Pennzoil-Quaker State Company Reports Second Quarter Results:
Down
HOUSTON, Aug. 2 Pennzoil-Quaker State Company
today announced recurring income from continuing operations of $12.2 million,
or 15 cents per share in the second quarter of 2001 versus 32 cents per share
a year ago. Including $14.9 million of nonrecurring after-tax charges,
reported results from continuing operations for the second quarter were a loss
of $2.7 million or 4 cents per share. Revenue in the quarter of
$604.1 million decreased 5.7 percent versus a year ago, due primarily to the
loss of $31.2 million in revenues from the sale of non-strategic assets, and
continued volume softness in the passenger car motor oil market.
For the first six months of 2001, recurring net income from continuing
operations was $20.9 million, or 26 cents per share. Including nonrecurring
charges, reported net income from continuing operations for the first six
months of 2001 was $6.0 million or 7 cents per share. Year-to-date, revenue
decreased 4.3 percent to $1.2 billion reflecting the loss of revenues
associated with the sale of non-strategic assets.
"We continued to face tough market conditions during the second quarter,
but we've taken important steps to address the challenges and position the
company for improved profitability going forward," said Jim Postl, president
and chief executive officer. "The consolidation and restructuring actions we
have taken in our International and Consumer Products segments, along with
planned restructuring actions in Lubricants will generate substantial savings
and position us to continue our long term growth plans. In addition,
profitability in the coming quarters should improve as we expect Excel
Paralubes to run effectively from this point forward, taking advantage of
strong margins; International will continue to improve; and the introduction
of new services at Jiffy Lube will help drive its profitability."
Lubricants: Recurring operating income for the Lubricant's segment was
$32.7 million in the second quarter versus $51.1 million last year. The year-
over-year decline in operating income reflects soft volume in the entire motor
oil market as high gasoline prices led to fewer miles being driven by
motorists, resulting in less frequent oil changes. In addition, the
introduction of Pennzoil(R) and Quaker State(R) motor oils that surpass the
ILSAC GF-3 performance standards increased cost of goods sold in the quarter.
In the second quarter, revenue in Lubricants declined 12.0 percent to
$333.7 million. The lower revenue in the quarter primarily reflects the loss
of $31.2 million in revenues from non-strategic assets sold.
For the first six months of 2001, revenue and recurring operating income
decreased 10.2 percent and 26.5 percent, respectively, from a year ago. The
first half results were impacted by the same factors affecting the second
quarter results including the sale of assets and a tough market environment,
respectively.
Pennzoil(R) motor oil is in its 15th year as America's number one selling
motor oil with an average 3-month market share of 21.0 percent. Quaker
State(R) motor oil is the number two selling motor oil in the United States
with an average 3-month market share of 14.4 percent.
Consumer Products: Recurring operating income for the company's Consumer
Products segment improved 5.1 percent to $10.3 million versus $9.8 million in
the second quarter last year. The higher results were due primarily to margin
improvement on the reformulated Fix-A-Flat tire sealant, as well as improved
performance from air fresheners and accessories. Recurring operating income
for the second quarter 2001 excludes $11.8 million in nonrecurring charges
versus $1.8 million a year ago. The charges in 2001 are for the consolidation
of the current four strategic business units into one centralized consumer
products organization. The consolidation will result in lower costs and
improved efficiencies. Second quarter revenue increased 7.2 percent year-
over-year to $102.4 million. As a result of a weak first quarter, year to
date revenues increased only 4.3 percent and recurring operating income
decreased 30.7 percent, respectively, from the same period results a year ago.
International: Pennzoil-Quaker State Company's International segment had
recurring operating income of $3.7 million, slightly below the $3.9 million
earned in the second quarter of 2000. Recurring operating income for the
second quarter 2001 excludes $16.7 million in nonrecurring restructuring
charges. The 2001 restructuring is focused primarily on reducing operating
expense and increasing higher margin opportunities. Second quarter revenue
increased 2.5 percent year-over-year to $66.1 million, primarily due to
increased motor oil pricing.
"The restructuring of our International business has helped drive its
profit from break even in the fourth quarter of 2000 to just under $4 million
in the second quarter of this year, and we expect further improvement in the
third and fourth quarters," said Postl.
For the first six months of 2001, revenue increased 5.0 percent and
recurring operating income decreased 44.6 percent, respectively, from a year
ago.
