<PAGE> 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 March 31, 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)
<TABLE>
<S> <C>
Delaware 25-0742820
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
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 May 1, 1994, 27,251,182 shares of Capital Stock, par
value $1.00 per share, of the registrant were outstanding.
Page 1 of 24 pages.
----
Exhibit Index appears on page 16 .
----
<PAGE> 2
PART I.
FINANCIAL INFORMATION
<PAGE> 3
Consolidated Statement of Operations
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the quarter ended March 31 1994 1993
(in thousands except per share data, unaudited)
<S> <C> <C>
Revenues
Sales and operating revenues $175,546 $150,368
Insurance revenues 31,053 29,434
206,599 179,802
Other, net 1,648 1,893
208,247 181,695
Costs and expenses
Cost of sales and operating costs 112,014 103,462
Insurance contract and benefit costs 25,552 24,068
Selling, general and administrative 53,108 40,698
Depreciation, depletion and amortization 7,587 6,964
Interest 1,203 1,435
199,464 176,627
Income before income taxes 8,783 5,068
Provision for (benefit from) income taxes
Current 4,125 2,600
Deferred (925) (935)
3,200 1,665
Net income $ 5,583 $ 3,403
Net income per share $.20 $ .13
Weighted average shares outstanding 27,323 27,169
Cash dividends paid per share $.10 $ .20
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
Consolidated Statement of Cash Flows
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the three months ended March 31 1994 1993
(in thousands, unaudited)
Cash flows from operating activities
<S> <C> <C>
Net income $ 5,583 $ 3,403
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 7,587 6,964
Deferred income taxes and investment tax credit 958 (2,284)
Increase (decrease) from changes in:
Receivables (22,945) (2,481)
Inventories 549 (1,554)
Other current assets 2,021 (1,117)
Accounts payable 6,077 1,306
Accrued liabilities 6,604 1,241
Other (2,204) (5,409)
Increase (decrease) from changes in insurance operations
Realized investment (gains)/losses 17 (667)
Deferred policy acquisition costs 575 373
Unearned premiums 2,166 (507)
Other (861) (394)
Net cash provided by (used in) operating activities 6,127 (1,126)
Cash flows from investing activities
Proceeds from disposal of property and equipment 1,128 962
Capital expenditures (4,003) (3,632)
Proceeds from sale of bonds and securities 26,005 9,783
Purchase of bonds and securities (34,626) (12,844)
Proceeds from sale of coal assets 1,009 --
Net cash used in investing activities (10,487) (5,731)
Cash flows from financing activities
Dividends paid (2,725) (5,430)
Proceeds from notes payable 213 186
Payments on long-term debt (63) (17,635)
Net cash used in financing activities (2,575) (22,879)
Net decrease in cash and cash equivalents (6,935) (29,736)
Cash and cash equivalents at beginning of year:
Other than insurance 6,220 34,146
Insurance 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 insurance 4,245 7,094
Insurance 4,448 4,518
Total cash and cash equivalents at end of period $ 8,693 $ 11,612
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
Consolidated Balance Sheet
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
3/31/94 12/31/93*
(in thousands except share data) (unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,245 $ 6,220
Accounts and notes receivable, less allowance of
$2,051 at 3/31/94 and $1,679 at 12/31/93. 79,763 56,818
Inventories: (Note 2)
Crude oil 2,575 2,591
Finished and in-process petroleum products 22,366 23,225
Other 14,613 14,287
Total 39,554 40,103
Deferred income taxes 17,417 18,375
Other current assets 14,438 17,468
Total current assets 155,417 138,984
Property, plant, and equipment, net of accumulated depreciation
