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Share Name | Share Symbol | Market | Type |
---|---|---|---|
National Technical Systems, Inc. (MM) | NASDAQ:NTSC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 23.00 | 0 | 01:00:00 |
T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
California
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95-4134955
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
|
|
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24007 Ventura Boulevard, Suite 200
Calabasas, California
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91302
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
T
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|
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(do not check if a smaller reporting company)
|
|
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Class
|
|
Outstanding at September 4, 2013
|
|
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Common Stock, no par value
|
|
11,714,729 shares
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ii
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1
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Item 1.
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1
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1
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2
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3
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4
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5
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Item 2.
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12
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Item 3.
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23
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Item 4.
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23
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25
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Item 1.
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25
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Item 1A.
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25
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Item 2.
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25
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Item 3.
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25
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Item 4.
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25
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Item 5.
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25
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Item 6.
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25
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26
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27
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• | anticipated results of operations including expected trends in our revenues, gross margins, operating expenses, adjusted EBITDA and net income; |
• | the future actions of our competitors, including pricing decisions and new service offerings; |
• | our ability to obtain future financing or capital when needed; |
• | anticipated economic trends in the industries that we serve; |
• | our ability to complete or achieve the anticipated benefits from acquisitions, business combinations, strategic partnerships, divestitures and other significant transactions. |
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At
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At
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||||||
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July 31,
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January 31,
|
||||||
|
2013
|
2013
|
||||||
ASSETS
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(unaudited)
|
|
||||||
CURRENT ASSETS:
|
|
|
||||||
Cash and cash equivalents
|
$
|
5,956,000
|
$
|
8,875,000
|
||||
Investments
|
3,691,000
|
3,410,000
|
||||||
Accounts receivable, less allowance for doubtful accounts of $701,000 at July 31, 2013 and $847,000 at January 31, 2013
|
31,928,000
|
33,573,000
|
||||||
Unbilled receivable
|
11,857,000
|
8,073,000
|
||||||
Income taxes receivable, net
|
2,586,000
|
639,000
|
||||||
Inventories, net
|
279,000
|
446,000
|
||||||
