##### Table of Contents



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 September 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)
 þ o
 o þ
 þ o
 o þ




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TABLE OF CONTENTS
 PagePart IFinancial InformationItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsSeptember 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of OperationsThree Months Ended September 30, 2005 and 2004 and Nine Months Ended September 30, 2005 and 2004
    
    
    4Consolidated Statements of Cash FlowsNine Months Ended September 30, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4.
    
    Controls and Procedures
    
    
    31Part IIOther InformationItem 1.
    
    Legal Proceedings
    
    
    31Item 5.
    
    Other Information
    
    
    31Item 6.
    
    Exhibits
    
    
    33Certification of Michael Y. McGovern required by Rule 13a-14a/15d-14aCertification of Gary L. Pittman required by Rule 13a-14a/15d-14aCertification of Michael Y. McGovern required by Rule 13a-14b/15d-14bCertification of Gary L. Pittman required by Rule 13a-14b/15d-14b
  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, 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 sales of certain excess land,
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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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 PIONEER COMPANIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (unaudited, in thousands, except par value)
 September 30,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    53,468
    
    
    $
    16,191Accounts receivable, net of allowance for doubtful accounts of $2,662
at September 30, 2005 and $2,563 at December 31, 2004
    
    
    62,660
    
    
    
    52,693Inventories, net
    
    
    14,022
    
    
    
    16,417Prepaid expenses and other current assets
    
    
    6,608
    
    
    
    5,682Total current assets
    
    
    136,758
    
    
    
    90,983Property, plant and equipment:Land
    
    
    6,520
    
    
    
    6,520Buildings and improvements
    
    
    30,000
    
    
    
    30,375Machinery and equipment
    
    
    205,533
    
    
    
    198,121Construction in progress
    
    
    2,303
    
    
    
    3,013244,356
    
    
    
    238,029Less: accumulated depreciation
    
    
    (83,820
    )
    
    
    (65,831
    )Property, plant and equipment, net
    
    
    160,536
    
    
    
    172,198Other assets, net
    
    
    4,731
    
    
    
    4,359Excess reorganization value over the fair value of identifiable assets
    
    
    84,064
    
    
    
    84,064Total assets
    
    $
    386,089
    
    
    $
    351,604Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    18,110
    
    
    $
    16,545Accrued liabilities
    
    
    35,397
    
    
    
    24,295Short-term debt, including current portion of long-term debt
    
    
    1,825
    
    
    
    1,979Total current liabilities
    
    
    55,332
    
    
    
    42,819Long-term debt, less current portion
    
    
    152,948
    
    
    
    200,797Accrued pension and other employee benefits
    
    
    21,615
    
    
    
    23,248Other long-term liabilities
    
    
    56,947
    
    
    
    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, 11,527 shares issued and outstanding
at September 30, 2005 and 11,176 shares issued and outstanding at December 31, 2004
    
    
    115
    
    
    
    112Additional paid-in capital
    
    
    35,787
    
    
    
    33,649Other comprehensive loss
    
    
    (8,054
    )
    
    
    (8,054
    )Retained earnings
    
    
    71,399
    
    
    
    12,188Total stockholders equity
    
    
    99,247
    
    
    
    37,895Total liabilities and stockholders equity
    
    $
    386,089
    
    
    $
    351,604
  3




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##### Table of Contents



PIONEER COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    132,773
    
    
    $
    105,961
    
    
    $
    384,722
    
    
    $
    295,075Cost of sales
    
    
    (96,087
    )
    
    
    (91,282
    )
    
    
    (276,292
    )
    
    
    (263,926
    )Gross profit
    
    
    36,686
    
    
    
    14,679
    
    
    
    108,430
    
    
    
    31,149Selling, general and administrative expenses
    
    
    (8,735
    )
    
    
    (5,424
    )
    
    
    (25,212
    )
    
    
    (20,381
    )Other items
    
    
    (483
    )
    
    
    (97
    )
    
    
    (2,485
    )
    
    
    (3,440
    )Operating income
    
    
    27,468
    
    
    
    9,158
    
    
    
    80,733
    
    
    
    7,328Interest expense, net
    
    
    (3,597
    )
    
    
    (4,578
    )
    
    
    (11,967
    )
    
    
    (13,781
    )Other expense, net
    
    
    (1,711
    )
    
    
    (1,848
    )
    
    
    (1,129
    )
    
    
    (1,113
    )Income (loss) before income taxes
    
    
    22,160
    
    
    
    2,732
    
    
    
    67,637
    
    
    
    (7,566
    )Income tax benefit (expense)
    
    
    (2,058
    )
    
    
    1,185
    
    
    
    (8,426
    )
    
    
    1,789Net income (loss)
    
    $
    20,102
    
    
    $
    3,917
    
    
    $
    59,211
    
    
    $
    (5,777
    )Net income (loss) per share:Basic
    
    $
    1.76
    
    
    $
    0.39
    
    
    $
    5.24
    
    
    $
    (0.58
    )Diluted
    
    $
    1.70
    
    
    $
    0.38
    
    
    $
    5.02
    
    
    $
    (0.58
    )Weighted average number of shares outstanding:Basic
    
    
    11,412
    
    
    
