1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
X QUARTERLY REPORT UNDER SECTION 13 or 15(d)
----- OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994.
TRANSITION REPORT PURSUANT TO SECTION 13 OR
----- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _____________________
Commission File Number 1-2677
QUAKER STATE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 25-0742820
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
255 Elm Street
Oil City, Pennsylvania 16301
(Address of Principal Executive Offices)
(Zip Code)
(814) 676-7676
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of August 1, 1994, 27,339,077 shares of Capital Stock, par value $1.00
per share, of the registrant were outstanding.
2
PART I.
FINANCIAL INFORMATION
Consolidated Statement of Operations
Quaker State Corporation and Subsidiaries
Quarter Ended Six Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
(in thousands except per share data, unaudited)
Revenues
Sales and operating revenues $168,192 $163,722 $343,670 $314,090
Other, net 1,445 2,136 3,093 4,029
169,637 165,858 346,763 318,119
Costs and expenses
Cost of sales and operating costs 111,661 111,936 223,675 215,398
Selling, general and administrative 43,031 42,438 92,727 79,556
Depreciation, depletion and amortization 7,878 6,874 15,465 13,838
Interest 1,200 1,508 2,403 3,056
163,770 162,756 334,270 311,848
Income from continuing operations before income taxes 5,867 3,102 12,493 6,271
Provision for (benefit from) income taxes
Current 4,455 2,010 8,075 4,130
Deferred (2,136) (1,202) (2,949) (1,984)
2,319 808 5,126 2,146
Income from continuing operations 3,548 2,294 7,367 4,125
Income from discontinued insurance
operations, net of taxes (Note 3) 1,521 2,087 3,285 3,659
Net income (loss) $ 5,069 $ 4,381 $ 10,652 $ 7,784
Per Share:
Income from continuing operations $.13 $.08 $.27 $.15
Discontinued insurance operations .06 .08 .12 .14
Net income (loss) per share $.19 $.16 $.39 $.29
Weighted average shares outstanding 27,360 27,204 27,358 27,187
Cash dividends paid per share $.10 $ .20 $.20 $.40
The accompanying notes are an integral part of the financial statements.
3
Consolidated Statement of Cash Flows
Quaker State Corporation and Subsidiaries
For the six months ended June 30 1994 1993
(in thousands, unaudited)
Cash flows from operating activities
Net income (loss) $ 10,652 $ 7,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 15,465 13,838
Deferred income taxes and investment tax credit (121) 1,314
Increase (decrease) from changes in:
Receivables (6,336) 611
Inventories (5,182) 5,043
Other current assets (911) 7,460
Accounts payable 525 1,721
Accrued liabilities 1,687 (7,041)
Other (1,934) (7,456)
Changes in discontinued insurance operations 5,224 620
Net cash provided by operating activities 19,069 23,894
Cash flow from investing activities
Proceeds from disposal of property and equipment 1,544 1,222
Capital expenditures (11,555) (6,944)
Proceeds from sale of discontinued coal operation assets 1,568 --
Discontinued insurance operations
Proceeds from sale of bonds and securities 37,046 30,241
Purchase of bonds and securities (49,259) (36,248)
Net cash used in investing activities (20,656) (11,729)
Cash flow from financing activities
Dividends paid (5,457) (10,861)
Proceeds from notes payable 320 354
Payments on long-term debt (137) (17,844)
Net cash used in financing activities (5,274) (28,351)
Net decrease in cash and cash equivalents (6,861) (16,186)
Cash and cash equivalents at beginning of year:
Other than discontinued insurance operations 6,220 34,146
Discontinued insurance operations 9,408 7,202
Total cash and cash equivalents at beginning of year 15,628 41,348
Cash and cash equivalents at end of period:
Other than discontinued insurance operations 3,063 19,688
Discontinued insurance operations 5,704 5,474
Total cash and cash equivalents at end of period $ 8,767 $ 25,162
The accompanying notes are an integral part of the financial statements.
