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

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

                                 FORM 10-K/A

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

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

                FOR THE TRANSITION PERIOD FROM               TO

                         COMMISSION FILE NUMBER 1-9859

                            PIONEER COMPANIES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      06-1215192
       (State or other jurisdiction of                        (I.R.S. Employer
        Incorporation or organization)                      Identification No.)
</TABLE>

<TABLE>
<S>                                            <C>
       700 LOUISIANA STREET, SUITE 4300
                HOUSTON, TEXAS
                (713) 570-3200                                     77002
   (Address of principal executive offices)                      (Zip Code)
</TABLE>

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

<TABLE>
<S>                                                          <C>
Securities registered pursuant to Section 12(b) of the Act:                   NONE
Securities registered pursuant to Section 12(g) of the Act:   CLASS A COMMON STOCK, $.01 PAR VALUE
                                                                        (Title of Class)
</TABLE>

    On March 30, 2001, there were outstanding 10,678,893 shares of the Company's
Class A Common Stock, $.01 par value. The aggregate market value of the
Company's voting stock held by non-affiliates of the Company is $2,476,584 based
on the closing price for the Class A Common Stock in consolidated trading on
March 30, 2001.

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]  No [ ]

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

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

                      DOCUMENTS INCORPORATED BY REFERENCE:

    Portions of the proxy statement to be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year covered by this
report pursuant to Regulation 14A under the Securities Exchange Act of 1934 in
connection with the Company's 2001 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Annual Report on Form 10-K.
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<PAGE>   2

                            PIONEER COMPANIES, INC.

                               TABLE OF CONTENTS
                       ANNUAL REPORT ON FORM 10-K FOR THE
                          YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>       <C>                                                            <C>
                                   PART I
Item 1.   Business....................................................     1
Item 2.   Properties..................................................     7
Item 3    Legal Proceedings...........................................     9
Item 4.   Submission of Matters to a Vote of Security Holders.........     9
Item 4a.  Executive Officers of the Registrant........................     9

                                   PART II
Item 5.   Market for Registrant's Common Equity and Related
            Stockholder Matters.......................................    11
Item 6.   Selected Financial Data.....................................    12
Item      Management's Discussion and Analysis of Financial Condition
  7.....  and Results of Operations...................................    13
Item 7a.  Quantitative and Qualitative Disclosures About Market
            Risk......................................................    20
Item 8.   Financial Statements and Supplementary Data.................    21
Item      Changes in and Disagreements with Accountants on Accounting
  9.....  and Financial Disclosure....................................    48

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........    48
Item 11.  Executive Compensation......................................    48
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management................................................    48
Item 13.  Certain Relationships and Related Transactions..............    48

                                   PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
            8-K.......................................................    48
</TABLE>
<PAGE>   3

                                     PART I

     Unless the context otherwise requires, (i) the term "Pioneer" refers to
Pioneer Companies, Inc. and its consolidated subsidiaries, (ii) the term
"Company" refers to Pioneer Companies, Inc., (iii) the term "PCA" refers to
Pioneer Corporation of America, a wholly-owned subsidiary of the Company, and
(iv) the term "Predecessor Company" refers to PCA and its subsidiaries as they
existed on April 20, 1995, the date they were acquired by the Company.

     Certain statements in this Form 10-K are "forward looking statements'
within the meaning of the 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 Company's
high financial leverage, the status and possible outcomes of restructuring
efforts, global economic conditions, Company and industry production problems,
competitive prices, the cyclical nature of the markets for many of the Company's
products and raw materials, and other risks and uncertainties discussed in
detail. Actual outcomes may vary materially from those indicated by the forward
looking statements.

ITEM 1. BUSINESS.

     Pioneer manufactures and markets chlorine and caustic soda and several
related products. Pioneer conducts its primary business through its operating
subsidiaries: Pioneer Americas, Inc. (formerly known as Pioneer Chlor-Alkali
Company, Inc.) ("PAI"), and PCI Chemicals Canada Inc. ("PCI Canada"). In August
2000 Pioneer completed the disposal of substantially all of the assets of two
former operating subsidiaries, Kemwater North America Company ("KNA") and KWT,
Inc. ("KWT," and together with KNA, "Kemwater").

     Pioneer owns and operates five chlor-alkali plants in North America with
aggregate production capacity of approximately 950,000 electrochemical units
("ECUs," each consisting of 1 ton of chlorine and 1.1 tons of caustic soda), as
well as certain related product manufacturing facilities. Management believes
that Pioneer is one of the six largest chlor-alkali producers in North America,
with approximately 6% of North American production capacity. In addition to its
chlor-alkali capacity, Pioneer manufactures hydrochloric acid, bleach, sodium
chlorate and other products.

     As of December 31, 2000, Interlaken Investment Partners, L.P., a Delaware
limited partnership (the "Interlaken Partnership") beneficially owned
approximately 34.9% of the voting power of Pioneer and William R. Berkley (who
may be deemed to beneficially own all shares of Pioneer common stock held by the
Interlaken Partnership) beneficially owned approximately 59.8% of the voting
power of Pioneer.

     Pioneer's five chlor-alkali production facilities are located in Becancour,
Quebec; Tacoma, Washington; St. Gabriel, Louisiana; Henderson, Nevada; and
Dalhousie, New Brunswick. The five facilities produce chlorine and caustic soda
for sale in the merchant markets and for use as raw materials in the manufacture
of downstream products. The Becancour and Henderson facilities also produce
hydrochloric acid and bleach, and the Tacoma facility also produces hydrochloric
acid and calcium chloride. The Dalhousie facility also produces sodium chlorate.
During 2000 Pioneer's U.S. plants faced substantially higher energy costs, and
in March 2001 Pioneer announced a fifty percent curtailment in the capacity of
the Tacoma plant due to an inability to obtain sufficient power at reasonable
prices.

     Pioneer also operates three bleach production and chlorine repackaging
facilities in California and Washington, and distributes these products to
municipalities and selected commercial markets in the western United States
through various distribution channels. All of the chlorine and caustic soda used
as raw materials at these facilities is supplied by the Henderson and Tacoma
chlor-alkali facilities. Additional production units at Cornwall, Ontario
produce hydrochloric acid, bleach, chlorinated paraffins sold under the brand
name Cereclor(R), and proprietary pulping additives, PSR 2000(R) and IMPAQT(R).

     No material gain or loss was recognized upon completion of the sale of the
Kemwater assets. Kemwater manufactured and supplied polyaluminum chlorides to
certain potable and waste water markets in the United States. The products were
used primarily to remove solids from waste water streams and to control hydrogen
sulfide emissions. Kemwater also manufactured and marketed aluminum sulfate to
the waste water and pulp
                                        1
<PAGE>   4

and paper industries. Also in 2000, an unusual charge of $0.9 million was
recorded, relating to the disposition of Kemwater's alum coagulant business at
Antioch, California. In early 1999, Kemwater sold its iron chlorides business,
which was located in the western U.S. This disposal resulted in a pretax loss of
approximately $0.9 million.

  Debt Restructuring

     In December 2000 the Company's subsidiary, PCA, delayed making payments on
various debt obligations due to lack of sufficient liquidity. As a result, at
December 31, 2000 Pioneer was not in compliance with the terms of certain of its
debt agreements. Accordingly, $597.7 million of debt outstanding under various
agreements is classified as a current liability on the Company's consolidated
balance sheet. Pioneer's cash flows and liquidity have been substantially
reduced due to the steep decline in ECU prices in 1999 and extraordinarily high
power costs in 2000. Decreased liquidity warranted the suspension of debt
service in favor of funding ongoing operations. Pioneer is developing a
comprehensive financial restructuring program for which it will solicit the
consent of its lenders at the earliest practical time. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

  Competition

     The chlor-alkali industry is highly competitive. Many of Pioneer's
competitors, including The Dow Chemical Company ("Dow"), Occidental Chemical
Corporation ("OxyChem"), and PPG Industries, Inc. are larger and have greater
financial resources than Pioneer. There are also several regional companies that
specialize in a smaller number of chemical products. While a significant portion
of Pioneer's business is based upon widely available technology, the difficulty
in obtaining permits for the production of chlor-alkali and chlor-alkali related
products may be a barrier to entry. Pioneer's ability to compete effectively
depends on its ability to maintain competitive prices, to provide reliable and
responsive service to its customers and to operate in a safe and environmentally
responsible manner.

     North America represents approximately 32% of world chlor-alkali production
capacity, with approximately 15.1 million tons of chlorine and 16.6 million tons
of caustic soda production capacity. OxyChem and Dow are the two largest
chlor-alkali producers in North America, together representing approximately 45%
of North American capacity. The remaining capacity is held by approximately 20
companies. Approximately 65% of North American chlor-alkali capacity is located
on the Gulf Coast of Texas and Louisiana. Pioneer's chlor-alkali capacity
represents approximately 6% of total North American capacity. The chlorine and
caustic soda currently produced at Pioneer's Tacoma and Henderson facilities
provide a significant source of supply for the West Coast region, where Pioneer
is the largest supplier of chlorine and bleach for water treatment purposes. The
Tacoma, St. Gabriel and Dalhousie facilities are leading suppliers of premium,
low-salt grade caustic soda in their respective regions. Pioneer believes its
strong regional presence in eastern Canada and the western United States has
enhanced the competitiveness of Pioneer's operations.

  Employees

     As of December 31, 2000, Pioneer had 895 employees. Ninety of Pioneer's
employees at the Henderson, Nevada plant are covered by collective bargaining
agreements with the United Steelworkers of America and with the International
Association of Machinists and Aerospace Workers that are in effect until March
13, 2004, and 112 of Pioneer's employees at the Tacoma facility are covered by
collective bargaining agreements with the International Chemical Workers Union
Council and the International Operating Engineers that are both in effect until
June 11, 2003. At Pioneer's Becancour facility, 137 employees are covered by
collective bargaining agreements with the Energy and Paper Workers Union that
are in effect until April 30, 2006, and 32 employees at Pioneer's Cornwall
facility are represented by the United Steelworkers Union, with a collective
bargaining agreement that expires on October 31, 2002. Ten employees at
Pioneer's Tacoma bleach facility are covered by a collective bargaining
agreement with the Teamsters Union that is in effect until December 1, 2002.
Pioneer is currently negotiating a collective bargaining agreement with 60
employees at the Dalhousie facility who are members of the Communication, Energy
and Paperworkers Union of Canada. Pioneer's employees at other production
facilities are not covered by union contracts or collective bargaining
                                        2
<PAGE>   5

agreements. Pioneer considers its relationship with its employees to be good and
it has not experienced any strikes or work stoppages.

  Environmental Regulation

  U.S. ENVIRONMENTAL LAWS

     Air Quality.  Pioneer's U.S. operations are subject to the federal Clean
Air Act and the amendments to that act which were enacted in 1990. Pioneer will
be subject to some of the additional environmental regulations adopted by the
federal EPA and state environmental agencies to implement the Clean Air Act
Amendments of 1990. Among the requirements that are potentially applicable to
Pioneer are those that require the EPA to establish hazardous air pollutant
emissions requirements for chlorine production facilities. Although Pioneer
cannot estimate the cost of complying with these requirements until such
regulations are proposed, at this time Pioneer does not believe that such
requirements will have a material adverse effect on it.

     Most of Pioneer's plants manufacture or use chlorine, which is in gaseous
form if released into the air. Chlorine gas in relatively low concentrations can
irritate the eyes, nose and skin and in large quantities or high concentrations
can cause permanent injury or death. From 1995 to date, there have been minor
releases at Pioneer's plants, none of which has had any impact on human health
or the environment. Those releases were controlled by plant personnel, in some
cases with the assistance of local emergency response personnel, and there were
no material claims against Pioneer as a result of those incidents. Pioneer
maintains systems to detect emissions of chlorine at its plants, and the Tacoma,
St. Gabriel and Henderson plants are members of their local industrial emergency
response networks. Pioneer believes that its insurance coverage is adequate with
respect to costs that might be incurred in connection with any future release,
although there can be no assurance that Pioneer will not incur substantial
expenditures that are not covered by insurance if a major release does occur in
the future.

     Water Quality.  Pioneer maintains waste water discharge permits for many of
its facilities pursuant to the federal Water Pollution Control Act of 1972, as
amended, and comparable state laws. Where required, Pioneer has also applied for
permits to discharge stormwater under such laws. In order to meet the discharge
requirements applicable to stormwater, it will be necessary to modify surface
drainage or make other changes at certain plants. Pioneer has spent
approximately $0.4 million during the combined 1998 through 2000 period for
modifications to the stormwater system at the Henderson plant, and believes that
any additional costs associated with stormwater discharge at Henderson and its
other plants will not have a material adverse effect on Pioneer's financial
condition, liquidity or operating results. The various states in which Pioneer
operates also have water pollution control statutes and regulatory programs
which include groundwater and surface water protection provisions. The
requirements of these laws vary and are generally implemented through a state
regulatory agency. These water protection programs typically require site
discharge permits, spill notification and prevention and corrective action
plans. At several of Pioneer's facilities and at certain sites where operations
have been discontinued, investigations or remediations are underway, and at some
of these locations regulatory agencies are considering whether additional
actions are necessary to protect or remediate surface or groundwater resources.
Pioneer could be required to incur additional costs to construct and operate
remediation systems in the future. In addition, at several of its facilities,
Pioneer is in the process of replacing or closing ponds used for the collection
of wastewater. Pioneer plans to spend approximately $1.5 million during the next
three years on improvements to discontinue the use of three chlor-alkali waste
water disposal ponds at its Henderson plant, replacing them with systems to
recycle wastewater.

     Hazardous and Solid Wastes.  Pioneer's manufacturing facilities generate
hazardous and non-hazardous solid wastes which are subject to the requirements
of the federal Resource Conservation and Recovery Act ("RCRA") and comparable
state statutes. The EPA has adopted regulations banning the land disposal of
certain hazardous wastes unless the wastes meet defined treatment or disposal
standards, including certain mercury-containing wastes generated by Pioneer's
St. Gabriel plant. In response to these regulations, the St. Gabriel plant has
substantially reduced the quantity of wastes that are subject to the land ban
through the installation of an in-plant treatment system that reduces the level
of mercury in its wastes below the hazardous classification. In 1999, the
facility applied for and received a "Determination of Equivalency" from the EPA

                                        3
<PAGE>   6

for its mercury recovery/treatment process. Pioneer's disposal costs could
increase substantially if its present disposal sites become unavailable due to
capacity or regulatory restrictions. Pioneer presently believes, however, that
its current disposal arrangements, together with the mercury recovery/treatment
system and less stringent land disposal restrictions resulting from the
"Determination of Equivalency," will allow Pioneer to continue to dispose of
land-banned wastes with no material adverse effect on it.

     Superfund.  In the ordinary course of Pioneer's operations, substances are
generated that fall within the definition of "hazardous substances," and Pioneer
is the owner or operator of several sites at which hazardous substances have
been released into soil or groundwater. Under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), also known as the
"Superfund" law, regulatory agencies or third parties may incur costs to
investigate or remediate such conditions and seek reimbursement from Pioneer for
such costs. However, no investigations or remedial activities are currently
being conducted under CERCLA by third parties at any of Pioneer's facilities,
with the exception of the Tacoma facility, where the activities are covered by
an indemnity from the previous owner. Such activities are being carried out at
certain facilities under the other statutory authorities discussed above
pursuant to provisions of indemnification agreements protecting Pioneer from
liability.

  CANADIAN ENVIRONMENTAL LAWS

     General.  Pioneer's Canadian facilities are governed by federal
environmental laws administered by Environment Canada and by provincial
environmental laws enforced by administrative agencies. Many of these laws are
comparable to the U.S. laws described above. In particular, the Canadian
environmental laws generally provide for control and/or prohibition of
pollution, for the issuance of certificates of authority or certificates of
authorization which permit the operation of regulated facilities and prescribe
limits on the discharge of pollutants, and for penalties for the failure to
comply with applicable laws. These laws include the substantive areas of air
pollution, water pollution, solid and hazardous waste generation and disposal,
toxic substances, petroleum storage tanks, protection of surface and subsurface
waters, and protection of other natural resources. However, there is no Canadian
law similar to CERCLA that would make a company liable for legal off-site
disposal.

     The Canadian Environmental Protection Act ("CEPA") is the primary federal
statute which governs environmental matters throughout the provinces. The
federal Fisheries Act is the principal federal water pollution control statute.
This law would apply in the event of a spill of caustic soda or another
deleterious substance that adversely impacts marine life in a waterway. The
Becancour, Dalhousie and Cornwall facilities are all adjacent to major waterways
and are therefore subject to the requirements of this statute. The Chlor-Alkali
Mercury Release Regulations and the Chlor-Alkali Mercury Liquid Effluent
Regulations, adopted under the CEPA, regulate the operation of the Dalhousie
facility. In particular, these regulations provide for the quantity of mercury a
chlor-alkali plant may release into the ambient air and the quantity of mercury
that may be released with liquid effluent. Pioneer believes it has operated and
is currently operating in compliance with these statutes.

     The primary provincial environmental laws include the Environmental
Protection Act in the province of Ontario, the Quebec Environment Quality Act in
Quebec and the Clean Environment Act in New Brunswick. In general, each of these
acts regulates the discharge of a contaminant into the natural environment if
such discharge causes or is likely to cause an adverse effect.

  Indemnities

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

                                        4
<PAGE>   7

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

     Payments for environmental liabilities under the ZENECA Indemnity, together
with other non-environmental liabilities for which the ZENECA Companies agreed
to indemnify Pioneer, cannot exceed approximately $65 million. To date Pioneer
has been reimbursed for approximately $12 million of costs covered by the ZENECA
Indemnity, but the ZENECA Companies may have directly incurred additional costs
that would further reduce the total amount remaining under the ZENECA Indemnity.
In 1994, Pioneer recorded a $3.2 million environmental reserve related to
pre-closing actions at sites that are the responsibility of ZENECA. At the same
time a receivable was recorded from ZENECA for the same amount. It is Pioneer's
policy to record such amounts when a liability can be reasonably estimated. In
2000, based on the results of a third party environmental analysis, the $3.2
million environmental reserve and offsetting receivable were adjusted to the
discounted future cash flows for estimated environmental remediation, which was
$2 million.

     The ZENECA Indemnity continues to cover claims after the April 20, 1999
expiration of the term of the indemnity to the extent that, prior to the
expiration of the indemnity, proper notice to the ZENECA Companies was given and
either the ZENECA Companies have assumed control of such claims or Pioneer was
contesting the legal requirements that gave rise to such claims, or had
commenced removal, remedial or maintenance work with respect to such claims, or
commenced an investigation which resulted in the commencement of such work
within ninety days. Management believes proper notice was provided to the ZENECA
Companies with respect to outstanding claims under the ZENECA Indemnity, but the
amount of such claims has not yet been determined given the ongoing nature of
the environmental work at Henderson. Pioneer believes that the ZENECA Companies
will continue to honor their obligations under the ZENECA Indemnity for claims
properly presented by Pioneer. It is possible, however, that disputes could
arise between the parties concerning the effect of contractual language and that
Pioneer would have to subject its claims for cleanup expenses, which could be
substantial, to the contractually-established arbitration process.

