HOUSTON, Feb. 18 /PRNewswire/ -- Pennzoil-Quaker State Company (NYSE: PZL)
today announced a 1998 net loss of $45.9 million, including nonrecurring
charges, or 96 cents per basic share, compared to a net loss of $0.6 million,
or 1 cent per basic share, in 1997. The fourth quarter 1998 net loss was
$53.1 million, including nonrecurring charges, or $1.09 per basic share,
compared to a net loss of $7.5 million, or 16 cents per basic share, in 1997.
The full year net loss includes nonrecurring after-tax charges of
$59.0 million, or $1.23 per basic share, primarily resulting from non-cash
asset impairments, charges taken in association with the company's merger with
Quaker State Corporation and a voluntary withdrawal of Fix-A-Flat(R) tire
inflator products. The fourth quarter net loss included similar nonrecurring
after-tax charges of $56.6 million, or $1.17 per basic share.
After adjusting for nonrecurring charges, Pennzoil-Quaker State Company's
net income for 1998 was $13.1 million, or 27 cents per basic share, compared
to net income of $15.3 million, or 32 cents per basic share, in 1997. Fourth
quarter 1998 recurring net income was $3.5 million, or 7 cents per basic
share, compared to net income of $3.8 million, or 8 cents per basic share, in
the fourth quarter of 1997.
Pennzoil-Quaker State Company's reported and recurring results for the
full year and fourth quarter of 1998 include $33.3 million and $8.4 million,
respectively, of pretax interest charges allocated from its former parent
company (Pennzoil Company) that will not be incurred by Pennzoil-Quaker State
Company in future periods. In addition, results from operations of Quaker
State Corporation, acquired in a merger transaction and accounted for as a
purchase on December 30, 1998, are not included in Pennzoil-Quaker State
Company's 1998 results, but will be included in future period results.
For the full year 1998, revenues totaled $1.8 billion, an 8 percent
reduction from 1997. The decline in total revenue for the year primarily
resulted from exclusion of sales related to the company's industrial specialty
products marketing business, which was contributed to a partnership with
Conoco Inc. called Penreco in October 1997. Penreco's results are now
reported as equity earnings. Lower fuels prices also contributed to the
year-on-year decline in total revenue.
Revenues for the fourth quarter totaled $432 million, an 8 percent
decrease compared to the same period in 1997, reflecting lower fuels prices
and lower same store sales for Jiffy Lube company-operated centers.
Formation of Pennzoil-Quaker State Company
Pennzoil-Quaker State Company includes the marketing, manufacturing and
fast lube operations of Pennzoil Company spun off on December 30, 1998 in a
tax-free distribution. Shareholders received one share of Pennzoil-Quaker
State Company for each share of Pennzoil Company stock held. Immediately
following the distribution, Quaker State Corporation, the second largest
domestic marketer of motor oil and a leading marketer of automotive consumer
products, was acquired by Pennzoil-Quaker State Company in a merger
transaction. Quaker State Corporation shareholders received .8204 share in
the newly combined company for each share of Quaker State Corporation common
stock held.
"The completion of the restructuring and merger at the end of 1998
represent a major milestone in the 110-year history of Pennzoil Company," said
James L. Pate, chairman and chief executive officer of Pennzoil-Quaker State
Company. "Pennzoil-Quaker State Company is uniquely positioned to capitalize
on substantial growth opportunities in the automotive consumer products
market. We have a broad portfolio of over 1,300 products with leading brands
in every category in which we compete. Our objective is to be the world's
premier automotive consumer products company."
Upon completion of the merger, James J. Postl was named president and
chief operating officer of Pennzoil-Quaker State Company. Postl has 31 years
of management experience in consumer products, including responsibility for a
broad array of consumer products.
"At Pennzoil-Quaker State Company, we have the fundamental elements for
long-term growth -- powerful brands, top market shares and a consumer-oriented
culture," Postl said. "We expect Pennzoil-Quaker State Company to be a leader
in automotive consumer products for years to come. And we have the people and
resources to do just that."
