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Quanex Announces Earnings for Fiscal 2001 Third Quarter

      Company More Than Doubles Second Quarter Basic Earnings Per Share;
             Engineered Products Group Reports Best-Ever Quarter

HOUSTON, Aug. 30 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2001, third quarter results for the period ending July 31. Earnings per share for the quarter were $.72 basic and $.67 diluted. This compares to $.74 basic and $.68 diluted earnings per share (excluding the loss on the sale of Piper Europe), for the same period last year. Third quarter net sales were $240 million compared to $254 million in 2000; net income for the quarter was $9.6 million compared to $10.0 million reported last year (excluding the loss on the sale of Piper Europe).

    Fiscal Third Quarter 2001 Versus Fiscal Third Quarter 2000
    --  MACSTEEL(R) - engineered steel bar group
          --  Net sales: $84.7 million vs. $89.9 million
          --  Operating income: $12.2 million vs. $14.5 million

    --  Nichols Aluminum - aluminum sheet products group
          --  Net sales:  $99.0 million vs. $110.8 million
          --  Operating income:  $2.2 million vs. $6.6 million

    --  Engineered Products - formed metal products group
          --  Net sales: $44.1 million vs. $32.3 million
          --  Operating income: $7.3 million vs. $4.9 million

    --  Piper Impact - impact extrusion products group
          --  Net sales: $19.8 million vs. $28.2 million
          --  Operating income: $700 thousand vs. a loss of $3.9 million
              (excluding charges)

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, chairman and chief executive officer of Quanex stated, "Quanex again demonstrated its ability to provide solid earnings in this slow business environment. We are encouraged by the ongoing improvements in our bookings, and increased shipments to the vehicular and building products markets. Quanex's operating groups, MACSTEEL, Nichols Aluminum, and Engineered Products, again exceeded their previous quarter results in both sales and operating income. Piper Impact reported another quarter of positive operating income compared to last year's third quarter loss. Overall, we continue to outperform the markets we serve.

"MACSTEEL's aggressive sales efforts helped achieve strong shipments for the quarter at both steel plants. New accounts as well as increasing orders from existing customers have enabled the mill to return to a 6-day schedule and this is expected to continue. Market share improvement at MACSTEEL is coming from the automotive, oil country and defense segments. Cost control initiatives have taken hold and scrap pricing remains in our favor. Fiscal Year 2001 will be a good year for MACSTEEL despite the turmoil being experienced in the steel industry."

Ray Jean added, "In line with MACSTEEL's ongoing strategy to aggressively pursue value-adding capabilities, the Board of Directors has approved a $5.8 million project to build a bar-cutting facility at MACSTEEL's Michigan plant. This project will reduce the current outsourcing of bar cutting, and meet customers' growing requests for 'one stop shopping'. The project will dovetail nicely into the ongoing work of the Phase VI capital project, i.e. the expansion of MACPLUS bright cold finished bar capacity. Having the financial capability to continue funding attractive incremental investments in a difficult environment bodes well for our longer term outlook.

"Nichols Aluminum reported operating income nearly double last quarter results. Although Nichols' distribution and truck-trailer markets remain weak, they have reduced fixed costs and gained share in the more robust building and construction markets. Nichols' reputation for providing quality products and superior service has served them well in this competitive environment. While overall industry demand for aluminum products has declined versus last year, Nichols volumes and market share have steadily increased throughout the year. Capital investments in recent years are paying off. For instance, not only do they utilize lower priced scrap metal in their mix, they can also produce more value-added products.

"Engineered Products achieved all-time quarterly records for sales and operating income during the third quarter. While housing remains somewhat softer than this time last year, attractive interest rates continue to draw buyers into the market, and remodeling spending has held up well. Results have benefited from last year's acquisitions and we are seeing the impact of new product development initiatives.

"Piper Impact reported another profitable quarter compared to last year's third quarter operating loss. They have now delivered three consecutive quarters of profitability. Opportunities are currently being explored to use additional MACSTEEL bars in Piper's processes to manufacture lower cost, high performance components for automotive markets. Piper is accelerating deployment of lean manufacturing practices, and remains focused on reaching closure on numerous business development opportunities."

Outlook

Ray Jean concluded, "In a difficult economic environment, we have clearly outperformed our markets and returned our under-performing unit to profitability. This speaks well for our strong market positions, unique processing capabilities and dedicated employees. The Company typically experiences better operating results as the year progresses and we expect that will be the case this year."

For the fourth quarter of fiscal 2001, operating results are expected to lag last year's comparable quarter but show some improvement from third quarter 2001. The Company previously indicated in its July 24, 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 results year-to-date and slow, but steady improvement in the demand for Quanex's vehicular and building products, the Company expects to earn near the top of 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; and by assuring operating units and future investments meet core business success attributes: customer focus, superior manufacturing process technologies, rigorous management practices, engineered-type products or value added services, and significant competitive position within served markets.