4
Consolidated Balance Sheet
Quaker State Corporation and Subsidiaries
6/30/94 12/31/93*
(in thousands except share data) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,063 $ 6,220
Accounts and notes receivable, less allowance of
$2,430 at 6/30/94 and $1,679 at 12/31/93. 63,154 56,818
Inventories: (Note 2)
Crude oil 2,999 2,591
Finished and in-process petroleum products 26,897 23,225
Other 15,389 14,287
Total inventories 45,285 40,103
Deferred income taxes 18,496 18,375
Other current assets 16,811 17,468
Total current assets 146,809 138,984
Property, plant, and equipment, net of accumulated depreciation
and depletion of $351,403 at 6/30/94 and $345,851 at 12/31/93. 221,355 225,828
Other assets 80,026 82,903
Total assets other than insurance 448,190 447,715
Discontinued insurance assets
Investments 194,688 185,446
Cash 5,704 9,408
Premiums and other receivables 59,662 59,310
Deferred insurance acquisition costs 60,521 60,005
Other assets 19,344 21,793
Total discontinued insurance assets 339,919 335,962
Total assets $ 788,109 $ 783,677
Liabilities
Current Liabilities:
Accounts payable $ 36,825 $ 35,980
Accrued liabilities 73,148 67,339
Installments on long-term debt 152 262
Total current liabilities 110,125 103,581
Long-term debt, less debt payable within one year 51,161 51,188
Other long-term liabilities 171,550 179,054
Total liabilities other than insurance 332,836 333,823
Discontinued insurance liabilities
Unearned premiums 219,032 208,530
Policy claims 30,133 28,773
Due to reinsurance companies 4,550 6,897
Other liabilities 10,057 16,904
Total discontinued insurance liabilities 263,772 261,104
Commitments and contingencies (Note 4)
Stockholders' Equity
Capital stock, $1.00 par value; authorized shares, 37,500,000;
issued shares, 27,332,050 at 6/30/94 and 27,250,818 at 12/31/93 27,332 27,251
Treasury stock, 6,696 shares, at cost (92) --
Additional capital 64,146 63,044
Retained earnings 102,076 98,877
Cumulative foreign currency translation adjustment (661) 75
Unearned compensation (Note 6) (1,300) (497)
Total stockholders' equity 191,501 188,750
Total liabilities and stockholders' equity $ 788,109 $ 783,677
<FN>
*Amounts are from December 31, 1993 audited balance sheet and footnotes.
The accompanying notes are an integral part of the financial statements.
5
Other Financial Information
Quaker State Corporation and Subsidiaries
The sales and operating revenues and contributions to income from continuing
operations, by industry segment, are as follows:
Quarter Ended Six Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
(in thousands, unaudited)
Sales and Operating Revenue
Motor oil $112,366 $116,132 $235,047 $218,875
Fast lube 27,967 25,832 54,126 51,034
Natural gas E&P 7,940 6,581 15,603 13,608
Truck-Lite 26,558 20,833 51,218 41,759
Docks 754 712 1,447 1,410
Intersegment sales (7,393) (6,368) (13,771) (12,596)
Total sales and operating revenue $168,192 $163,722 $343,670 $314,090
Operating Profit
Motor oil $ 3,064 $ 5,503 $ 8,268 $ 9,387
Fast lube 1,478 613 2,779 958
Natural gas E&P 2,304 1,203 4,140 3,027
Truck-Lite 4,570 1,834 7,434 3,568
Docks 250 276 469 560
Total operating profit from continuing operations 11,666 9,429 23,090 17,500
Corporate income 732 693 1,253 811
Interest expense, net (1,159) (1,428) (2,318) (2,890)
Corporate expenses (5,372) (5,592) (9,532) (9,150)
Income from continuing operations before income taxes $ 5,867 $ 3,102 $ 12,493 $ 6,271
The accompanying notes are an integral part of the financial statements.
