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Nortech Systems Announces Second-Quarter 2020 Results, Sale-Leaseback and Plant Consolidation
August 12, 2020 | Nortech Systems IncorporatedEstimated reading time: 2 minutes
Nortech Systems Incorporated, a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving the medical, aerospace & defense and industrial markets, reported net sales of $26.5 million for the second quarter ended June 30, 2020, compared with $27.3 million for the second quarter of 2019.
Operating income for the second quarter of 2020 was $49,000, which compares with an operating loss of $1.2 million for the second quarter of 2019. Net loss for the second quarter of 2020 was $123,000, or $0.05 per diluted common share. This compares with a net loss for the second quarter of 2019 of $1.6 million, or $0.58 per diluted common share. Nortech's backlog at the end of the second quarter 2020 was $46.6 million.
The Company also announced that it has entered into sale and leaseback agreements with Essjay Investment Company, LLC relating to the Company's manufacturing facilities in Bemidji and Mankato, Minnesota. Nortech and Essjay are expected to close the agreements during the Company's fiscal third quarter, subject to final documentation and other customary conditions.
Nortech expects net proceeds from the sale, excluding expenses and expected taxes, of approximately $5 million. Nortech intends to use the funds to pay down debt, provide additional liquidity for initiatives, capital investments and working capital, and strengthen the Company's financial position. At closing, Nortech will enter into a lease agreement for the Bemidji and Mankato, Minnesota facilities for an initial 15-year term, with multiple renewal options.
To further improve operational efficiencies and lower overhead costs, the Company announced that it is closing its Merrifield, Minnesota, production facility, shifting wire and cable assembly, system-level assembly and printed circuit board (PCB) manufacturing to Nortech's other Minnesota locations.
The Merrifield production facility consolidation is expected to be complete on or before December 31, 2020, and will impact approximately 60 employees, who will be offered positions at other Nortech facilities in Minnesota. Additionally, by the end of 2020, the company will shift its PCB manufacturing from its Monterrey, Mexico, location to its Mankato, Minnesota production facility, Nortech's PCB center of excellence.
"Given the challenging economic environment, we are pleased with the significant improvement in operating profitability for the second quarter, our sale and leaseback agreements with Essjay and the Company's plans to drive PCB manufacturing productivity. Our balance sheet continues to strengthen, and the sale leaseback and plant consolidation will provide significant liquidity to make further investments in the business. Our goal through these essential moves is to enhance Nortech's ability to operate through the current COVID-19 pandemic and succeed long term." stated Jay D. Miller, Chief Executive Officer and President.
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