Nortech Systems Reports Second Quarter Results
Company Posts Sequential Gains in Revenue and Operating Profits
Nortech Systems Incorporated (NASDAQ: NSYS) today reported net sales of $28.5 million for the second quarter ended June 30,
2018, which includes $1.6 million of revenue recognized under new FASB accounting guidelines adopted this fiscal year. On a pro
forma basis to adjust for this change in accounting guidance, second quarter sales of $26.9 million increased 5 percent and $1.2
million sequentially from the first quarter of 2018 while net sales for the second quarter of 2017 were $30.1 million.
For the six months ended June 30, 2018, Nortech Systems’ reported net sales of $55.0 million, which includes $2.3 million of
revenue recognized under the new FASB guidelines. For the first six months of 2017, net sales were $58.5 million.
For the second quarter of 2018, Nortech Systems reported operating income of $734,000, compared to an operating loss of $120,000
for the first quarter of 2018; operating income was $95,000 for the prior-year period. For the first six months of 2018, operating
income of $615,000 compares with $215,000 for the same period last year.
For the second quarter of 2018, Nortech Systems reported net income of $390,000, or $0.14 per diluted common share, compared
with a net loss of $16,000, or $0.01 per diluted common share, for the same period last year which included $175,000 of loss on
extinguishment of debt. For the six months ended June 30, 2018, Nortech Systems reported essentially breakeven results. This
compares with a net loss of $30,000, or $0.01 per diluted common share, for the first six months of 2017.
“We’re pleased with our sequential quarterly sales and profit improvements,” said Rich Wasielewski, Nortech Systems’ president
and CEO. “After several quarters of working through customer inventory issues, it was good to see contributions across the board.”
He noted that Nortech’s overall quarterly backlog increased nine percent, both sequentially and year over year, with all three
markets – medical, industrial and defense – providing momentum heading into the second half of the year.
Gross margin in the second quarter of 2018 was 13.4 percent, an improvement of 190 basis points sequentially and 220 basis
points compared to the prior-year period. The strong gross margin performance resulted from a favorable product/service mix, cost
reductions and process improvements.
“Our industry continues to face tariff concerns and electronic component shortages,” concluded Wasielewski, adding that these
issues may become even more challenging in the second half of the year. Nortech estimates it was unable to ship $0.6 million in
customer orders in the second quarter due to component shortages.
Conference Call
Nortech Systems announces a conference call to be held at 10:00 a.m. (CDT) on Thursday, August 16, 2018, to discuss the
company’s second quarter results. Anyone interested in participating in the conference can access the call by dialing 877-407-0782
from within the United States, or 201-689-8567 if calling internationally. An audio webcast and replay of this conference call can
be accessed at the investor relations portion of Nortech Systems’ website at www.nortechsys.com or at www.investorcalendar.com. The telephone replay will be available through August 30, 2018, by dialing
877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference ID 36917 is required.
About Nortech Systems Incorporated
Nortech Systems (www.nortechsys.com), based in Maple Grove, Minn., is a full-service electronics manufacturing services (EMS)
provider of complex interconnect solutions, printed circuit board assemblies and diagnostic repair and integration services
including higher-level assemblies and box builds for a wide range of industries. Markets served include industrial and commercial
equipment, medical device, and aerospace & defense. Nortech has a range of specialized, high-tech facilities in the U.S., Latin
America and Asia used for customized design, manufacture, testing and repair of its solutions. Nortech Systems is traded on the
NASDAQ Stock Market under the symbol NSYS.
