- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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): MAY 20, 1998
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 EMPLOYEE IDENTIFICATION NO.)
P.O. BOX 2967, HOUSTON, TEXAS 77252-2967
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE): (713) 546-4000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEM 5. OTHER EVENTS.
On April 15, 1998, Pennzoil Company ("Pennzoil") announced a comprehensive
restructuring that will result in the separation of Pennzoil's motor oil,
refined products and franchise operations (which generally include Pennzoil
Products Company ("PPC") and Jiffy Lube International, Inc. ("Jiffy Lube") and
their respective subsidiaries (collectively, "Products Group")) from
Pennzoil's exploration and production operations. The restructuring includes
the pro rata distribution of Products Group (i.e., the common stock of PPC
(which will at such time hold the motor oil and refined products operations of
PPC and the common stock of Jiffy Lube)) to holders of Pennzoil common stock.
1
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet (Unaudited) March 31,
1998................................................................ F-1
Pro Forma Condensed Consolidated Statement of Earnings (Unaudited)
For the Three Month Period Ended March 31, 1998..................... F-2
Pro Forma Condensed Consolidated Statement of Earnings (Unaudited)
For the Year Ended December 31, 1997................................ F-3
Pro Forma Condensed Consolidated Statement of Earnings (Unaudited)
For the Year Ended December 31, 1996 ............................... F-4
Pro Forma Condensed Consolidated Statement of Earnings (Unaudited)
For the Year Ended December 31, 1995................................ F-5
Notes to Pennzoil Company Unaudited Pro Forma Condensed Consolidated
Financial Statements................................................ F-6
Pro Forma Adjustments................................................ F-6
Other Pro Forma Adjustments.......................................... F-6
(c) Exhibits
Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges for the
years ended December 31, 1997, 1996, 1995, 1994 and 1993 and the three months
ended March 31, 1998 and the Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends--Pro Forma for the year ended
December 31, 1997 and the three months ended March 31, 1998, as adjusted for
Pennzoil's proposed offering of Series A Cumulative Preferred Stock,
Pennzoil's proposed exchange offers for Pennzoil's outstanding 6 1/2%
Exchangeable Senior Debentures due 2003 and Pennzoil's outstanding 4 3/4%
Exchangeable Senior Debentures due 2003, and for the classification as
discontinued operations of Products Group.
2
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Pennzoil Company
Date: May 19, 1998 By: /s/ David P. Alderson, II
----------------------------------
DAVID P. ALDERSON, II
GROUP VICE PRESIDENT--
FINANCE & ACCOUNTING
3
PENNZOIL COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
(EXPRESSED IN THOUSANDS)
PRO FORMA ADJUSTMENTS
-------------------------------------
RECLASSIFY OTHER
AS DISCONTINUED AS PRO FORMA
REPORTED OPERATIONS RECLASSIFIED ADJUSTMENTS PRO FORMA
---------- ------------ ------------ ----------- ----------
CURRENT ASSETS
Cash and cash
equivalents.......... $ 24,894 $ (9,988) $ 14,906 -- $ 14,906
Other current assets.. 533,006 (393,791) 139,215 -- 139,215
---------- ---------- ---------- ----------- ----------
Total current
assets............. 557,900 (403,779) 154,121 -- 154,121
---------- ---------- ---------- ----------- ----------
PROPERTY PLANT AND
EQUIPMENT, AT COST
Oil and Gas,
successful efforts
method of accounting. 4,637,447 -- 4,637,447 -- 4,637,447
Motor Oil & Refined
Products............. 1,192,944 (1,192,944) -- -- --
Franchise Operations.. 236,930 (236,930) -- -- --
Other................. 106,779 (296) 106,483 -- 106,483
---------- ---------- ---------- ----------- ----------
Total property,
plant and
equipment.......... 6,174,100 (1,430,170) 4,743,930 -- 4,743,930
Less accumulated
depreciation,
depletion and
amortization......... 3,639,917 (636,714) 3,003,203 -- 3,003,203
---------- ---------- ---------- ----------- ----------
Net property, plant
and equipment...... 2,534,183 (793,456) 1,740,727 -- 1,740,727
---------- ---------- ---------- ----------- ----------
OTHER ASSETS
Net Assets of
Discontinued Products
Group Operations..... -- 1,102,768 1,102,768 (1,102,768)(d) --
Marketable securities
and other assets..... 1,293,537 (350,703) 942,834 -- 942,834
