SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1)
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
QUANEX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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January 23, 2001
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 8:00 a.m., C.S.T., on Thursday, February 22, 2001, at
the Company's principal executive offices at 1900 West Loop South, 15th Floor,
Houston, Texas.
This year you will be asked to vote in favor of one proposal. The proposal
concerns the election of two directors. This matter is more fully explained in
the attached proxy statement, which you are encouraged to read.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE THE PROPOSAL AND URGES
YOU TO VOTE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
Thank you for your cooperation.
Sincerely,
/s/ Vernon E. Oechsle
Vernon E. Oechsle
Chairman of the Board
Quanex Corporation
1900 West Loop South
Suite 1500
Houston, Texas 77027
(713) 961-4600
Quanex Corporation
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held February 22, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Quanex
Corporation, a Delaware corporation (the "Company"), will be held at the
principal executive offices of Quanex Corporation, 1900 West Loop South, Suite
1500, Houston, Texas, on February 22, 2001, at 8:00 a.m., C.S.T., for the
following purposes:
(1) To elect two directors to serve until the Annual Meeting of
Stockholders in 2004, and
(2) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Information with respect to the above matters is set forth in the Proxy
Statement that accompanies this Notice.
The Board of Directors has fixed the close of business on January 12, 2001,
as the record date for determining stockholders entitled to notice of and to
vote at the meeting. A complete list of the stockholders entitled to vote at the
meeting will be maintained at the Company's principal executive offices, will be
open to the examination of any stockholder for any purpose germane to the
meeting during ordinary business hours for a period of ten days prior to the
meeting, and will be made available at the time and place of the meeting during
the whole time thereof.
Please execute your vote promptly. Your designation of a proxy is revocable
and will not affect your right to vote in person if you find it convenient to
attend the meeting.
The Company's Annual Report to Stockholders for the year ended October 31,
2000, accompanies this Notice.
By order of the Board of Directors,
/s/ Michael W. Conlon
Michael W. Conlon, Secretary
Houston, Texas
January 23, 2001
Quanex Corporation
PROXY STATEMENT
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Annual Meeting of Stockholders
To Be Held February 22, 2001
This Proxy Statement and the accompanying form of proxy are to be first
mailed on or about January 23, 2001, to all holders of record on January 12,
2001, (the "Record Date"), of the Common Stock, $.50 par value ("Common Stock"),
of Quanex Corporation, a Delaware corporation (the "Company"), and are furnished
in connection with the solicitation of proxies by the Board of Directors of the
Company to be used at the Annual Meeting of Stockholders to be held at 8:00
a.m., C.S.T., on Thursday, February 22, 2001, and at any adjournment or
adjournments thereof. Shares of Common Stock represented by any unrevoked proxy
in the enclosed form, if such proxy is properly executed and is received prior
to the meeting, will be voted in accordance with the specifications made on such
proxy. Proxies on which no specifications have been made will be voted for the
election as directors of the nominees listed herein. Proxies are revocable by
written notice to the Secretary of the Company at the address of the Company set
forth below, or by delivery of a later dated proxy, at any time prior to their
exercise. Proxies may also be revoked by a stockholder attending and voting in
person at the meeting.
The Common Stock is the only class of securities of the Company that is
entitled to vote at the meeting. As of the close of business on the Record Date,
the date for determining stockholders who are entitled to receive notice of and
to vote at the meeting, there were 13,438,102 shares of Common Stock issued and
outstanding. Each share is entitled to one vote. The presence at the meeting, in
person or by proxy, of the holders of a majority of shares of Common Stock is
necessary to constitute a quorum.
The cost of soliciting proxies will be borne by the Company. Solicitation
may be made personally or by mail, telephone or electronic data transfer by
officers, directors and regular employees of the Company (who will not receive
any additional compensation for any solicitation of proxies), as well as by the
firms of Automatic Data Processing and Beacon Hill Partners, which have been
retained by the Company to assist in the solicitation for a fee of approximately
$3000.00 and $1000.00 respectively. The Company will also reimburse brokerage
houses and other custodians, nominees and fiduciaries for their reasonable
expenses for sending proxy materials to the beneficial owners of Common Stock.
The mailing address of the Company's principal executive office is 1900 West
Loop South, Suite 1500, Houston, Texas 77027.
MATTERS TO COME BEFORE THE MEETING
(1) Election of Directors
Two directors are to be elected at the meeting. The Company's Restated
Certificate of Incorporation and Bylaws both provide that the Board of Directors
shall be divided into three classes as nearly equal in number as possible, with
the terms of office of the classes expiring at different times. The terms of
office of two directors, Carl E. Pfeiffer and Vincent R. Scorsone, expire at the
2001 Annual Meeting. The proposed nominees for director for a term expiring at
the 2004 Annual Meeting are Messrs. Pfeiffer and Scorsone. The respective terms
of directors expire on the dates set forth below.
Nominees for election for terms Director
expiring at the 2004 Annual Meeting Principal Occupation Age Since
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Carl E. Pfeiffer Chairman Emeritus, Quanex Corporation 70 1966
Vincent R. Scorsone. Retired since 1994 from Aluminum Company of America, 65 1995
a manufacturer of aluminum products (Pittsburgh,
Pennsylvania)
Directors whose terms
expire at the 2003 Annual Meeting
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Vernon E. Oechsle. Chairman of the Board and Chief Executive Officer, 58 1995
Quanex Corporation
Donald G. Barger, Jr. Senior Vice President and Chief Financial Officer of Yellow 57 1995
Corporation, a provider of transportation services throughout
North America and, through partnership alliances, other
international markets (Overland Park, Kansas)
Directors whose terms
expire at the 2002 Annual Meeting
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Michael J. Sebastian Retired since 1995 from Cooper Industries, Inc., 70 1991
manufacturer of electrical, automotive and industrial
equipment (Houston, Texas)
Russell M. Flaum Executive Vice President of Illinois Tool Works, an 50 1997
international manufacturer of engineered metal and plastic
components (Glenview, Illinois)
Susan F. Davis Vice President of Human Resources of Johnson 47 1998
Controls, Inc., a global market leader in automotive
systems and building controls (Milwaukee, Wisconsin)
Messrs. Pfeiffer and Scorsone have indicated a willingness to serve if
elected. If a nominee should be unable to serve or for good cause will not
serve, and if any other person is nominated, the persons designated on the
accompanying form of proxy will have discretionary authority to vote or refrain
from voting in accordance with their judgment on such other nominee unless
authority to vote on such matter is withheld. The nominees receiving a plurality
of votes cast at the meeting will be elected directors. Abstentions and broker
nonvotes will not be treated as a vote for or against any particular director
and will not affect the outcome of the election of directors.
Mr. Pfeiffer served as the Company's Chairman of the Board of Directors
from 1989 to 1995 and retired from active management in 1992. Mr. Pfeiffer
retired as non-executive Chairman of the Board in 1995.
Mr. Scorsone retired from Aluminum Company of America in 1994. Mr. Scorsone
currently serves on the board of the Indspec Chemical Company.
Mr. Oechsle joined the Company in 1993 as Executive Vice President and
Chief Operating Officer and served as President and Chief Executive Officer from
January, 1996, to February, 1999. Mr. Oechsle was appointed to the Board of
Directors of the Company in May 1995 and elected Chairman of the Board in
February, 1999. Prior to joining the Company, Mr. Oechsle was Executive Vice
President of the Automotive Sector of Allied Signal Inc., an advanced technology
and manufacturing company, since December 1990. Mr. Oechsle currently serves on
the board of Precision Castparts Corporation.
