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 September 30, 1995.
-------- 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 Identification No.)
incorporation or organization)
Xerox Centre
222 West Las Colinas Blvd.
Suite 1750
Irving, Texas 75039
(Address of Principal Executive Offices)
(Zip Code)
(214) 868-0400
(Registrant's telephone number, including area code)
255 Elm Street
Oil City, PA 16301
(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 October 31, 1995, 32,824,157 shares of Capital Stock, par value
$1.00 per share, of the registrant were outstanding.
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
--------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Quaker State Corporation and Subsidiaries
Quarter Ended Nine Months Ended
(in thousands except per share data, unaudited) 9/30/95 9/30/94 9/30/95 9/30/94
- --------------------------------------------------------------------------------------------------------
REVENUES
Sales and operating revenues $277,109 $179,702 $774,340 $509,762
Other, net 3,005 1,017 8,614 3,090
- --------------------------------------------------------------------------------------------------------
280,114 180,719 782,954 512,852
COSTS AND EXPENSES
Cost of sales and operating costs 189,431 122,651 543,567 343,167
Selling, general and administrative 72,703 47,491 188,414 138,348
Depreciation and amortization 8,330 5,199 22,900 15,203
Interest 1,777 1,177 4,895 3,580
Unusual item (Note 2) 1,204 -- 17,004 --
- --------------------------------------------------------------------------------------------------------
273,445 176,518 776,780 500,298
- --------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 6,669 4,201 6,174 12,554
- --------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 2,596 329 2,408 4,776
- --------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 4,073 3,872 3,766 7,778
INCOME FROM DISCONTINUED
OPERATIONS, NET OF TAXES (NOTE 4) 11,255 1,526 13,933 8,272
- --------------------------------------------------------------------------------------------------------
NET INCOME $15,328 $5,398 $17,699 $16,050
========================================================================================================
PER SHARE:
INCOME FROM CONTINUING OPERATIONS $.13 $.14 $.12 $.28
INCOME FROM DISCONTINUED OPERATIONS .34 .05 .43 .30
- --------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $.47 $.19 $.55 $.58
========================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 32,878 27,360 32,018 27,438
========================================================================================================
CASH DIVIDENDS PAID PER SHARE $.10 $.10 $.30 $.30
========================================================================================================
The accompanying notes are an integral part of the financial statements.
3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Quaker State Corporation and Subsidiaries
For the nine months ended September 30 1995 1994
- -----------------------------------------------------------------------
(in thousands, unaudited)
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 876 $30,522
- -----------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposal of property and 3,962 2,409
equipment
Capital expenditures (26,066) (22,481)
Proceeds from sale of discontinued operations 62,817 78,541
Net purchases of investments in connection
with discontinued insurance operations - (12,732)
Acquisitions, net of cash acquired (30,996) (28,366)
- -----------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 9,717 17,371
- -----------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid (9,583) (8,206)
Proceeds from long-term debt 31,829 303
Payments on long-term debt (32,700) (17,194)
- -----------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (10,454) (25,097)
- -----------------------------------------------------------------------
Net increase in cash and cash equivalents 139 22,796
Cash and cash equivalents at beginning of 29,805 15,628
period:
- -----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD: $29,944 $38,424
=======================================================================
The accompanying notes are an integral part of the financial statements.
