Denali news & news releases
November 8, 1999 Denali announces first quarter results. Houston - Denali Incorporated (Nasdaq: DNLI) today announced results
for the fiscal year 2000 first quarter which ended October 2,
1999. The Company reported net income of $734,000 or $.14 per diluted
share on $48.4 million in revenue. Excluding the impact of a one-time
restructuring charge and a warrant valuation adjustment, net income
was $715,000 or $.13 per diluted share. The Company previously
announced a restructuring of its operations and a resultant non-recurring
restructuring charge estimated to be $3.0 million in the first
half of fiscal year 2000. $1.4 million of this estimated charge
was recorded in the first quarter. The warrant valuation adjustment
relates to put warrants issued with the subordinated debt placed
in conjunction with the Welna acquisition. Generally Accepted
Accounting Principles require these warrants to be adjusted to
their fair value at the end of each quarter. The current quarter
valuation utilizing the Black-Scholes model resulted in a decrease
in the warrant values of $909,000, which is reflected in the results. Net income for the first quarter fiscal 1999 was $1,285,000 or
$.27 per diluted share on $35.5 million in revenue. "Even though revenues were up sharply due to acquisitions, the
earnings decline from the same period last year was certainly
disappointing," stated Edward de Boer, president and chief executive
officer of Denali Incorporated. "The company has reacted proactively
in reducing costs to address the adverse market conditions. Consistent
with our original business and integration strategies, Denali
has sized its operations to fit its markets." The most significant market shift facing the Company is the dramatic
drop in the petroleum equipment industry. EPA compliance drove
a positive spike into the Company’s business last year. A reduction
in activity was expected; however, the Company now faces potentially
a 35% drop in year-to-year revenues for this particular market
segment. Other important markets for the Company are the chemical,
power, and pulp and paper industries, and activity in these industries
is far from robust. Denali anticipates no discernible rebound
in activity until calendar year 2000, placing further pressure
on revenue and margin. Markets served by the European-based Welna
companies are stronger than their North American counterparts
except for the Netherlands and Germany, and the Welna companies
as a whole are performing well, in accordance with the acquisition
program. Because of the adverse market conditions, the Company on October
11, 1999, announced a cost reduction plan designed to reduce operating
expense by $4.5 million. The plan should be fully implemented
by January 2000 and will result in non-recurring restructuring
charges of approximately $3.0 million during the first half of
fiscal year 2000 with $1.4 million recorded in the first quarter.
The savings and charges are the result of the closure of a domestic
manufacturing facility, a reduction in overhead costs worldwide,
and integration of Denali’s businesses to improve operating and
administrative efficiencies. "Our focus through fiscal 2000 is the continued integration of
operations and implementation of cost reduction measures," continued
Mr. de Boer. "We are going to emphasize cash flow, anticipating
reducing overall indebtedness by approximately $15 million by
the end of this fiscal year, and we are continuing to control
and reduce costs throughout the organization. A key issue for
us is how to continue to supply superior products and services
in the most efficient manner. The Company will diligently explore
opportunities around the world to achieve improved performance. Denali’s strategy is to be a leading provider of fluid handling
solutions by offering a broad range of products, components and
systems. The Company has recently taken strategic steps to further
achieve this strategy by (1) acquiring a majority of a Chilean
water/wastewater engineering and distribution company, Manantial,
and (2) signing a letter of intent to acquire a Dutch high-pressure
flow control company, HP Valves. Both of these companies add to
Denali’s overall capabilities as well as provide growth opportunities." Mr. de Boer summarized, "We have improved our cost structure and
are well positioned to benefit from strengthening markets. Denali
maintains a strong leadership position in key markets and remains
committed to superior performance and improving shareholder value." Full financial statements will be available in the Company’s 10-Q
scheduled to be filed on November 16, 1999. Denali Incorporated is a global provider of fluid handling products,
specializing in corrosion-resistant applications in process industries
such as: chemical, power, pulp and paper, petroleum equipment,
and water/wastewater. The company manufactures engineered fiberglass-composite
tanks, vessels, and piping systems, as well as steel, aboveground
storage tanks. The company also distributes a wide range of engineered
products and systems. Headquartered in Houston, Texas, Denali
Incorporated has over 20 manufacturing facilities in the United
States, the Netherlands, Germany, the United Kingdom, Poland,
France, and Chile and joint ventures in Venezuela and Thailand. For more information on Denali Incorporated, please contact Mel
Carter, vice president of business development, at 713.627.0933,
or visit the Denali Incorporated Website at www.denaliincorporated.com. NOTE: This news release contains certain forward-looking statements
as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to the company and its subsidiaries
that are based on the beliefs of the company's management as well
as assumptions made by and information currently available to
the company management. When used in this report, the words, "anticipate",
"believe", "estimate", "expect", and "intend" and words or phrases
of similar import, as they relate to the company or its subsidiaries
or company management, are intended to identify forward-looking
statements. Such statements reflect the current risks, uncertainties
and assumptions related to certain factors including, without
limitations, competitive factors, general economic conditions,
customer relations, relationships with vendors, the interest rate
environment, governmental regulation and supervision, seasonality,
distribution networks, product introductions and acceptance, technological
change, changes in industry practices, onetime events and other
factors described herein. Based upon changing conditions, should
any one or more of these risks or uncertainties materialize, or
should any underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated,
believed, estimated, expected or intended.
Denali Incorporated Financial Highlights
(Unaudited)
Three Months Ended
October 2,
1999
September 26,
1998
(In thousands, except for per share amounts)
Revenues
Cost of Revenues
Gross Profit
SG&A Expense
Restructuring Charge
1,400
Operating Income
Interest Expense, net
Other Income
Put Warrant Valuation Adjustment
Income Before Taxes
Income Taxes
Net Income Before Minority Interest
Minority Interest
Net Income After Taxes
Earnings per Share: Diluted
Average Shares Outstanding: Diluted
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