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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o
    
    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 000-31230
 Pioneer Companies, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of
incorporation or organization)
    
    06-1215192
(I.R.S. Employer
Identification No.)
 700 Louisiana Street, Suite 4300, Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
 (713) 570-3200
(Registrants telephone number, including area code)
 R £
 £ R
 R £




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TABLE OF CONTENTS
  
 PagePart IFinancial InformationItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsJune 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of OperationsThree Months Ended June 30, 2005 and 2004 and Six Months Ended June 30, 2005 and 2004
    
    
    4Consolidated Statements of Cash FlowsSix Months Ended June 30, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28Part IIOther InformationItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    28Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    30Agreement to the Sale of Real PropertyCertification of Michael Y. McGovern Pursuant to Rule 13a-14(a)Certification of Gary L. Pittman Pursuant to Rule 13a-14(a)Certification of Michael Y. McGovern Pursuant to Section 1350Certification of Gary L. Pittman Pursuant to Section 1350
  Certain statements in this Form 10-Q regarding future expectations of Pioneers business and
Pioneers results of operations, financial condition and liquidity may be regarded as
forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
Forward-looking statements relate to matters that are not historical facts. Such statements involve
risks and uncertainties, including, but not limited to, Pioneers high financial leverage, global
political and economic conditions, the demand and prices for Pioneers products and raw materials,
Pioneer and industry production volumes, potential disruptions in operations or the availability of
transportation, the cyclical nature of the markets for many of Pioneers products and raw
materials, the results of Pioneers organizational efficiency project, Pioneers ability to
complete the sale of certain excess land at its Henderson facility, the effect of Pioneers results
of operations on its debt agreements, and other risks and uncertainties. Attention is directed to
Pioneers Annual Report on Form 10-K and Item 5 of Part II of this Report on Form 10-Q for a
discussion of such risks and uncertainties. Actual outcomes may vary materially.
 2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 PIONEER COMPANIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (unaudited, in thousands, except par value)
 June 30,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    19,413
    
    
    $
    16,191Accounts receivable, net of allowance for doubtful accounts of $3,163
at June 30, 2005 and $2,563 at December 31, 2004
    
    
    64,245
    
    
    
    52,693Inventories, net
    
    
    16,331
    
    
    
    16,417Prepaid expenses and other current assets
    
    
    8,626
    
    
    
    5,682Total current assets
    
    
    108,615
    
    
    
    90,983Property, plant and equipment:Land
    
    
    6,520
    
    
    
    6,520Buildings and improvements
    
    
    30,060
    
    
    
    30,375Machinery and equipment
    
    
    203,871
    
    
    
    198,121Construction in progress
    
    
    1,861
    
    
    
    3,013242,312
    
    
    
    238,029Less: accumulated depreciation
    
    
    (77,851
    )
    
    
    (65,831
    )Property, plant and equipment, net
    
    
    164,461
    
    
    
    172,198Other assets, net
    
    
    4,295
    
    
    
    4,359Excess reorganization value over the fair value of identifiable assets
    
    
    84,064
    
    
    
    84,064Total assets
    
    $
    361,435
    
    
    $
    351,604Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    17,520
    
    
    $
    16,545Accrued liabilities
    
    
    26,290
    
    
    
    24,295Short-term debt, including current portion of long-term debt
    
    
    1,844
    
    
    
    1,979Total current liabilities
    
    
    45,654
    
    
    
    42,819Long-term debt, less current portion
    
    
    160,057
    
    
    
    200,797Accrued pension and other employee benefits
    
    
    22,204
    
    
    
    23,248Other long-term liabilities
    
    
    55,294
    
    
    
    46,845Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value, 10,000 shares authorized, none issued or outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 50,000 shares authorized, 11,292 shares issued and outstanding
at June 30, 2005 and 11,176 shares issued and outstanding at December 31, 2004
    
    
    113
    
    
    
    112Additional paid-in capital
    
    
    34,870
    
    
    
    33,649Other comprehensive loss
    
    
    (8,054
    )
    
    
    (8,054
    )Retained earnings
    
    
    51,297
    
    
    
    12,188Total stockholders equity
    
    
    78,226
    
    
    
    37,895Total liabilities and stockholders equity
    
    $
    361,435
    
    
    $
    351,604
  3




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PIONEER COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    132,859
    
    
    $
    98,082
    
    
    $
    251,949
    
    
    $
    189,114Cost of sales
    
    
    (92,597
    )
    
    
    (85,327
    )
    
    
    (180,205
    )
    
    
    (172,644
    )Gross profit
    
    
    40,262
    
    
    
    12,755
    
    
    
    71,744
    
    
    
    16,470Selling, general and administrative expenses
    
    
    (8,014
    )
    
    
    (8,368
    )
    
    
    (16,477
    )
    
    
    (14,957
    )Other items
    
    
    (1,497
    )
    
    
    (3,178
    )
    
    
    (2,002
    )
    
    
    (3,343
    )Operating income (loss)
    
    
    30,751
    
    
    
    1,209
    
    
    
    53,265
    
    
    
    (1,830
    )Interest expense, net
    
    
    (4,114
    )
    
    
    (4,561
    )
    
    
    (8,370
    )
    
    
    (9,203
    )Other income, net
    
    
    409
    
    
    
    609
    
    
    
    582
    
    
    
    735Income (loss) before income taxes
    
    
    27,046
    
    
    
    (2,743
    )
    
    
    45,477
    
    
    
    (10,298
    )Income tax benefit (expense)
    
    
    (2,957
    )
    
    
    342
    
    
    
    (6,368
    )
    
    
    604Net income (loss)
    
    $
    24,089
    
    
    $
    (2,401
    )
    
    $
    39,109
    
    
    $
    (9,694
    )Net income (loss) per share:Basic
    
    $
    2.14
    
    
    $
    (0.24
    )
    
    $
    3.48
    
    
    $
    (0.97
    )Diluted
    
    $
    2.05
    
    
    $
    (0.24
    )
    
