Computational Systems, Inc. Reports Second Quarter Results.

KNOXVILLE, Tenn.--(BUSINESS WIRE)--July 11, 1997--

Second Quarter Sales Up 29%

Computational Systems, Incorporated (Nasdaq/NM:CSIN) today reported increased sales, decreased net income and net income per share for the second quarter and six-month period ended June 30, 1997.

For the second quarter, net sales rose 29% to $14,447,000 compared with $11,209,000 in the year-earlier period. Net income decreased 70% to $285,000, or $0.06 per share, compared with net income of $950,000, or $0.19 per share, a year ago based upon a weighted average number of shares outstanding of 5,169,688 for the second quarter of 1997 and 5,068,388 for the second quarter of 1996. For the six months ended June 30, 1997, net sales rose 32% to $28,922,000 compared with net sales of $21,941,000 in the year-earlier period. Net income was $996,000, down 31% from $1,452,000 reported in the prior-year period. Net income per share was $0.19 for the first six months of 1997 compared with $0.29 per share a year ago.

Commenting on the results, Chairman and Chief Executive Officer Ronald G. Canada said, "Although we are disappointed with the second quarter results, our previously announced reduction in work force coupled with the introduction of new products in the third quarter position CSI to improve results going forward."

CSI designs, produces and markets an integrated family of advanced predictive maintenance products and services for use in large scale, continuous-run manufacturing facilities worldwide. The Company's Reliability-Based Maintenance products and services help customers detect potentially disruptive conditions in the operation of their machinery before damage or complete machanical failure occurs, thereby allowing maintenance to be scheduled at the most appropriate time.

-0-

        COMPUTATIONAL SYSTEMS, INCORPORATED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)


                                              Three Months Ended
                                                    June 30,
                                                     1997
Revenues, net:
        Product                           $9,035,800      $ 8,354,790
        Services                           5,411,240        2,854,602
                                          14,447,040       11,209,392
Cost of revenues:
        Product                            2,254,134        2,014,666
        Services                           4,188,659        2,299,255
                                           6,442,793        4,313,921
Gross margin                               8,004,247        6,895,471

        Selling, general and
          administrative                   5,888,239        4,224,642
        Research and development           1,640,549        1,325,457
Income from operations                       475,459        1,345,372
Other income (expense):
        Interest expense                     (41,315)            (221)
        Interest income                      ( 9,488)         134,872
        Other income (expense), net            7,053            4,347
Income before provision for income taxes     431,679        1,484,370
Provision for income taxes                   146,736          534,374
Net income                               $   284,943     $    949,996
Earnings per share                       $      0.06     $       0.19
Weighted average shares outstanding        5,169,688        5,068,388


                                                Six Months Ended

                                            June 30,        June 30,
                                             1997            1996

Revenues, net:
        Product                          $17,757,080     $ 16,287,638
        Services                          11,164,508        5,653,047
                                          28,921,588       21,940,685

Cost of revenues:
        Product                            4,432,299        4,330,721
        Services                           8,207,566        4,479,510
                                          12,639,865        8,810,231
Gross margin                              16,281,723       13,130,454

      Selling, general and
        administrative                    11,522,513        8,579,642
Research and development                   3,251,673        2,531,653
Income from operations                     1,507,537        2,019,159
Other income (expense):
        Interest expense                     (51,822)          (1,366)
        Interest income                       38,685          252,460
        Other income (expense), net           15,295           (1,512)

Income before provision for income taxes   1,509,695        2,268,741
Provision for income taxes                   513,262          816,749
Net income                             $     996,433     $  1,451,992
Earnings per share                     $        0.19     $       0.29
Weighted average shares outstanding        5,191,735        5,047,363


                  CONDENSED CONSOLIDATED BALANCE SHEETS


                                           June 30,      December 31,
                                             1997           1996
                                         (Unaudited)      (Audited)

ASSETS

Current assets                         $ 20,656,555    $ 24,331,014
Total property, plant and equipment,
   net                                   14,568,601      13,483,920
Other non-current assets                  7,943,553       7,457,913
      Total assets                     $ 43,168,709    $ 45,272,847

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities                    $  9,101,504    $ 12,917,525
Long-term debt                                    0               0
Deferred revenue                            694,090         668,862
Total shareholders' equity               33,373,115      31,686,460

       Total liabilities and
       shareholders' equity            $ 43,168,709    $ 45,272,847

CONTACT: Computational Systems, Inc.

Tom Valunas, 423/675-2110