Dividend Declared

The Board of Directors declared a quarterly dividend of $.16 per share on the Company's common stock, payable September 28, 2001 to shareholders of record on September 14, 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 vehicular and building products markets.

Latest 12 Months Financial Information

(from continuing operations, excluding unusual charges)

Sales: $885.4 million; EBITDA: $104.5 million; Operating income: $59.1 million; Net income: $30.2 million; Basic earnings per share: $2.25; Quarterly common dividend rate (per share): $.16; Book value per common share: $20.43; Long-term debt to capitalization: 46.4 %; Return on common equity: 10.66 %; Actual number of common shares outstanding: 13,384,507; Common stock price range (52-week hi - low): $27.55 - $16.38.

    For further information visit the Company website at www.quanex.com .

     Financial Contact:  Jeff Galow, 713/877-5327
     Media Contact:  Valerie Calvert, 713/877-5305


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

     Three months ended                                   Nine months ended
          July 31,                                              July 31,
       2001      2000                                        2001      2000
        (Unaudited)                                           (Unaudited)
     $240,332  $254,144   Net sales                        $647,915  $696,709

      197,792   208,874   Cost of sales                     540,220   575,172
                          Selling, general and
       13,492    14,113    administrative expense            38,188    40,251
       10,695    12,310   Depreciation and amortization      33,116    37,381
          ---    14,280   Loss on sale of Piper Impact Europe   ---    14,280

       18,353     4,567   Operating income                   36,391    29,625

       (4,129)   (4,149)  Interest expense                  (12,412)  (11,499)
          349       499   Capitalized interest                1,095     1,690
          208       289   Other, net                          1,975     1,598
                          Income before income taxes
       14,781     1,206    and extraordinary gain            27,049    21,414

       (5,173)     (491)  Income tax expense                 (9,467)   (7,495)
        9,608       715   Income before extraordinary gain   17,582    13,919
                          Extraordinary gain on early
                           extinguishment of debt, net
          ---       ---    of income taxes                      372       358

       $9,608      $715   Net income                        $17,954   $14,277

                          Weighted average common
                           shares outstanding:
       13,377    13,534     Basic                            13,397    13,827
       15,428    13,682     Diluted                          15,420    13,973

                          Earnings per common share:
                            Basic:
                              Income before extraordinary
        $0.72     $0.05        gain                           $1.31     $1.00
          ---       ---       Extraordinary gain               0.03      0.03
        $0.72     $0.05         Total basic net earnings      $1.34     $1.03

                            Diluted:
                              Income before extraordinary
        $0.67     $0.05        gain                           $1.28     $1.00
          ---       ---       Extraordinary gain               0.02      0.02
        $0.67     $0.05         Total diluted net earnings    $1.30     $1.02

        $0.16     $0.16   Common stock dividends per share    $0.48     $0.48


     QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
     (In thousands)

     Three months ended                                    Nine months ended
          July 31,                                              July 31,
       2001      2000                                        2001      2000
         (Unaudited)                                          (Unaudited)
                          Engineered Steel Bars:
      $84,663   $89,938     Net sales                      $232,267  $257,885
      $12,171   $14,481     Operating income                $28,171   $42,218

                          Aluminum Mill Sheet Products:
      $98,963  $110,843     Net sales                      $267,923  $302,411
       $2,201    $6,591     Operating income                 $3,625   $15,376

                          Engineered Products:
      $44,062   $32,263     Net sales                      $101,655   $73,407
       $7,325    $4,863     Operating income                $12,325    $9,184

                          Piper Impact:
      $19,766   $28,173     Net sales                       $63,788   $81,361
         $700  $(18,136)    Operating income / (loss)        $2,772  $(25,408)

                          Corporate and Other:
      $(7,122)  $(7,073)    Net sales                      $(17,718) $(18,355)
      $(4,044)  $(3,232)    Operating loss                 $(10,502) $(11,745)

                          Total:
     $240,332  $254,144     Net sales                      $647,915  $696,709
      $18,353    $4,567     Operating income                $36,391   $29,625

    Note:  The one-time loss from the sale of Piper Impact-Europe of
           $14.3 million is included in Piper Impact's operating loss for the
           three and nine-months ended July 31, 2000.


     QUANEX CORPORATION
     CONSOLIDATED BALANCE SHEETS
     (In thousands)

          July 31,                                             October 31,
       2001    2000                                          2000      1999
        (Unaudited)       Assets                                (Audited)

      $31,805   $32,552   Cash and equivalents              $22,409   $25,874
                          Accounts and notes
       97,999    99,019    receivable, net                   98,465    87,204
       91,423    96,650   Inventories                       101,274    78,463
       18,006    12,877   Other current assets               13,798    20,846
      239,233   241,098     Total current assets            235,946   212,387

                          Property, plant and
      354,743   394,705    equipment, net                   338,248   406,841
       60,127    47,795   Goodwill, net                      47,539    48,990
       44,865    22,895   Other assets                       24,126    22,228

