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Quanex Reports Fiscal 2000 Third-Quarter Earnings

    - Best-ever quarterly sales performance; up 23 percent year-over-year

        - Record third-quarter earnings and sales at Nichols Aluminum

HOUSTON, Aug. 30 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2000 third-quarter earnings. Including the $14.3-million loss associated with the July sale of Piper Impact-Europe, net income for the three-month period that ended July 31, 2000, was $715,000, which represents basic and diluted earnings of 5 cents per share. Excluding that one-time, non-cash loss, Quanex would have reported net income of $10.0 million with basic earnings of 74 cents per share and diluted earnings of 68 cents per share. This compares with net income of $12.3 million and basic and diluted earnings per share of 86 cents and 79 cents, respectively, for fiscal 1999's third quarter.

Sales for the third quarter were a best-ever $254.1 million, a 23 percent increase from $206.6 million, which was reported for the same period last year.

Third-Quarter Business Results

Fiscal 2000's third-quarter net sales for the MACSTEEL(R) Group, Quanex's engineered steel bar business, were up 17 percent from a year ago to $89.9 million. In fiscal 1999's third quarter, net sales were $76.8 million. Third-quarter operating income was $14.5 million, compared with operating income of $16.8 million reported for the same period last year. Operating income for this year's third quarter was affected by higher outside processing costs, which should be alleviated with the completion of Phase VI expansion projects at the end of fiscal 2001.

Nichols Aluminum, the company's aluminum sheet products business, posted best-ever third-quarter operating income of $6.6 million, up 65 percent from the third-quarter operating income of $4.0 million reported last year. Net sales were a third-quarter record at $110.8 million, up 45 percent from $76.7 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, and Imperial Products) reported operating income of $4.9 million, compared with operating income of $5.2 million in the prior year's third quarter. Net sales for the period were $32.3 million, compared with $28.7 million for the same period in the previous year.

Piper Impact, whose results have now been separated from the Engineered Products Group, reported an operating loss of $18.1 million on sales of $28.2 million for the fiscal 2000 third-quarter period. That includes the one-time loss of $14.3 million associated with the sale of Piper Impact-Europe. In the same period of the prior year, Piper Impact reported a loss of $339,000 on sales of $31.6 million.

Also during fiscal 2000's third quarter, Quanex purchased 94,200 shares of its common stock as part of the company's share buyback program that was announced in December 1999.

Outlook

"While I'm pleased to see higher sales levels throughout our company -- annual sales for this fiscal year will top $900 million for the first time in the company's history -- I'm disappointed with the earnings we achieved during the period. I expect better results," said Vernon E. Oechsle, chairman and chief executive officer of Quanex. "Our disposition of Piper Impact's European facility will help improve our near-term profitability, as we focus on our core North American manufacturing operations.

"The MACSTEEL Group reported lower earnings compared to the same period a year ago due to higher costs associated with outside processing and raw material prices that are up from the very low levels of last year," Oechsle said. "Demand among OEMs in our primary transportation markets remains strong. Volumes are at record levels, especially for MACPLUS(R), our premium, cold-finished engineered steel bar product.

"Nichols Aluminum had another outstanding quarter, setting records in volumes, sales, and operating income for the period. Demand remains healthy, especially for Nichols' highest value-added product, wide-width painted aluminum sheet. Nichols Aluminum-Golden, the Fort Lupton, Colorado-based casting and finishing mill acquired in January, continues its smooth transition into the Quanex and Nichols organization. New customer trials are underway to more fully optimize the facility's capabilities.

"In our Engineered Products Group, higher operating costs and a perceptible slowdown in the housing industry contributed to lower earnings compared with results from a year ago. The addition of Imperial Products, the door component company we acquired in April, is already paying some dividends. In cooperation with the group's other businesses, new product introductions and developments are continuing at a significant pace," Oechsle said.

"Piper Impact has made progress toward solving major problems with production and delivery systems, improving the relationship with its major customer, and reducing costs," Oechsle said. "However, much work remains. Particularly, Piper Impact must develop and produce new products and diversify its customer base to return to profitability."