Mr. Barger was appointed to his present position with Yellow Corporation in
December 2000. From March 1998 to December 2000, Mr. Barger was Vice President
and Chief Financial Officer of Hillenbrand Industries, a provider of services
and products for the health care and funeral services industries. Prior to that
time, Mr. Barger was Vice President of Finance and Chief Financial Officer of
Worthington Industries, Inc., a diversified steel processor, since September
1993 and was employed by B. F. Goodrich Company, manufacturer of automobile
tires and related products, from 1973 to 1993. Mr. Barger currently serves on
the board of Gardner Denver Machinery Inc.
Mr. Sebastian retired from Cooper Industries, Inc. in 1995, and for more
than five years prior to his retirement, he served as Executive Vice President.
Mr. Sebastian currently serves on the board of Cooper Cameron Corporation.
Mr. Flaum has been employed in the principal occupation shown above, or in
a similar one with the same employer, for more than five years.
Ms. Davis has been employed in the principal occupation shown above, or in
a similar one with the same employer, for more than five years. Ms. Davis
currently serves on the board of Butler Manufacturing.
Committees of the Board of Directors
Pursuant to the Company's Bylaws, the Board of Directors has established
several committees, including an Executive Committee, an Audit and Environmental
Compliance Committee, a Compensation and Management Development Committee, a
Nominating and Corporate Governance Committee and a Finance and Investment
Committee. During fiscal 2000, the Board of Directors met seven times, the
Compensation and Management Development Committee met five times, the Nominating
and Corporate Governance Committee met three times, and the Audit and
Environmental Compliance Committee and the Finance and Investment Committee each
met twice. The Executive Committee did not meet. All directors attended more
than 75% of the combined number of Board meetings and meetings of committees of
which they are members, except for Mr. Pfeiffer who was unable to participate in
two Board meetings and an Audit Committee meeting due to illness.
Audit and Environmental Compliance Committee
The current members of the Audit and Environmental Compliance Committee are
Ms. Davis and Messrs. Pfeiffer, Flaum and Barger, who is Chairman. The Audit and
Environmental Compliance Committee's responsibilities to the Board are detailed
in the following Charter:
QUANEX CORPORATION
AUDIT AND ENVIRONMENTAL
COMPLIANCE COMMITTEE CHARTER
Purpose
The primary purpose of the Audit and Environmental Compliance Committee
(the "Committee") is to assist the Board of Directors (the "Board") in
fulfilling its responsibility to oversee management's conduct of the Company's
financial reporting process, including review of the financial reports and other
financial information provided by the Company to the public and governmental and
regulatory bodies, the Company's systems of internal accounting, the Company's
financial controls, the annual independent audit of the Company's financial
statement, and compliance with applicable laws and regulations relating to the
health, safety and the environment which may represent material financial
exposure to the Company.
In discharging its role, the committee is empowered to investigate any
matter brought to its attention, with full access to all books, records,
facilities and personnel to the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; and, accordingly, the independent
auditors are ultimately accountable to the Board through the Committee.
The Committee will review and reassess the adequacy of this Charter on an
annual basis.
Membership
The Committee will be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the New York Stock Exchange. Accordingly members will be
independent outside directors who, in the judgment of the Board, are financially
literate or who can become financially literate within a reasonable period of
time after appointment to the Committee. At least one member of the Committee
will have accounting or related financial management expertise, as the Board
interprets such qualification in its business judgment.
Key Responsibilities
The Committee's job is one of review and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the independent auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management and
the independent auditors have more time, knowledge, and detailed information
concerning the Company than do Committee members. Consequently, in performing
its functions, the Committee is not providing any expert or special assurance as
to the Company's financial statements or any professional certification as to
the independent auditors' work. Additionally, in performing the review of
environmental compliance, the Committee recognizes that management and outside
experts have more time, knowledge, and detailed information concerning the
Company than do Committee members.
The following functions will be the common recurring activities of the
Committee. These functions are set forth as a guide with the understanding that
the Committee may diverge from this guide as appropriate given the
circumstances.
o The Committee will review with management and the independent auditors
the audited financial statements to be included in the Company's
Annual Report on Form 10-K and review and consider with the
independent auditors the matters remaining to be discussed by
Statement of Auditing Standards No. 61, as it may be modified or
supplemented.
o As a whole or through the Committee chair, the Committee will review
with the independent auditors the Company's interim financial results.
o The Committee will discuss with management and independent auditors
the quality and adequacy of the Company's internal controls.
o The Committee shall:
1. Obtain from the independent auditors annually, a formal written
statement delineating all relationships between the auditors and
the Company consistent with Independence Standards Board Standard
Number 1;
2. Discuss with the independent auditors any such disclosed
relationships and their impact on the auditors' objectivity and
independence; and
3. Recommend that the Board take appropriate action in response to
the independent auditors' report to satisfy itself of the
auditors' independence.
o The Committee and the Board will have the ultimate authority and
responsibility to select, evaluate and where appropriate, replace the
independent auditors.
o Review annually the Company's Risk Management program and the
Company's program relating to monitoring compliance with the Company's
Standards of Business Conduct.
o Review annually any environmental issues and the adequacy of the
Company's program relating to monitoring compliance with applicable
laws relating to health, safety and the environment.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statement are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditors or to assure compliance with
laws and regulations and the Company's policies.
Report of the Audit and Environmental Compliance Committee
We have reviewed and discussed the Company's audited financial statements
for the year ended October 31, 2000 with management and with Deloitte & Touche
LLP, certified public accountants, the independent auditors and accountants for
the Company. In addition, we discussed with Deloitte & Touche LLP the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380) with respect to those statements.
We have received the written disclosures and the letter from Deloitte &
Touche LLP required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees)
and have discussed with Deloitte & Touche LLP its independence in connection
with its audit of the Company's most recent financial statements.
Based on these reviews, discussions, and management's assurances, we
recommended to the board of directors that these audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 2000.
Donald G. Barger, Jr., Susan F. Davis, Russell M. Flaum and Carl E.
Pfeiffer are the members of the Audit and Environmental Compliance Committee.
Each of these persons is independent, as defined in Sections 303.01(B)(2)(a) and
(3) of the New York Stock Exchange's listing standards.
The board of directors has adopted a written charter for the Audit and
Environmental Compliance Committee, a copy of which is contained in this Proxy
Statement.
The information in the foregoing three paragraphs shall not be deemed to be
soliciting material, or be filed with the SEC or subject to Regulation 14A or
14C or to liabilities of Section 18 of the Securities Act, nor shall it be
deemed to be incorporated by reference into any filing under the Securities Act
or the Exchange Act, except to the extent that we specifically incorporate these
paragraphs by reference.
Audit and Environmental Compliance Committee
Donald G. Barger, Jr., Chairman
Susan F. Davis
Russell M. Flaum
Carl E. Pfeiffer
Compensation and Management Development Committee
The current members of the Compensation and Management Development
Committee are Ms. Davis and Messrs. Scorsone and Sebastian, who is Chairman.
This Committee's responsibilities to the Board include the following:
1) Review, approve and report to the Board of Directors regarding the
Company's overall compensation policy, including compensation
philosophy and strategy, short- and long-term incentive plans and
programs, stock ownership plans, and employee benefit plans.
