HOUSTON, Nov. 10 /PRNewswire/ -- Pennzoil-Quaker State Company (NYSE: PZL)
today announced third quarter 1999 net income of $5.7 million before
nonrecurring charges, or 7 cents per basic share, compared to $3.0 million, or
6 cents per basic share, for the same period in 1998.
Nonrecurring after-tax charges in the third quarter of 1999 totaled
$12.5 million, or 16 cents per basic share, and were primarily associated with
the company's merger with Quaker State Corporation on December 30, 1998.
Including the nonrecurring charges, Pennzoil-Quaker State Company reported
a net loss of $6.7 million, or 9 cents per basic share, for the third quarter
of 1999 compared to net income of $0.6 million, or 1 cent per basic share, in
the third quarter of 1998.
Third quarter 1999 total revenues were $779.9 million, 64 percent above
revenues in the same period last year of $474.9 million. The increase in
revenues resulted primarily from the acquisition of Quaker State Corporation.
For the first three quarters of 1999, net income was $31.5 million before
nonrecurring charges, or 41 cents per basic share, compared to $9.7 million,
or 20 cents per basic share, for the same period last year. Year-to-date net
income before nonrecurring charges for 1999 includes a $2.1 million adjustment
for after-tax restructuring charges incurred by base oil and specialty
products during the first half of 1999. Including nonrecurring charges, the
company reported a net loss of $2.7 million, or 3 cents per basic share, for
the first nine months of 1999, compared to net income of $7.3 million, or
15 cents per basic share, for the first nine months of last year.
Year-to-date, total revenues were $2.3 billion, 61 percent above last year's
$1.4 billion.
The year-on-year improvement in third quarter and year-to-date recurring
earnings reflects last year's acquisition of Quaker State Corporation, the
benefits of merger-related synergies and efficiencies, lower costs at the
company's refineries and increased lubricants sales. Poor refining margins
resulted in reduced earnings per share of 17 cents and 49 cents for the third
quarter and year-to-date, respectively, compared to the same periods in 1998.
Formation of Pennzoil-Quaker State Company
Pennzoil-Quaker State Company includes the marketing, fast lube and
manufacturing operations of Pennzoil Company spun off on December 30, 1998 in
a tax-free distribution. Immediately following the distribution,
Pennzoil-Quaker State Company acquired Quaker State Corporation, the second
largest domestic marketer of motor oil and a leading marketer of automotive
consumer products. Results from operations of Quaker State Corporation are
not included in Pennzoil-Quaker State Company's 1998 results, but are included
in 1999 results.
Pennzoil-Quaker State Company expects to achieve annualized merger-related
synergies and efficiencies of $105 million, pretax, by the end of next year.
When the merger was announced in April 1998, management targeted cost savings
of approximately $34 million for the full year 1999 and $75 million for 2000,
with all of the savings to be realized on an annual basis in 2001 and beyond.
The total of cost of goods sold and selling, general and administrative
expenses (on a recurring basis) have been cut by $43.5 million, or 2 percent,
for the first nine months of 1999 compared to the combined total for these
costs for the merged companies on a pro forma basis during the same period
last year. Of the total decline in recurring cost of goods sold and selling,
general and administrative expense, approximately $35.0 million represents
merger-related synergies.
"We are making good progress in integrating Pennzoil's marketing,
manufacturing and fast lube business and Quaker State Corporation into a
powerful automotive consumer products company," said James L. Pate, chairman
and chief executive officer. "We are ahead of schedule on our cost savings
goals, and we're confident we will reach our savings targets before the end of
next year. We are also implementing other key strategies, including the
launching of several exciting new car care products."
James J. Postl, president and chief operating officer, said, "While weak
refining margins impacted third quarter results, operating results for
lubricants and consumer products demonstrate that we are on the road to
achieving our vision of being consumers' first choice for products and
services that enhance the car and the driving experience. We have launched
Rescue(R), a revolutionary new emergency fuel additive, and an exciting new
lubricant named Pennzoil(R) Synthetic with Pennzane(R). Pennzane(R) was
developed for the space program and is used by NASA. And more new products
are on the way."
