Pennzoil-Quaker State Company Reports Six Percent Increase in Second Quarter Recurring Net Income
9 August 2000
Pennzoil-Quaker State Company Reports Six Percent Increase in Second Quarter Recurring Net Income
HOUSTON - Pennzoil-Quaker State Company today announced recurring net income
of $18 million, a six percent improvement versus a year ago. On a per share
basis, recurring earnings were 23 cents for the quarter, flat with a year ago.
The increase in net income reflects improvement from all operating business
segments, partially offset by lower other income and higher interest expense.
Including nonrecurring charges related to one-time merger and restructuring
costs, reported net income was $12.6 million or 16 cents per share. Revenue in
the quarter increased 13 percent versus a year ago, to $859 million.
For the first six months of 2000, recurring net income was $25.3 million,
or 32 cents per share versus 34 cents per share for the same period last year.
Including nonrecurring charges, reported net loss for the first six months of
2000 was $5.3 million or seven cents per share. Year-to-date, revenue
increased 12 percent to $1.6 billion.
"These results are in-line with our expectations," according to Jim Postl,
president and chief executive officer. "We are achieving operating gains in
all three business segments, despite difficult market conditions. The cost of
our basic raw material tripled in the last 18 months, producing cost, price
and volume distortions in the market and in our operating results. We are
overcoming these challenges with cost reductions which, compared to last year,
equal $17 million in the quarter and $32 million year to date."
Lubricants and Consumer Products: Recurring operating income for this
segment increased 4.8 percent to $58.8 million in the second quarter versus
$56.1 million last year. Second quarter revenue increased 5.0 percent to
$532 million, driven by a 16.8 percent increase from consumer products and a
14.0 percent increase from international. Lubricants' revenue increased
2.6 percent versus a year ago.
For the first six months of 2000, revenue and recurring operating income
increased 3.5 percent and 4.1 percent, respectively, from a year ago.
Pennzoil(R) motor oil is America's number one selling motor oil with an
average 12-month market share of 22.3 percent compared to 21.6 percent for the
same period last year. Quaker State(R) motor oil is the number two selling
motor oil in the United States with an average market share of 14.7 percent,
nearly a full market share point ahead of the number three competitor.
Jiffy Lube International: Recurring operating income for Jiffy Lube in
the second quarter was $8.6 million, a 110 percent increase from $4.1 million
last year. Comparable store sales were up 5.2 percent systemwide in the
quarter. Revenues were $86.0 million, a 22 percent decrease from the second
quarter a year ago due to the sale of company-owned stores to franchisees
after the merger. The year-over-year improvement in operating income
highlights the continued turnaround begun late in 1999 at the nation's number
one fast lube operation.
For the first six months of 2000, comparable store sales were up
5.5 percent and recurring operating income increased 76 percent from a year
ago. Year-to-date revenues decreased 26 percent due to the sale of
company-owned stores.
Base Oil & Specialty Products: Recurring operating income for this
segment was $8.4 million in the second quarter compared to a recurring
operating loss of $0.7 million in 1999, reflecting improved margins. Total
revenue was $309.6 million, a 58 percent increase from $195.4 million for
second quarter of 1999.
For the first six months of 2000, revenue increased 65 percent while
recurring operating income increased $12.9 million from a year ago to
$9.7 million.
Pennzoil-Quaker State Company is a leading worldwide automotive consumer
products company, marketing over 1,300 products with 20 leading brands in more
than 50 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.
The following are the unaudited results of operations for the quarter and
six months ended June 30, 2000 compared to the same periods in 1999.
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
(Expressed in thousands except per share amounts)
REVENUES
Lubricants and Consumer
Products $532,432 $507,001 $1,020,837 $ 986,129
Base Oil and Specialty
Products 309,556 195,367 579,466 351,400
Jiffy Lube 85,968 110,107 171,005 231,206
Other (1,589) (668) 1,148 (1,574)
Intersegment sales (67,634) (54,293) (133,811) (105,585)
Total revenues $858,733 $757,514 $1,638,645 $1,461,576
OPERATING INCOME
Lubricants and Consumer
Products $ 56,232 $ 51,568 $ 102,925 $ 93,646
Base Oil and Specialty
Products 7,998 (3,628) (4,081) (9,606)
Jiffy Lube 7,627 (978) 10,876 (866)
Other (3,175) 7,251 (4,498) 10,780
Total operating income 68,682 54,213 105,222 93,954
Corporate administrative
expenses 17,075 18,728 69,141 40,540
Interest charges, net 23,601 21,081 45,242 38,822
Income (loss) before income
tax 28,006 14,404 (9,161) 14,592
Income tax provision
(benefit) 15,425 8,102 (3,834) 10,509
NET INCOME (LOSS) $ 12,581 $ 6,302 $ (5,327) $ 4,083
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE $ 0.16 $ 0.08 $ (0.07) $ 0.05
AVERAGE SHARES OUTSTANDING
BASIC 78,403 77,757 78,308 77,703
DILUTED 79,641 78,053 78,308 78,006
END OF PERIOD SHARES
OUTSTANDING 78,496 77,823 78,496 77,823
The following reconciles unaudited results of operations with recurring
results for the three months ended June 30, 2000.