2) Review and report to the Board of Directors annually on the
performance of the Chief Executive Officer and review with the Chief
Executive Officer the performance of each of the senior executives of
the Company. Senior executives include all officers of the Company and
the president or senior manager of each business group.
3) Review and approve the compensation to be paid to officers and key
employees of the Company.
4) Review and approve the establishment and administration of stock bonus
plans and stock option plans for employees and non-employee directors.
5) Serve as the appropriate committee to administer the Company's
Executive Incentive Compensation Plan (EICP) and to approve the
establishment of targets for such Plan and to approve all awards under
such Plan.
6) Review the structural organization of the Company and assist the Chief
Executive Officer in developing recommendations for the selection of
senior management personnel and their replacements and successors.
7) Review the adequacy of the management development program/process to
assure a capable cadre of personnel to support the senior managerial
needs of the Company.
Executive Committee
The current members of the Executive Committee are Messrs. Pfeiffer,
Sebastian, and Oechsle, who is Chairman. This committee acts on behalf of the
Board between regularly scheduled meetings of the Board of Directors.
Nominating and Corporate Governance Committee
The current members of the Nominating and Corporate Governance Committee
are Ms. Davis and Messrs. Sebastian and Scorsone, who is Chairman. This
Committee's responsibilities to the Board include the following:
1) Study and review with management the overall effectiveness of the
organization of the Board and the conduct of its business, and make
recommendations to the Board of Directors, as appropriate.
2) Develop and maintain criteria and procedures for the identification
and recruitment of candidates for election to serve as directors of
the Company.
3) Review the appropriateness and adequacy of information supplied to
directors prior to and during Board of Directors meetings.
4) Review director class each year and recommend directors for election
or re-election.
5) Review and make recommendations to the Board of Directors with respect
to compensation to be paid or provided to members of the Board of
Directors.
6) Evaluate annually the performance of the Board of Directors.
7) Consider nominees for director recommended by stockholders of the
Company, provided such recommendations are addressed to the chairman
of the Committee at the Company's principal executive office and
received by the chairman before November 1 of each year with respect
to the annual stockholders' meeting that is held thereafter.
Finance and Investment Committee
The current members of the Finance and Investment Committee are Messrs.
Barger, Pfeiffer and Flaum, who is Chairman. This committee's responsibilities
to the Board include the following:
1) Review, as appropriate, advise and consult with senior management
concerning the general financial affairs of the Company including the
capital structure of the Company, financing plans, cash flow
projections, dividend policy, stock re-purchase programs, currency
exchange agreement procedure, loan agreements, capital investment
policy, and appropriate target rates of return.
2) Monitor and review the establishment of investment objectives,
policies, and performance criteria for the management of the Company's
retirement and benefit plan assets.
Nomination of Directors
The Company's Bylaws provide that, subject to certain limitations discussed
below, any stockholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at the meeting. The
Company's Bylaws also provide that a stockholder must give written notice of
such stockholder's intent to make such nomination or nominations, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Company not later than (i) with respect to an election to be held at an
Annual Meeting of Stockholders, 90 days prior to the anniversary date of the
date of the immediately preceding Annual Meeting, and (ii) with respect to an
election to be held at a Special Meeting of Stockholders for the election of
directors, or otherwise, the close of business on the tenth day following the
date on which a written statement setting forth the date of such meeting is
first mailed to stockholders provided that such statement is mailed no earlier
than 120 days prior to the date of such meeting. Notwithstanding the foregoing,
if an existing director is not standing for re-election to a directorship which
is the subject of an election at such meeting or if a vacancy exists as to a
directorship which is the subject of an election, whether as a result of
resignation, death, an increase in the number of directors, or otherwise, then a
stockholder may make a nomination with respect to such directorship at any time
not later than the close of business on the tenth day following the date on
which a written statement setting forth the fact that such directorship is to be
elected and the name of the nominee proposed by the Board of Directors is first
mailed to stockholders. Each notice of a nomination from a stockholder shall set
forth: (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholders as would be
required to be included in a proxy statement filed pursuant to the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations); and (e) the consent of
each nominee to serve as a director of the Company if so elected. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure. Subject to the exceptions
discussed above, written notice of a stockholder's intent to nominate a person
for director at the 2002 Annual Meeting must be given on or before November 24,
2001.
Director Compensation
Directors (other than Mr. Oechsle, who is an officer of the Company) have
been paid a fee of $6,000, four times a year, at regular quarterly meetings and
$1,250 for attendance at each meeting of the Board and $1000 for each committee
meeting attended. With the exception of the Executive Committee Chair, Committee
Chairs receive a fee of $625 four times a year. Travel and lodging expenses
incurred by directors to attend such meetings are also paid by the Company.
Non-employee directors who first became directors prior to July 1, 1997, are the
beneficiaries of life insurance policies provided by the Company at a cost
ranging from approximately $2,000 to $3,000 per director for fiscal 2000.
At the Annual Meeting of Stockholders held on February 22, 1996, the
stockholders of the Company approved an amendment to the Quanex Corporation
Deferred Compensation Plan (the "DC Plan") that provided for (i) the addition of
a Common Stock election as an option for certain participants and (ii) a 20%
Company matching award for participants electing to make their deferrals in the
form of Common Stock. Under the terms of the DC Plan, officers and directors may
elect to defer a portion of their incentive bonuses and director fees,
respectively, awarded or earned during the ensuing plan year to a Common Stock
account. If a participant elects to make a deferral to a Common Stock account
for a period of three full years or more, a matching award equal to 20% of the
amount deferred is made by the Company to such participant's account. The number
of shares of Common Stock credited to a participant's deferral and matching
account is the number of full shares of Common Stock that could have been
purchased with the dollar amount deferred or matched based on the closing price
of the Common Stock on the New York
Stock Exchange (the "NYSE") on the day that the amount deferred would have been
paid had it not been deferred. Dividends and other distributions declared and
paid on the Common Stock will be accrued in the participant's account based upon
the number of shares of Common Stock credited to such account. No shares of
Common Stock or payments in respect thereof, however, are issued or made to any
participant until distribution in accordance with the DC Plan. All participant
deferrals and Company matching awards are 100% vested; provided, however, that
if a participant receives a benefit from the DC Plan for any reason, other than
death, disability or retirement, within three years after a deferral was
credited to a Common Stock account, any matching awards made by the Company with
respect to the deferral that is held less than three years will be forfeited.
