1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
Mark One
X ANNUAL REPORT PURSUANT TO SECTION 15(d)
- -------- OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- -------- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from to
Commission File Number 1-2677 --------------- ---------------
Full title of the Plan and the address of the Plan, if different from the issuer
named below:
Quaker State Corporation
Thrift and Stock Purchase Plan
Name of issuer of the securities held pursuant to the Plan and the address of
its principal executive office:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, Texas 75062
2
REQUIRED INFORMATION
The Quaker State Corporation Thrift and Stock Purchase Plan (Plan), is subject
to the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Therefore, in lieu of the information required by Items 1-3 of Form 11-K, the
financial statements and schedules of the Plan for the fiscal years ended
December 31, 1997 and 1996, which have been prepared in accordance with the
financial reporting requirements of ERISA, except for the "limited scope
exemption" contained in ERISA Section 103 (a)(3)(c) which does not apply, are
attached hereto as Appendix I and are incorporated herein by reference.
EXHIBITS
The Exhibit listed below is filed as a part of this Annual Report:
1. Consent of Coopers & Lybrand L.L.P.
3
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the members of the Organization and Compensation Committee of the Board of
Directors of Quaker State Corporation have duly caused this annual report to be
signed on behalf of the Plan by the undersigned hereunto duly authorized.
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
Date June 24,1998 By /s/ Forrest R. Haselton
------------ -------------------------
Forrest R. Haselton
Chairman, Organization
and Compensation Committee
4
APPENDIX I
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
--------
REPORT ON AUDITS OF FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
for the years ended December 31, 1997 and 1996
5
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
---------
Pages
-----
Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for
Benefits as of December 31, 1997 and 1996 3-5
Statements of Changes in Net Assets Available
for Benefits for the years ended
December 31, 1997 and 1996 6-8
Notes to Financial Statements 9-13
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1997 14
Item 27d - Schedule of Reportable Transactions
(Transactions in excess of 5% of Plan value)
for the year ended December 31, 1997 15
1
6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Organization and Compensation
Committee of the Board of Directors
Quaker State Corporation:
We have audited the accompanying statements of net assets available for benefits
of the Quaker State Corporation Thrift and Stock Purchase Plan (the Plan) as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in net assets available for benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed on page
1 are presented for the purpose of additional analysis and are not a required
part of the basic financial statements but are supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The Fund
Information in the statements of net assets available for benefits and the
statements of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets available
for benefits and changes in net assets available for benefits of each fund. The
supplemental schedules and Fund Information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
June 19, 1998
2
7
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997
Participant Directed Funds
-----------------------------------------------------------------------------
Formerly
Fund C Fidelity
Fund A Fund B Quaker State Fund D Puritan
Income Fund Bond Fund Stock Fund Equity Fund Fund
----------- --------- ------------ ----------- --------
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock $ 5,435,506
Registered Investment Companies -- $ 1,621,407
Money market accounts 127,941 --
Participant loans -- --
-----------------------------------------------------------------------------
TOTAL INVESTMENTS 5,563,447 1,621,407
RECEIVABLES
Employee contributions 66,634 19,854
Company contributions -- --
ACCRUED INTEREST RECEIVABLE -- --
-----------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ -- $ -- $ 5,630,081 $ -- $ 1,641,261
=============================================================================
Participant Directed Funds
------------------------------------------
Fidelity
Fidelity Investment
Magellan Fidelity Grade Bond
Fund Contrafund Fund
---------- ---------- ----------
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock
Registered Investment Companies $ 2,237,095 $ 2,699,960 $ 1,723,415
Money market accounts -- -- --
Participant loans -- -- --
-------------------------------------------
TOTAL INVESTMENTS 2,237,095 2,699,960 1,723,415
RECEIVABLES
Employee contributions 34,081 32,503 14,717
Company contributions -- -- --
ACCRUED INTEREST RECEIVABLE -- -- --
-------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 2,271,176 $ 2,732,463 $ 1,738,132
===========================================
(Continued)
The accompanying notes are an integral part of the financial statements.
