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Quanex Reports Fiscal 2000 Second-Quarter Earnings; - Best-Ever Quarterly Sales Performance; up 20 Percent Year-Over-Year; - EPS (Before One-Time Gains) of 66 Cents Basic/61 Cents Diluted Down From 69 Cents Basic/64 Cents Diluted A Year Ago; - Loss at Pip

HOUSTON, May 25 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2000 second-quarter earnings. Net income before extraordinary gains for the three-month period that ended April 30, 2000 was $9.0 million, which represents basic earnings of 66 cents per share and diluted earnings of 61 cents per share. This compares with net income of $9.8 million and basic and diluted earnings per share of 69 cents and 64 cents, respectively, for fiscal 1999's second quarter. Sales for the second quarter were a best-ever $243.3 million, a 20 percent increase from $202.9 million, which was reported for the same period last year.

During fiscal 2000's second quarter, the company accepted unsolicited block offers to buy back $10.4 million (principal amount) of convertible subordinated debentures. Quanex also purchased 511,800 shares of its common stock during fiscal 2000's second quarter as part of the company's share buyback program that was announced in December 1999.

Second-Quarter Business Results

The MACSTEEL(R) Group, Quanex's engineered steel bar business, earned second-quarter operating income of $15.9 million, an 11 percent increase compared with operating income of $14.3 million reported for the same period last year. Fiscal 2000's second-quarter net sales were up 18 percent from a year ago to $88.2 million. In fiscal 1999's second quarter, net sales were $74.9 million.

Nichols Aluminum, the company's aluminum sheet products business, posted best-ever second-quarter operating income of $6.6 million, up 117 percent from the second-quarter operating income of $3.0 million reported last year. Net sales were an all-time quarterly record at $112 million, up 46 percent from $76.9 million for the same period last year. Current year results include contributions by Nichols Aluminum-Golden, which was acquired in January 2000.

The Engineered Products Group (AMSCO, Homeshield, Imperial Products, Piper Impact(TM), and Piper Impact-Europe) reported an operating loss of $1.3 million, compared with operating income of $3.1 million in the prior year's second quarter. Net sales for the period were $49 million, compared with $57.9 million for the same period in the previous year.

Outlook

"The improved sales and operating income at Quanex's engineered steel bar and aluminum sheet businesses during the second quarter were offset by poor results from Piper Impact in our engineered products group," said Vernon E. Oechsle, chairman and chief executive officer of Quanex. "Despite that setback, Quanex still achieved strong EBITDA levels for the period and significant top-line growth, with revenues increasing 20 percent to $243 million, an all-time record for a three-month period.

"In our Engineered Products Group, Piper Impact-U.S. incurred higher costs due to the development and tooling of new products, implementing cellular manufacturing processes, and the decline in aluminum air bag components. The business outlook at our Netherlands-based facility has deteriorated as customer forecasted volumes for new products haven't materialized," Oechsle said. "These losses exceeded gains from the Fabricated Products Division, which realized strong results for this time of year. Progress on new aluminum products to replace declining sales of air bag parts continues slowly. Several new applications appear viable. We continue to monitor the progress at Piper Impact, and we should have better visibility on the prospects of these new products by year-end.

"The MACSTEEL Group's operating and financial results for the period were excellent," Oechsle said. "Bookings continue to be strong, with backlogs filled into July. Expansion at our MACSTEEL Heat Treating Division in Huntington, Indiana, is complete, and product trials have begun on its newly installed third line. MACSTEEL NitroSteel continues its improvement, and we're seeing stronger order backlogs for its products. Work continues at our two engineered bar mills on Phase V expansion projects, which are on schedule for completion by the end of the calendar year.

"Nichols Aluminum had an outstanding second quarter, setting records in volumes, sales, and operating income for the period. Even excluding the contribution from Nichols Aluminum Golden, the Colorado-based sheet manufacturing facility acquired in January from Alcoa (NYSE: AA), Nichols achieved best-ever second-quarter results," Oechsle said. "Backlogs remain solid, and we expect this division to be sold out through the fiscal year. Markets are strong, especially for painted aluminum sheet, Nichols' highest value-added product. At Nichols Aluminum-Golden we are focused on extending the customer base that eroded in the past few years when its ownership was uncertain."

