PalEx announces second quarter earnings.

HOUSTON--(BUSINESS WIRE)--July 7, 1997-- PalEx Inc. (the "company" or "PalEx"), headquartered in Houston (NASDAQ:PALX), announced the following results for the quarter ended June 1, 1997:

                                          PRO FORMA

                          Three Months Ended     Three Months Ended
                             June 1, 1997            May 31, 1996

                            (in thousands, except per share amount)


    Revenues                   $31,983                  $25,860

    Gross Profit                $5,512                   $5,355

    Net Income                  $1,874                   $1,768

    Earning Per Share              .18                      .17

PalEx completed its initial public offering on March 25, 1997. On that date, it acquired three pallet businesses having 1996 combined revenues of approximately $102 million, making PalEx one of the largest producers of new pallets and one of the largest pallet recyclers in the United States.

The discussion below compares the pro forma combined results of the three acquired businesses for the second quarter of 1996 to the pro forma results for the 1997 quarter, unless otherwise stated.

Net income and net income per share in the 1997 quarter increased to $1.9 million and 18 cents, from $1.8 million and 17 cents in the 1996 quarter.

Revenues for the second quarter of fiscal 1997 increased 23.7 percent from $25.9 million to $32.0 million. The increase was partially attributable to an increase in the average sales price of new pallets, an increase which reflects higher raw material costs which were partially passed on to customers in the form of higher sales prices. Total unit sales of new, repaired and used pallets also increased, from 3.4 million in the 1996 quarter to 3.7 million in the 1997 quarter. Unit sales of new pallets were relatively stable at approximately 2 million, despite reduced demand for pallets from the produce industry in south Florida during the 1997 quarter as a result of freezing weather conditions occurring in late January 1997 which impacted crop yields during the first half of 1997. Unit sales of repaired and used pallets increased from approximately 1.4 million to 1.7 million. These increases were partially offset by the anticipated decrease in unit sales of agricultural harvesting boxes and specialty bins from 16,600 to 5,700.

Gross profit increased from approximately $5.4 million to $5.5 million as a result of increased volumes. Gross profit as a percentage of revenues declined from 20.7 percent to 17.2 percent. This expected decline was the result of sharply higher lumber costs in the 1997 quarter which resulted from a number of factors, including wet weather which adversely affected the harvesting of timber in the winter months as well as heightened competition from other industries that use similar grades of lumber.

Selling, general and administrative costs increased from approximately $2.1 million in 1996 to $2.2 million in 1997. Selling, general and administrative costs decreased as a percentage of revenues from 8.3 percent to 6.9 percent of revenues, because these expenses are relatively fixed in nature.

Vance Maultsby, the company's chief executive officer, stated: "We are pleased with our second quarter results. We achieved increases in earnings and earnings per share despite a difficult current lumber market and the January freeze in Florida and its effect on the produce market. We continue to make substantial progress integrating our founding companies and pursuing our growth plans."

                                      PalEx Inc.
                        Pro Forma Combined Statements of Income


                For The Three Months Ended    For The Six Months Ending
                   June 1, 1997 and                June 1, 1997 and
                     May 31, 1996                    May 31, 1996
                      (unaudited)                     (unaudited)
           ($ in thousands, except for EPS) ($ in thousands, except for EPS)


               6/1/97    %    5/31/96    %     6/1/97    %    5/31/96   %


Revenue       $31,983   ---   $25,860   ---    $60,100  ---   $50,401  ---
Cost of
 Goods Sold    26,471  82.8    20,505   79.3    50,401  83.9   40,980  81.3

   Gross
   Profit       5,512  17.2     5,355   20.7     9,699  16.1    9,421  18.7


S,G & A
 Expenses       2,194   6.9     2,145    8.3     3,892   6.5    3,534   7.0

Supplemental
 Profit Sharing
 Contribution    ---    0.0      ---     0.0     1,069   1.8     ---    0.0

Goodwill
 Amortization     139   0.4      139     0.5       278   0.4     278    0.6

   Operating
   Income       3,179   9.9    3,071    11.9     4,460   7.4   5,609   11.1

Interest
 Expense           93   0.3       81     0.3       177   0.3     125    0.2
Other Income
 (expense), net    16   0.1      (72)   (0.3)        4   0.0     (42)  (0.1)

Income before
 Income Taxes   3,102   9.7    2,918    11.3     4,287   7.1   5,442   10.8
Provision
  for Income
  Taxes         1,228   3.8    1,150     4.5     1,695   2.8   2,152    4.3

Net Income     $1,874   5.9   $1,768     6.8    $2,592   4.3  $3,290    6.5

Weighted Avg.
 Shares        10,483         10,280            10,382        10,280
Earnings
 Per Share       $.18           $.17              $.25          $.32
Earnings Per
 Share before
 Supplemental
 Profit Sharing
 Contribution     ---           ---               $.31           ---

Earnings Per
 Share As Presented
 In Financial
 Statements,
 without Pro Forma
 Adjustment      $.16            N/A              $.34           N/A

CONTACT: PalEx Inc., Houston

Vance Maultsby, 713/626-9711

CONFERENCE CALL SCHEDULED:

July 8, 1997 at 9 a.m. EST 

Participant Dial-In Number: 800/553-2178 (USA/Canada)

or 303/267-1000 (International)