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National Technical Systems Inc. Reports Operating Results (10-Q)

September 14, 2009 | About:
10qk

10qk

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National Technical Systems Inc. (NTSC) filed Quarterly Report for the period ended 2009-07-31.

NAT L TECHNICAL SYS. INC. is a diversified services company which operates in four segments: technical services (engineering and testing) contract labor services quality registration services and environmental services. The business of Co. is conducted by a number of operating units each with its own organization. National Technical Systems Inc. has a market cap of $49.66 million; its shares were traded at around $5.3399 with a P/E ratio of 17.8 and P/S ratio of 0.41. National Technical Systems Inc. had an annual average earning growth of 15.3% over the past 5 years.

Highlight of Business Operations:

Net cash provided by operating activities of $2,948,000 in the six months ended July 31, 2009 primarily consisted of net income of $1,392,000 adjusted for non-cash items of $3,597,000 in depreciation and amortization, write off of receivables of $276,000, share-based compensation of $135,000, life insurance premium of $37,000, undistributed earnings of affiliate of $28,000 and loss on retirement of assets of 8,000, offset by changes in working capital of $2,194,000, deferred income taxes $171,000 and gain on investments of $160,000. Net cash provided by operating activities of $3,471,000 in the six months ended July 31, 2008 primarily consisted of net income of $1,858,000 adjusted for non-cash items of $3,599,000 in depreciation and amortization, share based compensation of $139,000, tax benefit from stock option exercises of $55,000, undistributed earnings of affiliate of $27,000, offset by changes in working capital of $929,000, recoveries of receivables of $680,000, deferred income taxes of $403,000 and gain on sale of securities of $195,000.

Net cash used in investing activities in the three months ended July 31, 2009 of $3,813,000 was primarily attributable to capital spending of $3,185,000, investment in retirement funds of $351,000, acquisitions of businesses, net of cash acquired of $159,000 and investment in life insurance of $118,000. Cash used for investing activities in the six months ended July 31, 2008 of $8,617,000 was primarily attributable to capital spending of $3,892,000, cash used to acquire businesses of $4,478,000, investment in retirement funds of $348,000 and investment in life insurance of $94,000, partially offset by net proceeds from sale of securities of $195,000. Capital spending is generally comprised of purchases of machinery and equipment, building, leasehold improvements, computer hardware, software and furniture and fixtures.

Net cash used in financing activities in the three months ended July 31, 2009 of $2,592,000 consisted of repayment of debt of $4,304,000, cash dividends paid of $558,000 and common stock repurchase of $58,000, partially offset by proceeds from borrowing of $2,328,000. Net cash provided by financing activities in the six months ended July 31, 2008 of $5,721,000 consisted primarily of proceeds from current and long-term debt of $8,650,000 and proceeds from stock options exercised of $220,000, partially offset by repayments of current and long term debt of $3,149,000.

(a) $16,500,000 revolving line of credit with interest rate at the agent s prime rate less 25 basis points, with an option for the Company to convert to loans at the Libor rate plus 200 basis points for periods ranging from 30 days to 365 days, with minimum advances of $1,000,000. There is an annual fee of 25 basis points and a quarterly unused credit fee of 25 basis points. The outstanding balance on the revolving line of credit at July 31, 2009 was $13,500,000. This balance is reflected in the accompanying consolidated balance sheets as long-term. The amount available on the line of credit was $3,000,000 as of July 31, 2009.

(b) $9,000,000 in Term Loan A which was used to consolidate previous term loans. The outstanding balance on Term Loan A at July 31, 2009 was $6,612,000. The interest rate is at the agent s prime rate less 25 basis points, with an option for the Company to convert to loans at the Libor rate plus 225 basis points for periods ranging from 30 days to 365 days, with minimum advances of $1,000,000. The principal amount is amortized over a seven-year period.

(c) $12,650,000 in Term Loan B which was used to acquire USTL on December 5, 2007. The outstanding balance on Term Loan B at July 31, 2009 was $9,041,000. The interest rate is at the agent s prime rate less 25 basis points, with an option for the Company to convert to loans at the Libor rate plus 225 basis points for periods ranging from 30 days to 365 days, with minimum advances of $1,000,000. The principal amount is amortized at the rate of 0% during the first year of the note, 5% in the second year, 10% in the third year and 15% in the fourth and fifth years.

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