4
CONDENSED CONSOLIDATED BALANCE SHEET
Quaker State Corporation and Subsidiaries
9/30/95 12/31/94*
- -----------------------------------------------------------------------
(in thousands except share data) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 29,944 $ 29,805
Accounts and notes receivable,
less allowance of $4,584 at
9/30/95 and $2,173 at 12/31/94 124,690 91,858
Inventories (Note 7) 81,243 73,442
Other current assets 27,658 23,498
Discontinued operation assets (Note 4) 3,712 3,537
- -----------------------------------------------------------------------
Total current assets 267,247 222,140
- -----------------------------------------------------------------------
Property, plant, and equipment, net of
accumulated depreciation and depletion
of $204,223 at 9/30/95 and
$190,986 at 12/31/94 198,196 199,983
Discontinued operation assets (Note 4) 114 37,491
Other assets 235,648 170,404
- -----------------------------------------------------------------------
TOTAL ASSETS $701,205 $630,018
=======================================================================
LIABILITIES
Current Liabilities:
Accounts payable $ 61,647 $ 58,500
Accrued liabilities 103,644 58,487
Debt payable within one year 4,192 3,714
- -----------------------------------------------------------------------
Total current liabilities 169,503 120,701
- -----------------------------------------------------------------------
Long-term debt, less debt payable
within one year 70,993 69,535
Other long-term liabilities 180,971 187,932
- -----------------------------------------------------------------------
Total liabilities 421,467 378,168
- -----------------------------------------------------------------------
Commitments and contingencies (Note 9)
STOCKHOLDERS' EQUITY
Capital stock, $1.00 par value;
authorized shares, 95,000,000;
issued shares, 32,811,396 at 9/30/95
and 31,517,305 at 12/31/94 32,811 31,517
Treasury stock, at cost,
12,761 shares at 9/30/95
and 33,948 shares at 12/31/94 (180) (467)
Additional capital 137,866 120,131
Retained earnings 112,402 104,286
Cumulative foreign currency
translation adjustment 120 (709)
Unearned compensation (3,281) (2,908)
- -----------------------------------------------------------------------
Total stockholders' equity 279,738 251,850
- -----------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $701,205 $630,018
=======================================================================
<FN>
*Amounts are derived from December 31, 1994 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 Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
- --------------------------------------------------------------------------------------------------
(in thousands, unaudited)
SALES AND OPERATING REVENUES
Motor oil $231,683 $131,005 $631,260 $366,052
Q Lube 32,339 30,470 92,603 84,596
Truck-Lite 20,656 24,281 70,273 75,499
Docks 701 754 2,363 2,201
Intersegment sales (8,270) (6,808) (22,159) (18,586)
- --------------------------------------------------------------------------------------------------
Total sales and operating revenues $277,109 $179,702 $774,340 $509,762
==================================================================================================
OPERATING PROFIT
Motor oil $ 9,451 $ 4,702 $ 22,325 $ 12,970
Q Lube 2,438 1,741 6,578 4,520
Truck-Lite 1,350 2,680 8,693 10,114
Docks 144 306 625 775
- --------------------------------------------------------------------------------------------------
Total operating profit from
continuing operations 13,383 9,429 38,221 28,379
Corporate income 1,093 788 3,670 2,041
Interest expense (1,808) (1,125) (4,831) (3,443)
Corporate expenses (4,795) (4,891) (13,882) (14,423)
Unusual item* (1,204) -- (17,004) --
- --------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes $ 6,669 $ 4,201 $ 6,174 $ 12,554
==================================================================================================
<FN>
* The Motor oil portion of the restructuring charges was $707 and
$9,987 for the quarter and nine months ended September 30, 1995.
The accompanying notes are an integral part of the financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quaker State Corporation and Subsidiaries (unaudited)
1. In the opinion of management of Quaker State Corporation (the
company or Quaker State), 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 part of the 1994 annual report on Form 10-K.
2. On April 28, 1995, the company announced plans to restructure its
organization to integrate recent acquisitions, consolidate management and
administrative activities, and move its corporate headquarters and Motor
Oil Division to the Dallas, Texas area. The company plans to complete the
move by the first quarter of 1996. The pre-tax costs and expenses
associated with the restructuring and relocating the work force and
closing the headquarters facility in Oil City, Pennsylvania and its
administrative unit in Shreveport, Louisiana are currently estimated to
be $25 million. A charge of $15.8 million ($9.5 million after tax) was
recorded in the second quarter 1995, of which $9.3 million related
directly to the Motor Oil Division. As of September 30, 1995, the
reserve was $8.4 million.
3. On July 11, 1995, the company completed the acquisition of all the
stock of Slick 50, Inc. (Slick 50) for $22 million in cash and the
issuance of approximately 1.3 million shares of Quaker State capital
stock. In addition, the company paid approximately $11 million to satisfy
certain Slick 50 indebtedness outstanding prior to the closing. Under the
terms of the Merger Agreement, additional consideration may be payable
by the company for Slick 50 stock depending upon the merged company's
performance during the fiscal years ending December 31, 1996, 1997,
and 1998 but subject to offset for indemnification obligations of
Slick 50 stockholders under the Merger Agreement.
