because of reduced customer demand
    that is difficult to predict.
      The
    expansion of our St. Gabriel facility subjects us to
    construction risks that could make the project more expensive or
    take longer to complete than anticipated.
    
    higher than anticipated construction and labor costs in southern
    Louisiana in the aftermath of Hurricanes Katrina and
    Rita; and
    an increase in the costs of the equipment required for the
    project.    
    a shortage of skilled and other labor for construction projects
    in the wake of Hurricanes Katrina and Rita;
    supply interruptions; 15




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
    difficulty or inability to find suitable replacement parts for
    equipment;
    permitting and other regulatory issues, license revocation and
    changes in legal requirements;
    labor disputes and work stoppages;
    unforeseen engineering and environmental problems; and
    weather interferences and extraordinary events including fires,
    explosions, hurricanes and acts of terrorism.    We
    will need to incur additional debt to fund the St. Gabriel
    project and may not have the ability to generate the cash needed
    to service such increased debt.
    Higher
    energy prices could increase our cost of producing chlor-alkali
    products.
    See
  The
    shipment of chlorine by rail may be negatively impacted by new
    regulatory and rail industry requirements.
   16




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
    Proposed new tank car standards.  The
    AARs tank car standard committee, the Tank Car Committee,
    and the Federal Railroad Administration (FRA), are
    both working to adopt new tank car performance standard for
    chlorine and other TIH railcars that have the goal of reducing
    the possibility of a chlorine or other TIH material release in
    the event of a railcar accident. When a new railcar design is
    established, which is expected by the end of 2007, we may be
    required to replace our existing fleet of chlorine railcars
    within an expected time frame possibly as short as ten years. We
    anticipate that any new chlorine railcar requirement will result
    in material cost increases that we are unable to quantify at
    this time. In addition, the uncertainty with the railcar design
    requirements has prompted some existing lessors of chlorine
    railcars to stop leasing or building chlorine railcars.
    Accordingly, in 2006, we were required to purchase 62 railcars
    that we formerly leased which has increased our costs. Further,
    some chlorine lessors have started to scrap chlorine cars
    instead of repairing them which has further tightened the
    current chlorine car market.
    Increased rail transport prices.  During the
    past few years, rail carriers have imposed substantially higher
    rates to transport chlorine and other TIH materials than most
    other chemicals due to safety and security concerns with
    chlorine products. As a result, as our rail contracts are coming
    up for renewal, we are experiencing cost increases for chlorine
    shipment that range from 15% to 30% on average per year. Our
    chlor-alkali plants are each served by only one rail carrier, so
    we do not have the ability to shift our business to alternate
    rail carriers to seek lower prices to ship our products. Rates
    for shipping caustic soda and our other products have also
    increased substantially and may continue to rise.
    Proposed new federal regulations affecting TIH rail
    shipments.  In December 2006, the Transportation
    Security Administration (TSA), which is part of the
    Department of Homeland Security, and the Pipeline and Hazardous
    Materials Safety Administration of the Department of
    Transportation, proposed new security regulations which are
    designed to reduce the risk, and increase the security, of
    transporting TIH materials by rail. These proposed regulations
    include the expedited movement and re-routing of railcars
    carrying TIH through high threat urban areas, the minimization
    of the time loaded TIH railcars are unattended, and the secure
    handoff of TIH railcars at carrier interchanges. The rail
    industry has already begun to implement some of the new security
    measures. These new regulations, once fully implemented, are
    expected to increase the difficulty of shipping chlorine by rail
    and to impose additional costs on both rail carriers and
    shippers to comply with the new requirements.  and/or
  We
    face competition from other chemical companies, which could
    adversely affect our revenues and financial
    condition.
  See
 17




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We are
    subject to possible risk of terrorist attacks or railcar
    accidents which could adversely affect our
    operations.
    Our
    facilities are subject to operating hazards and other
    disruptions that may disrupt our operations.
      We
    have ongoing environmental costs and we may be exposed to
    environmental liabilities that are not currently reserved for in
    our financial statements.
    See see
   18




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See
  See
  We are
    subject to litigation and other claims, which could cause us to
    incur significant expenses.
  See
  We are
    exposed to the financial and tax effects of U.S. to
    Canadian dollar currency translation, which are subject to
    economic forces beyond our control.
     19




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We
    face risks from continued declines in the pulp and paper
    industry.
    Labor
    disputes under our collective bargaining agreements may disrupt
    our business.
  See
  Our
    pension plans are currently underfunded, and may need to be
    funded in future years.
    We are
    dependent upon a limited number of key suppliers.
  See
  The
    concentrated ownership of our common stock may have the effect
    of delaying or preventing a change of control of our
    company.
   20




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES  Facilities
    Becancour, Quebec. 100-acre
  St.  Gabriel, Louisiana. 100-acre
  Henderson, Nevada. 309-acre 1976-1977,
  Dalhousie, New Brunswick. 36-acre
  Tracy, California. 15-acre
  Santa Fe Springs, California. 4.5-acre
  Tacoma, Washington. five-acre
  Other Facilities.
 21




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ITEM 3.
    LEGAL
    PROCEEDINGS    St. Gabriel Mercury Vapor Emissions
    Release.
    Claude
    Frazier, et al. v. Pioneer Americas, LLC and State of
    Louisiana through the Department of Environmental Quality
  Albany, N.Y. Mercury Refining Superfund
    Site. clean-up
  St. Gabriel Asbestos Premises Liability
    Lawsuits.
 22




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 4A.
    EXECUTIVE
    OFFICERS OF THE REGISTRANT    Name

Age

OfficeMichael Y. McGovern


55


Director, Chairman, President
    and
    Chief Executive OfficerDavid A. Scholes


61


Director, Senior Vice President,
    OperationsGary L. Pittman


51


Senior Vice President, Chief
    Financial Officer, Secretary and TreasurerJerry B. Bradley


61


Vice President, Human ResourcesRonald E. Ciora


65


Vice President,  Sales and
    MarketingMichael Mazzarello


52


Vice President, Logistics and
    Materials ManagementCarl Monticone


35


Vice President, Controller and
    Assistant SecretaryGary L. Sulik


53


Vice President, ManufacturingBruce K. Williams


53


Vice President, Distribution   Michael Y. McGovern
  David A. Scholes
  Gary L. Pittman
  Jerry B. Bradley
  Ronald E. Ciora
 23




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Michael Mazzarello
  Carl Monticone
  Gary L. Sulik
  Bruce K. Williams
 24




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    mark-ups,
  Bid PriceHigh


Low2006Fourth Quarter

$
30.39


$
24.27Third Quarter


28.74



21.75Second Quarter


34.45



25.92First Quarter


33.80



28.592005Fourth Quarter

$
30.20


$
21.26Third Quarter


26.20



21.48Second Quarter


23.89



17.34First Quarter


28.45



18.00     Dividend
    Policy
   25




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Equity
    Compensation Plan Information
    Number of SecuritiesRemaining Available forNumber of Securities





Future Issuance underto be Issued upon


Weighted Average


Equity CompensationExercise of


Exercise Price of


Plans (ExcludingOutstanding Options,


Outstanding Options,


Securities Reflected inWarrants and Rights


Warrants and Rights


Column (a))Plan category

(a)


(b)


(c)Equity compensation plans approved
    by security holders


178,039


$
11.74



1,109,479Equity compensation plans not
    approved by security holders










Total


178,039


$
11.74



1,109,479  26




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ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Statement of Operations
    Data:Revenues

$
525,705


$
515,715


$
407,115


$
378,675


$
316,907Cost of sales  product


(412,030
)


(376,225
)


(353,454
)


(340,804
)


(296,622
)Cost of sales 
    derivatives
    (1)














(20,999
)


12,877Gross profit


113,675



139,490



53,661



16,872



33,162Selling, general and administrative
    expenses


(32,373
)


(38,187
)


(27,608
)


(23,204
)


(23,893
)Change in fair value of derivatives
    (1)














87,271



23,566Asset impairment
    (2)














(40,818
)


(16,941
)Gain (loss) on asset disposition
    and other, net
    (3)


26,642



(1,222
)


(3,974
)


(340
)


(3,143
)Operating income


107,944



100,081



22,079



39,781



12,751Interest expense, net


(6,947
)


(15,267
)


(18,356
)


(19,064
)


(18,891
)Other income (expense), net
    (4)


(2,289
)


(1,543
)


(2,838
)


(5,816
)


602Income (loss) before income taxes


98,708



83,271



885



14,901



(5,538
)Income tax (expense) benefit
    (5)


(31,463
)


(10,781
)


(2,127
)


3,286



781Income (loss) before cumulative
    effect of change in accounting principle


67,245



72,490



(1,242
)


18,187



(4,757
)Cumulative effect of change in
    accounting principle, net of tax
    (6)






(2,194
)










Net income (loss)

$
67,245


$
70,296


$
(1,242
)

$
18,187


$
(4,757
)Income (loss) per share:BasicIncome (loss) before cumulative
    effect of change in accounting principle

$
5.71


$
6.37


$
(0.12
)

$
1.82


$
(0.48
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)










Net income (loss)

$
5.71


$
6.18


$
(0.12
)

$
1.82


$
(0.48
)DilutedIncome (loss) before cumulative
    effect of change in accounting principle

$
5.67


$
6.14


$
(0.12
)

$
1.79


$
(0.48
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)










Net income (loss)

$
5.67


$
5.95


$
(0.12
)

$
1.79


$
(0.48
)Other Financial Data:Net cash flows from operating
    activities

$
91,310


$
102,948


$
19,639


$
14,261


$
250Net cash flows from (used in)
    investing activities


15,234



(10,350
)


(8,069
)


(9,998
)


(8,568
)Net cash flows from (used in)
    financing activities


(53,968
)


(46,094
)


2,472



(5,367
)


6,392Capital expenditures


12,314



12,605



8,384



9,998



10,615Depreciation and amortization


24,335



24,564



25,514



21,551



24,926   27




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##### Table of Contents



At December 31,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Total assets

$
442,823


$
398,937


$
351,604


$
339,000


$
474,146Long-term debt (exclusive of
    current maturities)


101,761



152,739



200,797



203,803



207,463Total stockholders equity


184,820



104,990



37,895



18,990



1,252     (1)
    
    We had various derivative positions with the Colorado River
    Commission (CRC) until March 2003 under long-term
    power contracts related to our Henderson facility. Until March
    2003, approximately 35% of the electric power supply for our
    Henderson facility was hydropower furnished under a long-term
    contract with CRC, 50% was provided under a supplemental supply
    contract with CRC, and the remaining 15% was provided under a
    long-term arrangement with a third party. As of
    December 31, 2002, we had recorded a net liability of
    $87.3 million for the net
    mark-to-market
    loss on outstanding derivative positions, and a receivable from
    CRC of $21.0 million for estimated proceeds received by CRC
    for matured derivative contracts. The $87.3 million
    consisted of an $82.3 million liability of disputed
    derivatives and a $5.0 million liability relating to
    transactions that were not disputed. When we settled the dispute
    with the CRC in the first quarter of 2003, both the
    $87.3 million net liability and a $21.0 million
    receivable were reversed, resulting in a non-cash net gain of
    $66.3 million. These amounts appear in the consolidated
    statement of operations for the year ended December 31,
    2003, as $87.3 million of operating income under the
    caption Change in Fair Value of Derivatives to
    reflect the reversal of the previously recorded
    mark-to-market
    loss, and $21.0 million of Cost of Sales 
    Derivatives, reflecting the reversal of the receivable
    from CRC. The derivatives were accounted for under the guidance
    of Statement of Financial Accounting Standards
    (SFAS) 133, Accounting for Derivative
    Instruments and Hedging Activities, which 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.(2)
    
