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 EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ___________.
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if different from
that of the issuer name below:
Quanex Corporation Hourly Bargaining Unit Employees Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, Texas 77027
(713) 961-4600
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INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Quanex Corporation Hourly Bargaining Unit Employees Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Quanex Corporation Hourly Bargaining Unit Employee Savings Plan
(the "Plan") as of December 31, 1996 and 1995, 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1996 and 1995, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of (1) investments as of December 31, 1996 and (2) 5% reportable transactions
for the year ended December 31, 1996 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. These schedules are the responsibility
of the Plan's management. Such schedules have been subjected to the auditing
procedures applied in our audit of the basic 1996 financial statements and, in
our opinion, are fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
March 28, 1997
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QUANEX CORPORATION
HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-----------------------------
1996 1995
---------- ----------
Assets:
Investments, at fair value -
Mutual fund assets:
Fidelity Puritan Fund $1,268,634 $ 835,000
Fidelity Magellan Fund 2,326,232 1,843,510
Fidelity Contrafund 399,810 127,661
Fidelity Growth and Income Fund 624,189 328,455
Fidelity Overseas Fund 562,072 369,562
Fidelity Balanced Fund 143,087 74,250
Templeton Foreign Fund 41,980 --
Fidelity Government Money Market Fund 2,450,167 2,119,423
Quanex Corporation common stock 291,588 187,886
Common/commingled trust 147,525 95,257
---------- ----------
Total 8,255,284 5,981,004
---------- ----------
Employee contributions receivable 162,502 136,120
Employer contributions receivable 12,396 10,191
---------- ----------
Total 174,898 146,311
---------- ----------
Net assets available for benefits $8,430,182 $6,127,315
========== ==========
See notes to financial statements.
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QUANEX CORPORATION
HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-----------------------------
1996 1995
---------- ----------
Investment income:
Interest and dividends $ 672,045 $ 298,232
Net appreciation in fair value of investments 143,494 467,045
---------- ----------
Total 815,539 765,277
---------- ----------
Contributions:
Employee 1,786,138 1,637,214
Employer 105,510 98,350
---------- ----------
Total 1,891,648 1,735,564
---------- ----------
Total additions 2,707,187 2,500,841
Benefit payments 404,320 189,234
---------- ----------
Increase in net assets available
for benefits 2,302,867 2,311,607
Net assets available for benefits:
Beginning of year 6,127,315 3,815,708
---------- ----------
End of year $8,430,182 $6,127,315
========== ==========
See notes to financial statements.
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QUANEX CORPORATION
HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
A. DESCRIPTION OF THE PLAN
The following description of the Quanex Corporation Hourly Bargaining
Unit Employees' Savings Plan (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan
document for more complete information.
(1) General. The Plan, originally named the Quanex Corporation
Hourly Employee Savings Plan, became effective January 1,
1989 and is sponsored by Quanex Corporation (the "Company").
The Plan began receiving contributions in April 1989. The
Plan is a defined contribution plan which is subject to the
Employee Retirement Income Security Act of 1974 ("ERISA").
The Plan is a voluntary savings plan in which hourly
employees of certain divisions of the Company are eligible to
participate after completing three months of active service.
The assets of the Plan are held in trust by Fidelity
Management Trust Company ("Fidelity" or the "Trustee"). The
Benefits Committee (the "Committee"), appointed by the
Company's Board of Directors, serves as the Plan
administrator.
(2) Contributions. Participants may elect to contribute up to 15%
of their before-tax or after-tax compensation as defined by
the Plan agreement. The Plan was amended effective July 1,
1994 to include LaSalle Steel Company hourly employees. All
plan provisions apply to the LaSalle Steel Company hourly
employees with the addition of an employer matching
contribution that does not exceed 5% of the member's
considered compensation.
(3) Participant Accounts. Each participant's account is credited
with the participant's contribution and an allocation of
investment income, which is based upon individual participant
account balances as of the end of the period in which the
income was earned.
(4) Investment Options. The Plan has the following investment
funds managed by the Trustee:
Government Money Market Fund - composed of short-term
government obligations.
Balanced Fund - invested and reinvested in common and
preferred stocks and bonds.
Growth and Income Fund - invested and reinvested in equity
and debt securities of foreign and domestic companies.