The source of funds used for cash consideration in the transaction and
the payment of Slick 50 indebtedness was borrowing under Quaker State's
$45 million Revolving Credit Agreement.
The acquisition has been accounted for under the purchase method and,
accordingly, the operating results of Slick 50 have been included in the
accompanying Condensed Consolidated Financial Statements from the date of
acquisition.
The purchase price allocation to assets and liabilities is preliminary.
The acquisition has resulted in a preliminary excess of purchase price
over fair value of assets of approximately $49.1 million recorded in the
Condensed Consolidated Balance Sheet of September 30, 1995.
4. On August 9, 1995, the company sold most of the assets of its
Natural Gas Exploration and Production Division. Accordingly, the
operating results of Natural Gas Exploration and Production have been
reported as discontinued operations in the accompanying Condensed
Consolidated Statement of Operations for the quarter and nine months ended
September 30, 1995. The December 31, 1994 Condensed Consolidated Balance
Sheet has been reclassified to conform to the current period presentation.
The company recognized an after tax gain of $11.2 million from the sale of
these assets in the third quarter.
5. The effective tax rate for the nine months ended September 30, 1995
and 1994 of 39% and 38% for continuing operations is higher than the 35%
federal statutory rate due to the impact of state and foreign taxes.
(more)
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Quaker State Corporation and Subsidiaries (unaudited)
6. The following schedule is prepared on a pro forma basis as though
Specialty and Westland had been acquired as of the beginning of 1994,
after including the impact of adjustments, such as amortization of
intangible assets, intercompany sales elimination and related tax effects.
The discontinued Insurance and Natural Gas Exploration and Production
operations have also been excluded.
For the quarter and nine months ended September 30, 1994
(in thousands except per share data)
Quarter Nine months
ended ended
9/30/94 9/30/94
-------------------------------------------------------------
Revenues $266,883 $750,862
Income from continuing operations $ 4,765 $ 11,285
Income per share from continuing
operations $ .15 $ .34
-------------------------------------------------------------
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition and disposition had been in effect for the
periods presented. In addition, they are not intended to be a projection
of future results.
7. 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 $23.2 million at September 30, 1995, and $20.3 million at
December 31, 1994.
For the nine months ended September 30, 1995 certain inventory
quantities were reduced resulting in liquidations of LIFO inventory. The
effect of these liquidations was an increase in net income of $900,000 or
$.03 per share.
Inventories consist of:
--------------------------------------------------------------------------------
(in thousands) 9/30/95 12/31/94
-------------------------------------------------------------------------------
Crude Oil $ 2,983 $ 1,328
Finished and in-process petroleum products 42,259 49,252
Other 36,001 22,862
-------------------------------------------------------------------------------
Total $81,243 $73,442
===============================================================================
8. On May 25, 1995, the company's stockholders approved the Amendment
of Quaker State's Certificate of Incorporation to increase the authorized
number of shares of Quaker State's capital stock from 37.5 million to 95
million shares.
9. In December 1993, the United States commenced a lawsuit against the
company in the U.S. District Court for the Northern District of 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 not
to exceed $25,000 per day for each violation. The company intends to
vigorously defend this lawsuit. However, the ultimate outcome of this
litigation cannot presently be determined.
(more)
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Quaker State Corporation and Subsidiaries (unaudited)
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.
In April 1994, purported class actions were commenced in the U.S.
District Court for the Western District of Pennsylvania against the
company and two other oil companies. The complaints allege violations of
Section 1 of the Sherman Act. In July 1995, the United States District
Court certified the proceeding as a class action and denied the
defendants' motion for summary judgment. The company believes there is no
basis for the allegations in the complaint and intends to defend the
matter vigorously.
Contingent liabilities of an indeterminate amount exist in connection
with suits and claims arising in the ordinary course of business.
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.
10. In March, 1995, the Financial Accounting Standards Board issued
Standard No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and
for long-lived assets and certain identifiable intangibles to be disposed
of. The new Standard must be implemented in 1996. The company is
currently evaluating what effect, if any, this Standard will have on its
financial position and results of operations.