    Asset impairment includes a $40.8 million impairment of our
    Henderson, Nevada facility in 2003. Following the settlement of
    our dispute over certain derivative positions in 2003 in
    connection with energy contracts at our Henderson facility, we
    assigned the related long-term hydropower contracts to the
    Southern Nevada Water Authority, resulting in higher energy
    prices under the new supply agreement. As a result, we performed
    an impairment test and determined that the book value of the
    Henderson facility exceeded the undiscounted sum of future
    expected cash flows over the remaining life of the facility. In
    2002, we recognized a $16.9 million impairment relating to
    our Tacoma chlor-alkali facility as the result of the idling of
    this plant in March 2002.(3)
    
    In 2006, gains (loss) on asset dispositions and other, net
    included gains of $22.6 million and $2.2 million,
    respectively, from two separate land sales at our Henderson,
    Nevada facility, including the sale in September 2006 of
    approximately 60 acres of vacant land adjacent to our
    chlor-alkali plant and a sale in December 2006 of approximately
    4.2 acres. Also included in 2006 was a $1.6 million
    gain on sale of land at the former site of our Pittsburg,
    California manufacturing facility, a $0.8 million gain from
    the satisfaction of certain purchase price contingencies related
    to the 2005 chlorine supply agreement entered into in connection
    with the disposition of our Cornwall chlorinated paraffin
    operations at the Cornwall facility, and a $0.9 million
    loss from miscellaneous asset dispositions and write-offs.(4)
    
    Other income (expense), net is comprised primarily of currency
    exchange gain or loss resulting from increases or decreases in
    the rate at which Canadian dollar denominated amounts are
    converted into U.S. dollars.(5)
    
    Income tax expense increased by $20.7 million from 2005 to
    2006 mainly due to a larger decrease of the valuation allowance
    on the net deferred tax asset in 2005 ($31.0 million)
    compared to 2006 ($2.3 million).(6)
    
    We adopted Financial Accounting Standards Board Financial
    Interpretation (FIN) No. 47, Accounting
    for Conditional Asset Retirement Obligations, an interpretation
    of FASB Statement No. 143 at December 31, 2005
    which resulted in a cumulative effect of change in accounting
    principle. The $2.2 million charge represented the
    cumulative effect of depreciation and accretion expense of our
    asset retirement obligations as of December 31, 2005. 28




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Overview
    of Our Business
         29




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##### Table of Contents



2006
    Financial Results Summary
    For the Years Ended December 31,2006


2005


2004(In thousands, except ECU data)Revenues

$
525,705


$
515,715


$
407,115Operating income


107,944



100,081



22,079Income before income taxes


98,708



83,271



885Net income (loss)


67,245



70,296



(1,242
)Net cash flows from operating
    activities


91,310



102,948



19,639Total debt (as of
    December 31)*


102,739



154,597



202,776Average ECU netback prices


571



581



393   _
    _
      
    Revenues have been at historically high levels for the past two
    years due to favorable ECU prices resulting from the continued
    strong demand for our chlor-alkali products.
    We realized an aggregate gain of $26.4 million from three
    separate sales of excess properties located in Henderson, Nevada
    and Pittsburg, California.
    We had higher cost of sales mainly due to higher variable
    product costs, higher transportation costs and increased fixed
    costs primarily due to an increase in our environmental
    obligations discussed below.
    Our recently completed environmental liability study resulted in
    a charge of $6.9 million in the fourth quarter of 2006,
    primarily reflecting an increase in our environmental
    remediation liabilities.
    We had income tax expense of $31.5 million in 2006,
    resulting from higher taxable income which was partially offset
    by the decrease of the valuation allowance on net operating loss
    carryforwards from previous years.
    We had lower debt levels in 2006 due to the redemption of
    $50.0 million of our Senior Notes in January 2006. Our
    lower debt levels in 2006 resulted in reduced interest expense
    of approximately $5.8 million compared to 2005.
    At December 31, 2006, our cash and cash equivalents were
    $115.2 million.    Planned
    Expansion of St. Gabriel, Louisiana Plant
   30




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##### Table of Contents




    expanding the sites manufacturing capacity by 49,000 ECUs
    to meet the demand from nearby industrial customers for chlorine
    supplied by pipeline at a competitive delivered price;
    meeting increasing customer demand for high-quality membrane
    caustic soda;
    significantly lower variable and fixed unit costs at the plant,
    due to:  
    improved energy efficiency from the new membrane cells which use
    approximately 29% less energy than the technology currently used
    at the plant; and
    reduced maintenance and operating costs resulting from the use
    of the newer technology;  
    the incremental gross margin contribution from the additional
    49,000 ECUs of production capacity; and
    eliminating the use of mercury at this plant.      Asset
    Sales in 2006
  Sale of 60 Acres in Henderson, Nevada.
  Sale of 4.2 Acres in Henderson, Nevada.
  Property Sale in Pittsburg, California.
  Environmental
    Remediation Liabilities and Asset Retirement
    Obligations
   31




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##### Table of Contents



and/or
  Pricing
      2006


2005


2004First Quarter

$
616


$
548


$
339Second Quarter


577



577



354Third Quarter


557



581



409Fourth Quarter


534



619



480Annual Average


571



581



393    32




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##### Table of Contents



Chlorine


Caustic Soda2004:First Quarter

$
75


$
Second Quarter


20



95Third Quarter


20



110Fourth Quarter


20



502005:First Quarter

$
20


$
40Second Quarter






30Third Quarter


25



125Fourth Quarter






60
(1)2006First Quarter

$
25
(2)

$
Second Quarter






35Third Quarter


25



Fourth Quarter






402007First Quarter (through March 1)

$
25


$
40
(3)     (1)
    
    In late October 2005, we announced an additional caustic soda
    price increase of $160 per ton, although this increase was
    subject to a temporary voluntary allowance of $100 per ton.
    We reserved the right to remove all or any portion of the
    temporary voluntary allowance at any time following the
    effective date of the price increase, upon notice to our
    customers.(2)
    
    A February 2006 price increase for chlorine of $25 per ton
    was also subject to a temporary voluntary allowance for the full
    amount.(3)
    
    The $40 increase is for diaphragm and chemical grade liquid
    caustic soda. We also increased the price by $50 for membrane
    and rayon grade liquid caustic soda.       33




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##### Table of Contents



Production
    % of ProductionECUs (In Tons)


Capacity2006


2005


2004


2006


2005


2004Pioneer production volume


686,000



671,000



704,000



95
%


93
%


97
%Industry production volume(1)


13,198,000



13,264,000



14,385,000



89
%


90
%


97
%     (1)
    
    Sources: Chlorine Institute, CMAI and internal estimates.     34




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##### Table of Contents



Energy
    Costs
      2006


2005


2004Percentage of Cost


Total Power


Percentage of Cost


Total Power


Percentage ofTotal Power Costs


of Sales


Costs


of Sales


Costs


Cost of SalesFirst Quarter

$
29,963



30
%

$
21,199



24
%

$
20,919



24
%Second Quarter


26,226



26
%


24,466



26
%


22,094



26
%Third Quarter


28,945



28
%


25,892



27
%


23,959



26
%Fourth Quarter


26,076



25
%


32,184



32
%


22,990



26
%Total

$
111,210



27
%

$
103,741



28
%

$
89,962



25
%     Transportation
    Costs
    2006


2005


2004Product





Product





ProductTransportation


Percentage of


Transportation


Percentage of


Transportation


Percentage ofCosts


Cost of Sales


Costs


Cost of Sales


Costs


Cost of SalesFirst Quarter

$
23,981



24
%

$
20,674



24
%

$
21,093



24
%Second Quarter


24,914



24
%


22,503



24
%


22,265



26
%Third Quarter


27,361



26
%


22,367



23
%


22,843



25
%Fourth Quarter


25,290



24
%


23,462



23
%


20,497



23
%Total

$
101,546



25
%

$
89,006



24
%

$
86,698



25
%    35




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##### Table of Contents



Cost
    Reduction Measures
    See
        Critical
    Accounting Policies and Estimates
    Long-Lived Assets.
 36




---



##### Table of Contents



Environmental Remediation Liabilities and Asset Retirement
    Obligations. See
  See . See
  Defined Benefit Pension and Other Postretirement
    Plans. See
   37




---



##### Table of Contents



Pioneer


PioneerPCI Canada


Americas


ConsolidatedDefined benefit
    plans:Discount rate


5.20
%


5.75
%


5.49
%Expected return on plan assets


7.50
%


7.75
%


7.63
%Rate of compensation increase


3.50
%






3.50
%Other postretirement benefit
    plans:Discount rate


5.20
%


5.75
%


5.22
%Health care cost inflation


9.30
%


8.50
%


8.90
%   See
    Allowance for Doubtful Accounts.
  Income Taxes.
    Liquidity
    and Capital Resources
  Summary of Outstanding Debt and Borrowing
    Capability.
 38




---



##### Table of Contents



Debt Prepayments.
      Summary of Certain Debt Provisions.
   39




---



##### Table of Contents



Revolver Obligations.
      Three


Three


Three


Three


TwelveMonths


Months


Months


Months


MonthsEnded


Ended


Ended


Ended


EndedMarch 31,


June 30,


Sept. 30,


Dec. 31,


Dec. 31,2006


2006


2006


2006


2006Net income

$
16,050


$
15,414


$
31,515


$
4,266


$
67,245Income tax expense


6,661



2,125



14,582



8,095



31,463Income before income taxes


22,711



17,539



46,097



12,361



98,708Depreciation and amortization


6,030



5,968



6,051



6,286



24,335Interest expense


2,466



2,073



1,736



672



6,947Lender-Defined EBITDA

$
31,207


$
25,580


$
53,884


$
19,319


$
129,990   See
    Future Payment Commitments.
 40




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##### Table of Contents



2012 andTotal


2007


2008


2009


2010


2011


ThereafterConsolidated Balance Sheet:Long-term
    debt(1)(2)

$
123,315


$
11,092


$
110,058


$
58


$
58


$
58


$
1,991Other
    obligations(3):Leases(4)


58,469



16,540



14,245



12,465



7,281



4,749



3,189Purchase
    obligations(5)


5,571



5,571



















Total

$
187,355


$
33,203


$
124,303


$
12,523


$
7,339


$
4,807


$
5,180    (1)
    
    Includes the maturity of the Senior Notes in 2008. The timing
    and amount of payments that are set forth do not take into
    consideration any early redemption obligations that may arise.
    Long-term debt is inclusive of interest payments based on
    interest rates in effect at December 31, 2006 as follows:
    Senior Notes  fixed 10%; and other notes at various
    interest rates.(2)
    
    Long-term debt includes $25.0 million in principal amount
    of long-term debt that was voluntarily redeemed in January 2007,
    but otherwise would not have been due until 2008. Long-term debt
    also includes interest payable on such redeemed amount of
    $2.5 million annually that would have been paid in 2007 and
    2008.(3)
    
    Payments for environmental remediation liabilities and asset
    retirement obligations are excluded from the table as they are
    not contracted obligations. The timing of payment for these
    liabilities is predicated upon the timing of future events that
    have not occurred and may not be predicted with certainty.(4)
    
    Consists primarily of tank car leases and leases of certain
    facilities and equipment.(5)
    
    Consists primarily of purchase contracts with fixed and
    determinable payment obligations for goods and services used in
    manufacturing and producing operations in the normal course of
    business.    Tax Liability Upon Payment of Senior
    Notes.
 41




---



##### Table of Contents



Sarbanes-Oxley Section 404 Compliance.
  Capital and Environmental Expenditures.
     42




