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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 March 31, 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
    
    06-1215192(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ Indicate by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court. Yes þ No o On May 9, 2005, there were 11,284,774 shares of common stock of Pioneer Companies, Inc.
outstanding.




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TABLE OF CONTENTS PagePart IFinancial InformationItem 1.
    
    Consolidated Financial StatementsConsolidated Balance SheetsMarch 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of OperationsThree Months Ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Cash FlowsThree Months Ended March 31, 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
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27Part IIOther InformationItem 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    29Certification of Rule 13a-14a/15d-14aCertification of Rule 13a-14a/15d-14aCertification of Michael Y. McGovern pursuant to Section 1350Certification of Gary L. Pittman pursuant to Section 1350
  Certain statements in thisForm 10-Qregarding 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, competitive prices, the cyclical nature of the markets for
many of Pioneers products and raw materials, the results of Pioneers organizational efficiency
project, the effect of Pioneers results of operations on its debt agreements, Pioneers ability to
procure the sale of certain excess land and water rights at its Henderson facility, and other risks
and uncertainties. Attention is directed to Pioneers Annual Report onForm 10-Kand Item 5 of Part
II of this Report onForm 10-Qfor 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)
 March 31,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    15,566
    
    
    $
    16,191Accounts receivable, net of allowance for doubtful accounts of
$3,166 at March 31, 2005 and $2,563 at December 31, 2004
    
    
    57,107
    
    
    
    52,693Inventories, net
    
    
    14,365
    
    
    
    16,417Prepaid expenses and other current assets
    
    
    11,266
    
    
    
    5,682Total current assets
    
    
    98,304
    
    
    
    90,983Property, plant and equipment:Land
    
    
    6,520
    
    
    
    6,520Buildings and improvements
    
    
    30,393
    
    
    
    30,375Machinery and equipment
    
    
    199,695
    
    
    
    198,121Construction in progress
    
    
    5,387
    
    
    
    3,013241,995
    
    
    
    238,029Less: accumulated depreciation
    
    
    (71,524
    )
    
    
    (65,831
    )Property, plant and equipment, net
    
    
    170,471
    
    
    
    172,198Other assets, net
    
    
    4,298
    
    
    
    4,359Excess reorganization value over the fair value of identifiable assets
    
    
    84,064
    
    
    
    84,064Total assets
    
    $
    357,137
    
    
    $
    351,604Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    17,266
    
    
    $
    16,545Accrued liabilities
    
    
    27,751
    
    
    
    24,295Short-term debt, including current portion of long-term debt
    
    
    1,822
    
    
    
    1,979Total current liabilities
    
    
    46,839
    
    
    
    42,819Long-term debt, less current portion
    
    
    178,649
    
    
    
    200,797Accrued pension and other employee benefits
    
    
    22,668
    
    
    
    23,248Other long-term liabilities
    
    
    56,058
    
    
    
    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, 11,176
shares issued and outstanding at March 31, 2005 and December 31,
2004
    
    
    112
    
    
    
    112Additional paid-in capital
    
    
    33,657
    
    
    
    33,649Other comprehensive loss
    
    
    (8,054
    )
    
    
    (8,054
    )Retained earnings
    
    
    27,208
    
    
    
    12,188Total stockholders equity
    
    
    52,923
    
    
    
    37,895Total liabilities and stockholders equity
    
    $
    357,137
    
    
    $
    351,604
 See notes to consolidated financial statements. 3




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PIONEER COMPANIES, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands, except per share data)
 Three Months EndedMarch 312005
    
    
    2004Revenues
    
    $
    119,090
    
    
    $
    91,032Cost of sales
    
    
    (87,608
    )
    
    
    (87,317
    )Gross profit
    
    
    31,482
    
    
    
    3,715Selling, general and administrative expenses
    
    
    (8,463
    )
    
    
    (6,589
    )Other items
    
    
    (505
    )
    
    
    (165
    )Operating income (loss)
    
    
    22,514
    
    
    
    (3,039
    )Interest expense, net
    
    
    (4,256
    )
    
    
    (4,642
    )Other income, net
    
    
    173
    
    
    
    126Income (loss) before income taxes
    
    
    18,431
    
    
    
    (7,555
    )Income tax benefit (expense)
    
    
    (3,411
    )
    
    
    262Net income (loss)
    
    $
    15,020
    
    
    $
    (7,293
    )Net income (loss) per share:Basic
    
    $
    1.34
    
    
    $
    (0.73
    )Diluted
    
    $
    1.28
    
    
    $
    (0.73
    )Weighted average number of shares outstanding:Basic
    
    
    11,176
    
    
    
    10,006Diluted
    
    
    11,779
    
    
    
    10,006
 See notes to consolidated financial statements. 4




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PIONEER COMPANIES, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Three Months EndedMarch 31,2005
    
    
    2004Operating activities:Net income (loss)
    
    $
    15,020
    
    
    $
    (7,293
    )Adjustments to reconcile net income (loss) to net cash flows from operating
activities:Depreciation and amortization
    
    
    5,685
    
    
    
    8,884Provision for (recovery of) losses on accounts receivable
    
    
    603
    
    
    
    (653
    )Deferred tax (benefit) expense
    
    
    3,311
    
    
    
    (262
    )Gain (loss) on disposals of assets
    
    
    (74
    )
    
    
    175Currency exchange gain
    
    
    (173
    )
    
    
    (129
    )Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (5,064
    )
    
    
    654(Increase) decrease in inventories, prepaid expenses and other current assets
    
    
    (3,459
    )
    
    
    2,929(Increase) decrease in other assets
    
    
    39
    
    
    
    (381
    )Increase in accounts payable and accrued liabilities
    
    
    4,197
    
    
    
    9,679Increase in other long-term liabilities
    
    
    5,470
    
    
    
    600Net cash flows from operating activities
    
    
    25,555
    
    
    
    14,203Investing activities:Capital expenditures
    
    
    (3,932
    )
    
    
    (2,325
    )Proceeds from disposal of assets
    
    
    74
    
    
    
    Net cash flows used in investing activities
    
    
    (3,858
    )
    
    
    (2,325
    )Financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    (10,209
    )Repayments of long-term debt
    
    
    (22,316
    )
    
    
    (1,166
    )Proceeds from issuance of stock, net
    
    
    8
    
    
    
    18Net cash flows used in financing activities
    
    
    (22,308
    )
    
    
    (11,357
    )Effect of exchange rate changes on cash
    
    
    (14
    )
    
    
    35Net change in cash and cash equivalents
    
    
    (625
    )
    
    
    556Cash and cash equivalents at beginning of period
    
    
    16,191
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    15,566
    
    
    $
    2,502
 See notes to consolidated financial statements. 5




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PIONEER COMPANIES, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 1. Organization and Basis of Presentation The consolidated financial statements include the accounts of Pioneer Companies, Inc. (the
Company or PCI) and its consolidated subsidiaries (collectively, Pioneer). All significant
intercompany balances and transactions have been eliminated in consolidation. Pioneer operates in one industry segment, production and sales of chlor-alkali and related
products. The products consist of chlorine and caustic soda along with related products, primarily
bleach and hydrochloric acid. The segment consists of Pioneers two operating subsidiaries: PCI
Chemicals Canada Company (PCI Canada) and Pioneer Americas LLC (Pioneer Americas). The consolidated balance sheet at March 31, 2005, and the consolidated statements of
operations and cash flows for the periods presented are unaudited and reflect all adjustments,
which consist only of normal recurring items, that management considers necessary for a fair
presentation. Operating results for the first three months of 2005 are not necessarily indicative
of results to be expected for the year ending December 31, 2005. All dollar amounts in the
tabulations in the notes to the consolidated financial statements are stated in thousands of
dollars unless otherwise indicated. Certain amounts are reclassified in prior periods to conform to
current period presentations. The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires estimates and assumptions that affect the
reported amounts as well as certain disclosures. Pioneers financial statements include amounts
that are based on managements best estimates and judgments. Actual results could differ from those
estimates. The consolidated balance sheet at December 31, 2004, is derived from the December 31, 2004,
audited consolidated financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of America, since certain information
and disclosures normally included in the notes to the financial statements have been condensed or
omitted as permitted by the rules and regulations of the Securities and Exchange Commission. The
accompanying unaudited financial statements should be read in conjunction with the financial
statements contained in the Companys Annual Report on Form 10-K for the year ended December 31,
2004. 2. Debt Debt consisted of the following: March 31,
    
    
    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)
    
    $
    22,111
    
    
    $
    43,151Senior Floating Rate Term Notes, due December 2006, variable interest rates based
on the three-month LIBOR plus 3.5% (Senior Floating Notes)
    
    
    3,090
    
    
    
    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 March 31, 2005, and
December 31, 2004, respectively
    
    
    1,133
    
    
    
    1,947Other notes, maturing in various years through 2014, with various installments, at
various interest rates
    
    
    4,137
    
    
    
    4,588Total
    
    
    180,471
    
    
    
    202,776Short-term debt, including current maturities of long-term debt
    
    
    (1,822
    )
    
