SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
QUANEX CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies: N/A
2. Aggregate number of securities to which transaction applies: N/A
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
4. Proposed maximum aggregate value of transaction: N/A
5. Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid: N/A
2. Form, Schedule or Registration Statement No.: N/A
3. Filing Party: N/A
4. Date Filed: N/A
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Quanex Corporation
1900 West Loop South
Suite 1500 [LOGO -- QUANEX]
Houston, TX 77027
(713) 961-4600
- --------------------------------------------------------------------------------
January 24, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the
Company's Annual Meeting of Shareholders to be
held at 8:30 a.m., C.S.T., on Thursday, February
27, 1997, at the Doubletree Hotel, 2001 Post Oak
Blvd., Houston, Texas.
This year you will be asked to vote in favor
of three proposals. The proposals concern the
election of three directors, an amendment to the
Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common
Stock to 50,000,000 shares, and the appointment of
independent auditors for fiscal 1997. These
matters are more fully explained in the attached
proxy statement, which you are encouraged to read.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
APPROVE THESE PROPOSALS AND URGES THAT YOU RETURN
YOUR SIGNED PROXY CARD AT YOUR EARLIEST
CONVENIENCE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
Thank you for your cooperation.
Sincerely,
/s/ ROBERT C. SNYDER
Robert C. Snyder
Chairman of the Board
[LOGO -- QUANEX]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 27, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Quanex
Corporation, a Delaware corporation (the "Company"), will be held at the
Doubletree Hotel, 2001 Post Oak Blvd., Houston, Texas, on February 27, 1997, at
8:30 a.m., C.S.T., for the following purposes:
(1) To elect three directors to serve until the Annual Meeting of
Shareholders in 2000;
(2) To consider and act upon a proposal to amend the Company's Restated
Certificate of Incorporation to increase the number of authorized
shares of the Company's common stock, $.50 par value, from
25,000,000 shares to 50,000,000 shares;
(3) To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as independent auditors for the fiscal year
ending October 31, 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Information with respect to the above matters is set forth in the Proxy
Statement that accompanies this Notice.
The Board of Directors has fixed the close of business on January 17, 1997,
as the record date for determining shareholders entitled to notice of and to
vote at the meeting. A complete list of the shareholders entitled to vote at the
meeting will be maintained at the Company's principal executive offices, will be
open to the examination of any shareholder for any purpose germane to the
meeting during ordinary business hours for a period of ten days prior to the
meeting, and will be produced at the time and place of the meeting during the
whole time thereof.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR
DESIGNATION OF A PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU FIND IT CONVENIENT TO ATTEND THE MEETING.
The Company's Annual Report to Shareholders for the year ended October 31,
1996, accompanies this Notice.
By order of the Board of Directors,
/s/ MICHAEL W. CONLON
MICHAEL W. CONLON, Secretary
Houston, Texas
January 24, 1997
[LOGO -- QUANEX]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 27, 1997
This Proxy Statement and the accompanying form of proxy are to be first
mailed on or about January 24, 1997, to all holders of record on January 17,
1997, of the Common Stock, $.50 par value ("Common Stock"), of Quanex
Corporation, a Delaware corporation (the "Company"), and are furnished in
connection with the solicitation of proxies by the Board of Directors of the
Company to be used at the Annual Meeting of Shareholders to be held at 8:30
a.m., C.S.T., on Thursday, February 27, 1997, and at any adjournment or
adjournments thereof. Shares of Common Stock represented by any unrevoked proxy
in the enclosed form, if such proxy is properly executed and is received prior
to the meeting, will be voted in accordance with the specifications made on such
proxy. Proxies on which no specifications have been made will be voted for the
election as directors of the nominees listed herein and in favor of proposals 2
and 3. Proxies are revocable by written notice to the Secretary of the Company
at the address of the Company set forth below, or by delivery of a later dated
proxy, at any time prior to their exercise. Proxies may also be revoked by a
shareholder attending and voting in person at the meeting.
The Common Stock is the only class of securities of the Company that is
entitled to vote at the meeting. As of the close of business on January 17,
1997, the record date for determining shareholders who are entitled to receive
notice of and to vote at the meeting, there were 13,677,566 shares of Common
Stock issued and outstanding. Each share is entitled to one vote. The presence
at the meeting, in person or by proxy, of the holders of a majority of shares of
Common Stock is necessary to constitute a quorum.
The cost of soliciting proxies will be borne by the Company. Solicitation
may be made personally or by mail, telephone or telegraph by officers, directors
and regular employees of the Company (who will not receive any additional
compensation for any solicitation of proxies), as well as by the firm of Beacon
Hill Partners, Inc., which has been retained by the Company to assist in the
solicitation for a fee of approximately $4,000. The Company will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses for sending proxy materials to the beneficial owners of
Common Stock. The mailing address of the Company's principal executive office is
1900 West Loop South, Suite 1500, Houston, Texas 77027.
1
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF THREE DIRECTORS
Three directors are to be elected at the meeting. The Company's Restated
Certificate of Incorporation and Bylaws both provide that the Board of Directors
shall be divided into three classes as nearly equal in number as possible, with
the terms of office of the classes expiring at different times. The terms of
office of three directors, John D. O'Connell, Robert C. Snyder and Vernon E.
Oechsle, expire at the 1997 Annual Meeting. The proposed nominees for director
for a term expiring at the 2000 Annual Meeting are Messrs. O'Connell, Snyder and
Oechsle. The respective terms of directors expire on the dates set forth below.
NOMINEES FOR ELECTION FOR TERMS DIRECTOR
EXPIRING AT THE 2000 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
- ------------------------------------ ----------------------------------------------------- --- --------
John D. O'Connell................... Chairman, Executive Advisory Board of GES Exposition 66 1981
Services, a Viad Corp company, serving the
convention/exposition industry (Houston, Texas)
Robert C. Snyder.................... Chairman of the Board, Quanex Corporation 63 1986
Vernon E. Oechsle................... President and Chief Executive Officer, Quanex 54 1995
Corporation
DIRECTORS WHOSE TERMS
EXPIRE AT THE 1999 ANNUAL MEETING
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Gerald B. Haeckel................... Financial consultant (Scottsville, Virginia) 67 1978
Michael J. Sebastian................ Retired since 1995 from Cooper Industries, Inc., 66 1991
manufacturer of electrical, automotive and industrial
equipment (Houston, Texas)
DIRECTORS WHOSE TERMS
EXPIRE AT THE 1998 ANNUAL MEETING
- ------------------------------------
Carl E. Pfeiffer.................... Chairman Emeritus, Quanex Corporation 66 1966
Vincent R. Scorsone................. Retired since 1994 from Aluminum Company of America, 61 1995
a manufacturer of aluminum products (Pittsburgh,
Pennsylvania)
Donald G. Barger, Jr................ Vice President of Finance and Chief Financial Officer 53 1995
of Worthington Industries, Inc., a manufacturer of
steel products (Columbus, Ohio)
Messrs. O'Connell, Snyder and Oechsle have indicated a willingness to serve
if elected. If a nominee should be unable to serve or for good cause will not
serve, and if any other person is nominated, the persons designated on the
accompanying form of proxy will have discretionary authority to vote or refrain
from voting in accordance with their judgement on such other nominee unless
authority to vote on such matter is withheld. The nominees receiving a plurality
of votes cast at the meeting will be elected directors. Abstentions and broker
nonvotes will not be treated as a vote for or against any particular director
and will not affect the outcome of the election of directors.