    10,038
    
    
    
    11,291
    
    
    
    10,032Diluted
    
    
    11,814
    
    
    
    10,426
    
    
    
    11,791
    
    
    
    10,032
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PIONEER COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Nine Months EndedSeptember 302005
    
    
    2004Operating activities:Net income (loss)
    
    $
    59,211
    
    
    $
    (5,777
    )Adjustments to reconcile net income (loss) to net cash flows from operating activities:Depreciation and amortization
    
    
    18,582
    
    
    
    19,910Provision for (recovery of) losses on accounts receivable
    
    
    99
    
    
    
    (776
    )Deferred tax (benefit) expense
    
    
    7,212
    
    
    
    (1,789
    )Loss on disposals of assets
    
    
    1,532
    
    
    
    258Currency exchange loss
    
    
    1,052
    
    
    
    1,180Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (8,402
    )
    
    
    (7,157
    )Decrease in inventories, prepaid expenses and other current assets
    
    
    1,860
    
    
    
    1,813Increase in
other assets, net
    
    
    (440
    )
    
    
    (728
    )Increase in accounts payable and accrued liabilities
    
    
    8,851
    
    
    
    14,371Increase (decrease) in other long-term liabilities
    
    
    796
    
    
    
    (2,845
    )Other
    
    
    
    
    
    
    346Net cash flows from operating activities
    
    
    90,353
    
    
    
    18,806Investing activities:Capital expenditures
    
    
    (7,496
    )
    
    
    (6,179
    )Proceeds from disposal of assets
    
    
    1,228
    
    
    
    35Net cash flows used in investing activities
    
    
    (6,268
    )
    
    
    (6,144
    )Financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    (9,984
    )Repayments of long-term debt
    
    
    (48,107
    )
    
    
    (1,629
    )Proceeds from issuance of stock, net
    
    
    1,204
    
    
    
    145Net cash flows used in financing activities
    
    
    (46,903
    )
    
    
    (11,468
    )Effect of exchange rate changes on cash
    
    
    95
    
    
    
    132Net change in cash and cash equivalents
    
    
    37,277
    
    
    
    1,326Cash and cash equivalents at beginning of period
    
    
    16,191
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    53,468
    
    
    $
    3,272
  5




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##### Table of Contents



PIONEER COMPANIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 1. Organization and Basis of Presentation
      2. Debt
  September 30,
    
    
    December 31,2005
    
    
    2004Senior Secured Debt:Senior Secured Floating Rate Guaranteed Notes, due December 2006, variable rates
based on the three-month LIBOR (1.98% during the relevant period) plus 3.5%
(Senior Guaranteed Notes)
    
    $
    
    
    
    $
    43,151Senior Floating Rate Term Notes, due December 2006, variable interest rates based
on the three-month LIBOR (1.98% during the relevant period) plus 3.5% (Senior
Floating Notes)
    
    
    
    
    
    
    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 September 30, 2005,
and December 31, 2004, respectively
    
    
    1,228
    
    
    
    1,947Other notes, maturing in various years through 2014, with various installments, at
various interest rates
    
    
    3,545
    
    
    
    4,588Total
    
    
    154,773
    
    
    
    202,776Short-term debt, including current maturities of long-term debt
    
    
    (1,825
    )
    
    
    (1,979
    )Long-term debt, less current maturities
    
    $
    152,948
    
    
    $
    200,797
 6




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7




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3. Environmental Liabilities
     8




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##### Table of Contents



Claude Frazier, et al. v. Pioneer
Americas, LLC and State of Louisiana through the Department of Environmental Quality
 Frazier
 4. Asset Redeployments
     9




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##### Table of Contents



5. Other Items
 see
    Liability Balance
    
    
    Costs Recognized
    
    
    Costs Paid
    
    
    Liability Balance
    
    
    Cumulativeas of
    
    
    Nine Months Ended
    
    
    Nine Months Ended
    
    
    as of
    
    
    CostsDecember 31, 2004
    
    
    September 30, 2005
    
    
    September 30, 2005
    
    
    September 30, 2005
    
    
    RecognizedSeveranceProject STAR  original
    
    $
    1,446
    
    
    $
    110
    
    
    $
    1,147
    
    
    $
    409
    
    
    $
    3,652Extension of Project STAR concepts
to Dalhousie
    
    
    
    
    
    
    340
    
    
    
    78
    
    
    
    262
    
    
    
    340Total, Project STAR
    
    
    1,446
    
    
    
    450
    
    
    
    1,225
    
    
    
    671
    
    
    
    3,992Cornwall  asset transfer and sale
    
    
    447
    
    
    
    1,347
    
    
    
    189
    
    
    
    1,605
    
    
    
    1,794Termination of Tacoma terminal
operations
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    225
    
    
    
