1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2000
Commission File Number 1-5725
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Nichols 401(k) Savings Plan for Hourly Employees
B. Name of the issuer of the securities held pursuant to the plan
and the address of its principal executive office:
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, TX 77027
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INDEPENDENT AUDITORS' REPORT
The Benefits Committee
Quanex Corporation
Houston, Texas
Re: Nichols 401(k) Savings Plan for Hourly Employees
We have audited the accompanying statements of net assets available for benefits
of the Nichols 401(k) Savings Plan for Hourly Employees ("the Plan") as of
December 31, 2000 and 1999, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2000 and 1999, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
investments as of December 31, 2000 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. This supplemental schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE, LLP
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DELOITTE & TOUCHE, LLP
May 25,2001
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
----------------------------
2000 1999
----------- -----------
Assets:
Investments at fair value (see Note C) $22,264,190 $20,822,972
Participant loans 930,540 777,265
Employee contributions receivable 80,335 90,954
Employer contributions receivable 74,884 79,614
----------- -----------
155,219 170,568
----------- -----------
Net assets available for benefits $23,349,949 $21,770,805
=========== ===========
See notes to financial statements.
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
DECEMBER 31,
-------------------------------
2000 1999
------------ ------------
Investment income:
Interest and dividends $ 1,746,101 $ 1,594,367
Net appreciation (depreciation) in fair value
of investments (see Note C) (1,699,342) 1,614,744
------------ ------------
46,759 3,209,111
------------ ------------
Contributions:
Employer (net of forfeitures) 873,415 789,795
Employee 1,050,475 1,006,744
------------ ------------
1,923,890 1,796,539
------------ ------------
Interest on participant loans 68,620 61,177
------------ ------------
Total additions 2,039,269 5,066,827
------------ ------------
Benefit payments 361,834 649,264
Administrative fees (see Note D) 3,440 3,029
------------ ------------
Total deductions 365,274 652,293
------------ ------------
Transfers between plans (see Note G) (94,851) 291,816
------------ ------------
Increase in net assets available
for benefits 1,579,144 4,706,350
Net assets available for benefits:
Beginning of year 21,770,805 17,064,455
------------ ------------
End of year $ 23,349,949 $ 21,770,805
============ ============
See notes to financial statements.
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SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
EIN: 38-1872178; PN 016
QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
December 31, 2000
Shares/ Current
Par Value Cost Value
----------- ----------- -----------
* Fidelity Puritan Fund 11,279 $ 214,676 $ 212,374
* Fidelity Magellan Fund 30,541 3,116,308 3,643,557
* Fidelity Contrafund 43,742 2,116,890 2,150,778
* Fidelity Growth & Income Fund 97,426 3,362,635 4,101,643
* Fidelity Independence Fund 138,806 3,572,649 3,055,120
* Fidelity Overseas Fund 6,683 245,403 229,684
* Fidelity Balanced Fund 63,940 945,965 971,244
* Fidelity Blue Chip Fund 10,354 570,076 533,566
* Fidelity Asset Manager Fund 20,251 350,647 340,621
* Fidelity Low-Priced Stock Fund 3,265 77,632 75,483
* Fidelity Government Money Market Fund 3,725,625 3,725,625 3,725,625
Templeton Foreign Fund 11,220 115,760 116,015
Neuberger & Berman Partners Trust Fund 908 16,059 15,339
----------- -----------
Total Mutual Fund Assets 18,430,325 19,171,049
* Quanex Corporation unitized common stock 208,504 1,900,180 2,005,813
* Fidelity Common/Commingled trust 1,087,328 1,087,328 1,087,328
Participant loans (bearing interest rates from
7.85% to 9.50%, maturing within five to seven years) 930,540 930,540
----------- -----------
Total Investments $22,348,373 $23,194,730
=========== ===========
* Party-in-interest
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QUANEX CORPORATION
NICHOLS 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
A. DESCRIPTION OF THE PLAN
The following description of the Nichols 401(k) Savings Plan for Hourly
Employees (the "Plan") provides only general information. Participants
should refer to the Plan document for more complete information.
(1) General. The Plan, sponsored by Quanex Corporation (the
"Company") and Nichols Aluminum - Alabama, Inc., was
established on October 1, 1987 and was amended and restated in
its entirety in June 1999. The Plan is a defined contribution
plan, which covers substantially all union hourly employees of
the Davenport, Iowa and Decatur, Alabama facilities. The Plan
is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). Fidelity Management Trust
Company ("Fidelity" or the "Trustee") holds the assets of the
Plan in trust. The Benefits Committee (the "Committee"),
appointed by the Company's Board of Directors, serves as the
Plan administrator.
Effective January 1, 1999, the name of the Plan was changed to
the Nichols 401(k) Savings Plan for Hourly Employees.
Effective July 1, 1999, the Decatur Aluminum Corp. Hourly
Employees' 401(k) Retirement Plan was merged into the Plan.
(2) Contributions. Participants may elect to reduce the current
level of their compensation from 1% to 15% by contributing on
a pre-tax basis as defined by the Plan agreement. Participants
may also contribute in half percentages. Company contributions
are made based on a percentage of the employee's compensation
for each individual with at least one year of service.
(3) Participant Accounts. Each participant's account is credited
with the participant's contribution, the employer's
contribution, and the participant's pro rata share of
investment earnings. Investment earnings allocations are based
on individual participant account balances as of the end of
the period in which the income is earned.
