SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 1995
PENNZOIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-5591 74-1597290
(Commission File Number) (IRS Employer Identification No.)
Pennzoil Place, P.O. Box 2967, Houston, Texas 77252-2967
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (713) 546-4000
<PAGE>
Item 5. Other Events.
The press releases of Pennzoil Company dated October 26,
1995 are being filed as exhibits to this report.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Description Page
1. Press Release issued by Pennzoil Company
dated October 26, 1995
2. Press Release issued by Pennzoil Company
dated October 26, 1995
SIGNATURES
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 hereunto duly authorized.
PENNZOIL COMPANY
Date: October 30, 1995 By: \s\ MARK A. MALINSKI
Mark A. Malinski
Group Vice President
- Accounting
PENNZOIL COMPANY NEWS
PUBLIC RELATIONS DEPARTMENT - PENNZOIL PLACE - P.O. BOX 2967 -
HOUSTON, TEXAS 77252-8200
FOR IMMEDIATE RELEASE
CONTACT: Robert Harper
713/546-8536
PENNZOIL ACTS TO IMPROVE FINANCIAL FLEXIBILITY,
MAXIMIZE GROWTH OPPORTUNITIES
Houston, October 26, 1995 - Pennzoil Co. (NYSE:PZL)
today announced a broad cost reduction plan, a lower
dividend and related actions that Chairman and CEO James L.
Pate said "will significantly strengthen our operating
performance, improve our financial flexibility, increase
capital available for our growth opportunities and enhance
long-term shareholder value."
Specifically, the company announced the following
measures:
* a new program to reduce general and administrative
(G&A) expenses by $40 million per year which, when combined
with G&A reductions of $35 million per year already under
way in the oil and gas division, will result in future
annual cost savings of $75 million;
* a reduction in quarterly dividend payments from $0.75
per share to $0.25 per share, which will conserve $92
million per year for growth opportunities; and
* adoption of Financial Accounting Standard No. 121,
which results in noncash write-downs of $265 million (after
tax) during the third quarter of 1995 and will improve
future reported earnings because of the reduction of
depreciation, depletion and amortization (DD&A) expense.
The combined effect of these actions is expected to:
* increase future annual after-tax earnings by $76
million, or about $1.65 per share; and
* improve future annual after-tax free cash flow by $152
million.
STEPS TO IMPROVE FINANCIAL FLEXIBILITY
Pennzoil has targeted annual general and administrative
expense reductions totaling $75 million. Most of the
reductions will be implemented by the first quarter of 1996.
Although the number of positions to be eliminated as a
result of cost cutting measures has not been determined, the
company expects to recognize charges in the fourth quarter
for severance and other related expenses of less than $20
million.
The cost reduction program came about as a result of an
internal review of all aspects of the business, including
the continuing low level of natural gas prices. The company
has retained McKinsey & Co., Inc. to advise it regarding the
review of general and administrative costs. "Given the
competitive pressures in the industry and declining real
commodities prices, we undertook these actions to provide
our shareholders with attractive returns and solid financial
performance, even in a difficult price environment," Pate
said.
Pennzoil's board of directors declared the common stock
dividend of $0.25 per share for the fourth quarter of 1995.
Payment date for the common stock dividend is December 15,
1995, payable to shareholders of record on November 30,
1995.
By lowering the quarterly dividend, Pennzoil will
retain over $92 million per year for growth opportunities.
According to Pate, "The cash generated by the dividend
reduction will strengthen the company's financial position
and can be used to fund our accelerated growth program and
provide attractive returns for shareholders."
These actions are part of Pennzoil's long-term strategy
to focus on its core businesses and assets. "We are
investing in capital-intensive projects that will create
substantial future cash flow and create value for our
shareholders," Pate said. These projects include the
Conoco joint venture (Excel Paralubes) and the Atlas
refinery upgrade which are scheduled to be completed in the
fourth quarter of 1996, as well as the company's investment
in the Caspian Sea where production is expected to commence
in the second half of 1996.
ADOPTION OF FINANCIAL ACCOUNTING STANDARD
In accordance with the new mandatory accounting
standard issued by the Financial Accounting Standards Board
governing the impairment of long-lived assets, Pennzoil has
changed its method of determining the book value of its
assets. The change is reflected in the company's third
quarter 1995 financial statements.
As a result of the adoption of SFAS 121, the company
recognized a third quarter 1995 noncash charge of $265
million (after tax). Write-downs related to oil and gas
properties totaled $250 million (after tax). Other long-
lived assets recorded write-downs totaling $15 million
(after tax).
The adoption of this policy is a noncash accounting
event which will not affect any debt agreements. Pate
added, "Although shareholders' equity will be reduced,
future reported earnings will improve significantly because
the reduction of depreciation, depletion and amortization
will amount to $42 million annually over the next several
years."