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 September 29, 2000, to shareholders of record on September 15, 2000. This is the 49th 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: $914.2 million; EBITDA: $116.2 million; Operating income: $52.8 million; Net income: $27.2 million; Basic earnings per share: $1.94; Quarterly common dividend rate (per share): $.16; Book value per common share: $21.82; Long-term debt to capitalization: 41.9 %; Return on common equity: 9.3%; Actual number of common shares outstanding: 13,464,051; Common stock price range (52-week hi - low): $27-3/8 - $14-3/8.

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

       Three months ended                                  Nine months ended
            July 31,                                            July 31,
        2000       1999                                     2000       1999
          (Unaudited)                                          (Unaudited)

     $ 254,144  $ 206,619           Net sales            $ 696,709  $ 592,601
       208,874    161,107         Cost of sales            575,172    469,989
                              Selling, general and
        14,113     12,032    administrative expense         40,251     39,521
        12,310     11,571 Depreciation and amortization     37,381     34,548
                                 Loss on sale of
        14,280        ---      Piper Impact Europe          14,280        ---
         4,567     21,909        Operating income           29,625     48,543
        (4,149)    (3,595)       Interest expense          (11,499)   (10,881)
           499        383      Capitalized interest          1,690      1,204
           289        274           Other, net               1,598      1,099
                            Income before income taxes
         1,206     18,971     and extraordinary gain        21,414     39,965
          (491)    (6,640)      Income tax expense          (7,495)   (13,988)
           715     12,331 Income before extraordinary gain  13,919     25,977
                           Extraordinary gain on early
                             extinguishment of debt,
           ---        ---      net of income taxes             358        415
     $     715  $  12,331           Net income           $  14,277 $   26,392
                     Weighted average common shares outstanding:
        13,534     14,258              Basic                13,827     14,243
        13,682     16,737             Diluted               13,973     16,799
                             Earnings per common share:
                               Basic:
                                  Income before
     $    0.05  $    0.86       extraordinary gain       $    1.00  $    1.82
           ---        ---       Extraordinary gain            0.03       0.03
     $    0.05  $    0.86    Total basic net earnings    $    1.03  $    1.85
                               Diluted:
                                   Income before
     $    0.05  $    0.79        extraordinary gain      $    1.00  $    1.71
           ---        ---        Extraordinary gain           0.02       0.03
     $    0.05  $    0.79    Total diluted net earnings  $    1.02  $    1.74
                              Common stock dividends
     $    0.16  $    0.16            per share           $    0.48  $    0.48

    QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
    (In thousands)

       Three months ended                                  Nine months ended
            July 31,                                            July 31,
        2000       1999                                     2000       1999
          (Unaudited)                                         (Unaudited)
                           Engineered Steel Bars:
     $  89,938  $  76,789         Net sales              $ 257,885  $ 216,745
     $  14,481  $  16,829         Operating income       $  42,218  $  42,446
                           Aluminum Mill Sheet Products:
     $ 110,843  $  76,672         Net sales              $ 302,411  $ 224,959
     $   6,591  $   4,002         Operating income       $  15,376  $   9,201
                           Engineered Products:
     $  32,263  $  28,669         Net sales              $  73,407  $  67,372
     $   4,863  $   5,237         Operating income       $   9,184  $   8,682
                           Piper Impact:
     $  28,173  $  31,594         Net sales              $  81,361  $ 103,478
     $ (18,136) $    (339)        Operating loss         $ (25,408) $    (947)
                           Corporate and Other:
     $  (7,073) $  (7,105)        Net sales              $ (18,355) $ (19,953)
     $  (3,232) $  (3,820)        Operating loss         $ (11,745) $ (10,839)
                           Total:
     $ 254,144  $ 206,619         Net sales              $ 696,709  $ 592,601
     $   4,567  $  21,909         Operating income       $  29,625  $  48,543

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 is included in Piper Impact's operating loss for three and nine months ended July 31, 2000.