Lubricants and Consumer Products
Lubricants and consumer products reported operating income of
$65.4 million for 1998 on total revenue of $1.2 billion. Adjusted to exclude
nonrecurring charges, operating income totaled $104.6 million, a 16 percent
increase compared to $89.9 million in 1997.
Year-on-year recurring operating income increased because of higher motor
oil and other lubricating products sales volumes, which were up 4.8 percent
and 9.0 percent, respectively. Also contributing were lower raw material
costs, lower expenses and a full year's impact of income from the acquisitions
of Snap Automotive Products Inc.'s marketing and distribution assets and Total
Action Automotive Products made in late 1997. These improvements were
partially offset by increased promotional spending for lubricants, lower
filter and fuels volumes and lower Gumout(R) sales volumes.
For the fourth quarter of 1998, lubricants and consumer products reported
an operating loss of $13.7 million on total revenue of $285 million. Adjusted
to exclude nonrecurring charges, operating income totaled $24.0 million, a
32 percent improvement compared to $18.2 million for the same period in 1997.
The favorable variance for the fourth quarter is due primarily to increases of
8.3 percent and 5.2 percent in motor oil and other lubricating sales volumes,
respectively. Lower raw material costs and improved international results
also contributed to the increase. Lower chemical sales and higher promotional
sales for lubricants partially offset the fourth quarter improvements.
Full year and fourth quarter nonrecurring charges related primarily to
losses on the sale of assets, restructuring and merger charges, litigation
settlements and a voluntary withdrawal of Fix-A-Flat(R) tire inflator
products.
During the year, Pennzoil-Quaker State Company reformulated and repackaged
its Pennzoil(R) brand multi-grade motor oil line to take advantage of its
PureBase(R) base oil, which is specially formulated to protect against harsh
stop and go driving conditions. As part of an associated advertising
campaign, the company launched its first ever event truck, called the Stop and
Go Challenge Truck, and completed a nationwide Stop and Go survey that
received extensive national media attention. In addition, the company
designed a new logo for its Long-Life(R) commercial products and repositioned
them under the slogan, "When you're on the road, you're making money(TM)."
Pennzoil(R) motor oil continues as America's number one selling motor oil
for the 13th consecutive year. The Pennzoil(R) brand's market share increased
to 21.8 percent compared to 21.5 percent in 1997.
Pennzoil-Quaker State Company recently suspended the production and
distribution of its Fix-A-Flat(R) tire inflator products and began a voluntary
withdrawal of its Fix-A-Flat(R) tire inflator products. These actions were
taken because the company learned of rare instances in which automotive tires
exploded when subjected to extreme heat by welding on, or applying a flame to,
the wheel rim with the tire still on the rim. This practice is inconsistent
with safe automotive tire repair procedures and contrary to explicit warnings
on each Fix-A-Flat(R) automotive tire inflator product label. Reformulated
Fix-A-Flat(R) tire inflator products will be on store shelves nationwide
within a few weeks. The expected pretax cost of the voluntary withdrawal of
approximately $25.0 million was included in 1998 results.
Base Oil and Specialty Products
Base oil and specialty products reported operating income of $6.5 million
in 1998 on total revenue of $745.3 million. Total revenue for 1998 declined
19 percent compared to 1997, primarily due to lower market prices for refined
products and the exclusion of sales related to the industrial specialties
products marketing business, which was contributed to the Penreco partnership
in October 1997. Adjusted to exclude a nonrecurring gain of $1.6 million on
the sale of Pennzoil-Quaker State Company's Roosevelt, Utah refinery,
operating income totaled $4.9 million compared to $8.4 million in 1997. The
year-on-year decline in recurring operating income was primarily due to lower
fuels margins, partially offset by significantly improved results from the
Excel Paralubes partnership with Conoco.
