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:
Piper Impact 401 (k) 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: Piper Impact 401(k) Plan
We have audited the accompanying statements of net assets available for benefits
of the Piper Impact 401(k) 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
PIPER IMPACT 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<Table>
<Caption>
DECEMBER 31,
-----------------------
2001 2000
---------- ----------
Assets:
Investments at fair value (see Note C) $7,050,373 $6,913,217
Participant loans 424,617 365,313
Employee contributions receivable 64,502 83,617
Employer contributions receivable 40,373 46,464
---------- ----------
104,875 130,081
---------- ----------
Net assets available for benefits $7,579,865 $7,408,611
========== ==========
</Table>
See notes to financial statements.
QUANEX CORPORATION
PIPER IMPACT 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
<Table>
<Caption>
DECEMBER 31,
----------------------------
2001 2000
------------ ------------
Investment income:
Interest and dividends $ 138,081 $ 539,795
Net appreciation (depreciation) in fair value
of investments (see Note C) (800,919) (862,632)
------------ ------------
(662,838) (322,837)
------------ ------------
Contributions:
Employer (net of forfeitures) 503,960 463,148
Employee 969,125 958,451
------------ ------------
1,473,085 1,421,599
------------ ------------
Interest on participant loans 33,672 24,362
------------ ------------
Total additions 843,919 1,123,124
------------ ------------
Benefit payments 666,657 1,586,931
Administrative fees (see Note D) 6,008 5,643
------------ ------------
Total deductions 672,665 1,592,574
------------ ------------
Increase (decrease) in net assets available
for benefits 171,254 (469,450)
Net assets available for benefits:
Beginning of year 7,408,611 7,878,061
------------ ------------
End of year $ 7,579,865 $ 7,408,611
============ ============
</Table>
See notes to financial statements.
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
EIN: 38-1872178; PN 001
QUANEX CORPORATION
PIPER IMPACT 401(k) PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
December 31, 2001
<Table>
<Caption>
Shares/ Current
Par Value Cost Value
---------- ---------- ----------
* Fidelity Puritan Fund 38,450 $ 718,739 $ 679,418
* Fidelity Magellan Fund 1,698 206,398 176,970
* Fidelity Contrafund 23,642 1,191,856 1,011,186
* Fidelity Growth & Income Fund 1,418 58,886 52,989
* Fidelity Independence Fund 30,800 627,398 485,713
* Fidelity Overseas Fund 717 25,580 19,649
* Fidelity Balanced Fund 4,130 63,861 61,530
* Fidelity Blue Chip Fund 56,411 2,554,955 2,422,274
* Fidelity Asset Manager Fund 21,676 373,838 335,978
* Fidelity Low-Priced Stock Fund 3,777 96,915 103,560
* Fidelity Government Money Market Fund 798,918 798,918 798,918
Templeton Foreign Fund 938 8,983 8,676
Neuberger & Berman Partners Trust Fund 102 1,775 1,635
---------- ----------
Total Mutual Fund Assets 6,728,102 6,158,496
* Quanex Corporation unitized common stock 25,870 257,338 342,520
* Fidelity Common/Commingled trust 549,357 549,357 549,357
Participant loans (bearing interest rates from
8.75% to 10.50%, maturing within five to ten years) 424,617 424,617
---------- ----------
Total Investments $7,959,414 $7,474,990
========== ==========
</Table>
* Party-in-Interest
QUANEX CORPORATION
PIPER IMPACT 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
A. DESCRIPTION OF THE PLAN
The following description of the Piper Impact 401(k) Plan (the "Plan")
provides only general information. 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, a
division of Quanex Corporation (the "Company"). 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"
or the "Trustee"). The Benefits Committee (the "Committee"),
appointed by Quanex Corporation's Board of Directors, serves
as the Plan administrator.
(2) Contributions. Beginning January 1, 2002, participants may
contribute to the Plan by electing salary deferrals up to 50%
of compensation (20% before January 1, 2002) 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. In addition,
the Company makes a contribution on behalf of employees with
at least three months of service, based on company profits and
calculated based on a percentage of the employee's
compensation.
(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. The
benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
(4) 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. Forfeited
balances of terminated participants' non-vested accounts are
used to reduce current or future Company contributions.
Amounts forfeited during 2001 and 2000 were $39,858 and
$58,072, respectively.
(5) 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. Terminated participants
with an account balance 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 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.
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 Expense. The Company pays all administrative
expenses, except for loan set up and carrying fees and
redemption fees imposed on certain Fidelity funds.
(5) Payments 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 38,450 $ 679,418 28,833 $ 542,932
Fidelity Contrafund 23,642 1,011,186 22,437 1,103,233
Fidelity Independence Fund 30,800 485,713 30,116 662,856
Fidelity Blue Chip Fund 56,411 2,422,274 52,140 2,686,750
Fidelity Government Money Market Fund 798,918 798,918 654,507 654,507
Fidelity Common/Commingled Trust 549,357 549,357 414,834 414,834
</Table>
During the years ended December 31, 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 $ (894,858) $ (841,485)
Quanex unitized common stock 93,939 (21,147)
---------- ----------
$ (800,919) $ (862,632)
========== ==========
</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 $6,008 and $5,643 for the years ended December 31,
2001 and 2000, 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, 2001
and 2000, the value of Quanex Corporation unitized common stock held by
the Plan was $342,520 and $217,783, 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 September 30, 1998. 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.
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) 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>