11. On October 23, 1995, the company sold $100 million of 6.625%
notes due 2005. The company used $56.5 million of the proceeds to prepay
the company's 8.73% Senior Notes due 2002. As a result of the prepayment,
the company will recognize an extraordinary charge in the fourth quarter
of $6.8 million ($4.1 million net of taxes). The remaining proceeds will
be used for general corporate purposes, acquisitions, capital expenditures
or the reduction of other indebtedness.
9
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
The condensed consolidated financial statements, other financial
information and related notes for Quaker State Corporation (the company)
included in this Form 10-Q, should be read as an integral part of this
analysis.
The company reported net income of $15.3 million or $.47 per share for
the quarter ended September 30, 1995, compared to net income of $5.4 million or
$.19 per share for the quarter ended September 30, 1994. For the nine months
ended September 30, 1995, the company reported net income of $17.7 million or
$.55 per share compared to $16.1 million or $.58 per share for the nine months
ended September 30, 1994. The weighted average shares of capital stock
outstanding for the nine months ended September 30, 1995 increased over 4.5
million shares compared to the nine months ended September 30, 1994, primarily
as a result of issuing shares in connection with the acquisition of Specialty
Oil Companies (Specialty) and Westland Oil, Inc. (Westland) in September 1994
and the acquisition of Slick 50, Inc. (Slick 50) in July 1995. Sales and
operating revenues from continuing operations were $277.1 million and $774.3
million for the quarter and nine months ended September 30, 1995 compared to
$179.7 million and $509.8 million for the quarter and nine months ended
September 30, 1994. Sales and operating revenues included $91.6 million and
$256.2 million from Specialty and Westland for the quarter and nine months
ended September 30, 1995.
The quarter and nine months ended September 30, 1995 include $1.2
million and $17 million pretax restructuring charges related to the announced
relocation to the Dallas, Texas area. Total costs under the restructuring plan
are estimated to be $25 million (see note 2). Operating profits from
continuing operations for the quarter and nine months ended September 30, 1995,
excluding restructuring charges, increased 42% and 35% to $13.4 million and
$38.2 million compared to the quarter and nine months ended September 30, 1994.
On August 9, 1995, the company sold most of the assets of its Natural
Gas Exploration and Production Division. The company recognized an after tax
gain of $11.2 million in connection with the sale. Income from discontinued
operations was $11.3 million or $.34 per share, and $13.9 million or $.43 per
share for the quarter and nine months ended September 30, 1995 compared to $1.5
million or $.05 per share and $8.3 million or $.30 per share for the quarter
and nine months ended September 30, 1994.
Motor Oil Division operating profits, excluding restructuring charges
of $700,000 and $10 million, were $9.5 million and $22.3 million for the
quarter and nine months ended September 30, 1995 compared to $4.7 million and
$13 million for the quarter and nine months ended September 30, 1994.
Revenues of $231.7 million and $631.2 million in these periods increased 77%
and 72% over 1994 and included the 1995 sales from the Specialty and Westland
companies that were purchased in the third quarter of 1994 and Slick 50, which
was acquired in the third quarter of 1995. Operating profit was favorably
impacted by the company's recent acquisition, a reduction in marketing costs
and improved refinery product margins due to higher sales prices for base
stocks, gasoline and fuel oil.
10
Management's Discussion and Analysis of Results of Operations and
Financial Condition, continued
Branded motor oil sales volumes decreased 9% and 2% for the quarter
and nine months ended September 30, 1995, reflecting an overall decline in
the motor oil category and strong promotional sales volumes in the third
quarter of 1994.
Q Lube reported third quarter operating profits of $2.4 million on
sales and operating revenues of $32.3 million compared to profits of $1.7
million on revenues of $30.5 million for the same period last year. Operating
profits were $6.6 million on sales and operating revenues of $92.6 million for
the nine months ended September 30, 1995, compared to profits of $4.5 million
on revenues of $84.6 million for the nine months ended September 30, 1994.
