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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________
Commission file number 1-5725
QUANEX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 38-1872178
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1900 WEST LOOP SOUTH, SUITE 1500
HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 961-4600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
RIGHTS TO PURCHASE SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
DEPOSITARY CONVERTIBLE EXCHANGEABLE
PREFERRED SHARES, EACH REPRESENTING
1/10TH OF A SHARE OF 6.88% CUMULA-
TIVE CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK ($250 LIQUIDATION
PREFERENCE) NEW YORK STOCK EXCHANGE, INC.
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the registrant's voting stock held by
non-affiliates as of November 30, 1994, computed by reference to the closing
price for the Common Stock on the New York Stock Exchange, Inc. on that date,
was $294,490,013. Such calculation assumes only the registrant's officers and
directors were affiliates of the registrant.
At January 23, 1995, there were outstanding 13,429,533 shares of the
registrant's Common Stock, $.50 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Reference to this Report
--------- ------------------------
Annual Report to Stockholders Parts I, II and IV
Proxy Statement for Annual Meeting of
Stockholders to be held March 2, 1995 Part III
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ITEM 1. BUSINESS
GENERAL
The Company was organized in 1927 as a Michigan corporation under the name of
Michigan Seamless Tube Company. The Company reincorporated in Delaware in 1968
under the same name and changed its name to Quanex Corporation in 1977. The
Company's executive offices are located at 1900 West Loop South, Suite 1500,
Houston, Texas 77027. References made to the "Company" or "Quanex" include
Quanex Corporation and its subsidiaries unless the context otherwise requires.
Quanex Corporation is a technological leader in the manufacture of specialized
metals, including carbon and alloy steel and aluminum. The Company's products
include engineered hot rolled carbon and alloy steel bars, cold finished steel
bars, seamless and welded steel tubing and aluminum products. Quanex produces
high quality specialized metal products for selected markets to achieve
attractive profit margins. Through state-of-the-art process technology, low cost
production and engineering to specific customer applications, the Company
believes it achieves competitive advantages. To reduce the impact of cyclical
economic downturns, the Company's strategy is to participate in diversified
markets, including the industrial machinery and capital equipment industries,
the transportation industry (including auto and truck), energy processing and
the home building and remodeling industries.
Since the mid-1980s Quanex has refocused its strategy from being a
manufacturer principally of steel products with a heavy dependence on energy
markets to a diversified specialty metals company serving a broad range of
markets. The Company's future growth strategy focuses on continued penetration
of higher margin markets for the Company's steel products and the continued
expansion of its aluminum products manufacturing operations. Quanex also has
implemented programs to increase capacity utilization by selectively producing
certain commodity grade products at some of its facilities.
The Company has invested significantly in technologically advanced continuous
manufacturing processes to meet demanding quality specifications and to achieve
cost efficiencies. In its MacSteel operations, rotary centrifugal continuous
casters are used with an in-line manufacturing process to produce bearing grade
and aircraft quality, seam-free, specialty engineered carbon and alloy steel
bars that enable Quanex to participate in higher margin markets. In August 1991,
the Company completed Phase I of a capital improvement program for its MacSteel
operations, at a capital cost of approximately $20 million, that enhanced the
steel refining processes and increased productive capacity by approximately 10%
to 500,000 tons per year. Phase II of the program aims at increasing caster
productivity and modernizing rolling and finishing equipment to achieve
dimensional precision and increase productive capacity by approximately 10% to
550,000 tons per year when completed in early 1995. The Company estimates total
expenditures of approximately $60 million for the Phase II project.
In 1989 Quanex entered the aluminum products business through the acquisition
of Nichols-Homeshield, Inc. to diversify its earnings base and continue its
strategic transition into specialty metals. In early 1990 the Company commenced
a two-year aluminum mini-mill construction project to increase significantly its
participation in the aluminum markets. The plant began commercial production in
July 1992 producing coiled aluminum sheet from scrap using a state-of-the-art
Hazelett thin-slab continuous caster with annual finishing capacity of
approximately 280 million pounds.
The Company's business is managed on a decentralized basis. Each operating
group has administrative, operating and marketing functions. Financial
accounting and controls measure each plant's return on investment; and superior
performance is rewarded with incentive compensation, which is a significant
portion of total employee compensation. Intercompany sales are conducted on an
arms-length basis. Operational activities and policy are managed by corporate
officers and a small staff who provide corporate accounting, financial and cash
management, tax and human resource services to operating divisions.
MARKETS AND PRODUCT SALES BY BUSINESS SEGMENT
The Company's operations are primarily grouped into four business segments,
consisting of (i) hot rolled steel bars, (ii) cold finished steel bars, (iii)
steel tubes and (iv) aluminum products. General corporate expenses are
classified as "Corporate and Other" operations.
Information with respect to major markets for the Company's products,
expressed as a percentage of consolidated net sales, is shown under the heading
"Sales by Major Markets" on page 8 of the 1994 Annual Report to Stockholders and
is incorporated herein by reference. Although Quanex has attempted to estimate
its sales by product and market categories, many products have multiple end uses
for several industries and sales are not recorded on the basis of product or
market categories. A significant portion of sales is made to distributors who
sell to different industries. Net sales by principal market are based upon the
total dollar volume of customer invoices. For the year ended October 31, 1994,
no single customer allowed for more than 10% of the Company's sales.
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A description of each industry segment is shown below:
Hot Rolled Steel Bars
The Company's hot rolled steel bar operations are conducted through its
MacSteel division, consisting of two plants located in Ft. Smith, Arkansas and
Jackson, Michigan. These plants manufacture hot finished special bar quality
("SBQ") carbon and alloy steel bars. Management believes that MacSteel has the
only two plants in North America using continuous rotary centrifugal casting
technology. This casting process produces inherently seam-free bars, without
surface defects and inclusions, thereby reducing the need for subsequent surface
conditioning. The continuous casting and automated in-line manufacturing
operations at the MacSteel plants substantially reduce labor and energy costs by
eliminating the intermittent steps that characterize manufacturing operations at
most larger integrated steel mills. Typically, the Company sells only complete
heat lots, or batches, which are made to specific customer requirements. Heat
lots average 45 tons at Jackson and 50 tons at Ft. Smith. MacSteel's high
quality steel bars currently sell for an average of approximately $520 per ton,
and its specialty products can sell at a considerable premium to that price.
MacSteel has focused its capital improvement programs on production of high
quality specialty steel bars. In August 1991, MacSteel completed the first phase
of a capital improvement program, called MacSteel Ultra Clean Steel Program, at
a cost of approximately $20 million ("Phase I"). This program improved
MacSteel's metallurgical, melting and casting operations and provided ultrasonic
testing facilities at both plants. These improvements enable the Company to
produce bearing grade and aircraft quality steel bars, permitting the Company to
participate in higher margin segments of the market. Phase I increased
productive capacity of the MacSteel operations by approximately 40,000 tons to
500,000 tons per year. Phase II of the Ultra Clean Steel Program will upgrade
and modernize rolling and finishing capacity and increase caster productivity.