Deferred income taxes
|
4,959,000
|
4,959,000
|
||||||
Prepaid expenses
|
2,523,000
|
2,524,000
|
||||||
Total current assets
|
63,779,000
|
62,499,000
|
||||||
|
||||||||
Property, plant and equipment, at cost
|
150,334,000
|
147,864,000
|
||||||
Less: accumulated depreciation
|
(89,670,000
|
)
|
(85,586,000
|
)
|
||||
Net property, plant and equipment
|
60,664,000
|
62,278,000
|
||||||
|
||||||||
Goodwill
|
21,799,000
|
21,799,000
|
||||||
Intangible assets, net
|
15,136,000
|
16,149,000
|
||||||
Other assets
|
912,000
|
1,904,000
|
||||||
|
||||||||
TOTAL ASSETS
|
$
|
162,290,000
|
$
|
164,629,000
|
||||
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
5,358,000
|
$
|
7,473,000
|
||||
Accrued expenses
|
15,596,000
|
13,142,000
|
||||||
Deferred income
|
4,767,000
|
2,974,000
|
||||||
Current installments of long-term debt
|
6,037,000
|
5,572,000
|
||||||
Total current liabilities
|
31,758,000
|
29,161,000
|
||||||
|
||||||||
Long-term debt, excluding current installments
|
41,545,000
|
48,379,000
|
||||||
Deferred income taxes
|
16,461,000
|
16,461,000
|
||||||
Deferred compensation
|
1,288,000
|
1,794,000
|
||||||
Other long-term liabilites
|
437,000
|
382,000
|
||||||
Commitments and contingencies
|
||||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Preferred stock, no par value, 2,000,000 shares authorized; none issued
|
-
|
-
|
||||||
Common stock, no par value. Authorized, 20,000,000 shares; issued and outstanding, 11,660,000 as of July 31, 2013 and 11,475,000 as of January 31, 2013
|
29,841,000
|
29,053,000
|
||||||
Retained earnings
|
40,583,000
|
39,296,000
|
||||||
Accumulated other comprehensive loss
|
(248,000
|
)
|
(142,000
|
)
|
||||
Total shareholders' equity
|
70,176,000
|
68,207,000
|
||||||
Noncontrolling interests
|
625,000
|
245,000
|
||||||
Total equity
|
70,801,000
|
68,452,000
|
||||||
|
||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
162,290,000
|
$
|
164,629,000
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
|
July 31,
|
July 31,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Net revenues
|
$
|
46,186,000
|
$
|
47,329,000
|
$
|
91,203,000
|
$
|
90,782,000
|
||||||||
Cost of sales
|
31,719,000
|
34,519,000
|
63,206,000
|
66,651,000
|
||||||||||||
Gross profit
|
14,467,000
|
12,810,000
|
27,997,000
|
24,131,000
|
||||||||||||
|
||||||||||||||||
Selling, general and administrative expense
|
11,539,000
|
8,667,000
|
21,578,000
|
17,079,000
|
||||||||||||
Restructuring costs
|
1,037,000
|
-
|
1,037,000
|
-
|
||||||||||||
Equity loss from non-consolidated subsidiary
|
6,000
|
123,000
|
38,000
|
136,000
|
||||||||||||
Operating income
|
1,885,000
|
4,020,000
|
5,344,000
|
6,916,000
|
||||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense, net
|
(1,864,000
|
)
|
(922,000
|
)
|
(2,655,000
|
)
|
(1,799,000
|
)
|
||||||||
Other income (expense), net
|
68,000
|
65,000
|
82,000
|
93,000
|
||||||||||||
Total other income (expense), net
|
(1,796,000
|
)
|
(857,000
|
)
|
(2,573,000
|
)
|
(1,706,000
|
)
|
||||||||
|
||||||||||||||||
Income before income taxes and noncontrolling interests
|
89,000
|
3,163,000
|
2,771,000
|
5,210,000
|
||||||||||||
Income taxes
|
38,000
|
1,313,000
|
1,104,000
|
2,146,000
|
||||||||||||
|
||||||||||||||||
Net income from continuing operations
|
51,000
|
1,850,000
|
1,667,000
|
3,064,000
|
||||||||||||
Loss from discontinued operations, net of tax
|
-
|
(12,000
|
)
|
-
|
(4,000
|
)
|
||||||||||
Net income
|
51,000
|
1,838,000
|
1,667,000
|
3,060,000
|
||||||||||||
|
||||||||||||||||
Net income attributable to noncontrolling interests
|
(195,000
|
)
|
(236,000
|
)
|
(380,000
|
)
|
(504,000
|
)
|
||||||||
|
||||||||||||||||
Net (loss) income attributable to NTS
|
$
|
(144,000
|
)
|
$
|
1,602,000
|
$
|
1,287,000
|
$
|
2,556,000
|
|||||||
|
||||||||||||||||
Net (loss) income from continuing operations attributable to NTS
|
$
|
(144,000
|
)
|
$
|
1,614,000
|
$
|
1,287,000
|
$
|
2,560,000
|
|||||||
Net loss from discontinued operations attributable to NTS
|
$
|
-
|
$
|
(12,000
|
)
|
$
|
-
|
$
|
(4,000
|
)
|
||||||
|
||||||||||||||||
Basic earnings attributable to NTS per common share:
|
||||||||||||||||
Net (loss) income from continuing operations
|
$
|
(0.01
|
)
|
$
|
0.14
|
$
|
0.11
|
$
|
0.23
|
|||||||
Net loss from discontinued operations
|
-
|
-
|
-
|
-
|
||||||||||||
Net (loss) income attributable to NTS *