Under the terms of the DC Plan, as subsequently amended, in the event of a
"change of control" of the Company, any amount credited to a participant's
account is fully vested and is payable in cash within five days after the change
of control occurs. A "change in control" is defined generally as (i) an
acquisition of securities resulting in an individual or entity or group thereof
becoming, directly or indirectly, the beneficial owner of 20% or more of either
(a) the Company's then-outstanding Common Stock or (b) the combined voting power
of the then-outstanding voting securities of the Company entitled to vote
generally in the election of directors, (ii) a change in a majority of the
persons who are members of the Board of Directors as of June 1, 1999 (the
"Incumbent Board"), (iii) generally, a reorganization, merger or consolidation
or sale of the Company or disposition of all or substantially all of the assets
of the Company, or (iv) the approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company. For this purpose, an
individual will be treated as a member of the Incumbent Board if he becomes a
director subsequent to June 1, 1999 and his election, or nomination for election
by Quanex's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board; unless his initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of an individual, entity or
group other than the Board. During 1999, the DC Plan was amended to provide that
if a participant in the DC Plan is entitled to a cash payment of a bonus under
the Quanex Corporation Executive Incentive Compensation Plan and the Company
determines that section 162(m) of the Internal Revenue Code of 1986, as amended,
may not allow the Company to take a deduction for part or all of the bonus then,
the payment of the amount of the bonus that is not deductible by the Company
will be delayed and deferred under the provisions of the Plan until the 76th day
following the end of the fiscal year of the Company in which the bonus was
earned. During fiscal 2000, Messrs. Barger and Scorsone elected to defer
director fees of $9,375 and $10,375, respectively, under the DC Plan in the form
of Common Stock and their accounts were credited with 511 and 568 shares of
Common Stock, respectively. In addition, pursuant to the terms of the DC Plan,
the Company made matching awards to their respective accounts of 105 and 119
shares of Common Stock.
At the Annual Meeting of Stockholders held on February 26, 1998, the
stockholders of the Company approved the Quanex Corporation 1997 Non-Employee
Director Stock Option Plan (the "1997 Plan"), which provides for the granting to
non-employee directors of options to purchase an aggregate of 400,000 shares of
Common Stock. The 1997 Plan currently provides for grants of options, to be
determined by the Board of Directors, to all non-employee directors on each
October 31 on which the director serves as a director of the Company. Option
agreements for options granted under the 1997 Plan may provide that the options
are transferable to or for the benefit of certain family members. The 1997 Plan,
as subsequently amended, provides that options granted under the 1997 Plan after
December 31, 1999 may continue to be exercisable and shall continue to vest for
a period of not longer than three years after the death, disability or
retirement of the non-employee director. During fiscal 2000, Ms. Davis and
Messrs. Barger, Flaum, Pfeiffer, Scorsone and Sebastian were each granted
options under the 1997 Plan to purchase 2,000 shares of Common Stock with an
exercise price of $19.8125. Mr. Sebastian was granted an option to purchase
6,000 additional shares at an exercise price of $19.8125. The purpose of this
grant was to recognize the significant amount of extra effort required as
Chairman of the Compensation and Management Development Committee in leading the
external search for a Chief Executive Officer to replace Mr. Oechsle, who
announced his plans to retire as chief executive officer during 2001. There are
currently 364,000 shares of Common Stock remaining available for option grants
under the 1997 Plan.
The Company also has in effect the Quanex Corporation Non-Employee Director
Retirement Plan (the "Retirement Plan"), which provides non-employee directors
who have served on the Board of Directors of the Company for at least ten full
years an annual payment after retirement from the Board equal to the base annual
director retainer fee received by the director at the time such director ceases
to serve on the Board. Under the Retirement Plan, the Company will continue to
make an annual payment for a period equal to the aggregate length of time the
director served on the Board of Directors as a non-employee director, unless
earlier terminated due to (i) the death of the director, (ii) the expiration of
two years following the termination of the Retirement Plan or (iii) the director
serving as a director, officer or employee of a competitor of the Company.
Further Information
Principal Stockholders
The following table sets forth as of November 30, 2000, the beneficial
ownership of each person who is known by the Company to be the beneficial owner
of more than five percent of the Company's outstanding Common Stock. Such
information is based upon information provided to the Company by such persons or
their required SEC filings.
Amount and
Nature of
Beneficial Percent
Name and Address Ownership (%)
- ------------------ ------------ --------
Wallace R. Weitz & Company, One Pacific Place, Suite 600,
Omaha, NE 68124 1,114,100(1) 8.2
Dimensional Fund Advisors, Inc., 1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 830,302(2) 7.5
Merrill Lynch Investment Management, Inc.,
Equity Funds Group, 800 Scudders Mill Road,
Plainsboro, NJ 08536-1606 1,005,200(1) 7.4
Putnam Investment Management, 1 Post Office Square,
Boston, MA,02109-2137 716,500(1) 5.3
Barclays Global Investors, N.A., 45 Fremont Street,
San Francisco, CA 94105-2228 713,500(1) 5.2
- ----------
(1) Has sole voting power of all shares.
(2) Dimensional Fund Advisors, Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to fourinvestment companies registered under
the Investment Company Act of 1940, and servesas investment manager to
certain other investment vehicles, including commingled group trusts. In
its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power with respect to all shares
owned.
Common Stock Ownership
The following table sets forth as of December 31, 2000, the number and
percentage of beneficial ownership of shares of Common Stock, the shares of
Common Stock credited under the Deferred Compensation Plan, the principal amount
of the Company's 6.88% Convertible Subordinated Debentures (the "Debentures")
owned, the amount of shares obtainable upon conversion of the debentures owned
and the amount of shares obtainable upon conversion of options exercisable (or
exercisable within 60 days) for each current director and nominee for director
of the Company, the executive officers named in the compensation table on page
15 of this Proxy Statement, and all officers and directors as a group.
Common Common Stock Face Value Common Common Stock
Stock Credited of Debentures Stock of Underlying
Owned of Under Beneficially Converted Exercisable
Name Record DC Plan Owned Debentures Options Total Percent
- ---- ------ ------- ----- ---------- ------- ----- -------
Donald G. Barger, Jr. 1,000 2,359 $0 0 25,000 28,359 *
James H. Davis 5,020 0 0 0 115,332 120,352 *
Susan F. Davis 1,000 786 $15,000 476 7,000 9,262 *
Russell M. Flaum 250 230 $0 0 9,333 9,813 *
Paul J. Giddens 0 11,617 $0 0 14,333 25,950 *
Robert V. Kelly, Jr. 31,958 0 $0 0 109,432 141,390 1.0
Terry M. Murphy 5,772 5,101 $0 0 9,999 20,872 *
Vernon E. Oechsle 28,712 43,779 $0 0 255,866 328,357 2.4
Viren M. Parikh 4,360 15,223 $50,000 1,587 42,832 64,002 *
Carl E. Pfeiffer 17,865 0 $0 0 15,000 32,865 *
Terry A. Schroeder 2,190 0 $0 0 51,499 53,689 *
Vincent R. Scorsone 7,000 4,545 $148,000 4,697 25,000 41,242 *
Michael J. Sebastian 20,200 0 $195,000 6,187 19,000 45,387 *
All Officers and
Directors as a group 125,327 83,640 $408,000 12,947 699,626 921,540 6.8
- ----------
* Less than 1.0%
Unless otherwise indicated, directors and officers have sole voting and
investment power with respect to the securities they own.
Executive Officers
Set forth below is certain information concerning the executive officers of
the Company, each of whom serves at the pleasure of the Board of Directors.
There is no family relationship between any of these individuals or any of the
Company's directors.
Name and Age Office and Length of Service
- -------------- ----------------------------
Vernon E. Oechsle; 58 Chairman of the Board since 1999, Chief Executive Officer since 1996,
President since 1995 and Chief Operating Officer from 1993 to 1995
Terry M. Murphy; 52 Vice President of Finance and Chief Financial Officer since 1999
Paul J. Giddens; 56 Vice President of Human Resources since 1998
Robert V. Kelly, Jr.; 62. Vice President since 1979 (also Group President since 1982)
Viren M. Parikh; 58 Controller since 1993
*Terry A. Schroeder; 52 President of Nichols Aluminum since 1996
- ----------
* Although Mr. Schroeder is not an executive officer of the Company, he
performs a policymaking function for the Company in his capacity as the
President of the Company's Nichols Aluminum Division. Accordingly, for
purposes of this Proxy Statement, he is considered to be an executive
officer of the Company.