[See press release on third quarter 1995 results to follow.]
PENNZOIL COMPANY NEWS
PUBLIC RELATIONS DEPARTMENT - PENNZOIL PLACE - P.O. BOX 2967 -
HOUSTON, TEXAS 77252-8200
FOR IMMEDIATE RELEASE
CONTACT: Robert G. Harper
713/546-8536
PENNZOIL REPORTS THIRD-QUARTER RESULTS
HOUSTON, October 26, 1995 - Pennzoil Co. (NYSE:PZL)
reported a net loss of $ 275.3 million, or $ 5.95 per share,
for the third quarter of 1995 reflecting $ 271.2 million in
after-tax, nonrecurring write-offs and net charges,
including net noncash charges of $ 265.5 million, or $ 5.74
per share, related to the mandated adoption of the Statement
of Financial Accounting Standards (SFAS) No. 121.
After eliminating the effects of nonrecurring charges,
Pennzoil reported a 1995 third quarter net loss of $4.1
million, or $0.09 per share. The adjusted loss for the nine-
month period was $19.0 million, or $0.41 per share.
For the third quarter of 1994, the company recorded a
net loss of $299.8 million, or $6.51 per share, reflecting
$303.8 million in after-tax, nonrecurring write-offs and
charges, including net charges of $208.1 million associated
with a settlement with the Internal Revenue Service (IRS).
Revenues for the third quarter of 1995 were $600
million versus $632 million for the same period last year.
For the first nine months of 1995, the company
recognized a net loss of $277.3 million, or $6.00 per
share, compared to a net loss of $277.2 million, or $6.03
per share for the same period in 1994.
Revenues for the first nine months of 1995 were $1.882
billion versus $1.906 billion for the first nine months of
1994.
The adoption of SFAS No. 121 will result in a reduction
in depreciation, depletion and amortization (DD&A) expenses
of approximately $42 million annually over the next several
years. Pennzoil Chairman and Chief Executive Officer James
L. Pate said this reduction in DD&A, combined with the
anticipated annualized reduction of $75 million (pretax) in
general and administrative expenses which was separately
announced earlier today, is expected to increase future
earnings by approximately $76 million (after tax), or more
than $1.65 per share.
Discussing the company's results of operations, Pate
said, "Excluding the effect of adopting SFAS 121, the third-
quarter loss was primarily due to lower natural gas prices."
Compared to last year, natural gas prices were down $0.33
per Mcf in the third quarter and $0.53 per Mcf for the first
nine months.
Oil and Gas Segment
In addition to lower natural gas and liquids prices,
which lowered operating income by $26 million compared to
1994, the oil and gas segment also reported lower natural
gas and liquid production volumes. The lower volumes
resulted primarily from the continued sale during the past
year of noncore oil and gas properties.
The segment reported a $9.8 million improvement in
operating expenses due to the company's cost reduction
program and the sale of noncore properties. Exploration
expenses were also lower in 1995 due in part to higher
drilling success rates. Other income was higher in 1995
compared to 1994 because of one-time charges and write-downs
in 1994.
Pate explained that the oil and gas segment's 1995 DD&A
charges were down $105.4 million compared to 1994 primarily
due to last year's cumulative charge associated with the IRS
settlement and lower DD&A rates after the July 1, 1995,
adoption of SFAS 121.
Motor Oil and Refined Products
Looking at the results for the motor oil and refined
products segment, Pate confirmed that the company maintained
the hold on its position as the leading marketer of motor
oil. He also noted that the segment reported higher motor
oil and specialty product margins and higher international
volumes. These were partially offset by lower motor oil and
specialty volumes. The segment's 1994 results were affected
by a $33 million accrual from the cessation of crude
processing at the Roosevelt refinery.
Commenting on the recent fire at the refinery in
Rouseville, PA, Pate said the blending and packaging
facilities were undamaged and back in operation shortly
after the fire. "Our base stock supply is plentiful, we
have missed no shipments of motor oil, and our customers'
needs are being met," he noted. Pate also pointed out that
the refinery's packaging facility can continue to operate
until the refinery is back in full operation.
Charges related to the fire are expected to be less
than $20 million, he added.
Franchise Operations
Jiffy Lube, the company's franchise operations segment,
reported systemwide sales of $171.6 million, up from $157.3
million for the third quarter of 1994. At the same time,
Jiffy Lube's average ticket price rose from $33.60 in the
third quarter of 1994 to $34.60 for the same period this
year. The average number of cars serviced per store per day
increased from 48.3 to 49.6.
For the year to date, comparable stores in the Jiffy
Lube system reported a 4.9% increase in sales and a 2.4%
increase in car counts.
