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Quanex Reports Record Earnings for Fiscal 2000 First Quarter; - Basic and Diluted EPS of 29 Cents, Up From 27 Cents Compared With Same Period Last Year; - Nichols Aluminum, MACSTEEL(R) Post Record First-Quarter Operating Income, Higher Sales

HOUSTON, Feb. 24 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2000 first-quarter earnings, including record sales and earnings for the three-month period ending January 31. Net income for the three-month period was $4.2 million, representing basic and diluted earnings per share of 29 cents. This compares with net income of $3.9 million and basic and diluted earnings per share of 27 cents for the same period last year. Sales for the first quarter were $199.3 million, up 9 percent compared with sales of $183.1 million for fiscal 1999's first quarter.

The company's engineered steel bar and aluminum mill sheet products businesses posted record first-quarter operating income and significantly higher sales compared with the same period last year. These results reflect a more value-added product mix, operational improvements, and seasonally strong markets with customers in the transportation and construction industries.

First Quarter Business Results

The MACSTEEL Group, Quanex's engineered steel bar business, earned best- ever first-quarter operating income of $11.8 million, up 5 percent compared with $11.3 million reported in the prior year. Fiscal 2000's first-quarter net sales increased 22 percent to $79.7 million. For the same period last year net sales were $65.1 million.

Nichols Aluminum, the company's aluminum sheet products business, posted first-quarter operating income of $2.2 million, matching the record of $2.2 million reported for the prior year. Net sales were a first-quarter record at $79.7 million, up 12 percent from $71.4 million reported for the same period last year.

The Engineered Products Group (AMSCO, Homeshield Fabricated Products, Piper Impact, and Piper Impact-Europe) reported an operating loss of $1.6 million, compared with an operating loss of $222,000 in the prior year's first quarter. Net sales for the period were $45.2 million, down from $52.7 million in the previous year.

Outlook

"I am pleased to report that Quanex posted another strong quarter with higher sales and earnings compared with the same period a year ago," said Vernon E. Oechsle, chairman of the board and chief executive officer of Quanex. "In what has historically been the slowest period of the year due to the holidays, model year changeovers, and other factors, we achieved year- over-year improvement in sales, net income, and earnings per share. We are running our businesses better, operating more efficiently and manufacturing more value-added products.

"The MACSTEEL Group reported record period results for the third consecutive quarter," Oechsle said. "This was achieved despite scheduled shutdowns due to the holidays and Phase V expansion projects at our engineered bar mills. While demand for MACSTEEL products is high and the backlog for orders looks strong, scrap markets are a little tighter, contributing to reduced spreads from a year ago." Sales of MACPLUS(R), a premium, value-added cold-finished steel bar, are at record levels. Higher volumes are being realized from last year's completion of Phase IV expansion projects, which boosted cold-finishing capacity at both of MACSTEEL's engineered bar mills.

"Nichols Aluminum is building on its record-setting performance from last year with best-ever first-quarter results for sales and operating income for the three-month period just completed," Oechsle said. "With the acquisition from Alcoa (NYSE: AA) of a high-quality, value-added aluminum sheet casting and rolling mill based in Fort Lupton, Colorado, this division is well- positioned for further growth and another record year." The newly acquired mill, which has been renamed Nichols Aluminum-Golden, was purchased in January 2000. It produces high-grade aluminum alloys that bring our Nichols division into more value-added applications. The plant features full finishing capabilities, including a paint line, for the production of aluminum sheet used for beverage can end-tabs, lids, and other food and packaging markets, as well as for other high quality, engineered consumer durable products.

"Lower revenues at Piper Impact due to declining sales of aluminum automotive air bag products were the major contributor to the first-quarter loss posted by the Engineered Products Group. Sales for the Fabricated Products unit (AMSCO and Homeshield) during the fiscal 2000 first-quarter period also were off from the seasonally high levels of a year ago. We are aggressively pursuing new business, and I'm encouraged with the amount of sales growth activity underway. New applications for our specialized roll- forming and impact-extrusion technologies are being developed. Several prototypes have been delivered and trials are taking place with both new and existing customers," he said.

Other

In December 1999, Quanex announced a program to repurchase the company's common stock. At the end of fiscal 2000's first quarter, the company had repurchased approximately 157,000 shares at a cost of nearly $3.8 million.

At the annual meeting of Quanex shareholders held February 23, 2000, Donald G. Barger and Vernon E. Oechsle were elected to the board of directors for terms expiring in 2003. Also, the company's 1996 Employee Stock Option and Restricted Stock Plan was amended to increase the number of authorized shares that can be issued under the plan.

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 March 31, 2000, to shareholders of record on March 17, 2000.

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

Sales: $826.3 million; EBITDA: $118.1 million; Operating income: $71.5 million; Net income: $39.6 million; Basic earnings per share: $2.78; Quarterly common dividend rate (per share): $.16; Book value per common share: $21.33; Long-term debt to capitalization: 38.6%; Return on common equity: 13.8%; Actual number of common shares outstanding: 14,047,890; Common stock price range (52-week hi - low): $29 - $15 3/8.