    QUANEX CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (In thousands)

            July 31,                                           October 31,
        2000       1999                                     1999       1998
          (Unaudited)       Assets                             (Audited)

     $  32,552  $  41,863   Cash and equivalents         $  25,874  $  26,279
                            Accounts and notes
        99,019     78,918    receivable, net                87,204     85,166
        96,650     81,824   Inventories                     78,463     85,397
        12,877     14,365   Other current assets            20,846     12,970
       241,098    216,970     Total current assets         212,387    209,812
                            Property, plant and
       394,705    400,506    equipment, net                406,841    395,054
        47,795     49,644   Goodwill, net                   48,990     52,281
        22,895     20,362   Other assets                    22,228     17,141
     $ 706,493  $ 687,482     Total assets               $ 690,446  $ 674,288
                            Liabilities and stockholders' equity
     $  79,593  $  70,757   Accounts payable             $  70,187  $  75,160
        50,842     54,197   Accrued expenses                54,305     56,125
                            Current portion of
           259      8,628    long-term debt                 10,545     12,248
         3,025      1,648   Income taxes payable             1,103      3,300
       133,719    135,230     Total current liabilities    136,140    146,833
       211,505    194,428   Long-term debt                 179,121    188,302
         6,631      7,113   Deferred pension credits         6,691      7,832
                            Deferred postretirement
         7,634      7,342    welfare benefits                7,490      7,092
        38,862     35,295   Deferred income taxes           43,910     33,412
        14,423     16,528   Other liabilities               16,033     18,773
       412,774    395,936     Total liabilities            389,385    402,244
       293,719    291,546     Total stockholders' equity   301,061    272,044
                            Total liabilities and
     $ 706,493  $ 687,482    stockholders' equity        $ 690,446  $ 674,288

    QUANEX CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOW
    (In thousands)

       Three months ended                                  Nine months ended
            July 31,                                            July 31,
        2000       1999                                     2000       1999
          (Unaudited)                                         (Unaudited)
                           Operating activities:
     $     715  $  12,331    Net income                  $  14,277  $  26,392
                             Extraordinary gain on
                              early extinguishment of
           ---        ---     debt (net of taxes)             (358)      (638)
                             Loss on sale of Piper
                              Impact Europe (net of
         9,282        ---     taxes of $4,998)               9,282        ---
        12,437     11,703    Depreciation and amortization  37,777     34,957
        (3,036)     2,504    Deferred income taxes          (2,877)     1,915
                             Deferred pension and
          (478)      (390)    postretirement benefits          158       (469)
        18,920     26,148                                   58,259     62,157
                             (Increase) decrease in
        13,443        722     accounts and notes receivable (8,546)     5,691
                             (Increase) decrease
         3,126     (3,104)    in inventory                  (7,878)     3,190
                             Increase (decrease) in
        (1,968)     2,615     accounts payable               7,666     (4,114)
                             Increase (decrease) in
           669     (1,829)    accrued expenses              (5,661)    (1,661)
                             Other, net (including
         2,663     (3,302)    income tax refund)            10,530     (4,940)
                           Cash provided by
        36,853     21,250   operating activities            54,370     60,323
                           Investment activities:
                             Acquisition of Golden Aluminum
           ---        ---     , net of cash acquired       (20,148)       ---
                             Acquisition of Imperial
                              Fabricated Products, net
           ---        ---     of cash acquired             (15,303)       ---
                             Capital expenditures, net
        (8,598)   (13,547)    of retirements               (33,368)   (43,885)
                             Cash provided (used) by
         1,158        (89)    other investment activities     (569)      (842)
                             Cash used by investment
        (7,440)   (13,636)    activities                   (69,388)   (44,727)
                           Financing activities:
                             Bank borrowings
       (16,280)     3,088     (repayments), net             53,193     14,196
                             Purchase of subordinated
           ---        ---     debentures                    (9,586)    (8,799)
                             Purchases of Quanex
        (1,675)       ---     common stock                 (15,879)       ---
        (2,190)    (2,281)   Common dividends paid          (6,711)    (6,841)
           345        236    Issuance of common stock, net     964      1,519
                             Cash used by other
          (301)       (30)    financing activities            (352)       (59)
                           Cash provided (used) by
       (20,101)     1,013   financing activities            21,629         16
                           Effect of exchange rate changes
          (100)        13   on cash and equivalents             67        (28)
         9,212      8,640  Increase in cash                  6,678     15,584
                           Beginning of period cash
        23,340     33,223   and equivalents                 25,874     26,279
                           End of period cash
     $  32,552  $  41,863   and equivalents              $  32,552  $  41,863

    Contact:  media, 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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