This improvement should permit increased participation in the value-added cold
forming and bearing markets and will expand product size ranges. The Phase II
program is expected to increase annual productive capacity by approximately
50,000 tons to 550,000 tons per year when construction is completed, which is
currently scheduled to be in March 1995. Total cost of Phase II is expected to
be approximately $60 million.
MacSteel products are manufactured for customers in the automotive, light
truck, heavy truck, anti-friction bearing, off-road and farm equipment, defense,
capital equipment and seamless tubular industries. These industries use SBQ
steel in critical applications such as camshafts, crankshafts, transmission
gears, bearing cages and rollers, steering components, hydraulic mechanisms,
seamless tube production and track components of military vehicles. Part of
MacSteel's production may be sold to LaSalle Steel for conversion into cold
finished bars. The Company's steel tube business also purchases MacSteel bars
for piercing and extrusion into specialty tubular products.
Cold Finished Steel Bars
The Company's LaSalle Steel subsidiary produces cold finished bars in its
Hammond, Indiana facility. LaSalle Steel is a technological leader in the
production of cold finished and special purpose steel bar products, having
obtained numerous foreign and domestic patents throughout its history. Like
MacSteel, LaSalle Steel features products and manufacturing processes that
emphasize quality and cost effectiveness. LaSalle Steel uses high quality hot
finished steel bars that satisfy exacting quality and metallurgical
specifications. The bars are cold drawn and, through a combination of turning,
grinding and polishing operations, are manufactured into bars with precision
surfaces and guaranteed size and straightness tolerances. These processes,
together with heat treating, enhance the tensile and fatigue strength,
machinability, wear and corrosion resistance, weldability and platability of the
cold finished bar product.
LaSalle Steel's products are sold directly to customers in the machinery,
industrial equipment, tooling and automotive markets and are used to produce
items such as clutch shafts, gear box shafts, ball joints, sprockets and drive
mechanisms. Over one-half of LaSalle Steel's sales are to service centers that
supply the same industries. LaSalle Steel has implemented programs to increase
capacity utilization by selectively producing certain commodity grade products.
LaSalle Steel's Fluid Power plant in Griffith, Indiana is a major producer of
chrome plated steel bars. The plant uses advanced techniques of surface removal,
induction hardening and chrome plating to produce chrome plated bars and
induction hardened chrome plated bars. These products, which represent the
highest value-added products manufactured by LaSalle Steel, are used in
hydraulic and pneumatic cylinders by customers in the construction, material
handling, farm equipment and industrial machinery industries.
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Steel Tubes
The Company's steel tube business consists of its Michigan Seamless Tube
("MST") plant in South Lyon, Michigan, which produces cold drawn seamless steel
tube and drawn-over-mandrel welded steel tube; its Gulf States Tube ("GST")
plant in Rosenberg, Texas, which produces hot finished and cold drawn seamless
steel tube and welded tubular products; its Heat Treating plant in Huntington,
Indiana provides tube and bar heat treating services. A significant portion of
production at all plants is manufactured to specific customer orders. The
Company can deliver small quantities of finished products at competitive prices
in considerably less time than many other mills as a result of its production
efficiencies.
MST produces over 60 grades of carbon and alloy tubing. Major product lines
include customized seamless carbon and alloy mechanical tubing, carbon and alloy
boiler and condenser tubing and carbon and alloy pipe. These products are sold
by MST to customers in the commercial and utility boiler market, industrial
equipment market and capital goods market.
GST produces seamless and welded tubular products in 35 grades to over 100
specifications. The hot finished seamless carbon and alloy pipe and cold drawn
tubing produced at GST are used in petroleum refining, petrochemical, aircraft,
public utility, oil country and mechanical applications. Electric resistance
welded tubing is also manufactured primarily for heat exchangers and condenser
applications.
The Heat Treating plant provides tube and bar heat treating services, such as
quench and temper, stress relieving, normalizing and "cut-to-length".
Metallurgical testing services are also available. This plant serves customers
in the energy, automotive, ordnance, mining and fluid power markets.
Aluminum Products
Nichols-Homeshield ("N-H") manufactures aluminum sheet and fabricates aluminum
products for the home improvement, new construction and light commercial
construction markets. The principal products produced by N-H include aluminum
window screens, patio door screens, window frames, window and screen components,
rain carrying systems, exterior trim, and mill finish sheet. Aluminum reroll
coil is produced by the Company's mini-mill ("N-H Casting"), which began
commercial operations in July 1992. The aluminum reroll coil is cold rolled,
finished and marketed from the existing Davenport, Iowa, and Lincolnshire,
Illinois facilities (collectively, "Nichols-Aluminum"). The Company's aluminum
products are fabricated at the AMSCO plant ("AMSCO") in Rice Lake, Wisconsin,
and at its Homeshield Fabricated Products plant ("HFP") in Chatsworth, Illinois.
N-H's primary businesses are described below.
N-H Casting completed construction of a $60 million aluminum mini-mill in
Davenport, Iowa in late fiscal 1992. The capital costs included site
acquisition, scrap processing and melting equipment, a 52-inch wide Hazelett
thin-slab continuous caster and a three-stand hot rolling mill. The mini-mill
provides N-H Casting with finished capacity of as much as 280 million pounds
annually of hot rolled coiled aluminum sheet for building products markets,
including the Company's fabricated products businesses, and other markets. The
three-stand hot rolling mill is able to reduce aluminum slab from a thickness of
approximately .75 inches to coiled aluminum sheet with a thickness of .055
inches. This hot rolling mill process substantially reduces subsequent cold
rolling requirements. Similar to the more developed steel mini-mill sector, the
advent of aluminum mini-mills offers comparative advantages over large
integrated producers, including labor and energy savings and reduced capital and
raw material costs.
Nichols Aluminum finishes the coiled aluminum sheet produced at N-H Casting
and markets aluminum mill products. This division includes the Nichols Aluminum
Davenport (NAD) plant and the Nichols Aluminum Lincolnshire (NAL) plant acquired
in 1991. Operations include cold rolling to specific gauge, slitting to width,
annealing, leveling and custom coating. The Company currently has cold rolling
capacity of 300 million pounds annually. On August 25, 1993, a fire occurred at
NAL. Damage was confined to the largest of 3 rolling mills and adjacent portions
of the building. Total damage to the facility was approximately $17 million. The
damaged mill was made fully operational in the Company's second quarter of 1994.