Each of the above persons, except for Messrs. Snyder, Scorsone, Barger,
Sebastian, Oechsle and Pfeiffer, has been employed in the principal occupation
shown above or in a similar one with the same employer for more than five years.
Mr. Snyder retired from the Company in December 1995. His position at the time
was as Chairman of the Board and Chief Executive Officer. Mr. Snyder remains
Chairman of the Board, having served as Chairman of the Board since 1995, Chief
Executive Officer from 1992 to 1995, and President from 1989 to 1995. For more
than five years prior to its acquisition by GES Exposition Services in 1993, Mr.
O'Connell was President and Chief Executive Officer of United Exposition Service
Co., Inc. Mr. Scorsone was employed by Aluminum Company of America
2
from 1960 until his retirement in 1994. His position prior to retirement was
Executive Vice President -- Chairman's Counsel. Mr. Scorsone currently serves on
the board of the Indspec Chemical Company. Mr. Barger was appointed to his
present position with Worthington Industries, Inc., in September 1993 and was
employed by B. F. Goodrich Company, manufacturer of automobile tires and related
products, Akron, Ohio from 1973 to 1993. Mr. Barger currently serves on the
board of Gardner Denver Machinery Inc. Mr. Sebastian retired from Cooper
Industries, Inc. in 1995, and for more than five years prior to his retirement,
he served as Executive Vice President. Mr. Sebastian currently serves on the
board of Cooper Cameron Corporation and Gardner Denver Machinery Inc. Mr.
Oechsle joined the Company in 1993 as Executive Vice President and Chief
Operating Officer and has served as President and Chief Executive Officer since
January 1, 1996. Mr. Oechsle was appointed to the Board of Directors of the
Company in May 1995. Prior to joining the Company, Mr. Oechsle was Executive
Vice President of the Automotive Sector of AlliedSignal Inc. since December 1990
and Group Vice President of Dana Corporation since January 1985. Mr. Oechsle
currently serves on the board of Walbro Corporation and Precision Castparts
Corporation. Mr. Pfeiffer served as the Company's Chairman of the Board of
Directors from 1989 to 1995. Each person, except for Mr. Oechsle, has been
previously elected a director by the shareholders of the Company.
Pursuant to the Company's Bylaws, the Board of Directors has established
several committees, including an Executive Committee, an Audit and Environmental
Compliance Committee, a Compensation and Management Development Committee, a
Nominating and Corporate Governance Committee and a Finance and Investment
Committee. During the fiscal year ended October 31, 1996, the Board of Directors
reviewed the scope and authority of each committee charter. Changes that
resulted from this review called for a broadening of charter powers within the
committees and the development of specific oversight areas. In addition, a new
committee, the Finance and Investment Committee, was formed. The Finance and
Investment Committee's charter includes the oversight of the general financial
affairs of the Company. During fiscal 1996, the Board of Directors met six
times, the Audit and Environmental Compliance Committee met two times, and the
Compensation and Management Development Committee met four times. The Nominating
and Corporate Governance Committee and the Finance and Investment Committee met
once. The Executive Committee did not meet. All directors attended more than 75%
of the combined number of Board meetings and meetings of committees of which
they are members.
The current members of the Audit and Environmental Compliance Committee are
Messrs. Barger, Pfeiffer, Scorsone and Haeckel, who is Chairman. The Audit and
Environmental Compliance Committee's responsibilities to the Board include the
following:
a) Review the accounting and financial policies and procedures of the
Company, including the internal accounting control system and
financial reporting processes and procedures and review any issues
identified by the independent auditors and/or the internal auditing
department regarding accounting and financial policies and procedures,
together with their recommendations.
b) Recommend the annual nomination of independent auditors of the Company
for appointment by the Board of Directors.
c) Review the scope and results of the Company's internal audit activity,
together with the specifics of the annual audit plan. Review any
accounting changes having a major impact on the obligations or
financial statements of the Company, review filings made with the
Securities and Exchange Commission as required, and hold such other
conferences and conduct such other reviews with the independent
auditors or with management as may be desired either by the Audit
Committee or the independent auditors.
d) Review annually the Company's risk management program.
e) Review annually the Company's program relating to monitoring
compliance with the Company's Statement of Business Policies.
3
f) Review the Company's compliance with applicable laws and regulations
relating to the health, safety, and the environment which may
represent material financial exposure to the Company.
The current members of the Compensation and Management Development
Committee are Messrs. Barger, Haeckel, O'Connell and Sebastian, who is chairman.
This Committee's responsibilities to the Board include the following:
a) Review, approve and report to the Board of Directors regarding the
Company's overall compensation policy, including compensation
philosophy and strategy, short and long-term incentive plans and
programs, stock ownership plans, and employee benefit plans.
b) Review and report to the Board of Directors annually on the
performance of the Chief Executive Officer and review with the Chief
Executive Officer the performance of each of the senior executives of
the Company. Senior executives include all officers of the Company and
the president or senior manager of each business group.
c) Review and approve the compensation to be paid to officers and key
employees of the Company.
d) Review and approve the establishment and administration of stock bonus
plans and stock option plans for employees and non-employee directors.
e) Serve as the appropriate committee to administer the Company's
Executive Incentive Compensation Plan (EICP) and to approve the
establishment of targets for such Plan and to approve all awards under
such Plan.
f) Review the structural organization of the Company and assist the Chief
Executive Officer in developing recommendations for the selection of
senior management personnel and their replacements and successors.
g) Review the adequacy of the management development program/process to
assure a capable cadre of personnel to support the senior managerial
needs of the Company.
The current members of the Executive Committee are Messrs. Pfeiffer,
Sebastian, Oechsle, O'Connell and Snyder, who is chairman. This committee acts
on behalf of the Board between regularly scheduled meetings of the Board of
Directors.
The current members of the Nominating and Corporate Governance Committee
are Messrs. Sebastian, Snyder and O'Connell, who is Chairman. This Committee's
responsibilities to the Board include the following:
a) Study and review with management the overall effectiveness of the
organization of the Board and the conduct of its business, and make
recommendations to the Board of Directors, as appropriate.
b) Develop and maintain criteria and procedures for the identification
and recruitment of candidates for election to serve as directors of
the Company.
c) Review the appropriateness and adequacy of information supplied to
directors prior to and during Board of Directors meetings.
d) Review director class each year and recommend directors for election
or re-election.
e) Review and make recommendations to the Board of Directors with respect
to compensation to be paid or provided to members of the Board of
Directors.
f) Evaluate annually the performance of the Board of Directors.
g) Consider nominees for director recommended by shareholders of the
Company, provided such recommendations are addressed to the chairman
of the Committee at the Company's principal executive office and
received by the chairman before November 1 of each year with respect
to the annual shareholders' meeting that is held thereafter.
