Denali Reports Second Quarter Results.

Business Editors

HOUSTON--(BUSINESS WIRE)--Feb. 7, 2000

Denali Incorporated (Nasdaq:DNLI) today announced results for the three months and six months ended Jan. 1, 2000.

Revenues for the fiscal second quarter of 2000 increased 29 percent to $49,555,000, up from $38,353,000 during the second quarter of fiscal 1999. Net loss for the second quarter was $960,000, or $0.17 loss per share, compared to net income of $916,000, or $0.19 earnings per share, for the second quarter of 1999. Excluding the impact of the restructuring charge and warrant valuation adjustments in fiscal year 2000, the net loss was $556,000, or $0.10 loss per share, versus $0.28 earnings per share in fiscal year 1999, excluding the non-recurring compensation charge.

Revenues for the first six months of fiscal 2000 increased 32 percent to $97,921,000, compared with revenues of $73,888,000 in the first six months of fiscal 1999. Net loss for the first six months was $226,000, or $0.04 loss per share, compared to net income of $2,201,000, or $0.45 earnings per share, for the first six months of 1999. Excluding the impact of the restructuring charge and warrant valuation adjustments, net income was $158,000, or $0.03 earnings per share for the first six months of fiscal 2000.

The Company recorded a non-recurring restructuring charge of $2,491,000 in the first half of fiscal year 2000, of which $1,400,000 was recorded in the first quarter and $1,091,000 was recorded in the second quarter.

&uot;As we stated last month, we are disappointed by the poor results of two large projects, softness in the European market and the delay of expected second quarter revenue into the third and fourth quarters of fiscal 2000,&uot; stated Richard W. Volk, Chairman and Chief Executive Officer of Denali Incorporated. &uot;We see market conditions improving through increased bidding activity in Europe as well as in engineered products in the U.S. Looking forward, we will continue to focus on reducing costs and improving our balance sheet as we work to enhance shareholder value.&uot;

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 the Company, please visit its Web site at http://www.denaliincorporated.com.

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, &uot;anticipate,&uot; &uot;believe,&uot; &uot;estimate,&uot; &uot;expect,&uot; and &uot;intend&uot; 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    Six Months Ended
                           ---------------------- --------------------
                            Jan. 1,     Dec. 26,   Jan. 1,    Dec. 26,
                             2000         1998      2000        1998
                           --------    --------   --------    --------
                            (In thousands, except per share amounts)

Revenues                    $49,555     $38,353    $97,921     $73,888
Cost of Revenues             37,541      28,213     73,541      54,982
                           --------    --------   --------    --------
Gross Profit                 12,014      10,140     24,380      18,906
G& Expense                  10,713       7,317     19,920      13,506
Restructuring Charge          1,091        --        2,491        --
Non-recurring
 Compensation Expense          --           682       --           682
                           --------    --------   --------    --------
Operating Income                210       2,141      1,969       4,718

Interest Expense, Net         2,063         631      4,050       1,273
Other Expense (Income)          (67)         31       (131)       (107)
Put Warrant
 Valuation Adjustment          (289)       --       (1,198)       --
                           --------    --------   --------    --------
Income (Loss) Before
 Income Taxes and
 Minority Interest           (1,497)      1,479       (752)      3,552

Income Tax (Benefit)
 Expense                       (658)        563       (718)      1,351
                           --------    --------   --------    --------
Net Income (Loss)
 Before Minority
 Interest                      (839)        916        (34)      2,201
Minority Interest               121        --          192        --
                           --------    --------   --------    --------
Net Income (Loss)
 After Taxes                  $(960)       $916      $(226)     $2,201
                           ========    ========   ========    ========
Earnings (Loss)
 Per Share:
 Basic and Diluted           $(0.17)      $0.19     $(0.04)      $0.45
                           ========    ========   ========    ========
Average Shares
 Outstanding:
 Basic and Diluted            5,520       4,853      5,476       4,845
                           ========    ========   ========    ========