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, 1997
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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[DELOITTE & TOUCHE LLP LETTERHEAD]
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 Employees Savings 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, such financial statements 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 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, 1997 and (2) 5% reportable transactions
for the year ended December 31, 1997 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 1997 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
May 22, 1998
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QUANEX CORPORATION
HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-------------------------------------
1997 1996
---------- ----------
Assets:
Investments, at fair value:
Mutual fund assets:
Fidelity Puritan Fund $1,430,212 $1,268,634
Fidelity Magellan Fund 2,681,622 2,326,232
Fidelity Contrafund 446,311 399,810
Fidelity Growth & Income Fund 792,874 624,189
Fidelity Overseas Fund 450,127 562,072
Fidelity Balanced Fund 76,979 143,087
Templeton Foreign Fund 72,104 41,980
Fidelity Government Money Market Fund 2,295,174 2,450,167
Quanex Corporation Common Stock 247,035 291,588
Fidelity Common/Commingled Trust 57,239 147,525
---------- ----------
Total 8,549,677 8,255,284
---------- ----------
Employee contributions receivable 49,534 162,502
Employer contributions receivable - 12,396
---------- ----------
Total 49,534 174,898
---------- ----------
Net Assets Available for Benefits $8,599,211 $8,430,182
========== ==========
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
Year Ended December 31,
------------------------
1997 1996
---------- ----------
Investment income:
Interest and dividends $ 593,142 $ 672,045
Net appreciation in fair value of investments 920,890 143,494
---------- ----------
Total income 1,514,032 815,539
---------- ----------
Contributions:
Employer 33,347 105,566
Less forfeitures 115 56
---------- ----------
33,232 105,510
Employee 1,392,270 1,786,138
---------- ----------
Total contributions 1,425,502 1,891,648
---------- ----------
Total additions 2,939,534 2,707,187
---------- ----------
Benefit payments 635,122 404,320
LaSalle asset transfer 2,135,383 --
---------- ----------
Total deductions 2,770,505 404,320
---------- ----------
Increase in net assets available
for benefits 169,029 2,302,867
Net assets available for benefits:
Beginning of year 8,430,182 6,127,315
---------- ----------
End of year $8,599,211 $8,430,182
========== ==========
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, 1997 AND 1996
A. DESCRIPTION OF THE PLAN
The following description of the Quanex Corporation Hourly Bargaining
Unit Employees Savings Plan (the "Plan") is provided for general
informational purposes only. Participants should refer to the Plan
document for more complete information.
(1) General. The Plan, originally named the Quanex Corporation
Hourly Employees 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 (Note
E). 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 on individual participant
account balances as of the end of the period in which the
income is 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.
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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.
(5) Vesting. Participants are immediately vested in their
contributions and the related earnings. Vesting in the
employer's matching contributions for Lasalle Steel Company
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, 1997 and 1996, net assets available for
benefits included benefits of $7,794 and $5,632, respectively,
due to participants who had 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 these 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 any time 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.
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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 April 25, 1997. 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.
E. TRANSFER OF ASSETS
Effective April 18, 1997, Quanex Corporation sold its LaSalle Steel
Company subsidiary ("LaSalle") to Niagara Corporation. On December 1,
1997, assets of the Plan in the amount of $2,135,383 were transferred
to the trustee of the LaSalle Steel Company Hourly Bargaining Unit
Employees Savings Plan.
F. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Quanex Corporation common stock, as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 4,038 $109,945 3,306 $75,789
Sales 5,906 141,059 $167,646 2,351 50,315 $54,568
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Fidelity mutual fund assets as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 786,686 $2,734,223 711,273 $2,842,364
Sales 947,926 2,821,811 $3,212,731 320,094 754,693 $785,068
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Fidelity Common/Commingled Trust as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 68,202 $ 68,202 87,559 $87,559
Sales 158,488 158,488 $158,488 35,292 35,292 $35,292
G. SUBSEQUENT EVENTS
On December 3, 1997, Michigan Seamless Tube Company, the Gulf States
Tube and the Tube Group Office divisions of Quanex Corporation (the
"Tube Group") were sold to Vision Metals, Inc. In plan year 1998, the
net assets attributable to the Tube Group employees will be transferred
to the new qualified savings plan established by Vision Metals, Inc.