3
8
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS (Continued)
December 31, 1997
Participant Directed Funds
------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity
Growth & Low-Priced Diversified Retirement
Income Stock International Money Market
Fund Fund Fund Fund Loans
---- ---- ---- ---- -----
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock
Registered Investment Companies $ 8,536,472 $ 2,171,905 $ 847,759
Money market accounts -- -- -- $ 2,573,912
Participant loans -- -- -- -- $ 1,953,633
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS 8,536,472 2,171,905 847,759 2,573,912 1,953,633
RECEIVABLES
Employee contributions 79,241 26,076 13,900 13,754 --
Company contributions -- -- -- -- --
ACCRUED INTEREST RECEIVABLE -- -- -- -- --
-------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 8,615,713 $ 2,197,981 $ 861,659 $ 2,587,666 $ 1,953,633
=====================================================================================
Non-Participant
Directed
---------------
Formerly
Fund C
Quaker State
Stock Fund Total
---------- -----
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock $ 8,366,562 $ 13,802,068
Registered Investment Companies -- 19,838,013
Money market accounts 197,428 2,899,281
Participant loans -- 1,953,633
-------------------------------
TOTAL INVESTMENTS 8,563,990 38,492,995
RECEIVABLES
Employee contributions 480 301,240
Company contributions 80,067 80,067
ACCRUED INTEREST RECEIVABLE 1,259 1,259
-------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 8,645,796 $ 38,875,561
===============================
The accompanying notes are an integral part of the financial statements.
4
9
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1996
Participant
Directed and
Non-Participant
Participant Directed Funds Directed
-----------------------------------------------------------------------------------
Fund C
Fund A Fund B Fund D Quaker State
Income Fund Bond Fund Equity Fund Loans Stock Fund
----------- --------- ----------- ----- ------------
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock $ 13,535,662
U. S. government obligations $ 2,446,337 --
Registered Investment Companies -- $ 2,300,053 $ 5,711,006 --
Money market accounts 2,294,691 -- -- 84,066
Participant loans -- -- -- $ 1,500,938 --
------------------------------------------------------------------------------------
TOTAL INVESTMENTS 4,741,028 2,300,053 5,711,006 1,500,938 13,619,728
RECEIVABLES
Employee contributions 62,643 51,743 124,788 -- 106,872
Company contributions -- -- -- -- 107,226
ACCRUED INTEREST RECEIVABLE 54,914 71 98 -- 394
------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 4,858,585 $ 2,351,867 $ 5,835,892 $ 1,500,938 $ 13,834,220
====================================================================================
Total
-----
ASSETS
INVESTMENTS, AT FAIR VALUE
Quaker State Corporation capital stock $ 13,535,662
U. S. government obligations 2,446,337
Registered Investment Companies 8,011,059
Money market accounts 2,378,757
Participant loans 1,500,938
-------------
TOTAL INVESTMENTS 27,872,753
RECEIVABLES
Employee contributions 346,046
Company contributions 107,226
ACCRUED INTEREST RECEIVABLE 55,477
-------------
NET ASSETS AVAILABLE FOR BENEFITS $ 28,381,502
=============
The accompanying notes are an integral part of the financial statements.
5
10
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31, 1997
Participant Directed Funds
--------------------------------------------------------------------------------
Formerly
Fund C Fidelity
Fund A Fund B Quaker State Fund D Puritan
Income Fund Bond Fund Stock Fund Equity Fund Fund
----------- --------- ------------ ----------- ----
CONTRIBUTIONS
Employee $ 99,960 $ 35,637 $ 1,241,441 $ 59,079 $ 314,093
Company -- -- -- -- --
--------------------------------------------------------------------------------
99,960 35,637 1,241,441 59,079 314,093
INVESTMENT INCOME
Dividends -- -- 45,916 -- --
Interest 28,996 25,059 31,508 5,570 119,293
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS (6,574) (6,880) 224,025 342,840 108,984
DISTRIBUTIONS AND WITHDRAWALS (370,550) (72,326) (1,515,281) (257,170) (109,400)
NET TRANSFERS
Among funds (4,610,417) (2,333,357) (770,798) (5,986,211) 890,200
From other plans -- -- 35,670 -- 318,091
--------------------------------------------------------------------------------
NET CHANGE (4,858,585) (2,351,867) (707,519) (5,835,892) 1,641,261
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year 4,858,585 2,351,867 6,337,600 5,835,892 --
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ -- $ -- $ 5,630,081 $ -- $ 1,641,261
================================================================================
Participant Directed Funds
--------------------------------------------
Fidelity
Fidelity Fidelity Investment
Magellan Contrafund Grade Bond
Fund Fund Fund
---- ---- ----
CONTRIBUTIONS
Employee $ 521,832 $ 533,080 $ 232,861
Company -- -- --
--------------------------------------------
521,832 533,080 232,861
INVESTMENT INCOME
Dividends -- -- --
Interest 137,426 232,420 129,798
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS 193,588 258,553 22,458
DISTRIBUTIONS AND WITHDRAWALS (87,232) (100,596) (150,663)
NET TRANSFERS
Among funds 1,295,177 831,525 1,264,668
From other plans 210,385 977,481 239,010
--------------------------------------------
NET CHANGE 2,271,176 2,732,463 1,738,132
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year -- -- --
--------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ 2,271,176 $ 2,732,463 $ 1,738,132
============================================
(Continued)
The accompanying notes are an integral part of the financial statements.