---



##### Table of Contents



See See
  Defined Benefit Pension and Other Postretirement Plan
    Liabilities.
  Net Operating Loss Carryforward. See
  Foreign Operations and Exchange Rate
    Fluctuations.
  see
  Working Capital.
  Net Cash Flows from Operating Activities.
 43




---



##### Table of Contents



Net Cash Flows From (Used in) Investing
    Activities.
  Net Cash Flows Used in Financing
    Activities.
  Off
    Balance Sheet Arrangements
  Regulation S-K.
  Cumulative
    Effect of Accounting Change
  and/or and/or and/or
  and/or See
     44




---



##### Table of Contents



Results
    of Operations
    Year Ended December 31,2006


2005


2004Revenues

$
525,705



100
%

$
515,715



100
%

$
407,115



100
%Cost of sales


(412,030
)


(78
)


(376,225
)


(73
)


(353,454
)


(87
)Gross profit


113,675



22



139,490



27



53,661



13Selling, general and
    administrative expenses


(32,373
)


(6
)


(38,187
)


(8
)


(27,608
)


(7
)Gain (loss) on asset dispositions
    and other, net


26,642



5



(1,222
)






(3,974
)


(1
)Operating income


107,944



21



100,081



19



22,079



5Interest expense, net


(6,947
)


(2
)


(15,267
)


(3
)


(18,356
)


(5
)Other expense, net


(2,289
)






(1,543
)






(2,838
)


(1
)Income before income taxes


98,708



19



83,271



16



885



Income tax expenses


(31,463
)


(6
)


(10,781
)


(2
)


(2,127
)


(1
)Income before cumulative effect of
    change in accounting principle


67,245



13



72,490



14



(1,242
)


Cumulative effect of a change in
    accounting principle, net of tax










(2,194
)










Net income (loss)


67,245



13
%

$
70,296



14
%

$
(1,242
)


   Year
    Ended December 31, 2006, Compared to Year Ended
    December 31, 2005
  Revenues.
  2006


2005Chlorine and caustic soda

$
393,600


$
386,011Other


132,105



129,704Total revenues

$
525,705


$
515,715Average ECU netback*

$
571


$
581     *
    
    The average ECU netback, which is net of the cost of
    transporting our products to customers, relates only to sales of
    chlorine and caustic soda, and not to sales of other products.   45




---



##### Table of Contents



Cost of Sales.
          Selling, General and Administrative
    Expenses.
  Gain (loss) on Asset Dispositions and Other,
    Net.
 46




---



##### Table of Contents



Interest Expense, Net.
  Other Expense, Net.
  Income Tax Expense.
  Year
    Ended December 31, 2005, Compared to Year Ended
    December 31, 2004
  Revenues.
  2005


2004Chlorine and caustic soda

$
386,011


$
293,508Other


129,704



113,607Total revenues

$
515,715


$
407,115Average ECU netback*

$
581


$
393     *
    
    The average ECU netback, which is net of the cost of
    transporting the products to customers, relates only to sales of
    chlorine and caustic soda, and not to sales of other products.  ,
 47




---



##### Table of Contents



Cost of Sales.
  Selling, General and Administrative
    Expenses.
  Gain (loss) on Asset Dispositions and Other,
    Net.
  Interest Expense, Net.
  Other Expense, Net.
  Income Tax Expense.
 48




---



##### Table of Contents



Recent
    Accounting Pronouncements and Developments
      See
     49




---



##### Table of Contents



paid-in-capital
    and/or See
  See
 50




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    ApproximateExpected Maturity Date At December 31, 2006


Fair Value atYear Ending December 31,


December 31,2007


2008


2009


2010


2011


Thereafter


2006(In thousands)Fixed rate
    debt(1)

$
978


$
100,000


$



$



$



$



$
103,478Variable rate debt






















1,761



1,761Total debt

$
978


$
100,000


$



$



$



$
1,761


$
105,239     (1)
    
    Debt instruments at fixed interest rates ranging from 8.0% to
    10.0%, with the majority at 10.0%; includes the payment of the
    Senior Notes in 2008. In January 2007, we redeemed
    $25.0 million in principal amount of the Senior Notes that
    is included in the above table with a maturity in 2008.      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15 15d-15,
  Changes
    in Internal Control Over Financial Reporting
   51




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial
    Reporting
            Internal Control 
    Integrated Framework
   52




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on Internal
 Control over Financial Reporting
  
  Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
    Deloitte &
    Touche LLP
     53




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT  Form 10-K, Form 10-K Regulation S-K (Regulation S-K).
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Form 10-K, Form 10-K Regulation S-K,
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K, Form 10-K Regulation S-K,
  see
  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS  Form 10-K, Form 10-K Regulation S-K,
  ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES  Form 10-K, Form 10-K
 54




---



##### Table of Contents



PART IV   ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
  page F-1.
  Financial Statement
    Schedule
    Exhibits
    Exhibits
  Exhibit No.

Description2
.1*

Pioneer Companies, Inc. Amended
    Joint Plan of Reorganization under Chapter 11 of the United
    States Bankruptcy Code (incorporated by reference to
    Exhibit 2.1 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).2
.2*

Order Approving Disclosure
    Statement, dated September 21, 2001 (incorporated by
    reference to Exhibit 2.2 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).2
.3*

Order Confirming Joint Plan of
    Reorganization, dated November 28, 2001 (incorporated by
    reference to Exhibit 2.4 to Pioneers Current Report
    on
    Form 8-K
    filed on December 28, 2001).2
.4*

Asset Purchase and Sale Agreement
    dated December 22, 2005 between Mariana Properties, Inc.
    and Pioneer Americas LLC (incorporated by reference to
    Exhibit 10.1 to Pioneers Current Report on
    Form 8-K
    filed on January 5, 2006).2
.5*

Asset Purchase Agreement, dated as
    of September 22, 1997, between PCI Chemicals Canada Inc.
    (PCICC), PCI Carolina, Inc. and Pioneer Companies,
    Inc. and ICI Canada Inc., ICI Americas, Inc. and Imperial
    Chemical Industries PLC (incorporated by reference to
    Exhibit 2 to Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 1997).2
.6*

First Amendment to Asset Purchase
    Agreement, dated as of October 31, 1997, between PCICC, PCI
    Carolina, Inc. and Pioneer Companies, Inc. and ICI Canada Inc.,
    ICI Americas, Inc. and Imperial Chemical Industries PLC
    (incorporated by reference to Exhibit 2 to Pioneers
    Current Report on
    Form 8-K
    filed on November 17, 1997).3
.1*

Fourth Amended and Restated
    Certificate of Incorporation of Pioneer Companies, Inc.
    (incorporated by reference to Exhibit 3.1 to Pioneers
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).3
.2*

Amended and Restated By-laws of
    Pioneer Companies, Inc. (incorporated by reference to
    Exhibit 3.2 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.1*

Specimen Pioneer Companies, Inc.
    Stock Certificate (incorporated by reference to Exhibit 4.1
    to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.2*

Indenture, dated as of
    December 31, 2001, among PCI Chemicals Canada Company, the
    guarantors named therein and Wells Fargo Bank Minnesota,
    National Association, as trustee, relating to $150,000,000
    principal amount of 10% Senior Secured Guaranteed Notes due
    2008 (incorporated by reference to Exhibit 4.3 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.3*

First Supplemental Indenture dated
    as of June 30, 2005 among PCI Chemicals Canada Company, the
    guarantors named therein and Wells Fargo Bank, National
    Association, as trustee, relating to the $150,000,000 principal
    amount of 10% Senior Secured Guaranteed Notes due 2008
    (incorporated by reference to Exhibit 4.3 to Pioneers
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).4
.4*

Loan and Security Agreement, dated
    as of December 31, 2001, among PCI Chemicals Canada
    Company, Pioneer Americas LLC, the lenders that are signatories
    thereto and Foothill Capital Corporation, as arranger and
    administrative agent (incorporated by reference to
    Exhibit 4.6 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001). 55




---



##### Table of Contents



Exhibit No.

Description4
.5*

First Amendment to Loan and
    Security Agreement, dated April 15, 2002, between and among
    the lenders identified on the signature pages thereto, Foothill
    Capital Corporation, PCI Chemicals Canada Company and Pioneer
    Americas LLC (incorporated by reference to Exhibit 4.7 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.6*

Second Amendment to Loan and
    Security Agreement effective as of May 31, 2002, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.1 to Pioneers Current Report on
    Form 8-K
    filed on June 14, 2002).4
.7*

Third Amendment to Loan and
    Security Agreement effective as of July 29, 2002, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.8 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002).4
.8*

Fourth Amendment to Loan and
    Security Agreement effective as of December 10, 2002,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.9 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002).4
.9*

Fifth Amendment to Loan and
    Security Agreement effective as of July 1, 2003, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.10 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).4
.10*

Sixth Amendment to Loan and
    Security Agreement effective as of December 31, 2003,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.11 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).4
.11*

Seventh Amendment to Loan and
    Security Agreement effective as of December 31, 2006,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.1 to Pioneers Current Report on
    Form 8-K
    filed on December 26, 2006).4
.12

Eighth Amendment to Loan and
    Security Agreement effective as of March 13, 2007, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC.4
.13*

Common Security and Intercreditor
    Agreement, dated as of December 31, 2001, by and among the
    grantors named therein and Wells Fargo Bank Minnesota, National
    Association (incorporated by reference to Exhibit 4.8 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).10
.1+*

Pioneer Companies, Inc. 2006 Stock
    Incentive Plan (incorporated by reference to Annex B of
    Pioneers Proxy Statement filed on April 6, 2006).10
.2+*

Employment Agreement, dated
    May 2, 2006, between Pioneer Companies, Inc. and Michael Y.
    McGovern (incorporated by reference to Exhibit 10.2 to
    Pioneers Current Report on
    Form 8-K
    filed on May 5, 2006).10
.3*

Indemnity Agreement dated
    March 14, 2002, between Pioneer Companies, Inc. and Marvin
    E. Lesser (incorporated by reference to Exhibit 10.1 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2002).10
.4*

Indemnity Agreement dated
    March 14, 2002, between Pioneer Companies, Inc. and Michael
    Y. McGovern (incorporated by reference to Exhibit 10.2 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2002).10
.5*

Indemnity Agreement dated
    March 9, 2002, between Pioneer Companies, Inc. and David A.
    Scholes (incorporated by reference to Exhibit 10.7 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004).10
.6*

Indemnity Agreement dated
    May 13, 2004, between Pioneer Companies, Inc. and Charles
    L. Mears (incorporated by reference to Exhibit 10.6 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005). 56




---



##### Table of Contents



Exhibit No.

