Nortech Systems Incorporated 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 Call
Nortech 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 Incorporated
Nortech
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 Statements
This
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) |
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Pro Forma as if the previous |
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accounting guidance was in |
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As Reported |
effect |
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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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