6
11
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (Continued)
For the year ended December 31, 1997
Participant Directed Funds
-------------------------------------------------------------------------------
Fidelity Fidelity Fidelity Fidelity
Growth & Low-Priced Diversified Retirement
Income Stock International Money Market
Fund Fund Fund Fund Loans
---- ---- ---- ---- -----
CONTRIBUTIONS
Employee $ 1,423,387 $ 457,079 $ 198,537 $ 293,519
Company -- -- -- --
-------------------------------------------------------------------------------
1,423,387 457,079 198,537 293,519
INVESTMENT INCOME
Dividends -- -- -- --
Interest 412,915 143,498 34,380 161,416
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS 1,154,719 215,327 20,787 --
DISTRIBUTIONS AND WITHDRAWALS (408,303) (45,885) (41,143) (399,933) $ (106,386)
NET TRANSFERS
Among funds 5,583,824 1,427,962 521,834 1,972,442 559,081
From other plans 449,171 -- 127,264 560,222 --
-------------------------------------------------------------------------------
NET CHANGE 8,615,713 2,197,981 861,659 2,587,666 452,695
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year -- -- -- -- 1,500,938
-------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ 8,615,713 $ 2,197,981 $ 861,659 $ 2,587,666 $ 1,953,633
===============================================================================
Non-Participant
Directed
-------------------------------
Formerly
Fund C
Quaker State
Stock Fund Total
---------- -----
CONTRIBUTIONS
Employee $ 5,410,505
Company $ 1,574,142 1,574,142
-------------------------------
1,574,142 6,984,647
INVESTMENT INCOME
Dividends 48,901 94,817
Interest 5,484 1,467,763
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS 324,967 2,852,794
DISTRIBUTIONS AND WITHDRAWALS (675,229) (4,340,097)
NET TRANSFERS
Among funds (645,930) --
From other plans 516,841 3,434,135
-------------------------------
NET CHANGE 1,149,176 10,494,059
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year 7,496,620 28,381,502
-------------------------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ 8,645,796 $ 38,875,561
===============================
The accompanying notes are an integral part of the financial statements.
7
12
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31, 1996
Participant
Directed and
Non-Participant
Participant Directed Funds Directed
----------------------------------------------------------------- ---------------
Fund C
Fund A Fund B Fund D Quaker State
Income Fund Bond Fund Equity Fund Loans Stock Fund
----------- --------- ----------- ----- ------------
CONTRIBUTIONS
Employee $ 775,395 $ 454,259 $ 992,063 $ 972,764
Company -- -- -- 1,277,279
----------------------------------------------------------------------------------
775,395 454,259 992,063 2,250,043
INVESTMENT INCOME
Dividends -- -- 359,311 426,042
Interest 347,419 145,862 39,760 46,040
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS (78,588) (29,465) 711,435 1,799,405
NET TRANSFERS
Among funds (184,307) 19,980 89,137 $ (178,986) 254,176
DISTRIBUTIONS AND WITHDRAWALS (1,729,510) (554,980) (1,260,671) -- (6,121,520)
----------------------------------------------------------------------------------
NET CHANGE (869,591) 35,656 931,035 (178,986) (1,345,814)
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year 5,728,176 2,316,211 4,904,857 1,679,924 15,180,034
----------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ 4,858,585 $ 2,351,867 $ 5,835,892 $ 1,500,938 $ 13,834,220
==================================================================================
Total
-----
CONTRIBUTIONS
Employee $ 3,194,481
Company 1,277,279
-------------
4,471,760
INVESTMENT INCOME
Dividends 785,353
Interest 579,081
NET APPRECIATION (DEPRECIATION)
OF INVESTMENTS 2,402,787
NET TRANSFERS
Among funds --
DISTRIBUTIONS AND WITHDRAWALS (9,666,681)
-------------
NET CHANGE (1,427,700)
NET ASSETS AVAILABLE FOR BENEFITS,
Beginning of year 29,809,202
-------------
NET ASSETS AVAILABLE FOR BENEFITS,
End of year $ 28,381,502
=============
The accompanying notes are an integral part of the financial statements.