    $
    3.32
    
    
    $
    (0.97
    )Weighted average number of shares outstanding:Basic
    
    
    11,271
    
    
    
    10,030
    
    
    
    11,229
    
    
    
    10,022Diluted
    
    
    11,767
    
    
    
    10,030
    
    
    
    11,778
    
    
    
    10,022
  4




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PIONEER COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Six Months EndedJune 302005
    
    
    2004Operating activities:Net income (loss)
    
    $
    39,109
    
    
    $
    (9,694
    )Adjustments to reconcile net income (loss) to net cash flows from operating activities:Depreciation and amortization
    
    
    12,332
    
    
    
    14,353Provision for (recovery of) losses on accounts receivable
    
    
    600
    
    
    
    (480
    )Deferred tax (benefit) expense
    
    
    6,168
    
    
    
    (604
    )Loss on disposals of assets
    
    
    1,291
    
    
    
    152Currency exchange gain
    
    
    (634
    )
    
    
    (671
    )Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (11,256
    )
    
    
    (4,213
    )(Increase) decrease in inventories, prepaid expenses and other current assets
    
    
    (2,967
    )
    
    
    3,273(Increase) decrease in other assets
    
    
    23
    
    
    
    (1,101
    )Increase in accounts payable and accrued liabilities
    
    
    2,056
    
    
    
    12,313Increase (decrease) in other long-term liabilities
    
    
    2,685
    
    
    
    (2,488
    )Net cash flows from operating activities
    
    
    49,407
    
    
    
    10,840Investing activities:Capital expenditures
    
    
    (5,758
    )
    
    
    (4,810
    )Proceeds from disposal of assets
    
    
    180
    
    
    
    Net cash flows used in investing activities
    
    
    (5,578
    )
    
    
    (4,810
    )Financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    (434
    )Repayments of long-term debt
    
    
    (40,894
    )
    
    
    (1,449
    )Proceeds from issuance of stock, net
    
    
    289
    
    
    
    114Net cash flows used in financing activities
    
    
    (40,605
    )
    
    
    (1,769
    )Effect of exchange rate changes on cash
    
    
    (2
    )
    
    
    99Net change in cash and cash equivalents
    
    
    3,222
    
    
    
    4,360Cash and cash equivalents at beginning of period
    
    
    16,191
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    19,413
    
    
    $
    6,306
  5




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PIONEER COMPANIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 1. Organization and Basis of Presentation
      2. Debt
  June 30,
    
    
    December 31,2005
    
    
    2004Senior Secured Debt:Senior Secured Floating Rate Guaranteed Notes, due December 2006, variable rates
based on the three-month LIBOR plus 3.5% (Senior Guaranteed Notes)
    
    $
    6,076
    
    
    $
    43,151Senior Floating Rate Term Notes, due December 2006, variable interest rates based
on the three-month LIBOR plus 3.5% (Senior Floating Notes)
    
    
    849
    
    
    
    3,09010% Senior Secured Guaranteed Notes, due December 2008 (10% Senior Secured Notes)
    
    
    150,000
    
    
    
    150,000Revolving credit facility, variable interest rates based on U.S. prime rate plus a
margin ranging from 0.5% to 1.25% or LIBOR plus a margin ranging from 2.50% to
3.25%, expiring December 31, 2006, as amended (Revolver)
    
    
    
    
    
    
    Other debt:Unsecured, non-interest-bearing, long-term debt, denominated in Canadian dollars
(amounts below are in Canadian dollars), original face value of $5.5 million,
payable in five annual installments of $1.0 million and a final payment of $0.5
million, beginning January 10, 2002, with an effective interest rate of 8.25%, net
of unamortized discount of $0.1 million and $0.2 million at June 30, 2005, and
December 31, 2004, respectively
    
    
    1,141
    
    
    
    1,947Other notes, maturing in various years through 2014, with various installments, at
various interest rates
    
    
    3,835
    
    
    
    4,588Total
    
    
    161,901
    
    
    
    202,776Short-term debt, including current maturities of long-term debt
    
    
    (1,844
    )
    
    
    (1,979
    )Long-term debt, less current maturities
    
    $
    160,057
    
    
    $
    200,797
 6




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3. Environmental Liabilities
    8




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4. Asset Redeployments
    5. Other Items
 see
   9




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Liability Balance
    
    
    Costs Recognized
    
    
    Costs Paid
    
    
    Liability Balance
    
    
    Cumulativeas of
    
    
    Six Months Ended
    
    
    Six Months Ended
    
    
    as of
    
    
    CostsDec. 31, 2004
    
    
    June 30, 2005
    
    
    June 30, 2005
    
    
    June 30, 2005
    
    
    RecognizedSeveranceProject STAR  Original
    
    $
    1,446
    
    
    $
    110
    
    
    $
    974
    
    
    $
    582
    
    
    $
    3,652Extension of Project STAR concepts
to Dalhousie
    
    
    
    
    
    
    340
    
    
    
    21
    
    
    
    319
    
    
    
    340Total, Project STAR
    
    
    1,446
    
    
    
    450
    
    
    
    995
    
    
    
    901
    
    
    
    3,992Cornwall  Asset Transfer and Sale
    
    
    447
    
    
    
    1,347
    
    
    
    101
    
    
    
    1,693
    
    
    
    1,794Total Severance
    
    $
    1,893
    
    
    $
    1,797
    
    
    $
    1,096
    
    
    $
    2,594
    
    
    $
    5,786
 6. Net Income (Loss) per Share
 see
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator for basic and diluted net income (loss) per share:Net income (loss)
    
    $
    24,089
    
    
    $
    (2,401
    )
    
    $
    39,109
    
    
    $
    (9,694
    )Denominator for basic and diluted net income (loss) per share:Weighted average shares
    
    
    11,271
    
    
    
    10,030
    
    
    
    11,229
    
    
    
    10,022Potentially dilutive common shares:Stock options
    
    
    496
    
    
    
    
    
    
    
    549
    
    
    
