Nortech Systems Reports Fourth Quarter and Year-End Results

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 $29.0 million for the fourth quarter ended December 31, 2016, compared with net sales of $31.4 million for the fourth quarter of 2015. Net sales for the 2016 fiscal year ended December 31 rose one percent, to $116.6 million, compared with $115.2 million reported for fiscal 2015.

For the fourth quarter of 2016, the majority of the revenue decline was from industrial customers in the transportation sector. Profitability was aided by a favorable medical product and service mix, which offset the volume impact. Operating income for the fourth quarter was $328,000, compared with $329,000 for the fourth quarter of 2015. Fourth quarter net income of $98,000, or $0.04 per diluted common share, compares with $123,000, or $0.04 per diluted common share, in the fourth quarter of 2015.

For fiscal 2016, operating income was $629,000, an improvement of $1.1 million from a fiscal 2015 loss. Net income was $44,000, or $0.02 per diluted common share, for fiscal 2016. This compares with a net loss of $571,000, or $0.21 per diluted common share, for fiscal 2015.

“We’re pleased with our progress transitioning into a more global value-added and medical-focused EMS company,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our strategy of early engagement, engineering expertise and solutions selling is also gaining traction with our industrial and defense customers.”

During 2016, Nortech’s medical sales increased 30 percent and defense sales rose 11 percent. Industrial sales declined 21 percent, impacted by the slow economic growth and softness in the transportation and oil and gas sectors. The company’s overall 90-day backlog was $20.5 million at the end of 2016 compared with $20.7 million at the end of 2015. The medical products and service mix, cost improvements and selective pricing actions all contributed to the 140-basis-point improvement in gross margin and improved profitability in fiscal 2016. Net cash provided by operating activities was $3.5 million in the year and debt was lowered by $1.4 million.

“Looking ahead, we’re expecting the first quarter to be soft,” explained Wasielewski, adding that the recent increased activity in new projects and bookings – the strongest levels since 2009 – gives the company optimism for profitable growth in 2017. Renewed U.S. economic confidence, buoyed by the potential of tax reform, reduced regulations and increased spending on infrastructure and defense, contributes to this outlook.

Conference Call

Nortech Systems will hold a conference call at 10:00 a.m. (CST) on Thursday, March 9, 2017, to discuss the company’s fourth quarter and fiscal year 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 March 23, 2017, by dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference ID 10237 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 December 31 Audited		Twelve Months Ended December 31 Audited
	2016	2015	2016	2015
Net Sales	$29,008,128	$31,441,746	$116,621,719	$115,191,905
Income (Loss) From Operations	328,287	328,559	629,063	(422,048)
Interest Expense	(139,562)	(124,226)	(550,289)	(465,374)
Loss Before Income Taxes	188,725	204,333	78,774	(887,422)
Income Tax Benefit	91,000	81,000	35,000	(316,000)
Net Loss	$97,725	$123,333	$43,774	($571,422)
Net Loss per Basic and Diluted Common Shares	$0.04	$0.04	$0.02	($0.21)
Weighted Average Number of Common Shares Outstanding:
Basic	2,747,832	2,746,325	2,747,424	2,745,759
Diluted	2,749,889	2,748,977	2,749,545	2,745,759

Condensed Balance Sheets

	December 30, 2016 Audited	December 31, 2015 Audited
Cash	$268,204	$887
Accounts Receivable	$17,320,784	$18,431,746
Inventories	20,653,841	20,185,445
Other Current Assets	1,246,908	1,755,661
Property and Other Long-term Assets	16,026,778	16,192,348
Total Assets	$55,516,515	$56,565,087
Accounts Payable	$13,825,530	$13,041,377
Other Current Liabilities	6,480,109	6,630,333
Line of Credit – Long-term	7,315,262	7,691,237
Long-term Debt and Other Long-term Liabilities	5,580,826	6,930,284
Shareholders’ Equity	22,314,788	22,271,856
Total Liabilities and Shareholders’ Equity	$55,516,515	$56,565,087