UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000 Commission File No. 1-14501
PENNZOIL-QUAKER STATE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 76-0200625
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 546-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Number of shares of stock were outstanding, as of latest
practicable date, April 30, 2000:
Common Stock, par value $0.10 per share, 78,373,708 shares.
<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
PENNZOIL-QUAKER STATE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
----------------------------
2000 1999
----------- -----------
(Expressed in thousands
except per share amounts)
<S> <C> <C>
REVENUES $ 779,912 $ 704,062
COSTS AND EXPENSES
Cost of sales 595,724 500,549
Selling, general and administrative 135,119 147,700
Restructuring charges 34,405 -
Depreciation and amortization 25,860 33,514
Taxes, other than income 4,330 4,370
Interest charges, net 21,641 17,741
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX (37,167) 188
Income tax provision (benefit) (19,259) 2,407
----------- -----------
NET LOSS $ (17,908) $ (2,219)
=========== ===========
BASIC AND DILUTED LOSS PER SHARE $ (0.23) $ (0.03)
=========== ===========
DIVIDENDS PER COMMON SHARE $ 0.1875 $ 0.1875
=========== ===========
BASIC AND DILUTED AVERAGE SHARES OUTSTANDING 78,216 77,648
=========== ===========
END OF PERIOD SHARES OUTSTANDING 78,318 77,697
=========== ===========
NET LOSS $ (17,908) $ (2,219)
OTHER COMPREHENSIVE INCOME, NET OF TAX 308 3,492
----------- -----------
COMPREHENSIVE INCOME (LOSS) $ (17,600) $ 1,273
=========== ===========
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION - continued
<TABLE>
PENNZOIL-QUAKER STATE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(Unaudited)
(Expressed in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 32,190 $ 20,155
Receivables 385,206 312,320
Inventories 338,051 298,202
Materials and supplies 10,765 11,063
Other current assets 33,847 44,298
------------- -------------
Total current assets 800,059 686,038
Property, plant and equipment, net 500,817 502,101
Deferred income taxes 291,390 272,677
Goodwill and other intangibles 1,097,955 1,065,143
Other assets 213,850 207,262
------------- -------------
TOTAL ASSETS $ 2,904,071 $ 2,733,221
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 2,900 $ 1,080
Accounts payable 200,584 210,700
Payroll accrued 36,115 28,328
Other current liabilities 163,723 129,295
------------- -------------
Total current liabilities 403,322 369,403
Total long-term debt, less current maturities 1,191,415 1,026,153
Capital lease obligations, less current maturities 66,603 68,786
Other liabilities 323,131 319,011
------------- -------------
TOTAL LIABILITIES 1,984,471 1,783,353
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 919,600 949,868
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,904,071 $ 2,733,221
============= =============
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 4
PART I. FINANCIAL INFORMATION - continued
<TABLE>
PENNZOIL-QUAKER STATE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
---------------------------------
2000 1999
----------- -----------
(Expressed in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (17,908) $ (2,219)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 25,860 33,514
Deferred income tax (18,914) 1,815
Distributions from equity investees less than earnings (3,465) (980)
Other non-cash items 16,229 2,963
Changes in accounts receivable (54,685) (90,353)
Changes in other operating assets and liabilities (13,926) 3,089
----------- -----------
Net cash used in operating activities (66,809) (52,171)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10,491) (11,343)
Acquisitions (64,941) -
Proceeds from sales of assets 3,707 30,479
Other investing activities (987) 4,674
----------- -----------
Net cash provided by (used in) investing activities (72,712) 23,810
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt and capital lease obligation repayments (1,828) (372,573)
Proceeds from issuances of debt 167,965 626,087
Dividends paid (14,581) (14,560)
Other financing activities - (6,149)
----------- -----------
Net cash provided by financing activities 151,556 232,805
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,035 204,444
CASH AND CASH EQUIVALENTS, beginning of period 20,155 14,899
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 32,190 $ 219,343
=========== ===========
<FN>
<F1>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 5
PART I. FINANCIAL INFORMATION - continued
PENNZOIL-QUAKER STATE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General -
The condensed consolidated financial statements included herein
have been prepared by Pennzoil-Quaker State Company ("Pennzoil-Quaker
State" or the "Company") without audit and should be read in
conjunction with the financial statements and the notes thereto
included in Pennzoil-Quaker State's latest annual report. The
foregoing financial statements include only normal recurring accruals
and all adjustments which Pennzoil-Quaker State considers necessary
for a fair presentation. Certain prior period items have been
reclassified in the condensed consolidated financial statements in
order to conform with the current year presentation.
(2) New Accounting Standards -
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as
either an asset or liability measured at its fair value. The
standards require that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally
document, designate, and assess the effectiveness of transactions
that receive hedge accounting. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No.
133" which defers the effective date of SFAS No. 133 until all fiscal
years beginning after June 15, 2000. The Company is currently
assessing SFAS No. 133 to determine what impact, if any, this
pronouncement will have on the Company's financial position or
results of operations.
(3) Summarized Financial Data of Excel Paralubes -
Summarized operations information for Excel Paralubes, an equal
partnership with Conoco Inc., for the three months ended March 31,
2000 and 1999 on a 100% basis follows:
<TABLE>
Three months ended March 31
----------------------------
2000 1999
----------- -----------
(Expressed in thousands)
(Unaudited)
<S> <C> <C>
Revenues $ 114,864 $ 43,527
Operating earnings 14,470 6,868
Net income (loss) 4,373 (2,814)
</TABLE>
Pennzoil-Quaker State's net investment in Excel Paralubes,
carried as a credit balance of $59.4 million and $50.5 million at
March 31, 2000 and 1999, respectively, is netted against other equity
investments and included in other assets on the condensed
consolidated balance sheet. Pennzoil-Quaker State's equity in Excel
Paralubes' pretax income (loss) for the three months ended March 31,
2000 and 1999 of $2.2 million and $(1.4) million, respectively, is
included in revenues in the condensed consolidated statement of
operations and comprehensive income.
<PAGE>
<PAGE> 6
PART I. FINANCIAL INFORMATION - continued
(4) Debt -
Pennzoil-Quaker State primarily utilizes commercial paper
programs to manage its cash flow needs and currently limits
aggregate borrowings under those commercial paper programs to $600.0
million. As of March 31, 2000 commercial paper borrowings totaling
$387.1 million have been classified as long-term debt. Such debt
classification is based upon the availability of long-term credit
facilities to refinance the commercial paper and the Company's intent
to maintain such commitments in excess of one year. The Company had
three short-term variable-rate credit arrangements with banks at
March 31, 2000 and intends to enter into several additional
arrangements. The Company currently limits its aggregate borrowings
under these types of credit arrangements to $300.0 million.
Outstanding borrowings were $32.0 million at March 31, 2000 and were
classified as long-term debt. Such debt classification is also based
on the availability of long-term credit facilities to refinance these
arrangements and the Company's intent to maintain such commitments in
excess of one year. The Company has a revolving credit facility with
a group of banks that provides for up to $600.0 million of committed
unsecured revolving credit borrowings through November 14, 2000,
with any outstanding borrowings on such date being converted into a
term credit facility terminating on November 14, 2001. There were no
borrowings outstanding under this revolving credit at March 31, 2000.
Pennzoil-Quaker State also maintains a revolving credit facility
with a Canadian bank, which provides for up to US$18.7 million of
committed borrowings through October 29, 2000 with any outstanding
borrowings on such date being converted into a term credit facility
terminating on October 29, 2001. As of March 31, 2000, borrowings
under the Company's Canadian facility totaling US$13.8 million have
been classified as long-term debt.