4
The current members of the Finance and Investment Committee are Messrs.
Barger, Pfeiffer, Scorsone and Haeckel. This committee's responsibilities to the
Board include the following:
a) Review, as appropriate, advise and consult with senior management
concerning the general financial affairs of the Company including the
capital structure of the Company, financing plans, cash flow
projections, dividend policy, stock re-purchase programs, currency
exchange agreement procedure, loan agreements, capital investment
policy, and appropriate target rates of return.
b) Monitor and review the establishment of investment objectives,
policies, and performance criteria for the management of the Company's
retirement and benefit plan assets.
The Company's Bylaws provide that, subject to certain limitations discussed
below, any shareholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at the meeting. The
Company's Bylaws also provide that a shareholder must give written notice of
such shareholder's intent to make such nomination or nominations, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Company not later than (i) with respect to an election to be held at an
Annual Meeting of Shareholders, 90 days prior to the anniversary date of the
date of the immediately preceding Annual Meeting, and (ii) with respect to an
election to be held at a Special Meeting of Shareholders for the election of
directors, or otherwise, the close of business on the tenth day following the
date on which a written statement setting forth the date of such meeting is
first mailed to shareholders provided that such statement is mailed no earlier
than 120 days prior to the date of such meeting. Notwithstanding the foregoing,
if an existing director is not standing for re-election to a directorship which
is the subject of an election at such meeting or if a vacancy exists as to a
directorship which is the subject of an election, whether as a result of
resignation, death, an increase in the number of directors, or otherwise, then a
shareholder may make a nomination with respect to such directorship at any time
not later than the close of business on the tenth day following the date on
which a written statement setting forth the fact that such directorship is to be
elected and the name of the nominee proposed by the Board of Directors is first
mailed to shareholders. Each notice of a nomination from a shareholder shall set
forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the shareholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholders as would be
required to be included in a proxy statement filed pursuant to the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations); and (e) the consent of
each nominee to serve as a director of the Company if so elected. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure. Subject to the exceptions
discussed above, written notice of a shareholder's intent to nominate a person
for director at the 1998 Annual Meeting must be given on or before November 29,
1997.
Directors (other than Mr. Oechsle, who is an officer of the Company) are
currently paid an annual fee of $21,000 and a fee of $900 for attendance at each
meeting of the Board and any committee on which they serve. Directors who serve
as the Chairman of the Audit and Environmental Compliance Committee, the
Compensation and Management Development Committee, the Nominating and Corporate
Governance Committee and the Finance and Investment Committee receive an
additional $2,000 annually for services. Travel and lodging expenses incurred by
directors to attend such meetings are also paid by the Company. Non-employee
directors are the beneficiaries of life insurance policies provided by the
Company at a cost ranging from approximately $2,000 to $5,000 per director for
fiscal 1996.
5
At the Annual Meeting of Shareholders held on February 23, 1988, the
shareholders approved the Quanex Corporation Non-Employee Director Plan, which
provides for the granting of options to non-employee directors to purchase up to
an aggregate amount of 100,000 shares of Common Stock. The Non-Employee Director
Plan initially provided that each non-employee director of the Company as of the
1987 Annual Meeting and each future non-employee director as of his election as
a director of the Company would be granted an option to purchase 10,000 shares
of Common Stock at a price per share of Common Stock equal to the fair market
value of the Common Stock as of the date of the grant. During 1988, the
Non-Employee Director Plan was amended to provide that the grant of options
thereunder to future non-employee directors would occur on the date of the first
anniversary of their election rather than upon their election. Options granted
under the Non-Employee Director Plan become exercisable in one-third increments
maturing cumulatively on each of the first through third anniversaries of the
date of the grant and must be exercised no later than ten years from the date of
grant. No options may be granted under the plan after June 22, 1997.
At the Annual Meeting of Shareholders held on February 22, 1990, the
shareholders of the Company approved the Quanex Corporation 1989 Non-Employee
Director Stock Option Plan (the "1989 Plan"), which provides for the granting
to non-employee directors of options to purchase an aggregate of 210,000 shares
of Common Stock. The 1989 Plan provides for grants of options with respect to
3,000 shares of Common Stock to all non-employee directors on each October 31 on
which the director serves as a director of the Company. Options granted under
the 1989 Plan may be exercised by the holder thereof in whole or in part at any
time or from time to time commencing six months after the date of grant and must
be exercised no later than ten years from the date of grant. No options may be
granted under the 1989 Plan after December 5, 1999.
At the Annual Meeting of Shareholders held on February 22, 1996, the
shareholders of the Company approved an amendment to the Quanex Corporation
Deferred Compensation Plan (the "DC Plan") that provided for (i) the addition
of a Common Stock election as an option for participants and (ii) a 20% Company
matching award for participants electing to make their deferrals in the form of
Common Stock. Under the terms of the DC Plan, officers and directors may elect
to defer a portion of their incentive bonuses and director fees, respectively,
awarded or earned during the ensuing plan year to a Common Stock account. If a
participant elects to make a deferral to a Common Stock account for a period of
three full years or more, a matching award equal to 20% of the amount deferred
is made by the Company to such participant's account. The number of shares of
Common Stock credited to a participant's deferral and matching account is the
number of full shares of Common Stock that could have been purchased with the
dollar amount deferred or matched based on the closing price of the Common Stock
on the New York Stock Exchange (the "NYSE") on the day that the amount
deferred would have been paid had it not been deferred. Dividends and other
distributions declared and paid on the Common Stock will be accrued in the
participant's account based upon the number of shares of Common Stock credited
to such account. No shares of Common Stock or payments in respect thereof,
however, are issued or made to any participant until distribution in accordance
with the DC Plan. All participant deferrals and Company matching awards are 100%
vested; provided, however, that if a participant receives a benefit from the DC
Plan for any reason, other than death, disability or retirement, within three
years after a deferral was credited to a Common Stock account, any matching
awards made by the Company with respect to the deferral that is held less than
three years will be forfeited. During 1996, Messrs. Barger and Scorsone elected
to defer director fees of $7,950 and $29,200, respectively, under the DC Plan in
the form of Common Stock and their accounts were credited with 350 and 1,291
shares of Common Stock, respectively. In addition, pursuant to the terms of the
DC Plan, the Company made matching awards to their respective accounts of 75 and
262 shares of Common Stock.
The Company also has in effect a Non-Employee Director Retirement Plan,
which provides non-employee directors who have served on the Board of Directors
of the Company for at least ten full years an annual payment after retirement
from the Board equal to the base annual director retainer fee received by the
director at the time such director ceases to serve on the Board. Under the Non-
6
Employee Director Retirement Plan, the Company will continue to make an annual
payment for a period equal to the aggregate length of time the director served
on the Board of Directors as a Non-Employee Director, unless earlier terminated
due to (i) the death of the director, (ii) the expiration of two years following
the termination of the Non-Employee Director Retirement Plan or (iii) the
director serving as a director, officer or employee of a competitor of the
Company.
(2) APPROVAL OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has recommended the adoption of an amendment to the
Company's Restated Certificate of Incorporation that will increase the number of
authorized shares of Common Stock from 25,000,000 shares to 50,000,000 shares.
