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Quanex Reports Annual and Fourth Quarter Earnings for Fiscal 2000

            - Annual Sales Increased 15% to a Record $934 Million
                    - MACSTEEL(R) Records Best-Ever Sales
      - Nichols Aluminum Posts Record Annual Sales and Operating Income
     - Company Records a $56.3 Million Impairment Charge at Piper Impact

HOUSTON, Dec. 7 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced record sales of $237.5 million for the fourth quarter of fiscal 2000, up 9 percent from fourth quarter a year ago, and annual sales of $934 million, up 15 percent from $810 million in 1999. Net loss for fiscal 2000 was $9.7 million, or $.70 basic and diluted earnings per share, which includes a $14.3 million (pre-tax) loss associated with the sale of Piper Impact-Europe, reported in the third quarter, and an asset impairment charge of $56.3 million (pre-tax) associated with Piper Impact -- US, reported in the fourth quarter. Excluding these charges, Quanex would have reported fiscal 2000 net income of $36.2 million or $2.64 basic and $2.46 diluted earnings per share, compared to net income of $39.7 million or $2.79 basic and $2.59 diluted earnings per share reported for fiscal 1999.

For the fourth quarter ending October 31, 2000, Quanex recorded a net loss of $23.9 million or $1.78 per share, which includes the asset impairment charge. Without this charge, the company would have reported net income of $12.7 million, representing basic and diluted earnings per share of $.94 and $.86 respectively. This compares with net income of $13.3 million, or basic and diluted earnings per share of $.94 and $.85 respectively, reported for fiscal 1999.

The asset impairment charge relates to the company's Piper Impact operations and results from the application of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."

Fiscal 2000 Segment Results

Quanex posted fiscal 2000 operating income of $66.6 million (before unusual charges) compared to $71.8 million in the prior year. Net sales were $934 million, up 15 percent from $810 million posted in the previous year.

MACSTEEL, Quanex's engineered steel bar business, reported operating income of $57.7 million compared with $60.4 million reported last year. The group's annual sales were a record $344.2 million, an increase of 16 percent from last year's sales of $297.4 million.

Nichols Aluminum, the company's aluminum sheet products business, inclusive of Nichols Aluminum Golden acquired in January 2000, posted best- ever operating income of $21.5 million for the year, a 41 percent increase from 1999 operating income of $15.3 million. Net sales of $404.4 million were also the highest reported, up 30 percent from last year.

Engineered Products (AMSCO, Homeshield, and Imperial Products acquired in April 2000) earned operating income of $14.3 million, up from $13.0 million posted in 1999. Net sales were also up to $104.9 million from $92.7 million, a 13 percent year-over-year increase.

Piper Impact reported an operating loss of $11.9 million (before unusual charges) for fiscal 2000, versus a loss of $853 thousand posted in 1999. Fiscal 2000 net sales were $105.6 million compared to $134.7 million reported in fiscal 1999.

Fourth Quarter Segment Results

MACSTEEL earned fourth quarter operating income of $15.5 million, compared with operating income of $18 million reported for the same period last year. Fiscal 2000's fourth quarter net sales were $86.4 million, an increase of 7 percent from fourth quarter 1999 sales of $80.6 million.

Nichols Aluminum reported fourth quarter operating income of $6.2 million, compared with $6.1 million reported for the same period last year. Net sales were $101.9 million, a fourth quarter record, compared to $86.8 million last year.

Engineered Products earned record fourth quarter operating income of $5.1 million, up 18 percent from the $4.3 million reported for the same period last year. Fourth quarter net sales were a quarterly record at $31.5 million versus 1999 fourth quarter sales of $25.3 million, a 25 percent increase year to year.

Piper Impact reported a fourth quarter operating loss of $762 thousand (before unusual charges) on sales of $24.3 million. In the same period of last year, Piper reported operating income of $94 thousand on sales of $31.2 million.

Portions of these statements are based on current expectations. Statements that use the word "expect," "should," "will" or similar words reflecting future expectation or belief are forward-looking statements, and actual results or events may differ materially. For a more complete discussion of factors that may affect the Company's future performance, please refer to the Company's most recent filings under the Securities Exchange Act of 1934, in particular, the sections titled "Private Securities Litigation Reform Act" contained therein.

