National Technical Systems Announces Fiscal 2006 Second Quarter, Six Months Results


CALABASAS, Calif.--(BUSINESS WIRE)--Sept. 14, 2005--National Technical Systems, Inc. (Nasdaq:NTSC) (NTS) today announced results for its fiscal 2006 second quarter and six months ended July 31, 2005. Net income for the quarter increased 93% to $468,000 as compared to $242,000 for the same period in the prior year with corresponding diluted earnings per share of $0.05 in the current period compared to $0.03 for the same quarter in the prior year. Net income for the six months ended July 31, 2005 increased 55% to $1,202,000 as compared to $775,000 for the same period in the prior year with corresponding diluted earnings per share of $0.13 in the current period compared to $0.08 for the same period in the prior year. The improvement in earnings resulted from a strong performance in the Engineering & Evaluation segment during the six months period in the current year, partially offset by a weaker performance in the Technical Solutions segment.

Total revenues for the second quarter of fiscal 2006 were $26.8 million, compared to $27.2 million for the same period in the prior year. Total revenues for the six months ended July 31, 2005 were $54.2 million, compared to $54.7 million for the same period in the prior year. The decrease in revenues was primarily due to the decline in the general IT service business in the Technical Solutions group.

Gross profit increased 7.3% to $6,239,000 in the current quarter compared to $5,813,000 for the same period in the prior year. Gross profit for the six months ended July 31, 2005 increased 8.3% to $12,837,000 compared to $11,851,000 for the same period in the prior year.

Operating income increased 93.6% to $1,154,000 in the current quarter compared to $596,000 for the same period in the prior year. Operating income for the six months ended July 31, 2005 increased 73.0% to $2,614,000 compared to $1,511,000 for the same period in the prior year.

Revenues from Engineering & Evaluation for the fiscal 2006 second quarter increased 9.8% to $17.2 million, compared to $15.7 million for the same period in the prior year. For the six months ended July 31, 2005, revenues increased 9.3% to $34.5 million, compared to $31.6 million for the same period in the prior year. The year-over-year increase in revenues was primarily due to increased revenues in the defense, telecom and automotive markets and additional revenues from the acquisition of the telecommunications test laboratories in Calgary, Canada on July 30, 2004 and the acquisition of Phase Seven Laboratories in Santa Rosa, California on March 18, 2005.

Operating income in the Engineering & Evaluation group increased 192% to $1,148,000 in the current quarter, compared to $393,000 for the same period in the prior year. For the six months ended July 31, 2005, operating income increased 115% to $2,557,000, compared to $1,189,000 for the same period in the prior year.

CEO William C. McGinnis commented, "The strong performance in the Engineering & Evaluation group is primarily attributable to the increase in demand for the evaluation of military equipment and weapons systems and increased activity in the telecommunications arena. We have expanded our testing capabilities significantly through targeted acquisitions and capital spending. The recent acquisition of Phase Seven Laboratories in Santa Rosa, California will further extend the Company's DSL certification testing capabilities and also handle the anticipated demand for interoperability testing related to FTTP (fiber to the premise) deployment. We are also very optimistic about our growth opportunities in the Asian markets after the recent completion of two separate agreements: the first agreement is with SGS Taiwan Limited (SGS) to pursue the joint development of testing facilities in Taiwan and South Korea. The second agreement is with Hong Kong Standards and Testing Center (STC) to pursue the development of a testing laboratory to serve the markets of the Peoples Republic of China (China) and the Hong Kong Special Administrative Region (Hong Kong)."

Revenues from Technical Solutions for the fiscal 2006 second quarter were $9.5 million compared to $11.5 million for the year-earlier period. For the six months ended July 31, 2005, revenues decreased 14.8% to $19.7 million, compared to $23.1 million for the same period in the prior year. The decrease in revenues was due to the continued decline of the IT service business due to competition from off-shore companies and the loss of certain customers in geographic areas where the Company discontinued its sales and marketing efforts. Operating income in the Technical Solutions group was $6,000 in the current quarter compared to $203,000 for the year-earlier period. For the six months ended July 31, 2005, operating income decreased to $57,000 from $322,000 for the same period in the prior year.

McGinnis added, "To offset the competitive environment in the markets served by the Technical Solutions group, the Company is deploying a migration strategy focused on meeting the anticipated increase in demand for specialized compliance and engineering support services at Company locations, as well as taking advantage of offshore opportunities. The Company is now offering a specialized niche-oriented compliance and engineering service. This service is being deployed by cross selling to the clients currently being serviced by the Engineering and Evaluation segment."

Conference Call

NTS is conducting a conference call to review the financial results today at 11:00 AM Pacific Time (12:00 PM Mountain Time, 1:00 PM Central Time, 2:00 PM Eastern Time). The dial-in number for the call is 1-800-257-1836. A live web cast of the call can be accessed at www.ntscorp.com.

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 engineering solutions. For additional information about National Technical Systems, visit its web site at www.ntscorp.com.

Cautionary Note Regarding Forward-Looking Statements:

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 associated with uncertainties pertaining to customer orders, demand for services and products, development of markets for the companies' services and products and other risks identified in the companies' 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.

          NATIONAL TECHNICAL SYSTEMS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income

Three Months Ended Six Months Ended
July 31, July 31,
2005 2004 2005 2004
----------- ----------- ----------- -----------

Net revenues $26,755,000 $27,189,000 $54,199,000 $54,661,000
Cost of sales 20,516,000 21,376,000 41,362,000 42,810,000
----------- ----------- ----------- -----------
Gross profit 6,239,000 5,813,000 12,837,000 11,851,000

Selling, general
and
administrative
expense 5,120,000 5,378,000 10,335,000 10,534,000
Equity income
from non-
consolidated
subsidiary (35,000) (161,000) (112,000) (194,000)
----------- ----------- ----------- -----------
Operating
income 1,154,000 596,000 2,614,000 1,511,000
Other expenses:
Interest
expense, net (329,000) (271,000) (647,000) (523,000)
Other 16,000 11,000 16,000 163,000
----------- ----------- ----------- -----------
Total other
expenses (313,000) (260,000) (631,000) (360,000)
----------- ----------- ----------- -----------

Income before
income taxes
and minority
interest 841,000 336,000 1,983,000 1,151,000
Income taxes 335,000 93,000 735,000 421,000
----------- ----------- ----------- -----------

Income before
minority
interest 506,000 243,000 1,248,000 730,000
Minority
interest (38,000) (1,000) (46,000) 45,000
----------- ----------- ----------- -----------

Net income $ 468,000 $ 242,000 $ 1,202,000 $ 775,000
=========== =========== =========== ===========

Net income per
common share:
Basic $ 0.05 $ 0.03 $ 0.13 $ 0.09
=========== =========== =========== ===========
Diluted $ 0.05 $ 0.03 $ 0.13 $ 0.08
=========== =========== =========== ===========


Weighted average
common shares
outstanding 9,106,000 8,929,000 9,079,000 8,902,000
Dilutive effect
of stock
options 541,000 612,000 516,000 668,000

------------ ------------ ------------ ------------
Weighted average
common shares
outstanding
assuming
dilution 9,647,000 9,541,000 9,595,000 9,570,000
=========== =========== =========== ===========
    CONTACT: National Technical Systems
Lloyd Blonder, 818-591-0776
or
BPC Financial Marketing
John Baldissera, 800-368-1217

SOURCE: National Technical Systems, Inc.