Of the 25,000,000 shares of Common Stock currently authorized, at the record
date there were 13,677,566 shares of Common Stock outstanding and an aggregate
of 1,467,928 shares of Common Stock reserved for issuance pursuant to
outstanding options granted under the Company's 1987 Non-Employee Director Stock
Option Plan, 1989 Plan, 1988 Employee Stock Option Plan, 1993 Employee Stock
Option and Restricted Stock Plan, and 1996 Employee Stock Option and Restricted
Stock Plan and 2,695,873 shares of Common Stock reserved for issuance upon the
conversion of the Company's 6.88% Convertible Subordinated Debentures due June
30, 2007, leaving a total of 7,158,633 shares of Common Stock authorized and
available for future issuances for corporate purposes, including acquisitions,
financings and employee benefit plans.
The purpose of the amendment increasing the authorized number of shares of
Common Stock is to provide the Company with greater flexibility in effecting
acquisitions and financings. Although the Company has no current plans,
proposals or understandings that would require the use of the additional shares
of Common Stock to be authorized, the Company recognizes the desirability of
having a sufficient number of authorized shares available for future
acquisitions as well as for public offerings or private placements of Common
Stock or securities convertible or exchangeable into shares of Common Stock. The
proposed amendment would provide the Company with additional flexibility to
effect any future acquisitions and financings or implement additional employee
benefit plans without the delay and expense associated with obtaining the
approval or consent of shareholders at the same time the shares are needed.
The increase in the authorized number of shares of Common Stock will be
effected through an amendment to the first paragraph of Article Fourth of the
Company's Restated Certificate of Incorporation. As amended, such paragraph
would read as follows:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is Fifty-One
Million (51,000,000), of which Fifty Million (50,000,000) shall be
shares of Common Stock, par value Fifty Cents ($.50) per share, and of
which One Million (1,000,000) shares shall be Preferred Stock, no par
value."
Unless required by law, regulatory authorities or applicable rules of the
New York Stock Exchange, it is not anticipated that any future authorization by
a vote of shareholders will be sought for the issuance of any shares of Common
Stock. Shareholders of the Company do not have any preemptive rights to purchase
additional shares of Common Stock, whether now or hereafter authorized.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for approval of the proposed amendment to the
Company's Restated Certificate of Incorporation. Abstentions and broker
non-votes will not be treated as either a vote for or against the proposal.
However, because the proposal requires the affirmative vote of a majority of the
outstanding shares, abstentions and broker non-votes will have the same effect
as a vote against the proposal. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" THE APPROVAL OF THE PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION.
7
(3) RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of Deloitte & Touche LLP as independent auditors for the year
ending October 31, 1997, subject to ratification of the shareholders at the 1997
Annual Meeting. Representatives of Deloitte & Touche are expected to attend the
meeting, will be afforded an opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions by
shareholders.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the meeting and entitled to vote thereon
is necessary for ratification of the selection of Deloitte & Touche. Abstentions
will not be treated as either a vote for or against ratification, but will have
the same effect as a vote against ratification. Broker nonvotes are not entitled
to vote and will not be counted as a vote for or against ratification.
FURTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth as of November 30, 1996, the beneficial
ownership of each person who is known by the Company to be the beneficial owner
of more than five percent of the Company's Common Stock. Such information is
based upon information provided to the Company by such persons.
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP PERCENT
- ------------------------------------- ----------- -------
Jurika & Voyles, Lake Merritt Plaza,
1999 Harrison, Suite 700
Oakland, CA 94612.................. 948,915(1) 7.0
- ------------
(1) Has sole investment power and shared voting power with respect to such
shares.
The following table sets forth as of December 31, 1996, the number and
percentage of beneficial ownership of shares of Common Stock and the principal
amount of the Company's 6.88% Convertible Subordinated Debentures (the
"Debentures") for each current director and nominee for director of the
Company, the executive officers named in the compensation table below, and all
officers and directors as a group.
DEBENTURES SHARES OF COMMON STOCK
BENEFICIALLY BENEFICIALLY OWNED(1)
OWNED AS OF DECEMBER 31, 1996
AS OF -------------------------
DECEMBER 31, NUMBER PERCENTAGE
NAME 1996 OF SHARES OF SHARES
- ---------------------------------- ------------ --------- ----------
Gerald B. Haeckel................. $ 25,000 30,200 *
John D. O'Connell................. 12,500 19,209 *
Vernon E. Oechsle................. 0 83,378 *
Carl E. Pfeiffer.................. 0 119,030 *
Michael J. Sebastian.............. 75,000 22,000 *
Robert C. Snyder.................. 0 170,071 1.3
Vincent R. Scorsone............... 0 4,000 *
Donald G. Barger, Jr.............. 0 4,000 *
James H. Davis.................... 0 10,333 *
Wayne M. Rose..................... 0 75,022 *
Robert V. Kelly, Jr............... 0 100,391 *
Joseph K. Peery................... 0 71,668 *
All officers and directors
as a group (17 persons)......... 225,000 840,384(3) 6.2
(FOOTNOTES ON FOLLOWING PAGE)
8
- ------------
* Less than 1.0%
(1) Unless otherwise indicated, directors and officers have sole voting and
investment power with respect to the securities they own. The beneficial
ownership of shares of Messrs. Haeckel, O'Connell, Oechsle, Pfeiffer,
Sebastian, Snyder, Davis, Rose, Kelly, Jr., Peery and all officers and
directors as a group includes 18,000, 9,000, 53,366, 63,000, 16,000,
154,183, 8,333, 66,700, 65,700, 58,566 and 628,425 shares, respectively,
that may be acquired through exercise of stock options. The beneficial
ownership of shares of Messrs. Haeckel, O'Connell, Sebastian and all
officers and directors as a group includes 793, 396, 2,380 and 7,140 shares,
respectively, that may be acquired through conversion of the Debentures held
by them. The beneficial ownership of shares of Messrs. Oechsle, Rose, Kelly,
Jr., Peery and all officers and directors as a group includes 4,412, 2,720,
2,691, 1,920 and 18,001 shares, respectively, of restricted stock. The
beneficial ownership of shares does not include 17,481, 1,553, 425, 11,558,
4,033 and 5,704 shares of Common Stock that were credited under the DC Plan
to the accounts of Messrs. Oechsle, Scorsone, Barger, Davis, Rose and Peery,
respectively, in connection with deferral of director fees and bonuses for
fiscal year 1996 and related Company matching contributions under the DC
Plan. See "Election of Three Directors" and footnotes 1 and 4 to the
Summary Compensation Table.
EXECUTIVE OFFICERS
Set forth below is certain information concerning the present executive
officers of the Company, each of whom serves at the pleasure of the Board of
Directors. There is no family relationship between any of these individuals or
any of the Company's directors.