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

                                        5
<PAGE>   8

     In 1999 disputes arose between Pioneer and the Sellers as to the proper
scope of the indemnity. During June 2000, Pioneer and the Sellers effected an
agreement, pursuant to which Pioneer, in exchange for cash and other
consideration, relieved the Sellers from their environmental indemnity
obligations and agreed to transfer to the Sellers the record title to the
Contingent Payment Properties and the $800,000 remaining cash balance in the
Contingent Payment Account that was determined to be in excess of anticipated
environmental liability. The cash balance in the Contingent Payment Account at
the time of this transaction was $6.1 million. This cash balance was not
previously reflected on Pioneer's balance sheet since a right of setoff existed.

     A third-party environmental analysis that was performed on all of Pioneer's
sites subject to the indemnity provided the basis for the anticipated
environmental liability. Pioneer then adjusted the remediation reserve on its
balance sheet to the discounted future cash flows for estimated environmental
remediation. As a result of the above transaction and the new environmental
analysis, Pioneer reported a pre-tax gain of $1.8 million during the second
quarter of 2000, which was reflected as a reduction of cost of sales.

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

     OCC Tacoma will also indemnify Pioneer against certain other environmental
conditions and environmental violations caused by pre-closing operations that
are identified after the closing. Environmental conditions that are subject to
formal agency action within five years after closing or to an administrative or
court order within ten years after closing, and environmental violations that
are subject to an administrative or court order within five years after closing,
will be covered by the indemnity up to certain dollar amounts and time limits.
Pioneer will indemnify OCC Tacoma for environmental conditions and environmental
violations identified after the closing if (i) an order or agency action is not
imposed within the relevant time frames or (ii) applicable expiration dates or
dollar limits are reached.

     Pioneer has reviewed the time frames currently estimated for remediation of
the known environmental conditions associated with the plant and adjacent areas
and Pioneer presently believes that it will have no material liability upon the
termination of OCC Tacoma's indemnity. However, the OCC Tacoma indemnity is
subject to limitations as to dollar amount and duration, as well as certain
other conditions, and there can be no assurance that such indemnity will be
adequate to protect Pioneer, that remediation will proceed on the present
schedule, that it will involve the presently anticipated remedial methods, or
that unanticipated conditions will not be identified. If these or other changes
occur, Pioneer could incur a material liability for which it is not insured or
indemnified.

     PCI Canada Acquisition Indemnity.  In connection with the acquisition by
Pioneer of the assets of PCI Canada in 1997, Imperial Chemical Industrials PLC
("ICI") and its affiliates (together the "ICI Indemnitors") agreed to indemnify
Pioneer for certain liabilities associated with environmental matters arising
from pre-closing operations of the Canadian facilities. In particular, the ICI
Indemnitors will retain unlimited responsibility for environmental liabilities
associated with the Cornwall site, liabilities arising out of the

                                        6
<PAGE>   9

discharge of contaminants into rivers and marine sediments and liabilities
arising out of off-site disposal sites. The ICI Indemnitors are also subject to
a general environmental indemnity for other pre-closing environmental matters.
This indemnity will terminate on October 31, 2007, and is subject to a limit of
$25 million (Cdn). Pioneer may not recover under the environmental indemnity
until it has incurred cumulative costs of $1 million (Cdn), at which point
Pioneer may recover costs in excess of $1 million (Cdn). As of December 31,
2000, Pioneer had incurred no cumulative costs towards the $25 million (Cdn)
indemnity.

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

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

ITEM 2. PROPERTIES.

  Facilities

     The following table sets forth certain information regarding Pioneer's
principal production, distribution and storage facilities as of March 31, 2001.
All property is owned by Pioneer unless otherwise indicated.

<TABLE>
<CAPTION>
            LOCATION                      MANUFACTURED PRODUCTS
            --------                      ---------------------
<S>                                 <C>
Becancour, Quebec................   Chlorine and caustic soda
                                    Hydrochloric acid
                                    Bleach
                                    Hydrogen
Tacoma, Washington...............   Chlorine and caustic soda
                                    Hydrochloric acid
                                    Calcium chloride
                                    Hydrogen
St. Gabriel, Louisiana...........   Chlorine and caustic soda
                                    Hydrogen
Henderson, Nevada................   Chlorine and caustic soda
                                    Hydrochloric acid
                                    Bleach
                                    Hydrogen
Dalhousie, New Brunswick.........   Chlorine and caustic soda
                                    Sodium chlorate
                                    Hydrogen
Cornwall, Ontario*...............   Bleach
                                    Cereclor(R) chlorinated paraffin
                                    PSR 2000(R) pulping additive
                                    IMPAQT(R) pulping additive
Tracy, California*...............   Bleach
                                    Chlorine repackaging
Santa Fe Springs, California*....   Bleach
                                    Chlorine repackaging
Tacoma, Washington...............   Bleach
                                    Chlorine repackaging
</TABLE>

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

*  Leased property

                                        7
<PAGE>   10

     Corporate headquarters for Pioneer is located in leased office space in
Houston, Texas under a lease terminating in 2006. Pioneer also leases office
space in Montreal, Quebec under a lease terminating in 2003 and owns a
technology center in Mississauga, Ontario located on 1.2 acres of land in the
Sheridan Park Research Center near Toronto, Ontario, which conducts applications
research, particularly with respect to pulp and paper process technology.

     The acquisition of the chlor-alkali facility in Tacoma was financed with a
portion of the proceeds of a nine and one-half year $100 million term facility
provided to PCA (the "PCA Term Facility"), and with a portion of the proceeds of
a $200 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCA
(the "Senior Notes"). The Senior Notes and obligations outstanding under the PCA
Term Facility are secured by first mortgages on PAI's Tacoma, St. Gabriel and
Henderson facilities. The acquisition of the PCI Canada facilities was financed
with the proceeds of a nine and one-quarter year $83 million term facility
provided to Pioneer Americas (the "PCI Canada Term Facility"), and with the
proceeds of a $175 million offering of 9 1/4% Senior Secured Notes due 2007
issued by PCI Canada (the "PCI Canada Senior Notes"). The PCI Canada Senior
Notes and obligations outstanding under the PCI Canada Term Facility are secured
by liens on and security interests in substantially all tangible and intangible
property and assets used in PCI Canada's business in Canada. See further
discussion regarding the status of the Senior Notes and the PCI Canada Senior
Notes at "Managements Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources" and Note 10 to the
Consolidated Financial Statements.

  Production Facilities

     Becancour, Quebec.  The Becancour facility is located on a 100-acre site in
an industrial park on the deep-water St. Lawrence Seaway. The plant was
constructed in 1975, with additions in 1979 and 1997. Annual production capacity
is 340,000 tons of chlorine, 383,000 tons of caustic soda and 150,000 tons of
hydrochloric acid. In addition, the site has a bleach production facility.

     Tacoma, Washington.  The Tacoma plant is located on a 31-acre site which is
part of an industrial complex on the Hylebos Waterway in Tacoma, Washington. The
plant was upgraded and expanded in the late 1970s and in 1988. The site has rail
facilities as well as docks capable of handling ocean-going vessels. Annual
capacity is currently 225,000 tons of chlorine, 247,500 tons of caustic soda,
44,000 tons of hydrochloric acid and 8,800 tons of calcium chloride. In March
2001 Pioneer announced that the capacity of the Tacoma plant is being reduced by
fifty percent in response to high power costs in the Pacific Northwest.

     St.  Gabriel, Louisiana.  The St. Gabriel plant is located on a 100-acre
site near Baton Rouge, Louisiana. Approximately 228 acres adjoining the site are
available to Pioneer for future industrial development. The plant was completed
in 1970 and is situated on the Mississippi River with river frontage and
deepwater docking, loading and unloading facilities. Annual production capacity
at St. Gabriel is 197,000 tons of chlorine and 216,700 tons of caustic soda.

     Henderson, Nevada.  The Henderson plant is located on a 374-acre site near
Las Vegas, Nevada. Approximately 70 acres are developed and used for production
facilities. The original plant, which began operation in 1942, was upgraded and
rebuilt in 1976-1977. Annual production capacity at the plant is 152,000 tons of
chlorine, 167,200 tons of caustic soda and 130,000 tons of hydrochloric acid. In
addition, the plant produces bleach. The Henderson plant is part of an
industrial complex shared with three other manufacturing companies. Common
facilities and property are owned and managed by subsidiaries of Basic
Management, Inc. ("BMI"), which provide common services to the four site
companies. BMI's facilities include extensive water and high voltage power
distribution systems and access roads.

     Dalhousie, New Brunswick.  The Dalhousie facility is located on a 36-acre
site along the north shore of New Brunswick on the Restigouche River. The
facility consists of a chlor-alkali plant built in 1963 and expanded in 1971 and
a sodium chlorate plant built in 1992. Annual production capacity is 36,000 tons
of chlorine, 40,000 tons of caustic soda and 22,000 tons of sodium chlorate.

                                        8
<PAGE>   11

     Cornwall, Ontario.  The Cornwall units are located on leased portions of a
36-acre site on the St. Lawrence River. The facilities consist of a bleach
facility, Cereclor(R) chlorinated paraffin plant, a PSR 2000(R) pulping additive
plant and an IMPAQT(R) pulping additive plant.

     Tracy, California.  The Tracy plant includes a bleach production facility
and a chlorine repackaging facility on a 15-acre tract. The land at the facility
is leased under a lease expiring in the year 2005, with two five-year renewal
options.

     Santa Fe Springs, California.  The Santa Fe Springs plant includes a bleach
production plant and a chlorine repackaging facility on a 4.5-acre tract. The
land at the facility is leased under a lease expiring in 2008 with a five-year
renewal option.

     Tacoma, Washington.  The Tacoma bleach plant serves the Pacific Northwest
market. The plant consists of a bleach production facility and a chlorine
repackaging facility on a five-acre company-owned site.

ITEM 3. LEGAL PROCEEDINGS.

     From time to time, Pioneer is involved in litigation relating to claims
arising out of its operations in the normal course of its business. Pioneer
maintains insurance coverage against potential claims in amounts which it
believes to be adequate. In the opinion of management, uninsured losses, if any,
resulting from these matters will not have a material adverse effect on
Pioneer's results of operations, cash flow or financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted during the fourth quarter of 2000 to a vote of
holders of Pioneer's Common Stock.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

     The names, ages and current offices of the executive officers of the
Company, who are to serve until the next annual meeting of the Board of
Directors to be held on May 23, 2001, are set forth below.

<TABLE>
<CAPTION>
NAME AND AGE                                                 OFFICE
------------                                                 ------
<S>                                         <C>
Michael J. Ferris (56)...................   President and Chief Executive Officer
Philip J. Ablove (60)....................   Executive Vice President and Chief
                                            Financial Officer
G. Paul Donnini (48).....................   Vice President, Sales
James E. Glattly (54)....................   Vice President, Marketing
Pierre Prud'homme (42)...................   Vice President, Controller
David A. Scholes (55)....................   Vice President, Manufacturing
Kent R. Stephenson (51)..................   Vice President, General Counsel and
                                            Secretary
Roger A. Zampini (45)....................   Vice President, Supply Chain Management
</TABLE>

     Michael J. Ferris has served as President and Chief Executive Officer and a
director of the Company since January 1997. He was employed by Vulcan Materials
Company, a company engaged in the production of industrial materials and
commodities with significant positions in two industries, construction
aggregates and chemicals, in various capacities from March 1974 to January 1997.
His last position was Executive Vice President, Chemicals from 1996 to 1997.

     Philip J. Ablove has served as Executive Vice President and Chief Financial
Officer of the Company since November 1999. He was Vice President and Chief
Financial Officer of the Company from March 1996 to November 1999. He was a
consultant and an officer and director specializing in high growth or
financially distressed companies from 1983 to 1996. In a consulting role he
served as Acting Chief Financial Officer of Pioneer from October 1995 to March
1996. He has also been a director of the Company since January 1991.

     G. Paul Donnini has served as Vice President, Sales of the Company since
March 2001. He was Vice President, Sales & Marketing -- East of the Company from
June 1999 to March 2001, and Vice President,

                                        9
<PAGE>   12

Sales of PCI Canada from November 1997 to June 1999. He served as Vice
President, Sales of the forest products division of ICI Canada Inc. prior to the
acquisition of that business by the Company in 1997.

     James E. Glattly has served as Vice President, Marketing of the Company
since March 2001. He was Senior Vice President, Sales & Marketing -- West of the
Company from June 1999 to March 2001, and President of PAI from December 1996 to
June 1999. He was Vice President, Sales and Marketing of the Predecessor Company
and PAI from 1988 to 1996.

     Pierre Prud'homme has served as Vice President, Controller of the Company
since November 2000. He was Vice President, Business Planning and Development of
PCI Canada from October 1997 to November 2000. Prior to October 1997, Mr.
Prud'homme was Controller of ICI Canada, after having served in various
financial and marketing capacities.

     David A. Scholes has served as Vice President, Manufacturing of the Company
since March 2001. He was Vice President, Manufacturing -- U.S. of the Company
from November 1999 to March 2001, and Vice President -- Manufacturing of PAI
from January 1997 to November 1999. Prior to joining the Company, he was manager
of Occidental Chemical Corporation's Houston chemical complex.

     Kent R. Stephenson has served as Vice President, General Counsel and
Secretary of the Company since June 1995, and as Vice President, General Counsel
and Secretary of the Predecessor Company since 1993. Prior to joining the
Predecessor Company, he was employed by Zapata Corporation, then an oil and gas
services company.

     Roger A. Zampini has served as Vice President, Supply Chain Management of
the Company since March 2001. He was Vice President, Logistics and Product
Management from June 1999 to March 2001, and Vice President, Marketing and
Logistics of PCI Canada from November 1997 to June 1999. He served as Vice
President, Marketing and Logistics of the forest products division of ICI Canada
Inc. prior to the acquisition of that business by the Company in 1997.

                                        10
<PAGE>   13

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     On March 31, 1995, the Company's stockholders approved a one-for-four
reverse stock split which was effective on April 27, 1995 (the "Reverse Stock
Split"). The number of authorized shares remained at 46.0 million for Class A
Common Stock and 4.0 million for Class B Common Stock, and the par value of the
Common Stock was unchanged. Unless the context otherwise requires, all
references in this Report to Common Stock share and per share amounts reflect
the Reverse Stock Split.

     The Company's Class A common stock was delisted from the NASDAQ SmallCap
Market on January 12, 2001. This action occurred because the Company's Common
Stock market capitalization no longer met the minimum amount required under
NASDAQ's rules. The Company's Common Stock now trades on the NASD-regulated OTC
Bulletin Board under the symbol "PIONA." There is no established trading market
for Pioneer's Class B Common Stock. The price range for the Class A Common
Stock, as adjusted to reflect the Reverse Stock Split and stock dividends, for
each quarterly period for the last two fiscal years is shown in the following
table:

<TABLE>
<CAPTION>
                                                              HIGH     LOW
                                                              -----   -----
<S>                                                           <C>     <C>
2000
Fourth Quarter..............................................  $4.22   $0.62
Third Quarter...............................................   5.12    3.81
Second Quarter..............................................   6.50    4.06
First Quarter...............................................   9.31    5.12
1999
Fourth Quarter..............................................  $7.13   $4.61
Third Quarter...............................................   7.13    4.21
Second Quarter..............................................   5.61    3.97
First Quarter...............................................   4.56    3.04
</TABLE>

     Prices set forth in the table are as reported in the consolidated
transaction reporting system.

     As of March 29, 2001, there were approximately 113 holders of record of the
Class A Common Stock and there were two holders of record of the Class B Common
Stock.

     No cash dividends have been declared or paid with respect to the Company's
Common Stock during the three most recent fiscal years. Pursuant to the terms of
certain debt instruments, there are restrictions on the ability of PCA to
transfer funds to the Company, resulting in limitations on the Company's ability
to declare dividends on its Common Stock. See Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 10 to the
Consolidated Financial Statements. The Company issued 7% stock dividends on the
Class A and Class B Common Stock in December 1999 and December 1998.

                                        11
<PAGE>   14

ITEM 6. SELECTED FINANCIAL DATA.

     The following table sets forth selected historical financial data of
Pioneer for the years ended December 31, 2000, 1999, 1998, 1997, and 1996.
Certain amounts have been reclassified in prior years to conform to the current
year presentation. Per share information for all periods presented reflects 7%
stock dividends on the Class A and Class B Common Stock in 1999, 1998, 1997 and
1996. The data should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------------------
                                                                2000        1999       1998     1997(1)      1996
                                                              ---------   --------   --------   --------   --------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>         <C>        <C>        <C>        <C>
Statement of Operations Data:
  Revenues..................................................  $ 341,481   $296,642   $384,688   $270,341   $208,908
  Cost of sales.............................................    309,570    285,909    301,793    207,906    150,464
                                                              ---------   --------   --------   --------   --------
  Gross profit..............................................     31,911     10,733     82,895     62,435     58,444
  Selling, general and administrative expenses..............     43,424     49,580     50,162     36,192     29,860
  Unusual charges...........................................         --         --      1,661      5,348         --
                                                              ---------   --------   --------   --------   --------
  Operating income (loss)...................................    (11,513)   (38,847)    31,072     20,895     28,584
  Interest expense, net.....................................    (56,328)   (51,927)   (50,521)   (28,987)   (19,212)
  Other income, net(2)......................................      3,309     14,176      1,755      1,907        887
                                                              ---------   --------   --------   --------   --------
  Income (loss) before income taxes and extraordinary
    items...................................................    (64,532)   (76,598)   (17,694)    (6,185)    10,259
  Income tax provision (benefit)(3).........................     41,031    (26,214)    (4,677)      (289)     5,859
                                                              ---------   --------   --------   --------   --------
  Income (loss) before extraordinary Item...................   (105,563)   (50,384)   (13,017)    (5,896)     4,400
  Extraordinary item, net of tax(4).........................         --         --         --    (18,658)        --
                                                              ---------   --------   --------   --------   --------
Net income (loss)...........................................  $(105,563)  $(50,384)  $(13,017)  $(24,554)  $  4,400
                                                              =========   ========   ========   ========   ========
Net income (loss) per share -- basic and diluted............  $   (9.15)  $  (4.38)  $  (1.14)  $  (2.15)  $   0.39
                                                              =========   ========   ========   ========   ========
Other Financial Data:
  Capital expenditures......................................  $  18,697   $ 28,318   $ 34,759   $ 28,091   $ 17,839
  Depreciation and amortization.............................     50,242     54,713     50,316     27,655     18,213
  Cash flows from operating activities......................     13,137    (52,349)    39,337     27,320     29,234
  Cash flows from investing activities......................    (15,819)   (15,159)   (34,424)  (354,682)   (25,120)
  Cash flows from financing activities......................      4,486     17,658     (2,264)   363,495         72
Balance Sheet Data:
  Total assets..............................................  $ 590,037   $680,606   $731,442   $753,672   $301,568
  Total long-term debt (exclusive of current maturities),
    and redeemable preferred stock(5).......................      9,586    600,223    589,668    592,366    161,103
  Stockholders' equity (deficiency in assets)...............   (132,324)   (26,702)    23,553     36,221     59,901
Additional Data:
  EBITDA(6).................................................  $  42,571   $ 31,583   $ 86,649   $ 55,805   $ 47,684
</TABLE>

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

(1) The chlor-alkali facility in Tacoma was acquired in June 1997, and the
    business of PCI Canada was acquired in October 1997. The results of
    operations for the year ended December 31, 1997 include results from the
    respective acquisition dates through December 31, 1997.