    Denominator for diluted net income (loss) per share
    
    
    11,767
    
    
    
    10,030
    
    
    
    11,778
    
    
    
    10,022Net income (loss) per share:Basic
    
    $
    2.14
    
    
    $
    (0.24
    )
    
    $
    3.48
    
    
    $
    (0.97
    )Diluted
    
    $
    2.05
    
    
    $
    (0.24
    )
    
    $
    3.32
    
    
    $
    (0.97
    )
  7. Inventories
  June 30,
    
    
    December 31,2005
    
    
    2004Raw materials, supplies and parts, net
    
    $
    6,847
    
    
    $
    7,089Finished goods
    
    
    9,484
    
    
    
    9,328$
    16,331
    
    
    $
    16,417
 8. Stock-Based Compensation
  10




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss):As reported
    
    $
    24,089
    
    
    $
    (2,401
    )
    
    $
    39,109
    
    
    $
    (9,694
    )Add: Stock-based
compensation expense included
in reported net income (loss)
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Deduct: Stock-based
compensation expense determined
under fair-value-based method
    
    
    (202
    )
    
    
    (171
    )
    
    
    (391
    )
    
    
    (285
    )Pro forma net income (loss)
    
    $
    23,887
    
    
    $
    (2,515
    )
    
    $
    38,718
    
    
    $
    (9,922
    )Net income (loss) per common share:Basic, as reported
    
    $
    2.14
    
    
    $
    (0.24
    )
    
    $
    3.48
    
    
    $
    (0.97
    )Basic, pro forma
    
    $
    2.12
    
    
    $
    (0.25
    )
    
    $
    3.45
    
    
    $
    (0.99
    )Diluted, as reported
    
    $
    2.05
    
    
    $
    (0.24
    )
    
    $
    3.32
    
    
    $
    (0.97
    )Diluted, pro forma
    
    $
    2.03
    
    
    $
    (0.25
    )
    
    $
    3.29
    
    
    $
    (0.99
    )
  9. Supplemental Cash Flow Information
  Six Months EndedJune 30,2005
    
    
    2004Cash payments for:Interest
    
    $
    8,365
    
    
    $
    9,163Income taxes
    
    
    200
    
    
    
    
 10. Condensed Consolidating Financial Statements
   11




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Condensed Consolidating Balance Sheet  June 30, 2005 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    319
    
    
    $
    19,084
    
    
    $
    10
    
    
    $
    
    
    
    $
    19,413Accounts receivable, net
    
    
    
    
    
    
    14,980
    
    
    
    49,265
    
    
    
    
    
    
    
    
    
    
    
    64,245Inventories, net
    
    
    
    
    
    
    6,258
    
    
    
    10,073
    
    
    
    
    
    
    
    
    
    
    
    16,331Prepaid expenses and other current assets
    
    
    1,067
    
    
    
    6,753
    
    
    
    806
    
    
    
    
    
    
    
    
    
    
    
    8,626Total current assets
    
    
    1,067
    
    
    
    28,310
    
    
    
    79,228
    
    
    
    10
    
    
    
    
    
    
    
    108,615Property, plant and equipment, net
    
    
    
    
    
    
    98,006
    
    
    
    64,927
    
    
    
    1,528
    
    
    
    
    
    
    
    164,461Other assets, net
    
    
    
    
    
    
    176
    
    
    
    4,119
    
    
    
    
    
    
    
    
    
    
    
    4,295Intercompany receivable
    
    
    15,101
    
    
    
    117,891
    
    
    
    
    
    
    
    82,471
    
    
    
    (215,463
    )
    
    
    Investment in subsidiaries
    
    
    63,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,391
    )
    
    
    Excess reorganization value over the fair value of identifiable assets
    
    
    
    
    
    
    84,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,064Total assets
    
    $
    79,559
    
    
    $
    328,447
    
    
    $
    148,274
    
    
    $
    84,009
    
    
    $
    (278,854
    )
    
    $
    361,435Liabilities and stockholders equity (deficiency in assets)Current liabilities:Accounts payable
    
    $
    
    
    
    $
    7,222
    
    
    $
    10,298
    
    
    $
    
    
    
    $
    
    
    
    $
    17,520Accrued liabilities
    
    
    
    
    
    
    10,682
    
    
    
    15,608
    
    
    
    
    
    
    
    
    
    
    
    26,290Current portion of long-term debt
    
    
    
    
    
    
    751
    
    
    
    1,065
    
    
    
    28
    
    
    
    
    
    
    
    1,844Total current liabilities
    
    
    
    
    
    
    18,655
    
    
    
    26,971
    
    
    
    28
    
    
    
    
    
    
    
    45,654Long-term debt, less current portion
    
    
    
    
    
    
    150,390
    
    
    
    9,646
    
    
    
    21
    
    
    
    
    
    
    
    160,057Investment in subsidiary
    
    
    
    
    
    
    133,960
    
    
    
    
    
    
    
    429
    
    
    
    (134,389
    )
    
    
    Intercompany payable
    
    
    1,333
    
    
    
    
    
    
    
    214,131
    
    
    
    
    
    
    
    (215,464
    )
    
    
    Accrued pension and other employee benefits
    
    
    
    
    
    
    6,979
    
    
    
    15,224
    
    
    
    
    
    
    
    1
    
    
    
    22,204Other long-term liabilities
    
    
    
    
    
    
    38,083
    
    
    
    16,262
    
    
    
    949
    
    
    
    
    
    
    
    55,294Stockholders equity (deficiency in assets)
    
    
    78,226
    
    
    
    (19,620
    )
    
    
    (133,960
    )
    
    
    82,582
    
    
    
    70,998
    
    
    
    78,226Total
liabilities and stockholders equity (deficiency in assets)
    
    $
    79,559
    
    
    $
    328,447
    
    
    $
    148,274
    
    
    $
    84,009
    
    
    $
    (278,854
    )
    
    $
    361,435
 Condensed Consolidating Balance Sheet  December 31, 2004 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    148
    
