BTG Reports Third Consecutive Quarter of Profitable Results.

FAIRFAX, Va.--(BUSINESS WIRE)--Jan. 19, 1999--

Operating income up 87% from Q2

BTG, Inc. (Nasdaq: BTGI), an information systems and technical services company, today announced unaudited financial results for its fiscal year 1999 third quarter, which ended December 31, 1998.

This is the company's third financial report since the divestiture of its product reselling division. Because of the divestiture, the company finds it more meaningful to present financial results of the third quarter with the second quarter of this fiscal year.

Net income for the third quarter was $1.2 million, up from $93,000 reported for the quarter ended September 30. Diluted earnings per share for the third quarter were $0.13, up from the $0.01 diluted EPS reported in the previous quarter. Both third quarter net income and diluted earnings per share include net non-operating gains of $269,000, on a pretax basis. Excluding these non-operating items, third quarter net income was $1.0 million and diluted earnings per share were $0.12. Revenue for the third quarter was $84.5 million, compared to $88.2 million in the second quarter.

For the first nine months of FY 1999, April 1 through December 31, 1998, BTG reported revenue of $257.3 million, net income of $1.3 million, and diluted EPS of $0.15.

BTG President and CEO Dr. Edward H. Bersoff said he continues to be very pleased with the profitable results of the company in the 1999 fiscal year. He said highlights included:

-- improvement in gross margins in BTG's services business, from 32.8% in the second quarter to 35.2% this quarter.

-- third quarter operating margin of 3.1%, an increase of 150 basis points from the previous quarter.

-- decrease in indirect costs as a percentage of revenue from 16.8% to 15.3%.

-- 6% decrease in interest expense from the second to the third quarter.

-- BTG's selection as one of four prime contractors for a $353 million ID/IQ (indefinite delivery/indefinite quantity) contract to provide Engineering Technical Support Services (ETSS) to the U.S. Air Force Information Warfare Center and the Air Intelligence Agency. Potential revenue to BTG and its team is estimated at more than $100 million during the five-year term of the contract.

-- multiple new contracts and subcontracts for engineering services in support of U.S. defense and intelligence agencies. Potential revenue to BTG for these new contracts is estimated at $34 million over the next five years.

-- continued growth in the services' percentage of total revenue. Without the product revenue from the four pass-through royalty contracts, which are winding down, services accounted for 80% of total revenue for the third quarter.

Bersoff said "We continue to improve service margins and operating income, while reducing interest and indirect costs. Our plan to extend our reach in our traditional government base will be strengthened with our pending acquisition of STAC, Inc. The combined expertise and experience of BTG and STAC employees will enhance our ability to provide systems integration and technical services to Federal agencies." BTG is an information systems and technical services firm that provides solutions to complex information technology issues for government and commercial clients. More information is available on the Web at www.btg.com, by e-mail at [e-mail], or by calling 703-383-8000.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: The statements in this news release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include the review by regulatory authorities, the Company's dependence on contractual commitments and continued funding of U.S. government programs, government contract procurement and termination risks, and other risks described in the Company's Securities and Exchange Commission filings. -0-

                         BTG, Inc. and Subsidiaries
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                    (In thousands, except Per Share Data)
                                                     Nine      Nine
                               Quarter   Quarter    Months    Months
                                Ended     Ended     Ended     Ended
                              12/31/98  9/30/98   12/31/98  12/31/97
Revenue:
  Contract revenue           $ 41,976  $ 46,556   $132,188  $115,239
  Product sales                42,554    41,660    125,141   379,961
                               84,530    88,216    257,329   495,200
Direct costs:
   Contract costs              27,220    31,277     87,790    76,008
   Cost of product sales       41,394    40,414    121,286   346,925

Indirect, general and
 administrative expenses       13,177    14,953     42,977    66,201
Amortization and other
 operating costs, net             153       190        523     1,367

Operating income                2,586     1,382      4,753     4,699

Interest expense                 (790)     (840)    (3,323)   (6,021)
Other non-operating income
 (expense)                        269      (380)       940       491
Income (loss) from continuing
 operations before income taxes 2,065       162      2,370      (831)

Income tax expense (benefit)      901        69      1,031       (46)

Income (loss) from continuing
 operations                     1,164        93      1,339      (785)

Loss from discontinued operations,
  net of income taxes              --        --         --    (2,113)

Net income (loss)           $   1,164   $    93     $1,339   $(2,898)

Diluted earnings (loss) per
  share                     $    0.13   $  0.01   $   0.15   $ (0.34)

Weighted average common and
  common equivalent shares
  outstanding                   8,802     8,819      8,796     8,522


                      BTG, Inc. and Subsidiaries
                      CONSOLIDATED BALANCE SHEETS
                 December 31, 1998 and March 31, 1998

                              December 31, 1998
                                 (unaudited)       March 31, 1998
      ASSETS
 Current assets:
   Investments, at fair value  $    3,809         $    22,286
   Receivables, net                66,970             135,050
   Inventory, net                   1,202               2,214
   Prepaid expenses                 4,076               3,338
   Income tax receivable            1,355              10,348
   Other                            4,263               9,128
    Total current assets           81,675             182,364

 Property and equipment, net        3,933               4,508

 Other assets:
   Goodwill, net                    8,591               8,860
   Other intangible assets,
    net                               387                 874
   Investments in unconsolidated
    affiliates                      9,396              14,813
   Other                              674               1,020
                                $ 104,656           $ 212,439


       LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
   Current maturities of
    long-term debt              $     --            $  15,000
   Current maturities of line
    of credit                         --               31,417
   Accounts payable                17,377              74,573
   Accrued expenses                13,044              13,483
   Other                            2,470               4,079
    Total current liabilities      32,891             138,552

 Line of credit, excluding
  current maturities               33,381              38,835
 Other                              1,963               1,992
   Total liabilities               68,235             179,379

 Shareholders' equity:
   Preferred stock              $     --            $    --
   Common stock                    54,664              53,384
   Accumulated deficit            (19,191)            (20,530)
   Treasury stock, at cost           (314)               (527)
   Unrealized gains on
    investments, net of
     related tax effects            1,262                 733
     Total shareholders' equity    36,421              33,060
                                 $104,656           $ 212,439

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