1
SECURITY 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 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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 named below:
Nichols-Homeshield 401(k) 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
Phone: (713) 961-4600
2
INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Nichols-Homeshield 401(k) Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Nichols-Homeshield 401(k) Savings Plan (the "Plan") as of
December 31, 1995 and 1994, 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,
1995 and 1994, 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, 1995 and (2) 5% reportable transactions
for the year ended December 31, 1995 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 1995 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 3, 1996
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QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-------------------------------
1995 1994
----------- -----------
Investments at fair value:
Mutual fund assets:
Fidelity Puritan Fund $ 127,812 $ 73,423
Fidelity Magellan Fund 4,590,045 3,043,570
Fidelity Contrafund 2,281,286 1,496,428
Fidelity Growth & Income Fund 4,483,709 3,140,449
Fidelity Overseas Fund 495,052 343,791
Fidelity Balanced Fund 1,255,353 836,053
Fidelity Government Money Market Fund 6,416,031 6,765,969
Quanex Corporation common stock 611,774 235,079
Common/commingled trust 439,555 301,399
Loans to participants 752,684 754,101
----------- -----------
Total investments 21,453,301 16,990,262
----------- -----------
Contributions Receivable:
Employer 102,285 99,021
Employee 139,177 92,359
----------- -----------
Total 241,462 191,380
----------- -----------
Net assets available for benefits $21,694,763 $17,181,642
=========== ===========
See notes to financial statements
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QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
December 31,
-------------------------------
1995 1994
----------- -----------
Investment income:
Interest and dividends $ 1,135,097 $ 687,316
Net appreciation (depreciation) in
fair value of investments 2,291,096 (571,943)
----------- -----------
Total income 3,426,193 115,373
----------- -----------
Contributions:
Employer 1,202,902 1,120,702
Less forfeitures 25,176 20,055
----------- -----------
1,177,726 1,100,647
Employee 1,496,737 1,178,336
----------- -----------
Total contributions 2,674,463 2,278,983
----------- -----------
Interest on participant loans 61,206 51,773
----------- -----------
Total additions 6,161,862 2,446,129
----------- -----------
Benefit payments 1,643,823 1,672,433
Administrative fees 4,918 3,449
----------- -----------
Total deductions 1,648,741 1,675,882
Increase in net assets available
for benefits 4,513,121 770,247
Net assets available for benefits:
Beginning of year 17,181,642 16,411,395
----------- -----------
End of year $21,694,763 $17,181,642
=========== ===========
See notes to financial statements
5
QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
A. DESCRIPTION OF THE PLAN
The following description of the Nichols-Homeshield 401(k) 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 was established on October 1, 1987, and was
amended and restated effective January 1, 1989, as a defined
contribution plan under Section 401(k) of the Internal Revenue
Code ("IRC") which covers substantially all salaried and
non-union hourly employees at the Nichols-Homeshield division
of Quanex Corporation (the "Company") and bargaining unit
employees at the Lincolnshire, Illinois plant. The Plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). 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. Employees are eligible to make salary deferral
contributions to the Plan on the entry date next following the
date that the employee completes one month of service.
Participants may elect salary deferrals between 1% and 15% of
compensation as defined by the Plan agreement. The Company
makes contributions on behalf of employees who have at least
one year of service. The Company contribution is based on
Company profits and is calculated based on a percentage of the
employee's compensation.
(3) Participant Accounts. Each participant's account is credited
with the participant's contribution, the employer's
contribution, and an allocation of investment income.
Investment income allocations are based upon individual
participant account balances as of the end of the period in
which the income was earned.
(4) Investment Options. Participants may direct allocation of
their contributions to eight investment funds and Quanex stock
as follows:
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.
Common/Commingled Trust - invested and reinvested in
investment contracts issued by insurance companies, banks and
other financial institutions.
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Puritan Fund - invested and reinvested in common and preferred
stocks and bonds.
Quanex Corporation Common Stock - invested and reinvested
exclusively in the common stock of Quanex Corporation.
(5) Vesting. Participants are immediately vested in their
voluntary contributions and earnings thereon. Vesting in the
employer contribution is based on years of credited service.
A participant is 20% vested for each year of credited service
and fully vested after five years. If a participant
terminates employment prior to becoming fully vested, the
nonvested portion of the employer contributions are
immediately forfeited by the participant and utilized to
reduce future employer contributions.