and depletion of $347,260 at 3/31/94 and $345,851 at 12/31/93. 222,312 225,828
Other assets 78,842 82,903
Total assets other than insurance 456,571 447,715
Insurance assets
Investments 191,700 185,446
Cash 4,448 9,408
Premiums and other receivables 58,314 59,310
Deferred insurance acquisition costs 59,430 60,005
Other assets 22,370 21,793
Total insurance assets 336,262 335,962
Total assets $ 792,833 $ 783,677
Liabilities
Current Liabilities:
Accounts payable $ 42,270 $ 35,980
Accrued liabilities 73,943 67,339
Debt payable within one year 211 262
Total current liabilities 116,424 103,581
Long-term debt, less debt payable within one year 51,176 51,188
Other long-term liabilities 174,830 179,054
Total liabilities other than insurance 342,430 333,823
Insurance liabilities
Unearned premiums 210,696 208,530
Policy claims 29,103 28,773
Due to reinsurance companies 4,072 6,897
Other liabilities 17,033 16,904
Total insurance liabilities 260,904 261,104
Commitments and contingencies (Note 4)
Stockholders' Equity
Capital stock, $1.00 par value; authorized shares, 37,500,000;
issued shares, 27,250,920 at 3/31/94 and 27,250,818 at 12/31/93. 27,251 27,251
Treasury stock, 6,696 shares, at cost (92) --
Additional capital 63,046 63,044
Retained earnings 100,471 98,877
Cumulative foreign currency translation adjustment (733) 75
Unearned compensation (Note 8) (444) (497)
Total stockholders' equity 189,499 188,750
Total liabilities and stockholders' equity $ 792,833 $ 783,677
</TABLE>
The accompanying notes are an integral part of the financial statements.
*-Amounts are from December 31, 1993 audited balance sheet and footnotes.
<PAGE> 6
Other Financial Information
Quaker State Corporation and Subsidiaries
The sales and operating revenues and contributions to income before income
taxes, by industry segment, are as follows:
<TABLE>
<CAPTION>
For the quarter ended March 31 1994 1993
(in thousands, unaudited)
<S> <C> <C>
Sales and Operating Revenue
Motor oil $ 122,749 $ 102,743
Fast lube 26,159 25,202
Natural gas E&P 7,663 7,027
Insurance 31,121 29,547
Truck-Lite 24,660 20,926
Docks 693 698
Intersegment sales (6,446) (6,341)
Total sales and operating revenue $ 206,599 $ 179,802
Operating Profit
Motor oil $ 5,204 $ 3,884
Fast lube 1,301 345
Natural gas E&P 1,836 1,824
Insurance 2,157 1,899
Truck-Lite 2,864 1,734
Docks 219 284
Intersegment elimination (68) (113)
Total operating profit 13,513 9,857
Corporate income 521 118
Interest expense (1,159) (1,462)
Corporate expenses (4,160) (3,558)
Intersegment eliminations 68 113
Income before income taxes $ 8,783 $ 5,068
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
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
$18,028,,000 at March 31, 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 subsidiary to GE Capital for $85,000,000 in cash. Under the
agreement, GE Capital will acquire 100 percent of the stock in Heritage. The
transaction, subject to approval of Quaker State's board of directors and
state and federal regulatory approval, is expected to close in the third
quarter of this year. The company expects a gain from this transaction.
Heritage's condensed income statements for the three months ended March
31, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
<S> <C> <C>
Premiums $ 24,338 $ 23,247
Net investment income* 2,627 3,047
Realized investment gains (losses) (17) 667
Other, net 4,105 2,473
Total revenue 31,053 29,434
Policy and contract benefit expenses (13,658) (12,766)
Amortization of deferred policy acquisition costs (11,894) (11,302)
General and administrative costs (3,412) (3,580)
Income before income taxes 2,089 1,786
Provision for income taxes (393) (327)
Net income $ 1,696 $ 1,459
*Excludes intercompany interest of $ 68 $ 113
</TABLE>
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.
