1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ___________.
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if different from
that of the issuer name below:
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
(713) 961-4600
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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, 1996 and 1995, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1996 and 1995, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of (1) investments as of December 31, 1996 and (2) 5% reportable transactions
for the year ended December 31, 1996 are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These schedules are the responsibility
of the Plan's management. Such schedules have been subjected to the auditing
procedures applied in our audit of the basic 1996 financial statements and, in
our opinion, are fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
May 9, 1997
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QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-------------------------
1996 1995
----------- -----------
Investments at fair value:
Mutual fund assets:
Fidelity Puritan Fund $ 368,260 $ 127,812
Fidelity Magellan Fund 4,613,459 4,590,045
Fidelity Contrafund 3,436,148 2,281,286
Fidelity Growth & Income Fund 5,722,217 4,483,709
Fidelity Overseas Fund 339,269 495,052
Fidelity Balanced Fund 1,441,746 1,255,353
Fidelity Government Money Market Fund 6,587,993 6,416,031
Templeton Foreign Fund 58,309 -
Quanex Corporation common stock 518,125 611,774
Common/commingled trust 764,169 439,555
Loans to participants 1,067,089 752,684
----------- -----------
Total investments 24,916,784 21,453,301
----------- -----------
Contributions Receivable:
Employer 96,848 102,285
Employee 126,604 139,177
----------- -----------
Total 223,452 241,462
----------- -----------
Net assets available for benefits $25,140,236 $21,694,763
=========== ===========
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,
-------------------------
1996 1995
----------- -----------
Investment income:
Interest and dividends $ 1,760,124 $ 1,135,097
Net appreciation in fair value of investments 1,044,037 2,291,096
----------- -----------
Total income 2,804,161 3,426,193
----------- -----------
Contributions:
Employer 1,302,003 1,202,902
Less forfeitures 34,342 25,176
----------- -----------
1,267,661 1,177,726
Employee 1,464,390 1,496,737
----------- -----------
Total contributions 2,732,051 2,674,463
----------- -----------
Interest on participant loans 69,555 61,206
----------- -----------
Total additions 5,605,767 6,161,862
----------- -----------
Benefit payments 2,154,169 1,643,823
Administrative fees 6,125 4,918
----------- -----------
Total deductions 2,160,294 1,648,741
----------- -----------
Increase in net assets available
for benefits 3,445,473 4,513,121
Net assets available for benefits:
Beginning of year 21,694,763 17,181,642
----------- -----------
End of year $25,140,236 $21,694,763
=========== ===========
See notes to financial statements
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QUANEX CORPORATION
NICHOLS-HOMESHIELD 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
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 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.
Puritan Fund - invested and reinvested in common and preferred
stocks and bonds.
Templeton Foreign Fund - invested and reinvested in foreign
securities.
Quanex Corporation Common Stock - invested and reinvested
exclusively in the common stock of Quanex Corporation.
Common/Commingled Trust - invested and reinvested in
investment contracts issued by insurance companies, banks and
other financial institutions.
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(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. As of December 31, 1996 and 1995, net assets
available for benefits included benefits of $22,530 and
$69,484, respectively, due to participants who have withdrawn
from participation in the Plan.
(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. The fair value of the common/commingled trust is at
face value.
(4) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of changes in
the net assets available for benefits during the reporting
period. The Plan's financial statements include amounts that
are based on management's best estimates and judgments.
Actual results could differ from those estimates.
(5) Payment of Benefits. Benefit payments are recorded when paid.
(C) PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has
the right under the Plan to terminate the Plan at any time subject to
the provisions set forth in ERISA. In the event of plan termination,
the assets held by the Trustee under the Plan will be valued and fully
vested, and each participant will be entitled to distributions
respecting his or her account.
(D) FEDERAL INCOME TAX STATUS
The Plan is subject to specific rules and regulations related to
employee benefit plans under the Department of Labor and the Internal
Revenue Service ("IRS"). The Plan is a qualified trust under Sections
401(a) and 401(k) of the Internal Revenue Code (the "Code") and, as a
result, is exempt from taxation under Sections 501(a) of the Code.
The Plan received a favorable determination letter from the IRS dated
December 22, 1994. The Company believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Code. Therefore, it believes the Plan was
qualified and the related trust was tax-exempt as of the financial
statement dates.
