PONR Pioneer Companies New 2/02 (MM)

HOUSTON, May 8 /PRNewswire-FirstCall/ -- Pioneer Companies, Inc. (NASDAQ:PONR) today reported net income of $16.1 million, or $1.35 per diluted share, on revenues of $134.9 million for the three months ended March 31, 2006. This compares to net income of $15.0 million, or $1.28 per diluted share, on revenues of $119.1 million for the first quarter of 2005. Pioneer's average ECU netback during the first quarter of 2006 was $616, which was $3 lower than the preceding quarter, and $68 higher than the first quarter of 2005. The increase in revenues for the three months ended March 31, 2006 compared to the first quarter of 2005 resulted from a higher ECU netback, as well as higher prices for bleach and other Pioneer products. Pioneer's ECU production was 165,359 ECUs in the first quarter of 2006, as compared to 163,729 ECUs and 161,635 ECUs in the preceding quarter and the first quarter of 2005, respectively. Cost of sales for the three-months ended March 31, 2006 increased by $12.0 million, to $99.6 million, as compared to the first quarter of 2005. In the most recent quarter, Pioneer's cost of sales included an increase in variable product costs of $11.0 million and an increase in fixed costs of $1.0 million, as compared to the first quarter of 2005. The variable product cost increase of $11.0 million included higher production costs of $9.4 million related primarily to higher energy prices, and $1.2 million as a result of higher production volumes. Pioneer also incurred higher freight costs of $3.3 million compared to the prior year period. These variable cost increases were partially offset by a decrease of $1.8 million in the costs of purchases for resale due to certain sales contracts expiring related to Pioneer's former chlor-alkali facility in Tacoma and lower costs of $1.1 million for non-ECU products resulting from the closure of its Cornwall plant in mid 2005. Pioneer's fixed costs increased by $1.0 million due to higher personnel costs of $0.4 million, higher depreciation expense of $0.4 million and higher plant utilities costs of $1.3 million. That increase was offset in part by lower maintenance costs of $1.5 million, mainly caused by fewer turnaround projects in the first quarter of 2006 compared to the 2005 period. Selling, general and administrative expenses decreased by $0.4 million, or approximately 5%, to $8.1 million for the first quarter of 2006, compared to the same period of 2005. This decrease included $1.1 million of lower bad debt expense due to improvements in accounts receivables from certain customers in higher risk industries and a decrease of $1.5 million in the employee bonus accrual from the prior period. Partially offsetting these decreases was $1.2 million of higher professional fees in the first quarter of 2006, of which $0.9 million was related to our ongoing Sarbanes-Oxley compliance efforts. Additionally, there were $1.2 million of higher employee related costs in the current period. During the first quarter of 2006, Pioneer redeemed $50.0 million of its senior secured notes, plus paid a prepayment premium of $2.5 million, which reduced the balance of its outstanding senior notes to $100 million. Further, there were no borrowings under Pioneer's revolving credit facility in the first quarter of 2006. Interest expense for the three months ended March 31, 2006 was $2.5 million, compared to $4.3 million during the year-earlier period. Pioneer has substantial Canadian operations and accordingly must measure Canadian dollar-denominated account balances in U.S. dollars impacts for financial reporting purposes. Accordingly, in the first quarter of 2006, Pioneer reported as other income, $0.2 million of currency exchange gain, compared to a $0.2 million currency exchange gain in the first quarter of 2005. Income tax expense for the first quarter of 2006 was $6.7 million, primarily from taxes on income from Pioneer's Canadian operations. The Company had available net operating loss carryforward to offset its taxable U.S. income. In comparison, Pioneer reported an income tax expense of $3.4 million for the first quarter of 2005. At March 31, 2006, Pioneer had liquidity of $52.5 million, which included $26.1 million of cash and $26.4 million available for borrowing under Pioneer's revolving credit facility, which was net of $3.6 million of outstanding letters of credit. Michael Y. McGovern, Pioneer's Chairman, President and Chief Executive Officer, stated, "The first quarter of 2006 was another outstanding quarter for Pioneer. With continuing strong demand for chlorine and caustic soda, our average ECU netback of $616 for the first quarter of 2006 showed only a slight decline from the ECU average netback of $619 during the fourth quarter of 2005." Mr. McGovern continued, "Two other recent events are worth noting. As previously discussed, our total debt has been reduced to $103 million as of March 31, 2006. This provides the Company with much greater financial