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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 2000
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Nichols 401(k) Savings Plan
B. Name of the 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, TX 77027
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INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Nichols 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Nichols 401(k) Savings Plan ("the Plan") as of December 31, 2000 and
1999, 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 auditing standards generally accepted
in the United States of America. 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,
2000 and 1999, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
investments as of December 31, 2000 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
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 schedule is the responsibility of the
Plan's management. This supplemental schedule has been subjected to the auditing
procedures applied in our audits 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
May 25, 2001
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
-----------------------------
2000 1999
----------- -----------
Assets:
Investments at fair value (see Note C) $50,179,949 $48,402,820
Participant loans 1,745,996 1,337,227
Employee contributions receivable 317,473 247,411
Employer contributions receivable 206,740 166,134
----------- -----------
524,213 413,545
----------- -----------
Net assets available for benefits $52,450,158 $50,153,592
=========== ===========
See notes to financial statements.
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
DECEMBER 31,
--------------------------------
2000 1999
------------ ------------
Investment income:
Interest and dividends $ 3,697,748 $ 3,862,136
Net appreciation (depreciation) in fair value
of investments (see Note C) (4,605,444) 3,642,196
------------ ------------
(907,696) 7,504,332
------------ ------------
Contributions:
Employer (net of forfeitures) 2,069,235 1,514,639
Employee 5,255,888 2,159,361
------------ ------------
7,325,123 3,674,000
------------ ------------
Interest on participant loans 126,481 104,839
------------ ------------
Total additions 6,543,908 11,283,171
------------ ------------
Benefit payments 4,335,196 1,904,939
Administrative fees (see Note D) 6,997 6,130
------------ ------------
Total deductions 4,342,193 1,911,069
------------ ------------
Transfers between plans (see Note G) 94,851 1,126,088
------------ ------------
Increase in net assets available
for benefits 2,296,566 10,498,190
Net assets available for benefits:
Beginning of year 50,153,592 39,655,402
------------ ------------
End of year $ 52,450,158 $ 50,153,592
============ ============
See notes to financial statements.
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SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
EIN: 38-1872178; PN 017
QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
December 31, 2000
Shares/ Current
Par Value Cost Value
---------- ----------- -----------
* Fidelity Puritan Fund 27,700 $ 524,608 $ 521,598
* Fidelity Magellan Fund 90,729 9,067,486 10,823,981
* Fidelity Contrafund 124,184 5,934,688 6,106,141
* Fidelity Growth & Income Fund 233,125 7,734,672 9,814,545
* Fidelity Independence Fund 141,445 3,713,502 3,113,197
* Fidelity Overseas Fund 16,458 645,275 565,670
* Fidelity Balanced Fund 191,699 2,828,596 2,911,908
* Fidelity Blue Chip Fund 38,510 2,147,801 1,984,421
* Fidelity Asset Manager Fund 11,676 214,234 196,395
* Fidelity Low-Priced Stock Fund 7,293 167,309 168,603
* Fidelity Government Money Market Fund 7,954,206 7,954,206 7,954,206
Templeton Foreign Fund 32,410 335,300 335,118
Neuberger & Berman Partners Trust Fund 5,776 101,830 97,613
----------- -----------
Total Mutual Fund Assets 41,369,507 44,593,396
* Quanex Corporation unitized common stock 474,485 4,349,836 4,564,544
* Fidelity Common/Commingled trust 1,022,009 1,022,009 1,022,009
Participant loans (bearing interest rates from
7.85% to 10.50%, maturing within five to seven years) 1,745,996 1,745,996
----------- -----------
Total Investments $48,487,348 $51,925,945
=========== ===========
* Party-in-Interest
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
A. DESCRIPTION OF THE PLAN
The following description of the Nichols 401(k) Savings Plan (the "Plan")
provides only general information. Participants should refer to the Plan
document for more complete information.
(1) General. The Plan, sponsored by Quanex Corporation (the "Company"),
Nichols Aluminum - Alabama, Inc., Nichols Aluminum - Golden, Inc. and
Imperial Products, Inc., was established on October 1, 1987, and was
amended and restated in its entirety in June 1999. The Plan is a
defined contribution plan that is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"). It covers
substantially all salaried and non-union hourly employees at the
Nichols Aluminum divisions and Engineered Products divisions, and
bargaining unit employees at the Lincolnshire, Illinois plant.
Employees of Temroc Metals, Inc., a subsidiary of Quanex Corporation,
are not covered by the Plan as of December 31, 2000. The assets of the
Plan are held in trust by Fidelity Management Trust Company
("Fidelity" or the "Trustee"). The Benefits Committee (the
"Committee"), appointed by the Company's Board of Directors, serves as
the Plan administrator.
Effective January 1, 1999, the name of the Plan was changed to the
Nichols 401(k) Savings Plan. Effective July 1, 1999, the Decatur
Aluminum Corp. Salaried Employees' 401(k) Retirement Plan was merged
into the Plan. Effective February 14, 2000, the employees of Nichols
Aluminum - Golden, Inc. became participants in the Plan. Effective
June 1, 2000, the employees of Imperial Products, Inc. became
participants in the Plan.
