Quaker State Earnings Meet Market Expectations as Sales and Operating Profits Rise in First Quarter
23 April 1998
Quaker State Earnings Meet Market Expectations as Sales and Operating Profits Rise in First Quarter
Restructuring Program Underway in Lubricants Business
IRVING, Texas, April 23 -- Quaker State Corporation
today reported first-quarter income from continuing operations of
$0.15 per share, excluding special charges, which was in line with analyst
expectations for the period. The company also recorded higher first-quarter
sales and operating profits from continuing operations, as acquisitions and
aggressive marketing spending led to increased volume and revenues in branded
motor oil and consumer products.
Overall, sales for the quarter ended March 31, 1998 were $298,529,000, up
1.4 percent from $294,353,000 for the same period last year. The company
attributed the increase primarily to higher sales of Quaker State branded
motor oil, higher sales at Q Lube fast lube centers and the inclusion of sales
of Axius auto accessories and the Rain-X brand of window treatments, both of
which were acquired in the second half of 1997. These increases more than
offset $19,000,000 in lost first-quarter sales resulting from the divestiture
of Quaker State's West Virginia refinery operations last July.
Including after-tax charges of $3,921,000, or $0.11 per share, related to
the restructuring and computer systems integration program announced in
December 1997 and other deal related costs associated with the recently
announced proposal to merge with Pennzoil's motor oil operations, Quaker
State's net income for the first quarter was $1,618,000, or $0.04 per share,
compared to $6,865,000, or $0.20 per share, for the prior-year period.
Excluding the charges, income from continuing operations was $5,539,000, or
$0.15 per share, for the quarter (on 1.4 million more shares in first quarter
1998 than first quarter 1997), down from $5,771,000, or $0.17 per share, for
the prior-year period. Year ago first quarter net income also included $0.03
from Truck-Lite.
Income from continuing operations reflected higher operating profit in
Quaker State's Lubricants and Lubricant Services segment, offset by lower
operating profit for its Consumer Products segment, primarily due to increased
advertising and marketing costs and a change in product mix. Consumer
Products contributed 54 percent of first-quarter operating earnings on 29
percent of sales revenues.
"Quaker State's operating units' performance matches analysts' earnings
expectations," said Herbert M. Baum, Quaker State's chairman and chief
executive officer. "Overall first-quarter 1998 earnings reflects the
restructuring starting to take hold in our lubricants business. Our branded
motor oil sales continue to rise, improving the performance of our business as
we prepare to form a dynamic new automotive aftermarket consumer products
company under our recently announced agreement with Pennzoil."
Baum continued: "By combining with Pennzoil's motor oil, refined products
and franchise operations, we will create a premier automotive products and
consumer car care company, with strong brands, an outstanding distribution
network and exceptional manufacturing and marketing synergies. As that
initiative moves forward, we are laying the groundwork for an enterprise that
promises exceptional value for our shareholders, customers and consumers."
Higher Branded Motor Oil Sales
Operating profit for Lubricants and Lubricant Services was $9,758,000, up
13 percent over the first quarter of 1997. Branded motor oil volume rose 10
percent and Q Lube car counts were 8 percent higher than the prior-year
period. The average Q Lube ticket price increased 5 percent.
Revenues for the segment were $213,671,000, versus $224,538,000 for the
first quarter of 1997. The decrease reflects $19,000,000 in lost revenues
from refinery and base stock sales at the divested West Virginia refining
operations, partially offset by higher branded motor oil and Q Lube sales.
Consumer Products Sales Rise
With the inclusion of results from Axius and Rain-X, first-quarter sales
for the Consumer Products segment jumped nearly 22 percent, to $86,968,000,
from $71,475,000 in the first quarter of 1997.
First-quarter operating profit for the Consumer Products segment was
$11,409,000, compared to $12,191,000 for the same period last year. The
company attributed the decline primarily to a change in product mix, promotion
timing, and higher advertising and marketing costs.
"The operating profit margin for our Consumer Products segment was nearly
three times as large as that for Lubricants and Lubricant Services," Baum
noted. "By building our portfolio of higher-margin businesses, we are
establishing a stable of thoroughbred consumer car care brands. Expanding
that stable with leading Pennzoil brands, such as Gumout, Fix-a-Flat and
Classic Car Wax, will further enhance our higher-margin portfolio and ensure
our position as a leader in automotive protection and appearance - bumper to
bumper, inside and out."
Quaker State Corporation is principally a manufacturer and distributor of
leading consumer aftermarket products and services, including motor oil and a
full range of high-quality automotive treatment, appearance, accessory and air
freshener products.
Quaker State Corporation and Subsidiaries
Consolidated Statement of Operations
(in thousands, except per share data)
For the Quarter
Ended March 31
1998 1997
Revenues
Sales and operating revenues
Lubricants and lubricant services $213,671 $224,538
Consumer products 86,968 71,475
Intersegment sales (2,110) (1,660)
Total operating revenues 298,529 294,353
Other, net 1,629 2,057
Total revenues 300,158 296,410
Costs and Expenses
Costs of sales and operating costs 183,867 191,759
Selling, general and administrative 88,711 78,838
Depreciation and amortization 11,353 9,741
Interest 6,959 6,326
Restructuring, systems integration and
other special charges 6,425 ---
Total costs and expenses 297,315 286,664
Pretax income from continuing operations 2,843 9,746
Provision for income taxes 1,225 3,975
Income from continuing operations 1,618 5,771
Income from discontinued operations --- 1,094
Net income $ 1,618 $ 6,865
Per Share (basic and diluted)
Income from continuing operations $ .04 $ .17
Income from discontinued operations --- .03
Net income per share $ .04 $ .20
Weighted average capital shares
Outstanding - basic 36,298 34,868
Segment Operating Profit
Lubricants and lubricant services $ 9,758 $ 8,668
Consumer products 11,409 12,191
Total operating profit 21,167 20,859
Corporate income 141 190
Interest expense (6,959) (6,326)
Corporate expenses (5,081) (4,977)
Restructuring, systems integration and
other special charges (6,425) ---
Pretax income from continuing operations $ 2,843 $ 9,746
SOURCE Quaker State Corporation