Nortech Systems Reports 2016 Second Quarter Results

Revenue Up Eight Percent, Improved Operating Performance

MINNEAPOLIS – Nortech Systems Incorporated (NASDAQ: NSYS) today reported net sales of $28.9 million for the second quarter ended June 30, 2016, an eight percent increase over net sales of $26.8 million for the second quarter of 2015. For the six months ended June 30, 2016, Nortech Systems’ net sales increased nine percent to $57.9 million, compared with $53.3 million for the same period in 2015.

For the second quarter of 2016, Nortech Systems reported an operating loss of $110,000, an improvement of $373,000 compared to the prior-year period. For the first six months of 2016, Nortech Systems reported operating income of $111,000, an improvement of $796,000 over the same period last year, when the operating loss was $685,000.

For the second quarter of 2016, Nortech Systems reported a net loss of $180,000, or $0.07 per diluted common share, compared with a net loss of $378,000, or $0.14 per diluted common share, for the same period last year. For the six months ended June 30, Nortech Systems reported a net loss of $117,000, or $0.04 per diluted common share. This compares with a net loss of $571,000, or $0.21 per diluted common share, for the first six months of 2015.

“The revenue improvement in the second quarter was led by medical sales, up 40 percent year over year,” said Rich Wasielewski, Nortech Systems’ president and CEO. “Our strategic investment in engineering services helped our medical backlog increase 28 percent during the second quarter, which bodes well for continued future growth.”

Wasielewski cited ongoing volatility among Nortech Systems’ industrial customers, with transportation, semiconductor and process control sectors experiencing economic headwinds throughout the first half of the year; those conditions are expected to persist this year. Quarterly defense sales improved, increasing 20 percent year over year amid signs of industry stabilization.

“Our overall backlog increased 12 percent during the second quarter and we’re beginning to see early signs that our growth and cost initiatives are taking hold,” Wasielewski explained. “Compared to a year ago, we’re in a better position heading into the second half of the year.”

Nortech Systems’ improved profitability for the quarter and six-month period resulted from the overall revenue increase, evolving product-service mix and cost-containment efforts. Profitability was impacted by startup costs for new China operations of $200,000 for the second quarter and $360,000 for the six-month period.

This week Nortech Systems announced the closing of its facility in Augusta, Wis., by year-end to improve asset utilization. The company will consolidate operations at its other facilities and serve customers without interruption.

“We are continuing to transform our business model with more early-engagement opportunities and value-added services like engineering, quick-turn prototyping and additional box-build solutions,” concluded Wasielewski. “Our customers also appreciate our competitive ‘One Nortech’ global options aided by our expansion into China and investments in Mexico.”

Conference Call
Nortech Systems announces a conference call to be held at 10:00 a.m. (CDT) on Thursday, August 4, 2016, to discuss the company’s second quarter results. Anyone interested in participating in the conference can access the call by dialing 866-635-0172 from within the United States, or 785-424-1629 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 August 28, 2016, by dialing 877-481-4010 (from U.S.) or 919-882-2331 (International). To access the replay, the conference ID 10065 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, medical and aerospace/defense. 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 June 30 Unaudited		Six Months Ended June 30 Unaudited
	2016	2015	2016	2015
Net Sales	$28,945,135	$26,801,473	$57,895,177	$53,341,095
Income (Loss) From Operations	(109,936)	(483,360)	111,012	(684,961)
Interest Expense	(139,247)	(112,002)	(271,269)	(207,188)
Loss Before Income Taxes	(249,183)	(595,362)	(160,257)	(892,149)
Income Tax Benefit	(69,000)	(217,000)	(43,000)	(321,000)
Net Loss	($180,183)	($378,362)	($117,257)	($571,149)
Net Loss per Basic and Diluted Common Shares	($0.07)	($0.14)	($0.04)	($0.21)
Weighted Average Number of Common Shares Outstanding:
Basic	2,747,700	2,746,325	2,747,012	2,745,183
Diluted	2,747,700	2,746,325	2,747,012	2,745,183

Condensed Balance Sheets

	June 30, 2016 Unaudited	December 31, 2015
Accounts Receivable	$18,101,914	$18,431,746
Inventories	21,520,434	20,185,445
Other Current Assets	1,688,646	1,755,548
Property and Other Long-term Assets	16,363,969	16,192,348
Total Assets	$57,674,963	$56,565,087
Accounts Payable	$14,164,865	$13,041,377
Other Current Liabilities	6,513,628	6,630,333
Line of Credit – Long-term	8,539,994	7,691,237
Long-term Debt and Other Long-term Liabilities	6,321,270	6,930,284
Shareholders’ Equity	22,135,206	22,271,856
Total Liabilities and Shareholders’ Equity	$57,674,963	$56,565,087