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, 2001
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:
Quanex Corporation Employee Saving 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
INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Quanex Corporation Employee Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Quanex Corporation Employee Savings Plan ("the Plan") as of December 31,
2001 and 2000, 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,
2001 and 2000, 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, 2001 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
Houston, Texas
June 19, 2002
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<Table>
<Caption>
DECEMBER 31,
---------------------------
2001 2000
------------ ------------
Assets:
Investments at fair value (see Note C) $ 37,011,880 $ 40,794,168
Employee contributions receivable 288,047 339,121
Employer contributions receivable 77,855 93,358
------------ ------------
365,902 432,479
------------ ------------
Net assets available for benefits $ 37,377,782 $ 41,226,647
============ ============
</Table>
See notes to financial statements.
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
<Table>
<Caption>
DECEMBER 31,
----------------------------
2001 2000
------------ ------------
Investment income:
Interest and dividends $ 961,189 $ 3,160,311
Net appreciation (depreciation) in fair value
of investments (see Note C) (3,374,469) (5,320,468)
------------ ------------
(2,413,280) (2,160,157)
------------ ------------
Contributions:
Employer (net of forfeitures) 550,667 593,448
Employee 2,260,223 2,633,821
------------ ------------
2,810,890 3,227,269
------------ ------------
------------ ------------
Total additions 397,610 1,067,112
------------ ------------
Benefit payments 4,247,705 2,855,790
Administrative fees (see Note D) 132 512
------------ ------------
Total deductions 4,247,837 2,856,302
------------ ------------
Transfers between plans (see Note G) 1,362 (6,134,964)
------------ ------------
Increase (decrease) in net assets available
for benefits (3,848,865) (7,924,154)
Net assets available for benefits:
Beginning of year 41,226,647 49,150,801
------------ ------------
End of year $ 37,377,782 $ 41,226,647
============ ============
</Table>
See notes to financial statements.
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
EIN: 38-1872178; PN 012
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
DECEMBER 31, 2001
<Table>
<Caption>
Shares/ Current
Par Value Cost Value
------------ ------------ ------------
* Fidelity Puritan Fund 263,756 $ 4,607,522 $ 4,660,576
* Fidelity Magellan Fund 79,851 7,865,440 8,322,032
* Fidelity Contrafund 84,832 4,233,875 3,628,266
* Fidelity Growth & Income Fund 99,241 3,661,668 3,709,632
* Fidelity Independence Fund 171,571 3,769,397 2,705,670
* Fidelity Overseas Fund 38,697 1,314,343 1,061,083
* Fidelity Balanced Fund 66,937 1,010,162 997,366
* Fidelity Blue Chip Fund 44,015 2,162,618 1,889,991
* Fidelity Asset Manager Fund 11,138 199,364 172,638
* Fidelity Low-Priced Stock Fund 39,786 1,010,962 1,090,923
* Fidelity Government Money Market Fund 5,079,805 5,079,805 5,079,805
Templeton Foreign Fund 57,011 575,346 527,356
Neuberger & Berman Partners Trust Fund 7,742 132,871 124,022
------------ ------------
Total Mutual Fund Assets 35,623,373 33,969,360
* Quanex Corporation unitized common stock 126,090 1,282,482 1,669,436
* Fidelity Common/Commingled trust 1,373,084 1,373,084 1,373,084
------------ ------------
Total Investments $ 38,278,939 $ 37,011,880
============ ============
</Table>
* Party-in-Interest
QUANEX CORPORATION
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
A. DESCRIPTION OF THE PLAN
The following brief description of the Quanex Corporation Employee
Savings Plan (the "Plan") provides only general information.
Participants should refer to the Plan agreement for more complete
information.
(1) General. The Plan became effective April 1, 1986, as amended
and restated effective January 1, 1989, and is sponsored by
Quanex Corporation (the "Company"). The Plan is a defined
contribution plan that is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Plan is a voluntary
savings plan in which employees of the Company's MacSteel and
Corporate office divisions, excluding those employees who are
covered by a collective bargaining agreement, are eligible to
participate after completing three months of active service.
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 Board
of Directors of the Company, serves as the Plan administrator.
(2) Contributions. Beginning January 1, 2002, participants may
elect to contribute up to 50% of their pre-tax or after-tax
annual compensation (20% before January 1, 2002) limited to
50% of considered compensation (20% before January 1, 2002) as
defined by the Plan agreement. The Company contributes 50% of
the first 5% of compensation that a participant contributes to
the Plan.
(3) Participants Account. Each participant's account is credited
with the participant's contribution; the Company's matching
contribution, and an allocation of investment income, which is
based on the participant's account balance as of the end of
the period in which the income is earned.
(4) Vesting. Participants are immediately vested in their
voluntary contributions and the related earnings. Vesting in
the employer's matching contributions for employees is 20% for
more than one year of service graduating to 100% for five or
more years. Upon death, retirement or total and permanent
disability, the participant or beneficiary becomes immediately
fully vested in the employer's contribution. In the event of
termination, nonvested portions of employer's contributions
are immediately forfeited by participants and utilized to
reduce future employer matching contributions.
(5) Payment of Benefits. Upon termination of service, the
participant may elect to receive a lump-sum amount equal to
the amount of vested benefits in his or her account.
Terminated employees with an account balance of less than
$5,000 will automatically receive a lump sum distribution.
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
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 the
affect
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 all administrative
expenses, except for 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.
<Table>
<Caption>
December 31, 2001 December 31, 2000
Shares Amount Shares Amount
---------- ---------- ---------- ----------
Fidelity Puritan Fund 263,756 $4,660,576 251,715 $4,739,788
Fidelity Magellan Fund 79,851 8,322,032 78,579 9,374,536
Fidelity Contrafund 84,832 3,628,266 83,640 4,112,589
Fidelity Growth & Income Fund 99,241 3,709,632 108,116 4,551,692
Fidelity Independence Fund 171,571 2,705,670 130,799 2,878,876
Fidelity Blue Chip Fund 44,015 1,889,991 30,821 1,588,188
Fidelity Government Money Market Fund 5,079,805 5,079,805 5,349,286 5,349,286
Quanex unitized common stock 126,090 1,669,436 434,259 4,177,576
</Table>
During the years ended 2001 and 2000, 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:
<Table>
<Caption>
2001 2000
------------ ------------
Mutual funds $ (4,198,618) $ (4,484,796)
Quanex unitized common stock 824,149 (835,672)
------------ ------------
$ (3,374,469) $ (5,320,468)
============ ============
</Table>
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 $132 and $512 for the years ended December 31,
2001 and 2000. 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, 2001 and
2000, the value of Quanex Corporation common stock held by the Plan was
$1,669,436 and $4,177,576, respectively.
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 October 3, 1996. 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
The account balances, totaling $6,134,964, of the employees at
MACSTEEL's Fort Smith, Arkansas facility who were covered by a
collective bargaining agreement were transferred to the Quanex
Corporation Hourly Bargaining Unit Employees Savings Plan on June 30,
2000.
During 2001, account balances of $1,362 were transferred between the
Plan and the Quanex Corporation Hourly Bargaining Unit Employees
Savings Plan.
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.
Quanex Corporation Employee Savings Plan
Date: June 28, 2002 /s/ Viren M. Parikh
-------------------
Viren M. Parikh, Benefits Committee
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
23.1 Independent Auditor's Consent
</Table>