6
Notes To Consolidated Financial Statements
Quaker State Corporation and Subsidiaries
(unaudited)
1. In the opinion of management of Quaker State Corporation (the company),
the accompanying financial statements include all adjustments which are
necessary to a fair statement of the results for such periods. All of
these adjustments are of a normal recurring nature. These statements
should be read in conjunction with the financial statements included as a
part of the 1993 annual report on Form 10-K. In accordance with insurance
industry practice, the assets and liabilities for the insurance operations
have not been classified as current or noncurrent.
2. Inventories are stated at the lower of cost or market. Cost is determined
on the last-in, first-out (LIFO) basis for all crude oil, the majority of
company refined petroleum and vehicular lighting products; and on the
first-in, first-out (FIFO) basis for other inventories. The reserve to
reduce the carrying value of inventories from FIFO basis to LIFO basis
amounted to $19,387,000 at June 30, 1994, and $19,090,000 at December 31,
1993.
3. Heritage is an insurance holding company principally engaged, through its
subsidiaries, in the business of credit life, accident and health, and
special indemnity insurance closely associated with automobile sales.
On May 12,1994 the company and GE Capital Corporation signed a
definitive agreement for the sale of Quaker State's wholly owned Heritage
Insurance Group subsidary to GE Capital for $85,000,000 in cash. Under
the agreement, GE Captial will acquire 100 percent of the stock in
Heritage. Accordingly, the operating results of the insurance business
have been segregated and reported as a discontinued operation in the
accompanying Consolidated Statement of Operations for the period ending
June 30, 1994. Prior year and prior period financial statements have been
reclassified to conform to the current period presentation. The
transaction, subject to state and federal regulatory approval, is expected
to close in the third quarter this year. The company expects a gain from
this transaction.
Heritage's condensed income statements for the quarter and six months
ended June 30, 1994 and 1993 are presented below:
For the Quarter Ended For the Six Months Ended
(in thousands) 6/30/94 6/30/93 6/30/94 6/30/93
Premiums $ 23,439 $ 21,972 $ 47,777 $ 45,219
Net investment income* 3,041 3,113 5,736 6,273
Realized investment gains 120 1,978 103 2,645
Other, net 5,109 4,419 9,214 6,892
Total revenue 31,709 31,482 62,830 61,029
Policy and contract benefit expenses 14,480 13,115 28,138 25,881
Amortization of deferred policy acquisition costs 11,738 11,924 23,632 23,226
General and administrative costs 3,789 3,779 7,201 7,359
Income before income taxes 1,702 2,664 3,859 4,563
Provision for income taxes 181 577 574 904
Net income $ 1,521 $ 2,087 $ 3,285 $ 3,659
*Includes intercompany interest of $ 66 $ 112 $ 134 $ 225
(more)
7
Notes To Consolidated Financial Statements
Quaker State Corporation and Subsidiaries
(unaudited)
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" which addresses the accounting and reporting for
investments in equity securities that have readily determinable values and
for investments in debt securities. This Standard did not have a material
impact on the company's financial position and results of operations.
The effect of reinsurance transactions on the Consolidated Statement of
Operations for premiums written and earned for the quarter and six months
ended June 30, 1994 are as follows (in thousand):
For the quarter For the six months
ended 6/30/94 ended 6/30/94
Written Earned Written Earned
Direct Premiums $ 37,939 $ 30,756 $ 69,812 $ 61,362
Assumed Premiums 2,269 2,353 4,140 3,433
Ceded Premiums (10,038) (9,670) (18,012) (17,018)
Net Premiums $ 30,170 $ 23,439 $ 55,940 $ 47,777
Recoveries of policy and contract benefit expense recognized under
reinsurance contracts for the quarter and six months ended June 30, 1994 and
1993 respectively, was $4,913,000 and $9,639,000, and $6,812,000 and
$15,929,000. For information regarding the nature and purpose of reinsurance
transactions, reference should be made to the 1993 Annual Report.
4. In December 1993, the United States of America commenced a lawsuit against
the company in the U.S. District Court for Northern West Virginia. The
complaint alleges the company violated the federal Resource Conservation
and Recovery Act and the federal Clean Air Act at the Congo refinery on
various dates starting in 1980 and seeks civil penalties as allowable
under federal law not to exceed $25,000 per day for each violation. The
company intends to vigorously defend itself in this lawsuit. However, the
ultimate outcome of this litigation cannot presently be determined. A
provision of $1,000,000 was established in the first quarter for costs
associated with the pending litigation.
