Quaker State Income Rises in Third Quarter
30 October 1998
Quaker State Income Rises in Third Quarter as Company Prepares for Merger With Pennzoil Downstream Operations
IRVING, Texas, Oct. 30 -- Quaker State Corporation
today announced income from continuing operations for the third
quarter of 1998, before unusual charges, of $7,635,000, or $.21 per share, an
8.1% increase over $7,060,000, or $.20 per share, for the same period last
year.
Including previously announced charges (totaling $6,649,000, or $0.18 per
share) for costs related to its pending merger with the Pennzoil Products
Group of Pennzoil Company , restructuring and costs for integrating
the company's new SAP computer system, Quaker State's net income for the third
quarter was $986,000, or $0.03 per share. Year-ago net income of $5,309,000,
or $0.15 per share, included special charges of $3,228,000, or $.09 per share
and $1,477,000, or $0.04 per share, from discontinued Truck-Lite operations.
Revenues for the quarter ended September 30, 1998 were $296,509,000, down
2% from $303,356,000 in the prior year. The decrease primarily reflected the
elimination of $7,000,000 in sales resulting from last year's divestiture of
the company's West Virginia refinery operations and lower Slick 50 sales
volume. The sales decline was partially offset by the inclusion of Axius auto
accessories and the Rain-X brand of window treatments (both of which were
acquired in the second half of 1997) as well as increased sales at Quaker
State's fast lube operations.
"Pennzoil and Quaker State expect to complete their merger during the
fourth quarter of 1998," said Herbert M. Baum, Quaker State chairman and chief
executive officer. "I'm pleased with the spirit and commitment of the Quaker
State employees who are staying through the merger process."
"The market share for Quaker State branded motor oil continues to rise,"
Baum added. "Our year-to-date share now stands at 15.0%, versus 14.5% for the
same period last year. This is the highest it's been since 1989, and we're
confident in the brand's future growth prospects under the new Pennzoil --
Quaker State Company."
Quaker State's chairman pointed to the continuing strong performance in
the company's lubricants and lubricant services operations. He attributed the
weak performance of the Slick 50 business to competitive pressures that
intensified as the brand complied with advertising restrictions agreed to with
the Federal Trade Commission. New Slick 50 advertising and marketing support
is scheduled to appear early in 1999, aimed at rebuilding Slick 50 brand
strength.
Income Rises in Nine Months of 1998
For the nine months ending September 30, 1998, Quaker State reported
income from continuing operations, before restructuring, systems integration
and merger charges, of $24,173,000, or $0.66 per share, an 18.5% increase over
$20,398,000, or $0.58 per share, for the prior-year period. Operating profit
for three quarters of 1998 was $76,460,000, an 11.6% increase over the 1997
period. The company attributed these results to the strong performance of its
Lubricants and Lubricant Services businesses in the third quarter and the
inclusion of Axius and Rain-X in its consumer car care portfolio.
Sales for the nine-month period were $907,917,000, slightly below
$916,983,000 for the first three quarters of 1997. Improved sales at Q Lube
and Quaker State's Canadian businesses, plus the inclusion of Axius and Rain-
X, virtually offset the impact of lost refinery sales from the company's
divested West Virginia refining operations and lower volumes of Slick 50
during nine months of this year.
Including after-tax charges of $19,794,000, or $0.54 per share, related to
the restructuring and computer systems integration program and costs
associated with the proposed merger with the Pennzoil Products Group, Quaker
State's year-to-date net income was $4,379,000, or $0.12 per share, compared
to $21,018,000, or $0.60 per share, for the nine months ended September
30,1997. Year-ago net income for the period also included special charges of
$3,228,000, or $.09 per share and $3,848,000, or $0.11 per share, from
discontinued Truck-Lite operations.
Lubricants and Lubricant Services
Quaker State's Lubricants and Lubricant Services segment recorded
operating profit for the third quarter of $18,529,000, and $44,417,000 for the
nine-month period. This represented a rise of 64% for the quarter and a 36%
increase for the nine-months compared to the prior-year period. The company
attributed this improvement to increased branded volume and product cost
savings. Additionally, Q Lube same-store car counts for the third quarter
were 3% higher than the prior-year period, and average ticket prices at same
stores increased 8% due to additional services offered.
Revenues for Lubricants and Lubricant Services in the third quarter were
$228,192,000, down 4% from the prior year. Year-to-date revenues for the
segment were $661,867,000, a 6% decline from the same period in 1997. The
decrease was primarily due to lost refinery sales, offset in part by increases
in sales at Q Lube and Quaker State in Canada.
Consumer Car Care Products
Third-quarter operating profit for the Consumer Products segment was
$5,701,000, down 48% from the prior-year period. For the nine months ended
September 30,1998, operating profit for the company's Consumer Products
businesses was $32,043,000, down 11% from the same period in 1997, again due
almost exclusively to performance of its Slick 50 product line.
Third-quarter Consumer Products sales were $70,415,000, up 3% versus the
prior-year period. For the nine months ended September 30, 1998, sales for
the segment were $252,762,000, up 16% from the same period in 1997. The
inclusion of Axius auto accessories and Rain-X window treatments were offset
by the weak sales at Slick 50.
Certain matters discussed in this release are forward looking statements
subject to risks and uncertainties outlined in Item 7 of the company's 1997
report on SEC Form 10-K, which item is incorporated herein by reference.
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
(unaudited)
(in thousands, except per share data)
For the Quarter For the Nine Months
Ended September 30 Ended September 30
1998 1997 1998 1997
Revenues
Sales and operating revenues
Lubricants and
lubricant services $228,192 $237,540 $661,867 $706,823
Consumer products 70,415 68,405 252,762 217,675
Intersegment sales (2,098) (2,589) (6,712) (7,515)
Total operating revenues 296,509 303,356 907,917 916,983
Other, net 3,531 1,132 6,111 4,551
Total revenues 300,040 304,488 914,028 921,534
Costs and Expenses
Costs of sales
and operating costs 183,340 194,710 551,836 590,311
Selling, general
and administrative 83,038 80,566 263,369 246,408
Depreciation
and amortization 12,612 10,350 35,392 30,303
Interest 7,385 7,189 21,899 20,251
Restructuring, systems
integration, merger
and other special charges 10,929 5,291 32,603 5,291
Total costs and expenses 297,304 298,106 905,099 892,564
Pretax income from
continuing operations 2,736 6,382 8,929 28,970
Provision for income taxes 1,750 2,550 4,550 11,800
Income from continuing
operations 986 3,832 4,379 17,170
Income from
discontinued operations --- 1,477 --- 3,848
Net income $ 986 $ 5,309 $ 4,379 $ 21,018
Per Share (basic and diluted)
Income from continuing
operations $ 0.03 $ 0.11 $ 0.12 $ 0.49
Income from
discontinued operations --- 0.04 --- 0.11
Net income per share $ 0.03 $ 0.15 $ 0.12 $ 0.60
Weighted average capital
shares outstanding
- basic 36,430 35,140 36,384 35,042
Segment Operating Profit
Lubricants and
lubricant services $ 18,529 $ 11,292 $ 44,417 $ 32,563
Consumer products 5,701 11,036 32,043 35,921
Total operating profit 24,230 22,328 76,460 68,484
Corporate income 142 235 406 616
Interest expense (7,385) (7,189) (21,899) (20,251)
Corporate expenses (3,322) (3,701) (13,435) (14,588)
Restructuring, systems
integration, merger
and other special charges (10,929) (5,291) (32,603) (5,291)
Pretax income from
continuing operations $ 2,736 $ 6,382 $ 8,929 $ 28,970