    225Total severance
    
    $
    1,893
    
    
    $
    2,022
    
    
    $
    1,414
    
    
    $
    2,501
    
    
    $
    6,011
 6. Net Income (Loss) per Share
 see
  10




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator for basic and diluted net income (loss) per share:Net income (loss)
    
    $
    20,102
    
    
    $
    3,917
    
    
    $
    59,211
    
    
    $
    (5,777
    )Denominator for basic and diluted net income (loss) per share:Weighted average shares
    
    
    11,412
    
    
    
    10,038
    
    
    
    11,291
    
    
    
    10,032Potentially dilutive common shares:Stock options
    
    
    402
    
    
    
    388
    
    
    
    500
    
    
    
    Denominator for diluted net income (loss) per share
    
    
    11,814
    
    
    
    10,426
    
    
    
    11,791
    
    
    
    10,032Net income (loss) per share:Basic
    
    $
    1.76
    
    
    $
    0.39
    
    
    $
    5.24
    
    
    $
    (0.58
    )Diluted
    
    $
    1.70
    
    
    $
    0.38
    
    
    $
    5.02
    
    
    $
    (0.58
    )
  7. Inventories
  September 30,
    
    
    December 31,2005
    
    
    2004Raw materials, supplies and parts, net
    
    $
    7,634
    
    
    $
    7,089Finished goods
    
    
    6,388
    
    
    
    9,328$
    14,022
    
    
    $
    16,417
 8. Prepaid Expenses and Other Current Assets
  September 30,
    
    
    December 31,2005
    
    
    2004Prepaid insurance
    
    $
    592
    
    
    $
    2,627Deferred tax assets
    
    
    4,885
    
    
    
    1,476Other
    
    
    1,131
    
    
    
    1,579Prepaid expenses and other current assets
    
    $
    6,608
    
    
    $
    5,682
 9. Accrued Liabilities
  September 30,
    
    
    December 31,2005
    
    
    2004Payroll and benefits
    
    $
    11,634
    
    
    $
    7,250Electricity
    
    
    8,819
    
    
    
    8,558Interest and bank fees
    
    
    3,866
    
    
    
    261Other
    
    
    11,078
    
    
    
    8,226Accrued liabilities
    
    $
    35,397
    
    
    $
    24,295
 10. Stock-Based Compensation
  11




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss):As reported
    
    $
    20,102
    
    
    $
    3,917
    
    
    $
    59,211
    
    
    $
    (5,777
    )Add: Stock-based
compensation expense
included in reported net
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Deduct: Stock-based
compensation expense
determined under
fair-value-based method
    
    
    (212
    )
    
    
    (165
    )
    
    
    (603
    )
    
    
    (451
    )Pro forma net income (loss)
    
    $
    19,890
    
    
    $
    3,752
    
    
    $
    58,608
    
    
    $
    (6,171
    )Net income (loss) per common share:Basic, as reported
    
    $
    1.76
    
    
    $
    0.39
    
    
    $
    5.24
    
    
    $
    (0.58
    )Basic, pro forma
    
    $
    1.74
    
    
    $
    0.37
    
    
    $
    5.19
    
    
    $
    (0.62
    )Diluted, as reported
    
    $
    1.70
    
    
    $
    0.38
    
    
    $
    5.02
    
    
    $
    (0.58
    )Diluted, pro forma
    
    $
    1.68
    
    
    $
    0.36
    
    
    $
    4.97
    
    
    $
    (0.62
    )
  11. Supplemental Cash Flow Information
  Nine Months EndedSeptember 30,2005
    
    
    2004Cash payments for:Interest
    
    $
    8,500
    
    
    $
    9,976Income taxes
    
    
    300
    
    
    
    Noncash investing activities:Property, plant and equipment acquisitions
included in accounts payable
    
    $
    1,043
    
    
    $
    
 12. Condensed Consolidating Financial Statements
   12




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Condensed Consolidating Balance Sheet  September 30, 2005 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    3,697
    
    
    $
    49,766
    
    
    $
    5
    
    
    $
    
    
    
    $
    53,468Accounts receivable, net
    
    
    
    
    
    
    13,678
    
    
    
    48,982
    
    
    
    
    
    
    
    
    
    
    
    62,660Inventories, net
    
    
    
    
    
    
    6,096
    
    
    
    7,926
    
    
    
    
    
    
    
    
    
    
    
    14,022Prepaid expenses and other current assets
    
    
    591
    
    
    
    5,731
    
    
    
    284
    
    
    
    2
    
    
    
    
    
    
    
    6,608Total current assets
    
    
    591
    
    
    
    29,202
    
    
    
    106,958
    
    
    
    7
    
    
    
    
    
    
    
    136,758Property, plant and equipment, net
    
    
    
    
    
    
    95,501
    
    
    
    63,506
    
    
    
    1,529
    
    
    
    
    
    
    
    160,536Other assets, net
    
    
    
    
    
    
    185
    
    
    
    4,546
    
    
    
    
    
    
    
    
    
    
    
    4,731Intercompany receivable
    
    
    16,317
    
    
    
    135,540
    
    
    
    
    
    
    
    85,475
    
    
    
    (237,332
    )
    