    
    (1,979
    )Long-term debt, less current maturities
    
    $
    178,649
    
    
    $
    200,797
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The three-month London inter-bank offered rate (LIBOR) for the periods ended March 31,
2005, and December 31, 2004, was 2.56% and 1.98%, respectively. Senior secured debt outstanding under various debt instruments consists of the Senior
Guaranteed Notes, the Senior Floating Notes, the 10% Senior Secured Notes and the Revolver.
Collectively, the $175.2 million in Senior Guaranteed Notes, Senior Floating Notes and 10% Senior
Secured Notes are referred to as the Senior Notes, and together with the Revolver are referred to
as the Senior Secured Debt. In addition, at March 31, 2005, Pioneer had a $1.1 million unsecured
non-interest bearing instrument payable to a vendor for the settlement of certain amounts owed to
that vendor, which contains a covenant that allows the vendor to demand immediate repayment and
begin charging interest at a rate of 9.3% if Pioneers liquidity (as defined in the agreement with
the vendor) falls below $5 million (Canadian dollars); a $0.4 million obligation payable over
several years to a state taxing authority; and $3.8 million of other debt outstanding, comprised of
notes maturing in various years through 2014. In December 2004, Pioneer issued 1.1 million shares of its common stock in a public offering.
Of the $22.1 million in net proceeds of the offering, a total of $1.3 million was applied to prepay
a portion of the outstanding Senior Floating Notes in December 2004, and the remainder was applied
to the redemption of $21.1 million in principal amount of the outstanding Senior Guaranteed Notes
in January 2005. The Revolver provides for revolving loans in an aggregate amount of up to $30 million, subject
to borrowing base limitations related to the level of eligible accounts receivable, as determined
in accordance with and subject to reserves established pursuant to the agreement, and as reduced by
the amount of letters of credit that are outstanding. Borrowings under the Revolver are available
through December 31, 2006, so long as no default exists and all conditions to borrowings are met.
Borrowings under the Revolver accrue interest at a rate equal to either the prime rate plus a
margin or LIBOR plus a margin. Pioneer incurs a fee on the unused amount of the facility at a rate
of 0.375% per year. No borrowings were outstanding under the Revolver on March 31, 2005. On that
date the borrowing base under the Revolver was $25.4 million. The Revolver requires Pioneer to maintain Liquidity (as defined in the agreement) of at least
$5.0 million, and limits capital expenditures to $25.0 million in each fiscal year. At March 31,
2005, Liquidity was $41.0 million, consisting of borrowing availability, net of $4.6 million in outstanding letters
of credit, of $25.4 million and cash of $15.6 million. Capital expenditures were $3.9 million
during the three months ended March 31, 2005. One of the covenants in the Revolver requires Pioneer
to generate at least $21.550 million of Lender-Defined EBITDA (as defined) for each twelve-month
period ending at the end of each fiscal quarter. The Revolver also provides that, as a condition
of borrowings, there shall not have occurred any material adverse change in Pioneers business,
prospects, operations, results of operations, assets, liabilities or condition (financial or
otherwise). If in the future the required Lender-Defined EBITDA level under the Revolver were not met or
if Pioneer were to fail to comply with other covenants and the lender did not waive Pioneers
non-compliance, Pioneer would be in default under the terms of the Revolver. Moreover, if
conditions constituting a material adverse change occur, the lender could refuse to make further
advances. Following any such refusal, customer receipts would be applied to Pioneers borrowings
under the Revolver, if any, and Pioneer would not have the ability to reborrow. This could cause
Pioneer to suffer a rapid loss of liquidity and it could lose the ability to operate on a
day-to-day basis. In addition, a default under the Revolver would allow the lender to accelerate
the outstanding indebtedness under the Revolver and would also result in a cross-default under the
Senior Notes that would provide the holders of the Senior Notes with the right to demand immediate
repayment. Interest on the 10% Senior Secured Notes is payable on June 30 and December 31. Interest on
the Senior Guaranteed Notes and the Senior Floating Notes (collectively, the Tranche A Notes) is
payable quarterly on March 31, June 30, September 30 and December 31. Interest on any borrowings
outstanding from time to time under the Revolver is payable monthly. Pioneer is required to make mandatory redemptions of the Tranche A Notes from and to the
extent of net cash proceeds of certain asset sales, new equity issuances in excess of $5 million
and excess cash flow (as defined in the related agreements), or if there is a change of control.
The $22.1 million in net proceeds of Pioneers equity offering 7




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in December 2004 was applied to the redemption and prepayment of Tranche A Notes in December
2004 and January 2005. The Tranche A Notes also provide that, within 60 days after each calendar quarter through
2006, Pioneer is required to redeem and prepay the greater of (a) an amount determined on the basis
of Pioneer Americas net income before extraordinary items, other income, net, interest, income
taxes, depreciation and amortization (Tranche A Notes EBITDA) and (b) an amount determined on the
basis of Pioneers excess cash flow and average liquidity, as defined. With respect to the Tranche
A Notes EBITDA, the amount that is to be redeemed and prepaid is (i) $2.5 million if Tranche A
Notes EBITDA for a calendar quarter is $20 million or more but less than $25 million, (ii) $5
million if Tranche A Notes EBITDA for a calendar quarter is $25 million or more but less than $30
million and (iii) $7.5 million if Tranche A Notes EBITDA for a calendar quarter is $30 million or
more, in each case plus accrued and unpaid interest to the date of redemption and prepayment. With
respect to excess cash flow, the amount that is to be redeemed and prepaid is a percentage of
Pioneers consolidated net income, without regard to extraordinary gains and losses and net
after-tax other income, plus depreciation, amortization and other non-cash charges, and less
scheduled cash principal payments, capital expenditures and extraordinary cash gains or cash income
received, plus or minus cash changes in working capital. The applicable percentage is to be
determined on the basis of the Companys average liquidity, which is the average of cash plus
borrowing availability under the Revolver for the quarter or for the 45-day period following the
end of the quarter. Each holder of Senior Floating Notes may refuse any such prepayment. While no redemption and prepayment of Tranche A Notes was required with respect to any
calendar quarter during 2004, on the basis of current estimates Pioneer believes that it will be
required to redeem and prepay approximately $18.3 million of the principal amount of the Tranche A
Notes as a result of the application of these provisions with respect to Pioneers excess cash flow
for the quarter ended March 31, 2005, although the holders of Senior Floating Notes may refuse the
prepayment of a portion of such amount. Such prepayment and redemption is expected to occur during
May 2005. The holders of the 10% Senior Secured Notes may require Pioneer to redeem 10% Senior Secured
Notes with net cash proceeds of certain asset sales and of new equity issuances in excess of $35
million (if there is no indebtedness outstanding under the Tranche A Notes). In addition, the
holders may require Pioneer to repurchase all or a portion of the notes upon the occurrence of a
change of control. Pioneer may prepay amounts owed on the Tranche A Notes and the 10% Senior Secured Notes in
minimum amounts of $1.0 million or more and Pioneer may, at its option, terminate the Revolver. If
the Revolver is terminated early, a prepayment premium of $0.3 million will be required. On or
after December 31, 2005, Pioneer may redeem some or all of the 10% Senior Secured Notes by paying
the holders a percentage declining from 105% to 100% (depending on the year of redemption) of the
stated principal amount to be redeemed plus accrued and unpaid interest to the redemption date. The obligations under the Revolver are secured by liens on Pioneers accounts receivable and
inventory, and the obligations under the Senior Notes are secured by liens on substantially all of
Pioneers other assets, with the exception of certain assets that secure the obligations
outstanding under certain other long-term liabilities. The debt agreements contain covenants requiring Pioneer to meet minimum liquidity levels, and
limiting or prohibiting Pioneers ability to, among other things, incur additional indebtedness,
prepay or modify debt instruments, grant additional liens, guarantee any obligations, sell assets,
engage in another type of business or suspend or terminate a substantial portion of business,
declare or pay dividends, make investments, make capital expenditures in excess of certain amounts,
or make use of the proceeds of borrowings for purposes other than those specified in the
agreements. The agreements also include customary events of default, including one in the Revolver
relating to a change of control. Borrowings under the Revolver will generally be available subject
to the accuracy of all representations and warranties, including the absence of a material adverse
change and the absence of any default or event of default. On March 31, Pioneer was in compliance
with all of the covenants contained in its debt agreements. The cash that Pioneer generates from its operations may not be sufficient for the repayment of
the 10% Senior Secured Notes when they are due in December 2008. To the extent that Pioneer is
unable to repay any indebtedness 8




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when it is due, it would be necessary to refinance the indebtedness, issue new equity or sell
assets. The terms of any necessary new borrowings would be determined by then-current market
conditions and other factors, and could impose significant additional burdens on Pioneers
financial condition and operating flexibility, and the issuance of new equity securities could
dilute the interest of Pioneers existing stockholders. Pioneer cannot provide any assurance that
it would be able to refinance any of its indebtedness, raise equity on commercially reasonable
terms or at all, or sell assets, which failure could cause Pioneer to default on its obligations
and impair its liquidity. Any inability by Pioneer to generate sufficient cash flow to satisfy its
debt obligations, or to refinance its obligations on commercially reasonable terms, would have a
material adverse effect on its business, financial condition and results of operations. 3. Tacoma Facility In March 2004 Pioneer completed its evaluation of the resumption of operations at the Tacoma
chlor-alkali facility, which was idled in March 2002. As a result of the evaluation, Pioneer
decided that the chlor-alkali production operations at the facility would not be restarted.
However, Pioneer has continued to use the facility as a terminal. Pioneer recorded additional
depreciation expense of $3.4 million related to the net book value of the non-productive
chlor-alkali assets at the Tacoma facility during the quarter ended March 31, 2004. As of March 31,
2004, the net book value of the Tacoma facility was $1.3 million. Pioneer anticipates that its
evaluation of other uses of the facility will be completed during 2005. 4. Environmental Liabilities Pioneer and its operations are subject to extensive United States and Canadian federal, state,
provincial and local laws, regulations, rules and ordinances relating to pollution, the protection
of the environment and the release or disposal of regulated materials. The operation of any
chemical manufacturing plant and the distribution of chemical products entail certain obligations
under current environmental laws. Pioneer commissions periodic reassessments of its environmental obligations. In April 2005
the most recent independent analysis of environmental concerns at all of Pioneers sites was
completed, updating a similar independent environmental analysis completed in April 2003. The new
study involved a site-by-site analysis of environmental concerns and assessed conditions,
situations, and sets of circumstances involving uncertainty as to a possible loss to Pioneer. The
outcomes of uncertain conditions will be resolved when one or more future events occur or fail to
occur, and resolution of the uncertainty may confirm the impairment of an asset or the incurrence
of a liability. The study was based on the same methodology as the 2003 study, using scenario
analysis to estimate the cost to remedy environmental concerns at Pioneers sites. For each

scenario, the study also used cost estimating techniques that included actual historical costs,
estimates prepared for Pioneer by other consultants, estimates prepared by Pioneer engineers and
other published cost data available for similar projects completed at the same or other sites. The study identified a number of conditions that have changed since the 2003 environmental
analysis due to, among other things, changes in regulations or in their application by regulatory
agencies, the results of on-going and completed remediation projects, increased knowledge of site
conditions, the use of alternative remediation technologies, post-acquisition contamination not
covered under existing environmental indemnity agreements and the inherent risk of disputes under
some of the indemnity agreements due to passage of time. Based on the recent study, Pioneer
estimated its total environmental remediation liabilities to be $19.8 million, of which $3.2
million is subject to indemnity claims against a previous owner, as discussed below. As a result,
Pioneer reduced its environmental reserves by $0.2 million in the first quarter of 2005, which is
reflected as a reduction in cost of sales in the consolidated statement of operations, and during
the quarter Pioneer also paid $0.3 million of environmental costs in connection with certain
remediation projects. Pioneer bases its environmental reserves on undiscounted costs. See Note
12. As discussed in the Annual Report on Form 10-K for the year ended December 31, 2004, Pioneer
has indemnity agreements with certain previous owners covering, among other things, pre-acquisition
environmental conditions at certain of its sites. Previous analysis resulted in a $3.2 million
environmental reserve related to pre-acquisition conditions at the Henderson site that is the
responsibility of a previous owner, and a receivable from the previous owner for the same amount
has also been recorded. Pioneer believes that the previous owner will continue to honor 9