(2) Other income in 1999 included a $12.0 million gain on the sale of Pioneer's
    15% partnership interest in Saguaro Power Company ("Saguaro").

(3) Income taxes in 2000 includes a valuation allowance of $67.8 million
    reducing the deferred tax assets relating to net operating loss
    carryforwards. See Note 16 to the Consolidated Financial Statements included
    elsewhere herein.

(4) An extraordinary item of $18.7 million in 1997, net of an income tax benefit
    of $12.4 million, consisted primarily of the 20% premium paid on the face
    value of notes and the write-off of debt placement fees pertaining to debt
    refinanced by Pioneer concurrent with the acquisition of the Tacoma
    chlor-alkali facility.

(5) Because Pioneer is in default, $597.7 million of debt outstanding under
    various agreements is classified as a current liability on Pioneer's
    consolidated balance sheet. See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations -- Liquidity and Capital
    Resources."

(6) EBITDA is defined as earnings before interest, income taxes, depreciation
    and amortization, unusual charges and extraordinary items. It is presented
    because it is a widely accepted financial indicator of a company's ability
    to incur and service debt. EBITDA should not be considered in isolation or
    as a substitute for net income (loss), cash flows from operating activities
    and other combined income or cash flow statement data prepared in accordance
    with generally accepted accounting principles or as a measure of Pioneer's
    profitability or liquidity. Pioneer's calculation of EBITDA may not be
    consistent with similarly captioned amounts used by other companies.

                                        12
<PAGE>   15

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following discussion reviews Pioneer's operations for the years ended
December 31, 2000, 1999 and 1998 and should be read in conjunction with the
Pioneer's audited Consolidated Financial Statements and related notes thereto
included elsewhere herein. Pioneer reports in US dollars and in accordance with
accounting principles generally accepted in the United States of America.

     Pioneer has delayed making interest and principal payments required by
various debt agreements due to insufficient liquidity. Pioneer is developing a
comprehensive financial restructuring program for which it will solicit the
consent of its lenders at the earliest practical time. Until the financial
uncertainty surrounding Pioneer is removed and the new capital structure is in
place, the reported financial information discussed herein may not be
necessarily indicative of future operating results or future financial
condition.

  Overview

     Pioneer manufactures and markets chlorine, caustic soda, hydrochloric acid
and related products used in a variety of applications, including water
treatment, plastics, pulp and paper, detergents, agricultural chemicals,
pharmaceuticals, and medical disinfectants.

     Chlorine and caustic soda are the seventh and sixth most commonly produced
chemicals, respectively, in the United States, based on volume, and are used in
a wide variety of applications and chemical processes. Caustic soda and chlorine
are co-products, concurrently produced in a ratio of approximately 1.1 to 1
through the electrolysis of salt water. An electrochemical unit ("ECU") consists
of 1.1 tons of caustic soda and 1 ton of chlorine.

     Chlorine is used to manufacture over 15,000 products, including
approximately 60% of all commercial chemistry, 85% of all pharmaceutical
chemistry and 95% of all crop protection chemistry. Products manufactured with
chlorine as a raw material include water treatment chemicals, plastics,
detergents, pharmaceuticals, disinfectants and agricultural chemicals. Chlorine
is also used directly in water disinfection applications. In the United States
and Canada, virtually all public drinking water is made safe to drink by
chlorination, and a significant portion of industrial and municipal waste water
is treated with chlorine or chlorine derivatives to kill water-borne pathogens
and remove solids.

     Caustic soda is a versatile chemical alkali used in a diverse range of
manufacturing processes, including metal smelting, oil production and refining
and pulp and paper production. Caustic soda is combined with chlorine to produce
bleach. Caustic soda is also used as an active ingredient in a wide variety of
other end use products, including detergents, rayon and cellophane.

     The chlorine and caustic soda markets have been, and are likely to continue
to be, cyclical. Periods of high demand, high capacity utilization and
increasing operating margins tend to result in new plant investments and
increased production until supply exceeds demand, followed by a period of
declining prices and declining capacity utilization until the cycle is repeated.

     During 1998 and 1999 supply of chlor-alkali products exceeded demand as a
result of the Asian and South American financial crises and increased worldwide
capacity. These conditions caused a severe downturn in the industry pricing
cycle, reaching a 25-year industry low in the third quarter of 1999 and then
moving up in the fourth quarter of 1999 and during the year in 2000. Average ECU
netbacks in 2000 for Pioneer were $327 compared to $242 in 1999 and $336 in
1998. While the pricing cycle improved in 2000, demand for chlorine decreased
dramatically in the second half primarily due to lower demand in the vinyl
market. The weak demand for chlorine along with higher power prices caused
industry operating rates to decline which reduced the availability of caustic
soda. The short supply of caustic soda due to low production rates supported
several price increases which more than offset the declining chlorine prices.

     During 2000, costs for power, a key raw material used for producing
chlorine and caustic soda, increased dramatically and had a significant impact
on Pioneer's operating rates and earnings. Power costs in 2000 were $18 million
higher than in 1999. The Tacoma and St. Gabriel plants accounted for $12 million
and $5 million, respectively, of the increase. St. Gabriel buys power on a firm
contract tariff, which means that St. Gabriel's

                                        13
<PAGE>   16

power supply cannot be reduced or cut-off except in the case of an emergency and
the price fluctuates based on a formula which takes into account prices for
various energy sources. The energy used to generate electricity is primarily
natural gas. Natural gas prices increased significantly during 2000, averaging
$3.56 per MMBTU in 2000 compared with an average of $2.27 in 1999.
Extraordinarily high power costs in the Pacific Northwest have adversely
effected the Tacoma plant, resulting in negative cash flow. In response, in
March 2001 Pioneer announced that it was curtailing production operations by
fifty-percent at the Tacoma plant to reduce negative cash flow. Pioneer is
currently working to obtain power supply contracts that would begin in October
2001 and would reduce the price Pioneer would pay for power. Whether the
reduction at Tacoma is temporary or permanent will depend on the results of the
contract negotiations, which cannot be estimated at this time.

  Liquidity and Capital Resources

     Debt Restructuring.  In December 2000, Pioneer delayed making payments on
various debt obligations due to insufficient liquidity. Pioneer's cash flows and
liquidity have been substantially reduced due to the steep decline in ECU prices
in 1999 and extraordinarily high power costs in 2000. Decreased liquidity
warranted the suspension of debt service in favor of funding ongoing operations.
Pioneer is developing a comprehensive financial restructuring program for which
it will solicit the consent of its lenders at the earliest practical time.

     Pioneer has held discussions with an informal committee of holders of the
senior notes and term facilities, as well as other creditors, about a financial
restructuring plan. The objective of the restructuring is to establish a capital
structure that is consistent with Pioneer's cash flows throughout the industry
cycle, and that affords Pioneer adequate funding of capital expenditures,
working capital needs, and debt service requirements. The proposed restructuring
may have to occur under the supervision of a United States Bankruptcy Court.
While the Company believes that these discussions have been productive, there
can be no assurances that an agreement on the proposed restructuring can be
timely completed.

     The accompanying financial statements present the liabilities at face
value. The debt restructuring could result in debt being paid at less than 100%
of its face value. Moreover, the carrying value of assets and equity could be
changed, and the interests of existing preferred and common stockholders could,
among other things, be very substantially diluted or even eliminated.

     The sufficiency of Pioneer's liquidity and capital resources is dependent
upon the successful completion of the financial restructuring described above,
generating sufficient positive cash flow from operations and obtaining financing
as may be required. While Pioneer believes it may be able to complete a
consensual restructuring during 2001, there can be no assurance that it will be
successful in doing so. Pioneer is reviewing with its financial and legal
advisors the financial alternatives available to Pioneer, including without
limitation, the debt restructuring proposal described above and/or the filing of
a petition under Chapter 11 of the United States Bankruptcy Code.

     Financial Leverage and Covenants.  In December 2000, Pioneer suspended
payments of interest and principal under various debt agreements, and as of
December 31, 2000, Pioneer was not in compliance with certain covenants in the
various debt agreements. As a result, the debt outstanding under these
agreements is classified as a current liability on Pioneer's December 31, 2000
Consolidated Balance Sheet. At December 31, 2000, Pioneer had $601.8 million of
long-term debt outstanding, of which $597.7 million is classified as a current
liability.

     As part of the Tacoma acquisition in June 1997, Pioneer issued and sold
$200 million of 9 1/4% Senior Secured Notes due June 15, 2007. Interest is
payable semi-annually on June 15 and December 15. Effective December 15, 2000,
Pioneer suspended payments of interest on the notes which, after a 30 day grace
period, created a default under the indenture. Accordingly, the amount of the
notes outstanding has been classified as a current liability on the Consolidated
Balance Sheet at December 31, 2000.

     As part of the Tacoma acquisition in June 1997, Pioneer also entered into a
nine and one-half year $100 million term facility, due in quarterly installments
of $250,000 with the balance due in 2006. Pioneer did not make a principal
payment that was due on December 28, 2000, which created an event of default
under

                                        14
<PAGE>   17

the terms of the facility. Accordingly, the default interest rate is in effect
and the amount outstanding under the facility has been classified as a current
liability on the Consolidated Balance Sheet at December 31, 2000.

     As part of the PCI Canada acquisition in November 1997, Pioneer issued and
sold $175 million of 9 1/4% Senior Secured Notes due October 15, 2007. Interest
is payable semi-annually on April 15 and October 15. When Pioneer defaulted on
the $200 million 9 1/4% Senior Secured Notes due June 15, 2007, it constituted
an event of default under the indenture for the $175 million 9 1/4% Senior
Secured Notes due October 15, 2007. Accordingly, the amount of the notes
outstanding has been classified as a current liability on the Consolidated
Balance Sheet at December 31, 2000.

     As part of the PCI Canada acquisition in November 1997, Pioneer also
entered into a nine and one-quarter year $83 million term facility, due in
quarterly installments of $250,000 with the balance due in 2006. Pioneer did not
make a principal payment that was due on December 28, 2000, which created an
event of default under the terms of the facility. Accordingly, the default
interest rate is in effect and the amount outstanding under the facility has
been classified as a current liability on the Consolidated Balance Sheet at
December 31, 2000.

     In September 1999, PCA entered into a $50.0 million three-year revolving
credit facility with Congress Financial Corporation (Southwest) (the "Revolving
Facility") that replaced an existing $50.0 million revolving facility (the "Bank
Credit Facility"). The Revolving Facility provides for revolving loans in an
aggregate amount up to $50.0 million, subject to borrowing base limitations
related to the level of accounts receivable and inventory, which, together with
certain other collateral, secure borrowings under the facility. The total
borrowing base at December 31, 2000 of $45.8 million was subject to a reserve of
$5.0 million until the ratio of EBITDA to fixed charges, as defined in the
Revolving Facility, exceeds 1.15:1 for a period of two consecutive quarters. As
of December 31, 2000, there were letters of credit outstanding of $3.5 million
and loans outstanding of $27.6 million. Based on the cross default provisions
contained in the Revolving Facility Agreement, the Revolving Facility is
currently in default, may be subject to the default interest rate and is
classified as a current liability on the Consolidated Balance Sheet at December
31, 2000.

     Various unsecured notes totaling $17.7 million are in default at December
31, 2000 as these notes contain cross default provisions which were triggered
when Pioneer defaulted on the senior notes and term facilities. These notes have
been classified as a current liability on Pioneer's Consolidated Balance Sheet.

     Pioneer's cash obligations include payment of interest on the notes issued
in connection with the acquisition of the Predecessor Company. PCA is restricted
in paying dividends to the Company or funding cash to unrestricted subsidiaries,
as defined, to the sum of $5.0 million plus 50% of the cumulative consolidated
net income of PCA since June 1997. As of December 31, 2000, no distributions
were allowable under this covenant. Pioneer does not expect to be able to pay
dividends in 2001.

     PCA's ability to enter into new debt agreements is restricted by a debt
covenant requiring a minimum interest coverage ratio (as defined) of at least
2.0 to 1.0 for the prior four fiscal quarters. Currently, PCA is unable to incur
additional indebtedness as a result of this covenant, other than borrowing
available under its revolving credit facility. Pioneer's debt agreements contain
other restrictions on PCA's subsidiaries, which, among other things, limit the
ability of PCA's subsidiaries to acquire or dispose of assets or operations.

     Annualized cash interest of approximately $60.1 million is payable on
Pioneer's debt. To the extent that Pioneer draws additional funds under the
Revolving Facility, due to adverse business conditions or for other corporate
purposes, Pioneer's aggregate interest expense would be increased.

     The Company believes that cash generated from operations together with the
amounts available under the Revolving Facility will be adequate to meet its
capital expenditure and working capital needs, excluding debt service, although
no assurance can be given in this regard.

     Dispositions.  In March 2000 Pioneer sold its alum coagulant business at
Antioch, California, and recorded a $0.9 million loss on the sale.

     On August 21, 2000, Pioneer sold its remaining coagulant business and
transferred to the buyer fixed assets, including plants in Spokane, Washington,
and Savannah, Georgia, certain technology-related assets
                                        15
<PAGE>   18

and liabilities associated with the Spokane operations, and all assets and
liabilities of the Savannah operations, including $1.9 million of cash and notes
payable of $8.0 million. Pioneer received cash of $0.9 million as payment for
Spokane. This transaction did not have a material impact on Pioneer's statements
of operations or cash flows.

     Capital and Environmental Expenditures.  Total capital expenditures were
approximately $18.7 million, $28.3 million and $34.8 million for the years ended
December 31, 2000, 1999 and 1998, respectively. Capital expenditures for
environmental-related matters at existing facilities were approximately $1.8
million, $1.2 million and $2.5 million for the years ended December 31, 2000,
1999 and 1998, respectively. Pioneer anticipates that capital expenditures for
2001, excluding any acquisitions, will be approximately $25.7 million, including
$4.9 million for environmental compliance matters.

     Pioneer routinely incurs operating expenditures associated with hazardous
substance management and environmental compliance matters in ongoing operations.
These operating expenses include items such as outside waste management, fuel,
electricity and salaries. The amounts of these operating expenses were
approximately $2.7 million, $2.8 million and $3.4 million in 2000, 1999 and
1998, respectively. Pioneer does not anticipate an increase in these types of
expenses during 2001. Pioneer classifies these types of environmental
expenditures within cost of sales.

     Net Operating Loss Carryforward.  At December 31, 2000, Pioneer had, for
income tax purposes, approximately $224 million of U.S. net operating loss
carryforwards ("NOLs") which expires in 2009 through 2020, and $20 million
(U.S.) of Canadian NOLs available expiring in 2004 through 2008. The NOLs are
available for offset against future taxable income generated during the
carryforward period. In 2000, a valuation allowance of $67.8 million was
recorded reducing the deferred tax asset relating to net operating loss
carryforwards. (See Note 16 to the Consolidated Financial Statements included
elsewhere herein.)

     Foreign Operations and Exchange Rate Fluctuations.  Pioneer, through PCI
Canada, has operating activities in Canada and Pioneer engages in export sales
to various countries. International operations and exports to foreign markets
are subject to a number of risks, including currency exchange rate fluctuations,
trade barriers, exchange controls, political risks and risks of increases in
duties, taxes and governmental royalties, as well as changes in laws and
policies governing foreign-based companies. In addition, earnings of foreign
subsidiaries and intracompany payments are subject to foreign taxation rules.

     A portion of Pioneer's sales and expenditures are denominated in Canadian
dollars, and accordingly, Pioneer's results of operations and cash flows may be
affected by fluctuations in the exchange rate between the U.S. dollar and the
Canadian dollar. In addition, because a portion of Pioneer's revenues, cost of
sales and other expenses are denominated in Canadian dollars, Pioneer has a
translation exposure to fluctuation in the Canadian dollar against the U.S.
dollar. Due to the significance of PCI Canada's U.S. dollar-denominated
long-term debt (and related accrued interest payable) and certain other U.S.
dollar-denominated assets and liabilities, the entity's functional accounting
currency is the U.S. dollar. Currently, Pioneer is not engaged in forward
foreign exchange contracts, but may enter into such hedging activities in the
future.

     Preferred Stock.  During 1997, 55,000 shares of the Company's Convertible
Redeemable Preferred Stock, par value $0.01 per share, were issued in connection
with the acquisition of the Tacoma facility. Each share of preferred stock is
convertible at the option of the shareholder into 9.8 shares of the Company's
Class A Common Stock. In addition, the stock may be redeemed at varying premiums
either at the Company's option or upon the occurrence of certain designated
events.

     Working Capital.  At December 31, 2000, Pioneer's working capital
deficiency was $600.9 million, representing a decrease in working capital of
$611.6 million from December 31, 1999. The decrease was due primarily to
outstanding debt that was classified as a current liability at December 31,
2000, as well as a $13.3 million increase in accounts payable and a $9.5 million
increase in accrued liabilities during 2000 as compared to December 31, 1999.

     Net Cash Flows from Operating Activities.  Although Pioneer incurred a net
loss of $105.6 million during the year ended December 31, 2000, which included
$50.2 million of non-cash depreciation and amortization expenses and $67.8
million of non-cash income tax expense recorded to establish a valuation
                                        16
<PAGE>   19

allowance related to Pioneer's deferred tax assets (See Note 16 to the
Consolidated Financial Statements included elsewhere herein). Cash inflow from
operating activities was $13.1 million for the year ended December 31, 2000
versus cash outflow from operating activities of $52.3 million in the year ended
December 31, 1999.

     Net Cash Flows used in Investing Activities.  Net cash used in investing
activities was $15.8 million in 2000, as compared to $15.2 million in 1999. In
2000, investing activities consisted primarily of capital expenditures of $18.7
million. In 1999, investing activities consisted primarily of capital
expenditures of $28.3 million and included a $12.0 million gain on the sale of
Pioneer's 15% partnership interest in Saguaro.

     Net Cash Flows from Financing Activities.  Cash inflows from financing
activities in 2000 was $4.5 million, versus cash inflows of $17.7 million in
1999. The 2000 and 1999 cash inflows were due primarily to net borrowings under
the Revolving Facility, offset by scheduled debt repayments. Scheduled payments
on the term facilities totaling $500,000 were not made in December 2000, as
Pioneer suspended debt service due to insufficient cash flows.

  Results of Operations

     The following table sets forth certain operating data for the periods
indicated (dollars in thousands and percentages of revenues):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                  -----------------------------------------------------------
                                        2000                  1999                 1998
                                  -----------------     ----------------     ----------------
<S>                               <C>           <C>     <C>          <C>     <C>          <C>
Revenues........................  $ 341,481     100%    $296,642     100%    $384,688     100%
Cost of sales...................    309,570      91      285,909      96      301,793      78
                                  ---------     ---     --------     ---     --------     ---
Gross profit....................     31,911       9       10,733       4       82,895      22
Selling, general and
  administrative expenses.......     43,424      13       49,580      17       50,162      13
Unusual charges.................         --      --           --      --        1,661       1
                                  ---------     ---     --------     ---     --------     ---
Operating income (loss).........    (11,513)     (4)     (38,847)    (13)      31,072       8
Interest expense, net...........    (56,328)    (16)     (51,927)    (18)     (50,521)    (13)
Other income, net...............      3,309       1       14,176       5        1,755       1
                                  ---------     ---     --------     ---     --------     ---
Loss before income taxes........    (64,532)    (19)     (76,598)    (26)     (17,694)     (4)
Income tax expense (benefit)....     41,031      12      (26,214)     (9)      (4,677)     (1)
                                  ---------     ---     --------     ---     --------     ---
Net loss........................  $(105,563)    (31)%   $(50,384)    (17)%   $(13,017)     (3)%
                                  =========     ===     ========     ===     ========     ===
</TABLE>

  Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Revenues.  Revenues increased by $44.8 million, or approximately 15%, to
$341.5 million for the year ended December 31, 2000, as compared to 1999.
Pioneer's average ECU sales price for the year ended December 31, 2000 was $327,
an increase of approximately 35% from the average 1999 sales price of $242.
Sales volumes during the twelve months ended December 31, 2000 were similar to
those during 1999. The Kemwater sale resulted in a $13.6 million decrease in
revenues from 1999 to 2000 due to the inclusion of only a partial year of
operations in 2000.

