MINNEAPOLIS--(BUSINESS WIRE)--Nortech Systems Incorporated (Nasdaq: NSYS), a leading provider of full-service electronics manufacturing services (EMS), reported net sales of $112.3 million for the year ended December 31, 2017, compared with $116.6 million for fiscal 2016.
The reported fiscal 2017 loss from operations was $1.3 million and includes a year-end goodwill impairment charge of $0.9 million; this compares with operating income of $0.6 million for fiscal 2016. The net loss for fiscal 2017 was $2.4 million, or $0.89 per diluted common share, including $1.4 million of unfavorable impact from tax reform and discrete tax-related adjustments. This compares with net income of $44,000, or $0.02 per diluted common share, for fiscal 2016.
For the fourth quarter of 2017, net sales were $25.6 million, compared with $29.0 million for the prior-year period. The fourth quarter operating loss of $1.8 million includes the $0.9 million goodwill write-off; this compares with $0.3 million of operating income for the fourth quarter of 2016. The fourth quarter net loss of $2.5 million, or $0.90 per diluted common share, includes the significant year-end, non-cash charges and compares with net income of $0.1 million, or $0.04 per diluted common share, for the fourth quarter of 2016.
“The revenue decline in the quarter was primarily due to our larger medical customers adjusting orders to year-end demand and market conditions,” said Rich Wasielewski, Nortech Systems’ president and CEO, adding that the four percent decrease in annual revenue was mainly attributed to specific transportation and medical device customers.
“Despite the negative year-end factors impacting our revenue and income, we are encouraged by the increased sales for industrial and defense customers in the fourth quarter, up 12 and 20 percent respectively,” noted Wasielewski. He commented that both defense and industrial markets also saw sizable year-over-year 90-day backlog gains of greater than 35 percent, softening the impact of the 42 percent medical backlog decline. The lower order position should persist through the first half of 2018 as two large medical customers work through on-hand inventory.
Given the positive momentum with industrial and defense customers, along with cost structure changes made over the past six months, the company expects to improve profitability and cash flow in 2018.
“We’ll continue focusing on managing cash, working capital and costs,” Wasielewski stated, citing a $2.1 million inventory reduction and better alignment of accounts payable with customer terms and conditions at year end. There was $0.2 million in positive operating cash flow generated for the fourth quarter and $0.8 million for the year.
The company’s recent investments in Asia and new Surface Mount Technology capabilities are now accretive and ahead of their expected ROI. Additional investments are planned for 2018 in the areas of automation, targeted marketing, ERP software and facility upgrades, including the recently announced expansion in Mexico that will offer improved workflow, productivity and an enhanced customer experience.
“The goal remains the same, to outperform the EMS industry with profitable growth,” concluded Wasielewski. “Our global strategy is successfully transforming Nortech from being a commodity-oriented supplier to an early engagement valued partner.”
Conference Call
Nortech Systems
will hold a conference call at 10:00 a.m. (CT) on Wednesday, March 28,
2018, to discuss the company’s fourth quarter and fiscal year 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 April 11, 2018, by
dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To
access the replay, the conference ID 26833 is required.
About Nortech Systems Incorporated
Nortech
Systems Incorporated (www.nortechsys.com),
based in Maple Grove, Minn., is a full-service 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 equipment, aerospace/defense and medical. The
company has operations in the U.S., Latin America and Asia. 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.
|
Condensed Statements of Operations |
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| THREE MONTHS ENDED | TWELVE MONTHS ENDED | |||||||||||||||||
| DECEMBER 31 | DECEMBER 31 | |||||||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Net Sales | $ | 25,572,618 | $ | 29,008,128 | $ | 112,334,749 | $ | 116,621,719 | ||||||||||
| Income from Operations | (1,767,906 | ) | 328,287 | (1,268,386 | ) | 629,063 | ||||||||||||
| Loss on Extinguishment of Debt | - | - | (174,834 | ) | - | |||||||||||||
| Interest Expense | (174,860 | ) | (139,562 | ) | (627,555 | ) | (550,289 | ) | ||||||||||
| Income (Loss) Before Income Taxes | (1,942,766 | ) | 188,725 | (2,070,775 | ) | 78,774 | ||||||||||||
| Income Tax Expense (Benefit) | 516,061 | 91,000 | 375,000 | 35,000 | ||||||||||||||
| Net Income (Loss) | $ | (2,458,827 | ) | $ | 97,725 | $ | (2,445,775 | ) | $ | 43,774 | ||||||||
| Net Income (Loss) per Basic and Diluted Common Shares | $ | (0.90 | ) | $ | 0.04 | $ | (0.89 | ) | $ | 0.02 | ||||||||
| Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||||
| Basic | 2,739,650 | 2,747,832 | 2,745,602 | 2,747,424 | ||||||||||||||
| Diluted | 2,739,650 | 2,749,889 | 2,745,602 | 2,749,545 | ||||||||||||||
|
Condensed Balance Sheets |
||||||
| DECEMBER 31 | DECEMBER 31 | |||||
| 2017 | 2016 | |||||
| Unaudited | Audited | |||||
| Cash | $ | 472,886 | $ | 268,204 | ||
| Restricted Cash | 305,683 | - | ||||
| Accounts Receivable | 17,417,481 | 17,320,784 | ||||
| Inventories | 18,526,722 | 20,653,841 | ||||
| Other Current Assets | 1,044,649 | 1,246,908 | ||||
| Property and Other Long-term Assets | 10,203,979 | 10,881,560 | ||||
| Goodwill and Other Intangible Assets, Net | 4,114,075 | 5,145,218 | ||||
| Total Assets | $ | 52,085,475 | $ | 55,516,515 | ||
| Accounts Payable | $ | 11,699,220 | $ | 13,825,530 | ||
| Other Current Liabilities | 6,345,746 | 6,480,109 | ||||
| Line of Credit – Long-term | 8,502,853 | 7,315,262 | ||||
| Long-term Debt and Other Long-term Liabilities | 5,712,123 | 5,580,826 | ||||
| Shareholders’ Equity | 19,825,533 | 22,314,788 | ||||
| Total Liabilities and Shareholders’ Equity | $ | 52,085,475 | $ | 55,516,515 | ||