|
$
|
(0.01
|
)
|
$
|
0.14
|
$
|
0.11
|
$
|
0.23
|
|||||||
|
||||||||||||||||
Diluted earnings attributable to NTS per common share:
|
||||||||||||||||
Net (loss) income from continuing operations
|
$
|
(0.01
|
)
|
$
|
0.14
|
$
|
0.11
|
$
|
0.22
|
|||||||
Net loss from discontinued operations
|
-
|
-
|
-
|
-
|
||||||||||||
Net (loss) income attributable to NTS *
|
$
|
(0.01
|
)
|
$
|
0.13
|
$
|
0.11
|
$
|
0.22
|
|||||||
|
||||||||||||||||
Weighted average common shares outstanding
|
11,598,000
|
11,340,000
|
11,544,000
|
11,330,000
|
||||||||||||
Dilutive effect of stock options, nonvested shares and warrants
|
611,000
|
552,000
|
621,000
|
531,000
|
||||||||||||
Weighted average common shares outstanding, assuming dilution
|
12,209,000
|
11,892,000
|
12,165,000
|
11,861,000
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
|
July 31,
|
July 31,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
Net income
|
$
|
51,000
|
$
|
1,838,000
|
$
|
1,667,000
|
$
|
3,060,000
|
||||||||
Other comprehensive (loss) income, net of tax:
|
||||||||||||||||
Foreign currency translation adjustment
|
(66,000
|
)
|
(30,000
|
)
|
(106,000
|
)
|
91,000
|
|||||||||
Comprehensive (loss) income
|
$
|
(15,000
|
)
|
$
|
1,808,000
|
$
|
1,561,000
|
$
|
3,151,000
|
|||||||
Comprehensive income attributable to non-controlling interest
|
(195,000
|
)
|
(236,000
|
)
|
(380,000
|
)
|
(504,000
|
)
|
||||||||
Comprehensive (loss) income attributable to NTS
|
$
|
(210,000
|
)
|
$
|
1,572,000
|
$
|
1,181,000
|
$
|
2,647,000
|
|
2013
|
2012
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
||||||
Net income
|
$
|
1,667,000
|
$
|
3,060,000
|
||||
|
||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
5,152,000
|
4,943,000
|
||||||
Amortization of debt issuance cost and debt discount
|
1,180,000
|
344,000
|
||||||
Allowance for doubtful accounts
|
(147,000
|
)
|
129,000
|
|||||
Gain on investments
|
(51,000
|
)
|
(37,000
|
)
|
||||
Deferred income taxes
|
-
|
128,000
|
||||||
Share based compensation
|
2,991,000
|
572,000
|
||||||
Changes in operating assets and liabilities (net of acquisitions):
|
||||||||
Accounts receivable
|
1,792,000
|
(2,255,000
|
)
|
|||||
Unbilled accounts receivable
|
(3,784,000
|
)
|
(4,624,000
|
)
|
||||
Inventories
|
167,000
|
796,000
|
||||||
Prepaid expenses
|
(514,000
|
)
|
(182,000
|
)
|
||||
Other assets
|
406,000
|
190,000
|
||||||
Income taxes, net
|
(1,947,000
|
)
|
2,293,000
|
|||||
Accounts payable
|
(2,115,000
|
)
|
(4,190,000
|
)
|
||||
Accrued expenses
|
(385,000
|
)
|
(268,000
|
)
|
||||
Deferred income
|
1,793,000
|
645,000
|
||||||
Deferred compensation
|
117,000
|
61,000
|
||||||
Net cash provided by operating activities
|
6,322,000
|
1,605,000
|
||||||
|
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of property, plant and equipment
|
(2,525,000
|
)
|
(3,609,000
|
)
|
||||
Investment in life insurance
|
(267,000
|
)
|
(1,000
|
)
|
||||
Cash surrender of insurance policy
|
-
|
476,000
|
||||||
Acquisition of businesses, net of cash aquired
|
-
|
(3,116,000
|
)
|
|||||
Investment in retirement funds
|
-
|
(281,000
|
)
|
|||||
Net cash used in investing activities
|
(2,792,000
|
)
|
(6,531,000
|
)
|
||||
|
||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from current and long-term debt
|
9,783,000
|
10,579,000
|
||||||
Repayments of current and long-term debt
|
(16,817,000
|
)
|
(5,963,000
|
)
|
||||
Proceeds from stock options exercised
|
618,000
|
65,000
|
||||||
Tax benefit from restricted stock issuance and stock options exercised
|
73,000
|
55,000
|
||||||
Net cash (used) provided by financing activities
|
(6,343,000
|
)
|
4,736,000
|
|||||
Effect of exchange rate changes on cash
|
(106,000
|
)
|
91,000
|
|||||
|
||||||||
Net decrease in cash and cash equivalents
|
(2,919,000
|
)
|
(99,000
|
)
|
||||
Beginning cash and cash equivalents balance
|
8,875,000
|
4,335,000
|
||||||
|
||||||||
ENDING CASH AND CASH EQUIVALENTS BALANCE
|
$
|
5,956,000
|
$
|
4,236,000
|
1. | Basis of Presentation |
2. | Income Taxes |
3. | Comprehensive Income |
4. | Unbilled Receivables |
5. | Inventories |
6. | Noncontrolling Interests |
7. | Earnings Per Share |
8. | Intangible Assets |
|
July 31, 2013
|
January 31, 2013
|
||||||||||||||||||||||||
|
Gross
|
|
Net
|
Estimated
|
Gross
|
|
Net
|
Estimated
|
||||||||||||||||||
|
Carrying
|
Accum.