     Cost of Sales.  Cost of sales increased $23.7 million or approximately 8%
in 2000, as compared to 1999. $10.9 million of this increase was due to the
absence of the gain resulting from the modification of Pioneer's retiree health
care benefits that occurred during the first quarter of 1999. The remaining
increase in cost of sales was principally due to a $17.9 million increase in
power costs, and a $7.9 million increase in purchase-for-resale costs for
product purchased from third parties and resold to Pioneer customers, offset by
a $14.8 million decrease due to the inclusion of only a partial year of
operations of Kemwater.

     Gross Profit.  Gross profit increased $21.2 million, resulting in a gross
profit margin of 9% in 2000, compared to 4% in 1999, primarily as a result of
the ECU pricing increase, partially offset by the cost of sales increase
discussed above.
                                        17
<PAGE>   20

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased $6.2 million, or approximately 13%, for the
year ended December 31, 2000. Decreases related to overhead expense reductions
and the absence of asset impairments recorded in 1999 were partially offset by
an increase of $1.6 million due to the absence of the modification of Pioneer's
retiree health care benefits referred to above.

     Interest Expense, Net.  Interest expense, net increased $4.4 million to
$56.3 million in 2000, primarily as a result of interest incurred on higher
revolving credit balances and higher variable interest rates in 2000 as compared
to 1999. Although Pioneer suspended payments of interest under various debt
agreements in December 2000, all amounts owing were expensed and included in
accrued liabilities, or, in the case of the Revolving Facility, added to the
outstanding balance, as at December 31, 2000.

     Other Income, Net.  Other income, net decreased from $14.2 million for the
year ended December 31, 1999 to $3.3 million for the year ended December 31,
2000. The 2000 amount was the result of a $3.3 million gain from the sale of
certain excess property at the Henderson plant while 1999 included a $12 million
gain on the sale of Pioneer's 15% partnership interest in Saguaro.

     Income Taxes.  Pioneer is required to record a valuation allowance for
deferred tax assets when management believes it is more likely than not that the
asset will not be realized. In 2000, based on the uncertainty as to the effect
of the Company's restructuring on the availability and use of the NOLs, and the
level of historical taxable income and projections for future taxable income
over the periods in which the NOLs are available for use, it was estimated that
it is more likely than not that Pioneer will not realize the full benefit of the
deferred tax assets relating to NOLs. Accordingly, Pioneer has recorded a
valuation allowance of $67.8 million for the year ended December 31, 2000.

     Pioneer recorded deferred income tax assets in the years ended December 31,
1999 and 1998. In 1999 and 1998, no valuation allowance was recorded since
management believed at that time that it was more likely than not that the
benefit of the deferred tax asset would be realized based on the level of
historical taxable income and projections for future taxable income over the
periods in which the NOLs would be available for use.

  Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Revenues.  Revenues decreased by $88.0 million, or approximately 23%, to
$296.6 million for the twelve months ended December 31, 1999, as compared to the
same period in 1998. The decrease in revenues was primarily due to lower ECU
prices. Pioneer's average ECU sales price for the year ended December 31, 1999
was $242, a decrease of approximately 28% from the average 1998 sales price of
$336.

     The remaining revenue decrease was primarily due to the disposal of
Pioneer's household bleach bottling business during the third quarter of 1998
and the disposal of the pool chemicals business in the fourth quarter of 1998.
These businesses were considered non-strategic, and Pioneer retained long-term
supply agreements with the purchasers.

     Cost of Sales.  Cost of sales decreased $15.9 million or approximately 5%
in 1999, as compared to 1998. $10.9 million of this decrease was due to the
modification of Pioneer's retiree health care benefits. Benefits to current
retirees under the plan were not impacted, but current employees will no longer
receive benefits under this plan following retirement. The remaining decrease in
cost of sales was principally as a result of disposed operations discussed
above, offset by sales volume increases for chlorine and caustic soda in 1999 as
compared to 1998.

     Gross Profit.  Gross profit margin decreased to 4% in 1999 from 22% in
1998, primarily as a result of lower average ECU sales prices.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased $0.6 million in 1999. This reduction was due
to the modification of Pioneer's retiree health care benefits discussed above,
the absence of incentive compensation accruals made in 1998 and various overhead
expense

                                        18
<PAGE>   21

reductions, partially offset by increases in 1999 due to asset impairments
included in depreciation and amortization.

     Interest Expense, Net.  Interest expense, net increased $1.4 million to
$51.9 million in 1999 as a result of decreased interest income due to lower
average cash balances and interest expense incurred on revolving credit balances
in 1999.

     Other Income.  Other income in 1999 included a $12.0 million gain on the
sale of Pioneer's 15% partnership interest in Saguaro.

  Recent Accounting Pronouncements

     Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The adoption of SFAS 133 effective
January 1, 2001 did not have a significant impact on the financial position,
results of operations, or cash flows of the Company.

  Risk Factors

  ABILITY TO CONTINUE AS A GOING CONCERN IS DEPENDENT UPON RESTRUCTURING

     Since December 2000, Pioneer has not been in compliance with certain
covenants of its senior notes and term facilities. Pioneer stopped making
payments of interest under the senior notes and principal under the term
facilities in December 2000. Due to cross default provisions in the Revolving
Facility agreement, the Revolving Facility is currently in default also. As
Pioneer is not in compliance with the terms of these debt agreements, the debt
outstanding under these debt agreements is classified as a current liability on
Pioneer's December 31, 2000 Consolidated Balance Sheet.

  DISRUPTION OF OPERATIONS DUE TO RESTRUCTURING

     Pioneer's restructuring efforts could adversely affect its relationship
with its customers, suppliers and employees. Employees generally are not party
to employment contracts. Due to uncertainty about Pioneer's financial condition,
it may be difficult to retain or attract high quality employees. If Pioneer's
relationships with its customers, suppliers and employees are adversely
affected, its operations could be materially affected. Weakened operating
results could adversely affect Pioneer's ability to complete the restructuring.

  FINANCIAL UNCERTAINTY

     Until the financial restructuring is completed, there is significant
uncertainty regarding Pioneer. Until the uncertainty is removed and the new
capital structure is in place, the reported financial information discussed in
this Annual Report on Form 10-K may not be indicative of operating results or
financial condition. See Note 1 to the Consolidated Financial Statements
included elsewhere herein.

  Forward Looking Statements

     Certain statements in this Form 10-K regarding future expectations of
Pioneer's business and Pioneer's results of operations may be regarded as
"forward looking statements" within the meaning of the Securities Litigation
Reform Act. Such statements are subject to various risks, including Pioneer's
high financial leverage, the outcome of financial restructuring efforts, the
cyclical nature of the markets for many of the Pioneer's products and raw
materials and other risks discussed in detail. Actual outcomes may vary
materially.

                                        19
<PAGE>   22

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The table below provides information about Pioneer's market-sensitive
financial instruments and constitutes a "forward-looking statement." Pioneer has
certain long-term debt instruments that are subject to market risk. An increase
in the market interest rates would increase Pioneer's interest expense and its
cash requirements for interest payments. For example, an average increase of
0.25% in the variable interest rate would increase Pioneer's annual interest
expense and payments by approximately $0.5 million.

     All items described are non-trading and are stated in thousands of United
States dollars.

<TABLE>
<CAPTION>
                                                                                                              FAIR VALUE
                                                                                                             DECEMBER 31,
EXPECTED DEBT MATURITY DATES                  2001(D)    2002   2003   2004   2005   THEREAFTER    TOTAL         2000
----------------------------                  --------   ----   ----   ----   ----   ----------   --------   ------------
<S>                                           <C>        <C>    <C>    <C>    <C>    <C>          <C>        <C>
U.S. $ denominated
  Average interest rates -- fixed(a)........  $387,127   $622   $671   $724   $782     $1,286     $391,212     $ 92,462
  Average interest rates -- variable(b).....   198,852     --     --     --     --         --      198,852      198,852
Canadian $ denominated(c)...................    11,737     --     --     --     --         --       11,737       11,737
                                              --------   ----   ----   ----   ----     ------     --------     --------
        Total debt..........................  $597,716   $622   $671   $724   $782     $1,286     $601,801     $303,051
                                              ========   ====   ====   ====   ====     ======     ========     ========
</TABLE>

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

(a) Debt instruments at fixed interest rates ranging from 8.0% to 9.25%, with
    the majority at 9.25%

(b) Debt instruments at variable interest rates, including LIBOR and U.S. prime
    rate based loans

(c) Revolving credit facility based on Canadian prime rate plus 1 1/4%

(d) Certain amounts owed are reflected as current since they are in default.

     Pioneer, through PCI Canada, operates in Canada and is subject to foreign
currency exchange rate risk. Due to the significance of PCI Canada's U.S.
dollar-denominated long-term debt (and related accrued interest payable) and
certain other U.S. dollar-denominated assets and liabilities, the entity's
functional accounting currency is the U.S. dollar. Certain other items within
PCI Canada's working capital are denominated in Canadian dollars. An average
change of 1% in the currency exchange rate would change total assets by
approximately $0.3 million.

                                        20
<PAGE>   23

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Index:

<TABLE>
<CAPTION>
                                                                    PAGE
                                                                    ----
<S>  <C>                                                            <C>
     Consolidated financial statements, Pioneer Companies, Inc.
(1)    and subsidiaries:
     Report of Management........................................    22
     Independent Auditors' Report................................    23
     Consolidated Balance Sheets as of December 31, 2000 and
       1999......................................................    24
     Consolidated Statements of Operations for the years ended
       December 31, 2000, 1999 and 1998..........................    25
     Consolidated Statements of Stockholders' Equity (Deficiency
       in Assets) for the years ended December 31, 2000, 1999 and
       1998......................................................    26
     Consolidated Statements of Cash Flows for the years ended
       December 31, 2000, 1999 and 1998..........................    27
     Notes to Consolidated Financial Statements..................    28

(2)  Supplemental Schedule:
     Schedule II -- Valuation and Qualifying Accounts............    54
</TABLE>

     All schedules, except the one listed above, have been omitted because they
are either not applicable, not required or the information called for therein
appears in the consolidated financial statements or notes thereto.

                                        21
<PAGE>   24

                              REPORT OF MANAGEMENT

     Management is responsible for the preparation and content of the financial
statements and other information included in this annual report. The financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate under the circumstances to reflect, in all material
respects, the substance of events and transactions that should be included. The
financial statements reflect management's judgments and estimates as to the
effects of events and transactions that are accounted for or disclosed.

     The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1, the Company is experiencing difficulty in generating sufficient cash flow to
meet its obligations and sustain its operations, which raises substantial doubt
about its ability to continue as a going concern without a financial
restructuring. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

     Management maintains accounting systems which are supported by internal
accounting controls that provide reasonable assurance that assets are
safeguarded and that transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. The
concept of reasonable assurance is based on the recognition that the cost of a
system of internal accounting controls should not exceed the benefits.

     An independent auditor performed an audit of Pioneer's financial statements
for the purpose of determining that the statements are presented fairly in
accordance with accounting principles generally accepted in the United States of
America. The independent auditor is appointed by the Board of Directors and
meets regularly with the Audit Committee of the Board. The Audit Committee of
the Board of Directors is composed solely of outside directors. The Audit
Committee meets periodically with Pioneer's senior officers and independent
auditor to review the adequacy and reliability of Pioneer's accounting,
financial reporting and internal controls.

                                            PHILIP J. ABLOVE
                                            Executive Vice President and
                                            Chief Financial Officer
                                            (Principal Financial Officer)

                                            PIERRE PRUD'HOMME
                                            Vice President, Controller
                                            (Principal Accounting Officer)

April 11, 2001

                                        22
<PAGE>   25

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of Pioneer Companies, Inc.

     We have audited the accompanying consolidated balance sheets of Pioneer
Companies, Inc. and subsidiaries ("Pioneer") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, stockholders' equity
(deficiency in assets), and cash flows for each of the three years in the period
ended December 31, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 8. These financial statements and financial
statement schedule are the responsibility of Pioneer's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

     In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pioneer as of December 31, 2000 and 1999,
and the results of its operations and its cash flows for the each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

     The accompanying consolidated financial statements have been prepared
assuming that Pioneer will continue as a going concern. As discussed in Note 1,
Pioneer is experiencing difficulty in generating sufficient cash flow to meet
its obligations and sustain its operations, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

Houston, Texas
April 11, 2001

                                        23
<PAGE>   26

                            PIONEER COMPANIES, INC.

                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2000        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
                                      ASSETS

Current assets:
  Cash and cash equivalents.................................  $   5,935   $   5,510
  Accounts receivable, less allowance for doubtful accounts:
    2000, $1,392; 1999, $2,750..............................     49,571      50,185
  Inventories...............................................     25,067      23,130
  Prepaid expenses and other current assets.................      4,100       7,468
                                                              ---------   ---------
         Total current assets...............................     84,673      86,293
Property, plant and equipment:
  Land......................................................     10,622      10,622
  Buildings and improvements................................     61,334      63,949
  Machinery and equipment...................................    348,695     338,851
  Construction in progress..................................     15,138      19,434
                                                              ---------   ---------
                                                                435,789     432,856
Less accumulated depreciation...............................   (135,405)   (107,315)
                                                              ---------   ---------
                                                                300,384     325,541
Other assets, net of accumulated amortization: 2000,
  $12,004; 1999, $12,052....................................     25,420      76,308
Excess cost over the fair value of net assets acquired, net
  of accumulated amortization: 2000, $39,945; 1999,
  $32,526...................................................    179,560     192,464
                                                              ---------   ---------
         Total assets.......................................  $ 590,037   $ 680,606
                                                              =========   =========

            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)

Current liabilities:
  Accounts payable..........................................  $  43,738   $  30,443
  Accrued liabilities.......................................     44,082      34,517
  Current portion of long-term debt.........................    597,715      10,626
                                                              ---------   ---------
         Total current liabilities..........................    685,535      75,586
Long-term debt, less current portion........................      4,086     594,723
Accrued pension and other employee benefits.................     14,984      15,091
Other long-term liabilities.................................     12,256      16,408
Commitments and contingencies...............................         --          --
Redeemable preferred stock: $.01 par value, authorized
  10,000 shares, 55 issued and outstanding..................      5,500       5,500
Stockholders' equity (deficiency in assets):
  Common stock:
    Class A, $.01 par value, authorized 46,000 shares;
     issued and outstanding: 2000, 10,679; 1999, 10,656.....        106         106
    Class B, $.01 par value, authorized 4,000 shares; issued
     and outstanding: 2000, 859; 1999, 859; convertible
     share-for-share into Class A shares....................          9           9
Additional paid-in capital..................................     55,193      55,176
Retained deficit............................................   (187,556)    (81,993)
Accumulated other comprehensive income......................        (76)         --
                                                              ---------   ---------
         Total stockholders' equity (deficiency in
           assets)..........................................   (132,324)    (26,702)
                                                              ---------   ---------
         Total liabilities and stockholders' equity
           (deficiency in assets)...........................  $ 590,037   $ 680,606
                                                              =========   =========
</TABLE>

                See notes to consolidated financial statements.

                                        24
<PAGE>   27

                            PIONEER COMPANIES, INC.

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

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
Revenues....................................................  $ 341,481   $296,642   $384,688
Cost of sales...............................................    309,570    285,909    301,793
                                                              ---------   --------   --------
Gross profit................................................     31,911     10,733     82,895
Selling, general and administrative expenses................     43,424     49,580     50,162
Unusual charges.............................................         --         --      1,661
                                                              ---------   --------   --------
Operating income (loss).....................................    (11,513)   (38,847)    31,072
Interest expense, net.......................................    (56,328)   (51,927)   (50,521)
Other income, net...........................................      3,309     14,176      1,755
                                                              ---------   --------   --------
Loss before income taxes....................................    (64,532)   (76,598)   (17,694)
Income tax expense (benefit)................................     41,031    (26,214)    (4,677)
                                                              ---------   --------   --------
Net loss....................................................  $(105,563)  $(50,384)  $(13,017)
                                                              =========   ========   ========
Loss per common share -- basic and diluted:
  Net loss..................................................  $   (9.15)  $  (4.38)  $  (1.14)
                                                              =========   ========   ========
Weighted average number of shares outstanding:
  Basic and diluted.........................................     11,535     11,515     11,458
</TABLE>

                See notes to consolidated financial statements.

                                        25
<PAGE>   28

                            PIONEER COMPANIES, INC.

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

<TABLE>
<CAPTION>
                                                  COMMON STOCK ISSUED
                                                    AND OUTSTANDING
                                           ---------------------------------
                                               CLASS A           CLASS B       ADDITIONAL                   OTHER
                                           ---------------   ---------------    PAID-IN     RETAINED    COMPREHENSIVE
                                           SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL      DEFICIT        LOSS          TOTAL
                                           ------   ------   ------   ------   ----------   ---------   -------------   ---------
<S>                                        <C>      <C>      <C>      <C>      <C>          <C>         <C>             <C>
Balance at January 1, 1998...............  9,227     $ 92     750       $8      $54,713     $ (18,592)      $ --        $  36,221
  Net loss...............................     --       --      --       --           --       (13,017)        --          (13,017)
  Stock issued...........................     49       --      --       --          347            --         --              347
  Stock options exercised................      2       --      --       --            2            --         --                2
  Stock dividend issued..................    649        7      53       --           (7)           --         --               --
Balance at December 31, 1998.............  9,927       99     803        8       55,055       (31,609)        --           23,553
                                           ------    ----     ---       --      -------     ---------       ----        ---------
  Net loss...............................     --       --      --       --           --       (50,384)        --          (50,384)
  Stock issued...........................     32       --      --       --          129            --         --              129
  Stock dividend issued..................    697        7      56        1           (8)           --         --               --
                                           ------    ----     ---       --      -------     ---------       ----        ---------
Balance at December 31, 1999.............  10,656     106     859        9       55,176       (81,993)        --          (26,702)
Comprehensive loss:
  Net loss...............................     --       --      --       --           --      (105,563)        --
  Other comprehensive loss, net of taxes:
    Additional minimum pension
      liability..........................     --       --      --       --           --            --        (76)
      Comprehensive loss.................     --       --      --       --           --            --         --         (105,639)
  Stock issued...........................     23       --      --       --           17            --         --               17
                                           ------    ----     ---       --      -------     ---------       ----        ---------
Balance at December 31, 2000.............  10,679    $106     859       $9      $55,193     $(187,556)      $(76)       $(132,324)
                                           ======    ====     ===       ==      =======     =========       ====        =========
</TABLE>

                See notes to consolidated financial statements.