    
    Investment in subsidiaries
    
    
    83,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,672
    )
    
    
    Excess reorganization value over the fair value of identifiable assets
    
    
    
    
    
    
    84,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,064Total assets
    
    $
    100,580
    
    
    $
    344,492
    
    
    $
    175,010
    
    
    $
    87,011
    
    
    $
    (321,004
    )
    
    $
    386,089Liabilities and stockholders equity (deficiency in assets)Current liabilities:Accounts payable
    
    $
    
    
    
    $
    8,690
    
    
    $
    9,420
    
    
    $
    
    
    
    $
    
    
    
    $
    18,110Accrued liabilities
    
    
    
    
    
    
    15,095
    
    
    
    20,302
    
    
    
    
    
    
    
    
    
    
    
    35,397Current portion of long-term debt
    
    
    
    
    
    
    808
    
    
    
    989
    
    
    
    28
    
    
    
    
    
    
    
    1,825Total current liabilities
    
    
    
    
    
    
    24,593
    
    
    
    30,711
    
    
    
    28
    
    
    
    
    
    
    
    55,332Long-term debt, less current portion
    
    
    
    
    
    
    150,420
    
    
    
    2,513
    
    
    
    15
    
    
    
    
    
    
    
    152,948Investment in subsidiary
    
    
    
    
    
    
    125,093
    
    
    
    
    
    
    
    429
    
    
    
    (125,522
    )
    
    
    Intercompany payable
    
    
    1,332
    
    
    
    328
    
    
    
    235,672
    
    
    
    
    
    
    
    (237,332
    )
    
    
    Accrued pension and other employee benefits
    
    
    
    
    
    
    6,906
    
    
    
    14,709
    
    
    
    
    
    
    
    
    
    
    
    21,615Other long-term liabilities
    
    
    
    
    
    
    39,542
    
    
    
    16,498
    
    
    
    907
    
    
    
    
    
    
    
    56,947Stockholders equity (deficiency in assets)
    
    
    99,248
    
    
    
    (2,390
    )
    
    
    (125,093
    )
    
    
    85,632
    
    
    
    41,850
    
    
    
    99,247Total liabilities and stockholders equity (deficiency in assets)
    
    $
    100,580
    
    
    $
    344,492
    
    
    $
    175,010
    
    
    $
    87,011
    
    
    $
    (321,004
    )
    
    $
    386,089
 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
 13




---



##### Table of Contents



Condensed Consolidating Statement of Operations  Three Months Ended September 30, 2005 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    62,025
    
    
    $
    105,558
    
    
    $
    
    
    
    $
    (34,810
    )
    
    $
    132,773Cost of sales
    
    
    
    
    
    
    (44,548
    )
    
    
    (86,349
    )
    
    
    
    
    
    
    34,810
    
    
    
    (96,087
    )Gross profit
    
    
    
    
    
    
    17,477
    
    
    
    19,209
    
    
    
    
    
    
    
    
    
    
    
    36,686Selling, general and administrative expenses
    
    
    (179
    )
    
    
    (2,204
    )
    
    
    (6,349
    )
    
    
    (3
    )
    
    
    
    
    
    
    (8,735
    )Other items
    
    
    
    
    
    
    (431
    )
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    (483
    )Operating income (loss)
    
    
    (179
    )
    
    
    14,842
    
    
    
    12,808
    
    
    
    (3
    )
    
    
    
    
    
    
    27,468Interest expense, net
    
    
    
    
    
    
    (3,745
    )
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    (3,597
    )Other income (expense), net
    
    
    
    
    
    
    (1,689
    )
    
    
    (3,076
    )
    
    
    3,054
    
    
    
    
    
    
    
    (1,711
    )Income (loss) before income taxes
    
    
    (179
    )
    
    
    9,408
    
    
    
    9,880
    
    
    
    3,051
    
    
    
    
    
    
    
    22,160Income tax expense
    
    
    
    
    
    
    (1,044
    )
    
    
    (1,014
    )
    
    
    
    
    
    
    
    
    
    
    (2,058
    )Net income (loss) before equity in earnings of subsidiaries
    
    
    (179
    )
    
    
    8,364
    
    
    
    8,866
    
    
    
    3,051
    
    
    
    
    
    
    
    20,102Equity in net income of subsidiaries
    
    
    20,281
    
    
    
    8,866
    
    
    
    
    
    
    
    
    
    
    
    (29,147
    )
    
    
    Net income
    
    $
    20,102
    
    
    $
    17,230
    
    
    $
    8,866
    
    
    $
    3,051
    
    
    $
    (29,147
    )
    
    $
    20,102
 Condensed Consolidating Statement of Operations  Three Months Ended September 30, 2004 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    49,616
    
    
    $
    81,521
    
    
    $
    
    
    
    $
    (25,176
    )
    
    $
    105,961Cost of sales
    
    
    
    
    
    
    (41,801
    )
    
    
    (74,521
    )
    
    
    (136
    )
    
    
    25,176
    
    
    
    (91,282
    )Gross profit
    
    
    
    
    