Lubricants and Consumer Products
Lubricants and consumer products reported third quarter operating income
of $53.4 million excluding nonrecurring charges, an 87 percent increase
compared to $28.5 million last year. Including nonrecurring charges resulting
from one-time merger costs, reported operating income totaled $45.0 million.
Third quarter total revenue for lubricants and consumer products was
$487.8 million, 100 percent above last year's $244.0 million.
For the first three quarters of 1999, lubricants and consumer products had
operating income of $156.1 million excluding nonrecurring charges, a
110 percent increase from $74.2 million a year ago. Revenues exceeded
$1.5 billion for the first three quarters, more than double last year's
$730.9 million.
Operating income for the third quarter and year-to-date 1999 increased
compared to last year primarily because of the acquisition of Quaker State
Corporation. Lower expenses and higher international earnings also
contributed to the year-on-year improvement.
Year-to-date 1999, market share for both Pennzoil(R) and Quaker State(R)
brand motor oils increased compared to year-to-date 1998. Pennzoil(R) market
share increased to 21.8 percent from 21.6 percent, while Quaker State(R)
market share increased to 15.4 percent from 15 percent.
For the third quarter 1999, revenues for the other automotive products
increased substantially compared to last year. Blue Coral/Slick-50/Rain-X
sales increased nearly 23 percent, Automotive Chemicals sales increased nearly
14 percent, and Medo sales increased nearly 13 percent.
Pennzoil(R) motor oil is in its 14th consecutive year as America's number
one selling motor oil. Quaker State(R) motor oil continues to be the number
two selling motor oil in the United States.
Fast Lube Operations
Fast lube operations reported third quarter operating income of
$5.9 million excluding nonrecurring charges, a 51 percent increase compared to
$3.9 million for the same quarter last year. Including nonrecurring charges
resulting from one-time merger costs, fast lube operations reported an
operating loss of $0.3 million for the third quarter. Third quarter total
revenues for fast lube operations were $103.1 million, up 17 percent compared
to $87.9 million in the third quarter 1998.
Operating income for the third quarter 1999 increased compared to last
year primarily because of the addition of Quaker State Corporation's Q Lube
operations.
For the first three quarters of 1999, fast lube operations had
$12.9 million of operating income excluding nonrecurring charges, a 16 percent
decrease compared to $15.4 million for the first three quarters last year.
Revenues for the first nine months were $334.3 million, an increase of
31 percent compared to $255.7 million in the same period in 1998. The
year-on-year increase in revenues primarily reflects the addition of Quaker
State's Q Lube operations.
An initiative is now underway to increase car counts and ticket averages
while reducing store-level labor and operating expenses.
For the third quarter and year-to-date 1999, Jiffy Lube comparable store
sales have increased 2 percent versus last year. For the third quarter of
1999, systemwide sales increased 21 percent compared to last year, and
year-to-date systemwide sales increased 33 percent. The increase in
systemwide sales primarily reflects the acquisition of Q Lube.
Pennzoil-Quaker State Company has nearly completed the conversion of the
Q Lube service centers to Jiffy Lube service centers. By the end of this
year, the company expects to have over 2,150 Jiffy Lube centers.
Base Oil and Specialty Products
Base oil and specialty products reported a third quarter operating loss of
$7.2 million excluding nonrecurring charges, compared to operating income of
$3.0 million in the third quarter of 1998. Total revenue for the quarter was
$247.1 million, a 26 percent increase from $196.6 million for third quarter of
1998.
Nonrecurring restructuring charges totaled $1.9 million for the third
quarter of 1999. Including these nonrecurring charges, base oil and specialty
products reported an operating loss of $9.1 million for the third quarter of
1999 compared to operating income of $4.7 million in the third quarter of
1998.
Lower base oil and wax margins during the third quarter resulted in a
$20.5 million decline in operating income compared to the same period last
year. Partially offsetting the impact of lower margins was a $10.2 million
reduction in operating expenses.
For the first three quarters of 1999, base oil and specialty products had
a recurring operating loss of $10.4 million compared to recurring operating
income of $14.5 million during the first nine months last year. Year-to-date
1999 revenues were $598.5 million, a one percent increase compared to
$591.5 million last year.
