Heartland Automotive Services Inc., the largest U.S. Jiffy Lube franchisee, recently emerged from Chapter 11 bankruptcy reorganization with an approved payout plan for creditors, a commitment to remain in the Jiffy Lube fold, and an agreement with Shell Oil Products U.S. to use Pennzoil lubricants at all Heartland locations.
Omaha, Nebraska-based Heartland Automotive Services and its affiliates on Jan. 7, 2008, filed for Chapter 11. In the filing, the company said it was brought about by a breakdown in negotiations with Jiffy Lube International to resolve long-simmering disputes and by a decline in financial performance attributed to rising gasoline and oil costs that reduced customer visits and squeezed margins in 2007. One point of contention mentioned was oil pricing for Pennzoil-Quaker State products from JLI parent Shell Oil Co.
The bankruptcy laws absolutely worked as intended to protect us while we worked out some disputes with JLI, among others, Ralph Tschantz, Heartland Automotive marketing vice president, told Lube Report. Weve emerged stronger in terms of our commitment to Jiffy Lube International, and having a five year supply agreement with Pennzoil products. More importantly, were actually in better financial position than when we went in.
The supply agreement with Shell for Pennzoil products represents a big change for Heartland Automotive, he said, as its locations previously used a variety of different lubricant brands. Were in the process, as a result of negotiations, of converting all of our stores to Pennzoil products, Tschantz noted.
In its Chapter 11 filing, the company had said that as of Nov. 29, 2007, its books and records on a consolidated basis showed assets totaling $334 million and liabilities totaling $396 million. The filings list of creditors with the 20 largest unsecured claims included ConocoPhillips, SOPUS Products, Emerald Petroleum, Mobil Oil Corp., Interstate Petroleum Inc., United Oil and the Jiffy Lube Association of Franchisees.
We emerged with a full payout plan, which is virtually unheard of for most creditors – weve been told this by other folks around the process, Tschantz noted. Anybody that was a creditor of us before we went in [to Chapter 11 bankruptcy], can take 60 to 70 cents on the dollar in cash, or a note for 100 percent of what we owed them. We had that affirmed by all the creditors as well as the court. It was a very, very rich payout, which I think points to how healthy we are financially, and confident in ourselves going forward.
When it entered bankruptcy in January 2008, Heartland Automotive had 438 stores in 20 states, employing more than 4,000 people. It should emerge with about 396 stores, according to Tschantz. We used Chapter 11 as a chance to rationalize our footprint, he added, saying Heartland has about 3,000 to 4,000 employees now.
A Jiffy Lube re-imaging initiative started in 2007, constituting a facelift to the overall brand. Its the same name, but it features a new graphic and a new color scheme, Tschantz explained. Were literally going to be redoing our stores over the next 24 to 36 months, or sooner.
Jiffy Lube International president Rick Altizer said in a statement that the company was pleased to maintain its national footprint and franchise network through the continued partnership, and that Heartland had demonstrated a clear commitment to their mutual success.
Heartland Automotive Services was formed in 1995 when five independent Jiffy Lube franchisees in St. Louis, Minneapolis, Kansas City, Austin and Omaha joined forces, initially with 66 stores total.