|
Carrying
|
Useful
|
Carrying
|
Accum.
|
Carrying
|
Useful
|
||||||||||||||||||
|
Amount
|
Amort.
|
Amount
|
Life
|
Amount
|
Amort.
|
Amount
|
Life
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Covenants not to compete
|
$
|
990,000
|
$
|
793,000
|
$
|
197,000
|
3-5 years
|
$
|
990,000
|
$
|
740,000
|
$
|
250,000
|
3-5 years
|
||||||||||||
Customer relationships
|
20,547,000
|
6,459,000
|
14,088,000
|
3-15 years
|
20,547,000
|
5,552,000
|
14,995,000
|
3-15 years
|
||||||||||||||||||
Accreditations and certifications
|
20,000
|
20,000
|
-
|
5 years
|
20,000
|
18,000
|
2,000
|
5 years
|
||||||||||||||||||
Trademarks and tradenames
|
258,000
|
96,000
|
162,000
|
3-10 years
|
258,000
|
86,000
|
172,000
|
3-10 years
|
||||||||||||||||||
GSA Schedule
|
800,000
|
211,000
|
589,000
|
10 years
|
800,000
|
170,000
|
630,000
|
10 years
|
||||||||||||||||||
Total
|
$
|
22,615,000
|
$
|
7,579,000
|
$
|
15,036,000
|
|
$
|
22,615,000
|
$
|
6,566,000
|
$
|
16,049,000
|
|
||||||||||||
|
|
|
||||||||||||||||||||||||
Intangible assets not subject to amortization:
|
|
|
||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||
Goodwill
|
$
|
21,799,000
|
|
$
|
21,799,000
|
|
||||||||||||||||||||
Trademarks and tradenames
|
100,000
|
|
100,000
|
|
||||||||||||||||||||||
Total
|
$
|
21,899,000
|
|
$
|
21,899,000
|
|
9. | Accrued Expenses |
|
July 31, 2013
|
January 31, 2013
|
||||||
Compensation and employee benefits
|
$
|
7,583,000
|
$
|
6,484,000
|
||||
Garwood note payable
|
-
|
1,175,000
|
||||||
Acquistion holdback payable
|
1,650,000
|
1,650,000
|
||||||
Long term incentive plan
|
3,930,000
|
1,036,000
|
||||||
Other
|
2,433,000
|
2,797,000
|
||||||
Total accrued expenses
|
$
|
15,596,000
|
$
|
13,142,000
|
10. | Equity |
|
Shares
|
Weighted Avg. Exercise Price
|
Weighted Avg. Remaining Contract Life in years
|
Aggregate Intrinsic Value
|
||||||||||||
Outstanding at January 31, 2013
|
368,550
|
$
|
4.66
|
1.42
|
$
|
1,229,000
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
(167,300
|
)
|
4.56
|
|||||||||||||
Canceled, forfeited or expired
|
(6,750
|
)
|
4.44
|
|||||||||||||
Outstanding at July 31, 2013
|
194,500
|
$
|
4.76
|
1.72
|
$
|
2,176,595
|
||||||||||
Exercisable at July 31, 2013
|
194,500
|
$
|
4.76
|
1.72
|
$
|
2,176,595
|
11. | Fair Value Measurement |
Level 1 | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Level 2 | Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 3 | Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
SERP investment in mutual funds
|
$
|
3,441,000
|
$
|
3,441,000
|
$
|
-
|
$
|
-
|
||||||||
Liability on earn-out for LTI acquisition
|
(705,000
|
)
|
-
|
-
|
(705,000
|
)
|
||||||||||
Liability on earn-out for Garwood acquisition
|
(200,000
|
)
|
-
|
-
|
(200,000
|
)
|
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
SERP investment in mutual funds
|
$
|
3,410,000
|
$
|
3,410,000
|
$
|
-
|
$
|
-
|
||||||||
Liability on earn-out for LTI acquisition
|
(650,000
|
)
|
-
|
-
|
(650,000
|
)
|
||||||||||
Liability on earn-out for Garwood acquisition
|
(200,000
|
)
|
-
|
-
|
(200,000
|
)
|
||||||||||
Embedded derivative in debt put option
|
(61,000
|
)
|
-
|
-
|
(61,000
|
)
|
12. | Acquisition of Garwood Laboratories |
Cash paid
|
$
|
3,165,000
|
||
Note payable
|
1,175,000
|
|||
Purchase price held back
|
750,000
|
|||
Working capital adjustment receivable
|
(198,000
|
)
|
||
Fair value of earn-out
|
200,000
|
|||
Aggregate purchase price
|
$
|
5,092,000
|
||
|
||||
Cash
|
49,000
|
|||
Account Receivable, net
|
593,000
|
|||
Property, plant and equipment
|
3,138,000
|
|||
Other assets
|
23,000
|
|||
Intangible assets
|
1,200,000
|
|||
Accounts payable
|
(157,000
|
)
|
||
Accrued expenses
|
(131,000
|
)
|
||
Relocation expense
|
(300,000
|
)
|
||
Deferred taxes
|
(1,678,000
|
)
|
||
|
||||
Fair value of assets and liabilities acquired
|
2,737,000
|
|||
Goodwill
|
$
|
2,355,000
|
13. | Debt |