Portions of the statements above 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.

Dividend Declared

The Board of Directors declared a regular quarterly dividend of 16 cents per share on the Company's common stock, payable June 30, 2000, to shareholders of record on June 15, 2000. This is the 48th consecutive quarter Quanex has paid a dividend to shareholders of its common stock.

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

Sales: $866.7 million; EBITDA: $118.4 million; Operating income: $70.2 million; Net income: $38.9 million; Basic earnings per share: $2.75; Quarterly common dividend rate (per share): $.16; Book value per common share: $21.91; Long-term debt to capitalization: 44.4 %; Return on common equity: 13.45 %; Actual number of common shares outstanding: 13,536,090; Common stock price range (52-week hi - low): $29 - $16-1/8.

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

    Three months ended                                      Six months ended
         April 30,                                             April 30,
    2000           1999                                    2000         1999
        (Unaudited)                                           (Unaudited)

    $243,271    $202,879     Net sales                   $442,565    $385,982
     200,655     160,147     Cost of sales                366,298     308,882
      12,856      13,187     Selling, general and          26,138      27,489
                              administrative expense
      12,909      11,405     Depreciation and amortization 25,071      22,977

      16,851      18,140     Operating income              25,058      26,634
      (4,020)     (3,605)    Interest expense              (7,350)     (7,286)
         647         475     Capitalized interest           1,191         821
         307          31     Other, net                     1,309         825

      13,785      15,041     Income before income taxes    20,208      20,994
                              and extraordinary gain
      (4,756)     (5,264)    Income tax expense            (7,004)     (7,348)
       9,029       9,777     Income before extraordinary   13,204      13,646
                              gain
         358         415     Extraordinary gain on early      358         415
                              extinguishment of debt,
                              net of income taxes

      $9,387     $10,192     Net income                   $13,562     $14,061

                      Weighted average common shares outstanding:
      13,774      14,249     Basic                         13,975      14,236
      16,118      16,818     Diluted                       16,406      16,846

                              Earnings per common share:
                             Basic:
     $  0.66     $  0.69      Income before extraordinary $  0.95     $  0.96
                                gain
        0.02        0.03      Extraordinary gain             0.02        0.03
     $  0.68     $  0.72         Total basic net earnings $  0.97     $  0.99

                             Diluted:
     $  0.61     $  0.64      Income before extraordinary $  0.91     $  0.93
                                gain
     $  0.02        0.02      Extraordinary gain             0.02        0.02
     $  0.63     $  0.66       Total diluted net earnings $  0.93     $  0.95

     $  0.16     $  0.16      Common stock dividends      $  0.32     $  0.32
                               per share


    QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
    (In thousands)

      Three months ended                                   Six months ended
          April 30,                                            April 30,
      2000         1999                                    2000        1999
        (Unaudited)                                          (Unaudited)
                            Engineered Steel Bars:
    $ 88,205    $ 74,859      Net sales                  $167,947    $139,956
    $ 15,902    $ 14,314      Operating income           $ 27,737    $ 25,617
                            Aluminum Mill Sheet Products:
    $111,848    $ 76,867      Net sales                  $191,568    $148,287
    $  6,582    $  3,034      Operating income           $  8,785    $  5,199
                            Engineered Products:
    $ 49,115    $ 57,923      Net sales                  $ 94,332    $110,587
    $ (1,325)   $  3,059      Operating income           $ (2,951)   $  2,837
                            Corporate and Other:
    $ (5,897)   $ (6,770)     Net sales                  $(11,282)   $(12,848)
    $ (4,308)   $ (2,267)     Operating income           $ (8,513)   $ (7,019)
                            Total:
    $243,271    $202,879      Net sales                  $442,565    $385,982
    $ 16,851    $ 18,140      Operating income           $ 25,058    $ 26,634


    QUANEX CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (In thousands)

           April  30,                                        October 31,
       2000          1999                                1999           1998
          (Unaudited)         Assets                          (Audited)

    $ 23,340       $ 33,223   Cash and equivalents    $ 25,874       $ 26,279
     115,504         79,586   Accounts and notes        87,204         85,166
                               receivable, net
     104,199         78,669   Inventories               78,463         85,397
      13,966         14,108   Other current assets      20,846         12,970
     257,009        205,586     Total current assets   212,387        209,812