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its obligations for claims properly presented by Pioneer or by regulatory authorities,
although it is possible that disputes could arise concerning the effect of contractual language, in
which event Pioneer would have to subject any claims for cleanup expenses, which could be
substantial, to the contractually-established arbitration process. The recent study did not
include environmental matters covered by the $3.2 million environmental receivable. Such amount,
as originally estimated, is included in the consolidated balance sheet as of March 31, 2005, in
offsetting amounts in other assets and other long term liabilities. The recent study also did not
cover any environmental matters that Pioneer believes to be fully covered under other indemnity
agreements. 5. Other Items Pioneer began the development and implementation of an organizational efficiency project
referred to as Project STAR in the first quarter of 2004 and extended the concept of the project to
its Dalhousie facility in the first quarter of 2005. Additionally, in the fourth quarter of 2004
Pioneer initiated a plan to relocate the bleach production assets from its Cornwall plant to the
Becancour facility. Project STAR involves the design, development and implementation of uniform and standardized
systems, processes and policies to improve Pioneers management, sales and marketing, production,
process efficiency, logistics and material management and information technology functions. The
original project resulted in the elimination of 128 employee and contract positions. Almost all of
the reductions have now taken place. The extension of Project STAR to Dalhousie is expected to
result in the elimination of eleven employee positions. The anticipated completion date of Project
STAR, including the Dalhousie phase, is December 31, 2005. The transfer of bleach production assets from Cornwall to the Becancour facility was completed
in April 2005. The transfer is expected to result in the termination of thirteen employee
positions at the Cornwall facility. However, after taking into account the necessary additional
staffing at the Becancour plant, Pioneer anticipates that the project will result in a net
elimination of eight employee positions. Pioneer is currently evaluating the remaining operations
at the Cornwall facility. All employee severance and related costs are recognized in other items in the consolidated
statements of operations. Pioneer anticipates only minor cost recognition over the remainder of
the projects associated with Project STAR, including the Dalhousie project, and from the transfer
of the Cornwall bleach assets. The employee severance and related costs associated with the above
restructuring activities are shown in the table below (dollars in thousands). Liability Balance
    
    
    Costs Recognized
    
    
    Costs Paid
    
    
    Liability Balance
    
    
    Cumulativeas of
    
    
    First Quarter
    
    
    First Quarter
    
    
    as of
    
    
    CostsDec. 31, 2004
    
    
    2005
    
    
    2005
    
    
    Mar. 31, 2005
    
    
    RecognizedProject STAR -
Original
    
    $
    1,446
    
    
    $
    
    
    
    $
    620
    
    
    $
    826
    
    
    $
    3,542Extension of
Project concepts to
Dalhousie
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    413
    
    
    
    413Total,
Project STAR
    
    
    1,446
    
    
    
    413
    
    
    
    620
    
    
    
    1,239
    
    
    
    3,955Cornwall Project
    
    
    447
    
    
    
    164
    
    
    
    29
    
    
    
    582
    
    
    
    611Total
    
    $
    1,893
    
    
    $
    577
    
    
    $
    649
    
    
    $
    1,821
    
    
    $
    4,566
 6. Net Income (Loss) per Share Basic net income (loss) per share is based on the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share considers the dilutive effect of
potentially issuable shares pursuant to stock option plans (see Note 8) during the period. Computational amounts for net income (loss) per share are as follows: 10




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##### Table of Contents



Three Months EndedMarch 31,2005
    
    
    2004Numerator for basic and diluted
net income (loss) per share:Net income (loss)
    
    $
    15,020
    
    
    $
    (7,293
    )Denominator
for basic and diluted net income
(loss) per share:Weighted average shares
    
    
    11,176
    
    
    
    10,006Potentially dilutive common shares:Stock options
    
    
    603
    
    
    
    Denominator
for diluted net income (loss) per
share
    
    
    11,779
    
    
    
    10,006Net income (loss) per share:Basic
    
    $
    1.34
    
    
    $
    (0.73
    )Diluted
    
    $
    1.28
    
    
    $
    (0.73
    )
 All of the options to purchase shares of common stock that were outstanding during the
three-month period ended March 31, 2005, were included in the computation of diluted net income per
share. None of the options to purchase shares of common stock that were outstanding during the
three-month period ended March 31, 2004, were included in the computation of diluted net loss per
share since their inclusion would have been anti-dilutive. 7. Inventories Inventories consisted of the following: March 31,
    
    
    December 31,2005
    
    
    2004Raw materials, supplies and parts, net
    
    $
    5,614
    
    
    $
    7,089Finished goods
    
    
    8,751
    
    
    
    9,328$
    14,365
    
    
    $
    16,417
 8. Stock-Based Compensation At March 31, 2005, options to purchase 752,750 shares of PCIs common stock were outstanding,
with exercise prices ranging from $2.00 to $20.75 per share, a weighted average exercise price of
$4.97 and a weighted average remaining contractual life of 7.93 years. No options were granted
during the three months ended March 31, 2005 and 2004. Stock options generally expire 10 years from
the date of grant and fully vest after three years. Pioneer accounts for stock options under Accounting Principles Board Opinion No. 25 (APB
25), Accounting for Stock Issued to Employees. Stock options issued under Pioneers stock option
plans have no intrinsic value at the grant date, and Pioneer recorded no compensation costs under
APB 25. Had compensation expense for the stock option plans been determined in accordance with
Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-Based
Compensation, as amended by SFAS 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, Pioneers pro-forma net income (loss) and net income (loss) per share would have been
as follows: 11




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##### Table of Contents



Three Months EndedMarch 31,2005
    
    
    2004Net income (loss):As reported
    
    $
    15,020
    
    
    $
    (7,293
    )Deduct: Stock-based compensation expense
determined under fair- value-based method
    
    
    (189
    )
    
    
    (114
    )Pro forma net income (loss)
    
    $
    14,831
    
    
    $
    (7,407
    )Net income (loss) per common share:Basic, as reported
    
    $
    1.34
    
    
    $
    (0.73
    )Basic, pro forma
    
    $
    1.33
    
    
    $
    (0.74
    )Diluted, as reported
    
    $
    1.28
    
    
    $
    (0.73
    )Diluted, pro forma
    
    $
    1.26
    
    
    $
    (0.74
    )
 SFAS 123(R), Share-Based Payment, issued in December 2004, superseded APB 25 and revised
SFAS 123 and will require the recognition of compensation expense related to applicable stock
options. In April 2005 the Securities and Exchange Commission postponed the adoption date of SFAS
123(R), and Pioneer currently expects to adopt SFAS 123(R) effective January 1, 2006. We expect
the adoption of SFAS 123(R) to result in additional compensation expense of approximately $0.2
million for the year ending December 31, 2006. Until the adoption of SFAS 123(R), Pioneer
continues to account for its stock option plan under the provisions and related interpretations of
APB 25. No compensation expense is recognized for such options. 9. Supplemental Cash Flow Information Following are supplemental disclosures of cash flow information: Three Months EndedMarch 31,2005
    
    
    2004Cash payments for:Interest
    
    $
    528
    
    
    $
    884Income taxes
    
    
    
    
    
    
    
 10. Condensed Consolidating Financial Statements PCI Canada (a wholly-owned subsidiary of PCI) is the issuer of the $150 million principal
amount of 10% Senior Secured Notes, which are fully and unconditionally guaranteed on a joint and
several basis by PCI and all of PCIs other direct and indirect wholly-owned subsidiaries. Pioneer Americas (a wholly-owned subsidiary of PCI Canada) is the issuer of the $22.1 million
principal amount of Senior Guaranteed Notes and the $3.1 million principal amount of Senior
Floating Notes, which are fully and unconditionally guaranteed on a joint and several basis by PCI
and all of PCIs other direct and indirect wholly-owned subsidiaries. Together, PCI Canada, Pioneer
Americas and the subsidiary note guarantors comprise all of the direct and indirect subsidiaries of
PCI. Condensed consolidating financial information for PCI and its wholly-owned subsidiaries is
presented below. Separate financial statements of PCI Canada and Pioneer Americas are not provided
because Pioneer does not believe that such information would be material to investors or lenders of
the Company. 12




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##### Table of Contents



Condensed Consolidating Balance Sheet  March 31, 2005 (in thousands) PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    347
    
    
    $
    15,207
    
    
    $
    12
    
    
    $
    
    
    
    $
    15,566Accounts receivable, net
    
    
    
    
    
    
    12,869
    
    
    
    44,238
    
    
    
    
    
    
    
    
    
    
    
    57,107Inventories, net
    
    
    
    
    
    
    5,246
    
    
    
    9,119
    
    
    
    
    
    
    
    
    
    
    
    14,365Prepaid expenses and other current assets
    
    
    1,864
    
    
    
    9,049
    
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    11,266Total current assets
    
    
    1,864
    
    
    
    27,511
    
    
    
    68,917
    
    
    
    12
    
    
    
    
    
    
    
    98,304Property, plant and equipment, net
    
    
    
    
    
    
    101,716
    
    
    
    67,227
    
    
    
    1,528
    
    
    
    
    
    
    
    170,471Other assets, net
    
    
    
    
    
    
    177
    
    
    
    4,121
    
    
    
    
    
    
    
    
    
    
    
    4,298Intercompany receivable
    
    
    14,368
    
    
    
    113,936
    
    
    
    
    
    
    
    79,328
    
    
    
    (207,632
    )
    
    
    Investment in subsidiaries
    
    
    38,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,023
    )
    
    
    Excess reorganization value over the fair
value of identifiable assets
    
    
    
    
    
    
    84,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,064Total assets
    
    $
    54,255
    
    
    $
    327,404
    
    
    $
    140,265
    
    
    $
    80,868
    
    
    $
    (245,655
    )
    
    $
    357,137Liabilities and stockholders equity
(deficiency in assets)Current liabilities:Accounts payable
    
    $
    
    
    
    $
    8,044
    
    
    $
    9,222
    
    
    $
    
    
    
    $
    
    
    
    $
    17,266Accrued liabilities
    
    
    
    
    
    
    12,829
    
    
    
    14,922
    
    
    
    
    
    
    
    
    
    
    
    27,751Current portion of long-term debt
    
    
    
    
    
    
    745
    
    
    
    1,049
    
    
    
    28
    
    
    
    
    
    
    
    1,822Total current liabilities
    
    
    
    
    
    
    21,618
    
    
    
    25,193
    
    
    
    28
    
    
    
    
    
    
    
    46,839Long-term debt, less current portion
    
    
    
    
    
    
    150,389
    
    
    
    28,233
    
    
    
    27
    
    
    
    
    
    
    
    178,649Investment in subsidiary
    
    
    
    
    
    
    151,402
    
    
    
    
    
    
    
    427
    
    
    
    (151,829
    )
    