The HFP plant manufactures a broad line of custom designed, roll formed and
stamped shapes and residential building and home improvement products. HFP
designs and manufactures custom engineered aluminum products at its plants in
Chatsworth, Illinois, such as window and screen components, wood window cladding
and other custom products for manufacturers of premium wood windows. HFP also
coats and fabricates aluminum coil in many colors, sizes and finishes into rain
carrying systems, soffit, exterior housing trim and painted coiled sheet and
roofing products. These products are sold primarily through distributors and
private label producers for the new housing, remodeling and do-it-yourself
markets. Most of these products are marketed under the "Homeshield" brand name.
The AMSCO plant manufactures aluminum window and patio door screens, window
frames, combination windows and related accessories. All production from this
facility is sold to Andersen Corporation, a major
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manufacturer of premium wood windows, for the home improvement, new construction
and commercial construction markets. AMSCO combines a strong product design and
development emphasis with reliable, just-in-time delivery to service Andersen
Corporation. This exclusive business relationship has been in effect for 50
years.
MANUFACTURING
The Company operates twelve manufacturing facilities in seven states. These
facilities feature efficient plant design and flexibility in manufacturing
processes, enabling the Company to produce a wide variety of products for
various industries and applications. Because the Company typically manufactures
products to customer specifications upon order, it is able to maintain minimal
levels of finished goods inventories at most locations.
Hot Rolled Steel Bars. The Company's MacSteel facilities produce specialty
engineered steel bars by melting high quality steel scrap and casting it in a
rotary continuous caster. MacSteel's molten steel goes through a secondary
refining stage consisting of argon stirring, ladle injection and vacuum arc
degassing prior to casting. This enables MacSteel to produce higher quality,
"cleaner" steels. SBQ products are produced through a continuous in-line process
by which scrap steel is converted into hot rolled steel bars without
interruption. To the Company's knowledge, MacSteel has the only two plants in
North America producing inherently seam-free steel bars using the rotary
continuous casting process.
As a result of its state-of-the-art continuous manufacturing technology, which
reduces labor, energy and process yield loss, the Company believes that MacSteel
is one of the lowest cost producers of SBQ carbon and alloy steel bars. The
Company believes that energy costs at MacSteel are significantly lower than
those of its competitors because its bars are moved directly from the caster to
the rolling mill before cooling, eliminating the need for costly reheating.
MacSteel's unit labor costs are similarly very low, with its highly automated
manufacturing process enabling it to produce finished high quality steel bars
using approximately 2 man-hours of labor per ton compared to an estimated
average of 4.5 man-hours per ton for U.S. integrated steel producers.
Cold Finished Steel Bars. At the LaSalle Steel facility in Hammond, Indiana,
hot finished steel bars meeting quality and metallurgical specifications are
used as raw materials in the manufacturing process. These bars are cold drawn
and, through a combination of turning, grinding and polishing operations,
manufactured into bars having precision surfaces with guaranteed size and
straightness tolerances. Heat treating further enhances the tensile and fatigue
strength, machinability, wear and corrosion resistance, weldability and
platability of LaSalle Steel's cold finished bar products. The Company's
Griffith, Indiana facility uses advanced techniques of induction hardening and
chrome plating to produce chrome plated bars and induction hardened chrome
plated bars.
Steel Tubes. The Company produces seamless tubing at its MST and GST
facilities. The manufacturing begins with solid steel bars that are heated and
then pierced on a rotary piercing mill at MST or extruded at GST. The resulting
hot tube shells are further reduced on draw benches. The product may be shipped
as hot finished pipe at GST or, after cooling and inspection, be again reduced
in size by cold drawing at both plants. After cold drawing, tubing is annealed
to develop specific metallurgical characteristics and mechanical properties to
customer order. Following straightening, the product is cut to length and
transferred to final inspection where various mechanical and non-destructive
tests are performed to insure product integrity. Cold drawn tubing offers a
greater degree of dimensional consistency and better machinability than does hot
finished tubing. GST also produces small diameter welded tubular products.
Aluminum Products. Manufacturing at the Company's various N-H facilities
ranges from the production of coiled aluminum sheet to the production and
fabrication of finished building products such as window and patio door screens
and window frames.
Since commercial production began in July 1992, all of the Company's aluminum
casting operations have been conducted at N-H Casting's mini-mill in Davenport,
Iowa. The single in-line manufacturing process at the facility has 280 million
pounds of annual finished and hot rolled capacity. The mini-mill converts scrap
to aluminum sheet through continuous casting and in-line hot rolling. N-H
Casting also has the ability to shred aluminum to broaden the diversity and
source of its scrap raw material. Additionally, fuel efficient delacquering
equipment improves the quality of the raw material before it reaches the melting
furnaces where it is blended through computer analysis to achieve the desired
alloy composition. After melting and degassing, the molten metal flows into a
single Hazelett thin-slab caster, which casts up to a 52-inch wide aluminum slab
at the rate of 20 to 26 feet per minute. The slab then is fed directly to a hot
mill with three in-line rolling stands to reduce the slab from a thickness of
approximately .75 inches to coiled aluminum sheet with a target thickness of
.055 inches. The combination of capacity increases and technological
enhancements are directed at producing quality coiled aluminum sheet for the
building products, service center, appliance and truck trailer markets. Cost
savings are derived from higher scrap utilization and the ability to use lower
cost scrap, reduced energy cost per pound, reduced cold rolling requirements and
decreases in direct and indirect labor costs.
Further processing of the coiled aluminum sheet from the mini-mill occurs at
Nichols Aluminum. At Nichols Aluminum's Davenport, Iowa, and Lincolnshire,
Illinois, plants, the specific product requirements of customers
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can be met through cold rolling to various gauges, slitting to specific widths,
annealing for additional product formability and tension levelling. Products at
Davenport can also be custom coated, an important feature for the building
products applications of certain customers.
Manufacturing of products and components takes place at the group's HFP
facilities (including residential building products such as rain carrying
systems and engineered products such as window and screen components), and at
AMSCO (including aluminum windows and patio door screens). These facilities
fabricate aluminum sheet into various components, some of which are then
assembled into final products. A significant aspect of the manufacturing process
at HFP and AMSCO is the use of MRP II, a closed loop management information
system in which all stages of manufacturing, including receiving, billing,
accounting, ordering and production, are linked. This process enables HFP and
AMSCO to operate efficiently and effect a just-in-time delivery system, with
minimal levels of raw materials inventory and maximum usage of available
manufacturing capacity.