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H. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund were as
follows for the years ended December 31:
1997 1996
---------- ----------
Employee Contributions:
Fidelity Puritan Fund $ 214,527 $ 258,650
Fidelity Magellan Fund 342,660 453,847
Fidelity Contrafund 92,752 91,666
Fidelity Growth and Income Fund 139,049 146,079
Fidelity Overseas Fund 94,260 148,714
Fidelity Balanced Fund 33,599 59,839
Fidelity Government Money Market Fund 377,817 491,386
Templeton Foreign Fund 22,511 4,812
Quanex Corporation Common Stock 34,129 63,562
Fidelity Common/Commingled Trust 40,966 67,583
---------- ----------
$1,392,270 $1,786,138
========== ==========
1997 1996
---------- ----------
Employer Contributions:
Fidelity Puritan Fund $ 4,883 $ 15,152
Fidelity Magellan Fund 6,982 21,803
Fidelity Contrafund 2,104 6,119
Fidelity Growth and Income Fund 3,727 10,918
Fidelity Overseas Fund 3,169 10,289
Fidelity Balanced Fund 2,170 7,296
Fidelity Government Money Market Fund 5,660 18,902
Templeton Foreign Fund 142 104
Quanex Corporation Common Stock 1,750 6,047
Fidelity Common/Commingled Trust 2,645 8,880
---------- ----------
$ 33,232 $ 105,510
========== ==========
1997 1996
---------- ----------
Benefit Payments:
Fidelity Puritan Fund $ 76,324 $ 41,028
Fidelity Magellan Fund 146,690 121,150
Fidelity Contrafund 20,279 5,210
Fidelity Growth and Income Fund 36,649 14,286
Fidelity Overseas Fund 37,990 9,593
Fidelity Balanced Fund 11,892 7,915
Fidelity Government Money Market Fund 268,779 171,595
Templeton Foreign Fund -- --
Quanex Corporation Common Stock 23,893 4,863
Fidelity Common/Commingled Trust 12,626 28,680
---------- ----------
$ 635,122 $ 404,320
========== ==========
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1997 1996
---------- ----------
Investment Income:
Fidelity Puritan Fund $ 294,604 $ 149,359
Fidelity Magellan Fund 637,945 243,707
Fidelity Contrafund 98,587 51,197
Fidelity Growth and Income Fund 225,857 86,323
Fidelity Overseas Fund 56,810 58,357
Fidelity Balanced Fund 34,599 11,564
Fidelity Government Money Market Fund 132,873 115,993
Templeton Foreign Fund 2,690 3,593
Quanex Corporation Common Stock 20,390 88,680
Fidelity Common/Commingled Trust 9,677 6,766
---------- ----------
$1,514,032 $ 815,539
========== ==========
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ITEM 27-A SCHEDULE OF ASSETS HELD FOR INVESTMENTS PURPOSES
EIN: 38-1872178; PN 015
QUANEX CORPORATION
HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1997
Shares/ Current
Par Value Cost Value
--------- ---- -----
Mutual Fund Assets - Fidelity Investments:
Puritan Fund* 73,798 $1,246,497 $1,430,212
Magellan* 28,148 2,175,266 2,681,622
Contrafund* 9,571 405,764 446,311
Growth and Income Fund* 20,810 591,811 792,874
Overseas Fund* 13,833 406,378 450,127
Balanced Fund* 5,041 73,710 76,979
Templeton Foreign Fund* 7,247 75,119 72,104
Government Money Market Fund* 2,295,174 2,295,174 2,295,174
------------------------
Total Mutual Fund Assets 7,269,719 8,245,403
Quanex Corporation Common Stock* 8,783 202,788 247,035
Fidelity Common/Commingled Trust* 57,239 57,239 57,239
------------------------
Total Investments $7,529,746 $8,549,677
========================
* Party-in-Interest
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ITEM 27-D - 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, 1997
Series of Transactions
----------------------
Current
Total Number of Total Number of Value on
Purchases During Purchase Sales During the Selling Cost of Transaction Net
Description the Plan Year Price Plan Year Price Asset Date Gain
----------- ---------------- -------- ---------------- ------- ------- ----------- ----
Fidelity Investments:
Puritan* 67 $441,338 45 $447,736 $388,133 $447,736 $ 59,603
Magellan* 71 670,769 49 773,603 $635,924 773,603 137,679
Contrafund* 52 264,403 21 270,715 $223,485 270,715 47,230
Growth & Income* 67 331,910 32 344,457 $259,160 344,457 85,297
Overseas* 48 163,876 32 310,582 $273,191 310,582 37,391
Gov't Money Market* 77 725,156 61 880,149 $880,149 880,149 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 29, 1998 /s/ Wayne M. Rose
---------------------------------
Wayne M. Rose, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independents 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 May 22, 1998
appearing in the Annual Report of Form 11-K of the Quanex Corporation Hourly
Bargaining Unit Employees Savings Plan for the year ended December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
June 29, 1998