(5) Earnings Per Share -
Computations for basic and diluted loss per share for the three
months ended March 31, 2000 and 1999 consist of the following:
<TABLE>
Three Months Ended March 31
----------------------------
2000 1999
----------- -----------
(Expressed in thousands
except per share amounts)
<S> <C> <C>
Net loss $ (17,908) $ (2,219)
Basic and diluted weighted average shares (A) 78,216 77,648
Basic and diluted loss per share (0.23) (0.03)
<FN>
<F1> (A) A weighted average number of options to purchase 9.8 million and 6.9
million shares of common stock and awards of 583.7 thousand and 308.8
thousand shares of common stock were outstanding for the three months
ended March 31, 2000 and 1999, respectively, but were not included in the
computation of diluted loss per share because these options and awards
would result in an antidilutive per share amount.
</FN>
</TABLE>
(6) Use of Derivatives -
Pennzoil-Quaker State has approved a tactical hedging program to
lock in the refining margins on up to ninety percent of its production
of certain refined fuel products through year-end 2000. Pursuant to
this strategy, Pennzoil-Quaker State entered into several futures
contracts in January 2000 and additional contracts in May 2000. An
operating loss of $1.6 million related to this program was recognized
in cost of sales during the first quarter of 2000. The estimated
fair value of the unrealized gain associated with the open futures
contracts was $0.1 million at March 31, 2000.
In April 2000, in conjunction with the purchase of two British
automotive consumer products companies, the Company entered into an
UK pound sterling forward swap for the pound sterling equivalent of
approximately $17.3 million. The swap will be settled in June
2000.
<PAGE>
<PAGE> 7
PART I. FINANCIAL INFORMATION - continued
(7) Comprehensive Income (Loss) -
The components of the Company's other comprehensive income (loss)
include changes in foreign currency translation adjustments,
unrealized holding gains and losses on available-for-sale securities
and minimum pension liability. The Company's comprehensive income
(loss) information is included in the accompanying condensed
consolidated statement of operations and comprehensive income.
(8) Cash Flow Information -
Cash paid for interest during the three months ended March 31,
2000 and 1999 was $13.7 million and $10.2 million, respectively. An
income tax refund, net of tax payments, of $0.7 million was received
during the three months ended March 31, 2000. Income taxes paid
during the three months ended March 31, 1999 were $0.3 million.
(9) Restructuring Charges and Other -
In the first quarter of 2000, the Company recorded a $34.4
million charge to accrue the costs associated with a general and
administrative cost reduction effort. The charge affected each
operating segment as follows: Lubricants and Consumer Products -
$11.0 million; Base Oil and Specialty Products - $5.4 million; Jiffy
Lube - $1.0 million; Other - $17.0 million. The Company is reducing
the number of employees and consolidating office space in order to
reduce general and administrative expenses. The restructuring is
expected to be completed by the end of 2000. These charges primarily
include severance for approximately 400 administrative and
operational employees, the accrual of future lease obligations and
restoration costs of office space in Houston. Also included in the
charge was the write-off of obsolete information technology assets.
No employees had been terminated as of March 31, 2000.
Pennzoil-Quaker State also recorded a first quarter 2000 charge
of $13.0 million related to a January 18, 2000 fire at the
Shreveport, Louisiana refinery facility. The charge, recorded in
cost of sales, included repairs, business interruption losses, and
legal and other related obligations, net of expected insurance
recovery. The explosion and resulting fire occurred in the
unifiner area, a part of the fuels processing unit. The fire
temporarily shut down the refinery for approximately two weeks and
all units are currently in full operation. The Company does not
expect to incur any additional costs as a result of the Shreveport
fire.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Pennzoil-Quaker State's operations are conducted primarily
through the following three segments: (1) Lubricants and Consumer
Products, (2) Jiffy Lube and (3) Base Oil and Specialty Products.
Results of Operations
Net sales for Pennzoil-Quaker State for the quarter ended March
31, 2000 were $765.6 million, an increase of $67.7 million, or
approximately 10%, from the same period in 1999. The increase in
net sales was primarily due to higher refined products prices
partially offset by lower Jiffy Lube net sales resulting from sales
of stores.
Net loss for the quarter ended March 31, 2000 was $17.9 million,
or 23 cents per basic share. This compares with a net loss of $2.2
million, or 3 cents per basic share for the quarter ended March 31,
1999. The decrease in income is primarily related to charges
resulting from a fire at the Shreveport, Louisiana refinery and one-
time costs associated with the Company's general and administrative
cost reduction project.
<PAGE>
<PAGE> 8
PART I. FINANCIAL INFORMATION - continued
Pennzoil-Quaker State also recorded a first quarter 2000 charge
of $13.0 million related to a January 18, 2000 fire at the
Shreveport, Louisiana refinery facility. The charge, recorded in
cost of sales, included repairs, business interruption losses, and
legal and other related obligations, net of expected insurance
recovery. The explosion and resulting fire occurred in the
unifiner area, a part of the fuels processing unit. The fire
temporarily shut down the refinery for approximately two weeks and
all units are currently in full operation. The Company does not
expect to incur any additional costs as a result of the Shreveport
fire.
In the first quarter of 2000, the Company recorded a $34.4
million charge to accrue the costs associated with a general and
administrative cost reduction effort. The charge affected each
operating segment as follows: Lubricants and Consumer Products -
$11.0 million; Base Oil and Specialty Products - $5.4 million; Jiffy
Lube - $1.0 million; Other - $17.0 million. The Company is reducing
the number of employees and consolidating office space in order to
reduce general and administrative expenses. The Company expects to
save approximately $40.0 million in annual pretax general and
administrative costs. The restructuring is expected to be completed
by the end of 2000. These charges primarily include severance for
approximately 400 administrative and operational employees, the
accrual of future lease obligations and restoration costs of office
space in Houston. Also included in the charge was the write-off of
obsolete information technology assets. No employees had been
terminated as of March 31, 2000. The Company expects costs to be
funded through cash flows from operating activities.
Lubricants and Consumer Products
Net sales for the Lubricants and Consumer products segment
were $485.8 million for the quarter ended March 31, 2000 compared
to $479.1 million for the same period last year. The increase
in net sales is primarily due to higher international and consumer
product sales and higher average lubricants product prices.
Operating income for this segment was $46.7 million for the quarter
ended March 31, 2000 compared to $42.1 million for the same period
last year. Operating income for the first quarter of 2000 included
$1.4 million of expenses related to the Company's acquisition of
Quaker State Corporation that occurred in December of 1998.
Operating income for the first quarter of 1999 included $4.5 million
of merger related expenses. Excluding these merger related expenses,
operating income was $48.1 million for the first quarter of 2000
compared to $46.6 million for the same period last year. The
increase is primarily due to higher consumer products and
international operating income partially offset by higher division
overhead.
In February 2000, the Company completed the acquisition of Auto
Fashions, a 25 year-old Australian automotive accessories firm
operated by Robert Hicks Pty Ltd. for approximately US$5.3 million.