    
    Intercompany payable
    
    
    1,332
    
    
    
    384
    
    
    
    205,916
    
    
    
    
    
    
    
    (207,632
    )
    
    
    Accrued pension and other employee benefits
    
    
    
    
    
    
    6,697
    
    
    
    15,971
    
    
    
    
    
    
    
    
    
    
    
    22,668Other long-term liabilities
    
    
    
    
    
    
    38,685
    
    
    
    16,354
    
    
    
    1,019
    
    
    
    
    
    
    
    56,058Stockholders equity (deficiency in assets)
    
    
    52,923
    
    
    
    (41,771
    )
    
    
    (151,402
    )
    
    
    79,367
    
    
    
    113,806
    
    
    
    52,923Total liabilities and stockholders equity
    
    $
    54,255
    
    
    $
    327,404
    
    
    $
    140,265
    
    
    $
    80,868
    
    
    $
    (245,655
    )
    
    $
    357,137
 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




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##### Table of Contents



Condensed Consolidating Statement of Operations  Three Months Ended March 31, 2005 (in thousands) PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    55,833
    
    
    $
    93,382
    
    
    $
    
    
    
    $
    (30,125
    )
    
    $
    119,090Cost of sales
    
    
    
    
    
    
    (39,430
    )
    
    
    (78,508
    )
    
    
    205
    
    
    
    30,125
    
    
    
    (87,608
    )Gross profit
    
    
    
    
    
    
    16,403
    
    
    
    14,874
    
    
    
    205
    
    
    
    
    
    
    
    31,482Selling, general and administrative expenses
    
    
    (211
    )
    
    
    (2,544
    )
    
    
    (5,708
    )
    
    
    
    
    
    
    
    
    
    
    (8,463
    )Other items
    
    
    
    
    
    
    (579
    )
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    (505
    )Operating income (loss)
    
    
    (211
    )
    
    
    13,280
    
    
    
    9,240
    
    
    
    205
    
    
    
    
    
    
    
    22,514Interest expense, net
    
    
    
    
    
    
    (3,774
    )
    
    
    (481
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4,256
    )Other income (expense), net
    
    
    
    
    
    
    173
    
    
    
    (2,882
    )
    
    
    2,882
    
    
    
    
    
    
    
    173Income (loss) before income taxes
    
    
    (211
    )
    
    
    9,679
    
    
    
    5,877
    
    
    
    3,086
    
    
    
    
    
    
    
    18,431Income tax expense
    
    
    
    
    
    
    (3,311
    )
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    (3,411
    )Net income (loss) before equity in earnings
of subsidiaries
    
    
    (211
    )
    
    
    6,368
    
    
    
    5,777
    
    
    
    3,086
    
    
    
    
    
    
    
    15,020Equity in net income of subsidiaries
    
    
    15,231
    
    
    
    5,777
    
    
    
    
    
    
    
    203
    
    
    
    (21,211
    )
    
    
    Net income (loss)
    
    $
    15,020
    
    
    $
    12,145
    
    
    $
    5,777
    
    
    $
    3,289
    
    
    $
    (21,211
    )
    
    $
    15,020
 Condensed Consolidating Statement of Operations  Three Months Ended March 31, 2004 (in thousands) PCI
    
    
    Pioneer
    
    
    Other
    
    
    
    
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    44,054
    
    
    $
    67,391
    
    
    $
    
    
    
    $
    (20,413
    )
    
    $
    91,032Cost of sales
    
    
    
    
    
    
    (39,198
    )
    
    
    (68,532
    )
    
    
    
    
    
    
    20,413
    
    
    
    (87,317
    )Gross profit
    
    
    
    
    
    
    4,856
    
    
    
    (1,141
    )
    
    
    
    
    
    
    
    
    
    
    3,715Selling, general and administrative expenses
    
    
    (237
    )
    
    
    (2,048
    )
    
    
    (4,335
    )
    
    
    31
    
    
    
    
    
    
    
    (6,589
    )Other items
    
    
    
    
    
    
    (1
    )
    
    
    (164
    )
    
    
    
    
    
    
    
    
    
    
    (165
    )Operating income (loss)
    
    
    (237
    )
    
    
    2,807
    
    
    
    (5,640
    )
    
    
    31
    
    
    
    
    
    
    
    (3,039
    )Interest expense, net
    
    
    
    
    
    
    (3,786
    )
    
    
    (855
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4,642
    )Other income (expense), net
    
    
    
    
    
    
    131
    
    
    
    (2,059
    )
    
    
    2,054
    
    
    
    
    
    
    
    126Income (loss) before income taxes
    
    
    (237
    )
    
    
    (848
    )
    
    
    (8,554
    )
    
    
    2,084
    
    
    
    
    
    
    
    (7,555
    )Income tax benefit
    
    
    
    
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262Net income (loss) before equity in earnings
(loss) of subsidiaries
    
    
    (237
    )
    
    
    (586
    )
    
    
    (8,554
    )
    
    
    2,084
    
    
    
    
    
    
    
    (7,293
    )Equity in net earnings of subsidiaries
    
    
    (7,056
    )
    
    
    (8,554
    )
    
    
    
    
    
    
    (1
    )
    
    
    15,611
    
    
    
    Net income (loss)
    
    $
    (7,293
    )
    
    $
    (9,140
    )
    
    $
    (8,554
    )
    
    $
    2,083
    
    
    $
    15,611
    
    
    $
    (7,293
    )
 Condensed Consolidating Statement of Cash Flows  Three Months Ended March 31, 2005 (in thousands) PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from operating activities:Net cash flows from operating activities
    
    $
    (8
    )
    
    $
    2,529
    
    
    $
    23,018
    
    
    $
    16
    
    
    $
    25,555Cash flows from (used in) investing activities:Capital expenditures
    
    
    
    
    
    
    (1,489
    )
    
    
    (2,443
    )
    
    
    
    
    
    
    (3,932
    )Proceeds from disposal of assets
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    74Net cash flows used in investing activities
    
    
    
    
    
    
    (1,489
    )
    
    
    (2,369
    )
    
    
    
    
    
    
    (3,858
    )Cash flows from (used in) financing activities:Repayments of long-term debt
    
    
    
    
    
    
    (827
    )
    
    
    (21,483
    )
    
    
    (6
    )
    
    
    (22,316
    )Proceeds from issuance of stock
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Net cash flows from (used in) financing activities
    
    
    8
    
    
    
    (827
    )
    
    
    (21,483
    )
    
    
    (6
    )
    
    
    (22,308
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    (14
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    199
    
    
    
    (834)
    
    
    
    10
    
    
    
    (625
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    148
    
    
    
    16,041
    
    
    
    2
    
    
    
    16,191Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    347
    
    
    $
    15,207
    
    
    $
    12
    
    
    $
    15,566
 14




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows  Three Months Ended March 31, 2004 (in thousands) PCI
    
    
    Pioneer
    
    
    Other
    
    
    PioneerPCI
    
    
    Canada
    
    
    Americas
    
    
    Guarantors
    
    
    ConsolidatedCash flows from (used in) operating activities:Net cash flows from (used in) operating activities
    
    $
    (18
    )
    
    $
    2,149
    
    
    $
    12,088
    
    
    $
    (16
    )
    
    $
    14,203Cash flows used in investing activities:Capital expenditures
    
    
    
    
    
    
    (445
    )
    
    
    (1,880
    )
    
    
    
    
    
    
    (2,325
    )Net cash flows used in investing activities
    
    
    
    
    
    
    (445
    )
    
    
    (1,880
    )
    
    
    
    
    
    
    (2,325
    )Cash flows from (used in) financing activities:Net payments under revolving credit arrangements
    
    
    
    
    
    
    
    
    
    
    (10,209
    )
    
    
    
    
    
    
    (10,209
    )Payments on debt
    
    
    
    
    
    
    (792
    )
    
    
    (369
    )
    
    
    (5
    )
    
    
    (1,166
    )Proceeds from issuance of stock
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Net cash flows used in financing activities
    
    
    18
    
    
    
    (792
    )
    
    
    (10,578
    )
    
    
    (5
    )
    
    
    (11,357
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    35Net change in cash and cash equivalents
    
    
    
    
    
    
    947
    
    
    
    (370
    )
    
    
    (21
    )
    
    
    556Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    500
    
    
    
    1,422
    
    
    
    24
    
    
    
    1,946Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    1,447
    
    
    $
    1,052
    
    
    $
    3
    
    
    $
    2,502
 11. Pension and Other Postretirement Benefits Effective February 29, 2004, Pioneer Americas froze benefits under its defined benefit pension
plans for substantially all U.S. salaried and union and non-union hourly employees. The effect of
the freezing of defined benefit pension plan benefits has been accounted for as a curtailment
pursuant to SFAS 88, Employers Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits. As a result of the curtailment, the projected benefit
obligations for the Pioneer Americas pension plans decreased by $4.3 million. The actuarial gain
from such decrease was applied against existing unrecognized actuarial losses and Pioneer recorded
no curtailment gain in its statement of operations for the three months ended March 31, 2004. The component of net periodic benefit costs related to Pioneers defined benefit pension plans
for the three months ended March 31, 2005 and 2004 were: PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended March 31, 2005Components of net periodic benefit cost:Service cost
    
    $
    335
    
    
    $
    22
    
    
    $
    357Interest cost
    
    
    637
    
    
    
    727
    
    
    
    1,364Expected return on plan assets
    
    
    (696
    )
    
    
    (807
    )
    
    
    (1,503
    )Amortization of prior service costs
    
    
    
    
    
    
    
    
    
    
    Amortization of net actuarial loss
    
    
    
    
    
    
    154
    
    
    
    154Net periodic benefit cost
    
    $
    276
    
    
    $
    96
    
    
    $
    372
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended March 31, 2004Components of net periodic benefit cost:Service cost
    
    $
    297
    
    
    $
    392
    
    
    $
    689Interest cost
    
    
    570
    
    
    
    740
    
    
    
    1,310Expected return on plan assets
    
    
    (618
    )
    
    
    (733
    )
    
    
    (1,351
    )Amortization of prior service costs
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Amortization of net actuarial loss (gain)
    
    
    70
    
    
    
    (21
    )
    
    
    49Net periodic benefit cost
    
    $
    319
    
    
    $
    377
    
    
    $
    696
 Pension expense was $0.4 million and $0.7 million for the three months ended March 31, 2005
and 2004, respectively. Pension contributions were $0.9 million and $0.3 million in the three
months ended March 31, 2005 and 2004, respectively. Total contributions in 2005, which are based on
regulatory requirements, are expected to be approximately $5.3 million. Effective December 31, 2003, Pioneer Americas retiree health care benefits plan was modified
to eliminate retiree health care benefits when a participant reaches age 65. Pioneer Americas
accounted for the reduction in 15