                                        26
<PAGE>   29

                            PIONEER COMPANIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
Operating activities:
  Net loss..................................................  $(105,563)  $(50,384)  $(13,017)
  Adjustments to reconcile net loss to net cash flows from
     operating activities:
     Reduction in post-retirement medical expense...........         --    (12,530)        --
     Depreciation and amortization..........................     50,242     54,713     50,316
     Deferred tax expense (benefit).........................     41,348    (26,181)    (4,677)
     Unusual charges........................................         --         --      1,661
     Gain (loss) on disposal of assets......................     (2,257)   (10,922)     1,845
     Foreign exchange gain (loss)...........................        636     (1,025)        78
     Net effect of changes in operating assets and
       liabilities..........................................     28,731     (6,020)     3,131
                                                              ---------   --------   --------
          Net cash flows from operating activities..........     13,137    (52,349)    39,337
                                                              ---------   --------   --------
Investing activities:
  Capital expenditures......................................    (18,697)   (28,318)   (34,759)
  Proceeds from disposal of assets..........................      2,878     13,159        335
                                                              ---------   --------   --------
          Net cash flows from investing activities..........    (15,819)   (15,159)   (34,424)
                                                              ---------   --------   --------
Financing activities:
  Net proceeds under revolving credit arrangements..........      6,418     21,163         --
  Repayments on long-term debt..............................     (1,950)    (2,666)    (2,611)
  Debt issuance and related costs...........................         --       (968)        --
  Other.....................................................         18        129        347
                                                              ---------   --------   --------
          Net cash flows from financing activities..........      4,486     17,658     (2,264)
                                                              ---------   --------   --------
Effect of exchange rate changes on cash.....................     (1,379)     1,538       (714)
                                                              ---------   --------   --------
Net increase (decrease) in cash.............................        425    (48,312)     1,935
Cash at beginning of period.................................      5,510     53,822     51,887
                                                              ---------   --------   --------
Cash at end of period.......................................  $   5,935   $  5,510   $ 53,822
                                                              =========   ========   ========
</TABLE>

                See notes to consolidated financial statements.

                                        27
<PAGE>   30

                            PIONEER COMPANIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

  Organization

     The consolidated financial statements include the accounts of Pioneer
Companies, Inc. (the "Company") and its subsidiaries (collectively, "Pioneer"),
including Pioneer Corporation of America ("PCA"), Pioneer Americas, Inc. ("PAI")
and PCI Chemicals Canada Inc. ("PCI Canada"). All significant intercompany
balances and transactions have been eliminated in consolidation.

     In August 2000 Pioneer completed the disposal of substantially all of the
assets of two former operating subsidiaries, Kemwater North America Company
("KNA") and KWT, Inc. ("KWT," and together with KNA, "Kemwater"). Kemwater had
revenues of $8.7 million, $22.4 million and $35.3 million in 2000, 1999 and
1998, respectively.

     Pioneer operates in one industry segment, that being the production,
marketing and selling of chlor-alkali and related products. Pioneer operates in
one geographic area, North America.

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

     The accompanying consolidated financial statements have been prepared on
the going concern basis of accounting, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
Pioneer has experienced net losses each of the four years in the period ended
December 31, 2000. In December 2000, Pioneer delayed making payments on various
debt obligations due to insufficient liquidity. As a result, at December 31,
2000 Pioneer was not in compliance with the terms of certain of its debt
agreements and the maturity of the debt could be accelerated. Accordingly,
$597.7 million of debt outstanding under various agreements is classified as a
current liability on Pioneer's consolidated balance sheet. Pioneer is developing
a comprehensive financial restructuring program for which it will solicit the
consent of its lenders at the earliest practical time. The consolidated
financial statements do not include any adjustments that may result from the
resolution of these uncertainties.

     Pioneer has held discussions with an informal committee of holders of its
outstanding senior notes and term facilities and their advisers, and
representatives of its revolving credit lender about a financial restructuring
program. Negotiations and discussions with the lenders regarding a restructuring
agreement have recently begun. If a consensual agreement cannot be reached, the
proposed restructuring may occur under the supervision of a United States
Bankruptcy Court. While Pioneer believes that the discussions to-date have been
productive, there can be no assurance that an agreement on the proposed
restructuring can be timely completed.

     Accounting principles generally accepted in the United States of America
("GAAP") require that the amounts owed to Pioneer's creditors as of December 31,
2000 not be adjusted to reflect any proposed restructuring as Pioneer continues
to be bound by the provisions of the original credit agreements. If a
restructuring agreement is reached and implemented, the restructuring of debt
could give rise to a gain that will be reported as income in 2001 at the time of
plan implementation, in accordance with GAAP. The amount of such gain, if any,
cannot be determined until the restructuring plan is finalized.

     Pioneer's ability to meet its ongoing liquidity requirements is dependent
upon the successful completion of the financial restructuring described above,
its ability to generate sufficient cash flow to meet its obligations on a timely
basis and its ability to obtain other financing as may be required. While
Pioneer believes it may be able to complete a consensual restructuring during
2001, there can be no assurance that it will be successful in doing so. Pioneer
is reviewing with its financial and legal advisors the financial alternatives
available to Pioneer, including without limitation the debt restructuring
proposal described above and/or the filing of a petition under Chapter 11 of the
United States Bankruptcy Code.

                                        28
<PAGE>   31
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Cash and Cash Equivalents

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

  Inventories

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

  Property, Plant and Equipment

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

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

  Other Assets

     Other assets include amounts for deferred financing costs, which are being
amortized on a straight-line basis over the term of the related debt.
Amortization of such costs using the interest method would not result in
material differences in the amounts amortized during the periods presented.
Amortization expense for other assets for the years ended December 31, 2000,
1999, and 1998 was approximately $4.8 million, $7.7 million, and $4.4 million,
respectively.

  Excess Cost Over The Fair Value of Net Assets Acquired

     Excess cost over the fair value of net assets acquired ("goodwill") of
approximately $219.5 million is amortized on a straight-line basis over 25
years. The carrying value of goodwill is reviewed annually, and if this review
indicates that such excess cost will not be recoverable, as determined based on
the estimated future undiscounted cash flows of the entity acquired over the
remaining amortization period, Pioneer's carrying value of goodwill will be
reduced by the estimated deficit of discounted cash flows compared to the fair
value of the related entity. Amortization expense for excess cost over the fair
value of net assets acquired was approximately $9.0 million, $9.3 million and
$9.2 million for the years ended December 31, 2000, 1999, and 1998,
respectively.

  Environmental Expenditures

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

                                        29
<PAGE>   32
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Revenue Recognition

     Pioneer generates revenues through sales in the open market and long-term
supply contracts. Revenue is recognized when the products are shipped and
collection is reasonably assured. Pioneer classifies amounts billed to customers
for shipping and handling as revenues, with the related shipping and handling
costs included in cost of goods sold.

  Research and Development Expenditures

     Research and development expenditures are expensed as incurred. Such costs
totaled $1.4 million in 2000, $1.5 million in 1999, and $1.4 million in 1998.

  Per Share Information

     Per share information for all periods presented reflects 7% stock dividends
on the Class A and Class B Common Stock issued in December 1999 and December
1998.

  Preferred Stock

     Each share of preferred stock is convertible at the option of the
shareholder into 9.8 shares of the Company's Class A Common Stock (which
reflects adjustment for stock dividends subsequent to the issuance of the
preferred stock). In addition, the stock may be redeemed at varying premiums
either at the Company's option or upon the occurrence of certain designated
events. Because of the preferred stock's mandatory redemption characteristics,
the stock is excluded from stockholders' equity.

  Foreign Currency Translation

     Following SFAS No. 52, "Foreign Currency Translation," the functional
accounting currency for Canadian operations is the U.S. dollar; accordingly,
gains and losses resulting from balance sheet translations are included in the
consolidated statement of operations.

  Reclassifications

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

     The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from the
estimates and judgments made in preparing these financial statements, which
include assumptions made concerning the amounts owed to creditors and realizable
values of assets. Management has reviewed Pioneer's long-lived assets and
intangibles such as goodwill, to assess whether the events and changes in
circumstances described in Note 1 indicate that the carrying amount of the asset
may not be recoverable. In making these estimates, management has utilized the
assessments, calculations, and determinations made in preparing analyses
utilized in discussions with creditors, including estimates of overall
enterprise value.

3. DIVESTITURES

     In March 2000 Pioneer sold its coagulant business at Antioch, California,
and recorded a $0.9 million loss on the sale.

     On August 21, 2000, Pioneer sold its remaining coagulant business and
transferred to the buyer fixed assets, including plants in Spokane, Washington,
and Savannah, Georgia, certain technology-related assets
                                        30
<PAGE>   33
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and liabilities associated with the Spokane operations, and all assets and
liabilities of the Savannah operations, including $1.9 million of cash and notes
payable of $8.0 million. Pioneer received cash of $0.9 million as payment for
Spokane. This transaction did not have a material impact on Pioneer's financial
statements.

4. CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          2000      1999       1998
                                                         -------   -------   --------
<S>                                                      <C>       <C>       <C>
Accounts receivable....................................  $   844   $(2,800)  $ 21,418
Inventories............................................   (2,019)    3,487     (3,139)
Prepaid expenses.......................................    1,054       826     (1,590)
Other assets...........................................    5,145    (1,333)    (4,202)
Accounts payable.......................................   16,188    (2,709)   (14,604)
Accrued liabilities....................................   12,934       189      1,707
Other long-term liabilities............................   (4,406)   (5,229)        52
Accrued pension and other employee benefits............   (1,009)    1,549      3,489
                                                         -------   -------   --------
Net change in operating accounts.......................  $28,731   $(6,020)  $  3,131
                                                         =======   =======   ========
</TABLE>

     Following is supplemental cash flow information:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                           2000      1999      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Cash payments for:
  Interest..............................................  $46,613   $52,652   $50,651
  Income taxes..........................................  $    11   $   126   $   159
</TABLE>

5. INVENTORIES

     Inventories consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Raw materials, supplies and parts...........................  $14,329   $16,822
Finished goods and work-in-process..........................    9,391     5,350
Inventories under exchange agreements.......................    1,347       958
                                                              -------   -------
                                                              $25,067   $23,130
                                                              =======   =======
</TABLE>

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

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

     Pioneer's interests in BMI and LandWell, together with certain other
California and Louisiana real estate interests, constituted assets that were
held for the economic benefit of the previous owners of PAI. Dividends and
distributions received by Pioneer on account of such interests were deposited in
a separate cash account

                                        31
<PAGE>   34
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(the "Contingent Payment Account"), the balance of which was to be applied in
satisfaction of certain obligations of such previous owners under environmental
indemnity obligations in favor of Pioneer, provided that any amounts not so
applied prior to April 20, 2015 were to be remitted to such persons.

     Pioneer's investment in BMI, LandWell and the California and Nevada real
estate interests, following the equity method, was $18.0 million at December 31,
1999, and the balance in the Contingent Payment Account was $6.7 million on that
date. Within Pioneer's balance sheet as of December 31, 1999, those assets were
offset by liabilities of the same amount because the right of setoff existed, as
Pioneer and the previous owners owed determinable amounts, Pioneer had the right
to set off the amount owed by the previous owners, Pioneer intended to set off
the amount and the setoff was enforceable by law.

     Effective in June 2000 Pioneer and the previous owners effected an
agreement pursuant to which Pioneer agreed to transfer to the previous owners
the record title to the interests in BMI, LandWell and the California and
Louisiana real estate interests, as well as $800,000 of the cash balance in the
Contingent Payment Account. The remaining $5.3 million balance in the Contingent
Payment Account, which was determined as an amount adequate to pay for future
environmental remediation costs that would be subject to the indemnity
obligations of the previous owners, was retained by Pioneer, in exchange for the
release of the indemnity obligations. This transaction resulted in a gain of
$1.8 million.

7. OTHER ASSETS

     Other assets consist of the following at December 31:

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Debt financing assets and organizational cost assets, net of
  accumulated amortization of $7,598 in 2000 and $5,311 in
  1999......................................................  $14,646   $18,150
Deferred tax asset, net of valuation allowance..............    2,833    39,821
Patents, trademarks and other intangibles, net of
  accumulated amortization of $4,406 in 2000 and $6,741 in
  1999......................................................    3,607     8,518
Indemnification of environmental reserve....................    2,367     7,777
Other.......................................................    1,967     2,042
                                                              -------   -------
          Other assets, net.................................  $25,420   $76,308
                                                              =======   =======
</TABLE>

8. ACCRUED LIABILITIES

     Accrued liabilities consist of the following at December 31:

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Payroll, benefits and pension...............................  $ 6,234   $ 6,300
Interest and bank fees......................................   16,760     6,671
Other accrued liabilities...................................   21,088    21,546
                                                              -------   -------
          Accrued liabilities...............................  $44,082   $34,517
                                                              =======   =======
</TABLE>

9. EMPLOYEE BENEFITS

  Pension Plans

     Pioneer sponsors various non-contributory, defined benefit plans covering
substantially all union and non-union employees of PAI and PCI Canada. Pension
plan benefits are based primarily on participants' compensation and years of
credited service. Annual pension costs and liabilities for Pioneer under its
defined benefit plans are determined by actuaries using various methods and
assumptions. Pioneer has agreed to contribute such amounts as are necessary to
provide assets sufficient to meet the benefits to be paid to its

                                        32
<PAGE>   35
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees. Pioneer's present intent is to make annual contributions, which are
actuarially computed, in amounts not more than the maximum nor less than the
minimum allowable under the Internal Revenue Code. Plan assets at December 31,
2000 and 1999 consist primarily of fixed income investments and equity
investments.

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

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Change in benefit obligation:
  Projected benefit obligation, beginning of year...........  $56,966   $55,011
  Service cost..............................................    2,766     3,042
  Interest cost.............................................    4,187     3,850
  Actuarial gains...........................................     (270)   (3,573)
  Benefits paid.............................................   (1,491)   (1,379)
  Plan amendments...........................................      928        15
                                                              -------   -------
  Projected benefit obligation, end of year.................  $63,086   $56,966
                                                              =======   =======
Change in plan assets:
  Market value of assets, beginning of year.................  $49,591   $42,643
  Actual return on plan assets..............................    2,465     5,755
  Employer contributions....................................    3,412     2,600
  Benefits paid.............................................   (1,518)   (1,407)
                                                              -------   -------
  Market value of assets, end of year.......................  $53,950   $49,591
                                                              =======   =======
Development of net amount recognized:
  Funded status.............................................  $(9,157)  $(7,375)
  Actuarial gain............................................     (428)   (1,829)
  Unrecognized prior service cost...........................    1,467       666
                                                              -------   -------
  Net amount recognized.....................................  $(8,118)  $(8,538)
                                                              =======   =======
Amounts recognized in the Consolidated Balance Sheets:
  Accrued pension cost......................................  $(8,194)  $(8,538)
  Accumulated other comprehensive income....................       76        --
                                                              -------   -------
  Net amount recognized.....................................  $(8,118)  $(8,538)
                                                              =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                                               2000      1999      1998
                                                              -------   -------   -------
<S>                                                           <C>       <C>       <C>
Components of net periodic benefit cost:
  Service cost..............................................  $ 2,766   $ 3,042   $ 2,278
  Interest cost.............................................    4,187     3,850     3,232
  Expected return on plan assets............................   (4,109)   (3,311)   (3,020)
  Amortization of prior service cost........................      126       127        49
                                                              -------   -------   -------
  Net period benefit cost...................................  $ 2,970   $ 3,708   $ 2,539
                                                              =======   =======   =======
Weighted-average assumptions as of December 31:
  Discount rate.............................................      7.5%      7.4%      6.8%
  Expected return on plan assets............................      8.0%      8.0%      8.0%
  Rate of compensation increase.............................      4.4%      4.0%      4.0%
</TABLE>

                                        33
<PAGE>   36
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Defined Contribution Plans

     Pioneer offers defined contribution plans under which employees may
generally contribute from 1% to 15% of their compensation. Pioneer also
contributes funds to the plans in the amount of 50% of employee contributions up
to 4% to 6% of employee compensation, depending on the plan. Aggregate expense
of Pioneer with respect to such plans was $1.2 million, $1.5 million, and $0.7
million in 2000, 1999, and 1998, respectively.

  Post-Retirement Benefits Other Than Pensions

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

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

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Change in benefit obligation:
  Accumulated post-retirement benefit obligation, beginning
     of year................................................  $ 6,151   $28,396
  Service cost..............................................      122        99
  Interest cost.............................................      579       499
  Actuarial gain............................................      (39)   (1,644)
  Benefits paid.............................................     (260)     (325)
  Plan curtailment..........................................       --   (20,874)
                                                              -------   -------
  Accumulated post-retirement benefit obligation, end of
     year...................................................  $ 6,553   $ 6,151
                                                              =======   =======
  Funded status.............................................  $(6,553)  $(6,151)
  Unrecognized net loss.....................................       68       146
                                                              -------   -------
  Accrued benefit cost......................................  $(6,485)  $(6,005)
                                                              =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                                              2000   1999    1998
                                                              ----   ----   ------
<S>                                                           <C>    <C>    <C>
Components of net periodic benefit cost:
  Service cost..............................................  $122   $ 99   $  535
  Interest cost.............................................   579    499      776
  Amortization of net loss..................................    37      4      283
                                                              ----   ----   ------
  Net period benefit cost...................................  $738   $602   $1,594
                                                              ====   ====   ======
Weighted-average assumptions as of December 31:
  Discount rate.............................................   7.6%   8.0%     6.8%
</TABLE>

                                        34
<PAGE>   37
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The weighted-average annual assumed health care trend rate is assumed to be
9% for 2000. The rate is assumed to decrease gradually to 4.5% in 2013 and
remain level thereafter. Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A one-percentage-point
change in assumed health care trend rates would have the following effects:

<TABLE>
<CAPTION>
                                                             1-PERCENTAGE     1-PERCENTAGE
                                                            POINT INCREASE   POINT DECREASE
                                                            --------------   --------------
<S>                                                         <C>              <C>
Effect on total of service and interest cost components...      $  119          $  (101)
Effect on post-retirement benefit obligation..............       1,291           (1,134)
</TABLE>

  Stock Based Compensation

     Pioneer has two stock option plans which provide for the issuance of
options to key employees. The plans authorized the issuance of options to
purchase up to a total of 2.3 million shares of common stock, with vesting
periods of up to three years and maximum option terms of ten years. As of
December 31, 2000, options to purchase approximately 0.8 million shares were
available for issuance. In addition, options for the purchase of 0.3 million
shares have been issued outside the scope of the stock option plans.

