VIENNA, Va., May 12 /PRNewswire/ -- GRC International's (NYSE: GRH)
discontinuation of its Telecommunications and Advanced Products divisions
during the third quarter of the current fiscal year has resulted in the
company's return to profitability with a net income of $516,000 and a positive
cash flow from continuing operations. The financial results of the
Telecommunications and Advanced Products divisions for the quarter ended March
31, 1997, and for all prior periods, are reported as discontinued operations.
   GRC International President and CEO Jim Roth said, "GRCI is once again
fully focused on growing its professional services business as the core of its
continuing operations."

    Three-Month Results for Continuing Services Operations
    For the third quarter ended March 31, 1997, GRCI's earnings before
interest and tax (EBIT) for continuing operations was $1.0 million, compared
to continuing operations EBIT of $344,000 for the comparable period last year.
Because of the profitable nature of the company's continuing services business
and tax loss carry-forwards, the company reported a tax benefit for the
reported quarter of $8.2 million.  Including a net interest expense of
$445,000, income from continuing operations was $8.8 million for the third
quarter of the current fiscal year.  This compares with income from continuing
operations of $149,000 in the comparable quarter last year after a $195,000
net interest expense.
    Revenues from continuing operations in the third quarter of the current
fiscal year increased 6.0 percent to $29.3 million from $27.6 million for the
third quarter last year.
    Net income for the current quarter was $516,000, or $0.06 per share,
compared to a net loss of $1.3 million, or $0.13 per share, for the comparable
period last year.

    Three-Month Results for Discontinued Operations
    Losses from operations for the discontinued Telecommunications and
Advanced Products divisions in the third quarter were $1.9 million and exit
accruals were $6.4 million.  During the comparable quarter last year, GRCI's
loss from these discontinued operations was $1.4 million.
    "In less than two months," said GRCI President and CEO Jim Roth, "we have
significantly transformed GRC International's cost structure by discontinuing
our OSU(R) Network Interface, NetworkVUE(TM) telecommunications software and
FLOW GEMINI(TM) environmental software businesses.  I am disappointed that we
did not achieve all the results we had hoped from these commercial products,
but our cost-cutting steps have turned the company's continuing operations
cash-flow positive in a very short time and returned the company to
profitability.
    "With this new structure in place, we are now focused entirely on our
professional services business, which, as our results demonstrate, is
profitable and showing significant improvement at the income from operations
level.  This is the result of higher profitability from our continuing service
operations, the termination of unprofitable activities and related write-offs
taken last year.
    "Looking towards the future, we will be working towards expanding our
profitability by achieving margins and top- and bottom-line growth rates that
are comparable to industry peers," said Roth. "I feel confident that we can
achieve these objectives; the immense and stable demand by the federal
government for knowledge-based professional services and information
technology solutions provides significant opportunities for expansion. GRC
International is one of the pioneers in this industry and I believe the high
quality services we have consistently delivered over 36 years puts us in an
excellent position to capture more business over the coming years."
    GRCI is continuing its efforts to sell the rights to the intellectual
property underlying its discontinued  commercial telecommunications products
and the remaining operations within its former Advanced Products Division.
Subsequent to the close of the quarter the company's GRC
Instruments/Dynatup(R) materials testing equipment business was purchased by
Instron (AMEX: ISN) for an undisclosed amount of cash. Other assets GRCI still
held for sale include the intellectual properties and residual assets and
activities for the OSU Network Interface, NetworkVUE software, the FLOW GEMINI
environmental software businesses, and the Vindicator(R) security business.
    Mr. Roth added: "These product areas were a result of ideas or initiatives
generated within the GRC professional services business and, to some extent,
are ahead of their time. In the future, we will continue to consider the
potential for commercial application of the ideas and initiatives we generate
and would explore such strategies as joint ventures with large, established
commercial companies to help us finance and develop any other high-value,
state-of-the-art products."
    GRCI's Applications Software Group (ASG), which was formerly a part of the
company's Telecommunications Division, is being retained by the company under
the name Telecommunications Applications Software Group and will continue its
work developing software applications for Lucent Technologies and others as
part of the company's on-going services business.

