Pennzoil-Quaker State restates earnings

February 4, 2002: 6:35 p.m. ET

Motor oil maker says it got less than thought from joint venture.

NEW YORK (CNN/Money) - Pennzoil-Quaker State Co. has restated its earnings for the first three quarters of 2001 as well as the full years of 2000 and 1999, based on an error in calculating the amount of revenue it received as part of a joint venture with Conoco.

Pennzoil (PZL: down $0.23 to $13.68, Research, Estimates), which makes the US's No. 1 and No. 2 brands of motor oil, made the revelation in a filing with the Securities and Exchange Commission Monday.

The company reduced its net income for the quarter ended Sept. 30, 2001, by $600,000 or a penny per share, to 20 cents per share from 21 cents per share. For the quarter ended June 30, the company trimmed $100,000 from its net income line, which did not effect its per-share figure of 15 cents. For the quarter ended March 31, the restatement resulted in a $400,000 reduction in net income, which did not affect its per-share earnings of 11 cents.

For all of 2000, the restatement resulted in a reduction in net income of $1.6 million, or 2 cents per share. The 2000 per-share figure now stands at 62 cents.

The restatement resulted in a $600,000 discrepancy in net income for 1999, which did not affect the 63 cent per-share earnings figure for that year.

A company spokesman said the restatement is a result of an error in calculating the amount of revenue Pennzoil has been receiving from its stake in Excel Paralubes, a base oil processing facility in which it is equal partners with Conoco.

The restatement was necessary because the allocation of products meant to be distributed between Excel Paralubes and Conoco had been measured incorrectly since operations at Excel began in 1997.

Conoco (COC: down $0.78 to $27.70, Research, Estimates), which has agreed to merge with Phillips Petroleum, is not expected to restate its earnings for those periods, since the error would not have had a material impact.

Arthur Andersen is Pennzoil's auditor, but the company said it relied solely on the auditors' reports of PriceWaterhouseCoopers, which audited Excel's books, insofar as they related to Pennzoil's financial interest in the joint venture.