Lower refining margins during the first nine months of 1999 resulted in a
$61.8 million decline in operating income compared to last year. Lower
margins offset a decrease in operating expenses of $32.3 million, primarily
associated with the total quality initiative at the Shreveport refinery.
Higher refinery volumes and higher partnership income also partially offset
lower refining margins.
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, Fix-A-Flat(R)
tire sealants, 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
nine months ended September 30, 1999 compared with the same periods in 1998.
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998(A) 1999 1998(A)
(Expressed in thousands except per share amounts)
REVENUES
Lubricants and
Consumer Products $ 487,829 $ 243,975 $ 1,510,850 $ 730,915
Base Oil and
Specialty Products 247,109 196,563 598,508 591,517
Fast Lube Operations 103,072 87,895 334,278 255,741
Other (1,533) (1,150) (3,107) (3,888)
Intersegment sales (56,614) (52,431) (162,199) (157,021)
Total revenues $ 779,863 $ 474,852 $ 2,278,330 $ 1,417,264
OPERATING INCOME
Lubricants and
Consumer Products $ 45,051 $ 26,955 $ 138,697 $ 72,659
Base Oil and
Specialty Products (9,103) 4,606 (18,709) 16,082
Fast Lube Operations (330) 985 (1,196) 12,547
Other (5,622) (703) 5,158 (2,237)
Total operating
income 29,996 31,843 123,950 99,051
Corporate
administrative
expenses 17,489 12,468 58,029 32,041
Interest charges, net 20,143 17,232 58,965 51,389
Income (loss) before
income tax (7,636) 2,143 6,956 15,621
Income tax provision (892) 1,507 9,617 8,336
NET INCOME (LOSS) $ (6,744) $ 636 $ (2,661) $ 7,285
BASIC AND DILUTED
EARNINGS (LOSS)
PER SHARE $ (0.09) $ 0.01 $ (0.03) $ 0.15
AVERAGE SHARES
OUTSTANDING BASIC
AND DILUTED 77,874 47,847 77,760 47,847
END OF PERIOD SHARES
OUTSTANDING - BASIC 77,926 47,847 77,926 47,847
(A) Excludes Quaker State Corporation results.
PENNZOIL - QUAKER STATE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, December 31,
1999 1998
(Unaudited)
(Expressed in Thousands)
ASSETS
Current assets
Cash and cash equivalents $ 19,094 $ 14,899
Receivables 344,297 291,997
Inventories
Crude Oil 17,488 6,911
Petroleum Products 286,809 299,601
Materials and Supplies 14,560 12,422
Deferred income taxes --- 47,413
Other current assets 86,387 63,328
Total current assets 768,635 736,571
Net, property, plant, and equipment 984,466 1,032,076
Deferred income taxes 76,384 36,614
Goodwill 1,049,467 1,104,353
Other assets 195,847 235,380
TOTAL ASSETS $ 3,074,799 $ 3,144,994
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt $ 1,074 $ 1,283
Accounts payable 273,534 245,721
Payroll accrued 25,526 18,734
Other current liabilities 121,936 147,609
Total current liabilities 422,070 413,347
Other long-term debt less
current maturites 990,079 1,026,054
Capital lease obligations 70,092 74,464
Other liabilities 279,674 280,922
TOTAL LIABILITIES 1,761,915 1,794,787
SHAREHOLDERS' EQUITY 1,312,884 1,350,207
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 3,074,799 $ 3,144,994
PENNZOIL - QUAKER STATE COMPANY
CASH FLOW FROM OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998(A) 1999 1998(A)
(Expressed in thousands)
Description
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (6,744) $ 636 $ (2,661) $ 7,285
Adjustments to net
income (loss)
Depreciation and
amortization 31,656 19,653 95,526 56,329
Deferred income tax (981) 8,611 6,751 20,421
Partnership
distributions in
excess of earnings 6,234 3,930 2,100 8,856
Non-cash items and
other non-operating
items 9,789 (2,155) 14,407 12,238
Changes in assets and
liabilities 11,707 (31,778) (54,935) (102,501)
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES 51,661 (1,103) 61,188 2,628
CASH FLOW FROM INVESTING
AND FINANCING ACTIVITIES:
Capital expenditures (19,470) (14,321) (50,395) (43,349)
Net debt increase
(decrease) (52,264) 9,091 (40,614) 11,334
Proceeds from the sales
of assets 22,408 4,194 95,514 17,982
Dividends paid (14,604) --- (43,747) ---
Other (5,725) 617 (17,751) 8,916
Total Cash Flow (17,994) (1,522) 4,195 (2,489)
Beginning Balance 37,088 8,165 14,899 9,132
Ending Balance $ 19,094 $ 6,643 $ 19,094 $ 6,643
(A) Excludes Quaker State Corporation results.
