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 [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 -- Davenport
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
2
INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Nichols-Homeshield
401(k) Savings Plan - Davenport
We have audited the accompanying statements of net assets available for
benefits of the Nichols-Homeshield 401(k) Savings Plan - Davenport (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 - DAVENPORT
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------------------------
1995 1994
---------- ------------
Assets:
Investments at fair value -
Mutual fund assets:
Fidelity Puritan Fund $ 51,298 $ 16,831
Fidelity Magellan Fund 1,434,825 931,561
Fidelity Contrafund 711,513 440,914
Fidelity Growth and Income Fund 1,755,359 1,191,953
Fidelity Overseas Fund 88,561 120,696
Fidelity Balanced Fund 614,803 435,903
Fidelity Government Money Market Fund 2,820,968 2,445,663
Quanex Corporation common stock 103,640 59,346
Common/commingled trust 20,374 11,024
----------- ----------
7,601,341 5,653,891
Participant loans 490,166 360,335
----------- ----------
Total 8,091,507 6,014,226
----------- ----------
Employee contributions receivable 60,444 65,704
Employer contributions receivable 45,130 56,361
----------- ----------
Total 105,574 122,065
----------- ----------
Net assets available for benefits $8,197,081 $6,136,291
=========== ==========
See notes to financial statements.
4
QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN - DAVENPORT
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
December 31,
------------------------------
1995 1994
---------- ----------
Investment income:
Interest and dividends $ 397,598 $ 233,942
Net appreciation (depreciation) in
fair value of investments 763,389 (187,861)
---------- ----------
Total 1,160,987 46,081
---------- ----------
Contributions:
Employer 519,252 547,881
Less forfeitures 10,999 3,144
---------- ----------
508,253 544,737
Employee 554,454 594,047
---------- ----------
Total 1,062,707 1,138,784
---------- ---------
Interest on participant loans 33,277 25,430
---------- ----------
Total additions 2,256,971 1,210,295
---------- ----------
Benefit payments 194,297 357,557
Administrative fees 1,884 1,259
---------- ----------
Total deductions 196,181 358,816
---------- ----------
Increase in net assets available
for benefits 2,060,790 851,479
Net assets available for benefits:
Beginning of year 6,136,291 5,284,812
---------- ----------
End of year $8,197,081 $6,136,291
========== ==========
See notes to financial statements.
5
QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN - DAVENPORT
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 - Davenport (the "Plan") is provided for general information
purposes only. Participants should refer to the Plan document for
more complete information.
1. General. The Plan, sponsored by Quanex Corporation (the
"Company"), was established on October 1, 1987 and was amended
and restated in its entirety in January 1993. The Plan is a
defined contribution plan, which covers substantially all
union hourly employees of the Davenport, Iowa facility. The
Plan permits eligible employees to elect a deferral of
compensation under Section 401(k) of the Internal Revenue Code
("IRC"). 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. Participants may contribute to the Plan by
electing salary deferrals between 1% and 15% of compensation
as defined by the Plan agreement. Participants may also
contribute in half percentages. Company contributions are
made based on a percentage of the employee's compensation for
each individual with at least 1,000 hours of employment
service.
3. Participant Accounts. Each participant's account is credited
with the participant's contribution, the employer's
contribution, and the participant's pro rata share of
investment earnings. Investment earnings 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 allocations of
their contributions to the following funds:
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.
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.
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5. Vesting. Participants are immediately vested in their
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. In accordance with the
IRC, upon termination of service, a participant may elect to
receive a lump-sum distribution equal to the total amount of
vested benefits in his or her account.
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 for the
purchase of 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 using the last recorded sales
price.
4. Payment of Benefits. Benefit payments are recorded when
paid. As of December 31, 1995 and 1994, net assets available
for benefits included benefits of $5,270 and $0, respectively,
due to participants who have withdrawn from participation in
the Plan.
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 Internal Revenue Code. The Plan received a
favorable letter of tax determination from the Internal Revenue
Service dated June 18, 1993 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
------ -------- ------ -------
6,171 $130,522 2,594 $58,983
During the year ended December 31, 1995, the Plan sold 3,416 shares of
Quanex Corporation common stock valued at $75,227 (cost $73,665).
During the years ended December 31, 1995 and 1994, the Plan purchased
shares of Fidelity mutual fund assets, as shown below:
1995 1994
---- ----
Shares Cost Shares Cost
--------- ---------- --------- ----------
1,229,689 $2,945,250 1,454,728 $2,668,351
During the years ended December 31, 1995 and 1994, the Plan sold
828,604 and 589,033 shares of Fidelity mutual fund assets valued at
$1,825,834 and $1,824,022 (cost $1,761,256 and $1,771,152),
respectively.