NAME AND AGE OFFICE AND LENGTH OF SERVICE
- ------------------------------------- ---------------------------------------------------------
Vernon E. Oechsle; 54................ President and Chief Executive Officer since January 1996
and President since 1995 and Chief Operating Officer
from 1993 to 1995
James H. Davis; 61................... Executive Vice President and Chief Operating Officer
since 1995
Wayne M. Rose; 50.................... Vice President and Chief Financial Officer since 1987
James C. Hill; 49.................... Vice President since 1984 (also Group President since
1983)
Robert V. Kelly, Jr.; 58............. Vice President since 1979 (also Group President since
1982)
Joseph K. Peery; 57.................. Vice President -- Human Resources since 1984
Viren M. Parikh; 54.................. Controller since 1993
*Patrick H. Wannell; 57.............. Vice President and General Manager of LaSalle Steel
Company since 1991
*Terry A. Schroeder; 48.............. President of Nichols Aluminum since August 1996
*B.F. Sammons; 55.................... President of Piper Impact since August 1996
- ------------
* Although Messrs. Wannell, Schroeder and Sammons are not executive officers of
the Company, each performs a policymaking function for the Company. Mr.
Schroeder in his capacity as the President of the Company's Nichols Aluminum
Division, Mr. Sammons in his capacity as President of the Company's Piper
Impact subsidiary and, as the result of policy changes effected in June 1994,
Mr. Wannell in his capacity as Vice President of the Company's LaSalle Steel
Company subsidiary. Accordingly, for purposes of this Proxy Statement, each is
considered to be an executive officer of the Company.
Messrs. Rose, Hill, Peery, Kelly and Wannell have been principally employed
in the positions shown above for more than five years. Mr. Oechsle was named
President and Chief Executive Officer on January 1, 1996 and prior to that was
President since 1995 and Chief Operating Officer of the Company since 1993.
Prior to that Mr. Oechsle was Executive Vice President of the Automotive
9
Sector of Allied Signal since December 1990 and Group Vice President of Dana
Corporation since January 1985. Mr. Davis was named Executive Vice President and
Chief Operating Officer on January 1, 1996 and prior to that was Executive Vice
President, Manufacturing Operations of the Company since September 16, 1995.
Prior to that Mr. Davis was President and Chief Executive Officer of Horsehead
Resources Development Company, Inc. since 1990, Senior Vice President of
Horsehead Industries since 1984. Mr. Parikh has been with the Company for more
than five years and from November 1, 1983, served as Tube Group Controller until
April 1, 1993 when he was named Quanex Corporation Controller. Mr. Schroeder was
named President of Nichols Aluminum on August 19, 1996. Prior to that Mr.
Schroeder served as President and General Manager of Borg Warner Automotive's
Controls Group business since 1993 and as Vice President -- General Manager for
the Commercial Industrial Division of ITT Cannon since 1988. Mr. Sammons has
served as President of Piper Impact Inc., a wholly owned subsidiary of the
Company, since 1988. Piper Impact was acquired by the Company in August 1996.
QUANEX CORPORATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee (the "Committee")
of your Board of Directors is pleased to present its annual report which is
intended to update shareholders on the results of the executive compensation
program. This report summarizes the responsibilities of the Committee, the
compensation policy and objectives that guide the development and administration
of the executive compensation program, each component of the program, and the
basis on which the compensation for the Chief Executive Officer, corporate
officers and other key executives was determined for the fiscal year ended
October 31, 1996.
During the fiscal year, the Committee was comprised of the following Board
members, all of whom were non-employee directors of the Company: Michael J.
Sebastian, Chair, John D. O'Connell, Gerald B. Haeckel and Donald G. Barger, Jr.
The Committee's responsibilities are to oversee the development and
administration of the total compensation and benefits program for corporate
officers and key executives, and administer the executive annual incentive and
stock incentive plans. In addition to these duties, the Committee also oversees
the senior management selection and development processes for the Company.
During the fiscal year, the Committee met four times.
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of the executive compensation program is to create financial
incentive for corporate officers and key executives to achieve performance plans
by offering them the opportunity to earn above average compensation when the
Company achieves above average results. To achieve this objective, the Company
emphasizes variable incentive pay. The executive compensation program includes
base salary, annual cash incentive compensation, longer term stock based grants
and awards, and executive benefits.
On an annual basis the Committee, in conjunction with executive management,
assesses the effectiveness of the overall program and compares the compensation
levels of its executives and the performance of the Company to the compensation
received by executives and the performance of similar companies. The primary
market comparisons are made to a broad group of manufacturing companies,
adjusted for size and job responsibilities. This group is broader than the peer
companies included in the Relative Market Performance graph presented elsewhere
in this proxy and is used because it is more representative of the market in
which the Company competes for executive talent and provides a consistent and
stable market reference from year to year. As a secondary validation, however,
the pay levels of the peer companies are compared against the broad
manufacturing group and have been found to be comparable. Data sources include
national survey databases, proxy disclosures, and general trend data which are
updated annually.
10
Variable incentives, both annual and longer term, are important components
of the program and are used to link pay and performance results. Longer term
incentives are designed to create a heavy emphasis on the increase in
shareholder value as measured by share price appreciation and dividends. The
annual incentive plans measure a combination of corporate and division
profitability using return on equity, return on investment, and cash flow.
Executives with Company-wide responsibilities are measured on overall Company
results. Executives with specific business unit responsibilities are measured on
both Company-wide and their business unit results. Variable incentive awards and
performance standards are calibrated such that total compensation will generally
approximate the market 75th percentile when Company performance results are at
the 75th percentile.
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to the Company's five highest paid executives. Excluded from the limitation
is compensation that is "performance based". For compensation to be
performance based, it must meet certain criteria, including being based on
predetermined objective standards approved by shareholders. In general, the
Company believes that compensation relating to options granted under its current
employee stock option plans should be excluded from the $1 million limitation.
Compensation relating to the Company's restricted stock and incentive
compensation awards do not currently qualify for exclusion from limitation,
given the discretion that is provided to the Committee under the Company's plans
in establishing the performance goals for such awards. The Committee believes
that maintaining the discretion to evaluate the performance of the Company's
management is an important part of its responsibilities and inures to the
benefit of the Company's shareholders. Incentive awards for fiscal 1996 were
determined solely on the predetermined quantitative performance standards. The
Committee, however, will continue to take into account the potential application
of Section 162(m) with respect to incentive compensation awards and other
compensation decisions made by it in the future.
Following is a discussion of each of the principal components of the
executive total compensation program. There have been no major changes to the
executive total compensation program during the fiscal year.
BASE SALARY
The base salary program targets the median of the primary comparison group.
Each executive is reviewed individually on an annual basis. Salary adjustments
are based on the individual's experience and background, performance during the
prior year, the general movement of salaries in the marketplace, and the
Company's financial position. Due to these factors, an executive's base salary
may be above or below the median at any point in time. Overall the base salaries
of the corporate officers and key executives approximate the market median.
ANNUAL INCENTIVE COMPENSATION
The Committee administers the Executive Incentive Compensation Plan
("EICP") for corporate officers and selected key executives. The goal of the
EICP is to reward participants in proportion to the performance of the Company
and/or the business unit for which they have direct responsibility.
The EICP relies on predetermined, objective performance measures. For
officers with corporate responsibilities, the performance measures include the
ratio of cash flow to revenues, return on common equity, and return on
investment. For group and subsidiary executives, the performance measures
include the business unit ratio of cash flows to revenues and business unit
return on controllable investment.