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##### Table of Contents



benefits as a negative plan amendment. The gain is amortized over a period of up to 7.63
years, and at March 31, 2005, the unamortized gain related to the negative plan amendment was $3.7
million. The annual costs and liabilities under both the U.S. and Canadian retiree health care plans
are determined each year by Pioneers actuaries using various assumptions. The component of net
periodic benefit costs related to Pioneers postretirement benefits other than pensions for the
three months ended March 31, 2005 and 2004 were: PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended March 31, 2005Components of net periodic benefit cost:Service cost
    
    $
    47
    
    
    $
    1
    
    
    $
    48Interest cost
    
    
    84
    
    
    
    9
    
    
    
    93Amortization of prior service costs
    
    
    (8
    )
    
    
    (156
    )
    
    
    (164
    )Amortization of net actuarial gain
    
    
    (18
    )
    
    
    (12
    )
    
    
    (30
    )Net periodic benefit cost
    
    $
    105
    
    
    $
    (158
    )
    
    $
    (53
    )
 PCI
    
    
    Pioneer
    
    
    PioneerCanada
    
    
    Americas
    
    
    ConsolidatedThree Months Ended March 31, 2004Components of net periodic benefit cost:Service cost
    
    $
    36
    
    
    $
    1
    
    
    $
    37Interest cost
    
    
    69
    
    
    
    9
    
    
    
    78Amortization of prior service costs
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Amortization of net actuarial gain
    
    
    (20
    )
    
    
    (10
    )
    
    
    (30
    )Net periodic benefit cost
    
    $
    78
    
    
    $
    
    
    
    $
    78
 Pioneer also maintains matched defined contribution savings plans for its employees in the
U.S. and Canada. Pioneers contributions to these plans are based on the amount of employee
contributions to the plans. In connection with the freezing of benefits under Pioneer Americas
defined benefit plans, after March 1, 2004, the U.S. defined contribution plans have been
supplemented by the companys voluntary contributions to employees accounts based on various
percentages of compensation. Pioneers contributions to the U.S. and Canadian defined contribution
plans, consisting of both matching and supplemental contributions, were $0.3 million and $0.2
million for the three months ended March 31, 2005 and 2004, respectively. 12. Commitments and Contingencies Present or future environmental laws and regulations may affect Pioneers capital and
operating costs relating to compliance, may impose cleanup requirements with respect to site
contamination resulting from past, present or future spills and releases and may affect the markets
for Pioneers products. Pioneer believes that its operations are currently in general compliance
with environmental laws and regulations, the violation of which could result in a material adverse
effect on Pioneers business, properties or results of operations on a consolidated basis. There
can be no assurance, however, that material costs will not be incurred as a result of instances of
noncompliance or new regulatory requirements. Pioneer relies on certain indemnities from previous owners and believes it has adequate
environmental reserves covering known and estimable environmental liabilities at its chlor-alkali
plants and other sites. There can be no assurance, however, that such indemnity agreements will be
adequate to protect Pioneer from environmental liabilities at these sites or that such parties will
perform their obligations under the respective indemnity agreements. The failure by such parties to
perform under these indemnity agreements and/or any material increase in Pioneers environmental
obligations will have a material adverse effect on Pioneers future results of operations and
liquidity. Pioneer is subject to various legal proceedings and potential claims arising in the ordinary
course of its business. In the opinion of management, Pioneer has adequate legal defenses and/or
insurance coverage with respect to these matters, and management does not believe that they will
materially affect Pioneers operations or financial position. 16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our annual report on Form 10-K for the year ended December 31, 2004, provides a discussion of
our business, including the chlor-alkali industry, our customers and markets, the major components
of our production process and costs and the means we use to distribute our products. The following
discussion and analysis should be read in conjunction with the information provided in the annual
report on Form 10-K for the year ended December 31, 2004, the consolidated financial statements and
the related notes thereto. Listing of Common Stock On April 15, 2005, trading of our common stock began on the NASDAQ National Market under the
symbol PONR. Product Prices In accordance with industry practice, we compare ECU prices on a netback basis, reporting and
analyzing prices without regard to the cost of transporting the products to customers to allow for
a comparable means of price comparisons between periods and with respect to our competitors. An
electrochemical unit, which we refer to as an ECU, consists of 1.1 tons of caustic soda and 1 ton
of chlorine. For purposes of determining our ECU netback, we use prices that we realize as a
result of sales of chlorine and caustic soda to our customers, and we do not include the value of
chlorine and caustic soda that is incorporated in other products that we manufacture and sell.
During the quarter ended March 31, 2005, we used approximately 23% of the chlorine and 9% of the
caustic soda that we produced to manufacture other products, primarily bleach and hydrochloric
acid. Our quarterly average ECU netback for each of the most recent five quarters was as follows: 2004:First Quarter
    
    $
    339Second Quarter
    
    
    354Third Quarter
    
    
    409Fourth Quarter
    
    
    4802005:First Quarter
    
    
    548
 Increasing demand for chlorine since the beginning of 2004 and increasing demand for caustic
soda beginning in the second quarter of 2004 led us to announce price increases for those products
since January 1, 2004, as follows (stated on a per ton basis): Chlorine
    
    
    Caustic Soda2004:First Quarter
    
    $
    75
    
    
    $
    Second Quarter
    
    
    20
    
    
    
    95Third Quarter
    
    
    20
    
    
    
    110Fourth Quarter
    
    
    20
    
    
    
    502005:First Quarter
    
    
    20
    
    
    
    40
 All of the price increases that we announce are implemented on effective dates as announced or
as soon thereafter as permitted by applicable contract terms. Our annual production capacity is approximately 1,500,000 tons of chlorine and caustic soda.
Most of the chlorine and caustic soda that we sell to customers is sold under contracts with
varying terms and conditions. As of January 1, 2005, we had contracts covering the anticipated sale
of an annual total of approximately 520,000 tons of chlorine and caustic soda (including equivalent
amounts that will be sold as bleach or hydrochloric acid), and that are subject to contractual
provisions that could restrict or eliminate our ability to increase the netback we will 17




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##### Table of Contents



receive for the amount of product that is sold under those contracts. Of the contracts that
are subject to such restrictions, contracts with respect to approximately 460,000 tons will expire
over the course of the next three years and the remainder will expire over the following five
years. The prices that we realize for contract sales of chlorine and caustic soda during any quarter,
and thus our average ECU netback for the quarter, are different from the chlorine and caustic soda
contract prices that are reported by Chemical Market Associates, Inc. (commonly referred to as
CMAI), a leading industry observer. CMAIs reported monthly contract prices are based on the
assumption that price changes are implemented on the first day of the calendar quarter that follows
announced price changes, while we have a mix of pricing provisions that in some cases limits or
delays the implementation of price changes. CMAIs reported monthly contract prices also relate to
products that are produced and delivered in the U.S. Gulf Coast. While the majority of the demand
for North American chlor-alkali production does occur in the U.S. Gulf Coast region, only one of
our plants is located in that region, and regional supply and demand factors and logistical
considerations generally result in varying regional prices for our products. During the first quarter of 2005 our average ECU netback was $548, while the average ECU
netback quoted by CMAI for the same quarter was $709. In general, changes in our average ECU
netback and the related effect on our revenues and cash flow have lagged changes in our announced
prices and changes in the contract prices that are reported by CMAI, although the corresponding
benefit to us in a period of declining prices is of a somewhat lesser magnitude. The following
table illustrates the recent relationship between our average ECU netback and the monthly contract
price reported by CMAI: (LINE GRAPH) For the month of April 2005 our average ECU netback was approximately $570. Since part of the
benefit of the price increases that we have announced has been delayed, we expect that absent
unforeseen circumstances our average ECU netback will increase during the balance of 2005, even in
the absence of any further price increases. Plant operating rates in the chlor-alkali industry are
reportedly at near capacity, and further increases in ECU prices during the remainder of 2005 could
be announced if these conditions continue. The order control programs that we have implemented for both chlorine and caustic soda are a
necessary means of balancing the demand for the products with our manufacturing capacity and the
availability of products that we are able to purchase for resale, as permitted by our standard
contract terms. Many of our competitors are reported to have adopted similar programs as a result
of the industrys current operating rate. Production Our quarterly production volumes, expressed in terms of ECUs, at our chlor-alkali facilities
for the most recent five quarters were as follows: 18




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##### Table of Contents



2004:First Quarter
    
    
    169,555Second Quarter
    
    
    183,404Third Quarter
    
    
    177,751Fourth Quarter
    
    
    173,6902005:First Quarter
    
    
    161,635
 In January 2005 we reduced the operation of our chlor-alkali plant in Henderson, Nevada when
flooding in California and Utah disrupted rail transportation of salt to the plant and the shipment
of chlorine, caustic soda and hydrochloric acid to our customers, as well as the shipment of
chlorine and caustic soda to our bleach plants in California. Also in January 2005, an apparently
seasonal reduction in orders that would ordinarily be supplied by our Becancour plant led us to
reduce that plants operating rate for several days. Those reductions led to approximately 9,500
fewer ECUs being produced during the month. We also had a planned maintenance outage at our St.
Gabriel plant in March, reducing production by approximately 8,000 ECUs. As a result of those
reductions and with various other minor production losses, during the most recent quarter our
chor-alkali plants operated at approximately 88% of capacity. While we do not have any maintenance
outages planned for our chlor-alkali plants during the second quarter of 2005, reductions in our
operating rate could occur as a result of further disruptions in rail transportation or operating
equipment failures. The volumes (in tons) of caustic soda that we purchased for resale during the most recent five
quarters were as follows: 2004:First Quarter
    
    
    30,636Second Quarter
    
    
    39,504Third Quarter
    
    
    35,080Fourth Quarter
    
    
    24,5992005:First Quarter
    
    
    16,315
 On average, our margins on purchases for resale are lower than the margins we realize from the
sales of caustic soda that is produced in our own plants. Some of the purchases are made under
contracts with suppliers, and others are made on a spot basis, and we generally use such purchases
to satisfy contractual commitments to customers. Following the reduction and later termination of
chlor-alkali production in Tacoma, we met contractual commitments for caustic soda through
purchases for resale. Those commitments have been terminated and we anticipate a reduced need for
purchases for resale in future periods, and in any event, the decreasing availability of caustic
soda under current market conditions may limit our purchases for resale during the remainder of
2005. Raw Material and Transportation Costs The electricity costs associated with our production of chlor-alkali products can materially
affect our results of operations, as each one dollar change in our cost for a megawatt hour of
electricity generally results in a corresponding change of approximately $2.75 in our cost to
produce an ECU. The amounts (in thousands) that we spent on power for the production of chlor-alkali products
and for other power requirements during each of the most recent five quarters, and the
corresponding percentages of our cost of sales that those amounts represented, were as follows: 19