---------- ---------- ---------- ----------- ----------
Total other assets.. 1,293,537 752,065 2,045,602 (1,102,768) 942,834
---------- ---------- ---------- ----------- ----------
Total assets...... $4,385,620 $ (445,170) $3,940,450 $(1,102,768) $2,837,682
========== ========== ========== =========== ==========
Current liabilities..... $ 335,521 $ (197,773) $ 137,748 $ -- $ 137,748
LONG-TERM DEBT, LESS
CURRENT MATURITIES
Exchangeable
debentures........... 888,858 -- 888,858 -- 888,858
Other long-term debt.. 1,428,768 (50,756) 1,378,012 (388,013)(e) 989,999
---------- ---------- ---------- ----------- ----------
Total long-term
debt, less current
maturities......... 2,317,626 (50,756) 2,266,870 (388,013) 1,878,857
Other liabilities....... 590,737 (196,641) 394,096 -- 394,096
---------- ---------- ---------- ----------- ----------
Total liabilities... 3,243,884 (445,170) 2,798,714 (388,013) 2,410,701
---------- ---------- ---------- ----------- ----------
Shareholders' equity.... 1,141,736 -- 1,141,736 (714,755)(f) 426,981
---------- ---------- ---------- ----------- ----------
Total liabilities and
shareholders' equity... $4,385,620 $ (445,170) $3,940,450 $(1,102,768) $2,837,682
========== ========== ========== =========== ==========
F-1
PENNZOIL COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS
-------------------------------------
RECLASSIFY OTHER
AS DISCONTINUED AS PRO FORMA
REPORTED OPERATIONS RECLASSIFIED ADJUSTMENTS PRO FORMA
-------- ------------ ------------ ----------- ---------
Revenues................ $511,007 $(357,128) $153,879 $ -- $153,879
Investment and other in-
come, net.............. 34,803 (16,318) 18,485 -- 18,485
-------- --------- -------- ------ --------
545,810 (373,446) 172,364 -- 172,364
COSTS AND EXPENSES
Cost of sales......... 307,782 (255,059) 52,723 -- 52,723
Selling, general and
administrative
expenses 86,689 (68,385) 18,304 (9,456)(a) 8,848
Depreciation,
depletion and
amortization......... 73,362 (17,764) 55,598 -- 55,598
Exploration expense... 12,675 -- 12,675 -- 12,675
Taxes, other than
income............... 11,464 (3,502) 7,962 -- 7,962
Interest charges...... 41,880 (2,693) 39,187 (5,681)(b) 33,506
-------- --------- -------- ------ --------
Income (loss) before in-
come tax............... 11,958 (26,043) (14,085) 15,137 1,052
Income tax provision.... 2,300 (10,869) (8,569) 5,752 (c) (2,817)
-------- --------- -------- ------ --------
Earnings (loss) from
Continuing Operations.. 9,658 (15,174) (5,516) 9,385 3,869
Earnings from Discontin-
ued Products Group
Operations............. -- 15,174 15,174 -- --
-------- --------- -------- ------ --------
Net Earnings............ $ 9,658 $ -- $ 9,658
Basic Earnings (Loss)
Per Share
Continuing Operations. $ 0.20 $ (0.12) $ 0.08
========
Discontinued
Operations........... -- 0.32
-------- --------
$ 0.20 $ 0.20
======== ========
Diluted Earnings (Loss)
Per Share
Continuing Operations. $ 0.20 $ (0.11) $ 0.08
========
Discontinued
Operations........... -- 0.31
-------- --------
$ 0.20 $ 0.20
======== ========
Average Shares Outstand-
ing--Basic............. 47,593 47,593 47,593
======== ======== ========
Average Shares Outstand-
ing--Diluted........... 48,402 48,402 47,852
======== ======== ========
F-2
PENNZOIL COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS
--------------------------------------
RECLASSIFY OTHER
AS DISCONTINUED AS PRO FORMA
REPORTED OPERATIONS RECLASSIFIED ADJUSTMENTS PRO FORMA
---------- ------------ ------------ ----------- ---------
Revenues................ $2,511,247 $(1,645,735) $865,512 $ -- $865,512
Investment and other in-
come, net.............. 143,057 (31,012) 112,045 -- 112,045
---------- ----------- -------- ------- --------
2,654,304 (1,676,747) 977,557 -- 977,557
COSTS AND EXPENSES
Cost of sales......... 1,391,772 (1,182,742) 209,030 -- 209,030
Selling, general and
administrative
expenses............. 387,964 (295,302) 92,662 (54,821)(a) 37,841
Depreciation,
depletion and
amortization......... 288,848 (64,490) 224,358 -- 224,358
Exploration expense... 67,664 -- 67,664 -- 67,664
Taxes, other than
income............... 49,855 (11,956) 37,899 -- 37,899
Interest charges, net. 163,806 (5,406) 158,400 (19,100)(b) 139,300
---------- ----------- -------- ------- --------
Income before income
tax.................... 304,395 (116,851) 187,544 73,921 261,465
Income tax provision.... 124,140 (48,499) 75,641 28,090 (c) 103,731
---------- ----------- -------- ------- --------
Earnings from Continuing
Operations............. 180,255 (68,352) 111,903 45,831 157,734
Earnings from Discontin-
ued Products Group Op-