    
    $
    16,041
    
    
    $
    2
    
    
    $
    
    
    
    $
    16,191Accounts receivable, net
    
    
    
    
    
    
    11,199
    
    
    
    41,494
    
    
    
    
    
    
    
    
    
    
    
    52,693Inventories, net
    
    
    
    
    
    
    7,317
    
    
    
    9,100
    
    
    
    
    
    
    
    
    
    
    
    16,417Prepaid expenses and other current assets
    
    
    2,627
    
    
    
    2,011
    
    
    
    1,044
    
    
    
    
    
    
    
    
    
    
    
    5,682Total current assets
    
    
    2,627
    
    
    
    20,675
    
    
    
    67,679
    
    
    
    2
    
    
    
    
    
    
    
    90,983Property, plant and equipment, net
    
    
    
    
    
    
    103,554
    
    
    
    67,116
    
    
    
    1,528
    
    
    
    
    
    
    
    172,198Other assets, net
    
    
    
    
    
    
    179
    
    
    
    4,180
    
    
    
    
    
    
    
    
    
    
    
    4,359Intercompany receivable
    
    
    13,808
    
    
    
    100,789
    
    
    
    
    
    
    
    76,550
    
    
    
    (191,147
    )
    
    
    Investment in subsidiaries
    
    
    22,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,792
    )
    
    
    Excess reorganization value over fair value of identifiable assets
    
    
    
    
    
    
    84,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,064Total assets
    
    $
    39,227
    
    
    $
    309,261
    
    
    $
    138,975
    
    
    $
    78,080
    
    
    $
    (213,939
    )
    
    $
    351,604Liabilities and stockholders equity (deficiency in assets)Current liabilities:Accounts payable
    
    $
    
    
    
    $
    8,109
    
    
    $
    8,436
    
    
    $
    
    
    
    $
    
    
    
    $
    16,545Accrued liabilities
    
    
    
    
    
    
    7,990
    
    
    
    16,305
    
    
    
    
    
    
    
    
    
    
    
    24,295Current portion of long-term debt
    
    
    
    
    
    
    734
    
    
    
    1,217
    
    
    
    28
    
    
    
    
    
    
    
    1,979Total current liabilities
    
    
    
    
    
    
    16,833
    
    
    
    25,958
    
    
    
    28
    
    
    
    
    
    
    
    42,819Long-term debt, less current portion
    
    
    
    
    
    
    151,213
    
    
    
    49,550
    
    
    
    34
    
    
    
    
    
    
    
    200,797Investment in subsidiary
    
    
    
    
    
    
    157,176
    
    
    
    
    
    
    
    632
    
    
    
    (157,808
    )
    
    
    Intercompany payable
    
    
    1,332
    
    
    
    261
    
    
    
    189,554
    
    
    
    
    
    
    
    (191,147
    )
    
    
    Accrued pension and other employee benefits
    
    
    
    
    
    
    7,211
    
    
    
    16,037
    
    
    
    
    
    
    
    
    
    
    
    23,248Other long-term liabilities
    
    
    
    
    
    
    30,483
    
    
    
    15,052
    
    
    
    1,310
    
    
    
    
    
    
    
    46,845Stockholders equity (deficiency in assets)
    
    
    37,895
    
    
    
    (53,916
    )
    
    
    (157,176
    )
    
    
    76,076
    
    
    
    135,016
    
    
    
    37,895Total liabilities and stockholders equity (deficiency in assets).
    
    $
    39,227
    
    
    $
    309,261
    
    
    $
    138,975
    
    
    $
    78,080
    
    
    $
    (213,939
    )
    
    $
    351,604
 12




---



##### Table of Contents



Condensed Consolidating Statement of Operations  Three Months Ended June 30, 2005 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    58,209
    
    
    $
    105,815
    
    
    $
    
    
    
    $
    (31,165
    )
    
    $
    132,859Cost of sales
    
    
    
    
    
    
    (44,830
    )
    
    
    (78,932
    )
    
    
    
    
    
    
    31,165
    
    
    
    (92,597
    )Gross profit
    
    
    
    
    
    
    13,379
    
    
    
    26,883
    
    
    
    
    
    
    
    
    
    
    
    40,262Selling, general and administrative expenses
    
    
    (341
    )
    
    
    (2,002
    )
    
    
    (5,668
    )
    
    
    (3
    )
    
    
    
    
    
    
    (8,014
    )Other items
    
    
    
    
    
    
    (1,408
    )
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    (1,497
    )Operating income (loss)
    
    
    (341
    )
    
    
    9,969
    
    
    
    21,126
    
    
    
    (3
    )
    
    
    
    
    
    
    30,751Interest expense, net
    
    
    
    
    
    
    (3,801
    )
    
    
    (312
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4,114
    )Other income (expense), net
    
    
    
    
    
    
    461
    
    
    
    (3,271
    )
    
    
    3,219
    
    
    
    
    
    
    
    409Income (loss) before income taxes
    
    
    (341
    )
    
    
    6,629
    
    
    
    17,543
    
    
    
    3,215
    
    
    
    
    
    
    
    27,046Income tax expense
    
    
    
    
    
    
    (1,920
    )
    
    
    (1,037
    )
    
    
    
    
    
    
    
    
    
    
    (2,957
    )Net income (loss) before equity in earnings of subsidiaries
    
    
    (341
    )
    
    
    4,709
    
    
    
    16,506
    
    
    
    3,215
    
    
    
    
    
    
    
    24,089Equity in net income of subsidiaries
    
    
    24,430
    
    
    
    16,506
    
    
    
    
    
    
    
    (1
    )
    
    
    (40,935
    )
    
    
    Net income (loss)
    
    $
    24,089
    
    
    $
    21,215
    
    
    $
    16,506
    
    
    $
    3,214
    
    
    $
    (40,935
    )
    
    $
    24,089
 Condensed Consolidating Statement of Operations  Three Months Ended June 30, 2004 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    45,989
    
    
    $
    74,648
    
    
    $
    
    
    