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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
    %
 Electricity purchases account for the largest percentage of our raw material cost, and our
plants at St. Gabriel and Henderson rely on power sources that primarily use natural gas for the
generation of electricity. In response to natural gas price movements, our electricity rates
increased during the first quarter of 2005, but our total power costs decreased due to lower
production levels during the quarter. Rail service problems since the beginning of the year have made it increasingly difficult to
obtain timely and adequate supplies of salt at our Henderson facility. The same problems have made
it more difficult to ensure that caustic soda, chlorine and hydrochloric acid are shipped on a
timely basis to our customers, or that our bleach plants in Santa Fe Springs and Tracy, California
and Tacoma, Washington receive shipments of caustic soda and chlorine when necessary to produce and
deliver bleach to our bleach customers. Our rail carriers have indicated that they are reevaluating the transportation services that
they provide to us, including the contractual terms upon which those services are provided and the
prices charged for the services. A railroads ability to unilaterally change the terms upon which
services are provided to us, and to do so in a short period of time, means that rail transportation
could be reduced or even eliminated, or that we could be required to incur substantial increases in
the cost of service. There could be further and more severe disruptions to rail service, which
would affect our ability to meet our contractual obligations. Applicable contractual limitations
may also prevent us from passing some or all of any cost increases on to our customers. Cost Reduction Measures We began the development and implementation of an organizational efficiency project referred
to as Project STAR in the first quarter of 2004 and extended the concept of the project to our
Dalhousie facility in the first quarter of 2005. Additionally, in the fourth quarter of 2004 we
initiated a plan to relocate the bleach production assets from our Cornwall plant to the Becancour
facility. Project STAR involves the design, development and implementation of uniform and standardized
systems, processes and policies to improve our management, sales and marketing, production, process
efficiency, logistics and material management and information technology functions. The original
project resulted in the elimination of 128 employee and contract positions. Almost all of the
reductions have now taken place. The extension of Project STAR to Dalhousie is expected to result
in the elimination of eleven employee positions. The anticipated completion date of Project STAR,
including the Dalhousie phase, is December 31, 2005. The transfer of bleach production assets from Cornwall to the Becancour facility was completed
in April 2005. The transfer is expected to result in the termination of thirteen employee
positions at the Cornwall facility. However, after taking into account the necessary additional
staffing at the Becancour plant, we anticipate that the project will result in a net elimination of
eight employee positions. We are currently evaluating the remaining operations at the Cornwall
facility. All employee severance and related costs are recognized in other items in the consolidated
statements of operations. We anticipate only minor cost recognition over the remainder of the
projects associated with Project STAR, including the Dalhousie project, and from the transfer of
the Cornwall bleach assets. The employee severance and related costs associated with the above
restructuring activities are shown in the table below (dollars in thousands). 20




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##### Table of Contents



Liability Balance
    
    
    Costs Recognized
    
    
    Costs Paid
    
    
    Liability Balance
    
    
    Cumulativeas of
    
    
    First Quarter
    
    
    First Quarter
    
    
    as of
    
    
    CostsDec. 31, 2004
    
    
    2005
    
    
    2005
    
    
    Mar. 31, 2005
    
    
    RecognizedProject STAR -
Original
    
    $
    1,446
    
    
    $
    
    
    
    $
    620
    
    
    $
    826
    
    
    $
    3,542Extension of
Project concepts to
Dalhousie
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    413
    
    
    
    413Total,
Project STAR
    
    
    1,446
    
    
    
    413
    
    
    
    620
    
    
    
    1,239
    
    
    
    3,955Cornwall Project
    
    
    447
    
    
    
    164
    
    
    
    29
    
    
    
    582
    
    
    
    611Total
    
    $
    1,893
    
    
    $
    577
    
    
    $
    649
    
    
    $
    1,821
    
    
    $
    4,566
 Environmental Issues In December 2003 the Environmental Protection Agency adopted hazardous air pollutant emissions
limitations for mercury-cell chlor-alkali facilities, which would apply to our St. Gabriel
facility. The new regulations would require us to implement various measures at the St. Gabriel
facility over a three-year period that are designed to reduce mercury emissions. The measures
include the installation of additional emission monitoring systems, the adoption of more stringent
work practices and conducting more frequent operating and maintenance checks and repairs, at a
total estimated cost to us of approximately $2.3 million. Of that amount, we have already spent
approximately $1.8 million since January 1, 2001, in anticipation of the new requirements.
Environmental groups filed suit challenging the new regulations, contending that the EPA should
reconsider its rules and adopt new standards that bar the use of mercury for chlorine production.
The EPA has agreed to reconsider the new rules, and the litigation has been held in abeyance while
that process continues. The Department of Environmental Quality of the State of Louisiana recently initiated a program
with goals of continual reduction in the use and release of mercury in the state and the
minimization of human exposure to mercury through improved communication, management, research,
collection, recycling and disposal. We could incur substantial capital expenditures and/or expenses
in meeting any new emissions limitations and standards that result from the EPAs regulatory
process or the State of Louisianas initiatives. As a result of voluntary air emissions monitoring that we conducted during October 2004, we
discovered that the carbon-based system that we use to remove mercury from the hydrogen gas stream
at our St. Gabriel facility was not fully effective, resulting in mercury emissions that were above
the limits set forth in the current air permit, issued by the Louisiana Department of Environmental
Quality (LDEQ). We immediately reduced the plants operating rate in order to ensure that
emissions were below existing maximum achievable control technology levels, and evaluated the
materials and process changes that would be necessary to address the problem. The installation of
the necessary equipment was completed in November 2004, and the plant returned to its full
operating rate. Subsequent emissions monitoring has confirmed that air emissions are now below the
permit limits. LDEQ issued a consolidated compliance order and notice of potential penalty to us
as a result of the permit exceedances and has indicated that it intends to assess a penalty of
$42,000. An environmentalist group asserted in written comments that LDEQ should impose a penalty
of at least $10 million unless we agree to an enforceable schedule to cease the use and discharge
of mercury by the end of 2005. We do not agree with the environmentalist groups opinions, and we
believe that we operate our St. Gabriel facility in a safe manner and with due regard to applicable
environmental regulations. We
commission periodic reassessments of our environmental obligations. In
April 2005 the most recent independent analysis of environmental concerns at all of
our sites was completed, updating a similar independent environmental
analysis completed in April 2003. The new study involved a site-by-site analysis of environmental concerns and assessed
uncertain conditions, situations, and sets of circumstances that may involve a possible loss to us.
The outcomes of uncertain conditions will be resolved when one or more future events occur or fail
to occur, and resolution of the uncertainty may confirm the impairment of an asset or the
incurrence of a liability. The study was based on the same methodology as the 2003 study, using
scenario analysis to estimate the cost to remedy environmental concerns at our sites. For each
scenario, the study also used cost estimating techniques that included actual historical costs,
estimates prepared for us by other 21




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consultants, estimates prepared by our engineers and other published cost data available for
similar projects completed at the same or other sites. The new study identified a number of conditions that have changed since the 2003 environmental
analysis due to, among other things, changes in regulations or in their application by regulatory
agencies, the results of on-going and completed remediation projects, increased knowledge of site
conditions, the use of alternative remediation technologies, post-acquisition contamination not
covered under existing environmental indemnity agreements and the inherent risk of disputes under
some of the indemnity agreements due to passage of time. Based on the recent study, we estimated
our total environmental remediation liabilities to be $19.8 million, of which $3.2 million is
subject to indemnity claims against a previous owner, as discussed below. As a result, we reduced
our environmental reserves by $0.2 million in the first quarter of 2005, which is reflected as a
reduction in cost of sales in the consolidated statement of operations. As of March 31, 2005, the
total estimated environmental liabilities of $19.8 million that were included as other long term
liabilities on our consolidated balance sheet reflected a decrease of $0.5 million as compared to
December 31, 2004, as a result of the reduction in the environmental reserve in the first quarter
of 2005 and environmental costs paid during the quarter. We base our environmental reserves on
undiscounted costs. As discussed in our Annual Report on Form 10-K for the year ended December 31, 2004, we have
indemnity agreements with certain previous owners covering, among other things, pre-acquisition
environmental conditions at certain of our sites. Previous analysis resulted in a $3.2 million
environmental reserve related to pre-acquisition conditions at the Henderson site that is the
responsibility of a previous owner, and a receivable from the previous owner for the same amount
has also been recorded. We believe that the previous owner will continue to honor its obligations
for claims properly presented by us or by regulatory authorities, although it is possible that
disputes could arise concerning the effect of contractual language, in which event we would have to
subject any claims for cleanup expenses, which could be substantial, to the
contractually-established arbitration process. The recent study did not include environmental
matters covered by the $3.2 million environmental receivable. Such amount, as originally
estimated, is included in the consolidated balance sheet as of March 31, 2005, in offsetting
amounts in other assets and other long term liabilities. The recent study also did not cover any
environmental matters that we believe to be fully covered under other indemnity agreements. As of December 31, 2004, our total estimated environmental liabilities were $20.3 million,
which were included in other long-term liabilities on our balance sheet at that date. During the
three months ended March 31, 2005, we paid approximately $0.3 million for environmental costs that
were included in such liabilities. We believe the remaining amount of environmental reserves, as
adjusted in accordance with the recent study, is adequate to address costs that may arise over the
course of the next thirty years. Those costs will be determined on the basis of known
environmental concerns and the application of environmental requirements to those concerns, such
that the amount and timing of specific amounts are not certain. In 2005, we expect to fund
approximately $1.4 million in remediation expenses and $2.9 million in capital projects relating to
our environmental compliance program. Liquidity and Capital Resources Debt, Financial Leverage and Covenants.At March 31, 2005, our senior secured debt aggregated
$175.2 million, consisting of Senior Secured Floating Rate Guaranteed Notes due 2006 in the
aggregate principal amount of $22.1 million (the Senior Guaranteed Notes), Floating Rate Term
Notes due 2006 in the aggregate principal amount of $3.1 million (the Senior Floating Notes) and
10% Senior Secured Guaranteed Notes due 2008 in the aggregate principal amount of $150 million (the
10% Senior Secured Notes). As of March 31, 2005, we had no borrowings outstanding under a
Revolving Credit Facility with a $30 million commitment and a borrowing base restriction (the
Revolver). Collectively, the $175.2 million in Senior Guaranteed Notes, Senior Floating Notes and
10% Senior Secured Notes are referred to as the Senior Notes and together with the Revolver are
referred to as the Senior Secured Debt. The debt agreements contain covenants limiting or preventing our ability to, among other
things, incur additional indebtedness, prepay or modify debt instruments, grant additional liens,
guarantee any obligations, sell assets, engage in another type of business or suspend or terminate
a substantial portion of business, declare or pay dividends, make investments, make capital
expenditures in excess of certain amounts, or make use of the proceeds of borrowings for purposes
other than those specified in the agreements. The agreements also include customary 22