For the fourth quarter, base oils and specialty products reported an
operating loss of $3.1 million on total revenue of $170.5 million. Total
revenue for the fourth quarter of 1998 declined 11 percent compared to 1997,
primarily due to lower market prices for refined products. No special charges
were incurred during the quarter. The loss compares to recurring operating
income of $10.0 million for the same period in 1997. The year-on-year decline
in operating income is primarily attributable to a lower LIFO inventory
adjustment in comparison to 1997.
At Excel Paralubes, higher throughputs and lower operating costs more than
offset lower byproduct margins. In the latter part of 1998, Excel routinely
operated at 115 percent of design capacity. Sales for the Penreco partnership
with Conoco increased 4.1 percent over 1997 and, during 1998, Penreco
significantly increased the use of feedstocks from Excel to reduce operating
costs.
Fast Lube Operations
Jiffy Lube reported an operating loss of $33.7 million in 1998 on total
revenue of $335.9 million. Adjusted to exclude nonrecurring charges of
$44.4 million, operating income totaled $10.7 million compared to
$24.5 million in 1997. For the fourth quarter, Jiffy Lube reported an
operating loss of $46.2 million on total revenue of $80.1 million. Adjusted
to exclude nonrecurring charges of $41.5 million, Jiffy Lube reported an
operating loss of $4.7 million compared to recurring operating income of
$6.1 million for the fourth quarter of 1997.
The year-on-year declines in recurring operating income were primarily due
to a decline in same company store sales and increased expenses. These issues
are being aggressively addressed, and the company is currently experiencing
increases in same company store sales. The nonrecurring charges were
primarily impairments of facilities and one-time merger costs taken in
association with the merger with Quaker State Corporation and one-time merger
costs.
Quaker State Corporation Results
Quaker State Corporation reported a full year 1998 net loss of
$74.8 million for 1998 compared to net income of $23.1 million in 1997. The
fourth quarter 1998 net loss was $79.2 million compared to net income of
$2.1 million in the fourth quarter of 1997.
The full year net loss included nonrecurring after-tax charges of
$97.4 million, primarily resulting from non-cash asset impairments and
one-time charges taken in association with the Pennzoil-Quaker State Company
merger. The fourth quarter net loss included nonrecurring after-tax charges
of $77.6 million also primarily resulting from non-cash asset impairments and
one-time merger costs.
Recurring net income for 1998 was $22.6 million compared to $22.2 million
last year. The fourth quarter 1998 recurring net loss was $1.6 million
compared to net income of $1.8 million in 1997.
For the full year 1998, net sales totaled $1.2 billion. Net sales for the
fourth quarter totaled $254 million.
Pro Forma Pennzoil-Quaker State Company
Combining Pennzoil-Quaker State Company's results with Quaker State
Corporation's, pro forma 1998 net income was $48.4 million, or 62 cents per
basic share. Pro forma combined net income excludes nonrecurring charges and
pretax allocated interest charges of $33.3 million from Pennzoil-Quaker State
Company's former parent company (Pennzoil Company) that will not be incurred
in future periods.
For the fourth quarter, the pro forma combined net loss was $2.2 million,
or 3 cents per basic share, excluding nonrecurring charges and pretax
allocated interest charges of $8.4 million.
Pennzoil-Quaker State Company is a leading worldwide automotive consumer
products company that markets Pennzoil(R) and Quaker State(R) brand motor
oils, the number one and number two selling motor oils in the United States.
Jiffy Lube, a wholly owned subsidiary of Pennzoil-Quaker State Company, is the
world's largest fast lube operator and franchiser. Pennzoil-Quaker State
Company also markets a complete line of automotive car care products including
Axius(TM) auto accessories, Blue Coral(R) and Classic(R) waxes and washes,
Black Magic(R) and Westley's(R) tire and wheel care products, Medo(R) air
fresheners, Rain-X(R) glass treatments, Gumout(R), Snap(R) and The Outlaw(R)
maintenance chemicals and Slick 50(R) engine treatments.