14. | Restructuring Costs |
15. | Subsequent Events |
· | each outstanding share of Company common stock (other than shares held by any person who properly asserts dissenters’ rights under California law) will be converted into the right to receive an amount in cash equal to $23.00 per share (the "Per Share Merger Consideration"); |
· | each option to acquire Company common stock (whether vested or unvested) that is outstanding at the effective time of the Merger will become vested in full and will be cancelled in exchange for the right to receive the Per Share Merger Consideration minus the exercise price per share of the option; |
· | each restricted share of Company common stock (whether vested or unvested) that is outstanding at the effective time of the Merger will vest in full and will be converted into the right to receive the Per Share Merger Consideration; and |
· | each warrant to purchase Company common stock that is outstanding at the effective time of the Merger will be cancelled in exchange for the right to receive the Per Share Merger Consideration minus the exercise price per share of the warrant. |
· | Technical functional knowledge of engineering fundamentals: mechanical, structural, electrical, reliability, and high technology communication and security software system test and monitoring solutions. |
· | Testing on a variety of smart energy/smart grid products with a focus on the communications functionality and network protocols of smart meters, smart outlets, thermostats/in-home displays and smart appliances. |
· | Supply chain management focusing on assuring product integrity through quality process and product auditing, supplier improvement plans, and management of quality systems. |
· | Multi-disciplinary expertise in global compliance and certification for components, devices, communication products, software/hardware interoperability, and system security vulnerability assessments and validation. |
· | Testing on seismic, environmental, EMI, radiation, equipment qualification, commercial grade dedication, mechanical aging, thermal aging, vacuum testing, leak detection, and high expansion line breaks. Seismic and vibration simulation tests are conducted for a variety of products on single axis, dependent biaxial systems, or independent tri-axial and electro-mechanical shaker tables. |
· | Certification and evaluation services to nuclear utilities and suppliers worldwide. |
· | A full range of products, engineering and testing services under our NUPIC and NIAC audited 10CFR50, Appendix B quality program. |
· | increasing market share through leveraging its geographic reach and providing superior service that distinguishes it from its competition; |
· | investing in human and capital resources to strengthen existing capabilities; |
· | enhancing utilization of resources; |
· | adding new, innovative service offerings to the Company’s repertoire; |
· | identify, evaluate and acquire companies that can add significant value upon integration with NTS; and |
· | continue to integrate companies recently acquired. |
REVENUES | ||||||||||||
Six months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
Total revenues
|
$
|
91,203
|
$
|
90,782
|
0.5
|
%
|
GROSS PROFIT | ||||||||||||
Six months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
27,997
|
$
|
24,131
|
16.0
|
%
|
||||||
% to total revenues
|
30.7
|
%
|
26.6
|
%
|
SELLING, GENERAL & ADMINISTRATIVE | ||||||||||||
Six months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
21,578
|
$
|
17,079
|
26.3
|
%
|
||||||
% to total revenues
|
23.7
|
%
|
18.8
|
%
|
Six months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
5,344
|
$
|
6,916
|
(22.7
|
)%
|
||||||
% to total revenues
|
5.9
|
%
|
7.6
|
%
|
REVENUES | ||||||||||||
Three months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
Total revenues
|
$
|
46,186
|
$
|
47,329
|
(2.4
|
)%
|