Forward-Looking Statements
This press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Examples of forward-looking statements include, among others, statements we make regarding business
development activities, backlog, financial results, and initiatives related to operational efficiencies, cash management, working
capital utilization, inventory reduction and accounts payable reduction. While this release is based on management’s best judgment
and current expectations, actual results may differ and involve a number of risks and uncertainties. Important factors that could
cause actual results to differ materially from the forward-looking statements include, without limitation: volatility in market
conditions which may affect market supply of and demand for the company’s products; increased competition; dependence on major
customers, including a single customer that has represented a large percentage of our revenues in recent years; changes in the
reliability and efficiency of operating facilities or those of third parties; risks related to availability of labor; commodity and
energy cost instability; general economic, financial and business conditions that could affect the company’s financial condition
and results of operations; as well as risk factors listed from time to time in the company’s filings with the SEC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Operations |
|
(in thousands, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
As Reported |
|
|
Pro Forma as if the
previous accounting
guidance was in effect
|
|
|
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
THREE
MONTHS
ENDED
|
|
|
|
SIX
MONTHS
ENDED
|
|
|
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
|
|
Unaudited |
|
|
Unaudited |
|
|
Unaudited |
|
|
Unaudited |
|
|
Unaudited |
|
|
Unaudited |
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
$ |
28,538 |
|
|
$ |
30,134 |
|
|
|
54,985 |
|
|
$ |
58,452 |
|
|
|
26,928 |
|
|
$ |
52,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
|
|
24,721 |
|
|
|
26,769 |
|
|
|
48,140 |
|
|
|
51,995 |
|
|
|
23,106 |
|
|
|
45,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
|
3,817 |
|
|
|
3,365 |
|
|
|
6,845 |
|
|
|
6,457 |
|
|
|
3,822 |
|
|
|
6,822 |
|
|
|
|
|
13.4 |
% |
|
|
11.2 |
% |
|
|
12.4 |
% |
|
|
11.0 |
% |
|
|
14.2 |
% |
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling Expenses |
|
|
|
1,037 |
|
|
|
1,327 |
|
|
|
2,075 |
|
|
|
2,532 |
|
|
|
1,037 |
|
|
|
2,075 |
|
General and Administrative Expenses
|
|
|
|
2,046 |
|
|
|
1,944 |
|
|
|
4,155 |
|
|
|
4,065 |
|
|
|
2,046 |
|
|
|
4,155 |
|
Gain on Sale of Property and Equipment |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(355 |
) |
|
|
-
|
|
|
|
-
|
|
Total Operating Expenses |
|
|
|
3,083 |
|
|
|
3,270 |
|
|
|
6,230 |
|
|
|
6,242 |
|
|
|
3,083 |
|
|
|
6,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations |
|
|
|
734 |
|
|
|
95 |
|
|
|
615 |
|
|
|
215 |
|
|
|
739 |
|
|
|
592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Extinguishment of Debt |
|
|
|
- |
|
|
|
(175 |
) |
|
|
- |
|
|
|
(175 |
) |
|
|
- |
|
|
|
- |
|
Interest Expense |
|
|
|
(209 |
) |
|
|
(142 |
) |
|
|
(382 |
) |
|
|
(281 |
) |
|
|
(209 |
) |
|
|
(382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes |
|
|
|
525 |
|
|
|
(222 |
) |
|
|
233 |
|
|
|
(241 |
) |
|
|
530 |
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense (Benefit) |
|
|
|
135 |
|
|
|
(206 |
) |
|
|
235 |
|
|
|
(211 |
) |
|
|
135 |
|
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
$ |
390 |
|
|
$ |
(16 |
) |
|
|
(2 |
) |
|
$ |
(30 |
) |
|
|
395 |
|
|
$ |
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Per Common Share - Basic and Diluted |
|
|
$ |
0.14 |
|
|
$ |
(0.01 |
) |
|
|
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
0.15 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding - Basic and Diluted |
|
|
|
2,695,994 |
|
|
|
2,747,831 |
|
|
|
2,708,234 |
|
|
|
2,747,831 |
|
|
|
2,695,994 |
|
|
|
2,708,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets |
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 30, 2018 |
|
|
DECEMBER 31, 2017 |
|
|
|
|
Unaudited |
|
|
Audited |
Cash |
|
|
$ |
437 |
|
$ |
473 |
Restricted Cash |
|
|
|
234 |
|
|
306 |
Accounts Receivable |
|
|
|
19,309 |
|
|
17,417 |
Inventories |
|
|
|
13,969 |
|
|
18,527 |
Contract Assets |
|
|
|
6,547 |
|
|
- |
Prepaid Expenses and Other Current Assets |
|
|
|
1,259 |
|
|
1,044 |
Property and Other Long-term Assets |
|
|
|
10,138 |
|
|
10,204 |
Goodwill and Other Intangible Assets, Net |
|
|
|
4,008 |
|
|
4,114 |
Total Assets |
|
|
$ |
55,901 |
|
$ |
52,085 |
|
|
|
|
|
|
|
|
Accounts Payable |
|
|
$ |
15,676 |
|
$ |
11,699 |
Other Current Liabilities |
|
|
|
6,975 |
|
|
6,346 |
Long Term Line of Credit |
|
|
|
7,142 |
|
|
8,503 |
Long-term Debt and Other Long-term Liabilities |
|
|
|
5,099 |
|
|
5,712 |
Shareholders’ Equity |
|
|
|
21,009 |
|
|
19,825 |
Total Liabilities and Shareholders’ Equity |
|
|
$ |
55,901 |
|
$ |
52,085 |
Nortech Systems Incorporated
Connie Beck, 952-345-2244
or
Brookside Communications Group
Warren Djerf, 952-920-3908
warren@brookcomm.net
View source version on businesswire.com: https://www.businesswire.com/news/home/20180815005384/en/