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National Technical Systems Reports Fiscal Year 2011 Second Quarter, Six-Month Results

September 13, 2010

CALABASAS, Calif., Sept. 13 /PRNewswire-FirstCall/ — National Technical Systems, Inc. (Nasdaq: NTSC) (NTS), a leading provider of engineering and evaluation services, announced today year-over-year increases in revenues, operating income and net income for its fiscal year 2011 second quarter and six months ended July 31, 2010.

Total revenues for the second quarter of fiscal year 2011 increased to $34.5 million, up 20 percent from $28.7 million in last fiscal year’s second quarter. Year-over-year organic growth in the second quarter of this fiscal year was $3.0 million, or 10.4 percent, while the acquisition of Unitek Technical Services in November of 2009 accounted for $2.8 million, or 9.7 percent, of the increase in quarterly revenues.

Operating income in this fiscal year’s second quarter increased 16 percent to $2.0 million compared to $1.7 million in last fiscal year’s second quarter. Net income in the second quarter of fiscal year 2011 was $993,000, or $0.10 per basic and diluted share, compared to $852,000, or $0.09 per basic and diluted share for the same period in the prior fiscal year.

Revenues for the first six months of fiscal year 2011 were up 23 percent year over year to a record $70.7 million driven by the combination of the strong revenue growth of the fiscal 2011 second quarter and the especially strong revenue performance of this fiscal year’s first quarter.

Net income per diluted share for the first half of this fiscal year increased 93 percent year over year to $2.7 million, or $0.27 per diluted share, which excludes the one-time $1.8 million, or $0.18 per diluted share, net of tax gain from the sale of land recorded in the fiscal 2011 first quarter. Net income for the first six months of last fiscal year was $1.4 million, or $0.15 per diluted share.

President and CEO William C. McGinnis said the significant year-over-year revenue growth in this fiscal year’s second quarter and first six months, despite the lackluster economy, demonstrates the value of the Company’s strategy to invest in new resources and capabilities, including engineering services. In the defense market, NTS’ competitive cost structure and breadth of capabilities have resulted in increased market share. In the aerospace market, recent contract wins from Boeing and Hawker Beechcraft show that investments in a broader range of product engineering and testing services can be expected to result in higher revenues.

“We continue to evolve into a stronger, more diverse and more capable company and our revenue growth is proof of that,” McGinnis said. “Generating 68 percent of our overall revenue, aerospace and defense are two of our most important markets and we are making concerted efforts to use our new capabilities to expand our relationships with existing customers and develop new ones. Our Life Cycle Product Services is an important addition to those capabilities and can help counter defense market economic cycles by providing us with additional growth opportunities. The shift we are seeing among OEMs toward large scale integration, consolidation and outsourcing also presents important opportunities for us. We believe we are well positioned to grow, not only in aerospace and defense, but in the telecommunications market as well, thanks to our capital investments and expanded testing facilities in the wireless market.”

Gross margin as a percentage of revenues in this fiscal year’s second quarter was 27 percent compared to 28 percent in the prior fiscal year’s second quarter. Quarter-to-quarter fluctuations in gross margin reflect changes in the mix of services sold and capacity utilization at some of the Company’s recently expanded operations.

Gross margin as a percentage of revenue in the first six months of this fiscal year was 28 percent compared to 27 percent in the first six months of the prior fiscal year.

Operating income in the first six months of fiscal year 2011 increased to $5.3 million compared to $3.0 million in the first six months of last fiscal year. Net income for the first six months of fiscal year 2011, including the $1.8 million net of tax gain on the sale of land recorded in this fiscal year’s first quarter, was $4.5 million, or $0.47 per basic share and $0.45 per diluted share, compared to $1.4 million, or $0.15 per basic and diluted share, for the same period in the prior fiscal year.

The Company’s balance sheet as of July 31, 2010 remained strong with cash, cash equivalents and investments of $7.3 million, working capital of $22.2 million, total assets of $115.1 million, total bank debt of $33.0 million and total equity of $53.5 million.

Conference Call

As previously announced, NTS is conducting a conference call today to be broadcast live over the Internet at 11:30 AM Eastern Time to review the financial results for the fiscal year 2011 second quarter ended July 31, 2010. To access the call, please dial 1-877-941-8609 from the U.S. or, for international callers, please dial +1-480-629-9818. The live webcast and archived replay of the call can be accessed on the front page of the Investor section of NTS’ website at www.ntscorp.com.

About NTS

National Technical Systems, Inc. is a leading provider of engineering services to the aerospace, defense, telecommunications, automotive and high technology markets. Through a world-wide network of resources, NTS provides Life Cycle Product Services, offering world class design engineering, compliance, testing, certification, quality registration and program management. For additional information about NTS, visit our website at www.ntscorp.com or call 800-270-2516.

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, including the possibility of contract cancellations, 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 Company undertakes 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.

TABLE FOLLOWS

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

                             Three Months Ended            Six Months Ended
                                  July 31,                     July 31,
                               2010         2009          2010          2009
                               ----         ----          ----          ----
    Net revenues        $34,525,000  $28,736,000   $70,657,000   $57,428,000
    Cost of sales        25,212,000   20,600,000    50,560,000    41,886,000
                         ----------   ----------    ----------    ----------
         Gross profit     9,313,000    8,136,000    20,097,000    15,542,000

    Selling, general
     and
     administrative
     expense              7,323,000    6,440,000    14,765,000    12,533,000
    Equity loss from
     non-
     consolidated
     subsidiary              30,000        4,000        47,000        35,000
                             ------        -----        ------        ------
       Operating income   1,960,000    1,692,000     5,285,000     2,974,000
    Other income
     (expense):
       Interest
        expense, net       (287,000)    (327,000)     (583,000)     (723,000)
       Other income,
        net                 198,000      204,000     3,189,000       135,000
                            -------      -------     ---------       -------
    Total other
     income
     (expense), net         (89,000)    (123,000)    2,606,000      (588,000)

    Income before
     income taxes
     and
     noncontrolling
     interest             1,871,000    1,569,000  7,891,000     2,386,000
    Income taxes            749,000      638,000     3,151,000       966,000
                            -------      -------     ---------       -------

    Income before
     noncontrolling
     interests            1,122,000      931,000     4,740,000     1,420,000
    Net income
     attributable to
     noncontrolling
     interests             (129,000)     (79,000)     (201,000)      (28,000)
                           --------      -------      --------       -------

    Net income             $993,000     $852,000    $4,539,000    $1,392,000
                           ========     ========    ==========    ==========

    Net income per
     common share:
      Basic                   $0.10        $0.09         $0.47         $0.15
                              =====        =====         =====         =====
      Diluted                 $0.10        $0.09         $0.45         $0.15
                              =====        =====         =====         =====

    Weighted average
     common shares
     outstanding          9,705,000    9,303,000     9,585,000     9,301,000
    Dilutive effect
     of stock
     options and
     nonvested
     shares                 577,000      303,000    575,000       285,000
    Weighted average
     common shares
     outstanding,

      assuming
       dilution          10,282,000    9,606,000    10,160,000     9,586,000
                         ==========    =========    ==========     =========

    Cash dividends
     per common
     share                    $0.07        $0.06         $0.07         $0.06


    Contact: Allen & Caron    National Technical Systems
                               Raffy Lorentzian, Sr. Vice President,
    Jill Bertotti (investors)  CFO
    Jill@allencaron.com       raffy.lorentzian@ntscorp.com
    Len Hall (media)          (818) 591-0776
    Len@allencaron.com
    (949) 474-4300

SOURCE National Technical Systems, Inc.


Source: newswire