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
------ ------ ------ -------
9,350 $9,350 11,024 $11,024
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F. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund were as
follows for the years ended December 31:
1995 1994
--------- ----------
Employee Contributions:
Fidelity Puritan Fund $ 8,238 $ 1,750
Fidelity Magellan Fund 88,077 115,775
Fidelity Contrafund 44,752 81,248
Fidelity Growth and Income Fund 127,054 135,098
Fidelity Overseas Fund 20,838 14,284
Fidelity Balanced Fund 61,072 64,857
Fidelity Government Money
Market Fund 182,325 151,552
Fidelity Short-Intermediate
Government Fund - 23,518
Quanex Corporation common stock 14,350 5,190
Common/commingled trust 7,748 775
--------- ----------
$ 554,454 $ 594,047
========= ==========
1995 1994
--------- ---------
Employer Contributions:
Fidelity Puritan Fund $ 3,814 $ 1,249
Fidelity Magellan Fund 85,071 91,005
Fidelity Contrafund 52,740 57,904
Fidelity Growth and Income Fund 111,238 115,970
Fidelity Overseas Fund 11,723 10,355
Fidelity Balanced Fund 57,963 62,531
Fidelity Government Money
Market Fund 179,518 180,248
Fidelity Short-Intermediate
Government Fund - 23,150
Quanex Corporation common stock 5,457 1,950
Common/commingled trust 729 375
--------- ---------
$ 508,253 $ 544,737
========= =========
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1995 1994
---------- ----------
Benefit payments:
Fidelity Puritan Fund $ 0 $ 57
Fidelity Magellan Fund 28,971 22,884
Fidelity Contrafund 16,482 11,336
Fidelity Growth and Income Fund 9,760 25,282
Fidelity Overseas Fund 13,092 408
Fidelity Balanced Fund 7,498 12,142
Fidelity Government Money
Market Fund 118,494 271,384
Fidelity Short-Intermediate
Government Fund 0 13,826
Quanex Corporation common stock 0 201
Common/commingled trust 0 37
---------- ----------
$ 194,297 $ 357,557
========== ==========
1995 1994
---------- ----------
Investment income:
Fidelity Puritan Fund $ 6,041 $ (23)
Fidelity Magellan Fund 321,280 (15,704)
Fidelity Contrafund 161,934 (4,936)
Fidelity Growth and Income Fund 441,618 23,575
Fidelity Overseas Fund 12,960 (73)
Fidelity Balanced Fund 72,510 (22,803)
Fidelity Government Money 0
Market Fund 152,296 80,180
Fidelity Short-Intermediate
Government Fund 0 (14,823)
Quanex Corporation common stock (8,540) 408
Common/commingled trust 888 280
---------- ----------
$1,160,987 $ 46,081
========== ==========
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Item 27a - Schedule of Assets Held for Investment Purposes
EIN: 38-1872178; PN 016
QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN - DAVENPORT
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
Shares/ Current
Par Value Cost Value
---------- ---------- -----------
Mutual Fund Assets - Fidelity Investments:
Contrafund* 18,714 $ 611,013 $ 711,513
Government Money Market Fund* 2,820,968 2,820,968 2,820,968
Puritan Fund* 3,016 48,384 51,298
Growth and Income Fund* 64,893 1,434,276 1,755,359
Magellan* 16,688 1,221,174 1,434,825
Overseas Fund* 3,046 84,812 88,561
Balanced Fund* 45,474 592,589 614,803
---------- -----------
Total Mutual Fund Assets 6,813,216 7,477,327
Quanex Corporation Common Stock* 5,349 115,840 103,640
Common/Commingled Trust* 20,374 20,374 20,374
Participant loans (bearing interest rates
from 7.85% to 11%) 490,166 490,166
---------- -----------
Total investments $7,439,596 $ 8,091,507
========== ===========
* Party-in-Interest
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Item 27d - Schedule of Reportable (5%) Transactions EIN 38-1872178; PN 016
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN - DAVENPORT
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 53 $505,906
35 $250,440 $235,441 $250,440 $14,999
Contrafund 49 314,396
31 150,182 135,051 150,182 15,131
Growth & Income Fund 54 468,985
36 262,424 234,292 262,424 28,132
Overseas Fund 31 195,006
14 238,067 230,726 238,067 7,341
Balanced Fund 50 263,895
29 133,587 134,615 133,587 (1,028)
Government Money
Market Fund 67 1,166,388
50 791,084 791,084 791,084 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 - Davenport
Date June 24, 1996 /s/ JOSEPH K. PEERY
----------------------------- ---------------------------------------
Joseph K. Peery, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independent Auditor's Consent
1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-54081 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-Davenport for the year ended December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
- ----------------------------
Deloitte & Touche LLP
Houston, Texas
June 24, 1996