Description10
.7*

Indemnity Agreement dated
    May 12, 2005, between Pioneer Companies, Inc. and
    Richard L. Urbanowski (incorporated by reference to
    Exhibit 10.7 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.8*

Indemnity Agreement dated
    January 24, 2006 between Pioneer Companies, Inc. and Robert
    E. Allen (incorporated by reference to Exhibit 10.8 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.9*+

Pioneer Companies, Inc.
    Discretionary Severance Benefit Plan, effective May 1, 2003
    (incorporated by reference to Exhibit 10.9 to Pioneers
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).10
.10*+

Notice Letter dated
    November 14, 2005 between Kent R. Stephenson and Pioneer
    Companies, Inc (incorporated by reference to Exhibit 10.10
    to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.11*

Agreement of Purchase and Sale and
    Joint Escrow Instructions dated effective as of June 3,
    2005, by and between Pioneer Americas LLC and Marnell
    Properties, LLC relating to the sale of approximately sixty
    acres of real property adjacent to Pioneer Americas
    chlor-alkali manufacturing facility in Henderson, Nevada.
    (Incorporated by reference to Exhibit 10.1 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed on
    August 12, 2005).10
.12*

First Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of October 31, 2005, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.12 to Pioneers Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.13*

Second Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of March 31, 2006, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.1 to Pioneers Current Report
    on
    Form 8-K
    filed on April 7, 2006).10
.14*

Third Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of June 30, 2006, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.1 to Pioneers Current Report
    on
    Form 8-K
    filed on July 7, 2006).10
.15*

Fourth Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of July 7, 2006, among PALLC, Marnell Properties,
    LLC and Century Steel, Inc (incorporated by reference to
    Exhibit 10.2 to Pioneers Current Report on
    Form 8-K
    filed on July 7, 2006).14
.1*

Pioneer Companies, Inc. Code of
    Business Conduct and Ethics (incorporated by reference to
    Exhibit 14.1 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).21
.1

List of Subsidiaries.23
.1

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification of Michael Y.
    McGovern required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934.31
.2

Certification of Gary L. Pittman
    required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934.32
.1

Certification of Michael Y.
    McGovern required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    under the Securities Exchange Act of 1934 and 18 U.S.C.
    Section 1350.32
.2

Certification of Gary L. Pittman
    required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    under the Securities Exchange Act of 1934 and 18 U.S.C.
    Section 1350.99
.1

Schedule II 
    Valuation and Qualifying Accounts.     *
    Indicates exhibit previously filed with the Securities and
    Exchange Commission as indicated and incorporated herein by
    reference.  +
    Indicates management contract or compensatory plan or
    arrangement. 57




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##### Table of Contents



SIGNATURES
       By:
    /s/  Michael
    Y. McGovern         Signature

Title

Date/s/  MICHAEL
    Y. McGOVERNMichael
    Y. Mcgovern

President, Chief Executive
    Officer
    and Chairman of the Board of
    Directors

March 14, 2007/s/  GARY
    L. PITTMANGary
    L. Pittman

Senior Vice President, Chief
    Financial Officer, Treasurer and Secretary
    (Principal Financial Officer)

March 14, 2007/s/  CARL
    MONTICONECarl
    Monticone

Vice President, Controller and
    Assistant Secretary
    (Principal Accounting Officer)

March 14, 2007/s/  ROBERT
    E. ALLENRobert
    E. Allen

Director

March 14, 2007/s/  MARVIN
    E. LESSERMarvin
    E. Lesser

Director

March 14, 2007/s/  CHARLES
    L. MEARSCharles
    L. Mears

Director

March 14, 2007/s/  DAVID
    A. SCHOLESDavid
    A. Scholes

Senior Vice President, Operations
    and
    Director

March 14, 2007/s/  RICHARD
    L.
    URBANOWSKI(Richard
    L. Urbanowski)

Director

March 14, 2007  58




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##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
    AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
  PageReport of
    Independent Registered Public Accounting Firm


F-2Consolidated Financial Statements,
    Pioneer Companies, Inc. and subsidiaries:Consolidated
    Balance Sheets as of December 31, 2006 and 2005


F-3Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 and 2004


F-4Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2006, 2005 and 2004


F-5Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


F-6Notes to
    Consolidated Financial Statements


F-7    F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Internal Control  Integrated
    Framework
  Deloitte &
    Touche LLP
    F-2




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##### Table of Contents



PIONEER
    COMPANIES, INC. CONSOLIDATED BALANCE SHEETS
  December 31,


December 31,2006


2005(In thousands,Except Par Value)ASSETSCurrent assets:Cash and cash equivalents

$
115,216


$
62,790Accounts receivable, less
    allowance for doubtful accounts:2006, $2,235; 2005, $3,748


52,028



65,937Inventories, net


21,023



19,076Prepaid expenses and other current
    assets


15,858



3,800Total current assets


204,125



151,603Property, plant and equipment:Land


5,758



6,516Buildings and improvements


30,431



30,234Machinery and equipment


229,059



209,457Construction in progress


2,350



2,208267,598



248,415Less accumulated depreciation


(114,814
)


(89,455
)Property, plant and equipment, net


152,784



158,960Other assets, net


1,850



4,310Excess reorganization value over
    the fair value of identifiable assets


84,064



84,064Total assets

$
442,823


$
398,937LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
16,969


$
18,630Accrued liabilities


42,625



39,444Short-term debt, including current
    portion of long-term debt


978



1,858Total current liabilities


60,572



59,932Long-term debt, less current
    portion


101,761



152,739Accrued pension and other employee
    benefits


20,729



26,619Other long-term liabilities


74,941



54,657Commitments and contingenciesStockholders equity:Preferred stock, $.01 par
    value, 10,000 shares authorized, none issued or outstanding






Common stock, $.01 par value,
    50,000 shares authorized, 11,803 (2006) and 11,759
    (2005) shares issued and outstanding


118



118Additional paid-in capital


43,704



36,784Accumulated other comprehensive
    loss


(7,997
)


(14,396
)Retained earnings


148,995



82,484Total stockholders equity


184,820



104,990Total liabilities and
    stockholders equity

$
442,823


$
398,937    F-3




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##### Table of Contents



PIONEER
    COMPANIES, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2006


2005


2004(In thousands, except per share amounts)Revenues

$
525,705


$
515,715


$
407,115Cost of sales


(412,030
)


(376,225
)


(353,454
)Gross profit


113,675



139,490



53,661Selling, general and
    administrative expenses


(32,373
)


(38,187
)


(27,608
)Gain (loss) on asset dispositions
    and other, net


26,642



(1,222
)


(3,974
)Operating income


107,944



100,081



22,079Interest expense, net


(6,947
)


(15,267
)


(18,356
)Other expense, net


(2,289
)


(1,543
)


(2,838
)Income before income taxes


98,708



83,271



885Income tax expense


(31,463
)


(10,781
)


(2,127
)Income (loss) before cumulative
    effect of change in accounting principle


67,245



72,490



(1,242
)Cumulative effect of change in
    accounting principle, net of tax






(2,194
)


Net income (loss)

$
67,245


$
70,296


$
(1,242
)Income (loss) per share:Basic:Income (loss) before cumulative
    effect of change in accounting principle

$
5.71


$
6.37


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)


Net income (loss)

$
5.71


$
6.18


$
(0.12
)Diluted:Income (loss) before cumulative
    effect of change in accounting principle

$
5.67


$
6.14


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)


Net income (loss)

$
5.67


$
5.95


$
(0.12
)Weighted average number of shares
    outstanding:Basic


11,781



11,379



10,113Diluted


11,866



11,808



10,113    F-4




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##### Table of Contents



PIONEER
    COMPANIES, INC.
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  AccumulatedAdditional





OtherCommon Stock


Paid-In


Retained


ComprehensiveShares


Amount


Capital


Earnings


Loss


Total(In thousands)Balance at January 1, 2004


10,004


$
100


$
10,941


$
13,430


$
(5,481
)

$
18,990Comprehensive income:Net loss














(1,242
)






(1,242
)Other comprehensive loss:Additional minimum pension liability


















(2,573
)


(2,573
)Total comprehensive income






















(3,815
)Predecessor company net operating
    loss benefit










346











346Issuance of new shares


1,172



12



22,362











22,374Balance at December 31, 2004


11,176



112



33,649



12,188



(8,054
)


37,895Comprehensive income:Net income














70,296







70,296Other comprehensive loss:Additional minimum pension liability


















(6,342
)


(6,342
)Total comprehensive loss






















63,954Predecessor company net operating
    loss benefit










937











937Issuance of new shares under stock
    incentive plan


583



6



2,220











2,226Other










(22
)










(22
)Balance at December 31, 2005


11,759



118



36,784



82,484



(14,396
)


104,990Comprehensive income:Net income














67,245







67,245Other comprehensive loss:Additional minimum pension
    liability, (net of tax of $2.9 million)


















8,215



8,215Total comprehensive income






















75,460Cumulative effect of adjustment
    resulting from the adoption of SAB 108,(net of tax of
    $0.2 million)














(734
)






(734
)Stock-based compensation










815











815Issuance of new shares under stock
    incentive plan


44







412











412Predecessor company net operating
    loss benefit










1,102











1,102Excess tax benefits related to
    stock option exercises










4,591











4,591Adoption of SFAS No. 158,
    (net of tax of $6.8 million)


















(1,816
)


(1,816
)Balance at December 31, 2006

$
11,803


$
118


$
43,704


$
148,995


$
(7,997
)

$
184,820    F-5




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##### Table of Contents



PIONEER
    COMPANIES, INC.
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2006


2005


2004(In thousands)Operating activities:Net income (loss)

$
67,245


$
70,296


$
(1,242
)Adjustments to reconcile net
    income (loss) to net cash flows from operating activities:Depreciation and amortization


24,335



24,564



25,514(Reduction of) provision for
    allowance for doubtful accounts


(1,513
)


1,185



(384
)Deferred tax expense


15,465



8,636



2,127(Gain) loss on disposal of assets


(26,275
)


316



(10
)Currency exchange (gain) loss


(9
)


1,470



2,840Loss on early debt extinguishment


2,500







Stock-based compensation expense


815







Accretion of asset retirement
    obligations


304







Cumulative effect of change in
    accounting principle






2,194



Changes in operating assets and
    liabilities:(Increase) decrease in accounts
    receivable


12,310



(12,074
)


(12,803
)Increase in inventories, prepaid
    expenses and other current assets


(1,701
)


(256
)


(774
)(Increase) decrease in other assets


(1,077
)


(40
)


(494
)Increase in accounts payable and
    accrued liabilities


1,527



10,657



8,313Decrease in other long-term
    liabilities


(2,616
)


(4,000
)


(3,794
)Other










346Net cash flows from operating
    activities


91,310



102,948



19,639Investing activities:Capital expenditures


(12,314
)


(12,605
)


(8,384
)Proceeds from disposal of assets


27,548



2,255



315Net cash flows from (used) in
    investing activities


15,234



(10,350
)


(8,069
)Financing activities:Payment of premium on early debt
    extinguishment


(2,500
)






Net borrowings (payments) under
    revolving credit arrangements










(16,823
)Repayments of long-term debt


(51,880
)


(48,320
)


(3,079
)Proceeds from issuance of stock,
    net


412



2,226



22,374Net cash flows from (used in)
    financing activities


(53,968
)


(46,094
)


2,472Effect of exchange rate changes on
    cash


(150
)


95



203Net change in cash and cash
    equivalents


52,426



46,599



14,245Cash and cash equivalents at
    beginning of year


62,790



16,191



1,946Cash and cash equivalents at end
    of year

$
115,216


$
62,790


$
16,191    F-6




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    Organization
    and Basis of Presentation        2.
    Summary
    of Significant Accounting Policies  Cash and Cash Equivalents.
  Inventories. first-in,
  Property, Plant and Equipment.
    Planned Major Maintenance Activities.
  Impairment of Long-Lived Assets.
  Other Assets.
  Excess Reorganization Value Over The Fair Value of
    Identifiable Assets.
 F-7




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Environmental Remediation
    Liabilities. See
  Asset Retirement Obligations. and/or See
  Revenue Recognition.
  Cost of Sales.
  Selling, General and Administrative
    Expenses.
  Interest Expense.
  Year Ended December 31,2006


2005


2004(In thousands)Interest expense

$
10,403


$
16,191


$
18,462Interest income


(3,456
)


(924
)


(106
)Interest expense, net

$
6,947


$
15,267


$
18,356     Income (Loss) Per Share.
 F-8




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Year Ended December 31,2006


2005


2004(In thousands)Income (loss)Income (loss) before cumulative
    effect of change in accounting principle