###
<TABLE>
The following are the unaudited results of operations for the quarter and nine
months ended September 30, 1995 compared with the same periods in 1994.
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
(Expressed in thousands except per share amounts)
<S> <C> <C> <C> <C>
REVENUES
Oil and Gas $ 166,700 $ 181,737 $ 557,719 $ 596,054
Motor Oil & Refined Products 380,801 405,954 1,159,802 1,150,933
Franchise Operations 76,791 65,403 216,790 192,757
Sulphur - 18,019 - 48,846
Other 15,353 5,488 70,809 43,744
Intersegment sales (39,633) (44,947) (123,155) (126,795)
----------- ----------- ----------- -----------
Total revenues $ 600,012 $ 631,654 $1,881,965 $1,905,539
=========== =========== =========== ===========
OPERATING INCOME (LOSS)
Oil and Gas <F1> $ 19,548 $ (102,852) $ 64,931 $ (11,145)
Motor Oil & Refined Products 11,891 (15,993) 39,550 26,365
Franchise Operations 5,416 (2,155) 10,314 (557)
Sulphur - (51,520) - (58,656)
Impairment of Long-Lived Assets (399,830) - (399,830) -
Other 10,475 4,676 58,389 39,378
----------- ----------- ----------- -----------
Total operating loss (352,500) (167,844) (226,646) (4,615)
Corporate administrative expenses 15,234 17,426 49,418 52,856
Interest charges, net <F2> 48,322 338,609 144,568 423,779
----------- ----------- ----------- -----------
Loss before income tax (416,056) (523,879) (420,632) (481,250)
Income tax benefit <F3> (140,770) (224,077) (143,299) (208,996)
----------- ----------- ----------- -----------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (275,286) (299,802) (277,333) (272,254)
Cumulative effect of change in accounting principle - - - (4,948)
----------- ----------- ----------- -----------
NET LOSS $ (275,286) $ (299,802) $ (277,333) $ (277,202)
=========== =========== =========== ===========
LOSS PER SHARE
Loss before cumulative effect of change in
accounting principle $ (5.95) $ (6.51) $ (6.00) $ (5.92)
Cumulative effect of change in accounting principle - - - (0.11)
----------- ----------- ----------- -----------
TOTAL $ (5.95) $ (6.51) $ (6.00) $ (6.03)
=========== =========== =========== ===========
AVERAGE SHARES OUTSTANDING 46,273 46,038 46,216 45,987
=========== =========== =========== ===========
NUMBER OF SHARES OUTSTANDING 46,303 46,066 46,303 46,066
=========== =========== =========== ===========
<FN>
<F1>
1994 quarter and nine month totals include $93,875 in charges
associated with the IRS settlement.
<F2>
1994 quarter and nine month totals include $290,703 in charges
associated with the IRS settlement.
<F3>
1994 quarter and nine month totals include $176,499 in tax
benefits associated with the IRS settlement.
</FN>
</TABLE>
<TABLE>
PENNZOIL COMPANY
OPERATING HIGHLIGHTS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ ------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING DATA
- --------------
OIL AND GAS
Net production
Crude oil, condensate and natural
gas liquids (barrels per day) 64,604 71,930 69,139 67,210
Natural gas produced for sale (Mcf per day) 662,923 732,781 687,863 704,524
Weighted average prices
Crude oil, condensate and natural
gas liquids (per barrel) $ 14.00 $ 14.72 $ 14.46 $ 13.65
Natural gas (per Mcf) $ 1.32 $ 1.65 $ 1.39 $ 1.92
MOTOR OIL & REFINED PRODUCTS
Sales (barrels per day)
Gasoline and naphtha 19,586 25,357 20,168 25,298
Distillates and gas oils 24,681 31,094 27,148 30,509
Lubricating oil and other specialty products 22,156 24,447 23,435 23,332
Residual fuel oils 3,140 2,956 3,654 3,371
----------- ----------- ----------- -----------
Total sales (barrels per day) 69,563 83,854 74,405 82,510
=========== =========== =========== ===========
Raw materials processed (barrels per day) 50,650 61,844 53,492 59,056
Refining capacity (barrels per day) <F1> 62,700 70,700 62,700 70,700
FRANCHISE OPERATIONS
Domestic systemwide sales (in thousands) $ 171,627 $ 157,316 $ 491,839 $ 448,904
Same center sales (in thousands) $ 163,068 $ 155,479 $ 466,636 $ 442,968
Centers open (U.S.) 1,165 1,098 1,165 1,098
<FN>
<F1>
As of September 1994, Pennzoil stopped processing
crude oil at its refinery in Roosevelt, Utah. The
Roosevelt Refinery had a refining capacity of 8,000
barrels per day.
</FN>
</TABLE>