8
13
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
-----------
1. MAJOR FEATURES OF THE PLAN:
General
The Quaker State Corporation Thrift and Stock Purchase Plan (the Plan)
is a defined contribution and profit sharing plan available to eligible
employees of Quaker State Corporation and certain of its subsidiaries
(Quaker State or the Company) who have reached age 21. The Plan is
subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA). The Organization and Compensation Committee
of the Quaker State Board of Directors administers the Plan. Reference
should be made to the Quaker State Corporation Thrift and Stock
Purchase Plan Summary Plan Description and Prospectus for a detailed
description of the Plan including eligibility, vesting, employee and
Company contributions, investment options, withdrawals, borrowings by
participants and termination of the Plan.
Investment Options
Effective February 1, 1997, certain funds managed by Fidelity
Investments, a registered investment advisor, became the investment
options of the Plan. All Company contributions are invested in the
Quaker State Stock Fund; however, participants may select any one or
more of the funds for their contributions.
The investment options are as follows:
o Fidelity Retirement Money Market Portfolio - A fund primarily
invested in short-term money market securities of U.S. and
foreign issuers.
o Fidelity Investment Grade Bond Fund - A fund that invests at
least 65% of its portfolio in investment-grade fixed-income
securities including a broad range of corporate debt securities
that are investment grade.
o Fidelity Puritan Fund - A balanced fund primarily invested in a
combination of equity and fixed income securities.
o Fidelity Growth & Income Portfolio - A growth and income fund
invested primarily in domestic securities focusing on those that
pay current dividends and offer potential growth of earnings.
o Fidelity Contrafund - A growth fund which seeks long-term capital
appreciation by investing mainly in the securities of companies
believed to be undervalued.
o Fidelity Low-Priced Stock Fund - A growth fund primarily invested
in domestic and foreign low-priced stocks that may be
undervalued.
o Fidelity Magellan Fund - A growth fund primarily invested in
securities of companies with above-average growth potential.
o Fidelity Diversified International Fund - An international fund
invested primarily in equity securities of companies outside the
United States.
o Quaker State Stock Fund - A fund invested primarily in Quaker
State common stock with a small amount invested in short-term
instruments.
Prior to February 1, 1997, only four funds were available for
investment. Fund A, the Income Fund, was composed of Compass Capital
Money Market funds and bonds or other obligations issued by the U.S.
Government. Fund B was the Compass Capital Intermediate Government
Portfolio, a registered investment company, comprised of a portfolio of
fixed income securities. Fund C, the Quaker State Stock Fund, is
composed of Quaker State capital stock. Fund D was the Compass Capital
Index Equity Portfolio, a registered investment company, comprised of a
diversified portfolio of corporate stocks. Participant directed and
non-participant directed funds included in Fund C at December 31, 1996
were as follows:
Units Dollars
------- ----------
Participant directed 171,903 $6,337,600
Non-participant directed 203,340 7,496,620
9
14
NOTES TO FINANCIAL STATEMENTS, Continued
-----------
1. MAJOR FEATURES OF THE PLAN, continued
Investments in Fund C represent shares of Quaker State capital stock,
and, therefore, transactions within Fund C also qualify as exempt
party-in-interest transactions.
In 1996, the recordkeeper for the Plan was William M. Mercer Company,
Inc. On February 1, 1997, the Plan changed recordkeeper to Fidelity
Institutional Retirement Services Company and the trustee to Fidelity
Management Trust Company.