In addition, the company has received notices from the EPA and others
that it is a "potentially responsible party" relative to certain waste
disposal sites identified by the EPA and may be required to share in the
cost of cleanup. The company has accrued for all matters which are
probable and can be reasonably estimated.
Contingent liabilities of an indeterminate amount exist in connection
with suits and claims arising in the ordinary course of business.
In April 1994, three purported class actions were commenced in the
Federal District Court for the Western District of Pennsylvania against
Witco Corporation, Quaker State Corporation and Pennzoil Company. The
complaints allege violations of Section 1 of the Sherman Act. The company
believes there is no basis for the allegations in the complaints and
intends to defend these matters vigorously.
In the opinion of management, all matters discussed above are
adequately accrued for or covered by insurance or, if not so provided for,
are without merit or the disposition is not anticipated to have a material
effect on the company's financial position; however, one or more of these
matters could have a material effect on future quarterly or annual results
of operations when resolved.
5. The effective income tax rate of 41% for continuing operations for the six
months ended June 30, 1994 is higher than the 35% federal rate due to
increased income and the added impact of state and foreign taxes. The 1994
six month effective tax rate of 41% for continuing operations is higher
than the 1993 restated effective tax rate of 21% due to higher income, an
enacted federal rate change in 1993 that increased the value of deferred
tax assets in 1993, 1993 net adjustments to valuation allowance and other
1993 credits.
(more)
8
Notes To Consolidated Financial Statements
Quaker State Corporation and Subsidiaries
(unaudited)
6. On May 12, 1994 the company's stockholders approved the 1994 Stock
Incentive Plan. The number of shares which may be issued under this plan
is 1,250,000 and the plan includes stock options, alternative stock
appreciation rights, cash payment rights, restricted shares, performance
shares and other share awards. In 1994 65,800 restricted performance
shares were granted under this plan to key employees subject to forfeiture
if certain three year performance goals are not met. As a result of the
grant of these restricted shares, the company recorded $909,000 as
unearned compensation in the equity section of the Consolidated Balance
Sheet. This unearned compensation is being amortized on a straight line
basis as compensation expense over the performance cycle period.
7. On August 4, 1994 Quaker State Corporation and the Specialty Oil Companies
of Shreveport, Lousiana, announced that they signed definitive agreements
for Quaker State to acquire the privately owned Specialty Oil Companies
and related assets. The acquisition will be made through separate stock
exchange and cash merger agreements for an aggregate consideration of
4,000,000 newly issued shares of Quaker State common stock (believed to be
non-dilutive) and approximately $25,000,000 in cash and the assumption of
certain outstanding indebtedness of the acquired companies. Quaker State
has also agreed to purchase related assets for approximately $10,000,000.
The closing is expected to occur prior to the end of the third quarter,
subject to obtaining necessary third party consents and regulatory
approvals.
9
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
-------
The consolidated financial statements and related notes including
information about Quaker State Corporation's (the company) operations in
different segments included in this Form 10-Q should be read as an integral
part of this review.
-------
Quaker State Corporation reported second quarter net income of $5,069,000,
or $.19 per share compared to $4,381,000, or $.16 per share, in the same
quarter last year. Six month net income was $10,652,000, or $.39 per share,
versus $7,784,000, or $.29 per share in 1993. Sales and operating revenues from
continuing operations in 1994 were $168,192,000 and $343,670,000 for the
quarter and six months compared to $163,722,000 and $314,090,000 for the same
periods last year. Operating profits from continuing operations in 1994
increased 24%, to $11,666,000 in the second quarter and 32%, to $23,090,000,
for the first six months. The six month revenue, operating profit and net
income improvements are based primarily on sales volume increases at the major
business segments.