erations............... -- 68,352 68,352 -- --
---------- ----------- -------- ------- --------
Net Earnings............ $ 180,255 -- $180,255
Basic Earnings (Loss)
Per Share
Continuing Operations. $ 3.83 $ 2.38 $ 3.35
========
Discontinued
Operations........... -- 1.45
---------- --------
$ 3.83 $ 3.83
========== ========
Diluted Earnings (Loss)
Per Share
Continuing Operations. $ 3.76 $ 2.33 $ 3.33
========
Discontinued
Operations........... -- 1.43
---------- --------
$ 3.76 $ 3.76
========== ========
Average Shares Outstand-
ing--Basic............. 47,119 47,119 47,119
========== ======== ========
Average Shares Outstand-
ing--Diluted........... 47,923 47,923 47,376
========== ======== ========
F-3
PENNZOIL COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS
--------------------------------------
RECLASSIFY OTHER
AS DISCONTINUED AS PRO FORMA
REPORTED OPERATIONS RECLASSIFIED ADJUSTMENTS PRO FORMA
---------- ------------ ------------ ----------- ---------
Revenues................ $2,364,732 $(1,619,270) $745,462 $ -- $745,462
Investment and other in-
come, net.............. 122,114 (6,697) 115,417 -- 115,417
---------- ----------- -------- ------- --------
2,486,846 (1,625,967) 860,879 -- 860,879
COSTS AND EXPENSES
Cost of sales......... 1,421,731 (1,202,909) 218,822 -- 218,822
Selling, general and
administrative
expenses............. 349,019 (284,383) 64,636 (30,639)(a) 33,997
Depreciation,
depletion and
amortization......... 273,937 (51,918) 222,019 -- 222,019
Exploration expense... 44,271 -- 44,271 -- 44,271
Taxes, other than
income............... 51,342 (11,339) 40,003 -- 40,003
Interest charges, net. 177,420 (2,105) 175,315 (23,831)(b) 151,484
---------- ----------- -------- ------- --------
Income before income
tax.................... 169,126 (73,313) 95,813 54,470 150,283
Income tax provision.... 35,228 (30,667) 4,561 20,699 (c) 25,260
---------- ----------- -------- ------- --------
Earnings from Continuing
Operations............. 133,898 (42,646) 91,252 33,771 125,023
Earnings from Discontin-
ued Products Group Op-
erations............... -- 42,646 42,646 -- --
---------- ----------- -------- ------- --------
Net Earnings............ $ 133,898 $ -- $133,898
Basic Earnings (Loss)
Per Share
Continuing Operations. $ 2.88 $ 1.96 $ 2.69
========
Discontinued
Operations........... -- 0.92
---------- --------
$ 2.88 $ 2.88
========== ========
Diluted Earnings (Loss)
Per Share
Diluted Earnings
(Loss) Per Share
Continuing
Operations........... $ 2.86 $ 1.95 $ 2.68
========
Discontinued
Operations........... -- 0.91
---------- --------
$ 2.86 $ 2.86
========== ========
Average Shares Outstand-
ing--Basic............. 46,473 46,473 46,473
========== ======== ========
Average Shares Outstand-
ing--Diluted........... 46,758 46,758 46,564
========== ======== ========
F-4
PENNZOIL COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS
--------------------------------------
RECLASSIFY OTHER
DISCONTINUED AS PRO FORMA
AS REPORTED OPERATIONS RECLASSIFIED ADJUSTMENTS PRO FORMA
----------- ------------ ------------ ----------- ---------
Revenues................ $2,385,287 $(1,656,233) $ 729,054 $ -- $729,054
Investment and other in-
come, net.............. 104,699 (20,635) 84,064 -- 84,064
---------- ----------- --------- ------- --------
2,489,986 (1,676,868) 813,118 -- 813,118
COSTS AND EXPENSES
Cost of sales......... 1,537,737 (1,278,566) 259,171 -- 259,171
Selling, general and
administrative
expense.............. 419,530 (304,063) 115,467 (43,235)(a) 72,232
Depreciation,
depletion and
amortization......... 325,119 (48,562) 276,557 -- 276,557
Impairment of long-
lived assets......... 399,830 (6,987) 392,843 -- 392,843
Exploration expense... 39,782 -- 39,782 -- 39,782
Taxes, other than
income............... 51,315 (11,837) 39,478 -- 39,478
Interest charges, net. 194,348 (10,198) 184,150 (18,548)(b) 165,602
---------- ----------- --------- ------- --------
Income before income
tax.................... (477,675) (16,655) (494,330) 61,783 (432,547)
Income tax provision.... (172,533) (11,653) (184,186) 23,478 (c) (160,708)
---------- ----------- --------- ------- --------
Earnings (Loss) from
Continuing Operations.. (305,142) (5,002) (310,144) 38,305 (271,839)
Earnings from
Discontinued Products
Group Operations....... -- 5,002 5,002 -- --
---------- ----------- --------- ------- --------
Net Loss................ $ (305,142) $ -- $(305,142)
Basic Earnings (Loss)
Per Share Continuing
Operations............. $ (6.60) $ (6.71) $ (5.88)
========
Discontinued Operations. -- 0.11
---------- ---------
$ (6.60) $ (6.60)
========== =========