Contributions
Under the Plan, participants may elect to make contributions on a
tax-deferred basis in the form of a salary reduction (Tax-Deferred
Contributions) up to the lesser of 15% of their compensation or $10,000
(as adjusted annually by the Internal Revenue Service). In addition,
employees may elect to make contributions on an after-tax basis in the
form of a payroll deduction (Thrift Contributions) of up to 6% of their
compensation; however, the sum of the Thrift Contributions and the
Tax-Deferred Contributions cannot exceed 15% of the participant's
compensation. For contribution purposes, not more than $160,000 of a
participant's compensation (as adjusted annually by the Internal
Revenue Service) can be taken into account for any one calendar year.
Subject to limitations, the Company will make contributions (Regular
Company Contributions) in an amount equal to 50% of a participant's
total contributions paid each pay date up to a maximum of 3% of that
participant's compensation. In addition, the Plan accepts rollover
contributions from employees' former employer qualified plans and
conduit IRAs.
Vesting
Participants are fully vested in their contributions plus actual
earnings thereon. Participants are also fully vested in Regular Company
Contributions and Company Profit Sharing Contributions.
Participant Accounts and Benefit Payments
An account is maintained for each participant, which is credited with
the participant's contributions and allocation of (a) the Company's
contributions, and (b) Plan earnings. Allocations are based on
participant contributions, other than rollover contributions, or
account balances, as defined by the Plan. The benefit to which a
participant is entitled is the benefit that can be provided from that
participant's account. As of December 31, 1997 and 1996, there were
2,833 and 1,966 participants in the Plan, respectively.
Amendments
In February 1997, the Plan was amended to: (1) change the minimum
contribution percentage to each fund from 10% to 1% increments; (2)
make immediate participation available to new employees over 21 years
of age; (3) make Plan accounting and transaction processing daily; (4)
increase the number of investment options available under the Plan to a
maximum of ten investments, one of which would be Quaker State capital
stock; (5) change the method of calculating the interest rate on loans;
(6) make other changes necessary to comply with the new recordkeeper
and trustee systems; and (7) make amendments required by the Small
Business Job Protection Act of 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
10
15
NOTES TO FINANCIAL STATEMENTS, Continued
-----------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Investments
Investments are carried at fair value in the accompanying financial
statements. Investments in Quaker State capital stock are valued at the
closing price on the last business day of the period. Investments in
money market accounts are carried at cost which approximates market.
Registered investment companies are valued at market determined by
quoted market prices. Participant loans receivable are valued at cost
which approximates market.
Purchases and sales of Quaker State capital stock are reflected on a
trade-date basis. Gains and losses are based on average cost for Quaker
State capital stock.
Dividend income is recorded on the ex-dividend date. Interest income is
recorded as earned.
The Plan presents in the Statement of Changes in Net Assets Available
for Benefits the net appreciation (depreciation) in the fair value of
its investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on Quaker State capital stock
and net increase (decrease) in the value of the Plan's interest in
mutual funds.
Other
Administrative expenses, including trustee, legal, auditing and other
fees, are paid by Quaker State and, therefore, are not expenses of the
Plan.
The preparation of financial statements requires the plan administrator
to make estimates and assumptions that affect the reported amounts of
net assets available for benefits at the date of the financial
statements and amounts included as changes in net assets available for
benefits during the reporting period. Actual results could differ from
those estimates.
The Plan provides for various investment options including investment
securities. Investment securities are exposed to various risks, such as
interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities, it is at least
reasonably possible that changes in the values of the investment
securities will occur in the near term and that such changes could
materially affect the amounts reported in the Statement of Net Assets
Available for Plan Benefits.
3. INVESTMENTS:
Investments that represent 5% or more of the Plan's net assets are:
FUNDS 1997 1996
----- ---- ----
Fidelity Magellan Fund $ 2,237,095 --
Fidelity Contrafund 2,699,960 --
Fidelity Growth & Income Fund 8,536,472 --
Fidelity Low-Priced Stock Fund 2,171,905 --
Fidelity Retirement Money Market Fund 2,573,912 --
Compass Capital Money Market -- $ 2,378,757
Compass Capital Intermediate Government Portfolio -- 2,300,053
Quaker State Corporation Stock 13,802,068 13,535,662
Compass Capital Index Equity Portfolio -- 5,711,006
Participant Loans 1,953,633 1,500,938
11
16
NOTES TO FINANCIAL STATEMENTS, Continued
-----------
4. PARTICIPANT LOANS:
Participants are permitted to borrow against all or a portion of their
Tax-Deferred Contribution and Company Profit-Sharing Contribution units
within prescribed limitations and pursuant to nondiscriminatory rules
established by the Committee. Loan transactions are treated as a
transfer to (from) the applicable investment fund from (to) the
Employee Loan Account. Each loan is to be repaid over a period not to
exceed five years or ten years for certain loans related to a
participant's primary residence.