    
    7,815
    
    
    
    7,000
    
    
    
    (136
    )
    
    
    
    
    
    
    14,679Selling, general and administrative expenses
    
    
    (218
    )
    
    
    (1,629
    )
    
    
    (3,577
    )
    
    
    
    
    
    
    
    
    
    
    (5,424
    )Other items
    
    
    
    
    
    
    
    
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (97
    )Operating income (loss)
    
    
    (218
    )
    
    
    6,186
    
    
    
    3,326
    
    
    
    (136
    )
    
    
    
    
    
    
    9,158Interest expense, net
    
    
    
    
    
    
    (3,802
    )
    
    
    (774
    )
    
    
    (2
    )
    
    
    
    
    
    
    (4,578
    )Other income (expense), net
    
    
    
    
    
    
    (1,848
    )
    
    
    (2,434
    )
    
    
    2,434
    
    
    
    
    
    
    
    (1,848
    )Income (loss) before income taxes
    
    
    (218
    )
    
    
    536
    
    
    
    118
    
    
    
    2,296
    
    
    
    
    
    
    
    2,732Income tax benefit
    
    
    
    
    
    
    1,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,185Net income (loss) before equity in earnings of subsidiaries
    
    
    (218
    )
    
    
    1,721
    
    
    
    118
    
    
    
    2,296
    
    
    
    
    
    
    
    3,917Equity in net income of subsidiaries
    
    
    4,135
    
    
    
    118
    
    
    
    
    
    
    
    138
    
    
    
    (4,391
    )
    
    
    Net income
    
    $
    3,917
    
    
    $
    1,839
    
    
    $
    118
    
    
    $
    2,434
    
    
    $
    (4,391
    )
    
    $
    3,917
 Condensed Consolidating Statement of Operations  Nine Months Ended September 30, 2005 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    176,066
    
    
    $
    304,756
    
    
    $
    
    
    
    $
    (96,100
    )
    
    $
    384,722Cost of sales
    
    
    
    
    
    
    (128,808
    )
    
    
    (243,789
    )
    
    
    205
    
    
    
    96,100
    
    
    
    (276,292
    )Gross profit
    
    
    
    
    
    
    47,258
    
    
    
    60,967
    
    
    
    205
    
    
    
    
    
    
    
    108,430Selling, general and administrative expenses
    
    
    (732
    )
    
    
    (6,750
    )
    
    
    (17,726
    )
    
    
    (4
    )
    
    
    
    
    
    
    (25,212
    )Other items
    
    
    
    
    
    
    (2,417
    )
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    (2,485
    )Operating income (loss)
    
    
    (732
    )
    
    
    38,091
    
    
    
    43,173
    
    
    
    201
    
    
    
    
    
    
    
    80,733Interest expense, net
    
    
    
    
    
    
    (11,320
    )
    
    
    (644
    )
    
    
    (3
    )
    
    
    
    
    
    
    (11,967
    )Other income (expense), net
    
    
    
    
    
    
    (1,055
    )
    
    
    (9,230
    )
    
    
    9,156
    
    
    
    
    
    
    
    (1,129
    )Income (loss) before income taxes
    
    
    (732
    )
    
    
    25,716
    
    
    
    33,299
    
    
    
    9,354
    
    
    
    
    
    
    
    67,637Income tax expense
    
    
    
    
    
    
    (6,275
    )
    
    
    (2,151
    )
    
    
    
    
    
    
    
    
    
    
    (8,426
    )Net income (loss) before equity in earnings of subsidiaries
    
    
    (732
    )
    
    
    19,441
    
    
    
    31,148
    
    
    
    9,354
    
    
    
    
    
    
    
    59,211Equity in net income of subsidiaries
    
    
    59,943
    
    
    
    31,148
    
    
    
    
    
    
    
    202
    
    
    
    (91,293
    )
    
    
    Net income
    
    $
    59,211
    
    
    $
    50,589
    
    
    $
    31,148
    
    
    $
    9,556
    
    
    $
    (91,293
    )
    
    $
    59,211
 14




---



##### Table of Contents



Condensed Consolidating Statement of Operations  Nine Months Ended September 30, 2004 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    139,659
    
    
    $
    223,561
    
    
    $
    
    
    
    $
    (68,145
    )
    
    $
    295,075Cost of sales
    
    
    
    
    
    
    (121,396
    )
    
    
    (210,538
    )
    
    
    (137
    )
    
    
    68,145
    
    
    
    (263,926
    )Gross profit
    
    
    
    
    
    
    18,263
    
    
    
    13,023
    
    
    
    (137
    )
    
    
    
    
    
    
    31,149Selling, general and administrative expenses
    
    
    (673
    )
    
    
    (5,800
    )
    
    
    (13,961
    )
    
    
    53
    
    
    
    
    
    
    
    (20,381
    )Other items
    
    
    
    
    
    
    (1,521
    )
    
    
    (1,919
    )
    
    
    
    
    
    
    
    
    
    
    (3,440
    )Operating income (loss)
    
    
    (673
    )
    
    
    10,942
    
    
    