Auto Fashions is a leader in Australian automotive air fresheners,
sunshades and comfort accessories and has a leading share position in
most of the categories it participates in. In early March, the
Company completed the acquisition of certain assets of Sagaz
Industries ("Sagaz"), a manufacturer and marketer of automobile seat
covers and cushions in North America, for approximately $62.5
million, subject to certain working capital adjustments. Sagaz was
absorbed into the Company's Axius(R) auto accessories business unit
in Moorpark, California. In April 2000, the Company signed a
definitive agreement to acquire two automotive consumer products
companies, Airfresh UK Limited ("Airfresh") and Bluecol Brands
Limited ("Bluecol") from Armour Trust plc for approximately $16.7
million. Airfresh manufactures, markets and distributes air
freshener and fragrance products for the automotive aftermarket with
primary markets in the U.K. and France. Bluecol manufactures,
markets and distributes branded anti-freeze, glass cleaning products,
rust treatments, cooling system treatments, and exterior appearance
products for the U.K. automotive aftermarket. The transaction closed
during the last week of April.
<PAGE>
<PAGE> 9
PART I. FINANCIAL INFORMATION - continued
Jiffy Lube
Net sales for this segment were $82.1 million for the quarter
ended March 31, 2000. This compares to net sales of $119.3 million
for the same period in 1999. The decrease in net sales for the first
quarter was primarily due to the sale of company-operated centers to
franchisees. Other income for this segment for the quarter ended
March 31, 2000 was $3.0 million compared to $1.8 million for the same
period in 1999. The increase in other income was primarily due to
higher franchise fees. Operating income from this segment for the
quarter ended March 31, 2000 was $3.2 million compared to $0.1
million for the same period in 1999. The improvement in operating
income for the first quarter 2000 was primarily due to higher
comparable sales in company-operated centers, higher rental and
royalty income, lower selling, general and administrative expenses
and merger costs.
Base Oil and Specialty Products
Net sales for this segment were $263.9 million for the quarter
ended March 31, 2000. This compares to net sales of $150.9 million
for the same period in 1999. The increase is primarily due to higher
average sales prices for fuels, base oils and other refined petroleum
products. Other income for this segment for the quarter ended
March 31, 2000 was $5.9 million compared to $5.1 million for the
same period in 1999. The increase in other income was primarily
due to higher equity earnings from Excel Paralubes. Operating loss
from this segment for the quarter ended March 31, 2000 was $12.1
million compared to operating loss of $6.0 million for the same
period in 1999. The decrease in operating income was primarily due
to higher crude oil costs and one-time costs associated with the
Shreveport fire.
In April 2000, Pennzoil-Quaker State completed a sale of its
Rouseville, Pennsylvania wax processing facilities and the related
assets at the Rouseville facility to Calumet Lubricants Company, LP.
Also included in the sale was Pennzoil-Quaker State's share of its
Bareco Products partnership with Baker Petrolite Corporation, a
division of Baker Hughes Incorporated. The Company received gross
proceeds of $27.6 million from the sale. No material gain or loss is
is expected.
Corporate Administrative Expense
Corporate administrative expense increased $30.3 million to
$52.1 million for the quarter ended March 31, 2000 compared to the
same period in 1999. The increase is due to one-time costs of $34.4
million associated with the Company's general and administrative cost
reduction effort.
Capital Resources and Liquidity
Cash Flow. As of March 31, 2000, Pennzoil-Quaker State had cash
and cash equivalents of $32.2 million. During the quarter ended
March 31, 2000 cash and cash equivalents increased $12.0 million.
For purposes of the condensed consolidated statement of cash
flows, all highly liquid investments purchased with a maturity of
three months or less are considered to be cash equivalents.
<PAGE>
<PAGE> 10
PART I. FINANCIAL INFORMATION - continued
Debt Instruments and Repayments. Pennzoil-Quaker State primarily
utilizes its commercial paper programs to manage its cash flow needs.
Pennzoil-Quaker State currently limits aggregate borrowings under its
commercial paper programs to $600.0 million. As of March 31, 2000
commercial paper borrowings totaling $387.1 million have been
classified as long-term debt. Such debt classification is based upon
the availability of long-term credit facilities to refinance the
commercial paper and the Company's intent to maintain such
commitments in excess of one year. The Company had three short-term
variable-rate credit arrangements with banks at March 31, 2000 and
intends to enter into several additional arrangements. The Company
currently limits its aggregate borrowings under these types of credit
arrangements to $300.0 million. Outstanding borrowings were $32.0
million at March 31, 2000 and were classified as long-term debt.
Such debt classification is also based on the availability of long-
term credit facilities to refinance these arrangements and the
Company's intent to maintain such commitments in excess of one year.
The Company has a revolving credit facility with a group of banks
that provides for up to $600.0 million of committed unsecured
revolving credit borrowings through November 14, 2000, with any
outstanding borrowings on such date being converted into a term
credit facility terminating on November 14, 2001. There were no
borrowings outstanding under this revolving credit at March 31, 2000.
Pennzoil-Quaker State also maintains a revolving credit
facility with a Canadian bank, which provides for up to US$18.7
million of committed borrowings through October 29, 2000, with any
outstanding borrowings on such date being converted into a term
credit facility terminating on October 29, 2001. As of March 31,
2000, borrowings under the Company's Canadian facility totaling
US$13.8 million have been classified as long-term debt.
Accounts Receivable. Pennzoil-Quaker State, through its wholly
owned subsidiary Pennzoil Receivables Company ("PRC"), sells certain
of its accounts receivable to a third party purchaser. PRC is a
special limited purpose corporation and the assets of PRC are
available solely to satisfy the claims of its own creditors and not
those of Pennzoil-Quaker State or its affiliates. The Company
entered into a new one-year receivables sales facility in June 1999
that provides for ongoing sales of up to $160.0 million of accounts
receivable. The Company's net accounts receivable sold under its
receivable sales facility totaled $160.0 million at March 31, 2000.
The Company maintains a lube center receivable purchase and
sale agreement, which provides for the sale of certain notes
receivable up to $210.0 million, through a wholly owned subsidiary,
Pennzoil Lube Center Acceptance Corporation ("PLCAC"). The aggregate
purchase price limit was increased in January 2000 from $200.0
million to $210.0 million. PLCAC is a Nevada corporation and the
assets of PLCAC are available solely to satisfy the claims of its own
creditors and not those of Pennzoil-Quaker State or its affiliates.
Through March 31, 2000, the Company has sold a total of $196.6
million of notes receivable under this agreement, of which $158.5
million were outstanding to the third party purchaser at March 31,
2000.
Disclosures about Market Risk
The Company's primary exposure to market risk includes changes
in interest rates, commodity prices and foreign currency exchange
rates.
Pennzoil-Quaker State has approved a tactical hedging program to
lock in refining margins on up to ninety percent of its production of
certain refined fuel products through year-end 2000. Pursuant to
this strategy, Pennzoil-Quaker State entered into several futures
contracts in January 2000 and additional contracts in May 2000. A
loss of $1.6 million related to current period operations was
recognized in cost of sales during the first quarter of 2000. The
estimated fair value of the unrealized gain associated with the open
futures contracts was $0.1 million at March 31, 2000.
In April 2000, in conjunction with the purchase of two British
automotive consumer products companies, the Company entered into an
UK pound sterling forward swap for the pound sterling equivalent of
approximately $17.3 million in April 2000. The swap will be settled
in June 2000.
<PAGE>
<PAGE> 11
PART I. FINANCIAL INFORMATION - continued
Forward-Looking Statements - Safe Harbor Provisions
This quarterly report on Form 10-Q of Pennzoil-Quaker State for
the quarter ended March 31, 2000 contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, which are intended to be covered by the safe
harbors created thereby. To the extent that such statements are not
recitations of historical fact, such statements constitute forward-
looking statements, which, by definition, involve risks and
uncertainties. Where, in any forward-looking statements, Pennzoil-
Quaker State expresses an expectation or belief as to future results
or events, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance
that the statement of expectation or belief will result or be
achieved or accomplished.
