Denali Announces First Quarter Results.

HOUSTON--(BUSINESS WIRE)--Nov. 8, 1999--

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 http://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,        September 26,
                                         1999                1998
                                         ----                ----
                                         (In thousands, except for
                                             per share amounts)

Revenues                                $48,366             $35,535
Cost of Revenues                         36,000              26,769
                                        --------            --------
Gross Profit                             12,366               8,766

SG&A Expense                              9,204               6,189
Restructuring Charge                      1,400                   -
                                        --------            --------
Operating Income                          1,762               2,577

Interest Expense, net                     1,989                 642
Other Income                                (64)               (138)
Put Warrant Valuation Adjustment           (909)                  -
                                        --------            --------
Income Before Taxes                         746               2,073

Income Taxes                                (59)                788
                                        --------            --------
Net Income Before Minority Interest         805               1,285
Minority Interest                            71                   -
                                        --------            --------
Net Income After Taxes                      734               1,285
                                        ========            ========
Earnings per Share: Diluted               $0.14               $0.27

Average Shares Outstanding: Diluted       5,432               4,837