Jiffy Lube International: Recurring operating income for Jiffy Lube in the
second quarter was $7.7 million, down $0.9 million from last year. Recurring
operating income for the second quarter 2001 excludes $3.2 million in
nonrecurring charges versus $0.9 million a year ago. Comparable store sales
were up 5.6 percent system wide in the quarter, with total system sales up
6.2 percent. Since completing the reconfiguration of Jiffy Lube's system, the
company has recorded a strong turnaround. While second quarter 2001 recurring
operating income declined due to increased costs, Jiffy Lube still achieved
approximately 9 percent operating margins.
For the first six months of 2001, comparable store sales were up
6.3 percent, with total system sales up 7.2 percent and recurring operating
income up 3.3 percent from a year ago. Year-to-date revenues increased
1.4 percent to $172.2 million.
Supply Chain Investments: Operating income for the Supply Chain Investment
segment, which includes Pennzoil-Quaker State Company's equity investment in
the Excel Paralubes base oil processing facility, was $8.9 million in the
second quarter compared to $13.6 million in 2000. Total revenue was
$70.0 million, a 21.6 percent decrease from $89.4 million for the second
quarter of 2000. The decline in both operating income and revenues is due
primarily to lower volumes produced at the Lake Charles facility, as
restricted hydrogen supply and operating issues caused unforeseen downtime.
Excel Paralubes is now operating near capacity, and is expected to perform at
this level throughout the remainder of the year.
For the first six months of 2001, revenue decreased 2.9 percent and
recurring operating income increased 1.1 percent, respectively, from a year
ago.
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.
Note: The company's second quarter conference call with the financial
community will be broadcast live on the internet beginning at 9:00 a.m. CDT on
Thursday, August 2nd. The audio recording will be available for one week
following the live call. To listen to the call or for more information,
please visit the company's website at http://www.pennzoil-quakerstate.com/ .
The following are the unaudited results of operations for the quarter and
six months ended June 30, 2001 compared with the same periods in 2000.
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
(Expressed in thousands except per share amounts)
REVENUES
Lubricants $333,703 $379,057 $654,834 $729,259
Consumer Products 102,412 95,541 187,351 179,628
International 66,139 64,511 129,411 123,202
Jiffy Lube 88,458 85,979 172,222 169,810
Supply Chain Investments 70,014 89,358 152,722 157,223
Other (2,009) (1,589) (3,604) 1,148
Intersegment sales (54,625) (72,220) (119,900) (134,046)
Total revenues $604,092 $640,637 $1,173,036 $1,226,224
OPERATING INCOME (LOSS)
Lubricants $32,739 $50,363 $64,007 $84,948
Consumer Products (1,498) 8,003 3,392 20,021
International (12,969) 3,900 (11,811) 8,851
Jiffy Lube 4,531 7,627 9,504 10,876
Supply Chain
Investments [A] 8,937 13,637 19,351 19,137
Other (2,676) (3,175) (412) (4,498)
Total operating income 29,064 80,355 84,031 139,335
Corporate administrative
expenses 13,482 17,243 27,937 64,077
Interest charges, net 24,165 23,601 48,877 45,242
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAX (8,583) 39,511 7,217 30,016
Income tax provision
(benefit) (5,837) 19,968 1,258 11,639
INCOME (LOSS) FROM
CONTINUING OPERATIONS (2,746) 19,543 5,959 18,377
Discontinued Operations (2,465) (2,637) (2,465) (9,271)
NET INCOME (LOSS) $(5,211) $16,906 $3,494 $9,106
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE
Continuing Operations $(0.04) $0.25 $0.07 $0.23
Discontinued Operations (0.03) (0.03) (0.03) (0.11)
TOTAL $(0.07) $0.22 $0.04 $0.12
AVERAGE SHARES OUTSTANDING
BASIC 79,107 78,403 78,971 78,308
DILUTED 79,107 79,641 79,828 78,927
END OF PERIOD SHARES
OUTSTANDING 79,261 78,496 79,261 78,496
[A] Operating income for Supply Chain Investments includes partnership
income accounted for using the equity method.
The following reconciles unaudited results of operations to recurring
results for the three months ended June 30, 2001.