Performance standards are established at the beginning of the fiscal year
with awards calibrated at the 75th percentile if the Company achieves 75th
percentile performance results. For fiscal 1996, the performance results and
incentive awards were consistent with this strategy.
11
LONGER TERM STOCK BASED COMPENSATION
The goal of the Company's longer term stock based incentive plan is to
directly link a significant portion of the executive's compensation to the
enhancement of shareholder value. In addition, longer term incentives encourage
management to focus on the longer term development and prosperity of the
Company, in addition to annual operating profits. The Company encourages its top
management group to own and maintain significant stock holdings.
The Company annually grants stock options to its key executives based on
competitive multiples of base salary. Senior executives typically receive a
higher multiple and, as a result, have a greater portion of their total
compensation linked to increases in shareholder value. In determining the
appropriate grant multiples, the Company compares itself to publicly traded
companies of comparable size for whom stock is a significant part of total
compensation. The ultimate value of any stock option is based solely on the
increase in value of the shares over the grant price. Options have historically
been granted at fair market value on the date of grant, have a term of ten
years, and vest over a three year period. During fiscal 1996 the Committee
granted options to purchase shares of common stock to the executive officers of
the Company consistent with this policy.
Beginning in fiscal 1996, officers may defer receipt of all or a portion of
their EICP bonus into a cash account or Company common stock account. To
encourage stock ownership, if stock is elected, the participant receives a 20%
premium if the stock is held at least three years.
EXECUTIVE BENEFITS
The Company believes that it is critical in attracting and retaining top
caliber executives to provide comprehensive benefits that address the unique
circumstances of executives. In particular, limitations imposed on the benefits
payable from qualified welfare and retirement plans give rise to the need for
supplemental non-qualified plans to replace the benefits lost due to these
limitations and provide a mechanism for recruiting and retaining long service
executives. The Company provides corporate officers with supplemental retirement
and life insurance benefits.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer, Mr. Vernon Oechsle, participates in the
executive compensation program described in this report.
In January, 1996, Mr. Oechsle was appointed Chief Executive Officer, with a
base salary of $400,000. Mr. Oechsle was formerly the Chief Operating Officer of
the Company. In October, 1996, Mr. Oechsle received a salary increase to
$450,000. This increase was based on market comparisons to the primary
comparison group and an assessment of Mr. Oechsle's positive job performance in
assuming responsibility for guiding the operation and strategic direction for
the Company.
For fiscal 1996, Mr. Oechsle received an annual incentive award of $398,791
based on the objective performance measures set out in the EICP. Mr. Oechsle
elected to defer receipt of 100% of his incentive award into his common stock
account. In accordance with the Deferred Compensation Plan, Mr. Oechsle received
a premium equal to 20% of the shares credited, if they are held for at least
three years.
12
In fiscal 1996, Mr. Oechsle received 59,000 stock options with an option
price of $27.50 (fair market value on the date of grant).
Respectfully submitted,
Compensation Committee
Michael J. Sebastian, Chair
John D. O'Connell
Gerald B. Haeckel
Donald G. Barger, Jr.
13
The following table sets forth information concerning the cash compensation
and additional incentive compensation paid by the Company to the Chief Executive
Officer and to each of its four most highly compensated executive officers for
each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
--------------------------------------- -------
(E) (F)
OTHER RESTRICTED (H)
(A) (C) (D) ANNUAL STOCK (G) LTIP
NAME AND PRINCIPAL (B) SALARY BONUS(1) COMPENSATION(2) AWARD(S)(3) OPTIONS/ PAYOUTS
POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
- ------------------------------------- ---- -------- -------- --------------- ----------- -------- -------
Robert C. Snyder, (5) 1996 $ 75,000 $76,973 $18,519 0 0 0
Chairman and former President 1995 438,336 442,214 15,448 0 66,250 0
and Chief Executive Officer 1994 396,516 293,000 15,198 151,202 48,000 0
Vernon E. Oechsle,(6) 1996 392,506 398,791 15,787 0 59,000 0
President and Chief Executive 1995 316,672 296,651 12,062 0 40,500 0
Officer 1994 275,016 172,000 2,039 90,998 28,000 0
James H. Davis,(7) 1996 276,676 263,663 12,272 0 33,000 0
Executive Vice President and Chief 1995 32,502 0 0 0 0 0
Operating Officer 1994 0 0 0 0 0 0
Wayne M. Rose, 1996 209,167 184,004 9,993 0 19,000 0
Vice President and Chief Financial 1995 200,333 173,234 3,278 0 20,100 0
Officer 1994 192,000 112,000 2,648 56,100 15,000 0
Robert V. Kelly, Jr., 1996 210,000 159,915 5,186 0 19,000 0
Vice President and MacSteel 1995 199,167 185,427 4,904 0 20,100 0
President 1994 190,000 115,000 6,255 55,502 15,000 0
Joseph K. Peery, 1996 147,917 130,122 8,695 0 13,000 0
Vice President -- Human Resources 1995 141,500 122,359 6,735 0 14,200 0
1994 135,500 79,000 2,404 39,600 13,000 0
(I)
(A) ALL OTHER
NAME AND PRINCIPAL COMPENSATION(4)
POSITION ($)
- ------------------------------------- ---------------
Robert C. Snyder, (5) 0
Chairman and former President 3,604
and Chief Executive Officer 3,750
Vernon E. Oechsle,(6) 83,508
President and Chief Executive 3,750
Officer 3,750
James H. Davis,(7) 56,483
Executive Vice President and Chief 0
Operating Officer 0
Wayne M. Rose, 22,150
Vice President and Chief Financial 3,750
Officer 4,529
Robert V. Kelly, Jr., 3,750
Vice President and MacSteel 3,750
President 4,243
Joseph K. Peery, 29,909
Vice President -- Human Resources 3,870
4,096
- ------------
(1) Annual bonus compensation amounts are earned and accrued during the fiscal
years indicated and paid in the following year. The bonus amounts for fiscal
year 1996 also include the dollar value of the portion of the bonuses
deferred by each of Messrs. Oechsle, Davis, Rose and Peery, which have been
credited to a Common Stock account under the Company's DC Plan. Under the
terms of the DC Plan, which is more fully described under "Election of
Three Directors", participants may elect to defer a portion of their
incentive bonus to a Common Stock account. If a participant elects to defer
a portion of his bonus to a Common Stock account for a period of three full
years or more, a matching award equal to 20% of the amount deferred is made
by the Company to such participant's account. The number of shares of Common
Stock credited to each participant's deferral and matching account is the
number of full shares of Common Stock that could have been purchased with
the dollar amount deferred and matched based upon the closing price of the
Common Stock on the NYSE on the day that the bonus would have been paid had
it not been deferred. No shares of Common Stock or payments in respect
thereof, however, are issued or made to any participant until distribution
in accordance with the DC Plan. All participant deferrals and Company
matching awards are 100% vested; provided, however, that if a participant
receives a benefit from the DC Plan for any reason, other than death,
disability or retirement, within three years after a deferral was credited
to a Common Stock account, any matching awards made by the Company with
respect to the deferral that is held less than three years will be
forfeited. In fiscal year 1996, the dollar value of the bonuses deferred
under the DC Plan to a Common Stock account by Messrs. Oechsle, Davis, Rose
and Peery were $398,791, $263,663, $92,002, and $130,122, respectively. Such
amounts, if not deferred, would have been payable to each of such officers
on December 12, 1996. Based upon the closing price of the Common Stock on
the NYSE on such date, of $27.375 per share, 14,567, 9,631, 3,360 and 4,753
shares of Common Stock were credited under the DC Plan to the accounts of
Messrs. Oechsle, Davis, Rose and Peery, respectively.