     415,984        400,978   Property, plant and      406,841        395,054
                               equipment, net
      57,895         49,961   Goodwill, net             48,990         52,281
      25,443         17,229   Other assets              22,228         17,141
    $756,331       $673,754     Total assets          $690,446       $674,288

                              Liabilities and stockholders' equity

    $ 85,085       $ 68,082   Accounts payable        $ 70,187       $ 75,160
      51,948         56,003   Accrued expenses          54,305         56,125
       9,131          7,994   Current portion of        10,545         12,248
                               long-term debt
       3,783          3,827   Income taxes payable       1,103          3,300
     149,947        135,906     Total current          136,140        146,833
                                 liabilities
     236,874        191,611   Long-term debt           179,121        188,302
       7,217          7,595   Deferred pension credits   6,691          7,832
       7,598          7,250   Deferred postretirement    7,490          7,092
                               welfare benefits
      43,540         32,785   Deferred income taxes     43,910         33,412
      14,583         17,529   Other liabilities         16,033         18,773
     459,759        392,676     Total liabilities      389,385        402,244
     296,572        281,078     Total stockholders'    301,061        272,044
                                 equity
    $756,331       $673,754     Total liabilities and $690,446       $674,288
                                 stockholders' equity


    QUANEX CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOW
    (In thousands)

       Three months ended                                 Six months ended
           April 30,                                          April  30,
       2000         1999                                  2000         1999
          (Unaudited)                                        (Unaudited)

                            Operating activities:
    $ 9,387       $10,192    Net income                 $13,562      $14,061
       (551)         (638)   Extraordinary gain on         (551)        (638)
                              early extinguishment of
                              debt
     13,040        11,542    Depreciation and            25,340       23,254
                              amortization
        129            14    Deferred income taxes          159         (589)
        363          (533)   Deferred pension and           636          (79)
                              postretirement benefits
     22,368        20,577                                39,146       36,009
    (22,800)       (1,184)   (Increase) decrease in     (21,989)       4,969
                              accounts and notes
                              receivable
     (4,901)        1,679    (Increase) decrease in     (11,004)       6,294
                              inventory
      5,484         2,907    Increase (decrease) in       9,634       (6,729)
                              accounts payable
      3,312         8,854    Increase (decrease) in      (6,330)         168
                              accrued expenses
        (47)       (1,407)   Other, net (including        8,060       (1,638)
                              income tax refund)
      3,416        31,426   Cash provided by operating   17,517       39,073
                             activities

                            Investment activities:
    (13,742)          ---     Acquisition of Golden     (20,148)         ---
                               Aluminum, net of cash
                               acquired
    (15,303)          ---     Acquisition of Imperial   (15,303)         ---
                               Fabricated Products,
                               net of cash acquired
    (10,312)      (15,808)    Capital expenditures,     (24,770)     (30,338)
                               net of retirements
       (835)         (514)    Cash used by other         (1,727)        (753)
                               investment activities
    (40,192)      (16,322)  Cash used by investment     (61,948)     (31,091)
                             activities

                            Financing activities:
     60,304         7,414     Bank borrowings, net       69,473       11,108
     (9,586)       (8,399)    Purchase of subordinated   (9,586)      (8,799)
                               debentures
    (10,419)          ---     Purchases of Quanex common(14,204)         ---
                               stock
     (2,225)       (2,280)    Common dividends paid      (4,521)      (4,560)
         (1)            7     Issuance of common stock,     619        1,283
                               net
        (27)           (3)    Cash used by other            (51)         (29)
                               financing activities
     38,046        (3,261)  Cash provided by financing   41,730         (997)
                             activities
        115           (25)  Effect of exchange rate         167          (41)
                             changes on cash and equivalents
      1,385        11,818   Decrease in cash             (2,534)       6,944
     21,955        21,405   Beginning of period cash     25,874       26,279
                             and equivalents
    $23,340       $33,223   End of period cash and      $23,340      $33,223
                             equivalents

     Media contact: Patrick Cassidy of Quanex Corporation, 713/877-5389.

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, Patrick Cassidy, 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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