The following are factors that could cause actual results or
events to differ materially from those anticipated, and include but
are not limited to: general economic, financial and business
conditions; competition in the motor oil and marketing business; base
oil margins and supply and demand in the base oil business; the
success and cost of advertising and promotional efforts; mechanical
failure in refining operations; unanticipated environmental
liabilities; changes in and compliance with governmental regulations;
changes in tax laws; and the cost and effects of legal proceedings.
<PAGE>
<PAGE> 12
<TABLE>
PART I. FINANCIAL INFORMATION - continued
(UNAUDITED)
The following table shows revenues and operating income by segment
and other components of income.
<CAPTION>
Three Months Ended
March 31
----------------------------
2000 1999
----------- -----------
(Dollar amounts expressed
in thousands)
<S> <C> <C>
REVENUES
Net sales
Lubricants and Consumer Products $ 485,802 $ 479,082
Base Oil and Specialty Products 263,936 150,903
Jiffy Lube 82,084 119,300
Intersegment sales and other (66,177) (51,292)
----------- -----------
765,645 697,993
----------- -----------
Other income, net
Lubricants and Consumer Products $ 2,603 $ 46
Base Oil and Specialty Products 5,974 5,130
Jiffy Lube 2,953 1,799
Other 2,737 (906)
----------- -----------
14,267 6,069
----------- -----------
Total revenues $ 779,912 $ 704,062
=========== ===========
OPERATING INCOME (LOSS)
Lubricants and Consumer Products $ 46,693 $ 42,078
Base Oil and Specialty Products (12,079) (5,978)
Jiffy Lube 3,249 112
Other (1,323) 3,529
----------- -----------
Total operating income 36,540 39,741
Corporate administrative expense 17,661 21,812
Restructuring charges 34,405 -
Interest charges, net 21,641 17,741
----------- -----------
Income (loss) before income tax (37 167) 188
Income tax provision (benefit) (19,259) 2,407
----------- -----------
NET LOSS $ (17,908) $ (2,219)
=========== ===========
RATIO OF EARNINGS TO FIXED CHARGES - -
=========== ===========
AMOUNT BY WHICH FIXED CHARGES EXCEEDS EARNINGS $ 40,406 $ 301
=========== ===========
</TABLE>
<PAGE>
<PAGE> 13
<TABLE>
PART I. FINANCIAL INFORMATION - continued
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING DATA
- --------------
LUBRICANTS AND CONSUMER PRODUCTS
Total revenues (in thousands):
Lubricants $ 346,462 $ 344,860
Consumer products 87,283 84,295
International operations 56,973 49,943
Eliminations & other (2,313) 30
------------ ------------
Total revenues $ 488,405 $ 479,128
============ ============
Operating income (in thousands):
Lubricants $ 40,098 $ 40,045
Consumer products 15,162 11,137
International operations 4,467 1,633
Division overhead (13,034) (10,737)
------------ ------------
Total operating income $ 46,693 $ 42,078
============ ============
JIFFY LUBE
Domestic systemwide sales (in thousands) $ 279,459 $ 259,048
Same center sales (in thousands) $ 258,794 $ 244,671
Centers open 2,161 2,127
BASE OIL AND SPECIALTY PRODUCTS (A)
Raw materials processed (barrels per day) 49,683 60,983
Refining capacity (barrels per day)(B) 65,700 76,000
Refiner's margin ($ per barrel) $ 6.31 $ 7.46
Operating costs ($ per barrel) $ 8.39 $ 5.82
Depreciation ($ per barrel) $ 0.48 $ 1.35
Refinery Feedstocks:
Paraffinic crude oil 46% 70%
Naphthenic crude oil 8% 8%
Other feedstocks and blendstocks 46% 22%
Refinery Yields:
Gasolines 21% 29%
Distillates 31% 31%
Lube base stocks 31% 25%
Waxes 2% 3%
Other products 15% 12%
Market Data:
WTI crude oil ($ per barrel) $ 28.74 $ 13.06
3-2-1 crack spread ($ per barrel) (C) $ 3.79 $ 1.41
Base oil gross margin ($ per barrel) (D) $ 17.72 $ 19.03
<FN>
<F1>
(A) Includes Pennzoil-Quaker State's 50% ownership in Excel Paralubes.
<F2>
(B) Rouseville, PA refinery stopped processing crude oil on February 2, 2000.
<F3>
(C) Regular unleaded gasoline and low sulphur diesel vs. WTI crude oil.
<F4>
(D) Exxon 100N posting vs. WTI crude oil.
</TABLE>
<PAGE>
<PAGE> 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
3 By-laws of Pennzoil-Quaker State Company, as amended through
June 1, 2000.
12 Computation of Ratio of Earnings to Fixed Charges for the
three months ended March 31, 2000 and 1999.
27 Financial Data Schedule.
(b) Reports -
During the first quarter of 2000, Pennzoil-Quaker State filed
the following Current Reports on Form 8-K with the Securities and
Exchange Commission:
Date of Report Items Reported
April 19, 2000 Information related
to Pennzoil-Quaker State's sale of
its Rouseville, Pennsylvania wax
processing facilities and the
related assets at the Rouseville
facility to Calumet Lubricants
Company, LP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PENNZOIL-QUAKER STATE COMPANY
Registrant
S/N Michael J. Maratea
Michael J. Maratea
Vice President and Controller
May 11, 2000
BY-LAWS
PENNZOIL-QUAKER STATE COMPANY
ARTICLE 1
STOCKHOLDERS' MEETINGS
Section 1. ANNUAL MEETING. The annual meeting of the
stockholders shall be held at 10:00 a.m., Houston time on the
first Thursday in May in each year at the principal office of the
Corporation or at such other date, time or place as may be
designated by resolution of the Board of Directors.
Section 2. SPECIAL MEETINGS. Subject to the
provisions of the Certificate of Incorporation (the
"Certificate"), special meetings of the stockholders may be
called only by the Chairman of the Board of Directors, the
President, or by the Board of Directors pursuant to a resolution
adopted by a majority of the then-authorized number of directors.
Section 3. NOTICE. Notice of all meetings of the
stockholders shall be given by mailing to each stockholder, at
least ten days, or such greater number of days as shall be
required by law, before said meeting, at his last known address,
a written or printed notice fixing the time and place of such
meeting.
Section 4. QUORUM. The presence in person or by proxy
of the holders of a majority of the voting power of the
then-outstanding shares of Voting Stock (as defined in the
Certificate) on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the
transaction of any business, but, in the absence of a quorum, the
holders of a smaller number of shares of Voting Stock may adjourn
a meeting from time to time, without further notice (unless
otherwise required herein or by law), until a quorum is secured.
Unless otherwise provided in the Certificate, at each annual or
special meeting of stockholders, each stockholder shall be
entitled to one vote, either in person or by proxy, for each
share of Common Stock registered in the stockholder's name on the
books of the Corporation on the record date for any such meeting
as determined herein.
