- Fiscal Year Revenue Declines 10.5%; GAAP Net Loss of ($1.5)
million
- Adjusted EBITDA of $0.1 million for Fiscal Year 2020 Compared
to $2.4 million in Fiscal Year 2019
- Nortech Strengthens the Balance Sheet and Reduces Long Term
Debt via Sale & Leaseback of Two Minnesota Plants
- The Company has Sufficient Liquidity with $8.1 million Unused
Line of Credit Availability
- Monthly Bookings Trends Improving. Solid 90-day Backlog at $24
million and Total Backlog of $49 million
Nortech Systems Incorporated
(Nasdaq: NSYS) (the “Company”), a leading provider of engineering
and manufacturing solutions for complex electromedical and
electromechanical products serving the medical, aerospace &
defense and industrial markets, reported net sales of $104.1
million for the year ended December 31, 2020, a decline of 10.5%
compared to $116.3 for fiscal 2019. The decline was primarily due
to reduced demand from medical and industrial customers impacted by
COVID-19. Gross margin for fiscal 2020 was 8.1% compared to 10.8%
in 2019, a decline of 2.7 percentage points. Gross margin in the
fourth quarter was down approximately 6 percentage points versus
the same period last year due to unabsorbed fixed overhead in the
Company’s global manufacturing network. Net loss for fiscal year
2020 was ($1.5) million and ($0.58) per diluted share compared to a
net loss of ($1.2) million and ($0.46) per diluted share in fiscal
year 2019. Adjusted EBITDA was $0.1 million in fiscal 2020 compared
to $2.4 million in fiscal 2019. The EBITDA decline was primarily
due to reduced revenue in the fourth quarter related to
COVID-19.
"The fourth quarter of 2020
was a significant challenge for Nortech due to the effects of
COVID-19, related supply-chain challenges, and slower customer
order volume. Our team battled through adversity, preserved our
workforce with the help of a PPP loan, and continued supplying
mission critical parts to our medical, industrial, and defense
customers. Our monthly bookings trend improved late in the fourth
quarter of 2020 and we are seeing those positive trends continue
into the first quarter of 2021. The team has done a great job
positioning the Company to return to profitable growth in 2021.”
stated Jay D. Miller, Chief Executive Officer and
President.
Revenue was $23.8 million for
the fourth quarter ended December 31, 2020, compared with $30.8
million for the fourth quarter of 2019. Operating loss for the
fourth quarter of 2020 was ($3.8) million which includes a $2.4
million non-cash charge due to the impairment of goodwill remaining
from the acquisition of the Devicix business in 2015. During the
fourth quarter of 2020 all aspects of Devicix engineering services
were fully integrated into Nortech Systems to better facilitate our
value proposition for providing innovative speed-to-market
solutions for medical device customers. Excluding this one-time
charge, adjusted operating loss for the fourth quarter of 2020 was
($1.4) million. This compares with operating income of $0.8 million
for the fourth quarter of 2019. Net loss for the fourth quarter of
2020 was ($3.5) million, or ($1.33) per diluted common share
compared with net income in the fourth quarter of 2019 of $0.3
million, or $0.10 per diluted common share. Adjusted EBITDA was a
loss of ($0.9) million in the fourth quarter of 2020 compared to
$1.4 million in fiscal 2019. The EBITDA decline was primarily due
to reduced revenue related COVID-19. Nortech’s backlog at the end
of the fourth quarter of 2020 was $48.7 million and is rebounding
in the first quarter of 2021.
In the fourth quarter,
Nortech’s Merrifield production facility consolidation was
completed as planned. The Company shifted nearly all of its Printed
Circuit Board (PCB) manufacturing to its Mankato, Minnesota
production facility, and much of its complex wire and cable
assembly production to its Bemidji, Minnesota production facility
that recently achieved AS9100D certification.
Mr. Miller continued, “This
consolidation reflects Nortech’s strategy of focusing our
investments in talent, equipment, and infrastructure in fewer core
‘center of excellence’ locations to improve foundational
capabilities that matter most to our customers: high quality,
reliable on-time delivery, innovative solutions, and exceptional
value. I am also excited about recent additions to our leadership
team as we welcome Lianne King as our VP of Human Resources,
Christine LaPoint as our Senior Director of Quality &
Regulatory, and John Koski as the Plant Manager at our medical
device center of excellence in Milaca, Minnesota. Lianne,
Christine, and John all bring a wealth of experience to our
leadership team. I’m thrilled to have them on board, and I am
energized about the operational improvements they will implement in
2021 in conjunction with our entire global team."
Nortech, in partnership with our medical, industrial and defense
customers, uses intelligence, innovation, speed and global
expertise to provide manufacturing and engineering solutions. This
enables our customers to be leaders in digital connectivity and
data management to achieve their business goals. Nortech strives to
be a premier workplace that fosters valued relationships internally
and in our communities.