flexibility. The second event was the new six-year union contract recently ratified by our production and maintenance employees at our Becancour, Quebec facility. This demonstrates the positive labor-management relationship at Becancour which benefits all involved parties, and most especially our customers who rely on Pioneer to be a reliable supplier of our products." Pioneer, based in Houston, manufactures chlorine, caustic soda, bleach, hydrochloric acid and related products used in a variety of applications, including water treatment, plastics, pulp and paper, detergents, agricultural chemicals, pharmaceuticals and medical disinfectants. Pioneer owns and operates four chlor-alkali plants and several downstream manufacturing facilities in North America. Pioneer's common stock trades on the NASDAQ Stock Market under the symbol PONR. Pioneer has filed its quarterly report on Form 10-Q for the quarter ended March 31, 2006, and has posted it to its Internet web site. Other information and press releases of Pioneer Companies, Inc. can also be obtained from its Internet web site at http://www.piona.com/ . Pioneer will conduct a teleconference on May 10, 2006, at 9:00 a.m. Central time in order to discuss its financial results for the first quarter of 2006. Individuals who are interested in listening to the teleconference may call (800) 314-3563 at that time and request to listen to the Pioneer earnings teleconference. A replay of this teleconference will be available from 11:00 a.m. (Central time) on May 10, 2006, until 11:00 a.m. on May 16, 2006, by dialing (800) 633-8284, reservation #21291710. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. Forward- looking statements relate to matters that are not historical facts. Such statements involve risks and uncertainties, including, but not limited to, the cyclical nature of the markets for Pioneer's products and raw materials, the fluctuations in demand and prices for Pioneer's products and raw materials, increases in energy prices, Pioneer's access to and the cost of rail transportation, Pioneer and industry production volumes, competitive prices, and other risks and uncertainties described in Pioneer's filings with the Securities and Exchange Commission. Actual outcomes may vary materially from those indicated by the forward-looking statements. PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data) Three Months Ended March 31, 2006 2005 Revenues $134,872 $119,090 Cost of sales (99,638) (87,608) Gross profit 35,234 31,482 Selling, general and administrative expenses (8,079) (8,463) Other items 312 (505) Operating income 27,467 22,514 Interest expense, net (2,466) (4,256) Other income (expense), net (2,290) 173 Income before income taxes 22,711 18,431 Income tax expense (6,661) (3,411) Net income $ 16,050 $ 15,020 Net Income per share: Basic $ 1.36 $ 1.34 Diluted $ 1.35 $ 1.28 Weighted average number of shares outstanding: Basic 11,761 11,176 Diluted 11,864 11,779 PIONEER COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) March 31, Dec. 31, 2006 2005 Assets Current assets $108,286 $151,603 Property, plant and equipment, net 155,330 158,960 Other assets, net 4,177 4,310 Excess reorganization value over the fair value of identifiable assets 84,064 84,064 Total assets $351,857 $398,937 Liabilities and stockholders' equity Current liabilities $ 47,404 $ 59,932 Long-term debt, less current portion 101,979 152,739 Employee benefit and other long-term liabilities 80,791 81,276 Total stockholders' equity 121,683 104,990 Total liabilities and stockholders' equity $351,857 $398,937 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Three Months Ended March 31, 2006 2005 Operating activities: Net income $ 16,050 $ 15,020 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 6,030 5,685 Provision for (recovery of) losses on accounts receivable (674) 603 Deferred tax expense 742 3,311 Gain on disposal of assets (312) (74) Currency exchange gain (153) (173) Loss on early debt extinguishment 2,500 --- Stock-based compensation expense 378 --- Accretion expense 76 --- Net effect of changes in operating assets and liabilities (4,953) 1,183 Net cash flows from operating activities 19,684 25,555 Investing activities: Capital expenditures (3,087) (3,932) Proceeds from disposal of assets 132 74 Net cash flows used in investing activities (2,955) (3,858) Financing activities: Payment of premium on early debt extinguishment (2,500) --- Repayments of long-term debt (51,135) (22,316) Proceeds from issuance of stock, net 218 8 Net cash flows used in financing activities (53,417) (22,308) Effect of exchange rate changes on cash (17) (14) Net change in cash and cash equivalents (36,705) (625) Cash and cash equivalents at beginning of period 62,790 16,191 Cash and cash equivalents at end of period $ 26,085 $ 15,566 DATASOURCE: Pioneer Companies, Inc. CONTACT: Gary Pittman of Pioneer Companies, Inc., +1-713-570-3200 Web site: http://www.piona.com/

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