(4) Vesting. Participants are immediately vested in their
contributions and earnings thereon. Vesting in the employer
contribution is based on years of credited service. A
participant is 20% vested for each year of credited service
and fully vested after five years. If a participant terminates
employment prior to becoming fully vested, the nonvested
portion of the employer contributions are immediately
forfeited by the participant and utilized to reduce future
employer contributions.
(5) Payment of Benefits. The Plan is intended for long-term
savings but provides for early withdrawals and loan
arrangements under certain conditions. Upon termination of
service, a participant may elect to receive a lump-sum
distribution equal to the total amount of vested benefits in
his or her account. Terminated participants with account
balances of less than $5,000 will automatically receive a lump
sum distribution.
(6) Loans. Loans may be granted to a participant of the Plan at
the Committee's discretion. Loan terms range up to five years
or seven years if used for the purchase of a primary
residence. The loans bear a reasonable rate of interest
established by the Committee. Interest on the loan is
allocated to the borrower's participant account.
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B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting Basis. The financial statements of the Plan are
prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles.
(2) Investment Valuation. The Plan recognizes net appreciation or
depreciation in the fair value of its investments. Investments
are reflected at fair value in the financial statements. Fair
value of mutual fund assets is determined using a quoted net
asset value. Fair value for Quanex Corporation common stock,
which is listed on the New York Stock Exchange, is determined
using the last recorded sales price. The recorded value of the
common/commingled trust is at face value, which is fair value.
(3) Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
changes therein and disclosure of contingent assets and
liabilities. Actual results could differ from these estimates.
(4) Administrative Expenses. The Company pays administrative
expenses of the Plan, except loan set up and carrying fees and
redemption fees imposed on certain Fidelity funds.
(5) Payment of Benefits. Benefit payments are recorded when paid.
C. INVESTMENTS
The following are investments that represent 5 percent or more of the
Plan's net assets.
December 31, 2000 December 31, 1999
Shares Amount Shares Amount
--------- ----------- --------- -------------
Fidelity Magellan Fund 30,541 $ 3,643,557 29,295 $ 4,016,271
Fidelity Contrafund 43,742 2,150,778 38,197 2,292,618
Fidelity Growth and Income Fund 97,426 4,101,643 100,174 4,724,223
Fidelity Independence Fund 138,806 3,055,120 15,044 388,898
Fidelity Government Money Market Fund 3,725,625 3,725,625 3,893,899 3,893,899
Quanex unitized common stock 208,504 2,005,813 123,802 1,525,235
Common / Commingled Trust 1,087,328 1,087,328 1,594,176 1,594,176
During the years ended December 31, 2000 and 1999, the Plan's
investments (including gains and losses on investments bought and sold,
as well as held during the year) appreciated / (depreciated) in value
as follows:
2000 1999
----------- -----------
Fidelity mutual funds $(1,678,080) $ 1,049,447
Quanex unitized common stock (21,262) 565,297
----------- -----------
$(1,699,342) $ 1,614,744
=========== ===========
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 $3,440 and $3,029 for the years ended December 31,
2000 and 1999, respectively. In addition, the Plan invests in shares of
Quanex Corporation unitized common stock. Quanex Corporation is the
Plan sponsor as defined by the Plan and, therefore, these transactions
also qualify as party-in-interest transactions. As of December 31, 2000
and 1999, the value of Quanex Corporation common stock held by the Plan
was $2,005,813 and $1,525,235, respectively.
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E. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has
the right under the Plan to terminate the Plan at any time subject to
the provisions set forth in ERISA. In the event of Plan termination,
the assets held by the Trustee under the Plan will be valued and fully
vested, and each participant will be entitled to distributions
respecting his or her account.
F. FEDERAL INCOME TAX STATUS
The Plan is subject to specific rules and regulations related to
employee benefit plans under the Department of Labor and the Internal
Revenue Service. The Plan has received a favorable letter of tax
determination dated June 18, 1993. As such, the Plan is a qualified
trust under Sections 401(a) and 401(k) of the Internal Revenue Code
(the "Code") and, as a result, is exempt from federal income tax under
Section 501(a) of the Code. The Company believes the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Code. The Company believes the Plan was qualified
and the related trust was tax-exempt as of the financial statement
dates.
G. TRANSFER OF ASSETS
Account balances and participant loans of $94,851 were transferred from
the Plan to the Nichols 401(k) Savings Plan in plan year 2000.
The assets and participant loans of the Decatur Aluminum Corp. Hourly
Employees' 401(k) Retirement Plan, totaling $291,816, were transferred
to the Plan on July 1, 1999.
H. SUBSEQUENT EVENTS
Effective July 1, 2001, the union employees of Temroc Metals, Inc. will
become participants of the Plan. The assets of the Temroc Metals, Inc.
Bargaining Unit Employees' 401(k) Plan will be transferred to the Plan
on July 2, 2001.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Nichols 401(k) Savings Plan for Hourly Employees
Date: June 22, 2001 /s/ Viren M. Parikh
-------------------
Viren M. Parikh, Benefits Committee
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
23.1 Independents Auditor's Consent
1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-54085 of Quanex Corporation on Form S-8 of our report dated May 25, 2001,
appearing in the Annual Report of Form 11-K of the Nichols 401(k) Savings Plan
for Hourly Employees for the year ended December 31, 2000.
/s/ DELOITTE & TOUCHE LLP
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DELOITTE & TOUCHE LLP
Houston, Texas
June 22, 2001