Section 5. ADJOURNMENT. Any meeting of stockholders,
annual or special, may adjourn from time to time to reconvene at
the same or some other place, and, unless otherwise required by
law and subject to the provisions hereof, notice need not be
given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any
business that might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. PROCEDURES. Meetings of stockholders shall
be presided over by the Chairman of the Board or in his absence
by the President, or in his absence by a Vice President, or in
the absence of the foregoing persons by a chairman designated by
the Board of Directors, or in the absence of such designation by
a chairman chosen at the meeting. The Secretary of the
Corporation shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting by the person presiding
over the meeting. The Board of Directors of the Corporation may
adopt by resolution such rules and regulations for the conduct of
the meeting of stockholders as it shall deem appropriate. Except
to the extent inconsistent with such rules and regulations as
adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures,
whether adopted by the Board of Directors or prescribed by the
chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of
business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the
meeting to stockholders of record of the Corporation, their duly
authorized and constituted proxies or such other persons as the
chairman of the meeting shall determine; (iv) restrictions on
entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or
comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings
of stockholders shall not be required to be held in accordance
with the rules of parliamentary procedure.
Section 7. PROXIES; REQUIRED VOTE. Each stockholder
entitled to vote at a meeting of stockholders may authorize
another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the corporation.
At all meetings of stockholders for the election of directors, a
plurality of the voting power of the Voting Stock present at the
meeting shall be sufficient to elect. In the case of a matter
submitted for action by the stockholders at the direction of the
Board of Directors as to which a stockholder approval requirement
is applicable under a rule or policy of a national stock exchange
or any provision of the Internal Revenue Code, in each case for
which no higher voting requirement is specified by law, the
Certificate or these By-laws, the vote required for approval
shall be the requisite vote specified in such rule or policy or
Internal Revenue Code provision, as the case may be (or the
highest such requirement if more than one is applicable). For
approval of the appointment of independent public accountants (if
submitted for a vote at the direction of the Board of Directors),
the vote required for approval shall be a majority of the votes
cast on the matter. All other elections and questions shall,
unless otherwise provided by law, the Certificate or these By-
laws, be decided by the vote of the holders of shares of stock
having a majority of the voting power of the then-outstanding
shares of Voting Stock.
Section 8. NOMINATIONS. Except for directors elected
by the holders of any series of Preferred Stock as provided for
or fixed pursuant to the provisions of Article V of the
Certificate, or for directors otherwise elected pursuant to the
provisions of Section C of Section VI of the Certificate, only
individuals nominated for election to the Board of Directors
pursuant to and in accordance with the provision of this Section
8 may be elected to and may serve upon the Board of Directors of
the Corporation. Subject to the rights of holders of any series
of Preferred Stock of the Corporation to elect directors under
specified circumstances, nominations for the election of
directors may be made only (i) by or at the direction of the
Board of Directors (or any duly authorized committee thereof) or
(ii) by any stockholder of record entitled to vote in the
election of directors generally who complies with the procedures
set forth in this Section 8. Subject to the foregoing, only a
stockholder of record entitled to vote in the election of
directors generally may nominate persons for election as a
director at a meeting of stockholders and only if written notice
of such stockholder's intent to make a nomination or nominations
has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation and
has been received by the Secretary at the principal executive
offices of the Corporation, (i) with respect to an election to be
held at an annual meeting of stockholders not less than 90 days
nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for
a date that is not within 30 days before or after such
anniversary date, notice by the stockholder, in order to be
timely, must be so received not later than the close of business
on the tenth business day following the day on which such notice
of such meeting is first mailed by the Corporation to
stockholders or public disclosure of the date of the annual
meeting was made, whichever first occurs; and (ii) with respect
to an election to be held at a special meeting of stockholders
for the election of directors, the close of business on the tenth
business day following the date on which notice of such meeting
is first mailed by the Corporation to stockholders or public
disclosure of the date and purpose of such special meeting was
made, whichever first occurs. In no event shall the public
disclosure of an adjournment or postponement of a meeting
commence a new time period for the giving of a stockholder's
notice as described above.
To be in proper written form, a stockholder's notice to
the Secretary must set forth (a) as to each person whom the
stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such
person, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of
record, if any, by such person and (iv) any other information
relating to such person that would be required to be disclosed in
a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such
stockholder, (ii) the number of shares of each class or series of
capital stock of the Corporation that are owned beneficially or
of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each
proposed nominee and any other person or persons (including their
names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends
to appear in person or by proxy at the meeting to nominate the
persons named in its notice and (v) any other information
relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of
the directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. To be effective,
such notice must be accompanied by a written consent of each
proposed nominee to be named as a nominee and to serve as a
director if elected.
The chairman of the meeting shall, if the facts
warrant, determine that a nomination was not properly brought
before the meeting in accordance with the provisions hereof and,
if he should so determine, he shall declare to the meeting that
such nomination was not properly brought before the meeting and
shall not be considered.
Notwithstanding anything in the first paragraph of this
Section 8 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the
Corporation is increased and there is no public disclosure by the
Corporation naming all of the nominees for director or specifying
the size of the increased Board of Directors at least 100 days
prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 8 shall
also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the tenth
business day following the day on which such public disclosure is
first made by the Corporation.
Nothing in this Section 8 shall be interpreted or
construed to require the inclusion of information about any such
nominee in any proxy statement distributed by, at the direction
of, or on behalf of the Board or the Corporation.
For purposes of this Section 8 and Section 9 of these
By-laws, "public disclosure" shall mean disclosure in a press
release reported by the Dow Jones News Service, Associated Press,
PR Newswire, Bloomberg or comparable national news service or in
a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
Section 9. PROPER BUSINESS. At a meeting of the
stockholders, only such business shall be conducted as shall be a
proper subject for the meeting and shall have been properly
brought before the meeting. To be properly brought before a
meeting, business must (a) be specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board of Directors (or any duly authorized committee thereof),
(b) otherwise be properly brought before the meeting by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), or (c) otherwise (i) be properly requested to
be brought before the meeting by a stockholder of record entitled
to vote in the election of directors generally, in compliance
with the provisions of this Section 9; and (ii) constitute a
proper subject to be brought before such meeting. For business to
be properly brought before a meeting of stockholders, any
stockholder who intends to bring any matter (other than the
election of directors) before a meeting of stockholders and is
entitled to vote on such matter must deliver written notice of
such stockholder's intent to bring such matter before the meeting
of stockholders, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation. Such
notice must be received by the Secretary, with respect to an
annual meeting of stockholders, not less than 90 days nor more
than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that
in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice
by the stockholder, in order to be timely, must be so received
not later than the close of business on the tenth business day
following the day on which such notice of such meeting is first
mailed by the Corporation to stockholders or public disclosure
(as defined in Section 8) of the date of the annual meeting was
made, whichever first occurs. In no event shall the public
disclosure of an adjournment of a meeting commence a new time
period for the giving of a stockholder's notice as described
above.
To be in proper written form, a stockholder's notice to
the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting of stockholders (a) a brief
description of the business desired to be brought before the
meeting and the reasons for conducting such business at the
meeting (which, in case the proposal is for any alteration,
amendment, rescission or repeal of these By-laws, shall include
the text of the resolution which will be proposed to implement
the same), (b) the name and record address of the stockholder
proposing such business, (c) the number of shares of each class
or series of capital stock of the Corporation that are owned
beneficially or of record by such stockholder, (d) a description
of all arrangements or understandings between such stockholder
and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder
and any material interest of such stockholder in such business
and (e) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such
business before the meeting. No business shall be conducted at a
meeting of stockholders except in accordance with the procedures
set forth in this Section 9.
