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

December 14, 2009 | About:
10qk

10qk

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National Technical Systems Inc. (NTSC) filed Quarterly Report for the period ended 2009-10-31.

National Technical Systems, Inc., based in Calabasas, California, is a leading provider of engineering and testing services to the defense, aerospace, telecommunications, automotive and high technology markets. Through a world-wide network of resources, NTS provides full product life-cycle support, offering world class design engineering, compliance, testing, certification, quality registration and program management. It provides conformity assessment and management system registration services, as well as technical personnel for product certification, product safety testing, and product evaluation. The company offers management registration and certification services. It operates in the United States, Japan, Vietnam, Germany, and Canada. National Technical Systems Inc. has a market cap of $49.07 million; its shares were traded at around $5.27 with a P/E ratio of 19.52 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 $5,798,000 in the nine months ended October 31, 2009 primarily consisted of net income of $2,517,000 adjusted for non-cash items of $5,411,000 in depreciation and amortization, write off of receivables of $222,000, share-based compensation of $229,000, undistributed earnings of affiliate of $97,000, life insurance premium of $49,000, and loss on retirement of assets of 8,000, offset by changes in working capital of $2,342,000, gain on investments of $212,000 and deferred income taxes of $181,000. Net cash provided by operating activities of $4,738,000 in the nine months ended October 31, 2008 primarily consisted of net income of $3,033,000 adjusted for non-cash items of $5,333,000 in depreciation and amortization, share-based compensation of $220,000, partially offset by changes in working capital of $3,312,000, and other non-cash items of $536,000.

Net cash used in investing activities in the nine months ended October 31, 2009 of $5,630,000 was primarily attributable to capital spending of $4,760,000, investment in retirement funds of $527,000, investment in life insurance of $184,000 and acquisitions of businesses, net of cash acquired of $159,000. Cash used in investing activities in the nine months ended October 31, 2008 of $10,380,000 was primarily attributable to capital spending of $5,391,000, cash used to acquire businesses of $4,720,000, investment in retirement funds of $428,000 and investment in life insurance of $36,000, partially offset by net proceeds from sale of securities of $195,000.

Net cash used in financing activities in the nine months ended October 31, 2009 of $2,896,000 consisted of repayment of debt of $5,126,000, cash dividends paid of $566,000 and common stock repurchase of $58,000, partially offset by proceeds from borrowing of $2,808,000 and proceeds from stock options exercised of $46,000. Net cash provided by financing activities in the nine months ended October 31, 2008 of $7,551,000 consisted primarily of proceeds from current and long-term debt of $11,350,000 and proceeds from stock options exercised of $222,000, partially offset by repayments of current and long-term debt of $3,835,000 and cash dividends paid of $186,000.

(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 October 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 October 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 October 31, 2009 was $6,291,000. 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 October 31, 2009 was $8,883,000. 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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