     The following table summarizes the transactions with respect to the stock
options for the three year period ended December 31, 2000:

<TABLE>
<CAPTION>
                                                                WEIGHTED AVERAGE
                                   NUMBER OF   EXERCISE PRICE    EXERCISE PRICE      OPTIONS
                                    SHARES       PER SHARE         PER SHARE       EXERCISABLE
                                   ---------   --------------   ----------------   -----------
<S>                                <C>         <C>              <C>                <C>
Outstanding at January 1, 1998...    1,338      $4.07-$11.12         $4.79              --
1998:
  Granted........................      179      $4.89-$7.86          $7.35
  Exercised......................      (47)     $4.95-$4.95          $4.95
  Forfeited......................       (1)     $4.95-$4.95          $4.95
                                     -----
Outstanding at December 31,
  1998...........................    1,469      $4.08-$11.12         $5.10             338
1999:
  Granted........................      176      $4.09-$6.53          $4.79
  Exercised......................       --           --                 --
  Forfeited......................     (101)     $4.69-$4.95          $4.90
                                     -----
Outstanding at December 31,
  1999...........................    1,544      $4.08-$11.12         $5.08             520
2000:
  Granted........................      102         $5.45             $5.45
  Exercised......................       (3)        $4.95             $4.95
  Forfeited......................     (204)      $4.09-7.86          $5.01
                                     -----
Outstanding at December 31,
  2000...........................    1,439      $4.08-$11.12         $5.11             773
</TABLE>

                                        35
<PAGE>   38
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes information about stock options outstanding
at December 31, 2000:

<TABLE>
<CAPTION>
                                                 OPTIONS OUTSTANDING
                                        -------------------------------------     OPTIONS EXERCISABLE
                                                        WEIGHTED-               -----------------------
                                                         AVERAGE     WEIGHTED   EXERCISABLE    WEIGHTED
                                           AS OF        REMAINING    AVERAGE       AS OF       AVERAGE
                                        DECEMBER 31,   CONTRACTUAL   EXERCISE   DECEMBER 31,   EXERCISE
RANGE OF EXERCISE PRICES                    2000          LIFE        PRICE         2000        PRICE
------------------------                ------------   -----------   --------   ------------   --------
<S>                                     <C>            <C>           <C>        <C>            <C>
$4.00-$5.00...........................     1,075        5.5 years     $ 4.44        723         $ 4.53
$5.01-$6.00...........................       152        8.4 years     $ 5.51         26         $ 5.57
$6.01-$7.00...........................        31        8.0 years     $ 6.53          6         $ 6.53
$7.01-$8.00...........................       141        7.4 years     $ 7.86         --         $   --
$11.00-$12.00.........................        40        4.3 years     $11.11         18         $11.12
                                           -----                      ------        ---
          Total.......................     1,439        6.0 years     $ 5.11        773         $ 4.73
                                           =====                      ======        ===
</TABLE>

     All stock options are granted at fair market value of the common stock at
the grant date. The fair value of the stock options granted during 2000, 1999,
and 1998, was $0.4 million, $0.6 million, and $0.8 million, respectively. The
fair value of each stock option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for the grants: risk free interest rate of 5.2% in 2000, 4.5%
in 1999, and 4.5% in 1998; expected dividend yield of 0.0%; expected life of six
years. Expected volatility was 95% in 2000, 95% in 1999, and 95% in 1998.

     Pioneer accounts for the stock option plans in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation expense has been
recognized for stock option awards. Had compensation expense for the plans been
determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," Pioneer's pro forma net income and earnings per share for the
three years ended December 31, 2000 would have been as indicated below:

<TABLE>
<CAPTION>
                                                        2000        1999       1998
                                                      ---------   --------   --------
<S>                                                   <C>         <C>        <C>
Net loss:
  As reported.......................................  $(105,563)  $(50,384)  $(13,017)
  Pro forma.........................................   (105,935)   (50,796)   (13,591)
Loss per share -- basic and diluted As reported.....  $   (9.15)  $  (4.38)  $  (1.14)
  Pro forma.........................................      (9.18)     (4.41)     (1.19)
</TABLE>

                                        36
<PAGE>   39
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Revolving credit facility; variable interest rates based on
  U.S. prime rate plus  1/2% and Canadian prime rate plus
  1 1/4%....................................................  $  27,581   $ 21,163
9 1/4% Senior Secured Notes, due June 15, 2007..............    200,000    200,000
9 1/4% Senior Secured Notes, due October 15, 2007...........    175,000    175,000
June 1997 term facility, due in quarterly installments of
  $250 with the balance due 2006; variable interest rate
  based on LIBOR or base rate...............................     96,750     97,500
November 1997 term facility, due in quarterly installments
  of $250 with the balance due 2006; variable interest rate
  based on LIBOR or base rate...............................     80,000     80,750
Promissory note, interest at 8% per annum and payable
  quarterly, due April 20, 2005.............................     11,463     11,463
Promissory note to Kemira Kemi AB, principal payments due in
  four equal installments on March 31, 2000, 2001 and 2002
  and December 31, 2002, with a variable interest rate based
  on LIBOR plus 1.2%........................................         --      8,016
Other notes, maturing in various years through 2014, with
  various installments, at various interest rates...........     11,007     11,457
                                                              ---------   --------
          Total.............................................    601,801    605,349
Current maturities of long-term debt........................   (597,715)   (10,626)
                                                              ---------   --------
          Long-term debt, less current maturities...........  $   4,086   $594,723
                                                              =========   ========
</TABLE>

     Contractual long-term debt maturities (which include $0.5 million in 2001
of principal payments due in 2000 on the term loans that were not made) are as
follows: $10.5 million in 2001; $32.5 million in 2002; $5.0 million in 2003;
$5.0 million in 2004; $5.0 million in 2005; and $543.8 million thereafter.

     As part of the acquisition of the Tacoma plant in June 1997, Pioneer issued
and sold $200 million of 9 1/4% Senior Secured Notes due June 15, 2007. Interest
is payable semi-annually on June 15 and December 15. Effective December 15,
2000, Pioneer suspended payments of interest on the notes which, after a 30 day
grace period, created a default under the indenture. Accordingly, the amount of
the notes outstanding has been classified as a current liability at December 31,
2000.

     As part of the acquisition of the Tacoma plant in June 1997, Pioneer also
entered into a nine and one-half year $100 million term facility, due in
quarterly installments of $250,000 with the balance due in 2006. Pioneer did not
make a principal payment that was due on December 28, 2000, which created an
event of default under the terms of the facility. Accordingly, the default
interest rate is in effect and the amount outstanding under the facility has
been classified as a current liability at December 31, 2000.

     As part of the acquisition of the PCI Canada assets in November 1997,
Pioneer issued and sold $175 million of 9 1/4% Senior Secured Notes due October
15, 2007. Interest is payable semi-annually on April 15 and October 15. When
Pioneer defaulted on the $200 million 9 1/4 % Senior Secured Notes due June 15,
2007, it constituted an event of default under the indenture for the $175
million 9 1/4% Senior Secured Notes due October 15, 2007. Accordingly, the
amount of the notes outstanding has been classified as a current liability at
December 31, 2000.

     As part of the acquisition of the PCI Canada assets in November 1997,
Pioneer also entered into a nine and one-quarter year $83 million term facility,
due in quarterly installments of $250,000 with the balance due

                                        37
<PAGE>   40
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in 2006. Pioneer did not make a principal payment that was due on December 28,
2000, which created an event of default under the terms of the facility.
Accordingly, the default interest rate is in effect and the amount of
outstanding under the facility has been classified as a current liability at
December 31, 2000.

     In September 1999, PCA entered into a $50.0 million three-year revolving
credit facility with Congress Financial Corporation (Southwest) (the "Revolving
Facility") that replaced an existing $50.0 million revolving facility (the "Bank
Credit Facility"). The Revolving Facility provides for revolving loans in an
aggregate amount up to $50.0 million, subject to borrowing base limitations
related to the level of accounts receivable and inventory, which, together with
certain other collateral, secure borrowings under the facility. The total
borrowing base at December 31, 2000 of $45.8 million was subject to a reserve of
$5.0 million until the ratio of EBITDA to fixed charges, as defined in the
Revolving Facility, exceeds 1.15:1 for a period of two consecutive quarters. As
of December 31, 2000, there were letters of credit outstanding of $3.5 million
and loans outstanding of $27.6 million. Based on the cross default provisions
contained in the Revolving Facility agreement, the facility is currently in
default, may be subject to the default rate of interest and is classified as a
current liability at December 31, 2000.

     The Senior Secured Notes due June 15, 2007, and the Senior Secured Notes
due October 15, 2007, are senior obligations of Pioneer, ranking pari passu with
all existing and future senior indebtedness of Pioneer. These notes and both
term facilities are fully and unconditionally guaranteed on a joint and several
basis by all of PCA's direct and indirect wholly-owned subsidiaries and are
secured by first mortgage liens on certain manufacturing facilities. Following
is a summary of selected financial information as of December 31, 2000 and 1999
for the direct and indirect subsidiaries which, as of December 31, 2000, were
not guarantors of the senior notes and term facilities.

<TABLE>
<CAPTION>
                                                               2000      1999
                                                              -------   -------
<S>                                                           <C>       <C>
Balance sheet data:
  Current assets............................................  $   272   $ 1,148
  Non-current assets........................................       --     7,628
  Current liabilities.......................................       --    13,224
  Non-current liabilities...................................    2,337     9,959
Operating statement data:
  Revenues..................................................    6,329    12,330
  Gross margin..............................................    1,116       602
  Net income (loss).........................................   17,016    (2,596)
</TABLE>

     The Company is a holding company with no operating assets or operations.
Financial statements of the Company's direct and indirect wholly-owned
subsidiaries are not separately included herein because Pioneer's management
does not believe this information would be material to investors or lenders.

     The senior notes are redeemable at a premium at Pioneer's option starting
in 2002. Upon change of control, as defined in the agreement, Pioneer is
required to offer to purchase all the senior notes for 101% of the principal
due.

     Pioneer may prepay the June 1997 term facility and the November 1997 term
facility without penalty or premium.

     Pioneer's long-term debt agreements contain various restrictions which,
among other things, limit the ability of Pioneer to incur additional
indebtedness and to acquire or dispose of assets or operations.

     PCA is restricted in paying dividends to the Company and providing cash to
the unrestricted subsidiaries, as defined, to the sum of $5.0 million plus 50%
of the cumulative consolidated net income of PCA since June 1997. As of December
31, 2000, no additional distributions were allowable under the debt covenants.
PCA's ability to incur additional new indebtedness is restricted by a covenant
requiring an interest coverage ratio of at

                                        38
<PAGE>   41
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

least 2.0 to 1.0 for the prior four fiscal quarters. As of December 31, 2000,
PCA did not meet this requirement and accordingly, additional new indebtedness,
other than borrowing available under the Revolving Facility, is not allowed.

11. FINANCIAL INSTRUMENTS

  Concentration of Credit Risk

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

     Pioneer maintains cash deposits with major banks, which may exceed
federally insured limits. Pioneer periodically assesses the financial condition
of the institutions and believes that any risk of loss is minimal.

  Investments

     It is the policy of Pioneer to invest its excess cash in securities whose
value is not subject to market fluctuations such as master notes of issuers
rated at the time of such investment at least "A-2" or the equivalent thereof by
S&P or at least "P-2" or the equivalent thereof by Moody's or any bank or
financial institution party to the Revolving Facility.

  Fair Value of Financial Instruments

     In preparing disclosures about the fair value of financial instruments,
Pioneer has assumed that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings, accounts payable and
certain accrued expenses because of the short maturities of those instruments.
The fair values of debt instruments are estimated based upon quoted market
values (if applicable), or based on debt with similar terms and remaining
maturities. Considerable judgment is required in developing these estimates and,
accordingly, no assurance can be given that the estimated values presented
herein are indicative of the amounts that would be realized in a free market
exchange. Pioneer held no derivative financial instruments as of December 31,
2000 and 1999.

     At December 31, 2000, the fair market value of all of Pioneer's financial
instruments approximated the book value with the exceptions of the 9 1/4% Senior
Notes due June 15, 2007 and the 9 1/4% Senior Notes due October 15, 2007, which
had a book value of $200.0 million and $175.0 million, respectively and a fair
value, based upon quoted market prices, of $36.0 million and $40.3 million,
respectively.

                                        39
<PAGE>   42
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. GEOGRAPHIC INFORMATION

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

<TABLE>
<CAPTION>
                                                         2000       1999       1998
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
REVENUES
United States........................................  $249,377   $207,754   $291,460
Canada...............................................    90,387     84,274     87,614
Other................................................     1,717      4,614      5,614
                                                       --------   --------   --------
Consolidated.........................................  $341,481   $296,642   $384,688
                                                       ========   ========   ========
LONG-LIVED ASSETS
United States........................................  $356,357   $345,573   $399,219
Canada...............................................   146,174    186,514    175,655
</TABLE>

     No individual customer constituted 10% or more of the total revenues in
1998, 1999 or 2000.

13. UNUSUAL CHARGES

     During 1998, Pioneer disposed of its pool chemicals business. This disposal
included the sale of certain packaging and transportation equipment for bottled
bleach and hydrochloric acid. Pioneer recognized a $1.8 million loss from the
disposal of assets plus an unusual charge of approximately $1.0 million related
to closing Pioneer's facility at City of Industry, California. Unusual charges
in 1998 also include approximately $0.7 million related to the consolidation and
downsizing of certain administrative functions. Substantially all accrued
unusual charges were expended by December 31, 1998.

14. INTEREST EXPENSE, NET

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

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                           2000      1999      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Interest expense........................................  $56,702   $52,969   $52,006
Interest income.........................................     (374)   (1,042)   (1,485)
                                                          -------   -------   -------
Interest expense, net...................................  $56,328   $51,927   $50,521
                                                          =======   =======   =======
</TABLE>

     Capitalized interest was $0.3 million in 1999. No interest was capitalized
in 2000 or in 1998.

15. COMMITMENTS AND CONTINGENCIES

  Letters of Credit

     At December 31, 2000, Pioneer had letters of credit and performance bonds
outstanding of approximately $3.5 million and $1.8 million, respectively. These
letters of credit and performance bonds were issued for the benefit of customers
under sales agreements securing delivery of products sold and state
environmental agencies as required for manufacturers in the state. The letters
of credit expire at various dates in 2001. No amounts were drawn on the letters
of credit at December 31, 2000.

                                        40
<PAGE>   43
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Purchase Commitments

     Pioneer has various purchase commitments related to its operations. Pioneer
has committed to purchase salt used in its production processes under contracts
which continue through the year 2004 with rates similar to prevailing market
rates. Pioneer also has various commitments related to the purchase of
electricity, which continue through the year 2008 at rates similar to prevailing
market rates. Required purchase quantities of commitments in excess of one year
at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              SALT-TONS   ELECTRICITY-MWH
                                                              ---------   ---------------
<S>                                                           <C>         <C>
2001........................................................    1,414          333,540
2002........................................................      612          395,940
2003........................................................      447          395,940
2004........................................................       67          395,940
2005........................................................       --          395,940
Thereafter..................................................       --        1,111,840
                                                                -----        ---------
          Total commitment quantities.......................    2,540        3,029,140
                                                                =====        =========
</TABLE>

     During the years ended December 31, 2000, 1999, and 1998, all required
purchase quantities under the above commitments were consumed during normal
operations.

  Operating Leases

     Pioneer leases certain manufacturing and distribution facilities, computer
equipment, and administrative offices under non-cancelable leases. Minimum
future rental payments on such leases with terms in excess of one year in effect
at December 31, 2000 are as follows:

<TABLE>
<S>                                                          <C>
2001......................................................   $12,905
2002......................................................     8,992
2003......................................................     6,379
2004......................................................     3,985
2005......................................................     1,708
Thereafter................................................       967
                                                             -------
          Total minimum obligations.......................   $34,936
                                                             =======
</TABLE>

     Lease expense charged to operations for the years ended December 31, 2000,
1999, and 1998 was approximately $20.2 million, $17.7 million, and $19.2
million, respectively.

  Litigation

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

16. INCOME TAXES

     For financial reporting purposes, deferred income taxes are determined
utilizing an asset and liability approach. This method gives consideration to
the future tax consequences associated with differences between the financial
accounting basis and tax basis of the assets and liabilities, and the ultimate
realization of any deferred tax asset resulting from such differences. Pioneer
considers all foreign earnings as being permanently invested in that country.
                                        41
<PAGE>   44
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
                                                         2000       1999       1998
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Income (loss) before income taxes:
  U.S. ..............................................  $(57,932)  $(55,924)  $(27,267)
  Foreign............................................    (6,600)   (20,674)     9,573
                                                       --------   --------   --------
          Total......................................  $(64,532)  $(76,598)  $(17,694)
                                                       ========   ========   ========
Deferred income tax provision (benefit):
  U.S. ..............................................  $ 42,353   $(18,010)  $ (8,562)
  Foreign............................................    (2,686)    (6,973)     4,375
  State..............................................     1,364     (1,231)      (490)
                                                       --------   --------   --------
          Total deferred.............................    41,031    (26,214)    (4,677)
                                                       --------   --------   --------
          Total income tax...........................  $ 41,031   $(26,214)  $ (4,677)
                                                       ========   ========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax liabilities:
  Property, plant and equipment.............................  $(33,092)  $(32,987)
                                                              --------   --------
          Total deferred tax liabilities....................   (33,092)   (32,987)
                                                              --------   --------
Deferred tax assets:
  Post employment benefits..................................     5,532      3,972
  Environmental reserve.....................................     3,178      4,656
  Equity in partnership.....................................     4,082      4,082
  Tax credit carryovers.....................................     3,037      1,956
  Other deferred assets.....................................       711        890
  Net operating loss carryforward...........................    89,017     61,070
                                                              --------   --------
          Total deferred tax assets.........................   105,557     76,626
Valuation allowance for deferred tax assets.................   (67,835)        --
                                                              --------   --------
     Net deferred tax assets................................    37,722     76,626
                                                              --------   --------
     Net deferred taxes.....................................  $  4,630   $ 43,639
                                                              ========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                       2000                 1999                1998
                                ------------------   ------------------   -----------------
                                 AMOUNT    PERCENT    AMOUNT    PERCENT   AMOUNT    PERCENT
                                --------   -------   --------   -------   -------   -------
<S>                             <C>        <C>       <C>        <C>       <C>       <C>
Tax at U.S. statutory rates...  $(22,586)    (35)%   $(26,809)    (35)%   $(6,193)    (35)%
State and foreign income
  taxes, net of federal tax
  benefit.....................    (6,068)     (9)      (1,186)     (1)       (142)     (1)
Amortization of non-deductible
  Goodwill....................     1,850       3        1,781       2       1,658       9
Valuation allowance...........    67,835     105           --      --          --      --
                                --------     ---     --------     ---     -------     ---
                                $ 41,031      64%    $(26,214)    (34)%   $(4,677)    (27)%
                                ========     ===     ========     ===     =======     ===
</TABLE>

                                        42
<PAGE>   45
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 2000, Pioneer had available U.S. net operating loss
carryforward ("NOL") of approximately $224 million which expires in 2009 through
2020 and $20 million of foreign NOL expiring in 2004 through 2008. The NOLs are
available for offset against future taxable income generated during the
carryforward period. In assessing the value of the deferred tax assets,
management considers whether it is more likely than not that all of the deferred
tax assets will be realized. Projected future income tax planning strategies and
the expected reversal of deferred tax liabilities are considered in making this
assessment. In 2000, based on the uncertainties as to the effect of the
financial restructuring on the NOLs and the level of historical taxable income
and projections for future taxable income over the periods in which the NOLs are
available for use, it was estimated that it is more likely than not that Pioneer
will not realize the full benefits of deferred tax assets. Accordingly, a
valuation allowance of $67.8 million has been recorded as of December 31, 2000.