(6) Payment of Benefits. The Plan is intended for long-term
savings but provides for early withdrawals and loan
arrangements under certain conditions. Upon termination of
service, a participant may elect to receive a cash lump-sum
distribution equal to the amount of vested benefits in his or
her account. For further discussion of benefits payable, see
Note F.
(7) Loans. Loans may be granted to a participant of the Plan at
the Committee's discretion. Any loan authorized by the
Committee shall be subject to a term not to exceed five years.
The Committee may agree to a longer term (up to seven years)
only if the proceeds of the loan are to be used to purchase a
dwelling. The loans bear a reasonable rate of interest
established by the Committee. Interest on the loan is
allocated to the borrower's participant account.
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) Administrative Expenses. Administrative expenses of the Plan
are paid by the Company. Loan set up fees and carrying fees
are paid by the participant.
(3) 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 by using the last recorded sales
price.
(4) 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.
D. FEDERAL INCOME TAX STATUS
Management of the Company, the Plan administrator, and the Plan's
legal counsel are of the opinion that the Plan is qualified under
Sections 401(a) and 401(k) and exempt from federal income tax under
Section 501(a) of the IRC. The Plan received a favorable letter of
tax determination from the Internal Revenue Service dated December 22,
1994 as to the tax-exempt status of the Plan.
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E. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Quanex Corporation common stock, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------ ---- ------ ----
21,420 $410,186 10,964 $255,321
During the year ended December 31, 1995, the Plan sold 121 shares of
Quanex Corporation common stock at $2,618 (cost $2,554). During the
year ended December 31, 1994, the Plan sold 687 shares of Quanex
Corporation common stock at $20,171 (cost $17,920).
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Fidelity mutual funds, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------ ---- ------ ----
2,217,167 $9,843,629 4,518,739 $8,517,972
During the year ended December 31, 1995, the Plan sold 2,500,093
shares of Fidelity mutual fund assets valued at $8,215,994 (cost
$7,931,353). During the year ended December 31, 1994, the Plan sold
2,308,717 shares of Fidelity mutual fund assets valued at $7,682,740
(cost $7,741,110).
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Fidelity Common/Commingled Trust, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
------ ---- ------ ----
3,458,959 $3,458,959 580,428 $580,428
During the year ended December 31, 1995, the Plan sold 3,320,803
shares of Fidelity Common/Commingled Trust valued at $3,320,803 (cost
$3,320,803). During the year ended December 31, 1994, the Plan sold
279,029 shares of Fidelity Common/Commingled Trust for $279,029 (cost
$279,029).
F. BENEFITS PAYABLE
As of December 31, 1995 and 1994, net assets available for benefits
included benefits of $69,484 and $553,455, respectively, due to
participants who had withdrawn from participation in the Plan. As of
December 31, 1994, benefits payable of $553,455 were reported as a
liability on the ERISA Form 5500, resulting in a difference between
net assets available for benefits presented within this report of
$17,181,642 and the net assets recorded on Form 5500 of $16,628,187.