Magellan Fund - invested and reinvested in equity and debt
securities of foreign and domestic companies.
Contrafund - invested and reinvested in equities of foreign
and domestic companies.
Overseas Fund - invested and reinvested in foreign
securities.
Puritan Fund - invested and reinvested in common and
preferred stocks and bonds.
Templeton Foreign Fund - invested and reinvested in foreign
securities.
Quanex Corporation Common Stock - invested and reinvested
exclusively in the common stock of Quanex Corporation.
Common/Commingled Trust - invested and reinvested in
investment contracts with insurance companies, banks and
other financial institutions.
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(5) Vesting. Participants are immediately vested in their
contributions and the related earnings. Vesting in the
employer's matching contributions for employees is 0% for
less than one year of service graduating to 100% for five or
more years. Upon death, retirement or total and permanent
disability, the participant or beneficiary becomes
immediately vested in the employer's contribution. In the
event of termination, nonvested portions of employer's
contributions are immediately forfeited by participants and
utilized to reduce future employer matching contributions.
(6) Payment of Benefits. Upon termination of service, the
participant may elect to receive a lump sum distribution
equal to the total amount of vested benefits in his or her
account. As of December 31, 1996 and 1995, net assets
available for benefits included benefits of $5,632 and
$16,875, respectively, due to participants who have withdrawn
from participation in the Plan.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting Basis. The financial statements of the Plan are
prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles.
(2) Investment Valuation. The Plan recognizes net appreciation or
depreciation in the fair value of its investments.
Investments are reflected at fair value in the financial
statements. Fair value of mutual fund assets is determined
using a quoted net asset value. Fair value for Quanex
Corporation common stock, which is listed on the New York
Stock Exchange, is determined using the last recorded sales
price. The fair value of the common/commingled trust is at
face value.
(3) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of changes in
the net assets available for benefits during the reporting
period. The Plan's financial statements include amounts that
are based on management's best estimates and judgments.
Actual results could differ from those estimates.
(4) Administrative Expenses. The Company pays all administrative
expenses.
(5) Payment of Benefits. Benefit payments are recorded when paid.
C. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has
the right under the Plan to terminate the Plan at anytime subject to
the provisions set forth in ERISA. In the event of Plan termination,
the assets held by the Trustee under the Plan will be valued and fully
vested, and each participant will be entitled to distributions
respecting his or her account.
D. FEDERAL INCOME TAX STATUS
The Plan is subject to specific rules and regulations related to
employee benefit plans under the Department of Labor and the Internal
Revenue Service (the "IRS"). The Plan has received a favorable letter
of tax determination dated October 24, 1996. As such, the Plan is a
qualified trust under Sections 401 (a) and 401 (k) of the Internal
Revenue Code (the "Code") and, as a result, is exempt from federal
income tax under Section 501 (a) of the Code. The Company believes the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Code. The Company believes the Plan was
qualified and the related trust was tax-exempt as of the financial
statement dates.
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E. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Quanex Corporation common stock, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 3,306 $75,789 4,243 $92,529
Sales 2,351 50,315 $54,568 347 7,997 $7,457
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Fidelity mutual fund assets as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 711,273 $2,842,364 879,682 $2,278,180
Sales 320,094 754,693 $785,068 270,825 456,173 $484,054
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Fidelity Common/Commingled Trust as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 87,559 $87,559 82,554 $82,554
Sales 35,292 35,292 $35,292 7,387 82,554 $82,554
F. SUBSEQUENT EVENT
In April 1997, Quanex Corporation announced the sale of their LaSalle
Steel Company subsidiary ("LaSalle") to Niagara Corporation.