$
67,245


$
72,490


$
(1,242
)Cumulative effect of change in
    accounting principle, net of tax






(2,194
)


Net income (loss)

$
67,245


$
70,296


$
(1,242
)Average SharesDenominator for Weighted average
    shares  Basic


11,781



11,379



10,113Potentially dilutive common shares:Stock options


85



429



Denominator for weighted average
    diluted shares


11,866



11,808



10,113Income (loss) per
    shareBasic:Income (loss) before cumulative
    effect of change in accounting principle

$
5.71


$
6.37


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)


Net income (loss)

$
5.71


$
6.18


$
(0.12
)Diluted:Income (loss) before cumulative
    effect of change in accounting principle per share:

$
5.67


$
6.14


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax






(0.19
)


Net income (loss)

$
5.67


$
5.95


$
(0.12
)   Stock-Based Compensation.
   F-9




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2005


2004(In thousands)Net income (loss):As reported

$
70,296


$
(1,242
)Add: Stock-based compensation
    expense included in reportedNet income (loss)






57Deduct: Stock-based compensation
    expense determined under fair-value-based method


(825
)


(701
)Pro forma net income (loss)

$
69,471


$
(1,886
)Net income (loss), per common
    share:Basic, as reported

$
6.18


$
(0.12
)Basic, pro forma

$
6.11


$
(0.19
)Diluted, as reported

$
5.95


$
(0.12
)Diluted, pro forma

$
5.88


$
(0.19
)   Foreign Currency Translation.
  Concentration of Credit Risk.
    Fair Value of Financial Instruments.
    Estimates and Assumptions.
 F-10




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Recent
    Accounting Pronouncements and Developments
      See
    paid-in-capital
 F-11




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      and/or See
    3.
    Cash Flow
    Information    2006

2005

2004(In thousands)Accounts payable property, plant
    and equipment acquisitions

$
2,149


$
1,438


$
      2006


2005


2004(In thousands)Interest paid

$
10,476


$
16,264


$
18,434Income taxes paid (refunded)


6,038



729



(346
)   See
 F-12




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   4.
    Supplemental
    Financial Information  Inventories
    2006


2005(In thousands)Raw materials, supplies and parts,
    net

$
10,655


$
9,807Finished goods


10,368



9,269Inventories

$
21,023


$
19,076   Prepaid
    Expenses and Other Current Assets
    2006


2005(In thousands)Prepaid insurance

$
2,614


$
2,034Deferred tax assets


12,313



1,383Other


931



383Prepaid expenses and other current
    assets

$
15,858


$
3,800   Accrued
    Liabilities
    2006


2005(In thousands)Payroll and benefits

$
9,330


$
13,567Taxes


11,694



2,063Electricity


8,488



10,104Professional services


1,647



3,037Maintenance services


5,056



4,702Other


6,410



5,971Accrued liabilities

$
42,625


$
39,444   Other
    long-term liabilities
    2006


2005(In thousands)Environmental

$
16,527


$
14,508Asset retirement obligation


10,962



4,036Deferred revenue


1,417



1,237Deferred tax liability


44,953



34,533Other


1,082



343Other long-term liabilities

$
74,941


$
54,657  F-13




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    Employee
    Benefit Plans  Defined
    Benefit Plans
          Balance Before





Balance AfterApplication





Applicationof SFAS No. 158


Adjustments


of SFAS No. 158(In thousands)Other long term assets

$
6,604


$
(6,604
)

$
Accrued liabilities


42,265



360



42,625Accrued pension and other employee
    benefits


19,117



1,612



20,729Other long-term liabilities
    (deferred tax impact)


68,181



6,760



74,941Accumulated other comprehensive
    loss, net of tax


(6,181
)


(1,816
)


(7,997
)   Defined Benefit Pension Plans.
    F-14




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  PCI Canada


Pioneer Americas


Pioneer Consolidated2006


2005


2006


2005


2006


2005(In thousands)Change in benefit obligation:Projected benefit obligation,
    beginning of year

$
54,190


$
43,031


$
56,763


$
51,922


$
110,953


$
94,953Service cost


1,270



1,047







74



1,270



1,121Interest cost


2,909



2,657



3,109



2,977



6,018



5,634Benefits paid


(1,979
)


(2,297
)


(2,680
)


(3,140
)


(4,659
)


(5,437
)Curtailment






394







(121
)






273Special termination benefits






343















343Settlements


(6,760
)














(6,760
)


Actuarial loss (gain)


1,586



7,203



(543
)


5,051



1,043



12,254Currency translation (gain)loss


(2
)


1,812











(2
)


1,812Projected benefit obligation, end
    of year

$
51,214


$
54,190


$
56,649


$
56,763


$
107,863


$
110,953Change in plan assets:Market value of plan assets,
    beginning of year

$
42,962


$
36,938


$
43,422


$
40,588


$
86,384


$
77,526Actual return on plan assets


5,619



4,020



5,123



3,937



10,742



7,957Employer contributions


8,741



3,336



3,209



2,037



11,950



5,373Benefits paid


(1,978
)


(2,297
)


(2,680
)


(3,029
)


(4,658
)


(5,326
)Actual plan expenses


(624
)


(457
)






(111
)


(624
)


(568
)Settlement payments


(6,557
)














(6,557
)


Currency translation (gain)loss


(445
)


1,422











(445
)


1,422Market value of plan assets, end of
    year

$
47,718


$
42,962


$
49,074


$
43,422


$
96,792


$
86,384Accumulated benefit obligation

$
46,387


$
46,485


$
56,649


$
56,763


$
103,036


$
103,248   PCI Canada


Pioneer Americas


Pioneer Consolidated2006


2005


2006


2005


2006


2005(In thousands)Benefit obligation  end
    of year

$
(51,214
)

$
(54,190
)

$
(56,649
)

$
(56,763
)

$
(107,863
)

$
(110,953
)Market value of plan
    assets  end of year


47,718



42,962



49,074



43,422



96,792



86,384Under funded status of plans


(3,496
)


(11,228
)


(7,575
)


(13,341
)


(11,071
)


(24,569
)Items not yet recognized as a
    component of periodic benefit costs:Transition obligation or asset






















Unamortized prior service costs






















Unamortized net actuarial loss


8,380



10,327



9,023



12,617



17,403



22,944   PCI Canada


Pioneer Americas


Pioneer Consolidated2006


2005


2006


2005


2006


2005(In thousands)Amounts recognized in the
    consolidated balance sheets related to defined benefits pension
    plans:Accrued liabilities

$
125


$



$
44


$



$
169


$
Accrued pension and other employee
    benefits


3,371



3,523



7,531



13,341



10,902



16,864Net pension liability

$
3,496


$
3,523


$
7,575


$
13,341


$
11,071


$
16,864Accumulated other comprehensive
    loss, net of tax

$
(5,786
)

$
(2,621
)

$
(2,896
)

$
(11,775
)

$
(8,682
)

$
(14,396
)   F-15




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  PCI


Pioneer


PioneerCanada


Americas


Consolidated(In thousands)Year Ended December 31,
    2006Components of net periodic benefit
    cost:Service cost

$
1,491


$



$
1,491Interest cost


2,909



3,109



6,018Expected return on plan assets


(3,593
)


(3,480
)


(7,073
)Amortization of net actuarial loss


819



1,408



2,227Settlement loss


1,113







1,113Loss on plan curtailment










Net periodic benefit cost

$
2,739


$
1,037


$
3,776Weighted average assumptions as of
    December 31:Discount rate


5.20
%


5.75
%


5.49
%Expected return on plan assets


7.50
%


7.75
%


7.63
%Rate of compensation increase


3.50
%






3.50
%Year Ended December 31,
    2005Components of net periodic benefit
    cost:Service cost

$
1,172


$
74


$
1,246Interest cost


2,652



2,977



5,629Expected return on plan assets


(2,885
)


(3,208
)


(6,093
)Amortization of net actuarial loss


234



850



1,084Loss on plan curtailment


735







735Net periodic benefit cost

$
1,908


$
693


$
2,601Weighted average assumptions as of
    December 31:Discount rate


5.00
%


5.50
%


5.30
%Expected return on plan assets


7.75
%


8.00
%


7.90
%Rate of compensation increase


3.50
%


3.50
%


3.50
%Year Ended December 31,
    2004Components of net periodic benefit
    cost:Service cost

$
1,182


$
328


$
1,510Interest cost


2,291



2,939



5,230Expected return on plan assets


(2,487
)


(2,995
)


(5,482
)Loss on plan curtailment






77



77Gain on plan settlement






(58
)


(58
)Amortization of net actuarial loss






745



745Net periodic benefit cost

$
986


$
1,036


$
2,022Weighted average assumptions as of
    December 31:Discount rate


6.00
%


5.75
%


5.90
%Expected return on plan assets


7.75
%


8.00
%


7.90
%Rate of compensation increase


3.50
%


3.50
%


3.50
%  F-16




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
               F-17




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     December 31, 2006


December 31, 2005PCI


Pioneer


PCI


PioneerCanada


Americas


Canada


AmericasEquity securities 
    U.S.


18
%


40
%


21
%


40
%Equity securities 
    Canadian


20







25



Equity securities 
    International


22



13



20



13Debt securities


36



23



33



23Real estate fund






5







5Guaranteed accounts






19







19Short-term investments


4







1



100
%


100
%


100
%


100
%     PCI


Pioneer


PioneerFor the Years Ended December 31:

Canada


Americas


Consolidated(In thousands)2007

$
1,844


$
2,705


$
4,5492008


2,040



2,814



4,8542009


2,234



2,987



5,2212010


2,439



3,136



5,5752011


2,660



3,269



5,9292012 through 2016


16,156



19,352



35,508Total

$
27,373


$
34,263


$
61,636   Postretirement Benefits Other Than
    Pension.
 F-18




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     PCI Canada


Pioneer Americas


Pioneer Consolidated2006


2005


2006


2005


2006


2005(In thousands)Change in benefit obligation:Benefit obligation, beginning of
    Year

$
9,035


$
5,737


$
484


$
579


$
9,519


$
6,316Service cost


324



192



2



2



326



194Interest cost


460



339



23



28



483



367Benefits paid


(151
)


(93
)


(172
)


(51
)


(323
)


(144
)Actuarial loss (gain)


34



2,540



60



(74
)


94



2,466Currency translation loss


(36
)


320











(36
)


320Benefit obligation, end of year

$
9,666


$
9,035


$
397


$
484


$
10,063


$
9,519Under funded status of
    plans  deficit

$
(9,666
)

$
(9,035
)

$
(397
)

$
(484
)

$
(10,063
)

$
(9,519
)Items not yet recognized as a
    component of periodic benefit costs:Transition obligation on assets






















Unamortized prior service costs


(129
)


(155
)


(2,575
)


(3,198
)


(2,704
)


(3,353
)Unamortized net actuarial loss
    (gain)


3,408



3,511



(420
)


(533
)


2,988



2,978   PCI Canada


Pioneer Americas


Pioneer Consolidated2006


2005


2006


2005


2006


2005(In Thousands)Amounts recognized in consolidated
    balance sheets related to postretirement benefits other than
    pension plans:Accrued liabilities

$
183


$



$
53


$



$
236


$
Accrued pension and other employee
    benefits


9,483



5,540



344



4,215



9,827



9,755Net liability 
    postretirement benefits other than pension

$
9,666


$
5,540


$
397


$
4,215


$
10,063


$
9,755Accumulated other comprehensive
    loss (income), net of tax

$
(2,262
)

$



$
2,947


$



$
685


$
   F-19




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  PCI


Pioneer


PioneerCanada


Americas


Consolidated(In Thousands)Year Ended December 31,
    2006Components of net periodic benefit
    cost:Service cost