    (2,857
    )
    
    
    (84
    )
    
    
    
    
    
    
    7,328Interest expense, net
    
    
    
    
    
    
    (11,350
    )
    
    
    (2,427
    )
    
    
    (4
    )
    
    
    
    
    
    
    (13,781
    )Other income (expense), net
    
    
    
    
    
    
    (1,109
    )
    
    
    (6,738
    )
    
    
    6,734
    
    
    
    
    
    
    
    (1,113
    )Income (loss) before income taxes
    
    
    (673
    )
    
    
    (1,517
    )
    
    
    (12,022
    )
    
    
    6,646
    
    
    
    
    
    
    
    (7,566
    )Income tax benefit
    
    
    
    
    
    
    1,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,789Net income (loss) before equity in earnings of subsidiaries
    
    
    (673
    )
    
    
    272
    
    
    
    (12,022
    )
    
    
    6,646
    
    
    
    
    
    
    
    (5,777
    )Equity in net income (loss) of subsidiaries
    
    
    (5,104
    )
    
    
    (12,022
    )
    
    
    
    
    
    
    (141
    )
    
    
    17,267
    
    
    
    Net income (loss)
    
    $
    (5,777
    )
    
    $
    (11,750
    )
    
    $
    (12,022
    )
    
    $
    6,505
    
    
    $
    17,267
    
    
    $
    (5,777
    )
 Condensed Consolidating Statement of Cash Flows  Nine Months Ended September 30, 2005 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from operating activities:Net cash flows from operating activities
    
    $
    (1,204
    )
    
    $
    7,445
    
    
    $
    84,090
    
    
    $
    22
    
    
    $
    90,353Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (3,170
    )
    
    
    (4,326
    )
    
    
    
    
    
    
    (7,496
    )Proceeds from disposal of assets
    
    
    
    
    
    
    6
    
    
    
    1,222
    
    
    
    
    
    
    
    1,228Net cash flows used in investing activities
    
    
    
    
    
    
    (3,164
    )
    
    
    (3,104
    )
    
    
    
    
    
    
    (6,268
    )Cash flows from financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on debt
    
    
    
    
    
    
    (827
    )
    
    
    (47,262
    )
    
    
    (18
    )
    
    
    (48,107
    )Proceeds from issuance of stock
    
    
    1,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,204Net cash flows from (used in) financing activities
    
    
    1,204
    
    
    
    (827
    )
    
    
    (47,262
    )
    
    
    (18
    )
    
    
    (46,903
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    95Net change in cash and cash equivalents
    
    
    
    
    
    
    3,549
    
    
    
    33,724
    
    
    
    4
    
    
    
    37,277Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    148
    
    
    
    16,041
    
    
    
    2
    
    
    
    16,191Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    3,697
    
    
    $
    49,765
    
    
    $
    6
    
    
    $
    53,468
 Condensed Consolidating Statement of Cash Flows  Nine Months Ended September 30, 2004 (in thousands)
 PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from operating activities:Net cash flows from operating activities
    
    $
    (145
    )
    
    $
    2,111
    
    
    $
    16,847
    
    
    $
    (7
    )
    
    $
    18,806Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (1,384
    )
    
    
    (4,795
    )
    
    
    
    
    
    
    (6,179
    )Proceeds from disposal of assets
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Net cash flows used in investing activities
    
    
    
    
    
    
    (1,384
    )
    
    
    (4,760
    )
    
    
    
    
    
    
    (6,144
    )Cash flows from financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    
    
    
    
    (9,984
    )
    
    
    
    
    
    
    (9,984
    )Payments on debt
    
    
    
    
    
    
    (792
    )
    
    
    (826
    )
    
    
    (11
    )
    
    
    (1,629
    )Proceeds from issuance of stock
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Net cash flows from (used in) financing activities
    
    
    145
    
    
    
    (792
    )
    
    
    (10,810
    )
    
    
    (11
    )
    
    
    (11,468
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    132Net change in cash and cash equivalents
    
    
    
    
    
    
    67
    
    
    
    1,277
    
    
    
    (18
    )
    
    
    1,326Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    499
    
    
    
    1,423
    
    
    
    24
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    566
    
    
    $
    2,700
    
    
    $
    6
    
    
    $
    3,272
 13. Pension and Other Postretirement Benefits
  15




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##### Table of Contents



PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended September 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    293
    
    
    $
    13
    
    
    $
    306Interest cost
    
    
    693
    
    
    
    779
    
    
    
    1,472Expected return on plan assets
    
    
    (755
    )
    
    
    (792
    )
    
    
    (1,547
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss
    
    
    70
    
    
    
    329
    
    
    
    399Loss on plan curtailment
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    301
    
    
    $
    329
    
    
    $
    630
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended September 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    343
    
    
    $
    79
    
    
    $
    422Interest cost
    
    
    660
    
    
    
    728
    
    
    
    1,388Expected return on plan assets
    
    
    (726
    )
    
    
    (748
    )
    
    
    (1,474
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss (gain)
    
    
    (156
    )
    
