1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
------ ------
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if different from that
of the issuer name below:
Piper Impact 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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[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Piper Impact 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Piper Impact 401(k) Savings Plan (the "Plan") as of December 31, 1997 and
1996 and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1997 and 1996 and the changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of (1) investments as of December 31, 1997 and (2) 5% reportable transactions
for the year ended December 31, 1997 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 1997 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
May 22, 1998
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QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-----------------------
1997 1996
---------- ----------
Assets:
Investments, at fair value:
Mutual fund assets:
Fidelity Puritan Fund $ 393,816 $ 218,869
Fidelity Contrafund 522,991 234,672
Fidelity Intermediate Bond Fund 171,180 110,374
Fidelity Retirement Growth Fund 254,730 132,456
Fidelity Blue Chip Fund 1,399,981 707,914
Fidelity Asset Manager Fund 216,111 120,481
Fidelity Retirement Money Market Fund 273,551 154,004
Quanex Corporation Common Stock 42,176 --
Fidelity Common/Commingled Trust 150,845 83,199
---------- ----------
3,425,381 1,761,969
Participant loans 146,425 44,691
---------- ----------
Total 3,571,806 1,806,660
---------- ----------
Employee contributions receivable 176,609 144,214
Employer contributions receivable 27,343 24,290
---------- ----------
Total 203,952 168,504
---------- ----------
Net Assets Available for Benefits $3,775,758 $1,975,164
========== ==========
See notes to financial statements.
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QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
Year Ended December 31,
-----------------------
1997 1996
---------- ----------
Investment income:
Interest and dividends $ 231,919 $ 114,195
Net appreciation in fair value of investments 252,778 40,251
---------- ----------
Total income 484,697 154,446
---------- ----------
Contributions:
Employer 240,468 198,604
Less forfeitures 9,434 2,887
---------- ----------
231,034 195,717
Employee 1,247,453 1,007,030
---------- ----------
Total contributions 1,478,487 1,202,747
---------- ----------
Interest on participant loans 6,290 555
---------- ----------
Total additions 1,969,474 1,357,748
---------- ----------
Benefit payments 163,966 30,777
Administrative fees 4,914 1,856
---------- ----------
Total deductions 168,880 32,633
---------- ----------
Increase in net assets available
for benefits 1,800,594 1,325,115
Net assets available for benefits:
Beginning of year 1,975,164 650,049
---------- ----------
End of year $3,775,758 $1,975,164
========== ==========
See notes to financial statements.
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QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
A. DESCRIPTION OF THE PLAN
The following description of the Piper Impact 401(k) Plan (the "Plan")
is provided for general informational purposes only. Participants
should refer to the Plan document for a more complete description of
the Plan's provisions.
(1) General. The Plan is a defined contribution plan which covers
substantially all full-time employees of Piper Impact, Inc.
(the "Company"), a subsidiary of Quanex Corporation. The Plan
permits eligible employees to elect a deferral of compensation
under Section 401(k) of the Internal Revenue Code ("Code").
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"). The Benefits Committee (the
"Committee"), appointed by Quanex Corporation'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 document. The Company contributes 25%
of the first 6% of base compensation that a participant
contributes to the Plan. Contributions are subject to certain
limitations. Additional amounts may be contributed at the
option of the Company's Board of Directors.
(3) Participant Accounts. Each participant's account is credited
with the participant's contribution and allocations of the
Company's contribution and Plan earnings, and charged with an
allocation of administrative expenses. Allocations are based
on participant earnings or account balances, as defined.
Forfeited balances of terminated participants' non-vested
accounts are used to reduce current or future Company
contributions. The benefit to which a participant is entitled
is the benefit that can be provided from the participant's
vested account.
(4) Investment Options. Participants may direct allocations of
their contributions to the following funds:
Puritan Fund - invested and reinvested in domestic and foreign
common stocks, preferred stocks and bonds, and debt
securities.
Contrafund - invested and reinvested in equities of foreign
and preferred stock.
Intermediate Bond Fund - invested primarily in fixed-income
obligations including corporate bonds, mortgage securities,
bank obligations and U.S. government and agency securities.