$
324


$
2


$
326Interest cost


460



23



483Amortization of prior service costs


(33
)


(623
)


(656
)Amortization of net actuarial
    (gain) loss


281



(53
)


228Net periodic benefit cost

$
1,032


$
(651
)

$
381Weighted average assumptions as of
    December 31:Discount rate


5.20
%


5.75
%


5.22
%Year Ended December 31,
    2005Components of net periodic benefit
    cost:Service cost

$
192


$
2


$
194Interest cost


339



28



367Amortization of prior service costs


(31
)


(623
)


(654
)Amortization of net actuarial
    (gain) loss


40



(49
)


(9
)Net periodic benefit cost

$
540


$
(642
)

$
(102
)Weighted average assumptions as of
    December 31:Discount rate


5.00
%


5.50
%


5.00
%Year Ended December 31,
    2004Components of net periodic benefit
    cost:Service cost

$
148


$
2


$
150Interest cost


277



35



312Amortization of prior service costs


(29
)


(623
)


(652
)Amortization of net actuarial loss
    (gain)


2



(47
)


(45
)Net periodic benefit cost

$
398


$
(633
)

$
(235
)Weighted average assumptions as of
    December 31:Discount rate


6.00
%


5.75
%


6.00
%    F-20




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    PCI


Pioneer


PioneerCanada


Americas


Consolidated(In thousands)Effect of a one-percentage-point
    change to the health care cost trend rate assumption:Effect of + 1% on service cost
    plus interest cost

$
166


$



$
166Effect of − 1% on service
    cost plus interest cost


(129
)






(129
)Effect of + 1% on accrued benefit
    obligation


1,821



1



1,822Effect of − 1% on accrued
    benefit obligation


(1,449
)


(1
)


(1,450
)     PCI


Pioneer


PioneerFor the years ended December 31:

Canada


Americas


Consolidated(In thousands)2007

$
183


$
53


$
2362008


225



48



2732009


271



12



2832010


316



13



3292011


352



14



3662012 through 2016


2,392



93



2,485Total

$
3,739


$
233


$
3,972     Defined
    Contribution Plans
     F-21




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    6.
    Stock-Based
    Compensation  Share-Based
    Incentive Plan
        Accounting
    for Share-Based Compensation
       F-22




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Stock
    Options and Stock Grants
    Weighted-Range of


AverageNumber of


Exercise Price


Exercise PriceShares


Per Share


Per Share2006:Outstanding at January 1, 2006


236


$
2.00 - 29.97


$
12.69Granted


10



31.37



31.37Exercised


(36
)


2.50 - 20.75



11.35Forfeited


(32
)


8.28 - 26.40



25.63Outstanding at December 31,
    2006


178



2.00 - 31.37



11.74Exercisable at December 31,
    2006


123


$
2.00 - 31.37


$
13.30    Weighted-AverageGrant DateNumber of


Fair ValueShares


per Share2006:Non-vested at January 1, 2006





$
Granted


8



29.29Vested


(8
)


29.29Forfeited






Non-vested at December 31,
    2006






       Weighted-Weighted-


AverageAverage


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price per Share


Term (Years)


Value(1)(In thousands)Fully vested and currently
    exercisable


123


$
13.30



7.4


$
1,932Expected to vest


55



8.28



7.7



1,128Total outstanding stock options


178



11.74



7.4


$
3,060     (1)
    
    The aggregate intrinsic value is computed based on the closing
    price of Pioneers stock on December 29, 2006.   F-23




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Year Ended December 31,2006


2005


2004Expected Term (years)


5.2



10.0



10.0Expected Volatility


45.4
%


48.0
%


54.0
%Risk-free Interest Rate


4.5
%


4.4
%


4.3
%Expected Dividends










      F-24




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  7.
    Debt   2006


2005(In Thousands)Senior Secured Debt:10% Senior Secured Guaranteed
    Notes, due December 2008(Senior Notes)

$
100,000


$
150,000Senior Secured Floating Rate
    Guaranteed Notes, variable rates (Senior Guaranteed
    Notes)






Senior Floating Rate Term Notes,
    variable interest rates (Senior Floating Notes)






Revolving credit facility;
    variable interest rates based on U.S. prime rate plus a
    margin ranging from 0.5% to 1.25% or LIBOR* plus a margin
    ranging from 2.50% to 3.25% expiring December 31, 2007, as
    amended (Revolver)






Other debt:Unsecured, non-interest-bearing,
    long-term debt, denominated in Canadian dollars (amounts below
    are in Canadian dollars), original face value of
    $5.5 million, payable in five annual installments of
    $1.0 million and a final payment of $0.5 million,
    beginning January 10, 2002, with an effective interest rate
    of 8.25%


428



1,253Other notes, maturing in various
    years through 2014, with various installments, at various
    interest rates


2,311



3,344Total


102,739



154,597Short-term debt, including current
    maturities of long-term debt


(978
)


(1,858
)Long-term debt, less current
    maturities

$
101,761


$
152,739     *
    
    The three-month London inter-bank offered rate
    (LIBOR) for the periods ended December 31, 2006
    and 2005 was 5.36% and 4.39%, respectively.    Debt Prepayments.
   F-25




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
           Revolver.
       F-26




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          SeniorSecuredDebt


Other


Total(In thousands)2007






978



9782008*


100,000







100,0002009










2010










2011










Thereafter






1,761



1,761$
100,000


$
2,739


$
102,739     *
    
    The amount of Senior Secured Debt does not reflect the
    redemption of $25.0 million in principal amount of the
    Senior Notes in January 2007.  8.
    Condensed
    Consolidating Financial Statements     F-27




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
  December 31,
    2006
  PCI


Pioneer


Other





PioneerPCI


Canada


Americas


Guarantors


Eliminations


Consolidated(In thousands)AssetsCurrent assets:Cash and cash equivalents

$



$
3,049


$
112,167


$



$



$
115,216Accounts receivable, net






11,327



40,701











52,028Inventories, net






10,158



10,865











21,023Prepaid expenses and other current
    assets


2,614



2,121



11,123











15,858Total current assets


2,614



26,655



174,856











204,125Property, plant and equipment, net






88,122



63,881



781







152,784Other assets, net






15



1,835











1,850Intercompany receivable


15,679



132,483







90,438



(238,600
)


Investment in subsidiaries


167,859















(167,859
)


Excess reorganization value over
    fair value of identifiable assets






84,064















84,064Total assets

$
186,152


$
331,339


$
240,572


$
91,219


$
(406,459
)

$
442,823Liabilities and
    Stockholders EquityCurrent liabilities:Accounts payable

$



$
10,530


$
6,432


$



$
7


$
16,969Accrued liabilities






22,906



19,719











42,625Current portion of long-term debt






428



543



7







978Total current liabilities






33,864



26,694



7



7



60,572Long-term debt, less current
    portion






100,000



1,761











101,761Investment in subsidiary






71,550











(71,550
)


Intercompany payable


1,332



161



237,114







(238,607
)


Accrued pension and other employee
    benefits






12,854



7,875











20,729Other long-term liabilities






35,844



38,678



419







74,941Stockholders equity
    (deficiency in assets)


184,820



77,066



(71,550
)


90,793



(96,309
)


184,820Total liabilities and
    stockholders equity

$
186,152


$
331,339


$
240,572


$
91,219


$
(406,459
)

$
442,823  F-28




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
  December 31,
    2005
  PCI


Pioneer


Other





PioneerPCI


Canada


Americas


Guarantors


Eliminations


Consolidated(In thousands)AssetsCurrent assets:Cash and cash equivalents

$



$
1,587


$
61,198


$
5


$



$
62,790Accounts receivable, net






14,264



51,673











65,937Inventories, net






9,040



10,036











19,076Prepaid expenses and other current
    assets


2,034



1,516



250











3,800Total current assets


2,034



26,407



123,157



5







151,603Property, plant and equipment, net






93,977



63,455



1,528







158,960Other assets, net






186



4,124











4,310Intercompany receivable


15,887



148,733







88,541



(253,161
)


Investment in subsidiaries


88,530















(88,530
)


Excess reorganization value over
    fair value of identifiable assets






84,064















84,064Total assets

$
106,451


$
353,367


$
190,736


$
90,074


$
(341,691
)

$
398,937Liabilities and
    Stockholders EquityCurrent liabilities:Accounts payable

$



$
8,171


$
10,460


$



$
(1
)

$
18,630Accrued liabilities


128



12,815



26,501











39,444Current portion of long-term debt






825



1,005



28







1,858Total current liabilities


128



21,811



37,966



28



(1
)


59,932Long-term debt, less current
    portion






150,429



2,303



7







152,739Investment in subsidiary






133,690







429



(134,119
)


Intercompany payable


1,333



347



251,481







(253,161
)


Accrued pension and other employee
    benefits






9,064



17,555











26,619Other long-term liabilities






38,670



15,121



865



1



54,657Stockholders equity
    (deficiency in assets)


104,990



(644
)


(133,690
)


88,745



45,589



104,990Total liabilities and
    stockholders equity

$
106,451


$
353,367


$
190,736


$
90,074


$
(341,691
)

$
398,937  F-29




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
  Fiscal
    Year Ended December 31, 2006
  PCI


Pioneer


Other





PioneerPCI


Canada


Americas


Guarantors


Eliminations


Consolidated(In thousands)Revenues

$



$
246,027


$
409,773


$



$
(130,095
)

$
525,705Cost of sales






(193,596
)


(348,527
)


(2
)


130,095



(412,030
)Gross profit






52,431



61,246



(2
)


0



113,675Selling, general and
    administrative expenses


(727
)


(11,313
)


(20,331
)


(2
)






(32,373
)Gain (loss) on asset dispositions
    and other, net






(344
)


25,361



1,625







26,642Operating income (loss)


(727
)


40,774



66,276



1,621



0



107,944Interest expense, net






(10,222
)


3,277



(2
)






(6,947
)Other income (expense), net






(2,305
)


16







0



(2,289
)Income loss before income taxes


(727
)


28,247



69,569



1,619



0



98,708Income tax expense






(6,865
)


(24,598
)










(31,463
)Net income (loss) before equity in
    earnings of subsidiaries


(727
)


21,382



44,971



1,619



0



67,245Equity in net earnings of
    subsidiaries


67,972



44,971











(112,943
)


Net income

$
67,245


$
66,353


$
44,971


$
1,619


$
(112,943
)

$
67,245  F-30




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
  Fiscal
    Year Ended December 31, 2005
  PCI


Pioneer


Other





PioneerPCI


Canada


Americas


Guarantors


Eliminations


Consolidated(In thousands)Revenues

$



$
244,553


$
408,834


$



$
(137,672
)

$
515,715Cost of sales






(172,381
)


(341,684
)


168



137,672



(376,225
)Gross profit






72,172



67,150



168







139,490Selling, general and
    administrative expenses


(846
)


(9,042
)


(28,291
)


(8
)






(38,187
)Change in fair value of derivatives






















Asset impairment






















Gain (loss) on asset dispositions
    and other, net






(4,536
)


3,314











(1,222
)Operating income (loss)


(846
)


58,594



42,173



160







100,081Interest expense, net






(15,095
)


(168
)


(4
)






(15,267
)Other income (expense), net






(1,471
)


(12,381
)


12,309







(1,543
)Income (loss) before income taxes


(846
)


42,028



29,624



12,465







83,271Income tax expense






(9,237
)


(1,544
)










(10,781
)Net income (loss) before equity in
    earnings of subsidiaries and change in accounting principle


(846
)