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

                                                Three months ended
                                                   January  31,
                                               2000         1999
                                                  (Unaudited)

    Net sales                                $199,294      $183,103
    Cost of sales                             165,643       148,735
    Selling, general and
     administrative expense                    13,282        14,302
    Depreciation and amortization              12,162        11,572

    Operating income                            8,207         8,494
    Interest expense                           (3,330)       (3,681)
    Capitalized interest                          544           346
    Other, net                                  1,002           794

    Income before income taxes                  6,423         5,953
    Income tax expense                         (2,248)       (2,084)

    Net income                                 $4,175        $3,869

    Weighted average common shares outstanding:
             Basic                             14,172        14,224
             Diluted                           14,360        14,234

    Earnings per common share:
        Basic:
                Total basic net earnings        $0.29         $0.27
        Diluted:
                Total diluted net earnings      $0.29         $0.27

    Common stock dividends per share            $0.16         $0.16

    QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
    (In thousands)

                                            Three months ended
                                                January 31,
                                            2000         1999
                                               (Unaudited)
    Engineered Steel Bars:
            Net sales                     $79,742       $65,097
            Operating income              $11,835       $11,303

    Aluminum Mill Sheet Products:
            Net sales                     $79,720       $71,420
            Operating income              $ 2,203       $ 2,165

    Engineered Products:
            Net sales                     $45,217       $52,664
            Operating income              $(1,626)      $  (222)

    Corporate and Other:
            Net sales                     $(5,385)      $(6,078)
            Operating income              $(4,205)      $(4,752)

    Total:
            Net sales                    $199,294      $183,103
            Operating income             $  8,207      $  8,494

    QUANEX CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (In thousands)

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

     $21,955   $21,405   Cash and equivalents               $25,874   $26,279
      91,816    78,804   Accounts and notes receivable, net  87,204    85,166
      97,594    80,615   Inventories                         78,463    85,397
      13,505    13,342   Other current assets                20,846    12,970
     224,870   194,166     Total current assets             212,387   209,812

     416,543   397,638   Property, plant and equipment, net 406,841   395,054
      47,715    51,302   Goodwill, net                       48,990    52,281
      23,812    17,166   Other assets                        22,228    17,141
    $712,940  $660,272      Total assets                   $690,446  $674,288

                       Liabilities and stockholders' equity
    $ 79,004  $ 65,373   Accounts payable                   $70,187   $75,160
      13,462       ---   Accrued payable - acquisition          ---       ---
      47,615    47,358   Accrued expenses                    54,305    56,125
       9,226    13,583   Current portion of long-term debt   10,545    12,248
       3,176     3,473   Income taxes payable                 1,103     3,300
     152,483   129,787      Total current liabilities       136,140   146,833

     188,121   189,425   Long-term debt                     179,121   188,302
       7,004     8,181   Deferred pension credits             6,691     7,832
       7,452     7,197   Deferred postretirement welfare      7,490     7,092
                          benefits
      43,531    32,797   Deferred income taxes               43,910    33,412
      14,711    18,617   Other liabilities                   16,033    18,773
     413,302   386,004      Total liabilities               389,385   402,244

     299,638   274,268   Total stockholders' equity         301,061   272,044
    $712,940  $660,272   Total liabilities and             $690,446  $674,288
                          stockholders' equity

      QUANEX CORPORATION
      CONSOLIDATED STATEMENTS OF CASH FLOW
      (In thousands)

                                                          Three months ended
                                                              January 31,
                                                           2000         1999
                                                              (Unaudited)
    Operating activities:
      Net income                                         $ 4,175      $ 3,869
      Depreciation and amortization                       12,300       11,712
      Deferred income taxes                                   30         (603)
      Deferred pension and postretirement benefits           273          454
                                                          16,778       15,432

      Decrease in accounts and notes receivable              811        6,153
      (Increase) decrease in inventory                    (6,103)       4,615
      Increase (decrease) in accounts payable              4,150       (9,636)
      Decrease in accrued expenses                        (9,642)      (8,686)
      Other, net (including income tax refund)             8,107         (231)

    Cash provided by continuing operations                14,101        7,647

    Investment activities:
      Acquisition of Golden Aluminum,
       net of cash acquired                               (6,406)         ---
      Capital expenditures, net of retirements           (14,458)     (14,530)
      Cash used by other investment activities              (892)        (239)

    Cash used by investment activities                   (21,756)     (14,769)

    Financing activities:
      Bank borrowings, net                                 9,169        3,694
      Purchase of subordinated debentures                    ---         (400)
      Purchases of Quanex common stock                    (3,785)         ---
      Common dividends paid                               (2,296)      (2,280)
      Issuance of common stock, net                          620        1,276
       Cash used by other financing activities               (24)         (26)

    Cash provided by financing activities                  3,684        2,264

    Effect of exchange rate changes on cash and equivalents   52          (16)

    Decrease in cash                                      (3,919)      (4,874)

    Beginning of period cash and equivalents              25,874       26,279

    End of period cash and equivalents                   $21,955      $21,405

    Contact:  Patrick Cassidy of Quanex Corporation, 713-877-5389.

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 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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