HOUSTON, June 26 /PRNewswire/ -- Pennzoil-Quaker State Company (NYSE: PZL)
announced today a comprehensive corporate restructuring program designed to
enhance growth potential, strengthen its balance sheet, accelerate debt
reduction and improve long-term shareholder value. The company also updated
its earnings expectations for the second quarter and full year 2001.
Specifically, the company announced the following:
-- The board of directors has reduced the quarterly dividend to 2.5 cents
per common share, and declared the dividend for the third quarter;
-- An accelerated organizational restructuring will be implemented in the
Lubricants, Consumer Products and International segments, generating
improvements of $40 million over the next two years;
-- Second quarter recurring earnings per share from continuing operations
are expected to be approximately 13-15 cents; and
-- Full year 2001 recurring earnings from continuing operations are
expected to be in the range of 65 to 70 cents.
The company is taking the restructuring and dividend actions in response
to continued weak demand for automotive consumer products, resulting from high
gasoline prices, fewer miles being driven by motorists and the lingering
effects from increased retail prices for motor oil. "These measures are the
right actions to be taking now," said James J. Postl, president and chief
executive officer of Pennzoil-Quaker State Company. "While the company has
been executing well on its strategy to create one of the leading automotive
consumer products powerhouses, we have been fighting an uphill battle against
a very difficult macro environment. I feel confident the industry will
recover as it has in the past, but we have not yet seen evidence that the
recovery has begun. Therefore, we must plan prudently to ensure that we
achieve our objectives in spite of the current soft market."
Dividend action
The board of directors of Pennzoil-Quaker State Company has declared a
quarterly dividend on its common stock of 2.5 cents per share, payable
September 15, 2001, to stockholders of record on August 31, 2001. The
dividend reflects the current market environment and the board's desire to
strengthen the company's financial structure for shareholders. A quarterly
dividend of 2.5 cents per share will improve free cash flow by over
$50 million per year, which will provide funds to reduce long-term debt and to
invest in growth initiatives.
"I asked the board to consider this move now," Postl added. "When
Pennzoil-Quaker State Company was formed in December of 1998, the company
believed that it could fund growth initiatives and substantially reduce debt
levels while paying out a high dividend. To achieve those disparate
objectives, the company counted on achieving cost synergies associated with
the Quaker State merger, successfully executing on our acquisitions and new
products growth strategy and, very importantly, the continued historical 1-2%
average annual growth rate in the lubricants market. We met the goals that we
could control. We reduced costs by much more than originally expected,
generated new products and acquisitions, dramatically streamlined our
portfolio and built a senior management team. The deteriorating market
environment, however, offset much of this success. The new quarterly dividend
improves free cash flow to grow the business and reduce debt in spite of a
weak market environment, while keeping our payout in-line with our consumer
products peer group."
Segment restructuring
The company also reported that it is restructuring its Lubricants,
Consumer Products and International segments. These initiatives are designed
to help it prosper even with the existing weak market conditions. "This
organizational restructuring of our business units goes well beyond what we
have done to date. In previous cost savings programs over the last two years,
we eliminated duplication in the merger savings program, reduced overhead in
the G&A initiative and lowered procurement and logistic costs in the supply
chain," said Postl. "This new program is an accelerated redesign and
restructuring of our operating areas. In Lubricants, the restructuring is
primarily intended to reduce manufacturing and selling expense. Consumer
Products will consolidate its four business units into one organization in
Houston. The International segment will be scaling back low margin
operations, facilities and distribution channels. When completed, we
anticipate that we will have created a better organization for our customers
and more profitable business segments for our shareholders."
These initiatives will require an after-tax charge to earnings of
approximately $50 million. The charges are expected to be incurred over the
next year and will be concentrated in the second and third quarters of 2001.
"Restructuring is never easy but we cannot wait for the market to correct
itself. I believe the initiatives that we are undertaking will provide us
with a better organization that will produce near-term profit improvement and
solid growth in the future," said Postl.
Earnings forecast
Recurring earnings from continuing operations for the second quarter 2001,
which will be released on August 2, are now expected to be approximately
13-15 cents per share, and below the current First Call consensus. The new
forecast reflects the industry-wide slowdown affecting the company's core
consumer businesses. There has been a substantial decline in lubricant
volumes versus a year ago and lower consumer spending on discretionary items.
In addition, the Excel Paralubes base oil plant (50% PZL-owned, but not
operated by the company) has experienced numerous operational difficulties
during the second quarter, and therefore the benefit during this quarter from
historically high base oil margins has been substantially, but temporarily,
reduced.
Reflecting continuing market weakness, the company now expects recurring
earnings on a continuing basis for the full year 2001 to be approximately 65
to 70 cents per share. Second half improvement in 2001 will come from
incremental supply chain savings, improved operating performance at Excel
Paralubes, the organizational restructuring announced herein and from a motor
oil price increase that will take effect in July 2001.
Note: The company will hold a conference call with the financial
community which will be broadcast live on the internet beginning at
5:00 p.m. EDT on Tuesday, June 26th. The statements contained in this release
and made on the conference call that are not historical facts are forward-
looking statements. Actual results may differ materially from those projected
in forward-looking statements. Please see the company's Form 10-K for more
information on the risks and uncertainties related to forward-looking
statements.
Pennzoil-Quaker State Company is a leading worldwide automotive consumer
products company, marketing over 1,300 products with 20 leading brands in more
than 90 countries. The company 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. For more
information about Pennzoil-Quaker State Company, visit its web site at
http://www.pennzoil-quakerstate.com/.
SOURCE Pennzoil-Quaker State Company
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http://www.pennzoil-quakerstate.com
Company News On-Call:
http://www.prnewswire.com/comp/684550.html or fax,
800-758-5804, ext. 684550
CONTACT:
investors, Jay Roueche, 713-546-4961, or
media, Ray Scippa, 713-546-8942, both of Pennzoil-Quaker State
Company
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