RAW MATERIALS AND SUPPLIES
The Company's specialty engineered steel bar plants purchase steel scrap and hot
briquetted iron, their principal raw materials, on the open market. Barge
transportation of these raw materials to Company plants can be adversely
affected by cold weather, creating seasonal price increases. Prices for quality
scrap also vary in relation to the general business cycle, typically declining
in periods of slow economic growth. LaSalle Steel's primary raw material is hot
finished steel bars that it purchases both from the Company's hot rolled steel
bars plants and on the open market. The Company's tube manufacturing facilities
also purchase hot rolled steel bars from MacSteel and on the open market. MST
also purchases tube hollows and GST purchases flat-rolled steel as raw material
on the open market.
Historically, the Company's aluminum products business purchased aluminum
scrap, ingot, reroll stock and finished sheet from aluminum dealers, brokers and
producers. With the completion of the N-H Casting mini-mill, the principal raw
material of this business is aluminum scrap. The mini-mill includes a scrap
processing and delacquering facility which enables the Company to use the
broadest and most economical mix of aluminum scrap for its requirements. The
Company also purchases aluminum ingot futures and option contracts on the London
Metals Exchange in amounts that approximate N-H's requirements for fixed price
sales commitments for aluminum products and future sales for which a sales price
increase is expected to lag a raw material cost increase, thereby protecting
against increases in the price of the aluminum used to manufacture the related
products.
BACKLOG
At October 31, 1994, Quanex's backlog of orders to be shipped in the next twelve
months was $182.7 million. This compares to $154.9 million at October 31, 1993.
Because many of the markets in which Quanex operates have short lead times,
backlog figures are not reliable indicators of annual sales volume or operating
results.
COMPETITION
All of the Company's products are sold under highly competitive conditions.
The Company competes with a number of companies, some of which have financial
and other resources greater than those of the Company. Competitive factors
include product quality, price, delivery and ability to manufacture products to
customer specifications. The amounts of tubing, aluminum, cold finished bar
products and steel bars produced by the Company represent a small percentage of
annual domestic production.
The hot rolled specialty steel bar plants compete with two large integrated
steel producers, two large nonintegrated steel producers and two smaller steel
companies. Although many of these producers are larger and have greater
resources than the Company, the Company believes that the technology used at the
MacSteel facilities permits it to compete effectively in the markets it serves.
LaSalle Steel has eight major competitors including both integrated and
independent steel producers. Although a portion of LaSalle Steel's sales are in
specialized products made by patented processes, many of their competitors have
similar products using their own patents and processes.
The Company's steel tube manufacturing businesses compete with numerous
domestic and foreign steel producers. As a specialized producer, the steel tube
segment manufactures seamless steel tubing only in the smaller size ranges.
Currently there are five other manufacturers of seamless tubing in the same size
ranges as those produced by Quanex. Each of these manufacturers is either wholly
or partially integrated in that they produce all or part of the steel used by
them for their production of tubing. The Company's welded tube business is also
highly competitive, with more than 100 companies producing welded steel tubing.
For reasons of geography and product quality, however, the number of welded tube
manufacturers with which Quanex is in direct competition is significantly lower.
Imports are a significant factor in this market. On June 23, 1994, Quanex
announced that its Gulf States Tube Division had filed petitions alleging that
imports of carbon and alloy seamless pipe up to 4.5 inches in diameter from four
countries were being dumped or subsidized. On August 3,
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1994, the International Trade Commission made an affirmative preliminary
determination that imports of small diameter pipe from these countries were
causing injury to the U.S. industry. The Company expects a preliminary
determination on January 19, 1995, from the Department of Commerce on dumping
margins.
The Company's aluminum products business competes with many small and large
manufacturers and fabricators of aluminum products. Some of these competitors
are divisions or subsidiaries of major corporations with substantially greater
resources. The Company also competes with major aluminum producers in
coil-coated and mill products, primarily on the basis of the breadth of product
lines, the quality and design of its products, the responsiveness of its
services and its prices. With the increased production of coiled aluminum sheet
for aluminum mill products markets, the Company will increasingly compete with
major integrated aluminum manufacturers.
SALES AND DISTRIBUTION
The Company has a nationwide system of sales offices. MacSteel sells hot
finished steel bars primarily to original equipment manufacturers ("OEM's")
through its sales organization and manufacturers' representatives. LaSalle Steel
sells its cold finished bars to independent distributors, steel service centers
and directly to OEM's. The steel tube segment's products are sold by its sales
organization to steel service centers and directly to OEM's.
The sales and distribution of products in the Company's aluminum products
business are organized by major product group. Residential products are sold
primarily through distributors; engineered products are sold primarily to OEM's;
and mill products are sold directly to OEM's and through metal service centers.
SEASONAL NATURE OF BUSINESS
The Company's aluminum products business is seasonal as its primary markets are
in the Northeast and Midwest regions of the United States where winter weather
reduces home building and home improvement activity. Historically, this
business's lowest sales have occurred during the Company's first fiscal quarter.
Because a high percentage of this business's manufacturing overhead and
operating expenses is due to labor and costs that are generally fixed throughout
the year, profits for the operations in this business tend to be lower in
quarters with lower sales.
The other businesses in which the Company competes are not seasonal. However,
due to the holidays in the Company's first fiscal quarter and steel plant
shutdowns for vacations and maintenance in the Company's third fiscal quarter,
sales have historically been lower in those quarters. Due to the combined
effects of seasonality, the Company generally expects that, absent unusual
activity or changes in economic conditions, its lowest sales will occur in the
first fiscal quarter.
TRADEMARKS, TRADE NAMES AND PATENTS
The Company's Nichols-Homeshield and MacSteel logos and designs are registered
trademarks. The trade name "Homeshield" and its unregistered name
"Nichols-Homeshield" are used in connection with the sale of the Company's
aluminum products. The Homeshield and MacSteel logos and designs and their trade
names are considered valuable in the conduct of the Company's business.
In general, the businesses conducted in the Company's businesses do not depend
upon patent protection. Although the Company holds numerous patents, in many
cases the proprietary technology that the Company has developed for using the
patents is more important than the patents themselves.
RESEARCH AND DEVELOPMENT
Expenditures for research and development of new products or services during the
last three years were not significant. Although not technically defined as
research and development, a significant amount of time, effort and expense is
devoted to customizing and qualifying the Company's products for specific
customer applications.
ENVIRONMENTAL MATTERS
As a manufacturer of specialty metal products, Quanex is subject to extensive
and expansive regulations concerning the discharge of materials into the
environment, and the remediation of chemical contamination at its plant sites or
offsite disposal locations. Quanex is required to make capital and other
expenditures on an ongoing basis in order to comply with such regulations. The
cost of environmental matters has not had a material adverse effect on Quanex's
operations or financial condition in the past, and management is not currently
aware of any existing conditions that it currently believes are likely to have a
material adverse effect on Quanex's operations or financial condition.