    Nine-Month Financial Results
    For the nine months ended March 31, 1997, pre-tax income for GRCI's
continuing operations was $2.2 million, compared to pre-tax income from
continuing operations of $1.4 million for the comparable period last year. The
company's previously discussed tax benefit and its losses and exit accruals
for its discontinued operations resulted in a net loss of $21.2 million, or
$2.20 per share, for the first nine months of the fiscal year.  For the
first nine months of fiscal 1996, the company reported a net loss of
$987,000, or $0.10 per share.
    For the first three quarters of FY 1997, revenues from continuing
operations on a reported basis were essentially unchanged at $86.3 million
compared to $85.8 million in the corresponding quarter last year. This is
primarily because of the accounting impact from a change in interest in a
joint venture previously accounted for on a consolidated basis through the
first quarter of FY 1996. Excluding the negative impact of this change,
revenues from continuing operations for the first nine months of FY 1997
increased $5.0 million, or 6.2 percent, from $81.3 million.

    Liquidity and Capital Resources
    As previously disclosed, the company received $4 million from the sale of
its Convertible Debentures in January 1997. At the close of the third quarter
on March 31, 1997, the company had available liquidity of $9.4 million
consisting of $4.7 million in cash and cash equivalents, and $4.7 million
available credit.  This compares with available liquidity of $8.2 million,
consisting of cash and cash equivalents of $3.7 million and $4.5 million
available credit at December 31, 1996.

    Subsequent to the close of the third quarter, GRCI sold its GRC
Instruments/Dynatup(R) materials testing business unit to Instron Corp. the
proceeds of which were used to pay-down a portion of the company's equipment
financing debt.
    Forward-looking statements contained in this release are subject to risks
and uncertainties that could cause actual results to differ materially. These
risks and uncertainties include the company's dependence on continued funding
of U.S. Department of Defense programs and the company's ability to fill
required staff positions to service the contracts granted under those
programs; government contract procurement and termination risks; and other
risks described in the company's Securities and Exchange Commission
filings.
    GRC International Inc., with headquarters in Vienna, Va., provides
knowledge-based professional services and high-quality technology-based
product solutions to government and commercial customers.  GRCI is a publicly
traded company listed on the New York Stock Exchange under the symbol GRH.
Additional details about the company can be obtained on the Internet at
http://www.grci.com/.

                           GRC International, Inc.
                 Consolidated Condensed Statements of Income
                  (in thousands, except for per share data)
                                 (unaudited)

                            Three Months Ended          Nine Months Ended
                               March 31,                  March 31,
                             1997       1996            1997       1996
    Revenues                $29,311    $27,645         $86,348    $85,780
    Cost of services         24,336     23,443          71,105     73,340
    Indirect and other costs  3,936      3,858          12,111     10,831

    Income from operations    1,039        344           3,132      1,609
    Interest expense (net)     (445)      (195)           (922)      (215)

    Income from continuing
     operations before benefit
     for income taxes           594        149           2,210      1,394
    Benefit for income taxes  8,200         --           8,200         --

    Income from continuing
     operations               8,794        149          10,410      1,394
    Discontinued Operations:
     Loss from operations of
     discontinued divisions  (1,887)    (1,449)         (25,220)    (2,381)
    Loss on disposal of
     discontinued divisions,
     including operating
     losses during phase out (6,391)         --          (6,391)        --

    Loss from discontinued
     operations              (8,278)    (1,449)         (31,611)    (2,381)
    Net income (loss)           516     (1,300)         (21,201)      (987)
    Per Share Amounts:
    Income from continuing
     operations              $ 0.89     $ 0.02          $  1.09     $ 0.15
    Loss from discontinued
     operations              $(0.83)    $(0.15)          $(3.29)    $(0.25)
    Net income (loss)        $ 0.06     $(0.13)          $(2.20)    $(0.10)
    Fully diluted common share
     equivalents              9,962      9,743            9,595      9,528

                         Consolidated Balance Sheets
                          (Condensed and unaudited)
                  (in thousands, except for per share data)

                                      March 31,       June 30,
                                        1997            1996
    Assets
    Current assets                      $36,456        $35,127
    Net assets of discontinued ops.          --         16,574
    Property and equipment, net           9,717          9,695
    Goodwill and other
      intangible assets, net              2,315          2,274
    Deferred software costs, net            488            467
    Deferred taxes                       10,825          2,625
    Deposits & other assets               3,623          3,755

    Total assets                        $63,424        $70,517

    Liabilities and stockholders' equity
     Current liabilities                $19,342        $22,726
    Net liabilities of discontinued ops.  3,646            --
    Long-term debt                       30,994         17,770
    Other non-current liabilities         1,246          1,346
    Stockholders' equity                  8,196         28,675

    Total liabilities and
     stockholders' equity              $63,424        $70,517

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