    
    183
    
    
    
    27Net periodic benefit cost
    
    $
    121
    
    
    $
    242
    
    
    $
    363
  PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedNine Months Ended September 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    859
    
    
    $
    56
    
    
    $
    915Interest cost
    
    
    2,035
    
    
    
    2,233
    
    
    
    4,268Expected return on plan assets
    
    
    (2,210
    )
    
    
    (2,406
    )
    
    
    (4,616
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss
    
    
    191
    
    
    
    637
    
    
    
    828Loss on plan curtailment
    
    
    727
    
    
    
    
    
    
    
    727Net periodic benefit cost
    
    $
    1,602
    
    
    $
    520
    
    
    $
    2,122
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedNine Months Ended September 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    930
    
    
    $
    238
    
    
    $
    1,168Interest cost
    
    
    1,786
    
    
    
    2,183
    
    
    
    3,969Expected return on plan assets
    
    
    (1,947
    )
    
    
    (2,246
    )
    
    
    (4,193
    )Amortization of prior service costs
    
    
    
    
    
    
    1
    
    
    
    1Amortization of net actuarial loss
    
    
    
    
    
    
    628
    
    
    
    628Net periodic benefit cost
    
    $
    769
    
    
    $
    804
    
    
    $
    1,573
  16




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##### Table of Contents



PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended September 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    47
    
    
    $
    1
    
    
    $
    48Interest cost
    
    
    84
    
    
    
    8
    
    
    
    92Amortization of prior service costs
    
    
    (8
    )
    
    
    (155
    )
    
    
    (163
    )Amortization of net actuarial loss (gain)
    
    
    12
    
    
    
    (12
    )
    
    
    Net periodic benefit cost
    
    $
    135
    
    
    $
    (158
    )
    
    $
    (23
    )
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended September 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    42
    
    
    $
    
    
    
    $
    42Interest cost
    
    
    78
    
    
    
    8
    
    
    
    86Amortization of prior service costs
    
    
    (8
    )
    
    
    (78
    )
    
    
    (86
    )Amortization of net actuarial gain
    
    
    (5
    )
    
    
    (8
    )
    
    
    (13
    )Net periodic benefit cost
    
    $
    107
    
    
    $
    (78
    )
    
    $
    29
  PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedNine Months Ended September 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    142
    
    
    $
    2
    
    
    $
    144Interest cost
    
    
    251
    
    
    
    26
    
    
    
    277Amortization of prior service costs
    
    
    (23
    )
    
    
    (467
    )
    
    
    (490
    )Amortization of net actuarial loss (gain)
    
    
    30
    
    
    
    (36
    )
    
    
    (6
    )Net periodic benefit cost
    
    $
    400
    
    
    $
    (475
    )
    
    $
    (75
    )
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedNine Months Ended September 30, 2004Components of net periodic benefit cost:Service cost
    
    $
    114
    
    
    $
    2
    
    
    $
    116Interest cost
    
    
    214
    
    
    
    26
    
    
    
    240Amortization of prior service costs
    
    
    (22
    )
    
    
    (234
    )
    
    
    (256
    )Amortization of net actuarial gain
    
    
    (2
    )
    
    
    (26
    )
    
    
    (28
    )Net periodic benefit cost
    
    $
    304
    
    
    $
    (232
    )
    
    $
    72
 17




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##### Table of Contents



14. Commitments and Contingencies
   Claude Frazier, et al.
v. Pioneer Americas, LLC and State of Louisiana through the Department of Environmental Quality See
 
 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
    
    
    577Third Quarter
    
    
    581
  18




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##### Table of Contents



Chlorine
    
    
    Caustic Soda2004:First Quarter
    
    $
    75
    
    
    $
    Second Quarter
    
    
    20
    
    
    
    95Third Quarter
    
    
    20
    
    
    
    110Fourth Quarter
    
    
    20
    
    
    
    502005:First Quarter
    
    
    20
    
    
    
    40Second Quarter
    
    
    
    
    
    
    30Third Quarter
    
    
    25
    
    
    
    125
     19




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##### Table of Contents



Production
  2004:First Quarter
    
    
    169,555Second Quarter
    
    
    183,404Third Quarter
    
    
    177,751Fourth Quarter
    
    
    173,6902005:First Quarter
    
    
    161,635Second Quarter
    
    
    181,003Third Quarter
    
    
    164,343
    20




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##### Table of Contents



2004:First Quarter
    
    
    30,636Second Quarter
    
    
    39,504Third Quarter
    
    
    35,080Fourth Quarter
    
    
    24,5992005:First Quarter
    
    
    16,315Second Quarter
    
    
    9,706Third Quarter
    
    
    15,277
  Raw Material and Transportation Costs
   21




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##### Table of Contents



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
    %Third Quarter
    
    
    25,109
    
    
    