Under applicable state and federal laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), also known as "Superfund," the Company may be responsible for all or
part of the costs required to remove or remediate previously disposed of wastes
or hazardous substances at the locations Quanex owns or operates or at which it
arranged for disposal of such materials. The Company's most significant
involvement at Superfund sites is described below.
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During fiscal 1987, Quanex's LaSalle Steel Company subsidiary paid
approximately $200,000, of which approximately $128,000 has subsequently been
contributed to Quanex by other potentially responsible parties, in connection
with a removal action at the Conservation Chemical Co. of Illinois site in the
State of Indiana in accordance with an order of the Environmental Protection
Agency (the "EPA") pursuant to Section 106 of CERCLA. This matter relates to
hazardous substances sold to owners of the waste site by a company whose assets
were purchased by Quanex and transferred to LaSalle Steel. LaSalle was named in
this matter by the EPA as a potentially responsible party. LaSalle and other
parties named by the EPA as potentially responsible parties took various actions
to comply with the EPA's order. The Company believes that the response actions
contemplated by the EPA removal order have been substantially completed. In
1989, LaSalle withdrew from the group of potentially responsible parties because
its only connection to the site was the purchase of assets, without
contractually assuming liabilities from a company that allegedly sent waste to
the site. Since that time, the Company has had no involvement with the site. The
need for, or extent of, any further cleanup therefore is unknown by Quanex. Even
if the Company is unsuccessful in asserting its defenses, LaSalle was one of
numerous parties contributing cleanup funds and it has no reason to believe that
those other parties generally would not be able to pay costs apportioned to
them. For all of these reasons, Quanex does not believe that its liability, if
any, with respect to this facility, will have a material adverse effect on its
business or financial position.
The EPA has placed on the Superfund National Priorities List the Lenz Oil site
in the State of Illinois to which a company, whose assets were purchased by
Quanex and transferred to LaSalle Steel, had previously sent used petroleum
products. The State of Illinois previously had sent a letter to LaSalle Steel
stating that those materials had been disposed of improperly at that site.
LaSalle Steel, in conjunction with a group of parties who received similar
letters, entered into a consent decree pursuant to which action was taken to
address the matters referred to in the letter from the State of Illinois.
LaSalle paid approximately $8 thousand out of a $2.5 million group settlement.
LaSalle Steel is currently participating in a group that is assessing site
conditions and further remediation options. Further liability could be asserted
against Quanex as a result of the EPA's actions. The company that sold its
assets to LaSalle Steel is one of many companies that had sent materials to this
facility. It is Quanex's understanding that such company contributed
approximately 0.2% of the total volume of materials handled at this facility.
The Company has no reason to believe that the other companies involved will not
be financially able to contribute to any possible future clean-up efforts at
this site, or that the basis for allocation of liability will substantially
change. As a result of the foregoing, Quanex does not believe that its
liability, if any, with respect to this facility, will have a material adverse
effect on its business or financial position.
The EPA also has placed on the National Priorities List the Douglassville, or
Berks Associates Disposal Site in the Commonwealth of Pennsylvania to which
LaSalle Steel may have sent used petroleum products. The EPA currently is
administering a multistage cleanup at the site. Liability has been asserted
against the Company by a group of potentially responsible parties for
contribution toward cleanup costs incurred at the facility. It is Quanex's
understanding that many companies sent wastes to this site and that LaSalle is
alleged to have contributed less than 0.005%, on a volumetric basis, of the
total materials. The group of defendants and third-party defendants include a
number of large companies and several agencies of the federal government that
the Company has no reason to believe will not be financially able to contribute
their expected share. These parties have expressed a willingness to participate
in settlement efforts. Pursuant to settlement negotiations, LaSalle Steel
currently is classified as a de minimis contributor. Based on the foregoing,
Quanex does not believe that its liability, if any, with respect to this site,
will have a material adverse effect on its business or financial position.
Amendments to the federal Clean Air Act were adopted in 1990, and the EPA
currently is developing regulations to implement the requirements of those
amendments. Depending on the nature of the regulations adopted, and upon
requirements that may be imposed by state and local regulatory authorities,
Quanex may be required to incur capital expenditures sometime in the next
several years for air pollution control equipment to maintain or obtain
operating permits and approvals and address other air emission-related issues.
Until such time as the new Clean Air Act requirements are implemented, Quanex is
unable to estimate the effect on earnings or operations or the amount and timing
of required capital expenditures. However, based upon it's preliminary analysis
to date, Quanex does not believe that its compliance with these requirements
will have a material effect on its operations or finances.
Quanex incurred approximately $4,000,000 and $3,500,000 during fiscal 1994 and
1993, respectively, in expenses and capital expenditures in order to comply with
existing or proposed environmental regulations. It is anticipated that Quanex
will spend approximately $3,500,000 at various of its facilities during fiscal
1995, and, although not currently quantifiable or expected to be material to the
Company as a whole, will continue to have expenditures in connection with
environmental matters beyond 1995. Future expenditures relating to environmental
matters will necessarily depend upon existing future regulations and their
application to Quanex and its facilities.
66
9
EMPLOYEES
At October 31, 1994, the Company employed 2,652 persons. Of the total employed,
47% were covered by collective bargaining agreements. During 1995, one labor
contract will expire affecting one Quanex facility. The United Steelworkers of
America contract at Gulf States Tube covering 211 employees will expire on
October 31, 1995.
ITEM 2. PROPERTIES
The following table lists Quanex's principal plants at October 31, 1994,
together with their locations, general character and the industry segment which
uses the facility. Each of the facilities identified as being owned by the
Company is free of any material encumbrance.
Square
Owned STEEL BARS Footage
- ------------------------ --------------------------- -------
Fort Smith, Arkansas MacSteel 415,723
Jackson, Michigan MacSteel 245,150
Owned COLD FINISHED STEEL BARS
- ------------------------ ---------------------------
Griffith, Indiana Fluid Power 37,000
Hammond, Indiana LaSalle Steel 493,000
Owned STEEL TUBES
- ------------------------ ----------------------------
Rosenberg, Texas Gulf States Tube 128,000
South Lyon, Michigan Michigan Seamless Tube 323,000
Huntington, Indiana Heat Treating 82,000
Owned ALUMINUM PRODUCTS
- ------------------------ ---------------------------
Rice Lake, Wisconsin AMSCO 290,800
Chatsworth, Illinois Homeshield Fabricated Products 212,000
Lincolnshire, Illinois Nichols Aluminum 142,000
Davenport, Iowa Nichols Aluminum 236,000
Davenport, Iowa Nichols-Aluminum Casting 245,000
Leased (expires 1999) EXECUTIVE OFFICES
- ------------------------ ---------------------------
Houston, Texas Quanex Corporation 21,000
ITEM 3. LEGAL PROCEEDINGS
Other than the proceedings under Item 1, "Environmental Matters", incorporated
here by reference, there are no material legal proceedings to which Quanex, its
subsidiaries, or its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise during the fourth quarter of the fiscal year covered by
this report.