Year-to-date car counts in 1995 increased 6% and average per car sales were up
4% to account for the revenue and operating result improvements. Higher
advertising, depreciation and amortization expenses resulting from the
conversion of the fast lube outlets to the new Q Lube format partially offset
the improvement in operating results.
Truck-Lite operating profits for the third quarter and nine months
ended September 30, 1995 were $1.4 million and $8.7 million compared to $2.7
million and $10.1 million for the third quarter and nine months ended September
30, 1994. Revenues were down 15% to $20.7 million and down 7% to $70.3 million
for the third quarter and nine months ended September 30, 1995. Lower sales
volume and negative product mix adversely affected operating results.
Automotive sales slowed down in 1995 as the overall car market has softened.
Management was able to reduce year-to-date operating expenses and other costs
by approximately $2.3 million to partially offset the slowdown in the business.
For the quarter and nine months ended September 30, 1995 corporate
income was $1 million and $3.7 million compared to $800,000 and $2
million for the quarter and nine months ended September 30, 1994. Included in
corporate income is approximately $1.3 million of additional royalty payments
received for coal deliveries made by the purchaser of a long-term coal sales
agreement. Interest expense increased for the quarter and nine months ended
September 30, 1995 as a result of the debt assumed in the acquisition of
Westland. As a result of lower salary and benefit expenses, corporate expenses
decreased 2% and 4% to $4.8 million and $13.9 million for the quarter and nine
months ended September 30, 1995.
Cash and cash equivalents increased by $100,000 from December 31,
1994. The increase was comprised of $900,000 of net cash flow provided from
operations, $9.7 million net cash provided by investing activities and $10.5
million net cash used in financing activities. Cash provided by operations
was impacted by additional working capital requirements and the loss of
operating cash flows from the insurance operations which were sold in the third
quarter of 1994.
11
Management's Discussion and Analysis of Results of Operations and
Financial Condition, continued
Cash provided by investing activities of $9.7 million is primarily due
to $62.8 million of proceeds from the sale of the Natural Gas Exploration and
Production Division assets, $31 million used in the acquisition of Slick 50
and capital expenditures of $26.1 million. Cash used in financing activities of
$10.5 million is primarily due to $9.6 million of dividend payments.
In April 1995, the company announced that the Board of Directors
approved a $25 million development project for the Red River port in
Shreveport, Louisiana which will become the company's lubricants manufacturing
and technical headquarters. The port development will include a blending,
packaging and warehousing facility in Shreveport, as well as a laboratory and
tank farm near the Red River. In addition, the Company plans to improve and
upgrade existing plant and facilities, and construct additional storage tanks
and bulk loading and unloading facilities near the Red River. The port
development project is subject to a number of conditions, including the
availability of state and local funding for land and certain infrastructure
which, to date, have not been finalized.
On May 25, 1995, the company's stockholders approved an amendment to the
company's Certificate of Incorporation to increase the authorized number of
shares of Quaker State's capital stock from 37.5 million to 95 million
shares.
On July 11, 1995, the company completed the acquisition of all the
stock of Slick 50 for $22 million in cash and the issuance of approximately 1.3
million shares of the company's capital stock. In addition, the company paid
approximately $11 million to satisfy certain Slick 50 indebtedness
outstanding prior to the closing. Under the terms of the Merger Agreement,
additional consideration may be payable by the company for Slick 50 stock
depending upon the merged company's performance during the fiscal years ending
December 31, 1996, 1997 and 1998 but subject to offset for indemnification
obligations of Slick 50 stockholders under the Merger Agreement.
On October 4, 1995, the company terminated its revolving credit
agreement due June 30, 1998 and executed a new $45 million credit agreement
due September 28, 1996.
On October 23, 1995, the company sold $100 million of 6.625% notes due
2005. The company used $56.5 million of the proceeds to prepay the 8.73% Senior
Notes due 2002. As a result of the prepayment, the company will recognize an
extraordinary charge in the fourth quarter of 1995 of approximately $6.8
million ($4.1 million net of taxes). The remaining proceeds will be used for
general corporate purposes, acquisitions, capital expenditures or the reduction
of other indebtedness.
On October 26, 1995, the Board of Directors of the company declared a
quarterly dividend of $.10 per share payable December 15, 1995 to shareholders
of record as of November 15, 1995.
