Nortech Systems Incorporated (Nasdaq: NSYS), a leading provider
of full-service electronics manufacturing services (EMS), today
reported net sales of $26.4 million for the first quarter ended
March 31, 2018, which includes $0.7 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,
first quarter sales of $25.7 million increased $0.2 million
sequentially from the fourth quarter of 2017 while net sales for
the first quarter of 2017 were $28.3 million.
Nortech reported an operating loss of $120,000 for the first
quarter of 2018. This compares with operating income of $121,000
for the first quarter of 2017, which included a one-time gain of
$354,000 on the sale of the company’s Wisconsin facility. Excluding
the one-time gain, the operating loss in the first quarter of 2017
would have been $233,000, and the first quarter 2018 operating
results would have represented an improvement of $113,000 over the
adjusted 2017 level, on $2.6 million lower revenue on a pro forma
basis.
The company reported a net loss of $391,000, or $0.14 per
diluted common share, for the first quarter of 2018, compared with
a net loss of $15,000, or $0.01 per diluted common share, for the
2017 period that reflected the gain on the facility sale. Nortech
recognized income tax expense for the first quarter of 2018 despite
the operating loss, as a result of foreign operations and related
minimum taxes generated from the recently enacted U.S. tax
reform.
“Our first quarter revenue came in as expected, up slightly from
the fourth quarter,” said Rich Wasielewski, Nortech Systems’
president and CEO. “Industrial sales were aided by the improving
economy, while defense sales continue to benefit from increased
defense spending.” He added, “Medical sales were still impacted by
several major customers working through their high inventory, but
the medical market led our backlog improvements during the quarter
and we expect its recovery to continue throughout the year.” Total
90-day backlog was up 13 percent from the start of the quarter.
“We are pleased with the improvement in our gross profit and
operating income, resulting from adjustments in our spending and
cost structure to match demand levels, and in generating positive
operating cash flow in the quarter,” concluded Wasielewski.
“Looking ahead, the improving medical backlog is expected to
provide the needed revenue to return to profitability in the second
half of the year.”
Conference CallNortech
Systems will hold a conference call at 10:00 a.m. (CDT) on Monday,
May 14, 2018, to discuss the company’s first 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 May 28, 2018, by dialing
877-481-4010 (from U.S.) or 919-882-2331 (International). To access
the replay, the conference ID 28591 is required.
About Nortech Systems
IncorporatedNortech 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
StatementsThis 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)
Pro Forma as if the previous
accounting guidance was in
As Reported
effect
THREE MONTHS ENDED THREE MONTHS ENDED MARCH
31, MARCH 31, Unaudited
Unaudited Unaudited 2018 2017
2018 Net Sales $ 26,447 $ 28,318 $ 25,730 Cost
of Goods Sold 23,419 25,226 22,731
Gross Profit 3,028 3,092 2,999 11.5 % 10.9 %
11.7 % Operating Expenses Selling Expenses 1,039 1,205 1,039
General and Administrative Expenses 2,109 2,120 2,109 Gain on Sale
of Property and Equipment - (354 ) - Total Operating
Expenses 3,148 2,971 3,148 Income
(Loss) From Operations (120 ) 121 (149 ) Other
Expense Interest Expense (172 ) (140 ) (172 ) Loss Before
Income Taxes (292 ) (19 ) (321 ) Income Tax Expense
(Benefit) 99 (4 ) 99 Net Loss $ (391 ) $ (15 )
$ (420 ) Loss Per Common Share - Basic and Diluted $ (0.14 )
$ (0.01 ) $ (0.15 ) Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 2,720,609 2,747,831
2,720,609
Condensed Consolidated Balance
Sheets
(in thousands)
MARCH 31, 2018 DECEMBER 31,
2017 Unaudited Audited Cash $ 466 $ 473
Restricted Cash 325 306 Accounts Receivable 18,179 17,417
Inventories 13,037 18,527 Contract Assets 6,151 - Prepaid Expenses
and Other Current Assets 984 1,044 Property and Other Long-term
Assets 10,126 10,204 Goodwill and Other Intangible Assets, Net
4,062 4,114 Total Assets $ 53,330 $ 52,085 Accounts Payable
$ 12,056 $ 11,699 Other Current Liabilities 6,388 6,346 Long Term
Line of Credit 8,649 8,503 Long-term Debt and Other Long-term
Liabilities 5,455 5,712 Shareholders’ Equity 20,782 19,825 Total
Liabilities and Shareholders’ Equity $ 53,330 $ 52,085
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version on businesswire.com: https://www.businesswire.com/news/home/20180511005471/en/
Nortech Systems IncorporatedConnie Beck, 952-345-2244VP &
CFOorBrookside Communications GroupWarren Djerf,
952-920-3908warren@brookcomm.net
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