PENNZOIL - QUAKER STATE COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998(A) 1999 1998(A)
OPERATING DATA
LUBRICANTS AND
CONSUMER PRODUCTS
Total revenues
(in thousands):
Lubricants $ 353,107 $ 199,978 $1,083,752 $ 599,026
Consumer Products 80,968 15,092 265,483 44,205
International 53,662 28,527 161,681 87,257
Eliminations & Other 92 378 (66) 427
Total revenues $ 487,829 $ 243,975 $1,510,850 $ 730,915
Operating income
(excludes unallocated
division overhead)
(in thousands):
Lubricants $ 37,711 $ 28,989 $ 110,572 $ 81,380
Consumer Products 8,819 2,609 33,129 7,521
International 3,436 (2,156) 9,098 (5,257)
Total operating
income $ 49,966 $ 29,442 $ 152,799 $ 83,644
FAST LUBE OPERATIONS
Domestic systemwide
sales (in thousands) $ 253,579 $ 209,961 $ 809,386 $ 610,402
Same center sales
Jiffy Lube
(in thousands) $ 201,428 $ 197,750 $ 582,163 $ 569,434
Centers open 2,117 1,574 2,117 1,574
(A) Excludes Quaker State Corporation statistics.
PENNZOIL - QUAKER STATE COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998(A) 1999 1998(A)
OPERATING DATA
BASE OIL AND
SPECIALTY PRODUCTS (B)
Raw materials
processed
(barrels per day) 74,895 70,857 70,548 72,064
Refining capacity
(barrels per day) 76,000 76,000 76,000 76,000
Refiner's margin
($ per barrel) $5.01 $8.36 $5.55 $8.09
Operating costs
($ per barrel) $4.67 $6.14 $4.58 $6.08
Depreciation
($ per barrel) $1.08 $1.14 $1.16 $1.11
Refinery Feedstocks:
Paraffinic Crude Oil 62% 65% 66% 67%
Naphthenic Crude Oil 8% 7% 7% 7%
Other Feedstocks
and Blendstocks 30% 28% 27% 26%
Refinery Yields:
Gasolines 27% 28% 28% 29%
Distillates 33% 30% 33% 31%
Lube Base Stocks 27% 27% 27% 25%
Waxes 2% 2% 2% 2%
Other Products 11% 13% 10% 13%
Market Data:
WTI Crude Oil $21.72 $14.15 $17.47 $14.93
3-2-1 crack spread
($ per barrel) (C) $2.81 $2.30 $1.94 $2.92
Base oil gross margin
($ per barrel) (D) $14.49 $18.98 $16.67 $19.74
(A) Excludes Quaker State Corporation statistics.
(B) Includes Pennzoil-Quaker State's 50% ownership in Excel Paralubes.
(C) Regular unleaded gasoline and low sulphur diesel vs. WTI crude oil.
(D) Exxon 100N posting vs. WTI crude oil.
SOURCE Pennzoil-Quaker State Company
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Related links:
http://www.pennzoil-quakerstate.com
Company News On-Call:
http://www.prnewswire.com/comp/684550.html or fax,
800-758-5804, ext. 684550
CONTACT:
Greg Panagos, 713-546-8914, or Ray Scippa,
713-546-8942, both of Pennzoil-Quaker State Company
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