    $
    (22,555
    )
    
    $
    98,082Cost of sales
    
    
    
    
    
    
    (40,397
    )
    
    
    (67,485
    )
    
    
    
    
    
    
    22,555
    
    
    
    (85,327
    )Gross profit
    
    
    
    
    
    
    5,592
    
    
    
    7,163
    
    
    
    
    
    
    
    
    
    
    
    12,755Selling, general and administrative expenses
    
    
    (218
    )
    
    
    (2,123
    )
    
    
    (6,049
    )
    
    
    22
    
    
    
    
    
    
    
    (8,368
    )Other items
    
    
    
    
    
    
    (1,520
    )
    
    
    (1,658
    )
    
    
    
    
    
    
    
    
    
    
    (3,178
    )Operating income (loss)
    
    
    (218
    )
    
    
    1,949
    
    
    
    (544
    )
    
    
    22
    
    
    
    
    
    
    
    1,209Interest expense, net
    
    
    
    
    
    
    (3,762
    )
    
    
    (797
    )
    
    
    (2
    )
    
    
    
    
    
    
    (4,561
    )Other income (expense), net
    
    
    
    
    
    
    608
    
    
    
    (2,246
    )
    
    
    2,248
    
    
    
    (1
    )
    
    
    609Income (loss) before income taxes
    
    
    (218
    )
    
    
    (1,205
    )
    
    
    (3,587
    )
    
    
    2,268
    
    
    
    (1
    )
    
    
    (2,743
    )Income tax expense
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342Net income (loss) before equity in earnings of subsidiaries
    
    
    (218
    )
    
    
    (863
    )
    
    
    (3,587
    )
    
    
    2,268
    
    
    
    (1
    )
    
    
    (2,401
    )Equity in net income of subsidiaries
    
    
    (2,183
    )
    
    
    (3,587
    )
    
    
    
    
    
    
    (1
    )
    
    
    5,771
    
    
    
    Net income (loss)
    
    $
    (2,401
    )
    
    $
    (4,450
    )
    
    $
    (3,587
    )
    
    $
    2,267
    
    
    $
    5,770
    
    
    $
    (2,401
    )
 Condensed Consolidating Statement of Operations  Six Months Ended June 30, 2005 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    114,042
    
    
    $
    199,197
    
    
    $
    
    
    
    $
    (61,290
    )
    
    $
    251,949Cost of sales
    
    
    
    
    
    
    (84,260
    )
    
    
    (157,440
    )
    
    
    205
    
    
    
    61,290
    
    
    
    (180,205
    )Gross profit
    
    
    
    
    
    
    29,782
    
    
    
    41,757
    
    
    
    205
    
    
    
    
    
    
    
    71,744Selling, general and administrative expenses
    
    
    (552
    )
    
    
    (4,546
    )
    
    
    (11,376
    )
    
    
    (3
    )
    
    
    
    
    
    
    (16,477
    )Other items
    
    
    
    
    
    
    (1,986
    )
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (2,002
    )Operating income (loss)
    
    
    (552
    )
    
    
    23,250
    
    
    
    30,365
    
    
    
    202
    
    
    
    
    
    
    
    53,265Interest expense, net
    
    
    
    
    
    
    (7,576
    )
    
    
    (792
    )
    
    
    (2
    )
    
    
    
    
    
    
    (8,370
    )Other income (expense), net
    
    
    
    
    
    
    635
    
    
    
    (6,155
    )
    
    
    6,102
    
    
    
    
    
    
    
    582Income (loss) before income taxes
    
    
    (552
    )
    
    
    16,309
    
    
    
    23,418
    
    
    
    6,302
    
    
    
    
    
    
    
    45,477Income tax expense
    
    
    
    
    
    
    (5,231
    )
    
    
    (1,137
    )
    
    
    
    
    
    
    
    
    
    
    (6,368
    )Net income (loss) before equity in earnings of subsidiaries
    
    
    (552
    )
    
    
    11,078
    
    
    
    22,281
    
    
    
    6,302
    
    
    
    
    
    
    
    39,109Equity in net income of subsidiaries
    
    
    39,661
    
    
    
    22,281
    
    
    
    
    
    
    
    204
    
    
    
    (62,146
    )
    
    
    Net income (loss)
    
    $
    39,109
    
    
    $
    33,359
    
    
    $
    22,281
    
    
    $
    6,506
    
    
    $
    (62,146
    )
    
    $
    39,109
 13




---



##### Table of Contents



Condensed Consolidating Statement of Operations  Six Months Ended June 30, 2004 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    90,042
    
    
    $
    142,040
    
    
    $
    
    
    
    $
    (42,968
    )
    
    $
    189,114Cost of sales
    
    
    
    
    
    
    (79,595
    )
    
    
    (136,017
    )
    
    
    
    
    
    
    42,968
    
    
    
    (172,644
    )Gross profit
    
    
    
    
    
    
    10,447
    
    
    
    6,023
    
    
    
    
    
    
    
    
    
    
    
    16,470Selling, general and administrative expenses
    
    
    (455
    )
    
    
    (4,171
    )
    
    
    (10,384
    )
    
    
    53
    
    
    
    
    
    
    
    (14,957
    )Other items
    
    
    
    
    
    
    (1,521
    )
    
    
    (1,822
    )
    
    
    
    
    
    
    
    
    
    
    (3,343
    )Operating income (loss)
    
    
    (455
    )
    
    
    4,755
    
    
    
    (6,183
    )
    
    
    53
    
    
    
    
    
    
    
    (1,830
    )Interest expense, net
    
    
    
    
    
    
    (7,547
    )
    
    
    (1,652
    )
    
    
    (4
    )
    
    
    
    
    
    
    (9,203
    )Other income (expense), net
    
    
    
    
    
    
    739
    
    
    
    (4,304
    )
    
    
    4,300
    
    
    
    
    
    
    
    735Income (loss) before income taxes
    
    
    (455
    )
    
    
    (2,053
    )
    
    
    (12,139
    )
    