GROSS PROFIT | ||||||||||||
Three months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
14,467
|
$
|
12,810
|
12.9
|
%
|
||||||
% to total revenues
|
31.3
|
%
|
27.1
|
%
|
SELLING, GENERAL & ADMINISTRATIVE | ||||||||||||
Three months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
11,539
|
$
|
8,667
|
33.1
|
%
|
||||||
% to total revenues
|
25.0
|
%
|
18.3
|
%
|
OPERATING INCOME | ||||||||||||
Three months ended July 31,
|
2013
|
2012
|
% Change
|
|||||||||
(Dollars in thousands)
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Total
|
$
|
1,885
|
$
|
4,020
|
(53.1
|
)%
|
||||||
% to total revenues
|
4.1
|
%
|
8.5
|
%
|
|
(Dollars in thousands)
|
|||||||
|
Three months ended July 31,
|
|||||||
|
2013
|
2012
|
||||||
|
|
|
||||||
Net Income
|
$
|
51
|
$
|
1,838
|
||||
Add
|
||||||||
Interest
|
1,864
|
922
|
||||||
Taxes
|
38
|
1,313
|
||||||
Depreciation
|
2,048
|
2,003
|
||||||
Amortization
|
506
|
506
|
||||||
EBITDA
|
4,507
|
6,582
|
||||||
Add
|
||||||||
Share based compensation
|
2,403
|
420
|
||||||
Adjusted EBITDA
|
$
|
6,910
|
$
|
7,002
|
|
(Dollars in thousands)
|
|||||||
|
July 31, 2013
|
January 31, 2013
|
||||||
Cash and cash equivalents
|
$
|
5,956
|
$
|
8,875
|
||||
Investments
|
$
|
3,691
|
$
|
3,410
|
||||
Accounts receivable
|
$
|
31,928
|
$
|
33,573
|
||||
Unbilled receivable
|
$
|
11,857
|
$
|
8,073
|
||||
Working capital
|
$
|
32,021
|
$
|
33,338
|
|
(Dollars in thousands)
|
|||
|
July 31, 2013
|
|||
Net cash provided by operating activities
|
$
|
6,322
|
||
Net cash used in investing activities
|
(2,792
|
)
|
||
Net cash used by financing activities
|
(6,343
|
)
|
||
Effect of exchange rate changes on cash
|
(106
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(2,919
|
)
|
|
(Dollars in thousands)
|
|||||||
|
July 31, 2013
|
January 31, 2013
|
||||||
Revolving credit line (a)
|
$
|
12,655
|
$
|
8,500
|
||||
Term loan (b)
|
12,450
|
14,300
|
||||||
Acquisition and equipment credit line (c)
|
17,636
|
18,447
|
||||||
Mill Road debt (d)
|
-
|
6,983
|
||||||
Secured and other notes payable (e)
|
4,841
|
5,721
|
||||||
Subtotal
|
47,582
|
53,951
|
||||||
Less current installments
|
6,037
|
5,572
|
||||||
Total
|
$
|
41,545
|
$
|
48,379
|
(a) | The Company is required to repay the outstanding principal under the revolving credit line on November 10, 2015. Interest accrues at the Company’s option at either (i) the Base Rate plus a specified margin ranging between 75 and 150 basis points depending on the Company’s consolidated total debt to consolidated EBITDA ratio or (ii) the Eurodollar Rate plus a specified margin ranging between 175 and 250 basis points depending on the Company’s consolidated total debt to consolidated EBITDA ratio. When interest is incurred at the Base Rate, interest is payable monthly in arrears on the first day of each month. When interest is incurred at the Eurodollar Rate, interest is payable at the end of each interest period, which is defined as one, two, three or six months after the applicable advance is disbursed to the Company (except that with respect to six month interest periods, interest is payable at three month intervals). The outstanding balance from revolving credit lines at July 31, 2013 was $12,655,000. The revolving credit line is limited to 85% of eligible accounts receivable, which equates to $24,980,000 as of July 31, 2013. The available amount on the revolving credit line was $8,578,000 as of July 31, 2013. |