Commentary

"Quanex's annual sales increased for all groups except Piper Impact," said Vernon E. Oechsle, chairman and chief executive officer of Quanex. "Quanex posted record 2000 sales, with company revenues increasing 15 percent to $934 million."

"MACSTEEL posted record sales while nearing completion of its Phase V capital expansion program. However, operating income was down due to higher depreciation charges and higher material and other costs." Mr. Oechsle added, "Pricing is a continuing concern as pressure from OEM's, weak domestic competitors, and globalization of the industry have affected some of our product lines. Phase V, which is being completed this month, will raise the annual shipping capacity to 700,000 tons at MACSTEEL and 35,000 tons at the Heat Treat facility, an increase of 13 percent and 40 percent, respectively. Also, work has begun at both bar mills for Phase VI, which will increase MACPLUS capacity, MACSTEEL's highest value-added product line."

"Nichols Aluminum had a record year in both sales and operating income," Oechsle said, "resulting from the acquisition of Nichols Aluminum Golden, operational improvements throughout the division, and healthy margins. A 41% increase in operating income from 1999 is a result of combined efforts of their new rotary furnaces, business acquisitions, penetration into more value- added markets and the improvements that Nichols accomplished in quality and delivery performance."

"The Engineered Products Group increased net sales in fiscal 2000 by 13% to $104.9 million and increased operating income by 10% to $14.3 million," Oechsle continued. "With the addition of Imperial Fabricated Products, we were able to add new customers and new markets while enjoying productivity improvements. The acquisition of Temroc Metals, Inc. provides us with extrusion capabilities in such diverse markets as outdoor recreation, medical, and energy."

"Piper Impact results have been adversely impacted all year by declining aluminum air bag product sales and higher manufacturing costs. Piper made good progress in the second half of the year reducing its costs and we look for those efforts to continue." Oechsle said, "The impairment charge in the fourth quarter, represents another step in our process of evaluating strategic alternatives for this business, including its possible sale."

Outlook

The company's first fiscal quarter (November, December, and January) is historically its least profitable of each year as there are fewer production days and the company's customers experience holiday shutdowns. Additionally, the business outlook for Quanex's first fiscal quarter 2001 finds the company's transportation and housing markets continuing to slow from fiscal 2000 levels.

However, because of recent acquisitions, the company expects net sales to be relatively flat when compared to fiscal first quarter 2000 net sales, which had no benefit from the operating results of Nichols Aluminum Golden, Imperial Products, and Temroc Metals acquisitions. Further, earnings are expected to be slightly better than first quarter 2000 earnings per share of $ .29 as the company expects results from its Piper Impact segment to approach breakeven versus a $3.5 million loss a year ago. Based on these assumptions, the company currently anticipates that fiscal 2001 fully diluted earnings per share will be higher than the $2.46 reported in fiscal 2000, excluding the charges related to Piper Impact-US and Piper Impact-Europe.

Other

The Board of Directors declared a regular quarterly dividend of 16 cents per share on the company's common stock, payable December 29, 2000, to shareholders of record on December 22, 2000. This is the 50th consecutive quarter Quanex has paid a dividend to shareholders of its common stock.

Also during the fiscal 2000 fourth quarter, Quanex purchased 71,600 shares of its common stock as part of the company's share buyback program that was announced in December 1999. For the 2000 fiscal year the company purchased a total of 834,300 shares under this program. Also during the year the company purchased $10.4 million, principal amount, of the Quanex Corporation 6.88% convertible subordinated debentures.

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, homebuilding and remodeling, packaging, defense, and other commercial markets. For more information, visit the company's web site at www.quanex.com.

Latest 12 Months Financial Information from continuing operations (excluding unusual charges)

Sales: $934.2 million; EBITDA: $115.5 million; Operating income: $66.6 million; Net income: $35.9 million; Basic earnings per share: $2.61; Quarterly common dividend rate (per share): $.16; Book value per common share: $19.90; Long-term debt to capitalization: 41.8%; Return on common equity: 12.63%; Actual number of common shares outstanding: 13,395,451; Common stock price range (52-week hi - low): $26.56 - $14.38.