<PAGE> 8
Notes To Consolidated Financial Statements
Quaker State Corporation and Subsidiaries
(unaudited)
The effect of reinsurance transactions on the Consolidated Statement of
Operations for premiums written and earned for the the quarter ended March
31, 1994 and 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
Written Earned Written Earned
<S> <C> <C> <C> <C>
Direct Premiums $31,873 $30,606 $ 28,710 $ 28,028
Assumed Premiums 1,871 1,080 15,339 17,258
Ceded Premiums (7,974) (7,348) (21,149) (22,039)
Net Premiums $25,770 $24,338 $ 22,900 $ 23,247
</TABLE>
Recoveries of policy and contract benefit expense recognized under
reinsurance contracts for the three months ended March 31, 1994 and 1993, was
$4,726,000 and $9,117,000. 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 noticies from the EPA and others
that it is a "potentially respon 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, two 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 approximately 36% for the three months
ended March 31,1994 is higher than the 35% federal rate due to increased
income and the added impact of state and foreign taxes. The first quarter
effective income tax rate of 36% is higher than the 1993 effective rate of
15% due to higher income, enacted federal rate change in 1993 that increased
the value of deferred tax assets in 1993, 1993 net adjustment to valuation
allowance and other 1993 credits.
<PAGE> 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 net income of $5,583,000, or $.20 per
share, in the first quarter ended March 31, 1994, compared to $3,403,000, or
$.13 per share, in the same quarter last year. Sales and operating revenues
in 1994 of $206,599,000 increased 15% over last year's total of
$179,802,000. The improvement in net income resulted from higher revenues
and operating profits, based primarily on increased volumes, were recorded
in all business segments except docks.
In the first quarter of 1994, the motor oil division operating profits
increased 34% to $5,204,000 from $3,884,000 last year while sales and
operating revenues increased 19% to $122,749,000 from $102,743,000 in 1993.
Branded motor oil volume increased 26% over 1993 to primarily account for
the increase in revenues and operating profits. First quarter advertising,
marketing, selling and freight expenses increased almost $10,000,000 over
last year to partially offset the positive impact of the increased branded
motor oil volume. In addition a $1,000,000 charge was recorded to 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.). Automotive consumer product sales increased 32% while refinery
base stock and fuels sales volume increased 15% and 5% over the first
quarter of last year. The average sales price of refinery base stocks and
fuels declined 5% and 9%.
The fast lube segment reported operating profits of $1,301,000 on sales
and operating revenues of $26,159,000 in the first quarter of 1994 compared
to profits of $345,000 on revenues of $25,202,000 last year. Car counts
increased 5% while operating and administrative expenses decreased 2% and 8%
to contribute to the improved results.
<PAGE> 10
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
---------------
The oil and gas production segment reported first quarter operating
profits of $1,836,000 in 1994 versus $1,824,000 in 1993. Sales and operating
revenues amounted to $7,663,000 compared to $7,027,000 last year. Natural
gas sales volume and average sales price increased 14% and 4% over the first
quarter of 1993 while crude oil sales volume and average sales price was
down 11% and 26%. Depreciation and depletion expenses were up $336,000 over
last year due to the lower crude oil prices.
Heritage Insurance Group reported a 14% first quarter increase in
operating profits to $2,157,000 from $1,899,000 last year. Revenues were
$31,121,000 compared to $29,547,000 last year, or a 5% increase. Earned
premiums increased 5% to $24,338,000 while investment income dropped 14% to
$2,627,000. A realized investment loss of $17,000 was recorded in the first
quarter and compared to a gain of $667,000 last year. The reduction in
investment income and realized investment gains resulted from fourth quarter
1993 restructuring of the Life Company's investment portfolio and resulting
realization of gains at that time.
Effective January 1, 1994 the company adopted Statement of Financial
Accounting Standard 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.
First quarter operating profits at Truck-Lite were $2,864,000 on sales
of $24,660,000 compared to profits of $1,734,000 on sales of $20,926,000
last year. The strong demand for new truck and trailer vehicles along with
high levels of new car sales, particularly sport utility vehicles, continues
to increase sales volumes and improve operating results at Truck-Lite.
<PAGE> 11
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
---------------
Corporate income of $521,000 in the first quarter of 1994 includes
interest related to semi-annual supplemental payments to be received from
1994 to 2013 from the December 30, 1992 sale of certain coal assets to Arch
Mineral Corporation. Corporate interest expense of $1,159,000 is down 21%
from last year due to lower average debt in 1994. First quarter corporate
expenses of $4,160,000 are up 17% primarily due to higher postretirement and
other employee benefit expenses.
