<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-5725
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
Piper Impact 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the Plan and the
address of the principal executive office:
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, Texas 77027
(713) 961-4600
<PAGE> 2
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, 1998 and
1997 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,
1998 and 1997 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, 1998 and (2) 5% reportable transactions
for the year ended December 31, 1998 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. The supplemental information by fund in the statements on
net assets available for benefits is presented for the purpose of additional
analysis rather than to present the net assets available for benefits of the
individual funds. The supplemental schedules and the supplemental information by
fund is the responsibility of the Plan's management. Such supplemental schedules
and supplemental information by fund have been subjected to the auditing
procedures applied in our audit of the basic 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
June 1, 1999
<PAGE> 3
QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Assets:
Investment at fair value:
Mutual fund assets:
Fidelity Puritan Fund $ 500,091 $ 393,816
Fidelity Magellan Fund 29,180 --
Fidelity Contrafund 949,606 522,991
Fidelity Growth & Income Fund 32,894 --
Fidelity Intermediate Bond Fund -- 171,180
Fidelity Retirement Growth Fund 446,819 254,730
Fidelity Overseas Fund 2,178 --
Fidelity Balanced Fund 5,826 --
Fidelity Blue Chip Fund 2,241,863 1,399,981
Fidelity Asset Manager Fund 307,494 216,111
Fidelity Low-Priced Stock Fund 136 --
Fidelity Retirement Money Market Fund -- 273,551
Fidelity Government Money Market Fund 398,700 --
Templeton Foreign Fund 2,327 --
Neuberger & Berman Partners Trust Fund 2,540 --
Quanex Corporation common stock 69,928 42,176
Common/commingled trust 406,465 150,845
---------- ----------
5,396,047 3,425,381
---------- ----------
Participant loans 198,115 146,425
---------- ----------
5,594,162 3,571,806
---------- ----------
Employee contributions receivable 161,998 176,609
Employer contributions receivable 29,398 27,343
---------- ----------
191,396 203,952
---------- ----------
Net Assets Available for Benefits $5,785,558 $3,775,758
========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 4
QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Investment income:
Interest and dividends $ 348,633 $ 231,919
Net appreciation in fair value of investments 674,906 252,778
---------- ----------
1,023,539 484,697
---------- ----------
Contributions:
Employer 239,388 240,468
Less forfeitures 29,413 9,434
---------- ----------
209,975 231,034
Employee 1,235,569 1,247,453
---------- ----------
1,445,544 1,478,487
---------- ----------
Interest on participant loans 14,340 6,290
---------- ----------
Total additions 2,483,423 1,969,474
---------- ----------
Benefit payments 468,421 163,966
Loan processing fees 5,202 4,914
---------- ----------
Total deductions 473,623 168,880
---------- ----------
Increase in net assets available
for benefits 2,009,800 1,800,594
Net assets available for benefits:
Beginning of year 3,775,758 1,975,164
---------- ----------
End of year $5,785,558 $3,775,758
========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 5
QUANEX CORPORATION
PIPER IMPACT 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
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 allocation of their
contributions to the following funds:
Fidelity Puritan Fund - invests in domestic and foreign common stocks,
preferred stocks and bonds.
Fidelity Magellan Fund - invests in equity and debt securities of
foreign and domestic companies.
Fidelity Contrafund - invests in equities of foreign and domestic
companies.
Fidelity Growth and Income Fund - invests in equity and debt
securities of foreign and domestic companies.
Fidelity Retirement Growth Fund - invests in common stocks and other
securities.
Fidelity Overseas Fund - invests in foreign equity and debt
securities.
Fidelity Balanced Fund - invests in common and preferred stocks and
bonds.
<PAGE> 6
Fidelity Blue Chip Fund - invests in domestic and foreign common
stocks.
Fidelity Asset Manager Fund - invests in domestic and foreign stocks,
bonds and short-term obligations.
Fidelity Low-Priced Stock Fund - invests in domestic and foreign
stocks.
Fidelity Government Money Market Fund - composed of short-term U.S.
government obligations.
Templeton Foreign Fund - invests in foreign securities.
Neuberger & Berman Partner Trust Fund - invests in common stocks.