(b) | The Company is required to repay the $20 million five-year term loan in equal quarterly principal installments of $500,000 commencing on February 1, 2011 until November 10, 2015, the maturity date, when all remaining outstanding principal plus accrued interest thereon is due and payable in full. Interest accrues at a specified margin plus either: (i) the greatest of (a) the prime rate announced by Comerica Bank, (b) the federal funds effective rate as published by the Federal Reserve Bank of New York plus 1.0%, and (c) a daily adjusting LIBOR rate plus 1.0%; or (ii) a rate based on LIBOR. The Company refers to the rates described in clauses (i) and (ii) in the preceding sentence, respectively, as the "Base Rate" and as the "Eurodollar Rate." The specific per annum interest rate will be, at the Company’s option, either the Base Rate plus a specified margin ranging between 100 and 175 basis points depending on the Company’s consolidated total debt to consolidated EBITDA ratio or the Eurodollar Rate plus a specified margin ranging between 200 and 275 basis points depending on the company’s consolidated total debt to consolidated EBITDA ratio. When interest is based on the Base Rate, interest is payable monthly in arrears on the first day of each month. When interest is based on the Eurodollar Rate, interest is payable at the end of each interest period, which is defined as one, two, three or six months after the applicable loan is disbursed to the Company (except that with respect to six month interest periods, interest is payable at three month intervals). Excess cash flow payments as defined under the credit agreement are required to be applied to the prepayment of the term loan. The outstanding balance from term loans at July 31, 2013 was $12,450,000. |
(c) | With respect to any credit advance under the acquisition and equipment line that is used to finance eligible acquisitions, the Company is required to make quarterly principal payments commencing one year after the date such credit advance is made, until November 10, 2015, the maturity date, when all remaining outstanding principal plus accrued interest thereon is due and payable in full. No principal payments are due during the first year. The amount of such quarterly principal payments is 1.25% of the aggregate original principal amount of such credit advance during the second year, increasing to 2.50% during the third year and increasing to 3.75% during the fourth and fifth years. |
(d) | The outstanding principal of $7,000,000, accrued interest of $745,000 and the prepayment penalty of $387,000, related to the Mill Road subordinated note were paid on June 27, 2013. There was no outstanding balance at July 31, 2013. |
(e) | The Company has an additional $4,178,000 at July 31, 2013 in equipment line balances which were used to finance various test equipment with terms of 60 months for each equipment schedule at interest rates ranging from 0.00% to 5.24%. |
|
National Technical Systems, Inc.
|
|
|
Date: September 12, 2013
|
/s/ Michael El-Hillow
|
|
Michael El-Hillow, Senior Vice President and
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Exhibit Number
|
|
Description of Exhibit
|
|
|
|
2.1*
|
|
Agreement and Plan of Merger dated August 15, 2013 among Nest Parent, Inc., Nest Merger Sub, Inc. and the registrant (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 16, 2013).
|
10.1*
|
|
Limited Guaranty dated August 15, 2013 by Aurora Equity Partners IV L.P. and Aurora Overseas Equity Partners IV L.P. in favor of the registrant (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 16, 2013).
|
10.2*
|
|
Form of Voting Agreement dated August 15, 2013 among Nest Parent, Inc. and certain shareholders of the Company (incorporated by reference to Exhibit 99.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 16, 2013).
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
|
XBRL Instance.
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema.
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation.
|
101.LAB*
|
|
XBRL Taxonomy Extension Labels.
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation.
|
* | Furnished herewith. |
1 Year National Technical Systems, Inc. (MM) Chart |
1 Month National Technical Systems, Inc. (MM) Chart |
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