Three Months Ended
June 30, 2001
Nonrecurring
Reported Items Recurring
(Expressed in millions except
per share amounts)
OPERATING INCOME (LOSS)
Lubricants $32.7 $--- $32.7
Consumer Products (1.5) 11.8 [A] 10.3
International (13.0) 16.7 [B] 3.7
Jiffy Lube 4.5 3.2 [C] 7.7
Supply Chain Investments 8.9 --- 8.9
Other (2.6) --- (2.6)
Total operating income 29.0 31.7 60.7
Corporate administrative expenses 13.4 --- 13.4
Interest charges, net 24.2 --- 24.2
Income (loss) from continuing
operations before income tax (8.6) 31.7 23.1
Income tax provision (benefit) (5.9) 16.8 10.9
INCOME (LOSS) FROM CONTINUING
OPERATIONS (2.7) 14.9 12.2
Discontinued Operations (2.5) --- (2.5)
NET INCOME (LOSS) $(5.2) $14.9 $9.7
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE
Continuing Operations $(0.04) $0.19 $0.15
Discontinued Operations (0.03) --- (0.03)
$(0.07) $0.19 $0.12
Explanation of Nonrecurring Items
[A] Consumer Products
Restructuring Charges 11.8
[B] International
Restructuring Charges 16.7
[C] Jiffy Lube
Impairment 3.2
The following reconciles unaudited results of operations to recurring
results for the six months ended June 30, 2001.
Six Months Ended
June 30, 2001
Nonrecurring
Reported Items Recurring
(Expressed in millions except
per share amounts)
OPERATING INCOME (LOSS)
Lubricants $64.0 $--- $64.0
Consumer Products 3.4 11.8 [A] 15.2
International (11.8) 16.7 [B] 4.9
Jiffy Lube 9.5 3.2 [C] 12.7
Supply Chain Investments 19.3 --- 19.3
Other (0.4) --- (0.4)
Total operating income 84.0 31.7 115.7
Corporate administrative expenses 27.9 --- 27.9
Interest charges, net 48.9 --- 48.9
Income from continuing operations
before income tax 7.2 31.7 38.9
Income tax provision 1.2 16.8 18.0
INCOME FROM CONTINUING OPERATIONS 6.0 14.9 20.9
Discontinued Operations (2.5) --- (2.5)
NET INCOME $3.5 $14.9 $18.4
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE
Continuing Operations $0.07 $0.19 $0.26
Discontinued Operations (0.03) --- (0.03)
$0.04 $0.19 $0.23
Explanation of Nonrecurring Items
[A] Consumer Products
Restructuring Charges 11.8
[B] International
Restructuring Charges 16.7
[C] Jiffy Lube
Impairment 3.2
PENNZOIL - QUAKER STATE COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
Three Months Ended % Six Months Ended %
June 30 Change June 30 Change
2001 2000 2001 2000
LUBRICANTS
Recurring
revenues
(in thousands)$ 333,703 $ 379,057 -12.0% $ 654,834 $ 729,259 -10.2%
Recurring
operating
income (in
thousands) $ 32,739 $ 51,111 -35.9% $ 64,007 $ 87,065 -26.5%
CONSUMER PRODUCTS
Recurring
revenues
(in thousands)$ 102,412 $ 95,541 7.2% $ 187,351 $ 179,628 4.3%
Recurring
operating
income (in
thousands) $ 10,254 $ 9,836 4.2% $ 15,143 $ 21,854 -30.7%
INTERNATIONAL
Recurring
revenues
(in thousands) $ 66,139 $ 64,511 2.5% $ 129,411 $ 123,202 5.0%
Recurring
operating
income (in
thousands) $ 3,742 $ 3,900 -4.1% $ 4,900 $ 8,851 -44.6%
JIFFY LUBE
Domestic
systemwide
sales (in
thousands) $ 320,396 $ 301,753 6.2% $ 622,999 $ 581,211 7.2%
Same center
sales Jiffy
Lube (in
thousands) $ 312,875 $ 296,257 5.6% $ 606,951 $ 570,716 6.3%
Systemwide
centers open 2,146 2,162 -0.7% 2,146 2,162 -0.7%
SUPPLY CHAIN INVESTMENTS
Base oil
production
(bbls per day) 7,621 10,446 -27.0% 8,216 10,162 -19.1%
Average base oil
margin ($ per
bbl) $ 25.62 $ 21.66 18.3% $ 25.27 $ 18.65 35.5%
