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Quanex Announces Earnings for Fiscal 2001 Second Quarter; Company Exceeds First Quarter 2001; Engineered Products Group Reports Best-Ever Second Quarter

HOUSTON, May 22 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2001, second quarter results for the period ending April 30. Basic and diluted earnings per share, on income before extraordinary items, were $.32 for the second quarter, compared to $.66 basic and $.61 diluted earnings per share for the same period last year. Second quarter net sales were $214 million compared to $243 million in 2000. Second quarter net income was $4.3 million, compared to $9.4 million reported in 2000.

     Fiscal Second Quarter 2001 Versus Fiscal Second Quarter 2000

     --  MACSTEEL(R) -- engineered steel bar group
         --  Net sales: $76.0 million vs. $88.2 million
         --  Operating income: $8.7 million vs. $15.9 million

     --  Nichols Aluminum -- aluminum sheet products group
         --  Net sales:  $90.1 million vs. $111.8 million
         --  Operating income:  $1.1 million vs. $6.6 million

     --  Engineered Products -- formed metal products group
         --  Net sales: $31.6 million vs. $22.7 million
         --  Operating income: $3.1 million vs. $2.5 million

     --  Piper Impact -- impact extrusion products group
         --  Net sales: $21.2 million vs. $26.4 million
         --  Operating income: $928 thousand vs. a loss of $3.8 million

Statements that use the words "expect," "should," "will," "might," or similar words reflecting future expectations or beliefs are forward-looking statements. The following statements are based on current expectations. Actual results or events may differ materially from this release. Factors that could impact future results may include, without limitation, the effect of both domestic and global economic conditions, the impact of competitive products and pricing, and the availability and cost of raw materials. For a more complete discussion of factors that may affect the Company's future performance, please refer to the Company's most recent 10-K filing (January 5, 2001) under the Securities Exchange Act of 1934, in particular the sections titled, "Private Securities Litigation Reform Act" contained therein.

Commentary

Regarding the Company's results, Raymond A. Jean, president and chief executive officer of Quanex stated, "Quanex continues to outperform the markets we serve. Manufacturing activity continues to be sluggish and our customers remain cautious with new orders and in the management of their inventory. Quanex's operating groups, MACSTEEL, Nichols Aluminum, and Engineered Products, exceeded first quarter results in both sales and operating income. Engineered Products, due in part from the benefit of acquisitions, and Piper Impact, with the benefits of higher productivity and cost cutting efforts, both reported higher operating income compared to last year's second quarter.

"MACSTEEL continues to profitably manage its business while the severity of the distressed conditions in the steel industry are forcing others to restructure. It is a tough business environment for all steel makers, and our primary markets, namely transportation and capital goods, have certainly been impacted. However, we continue to show solid results and have recently returned to a five-day schedule. We enter our third quarter with a stronger backlog and new programs that are starting to kick in. We fully expect MACSTEEL to continue showing operating improvements as the year progresses.

"Nichols Aluminum continues to experience reduced business activity in the building and construction markets but remains profitable. Sheet pricing is extremely competitive at this time and all mills are aggressively seeking available business, resulting in lower margins. However, second quarter operating income was up significantly from the first quarter and bookings and backlog continue to increase. We expect the results for the second half of 2001 to exceed the first half.

"The Engineered Products Group is experiencing sluggish markets, but managed to outperform last year and last quarter with increases in sales and operating income. Results have benefited from the acquisitions of Imperial Fabricated Products and Temroc Metals and we are also seeing the results of new product development initiatives. We anticipate higher operating results for the third quarter versus last year as these benefits and the seasonal factors impact favorably.

"Piper Impact reported another profitable quarter compared to last year's operating loss. Autoliv and ordnance demand remains good given today's economic environment. Productivity and new product development initiatives have gained momentum and are contributing to the improved results."

Outlook

Ray Jean concluded, "Quanex clearly has businesses with unique processes and market positions that enable it to better compete in today's very difficult environment. We expect our operating income to continue to improve in coming quarters as our new programs ramp up, customer activity increases and markets slowly improve."

For the third quarter of fiscal 2001, operating results are expected to lag last year's comparable quarter but to show significant improvement from the second quarter of 2001. The Company previously indicated in its April 19, 2001 quarterly update that the fiscal year 2001 fully diluted earnings per share are expected to be between $1.75 and $2.00. Based on actual results for the first half of the year and outlook for the second half, the Company continues to support that range.

Growth Strategy

Our strategy for enhancing long-term shareholder value will be accomplished through sales and earnings growth. We will strive to achieve this by focusing on consistently earning a cash return in excess of our cost of capital; by being the low cost / high quality producers in our industries; and by investing in internal capital projects and acquisitions that will provide growth and high cash returns.

Other

During the second quarter, the Company purchased 61,900 shares of its common stock under the company's common stock repurchase program announced in December 1999. Since the program's inception, Quanex has purchased a total of 942,100 shares at a cost of $19.2 million.