67
10
FORM 10K INFORMATION PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Quanex's common stock, $.50 par value, is traded on the New York Stock Exchange,
ticker symbol: NX. Quarterly stock price information and dividend information is
shown on page 69.
The terms of Quanex's revolving credit arrangements with certain banks and its
senior note agreement with certain institutional noteholders, limit the total
amount of common and preferred stock dividends and other distributions on such
stock. Under the most restrictive test under such credit facilities, the total
common stock dividends the Company may declare and pay is limited to
$21,000,000, plus 50% of consolidated net earnings after October 31, 1989,
adjusted for other factors as defined in their respective Loan Agreements. As of
October 31, 1994, the amount of dividends and other distributions the Company
was permitted to declare and pay under its credit facilities was $45,854,000.
Dividends on the Common Stock are also subject to the prior payment of dividends
on the Company's outstanding 6.88% Cumulative Convertible Exchangeable Preferred
Stock.
There were 3,454 record holders of Quanex common stock on October 31, 1994.
ITEM 6. SELECTED FINANCIAL DATA
Pages 34 and 35 of the 1994 Annual Report to Stockholders present selected
financial data for the past eleven fiscal years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 37-41 of the 1994 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data for Quanex are on pages 42-57 of
the 1994 Annual Report to Stockholders.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the past two fiscal years there has been no change in the Company's
independent auditors, and there has been no disagreement on accounting practices
or financial statement disclosure required to be reported.
68
11
INDEX TO FORM 10-K INFORMATION
Form 10-K Item No. Location in Annual Report
- --------------------------------------------------------------------------------
PART I
1. Business ...................................................... 8, 40, 60-67
2. Properties .............................................................. 67
3. Legal Proceedings ....................................................... 67
4. Submission of Matters to a Vote of Security Holders ..................... 67
- --------------------------------------------------------------------------------
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters ............................................................. 68, 69
6. Selected Financial Data ...................................... 33, 34-35, 68
7. Management's Discussion and Financial Analysis of Financial Condition and
Results of Operations ............................................ 37-41, 68
8. Financial Statements and Supplementary Data .............. 36, 42-57, 68, 69
9. Disagreements on Accounting and Financial Disclosure .................... 68
- --------------------------------------------------------------------------------
PART III
10. Directors and Executive Officers of the Registrant(1) .................. --
11. Executive Compensation(2) .............................................. --
12. Security Ownership of Certain Beneficial Owners and Management(3) ...... --
13. Certain Relationships and Related Transactions(1) ...................... --
- --------------------------------------------------------------------------------
PART IV
14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules ...... 36, 42-59
(b) Exhibits(4) ........................................................ --
(c) Reports on Form 8-K4 ............................................... --
- --------------------------------------------------------------------------------
1 The information under the captions "Matters to Come Before the Meeting -- (1)
Election of Three Directors" and "Further Information -- Executive Officers"
in the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held March 2, 1995, is incorporated herein by reference.
2 The information under the captions "Further Information" and "Executive
Compensation" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held March 2, 1995, is incorporated herein by reference.
3 The information regarding beneficial ownership of Common Stock by directors
and nominees (in the table of directors and nominees) and under the caption
"Further Information -- Principal Shareholders" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held March 2, 1995, is
incorporated herein by reference.
4 A copy of the Index to Exhibits, filed with Quanex's Form 10-K Report, can be
obtained free of charge by written request to Investor Relations, Quanex
Corporation, 1900 West Loop South, Suite 1500, Houston, Texas, 77027. No
Reports on Form 8-K were filed by the Company during the quarter ended October
31, 1994.
70
12
EXHIBITS
Exhibit No. Name of Exhibit
- ----------- ---------------
3.1 Certificate of Incorporation of the Registrant, as amended, filed as Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1987, and
incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Registrant, as amended through October 21, 1992, filed as
Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1992, and incorporated herein by reference.
4.1 Form of Registrant's Common Stock certificate, filed as Exhibit 4.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1987, and incorporated herein by reference.
4.2 Amended and Restated Rights Agreement between the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, filed as Exhibit 1 to Amendment No. 1 to the Registrant's Form 8-A dated
April 28, 1989, and incorporated herein by reference.
4.3 Amended and Restated Certificate of Designation, Preferences and Rights of the Registrant's
Series A Junior Participating Preferred Stock, filed as Exhibit 1 to Amendment No. 1 to the
Registrant's Form 8-A dated April 28, 1989, and incorporated herein by reference.
4.4 Certificate of Designations of the Registrant's 6.88% Cumulative Convertible Exchangeable Preferred
Stock, liquidation preference $250 per share, filed as Exhibit 19.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1992, and incorporated herein by reference.
4.5 Form of Indenture relating to the Registrant's 6.88% Cumulative Subordinated Debentures due 2007
between the Registrant and Chemical Bank, as Trustee, filed as Exhibit 19.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1992, and incorporated herein by
reference.
4.6 Form of Certificate of 6.88% Cumulative Convertible Exchangeable Preferred Stock, liquidation
preference $250 per share, filed as Exhibit 19.3 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1992, and incorporated herein by reference.
4.7 Deposit Agreement, relating to Depositary Convertible Exchangeable Preferred Shares between the
Registrant and Chemical Bank, filed as Exhibit 19.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended April 30, 1992, and incorporated herein by reference.
4.8 Form of Depositary Receipt for Depositary Convertible Exchangeable Preferred Shares, filed as
Exhibit 19.6 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30,
1992, and incorporated herein by reference.
13
4.9 Note Agreement dated July 25, 1990 among the Registrant and the Purchasers listed therein,
regarding the sale of $125,000,000 of 10.77% Senior Notes due August 23, 2000, filed as Exhibit 4.1
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1990, and
incorporated herein by reference.
4.10 Revolving Credit and Letter of Credit Agreement dated as of December 4, 1990 among the Registrant
and the Banks listed therein relating to a $40,000,000 revolving credit, filed as Exhibit 4.7 to
the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991, and incorporated
herein by reference.
4.11 Second Amendment to the Revolving Credit and Letter of Credit Agreement dated as of April 15, 1992,
filed as Exhibit 4.13 to the Registrant's Registration Statement on Form S-3 (Registration
No. 33-47282), and incorporated herein by reference.