The following are the unaudited results of operations for the quarter and
twelve months ended December 31, 1998 compared with the same periods
in 1997.
PENNZOIL-QUAKER STATE COMPANY *
CONDENSED STATEMENT OF INCOME BY SEGMENT
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
(Expressed in thousands)
REVENUES
Lubricants and
Consumer
Products $ 285,320 $ 326,979 $1,218,137 $1,331,015
Base Oil and
Specialty
Products 170,477 190,008 745,251 917,986
Fast Lube
Operations 80,149 85,340 335,890 328,596
Other (6,488) (755) (10,376) (841)
Intersegment
sales (96,970) (133,383) (439,150) (563,596)
Total
revenues $ 432,488 $ 468,189 $1,849,752 $2,013,160
OPERATING INCOME (LOSS)
Lubricants and
Consumer
Products $ (13,707) $ 14,676 $ 65,432 $ 86,411
Base Oil and
Specialty
Products (3,106) 10,006 6,494 9,424
Fast Lube
Operations (46,214) 6,126 (33,667) 24,492
Other (5,864) (14) (8,099) 1,919
Total operating
income (loss) (68,891) 30,794 30,160 122,246
Corporate
administrative
expense 12,381 22,820 44,422 54,810
Interest
charges, net 18,552 17,651 69,943 61,780
Income (loss)
before income
tax (99,824) (9,677) (84,205) 5,656
Income tax
provision
(benefit) (46,672) (2,238) (38,338) 6,245
NET LOSS $ (53,152) $ (7,439) $ (45,867) $ (589)
BASIC AND DILUTED
LOSS PER SHARE $ (1.09) $ (0.16) $ (0.96) $ (0.01)
* Excludes Quaker State Corporation 1997 and 1998 results.
PENNZOIL-QUAKER STATE COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
OPERATING DATA
Lubricants and Consumer Products and
Base Oil and Specialty Products
Sales (barrels per day)
Gasoline and
naphtha 22,209 19,719 23,362 19,192
Distillates and
gas oils 25,885 25,784 25,879 26,304
Lubricating oil
and other
specialty
products 30,397 30,107 27,742 30,721
Residual fuel
oils 1,934 2,049 2,766 1,984
Penreco specialty
products (A) 4,191 3,851 4,180 5,942
Total sales
(barrels per
day) 84,616 81,510 83,929 84,143
Raw materials
processed (barrels
per day) (B) 72,957 68,128 72,276 65,707
Refining capacity
(barrels per
day) (B) 76,000 76,000 76,000 76,000
Fast Lube Operations
Domestic systemwide
sales (in
thousands) $207,175 $192,390 $817,578 $764,956
Same center sales
(in thousands) $195,568 $190,866 $773,770 $760,029
Centers open
(U.S.) 1,588 1,516 1,588 1,516
(A) Represents 100% of Pennzoil-Quaker State's specialty sales through
September 1997; thereafter, represents only Pennzoil-Quaker State's
proportional share of Penreco sales.
(B) Includes Pennzoil-Quaker State's 50% ownership in Excel Paralubes.