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


     Three months ended                               Twelve months ended
         October 31,                                      October 31,
     2000          1999                               2000          1999
        (Unaudited)                                       (Audited)

    $237,494      $217,493    Net sales              $934,203      $810,094
     190,947       169,922    Cost of sales           766,119       639,911
      13,294        13,583    Selling, general and     53,545        53,104
                               administrative expense
      10,540        10,774    Depreciation and         47,921        45,322
                               amortization
      22,713        23,214    Operating income before  66,618        71,757
                               unusual charges
      56,300           ---    Piper Impact impairment  56,300           ---
                               charge
         ---           ---    Loss on sale of Piper    14,280           ---
                               Impact Europe
     (33,587)       23,214    Operating income/(loss)  (3,962)       71,757
      (3,756)       (3,521)   Interest expense        (15,255)      (14,402)
         251           407    Capitalized interest      1,941         1,611
         272           284    Other, net                1,870         1,383
     (36,820)       20,384    Income/(loss) before    (15,406)       60,349
                               income taxes and
                               extraordinary gain
      12,878        (7,060)   Income tax (expense)      5,383       (21,048)
                               /benefit
     (23,942)       13,324    Income/(loss) before    (10,023)       39,301
                               extraordinary gain
         ---           ---    Extraordinary gain on       358           415
                               early extinguishment of
                               debt, net of income taxes
    $(23,942)      $13,324    Net income/(loss)      $ (9,665)     $ 39,716
                              Weighted average common
                               shares outstanding:
      13,428        14,206      Basic                  13,727        14,234
      13,428        16,705      Diluted                13,727        16,776
                              Earnings per common share:
                                Basic:
    $  (1.78)      $  0.94       Income/(loss) before $ (0.73)      $  2.76
                                  extraordinary gain
         ---           ---       Extraordinary gain      0.03          0.03
    $  (1.78)      $  0.94         Total basic net    $ (0.70)      $  2.79
                                    earnings
                                Diluted:
    $  (1.78)      $  0.85       Income/(loss) before $ (0.73)      $  2.56
                                  extraordinary gain
    $    ---           ---       Extraordinary gain      0.03          0.03
    $  (1.78)      $  0.85         Total diluted net  $ (0.70)      $  2.59
                                    earnings
    $   0.16       $  0.16    Common stock dividends  $  0.64       $  0.64
                               per share


    QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
    (In thousands)


     Three months ended                                 Twelve months ended
         October 31,                                        October 31,
     2000          1999                                 2000          1999
        (Unaudited)                                         (Audited)
                              Engineered Steel Bars:
    $ 86,360      $ 80,624     Net sales               $344,245      $297,369
    $ 15,484      $ 18,000     Operating income        $ 57,702      $ 60,446
                              Aluminum Mill Sheet
                               Products:
    $101,944      $ 86,804     Net sales               $404,355      $311,763
    $  6,153      $  6,105     Operating income        $ 21,529      $ 15,306
                              Engineered Products:
    $ 31,541      $ 25,296     Net sales               $104,948      $ 92,668
    $  5,117      $  4,324     Operating income        $ 14,301      $ 13,006
                              Piper Impact:
    $ 24,271      $ 31,216     Net sales               $105,632      $134,694
    $(57,062)     $     94     Operating income/(loss) $(82,470)     $   (853)
                              Corporate and Other:
    $ (6,622)     $ (6,447)    Net sales               $(24,977)     $(26,400)
    $ (3,279)     $ (5,309)    Operating loss          $(15,024)     $(16,148)
                              Total:
    $237,494      $217,493     Net sales               $934,203      $810,094
    $(33,587)     $ 23,214     Operating income/(loss) $ (3,962)     $ 71,757

    Note:  The results from operations of Piper Impact as well as Piper Impact
    Europe have been separated into their own reporting segment named "Piper
    Impact" beginning in the 3rd Quarter of Fiscal 2000.  Previous year's
    information has been restated to reflect this change.  The one-time loss
    from the sale of Piper Impact Europe of $14.3 million as well as the asset
    impairment charge of $56.3 million is included in Piper Impact's operating
    loss for three and twelve months ended October 31, 2000.