Mr. Oechsle was elected Chairman of the Board on February 25, 1999 and was
named President and Chief Executive Officer of the Company on January 1, 1996.
Prior to that time, Mr. Oechsle was President since 1995 and Chief Operating
Officer of the Company since 1993. Prior to that time, Mr. Oechsle was Executive
Vice President of the Automotive Sector of Allied Signal since December 1990 and
Group Vice President of Dana Corporation since January 1985.
Mr. Murphy was named Chief Financial Officer and Vice President of Finance
of the Company on July 1, 1999. Prior to that time, Mr. Murphy was Senior Vice
President, Finance and Chief Financial Officer for The Barnes Group Inc., a
diversified manufacturer of metal parts and distributor of industrial supplies,
from 1997 to 1999 and Vice President and Chief Financial Officer of Kysor
Industrial Corporation, a manufacturer of commercial refrigeration products,
from 1992 to 1997. Prior to that time, Mr. Murphy was Vice President of Finance,
Treasurer and Chief Financial Officer of Northwest Telecommunications from 1986
to 1992.
Mr. Giddens was named Vice President of Human Resources of the Company on
September 1, 1998 and prior to that time was Corporate Director of Human
Resources for Barnes Group, Inc. since June 1997 and Vice President of Human
Resources for York & Associates, Inc., a business information systems consulting
firm, since October 1996. Prior to that time, Mr. Giddens was Corporate Director
of Human Resources for Georgia Pacific Corporation, a forest products company,
since July 1992 and Manager of Human Resources & Organizational Development for
General Electric Company since April 1985.
Mr. Kelly has been principally employed in the position shown above for
more than five years.
Mr. Parikh has been with the Company for more than five years and from
November 1, 1983, served as Tube Group Controller until April 1, 1993 when he
was named Controller.
Mr. Schroeder was named President of the Company's Nichols Aluminum
Division on August 19, 1996. Prior to that time, Mr. Schroeder served as
President and General Manager of Borg Warner Automotive's Controls Group
business since 1993 and as Vice President -- General Manager for the Commercial
Industrial Division of ITT Cannon since 1988.
QUANEX CORPORATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT TO SHAREHOLDERS
ON EXECUTIVE COMPENSATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee (the "Committee") of
your Board of Directors is pleased to present its annual report which is
intended to update shareholders on the results of the executive compensation
program. This report summarizes the responsibilities of the Committee, the
compensation policy and objectives that guide the development and administration
of the executive compensation program, each component of the program, and the
basis on which the compensation for the Chief Executive Officer, corporate
officers and other key executives was determined for the fiscal year end October
31, 2000.
During the fiscal year ended October 31, 2000, the Committee was comprised
of the following Board Members, all of whom were non-employee directors of the
Company: Michael J. Sebastian, Chairman, Susan F. Davis, and Vincent R.
Scorsone. The Committee's responsibilities are to oversee the development and
administration of the total compensation and benefits programs for corporate
officers and key executives, and administer the executive annual incentive and
stock incentive plans. In addition to these duties, the Committee also oversees
the senior management selection, development and succession processes of the
Company. During the 2000 fiscal year, the Committee met four times.
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of the executive compensation program is to create financial
incentive for corporate officers and key executives to achieve performance plans
by offering them the opportunity to earn above average compensation when the
Company achieves above average results. To achieve this objective, the Company
emphasizes variable incentive pay. The executive compensation program includes
base salary, annual cash incentive compensation, long-term stock based grants
and awards, and executive benefits.
On an annual basis the Committee, in conjunction with executive management,
assesses the effectiveness of the overall program and compares the compensation
levels of its executives and the performance of the Company to the compensation
received by executives and the performance of similar companies. The primary
market comparisons are made to a broad group of manufacturing companies,
adjusted for size and job responsibilities. This group is broader than the peer
companies included in the Relative Market Performance graph presented elsewhere
in this Proxy Statement and is used because it is more representative of the
market in which the Company competes for executive talent and provides a
consistent and stable market reference from year to year. As a secondary
validation, however, the pay levels of the peer companies are compared against
the broad manufacturing group and have been found to be comparable. Data sources
include national survey databases, proxy disclosures, and general trend data
which are updated annually.
Variable incentives, both annual and longer-term, are important components
of the program and are used to link pay and performance results. Longer-term
incentives are designed to create a heavy emphasis on the increase in total
shareholder value as measured by share price appreciation and dividends. The
annual incentive plans measure a combination of corporate and group
profitability using return on equity, return on investment, and cash flow.
Executives with Company-wide responsibilities are measured on overall Company
results. Executives with specific business unit responsibilities are measured on
both Company-wide and business unit results. Variable incentive awards and
performance standards are calibrated such that total compensation will generally
approximate the market 75th percentile when Company performance results are at
the 75th percentile.
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to the Company's five highest paid executives. Excluded from the limitation
is compensation that is "performance based." For compensation to be performance
based, it must meet certain criteria, including being based on predetermined
objective standards approved by shareholders. In general, the Company believes
that compensation relating to options granted under its current employee stock
option plans should be excluded from the $1 million limitation. Compensation
relating to the Company's restricted stock and incentive compensation awards do
not currently qualify for exclusion from limitations, given the discretion that
is provided to the Committee under the Company's plans in establishing the
performance goals for such awards. The Committee believes that maintaining the
discretion to evaluate the performance of the Company's management is an
important part of its responsibilities and results in increased benefit to the
Company's shareholders. Incentive awards for fiscal year 2000 were determined
based on the predetermined quantitative performance standards. The Committee,
however, will continue to take into account the potential application of Section
162(m) with respect to incentive compensation awards and other compensation
decisions made by it in the future.
The following is a discussion of each of the principal components of the
total executive compensation program. There have been no major changes in the
executive compensation program during the 2000 fiscal year.
Base Salary
The base salary program targets the median of the primary comparison group.
Each executive is reviewed on an annual basis. Salary adjustments are based on
the individual's experience and background, performance during the prior year,
the general movement of salaries in the marketplace, and the Company's financial
position. Due to these factors, an executive's base salary may be above or below
the median at any point in time. Overall, the base salaries of the corporate
officers and key executives approximate the median.
Annual Incentive Compensation
The Committee administers the Executive Incentive Compensation Program
("EICP") for corporate officers and selected key executives. The goal of the
EICP is to reward participants in proportion to the performance of the Company
and/or the business unit for which they have direct responsibility.
The EICP relies primarily on predetermined, objective performance measures.
For officers with corporate responsibilities, the performance measures include
the ratio of cash flow to revenues, return on common equity, and return on
investment. For group and subsidiary executives, the performance measures
include the business unit ratio of cash flows to revenues and business unit
return on controllable investment.
Based primarily on objective standards established at the beginning of the
fiscal year, awards are calibrated at the 75th percentile if the Company
achieves 75th percentile performance results. For fiscal year 2000, the
performance results and incentive awards were consistent with this strategy.
Long-Term Stock Based Compensation
The goal of the Company's long-term stock based incentive program is to
directly link a significant portion of the executive's compensation to the
enhancement of shareholder value. In addition, longer term incentives encourage
management to focus on the longer term development and prosperity of the
Company, in addition to annual operating profits. The Company encourages its top
management group to own and maintain significant stock holdings.