On May 12, 1994 the company and GE Capital Corporation signed a definitive
agreement for the sale of Quaker State's wholly owned Heritage Insurance Group
subsidiary to GE Capital Corporation for $85,000,000 in cash. According to the
agreement GE Capital Corporation will acquire 100 percent of the stock in
Heritage Insurance Group. As a result the insurance operations have been
accounted for as a discontinued operation on the Consolidated Statement of
Operations for the period ending June 30, 1994, and its operating results have
been segregated and reported as discontinued insurance operations. Prior year
and prior period financial statements have been reclassified to conform to this
presentation. The transaction, subject to state and federal regulatory
approval, is expected to close in the third quarter of this year. The company
expects a gain from this transaction (Refer to Note 3).
In the second quarter of 1994 the motor oil division revenues and
operating profits declined 3% and 44% to $112,366,000 and $3,064,000. A 9%
drop in branded motor oil sales volume and reduced refinery product margins for
gasoline, fuel oil and lube stock sales primarily accounts for the decline in
second quarter operating results. In the first six months of 1994 revenues
increased 7% over 1993, to $235,047,000. Branded motor oil volume increased 7%
for the six months to primarily account for the higher revenues. Six month
automotive consumer product sales increased 26% over 1993 while refinery lube
stock and fuels sales volumes increased 9% and 15% over last year. The average
sales price of refinery lube stocks and fuels declined 7% and 9% for the six
months ended June 30, 1994. Operating profits did not follow the six month
increase in
10
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
----------
revenues as they were down 12%, to $8,268,000. This resulted from increases in
expenses of approximately $10,400,000 for aggressive share-building marketing
expenses, higher selling expenses geared towards developing additional sales
volume and higher freight from additional volume. Results also include a
$1,000,000 charge to a reserve for probable expenses associated with the
December 1993 lawsuit filed against the company for alleged violations at the
Congo refinery (Refer to Note 4.). Increases since January 1, 1994 for the cost
of crude oil, packaging and additives also had a negative impact on operating
profits. A price increase for branded motor oil products announced to take
effect September 1 is expected to partially offset the negative impact of these
increased costs.
The fast lube segment reported second quarter operating profits of
$1,478,000 on sales and operating revenues of $27,967,000 compared to profits
of $613,000 on revenues of $25,832,000 last year. Year-to-date operating
profits were $2,779,000 on revenues of $54,126,000 compared to profits of
$958,000 on revenues of $51,034,000 last year. Car counts in 1994 increased 8%
and 7% for the three and six months ended June 30. A 10% decrease in
administrative expenses for the six months also contributed to the improved
results.
Operating profits in the second quarter and first six months of 1994 at
the natural gas exploration and production business were $2,304,000 and
$4,140,000 compared to $1,203,000 and $3,027,000 in 1993. Revenues increased
21% to $7,940,000 in the second quarter while year-to-date revenues of
$15,603,000 increased 15% over 1993. Natural gas sales volume increased 27% and
20% for the second quarter and first six months and included deliveries made
through the new Stagecoach pipeline, while average sales prices were up
approximately 6% for the period ending June 30, 1994. Second quarter and
year-to-date crude oil sales volumes were down 11% and average sales prices
were off 15% and 21%. The posted price of crude oil sold has improved from
$13.50 per barrel at the beginning of 1994 to $18.00 per barrel at June 30,
1994.
Truck-Lite operating profits in 1994 of $4,570,000 and $7,434,000
increased 149% and 108% over the second quarter and first six months of 1993.
Significantly higher sales volume in both the automotive and original equipment
truck and trailer businesses accounts for the improved operating results and
revenue increases of 27% for the quarter to $26,558,000 and 23% for the six
months to $51,218,000.
11
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
--------
Corporate interest expense of $2,318,000 for the first six months of 1994
is down 20% from last year due to lower average debt in 1994. Corporate
expenses of $9,532,000 for the first six months of 1994 are up 4% primarily due
to higher postretirement, performance incentive and legal expenses partially
offset by declines in salary and other employee benefit expenses.