    QUANEX CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (In thousands)


                                                      October 31,
                                                   2000         1999
    Assets                                             (Audited)

    Cash and equivalents                        $ 22,409     $ 25,874
    Accounts and notes receivable, net            98,465       87,204
    Inventories                                  101,274       78,463
    Other current assets                          13,798       20,846
       Total current assets                      235,946      212,387
    Property, plant and equipment, net           338,248      406,841
    Goodwill, net                                 47,539       48,990
    Other assets                                  24,126       22,228
    Total assets                                $645,859     $690,446
    Liabilities and stockholders' equity
    Accounts payable                            $ 77,339     $ 70,187
    Accrued expenses                              50,189       54,305
    Current portion of long-term debt                256       10,545
    Income taxes payable                           3,218        1,103
       Total current liabilities                 131,002      136,140
    Long-term debt                               191,657      179,121
    Deferred pension credits                       7,026        6,691
    Deferred postretirement welfare benefits       7,634        7,490
    Deferred income taxes                         27,620       43,910
    Other liabilities                             14,423       16,033
       Total liabilities                         379,362      389,385
       Total stockholders' equity                266,497      301,061
    Total liabilities and stockholders' equity  $645,859     $690,446


    QUANEX CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOW
    (In thousands)


     Three months ended                               Twelve months ended
         October 31,                                       October 31,
     2000          1999                                2000          1999
        (Unaudited)                                        (Audited)
                           Operating activities:
    $(23,942)     $ 13,324  Net income/(loss)        $ (9,665)      $ 39,716
         ---           ---  Extraordinary gain on        (358)          (415)
                             early extinguishment of
                             debt (net of taxes of
                             $193 and $223,
                             respectively for 2000
                             and 1999)
         ---           ---  Loss on sale of Piper       9,282            ---
                             Impact Europe (net of
                             taxes of $4,998)
      36,595           ---  Piper Impact Impairment    36,595            ---
                             charge (net of taxes of
                             $19,705)
      10,668        10,926  Depreciation and           48,445         45,883
                             amortization
       8,360         8,235  Deferred income taxes       5,483         10,150
         501            40  Deferred pension and          659           (429)
                             postretirement benefits
      32,182        32,525                             90,441         94,905
        (603)       (8,356) Increase in accounts and   (9,149)        (2,665)
                             notes receivable
      (4,596)        3,295  (Increase) decrease in    (12,474)         6,485
                             inventory
      (2,254)         (534) Increase (decrease) in      5,412         (4,648)
                             accounts payable
        (653)          151  Increase (decrease) in     (6,314)        (1,510)
                             accrued expenses
        (575)       (9,716) Other, net (including       9,954        (14,879)
                             income tax refund)
      23,501        17,365 Cash provided by operating  77,870         77,688
                             activities
                           Investment activities:
         ---           ---  Acquisition of Golden     (20,148)           ---
                             Aluminum, net of cash
                             acquired
         ---           ---  Acquisition of Imperial   (15,303)           ---
                             Fabricated Products, net
                             of cash acquired
      (8,959)      (16,963) Capital expenditures, net (42,327)       (60,848)
                             of retirements
      (1,240)         (990) Cash used by other         (1,809)        (1,832)
                             investment activities
     (10,199)      (17,953) Cash used by investment   (79,587)       (62,680)
                             activities
                           Financing activities:
     (20,000)      (13,161) Bank borrowings            33,394          1,035
                             (repayments), net
         ---           ---  Purchase of subordinated   (9,586)        (8,799)
                             debentures
      (1,306)          ---  Purchases of Quanex       (17,185)           ---
                             common stock
      (2,173)       (2,283) Common dividends paid      (8,884)        (9,124)
          29            48  Issuance of common stock,   1,002          1,567
                             net
           5            (1) Cash provided (used) by      (556)           (60)
                             other financing activities
     (23,445)      (15,397) Cash used by financing     (1,815)       (15,381)
                             activities
           0            (4) Effect of exchange rate        67            (32)
                             changes on cash and
                             equivalents
     (10,143)      (15,989) Decrease in cash           (3,465)          (405)
      32,552        41,863  Beginning of period cash   25,874         26,279
                             and equivalents
    $ 22,409      $ 25,874  End of period cash and   $ 22,409       $ 25,874
                             equivalents

SOURCE Quanex Corporation
Web site: http: //www.quanex.com
Photo: NewsCom: http: //www.newscom.com/cgi-bin/prnh/19990517/NXLOGO PRN Photo Desk, 888-776-6555 or 201-369-3467
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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