4.12 Third and Fourth Amendments to the Revolving Credit and Letter of Credit Agreement dated as of
February 12, 1993 and April 1, 1993, respectively, filed as Exhibit 19 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1993, and incorporated herein by
reference.
4.13 Fifth Amendment to the Revolving Credit and Letter of Credit Agreement dated as of December 8,
1994, filed as Exhibit 4.15 to the Registrant's Form S-8 Registration No. 33-57235, and
incorporated herein by reference.
10.1 Agreement of Lease between Leland Tube Company, Inc. and Role Realty Co., dated March 5, 1970, with
attached Assignment of Tenant's Interest in Lease from Leland Tube Company to the Registrant, dated
May 31, 1979, and filed as Exhibit 10.3 of the Registrant's Form S-2, Registration No. 2-88583, and
incorporated herein by reference.
10.2 Agreement of Lease between Leland Tube Company, Inc. and Role Realty Co., dated January 24, 1973,
with attached Assignment of Tenant's Interest in Lease from Leland Tube Company to the Registrant,
dated May 31, 1979, and filed as Exhibit 10.4 of the Registrant's Form S-2, Registration No.
2-88583, and incorporated herein by reference.
10.3 Lease Agreement between the Registrant and William M. Paul and Associates, dated August 27, 1980,
filed as Exhibit 10.5 of the Registrant's Form S-2, Registration No. 2-88583, and incorporated
herein by reference.
10.4 Agreement of Lease between the Registrant and 3D Tower Limited, dated March 5, 1985, filed as
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1985, and incorporated herein by reference, as amended by the First Amendment to Lease Agreement
between the Registrant and VPM 1989-1, Ltd. effective December 8, 1989.
10.5 Quanex Corporation 1988 Stock Option Plan and form of Stock Option Agreement filed as Exhibit 10.4
to the Registrant's Annual Report on Form 10-K for the year ended October 31, 1988, and
incorporated herein by reference.
14
10.6 Quanex Corporation Deferred Compensation Plan, as amended, filed as Exhibit 10.5 to the
Registrant's Form 10-K for the fiscal year ended October 31, 1981, and incorporated herein by
reference.
10.7 Quanex Corporation 1978 Stock Option Plan, as amended, filed as Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the year ended October 31, 1988, and incorporated herein by
reference.
10.8 Quanex Corporation Executive Incentive Compensation Plan, as amended, filed as Exhibit 10.8 to the
Registrant's Form 10-K for the fiscal year ended October 31, 1993, and incorporated herein by
reference.
10.9 Quanex Corporation Supplemental Benefit Plan, effective February 28, 1980 as restated November 1,
1988 and amended on June 28, 1991, filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the year ended October 31, 1991, and incorporated herein by reference.
10.10 Form of Severance Compensation Agreement and Escrow Agreement, adopted on February 28, 1985,
between the Registrant and each executive officer of the Registrant, filed as Exhibit 10.14 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, and
incorporated herein by reference.
10.11 Quanex Corporation Stock Option Loan Plan for Key Officers, filed as Exhibit 10.13 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1988, and
incorporated herein by reference.
10.12 Quanex Corporation 1987 Non-Employee Director Stock Option Plan and the related form of Stock
Option Agreement, filed as Exhibit 10.14 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1988, and incorporated herein by reference.
10.13 Quanex Corporation 1989 Non-Employee Director Stock Option Plan, filed as Exhibit 4.4 of the
Registrant's Form S-8, Registration No. 33-35128, and incorporated herein by reference.
10.14 Quanex Corporation Employee Stock Option and Restricted Stock Plan, as amended.
10.15 Retirement Agreement dated as of September 1, 1992, between the Registrant and Carl E. Pfeiffer,
filed as Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, and incorporated herein by reference.
10.16 Stock Option Agreement dated as of October 1, 1992, between the Registrant and Carl E. Pfeiffer,
filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, and incorporated herein by reference.
10.17 Deferred Compensation Agreement dated as of July 31, 1992, between the Registrant and Carl E.
Pfeiffer, filed as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1992, and incorporated herein by reference.
15
10.18 Quanex Corporation Non-Employee Director Retirement Plan.
11 Statement re computation of per share earnings.
13 Quanex Corporation Annual Report to Shareholders for fiscal year 1994 (each portion of the annual
report that is incorporated and filed as part of this report).
21 Subsidiaries of the Registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
As permitted by Item 601(b)(4) of Regulation S-K, the Registrant has not filed
with this Annual Report on Form 10-K certain instruments defining the rights of
holders of long-term debt of the Registrant and its subsidiaries because the
total amount of securities authorized under any of such instruments does not
exceed 10% of the total assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant agrees to furnish a copy of any such
agreements to the Securities and Exchange Commission upon request.
16
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
QUANEX CORPORATION
By: ROBERT C. SNYDER January 23, 1995
----------------------
Robert C. Snyder
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
CARL E. PFEIFFER January 23, 1995
--------------------------------------
Carl E. Pfeiffer
Chairman of the Board
ROBERT C. SNYDER January 23, 1995
--------------------------------------
Robert C. Snyder
President, Chief Executive Officer and
Director (Principal Executive Officer)
GERALD B. HAECKEL January 23, 1995
--------------------------------------
Gerald B. Haeckel
Director
DONALD J. MORFEE January 23, 1995
--------------------------------------
Donald J. Morfee
Director
JOHN D. O'CONNELL January 23, 1995
--------------------------------------
John D. O'Connell
Director
--------------------------------------
Fred J. Broad
Director
17
ROBERT L. WALKER January 23, 1995
--------------------------------------
Robert L. Walker
Director
MICHAEL J. SEBASTIAN January 23, 1995
--------------------------------------
Michael J. Sebastian
Director
WAYNE M. ROSE January 23, 1995
--------------------------------------
Wayne M. Rose
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
VIREN M. PARIKH January 23, 1995
--------------------------------------
Viren M. Parikh
Controller
(Chief Accounting Officer)
18
INDEX TO EXHIBITS
Exhibit
Number
-------
3.1 Certificate of Incorporation of the Registrant, as amended, filed as Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1987, and
incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Registrant, as amended through October 21, 1992, filed as
Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1992, and incorporated herein by reference.
4.1 Form of Registrant's Common Stock certificate, filed as Exhibit 4.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1987, and incorporated herein by reference.
4.2 Amended and Restated Rights Agreement between the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, filed as Exhibit 1 to Amendment No. 1 to the Registrant's Form 8-A dated
April 28, 1989, and incorporated herein by reference.
4.3 Amended and Restated Certificate of Designation, Preferences and Rights of the Registrant's
Series A Junior Participating Preferred Stock, filed as Exhibit 1 to Amendment No. 1 to the
Registrant's Form 8-A dated April 28, 1989, and incorporated herein by reference.