32,791



28,080



12,465







72,490Cumulative effect of change in
    accounting principle, net of tax






(385
)


(1,809
)










(2,194
)Equity in net earnings of
    subsidiaries


71,142



26,271







202



(97,615
)


Net income

$
70,296


$
58,677


$
26,271


$
12,667


$
(97,615
)

$
70,296  F-31




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
  Fiscal
    Year Ended December 31, 2004
  PCI


Pioneer


Other





PioneerPCI


Canada


Americas


Guarantors


Eliminations


Consolidated(In thousands)Revenues

$



$
193,691


$
310,810


$



$
(97,386
)

$
407,115Cost of sales






(162,192
)


(288,468
)


(180
)


97,386



(353,454
)Gross profit






31,499



22,342



(180
)






53,661Selling, general and
    administrative expenses


(885
)


(8,082
)


(18,693
)


52







(27,608
)Change in fair value of derivatives






















Asset impairment






















Gain (loss) on asset dispositions
    and other, net






(2,046
)


(1,928
)










(3,974
)Operating income (loss)


(885
)


21,371



1,721



(128
)






22,079Interest expense, net






(15,135
)


(3,215
)


(6
)






(18,356
)Other income (expense), net






(2,834
)


(9,421
)


9,417







(2,838
)Income (loss) before income taxes


(885
)


3,402



(10,915
)


9,283







885Income tax expense






(2,127
)














(2,127
)Net income (loss) before equity in
    earnings of subsidiaries


(885
)


1,275



(10,915
)


9,283







(1,242
)Equity in net earnings of
    subsidiaries


(357
)


(10,915
)






(186
)


11,458



Net income (loss)

$
(1,242
)

$
(9,640
)

$
(10,915
)

$
9,097


$
11,458


$
(1,242
)  F-32




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Fiscal
    Year Ended December 31, 2006
  PCI


Pioneer


Other


PioneerPCI


Canada


Americas


Guarantors


Consolidated(In thousands)Net cash flows from (used in)
    operating activities

$
(412
)

$
60,635


$
33,157


$
(2,070
)

$
91,310Cash flows from investing
    activities:Capital expenditures






(5,623
)


(6,691
)






(12,314
)Proceeds from disposal of assets






(42
)


25,490



2,100



27,548Net cash flows from (used in)
    investing activities






(5,665
)


18,799



2,100



15,234Cash flows from financing
    activities:Proceeds from stock issuance, net


412















412Redemption premium on early debt
    extinguishment






(2,500
)










(2,500
)Repayments on long-term debt






(50,851
)


(1,006
)


(23
)


(51,880
)Net cash flows from (used in)
    financing activities


412



(53,351
)


(1,006
)


(23
)


(53,968
)Effect of exchange rate changes on
    cash and cash equivalents






(150
)










(150
)Net increase (decrease) in cash
    and cash equivalents






1,469



50,950



7



52,426Cash and cash equivalents at
    beginning of period






1,580



61,217



(7
)


62,790Cash and cash equivalents at end
    of period

$



$
3,049


$
112,167


$



$
115,216  F-33




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Fiscal
    Year Ended December 31, 2005
  PCI


Pioneer


Other


PioneerPCI


Canada


Americas


Guarantors


Consolidated(In thousands)Net cash flows from (used in)
    operating activities

$
(2,226
)

$
8,638


$
96,527


$
9


$
102,948Cash flows from investing
    activities:Capital expenditures






(6,480
)


(6,125
)






(12,605
)Proceeds from disposal of assets






6



2,249







2,255Net cash flows from (used in)
    investing activities






(6,474
)


(3,876
)






(10,350
)Cash flows from financing
    activities:Repayments on long-term debt


2,226















2,226Revolving credit borrowings, net


















Proceeds from stock issuance, net






(827
)


(47,475
)


(18
)


(48,320
)Net cash flows from (used in)
    financing activities


2,226



(827
)


(47,475
)


(18
)


(46,094
)Effect of exchange rate changes on
    cash and cash equivalents






95











95Net increase (decrease) in cash
    and cash equivalents






1,432



45,176



(9
)


46,599Cash and cash equivalents at
    beginning of period






148



16,041



2



16,191Cash and cash equivalents at end
    of period

$



$
1,580


$
61,217


$
(7
)

$
62,790  F-34




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    Fiscal Year Ended December 31, 2004
  PCI


Pioneer


Other


PioneerPCI


Canada


Americas


Guarantors


Consolidated(In thousands)Net cash flows from (used in)
    operating activities

$
(22,374
)

$
3,363


$
38,656


$
(6
)

$
19,639Cash flows from investing
    activities:Capital expenditures






(3,074
)


(5,310
)






(8,384
)Proceeds from disposal of assets










315







315Net cash flows from (used in)
    investing activities






(3,074
)


(4,995
)






(8,069
)Cash flows from financing
    activities:Revolving credit borrowings, net






(793
)


(2,270
)


(16
)


(3,079
)Repayments on long-term debt










(16,823
)






(16,823
)Proceeds from issuance of stock


22,374















22,374Net cash flows from (used in)
    financing activities


22,374



(793
)


(19,093
)


(16
)


2,472Effect of exchange rate changes on
    cash and cash equivalents






203











203Net increase (decrease) in cash
    and cash equivalents






(301
)


14,568



(22
)


14,245Cash and cash equivalents at
    beginning of period






499



1,423



24



1,946Cash and cash equivalents at end
    of period

$



$
198


$
15,991


$
2


$
16,191   See
    9.
    Business
    Segment Information      F-35




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  2006


2005


2004(In thousands)Revenues:United States

$
410,426


$
405,867


$
310,118Canada


115,007



108,665



96,423Other


272



1,183



574Consolidated

$
525,705


$
515,715


$
407,115 2006


2005(In thousands)Long-lived assets (at year end):United States

$
66,498


$
64,382Canada


172,200



178,040     2006


2005


2004(In thousands)Revenues:Chlorine and caustic soda

$
393,600


$
386,011


$
293,508Other


132,105



129,704



113,607Total revenues

$
525,705


$
515,715


$
407,115     10.
    Commitments
    and Contingencies  Environmental
    Matters
  See
  Letters
    of Credit
   F-36




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Operating
    Leases
    2007

$
15,4122008


14,2452009


12,4652010


7,2812011


4,749Thereafter


3,189Total minimum obligations

$
57,341     Litigation
    St. Gabriel Mercury Vapor Emissions
    Release.
    Claude
    Frazier, et al. v. Pioneer Americas, LLC and State of
    Louisiana through the Department of Environmental Quality
 F-37




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Albany, N.Y. Mercury Refining Superfund
    Site. clean-up
  St. Gabriel Asbestos Premises Liability
    Lawsuits.
  Collective
    Bargaining Agreements
    11.
    Income
    Taxes   F-38




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     2006


2005


2004Current income tax (expense)
    benefit:U.S.  Federal

$
(3,801
)

$
(590
)

$
U.S.  State


(1,797
)


(17
)


Canada


(10,401
)


(1,538
)


Total

$
(15,999
)

$
(2,145
)

$
Deferred income tax (expense)
    benefit:U.S.  Federal

$
(17,994
)

$
(886
)

$
U.S.  State


(1,006
)


(51
)


Canada


3,536



(7,699
)


(2,127
)Total


(15,464
)


(8,636
)


(2,127
)Total income tax (expense) benefit

$
(31,463
)

$
(10,781
)

$
(2,127
)     2006


2005


2004Amount


Percent


Amount


Percent


Amount


PercentTax at U.S. statutory rates

$
(34,548
)


(35
)%

$
(29,145
)


(35
)%

$
(310
)


(35
)%State and foreign income taxes,
    net of U.S. benefit


(2,548
)


(2
)%


(13,280
)


(16
)%


1,732



196
%Canadian Rate  Enacted
    law changes


3,204



3
%














Adjustments to carryforward










(69,993
)


(84
)%






Release of valuation allowance


2,318



2
%


102,638



123
%


(2,912
)


(329
)%Other


111



0
%


(1,001
)


(1
)%


(637
)


(72
)%Total tax (expense) benefit,

$
(31,463
)


(32
)%

$
(10,781
)


(13
)%

$
(2,127
)


(240
)%  F-39




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2006


2005U.S.


Canada


Total


U.S.


Canada


TotalDeferred tax liabilities:Property, plant and equipment

$
(26,323
)

$
(24,879
)

$
(51,202
)

$
(27,556
)

$
(30,730
)

$
(58,286
)Goodwill


(355
)


(8,394
)


(8,749
)


1,522



(9,275
)


(7,753
)Total deferred tax liabilities


(26,678
)


(33,273
)


(59,951
)


(26,034
)


(40,005
)


(66,039
)Deferred tax assets:Environmental reserve

$
4,661


$
1,033


$
5,694


$
2,680


$
884


$
3,564Net operating losses


2,545







2,545



20,992







20,992Other


5,965



1,891



7,856



10,793



1,875



12,668Pension and other postretirement
    benefits


7,825



3,178



11,003



3,986



1,350



5,336Tax credit and other tax loss
    carryovers


32,878



1,037



33,915



2,444



3,681



6,125Total deferred tax assets


53,874



7,139



61,013



40,895



7,790



48,685Valuation allowance for deferred
    tax assets


(34,614
)






(34,614
)


(14,861
)


(935
)


(15,796
)Net deferred tax assets


19,260



7,139



26,399



26,034



6,855



32,889Net deferred tax liabilities

$
(7,418
)

$
(26,134
)

$
(33,552
)

$



$
(33,150
)

$
(33,150
)          F-40




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        12.
    Environmental
    Liabilities  clean-up and/or
       F-41




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Henderson, Nevada.
       F-42




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Tacoma, Washington.
  See
  Canadian Sites.
     F-43




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     13.
    Selected
    Quarterly Financial Data (Unaudited)  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands)Year ended December 31,
    2006Revenues

$
134,872


$
132,533


$
137,110


$
121,190Gross profit


35,234



30,508



32,021



15,912Operating income


27,467



21,687



47,798



10,992Income before income taxes


22,711



17,539



46,097



12,361Net income


16,050



15,414



31,515



4,266Per share data:Basic Net Income

$
1.36


$
1.31


$
2.68


$
0.36Diluted Net income

$
1.35


$
1.30


$
2.66


$
0.36Year ended December 31,
    2005Revenues

$
119,090


$
132,859


$
132,773


$
130,993Gross profit


31,482



40,262



36,686



31,060Operating income


22,514



30,751



27,468



19,348Income before income taxes


18,431



27,046



22,160



15,634Income before cumulative effect of
    change in accounting principle


15,020



24,089



20,102



13,279Cumulative effect of change in
    accounting principle, net of tax














(2,194
)Net income


15,020



24,089



20,102



11,085Per share data:Basic:Income before cumulative effect of
    change in accounting principle

$
1.34


$
2.14


$
1.76


$
1.14Cumulative effect of change in
    accounting principle, net of tax














(0.19
)Net income

$
1.34


$
2.14


$
1.76


$
0.95Diluted:Income before cumulative effect of
    change in accounting principle

$
1.28


$
2.05


$
1.70


$
1.12Cumulative effect of change in
    accounting principle, net of tax














(0.18
)Net income

$
1.28


$
2.05


$
1.70


$
0.94 F-44




---



##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands)Year ended December 31,
    2004Revenues

$
90,026


$
97,072


$
104,979


$
115,038Gross profit


3,715



12,755



14,679



22,512Operating income (loss)


(3,039
)


1,209



9,158



14,751Income (loss) before income taxes


(7,555
)


(2,743
)


2,732



8,451Net income (loss)


(7,293
)


(2,401
)


3,917



4,535Per share data:Basic Net income (loss)