     $698,968  $706,493   Total assets                     $645,859  $690,446

                          Liabilities and stockholders'
                           equity
      $77,289   $79,593   Accounts payable                  $77,339   $70,187
       48,222    50,842   Accrued expenses                   50,189    54,305
        3,740     3,025   Income taxes payable                3,218     1,103
        3,582       ---   Other current liabilities             ---       ---
          420       259   Current portion of long-term debt     256    10,545

      133,253   133,719     Total current liabilities       131,002   136,140

      236,487   211,505   Long-term debt                    191,657   179,121
        5,158     6,631   Deferred pension credits            7,026     6,691
                          Deferred postretirement welfare
        7,718     7,634    benefits                           7,634     7,490
       25,301    38,862   Deferred income taxes              27,620    43,910
       17,605    14,423   Other liabilities                  14,423    16,033

      425,522   412,774     Total liabilities               379,362   389,385

      273,446   293,719     Total stockholders' equity      266,497   301,061

                          Total liabilities and
     $698,968  $706,493    stockholders' equity            $645,859  $690,446


     QUANEX CORPORATION
     CONSOLIDATED STATEMENTS OF CASH FLOW
     (In thousands)

      Three months ended                                   Nine months ended
          July 31,                                              July 31,
       2001      2000                                        2001      2000
        (Unaudited)                                            (Unaudited)

                          Operating activities:
       $9,608      $715     Net income                      $17,954   $14,277

                            Extraordinary gain on early
                             extinguishment of debt
          ---       ---      (net of taxes)                    (372)     (358)
                            Loss on sale of Piper Impact
          ---     9,282      Europe (net of taxes of $4,998)    ---     9,282
       10,779    12,437     Depreciation and amortization    33,454    37,777
         (795)   (3,036)    Deferred income taxes            (2,596)   (2,877)
                            Deferred pension and
         (707)     (478)     postretirement benefits         (1,784)      158
       18,885    18,920                                      46,656    58,259
                            (Increase) decrease in accounts
        6,601    13,443      and notes receivable             3,790    (8,546)
        7,457     3,126     (Increase) decrease in inventory 12,494    (7,878)
                            Increase (decrease) in
        2,518    (1,968)     accounts payable                (2,111)    7,666
                            Increase (decrease) in
        2,487       669      accrued expenses                (3,348)   (5,661)
                            Other, net (including income
         (121)    2,663      tax refund)                     (1,394)   10,530

                          Cash provided by operating
       37,827    36,853    activities                        56,087    54,370

                          Investment activities:
                            Acquisition of Golden Aluminum,
          ---       ---      net of cash acquired               ---   (20,148)
                            Acquisition of Temroc Metals,
          ---       ---      net of cash acquired           (17,922)      ---
                            Acquisition of Imperial
          ---       ---      Products, net of cash acquired     ---   (15,303)
                            Capital expenditures, net
      (16,513)   (8,598)     of retirements                 (42,998)  (33,368)
                            Cash provided (used) by
       (2,429)    1,158      other investment activities     (3,523)     (569)

                          Cash used by investment
      (18,942)   (7,440)   activities                       (64,443)  (69,388)

                          Financing activities:
                            Bank borrowings
       15,000   (16,280)     (repayments), net               47,000    53,193
                            Repayment of borrowings on
      (17,273)      ---      insurance policies             (17,273)      ---
                            Purchase of subordinated
          ---       ---      debentures                      (3,942)   (9,586)
          ---    (1,675)    Purchases of Quanex common stock (1,990)  (15,879)
       (2,147)   (2,190)    Common dividends paid            (6,469)   (6,711)
          283       345     Issuance of common stock, net     1,813       964
                            Cash used by other financing
         (275)     (301)     activities                      (1,387)     (352)

                          Cash provided (used) by
       (4,412)  (20,101)   financing activities              17,752    21,629

                          Effect of exchange rate changes
          ---      (100)   on cash and equivalents              ---        67

       14,473     9,212   Increase in cash                    9,396     6,678

                          Beginning of period cash
       17,332    23,340    and equivalents                   22,409    25,874

                          End of period cash and
      $31,805   $32,552    equivalents                      $31,805   $32,552

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SOURCE Quanex Corporation
Web site: http: //www.quanex.com
Photo: http: //www.newscom.com/cgi-bin/prnh/19990517/NXLOGO http://www.newscom.com/cgi-bin/prnh/20010522/DATU048 PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840
Company News On-Call: http: //www.prnewswire.com/comp/117216.html
CONTACT: financial, Jeff Galow, +1-713-877-5327, or media, Valerie Calvert, +1-713-877-5305, both of Quanex Corporation
CAPTION: DATU048 QUANEX CORPORATION RAYMOND JEAN Raymond A. Jean, chairman of the board, chief executive officer, Quanex Corporation. (PRNewsFoto)[TC] HOUSTON, TX USA 05/22/2001
CAPTION: NXLOGO QUANEX CORPORATION LOGO Quanex Corporation logo. (PRNewsFoto)[HD] HOUSTON, TX USA 05/17/1999

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