(2) Represents amounts reimbursed during the fiscal year for the payment of
taxes. The dollar value of perquisites and other personal benefits were less
than the lesser of either $50,000 or 10% of the total of annual salary and
bonus for each named officer and therefore has been excluded.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
14
(3) Awards consist of restricted common stock valued at the market close on the
date of grant. Dividends are paid on the restricted shares to the same
extent as paid on the Company's common stock. At the end of fiscal 1996,
Messrs. Snyder, Oechsle, Rose, Kelly and Peery respectively held 2,932,
4,412, 2,720, 2,691 and 1,920 shares of restricted stock valued at $83,562,
$125,742, $77,520, $76,694 and $54,720 based on the October 31, 1996 closing
price of $28.50.
(4) Includes matching contributions made by the Company to defined contribution
plans for each of the fiscal years indicated. The amounts shown for fiscal
year 1996 also include the dollar value of the number of shares of Common
Stock credited by the Company to the accounts of each participant in the DC
Plan who elected to defer a portion of their bonus in the form of Common
Stock. For fiscal year 1996, the number of shares of Common Stock credited
by the Company as matching contributions under the DC Plan to the accounts
of Messrs. Oechsle, Davis, Rose and Peery were 2,914, 1,927, 673 and 951
shares, respectively. Based on the closing price of the Common Stock on the
NYSE on December 12, 1996, of $27.375 per share, the dollar value of the
number of shares Common Stock credited by the Company in fiscal year 1996 to
the accounts of Messrs. Oechsle, Davis, Rose and Peery were $79,758,
$52,733, $18,400 and $26,024, respectively.
(5) Retired effective December 31, 1995.
(6) Promoted from Executive Vice President and Chief Operating Officer to
President and Chief Executive Officer, effective January 1, 1996.
(7) Joined the Company in September 1995 as Executive Vice President,
Manufacturing Operations and was promoted to Executive Vice President and
Chief Operating Officer, effective January 1, 1996.
15
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL
GRANTS
- --------------------------------------------------------------------------------------------------------- GRANT DATE
(C) VALUE
% OF TOTAL -------------
OPTIONS/
(B) SARS (D) (F)
OPTIONS/ GRANTED TO EXERCISE GRANT
SARS EMPLOYEES OR BASE (E) DATE
(A) GRANTED(1) IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SHARE) DATE VALUE ($)(2)
- -------------------------------------------------- --------- ----------- ---------- ---------- -------------
Robert C. Snyder(3)............................... - 0 - - 0 - N/A N/A - 0 -
Vernon E. Oechsle................................. 59,000 21.9% 27.50 10-17-06 $ 607,700
James H. Davis.................................... 33,000 12.2 27.50 10-17-06 $ 339,900
Wayne M. Rose..................................... 19,000 7.0 27.50 10-17-06 $ 195,700
Robert V. Kelly, Jr............................... 19,000 7.0 27.50 10-17-06 $ 195,700
Joseph K. Peery................................... 13,000 4.8 27.50 10-17-06 $ 133,900
- ------------
(1) All stock options granted in fiscal 1996 become exercisable in 33 1/3%
increments maturing cumulatively on each of the first through third
anniversaries of the date of grant and must be exercised no later than ten
years from the date of grant.
(2) Calculated using the Black-Scholes option pricing model. The calculation
assumes volatility of 25.11%, a risk free interest rate of 6.54%, an annual
dividend yield of 2.18%, a 10-year option term, and option grants at $27.50
per share. The actual value, if any, an executive may realize will depend on
the excess of the stock price over the exercise price on the date the option
is exercised. There is no assurance the value realized by an executive will
be at or near the value estimated by the Black-Scholes model.
(3) Following Mr. Snyder's retirement as an executive officer of the Company in
December 1995, Mr. Snyder continues to serve as a director of the Company
and, as such, was granted an option to acquire 3,000 shares of Common Stock
on October 31, 1996, under the Company's 1989 Plan for non-employee
directors. Such option, which is not included in this table, has an exercise
price of $28.50 per share, expires on October 31, 2006, and has a grant date
present value of $30,030.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ---------------- ------------- --------------- -------------------------
Robert C. Snyder(1)............. 22,500 $ 372,188 154,183/63,167 $ 1,178,512/$404,857
Vernon E. Oechsle............... - 0 - - 0 - 53,366/95,334 373,402/305,210
James H. Davis.................. - 0 - - 0 - 8,333/49,667 67,706/168,419
Wayne M. Rose................... 6,334 95,008 66,700/37,400 635,313/142,250
Robert V. Kelly, Jr............. - 0 - - 0 - 65,700/37,400 573,563/142,250
Joseph K. Peery................. 29,537 454,515 58,566/26,134 582,351/100,462
- ------------
(1) Includes an option to acquire 3,000 shares granted under the 1989 Plan.
16
ANNUAL RETIREMENT BENEFIT EXAMPLES AT AGE 65
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 20 25 30 OR OVER
--------------- --------- --------- --------- ----------
$125,000........................ $ 51,563 $ 68,750 $ 85,938 $100,000
$150,000........................ 61,875 82,500 103,125 120,000
$175,000........................ 72,188 96,250 120,313 140,000
$200,000........................ 82,500 110,000 137,500 160,000
$225,000........................ 92,813 123,750 154,688 180,000
$250,000........................ 103,125 137,500 171,875 200,000
$300,000........................ 123,750 165,000 206,250 240,000
$350,000........................ 144,375 192,500 240,625 280,000
$400,000........................ 165,000 220,000 275,000 320,000
$450,000........................ 185,625 247,500 309,375 360,000
$500,000........................ 206,250 275,000 343,750 400,000
$550,000........................ 226,875 302,500 378,125 440,000
$600,000........................ 247,500 330,000 412,500 480,000
$650,000........................ 268,125 357,500 446,875 520,000
$700,000........................ 288,750 385,000 481,250 560,000
$750,000........................ 309,375 412,500 515,625 600,000
$800,000........................ 330,000 440,000 550,000 640,000
$850,000........................ 350,625 467,500 584,375 680,000
$900,000........................ 371,250 495,000 618,750 720,000
The above retirement benefit examples are subject to deduction for benefits
under Social Security. Benefits provided under the Company's pension plans are
determined on a life annuity basis but optional forms of benefits are available.
