Denali Reports Significant Increase in Earnings for Second Quarter.

HOUSTON--(BUSINESS WIRE)--Jan. 25, 1999--Denali Incorporated (Nasdaq:DNLI) today reported net income for the second quarter ended December 26, 1998, was $916,000, or $.19 per diluted share on revenues of $38.4 million. Denali Incorporated's net income was $1,339,000 or $.28 per diluted share, excluding a non-recurring compensation charge of $682,000 ($423,000 net of tax) associated with the late Stephen Harcrow's salary continuation agreement.

As compared to the same quarter the prior year, revenues increased 54% and earnings, net of the non-recurring compensation charge, increased 139% to $1,339,000 from $561,000.

For the six months ended December 26, 1998, as compared to the six months ended, December 27, 1997, revenues increased over 57% to $73.9 million from $46.9 million. For the same periods, net income increased 189% to $2,624,000 from $908,000, excluding the impact of non-recurring compensation charges in both years.

"Denali's revenues and earnings continue to show tremendous growth on a year-to-year basis, resulting from both acquisitions and internal growth," stated Edward de Boer, president and chief executive officer. "Denali's fiberglass-composite underground and steel aboveground storage tanks businesses are particularly strong. These products, marketed to the downstream petroleum equipment industry, are benefiting from both EPA regulations and our customers' expansion plans."

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-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.), SEFCO Inc. (Tulsa, Okla.) and Plasti-Fab Inc. (Tualatin, Ore.).

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.

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                          Denali Incorporated
                 Consolidated Statements of Operations
                              (Unaudited)

                          Three months ended    Six months ended
                         Dec. 26,   Dec. 27,   Dec. 26,   Dec. 27,
                           1998      1997        1998      1997
                                     (In thousands, except per share amounts)
                         --------   --------   --------   --------
                          (In thousands, except per share amounts)

Net sales                $38,353    $24,914    $73,888    $46,893
Cost of sales             28,213     19,183     54,982     36,332
                         -------    -------    -------    -------
Gross profit              10,140      5,731     18,906     10,561
Selling, general and
 administrative
 expenses                  7,317      4,421     13,506      8,246
Non-recurring
 compensation
 expense                     682          -        682      2,312
                         -------    -------    -------    -------
Operating income           2,141      1,310      4,718          3
Interest expense             631        486      1,285      1,093
Interest income                -        (27)       (12)       (47)
Other expense
 (income), net                31        (84)      (107)      (226)
                         -------    -------    -------    -------
Income (loss) before
 income taxes              1,479        935      3,552       (817)
Income tax expense           563        355      1,351        568
                         -------    -------    -------    -------
Net income (loss)
 before extraordinary
 item                        916        580      2,201     (1,385)
Extraordinary loss on
 early extinguishment
 of debt, net of
 income tax benefit
 of $12                        -         19          -         19
                         -------    -------    -------    -------
Net income (loss)            916        561      2,201    $(1,404)
Dividends on Series A
 Preferred Stock               -          -          -        (30)
                         -------    -------    -------    -------
Net income (loss)
 attributable to
 common stock               $916       $561     $2,201    $(1,434)
                         =======    =======    =======    =======

Net income (loss) per
 common share
 assuming dilution:
Income (loss) before
 extraordinary item        $0.19      $0.17      $0.45     $(0.52)
Extraordinary item             -      (0.01)         -      (0.01)
                         -------    -------    -------    -------
Net income (loss) per
 common share
 assuming dilution         $0.19      $0.16      $0.45     $(0.53)
                         =======    =======    =======    =======

Net income (loss) per
 common share assuming
 dilution and excluding
 non-recurring
 compensation expense
 associated with the
 exchange of certain
 employee stock options
 in fiscal year 1998
 and the salary
 continuation agreement
 in fiscal year 1999:

Income (loss) before
 extraordinary item        $0.28      $0.17      $0.54      $0.31
Extraordinary item             -      (0.01)         -      (0.01)
                         -------    -------    -------    -------
Net income (loss) per
 common share
 assuming dilution         $0.28      $0.16      $0.54      $0.30
                         =======    =======    =======    =======

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