Cash provided by operations for the first three months of 1994 was
$6,127,000 compared to cash used by operations of $1,126,000 in 1993. This
increase resulted from higher net income and reduced working capital
requirements. Net cash used by coal activities was $4,432,000 in the first
quarter. Investing activities included proceeds from the sale of property
and equipment of $2,137,000 of which $1,009,000 related to the discontinued
coal operations. Investing activities also included capital expenditures of
$4,003,000, proceeds from the sale of insurance company bonds and securities
of $26,005,000 and disbursements to purchase insurance company bonds and
securities of $34,626,000. Cash used in financing activities was $2,525,000
and included payments of $2,725,000 for dividends.
In April 1994, two 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.
On April 28, 1994 the Board of Directors of the company authorized a
quarterly dividend of 10 cents per share payable to shareholders of record
as of May 16, 1994.
<PAGE> 12
QUAKER STATE CORPORATION AND SUBSIDIARIES
Discussion and Analysis of Results of Operations and Financial Condition
---------------
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 for $85,000,000 in cash. Under the
agreement, GE Capital will acquire 100 percent of the stock in Heritage. 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.
<PAGE> 13
PART II.
OTHER INFORMATION
<PAGE> 14
PART II
OTHER INFORMATION
QUAKER STATE CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings.
In its annual report on Form 10-K for the year ended December 31, 1993,
Quaker State reported that in October 1993, Larry Tucker and 13 other former
salaried supervisory employees of Donaldson Mine Company, a subsidiary of
Quaker State's subsidiary The Valley Camp Coal Company, instituted an action
in the Circuit Court of Kanawha County, West Virginia against Quaker State,
The Valley Camp Coal Company and Donaldson Mine Company. The suit alleges
various causes of action related to the termination of the plaintiffs'
employment with Donaldson Mine Company. In April 1994, the defendants
removed this action to the Federal District Court for the Southern District
of West Virginia.
Item 5. Other Information.
On May 12, 1994 Quaker State and General Electric Capital Corporation
entered into a Stock Purchase Agreement under which General Electric Capital
Corporation agreed to purchase all of the outstanding capital stock of Heritage
Insurance Group, Inc., a subsidiary of Quaker State, subject to state and
federal regulatory approval. Quaker State reported certain information related
to this matter under Item 5 on a current report on Form 8-K filed May 12, 1994.
Item 6. Exhibits and Reports on Form 8-K.
a) 10. Quaker State Corporation Annual Incentive Bonus Plan, filed
herewith.
11. Computation of Net Income Per Share, filed herewith.
b) No reports on Form 8-K were filed by Quaker State during the quarter
ending March 31, 1994.
<PAGE> 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 5/13/94 By /s/ Herbert M. Baum
-----------------------
Herbert M. Baum
Chairman of the Board and
Chief Executive Officer
Date 5/13/94 By /s/ R. Scott Keefer
-------------------------
R. Scott Keefer
Vice President, Finance and
Chief Financial Officer
<PAGE> 16
QUAKER STATE CORPORATION
EXHIBIT LIST
The following Exhibits are required to be filed with this quarterly
report on Form 10-Q. The page number where such Exhibit may be found under
the Commission's sequential numbering system is also indicated.
EXHIBIT NO. AND DOCUMENT PAGE
- - ------------------------ ----
10. Quaker State Corporation Annual Incentive 17-23
Bonus Plan, filed herewith.
11. Computation of Net Income Per Share for the 11
quarters ended March 31, 1994 and 1993, filed
herewith.
<PAGE> 1
EXHIBIT 10
Approved by the Organization &
Compensation Committee 2/24/94
QUAKER STATE CORPORATION
ANNUAL INCENTIVE BONUS PLAN
Purpose
The Annual Incentive Bonus Plan (the "Plan") of Quaker State corporation is
an incentive compensation plan designed to enhance and reinforce Quaker
State's profitable growth by providing key employees with cash reward based
on attainment of predetermined goals. A further purpose of the Plan is to
aid in obtaining, maintaining, and developing a management group capable of
assuring Ouaker State's future success.
SECTION I
DEFINITIONS
(a) Award--the grant by the Committee to a participant of an opportunity to
earn a cash bonus.
