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8-K - 8-K - NORTECH SYSTEMS INCa18-40226_18k.htm

Exhibit 99.1

 

 

Contact:

Connie Beck

 

Nortech Systems Incorporated

 

(952) 345-2244

 

or

 

Warren Djerf

 

Brookside Communications Group

 

952-920-3908 / warren@brookcomm.net

 

Nov. 14, 2018

 

Nortech Systems Reports Third Quarter Results

 

MINNEAPOLIS — Nortech Systems Inc. (NASDAQ: NSYS) today reported net sales of $29.6 million for the third quarter ended September 30, which includes $1.9 million of revenue recognized under new FASB accounting guidelines adopted this fiscal year. This compares with $28.3 million reported for the third quarter of 2017. On a pro forma basis to adjust for this change in accounting guidance, sales were $27.7 million for the third quarter of 2018.

 

For the nine months ended September 30, Nortech’s net sales were $84.5 million, which includes $4.2 million of revenue recognized under the new FASB guidelines. For the comparable period in 2017, net sales were $86.8 million.

 

Operating income for the third quarter was $649,000, compared with $284,000 for the third quarter of 2017. For the nine-month period, Nortech reported operating income of $1.3 million, compared with $500,000 for the same period in 2017.

 

Nortech Systems reported net income in the third quarter of $364,000, or $0.14 per diluted common share, compared with $43,000, or $0.02 per diluted common share, for the same period last year. For the nine months ended September 30, 2018, Nortech reported net income of $362,000, or $0.13 per diluted common share. This compares with net income of $13,000, or $0.00 per diluted common share, for the same period in 2017.

 

“We’re encouraged by our quarterly performance and continued profit improvement,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our customers remain optimistic and confident, influenced by a strong economy, an increase in defense spending and higher medtech investing.”

 

Nortech continues to face challenges related to electronic component shortages, which are expected to continue into next year. The company estimates these shortages had a negative revenue impact of approximately five percent in the third quarter, with profitability also affected by related inefficiencies in production and increased inventory levels. Nortech is working with its customers and supply chain partners to reduce this impact.

 

-more-

 


 

Two facility-related developments expected to provide long-term benefits are scheduled to conclude by year-end: the move of Nortech’s Monterrey, Mexico, operations into a new larger and more efficient facility and the relocation of the Devicix by Nortech medical device product development group to an expanded corporate headquarters building in Maple Grove, Minn.

 

“These improvements to our infrastructure and operations support our ongoing strategy of equipping the company for future growth and profitability,” concluded Wasielewski. He added that the company’s backlog position of $27.7 million — up double digits both sequentially and year-over-year — should help absorb investment-related costs and provide momentum to finish out the year.

 

Conference Call

 

Nortech Systems will hold a conference call at 10:00 a.m. (CST) on Thursday, November 15, 2018, to discuss the company’s third 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 November 29, 2018, by dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference PIN #40286 is required.

 

About Nortech Systems Incorporated

 

Nortech Systems Incorporated (www.nortechsys.com), based in Maple Grove, Minn., is a full-service electronics manufacturing services (EMS) provider of wire and cable assemblies, printed circuit board assemblies and higher-level complete box build assemblies for a wide range of industries.  Markets served include industrial, medical and aerospace/defense. The company has operations in the U.S., Mexico and China. Nortech Systems Incorporated 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.  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; 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.

 

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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

 

NINE MONTHS ENDED

 

THREE
MONTHS
ENDED

 

NINE
MONTHS
ENDED

 

 

 

SEPTEMBER 30,

 

SEPTEMBER 30,

 

SEPTEMBER 30,

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

2018

 

2017

 

2018

 

2017

 

2018

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

29,558

 

$

28,310

 

84,543

 

$

86,762

 

27,665

 

$

80,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

26,171

 

24,794

 

74,311

 

76,789

 

24,454

 

70,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

3,387

 

3,516

 

10,232

 

9,973

 

3,211

 

10,032

 

 

 

11.5

%

12.4

%

12.1

%

11.5

%

11.6

%

12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling Expenses

 

717

 

1,144

 

2,792

 

3,676

 

717

 

2,792

 

General and Administrative Expenses

 

2,021

 

2,088

 

6,177

 

6,152

 

2,021

 

6,177

 

Gain on Sale of Property and Equipment

 

 

 

 

(355

)

 

 

Total Operating Expenses

 

2,738

 

3,232

 

8,969

 

9,473

 

2,738

 

8,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income From Operations

 

649

 

284

 

1,263

 

500

 

472

 

1,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on Extinguishment of Debt

 

 

 

 

(175

)

 

 

Interest Expense

 

(170

)

(172

)

(551

)

(453

)

(170

)

(551

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

479

 

112

 

712

 

(128

)

303

 

512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense (Benefit)

 

115

 

69

 

350

 

(141

)

115

 

350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

364

 

$

43

 

362

 

$

13

 

188

 

$

162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Per Common Share - Diluted

 

$

0.14

 

$

0.02

 

0.13

 

$

0.00

 

0.07

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding - Diluted

 

2,682,901

 

2,748,533

 

2,702,503

 

2,748,973

 

2,682,901

 

2,702,503

 

 

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

SEPTEMBER 30, 2018

 

DECEMBER 31, 2017

 

 

 

Unaudited

 

Audited

 

Cash

 

$

397

 

$

473

 

Restricted Cash

 

236

 

306

 

Accounts Receivable

 

18,979

 

17,417

 

Inventories

 

15,236

 

18,527

 

Contract Assets

 

7,076

 

 

Prepaid Expenses and Other Current Assets

 

1,380

 

1,044

 

Property and Other Long-term Assets

 

10,124

 

10,204

 

Goodwill and Other Intangible Assets, Net

 

3,953

 

4,114

 

Total Assets

 

$

57,381

 

$

52,085

 

 

 

 

 

 

 

Accounts Payable

 

$

16,887

 

$

11,699

 

Other Current Liabilities

 

6,222

 

6,346

 

Long Term Line of Credit

 

8,058

 

8,503

 

Long-term Debt and Other Long-term Liabilities

 

4,931

 

5,712

 

Shareholders’ Equity

 

21,283

 

19,825

 

Total Liabilities and Shareholders’ Equity

 

$

57,381

 

$

52,085

 

 

3