    
    4,349
    
    
    
    
    
    
    
    (10,298
    )Income tax expense
    
    
    
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    604Net income (loss) before equity in earnings of subsidiaries
    
    
    (455
    )
    
    
    (1,449
    )
    
    
    (12,139
    )
    
    
    4,349
    
    
    
    
    
    
    
    (9,694
    )Equity in net income of subsidiaries
    
    
    (9,239
    )
    
    
    (12,139
    )
    
    
    
    
    
    
    
    
    
    
    21,378
    
    
    
    Net income (loss)
    
    $
    9,694
    
    
    $
    (13,588
    )
    
    $
    (12,139
    )
    
    $
    4,349
    
    
    $
    21,378
    
    
    $
    (9,694
    )
 Condensed Consolidating Statement of Cash Flows  Six Months Ended June 30, 2005 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from operating activities:Net cash flows from operating activities
    
    $
    (289
    )
    
    
    3,365
    
    
    $
    46,310
    
    
    $
    21
    
    
    $
    49,407Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (2,364
    )
    
    
    (3,214
    )
    
    
    
    
    
    
    (5,578
    )Net cash flows from investing activities
    
    
    
    
    
    
    (2,364
    )
    
    
    (3,214
    )
    
    
    
    
    
    
    (5,578
    )Cash flows from financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on debt
    
    
    
    
    
    
    (827
    )
    
    
    (40,055
    )
    
    
    (12
    )
    
    
    (40,894
    )Proceeds from issuance of stock
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    289Net cash flows from (used in) financing activities
    
    
    289
    
    
    
    (827
    )
    
    
    (40,055
    )
    
    
    (12
    )
    
    
    (40,605
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    172
    
    
    
    3,041
    
    
    
    9
    
    
    
    3,222Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    148
    
    
    
    16,041
    
    
    
    2
    
    
    
    16,191Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    320
    
    
    $
    19,082
    
    
    $
    11
    
    
    $
    19,413
 Condensed Consolidating Statement of Cash Flows  Six Months Ended June 30, 2004 (in
thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from operating activities:Net cash flows from operating activities
    
    $
    (114
    )
    
    $
    4,844
    
    
    $
    6,133
    
    
    $
    (23
    )
    
    $
    10,840Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (925
    )
    
    
    (3,885
    )
    
    
    
    
    
    
    (4,810
    )Net cash flows from investing activities
    
    
    
    
    
    
    (925
    )
    
    
    (3,885
    )
    
    
    
    
    
    
    (4,810
    )Cash flows from financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    
    
    
    
    (434
    )
    
    
    
    
    
    
    (434
    )Payments on debt
    
    
    
    
    
    
    (792
    )
    
    
    (651
    )
    
    
    (6
    )
    
    
    (1,449
    )Proceeds from issuance of stock
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114Net cash flows from (used in) financing activities
    
    
    114
    
    
    
    (792
    )
    
    
    (1,085
    )
    
    
    (6
    )
    
    
    (1,769
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    99Net change in cash and cash equivalents
    
    
    
    
    
    
    3,226
    
    
    
    1,163
    
    
    
    (29
    )
    
    
    4,360Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    499
    
    
    
    1,423
    
    
    
    24
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    3,725
    
    
    $
    2,586
    
    
    $
    (5
    )
    
    $
    6,306
 11. Pension and Other Postretirement Benefits
  14




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##### Table of Contents



PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    231
    
    
    $
    21
    
    
    $
    252Interest cost
    
    
    705
    
    
    
    727
    
    
    
    1,432Expected return on plan assets
    
    
    (759
    )
    
    
    (807
    )
    
    
    (1,566
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss
    
    
    121
    
    
    
    154
    
    
    
    275Loss on plan curtailment
    
    
    727
    
    
    
    
    
    
    
    727Net periodic benefit cost
    
    $
    1,025
    
    
    $
    95
    
    
    $
    1,120
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended June 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    290
    
    
    $
    (234
    )
    
    $
    56Interest cost
    
    
    556
    
    
    
    715
    
    
    
    1,271Expected return on plan assets
    
    
    (603
    )
    
    
    (765
    )
    
    
    (1,368
    )Amortization of prior service costs
    
    
    
    
    
    
    2
    
    
    
    2Amortization of net actuarial loss
    
    
    86
    
    
    
    467
    
    
    
    553Net periodic benefit cost
    
    $
    329
    
    
    $
    185
    
    
    $
    514
  PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedSix Months Ended June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    566
    
    
    $
    43
    
    
    $
    609Interest cost
    
    
    1,342
    
    
    
    1,454
    
    
    
    2,796Expected return on plan assets
    
    
    (1,455
    )
    
    
    (1,614
    )
    
    
    (3,069
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss
    
    
    121
    
    
    
    308
    
    
    
    429Loss on plan curtailment
    
    
    727
    
    
    
    
    
    
    
    727Net periodic benefit cost
    
    $
    1,301
    
    
    $
    191
    
    
    $
    1,492
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedSix Months Ended June 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    587
    
    
    $
    159
    
    
    $
    746Interest cost
    
    
    1,126
    
    
    
    1,455
    
    
    
    2,581Expected return on plan assets
    
    
    (1,221
    )
    
    
    (1,498
    )
    
    
    (2,719
    )Amortization of prior service costs
    
    
    
    
    
    
    1
    
    
    
    1Amortization of net actuarial loss
    
    
    156
    
    
    
    445
    
    
    
    601Net periodic benefit cost
    
    $
    648
    
    
    $
    562
    
    
    $
    1,210
  15




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##### Table of Contents



PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    48
    
    
    $
    
    
    
    $
    48Interest cost
    
    
    83
    
    
    
    9
    
    
    
    92Amortization of prior service costs
    
    
    (7
    )
    
    
    (156
    )
    
    
    (163
    )Amortization of net actuarial gain (loss)
    
    
    36
    
    
    
    (12
    )
    
    
    24Net periodic benefit cost
    
    $
    160
    
    
    $
    (159
    )
    