The interest rate applied to a current loan is the rate set by the
Compensation Committee from time to time determined by periodically
comparing rates at various banks. Principal and interest payments are
generally made through payroll deductions and are credited to the
participant's individual Plan account(s). Loans totaling $1,275,409 and
$756,703 were made from the Plan, and repayments, including interest of
$134,154 and $118,203, totaling $956,868 and $1,053,892 were received
by the Plan during the years ended December 31, 1997 and 1996,
respectively.
As of December 31, 1997, there were 852 loans to participants, maturing
from 1998 to 2007, with interest rates ranging between 7% and 10.5%.
5. FEDERAL INCOME TAXES:
The Internal Revenue Service has determined and most recently informed
the Plan by letter dated January 27, 1998, that the Plan is qualified
and the Trust established under the Plan is tax-exempt, under the
appropriate sections of the Internal Revenue Code. Accordingly, no
provision has been made for federal income taxes. Certain prior and any
subsequent amendments to the Plan are subject to Internal Revenue
Service review and approval. The Plan administrator and its legal
counsel do not anticipate that such changes will affect the qualified
and tax-exempt status of the Plan and Trust, respectively.
Thrift Contributions are included in the participant's income in the
year the payroll deductions are made and are not deductible by the
participant for federal income tax purposes. Tax-Deferred Contributions
are not included in the participant's income for federal income tax
purposes and, therefore, are not subject to federal income tax or
withholding at the time of contribution.
Company contributions and earnings reinvested into the various funds
are not taxable to the participant until distribution.
6. PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA.
7. MERGER OF THE QUAKER STATE EMPLOYEE STOCK OWNERSHIP PLAN AND OTHER
PLANS:
Effective December 31, 1997, the Quaker State Employee Stock Ownership
Plan (ESOP) was merged into the Plan. In January 1997, the Plan was
amended to merge the Blue Coral, Slick 50 and Tye Distributing 401(K)
plans into the Plan and to add Blue Coral-Slick 50 Ltd. as a
participating company. To the extent not otherwise provided in the
Plan, the benefits, rights, and features of the subsidiary plans shall
be protected and provided to the extent required by applicable law.
12
17
NOTES TO FINANCIAL STATEMENTS, Continued
-------------
8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500:
The Form 5500 has not yet been filed; however, the treatment of
distributions due to participants is the only anticipated difference
between the Statements of Net Assets and Changes in Net Assets and the
Form 5500.
The following is a reconciliation of net assets available for benefits
per the financial statements to amounts anticipated to be reported in
the Form 5500:
1997
----
Net assets available for benefits per the financial statements $ 38,875,561
Amounts allocated to withdrawing participants (20,960)
--------------
Net assets available for benefits per the Form 5500 $ 38,854,601
==============
The following is a reconciliation of distributions to withdrawing
participants per the financial statements to amounts anticipated to be
reported in the Form 5500:
YEAR ENDED
DECEMBER 31, 1997
-----------------
Distributions to withdrawing participants per the financial statements $ 4,340,097
Add: Amounts allocated to withdrawing participants at December 31, 1997 20,960
Less: Amounts allocated to withdrawing participants at December 31, 1996 (1,285,486)
-----------------
Distributions to withdrawing participants per the Form 5500 $ 3,075,571
=================
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31 but not yet paid as of that date.
9. SUBSEQUENT EVENT:
On April 14, 1998, the Company, Pennzoil Company (Pennzoil) and certain
Pennzoil subsidiaries entered into an Agreement and Plan of Merger (the
Merger Agreement). The Merger Agreement and related agreements provide
for the separation of Pennzoil's motor oil, refined products and
franchise operations from its exploration and production operations and
for the combination of the motor oil, refined products and franchise
operations with the Company. Closing under the Merger Agreement is
conditioned on, among other things, approval by the Company's
stockholders, expiration or termination of waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, (which expired on
May 27, 1998) and receipt of a favorable tax ruling from the Internal
Revenue Service. Management has not determined the effect of the Merger
Agreement on the Plan.