The Company annually grants stock options to its key executives based on
competitive multiples of base salary. Senior executives typically receive a
higher multiple and, as a result, have a greater portion of their total
compensation linked to increases in shareholder value. In determining the
appropriate grant multiples, the Company compares itself to publicly traded
companies of comparable size for whom stock is a significant part of total
compensation. The ultimate value of any stock option is based solely on the
increase in value of the shares over the grant price. Options have historically
been granted at fair market value on the date of the grant, have a term of ten
years, and vest over a three-year period. During fiscal year 2000 the Committee
granted options to purchase shares of common stock to executive officers of the
Company consistent with this policy.
Executive Benefits
The Company believes that it is critical in attracting and retaining top
caliber executives to provide comprehensive benefits that address the unique
circumstances of executives. In particular, limitations imposed on the benefits
payable from qualified welfare and retirement plans give rise to the need for
supplemental non-qualified plans to replace the benefits lost due to these
limitations and provide a mechanism for recruiting and retaining long service
executives. The Company provides corporate officers with supplemental retirement
and life insurance benefits.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer, Mr. Oechsle, participates in the executive
compensation program described in this report.
In fiscal year 2000, Mr. Oechsle's base salary remained at $530,000.
For fiscal year 2000, Mr. Oechsle received an annual incentive award of
$263,386 based on the objective performance measures set out in the EICP, which
were adversely impacted by the results at Piper Impact. Mr. Oechsle elected to
defer 20% of his incentive award into his Common Stock account under the DC
Plan. In accordance with the DC Plan, Mr. Oechsle received a Company matching
award equal to 20% of the shares credited, if they are held for at least three
years.
In fiscal year 2000, Mr. Oechsle was granted options to purchase 70,000
shares of Common Stock with an exercise price of $18.1875 (fair market value on
the date of the grant).
Respectfully submitted,
Compensation and Management Development Committee
Michael J. Sebastian, Chairman
Susan F. Davis
Vincent R. Scorsone
The following table sets forth information concerning the cash compensation and
additional incentive compensation paid by the Company to the Chief Executive
Officer and to each of the Company's four most highly compensated executive
officers for each of the last three fiscal years.
Summary Compensation Table
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted All Other
Compen- Stock LTIP Compen-
Salary Bonus(1) sation(2) Award(s)(3) Options/ Payouts sation(4)
Name and Principal Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------------------- ---- --------- --------- --------- ----------- -------- ------- ---------
Vernon E. Oechsle, 2000 530,016 263,386 90,219 0 70,000 0 14,626
Chairman of the Board and 1999 512,516 589,625 84,905 0 61,500 0 33,387
Chief Executive Officer 1998 485,428 440,883 92,238 0 70,000 0 26,003
James H. Davis, 2000 345,428 159,395 16,507 0 0 0 89,081
President and 1999 331,846 354,501 13,484 0 32,000 0 74,900
Chief Operating Officer 1998 317,840 266,095 14,405 0 37,000 0 57,019
Terry M. Murphy, (5) 2000 244,167 156,746 4,761 0 25,000 0 39,856
Vice President - Finance 1999 80,000 78,891 0 171,000 30,000 0 500
Chief Financial Officer 1998 0 0 0 0 0 0 0
Robert V. Kelly, Jr., 2000 264,167 193,866 4,026 0 25,000 0 4,250
Vice President and 1999 252,428 263,075 9,498 0 20,000 0 4,000
MacSteel President 1998 235,333 240,385 5,807 0 22,000 0 3,116
Terry A. Schroeder, (6) 2000 238,531 134,853 0 0 24,000 0 11,050
Nichols Aluminum 1999 226,346 132,425 0 0 20,000 0 10,400
President 1998 214,036 61,032 0 0 20,000 0 12,500
- ----------
(1) Annual bonus compensation amounts are earned and accrued during the fiscal
years indicated and paid in the following year. The bonus amounts for
fiscal year 2000 also include the dollar value of the portion of the
bonuses deferred by each of Messrs. Oechsle, Davis and Murphy under the
Company's DC Plan. Such amounts, if not deferred, would have been payable
to each of such officers on December 7, 2000. Under the terms of the DC
Plan, participants may elect to defer a portion of their incentive bonus to
a Common Stock and/or cash account. If a participant elects to defer a
portion of his bonus to a Common Stock account for a period of three full
years or more, a matching award equal to 20% of the amount deferred is made
by the Company to such participantaccount. The number of shares of Common
Stock credited to each participant's deferral and matching account is the
number of full shares of Common Stock that could have been purchased with
the dollar amount deferred and matched based upon the closing price of the
Common Stock on the NYSE on the day that the bonus would have been paid had
it not been deferred. No shares of Common Stock or payments in respect
thereof, however, are issued or made to any participant until distribution
in accordance with the DC Plan. All participant deferrals and Company
matching awards are 100% vested; provided, however, that if a participant
receives a benefit from the DC Plan for any reason, other than death,
disability or retirement, within three years after a deferral was credited
to a Common Stock account, any matching awards made by the Company with
respect to the deferral that is held less than three years will be
forfeited. In fiscal year 2000, the dollar value of the bonuses deferred
under the DC Plan to a Common Stock account by Messrs. Oechsle, Davis and
Murphy were $52,677, $159,395 and $78,373, respectively. Based upon the
closing price of the Common Stock on the NYSE on such date, of $18.4375 per
share, 2,857, 8,645 and 4,250 shares of Common Stock were credited under
the DC Plan to the accounts of Messrs. Oechsle, Davis and Murphy,
respectively. In fiscal 2000, Mr. Murphy deferred $78,373 into the cash
account of the DC Plan.
(2) Represents amounts reimbursed during the fiscal year for the payment of
taxes as well as perquisites and other personal benefits which totaled or
exceeded the lesser of $50,000 or 10% of the total annual salary and bonus
for each named officer. For individuals above whose perquisites and other
personal benefits met this threshold for any one year, these amounts were
included in all years presented for comparability. Of the perquisites and
other personal benefits reported in "Other Annual compensation" above, Mr.
Oechsle received financial planning services of $32,713, which exceeded 25%
of his total perquisites and other personal benefits in 2000.
(3) Mr. Murphy received 6,000 restricted stock awards on July 1, 1999. The
closing stock price on that date was $28.50. These awards vest in 331/3%
increments on each of the first through third anniversaries of the date of
the awards. Dividends are paid on these restricted shares. As of October
31, 2000, the remaining 4,000 unvested restricted shares were valued at
$79,250 using the closing market price of $19.8125 on that date.