Compensation used for the Company's pension plans is essentially the
individual's cash compensation plus deferrals under the 401(k) Savings Plan and
is that compensation shown as "Salary" and "Bonus" in the Summary
Compensation Table. The Company's Salaried Employees' Pension Plan uses an
average of the five highest consecutive calendar years compensation and the
Company's Supplemental Benefit Plan uses an average of the highest 36
consecutive months of compensation.
As of November 1, 1996, the individuals named in the Summary Compensation
Table had the following years of service under the Company's pension plans: R.
C. Snyder--17; V. E. Oechsle--2; J. H. Davis--1, W. M. Rose--13; R.V. Kelly,
Jr.--18; J. K. Peery--12.
Following Mr. Snyder's retirement as the Company's President and Chief
Executive Officer in December 1995, Mr. Snyder received a lump sum payment of
$1,798,010 under the Company's Supplemental Benefit Plan and is entitled to
receive an annual benefit of $37,298.52 pursuant to the Company's other pension
plans in which he participated.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into severance compensation agreements with all of
its executive officers. The form of agreement provides that in the event of a
"change in control" of the Company, the executive agrees to remain in the
employ of the Company for a period of at least three years. A "change in
control" is defined as (i) a change in control which is required to be reported
pursuant to the rules and regulations under the Securities Exchange Act of 1934,
(ii) an acquisition of securities resulting in an individual or entity or group
thereof becoming, directly or indirectly, the beneficial owner of 20% or more of
the Company's outstanding voting stock or (iii) a change in a majority for the
members of the Board of Directors within three years after any tender offer for
the voting securities of the Company, a contested election for the directors of
the Company or a merger or sale of substantially all the assets of the Company.
The agreement contemplates that upon a change in control, the executive will
continue to receive substantially the same compensation and benefits from the
Company (or its successor) that he received before the change. If during the
three year period following a change in control the executive's employment is
terminated by the Company (or its successor) other than for "cause" or
"disability" (as defined in the agreement) or with the consent of the Board of
Directors, the executive will be entitled to a payment equal to 2.99 times the
executive's average annual taxable
17
compensation from the Company during the last five taxable years. Such payment
is to be payable in cash or a combination of cash, health insurance, life
insurance and pension benefits, as elected by the executive.
RELATIVE MARKET PERFORMANCE PRESENTATION
The following graph compares the Company's cumulative total stockholder
return for the last five years with the cumulative total return of the Standard
& Poor's 500 Composite Stock Index (the "S & P 500") and the Company's
industry peer group. The peer group is comprised of: ACX Technologies Inc.,
Alumax Inc., Birmingham Steel Corp., Carpenter Technology, CasTech Aluminum
Group Inc. (acquired by Commonwealth Aluminum Corp. in September 1996),
Chaparral Steel Company, Commonwealth Aluminum Corp., Inland Steel Industries
Inc., Keystone Consolidated Industries Inc., Laclede Steel Co., N S Group Inc.,
Republic Engineered Steels Inc., Roanoke Electric Steel Corp., Timken Co., Webco
Industries Inc., and Worthington Industries.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
QUANEX CORPORATION
RELATIVE MARKET PERFORMANCE
FIVE YEAR CUMULATIVE TOTAL RETURN THROUGH 10/31/96
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Quanex ........ 100 86 94 121 98 146
S&P 500 ....... 100 110 127 132 166 206
Peer Group .... 100 110 146 160 142 149
The above graph assumes $100 invested at the close of trading on October 31,
1991 in Quanex stock, the S&P 500 index and the industry peer group (dividends
reinvested).
18
OTHER MATTERS AND SHAREHOLDER PROPOSALS
At the date of this proxy statement, management is not aware of any matters
to be presented for action at the meeting other than those described above.
However, if any other matters should come before the meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to vote
in accordance with their judgement on such matters. Any proposals of
shareholders to be presented at the Annual Meeting to be held in 1998 that are
eligible for inclusion in the Company's proxy statement for the meeting under
applicable rules of the Securities and Exchange Commission must be received by
the Company no later than September 26, 1997.
The Company's Bylaws provide that, for business to be properly brought
before an Annual Meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Company. To be timely,
a shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company, not less than 60 days nor more than
180 days prior to the anniversary date of the immediately preceding Annual
Meeting; provided, however, that in the event that the date of the Annual
Meeting is more than 45 days later than the anniversary date of the immediately
preceding Annual Meeting, notice by the shareholder to be timely must be
received not later than the close of business on the tenth day following the
earlier of the date on which a written statement setting forth the date of the
Annual Meeting was mailed to shareholders or the date on which it is first
disclosed to the public. A shareholder's notice to the Secretary must set forth
with respect to each matter the shareholder proposes to bring before the Annual
Meeting (a) a brief description of the business desired to be brought before the
Annual meeting, (b) the name and address, as they appear on the Company's books,
of the shareholder making such proposal, (c) the class and number of shares of
the Company which are beneficially owned by the shareholder and (d) any material
interest of the shareholder in such business. In addition, if the shareholder's
ownership of shares of the Company, as set forth in the notice is solely
beneficial, documentary evidence of such ownership must accompany the notice.
Houston, Texas
January 24, 1997
19
PROXY QUANEX CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
IF NO SPECIFICATION IS MADE, PROXIES WILL VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ON THE REVERSE SIDE OR ANY SUBSTITUTE FOR THEM AND FOR ITEMS 2
THROUGH 3, AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned shareholder(s) of Quanex Corporation hereby appoints Carl
E. Pfeiffer and Gerald B. Haeckel, and either of them, proxies of the
undersigned with power of substitution to vote, as designated on the reverse
side of this card, all shares which the undersigned would be entitled to vote at
the Annual Meeting of Shareholders to be held at the Doubletree Hotel, 2001 Post
Oak Blvd., Houston, Texas on February 27, 1997, at 8:30 A.M., C.S.T., or at any
adjournment or adjournments thereof, on the matters described in the enclosed
Proxy Statement dated January 24, 1997.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
A [X] Please mark your
votes as in this
example.
FOR ALL
NOMINEES WITHHOLD AUTHORITY
LISTED OR ANY TO VOTE FOR ALL
SUBSTITUTES NOMINEES LISTED
Item 1. To elect
three [ ] [ ]
directors
to serve until the Annual Meeting of
Shareholders in 2000.
Nominees: John D. O'Connell
Robert C. Snyder
Vernon E. Oechsle
Instructions: To withhold authority to vote for any
nominees strike a line through his name.
Item 2. To consider and act upon a proposal FOR AGAINST ABSTAIN
to amend the Company's Restated
Certificate of Incorporation to [ ] [ ] [ ]
increase the number of authorized
shares of the Company's common stock,
$.50 par value, from 25,000,000 shares
to 50,000,000 shares.
Item 3: To consider and act upon a proposal FOR AGAINST ABSTAIN
to ratify the appointment of Deloitte
& Touche LLP as independent auditors [ ] [ ] [ ]
for the fiscal year ending
October 31, 1997; and
Item 4: To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
Signature(s):________________________________Dated:______________,1997
NOTE: Please sign your name exactly as it appears hereon. When
signing as attorney, executor, administrator, trustee or WILL [ ]
guardian, please give your full title as it appears hereon. ATTEND
When signing as joint tenants, all parties in the joint MEETING
tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer.