13
18
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
Cost Value
---- -----
Investments:
*Quaker State Corporation Stock $ 14,454,309 $ 13,802,068
Fidelity Puritan Fund 1,528,331 1,621,407
Fidelity Magellan Fund 2,069,696 2,237,095
Fidelity Contrafund 2,517,263 2,699,960
Fidelity Investment Grade Bond Fund 1,678,575 1,723,415
Fidelity Growth & Income Fund 7,471,488 8,536,472
Fidelity Low-Priced Stock Fund 1,971,186 2,171,905
Fidelity Diversified International Fund 833,446 847,759
Fidelity Retirement Money Market Fund 2,573,912 2,573,912
Money Market funds 325,369 325,369
*Participant loans, 7% - 10.5%, due at various dates 1,953,633 1,953,633
----------------------------------
$ 37,377,208 $ 38,492,995
==================================
* Denotes exempt party-in-interest
14
19
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
(Transactions in excess of 5% of plan value)
for the year ended December 31, 1997
Current Value
of Asset on
Description Purchase Selling Cost of Transaction Net Gain
Identity of Party of Asset Price Price Asset Date (Loss)
- ---------------------------------- ------------ ------------ ------------ ------------- ------------- -----------
Quaker State Stock Common Stock $ 17,332,419 $ 17,332,419 $ 17,332,419
Quaker State Stock Common Stock $ 4,573,968 4,573,968 4,632,253 $ 58,285
Fidelity Puritan Fund Mutual Fund 1,875,252 1,875,252 1,875,252 --
Fidelity Puritan Fund Mutual Fund 362,829 346,921 362,829 15,908
Fidelity Magellan Fund Mutual Fund 2,410,352 2,410,352 2,410,352 --
Fidelity Magellan Fund Mutual Fund 366,844 340,656 366,844 26,188
Fidelity Contrafund Mutual Fund 3,249,362 3,249,362 3,249,362 --
Fidelity Contrafund Mutual Fund 807,954 732,098 807,954 75,856
Fidelity Investment Grade Bond Mutual Fund 3,428,590 3,428,590 3,428,590 --
Fidelity Investment Grade Bond Mutual Fund 1,727,632 1,750,014 1,727,632 (22,382)
Fidelity Growth & Income Fund Mutual Fund 10,435,291 10,435,291 10,435,291 --
Fidelity Growth & Income Fund Mutual Fund 3,053,539 2,963,803 3,053,539 89,736
Fidelity Low-Priced Stock Fund Mutual Fund 2,114,414 2,114,414 2,114,414 --
Fidelity Low-Priced Stock Fund Mutual Fund 157,835 143,227 157,835 14,608
Fidelity Diversified International Mutual Fund 952,343 952,343 952,343 --
Fidelity Diversified International Mutual Fund 125,372 118,898 125,372 6,474
Fidelity Retirement Money Market Mutual Fund 5,947,143 5,947,143 5,947,143 --
Fidelity Retirement Money Market Mutual Fund 3,373,231 3,373,231 3,373,231 --
Number of
Identity of Party Transactions
- ---------------------------------- ------------
Quaker State Stock 186
Quaker State Stock 208
Fidelity Puritan Fund 148
Fidelity Puritan Fund 113
Fidelity Magellan Fund 168
Fidelity Magellan Fund 126
Fidelity Contrafund 153
Fidelity Contrafund 110
Fidelity Investment Grade Bond 165
Fidelity Investment Grade Bond 122
Fidelity Growth & Income Fund 178
Fidelity Growth & Income Fund 149
Fidelity Low-Priced Stock Fund 154
Fidelity Low-Priced Stock Fund 97
Fidelity Diversified International 139
Fidelity Diversified International 87
Fidelity Retirement Money Market 159
Fidelity Retirement Money Market 127
15
20
QUAKER STATE CORPORATION
THRIFT AND STOCK PURCHASE PLAN
---------
Annual Report on Form 11-K
for the fiscal year ended December 31, 1997
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
23 Consent of Independent Accountants,
filed herewith.