4.4 Certificate of Designations of the Registrant's 6.88% Cumulative Convertible Exchangeable Preferred
Stock, liquidation preference $250 per share, filed as Exhibit 19.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1992, and incorporated herein by reference.
4.5 Form of Indenture relating to the Registrant's 6.88% Cumulative Subordinated Debentures due 2007
between the Registrant and Chemical Bank, as Trustee, filed as Exhibit 19.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1992, and incorporated herein by
reference.
19
4.6 Form of Certificate of 6.88% Cumulative Convertible Exchangeable Preferred Stock, liquidation
preference $250 per share, filed as Exhibit 19.3 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1992, and incorporated herein by reference.
4.7 Deposit Agreement, relating to Depositary Convertible Exchangeable Preferred Shares between the
Registrant and Chemical Bank, filed as Exhibit 19.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended April 30, 1992, and incorporated herein by reference.
4.8 Form of Depositary Receipt for Depositary Convertible Exchangeable Preferred Shares, filed as
Exhibit 19.6 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30,
1992, and incorporated herein by reference.
4.9 Note Agreement dated July 25, 1990 among the Registrant and the Purchasers listed therein,
regarding the sale of $125,000,000 of 10.77% Senior Notes due August 23, 2000, filed as Exhibit 4.1
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1990, and
incorporated herein by reference.
4.10 Revolving Credit and Letter of Credit Agreement dated as of December 4, 1990 among the Registrant
and the Banks listed therein relating to a $40,000,000 revolving credit, filed as Exhibit 4.7 to
the Registrant's Annual Report on Form 10-K for the year ended October 31, 1991, and incorporated
herein by reference.
4.11 Second Amendment to the Revolving Credit Agreement dated as of April 15, 1992, filed as
Exhibit 4.13 to the Registrant's Registration Statement on Form S-3 (Registration No. 33-47282),
and incorporated herein by reference.
4.12 Third and Fourth Amendments to the Revolving Credit and Letter of Credit Agreement dated as of
February 12, 1993 and April 1, 1993, respectively, filed as Exhibit 19 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended April 30, 1993, and incorporated herein by
reference.
4.13 Fifth Amendment to the Revolving Credit and Letter of Credit Agreement dated as of December 8,
1994, filed as Exhibit 4.15 to the Registrant's Form S-8 Registration No. 33-57235, and
incorporated herein by reference.
20
10.1 Agreement of Lease between Leland Tube Company, Inc. and Role Realty Co., dated March 5, 1970, with
attached Assignment of Tenant's Interest in Lease from Leland Tube Company to the Registrant, dated
May 31, 1979, and filed as Exhibit 10.3 of the Registrant's Form S-2, Registration No. 2-88583, and
incorporated herein by reference.
10.2 Agreement of Lease between Leland Tube Company, Inc. and Role Realty Co., dated January 24, 1973,
with attached Assignment of Tenant's Interest in Lease from Leland Tube Company to the Registrant,
dated May 31, 1979, and filed as Exhibit 10.4 of the Registrant's Form S-2, Registration No.
2-88583, and incorporated herein by reference.
10.3 Lease Agreement between the Registrant and William M. Paul and Associates, dated August 27, 1980,
filed as Exhibit 10.5 of the Registrant's Form S-2, Registration No. 2-88583, and incorporated
herein by reference.
10.4 Agreement of Lease between the Registrant and 3D Tower Limited, dated March 5, 1985, filed as
Exhibit 10.13 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31,
1985, and incorporated herein by reference, as amended by the First Amendment to Lease Agreement
between the Registrant and VPM 1989-1, Ltd. effective December 8, 1989.
10.5 Quanex Corporation 1988 Stock Option Plan and form of Stock Option Agreement filed as Exhibit 10.4
to the Registrant's Annual Report on Form 10-K for the year ended October 31, 1988, and
incorporated herein by reference.
10.6 Quanex Corporation Deferred Compensation Plan, as amended, filed as Exhibit 10.5 to the
Registrant's Form 10-K for the fiscal year ended October 31, 1981, and incorporated herein by
reference.
10.7 Quanex Corporation 1978 Stock Option Plan, as amended, filed as Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the year ended October 31, 1988, and incorporated herein by
reference.
10.8 Quanex Corporation Executive Incentive Compensation Plan, as amended, filed as Exhibit 10.8 to the
Registrant's Form 10-K for the fiscal year ended October 31, 1993, and incorporated herein by
reference.
21
10.9 Quanex Corporation Supplemental Benefit Plan, effective February 28, 1980 as restated November 1,
1988 and amended on June 28, 1991, filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the year ended October 31, 1991, and incorporated herein by reference.
10.10 Form of Severance Compensation Agreement and Escrow Agreement, adopted on February 28, 1985,
between the Registrant and each executive officer of the Registrant, filed as Exhibit 10.14 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, and
incorporated herein by reference.
10.11 Quanex Corporation Stock Option Loan Plan for Key Officers, filed as Exhibit 10.13 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1988, and
incorporated herein by reference.
10.12 Quanex Corporation 1987 Non-Employee Director Stock Option Plan and the related form of Stock
Option Agreement, filed as Exhibit 10.14 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1988, and incorporated herein by reference.
10.13 Quanex Corporation 1989 Non-Employee Director Stock Option Plan, filed as Exhibit 4.4 of the
Registrant's Form S-8, Registration No. 33-35128, and incorporated herein by reference.
10.14 Quanex Corporation Employee Stock Option and Restricted Stock Plan, as amended.
10.15 Retirement Agreement dated as of September 1, 1992, between the Registrant and Carl E. Pfeiffer,
filed as Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, and incorporated herein by reference.
10.16 Stock Option Agreement dated as of October 1, 1992, between the Registrant and Carl E. Pfeiffer,
filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, and incorporated herein by reference.
10.17 Deferred Compensation Agreement dated as of July 31, 1992, between the Registrant and Carl E.
Pfeiffer, filed as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K
22
for the fiscal year ended October 31, 1992, and incorporated herein by reference.
10.18 Quanex Corporation Non-Employee Director Retirement Plan.
11 Statement re computation of per share earnings.
13 Quanex Corporation Annual Report to Shareholders for fiscal year 1994 (each portion of the annual
report that is incorporated and filed as part of this report).
21 Subsidiaries of the Registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
As permitted by Item 601(b)(4) of Regulation S-K, the Registrant has not filed
with this Annual Report on Form 10-K certain instruments defining the rights of
holders of long-term debt of the Registrant and its subsidiaries because the
total amount of securities authorized under any of such instruments does not
exceed 10% of the total assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant agrees to furnish a copy of any such
agreements to the Securities and Exchange Commission upon request.