- Revenue at $29.5 million in Fiscal Third Quarter of 2021; +
11.7% from Fiscal Third Quarter of 2020
- Net Income $3.6 million for the Fiscal Third Quarter of 2021
including the Employee Retention Credit of $5.2 million
- Monthly Bookings Trends Remain Strong. Solid Backlog of $79
million, an increase of $33 million or +72% vs September 2020
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 $29.5 million
for the quarter ended September 30, 2021, an increase of 11.7%
compared to $26.4 million for the third quarter of 2020. The
revenue improvement was primarily due to higher production volume
resulting from actions to scale the direct labor workforce and
strengthen the supply chain for parts. Net income for third quarter
2021 was $3.6 million and $1.24 per diluted share compared to a net
income of $2.0 million and $0.73 per diluted share for the third
quarter of 2020.
In May 2021 Nortech announced
that it planned to apply for the Employee Retention Credit (“ERC”)
to support ongoing investment in Nortech’s frontline workforce to
drive increased manufacturing output to meet our customers’ rising
demand. The Company has filed an application for the ERC with the
IRS and recognized $5.2 million reduction to payroll tax expense in
the fiscal third quarter of 2021. The Company has not received
funds as of the date of this press release.
Operating results from the
third quarter of 2020 included a $3.8 million gain on the sale and
leaseback transaction for its Bemidji and Mankato, Minnesota
manufacturing facilities. Proceeds from the sale-leaseback in
August 2020 were used to pay down bank debt.
“Nortech’s bookings continue
to be strong resulting in another record backlog. Meanwhile, our
operations team has been improving the supply chain to deliver high
quality parts to our customers while optimizing our investment in
working capital,” said Jay D. Miller, Chief Executive Officer and
President. “We expect improved results in the fourth quarter and
our $79 million backlog represents an encouraging vote of
confidence from our customers that bodes well for growth throughout
2022. Finally, I’m very enthusiastic about the innovative new
technologies Nortech has been developing that will help our
customers compete better and stay on the cutting edge of new
digital data opportunities in 2023 and beyond.”
The Company will hold a live conference call and webcast at 4:00
p.m. central time on Thursday, November 11, 2021 to discuss third
quarter financial results. The call will be hosted by Jay Miller,
Chief Executive Officer and Chris Jones, Chief Financial Officer.
To access the live audio conference call, US participants may call
844-602-0380 and international participants may call 862-298-0970.
Participants may also access the call via webcast at:
https://www.webcaster4.com/Webcast/Page/2814/43639
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 future financial
results, improving supply chain management, the impact of new
products and innovations on our customers’ and our results, and
forgiveness of our PPP loan, monthly sales booking and backlog
trends, customer demand, the ability of our supply chain to supply
materials on a timely basis, our ability to hire and retain
sufficient direct labor to produce our products, the steady
improvement in production output, receiving Employee Retention
Credit funds and forgiveness of our PPP loan. 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 (2) supply chain disruptions leading to parts
shortages for critical components; (3) volatility in market
conditions which may affect market supply of and demand for the
company’s products; (4) increased competition; (5) changes in the
reliability and efficiency of operating facilities or those of
third parties; (6) risks related to the availability of labor; (7)
commodity cost increases coupled with our inability to raise prices
charged to our customers; (8) the unanticipated loss of key members
of senior management and the transition of new members of our
management teams to their new roles; (9) general economic,
financial and business conditions that could affect the company’s
financial condition and results of operations; (10) the Company’s
ability to steadily improve manufacturing output throughout the
remainder of 2021 and into 2022 (11) the Company obtaining ERC
funds of approximately $5 million; and (12) the Company receiving
SBA approval for forgiveness of its PPP loan. 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.