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E. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Quanex Corporation common stock, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 6,087 $145,904 21,420 $410,186
Sales 18,735 370,590 $435,319 121 2,554 $ 2,618
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Fidelity mutual funds, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 2,158,747 $12,577,957 2,217,167 $9,843,629
Sales 1,918,003 10,179,781 $10,508,116 2,500,093 7,931,353 $8,215,994
During the years ended December 31, 1996 and 1995, the Plan purchased
and sold shares of Fidelity Common/Commingled Trust, as shown below:
1996 1995
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------ ---- ----------- ------ ---- -----------
Purchases 5,950,598 $5,950,598 3,458,959 $3,458,959
Sales 5,625,983 5,625,983 $5,625,983 3,320,803 3,320,803 $3,320,803
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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:
1996 1995
---------- ----------
Employee Contributions:
Fidelity Puritan Fund $ 24,360 $ 34,362
Fidelity Magellan Fund 339,683 353,686
Fidelity Contrafund 220,724 236,354
Fidelity Growth and Income Fund 333,733 297,674
Fidelity Overseas Fund 41,056 35,253
Fidelity Balanced Fund 129,715 157,288
Fidelity Government Money Market Fund 303,711 314,095
Templeton Fund 4,847 -
Quanex Corporation common stock 28,928 19,116
Common/commingled trust 37,633 48,909
---------- ----------
$1,464,390 $1,496,737
========== ==========
1996 1995
---------- ----------
Employer Contributions:
Fidelity Puritan Fund $ 20,637 $ 17,977
Fidelity Magellan Fund 268,954 265,178
Fidelity Contrafund 182,916 164,793
Fidelity Growth and Income Fund 247,719 221,139
Fidelity Overseas Fund 24,525 18,633
Fidelity Balanced Fund 121,618 141,918
Fidelity Government Money Market Fund 345,797 312,536
Templeton Foreign Fund 2,311 -
Quanex Corporation common stock 25,760 16,809
Common/commingled trust 27,424 18,743
---------- ----------
$1,267,661 $1,177,726
========== ==========
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1996 1995
---------- ----------
Benefit payments:
Fidelity Puritan Fund $ 42,523 $ 4,042
Fidelity Magellan Fund 393,328 395,607
Fidelity Contrafund 73,823 209,350
Fidelity Growth and Income Fund 455,730 348,748
Fidelity Overseas Fund 121,544 402
Fidelity Balanced Fund 197,261 24,874
Fidelity Government Money Market Fund 842,522 659,346
Templeton Foreign Fund - -
Quanex Corporation common stock 11,667 122
Common/commingled trust 15,771 1,332
---------- ----------
$2,154,169 $1,643,823
========== ==========
1996 1995
----------- -----------
Investment income:
Fidelity Puritan Fund $ 39,483 $ 19,349
Fidelity Magellan Fund 483,131 1,151,140
Fidelity Contrafund 573,106 525,713
Fidelity Growth and Income Fund 937,521 1,147,352
Fidelity Overseas Fund 74,008 51,666
Fidelity Balanced Fund 118,163 156,063
Fidelity Government Money Market Fund 331,052 362,824
Templeton Foreign Fund 5,015 -
Quanex Corporation common stock 210,499 (21,219)
Common/commingled trust 32,183 33,305
----------- -----------
$ 2,804,161 $ 3,426,193
=========== ===========
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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, 1996
Shares/ Current
Par Value Cost Value
--------- ---- -------
Mutual Fund Assets - Fidelity Investments:
- ------------------------------------------
Contrafund* 81,522 $ 2,842,393 $ 3,436,148
Government Money Market Fund* 6,587,993 6,587,993 6,587,993
Puritan Fund* 21,361 363,973 368,260
Growth and Income Fund* 186,209 4,377,320 5,722,217
Magellan* 57,203 4,188,048 4,613,459
Overseas Fund* 11,001 319,150 339,269
Balanced Fund* 102,397 1,343,059 1,441,746
Templeton Foreign Fund* 5,628 55,431 58,309
----------- -----------
Total mutual fund assets 20,077,367 22,567,401
Quanex Corporation common stock* 18,927 422,598 518,125
Common/commingled trust* 764,169 764,169 764,169
Participant loans (bearing interest rates
from 7.85% to 11%) 1,067,089 1,067,089
----------- -----------
Total investments $22,331,223 $24,916,784
=========== ===========
*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, 1996
Single Transactions
-------------------
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------------- --------- --------------- ------- ------- ------------ ------
None
Series of Transactions
----------------------
Current
Total Number of Total Number Value on Net
Purchases During Purchase of Sales During Selling Cost of Transaction Gain
Description Plan Year Price Plan Year Price Asset Date (Loss)
- ----------- ----------------- --------- --------------- ------- ------- ------------ ------
*Magellan Fund 124 $1,599,339
94 $1,345,826 $1,279,285 $1,345,826 $ 66,541
*Contrafund 112 1,225,157
58 378,427 331,323 378,427 47,104
*Growth & Income Fund 130 1,365,280
80 784,945 626,404 784,945 158,541
*Overseas Fund 84 5,737,666
41 5,947,091 5,904,611 5,947,091 42,480
*Government Money Market Fund 109 1,809,772
94 1,637,810 1,637,810 1,637,810 0
*Common/Commingled Trust 86 5,950,598
55 5,625,983 5,625,983 5,625,983 0
- -----------------------
*Party-in-interest
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Nichols-Homeshield 401(k) Savings Plan
Date: June 24, 1997 /s/ Joseph K. Peery
------------------ ---------------------------------------
Joseph K. Peery, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independent Auditor's Consent