National Technical Systems Reports Fiscal 2005 Third Quarter, Nine-Month Results

CALABASAS, Calif.--(BUSINESS WIRE)--Dec. 15, 2004--National Technical Systems, Inc. (NASDAQ:NTSC) (NTS) a leading provider of quality and conformance testing and managed services for industries, including aerospace, defense, telecommunications and information technology, announced today results for its fiscal 2005 third quarter and nine months ended October 31, 2004. Total revenues for the fiscal 2005 third quarter were $26.3 million, with net income of $319,000, or $0.03 per fully diluted share, compared to total revenues of $25.6 million, with net income of $273,000, or $0.03 per fully diluted share for the year-earlier period. For the first nine months of fiscal 2005, total revenues were $80.7 million, with net income of $1,094,000, or $0.11 per fully diluted share, compared to total revenues of $79.6 million, with net income of $941,000, or $0.10 per fully diluted share for the first nine months of fiscal 2004.

The income tax rates for the three months and nine months of fiscal 2005 were lower than that of the same period in fiscal 2004. The reduction in income tax was attributed to a significant increase in earnings associated with the Company\'s 50% owned Japanese subsidiary. This increase in earnings in fiscal 2005 was a direct result of additional USB testing in Japan, stemming from the successful USB technology transfer of software and testing protocols developed by our computer software testing group located in Culver City, CA. The income from Japan will be used for international expansion and is considered to be permanently invested and consequently no provision has been made for U.S. federal or state income taxes for this subsidiary.

The fully diluted share counts used in calculating earnings per share in the third quarter and first nine months of the current fiscal year were 9,490,000 and 9,546,000, respectively, and the fully diluted share counts used in the comparable periods of the prior fiscal year were 9,225,000 and 9,160,000, respectively.

The Company\'s October 31, 2005 balance sheet remained strong, with cash of $4.0 million, total assets of $65.9 million, shareholders equity of $30.2 million and a current ratio of 3.2:1.

CEO Dr. Jack Lin stated, "The DTI acquisition of last year has been very successful. This year the Company completed a strategic acquisition of a telecom laboratory in Calgary, Canada, and established a laboratory in Ho Chi Minh City, Vietnam. We expect both of these additional business units to contribute positively to the financial performance of NTS."

President and Chief Operating Officer, William C. McGinnis, commented, "Our results in the third quarter provide further evidence that our realignment strategy is working. We continue to focus on leveraging the strengths of our realigned sales organization, which has been cross-trained to sell all NTS services. This enhances our ability to better serve the needs of our existing customers, improve customer retention, and aggressively pursue new customers."

During the third quarter, NTS completed several key strategic alliances: the DSL Broadband Forum, which includes Verizon, SBC, Bell South, and Bell Canada, the USB Implementers Forum (USB-IF) and the Zigbee Alliance, where NTS is taking the lead in creating the certification program, and is one of only two authorized test labs for ZigBee logo testing. NTS has also forged a strategic alliance with Raytheon Company. NTS performs the testing at its various labs and facilities around the world and has already played an important testing role in Raytheon\'s Javelin and Tomahawk missile programs.

Revenues from Engineering & Evaluation for fiscal 2005 third quarter and nine months were $15.4 million and $46.7 million, respectively, compared with $14.2 million and $44.1 million for the year-earlier periods. Revenues during the third quarter of 2005 reflected a decrease in the telecom testing business at the Fullerton, CA facility, partially offset by an increase in the Company\'s automotive testing at its Detroit, MI facility, along with new revenues from its Rustburg, VA test facility acquired last year.

Mr. McGinnis states, "Revenues from Technical Solutions for the fiscal 2005 third quarter and nine months were $10.9 million and $34.0 million, respectively, compared to $11.4 million and $35.6 million for the year-earlier periods. Technical Solutions revenues declined in both periods due to the continuing competitive nature of the Information Technology business, which has resulted in price compression."

NTS\' Engineering & Evaluation (E&E) segment is one of the largest independent conformity assessment and management system registration organizations in the U.S. We have facilities throughout the U.S., and in Canada, Japan and Germany, serving a wide variety of high technology industries, including aerospace, defense, automotive, power products, electronics, computers and telecommunications. In addition, the E&E segment performs management registration and certification services to ISO related standards.

The Technical Solutions segment is a national provider of professional and specialty staffing services, including contract services, temporary and full-time placements. NTS Technical Solutions provides specialty solution services to its customers specifically in areas related to IT, information systems, engineering and on-site test and certification. We also supply professionals in support of customers who need help-desk analysts and managers, relational database administrators and developers, application and systems programmers, configuration and project managers, engineering personnel, and test and certification personnel.

Conference Call

As previously announced, NTS is conducting a conference call to review the financial results today at 1:30 p.m. Eastern Time. The dial-in number for the call is 1-800-240-5318. A live webcast and 90-day archive of the call can be accessed at

About National Technical Systems, Inc.

National Technical Systems, Inc. is a business-to-business services company providing organizations in the aerospace, defense, information technology (IT) and high technology markets integrated testing, certification, quality registration, systems evaluation and Information Technology business services. For additional information about National Technical Systems, visit its web site at

The statements in this press release that relate to future plans, events or performance, are forward-looking statements that involve risks and uncertainties, including risks associate with uncertainties pertaining to operating new facilities, customer orders, demand for services and products, development of markets for the company\'s services and products and other risks identified in the company\'s SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The companies undertake no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding National Technical Systems business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company\'s Annual Report or Form 10-K for the most recently ended fiscal year.

Unaudited Condensed Consolidated Statements of Income

Three Months Ended Nine Months Ended
October 31, October 31,
2004 2003 2004 2003
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Net revenues $26,293,000 $25,591,000 $80,715,000 $79,640,000
Cost of sales 20,467,000 19,791,000 63,041,000 61,916,000
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Gross profit 5,826,000 5,800,000 17,674,000 17,724,000

Selling, general and
expense 5,077,000 5,087,000 15,414,000 15,111,000
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Operating Income 749,000 713,000 2,260,000 2,613,000
Other income
Interest expense,
net (264,000) (250,000) (787,000) (855,000)
Other (6,000) 43,000 157,000 50,000
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Total other expense (270,000) (207,000) (630,000) (805,000)

Income before income
taxes and minority
interest 479,000 506,000 1,630,000 1,808,000
Income taxes 137,000 236,000 558,000 838,000
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Income before
minority interest 342,000 270,000 1,072,000 970,000
Minority interest (23,000) 3,000 22,000 (29,000)
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Net income $319,000 $273,000 $1,094,000 $941,000
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Net income per common
Basic $0.04 $0.03 $0.12 $0.11
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Diluted $0.03 $0.03 $0.11 $0.10
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Weighted average
common shares
outstanding 8,969,000 8,637,000 8,924,000 8,629,000
Dilutive effect of
stock options 521,000 588,000 622,000 531,000
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Weighted average
common shares
assuming dilution 9,490,000 9,225,000 9,546,000 9,160,000
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    CONTACT: National Technical Systems
Lloyd Blonder, 818-591-0776
BPC Financial Marketing
John Baldissera, 800-368-1217

SOURCE: National Technical Systems, Inc.