$
(0.73
)

$
(0.24
)

$
0.39


$
0.44Diluted Net income (loss)

$
(0.73
)

$
(0.24
)

$
0.38


$
0.41     14.
    Gain
    (loss) on Asset Dispositions and Other, Net    Sale of 60 Acres in Henderson, Nevada.
  Sale of 4.2 Acres in Henderson, Nevada.
  Property Sale in Pittsburg, California.
  15.
    Restructuring
    Charges    Project STAR.
 F-45




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Cornwall Asset Sale and Redeployment.
  Tacoma Plant Shutdown.
    As of and for the Year End December 31,Liability


Costs





Liability


CumulativeBalance


Recognized


Costs Paid


Balance


Costs2004


2005


2005


2005


Recognized(In thousands)SeveranceProject STAR  Original

$
1,446


$
98


$
1,370


$
174


$
3,640Extension of Project STAR concepts
    to Dalhousie






340



148



192



340Total, Project STAR


1,446



438



1,518



366



3,980Cornwall  Asset
    Transfer and Sale


447



1,437



481



1,403



1,884Termination of Tacoma terminal
    operations






254







254



254Total Severance

$
1,893


$
2,129


$
1,999


$
2,023


$
6,118     16.
    Asset
    Retirement Obligations  , and/or and/or
  and/or
 F-46




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      As of and for the Year End December 31,2006


2005(In thousands)Asset retirement obligations as of
    January 1

$
4,036


$
Adoption of FIN 47






4,036Accretion expense


301



Liabilities incurred


2,520



Revisions in estimated cash flows


4,105



Liabilities settled during the
    period






Asset retirement obligations as of
    December 31

$
10,962


$
4,036   and/or and/or
   F-47




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##### Table of Contents



PIONEER
    COMPANIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     As of and for the Year End December 31,2005


2004Pro-forma (net of tax)Net income (loss)

$
71,911


$
(1,797
)Net income (loss) per share data:Basic

$
6.32


$
(0.18
)Diluted

$
6.09


$
(0.18
)As-reported income (loss) per
    share data:Basic:Income (loss) before cumulative
    effect of change in accounting principle

$
6.37


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax


(0.19
)


Net income (loss)

$
6.18


$
(0.12
)Diluted:Income (loss) before cumulative
    effect of change in accounting principle

$
6.14


$
(0.12
)Cumulative effect of change in
    accounting principle, net of tax


(0.19
)


Net income (loss)

$
5.95


$
(0.12
)Pro-forma amounts of liability for
    asset retirement obligation at end of period

$
4,036


$
3,734  F-48




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##### Table of Contents



Index to
    Exhibits
  Exhibit No.

Description2
.1*

Pioneer Companies, Inc. Amended
    Joint Plan of Reorganization under Chapter 11 of the United
    States Bankruptcy Code (incorporated by reference to
    Exhibit 2.1 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).2
.2*

Order Approving Disclosure
    Statement, dated September 21, 2001 (incorporated by
    reference to Exhibit 2.2 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).2
.3*

Order Confirming Joint Plan of
    Reorganization, dated November 28, 2001 (incorporated by
    reference to Exhibit 2.4 to Pioneers Current Report
    on
    Form 8-K
    filed on December 28, 2001).2
.4*

Asset Purchase and Sale Agreement
    dated December 22, 2005 between Mariana Properties, Inc.
    and Pioneer Americas LLC (incorporated by reference to
    Exhibit 10.1 to Pioneers Current Report on
    Form 8-K
    filed on January 5, 2006).2
.5*

Asset Purchase Agreement, dated as
    of September 22, 1997, between PCI Chemicals Canada Inc.
    (PCICC), PCI Carolina, Inc. and Pioneer Companies,
    Inc. and ICI Canada Inc., ICI Americas, Inc. and Imperial
    Chemical Industries PLC (incorporated by reference to
    Exhibit 2 to Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 1997).2
.6*

First Amendment to Asset Purchase
    Agreement, dated as of October 31, 1997, between PCICC, PCI
    Carolina, Inc. and Pioneer Companies, Inc. and ICI Canada Inc.,
    ICI Americas, Inc. and Imperial Chemical Industries PLC
    (incorporated by reference to Exhibit 2 to Pioneers
    Current Report on
    Form 8-K
    filed on November 17, 1997).3
.1*

Fourth Amended and Restated
    Certificate of Incorporation of Pioneer Companies, Inc.
    (incorporated by reference to Exhibit 3.1 to Pioneers
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).3
.2*

Amended and Restated By-laws of
    Pioneer Companies, Inc. (incorporated by reference to
    Exhibit 3.2 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.1*

Specimen Pioneer Companies, Inc.
    Stock Certificate (incorporated by reference to Exhibit 4.1
    to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.2*

Indenture, dated as of
    December 31, 2001, among PCI Chemicals Canada Company, the
    guarantors named therein and Wells Fargo Bank Minnesota,
    National Association, as trustee, relating to $150,000,000
    principal amount of 10% Senior Secured Guaranteed Notes due
    2008 (incorporated by reference to Exhibit 4.3 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.3*

First Supplemental Indenture dated
    as of June 30, 2005 among PCI Chemicals Canada Company, the
    guarantors named therein and Wells Fargo Bank, National
    Association, as trustee, relating to the $150,000,000 principal
    amount of 10% Senior Secured Guaranteed Notes due 2008
    (incorporated by reference to Exhibit 4.3 to Pioneers
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).4
.4*

Loan and Security Agreement, dated
    as of December 31, 2001, among PCI Chemicals Canada
    Company, Pioneer Americas LLC, the lenders that are signatories
    thereto and Foothill Capital Corporation, as arranger and
    administrative agent (incorporated by reference to
    Exhibit 4.6 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.5*

First Amendment to Loan and
    Security Agreement, dated April 15, 2002, between and among
    the lenders identified on the signature pages thereto, Foothill
    Capital Corporation, PCI Chemicals Canada Company and Pioneer
    Americas LLC (incorporated by reference to Exhibit 4.7 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).4
.6*

Second Amendment to Loan and
    Security Agreement effective as of May 31, 2002, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.1 to Pioneers Current Report on
    Form 8-K
    filed on June 14, 2002).4
.7*

Third Amendment to Loan and
    Security Agreement effective as of July 29, 2002, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.8 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002).




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##### Table of Contents



Exhibit No.

Description4
.8*

Fourth Amendment to Loan and
    Security Agreement effective as of December 10, 2002,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.9 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002).4
.9*

Fifth Amendment to Loan and
    Security Agreement effective as of July 1, 2003, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.10 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).4
.10*

Sixth Amendment to Loan and
    Security Agreement effective as of December 31, 2003,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.11 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).4
.11*

Seventh Amendment to Loan and
    Security Agreement effective as of December 31, 2006,
    between and among the lenders identified on the signature pages
    thereof, Foothill Capital Corporation, PCI Chemicals Canada
    Company and Pioneer Americas LLC (incorporated by reference to
    Exhibit 4.1 to Pioneers Current Report on
    Form 8-K
    filed on December 26, 2006).4
.12

Eighth Amendment to Loan and
    Security Agreement effective as of March 13, 2007, between
    and among the lenders identified on the signature pages thereof,
    Foothill Capital Corporation, PCI Chemicals Canada Company and
    Pioneer Americas LLC.4
.13*

Common Security and Intercreditor
    Agreement, dated as of December 31, 2001, by and among the
    grantors named therein and Wells Fargo Bank Minnesota, National
    Association (incorporated by reference to Exhibit 4.8 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2001).10
.1+*

Pioneer Companies, Inc. 2006 Stock
    Incentive Plan (incorporated by reference to Annex B of
    Pioneers Proxy Statement filed on April 6, 2006).10
.2+*

Employment Agreement, dated
    May 2, 2006, between Pioneer Companies, Inc. and Michael Y.
    McGovern (incorporated by reference to Exhibit 10.2 to
    Pioneers Current Report on
    Form 8-K
    filed on May 5, 2006).10
.3*

Indemnity Agreement dated
    March 14, 2002, between Pioneer Companies, Inc. and Marvin
    E. Lesser (incorporated by reference to Exhibit 10.1 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2002).10
.4*

Indemnity Agreement dated
    March 14, 2002, between Pioneer Companies, Inc. and Michael
    Y. McGovern (incorporated by reference to Exhibit 10.2 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2002).10
.5*

Indemnity Agreement dated
    March 9, 2002, between Pioneer Companies, Inc. and David A.
    Scholes (incorporated by reference to Exhibit 10.7 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004).10
.6*

Indemnity Agreement dated
    May 13, 2004, between Pioneer Companies, Inc. and Charles
    L. Mears (incorporated by reference to Exhibit 10.6 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.7*

Indemnity Agreement dated
    May 12, 2005, between Pioneer Companies, Inc. and Richard
    L. Urbanowski (incorporated by reference to Exhibit 10.7 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.8*

Indemnity Agreement dated
    January 24, 2006 between Pioneer Companies, Inc. and Robert
    E. Allen (incorporated by reference to Exhibit 10.8 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.9*+

Pioneer Companies, Inc.
    Discretionary Severance Benefit Plan, effective May 1, 2003
    (incorporated by reference to Exhibit 10.9 to
    Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).10
.10*+

Notice Letter dated
    November 14, 2005 between Kent R. Stephenson and Pioneer
    Companies, Inc (incorporated by reference to Exhibit 10.10
    to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005).




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##### Table of Contents



Exhibit No.

Description10
.11*

Agreement of Purchase and Sale and
    Joint Escrow Instructions dated effective as of June 3,
    2005, by and between Pioneer Americas LLC and Marnell
    Properties, LLC relating to the sale of approximately sixty
    acres of real property adjacent to Pioneer Americas
    chlor-alkali manufacturing facility in Henderson, Nevada.
    (Incorporated by reference to Exhibit 10.1 to
    Pioneers Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2005 filed on
    August 12, 2005).10
.12*

First Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of October 31, 2005, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.12 to Pioneers Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2005).10
.13*

Second Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of March 31, 2006, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.1 to Pioneers Current Report
    on
    Form 8-K
    filed on April 7, 2006).10
.14*

Third Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of June 30, 2006, among Pioneer Americas LLC,
    Marnell Properties, LLC and Century Steel, Inc (incorporated by
    reference to Exhibit 10.1 to Pioneers Current Report
    on
    Form 8-K
    filed on July 7, 2006).10
.15*

Fourth Amendment and Assignment of
    Agreement of Purchase and Sale and Joint Escrow Instructions,
    dated as of July 7, 2006, among PALLC, Marnell Properties,
    LLC and Century Steel, Inc (incorporated by reference to
    Exhibit 10.2 to Pioneers Current Report on
    Form 8-K
    filed on July 7, 2006).14
.1*

Pioneer Companies, Inc. Code of
    Business Conduct and Ethics (incorporated by reference to
    Exhibit 14.1 to Pioneers Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003).21
.1

List of Subsidiaries.23
.1

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification of Michael Y.
    McGovern required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934.31
.2

Certification of Gary L. Pittman
    required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    under the Securities Exchange Act of 1934.32
.1

Certification of Michael Y.
    McGovern required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    under the Securities Exchange Act of 1934 and 18 U.S.C.
    Section 1350.32
.2

Certification of Gary L. Pittman
    required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    under the Securities Exchange Act of 1934 and 18 U.S.C.
    Section 1350.99
.1

Schedule II 
    Valuation and Qualifying Accounts.     *
    
    Indicates exhibit previously filed with the Securities and
    Exchange Commission as indicated and incorporated herein by
    reference.+
    
    Indicates management contract or compensatory plan or
    arrangement.