    $
    1
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended June 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    36
    
    
    $
    1
    
    
    $
    37Interest cost
    
    
    67
    
    
    
    9
    
    
    
    76Amortization of prior service costs
    
    
    (7
    )
    
    
    (156
    )
    
    
    (163
    )Amortization of net actuarial gain (loss)
    
    
    23
    
    
    
    (8
    )
    
    
    15Net periodic benefit cost
    
    $
    119
    
    
    $
    (154
    )
    
    $
    (35
    )
  PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedSix Months Ended June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    95
    
    
    $
    1
    
    
    $
    96Interest cost
    
    
    167
    
    
    
    18
    
    
    
    185Amortization of prior service costs
    
    
    (15
    )
    
    
    (312
    )
    
    
    (327
    )Amortization of net actuarial gain (loss)
    
    
    18
    
    
    
    (24
    )
    
    
    (6
    )Net periodic benefit cost
    
    $
    265
    
    
    $
    (317
    )
    
    $
    (52
    )
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedSix Months Ended June 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    72
    
    
    $
    2
    
    
    $
    74Interest cost
    
    
    136
    
    
    
    18
    
    
    
    154Amortization of prior service costs
    
    
    (14
    )
    
    
    (156
    )
    
    
    (170
    )Amortization of net actuarial gain (loss)
    
    
    3
    
    
    
    (18
    )
    
    
    (15
    )Net periodic benefit cost
    
    $
    197
    
    
    $
    (154
    )
    
    $
    43
 12. Commitments and Contingencies
  16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Product Prices
   2004:First Quarter
    
    $
    339Second Quarter
    
    
    354Third Quarter
    
    
    409Fourth Quarter
    
    
    4802005:First Quarter
    
    
    548Second Quarter
    
    
    577
  Chlorine
    
    Caustic Soda2004:First Quarter
    
    $
    75
    
    
    $
    Second Quarter
    
    
    20
    
    
    
    95Third Quarter
    
    
    20
    
    
    
    110Fourth Quarter
    
    
    20
    
    
    
    502005:First Quarter
    
    
    20
    
    
    
    40Second Quarter
    
    
    
    
    
    
    30
 17




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Production
  18




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##### Table of Contents



2004:First Quarter
    
    
    169,555Second Quarter
    
    
    183,404Third Quarter
    
    
    177,751Fourth Quarter
    
    
    173,6902005:First Quarter
    
    
    161,635Second Quarter
    
    
    181,003
       2004:First Quarter
    
    
    30,636Second Quarter
    
    
    39,504Third Quarter
    
    
    35,080Fourth Quarter
    
    
    24,5992005:First Quarter
    
    
    16,315Second Quarter
    
    
    9,706
 19




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##### Table of Contents



Raw Material and Transportation Costs
   Percentage ofTotal Power Costs
    
    Cost of Sales2004First Quarter
    
    $
    19,989
    
    
    
    23
    %Second Quarter
    
    
    21,273
    
    
    
    25
    %Third Quarter
    
    
    23,051
    
    
    
    26
    %Fourth Quarter
    
    
    22,201
    
    
    
    24
    %2005First Quarter
    
    
    20,334
    
    
    
    23
    %Second Quarter
    
    
    23,594
    
    
    
    25
    %
    Cost Reduction Measures and Asset Redeployments
  20




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##### Table of Contents



Liability
    
    
    Costs Recognized
    
    
    Costs Paid
    
    
    LiabilityBalance
    
    
    Six Months
    
    
    Six Months
    
    
    Balance
    
    
    Cumulativeas of
    
    
    Ended
    
    
    Ended
    
    
    as of
    
    
    CostsDec. 31, 2004
    
    
    June 30, 2005
    
    
    June 30, 2005
    
    
    June 30, 2005
    
    
    RecognizedSeveranceProject STAR  Original
    
    $
    1,446
    
    
    $
    110
    
    
    $
    974
    
    
    $
    582
    
    
    $
    3,652Extension of Project STAR concepts
to Dalhousie
    
    
    
    
    
    
    340
    
    
    
    21
    
    
    
    319
    
    
    
    340Total, Project STAR
    
    
    1,446
    
    
    
    450
    
    
    
    995
    
    
    
    901
    
    
    
    3,992Cornwall  Asset Transfer and Sale
    
    
    447
    
    
    
    1,347
    
    
    
    101
    
    
    
    1,693
    
    
    
    1,794Total Severance
    
    $
    1,893
    
    
    $
    1,797
    
    
    $
    1,096
    
    
    $
    2,594
    
    
    $
    5,786
  21




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Environmental Issues
     Liquidity and Capital Resources
 Debt, Financial Leverage and Covenants.
  22




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##### Table of Contents



ThreeMonths
    
    
    Three
    
    
    Three
    
    
    Three
    
    
    TwelveEnded
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsSeptember
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended30,
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    June 30,2004
    
    
    2004
    
    
    2005
    
    
    2005
    
    
    2005Net income
    
    $
    3,917
    
    
    $
    4,535
    
    
    $
    15,020
    
    
    $
    24,089
    
    
    $
    47,561Income tax (benefit) expense
    
    
    (1,185
    )
    
    
    3,916
    
    
    
    3,411
    
    
    
    2,957
    
    
    
    9,099Income before income taxes
    
    
    2,732
    
    
    
    8,451
    
    
    
    18,431
    
    
    
    27,046
    
    
    
    56,660Depreciation and amortization
    
    
    5,557
    
    
    
    5,603
    
    
    
    5,685
    
    
    
    6,647
    
    
    
    23,492Interest expense
    
    
    4,578
    
    
    
    4,575
    
    
    
    4,256
    
    
    
    4,114
    
    
    
    17,523Environmental charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lender-Defined EBITDA
    
