Denali Reports Record Operating Earnings and Sales.

HOUSTON--(BUSINESS WIRE)--August 3, 1998--Denali Incorporated (NASDAQ:DNLI) today announced record net income and revenues for the fiscal fourth quarter and its fiscal year 1998 ending June 27, 1998.

For the fiscal fourth quarter, the company reported net income of $1.4 million, or $.28 per diluted share on $31.4 million in revenue. Relative to the same period last year, net income increased 257 percent, earnings per diluted share increased 75 percent, and revenues increased 39 percent. Net income for the fourth quarter fiscal year 1997 was $381,000, or $.16 per diluted share on $22.5 million in revenue.

For fiscal year 1998, net income was $2.4 million, or $.62 per diluted share on sales of $99.9 million, excluding the impact of a non-recurring compensation expense of $2.3 million, or $.60 per diluted share associated with the exchange of certain employee stock options, and an extraordinary gain from the early retirement of debt of $219,000, or $.06 per diluted share. Including the non-recurring compensation expense and extraordinary gain, net income was $329,000, or $.08 per diluted share. The fiscal year 1998 results, excluding the non-recurring expense and the extraordinary gain, showed an increase in net income of over 600 percent as compared to fiscal 1997 net income of $317,000, or $.09 per diluted share, and an increase in sales of over 40 percent as compared to fiscal 1997 sales of $71.1 million.

"Executing the business plan to achieve our vision of being the leading provider of solutions for critical fluids handling has translated into exceptional financial performance," stated Steve Harcrow, chairman and CEO. "Denali's revenues and earnings showed tremendous growth, coming from both internal operations and acquisitions. I am pleased with the continued improvements of our ongoing operations. Gross margins made impressive gains over the fiscal year increasing from 19.5 percent to 22.6 percent of revenues, and operating income grew from 2.8 percent to 4.8 percent of revenue, excluding the non-recurring compensation expense."

Mr. Harcrow also noted, "We believe the fragmented nature of the critical fluids handling industry, which is comprised of many companies with limited product ranges or serving limited geographic areas, will provide continued acquisition opportunities."

"It has been a great year for Denali Incorporated. We grew revenues by more 40 percent with improving margins; we completed three major acquisitions (SEFCO, LaValley Construction, and Fibercast); and the company entered the public equities market. It is a strong beginning, and I believe the opportunity exists to achieve similar revenue growth and operating margin improvement in fiscal 1999 as Denali becomes the leading provider of solutions for critical fluids handling," Mr. Harcrow summarized.

Denali Incorporated is a provider of products and services for handling critical fluids, which are liquids, liquid mixtures, and slurries that are economically valuable or potentially hazardous to the environment. The company is a manufacturer of fiberglass-composite, underground storage tanks; steel, aboveground storage tanks; and engineered, fiberglass-reinforced, plastic-composite products for corrosion-resistant applications. Denali Incorporated is headquartered in Houston, Texas, and markets its products nationally through its subsidiaries Containment Solutions, Inc. (Houston), Ershigs, Inc. (Bellingham, Wash.), Fibercast (Tulsa, Okla.), and SEFCO, Inc. (Tulsa, Okla.).

For more information on Denali Incorporated, please contact Kevin Andrews (chief financial officer) at 713/627-0933 or visit the Denali Incorporated Website at 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's management. When used in this news release, 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 limitation, 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 and in the company's filings with the Securities and Exchange Commission. 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.

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               Denali Incorporated Financial Highlights

                         Three Months Ended           Year Ended
                       June 27,      June 28,   June 27,      June 28,
                         1998          1997       1998          1997
                         ----          ----       ----          ----
                         (In Thousands, except for per share amounts)

Revenues              $ 31,417      $ 22,522   $ 99,897      $ 71,101

Gross Margin             7,778         4,783     22,624        13,833
 % of Revenue            24.8%         21.2%      22.6%         19.5%

Operating Income (A)     2,153           867      2,469         1,959
 % of Revenue             6.9%          3.8%       2.5%          2.8%

Extraordinary Item (B)       -             -        219             -

Net Income (A)           1,360           381        329           317
 % of Revenue             4.3%          1.7%       0.3%          0.4%

Earnings per Share: (C)
 Basic                  $ 0.28        $ 0.16     $ 0.08        $ 0.09
 Diluted                $ 0.28        $ 0.16     $ 0.08        $ 0.09

Average Shares Outstanding:
 Basic                   4,823         2,185      3,736         2,185
 Diluted                 4,870         2,235      3,875         2,198


(A) Year ended June 27, 1998, operating and net income values include
    the impact of a non-recurring compensation expense of
    approximately $2.3 million associated with the exchange of certain
    employee stock options.

(B) Extraordinary gain associated with early retirement of debt.

(C) Earnings per diluted share for the year ended June 27, 1998 was
    $.62 excluding the above-mentioned non-recurring compensation
    expense and extraordinary gain.

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    CONTACT: Denali Incorporated, Houston
              Kevin Andrews, 713/627-0933
              denaliincorporated.com