The chairman of a meeting shall, if the facts warrant,
determine that (i) the business proposed to be brought before a
meeting is not a proper subject therefor and/or (ii) such
business was not properly brought before the meeting in
accordance with the provisions hereof and, if he should so
determine, he shall declare to the meeting that (i) the business
proposed to be brought before a meeting is not a proper subject
therefor and/or (ii) such business was not properly brought
before the meeting and shall not be transacted.
Nothing in this Section 9 shall be interpreted or
construed to require the inclusion of information about any such
proposal in any proxy statement distributed by, at the direction
of, or on behalf of the Board or the Corporation.
Section 10. STOCKHOLDER LIST. The Secretary shall
cause to be prepared and made, at least ten days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at
a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 11. PROPER BUSINESS - SPECIAL MEETING. At any
special meeting of stockholders, only such business shall be
conducted as shall have been stated in the notice of such
meeting.
Section 12. INSPECTORS OF ELECTION. The Corporation
shall, in advance of any meeting of stockholders, appoint one or
more inspectors of election, who may be employees of the
Corporation, to act at the meeting or any adjournment thereof and
to make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any
inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall
take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of
his or her ability.
The inspector or inspectors so appointed or designated
shall (i) ascertain the number of shares of capital stock of the
Corporation outstanding and the voting power of each such share,
(ii) determine the shares of capital stock of the Corporation
represented at the meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and
retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares of
capital stock of the Corporation represented at the meeting and
such inspectors' count of all votes and ballots. Such
certification and report shall specify such other information as
may be required by law. In determining the validity and counting
of proxies and ballots cast at any meeting of stockholders of the
Corporation, the inspectors may consider such information as is
permitted by applicable law. No person who is a candidate for an
office at an election may serve as an inspector at such election.
ARTICLE 2
DIRECTORS
Section 1. MANAGEMENT. The affairs and business of
the Corporation shall be managed by or under the direction of the
Board of Directors.
Section 2. NUMBER. The authorized number of directors
that shall constitute the Board of Directors shall be fixed from
time to time by or pursuant to a resolution passed by a majority
of the Board within the parameters set by the Certificate.
Section 3. QUALIFICATION. Except as provided in
these By-laws or as otherwise required by law, there shall be no
qualifications for directors of the Corporation.
Section 4. MEETINGS. The Board of Directors shall
meet at the principal office of the Corporation or elsewhere in
its discretion at such times to be determined by a majority of
its members, or at the call of the Chairman of the Board or the
President.
Section 5. SPECIAL MEETINGS. Special meetings of the
Board of Directors may be called at any time by the Chairman of
the Board or by the President, and shall be called upon the
written request of a majority of the then-authorized number of
directors.
Section 6. QUORUM. Unless otherwise provided by law,
a majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business
at any meeting of the Board of Directors.
Section 7. NOTICE. Written notice of any special
meeting of the Board of Directors, and of any change in the time
or place of any regular meeting of the Board of Directors, shall
be given to each director addressed or directed to him at his
residence or usual place of business, by telegram, cablegram,
facsimile transmission or other means of electronic transmission,
or shall be given to him personally or by telephone, not later
than the day before the day on which the meeting is to be held.
Such notice shall state the time and place of such meeting, but
need not state the purpose or purposes for which the meeting is
called, unless otherwise required by statute.
Section 8. VACANCIES. Subject to the provisions of
the Certificate, newly created directorships resulting from any
increase in the number of directors and any vacancies on the
Board resulting from death, resignation, disqualification,
removal or other cause shall be filled only by the affirmative
vote of a majority of the remaining directors then in office,
even though less than a quorum. Any director elected pursuant
hereto shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created
or in which the vacancy occurred, and until such director's
successor shall have been elected and qualified.
Section 9. REMOVAL. The Board of Directors may at any
time remove, with or without cause, any member of any Committee
appointed by it or any officer elected by it and may appoint or
elect his successor.
ARTICLE 3
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. EXECUTIVE COMMITTEE.
(A) COMPOSITION. The Executive Committee shall be
composed of at least two members who shall be selected by the
Board of Directors from its own members and who shall hold office
at the pleasure of the Board.
(B) POWERS. The Executive Committee shall have and
may exercise, to the fullest extent permitted by law, all the
powers of the Board of Directors when it is not in session in the
management of the business and affairs of the Corporation to
transact all business for and on behalf of the Corporation that
may be brought before it.
(C) MEETINGS. The Executive Committee shall meet at
the principal office of the Corporation or elsewhere in its
discretion at such times to be determined by a majority of its
members. A majority of its members shall be necessary to
constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when
a quorum is present.
(D) MINUTES. Minutes of each meeting of the Executive
Committee shall be kept and submitted to the Board of Directors
at its next meeting.
Section 2. OTHER COMMITTEES.
The Board of Directors may, by resolutions adopted by a
majority of the entire Board, designate one or more of its
members to constitute any other committee or committees with such
powers, duties, responsibilities and term of existence as the
Board of Directors shall determine.
Section 3. ABSENCE OR DISQUALIFICATION OF ANY MEMBER
OF A COMMITTEE. In the absence or disqualification of any member
of any Committee created under Article 3 of the By-laws of this
Corporation, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any
such absent or disqualified member.
ARTICLE 4
OFFICERS
Section 1. The officers of the Corporation shall
consist of a Chairman of the Board, President, Secretary,
Treasurer and such Executive, Group, Senior or other Vice
Presidents, and other officers as may be elected or appointed by
the Board of Directors. Any number of offices may be held by the
same person. All officers shall hold office until their
successors are elected or appointed, except that the Board of
Directors may remove any officer at any time at its discretion.
Section 2. The officers of the Corporation shall have such
powers and duties as generally pertain to their offices, except
as modified herein or by the Board of Directors, as well as such
powers and duties as from time to time may be conferred by the
Board of Directors. The Chairman of the Board shall preside at
meetings of the Board, of the Executive Committee and of the
stockholders and shall have such other powers and duties as from
time to time may be conferred to such office by the Board of
Directors. The President shall be the chief executive officer of
the Corporation and shall have general supervision over the
business, affairs, and property of the Corporation and shall have
such other powers and duties as from time to time may be
conferred to such office by the Board of Directors.
ARTICLE 5
STOCK AND STOCK CERTIFICATES
Section 1. TRANSFER. Shares of stock shall be
transferable on the books of the Corporation, and a transfer book
shall be kept in which all transfers of stock shall be recorded.
Section 2. CERTIFICATES. Every holder of stock shall
be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board, the President or a Vice
President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Corporation. The
corporate seal affixed thereto, and any of or all the signatures
on the certificate, may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 3. RECORD DATE. The Board of Directors is
authorized to fix in advance a record date for the determination
of the stockholders entitled to notice of and to vote at any
meeting of stockholders and any adjournment, or entitled to
receive payment of any dividend, or to any allotment of, or to
exercise any rights in respect of any change, conversion or
exchange of capital stock, which record date shall not, unless
otherwise required by law, be more than 60 nor less than 10 days
preceding the date of any meeting of stockholders nor more than
60 days preceding the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect.
ARTICLE 6
SEAL
The corporate seal of the Corporation shall be in such
form as the Board of Directors shall prescribe.
ARTICLE 7
FISCAL YEAR
The fiscal year of the Corporation shall be the
calendar year.
ARTICLE 8
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Directors of the Corporation, other than salaried
officers of the Corporation, shall be paid such reasonable fees
for their services and for attending meetings of the Board of
Directors or committees thereof as the Board of Directors may
from time to time determine. Directors may be employed by the
Corporation for such special services as the Board of Directors
may from time to time determine and shall be paid for such
special services so performed reasonable compensation as may be
determined by the Board of Directors.
