Sales and Profits Increase

MINNEAPOLIS – Nortech Systems Incorporated (Nasdaq: NSYS), a leading provider of full-service electronics manufacturing services (EMS), today reported net sales of $28.3 million for the first quarter ended March 31, 2017, compared with net sales of $29.0 million for the first quarter of 2016.

For the first quarter of 2017, operating income was $120,000, compared with $221,000 for the first quarter of 2016. For the first quarter of 2017, the company reported a net loss of $15,000, or $0.01 per diluted common share, compared with net income of $63,000, or $0.02 per diluted common share, in the prior-year period.

“Our first quarter revenue came in as expected due to lower backlog levels to start the quarter,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our overall 90-day backlog began the first quarter down sequentially as our customers adjusted orders to their current demand.” He added, “By the end of the first quarter, backlog had rebounded nicely across our three core markets, rising 15 percent overall.”

During the first quarter of 2017, gross margin and profits were impacted by expenses related to the Wisconsin facility closure and startup costs associated with the large number of product transfers, as well as delays with several new medical product launches planned for first quarter production. Nortech sold the Wisconsin facility at the end of the quarter and reported a gain of $354,000, helping offset the majority of the additional expenses incurred during the first quarter of 2017.

“We’re optimistic in the outlook for the remainder of 2017 with these expenses and delays behind us and our backlog increasing,” Wasielewski stated. “Our medical market continues to show the strongest growth potential and the positive momentum being generated from our industrial customers adds to our confidence.” The new China operation received production validations in April from a major medical customer and the plan is to be accretive starting in the second quarter.

Wasielewski concluded, “Nortech’s strategy to expand our global footprint is improving our competitiveness with multinational customers looking for partners to provide in-region manufacturing support and a global supply chain.” He expects the company’s facilities in China and Mexico to post significant revenue growth in 2017. Across all markets, Nortech continues to advance its successful approach offering customers earlier engagement, enhanced engineering resources and value-added services.

Conference Call

Nortech Systems will hold a conference call at 10:00 a.m. (CDT) on Friday, May 12, 2017, to discuss the company’s first quarter results. Anyone interested in participating in the conference can access the call by dialing 866-682-6100 from within the United States, or 862-255-5401 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. A podcast (MP3 download) will also be available. The telephone replay will be available through May 26, 2017, by dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference ID 10379 is required.

About Nortech Systems Incorporated

Nortech Systems Incorporated (www.nortechsys.com), based in Maple Grove, Minn., is a full-service electronics manufacturing services (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 Statement of Operations

Three Months Ended
March 31
Unaudited
 
2017 2016
Net Sales $28,317,857 $28,950,042
Income (Loss) From Operations 120,422 220,948
Interest Expense (139,522) (132,022)
Loss Before Income Taxes (19,100) 88,926
Income Tax Benefit (4,448) 26,000
Net Loss ($14,652) $62,926
Net Loss per Basic and Diluted Common Shares ($0.01) $0.02
Weighted Average Number of Common Shares Outstanding:
Basic 2,747,831 2,746,325
Diluted 2,747,831 2,748,771

Condensed Balance Sheets

March 31,     2017
Unaudited
December 31, 2016
Audited
Cash $205,455 $268,204
Accounts Receivable $17,300,792 $17,320,784
Inventories 21,675,236 20,653,841
Other Current Assets 1,156,089 1,246,908
Property and Other Long-term Assets 15,474,298 16,026,778
Total Assets $55,811,870 $55,516,515
Accounts Payable $15,330,606 $13,825,530
Other Current Liabilities 5,496,526 6,480,109
Line of Credit – Long-term 8,050,426 7,315,262
Long-term Debt and Other Long-term Liabilities 4,637,492 5,580,826
Shareholders’ Equity 22,296,820 22,314,788
Total Liabilities and Shareholders’ Equity $55,811,870 $55,516,515