SYS-CON MEDIA Authors: Liz McMillan, Carmen Gonzalez, Zakia Bouachraoui, Roger Strukhoff, David Linthicum

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Nortech Systems Reports Second Quarter Results

Nortech Systems Incorporated (Nasdaq: NSYS), a leading provider of engineering and manufacturing solutions for complex electromechanical products, reported net sales of $27.3 million for the second quarter ended June 30, 2019, compared with $28.5 million for the second quarter of 2018.

Operating loss for the second quarter of 2019 was $1.2 million, which compares with an operating income of $0.7 million for the second quarter of 2018. Net loss for the second quarter of 2019 was $1.6 million, or $0.58 per diluted common share. This compares with a net income for second quarter of 2018 of $0.4 million, or $0.14 per diluted common share. June 30, 2019 backlog was $58.7 million vs. $40.1 million on June 30, 2018.

“While our second quarter revenue met our expectations, our margins were negatively impacted by a higher mix of customer shipments with low margins and operational inefficiencies incurred managing component shortages, “ said Jay D. Miller, president and CEO. “We are working closely with our customers and our supplier partners to mitigate lower margin shipments and the effects of component shortages. We expect to deliver on our backlog for the remainder of the year, which is the highest backlog we have had in recent history. Our operating expenses increased compared to prior year while we completed the implementation of our global ERP. Now that our new ERP is in place, we have begun to experience operational efficiencies that we believe will positively impact future periods. We will also no longer expect to invest in our ERP as the same level.”

The mission of Nortech Systems is to be the most trusted, innovative, and nimble design and manufacturing services and solutions provider, while taking great care of its employees, customers, and supplier partners.

About Nortech Systems Incorporated Nortech Systems is a leading provider of design and manufacturing solutions for complex electromechanical systems, assemblies, and components. Nortech Systems primarily serves the medical, aerospace & defense, and industrial markets. Its design services span concept development to commercial design, and include software, electrical, mechanical, and biomedical engineering. Its manufacturing and supply chain capabilities are vertically integrated around wire/cable/interconnect assemblies, printed circuit board assemblies, as well as system-level assembly, integration, and final test. Headquartered in Maple Grove, Minn., Nortech currently has seven manufacturing locations and design centers across the U.S., Latin America, and Asia. Nortech Systems is traded on the NASDAQ Stock Market under the symbol NSYS. Nortech’s website is www.nortechsys.com.

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.

Condensed Consolidated Statements of Operations

(in thousands, except for share data)

THREE MONTHS ENDED
June 30, 2019
Unaudited   Unaudited

2019

 

2018

 
Net Sales

$

27,292

 

 

$

28,538

 

 
Cost of Goods Sold

24,967

 

24,721

 
Gross Profit

2,325

 

3,817

8.5

%  

13.4

%
 
Operating Expenses  
Selling Expenses

797

 

1,037

General and Administrative Expenses

2,737

 

2,046

Total Operating Expenses

3,534

 

3,083

 
(Loss) Income From Operations

(1,209

)  

734

 
Other Expense  
Interest Expense

(279

)  

(209

)
 
(Loss) Income Before Income Taxes

(1,488

)  

525

 
Income Tax Expense

64

 

135

 
Net (Loss) Income

$

(1,552

)

 

$

390

 

 
(Loss) Income Per Common Share - Diluted

$

(0.58

)

 

$

0.14

 

 
Weighted Average Number of Common Shares Outstanding - Diluted

2,676,449

 

2,695,994

 

Condensed Consolidated Balance Sheets

(in thousands)

June 30, 2019

December 31, 2018

Unaudited

Audited

Cash

$

399

 

$

480

Restricted Cash

 

406

 

 

467

Accounts Receivable

 

20,691

 

 

20,093

Inventories

 

16,273

 

 

17,004

Contract Assets

 

7,228

 

 

6,431

Prepaid Expenses and Other Current Assets

 

1,776

 

 

1,381

Property and Other Long-term Assets

 

9,512

 

 

10,178

Goodwill and Other Long-term Assets, Net

 

9,044

 

 

3,926

Total Assets

$

65,329

 

$

59,960

 

 

 

Accounts Payable

$

16,845

 

$

18,142

Current Portion of Lease Obligation

 

1,190

 

 

337

Other Current Liabilities

 

6,789

 

 

6,413

Long Term Line of Credit

 

12,297

 

 

9,264

Long-term Debt and Other Long-term Liabilities

 

4,295

 

 

4,714

Long Term Operating Lease Obligation, Net

 

4,666

 

 

0

Shareholders’ Equity

 

19,247

 

 

21,090

Total Liabilities and Shareholders’ Equity

$

65,329

 

$

59,960

 

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