    $
    12,867
    
    
    $
    18,629
    
    
    $
    28,372
    
    
    $
    37,807
    
    
    $
    97,675
   23




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##### Table of Contents



Future Payment Commitments.
   Net Operating Loss Carryforward.
  24




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##### Table of Contents



Net Cash Flows from Operating Activities.
 Net Cash Flows used in Investing Activities.
 Net Cash Flows used in Financing Activities.
 Critical Accounting Policies and Estimates
  RESULTS OF OPERATIONS
 Three Months Ended June 30, 2005, Compared to Three Months Ended June 30, 2004
 Revenues.
 Three Months EndedJune 30,2005
    
    
    2004Chlorine and caustic soda
    
    $
    100,208
    
    
    $
    69,013Other products
    
    
    32,651
    
    
    
    29,069$
    132,859
    
    
    $
    98,082ECU netback*
    
    $
    577
    
    
    $
    354
 
 *
    
    The ECU netback relates
only to sales of chlorine and caustic soda to
customers, and not to the value of chlorine and
caustic soda that is incorporated in other
products that we manufacture and sell. 25




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##### Table of Contents



Cost of Sales.
 Selling, General and Administrative Expenses.
 Other Items.
 Interest Expense.
 Other Income, Net.
 26




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##### Table of Contents



Income Tax Benefit (Expense).
 Six Months Ended June 30, 2005, Compared to Six Months Ended June 30, 2004
 Revenues.
 Six Months EndedJune 30,2005
    
    
    2004Chlorine and caustic soda
    
    $
    191,623
    
    
    $
    133,758Other products
    
    
    60,326
    
    
    
    55,356$
    251,949
    
    
    $
    189,114ECU netback*
    
    $
    563
    
    
    $
    346
 
 *
    
    The ECU netback
relates only to sales of chlorine and caustic
soda to customers, and not to the value of
chlorine and caustic soda that is
incorporated in other products that we
manufacture and sell.   Cost of Sales.
 Selling, General and Administrative Expenses.
 27




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##### Table of Contents



Other Items.
 Interest Expense.
 Other Income, Net.
 Income Tax Benefit (Expense).
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   28




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Name
    
    For
    
    Withheld
    

Broker
Non-
VotesDavid N. Weinstein
    
    
    10,805,388
    
    
    
    14,185
    
    
    
    Marvin E. Lesser
    
    
    10,805,388
    
    
    
    14,185
    
    
    
    Michael Y. McGovern
    
    
    10,805,053
    
    
    
    14,520
    
    
    
    Charles L. Mears
    
    
    10,805,388
    
    
    
    14,185
    
    
    
    David A. Scholes
    
    
    10,805,053
    
    
    
    14,520
    
    
    
    Richard L. Urbanowski
    
    
    10,805,388
    
    
    
    14,185
    
    
    
    
  
 ITEM 5. OTHER INFORMATION
 Forward-Looking Statements
   
    
    general economic, business and market conditions, including economic instability or a downturn in the markets served by us;
    
    the cyclical nature of our product markets and operating results;
    
    competitive pressures affecting selling prices and volumes;
    
    the supply/demand balance for our products, including the impact of excess industry capacity of the construction of new
industry capacity;
    
    the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of production
hazards, an interruption in the supply of electricity, salt or other raw materials, or labor unrest;
    
    failure to comply with financial covenants contained in our debt instruments;
    
    inability to make scheduled payments on or refinance our indebtedness;
    
    loss of key customers or suppliers;
 29




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##### Table of Contents




    
    increased prices for raw materials, including electricity;
    
    disruption of transportation or higher than expected transportation or logistics costs;
    
    environmental costs and other expenditures in excess of those projected;
    
    changes in laws and regulations inside or outside the United States;
    
    uncertainty with respect to interest rates and fluctuations in currency exchange rates;
    
    limitations on our NOL utilization;
    
    the effects of our organizational efficiency project;
    
    our ability to complete the sale of certain excess land at our Henderson facility; and
    
    the occurrence of extraordinary events, such as the attacks on the World Trade Center and the Pentagon that occurred on
September 11, 2001, or the war in Iraq.
  
 ITEM 6. EXHIBITS
 10.1
    
    Agreement dated June 3, 2005, by and between Pioneer Americas LLC
(PALLC) and Marnell Properties, LLC relating to the sale of
approximately sixty acres of real property adjacent to PALLCs
chlor-alkali manufacturing facility in Henderson, Nevada.31.1
    
    Certification of Michael Y. McGovern required by Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Gary L. Pittman required by Rule 13a-14(a) or Rule
15d-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Michael Y. McGovern required by Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350.32.2
    
    Certification of Gary L. Pittman required by Rule 13a-14(b) or Rule
15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.99.1
    
    Items incorporated by reference from the Pioneer Companies, Inc.
Form 10-K for the year ended December 31, 2004: Item 1 Business 
Risks (pages 13  19 of the Form 10-K).
 
 
    
    Indicates exhibit previously filed with the Securities and Exchange Commission as indicated
and incorporated herein by reference 30




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##### Table of Contents



SIGNATURES
  PIONEER COMPANIES, INC.Date: August 12, 2005
    By:
    /s/ Gary L. PittmanGary L. PittmanVice President and Chief Financial Officer
(Principal Financial Officer) 31




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##### Table of Contents



Exhibit Index
 10.1
    
    Agreement dated June 3, 2005, by and between Pioneer Americas LLC
(PALLC) and Marnell Properties, LLC relating to the sale of
approximately sixty acres of real property adjacent to PALLCs
chlor-alkali manufacturing facility in Henderson, Nevada.31.1
    
    Certification of Michael Y McGovern required by Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Gary L. Pittman required by Rule 13a-14(a) or Rule
15d-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Michael Y. McGovern required by Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350.32.2
    
    Certification of Gary L. Pittman required by Rule 13a-14(b) or Rule
15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350.99.1
    
    Items incorporated by reference from the Pioneer Companies, Inc.
Form 10-K for the year ended December 31, 2004: Item 1 Business 
Risks (pages 13  19 of the Form 10-K).
 
 
    
    Indicates exhibit previously filed with the Securities and Exchange Commission as indicated
and incorporated herein by reference 32