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events of default, including one for a change of control under the Revolver. Borrowings under
the Revolver are subject to the accuracy of all representations and warranties, including the
absence of a material adverse change and the absence of any default or event of default. Under the agreements we also may be required to redeem or prepay Senior Notes from and to the
extent of net cash proceeds of certain asset sales, certain new equity issuances and excess cash
flow, or if there is a change of control. The $22.1 million in net proceeds of our December 2004
equity offering was applied to the redemption and prepayment of Senior Guaranteed Notes and Senior
Floating Notes (collectively, the Tranche A Notes) in December 2004 and January 2005. Each
holder of Senior Floating Notes may refuse certain prepayments. While no redemption and prepayment
of Tranche A Notes was required with respect to any other calendar quarter during 2004, on the
basis of current estimates we believe that we will be required to redeem and prepay approximately
$18.3 million of the principal amount of the Tranche A Notes as a result of the application of
these provisions with respect to the quarter ended March 31, 2005, although the holders of Senior
Floating Notes may refuse the prepayment of a portion of such amount. Such prepayment and
redemption is expected to occur during May 2005. The obligations under the Revolver are secured by liens on our accounts receivable and
inventory, and the obligations under the Senior Notes are secured by liens on substantially all of
our other assets, with the exception of certain assets that secure the obligations under certain
other long-term liabilities. One of the covenants in the Revolver requires us to generate at least $21.55 million of net
earnings before extraordinary gains, the effects of derivative instruments excluding derivative
expenses paid by us, interest, income taxes, depreciation and amortization (referred to as
Lender-Defined EBITDA) for each twelve-month period ending at the end of each calendar quarter.
Our Lender-Defined EBITDA for the twelve months ended March 31,
2005, was $67.2 million. We report amounts of Lender-Defined EBITDA generated by our business because, as indicated
above, there is a covenant in the Revolver that requires us to generate specified levels of
Lender-Defined EBITDA. Lender-Defined EBITDA is not a measure of performance calculated in
accordance with accounting principles generally accepted in the United States of America.
Lender-Defined EBITDA should not be considered in isolation of, or as a substitute for, income
before income taxes as an indicator of operating performance or cash flows from operating
activities as a measure of liquidity. Lender-Defined EBITDA, as defined in the Revolver, may not be
comparable to similar measures reported by other companies. In addition, Lender-Defined EBITDA does
not represent funds available for discretionary use. The calculation of Lender-Defined EBITDA for the twelve months ended March 31, 2005, and for
each of the quarters in that period is as follows (dollar amounts in thousands). During the
periods presented there were no derivative items or impairment charges. ThreeThree
    
    
    Months
    
    
    Three
    
    
    Three
    
    
    TwelveMonths
    
    
    Ended
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    September
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30,
    
    
    30,
    
    
    December 31,
    
    
    March 31,
    
    
    March 31,2004
    
    
    2004
    
    
    2004
    
    
    2005
    
    
    2005Net income (loss)
    
    $
    (2,401
    )
    
    $
    3,917
    
    
    $
    4,535
    
    
    $
    15,020
    
    
    $
    21,071Income tax (benefit) expense
    
    
    (342
    )
    
    
    (1,185
    )
    
    
    3,916
    
    
    
    3,411
    
    
    
    5,800Income (loss) before income taxes
    
    
    (2,743
    )
    
    
    2,732
    
    
    
    8,451
    
    
    
    18,431
    
    
    
    26,871Depreciation and amortization
    
    
    5,470
    
    
    
    5,557
    
    
    
    5,603
    
    
    
    5,685
    
    
    
    22,315Interest expense
    
    
    4,561
    
    
    
    4,578
    
    
    
    4,575
    
    
    
    4,256
    
    
    
    17,970Environmental charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lender-Defined EBITDA
    
    $
    7,288
    
    
    $
    12,867
    
    
    $
    18,629
    
    
    $
    28,372
    
    
    $
    67,156
 If in the future the required Lender-Defined EBITDA level under the Revolver were not met
or if we were to fail to comply with other covenants and the lender did not waive our
non-compliance, we would be in default under the terms of the Revolver. Moreover, if conditions
constituting a material adverse change occur, the lender could refuse to make further advances.
Following any such refusal, customer receipts would be applied to our borrowings under the
Revolver, if any, and we would not have the ability to reborrow. This could cause us to suffer a
rapid loss of liquidity and we could lose the ability to operate on a day-to-day basis. In
addition, a default under the Revolver 23




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would allow the lender to accelerate the outstanding indebtedness under the Revolver and would
also result in a cross-default under the Senior Notes that would provide the holders of the Senior
Notes with the right to demand immediate repayment. On March 31, 2005, we were in compliance with
all of the covenants contained in our debt agreements. The Revolver contains additional covenants requiring us to maintain Liquidity (as defined in
the agreement) of at least $5.0 million, and limiting capital expenditure levels to $25.0 million
in each calendar year. At March 31, 2005, our Liquidity was $41.0 million, consisting of borrowing
availability, net of $4.6 million in outstanding letters of credit, of $25.4 million and cash of
$15.6 million. Our capital expenditures were $3.9 million in the three months ended March 31, 2005,
and we estimate capital expenditures will be approximately $15.1 million during 2005. The Revolver
also provides that, as a condition of borrowings, there shall not have occurred any material
adverse change in our business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise). We had no borrowings under the Revolver as of April 30, 2005. Our $30 million Revolver
commitment is subject to borrowing base limitations related to the level of eligible accounts
receivable, as determined in accordance with and subject to reserves established pursuant to the
agreement, and as reduced by the amount of letters of credit that are outstanding. As a result, on
April 30, 2005, our availability under the Revolver was
approximately $25.4 million, after reducing
the amount of availability by the $4.6 million of letters of credit then outstanding, and our
Liquidity was $47.9 million. The cash that we generate from our operations may not be sufficient for the prepayment of the
10% Senior Secured Notes when they are due in December 2008. To the extent that we are unable to
repay any indebtedness when it is due, it would be necessary to refinance the indebtedness, issue
new equity or sell assets. The terms of any necessary new borrowings would be determined by
then-current market conditions and other factors, and could impose significant additional burdens
on our financial condition and operating flexibility, and the issuance of new equity securities
could dilute the interest of our existing stockholders. We cannot provide any assurance that we
will generate sufficient cash from our operations to repay our outstanding debt obligations or that
we would be able to refinance any of our indebtedness, raise equity on commercially reasonable
terms or at all, or sell assets, which failure could cause us to default on our obligations and
impair our liquidity. Our inability to generate sufficient cash flow to satisfy our debt
obligations, or to refinance our obligations on commercially reasonable terms, would have a
material adverse effect on our business, financial condition and results of operations. Possible Asset Dispositions.During the third quarter of 2004 we engaged a real estate broker
in connection with the possible sale of approximately 60 acres of vacant land located at our
Henderson facility, which is located in the Las Vegas Valley at the intersection of I-515 and
I-215. We are also seeking a buyer for up to 750 annual acre-feet of Colorado River water rights.
The land and water rights have a nominal book value. The net proceeds from such sales, if any, must
be applied to mandatory redemptions and prepayments of the Tranche A Notes, if any Tranche A Notes
are then outstanding, or to offers to redeem the 10% Senior Secured Notes. Future Payment Commitments.For the nine months ending December 31, 2005, we expect to have
cash requirements, in addition to recurring operating and administrative costs, of approximately
$29.9 million, consisting of the following: (i) interest payments of $15.3 million, (ii) capital
expenditures of $11.2 million, (iii) environmental remediation spending of $1.1 million, (iv)
payments of severance and benefit costs of $1.6 million and (v) contractual debt repayments of $0.7
million. These amounts are our current estimates and they could materially change. We expect to
fund these obligations through internally-generated cash flows from operations, including changes
in working capital. We may also be obligated to prepay and redeem certain amounts of Senior Notes
with the proceeds of asset sales or as a result of excess cash flow. We will be subject to Sarbanes-Oxley Section 404 compliance beginning in 2005 and as a result
we anticipate a substantial increase in professional services and internal costs in connection with
our managements attestation of the effectiveness of our internal controls over financial reporting
and disclosure and related certifications. Defined benefit and
post-retirement plan liabilities totaled $23.2 million at December 31, 2004. Our contributions to
these plans were $0.9 million during the quarter ended March 31, 2005, and are expected to be $5.3
million for the year ending December 31, 2005. 24




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Net Operating Loss Carryforward.As of December 31, 2004, we had approximately $306.1 million
of net operating loss carryforward (NOL) for U.S. and Canadian income tax purposes. U.S. NOL in
the amount of $199.5 million (the Predecessor Company NOL), which expires from 2009 to 2021, was
generated prior to our emergence from bankruptcy on December 31, 2001. The remaining $79.1 million
of U.S. NOL (the Successor Company NOL) was generated in 2002 through 2004 and will expire in
2022 through 2024. An additional $27.5 million of Canadian NOL generated in 2002 and 2003 expires
in 2009 and 2010. For the first quarter of 2005, we recognized an income tax provision of $3.4 million,
consisting of $3.3 million of deferred tax expense with respect to our Canadian operations and
$0.1 million of current tax expense for our U.S. operations. During the quarter we applied
approximately $10.6 million of our Canadian NOL and $15.9 million of our Successor Company NOL to
offset current taxable income in Canada and the U.S. As of March 31, 2005, we continued to reflect
a valuation allowance for the full amount of the U.S. net deferred tax assets due to uncertainties
as to whether we will generate future taxable income so as to realize the benefit of the deferred
tax assets. In the first quarter of 2005 certain long-term deferred tax assets were reclassified to
other current assets on the consolidated balance sheet after an evaluation of the likelihood of
their application to future earnings. Under Section 382 of the Internal Revenue Code, if a corporation undergoes an ownership
change (generally defined as a greater than 50% change (by value) in its equity ownership over a
three-year period), the corporations ability to use its pre-change NOL and other pre-change tax
attributes against its post-change income is limited (the Section 382 Limitation). As a result of
our emergence from bankruptcy and changes in the ownership of our common stock in 2001, our
utilization of the $199.5 million of Predecessor Company NOL is subject to the Section 382
Limitation, and our ability to use it to offset future taxable income will be materially
restricted. However, the use of the Predecessor Company NOL is under review, and before June 30,
2005, we intend to determine whether and the extent to which it remains available. The $79.1
million of Successor Company NOL is available to offset future taxable income, but subsequent
changes in the ownership of our common stock could limit our ability to fully utilize the Successor
Company NOL. Net Cash Flows from Operating Activities.During the first three months of 2005 our cash flow
provided by operating activities was $25.6 million, $11.4 million more than during the same period
in 2004. The increase was primarily attributable to increased sales, resulting for the most part
from higher ECU prices. Changes in operating assets and liabilities
were approximately $12.3
million lower than during the comparable 2004 period, primarily as a result of changes in accounts
receivable, due to higher sales, and changes in accounts payable and accrued liabilities, due to
the timing of payments and favorable changes related to electricity costs as compared to the change
in the prior period, resulting from decreased activity in the first quarter of 2005 due to plant
maintenance activities. Net Cash Flows used in Investing Activities.Cash used in investing activities, which related
primarily to capital expenditures during the first three months of 2005, was $3.9 million, compared
to $2.3 million in the same period in 2004. Net Cash Flows used in Financing Activities.Net cash used in financing activities during the
first three months of 2005 was approximately $22.3 million, relating to the prepayment of long-term
debt, including the redemption of $21.1 million of Senior Guaranteed Notes. Cash used in financing
activities during the same period in 2004 was approximately $11.4 million, due primarily to
repayments, net of borrowings, of $10.2 million on the Revolver and other debt payments of $1.2
million. Critical Accounting Policies and Estimates Our Annual Report on Form 10-K for the year ended December 31, 2004, includes a discussion of
the critical accounting policies and estimates that we use in the preparation of our financial
statements. There were no significant changes in our critical accounting policies and estimates
during the quarter ended March 31, 2005, other than the changes to our estimates with respect to
environmental remediation liabilities, as discussed above. 25