Diluted Earnings (Loss)
Per Share Continuing
Operations............. $ (6.60) $ (6.71) $ (5.88)
========
Discontinued Operations. -- 0.11
---------- ---------
$ (6.60) $ (6.60)
========== =========
Average Shares Outstand-
ing--Basic............. 46,245 46,245 46,245
========== ========= ========
Average Shares Outstand-
ing--Diluted........... 46,245 46,245 46,245
========== ========= ========
F-5
NOTES TO PENNZOIL COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying pro forma condensed consolidated financial statements of
Pennzoil Company ("Pennzoil") presented illustrate the pro forma effect of
certain proposed transactions. These transactions include (i) the
reclassification as discontinued operations of Pennzoil's motor oil, refined
products and franchise operations ("Products Group"), (ii) the disposition of
Products Group and (iii) the planned use of cash payments made by Products
Group to Pennzoil immediately prior to the Spin-Off (as defined below).
The unaudited pro forma condensed consolidated balance sheet has been
prepared assuming that the transactions occurred on the last day of the period
presented. The pro forma condensed consolidated statements of income have been
prepared assuming that the transactions and agreements occurred at the
beginning of the period presented.
The unaudited pro forma condensed consolidated financial statements have
been prepared using assumptions deemed appropriate and are presented herein
for illustrative purposes only. These unaudited pro forma financial statements
are not necessarily indicative of the future financial position or results of
operations of Pennzoil, or of the financial position or results of operations
of Pennzoil that would have actually been reported had the events reported
herein occurred as of the dates indicated.
PRO FORMA ADJUSTMENTS
Discontinued Operations--For each period the "Reclassify Discontinued
Operations" column removes from each applicable caption the "As Reported"
amount previously included therein for the proposed discontinued Products
Group operations. A separate "As Reclassified" column is included for
information purposes.
OTHER PRO FORMA ADJUSTMENTS
(a) Selling, General & Administrative Expense--Represents the estimated
incremental expenses to be billed to Products Group by Richland Services
Company ("Richland"), a subsidiary of Pennzoil, in accordance with a
transition services agreement to be entered into between Richland and Products
Group. This pro forma adjustment assumes all services outlined in the
agreement are performed by Richland for the entire period presented.
(b) Interest Expense--Represents a reduction in interest expense as a result
of the application of cash to be received from Products Group immediately
prior to the Spin-Off, which will be applied to reduce amounts outstanding
under Pennzoil's various debt agreements. The interest rate assumed for this
pro forma adjustment is 6%, which approximates Pennzoil's short-term borrowing
rates for the periods presented.
(c) Income Taxes--Reflects the tax impact of pro forma adjustments assuming
a 38% effective tax rate.
(d) Net Assets of Discontinued Operations--Represents the disposition of
Products Group. Products Group will be separated and subsequently spun off
from Pennzoil. Pennzoil shareholders will receive a pro rata distribution of
all the issued and outstanding shares of common stock of the Products Group
(the "Spin-Off").
(e) Long-Term Debt--Represents the use of cash received from Products Group
to reduce outstanding variable-rate indebtedness. Certain intercompany
indebtedness is to be repaid by Products Group to Pennzoil immediately prior
to the Spin-Off. The maximum payment is the total of $500 million plus
outstanding cash of Products Group, less existing third party debt and capital
lease obligations of Products Group. The maximum payment has been assumed in
the pro forma statements. If the cash received from Products Group is in
excess of the variable-rate indebtedness outstanding at such time, Pennzoil
currently intends that the balance would be temporarily applied to cash and
would subsequently be used to repurchase or redeem a portion of Pennzoil's
outstanding notes and debentures due 1999-2009, which would create an
extraordinary loss on extinguishment of indebtedness. Pennzoil has not
determined which notes and debentures would be repurchased or redeemed in such
event.
(f) Shareholder's Equity--Represents disposition of net assets of
discontinued operations less reduction in debt to be funded by cash received
from Products Group.
F-6