    26
    %
     Cost Reduction Measures and Asset Redeployments
   22




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##### Table of Contents



Costs PaidLiability Balance
    
    
    Costs Recognized
    
    
    Nine Months
    
    
    Liability Balance
    
    
    Cumulativeas of
    
    
    Nine Months Ended
    
    
    Ended
    
    
    as of
    
    
    CostsDec. 31, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2005
    
    
    RecognizedSeveranceProject STAR  Original
    
    $
    1,446
    
    
    $
    110
    
    
    $
    1,147
    
    
    $
    409
    
    
    $
    3,652Extension of Project STAR
concepts to Dalhousie
    
    
    
    
    
    
    340
    
    
    
    78
    
    
    
    262
    
    
    
    340Total, Project STAR
    
    
    1,446
    
    
    
    450
    
    
    
    1,225
    
    
    
    671
    
    
    
    3,992Cornwall  asset transfer and sale
    
    
    447
    
    
    
    1,347
    
    
    
    189
    
    
    
    1,605
    
    
    
    1,794Termination of Tacoma terminal
operations
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    225
    
    
    
    225Total severance
    
    $
    1,893
    
    
    $
    2,022
    
    
    $
    1,414
    
    
    $
    2,501
    
    
    $
    6,011
   23




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##### Table of Contents



Environmental Issues
      Liquidity and Capital Resources
 Debt, Financial Leverage and Covenants.
  24




---



##### Table of Contents



Three
    
    
    Three
    
    
    Three
    
    
    Three
    
    
    TwelveMonths
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedDec. 31,
    
    
    March 31,
    
    
    June 30,
    
    
    Sept. 30,
    
    
    Sept. 30,2004
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005Net income
    
    $
    4,535
    
    
    $
    15,020
    
    
    $
    24,089
    
    
    $
    20,102
    
    
    $
    63,746Income tax expense
    
    
    3,916
    
    
    
    3,411
    
    
    
    2,957
    
    
    
    2,058
    
    
    
    12,342Income before income taxes
    
    
    8,451
    
    
    
    18,431
    
    
    
    27,046
    
    
    
    22,160
    
    
    
    76,088Depreciation and amortization
    
    
    5,603
    
    
    
    5,685
    
    
    
    6,647
    
    
    
    6,250
    
    
    
    24,185Interest expense
    
    
    4,575
    
    
    
    4,256
    
    
    
    4,114
    
    
    
    3,597
    
    
    
    16,542Lender-Defined EBITDA
    
    $
    18,629
    
    
    $
    28,372
    
    
    $
    37,807
    
    
    $
    32,007
    
    
    $
    116,815
  25




---



##### Table of Contents



Future Payment Commitments.
   Net Operating Loss Carryforward.
  26




---



##### 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
  27




---



##### Table of Contents



RESULTS OF OPERATIONS
 Three Months Ended September 30, 2005, Compared to Three Months Ended September 30, 2004
 Revenues.
 Three Months EndedSeptember 30,2005
    
    
    2004Chlorine and caustic soda
    
    $
    96,500
    
    
    $
    75,153Other products
    
    
    36,273
    
    
    
    30,808$
    132,773
    
    
    $
    105,961ECU netback*
    
    $
    581
    
    
    $
    409
 
 *
    
    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.
 28




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##### Table of Contents



Other Items.
 Interest Expense.
 Other Expense, Net.
 Income Tax Benefit (Expense).
 Nine Months Ended September 30, 2005, Compared to Nine Months Ended September 30, 2004
 Revenues.
 Nine Months EndedSeptember 30,2005
    
    
    2004Chlorine and caustic soda
    
    $
    288,123
    
    
    $
    208,911Other products
    
    
    96,599
    
    
    
    86,164$
    384,722
    
    
    $
    295,075ECU netback*
    
    $
    569
    
    
    $
    366
 
 *
    
    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.   29




---



##### Table of Contents



Cost of Sales.
 Selling, General and Administrative Expenses.
 Other Items.
 Interest Expense.
 Other Expense, Net.
 Income Tax Benefit (Expense).
 30




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Claude Frazier, et al. v. Pioneer
Americas LLC and State of Louisiana through the Department of Environmental Quality
  
 ITEM 5. OTHER INFORMATION
 Forward-Looking Statements
  31




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##### Table of Contents




    
    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, or costs and expenses occurring as a result of
production hazards, an interruption in the supply of electricity, salt or other raw materials, labor unrest or natural
disasters;
    
    failure to comply with financial covenants contained in our debt instruments;
    
    inability to make scheduled payments on or refinance our indebtedness;
    
    loss of key customers or suppliers;
    
    increased prices for raw materials, including electricity;
    
    disruption of transportation or higher than expected transportation or logistics costs;
    
    environmental liabilities or costs and other expenditures in excess of those
projected or resulting from unexpected discharges into the environment;
    
    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 sales of certain excess land; 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.
  32




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##### Table of Contents



ITEM 6. EXHIBITS
 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 33




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##### Table of Contents



SIGNATURES
  PIONEER COMPANIES, INC.Date: November 14, 2005
    
    By:
    
    /s/ Gary L. PittmanGary L. PittmanVice President and Chief Financial Officer(Principal Financial Officer)
 34




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##### Table of Contents



Exhibit Index
 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 35