17. OTHER LONG-TERM LIABILITIES -- ENVIRONMENTAL

     Pioneer's operations are subject to extensive environmental laws and
regulations related to protection of the environment, including those applicable
to waste management, discharge of materials into the air and water, clean-up
liability from historical waste disposal practices, and employee health and
safety. At several of Pioneer's facilities, investigations or remediation is
underway and at some of these locations regulatory agencies are considering
whether additional actions are necessary to protect or remediate surface or
groundwater resources. Pioneer could be required to incur additional costs to
construct and operate remediation systems in the future. In addition, at several
of its facilities Pioneer is in the process of replacing or closing ponds for
the collection of wastewater. Pioneer plans to spend approximately $1.5 million
during the next three years on improvements to discontinue the use of three
chlor-alkali waste water disposal ponds at the Henderson plant, replacing them
with systems to recycle wastewater. Pioneer believes that it is in substantial
compliance with existing government regulations.

     Pioneer's Henderson plant is located within what is known as the "Basic
Complex." Soil and groundwater contamination have been identified within and
adjoining the Basic Complex, including land owned by Pioneer. A groundwater
treatment system was installed at the facility in 1983 and, pursuant to a
Consent Agreement with the Nevada Division of Environmental Protection, studies
are being conducted to further evaluate soil and groundwater contamination at
the facility and other properties within the Basic Complex and to determine
whether additional remediation will be necessary with respect to Pioneer's
property.

     In connection with the October 1988 acquisition of the chlor-alkali
business by PCA's predecessor (the "Predecessor Company"), ICI Delaware
Holdings, Inc. and ICI Americas, Inc. (such companies or their successors, the
"ZENECA Companies") agreed to indemnify the Predecessor Company for certain
environmental liabilities (the "ZENECA Indemnity"), including liabilities
associated with operations at Pioneer's plant located in Henderson, Nevada (the
"Henderson Plant"). In general, the ZENECA Companies agreed to indemnify the
Predecessor Company for environmental costs which arise from or relate to
pre-acquisition actions which involved disposal, discharge, or release of
materials resulting from non-chlor-alkali manufacturing operations at the
Henderson Plant and at other properties within the same industrial complex.
Payments under the indemnity cannot exceed approximately $65 million.

     Due to the change in ownership resulting from the acquisition of the
Predecessor Company by PCA (the "Pioneer Acquisition"), the ZENECA Indemnity
terminated on April 20, 1999. The ZENECA Indemnity continues to cover those
claims as to which proper notice was given to the ZENECA Companies and certain
other conditions had been satisfied. Management believes that proper notice was
provided to the ZENECA Companies with respect to outstanding claims under the
ZENECA Indemnity, but the amount of such claims has not yet been determined
given the ongoing nature of the environmental work at Henderson. Pioneer
believes that the ZENECA Companies will continue to honor their obligations
under the ZENECA Indemnity for claims properly presented by Pioneer. It is
possible, however, that disputes could arise between

                                        43
<PAGE>   46
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the parties and that Pioneer would have to subject its claims for clean-up
expenses, which could be substantial, to the contractually established
arbitration process. In the opinion of management, any environmental liability
in excess of the amount indemnified and accrued on the consolidated balance
sheet would not have a material adverse affect on the consolidated financial
statements.

     In the agreement relating to the Pioneer Acquisition, the sellers agreed to
indemnify Pioneer for certain environmental liabilities that result from certain
discharges of hazardous materials, or violations of environmental laws, arising
prior to April 20, 1995 (the "Closing Date") from or relating to the PCA plant
sites or arising before or after the Closing Date with respect to certain
environmental liabilities relating to assets held by Pioneer for the benefit of
the sellers (the "Sellers' Indemnity"). Amounts payable pursuant to the Sellers'
Indemnity were generally payable as follows: (i) out of certain reserves
established on the Predecessor Company's balance sheet at December 31, 1994;
(ii) either by offset against the amounts payable under the notes issued to the
sellers or from deposit account balances held by Pioneer (see Note 6); and (iii)
in certain circumstances and subject to specified limitations, out of the
personal assets of the sellers. Pioneer was required to reimburse the sellers
for amounts paid under the Sellers' Indemnity with amounts recovered under the
ZENECA Indemnity or from other third parties.

     In 1999 disputes arose between the Company and the Sellers as to the proper
scope of the indemnity. During June 2000, the Company and the sellers effected
an agreement pursuant to which the Company, in exchange for cash and other
consideration, relieved the sellers from their environmental indemnity
obligations and agreed to transfer to the Sellers the record title to the
Contingent Payment Properties and the $800,000 remaining cash balance in the
Contingent Payment Account that was determined to be in excess of anticipated
environmental liability. The cash balance in the Contingent Payment Account at
the time of this transaction was $6.1 million. This cash balance was not
previously reflected on the Company's balance sheet since a right of setoff
existed. This transaction resulted in a gain of $1.8 million.

     Remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are based upon management's best estimate of
the ultimate cost and are recorded even if significant uncertainties exist over
the ultimate cost of the remediation. Ongoing environmental compliance cost,
including maintenance and monitoring costs, are charged to operations as
incurred. The liabilities are based upon all available facts, existing
technology, past experience and cost-sharing arrangements, including the
viability of other parties. Charges made against income for recurring
environmental matters, included in "cost of sales" on the statements of
operations, totaled approximately $2.7 million, $2.8 million and $3.4 million
for the years ended December 31, 2000, 1999, and 1998, respectively. Capital
expenditures for environmental-related matters at existing facilities
approximated $1.8 million, $1.2 million and $2.5 million for the years ended
December 31, 2000, 1999, and 1998, respectively. Future environmental-related
capital expenditures will depend upon regulatory requirements, as well as timing
related to obtaining necessary permits and approvals.

     Estimates of future environmental restoration and remediation costs are
inherently imprecise due to currently unknown factors such as the magnitude of
possible contamination, the timing and extent of such restoration and
remediation, the extent to which such costs are recoverable from third parties,
and the extent to which environmental laws and regulations may change in the
future. The Predecessor Company established a reserve at the time of its
acquisition of the Henderson, Nevada and St. Gabriel, Louisiana facilities with
respect to potential remediation costs relating to matters not covered by the
ZENECA Indemnity, consisting primarily of remediation costs that may be incurred
by Pioneer for chlor-alkali-related remediation of the Henderson and St. Gabriel
facilities. The recorded accrual included certain amounts related to anticipated
closure and post-closure actions that may be required in the event that
operation of the present chlor-alkali plants ceases. Such accrual, in the amount
of $5.9 million, is recorded in Pioneer's consolidated balance sheets at
December 31, 2000. However, complete analysis and study has not been completed,
and therefore, additional charges may be recorded in the event a decision for
closure is made.

                                        44
<PAGE>   47
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In 1994, the Predecessor Company recorded an additional $3.2 million
environmental reserve related to pre-closing actions at sites that are the
responsibility of the ZENECA Companies. In June 2000, based on the results of a
third party environmental analysis, the $3.2 million environmental reserve and
offsetting receivable discussed below were adjusted to the discounted future
cash flows for estimated environmental remediation, which was $2 million.
Reserves of $2 million and $3.2 million were recorded in Pioneer's consolidated
balance sheets at December 31, 2000 and 1999, respectively. Other assets include
an account receivable of the same amount from the ZENECA Companies. Pioneer
believes it will be reimbursed by the ZENECA Companies for substantially all of
such costs that are incurred at the Henderson Plant and other properties within
the same industrial complex. Additionally, certain other environmental matters
exist which have been assumed directly by the ZENECA Companies. No assurance can
be given that actual costs will not exceed accrued amounts. The imposition of
more stringent standards or requirements under environmental laws or
regulations, new developments or changes respecting site cleanup costs, or a
determination that Pioneer is potentially responsible for the release of
hazardous substances at other sites could result in expenditures in excess of
amounts currently estimated by Pioneer to be required for such matters. Further,
there can be no assurance that additional environmental matters will not arise
in the future.

18. RELATED PARTY TRANSACTIONS

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

<TABLE>
<CAPTION>
                                                               1999     1998
                                                              ------   ------
<S>                                                           <C>      <C>
Sales to Saguaro............................................  $  874   $  778
Purchases from Saguaro......................................   1,585    1,284
Partnership cash distribution from Saguaro (included in
  other income, net)........................................   1,020      975
</TABLE>

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

     Pioneer is a party to an agreement with BMI for the delivery of Pioneer's
water to the Henderson production facility. The agreement provides for the
delivery of a minimum of eight million gallons of water per day. The agreement
expires on December 31, 2014, unless terminated earlier in accordance with the
provisions of the agreement. In addition, BMI owns the power facilities which
transmit electricity to the Henderson facility. For the year ended December 31,
2000, 1999, and 1998, for its services BMI charged operating expenses to Pioneer
of approximately $1.5 million, $1.6 million, and $1.3 million, respectively.

     During 1999, Pioneer entered into arrangements with an affiliate of
Strategic Distribution, Inc. ("Strategic") pursuant to which Strategic's
affiliate provides procurement, handling and data management of maintenance,
repair and operating supplies at Pioneer's facilities in Henderson, Nevada and
St. Gabriel, Louisiana. William R. Berkley, Chairman of the Board of Pioneer,
owns approximately twenty-three percent of Strategic's common stock, and serves
as chairman of the board of directors of the company. Andrew R. Bursky, a
Pioneer director, is a director of Strategic, and Jack Nusbaum, a Pioneer
director, is also a director of Strategic. The Strategic affiliate was paid $4.0
million and $2.5 million for the years ended December 31, 2000 and 1999,
respectively, for services rendered to Pioneer under the agreement.

                                        45
<PAGE>   48
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. LOSS PER SHARE

     Per share information for all periods presented reflects 7% stock dividends
on the Class A and Class B Common Stock issued in 1999 and 1998. Computational
amounts for loss per share are as follows:

<TABLE>
<CAPTION>
                                                        2000        1999       1998
                                                      ---------   --------   --------
<S>                                                   <C>         <C>        <C>
Net loss............................................  $(105,563)  $(50,384)  $(13,017)
                                                      =========   ========   ========
Basic and Diluted Earnings Per Share:
  Weighted average number of common shares
     outstanding....................................     11,535     11,515     11,458
                                                      =========   ========   ========
  Loss per share....................................  $   (9.15)  $  (4.38)  $  (1.14)
                                                      =========   ========   ========
</TABLE>

20. RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The adoption of SFAS 133 effective
January 1, 2001 did not have a significant impact on the financial position,
results of operations, or cash flows of the Company.

21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIRST      SECOND     THIRD      FOURTH
                                             QUARTER    QUARTER    QUARTER    QUARTER
                                             --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>
Year ended December 31, 2000
  Revenues.................................  $ 84,304   $ 89,157   $ 87,363   $ 80,657
  Operating income (loss)..................      (807)       807     (6,243)    (5,270)
  Loss before income taxes.................   (14,171)    (8,692)   (21,203)   (20,466)
  Net loss.................................    (9,586)    (5,875)   (13,358)   (76,744)
  Per share data(1) --
     Basic and diluted net loss............  $  (0.83)  $  (0.51)  $  (1.16)  $  (6.65)
                                             ========   ========   ========   ========
Year ended December 31, 1999
  Revenues.................................  $ 70,949   $ 69,030   $ 74,872   $ 81,791
  Operating income (loss)..................     4,768    (14,622)   (12,599)   (16,394)
  Loss before income taxes.................    (8,553)   (27,247)   (23,201)   (17,597)
  Net loss.................................    (6,033)   (18,348)   (14,567)   (11,436)
  Per share data(1) --
     Basic and diluted net loss............  $  (0.52)  $  (1.59)  $  (1.26)  $  (0.99)
                                             ========   ========   ========   ========
</TABLE>

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

No cash dividends were declared or paid by the Company in 2000, 1999, or 1998.

(1) Per share information for all periods presented reflects 7% stock dividends
    on the Class A and Class B Common Stock in December 1999.

                                        46
<PAGE>   49
                            PIONEER COMPANIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

22. SUBSEQUENT EVENT

     In March 2001, Pioneer announced a fifty percent curtailment in the
capacity of the Tacoma plant due to an inability to obtain sufficient power at
reasonable prices. The primary cost related to the Tacoma curtailment is
severance expense, which management expects to be approximately $1.9 million.
Management has reviewed Tacoma's long-lived assets and goodwill to assess
whether the assets are impaired in accordance with SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Based on the results of this analysis, management believes that the Tacoma
long-lived assets and goodwill are not impaired.

                                        47
<PAGE>   50

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Pursuant to General Instruction G of Form 10-K, the information called for
by Item 10 of Part III of Form 10-K is incorporated by reference to the
information set forth in Pioneer's definitive proxy statement relating to the
2001 Annual Meeting of Stockholders of Pioneer (the "2001 Proxy Statement") to
be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), in response to Items 401 and 405 of Regulation
S-K under the Securities Act of 1933, as amended, and the Exchange Act
("Regulation S-K"), or if the 2001 Proxy Statement is not so filed within 120
days after December 31, 2000, such information will be included in an amendment
to this report filed not later than the end of such period. Reference is also
made to the information appearing in Item 4.a of Part I of this report under the
caption "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION.

     Pursuant to General Instruction G of Form 10-K, the information called for
by Item 11 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2001 Proxy Statement in response to Item 402 of
Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days
after December 31, 2000, such information will be included in an amendment to
this report filed not later than the end of such period.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Pursuant to General Instruction G of Form 10-K, the information called for
by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2001 Proxy Statement in response to Item 403 of
Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days
after December 31, 2000, such information will be included in an amendment to
this report filed not later than the end of such period.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Pursuant to General Instruction G of Form 10-K, the information called for
by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2001 Proxy Statement in response to Item 404 of
Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days
after December 31, 2000, such information will be included in an amendment to
this report filed not later than the end of such period.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) List of Documents Filed.

          (1) The financial statements filed as part of this report are listed
     in the Index to Financial Statements under Item 8 on page 20 hereof.

          (2) Additional financial information and schedules included pursuant
     to the requirements of Form 10-K are listed in the Index to Financial
     Statements under Item 8 on page 20 hereof.

                                        48
<PAGE>   51

          (3) Exhibits

     The exhibits indicated by an asterisk (*) are incorporated by reference.
The exhibits indicated by a plus sign (+) each constitute a management contract
or compensatory plan or arrangement required to be filed as an exhibit pursuant
to the requirements of Item 14(c) of Form 10-K.

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          2.1*           -- Stock Purchase Agreement, dated as of March 24, 1995, by
                            and among the Company, PCA and the Sellers parties
                            thereto (incorporated by reference to Exhibit 2 to the
                            Company's Current Report on Form 8-K filed on May 5,
                            1995)
          2.2*           -- Asset Purchase Agreement, dated as of May 14, 1997, by
                            and between OCC Tacoma, Inc. and the Company
                            (incorporated by reference to Exhibit 2 to Pioneer's
                            Current Report on Form 8-K filed on July 1, 1997)
          2.3(a)*        -- Asset Purchase Agreement, dated as of September 22, 1997,
                            between PCI Chemicals Canada Inc. ("PCICC"), PCI
                            Carolina, Inc. and the Company and ICI Canada Inc., ICI
                            Americas, Inc. and Imperial Chemical Industries plc
                            (incorporated by reference to Exhibit 2 to the Company's
                            Quarterly Report on Form 10-Q for the quarter ended
                            September 30, 1997)
          2.3(b)*        -- First Amendment to Asset Purchase Agreement, dated as of
                            October 31, 1997, between PCICC, PCI Carolina, Inc. and
                            the Company 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(a)*        -- Third Restated Certificate of Incorporation of the
                            Company filed with Secretary of State of Delaware on May
                            21, 1993 (incorporated by Reference to Exhibit 3.1 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 1993)
          3.1(b)*        -- First Amendment to Third Restated Certificate of
                            Incorporation of the Company filed with Secretary of
                            State of Delaware on April 20, 1995 (incorporated by
                            reference to Exhibit 3.1(b) to Pioneer's Annual Report on
                            Form 10-K for the year ended December 31, 1995)
          3.1(c)*        -- Second Amendment to Third Restated Certificate of
                            Incorporation of the Company filed with Secretary of
                            State of Delaware on April 27, 1995 (incorporated by
                            reference to Exhibit 3.1(c) to the Company's Annual
                            Report on Form 10-K for the year ended December 31, 1995)
          3.2*           -- By-laws of the Company (incorporated by reference to
                            Exhibit 3.2 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 1998)
          4.1*           -- Certificate of Designations of Series A Preferred Stock
                            of the Company (incorporated by reference to Exhibit 4 to
                            the Company's Current Report on Form 8-K filed on July 1,
                            1997)
          4.2*           -- Indenture, dated as of June 17, 1997, by and among PCA,
                            the Subsidiary Guarantors defined therein and United
                            States Trust Company of New York, as Trustee, relating to
                            $200,000,000 principal amount of 9 1/4% Series A Senior
                            Notes due 2007, including form of Note and Guarantees
                            (incorporated by reference to Exhibit 2 to the Company's
                            Current Report on Form 8-K filed on July 1, 1997)
          4.3(a)*        -- Deed of Trust, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (Tacoma, Washington) (incorporated by reference to
                            Exhibit 4.2(a) to PCA's Registration Statement on Form
                            S-4, as amended (file no. 333-30683))
</TABLE>

                                        49
<PAGE>   52

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.3(b)*        -- Mortgage, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (St. Gabriel, Louisiana) (incorporated by reference to
                            Exhibit 4.2(b) to PCA's Registration Statement on Form
                            S-4, as amended (file no. 333-30683))
          4.3(c)*        -- Mortgage, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (Henderson, Nevada) (incorporated by reference to Exhibit
                            4.2(c) to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.4(a)*        -- Term Loan Agreement, dated as of June 17, 1997, among
                            PAI, various financial institutions as Lenders, DLJ
                            Capital Funding, inc., as the Syndication Agent, Salomon
                            Brothers Holding Company Inc, as the Agent (the "PAI Term
                            Loan Agreement") (incorporated by reference to Exhibit
                            4.3(a) to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.4(b)*        -- Subsidiary Guaranty, dated June 17, 1997, executed by
                            each of the Subsidiaries party thereto, as guarantor,
                            respectively, in favor of the Lenders, guaranteeing the
                            obligations of one another under the PCA Term Loan
                            Agreement (incorporated by reference to Exhibit 4.3(b) to
                            PCA's Registration Statement on Form S-4, as amended
                            (file No. 333-30683))
          4.5*           -- Security Agreement, dated as of June 17, 1997, among PAI
                            and United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.4 to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.6*           -- Stock Pledge Agreement, dated as of June 17, 1997, among
                            PCA and United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.5 to PAI's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.7*           -- Intercreditor and Collateral Agency Agreement, dated as
                            of June 17, and Collateral Agent, Bank of America
                            Illinois, as Agent, PCA and PAI (incorporated by
                            reference to Exhibit 4.7 to PCA's Registration Statement
                            on Form S-4, as amended (file no. 333-30683))
          4.8*           -- Indenture, dated as of October 30, 1997, by and among
                            PCICC, the as Trustee, relating to $175,000,000 principal
                            amount of 9 1/4% Series A Senior Notes due 2007,
                            including form of Note and Guarantees (incorporated by
                            reference to Exhibit 4.1 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.9*           -- Deed of Hypothec, dated as of October 30, 1997, by PCICC
                            in favor of United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.2 to PCICC's Registration Statement on Form S-4, as
                            amended (file no. 333-41221))
          4.10*          -- Affiliate Security Agreement, dated as of October 30,
                            1997, among PCICC, Pioneer Licensing, Inc. and United
                            States Trust Company of New York, as Collateral Agent
                            (incorporated by reference to Exhibit 4.3 to PCICC's
                            Registration Statement on Form S-4, as amended (file no.
                            333-41221))
          4.11*          -- Borrower (Canadian) Security Agreement, dated as of
                            October 30, 1997, between PCICC and United States Trust
                            Company of New York, as Collateral Agent (incorporated by
                            reference to Exhibit 4.4 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
</TABLE>