Dividend Declared

The Board of Directors declared a regular quarterly dividend of $.16 per share on the company's common stock, payable June 29, 2001 to shareholders of record on June 15, 2001.

Corporate Profile

Quanex is a technological leader in the production of value-added engineered steel bars; aluminum flat-rolled products; and engineered, formed-metal products for customers in the transportation, capital equipment, packaging, homebuilding and remodeling, defense, and other commercial markets.

Latest 12 Months Financial Information

(from continuing operations, excluding unusual charges)

Sales: $899.2 million; EBITDA: $106.5 million; Operating income: $59.6 million; Net income: $30.6 million; Basic earnings per share: $2.27; Quarterly common dividend rate (per share): $.16; Book value per common share: $19.93; Long-term debt to capitalization: 45.4 %; Return on common equity: 10.88 %; Actual number of common shares outstanding: 13,370,302; Common stock price range (52-week hi - low): $21.15 - $14.375.

     QUANEX CORPORATION
     CONSOLIDATED STATEMENTS OF INCOME
     (In thousands, except per share data)

      Three months ended                                  Six months ended
           April 30,                                           April 30,
        2001       2000                                    2001       2000
          (Unaudited)                                        (Unaudited)

     $213,758    $243,271     Net sales                  $407,583   $442,565
      179,761     200,655     Cost of sales               342,428    366,298
                              Selling, general and
       12,968      12,856      administrative expense      24,696     26,138
                              Depreciation and
       11,185      12,909      amortization                22,421     25,071

        9,844      16,851     Operating income             18,038     25,058
       (4,122)     (4,020)    Interest expense             (8,283)    (7,350)
          432         647     Capitalized interest            746      1,191
          444         307     Other, net                    1,767      1,309
                              Income before income
                               taxes and extraordinary
        6,598      13,785      gain                        12,268     20,208
       (2,309)     (4,756)    Income tax expense           (4,294)    (7,004)
                              Income before extraordinary
        4,289       9,029      gain                         7,974     13,204
                              Extraordinary gain on early
                               extinguishment of debt,
          ---         358      net of income taxes            372        358
       $4,289      $9,387     Net income                   $8,346    $13,562
                              Weighted average common
                               shares outstanding:
       13,389      13,774        Basic                     13,407     13,975
       13,481      16,118        Diluted                   13,523     16,406
                              Earnings per common share:
                                Basic:
                                  Income before
        $0.32       $0.66          extraordinary gain       $0.59      $0.95
          ---        0.02         Extraordinary gain         0.03       0.02
                                    Total basic net
        $0.32       $0.68            earnings               $0.62      $0.97
                                Diluted:
                                  Income before
        $0.32       $0.61          extraordinary gain       $0.59      $0.91
          ---        0.02         Extraordinary gain         0.03       0.02
                                    Total diluted net
        $0.32       $0.63            earnings               $0.62      $0.93
                              Common stock dividends
        $0.16       $0.16      per share                    $0.32      $0.32


     QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
     (In thousands)

      Three months ended                                 Six months ended
           April 30,                                          April 30,
        2001       2000                                    2001      2000
          (Unaudited)                                        (Unaudited)

                              Engineered Steel Bars:
      $76,006     $88,205       Net sales                $147,604   $167,947
       $8,665     $15,902       Operating income          $16,000    $27,737
                              Aluminum Mill Sheet Products:
      $90,144    $111,848       Net sales                $168,960   $191,568
       $1,144      $6,582       Operating income           $1,424     $8,785
                              Engineered Products:
      $31,630     $22,726       Net sales                 $57,593    $41,144
       $3,067      $2,474       Operating income           $5,000     $4,321
                              Piper Impact:
      $21,173     $26,389       Net sales                 $44,022    $53,188
         $928     $(3,799)      Operating income / (loss)  $2,072    $(7,272)
                              Corporate and Other:
      $(5,195)    $(5,897)      Net sales                $(10,596)  $(11,282)
      $(3,960)    $(4,308)      Operating loss            $(6,458)   $(8,513)
                              Total:
     $213,758    $243,271       Net sales                $407,583   $442,565
       $9,844     $16,851       Operating income          $18,038    $25,058


     QUANEX CORPORATION
     CONSOLIDATED BALANCE SHEETS
     (In thousands)

           April 30,                                            October 31,
      2001           2000                                      2000      1999
         (Unaudited)      Assets                                 (Audited)

      $17,332     $23,340 Cash and equivalents              $22,409   $25,874
                          Accounts and notes receivable,
      104,600     115,504  net                               98,465    87,204
       98,880     104,199 Inventories                       101,274    78,463
       15,012      13,966 Other current assets               13,798    20,846
      235,824     257,009    Total current assets           235,946   212,387
                          Property, plant and equipment,
      348,308     415,984  net                              338,248   406,841
       60,720      57,895 Goodwill, net                      47,539    48,990
       25,284      25,443 Other assets                       24,126    22,228
     $670,136    $756,331 Total assets                     $645,859  $690,446