ARTICLE 9
INDEMNIFICATION
SECTION 1. The Corporation shall indemnify, and
advance Expenses to, each Indemnitee to the fullest extent
permitted by applicable law in effect on March 23, 1998, and to
such greater extent as applicable law may thereafter permit. The
rights of an Indemnitee provided under the preceding sentence
shall include, but not be limited to, the right to be indemnified
to the fullest extent permitted by Section 145(b) of the Delaware
General Corporation Law ("D.G.C.L.") in Proceedings by or in the
right of the Corporation and to the fullest extent permitted by
Section 145(a) of the D.G.C.L. in all other Proceedings.
SECTION 2. If an Indemnitee is, by reason of his
Corporate Status, a witness in or a party to and is successful,
on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred
by him or on his behalf in connection therewith. If an
Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to any Matter in such
Proceeding, the Corporation shall indemnify such Indemnitee
against all Expenses actually and reasonably incurred by him or
on his behalf relating to each Matter. The termination of any
Matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such
Matter.
SECTION 3. An Indemnitee shall be advanced Expenses
within 10 days after requesting them to the fullest extent
permitted by Section 145(e) of the D.G.C.L.
SECTION 4. To obtain indemnification an Indemnitee
shall submit to the Corporation a written request with such
relevant information as is reasonably available to Indemnitee.
The Secretary of the Corporation shall promptly advise the Board
of Directors of such request.
SECTION 5. If there has been no Change of Control at
the time the request for indemnification is sent, an Indemnitee's
entitlement to indemnification shall be determined in accordance
with Section 145(d) of the D.G.C.L. If entitlement to
indemnification is to be determined by Independent Counsel, the
Corporation shall furnish notice to the Indemnitee within 10 days
after receipt of the request for indemnification, specifying the
identity and address of Independent Counsel. The Indemnitee may,
within 14 days after receipt of such written notice of selection,
deliver to the Corporation a written objection to such selection.
Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of
the definition of Independent Counsel and the objection shall set
forth with particularity the factual basis of such assertion. If
there is an objection to the selection of Independent Counsel,
either the Corporation or the Indemnitee may petition the Court
of Chancery of the State of Delaware or any other court of
competent jurisdiction for a determination that the objection is
without a reasonable basis and/or for the appointment of
Independent Counsel selected by the Court.
SECTION 6. If there has been a Change of Control at
the time the request for indemnification is sent, an Indemnitee's
entitlement to indemnification shall be determined in a written
opinion by Independent Counsel selected by the Indemnitee. The
Indemnitee shall give the Corporation written notice advising of
the identity and address of the Independent Counsel so selected.
The Corporation may, within seven days after receipt of such
written notice of selection, deliver to the Indemnitee a written
objection to such selection. The Indemnitee may, within 5 days
after the receipt of such objection from the Corporation, submit
the name of another Independent Counsel and the Corporation may,
within seven days after receipt of such written notice of
selection, deliver to the Indemnitee a written objection to such
selection. Any objection is subject to the limitations in
Section 5. The Indemnitee may petition the Court of Chancery of
the State of Delaware or any other Court of competent
jurisdiction for a determination that the Corporation's objection
to the first and/or second selection of Independent Counsel is
without a reasonable basis and/or for the appointment as
Independent Counsel of a person selected by the Court.
SECTION 7. If a Change of Control shall have occurred
before the request for indemnification is sent by the Indemnitee,
the Indemnitee shall be presumed (except as otherwise expressly
provided in this Article) to be entitled to indemnification upon
submission of a request for indemnification in accordance with
Section 4 of this Article, and thereafter the Corporation shall
have the burden of proof to overcome the presumption in reaching
a determination contrary to the presumption. The presumption
shall be used by Independent Counsel as a basis for a
determination of entitlement to indemnification unless the
Corporation provides information sufficient to overcome such
presumption by clear and convincing evidence or the
investigation, review and analysis of Independent Counsel
convinces him by clear and convincing evidence that the
presumption should not apply.
Except in the event that the determination of
entitlement to indemnification is to be made by Independent
Counsel, if the person or persons empowered under Section 5 or 6
of this Article to determine entitlement to indemnification shall
not have made and furnished to the Indemnitee in writing a
determination within 60 days after receipt by the Corporation of
the request therefor, the requisite determination of entitlement
to indemnification shall be deemed to have been made and the
Indemnitee shall be entitled to such indemnification unless the
Indemnitee knowingly misrepresented a material fact in connection
with the request for indemnification or such indemnification is
prohibited by law. The termination of any Proceeding or of any
Matter therein, by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this Article) of
itself adversely affect the right of an Indemnitee to
indemnification or create a presumption that the Indemnitee did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, or with respect to any criminal Proceeding, that the
Indemnitee had reasonable cause to believe that his conduct was
unlawful.
SECTION 8. The Corporation shall pay any and all
reasonable fees and expenses of Independent Counsel incurred
acting pursuant to this Article and in any proceeding to which it
is a party or witness in respect of its investigation and written
report and shall pay all reasonable fees and expenses incident to
the procedures in which such Independent Counsel was selected or
appointed. No Independent Counsel may serve if a timely objection
has been made to his selection until a Court has determined that
such objection is without a reasonable basis.
SECTION 9. In the event that (i) a determination is
made pursuant to Section 5 or 6 that an Indemnitee is not
entitled to indemnification under this Article, (ii) advancement
of Expenses is not timely made pursuant to Section 3 of this
Article, (iii) Independent Counsel has not made and delivered a
written opinion determining the request for indemnification (a)
within 90 days after being appointed by the Court, or (b) within
90 days after objections to his selection have been overruled by
the Court, or (c) within 90 days after the time for the
Corporation or the Indemnitee to object to his selection, or (iv)
payment of indemnification is not made within five days after a
determination of entitlement to indemnification has been made or
deemed to have been made pursuant to Section 5, 6 or 7 of this
Article, the Indemnitee shall be entitled to an adjudication in
an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. In the event that a
determination shall have been made that the Indemnitee is not
entitled to indemnification, any judicial proceeding or
arbitration commenced pursuant to this Section shall be conducted
in all respects as a de novo trial on the merits and the
Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any
judicial proceeding commenced pursuant to this Section, the
Corporation shall have the burden of proving that the Indemnitee
is not entitled to indemnification or advancement of Expenses, as
the case may be. If a determination shall have been made or
deemed to have been made that the Indemnitee is entitled to
indemnification, the Corporation shall be bound by such
determination in any judicial proceeding commenced pursuant to
this Section 9, or otherwise, unless the Indemnitee knowingly
misrepresented a material fact in connection with the request for
indemnification, or such indemnification is prohibited by law.
The Corporation shall be precluded from asserting in
any judicial proceeding commenced pursuant to this Section 9 that
the procedures and presumptions of this Article are not valid,
binding and enforceable and shall stipulate in any such court
that the Corporation is bound by all provisions of this Article.