Retirement Growth Fund - invested and reinvested in common
stocks and other types of securities.
Blue Chip Fund - invested and reinvested primarily in common
stocks of established domestic and foreign companies.
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Asset Manager Fund - invested and reinvested in domestic and
foreign stocks, bonds, and short-term and money market
instruments.
Retirement Money Market Fund - invested in short-term money
market securities of U.S. and foreign issuers.
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
(5) Vesting. Participants are immediately vested in their
contributions and earnings thereon. Vesting in the Company's
matching and discretionary contribution portion of their
accounts plus actual earnings thereon is based on years of
continuous service. A participant is 20% vested for each year
of credited service beginning with his or her second year and
is 100% vested after six years of credited service.
(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
Code, 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. As of December 31, 1997
and 1996, net assets available for benefits included benefits
of $9,913 and $2,890, respectively, due to participants who
had withdrawn from participation in the Plan.
(7) Loans. Loans may be granted to a participant of the Plan at
the Committee's discretion. Loan terms range up to five years
or ten years if used for the purchase of a primary residence.
The loans bear a reasonable rate of interest established by
the Committee. Interest on the loan is allocated to the
borrower's participant account. Loan set up fees and carrying
fees are paid by the participant to Fidelity.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting Basis. The financial statements of the Plan are
prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles.
(2) Investment Valuation. The Plan recognizes net appreciation or
depreciation in the fair value of its investments. Investments
are reflected at fair value in the financial statements. Fair
value of mutual fund assets is determined using a quoted net
asset value. Fair value for Quanex Corporation common stock,
which is listed on the New York Stock Exchange, is determined
by using the last recorded sales price. The fair value of the
common/commingled trust is at face value.
(3) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of changes in
the net assets available for benefits during the reporting
period. The Plan's financial statements include amounts that
are based on management's best estimates and judgments. Actual
results could differ from these estimates.
(4) Administrative Expense. The Company pays all administrative
expenses.
(5) Payments of Benefits. Benefit payments are recorded when paid.
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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 of ERISA. In the event of Plan termination, participants
will become 100% vested in their accounts.
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 Code and, as a result, is exempt from taxation
under Section 501(a) of the Code. 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.
E. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Fidelity mutual fund assets, as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
----------- ----------- ----------- ----------- ----------- -----------
Purchases 250,854 $ 1,705,534 164,862 $ 1,194,042
Sales 86,413 373,734 $ 408,988 15,545 106,236 $ 107,440
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Fidelity Common/Commingled Trust, as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
----------- ----------- ----------- ----------- ----------- -----------
Purchases 105,387 $ 105,387 66,192 $ 66,192
Sales 37,741 37,741 $ 37,741 13,217 13,217 $ 13,217
During the years ended December 31, 1997 and 1996, the Plan purchased
and sold shares of Quanex Corporation common stock as shown below:
1997 1996
---- ----
Shares Cost Sales Price Shares Cost Sales Price
----------- ----------- ----------- ----------- ----------- -----------
Purchases 1,555 $ 48,030 -- -- --
Sales 55 1,682 $ 1,588 -- -- --
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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:
1997 1996
----------- -----------
Employee Contributions:
Fidelity Puritan Fund $ 139,215 $ 118,686
Fidelity Contrafund 204,631 142,176
Fidelity Intermediate Bond Fund 67,476 64,591
Fidelity Retirement Growth Fund 95,104 85,983
Fidelity Blue Chip Fund 444,602 388,617
Fidelity Asset Manager Fund 76,557 68,409
Fidelity Retirement Money Market Fund 121,081 88,743
Quanex Corporation Common Stock 35,632 --
Fidelity Common/Commingled Trust 63,155 49,825
----------- -----------
$ 1,247,453 $ 1,007,030
=========== ===========
1997 1996
----------- -----------
Employer Contributions:
Fidelity Puritan Fund $ 26,783 $ 23,821
Fidelity Contrafund 37,704 26,865
Fidelity Intermediate Bond Fund 13,701 12,487
Fidelity Retirement Growth Fund 18,608 15,386
Fidelity Blue Chip Fund 87,097 76,268
Fidelity Asset Manager Fund 14,557 12,750
Fidelity Retirement Money Market Fund 14,576 18,380
Quanex Corporation Common Stock 5,045 --
Fidelity Common/Commingled Trust 12,963 9,760
----------- -----------
$ 231,034 $ 195,717
=========== ===========
1997 1996
----------- -----------
Benefit Payments:
Fidelity Puritan Fund $ 17,800 $ 2,425
Fidelity Contrafund 15,905 6,166
Fidelity Intermediate Bond Fund 8,822 1,173
Fidelity Retirement Growth Fund 9,986 3,791
Fidelity Blue Chip Fund 55,029 15,749
Fidelity Asset Manager Fund 8,957 795
Fidelity Retirement Money Market Fund 32,630 79
Quanex Corporation Common Stock 1,419 --
Fidelity Common/Commingled Trust 13,418 599
----------- -----------
$ 163,966 $ 30,777
=========== ===========
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1997 1996
----------- -----------
Investment Income:
Fidelity Puritan Fund $ 62,162 $ 21,079
Fidelity Contrafund 80,320 29,620
Fidelity Intermediate Bond Fund 10,824 3,657
Fidelity Retirement Growth Fund 32,386 6,660
Fidelity Blue Chip Fund 250,281 74,190
Fidelity Asset Manager Fund 34,017 10,693
Fidelity Retirement Money Market Fund 11,626 5,173
Quanex Corporation Common Stock (3,830) --
Fidelity Common/Commingled Trust 6,911 3,374
----------- -----------
$ 484,697 $ 154,446
=========== ===========
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ITEM 27-a SCHEDULE OF ASSETS HELD FOR INVESTMENTS PURPOSES
EIN: 76-0396886; PN 001
QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1997
Shares/ Current
Par Value Cost Value
---------- ---------- ----------
Mutual Fund Assets - Fidelity Investments:
Puritan Fund* 20,321 $ 363,226 $ 393,816
Contrafund* 11,216 480,823 522,991
Intermediate Bond Fund* 16,832 170,105 171,180
Retirement Growth Fund* 15,118 278,500 254,730
Blue Chip Fund* 35,478 1,206,445 1,399,981
Asset Manager Fund* 11,777 199,782 216,111
Retirement Money Market Fund* 273,551 273,551 273,551
-----------------------
Total Mutual Fund Assets 2,972,432 3,232,360
Quanex Corporation Common Stock* 1,500 46,348 42,176
Fidelity Common/Commingled Trust* 150,845 150,845 150,845
Participant loans (bearing interest rates
from 7.85% to 11%) 146,425 146,425
-----------------------
Total Investments $3,316,050 $3,571,806
=======================
* Party-in-Interest
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ITEM 27-d - SCHEDULE OF REPORTABLE (5%) TRANSACTIONS EIN 76-0396886; PN 001
QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
Series of Transactions
Current
Total Number of Total Number of Value on Net
Purchases During Purchase Sales During the Selling Cost of Transaction Gain
Description the Plan Year Price Plan Year Price Asset Date (Loss)
----------- ---------------- -------- ---------------- -------- -------- ----------- --------
Fidelity Investments:
Puritan* 61 $197,986 44 $ 55,645 $ 50,913 $ 55,645 $ 4,732
Contrafund* 49 298,784 29 42,988 37,418 42,988 5,570
Intermediate Bond* 61 94,162 37 35,017 35,155 35,017 (138)
Retirement Growth* 51 166,433 31 32,549 30,320 32,549 2,229
Blue Chip* 85 646,301 59 140,189 120,125 140,189 20,064
Asset Manager* 49 110,252 34 30,530 27,733 30,530 2,797
Retirement Money Mkt* 61 191,616 41 72,070 72,070 72,070 0
Common/Commingled 54 105,387 38 37,741 37,741 37,741 0
Trust*
* 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.
Piper Impact 401 (k) Savings Plan
Date: June 29, 1998 /s/ Wayne M. Rose
----------------------------------------
Wayne M. Rose, Benefits Committee
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INDEX TO EXHIBITS
23.1 Independents Auditor's Consent