Nortech Systems Reports Modest Sales Drop in Q4 FY 2016

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Nortech Systems Incorporated 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.

About Nortech Systems Incorporated

Nortech Systems Incorporated, 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.