                                        50
<PAGE>   53

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.12(a)*       -- Demand Debenture (Ontario), dated as of October 30, 1997,
                            by PCICC in favor of United States Trust Company of New
                            York, as Collateral Agent (incorporated by reference to
                            Exhibit 4.5(a) to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
          4.12(b)*       -- Demand Debenture (Quebec), dated as of October 30, 1997,
                            by PCICC in favor of United States Trust Company of New
                            York, as Collateral Agent (incorporated by reference to
                            Exhibit 4.5(b) to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
          4.12(c)*       -- Demand Debenture (New Brunswick), dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.5(c) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.13(a)*       -- Demand Pledge Agreement (Ontario), dated as of October
                            30, 1997, by PCICC in favor of United States Trust
                            Company of New York, as Collateral Agent (incorporated by
                            reference to Exhibit 4.6(a) to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.13(b)*       -- Demand Pledge Agreement (Quebec), dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.6(b) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.13(c)*       -- Demand Pledge Agreement (New Brunswick), dated as of
                            October 30, 1997, by PCICC in favor of United States
                            Trust Company of New York, as Collateral Agent
                            (incorporated by reference to Exhibit 4.6(c) to PCICC's
                            Registration Statement on Form S-4, as amended (file no.
                            333-41221))
          4.14*          -- Subsidiary Security Agreement, dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.7 to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
          4.15(a)*       -- Term Loan Agreement, dated as of October 30, 1997, among
                            PCA, PAI, various financial institutions, as Lenders, DLJ
                            Capital Funding, Inc., Documentation Agent, Bank of
                            America National Trust and Savings Association, as the
                            Administrative Agent and United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.8(a) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.15(b)*       -- Affiliate Guaranty, dated as of October 30, 1997, by and
                            among PCICC, the Guarantors identified therein and the
                            Initial Purchasers identified therein (incorporated by
                            reference to Exhibit 4.8(b) to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
</TABLE>

                                        51
<PAGE>   54

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.16*          -- Amended and Restated Loan and Security Agreement by and
                            among Congress Financial Corporation (Southwest) as U.S.
                            Lender, Congress Financial Corporation (Canada) as
                            Canadian Lender, and Congress Financial Corporation
                            (Southwest) as Agent for Lenders and Pioneer Chlor Alkali
                            Company, Inc., All-Pure Chemical Co., Kemwater North
                            America Company, PCI Chemicals Canada Inc./PCI Chimie
                            Canada Inc., PCI Carolina, Inc. and T.C. Products, Inc.,
                            as Borrowers and Pioneer Americas, Inc., Imperial West
                            Chemical Co., Black Mountain Power Company, T.C.
                            Holdings, Inc., Pioneer Licensing, Inc. and Pioneer
                            (East), Inc., as Guarantors dated as of September 24,
                            1999 (incorporated by reference to Exhibit 10 to the
                            Company's Quarterly Report on Form 10-Q for the quarter
                            ended September 30, 1999)
         10.1*           -- Contingent Payment Agreement, dated as of April 20, 1995,
                            by and among the Company, PCA and the Sellers party
                            thereto (incorporated by Reference to Exhibit 10.2 to the
                            Company's Current Report on Form 8-K filed on May 5,
                            1995)
         10.2*           -- Tax Sharing Agreement, dated as of April 20, 1995, by and
                            among the Company, PCA and the Subsidiary Guarantors
                            (incorporated by reference to Exhibit 10.3 to PCA's
                            Registration Statement on Form S-4, as amended (file No.
                            33-98828))
         10.3*+          -- Pioneer Companies, Inc. 1995 Stock Incentive Plan
                            (incorporated by reference to Exhibit 10.4 to PCA's
                            Registration Statement on Form S-4, as amended (file No.
                            33-98828))
         10.4*+          -- Non-Qualified Stock Option Agreement, dated January 4,
                            1997, between Pioneer and Michael J. Ferris (incorporated
                            by reference to Exhibit 10.15 to the Company's Annual
                            Report on Form 10-K for the year ended December 31, 1996)
         10.5*+          -- Non-Qualified Stock Option Agreement, dated May 15, 1997,
                            between the Company and Andrew M. Bursky (incorporated by
                            reference to Exhibit 10.11 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
         21              -- Subsidiaries of the Company
         23.1            -- Independent Auditors' Consent
</TABLE>

     (b) Reports on Form 8-K.

     On December 19, 2000, the Company filed a report on Form 8-K. Under Item 5
of the report ("Other Events"), the Company reported that it had issued a press
release announcing that Pioneer Corporation of America, a wholly-owned
subsidiary of the Company, was delaying the payment of interest due on December
15, 2000, on outstanding 9 1/4% Senior Secured Notes due June 2007. The press
release also disclosed that the Company had entered into discussions with an
institutional investor with respect to a three-year credit facility of up to $35
million subject to specified conditions. It was stated that if the new financing
was consummated within thirty days, Pioneer would be able to pay the delayed
interest payment within the grace period allowed by the Notes, and that
necessary consents would be sought from the holders of the Company's senior
indebtedness. Further, the Company disclosed that if the financing was not
arranged or if the necessary consents were not obtained, the Company would seek
a restructuring of the senior indebtedness.

     In a subsequent Form 8-K filed on January 8, 2001, the Company reported
that a subsequent press release had been issued, announcing that principal
payments due on additional indebtedness had not been paid, that the discussions
with respect to a new credit facility had been terminated, and that the Company
was developing a more comprehensive financial restructuring program.

                                        52
<PAGE>   55

     (c) Financial Statement Schedule.

     Filed herewith as a financial statement schedule is Schedule II with
respect to Valuation and Qualifying Accounts for Pioneer. All other schedules
have been omitted because they are not applicable, not required or the required
information is included in the financial statements or notes thereto.

                                        53
<PAGE>   56

                                                                     SCHEDULE II

                            PIONEER COMPANIES, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                       BALANCE AT   CHARGED TO                                BALANCE AT
                                       BEGINNING    COSTS AND                                   END OF
DESCRIPTION                            OF PERIOD     EXPENSE     ADDITIONS   DEDUCTIONS         PERIOD
-----------                            ----------   ----------   ---------   ----------       ----------
<S>                                    <C>          <C>          <C>         <C>              <C>
Year Ended December 31, 2000:
  Allowance for doubtful accounts....    $2,750        $93                    $(1,451)(A)(B)    $1,392
Year Ended December 31, 1999:
  Allowance for doubtful accounts....     3,122        405          --           (777)(A)        2,750
Year Ended December 31, 1998:
  Allowance for doubtful accounts....     3,602        205          --           (685)(A)        3,122
</TABLE>

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

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

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

                                        54
<PAGE>   57

                                   SIGNATURES

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

                                            By:    /s/ MICHAEL J. FERRIS
                                              ----------------------------------
                                                      Michael J. Ferris
                                                President and Chief Executive
                                                            Officer

April 11, 2001

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                     DATE
                      ---------                                     -----                     ----
<C>                                                    <S>                               <C>

                /s/ MICHAEL J. FERRIS                  President and Chief Executive     April 11, 2001
-----------------------------------------------------    Officer and Director
                 (Michael J. Ferris)

                /s/ PHILIP J. ABLOVE                   Executive Vice President and      April 11, 2001
-----------------------------------------------------    Chief Financial Officer and
                 (Philip J. Ablove)                      Director (Principal Financial
                                                         Officer)

                /s/ PIERRE PRUD'HOMME                  Vice President, Controller        April 11, 2001
-----------------------------------------------------    (Principal Accounting
                 (Pierre Prud'homme)                     Officer)

               /s/ WILLIAM R. BERKLEY                  Chairman of the Board             April 11, 2001
-----------------------------------------------------
                (William R. Berkley)

                /s/ ANDREW M. BURSKY                   Director                          April 11, 2001
-----------------------------------------------------
                 (Andrew M. Bursky)

                /s/ DONALD J. DONAHUE                  Director                          April 11, 2001
-----------------------------------------------------
                 (Donald J. Donahue)

             /s/ RICHARD C. KELLOGG, JR.               Director                          April 11, 2001
-----------------------------------------------------
              (Richard C. Kellogg, Jr.)

                 /s/ JOHN R. KENNEDY                   Director                          April 11, 2001
-----------------------------------------------------
                  (John R. Kennedy)

                 /s/ JACK H. NUSBAUM                   Director                          April 11, 2001
-----------------------------------------------------
                  (Jack H. Nusbaum)
</TABLE>

                                        55
<PAGE>   58

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          2.1*           -- Stock Purchase Agreement, dated as of March 24, 1995, by
                            and among the Company, PCA and the Sellers parties
                            thereto (incorporated by reference to Exhibit 2 to the
                            Company's Current Report on Form 8-K filed on May 5,
                            1995)
          2.2*           -- Asset Purchase Agreement, dated as of May 14, 1997, by
                            and between OCC Tacoma, Inc. and the Company
                            (incorporated by reference to Exhibit 2 to Pioneer's
                            Current Report on Form 8-K filed on July 1, 1997)
          2.3(a)*        -- Asset Purchase Agreement, dated as of September 22, 1997,
                            between PCI Chemicals Canada Inc. ("PCICC"), PCI
                            Carolina, Inc. and the Company and ICI Canada Inc., ICI
                            Americas, Inc. and Imperial Chemical Industries plc
                            (incorporated by reference to Exhibit 2 to the Company's
                            Quarterly Report on Form 10-Q for the quarter ended
                            September 30, 1997)
          2.3(b)*        -- First Amendment to Asset Purchase Agreement, dated as of
                            October 31, 1997, between PCICC, PCI Carolina, Inc. and
                            the Company 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(a)*        -- Third Restated Certificate of Incorporation of the
                            Company filed with Secretary of State of Delaware on May
                            21, 1993 (incorporated by Reference to Exhibit 3.1 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 1993)
          3.1(b)*        -- First Amendment to Third Restated Certificate of
                            Incorporation of the Company filed with Secretary of
                            State of Delaware on April 20, 1995 (incorporated by
                            reference to Exhibit 3.1(b) to Pioneer's Annual Report on
                            Form 10-K for the year ended December 31, 1995)
          3.1(c)*        -- Second Amendment to Third Restated Certificate of
                            Incorporation of the Company filed with Secretary of
                            State of Delaware on April 27, 1995 (incorporated by
                            reference to Exhibit 3.1(c) to the Company's Annual
                            Report on Form 10-K for the year ended December 31, 1995)
          3.2*           -- By-laws of the Company (incorporated by reference to
                            Exhibit 3.2 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 1998)
          4.1*           -- Certificate of Designations of Series A Preferred Stock
                            of the Company (incorporated by reference to Exhibit 4 to
                            the Company's Current Report on Form 8-K filed on July 1,
                            1997)
          4.2*           -- Indenture, dated as of June 17, 1997, by and among PCA,
                            the Subsidiary Guarantors defined therein and United
                            States Trust Company of New York, as Trustee, relating to
                            $200,000,000 principal amount of 9 1/4% Series A Senior
                            Notes due 2007, including form of Note and Guarantees
                            (incorporated by reference to Exhibit 2 to the Company's
                            Current Report on Form 8-K filed on July 1, 1997)
          4.3(a)*        -- Deed of Trust, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (Tacoma, Washington) (incorporated by reference to
                            Exhibit 4.2(a) to PCA's Registration Statement on Form
                            S-4, as amended (file no. 333-30683))
          4.3(b)*        -- Mortgage, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (St. Gabriel, Louisiana) (incorporated by reference to
                            Exhibit 4.2(b) to PCA's Registration Statement on Form
                            S-4, as amended (file no. 333-30683))
</TABLE>
<PAGE>   59

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.3(c)*        -- Mortgage, Assignment of Leases and Rents, Security
                            Agreement, Fixture Filing and Financing Statement by PAI
                            (Henderson, Nevada) (incorporated by reference to Exhibit
                            4.2(c) to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.4(a)*        -- Term Loan Agreement, dated as of June 17, 1997, among
                            PAI, various financial institutions as Lenders, DLJ
                            Capital Funding, inc., as the Syndication Agent, Salomon
                            Brothers Holding Company Inc, as the Agent (the "PAI Term
                            Loan Agreement") (incorporated by reference to Exhibit
                            4.3(a) to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.4(b)*        -- Subsidiary Guaranty, dated June 17, 1997, executed by
                            each of the Subsidiaries party thereto, as guarantor,
                            respectively, in favor of the Lenders, guaranteeing the
                            obligations of one another under the PCA Term Loan
                            Agreement (incorporated by reference to Exhibit 4.3(b) to
                            PCA's Registration Statement on Form S-4, as amended
                            (file No. 333-30683))
          4.5*           -- Security Agreement, dated as of June 17, 1997, among PAI
                            and United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.4 to PCA's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.6*           -- Stock Pledge Agreement, dated as of June 17, 1997, among
                            PCA and United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.5 to PAI's Registration Statement on Form S-4, as
                            amended (file no. 333-30683))
          4.7*           -- Intercreditor and Collateral Agency Agreement, dated as
                            of June 17, and Collateral Agent, Bank of America
                            Illinois, as Agent, PCA and PAI (incorporated by
                            reference to Exhibit 4.7 to PCA's Registration Statement
                            on Form S-4, as amended (file no. 333-30683))
          4.8*           -- Indenture, dated as of October 30, 1997, by and among
                            PCICC, the as Trustee, relating to $175,000,000 principal
                            amount of 9 1/4% Series A Senior Notes due 2007,
                            including form of Note and Guarantees (incorporated by
                            reference to Exhibit 4.1 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.9*           -- Deed of Hypothec, dated as of October 30, 1997, by PCICC
                            in favor of United States Trust Company of New York, as
                            Collateral Agent (incorporated by reference to Exhibit
                            4.2 to PCICC's Registration Statement on Form S-4, as
                            amended (file no. 333-41221))
          4.10*          -- Affiliate Security Agreement, dated as of October 30,
                            1997, among PCICC, Pioneer Licensing, Inc. and United
                            States Trust Company of New York, as Collateral Agent
                            (incorporated by reference to Exhibit 4.3 to PCICC's
                            Registration Statement on Form S-4, as amended (file no.
                            333-41221))
          4.11*          -- Borrower (Canadian) Security Agreement, dated as of
                            October 30, 1997, between PCICC and United States Trust
                            Company of New York, as Collateral Agent (incorporated by
                            reference to Exhibit 4.4 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.12(a)*       -- Demand Debenture (Ontario), dated as of October 30, 1997,
                            by PCICC in favor of United States Trust Company of New
                            York, as Collateral Agent (incorporated by reference to
                            Exhibit 4.5(a) to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
</TABLE>
<PAGE>   60

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          4.12(b)*       -- Demand Debenture (Quebec), dated as of October 30, 1997,
                            by PCICC in favor of United States Trust Company of New
                            York, as Collateral Agent (incorporated by reference to
                            Exhibit 4.5(b) to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
          4.12(c)*       -- Demand Debenture (New Brunswick), dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.5(c) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.13(a)*       -- Demand Pledge Agreement (Ontario), dated as of October
                            30, 1997, by PCICC in favor of United States Trust
                            Company of New York, as Collateral Agent (incorporated by
                            reference to Exhibit 4.6(a) to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.13(b)*       -- Demand Pledge Agreement (Quebec), dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.6(b) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.13(c)*       -- Demand Pledge Agreement (New Brunswick), dated as of
                            October 30, 1997, by PCICC in favor of United States
                            Trust Company of New York, as Collateral Agent
                            (incorporated by reference to Exhibit 4.6(c) to PCICC's
                            Registration Statement on Form S-4, as amended (file no.
                            333-41221))
          4.14*          -- Subsidiary Security Agreement, dated as of October 30,
                            1997, by PCICC in favor of United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.7 to PCICC's Registration Statement on Form
                            S-4, as amended (file no. 333-41221))
          4.15(a)*       -- Term Loan Agreement, dated as of October 30, 1997, among
                            PCA, PAI, various financial institutions, as Lenders, DLJ
                            Capital Funding, Inc., Documentation Agent, Bank of
                            America National Trust and Savings Association, as the
                            Administrative Agent and United States Trust Company of
                            New York, as Collateral Agent (incorporated by reference
                            to Exhibit 4.8(a) to PCICC's Registration Statement on
                            Form S-4, as amended (file no. 333-41221))
          4.15(b)*       -- Affiliate Guaranty, dated as of October 30, 1997, by and
                            among PCICC, the Guarantors identified therein and the
                            Initial Purchasers identified therein (incorporated by
                            reference to Exhibit 4.8(b) to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
          4.16*          -- Amended and Restated Loan and Security Agreement by and
                            among Congress Financial Corporation (Southwest) as U.S.
                            Lender, Congress Financial Corporation (Canada) as
                            Canadian Lender, and Congress Financial Corporation
                            (Southwest) as Agent for Lenders and Pioneer Chlor Alkali
                            Company, Inc., All-Pure Chemical Co., Kemwater North
                            America Company, PCI Chemicals Canada Inc./PCI Chimie
                            Canada Inc., PCI Carolina, Inc. and T.C. Products, Inc.,
                            as Borrowers and Pioneer Americas, Inc., Imperial West
                            Chemical Co., Black Mountain Power Company, T.C.
                            Holdings, Inc., Pioneer Licensing, Inc. and Pioneer
                            (East), Inc., as Guarantors dated as of September 24,
                            1999 (incorporated by reference to Exhibit 10 to the
                            Company's Quarterly Report on Form 10-Q for the quarter
                            ended September 30, 1999)
         10.1*           -- Contingent Payment Agreement, dated as of April 20, 1995,
                            by and among the Company, PCA and the Sellers party
                            thereto (incorporated by Reference to Exhibit 10.2 to the
                            Company's Current Report on Form 8-K filed on May 5,
                            1995)
</TABLE>
<PAGE>   61

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                             DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.2*           -- Tax Sharing Agreement, dated as of April 20, 1995, by and
                            among the Company, PCA and the Subsidiary Guarantors
                            (incorporated by reference to Exhibit 10.3 to PCA's
                            Registration Statement on Form S-4, as amended (file No.
                            33-98828))
         10.3*+          -- Pioneer Companies, Inc. 1995 Stock Incentive Plan
                            (incorporated by reference to Exhibit 10.4 to PCA's
                            Registration Statement on Form S-4, as amended (file No.
                            33-98828))
         10.4*+          -- Non-Qualified Stock Option Agreement, dated January 4,
                            1997, between Pioneer and Michael J. Ferris (incorporated
                            by reference to Exhibit 10.15 to the Company's Annual
                            Report on Form 10-K for the year ended December 31, 1996)
         10.5*+          -- Non-Qualified Stock Option Agreement, dated May 15, 1997,
                            between the Company and Andrew M. Bursky (incorporated by
                            reference to Exhibit 10.11 to PCICC's Registration
                            Statement on Form S-4, as amended (file no. 333-41221))
         21              -- Subsidiaries of the Company
         23.1            -- Independent Auditors' Consent
</TABLE>