Quanex Corporation Common Stock - invests exclusively in the common
stock of Quanex Corporation.
Common/Commingled Trust - invests 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, 1998 and 1997, net assets available for benefits included benefits
of $23,075 and $9,913, 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. The
participant pays loan set up fees and carrying fees 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
<PAGE> 7
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.
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 Plan received a favorable determination letter from
the IRS dated September 30, 1998. 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, 1998 and 1997, the Plan purchased and
sold shares of Fidelity mutual fund assets, as shown below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------- ---------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases 583,981 $2,306,480 250,854 $1,705,534
Sales 442,597 1,215,903 $1,312,890 86,413 373,734 $408,988
</TABLE>
During the years ended December 31, 1998 and 1997, the Plan purchased and
sold shares of Fidelity Common/Commingled Trust, as shown below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------- ---------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases 351,332 $ 351,332 105,387 $ 105,387
Sales 95,712 95,712 $ 95,712 37,741 37,741 $ 37,741
</TABLE>
During the years ended December 31, 1998 and 1997, the Plan purchased and
sold shares of Quanex Corporation common stock as shown below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Shares Cost Sales Price Shares Cost Sales Price
------- ---------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases 2,189 $ 57,468 1,555 $ 48,030
Sales 589 17,873 $ 16,263 55 1,682 $ 1,588
</TABLE>
<PAGE> 8
F. SUPPLEMENTAL FUND INFORMATION
Contributions, benefit payments and investment income by fund were as
follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Employer contributions:
Fidelity Puritan Fund $ 24,329 $ 26,783
Fidelity Magellan Fund 1,405 --
Fidelity Contrafund 39,573 37,704
Fidelity Growth & Income Fund 876 --
Fidelity Intermediate Bond Fund -- 13,701
Fidelity Retirement Growth Fund 19,362 18,608
Fidelity Overseas Fund 109 --
Fidelity Balanced Fund 251 --
Fidelity Blue Chip Fund 85,239 87,097
Asset Manager Fund 13,831 14,557
Fidelity Low-Priced Stock Fund 92 --
Fidelity Retirement Money Market Fund (2,866) 14,576
Fidelity Government Money Market Fund (3,762) --
Templeton Foreign Fund 140 --
Neuberger & Berman Partners Trust Fund 197 --
Quanex Corporation common stock 8,309 5,045
Common/commingled trust 22,890 12,963
----------- -----------
$ 209,975 $ 231,034
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Employee contributions:
Fidelity Puritan Fund $ 129,257 $ 139,215
Fidelity Magellan Fund 9,575 --
Fidelity Contrafund 214,892 204,631
Fidelity Growth & Income Fund 5,319 --
Fidelity Intermediate Bond Fund -- 67,476
Fidelity Retirement Growth Fund 99,432 95,104
Fidelity Overseas Fund 511 --
Fidelity Balanced Fund 2,205 --
Fidelity Blue Chip Fund 420,740 444,602
Asset Manager Fund 73,368 76,557
Fidelity Low-Priced Stock Fund 857 --
Fidelity Retirement Money Market Fund -- 121,081
Fidelity Government Money Market Fund 118,789 --
Templeton Foreign Fund 603 --
Neuberger & Berman Partners Trust Fund 940 --
Quanex Corporation common stock 44,715 35,632
Common/commingled trust 114,366 63,155
----------- -----------
$ 1,235,569 $ 1,247,453
=========== ===========
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Benefit payments:
Fidelity Puritan Fund $ 72,628 $ 17,800
Fidelity Magellan Fund 4,417 --
Fidelity Contrafund 61,411 15,905
Fidelity Growth & Income Fund 1,374 --
Fidelity Intermediate Bond Fund -- 8,822
Fidelity Retirement Growth Fund 38,880 9,986
Fidelity Overseas Fund -- --
Fidelity Balanced Fund -- --
Fidelity Blue Chip Fund 182,786 55,029