QUAKER STATE CORPORATION
CONDENSED RESULTS OF OPERATIONS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
(Expressed in thousands)
REVENUES
Lubricants and
Consumer
Products $221,377 $245,784 $1,024,219 $1,078,545
Fast Lube
Operations 43,590 38,060 171,939 146,130
Intersegment
sales (10,773) (6,856) (34,047) (30,704)
Total
revenues $254,194 $276,988 $1,162,111 $1,193,971
OPERATING INCOME
Lubricants and
Consumer
Products $7,038 $8,587 $75,886 $70,372
Fast Lube
Operations 1,549 1,291 9,161 7,989
Total operating
income 8,587 9,878 85,047 78,361
Corporate
administrative
expenses (4,991) (4,268) (18,426) (18,855)
Corporate other
income 1,411 296 1,817 912
Interest expense (7,313) (6,662) (29,212) (26,913)
Gain on sale of
joint venture
interests -- 3,517 -- 3,517
Merger, systems
integration and
other special
charges (93,271) (43,120) (125,874) (48,411)
Loss before tax
benefit (95,577) (40,359) (86,648) (11,389)
Income tax benefit (16,350) (15,800) (11,800) (4,000)
Loss from
continuing
operations (79,227) (24,559) (74,848) (7,389)
Income from
discontinued
operations -- 722 -- 4,570
Gain on
disposition of
discontinued
operations -- 25,907 -- 25,907
NET INCOME
(LOSS) $(79,227) $2,070 $(74,848) $23,088
PENNZOIL-QUAKER STATE COMPANY
PRO FORMA RECURRING INCOME STATEMENT
DECEMBER 31, 1998 YEAR-TO-DATE
(Expressed in Thousands, Except Per Share Amounts)
(Unaudited)
Pennzoil Quaker Pennzoil-
Products State Quaker State
Company Corporation Company
REVENUES
Net sales $1,801,676 $1,162,111 $2,963,787
Other income, net 59,670 9,316 68,986
Total revenues 1,861,346 1,171,427 3,032,773
COSTS AND EXPENSES
Cost of sales 1,364,423 713,284 2,077,707
Selling, general and
administrative 329,799 341,632 671,431
Depreciation and
amortization (A) 77,210 48,073 125,283
Taxes other than income 12,209 -- 12,209
Total costs and expenses 1,783,641 1,102,989 2,886,630
INCOME BEFORE INTEREST AND TAXES 77,705 68,438 146,143
Interest charges, net (B) 36,696 29,212 65,908
INCOME BEFORE INCOME TAX 41,009 39,226 80,235
Income tax provision 15,224 16,636 31,860
NET INCOME $ 25,785 $ 22,590 $ 48,375
BASIC EARNINGS PER SHARE $ 0.62
(A) Excludes $11.8 million for the amortization of goodwill as a result of
the merger with Quaker State Corporation.
(B) Excludes pretax allocated interest charges from PennzEnergy Company
(formerly named Pennzoil Company).
PENNZOIL-QUAKER STATE COMPANY
PRO FORMA RECURRING INCOME STATEMENT
FOURTH QUARTER 1998
(Expressed in Thousands, Except Per Share Amounts)
(Unaudited)
Pennzoil Quaker Pennzoil-
Products State Quaker State
Company Corporation Company
REVENUES
Net sales $431,773 $254,194 $685,967
Other income, net 13,909 3,205 17,114
Total revenues 445,682 257,399 703,081
COSTS AND EXPENSES
Cost of sales 334,326 161,448 495,774
Selling, general and
administrative 80,222 78,263 158,485
Depreciation and
amortization (A) 20,881 12,681 33,562
Taxes other than income 3,158 -- 3,158
Total costs and expenses 438,587 252,392 690,979
INCOME BEFORE INTEREST
AND TAXES 7,095 5,007 12,102
Interest charges, net (B) 10,228 7,313 17,541
LOSS BEFORE INCOME TAX (3,133) (2,306) (5,439)
Income tax benefit (2,498) (724) (3,222)
NET LOSS $ (635) $ (1,582) $ (2,217)
BASIC LOSS PER SHARE $ (0.03)
(A) Excludes $3.0 million for the amortization of goodwill as a result of
the merger with Quaker State Corporation.
(B) Excludes pretax allocated interest charges from PennzEnergy Company
(formerly named Pennzoil Company).
SOURCE Pennzoil-Quaker State Company
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Related links:
http://www.pennzoil-quakerstate.com
CONTACT:
Greg Panagos, 713-546-8914, or Ray Scippa,
713-546-8942, both of Pennzoil-Quaker State Company
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