(b) Corporation--Quaker State Corporation.
(c) Committee--the Organization and Compensation committee appointed by the
Board of the Corporation.
(d) Designated Beneficiary--the person or persons designated in writing by a
participant as the recipient or recipients of any payments due under the
Plan in the event of the participant's death. Such designation must be
on file with the Committee in order to be effective, but may be changed
from time to time by the participant.
(e) Participant--an employee who has been awarded a bonus under the Plan.
(f) Payment--the cash payment made to a participant.
<PAGE> 2
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EXHIBIT 10
(g) Performance Period--the fiscal year during which performance is
measured.
(h) Performance Measures--the standards utilized by the Committee to measure
performance.
(i) Performance Measure Goals (or Goals)--the objectives or points in the
performance measures which when attained will cause bonuses to be earned
(j) Plan--this Annual Incentive Bonus Plan as adopted by the Committee.
SECTION II
ADHINISTRATION
The Plan will be administered under the supervision of the Committee. The
Committee shall have full power and authority to determine if bonuses will be
awarded in any particular year, to select participants from among those
eligible, to determine the percentage of base salary for individual target
bonuses, to set goals, and to adopt and revise such rules and procedures as
it shall deem necessary for the administration of the Plan. The decision of
the Committee with respect to any issues arising as to the administration and
interpretation of this Plan shall be final, conclusive and binding.
SECTION III
DESCRIPTION OF PLAN
The Plan is a cash incentive plan providing for the award of bonuses to key
employees to be earned if goals established by the Committee for performance
measures are met for the fiscal year. In the case of executive officers with
corporate-wide responsibility, the performance measures are corporate net
<PAGE> 3
-3-
EXHIBIT 10
income or earnings per share as to 80% of the bonus and sales revenues as to
20% of the bonus. In the case of Presidents of individual business segments,
the performance measures are operating unit earnings before income taxes
("EBIT") as to 60% of the bonus, sales revenues or sales volume as to 20% of
the bonus, and corporate net income or earnings per share for 20% of bonus;
and in the case of all other executive officers of operating units, the
performance measures will be operating unit EBIT for 80% of the bonus and
sales revenues or sales volume as to 20% of the bonus. The annual target
bonuses range in 5% increments up to a maximum of 50% of base salary in
effect when the bonus opportunities are awarded. In addition to target
bonuses which pay out 100% of target, the bonuses include a threshold goal
which pays out 50% of the target bonus and a maximum goal which pays out 150%
of the target bonus. Bonuses are prorated within this range of 50% to 150%
of target, depending on the extent to which the performance measure goals are
achieved. Threshold, target and maximum goals for each performance measure
will be established annually by the Ccmmittee, and it is expected that
threshold goals will be established above the prior year's performance.
SECTION IV
PARTICIPATION
(a) Participation in the Plan shall be limited to key employees of the
Corporation and its subsidiaries who occupy positions of special
responsibility and trust in the conduct of the business of the
Corporation and subsidiaries. In awarding bonuses, the Committee shall
consider the employee's position and potential impact on the business
results and performance of the Corporation or its subsidiaries.
<PAGE> 4
-4-
EXHIBIT 10
(b) The Chief Bxecutive Officer of the Corporation shall provide annually to
the Committee in writing his recommendation of those employees who
should participate in the Plan for a particular fiscal year. These
recommendations are to be effective only after they have been approved
by the Committee.
(c) In the event of a participant's termination of employment by reason of
death, disability, retirement under any retirement plan of the
Corporation or a subsidiary, voluntary termination with the consent of
the Corporation or a subsidiary, or the participant becomes entitled to
a severance benefit under the Company's Severance Pay Plan for Salaried
and Hourly Non-Union Employees (the "Severance Plan"), the participant
shall receive a pro rata share of any bonus awarded him or her for that
fiscal year for which the performance measure goals are met. The
pro rata share shall be based on the weeks worked in the year by the
participant divided by the fifty-two. Whether the termination of
employment is a voluntary termination with the consent of the
Corporation or a subsidiary shall be determined by the Committee and any
such determination shall be final and binding, but such terminations
will be assumed to be voluntary unless the Committee by resolution
determines to the contrary. If the participant either before or after
termination of employment engages in employment with a competitor of the
Corporation or its subsidiaries or solicits any employee of the
Corporation or subsidiary to leave the employment thereof, no bonus
shall be paid to the participant.