12
Management's Discussion and Analysis of Results of Operations and
Financial Condition, continued
In March 1995, the Financial Accounting Standards Board issued Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. The new Standard must be
implemented in 1996. The company is currently evaluating what effect, if any,
this Standard will have on its financial position and results of operations.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In its annual report on Form 10-K for the year ended December 31, 1994, Quaker
State Corporation ("Quaker State") reported that in October 1993, Larry Tucker
and sixteen (16) other former salaried supervisory employees of Donaldson Mine
Company, a subsidiary of Quaker State's subsidiary, The Valley Camp Coal
Company ("Valley Camp"), instituted an action in the Circuit Court of Kanawha
County, West Virginia against Quaker State, Valley Camp, and Donaldson Mine
Company. The suit was subsequently removed to the United States District Court
for the Southern District of West Virginia. In October 1995, the claims of
eleven (11) of the plaintiffs were settled and dismissed for a nominal payment
and the court granted summary judgment dismissing all claims of the nonsettling
plaintiffs.
Item 5. Other Information
-----------------
On September 28, 1995, the Quaker State Board of Directors adopted a
stockholders Rights plan and declared a dividend of one Right for each
outstanding share of Quaker State's capital stock. When exercisable, each Right
entitles the registered holder to purchase from Quaker State one share of
Quaker State capital stock or, in certain circumstances, common stock of an
acquiring company, at one-half the market price of such common stock. The
Rights were issued on October 18, 1995 to stockholders of record on that date.
For further information with respect to this item, see the current report on
Form 8-K and the exhibits thereto filed by Quaker State on October 20, 1995.
Item 6. Exhibits And Reports On Form 8-K
--------------------------------
(a) Exhibits:
4(a). $45,000,000 Credit Agreement between Quaker State and Morgan Guaranty
Trust Company of New York, as Agent, dated as of September 28, 1995,
filed herewith.
4(b). Amendment No. 6, dated as of September 29, 1995, to Credit Agreement by
and among Quaker State, Certain Banks and PNC Bank, National
Association, as agent for the Banks, filed herewith.
11. Computation of Net Income per Share for the quarters and nine months
ended September 30, 1995 and September 30, 1994, filed herewith.
14
PART II OTHER INFORMATION
27. Financial Data Schedule, filed herewith.
(b) Reports on Form 8-K.
On July 25, 1995, Quaker State filed a current report on Form 8-K, disclosing
under Item 2 that on July 11, 1995, Quaker State completed the acquisition of
all of the capital stock of Slick 50, Inc. No financial statements were
included with this report, which was amended by a report on Form 8-K/A1 filed
on September 21, 1995.
On August 23, 1995, Quaker State filed a current report on Form 8-K and
disclosed under Item 2 that on August 9, 1995, Quaker State completed the sale
to Belden & Blake Corporation of most of the assets of Quaker State's Natural
Gas Exploration and Production Division. The report included a pro forma
consolidated statement of operations of Quaker State and subsidiaries for the
fiscal year ending December 31, 1994, and a pro forma consolidated balance
sheet of Quaker State and subsidiaries as of June 30, 1995.
15
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 11/13/95 By /s/ HERBERT M. BAUM
------------------------------
Herbert M. Baum
Chairman of the Board and
Chief Executive Officer
Date 11/13/95 By /s/ C. A. CONRAD
------------------------------
C. A. Conrad
Vice Chairman and
Chief Financial Officer
16
QUAKER STATE CORPORATION
EXHIBIT LIST
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The following exhibits are required to be filed with this quarterly report on
Form 10-Q:
Exhibit No. And Document
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4(a). $45,000,000 Credit Agreement between Quaker State and Morgan Guaranty
Trust Company of New York, as Agent, dated as of September 28, 1995,
filed herewith.
4(b). Amendment No. 6, dated as of September 29, 1995, to Credit Agreement by
and among Quaker State, Certain Banks and PNC Bank, National
Association, as agent for the Banks, filed herewith.
11. Computation of net income per share for the quarters and nine months
ended September 30, 1995 and September 30, 1994, filed herewith.
27. Financial Data Schedule, filed herewith.