(4) Includes matching contributions made by the Company to defined contribution
plans for each of the fiscal years indicated. The amounts shown also
include the dollar value of the number of shares of Common Stock credited
by the Company to the accounts of each participant in the DC Plan who
elected to defer a portion of their bonus in the form of Common Stock. For
fiscal year 2000, the number of shares of Common Stock credited by the
Company as matching contributions under the DC Plan to the accounts of
Messrs. Oechsle, Davis and Murphy were 572, 1,730 and 851 shares,
respectively. Based on the closing price of the Common Stock on the NYSE on
December 7, 2000, of $18.4375 per share, the dollar value of the number of
shares of Common Stock credited by the Company in fiscal year 2000 to the
accounts of Messrs. Oechsle, Davis and Murphy were $10,546, $31,897 and
$15,690, respectively. Based on the closing price of the Common Stock on
the NYSE on December 8, 1999, of $19.375 per share, the dollar value of the
number of shares of Common Stock credited by the Company in fiscal year
1999 to the accounts of Messrs. Oechsle, Davis and Murphy were $29,489,
$70,912 and $0, respectively. Based on the closing price of the Common
Stock on the NYSE on December 9, 1998, of $18.6875 per share, the dollar
value of the number of shares of Common Stock credited by the Company in
fiscal year 1998 to the accounts of Messrs. Oechsle, Davis and Murphy were
$22,044, $53,219 and $0, respectively. Additionally, the amounts shown for
fiscal 2000 include moving expense reimbursements for Mr. Murphy and
payment of accrued, but unused vacation for Mr. Davis who retired.
(5) Joined the Company in July 1999 as Vice President - Finance and Chief
Financial Officer.
(6) Although Mr. Schroeder is not an executive officer of the Company, he
performs a policy making function for the Company as the President of the
Company's Nichols Aluminum Division. Accordingly, for purposes of this
Proxy Statement, he is considered to be an executive officer of the
Company.
Option/SAR Grants in Last Fiscal Year
Grant Date
Individual Grants Value
-------------------------------------------- -----------
(a) (b) (c) (d) (e) (f)
% of Total
Options/
SARs
Options/ Granted to Exercise Grant
SARs Employees Or Base Date
Granted(1) in Fiscal Price Expiration Present
Name (#) Year ($/Share) Date Value ($)(2)
- ------ ----------- ----------- -------- ---------- -----------
Vernon E. Oechsle 70,000 28.7% $18.1875 10-26-10 $432,600
James H. Davis 0 0.0% $18.1875 10-26-10 $0
Terry M. Murphy 25,000 10.2% $18.1875 10-26-10 $154,500
Robert V. Kelly, Jr 25,000 10.2% $18.1875 10-26-10 $154,500
Terry A. Schroeder 24,000 9.8% $18.1875 10-26-10 $148,320
- ----------
(1) All stock options granted in fiscal year 2000 become exercisable in 331/3%
increments maturing cumulatively on each of the first through third
anniversaries of the date of grant and must be exercised no later than ten
years from the date of grant.
(2) Calculated using the Black-Scholes option pricing model. The calculation
assumes volatility of 42.92%, a risk free interest rate of 5.72%, an annual
dividend yield of 3.35%, a 5-year weighted average expected option life,
and option grants at $18.1875 per share. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised. There is no assurance
the value realized by an executive will be at or near the value estimated
by the Black-Scholes model.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares Acquired Value at FY-End (#) at FY-End ($)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------ -------------- ----------- ------------------------- -------------------------
Vernon E. Oechsle -0- -0- 255,866/134,334 $29,375/$113,750
James H. Davis -0- -0- 115,332/33,668 $0/$0
Terry M. Murphy -0- -0- 9,999/45,001 $0/$40,625
Robert V. Kelly, Jr -0- -0- 109,432/45,668 $0/$40,625
Terry A. Schroeder -0- -0- 51,499/44,001 $0/$39,000
ANNUAL RETIREMENT BENEFIT EXAMPLES AT AGE 65
Years of Service
---------------------------------------------------------------
Remuneration 15 20 25 30 or Over
- ------------ ------------ ------------ ------------ ------------
$125,000 $51,563 $68,750 $85,938 $100,000
$150,000 61,875 82,500 103,125 120,000
$175,000 72,188 96,250 120,313 140,000
$200,000 82,500 110,000 137,500 160,000
$225,000 92,813 123,750 154,688 180,000
$250,000 103,125 137,500 171,875 200,000
$300,000 123,750 165,000 206,250 240,000
$350,000 144,375 192,500 240,625 280,000
$400,000 165,000 220,000 275,000 320,000
$450,000 185,625 247,500 309,375 360,000
$500,000 206,250 275,000 343,750 400,000
$550,000 226,875 302,500 378,125 440,000
$600,000 247,500 330,000 412,500 480,000
$650,000 268,125 357,500 446,875 520,000
$700,000 288,750 385,000 481,250 560,000
$750,000 309,375 412,500 515,625 600,000
$800,000 330,000 440,000 550,000 640,000
$850,000 350,625 467,500 584,375 680,000
$900,000 371,250 495,000 618,750 720,000
The above retirement benefit examples are subject to deduction for benefits
under Social Security. Benefits provided under the Company's pension plans are
determined on a life annuity basis but optional forms of benefits are available.
Compensation used for the Company's pension plans is essentially the
individual's cash compensation plus deferrals under the Quanex Corporation
Employee Savings Plan as well as the DC Plan, and is that compensation shown as
"Salary" and "Bonus" in the Summary Compensation Table. The Quanex Corporation
Salaried Employees' Pension Plan uses an average of the five highest consecutive
calendar years compensation and the Quanex Corporation Supplemental Benefit Plan
uses an average of the highest 36 consecutive months of compensation.
As of November 1, 2000, the individuals named in the Summary Compensation
Table had the following years of service under the Company's pension plans: Mr.
Oechsle -- 7; Mr. Davis -- 5; Mr. Murphy -- 1; Mr. Kelly, Jr. -- 23. Mr.
Schroeder is an employee of the Company's Nichols Aluminum Division and, as
such, he is not eligible to participate in the Company's pension plans. Mr.
Schroeder participates in the Nichols 401 (k) Savings Plan, but does not
participate in a defined benefit or actuarial plan under which benefits are
determined primarily by final compensation and years of service.
Change in Control Arrangements
The Company has entered into change in control agreements with all of its
executive officers. The form of agreement provides that in the event of a
"change in control" of the Company, the executive agrees to remain in the employ
of the Company for a period of at least three years. A "change in control" is
defined generally as (i) an acquisition of securities resulting in an individual
or entity or group thereof becoming, directly or indirectly, the beneficial
owner of 20% or more of either (a) the Company's then-outstanding Common Stock
or (b) the combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors, (ii) a
change in a majority of the members of the Board of Directors as of the
effective date of the agreement (the "Incumbent Board"), (iii) generally, a
reorganization, merger or consolidation or sale of the Company or disposition of
all or substantially all of the assets of the Company, or (iv) the approval by
the stockholders of the Company of a complete liquidation or dissolution of the
Company. For this purpose, an individual will be treated as a member of the
Incumbent Board if he becomes a director subsequent to the effective date of the
agreement and his election, or nomination for election by Quanex stockholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board; unless his initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of an individual, entity or group other than the Board.
The agreement contemplates that upon a change in control, the executive will
continue to receive substantially the same compensation and benefits from the
Company (or its successor) that he received before the change. Upon an event
that is a change in control, all options to acquire Common Stock and all stock
appreciation rights pertaining to Common Stock held by the executive will
immediately vest and be fully exercisable, and all restrictions on restricted
Common Stock granted to the executive will be removed and the stock will be
fully transferable. If during the three-year period following a change in
control the executive's employment is terminated by the Company (or its
successor) other than for "cause" (as defined in the agreement), the executive
will be entitled to a payment equal to 3 times the sum of (a) the executive's
base salary and (b) the executive's annual bonus. Such payment is to be payable
in cash.