(d) In the event of a participant's termination of employment for reason
other than death, disability, retirement under any retirement plan of
<PAGE> 5
-5- EXHIBIT 10
the Corporation or a subsidiary, voluntary termination with the consent
of the Corporation or a subsidiary, or is not entitled to a severance
benefit under the Severance Plan, all rights to the payment of a bonus
under this Plan will cease to exist on the day of termination of
employment.
SECTION V
COMMITTEE DETERMINATIONS
The Committee shall annually make the following determinations and take
action if appropriate:
(a) Whether an annual bonus will be granted for the following fiscal year;
(b) The key employees who shall participate;
(c) The percentage of each participant's salary which will be paid out upon
attaining threshold, target and maximum goals within the 50% maximum
range established in this Plan.
(d) The goals for attaining threshold, target and maximum payout.
(e) Whether goals set for the past fiscal year have been attained.
SECTION VI
GOALS
The determination of whether goals are attained shall be at the discretion of
the Committee. In making this determination, the Committee may consider the
effect of acquisitions, divestitures, the impact of Financial Accounting
Standards Board Statements and other unusual items.
SBCTION VII
PAYMENTS OF BONUSES
<PAGE> 6
-6- EXHIBIT 10
Bonuses under the Plan shall be payable in cash as soon as feasible after the
close of the Performance Period. In the event of the death of the
participant, bonuses will be paid to his or her Designated Beneficiary or the
participant's estate in the absence of a Desiqnated Beneficiary.
SECTION VIII
EFFECTIVE DATE OF THE PLAN
The Plan will be effective as of January 1, 1994, and shall continue in
effect until amended or terminated
SECTION IX
MISCELLANEOUS PROVISIONS
(a) Assignment or Transfer: No bonuses under the Plan or any rights or
interests therein shall be assignable or transferable prior to payment
by a participant nor subject to attachment, alienation, sale, pledge or
encumbrance. During the lifetime of a participant, bonuses hereunder
are payable only to the participant or his legally appointed Guardian.
(b) Communication of Bonuses: All bonuses awarded under the Plan shall
immediately be communicated in writing to the participant along with a
copy of the Plan.
(c) Withholding Taxes: The Corporation shall have the right to deduct from
all bonuses paid hereunder any federal, state or local taxes required by
law to be withheld with respect to such bonuses.
(d) Employment at Will: Neither the Plan nor any action taken hereunder
shall be construed as giving a participant any right to be retained in
the employment of the Corporation.
<PAGE> 7
-7- EXHIBIT 10
(e) Costs and Expenses: The costs and expenses of administering the Plan
shall be borne by the Corporation and not charged to any bonus nor to
any employee receiving a bonus.
(f) Amendments: The Committee may at any time terminate or from time to
time amend the Plan in whole or in part, but no such action shall
adversely affect any rights or obligations with respect to any bonuses
previously awarded under the Plan.
<PAGE> 1
Computation of Net Income Per Share EXHIBIT 11
Quaker State Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the quarter ended March 31 1994 1993
(in thousands except per share data, unaudited)
<S> <C> <C>
1.Net income $8,783 $3,403
2.Average number of shares of capital stock outstanding 27,249 27,152
3.Shares issuable upon exercise of dilutive stock options
outstanding during the period, based on average market
prices 74 17
4.Shares issuable upon exercise of dilutive stock
options outstanding during the period, based on
higher of average or period-end market prices 74 22
5.Average number of capital and capital equivalent
shares outstanding (2 + 3) 27,323 27,169
6.Average number of capital shares outstanding,
assuming full dilution (2 + 4) 27,323 27,174
7.Net income per capital and capital equivalent share
(1 divided by 5) $.20 $.13
8.Net income per capital share assuming full dilution
(1 divided by 6) $.20 $.13
</TABLE>
The accompanying notes are an integral part of the financial statements.