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RESULTS OF OPERATIONS Three Months Ended March 31, 2005, Compared to Three Months Ended March 31, 2004 Revenues.Our revenues for the three months ended March 31, 2005 and 2004 were derived as
follows (dollars in thousands, except ECU netback): Three Months EndedMarch 31,2005
    
    
    2004Chlorine and caustic soda
    
    $
    91,415
    
    
    $
    64,745Other products
    
    
    27,675
    
    
    
    26,287$
    119,090
    
    
    $
    91,032ECU netback*
    
    $
    548
    
    
    $
    339
   *
    
    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. During the three months ended March 31, 2005, we produced 161,635 tons of chlorine and 177,799
tons of caustic soda; we used approximately 23% of the chlorine and 9% of the caustic soda to
manufacture bleach and hydrochloric acid, as well as other downstream products. We also purchased
16,315 tons of caustic soda for resale during the quarter. During the three months ended March 31,
2004, we produced 169,555 tons of chlorine and 186,511 tons of caustic soda; we used approximately
29% of the chlorine and 11% of the caustic soda to manufacture bleach and hydrochloric acid, as
well as other downstream products. We purchased 30,636 tons of caustic soda for resale during the
2004 quarter. Revenues increased by $28.1 million, or approximately 31%, to $119.1 million for the three
months ended March 31, 2005, as compared to the three months ended March 31, 2004. An increase in
our revenues from sales of chlorine and caustic soda, resulting from higher ECU prices, was offset
in part by lower ECU sales volumes, reflecting lower caustic soda sales volumes. The average ECU
netback (which relates only to sales of chlorine and caustic soda to customers) for the three
months ended March 31, 2005, was $548, an increase of 62% from the average netback of $339 during
the three months ended March 31, 2004. Our revenues in the most recent quarter were also favorably
affected by increased prices for our other products, with an increase of $1.4 million in revenues
resulting from improved sales of bleach and other products. Cost of Sales.Cost of sales increased by $0.3 million for the three months ended March
31, 2005, as compared to the three months ended March 31, 2004. Cost of sales represented
approximately 74% of revenues in the 2005 quarter, compared to approximately 96% in the
year-earlier quarter. In the most recent quarter our variable product costs were $1.8 million
higher than in the 2004 period, with a $2.9 million increase resulting from higher prices for salt,
electricity and other raw materials being partially offset by $1.6 million due to lower production
volumes, in addition to higher non-ECU purchases for resale of $0.5 million. Additionally, during
the most-recent quarter there was also a $2.3 million increase in maintenance cost, partially
offset by lower salaries and employee-related costs as a result of workforce reductions related to
Project STAR. The increase in maintenance costs was incurred at our plant in St. Gabriel, where
major maintenance activities do not occur every year. Also offsetting these increases was the
absence of depreciation of approximately $3.4 million related to a decision to discontinue
chlor-alkali production at the Tacoma facility during the first quarter of 2004. Other companies
may include certain of these costs in selling, general and administrative expenses, resulting in a
lack of comparability between our gross profit and that reported by other companies. Selling, General and Administrative Expenses.Selling, general and administrative expenses
increased by $1.9 million, or approximately 28%, to $8.5 million for the three months ended March
31, 2005, as compared to the three months ended March 31, 2004. The increase was primarily
attributable to an increase in personnel expenses of $1.3 million, resulting from increased
employee bonus accruals partially offset by a decrease in salaries and other employee-related
costs, along with an increase in bad debt expense of approximately $0.9 million due to a much 26




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higher level of accounts
receivable. There was also a decrease in consulting fees, primarily reflecting
approximately $0.5 million of fees related to Project STAR that were incurred in the first quarter
of 2004. Other companies may include as a component of selling, general and administrative
expenses certain costs that we recognize as cost of sales. As a result, our gross profit may not
be comparable to that reported by other companies. Other Items.There were $0.5 million of other items for the three months ended March 31,
2005, an increase of approximately $0.3 million compared to the same period in 2004, due to
recognition of employee severance benefits as a result of the
extension of Project STAR to our Dalhousie facility and the realignment of certain Canadian
operations. Interest Expense.Interest expense decreased by approximately $0.4 million, to $4.3 million,
during the three months ended March 31, 2005, as a result of lower debt balances during the period.
There was a partial redemption of our Senior Guaranteed Notes in January 2005, and there was a
lower level of borrowings under the Revolver during the period. Other Income, Net.Other income, net of $0.2 million in the first quarter of 2005 reflected a
currency exchange gain, which resulted from an increase in the rate at which Canadian dollar
denominated amounts were converted into U.S. dollar balances (from $1.2020 at December 31, 2004, to
$1.2096 at March 31, 2005). Other income, net of $0.1 million for the first quarter of 2004 also
included currency exchange gain. Income Tax Benefit (Expense).We had income tax expense of $3.4 million for the quarter ended
March 31, 2005, compared to an income tax benefit of $0.3 million in the first quarter of 2004.
Income from our Canadian operations gave rise to $3.3 million of tax expense in the latest period. Net Income.Due to the factors described above, net income for the three months ended March
31, 2005, was $15.0 million, compared to a net loss of $7.3 million for the first quarter of 2004. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The nature of our market risk disclosures set forth in our Annual Report on Form 10-K for the
year ended December 31, 2004, did not change significantly during the three months ended March 31,
2005. 
 ITEM 4. CONTROLS AND PROCEDURES In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under
the supervision and with the participation of management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
March 31, 2005, to provide reasonable assurance that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions rules and forms. There has been no change in our internal controls over financial reporting that occurred
during the three months ended March 31, 2005, that has materially affected, or is reasonably likely
to materially affect, our internal controls over financial reporting. 
 PART II  OTHER INFORMATION 
 ITEM 5. OTHER INFORMATION Forward-Looking Statements. We are including the following discussion to inform our existing
and potential security holders generally of some of the risks and uncertainties that can affect our
company and to take advantage of the safe harbor protection for forward-looking statements that
applicable federal securities law affords. Many of these risks are described in more detail in our
Annual Report on Form 10-K for the year ended December 31, 2004, in Item 1. Business  Risks
which is hereby incorporated by reference. 27




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From time to time, our management or persons acting on our behalf make forward-looking
statements to inform existing and potential security holders about our company. These statements
may include projections and estimates concerning the timing and success of specific projects
(including our organizational efficiency project and the sale of excess land and water rights at
our Henderson facility), our future prices, liquidity, debt levels, production, revenue, income,
expenses, product margins, cash flows, capital spending and pension contributions, and the effects
of current and future environmental requirements. Forward-looking statements are generally
accompanied by words such as estimate, project, predict, believe, expect, anticipate,
plan, forecast, budget, goal or other words that convey the uncertainty of future events or
outcomes. In addition, sometimes we will specifically describe a statement as being a
forward-looking statement and refer to this cautionary statement. Any statement contained in this
report, other than statements of historical fact, is a forward-looking statement. Various statements this report contains, including those that express a belief, expectation or
intention, as well as those that are not statements of historical fact, are forward-looking
statements. These forward-looking statements speak only as of the date of this report, we disclaim
any obligation to update these statements, and we caution against any undue reliance on them. We
have based these forward-looking statements on our current expectations and assumptions about
future events. While our management considers these expectations and assumptions to be reasonable,
they are inherently subject to significant business, economic, competitive, regulatory and other
risks, contingencies and uncertainties, most of which are difficult to predict and many of which
are beyond our control. These risks, contingencies and uncertainties relate to, among other
matters, the following:  
    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 or an interruption in the supply of electricity, salt or other raw materials;
    failure to comply with financial covenants contained in our debt instruments;
    inability to make scheduled payments on or refinance our indebtedness;
    loss of key customers or suppliers;
    increased prices for raw materials, including electricity;
    disruption of transportation or higher than expected transportation or logistics costs;
    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 effect the sale of certain excess land and water rights at our Henderson facility; and 28




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
    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. We believe the items we have outlined above, as well as others, are important factors that
could cause our actual results to differ materially from those expressed in a forward-looking
statement made in this report or elsewhere by us or on our behalf. We have discussed most of these
factors in more detail elsewhere in this report and in our Annual Report on Form 10-K for the year
ended December 31, 2004. These factors are not necessarily all of the important factors that could
affect us. Unpredictable or unknown factors that we have not discussed in this report could also
have material adverse effects on actual results of matters that are the subject of our
forward-looking statements. We do not intend to update our description of important factors each
time a potential important factor arises. We advise our security holders that they should (i) be
aware that important factors we do not refer to above could affect the accuracy of our
forward-looking statements and (ii) use caution and common sense when considering our
forward-looking statements. 
 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.
   
    
    Indicates exhibit previously filed with the Securities and Exchange Commission as indicated
and incorporated herein by reference 29




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PIONEER COMPANIES, INC.Date: May 13, 2005
    By:
    /s/ Gary L. PittmanGary L. PittmanVice President and Chief Financial Officer
(Principal Financial Officer) 30




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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.
   
    
    Indicates exhibit previously filed with the Securities and Exchange Commission as indicated
and incorporated herein by reference