Nortech Systems Reports First Quarter Results;
Operating Profits Increase 15%

MINNEAPOLIS – Nortech Systems Incorporated (NASDAQ: NSYS) today reported net sales of $28.4 million for the first quarter ended March 31, 2012. This compares to net sales of $29.0 million for the first quarter of 2011.

Income from operations rose 15 percent for the first quarter of 2012, to $328,430. This compares with $286,662 for the same period in 2011. Net income for the first quarter of 2012 was $122,805, or $0.04 per diluted common share. This compares with last year’s $98,181, or $0.04 per diluted common share before non-operating gain from acquiring certain assets of Winland Electronics’ EMS operations. The net after-tax impact of the non-operating gain increased net income in the first quarter of 2011 by $528,007, or $0.19 per diluted common share.

“We’re pleased with our improvements in operating profits during the first quarter,” said Mike Degen, Nortech Systems’ president and CEO. “The progress we’ve made integrating our acquisitions, along with our ability to better control costs and expenses, helped us generate $2.7 million in operating cash flow for the quarter.”

Degen noted that revenue results across the company remain mixed in the sluggish economic environment. “We’re seeing encouraging signs from certain industrial and medical customers, evidenced by our backlog positions in these markets registering modest single-digit increases since year-end,” he added.

In the quarter, Nortech Systems was awarded significant design engineering projects from customers in both the industrial and medical markets. Degen cited these wins as examples of how Nortech’s internal realignment, implemented in January, improves the company’s ability to target new business opportunities across three key markets – industrial, medical and defense.

Last week Nortech amended its financing agreement with Wells Fargo Bank, N.A. and its Business Credit operating division. The fourth amendment to the third amended and restated credit agreement provides for a line of credit of $13.5 million through May 2015, a $1.8 million real estate term note with a maturity date of March 2027, which replaces the $0.9 million note set to expire on May 31, 2012, and a new term loan of up to $2.0 million for capital expenditures to be made through the end of 2013.

Conference Call
Nortech Systems announces a conference call to be held at 10:00 a.m. (CDT) on Thursday, May 10, to discuss the company’s first quarter results. Anyone interested in participating in the conference can access the call by dialing 877-407-8031 from within the United States, or 201-689-8031 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 24, 2012, by dialing 877-660-6853 (from U.S.) or 201-612-7415 (International). To access the replay, the account number 286 and conference ID 393913 are both required.

About Nortech Systems Incorporated
Nortech Systems Incorporated (www.nortechsys.com), based in Wayzata, 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 manufacturing capabilities and operating partners in the U.S., Asia and Latin America. 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 Income

Three months ended March 31
Unaudited
    2012     2011
Net Sales $28,360,914 $28,998,197
Income from Operations 328,430 286,662
Non-Operating Gain 0 791,615
Other Expenses (146,625) (139,089)
Income before Income Taxes 181,805 939,188
Income Tax Expense 59,000 313,000
Net Income $122,805 $626,188
Net Income Per Basic and Diluted Common Share $0.04 $0.23
Weighted Average Number of Common Shares
Basic & Diluted
2,742,992 2,742,992

Condensed Balance Sheets

March 31,2012
(Unaudited)
Dec 31, 2011
Current Assets $36,548,763 $37,297,487
Property and Other Long-term Assets 9,484,101 9,484,656
Total Assets $46,032,864 $46,782,143
Current Liabilities $23,536,292 $25,012,055
Long-term Debt 1,867,974 1,264,295
Shareholders’ Equity 20,628,598 20,505,793
Total Liabilities and Shareholders’ Equity $46,032,864 $46,782,143

Contact: Richard Wasielewski
Nortech Systems Incorporated
(952) 345-2244
or
Warren Djerf
Brookside Communications Group
952-920-3908 / warren@brookcomm.net