About Nortech Systems
Incorporated Nortech Systems is a leading provider of
design and manufacturing solutions for complex electromedical
devices, 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 medical device,
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
including without limitation statements regarding the Company
returning to profitable growth, monthly booking trend, the effects
of the Devicix integration, customer demand, the effects of the
Merrifield plant consolidation, and the effects of changes in
operations. While this release is based on management’s best
judgment and current expectations, actual results may differ
materially from those expressed or implied 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: (1) the impact of the COVID-19
pandemic on our customers, employees, manufacturing facilities,
suppliers, the capital markets and our financial condition, and
results of operations, all of which tend to aggravate the other
risks and uncertainties we face; (2) the impact of our indebtedness
on our business, financial condition and results of operations; (3)
the impact of restrictions in our debt instruments on our ability
to operate our business, finance our capital needs or pursue or
expand business strategies; (4) any failure to comply with
financial covenants and other provisions and restrictions of our
debt instruments; (5) supply chain disruptions leading to parts
shortages for critical components; (6) volatility in market
conditions which may affect market supply of and demand for the
company’s products; (7) increased competition; (8) changes in the
reliability and efficiency of operating facilities or those of
third parties; (9) risks related to the availability of labor; (10)
commodity cost increases coupled with our inability to raise prices
charged to our customers; (11) the unanticipated loss of key
members of senior management and the transition of new members of
our management teams to their new roles; (12) and general economic,
financial and business conditions that could affect the company’s
financial condition and results of operations. Some of the
above-mentioned factors are described in further detail in the
section entitled “Risk Factors” in our annual and quarterly
reports, as applicable. You should assume the information appearing
in this document is accurate only as of the date hereof, or as
otherwise specified, as our business, financial condition, results
of operations and prospects may have changed since such date.
Except as required by applicable law, including the securities laws
of the United States and the rules and regulations of the United
States Securities and Exchange Commission, we undertake no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, to reflect actual results or changes in factors or
assumptions affecting such forward-looking statements.
Non-GAAP Measurements
Management believes that certain
non-GAAP financial measures may be useful in providing additional
meaningful comparisons between current results and results in prior
periods. Adjusted EBITDA is a metric used by management to evaluate
performance. Adjusted EBITDA is also used by the financial
community to facilitate comparisons between peer companies since
interest, taxes, depreciation, and amortization can differ greatly
between organizations as a result of differing capital structures
and tax strategies. Adjusted EBITDA excludes certain items that are
unusual in nature or not comparable from period to period. The
Company provides this information to investors to assist in
comparisons of past, present, and future operating results and to
assist in highlighting the results of on-going operations. While
the Company’s management believes that non-GAAP measurements are
useful supplemental information, such adjusted results are not
intended to replace the Company’s GAAP financial results and should
be read in conjunction with those GAAP results. Other supplemental
information has been provided to demonstrate reconciliation of
non-GAAP measurements discussed above to most relevant GAAP
financial measurements.
Condensed Consolidated Statements of
Operations
(in thousands, except for share data)
THREE MONTHS ENDED
TWELVE MONTHS ENDED
December 31,
December 31,
Unaudited
Unaudited
Audited
Audited
2020
2019
2020
2019
Net Sales $
23,843
$
30,818
$
104,106
$
116,333
Cost of Goods Sold
22,480
27,163
95,651
103,757
Gross Profit
1,363
3,655
8,455
12,576
5.7%
11.9%
8.1%
10.8%
Operating Expenses Selling Expenses
529
576
2,474
2,723
General and Administrative Expenses
2,224
2,255
8,043
9,629
Loss on Impairment of Goodwill
2,375
-
2,375
-
Gain on Sale of Property and Equipment
-
-
(3,821)
-
Total Operating Expenses
5,128
2,831
9,071
12,352
Income (Loss) from Operations
(3,765)
824
(616)
224
Interest Expense
(94)
(263)
(620)
(1,043)
Income (Loss) Before Income Taxes
(3,859)
561
(1,236)
(819)
Income Tax (Benefit) Expense
(328)
287
310
409
Net Income (Loss) $
(3,531)
$
274
$
(1,546)
$
(1,228)
Income (Loss) Per Common Share - Diluted $
(1.33)
$
0.10
$
(0.58)
$
(0.46)
Weighted Average Number of Common Shares Outstanding -
Diluted
2,658,358
2,657,530
2,657,738
2,665,165
Condensed Consolidated Balance
Sheets
(in thousands)
December 31,
December 31,
2020
2019
Audited
Audited
Cash $
352
$
351
Restricted Cash
3,212
309
Accounts Receivable
15,625
18,558
Inventories
13,917
14,279
Contract Assets
5,899
7,659
Prepaid Expenses and Other Current Assets
2,032
2,128
Property and Operating Lease Assets
15,424
14,408
Goodwill and Other Long-term Assets, Net
1,173
3,718
Total Assets $
57,634
$
61,410
Accounts Payable $
11,239
$
14,014
Lease Obligations, Finance & Operating, Net
11,389
7,232
All Other Liabilities
5,891
6,477
Long Term Line of Credit
3,328
10,088
Long-term Debt, Net
7,069
3,623
Shareholders’ Equity
18,718
19,976
Total Liabilities and Shareholders’ Equity $
57,634
$
61,410
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
(in thousands)
Adjusted EBITDA
THREE MONTHS ENDED
TWELVE MONTHS ENDED
December 31,
December 31,
2020
2019
2020
2019
Net Income (Loss) $
(3,531)
$
274
$
(1,546)
$
(1,228)
Income Tax (Benefit) Expense
(328)
287
310
409
Interest Expense
94
263
620
1,043
Depreciation and Amortization
490
573
2,193
2,221
EBITDA
(3,275)
1,397
1,577
2,445
Loss on goodwill impairment
2,375
-
2,375
-
Gain on sale leaseback
-
-
(3,821)
-
Adjusted EBITDA $
(900)
$
1,397
$
131
$
2,445
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version on businesswire.com: https://www.businesswire.com/news/home/20210323006054/en/
Chris Jones, CFO cjones@nortechsys.com 952-345-2244
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