Asset Manager Fund 37,117 8,957
Fidelity Low-Priced Stock Fund -- --
Fidelity Retirement Money Market Fund -- 32,630
Fidelity Government Money Market Fund 26,303 --
Templeton Foreign Fund -- --
Neuberger & Berman Partners Trust Fund 83 --
Quanex Corporation common stock 5,784 1,419
Common/commingled trust 37,638 13,418
----------- -----------
$ 468,421 $ 163,966
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Investment income:
Fidelity Puritan Fund $ 71,598 $ 62,162
Fidelity Magellan Fund 4,357 --
Fidelity Contrafund 209,626 80,320
Fidelity Growth & Income Fund 3,853 --
Fidelity Intermediate Bond Fund 2,277 10,824
Fidelity Retirement Growth Fund 109,577 32,386
Fidelity Overseas Fund 7 --
Fidelity Balanced Fund 507 --
Fidelity Blue Chip Fund 555,258 250,281
Asset Manager Fund 40,480 34,017
Fidelity Low-Priced Stock Fund (123) --
Fidelity Retirement Money Market Fund 566 11,626
Fidelity Government Money Market Fund 16,718 --
Templeton Foreign Fund (229) --
Neuberger & Berman Partners Trust Fund 16 --
Quanex Corporation common stock (11,867) (3,830)
Common/commingled trust 20,918 6,911
----------- -----------
$ 1,023,539 $ 484,697
=========== ===========
</TABLE>
<PAGE> 10
ITEM 27-a SCHEDULE OF ASSETS HELD FOR INVESTMENTS PURPOSES
EIN: 76-0396886; PN 001
PIPER IMPACT, INC.
PIPER IMPACT 401(k) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Shares/ Current
Par Value Cost Value
--------- ---------- ---------
<S> <C> <C> <C>
Fidelity Mutual Fund Assets:
Puritan Fund* 24,917 460,975 500,091
Magellan Fund* 242 25,926 29,180
Contrafund* 16,721 777,692 949,606
Growth & Income Fund* 718 30,502 32,894
Retirement Growth Fund* 21,785 409,372 446,819
Overseas Fund* 61 2,212 2,178
Balance Fund* 356 5,397 5,826
Blue Chip Fund* 44,490 1,643,103 2,241,863
Asset Manager Fund* 17,682 308,997 307,494
Low-Priced Stock Fund* 6 131 136
Government Money Market Fund* 398,700 398,700 398,700
Templeton Foreign Fund 277 2,760 2,327
Neuberger & Berman Partners Trust Fund 141 2,596 2,540
---------- ----------
Total Mutual Fund Assets $4,068,363 $4,919,654
Quanex Corporation common stock* 3,099 85,943 69,928
Common/commingled trust* 406,465 406,465 406,465
Participant loans (bearing interest rates
from 7.85% to 11%) 198,115 198,115
---------- ----------
Total Investments $4,758,886 $5,594,162
========== ==========
</TABLE>
* Party-in-Interest
<PAGE> 11
ITEM 27-d - SCHEDULE OF REPORTABLE (5%) TRANSACTIONS EIN 76-0396886; PN 001
PIPER IMPACT 401(k) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF 5% REPORTABLE TRANSACTIONS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
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)
----------- ----------------- ------------- ---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Puritan* 65 $ 224,354 44 $ 140,328 $ 126,604 $ 140,328 $ 13,724
Contrafund* 65 367,587 38 80,756 70,718 80,756 10,038
Intermediate Bond* 4 10,244 3 183,265 180,349 183,265 2,916
Retirement Growth* 53 191,777 31 64,971 60,906 64,971 4,065
Blue Chip* 99 743,314 67 368,386 306,655 368,386 61,731
Asset Manager* 58 170,085 37 65,334 60,869 65,334 4,465
Retirement Money Mkt* 6 18,350 4 291,901 291,901 291,901 --
Government Money Mkt* 70 507,885 47 109,185 109,185 109,185 --
Common Trust* 64 351,332 53 95,712 95,712 95,712 --
</TABLE>
* Party-in-Interest
<PAGE> 12
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 28, 1999 /s/ Viren M. Parikh
--------------------------------
Viren M. Parikh, Benefits Committee
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
23.1 Independent Auditor's Consent
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-22977 of Quanex Corporation on Form S-8 of our report dated June 1, 1999,
appearing in the Annual Report of Form 11-K of the Piper Impact 401(k) Savings
Plan for the year ended December 31, 1998.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
June 28, 1999