Agreement Regarding Retirement of Mr. Oechsle
In connection with Mr. Oechsle's announced intention to retire as Chief
Executive Officer of the Company and to facilitate the search for a new chief
executive officer, Mr. Oechsle has agreed to remain Chief Executive Officer
until a new person is elected by the Board. Mr. Oechsle has also agreed to
continue his employment with the Company to facilitate the transition until
retirement on May 31, 2002, and has agreed not to compete with the Company
through October 31, 2004. The Company has agreed to pay Mr. Oechsle his base pay
through October 31, 2003, and to consider such date as his retirement date for
purposes of the Company's Supplemental Benefit Plan.
Relative Market Performance Presentation
The following graph compares the Company's cumulative total stockholder
return for the last five years with the cumulative total return for the Standard
& Poor's 500 composite Stock Index (the "S&P 500") and the Company's industry
peer group. The Company compiled a new peer group for fiscal year 2000. The new
peer group was revised by removing Century Aluminum Co., and adding IMCO
Recycling Inc. in its place. This revision was made due to changes made at
Century Aluminum Co., which the Company believes make it less comparable as a
peer group member. The "New Peer Group" is comprised of: Birmingham Steel Corp.,
Carpenter Technology, Commonwealth Industries Inc., IMCO Recycling Inc., Kaiser
Aluminum Corp., Keystone Cons. Industries Inc., Laclede Steel Co., Mascotech
Inc., NS Group Inc., Oregon Steel Mills Inc., Roanoke Electric Steel Corp.,
Timken Co., and Worthington Industries. The "Old Peer Group" is comprised of:
Birmingham Steel Corp., Carpenter Technology, Century Aluminum Co., Commonwealth
Industries Inc., Kaiser Aluminum Corp., Keystone Cons. Industries Inc., Laclede
Steel Co., Mascotech Inc., NS Group Inc., Oregon Steel Mills Inc., Roanoke
Electric Steel Corp., Timken Co., and Worthington Industries. The graph below
compares the Company to both the Old and the New Peer Groups.
Comparative Five-Year Total Returns*
Quanex Corp., S&P 500, Peer Group
(Performance results through 10/31/2000)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATEIRALS.]
- --------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
NX $100.00 $148.26 $146.80 $91.73 $121.41 $114.76
S&P 500 $100.00 $124.09 $163.94 $199.97 $251.30 $266.61
Old Peer Group $100.00 $114.56 $147.94 $91.22 $93.51 $74.88
New Peer Group (With IMR and Without CENX) $100.00 $112.97 $145.94 $90.44 $93.19 $72.39
- --------------------------------------------------------------------------------------------------------------------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in NX common stock, S&P 500,
and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
Source: Russell/Mellon Analytical Services
Compliance with Section 16(a) of the Exchange Act
To the Company's knowledge and except as set forth below, based solely on
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year 2000
all Section 16(a) filing requirements were complied with. Mr. Flaum purchased
250 shares of Common Stock in April 1999, which purchase was not reported on a
Form 4 until October 2000.
Other Matters and Stockholder Proposals
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of Deloitte & Touche LLP as independent auditors for the year
ending October 31, 2001. Representatives of Deloitte & Touche are expected to
attend the meeting, will be afforded an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions by
stockholders.
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the meeting other than those described above.
However, if any other matters should come before the meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to vote
in accordance with their judgment on such matters. Any proposals of stockholders
to be presented at the Annual Meeting to be held in 2002 that are eligible for
inclusion in the Company's Proxy Statement for the meeting under applicable
rules of the Securities and Exchange Commission must be received by the Company
no later than September 21, 2001.
The Company's Bylaws provide that, for business to be properly brought
before an Annual Meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Company. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company, not less than 60 days (which for the
2002 meeting would be December 24, 2001) nor more than 180 days (which for the
2002 meeting would be August 26, 2001) prior to the anniversary date of the
immediately preceding Annual Meeting; provided, however, that in the event that
the date of the Annual Meeting is more than 45 days (which for the 2002 meeting
would be April 8, 2001) later than the anniversary date of the immediately
preceding Annual Meeting, notice by the stockholder to be timely must be
received not later than the close of business on the tenth day following the
earlier of the date on which a written statement setting forth the date of the
Annual Meeting was mailed to stockholders or the date on which it is first
disclosed to the public. A stockholder's notice to the Secretary must set forth
with respect to each matter the stockholder proposes to bring before the Annual
Meeting (a) a brief description of the business desired to be brought before the
Annual meeting, (b) the name and address, as they appear on the Company's books,
of the stockholder making such proposal, (c) the class and number of shares of
the Company which are beneficially owned by the stockholder and (d) any material
interest of the stockholder in such business. In addition, if the stockholder's
ownership of shares of the Company, as set forth in the notice is solely
beneficial, documentary evidence of such ownership must accompany the notice.
Houston, Texas
January 23, 2001
Quanex
Quanex Corporation
1900 West Loop South
Suite 1500
Houston, Texas 77027
(713) 961-4600
January 23, 2001
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 8:00 a.m., C.S.T., on Thursday, February 22, 2001, at
the Company's principal executive offices at 1900 West Loop South, 15th Floor,
Houston, Texas.
This year you will be asked to vote in favor of one proposal. The proposal
concerns the election of two directors. This matter is more fully explained in
the attached proxy statement, which you are encouraged to read.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE THE PROPOSAL AND URGES
YOU TO VOTE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
Thank you for your cooperation.
Sincerely,
/s/ Vernon E. Oechsle
Vernon E. Oechsle
Chairman of the Board
- --------------------------------------------------------------------------------
PROXY
QUANEX CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
If no specification is made, proxies will vote FOR the election of the
nominees named on the reverse side or any substitute for them as recommended by
the Board of Directors.
The undersigned stockholder(s) of Quanex Corporation appoints Vernon E.
Oechsle and Michael J. Sebastian, or either of them, proxies of the undersigned
with power of substitution to vote, as designated on the reverse side of this
card, all shares which the undersigned would be entitled to vote at the Annual
Meeting of Stockholders to be held at the offices of Quanex Corporation, 1900
West Loop South, 15th Floor, Houston, Texas, on February 22, 2001, or any
adjournment or adjournments thereof, on the matters described in the enclosed
Proxy Statement dated January 23, 2001.
(Continued and to be signed on the other side)
Quanex
QUANEX CORPORATION
C/O PROXY SERVICES
P.O. BOX 9141
FARMINGDALE, NY 11735
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions. Have your
proxy card in hand when you call. You
will be prompted to enter your 12-digit
Control Number which is located below
and then follow the simple instructions
the Vote Voice provides you.
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery
of information. Have your proxy card in
hand when you access the web site. You
will be prompted to enter your 12-digit
Control Number which is located below to
obtain your records and create an
electronic voting instruction form.
VOTE BY MAIL -
Mark, sign and date your proxy card and
return it in the postage-paid envelope
we've provided or return to Quanex
Corporation, c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
QUANEX
KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
QUANEX CORPORATION
1. To elect two directors to serve until the Annual Meeting of Stockholders in
2004.
01) Carl E. Pfeiffer 02) Vincent R. Scorsone
2. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
For Withhold For All To withhold authority to vote, mark "For
All All Except All Except" and write the nominee's name
on the line below.
() () ()
________________________________________
Information with respect to the above matters is set forth in the Proxy
Statement that accompanies this Proxy.
- ---------------------------------------- ---------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