Condensed Consolidated Statements of
Operations
(in thousands, except for share data)
THREE MONTHS ENDED NINE MONTHS ENDED September
30, September 30, INCOME STATEMENT
Unaudited Unaudited Unaudited Unaudited
2021
2020
2021
2020
Net Sales $
29,452
$
26,362
$
81,706
$
80,263
Cost of Goods Sold
21,411
24,400
68,519
72,336
Gross Profit
8,041
1,962
13,187
7,926
27.3
%
7.4
%
16.1
%
9.9
%
Operating Expenses Selling Expenses
449
594
1,741
1,945
General and Administrative Expenses
2,046
2,480
7,247
6,654
R&D Expenses
141
-
348
-
Restructuring Expenses
23
-
319
-
Loss on Abandonment of Intangible Asset
560
-
560
-
Gain on Sale of Assets
(93
)
(3,821
)
(176
)
(3,821
)
Total Operating Expenses
3,125
(747
)
10,039
4,778
Income from Operations
4,916
2,709
3,148
3,148
Interest Expense
(112
)
(126
)
(314
)
(526
)
Income Before Income Taxes
4,804
2,583
2,834
2,623
Income Tax Expense
1,247
612
646
638
Net Income $
3,557
$
1,971
$
2,188
$
1,985
Income Per Common Share - Basic $
1.33
$
0.74
$
0.82
$
0.75
Weighted Average Number of Common Shares Outstanding - Basic
2,665,682
2,657,530
2,662,066
2,657,530
Income Per Common Share - Diluted $
1.24
$
0.73
$
0.78
$
0.74
Weighted Average Number of Common Shares Outstanding - Diluted
2,880,073
2,703,029
2,806,958
2,670,984
Condensed Consolidated Balance
Sheets
(in thousands)
BALANCE SHEET September 30, 2021 December 31,
2020 Unaudited Audited Cash $
444
$
352
Restricted Cash
999
3,212
Accounts Receivable
13,931
15,625
Employee Retention Credit Receivable
5,209
-
Inventories
20,643
13,917
Contract Assets
8,145
5,899
Prepaid Expenses and Other Current Assets
1,763
2,032
Property and Equipment, Net
5,803
6,426
Operating Lease Assets
9,052
8,998
Other Intangible Assets, Net
524
1,173
Total Assets $
66,513
$
57,634
Accounts Payable $
14,140
$
11,239
Lease Obligations, Finance & Operating, Net
11,086
11,389
All Other Liabilities
8,004
5,891
Line of Credit
6,009
3,328
Long-term Debt, Net
6,236
7,069
Shareholders’ Equity
21,036
18,718
Total Liabilities and Shareholders’ Equity $
66,513
$
57,634
Condensed Consolidated Statements of
Cash Flows
(in thousands)
CASH FLOW STATEMENT September 30, 2021 September
30, 2020 Cash Flows from Operating Activities
Unaudited Unaudited Net Income
$
2,188
$
1,985
Depreciation and Amortization
1,506
1,703
Compensation on Stock-Based Awards
201
111
Change in Accounts Receivable Allowance
18
158
Change in Inventory Reserves
(959
)
398
Loss on Abandonment of Intangible Asset
560
-
Gain on Disposal of Assets
(176
)
(3,821
)
Changes in Current Operating Items Accounts Receivable
1,686
2,429
Employee Retention Credit Receivable
(5,209
)
-
Inventories
(5,755
)
(567
)
Contract Assets
(2,246
)
325
Prepaid Expenses and Other Assets
(276
)
858
Accounts Payable
2,901
(2,807
)
Accrued Payroll and Commissions
1,537
(581
)
All Other Operating Items
1,172
(289
)
Net Cash Used in Operating Activities
(2,852
)
(98
)
Cash Flows from Investing Activities Proceeds from
Sale of Property and Equipment
626
6,019
Purchase of Intangible Asset
(49
)
(25
)
Purchase of Property and Equipment
(1,198
)
(397
)
Net Cash (Used In) Provided By Investing Activities
(621
)
5,597
Cash Flows from Financing Activities Net Change in
Line of Credit
2,681
(7,542
)
Proceeds from Notes Payable
-
6,077
Payments on Long-Term Debt
(873
)
(2,567
)
Payments on Capital Lease
(492
)
(432
)
Stock Option Exercises
36
-
Net Cash Provided by (Used in) Financing Activities
1,352
(4,464
)
Net Change in Cash
(2,121
)
1,035
Cash - Beginning of Period
3,564
660
Cash - Ending of Period
$
1,443
$
1,694
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211111005749/en/
Chris Jones, CFO cjones@nortechsys.com 952-345-2244
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