Income, net of taxes, from discontinued insurance operations in the second
quarter was $1,521,000 compared to $2,087,000 in 1993. Year-to-date income was
$3,285,000 compared to $3,659,000 last year. A reduction in realized investment
gains of $1,858,000 and $2,542,000 for the three and six month periods ended
June 30, 1994, partially offset by improved operating results, accounts for the
decrease in income from discontinued insurance operations.
Cash provided by operations for the first six months of 1994 was
$19,069,000 compared to $23,894,000 in 1993. This decrease resulted from higher
working capital requirements. Net cash used by coal activities was $8,868,000
in the first six months. Investing activities included proceeds from the sale
of property and equipment of $3,112,000 of which $1,568,000 related to the
discontinued coal operations. Investing activities also included capital
expenditures of $11,555,000, proceeds from the sale of discontinued insurance
company bonds and securities of $37,046,000 and disbursements to purchase
insurance company bonds and securities of $49,259,000. Cash used in financing
activities was $5,274,000 and included payments of $5,457,000 for dividends.
On July 28, 1994 the Board of Directors of the company authorized a
quarterly dividend of 10 cents per share payable September 15 to shareholders
of record as of August 15, 1994.
On August 4, 1994, Quaker State Corporation and the Specialty Oil
Companies of Shreveport, Louisiana, announced that they signed definitive
agreements for Quaker State to acquire the privately owned Specialty Oil
Companies and related assets. The acquisition will be made through separate
stock exchange and cash merger agreements for an aggregate consideration of
4,000,000 newly issued shares of Quaker State common stock (believed to be
non-dilutive) and approximately $25,000,000 in cash and the assumption of
certain outstanding indebtedness of the acquired companies. Quaker state has
also agreed to purchase related assets for approximately $10,000,000. The
closing is expected to occur prior to the end of the third quarter, subject to
obtaining necessary third party consents and regulatory approvals.
12
PART II
OTHER INFORMATION
QUAKER STATE CORPORATION AND SUBSIDIARIES
Item 1. LEGAL PROCEEDINGS.
Quaker State has previously reported (i) that in October 1990 it
commenced an action in the Circuit Court of the 18th Judicial District, DuPage
County, Illinois against Oil Express National, Inc. ("Oil Express") and certain
of its franchisees and principals and (ii) that in April 1992, Oil Express
filed a counterclaim and a third party claim in the proceeding against Quaker
State and its subsidiary Q Lube, Inc. The latest description of this
litigation appears in Quaker State's annual report on Form 10-K for the fiscal
year ended December 31, 1993. On May 2, 1994, this matter was settled by
payment of a nominal amount by Quaker State to Oil Express and all claims made
by all parties have been dismissed by stipulation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 12, 1994, Quaker State held its Annual Meeting of Stockholders, at
which four items were submitted to a vote of security holders. The first item
voted upon was the election of directors, and the following individuals were
elected as directors, with the following votes for or withheld from as to each:
Name Votes For Votes Withheld
- - ---- --------- --------------
Herbert M. Baum 22,765,144 963,284
Leonard M. Carroll 22,759,499 968,929
Conrad A. Conrad 22,774,916 953,512
Laurel Cutler 22,692,834 1,035,594
Homer M. Ellenburg 22,749,765 978,663
C. Frederick Fetterolf 22,759,016 969,412
Thomas A. Gardner 22,739,919 988,509
H. Bryce Jordan 22,697,203 1,031,225
W. Craig McClelland 22,747,649 980,779
Delbert J. McQuaide 22,748,591 979,837
Raymond A. Ross, Jr. 22,765,239 963,189
The second matter submitted to a vote of security holders was approval
of the adoption of Quaker State's 1994 Stock Incentive Plan. On this second
matter, 20,326,545 shares were voted for the proposition, 3,025,178 shares
were voted against, and 376,705 shares abstained.
13
QUAKER STATE CORPORATION
The third matter submitted to a vote of security holders was approval
of the adoption of Quaker State's 1994 Non-Employee Directors' Stock Option
Plan. On this third matter, 19,359,466 shares were voted for the proposition,
3,960,238 shares were voted against, and 408,724 shares abstained.