During 1995, the Department of Labor clarified its definition of
benefits payable, which resulted in no liability for benefits payable
on Form 5500 as of December 31, 1995. The following is a
reconciliation of benefit payments according to the financial
statements to Form 5500 for the year ended December 31, 1995:
Benefit payments per the financial statements $1,643,823
Amounts allocated to withdrawing participants
at December 31, 1994 (553,455)
----------
Benefit payments per Form 5500 $1,090,368
==========
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G. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund were as
follows for years ended December 31:
1995 1994
----------- ------------
Employee Contributions:
Fidelity Puritan Fund $ 34,362 $ 4,693
Fidelity Magellan Fund 353,686 271,963
Fidelity Contrafund 236,354 179,701
Fidelity Growth and Income Fund 297,674 235,006
Fidelity Overseas Fund 35,253 15,923
Fidelity Balanced Fund 157,288 133,354
Fidelity Government Money Market Fund 314,095 237,777
Fidelity Short-Intermediate
Government Fund - 40,399
Quanex Corporation common stock 19,116 50,706
Common/commingled trust 48,909 8,814
----------- ------------
$1,496,737 $1,178,336
=========== ============
1995 1994
----------- ------------
Employer Contributions:
Fidelity Puritan Fund $ 17,977 $ 2,845
Fidelity Magellan Fund 265,178 247,497
Fidelity Contrafund 164,793 159,420
Fidelity Growth and Income Fund 221,139 209,866
Fidelity Overseas Fund 18,633 10,892
Fidelity Balanced Fund 141,918 133,866
Fidelity Government Money Market Fund 312,536 287,442
Fidelity Short-Intermediate
Government Fund - 42,381
Quanex Corporation common stock 16,809 2,686
Common/commingled trust 18,743 3,752
----------- ------------
$1,177,726 $1,100,647
=========== ============
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1995 1994
----------- ------------
Benefit payments:
Fidelity Puritan Fund $ 4,042 $ 724
Fidelity Magellan Fund 395,607 173,120
Fidelity Contrafund 209,350 114,938
Fidelity Growth and Income Fund 348,748 231,561
Fidelity Overseas Fund 402 14,196
Fidelity Balanced Fund 24,874 147,526
Fidelity Government Money Market Fund 659,346 733,507
Fidelity Short-Intermediate
Government Fund - 251,569
Quanex Corporation common stock 122 2,320
Common/commingled trust 1,332 2,972
----------- ------------
$1,643,823 $1,672,433
=========== ============
1995 1994
----------- ------------
Investment income:
Fidelity Puritan Fund $ 19,349 $ (637)
Fidelity Magellan Fund 1,151,140 (57,133)
Fidelity Contrafund 525,713 (21,639)
Fidelity Growth and Income Fund 1,147,352 55,544
Fidelity Overseas Fund 51,666 (1,692)
Fidelity Balanced Fund 156,063 (47,397)
Fidelity Government Money Market Fund 362,824 224,906
Fidelity Short-Intermediate
Government Fund - (43,239)
Quanex Corporation common stock (21,219) (655)
Common/commingled trust 33,305 7,315
----------- ------------
$3,426,193 $ 115,373
=========== ============
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Item 27a - Schedule of Assets Held for Investment Purposes
EIN: 38-1872178; PN 017
QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(K) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
Shares/ Current
Par Value Cost Value
--------- ---- -------
Mutual Fund Assets - Fidelity Investments:
- -------------------------------------------
Contrafund* 60,002 $ 1,948,559 $ 2,281,286
Government Money Market Fund* 6,416,031 6,416,031 6,416,031
Puritan Fund* 7,514 119,111 127,812
Growth and Income Fund* 165,756 3,638,444 4,483,709
Magellan* 53,385 3,867,994 4,590,045
Overseas Fund* 17,030 486,095 495,052
Balanced Fund* 92,852 1,202,954 1,255,353
----------- -----------
Total Mutual Fund Assets 17,679,188 19,649,288
Quanex Corporation Common Stock* 31,575 647,285 611,774
Common/Commingled Trust* 439,555 439,555 439,555
Participant loans (bearing interest rates
from 7.85% to 11%) 752,684 752,684
----------- -----------
Total investments $19,518,712 $21,453,301
=========== ===========
*Party-in-Interest
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Item 27d - Schedule of Reportable (5%) Transactions EIN 38-1872178; PN 017
NICHOLS-HOMESHIELD 401(K) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
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)
- ----------- ----------------- --------- --------------- ------- ------- ------------ ------
Magellan Fund 108 $1,895,417
66 $1,234,925 $1,118,069 $1,234,925 $116,856
Contrafund 87 1,372,327
53 935,051 882,613 935,051 52,438
Growth & Income Fund 102 1,210,975
65 794,612 715,917 794,612 78,695
Overseas Fund 58 2,624,733
29 2,517,434 2,486,944 2,517,434 30,490
Government Money Market Fund 96 1,956,550
95 2,306,488 2,306,488 2,306,488 0
Common/Commingled Trust 73 3,458,959
34 3,320,803 3,320,803 3,320,803 0
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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.
Nichols-Homeshield 401(k) Savings Plan
Date June 24, 1996 /s/ JOSEPH K. PEERY
____________________________________
Joseph K. Peery, Benefits Committee
13
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.
33-54081 of Quanex Corporation on Form S-8 of our report dated May 3, 1996
appearing in the Annual Report of Form 11-K of the Nichols - Homeshield 401(k)
Savings Plan for the year ended December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 1996