                          Liabilities and stockholders' equity
      $74,771     $85,085 Accounts payable                  $77,339   $70,187
       45,735      51,948 Accrued expenses                   50,189    54,305
        1,815       3,783 Income taxes payable                3,218     1,103
        2,153         --- Other current liabilities             ---       ---
                          Current portion of long-term
          421       9,131  debt                                 256    10,545
      124,895     149,947    Total current liabilities      131,002   136,140
      221,578     236,874 Long-term debt                    191,657   179,121
        5,882       7,217 Deferred pension credits            7,026     6,691
                          Deferred postretirement welfare
        7,701       7,598  benefits                           7,634     7,490
       26,096      43,540 Deferred income taxes              27,620    43,910
       17,544      14,583 Other liabilities                  14,423    16,033
      403,696     459,759    Total liabilities              379,362   389,385
      266,440     296,572    Total stockholders' equity     266,497   301,061
                          Total liabilities and
     $670,136    $756,331  stockholders' equity            $645,859  $690,446


     QUANEX CORPORATION
     CONSOLIDATED STATEMENTS OF CASH FLOW
     (In thousands)

        Three months ended                                  Six months ended
            April 30,                                           April 30,
         2001      2000                                     2001       2000
          (Unaudited)                                         (Unaudited)

                              Operating activities:
       $4,289     $9,387        Net income                 $8,346    $13,562
                                Extraordinary gain on
                                 early extinguishment of
          ---       (358)        debt (net of taxes)         (372)      (358)
                                Depreciation and
       11,313     13,040         amortization              22,675     25,340
       (1,760)       129        Deferred income taxes      (1,801)       159
                                Deferred pension and
         (726)       363         postretirement benefits   (1,077)       636
       13,116     22,561                                   27,771     39,339
                                Increase in accounts and
      (10,021)   (22,800)        notes receivable          (2,811)   (21,989)
                                (Increase) decrease in
        4,745     (4,901)        inventory                  5,037    (11,004)
                                Increase (decrease) in
        5,861      5,484         accounts payable          (4,629)     9,634
                                Increase (decrease) in
        3,984      3,312         accrued expenses          (5,835)    (6,330)
                                Other, net (including
         (363)      (240)        income tax refund)        (1,273)     7,867
                              Cash provided by operating
       17,322      3,416       activities                  18,260     17,517
                              Investment activities:
                                Acquisition of Golden
                                 Aluminum, net of cash
          ---    (13,742)        acquired                     ---    (20,148)
                                Acquisition of Temroc
                                 Metals, net of cash
          ---        ---         acquired                 (17,922)       ---
                                Acquisition of Imperial
                                 Products, net of cash
          ---    (15,303)        acquired                     ---    (15,303)
                                Capital expenditures,
      (14,511)   (10,312)        net of retirements       (26,485)   (24,770)
                                Cash used by other
          496       (835)        investment activities     (1,094)    (1,727)
                               Cash used by investment
      (14,015)   (40,192)       activities                (45,501)   (61,948)

                              Financing activities:
       (1,000)    60,304        Bank borrowings, net       32,000     69,473
                                Purchase of subordinated
          ---     (9,586)        debentures                (3,942)    (9,586)
                                Purchases of Quanex
       (1,626)   (10,419)        common stock              (1,990)   (14,204)
       (2,155)    (2,225)       Common dividends paid      (4,322)    (4,521)
                                Issuance of common stock,
          730         (1)        net                        1,530        619
                                Cash used by other
         (803)       (27)        financing activities      (1,112)       (51)
                              Cash provided (used) by
       (4,854)    38,046       financing activities        22,164     41,730
                              Effect of exchange rate
                               changes on cash and
          ---        115       equivalents                    ---        167
                              Increase (decrease) in
       (1,547)     1,385       cash                        (5,077)    (2,534)
                              Beginning of period cash
       18,879     21,955       and equivalents             22,409     25,874
                              End of period cash and
      $17,332    $23,340       equivalents                $17,332    $23,340

     Financial Contact:  Jeff Galow, 713/877-5327
     Media Contact:  Marianne Gooch, 713/877-5389

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SOURCE Quanex Corporation
Web site: http: //www.quanex.com
Photo: http: //www.newscom.com/cgi-bin/prnh/19990517/NXLOGO PRN Photo Desk, 888-776-6555 or 212-782-2840
Company News On-Call: http: //www.prnewswire.com/comp/117216.html or fax, 800-758-5804, ext. 117216
CONTACT: financial, Jeff Galow, 713-877-5327, or media, Marianne Gooch, 713-877-5389, both of Quanex Corporation
CAPTION: NXLOGO QUANEX CORPORATION LOGO Quanex Corporation logo. (PRNewsFoto)[HD] HOUSTON, TX USA 05/17/1999

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