The fourth matter submitted to a vote of security holders was the
ratification of the appointment of the firm of Coopers & Lybrand as Quaker
State's independent auditors for the fiscal year ending December 31, 1994. On
this fourth matter, 23,439,959 shares were voted for the the proposition,
179,727 shares were voted against, and 108,742 shares abstained.
Item 5. OTHER INFORMATION.
On May 12, 1994, Quaker State signed a definitive agreement to sell its
subsidiary Heritage Insurance Group, Inc. to General Electric Capital
Corporation for $85,000,000 subject to certain possible adjustments and
regulatory approval. It is expected that the transaction will close before
September 30, 1994.
For further information with respect to this transaction, see the
information under the heading "Discussion and Analysis of Results of Operations
and Financial Condition" in Part I of this report on Form 10-Q and Note 3 of
Notes to Consolidated Financial Statements included in this report on
Form 10-Q.
On August 4, 1994, Quaker State announced that it had signed a definitive
agreement to acquire Specialty Oil Company and its affiliated companies through
separate stock exchange and cash merger agreements for an aggregate
consideration of 4,000,000 shares of Quaker State common stock, $25,000,000 in
cash, and the assumption of $30,000,000 in outstanding indebtedness of the
acquired companies. Quaker State also agreed to purchase certain related
assets for approximately $10,000,000. Specialty Oil Company and its affiliated
companies are engaged in lubricants manufacturing and services, marketing and
distribution of lubricants, and used oil collection and recycling.
For further information with respect to this transaction, see the
information under the heading "Discussion and Analysis of Results of Operations
and Financial Condition" in Part I of this report on Form 10-Q and Note 7
of Notes to Consolidated Financial Statements included in this report on
Form 10-Q.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 2 Stock Purchase Agreement dated as of May 12, 1994 Among Quaker
State Corporation, QS Holding Company and General Electric Capital
Corporation With Respect to all of the Outstanding Capital Stock
of Heritage Insurance Group, Inc., filed herewith.
11 Computation of Net Income Per Share for the quarters and six
months ended June 30, 1994 and 1993, filed herewith.
(b) A report on Form 8-K was filed by Quaker State on May 6, 1994. The
report disclosed under Item 5 that on April 19, 1994, Lazy Oil, Inc.,
on behalf of itself and all others similarly situated, and John B.
Andreassi on behalf of himself and all others similarly situated,
commenced actions in the Federal District Court for the Western
District of Pennsylvania against Witco Corporation, Quaker State
Corporation and Pennzoil Company alleging violations of Section 1
of the Sherman Antitrust Act.
A report on Form 8-K was filed by Quaker State on May 12, 1994.
The report disclosed under Item 5 that on May 10, 1994,
Quaker State announced that it was negotiating an agreement with
General Electric Capital Corporation for the sale of Quaker State's
subsidiary Heritage Insurance Group, Inc. A definitive agreement
was signed on May 12, 1994 (see Item 5 above).
14
QUAKER STATE CORPORATION AND SUBSIDIARIES
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 thereunto duly authorized.
QUAKER STATE CORPORATION
(Registrant)
Date 8/10/94 By /s/ Herbert M. Baum
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Herbert M. Baum
Chairman of the Board and
Chief Executive Officer
Date 8/10/94 By /s/ R. Scott Keefer
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R. Scott Keefer
Vice President, Finance and
Chief Financial Officer
15
QUAKER STATE CORPORATION
EXHIBIT LIST
The following Exhibits are required to be filed with this quarterly report
on Form 10-Q.
EXHIBIT NO. AND DOCUMENT
2. Stock Purchase Agreement Dated as of May 12, 1994
Among Quaker State Corporation, QS Holding Company
and General Electric Capital Corporation With Respect
to all of the Outstanding Capital Stock of Heritage
Insurance Group, Inc., filed herewith.
11. Computation of Net Income Per Share for the
quarters and six months ended June 30, 1994 and
1993, filed herewith.