Three Months Ended
June 30, 2000
Nonrecurring
Reported Items Recurring
(Expressed in millions except per share amounts)
OPERATING INCOME
Lubricants and Consumer Products $ 56.2 $ 2.6 (A) $ 58.8
Base Oil and Specialty Products 8.0 0.4 (B) 8.4
Jiffy Lube 7.7 0.9 (C) 8.6
Other (3.2) --- (3.2)
Total operating income 68.7 3.9 72.6
Corporate administrative expenses 17.1 (0.3)(D) 16.8
Interest charges, net 23.6 --- 23.6
Income before income tax 28.0 4.2 32.2
Income tax provision (benefit) 15.4 (1.2) 14.2
NET INCOME $ 12.6 $ 5.4 $ 18.0
BASIC AND DILUTED EARNINGS PER
SHARE $ 0.16 $ 0.07 $ 0.23
Explanation of Nonrecurring Items
(A) Lubricants and consumer products
One-time merger costs 2.6
(B) Base oil and specialty products
Restructuring costs 0.4
(C) Jiffy Lube
One-time merger costs 0.9
(D) Corporate and administrative
One-time merger costs 0.3
The following reconciles unaudited results of operations with recurring
results for the six months ended June 30, 2000.
Six Months Ended
June 30, 2000
Nonrecurring
Reported Items Recurring
(Expressed in millions except per share amounts)
OPERATING INCOME
Lubricants and Consumer
Products $ 102.9 $ 4.0 (A) $ 106.9
Base Oil and Specialty Products (4.1) 13.8 (B) 9.7
Jiffy Lube 10.9 1.4 (C) 12.3
Other (4.5) --- (4.5)
Total operating income 105.2 19.2 124.4
Corporate administrative expenses 69.2 (36.8)(D) 32.4
Interest charges, net 45.2 --- 45.2
Income (loss) before income tax (9.2) 56.0 46.8
Income tax provision (benefit) (3.9) 25.4 21.5
NET INCOME (LOSS) $ (5.3) $ 30.6 $ 25.3
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE $ (0.07) $ 0.39 $ 0.32
Explanation of Nonrecurring Items
(A) Lubricants and consumer products
One-time merger costs 4.0
(B) Base oil and specialty products
Restructuring costs 0.8
Costs associated with Shreveport fire 13.0
13.8
(C) Jiffy Lube
One-time merger costs 1.4
(D) Corporate and administrative
G&A cost reduction project 34.4
One-time merger costs 2.4
36.8
PENNZOIL - QUAKER STATE COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
Three Months Ended % Six Months Ended %
June 30 Change June 30 Change
2000 1999 2000 1999
LUBRICANTS AND
CONSUMER PRODUCTS
Total recurring
revenues
(in thousands):
Lubricants $375,856 $366,190 2.6% $ 722,318 $711,050 1.6%
Consumer
Products 96,869 82,924 16.8% 184,152 167,219 10.1%
International 66,229 58,071 14.0% 123,202 108,019 14.1%
Eliminations &
Other (6,522) (184) N/A (8,835) (155) N/A
Total recurring
revenues $532,432 $507,001 5.0% $1,020,837 $986,133 3.5%
Recurring Operating
income
(in thousands):
Lubricants $ 44,761 $ 38,736 15.6% $ 75,802 $ 73,981 2.5%
Consumer
Products 9,342 13,214 -29.3% 21,897 22,204 -1.4%
International 4,709 4,173 12.8% 9,176 6,509 41.0%
Total recurring
operating
income $ 58,812 $ 56,123 4.8% $ 106,875 $102,694 4.1%
JIFFY LUBE
Domestic systemwide
sales
(in thousands) $301,753 $278,895 8.2% $ 581,211 $555,807 4.6%
Same center sales
Jiffy Lube
(in thousands) $280,298 $266,328 5.2% $ 538,959 $510,999 5.5%
Systemwide average
cars per day (A) 41.3 --- N/A 40.4 --- N/A
Systemwide average
ticket
price (A) $ 40.33 $ --- N/A $ 39.79 $ --- N/A
Systemwide Centers
open 2,162 2,147 0.7% 2,162 2,147 0.7%
BASE OIL AND SPECIALTY
PRODUCTS
Excel Paralubes base
oil production
(bbls per day) 14,985 15,310 -2.1% 14,655 12,128 20.8%
Excel Paralubes
average base oil
margin
($ per bbl) $ 16.41 $ 12.28 33.6% $ 13.97 $ 12.90 8.3%
Shreveport raw
materials processed
(bbls per day) 44,499 49,817 -10.7% 37,511 45,750 -18.0%
Shreveport average
refiner's margin
($ per bbl) $ 2.99 $ 2.59 15.4% $ 2.74 $ 3.74 -26.7%
WTI Crude Oil $ 28.60 $ 17.66 61.9% $ 28.67 $ 15.35 86.8%
(A) 1999 Average Ticket Price and Average Cars per Day not available for
comparison.