In the event that an Indemnitee, pursuant to this Section 9,
seeks a judicial adjudication to enforce his rights under, or to
recover damages for breach of, this Article, the Indemnitee shall
be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any and all Expenses
actually and reasonably incurred by him in such judicial
adjudication, but only if he prevails therein. If it shall be
determined in such judicial adjudication that the Indemnitee is
entitled to receive part but not all of the indemnification or
advancement of Expenses sought, the Expenses incurred by the
Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
SECTION 10. The rights of indemnification and to
receive advancement of Expenses as provided by this Article shall
not be deemed exclusive of any other rights to which an
Indemnitee may at any time be entitled under applicable law, the
Certificate, these By-laws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Article or any provision thereof
shall be effective as to any Indemnitee for acts, events and
circumstances that occurred, in whole or in part, before such
amendment, alteration or repeal. The provisions of this Article
shall continue as to an Indemnitee whose Corporate Status has
ceased and shall inure to the benefit of his heirs, executors and
administrators.
SECTION 11. If any provision or provisions of this
Article shall be held to be invalid, illegal or unenforceable for
any reason whatsoever, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or
impaired thereby; and, to the fullest extent possible, the
provisions of this Article shall be construed so as to give
effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
SECTION 12. For purposes of this Article:
A "Change of Control", shall be deemed to have occurred
if, after the Public Status Date, (1) there shall have occurred
an event required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar
item on any similar schedule or form) promulgated under the
Exchange Act, whether or not the Corporation is then subject to
such reporting requirement; (2) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act) shall have
become the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 40% or more of the combined voting power
of the Corporation's then outstanding voting securities without
prior approval of at least two-thirds of the members of the Board
of Directors in office immediately prior to such person attaining
such percentage interest; (3) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or
a proxy contest, as a consequence of which members of the Board
of Directors in office immediately prior to such transaction or
event constitute less than a majority of the Board of Directors
thereafter; or (4) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director
whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
"Corporate Status" describes the status of a person who
(a) is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer or employee of another corporation, partnership, joint
venture, trust or other enterprise, in each case which is
controlled by the Corporation, or (b) is or was serving, at the
written request of the Corporation or pursuant to an agreement in
writing with the Corporation which request or agreement provides
for indemnification under these By-laws, as a director, officer
or employee of another corporation, partnership, joint venture,
trust or other enterprise not controlled by the Corporation,
provided that if such written request or agreement referred to in
this clause (b) provides for a lesser degree of indemnification
by the Corporation than that provided pursuant to this Article 9,
the provisions contained in or made pursuant to such written
request or agreement shall govern. References above to "other
enterprises" shall include employee benefit plans and references
to "serving at the request of the Corporation" shall include any
service as a director, officer or employee which imposes duties
on, or involves services by, such director, officer or employee
with respect to an employee benefit plan or its participants or
beneficiaries.
"Disinterested Director" means a director of the
Corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by indemnitee.
"Expenses" shall include all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily
incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a
witness in a Proceeding.
"Indemnitee" includes any person who is, or is
threatened to be made, a witness in or a party to any Proceeding
as described in Section 1 or 2 of this Article by reason of his
Corporate Status.
"Independent Counsel" means a law firm, or member of a
law firm, that is experienced in matters of corporation law and
neither presently is, nor in the five years previous to his
selection or appointment has been, retained to represent: (i)
the Corporation or the relevant Indemnitee in any matter material
to either such party, or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder.
"Matter" is a claim, a material issue, or a substantial
request for relief.
"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, except one initiated
by an Indemnitee (a) pursuant to Section 9 of this Article to
enforce his rights under this Article or (b) otherwise than
pursuant to clause (a) of this sentence and not authorized by the
Board of Directors.
"Public Status Date" shall mean the first date on which
the Corporation has outstanding a class of equity securities
registered under Section 12 of the Exchange Act.
SECTION 13. Any communication required or permitted to
the Corporation shall be addressed to the Secretary of the
Corporation and any such communication to Indemnitee shall be
addressed to his home address unless he specifies otherwise and
shall be personally delivered or delivered by overnight mail
delivery.
ARTICLE 10
AMENDMENTS TO BY-LAWS
Subject to the provisions of the Certificate, and in
addition to any affirmative vote required by law, any
alteration, amendment, repeal or rescission (any "Change") of
these By-laws occurring after the Public Status Date (as defined
in Section 12 of Article 9) must be approved either (i) by the
Board of Directors by the affirmative vote of at least a majority
of the then-authorized number of directors or (ii) by the
stockholders by the affirmative vote of the holders of at least
66% of the combined voting power of the then-outstanding shares
of Voting Stock, voting together as a single class.
Subject to the foregoing, the Board of Directors of the
Corporation is expressly authorized to make, alter, amend, repeal
or rescind the By-laws of the Corporation.
June 1, 2000
<TABLE>
EXHIBIT 12
PENNZOIL-QUAKER STATE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
For the three months ended
March 31,
----------------------------------
2000 1999
------------- -------------
(Dollar amounts expressed in thousands)
<S> <C> <C>
Loss from continuing operations
before income from equity investees $ (22,473) $ (6,797)
Distribution of income from equity investees 1,100 3,598
Amortization of capitalized interest 226 491
Income tax provision (benefit) (19,259) 2,407
Interest charges 29,423 25,702
------------- -------------
Income (loss) before income tax provision (benefit) and interest charges $ (10,983) $ 25,401
============= =============
Fixed charges $ 29,423 $ 25,702
============= =============
Amount by which fixed charges exceeds earnings $ 40,406 $ 301
============= =============
Ratio of earnings to fixed charges - -
============= =============
<CAPTION>
DETAIL OF INTEREST AND FIXED CHARGES
For the three months ended
March 31,
----------------------------------
2000 1999
------------- -------------
(Expressed in thousands)
<S> <C> <C>
Interest charges per Consolidated Statement of Operations
which includes amortization of debt discount, expense and premium $ 21,641 $ 17,741
Add: portion of rental expense representative of interest factor <F1> 7,782 7,961
------------- -------------
Total fixed charges $ 29,423 $ 25,702
Less: interest capitalized per Consolidated Statement of Operations - -
------------- -------------
Total interest charges $ 29,423 $ 25,702
============= =============
<FN>
<F1> Interest factor based on management's estimates and approximates one-third of rental expense.
</FN>
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000 Commission File No. 1-14501
PENNZOIL-QUAKER STATE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 76-0200625
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Pennzoil Place, P.O. Box 2967
Houston, Texas 77252-2967
(Address of principal executive offices)
EXHIBIT
PENNZOIL-QUAKER STATE COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
- -----------
3 By-laws of Pennzoil-Quaker State Company, as amended through
June 1, 2000.
12 Computation of Ratio of Earnings to Fixed Charges for the three
months ended March 31, 2000 and 1999.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 32,190
<SECURITIES> 0
<RECEIVABLES> 403,057
<ALLOWANCES> 17,851
<INVENTORY> 338,051
<CURRENT-ASSETS> 800,059
<PP&E> 1,749,739
<DEPRECIATION> 1,248,922
<TOTAL-ASSETS> 2,904,071
<CURRENT-LIABILITIES> 403,322
<BONDS> 1,258,018
<COMMON> 7,835
0
0
<OTHER-SE> 911,765
<TOTAL-LIABILITY-AND-EQUITY> 2,904,071
<SALES> 765,645
<TOTAL-REVENUES> 779,912
<CGS> 595,724
<TOTAL-COSTS> 595,724
<OTHER-EXPENSES> 30,190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,641
<INCOME-PRETAX> (37,167)
<INCOME-TAX> (19,259)
<INCOME-CONTINUING> (17,908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,908)
<EPS-BASIC> (0.23)<F1>
<EPS-DILUTED> (0.23)
<FN>
<F1> Reflects basic earnings per share.
</FN>
</TABLE>