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G. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund were
as follows for the years ended December 31:
1996 1995
---------- ----------
Employee Contributions:
Fidelity Puritan Fund $ 258,650 $ 225,346
Fidelity Magellan Fund 453,847 419,024
Fidelity Contrafund 91,666 44,860
Fidelity Growth and Income Fund 146,079 114,399
Fidelity Overseas Fund 148,714 144,420
Fidelity Balanced Fund 59,839 48,443
Fidelity Government Money Market Fund 491,386 508,585
Templeton Foreign Fund 4,812 --
Quanex Corporation common stock 63,562 62,267
Common/commingled trust 67,583 69,870
---------- ----------
$1,786,138 $1,637,214
========== ==========
1996 1995
-------- -------
Employer Contributions:
Fidelity Puritan Fund $ 15,152 $13,810
Fidelity Magellan Fund 21,803 19,431
Fidelity Contrafund 6,119 4,379
Fidelity Growth and Income Fund 10,918 9,598
Fidelity Overseas Fund 10,289 10,578
Fidelity Balanced Fund 7,296 6,954
Fidelity Government Money Market Fund 18,902 18,045
Templeton Foreign Fund 104 --
Quanex Corporation common stock 6,047 6,177
Common/commingled trust 8,880 9,378
-------- -------
$105,510 $98,350
======== =======
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1996 1995
-------- --------
Benefit payments:
Fidelity Puritan Fund $ 41,028 $ 26,984
Fidelity Magellan Fund 121,150 51,315
Fidelity Contrafund 5,210 --
Fidelity Growth and Income Fund 14,286 5,381
Fidelity Overseas Fund 9,593 2,595
Fidelity Balanced Fund 7,915 2,498
Fidelity Government Money Market Fund 171,595 94,128
Templeton Foreign Fund -- --
Quanex Corporation common stock 4,863 3,993
Common/commingled trust 28,680 2,340
-------- --------
$404,320 $189,234
======== ========
1996 1995
-------- ---------
Investment income:
Fidelity Puritan Fund $149,359 $ 129,241
Fidelity Magellan Fund 243,707 431,859
Fidelity Contrafund 51,197 17,439
Fidelity Growth and Income Fund 86,323 69,343
Fidelity Overseas Fund 58,357 26,530
Fidelity Balanced Fund 11,564 6,251
Fidelity Government Money Market Fund 115,993 105,725
Templeton Foreign Fund 3,593 --
Quanex Corporation common stock 88,680 (24,578)
Common/commingled trust 6,766 3,467
-------- ---------
$815,539 $ 765,277
======== =========
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ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
EIN: 38-1872178; PN 015
QUANEX CORPORATION
HOURLY BARGAINING UNIT
EMPLOYEES SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Shares/ Current
Par Value Cost Value
--------- ---- -------
Mutual Fund Assets - Fidelity Investments:
Government Money Market Fund* 2,450,167 $2,450,167 $2,450,167
Balanced Fund* 10,162 133,855 143,087
Puritan Fund* 73,587 1,193,292 1,268,634
Growth and Income Fund* 20,312 519,062 624,189
Magellan* 28,844 2,140,420 2,326,232
Contrafund* 9,485 364,846 399,810
Overseas Fund* 18,225 515,693 562,072
Templeton Foreign Fund* 4,052 39,972 41,980
-----------------------------
Total Mutual Fund Assets 7,357,307 7,816,171
Quanex Corporation Common Stock* 10,656 233,902 291,588
Common/Commingled Trust* 147,525 147,525 147,525
-----------------------------
Total investments $7,738,734 $8,255,284
========== ==========
*Party-in-Interest
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ITEM 27D - SCHEDULE OF REPORTABLE (5%) TRANSACTIONS EIN 38-1872178; PN 015
QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Single Transactions
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------- ------- ----------- ------- ------- ------ ------
None
Series of Transactions
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------- ------- ----------- ------- ------- ------ ------
*Puritan Fund 45 $474,444 17 $ 55,974 $ 52,419 $ 55,974 $ 3,555
*Magellan Fund 56 851,371 36 296,052 272,627 296,052 23,425
*Contrafund 46 305,355 10 60,227 60,772 60,227 (545)
*Government Money Market Fund 61 639,600 48 308,856 308,856 308,856 0
- -----------------------
*Party-in-interest
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Quanex Corporation Hourly Bargaining Unit
Employees Savings Plan
Date: June 24, 1997 /s/ Joseph K. Peery
--------------------------- -----------------------------------------
Joseph K. Peery, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independent Auditor's Consent
1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-46824 of Quanex Corporation on Form S-8 of our report dated March 28, 1997
appearing in the Annual Report on Form 11-K of the Quanex Corporation Hourly
Bargaining Unit Employees Savings Plan for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
- ---------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 1997