(2) Contributions. Participants may elect salary deferrals between 1% and
15% of compensation as defined by the Plan agreement. The Company
makes contributions on behalf of employees who have at least one year
of service. The Company contribution is based on Company profits and
is calculated based on a percentage of the employee's compensation.
(3) Participant Accounts. Each participant's account is credited with the
participant's contribution, the employer's contribution, and an
allocation of investment income. Investment income allocations are
based on individual participant account balances as of the end of the
period in which the income is earned.
(4) Vesting. Participants are immediately vested in their voluntary
contributions and earnings thereon. Vesting in the employer
contribution is based on years of credited service. A participant is
20% vested for each year of credited service and fully vested after
five years. If a participant terminates employment prior to becoming
fully vested, the nonvested portion of the employer contributions are
immediately forfeited by the participant and utilized to reduce future
employer contributions.
(5) Payment of Benefits. The Plan is intended for long-term savings but
provides for early withdrawals and loan arrangements under certain
conditions. Upon termination of service, a participant may elect to
receive a cash lump-sum distribution equal to the amount of vested
benefits in his or her account. Terminated participants with account
balances of less than $5,000 will automatically receive a lump sum
distribution.
(6) Loans. Loans may be granted to a participant of the Plan at the
Committee's discretion. Loan terms range up to five years or seven
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.
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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 recorded value of the common/commingled trust is at face
value, which is fair value.
(3) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and changes therein and disclosure
of contingent assets and liabilities. Actual results could differ from
these estimates.
(4) Administrative Expenses. The Company pays the administrative expenses
of the Plan, except loan set up and carrying fees and redemption fees
imposed on certain Fidelity funds.
(5) Payment of Benefits. Benefit payments are recorded when paid.
C. INVESTMENTS
The following are investments that represent 5 percent or more of the
Plan's net assets.
December 31, 2000 December 31, 1999
Shares Amount Shares Amount
--------- --------- --------- -----------
Fidelity Magellan Fund 90,729 $10,823,981 82,483 $11,269,697
Fidelity Contrafund 124,184 6,106,141 108,821 6,531,426
Fidelity Growth & Income Fund 233,125 9,814,545 214,485 10,115,115
Fidelity Independence Fund 141,445 3,113,197 17,943 463,826
Fidelity Balanced Fund 191,699 2,911,908 218,608 3,357,817
Fidelity Government Money Market Fund 7,954,206 7,954,206 8,358,926 8,358,926
Quanex unitized common stock 474,485 4,564,544 161,574 1,990,592
During the years ended 2000 and 1999, the Plan's investments (including
gains and losses on investments bought and sold, as well as held during the
year) appreciated / (depreciated) in value as follows:
2000 1999
----------- -----------
Fidelity mutual funds $(4,757,756) $ 2,788,078
Quanex unitized common stock 152,312 854,118
----------- -----------
$(4,605,444) $ 3,642,196
=========== ===========
D. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Fidelity.
Fidelity is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. Fees paid by the
Plan for the investment management services amounted to $6,997 and $6,130
for the years ended December 31, 2000 and 1999, respectively. In addition,
the Plan invests in shares of Quanex Corporation unitized common stock.
Quanex Corporation is the Plan sponsor as defined by the Plan and,
therefore, these transactions also qualify as party-in-interest
transactions. As of December 31, 2000 and 1999, the value of Quanex
Corporation common stock held by the Plan was $4,564,544 and $1,990,592,
respectively.
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E. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the
right under the Plan to terminate the Plan at any time subject to the
provisions set forth in ERISA. In the event of Plan termination, the assets
held by the Trustee under the Plan will be valued and fully vested, and
each participant will be entitled to distributions respecting his or her
account.
F. 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. The Plan has received a favorable letter of tax determination
dated December 22, 1994. As such, the Plan is a qualified trust under
Sections 401(a) and 401(k) of the Internal Revenue Code (the "Code") and,
as a result, is exempt from federal income tax under Section 501(a) of the
Code. The Company believes the Plan is currently designed and being
operated in compliance with the applicable requirements of the Code. The
Company believes the Plan was qualified and the related trust was
tax-exempt as of the financial statement dates.
G. TRANSFER OF ASSETS
Account balances and participant loans of $94,851 were transferred from the
Nichols 401(k) Savings Plan for Hourly Employees to the Plan in plan year
2000.
The assets and participant loans of the Decatur Aluminum Corp. Salaried
Employees' 401(k) Retirement Plan, totaling $1,126,088, were transferred to
the Plan on July 1, 1999.
H. SUBSEQUENT EVENTS
Effective April 1, 2001, the Company will contribute 50% of the first 5% of
compensation that a participant contributes to the Plan.
Effective July 1, 2001, the non-union employees of Temroc Metals, Inc. will
become participants of the Plan. The assets of the Temroc Metals, Inc.
Nonbargaining Unit Employees' 401(k) Plan will be transferred to the Plan
on July 2, 2001.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Nichols 401 (k) Savings Plan
Date: June 22, 2001 /s/ Viren M. Parikh
-----------------------------------
Viren M. Parikh, Benefits Committee
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23.1 Independents Auditor's Consent