Exhibit 10.1

 logo.jpg [logo.jpg]

November 12, 2020

 

Nortech Systems Announces Third-Quarter 2020 Results

 

MINNEAPOLIS, MINNESOTA, USA – Nortech Systems Incorporated (Nasdaq: NSYS) (the
“Company”), 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 $26.3 million
for the third quarter ended September 30, 2020, compared with $30.1 million for
the third quarter of 2019.

 

Operating income for the third quarter of 2020 was $2.7 million which includes a
gain on sale of property and equipment of $3.8 million; this compares with
operating income of $0.7 million for the third quarter of 2019. Net income for
the third quarter of 2020 was $2.0 million, or $0.73 per diluted common share.
This compares with net income for the third quarter of 2019 of $0.4 million, or
$0.16 per diluted common share. Nortech’s backlog at the end of the third
quarter 2020 was $45.8 million.

 

The Company closed on sale and leaseback agreements with Essjay Investment
Company, LLC (“Essjay”) relating to the Company’s manufacturing facilities in
Bemidji and Mankato, Minnesota during the third quarter of 2020. The Company
received net proceeds from the sale, excluding closing costs, of approximately
$6.0 million and recorded a gain on sale of property of equipment of $3.8
million. The Company entered into a lease agreement for the Bemidji, Minnesota
facility and the Mankato, Minnesota facility for an initial 15-year term, with
multiple 5-year renewal options.

 

The Nortech Merrifield production facility consolidation is on track and
expected to be complete on or before December 31, 2020. By the end of 2020, the
Company will shift nearly all of its Printed Circuit Board (PCB) manufacturing
to its Mankato, Minnesota production facility, Nortech’s PCB center of
excellence, and much of its complex wire and cable assembly production to its
Bemidji, Minnesota production facility, Nortech’s wire and cable assembly center
of excellence. This consolidation is impacting approximately 60 employees, who
have been offered positions at other Nortech facilities in Minnesota and given
outplacement assistance.

 

"Although our third quarter revenue, gross profit and backlog have been impacted
by the COVID-19 pandemic, we are pleased with our recent improving bookings
trend, and the strides we have proactively made to improve our financial
liquidity with our sale and leaseback closing, the PPP loan and the plant
consolidation continuing as planned. We expect this will allow us to operate
through the current COVID-19 pandemic, invest in the business, create positive
momentum for 2021, and succeed long term." stated Jay D. Miller, Chief Executive
Officer and President.

 

 

--------------------------------------------------------------------------------

 

logo.jpg [logo.jpg]

 

Nortech, in partnership with our medical, industrial and defense customers, uses
intelligence, innovation, speed and global expertise to provide manufacturing
and engineering solutions. This enables our customers to be leaders in digital
connectivity and data management to achieve their business
goals. Nortech strives to be a premier workplace that fosters valued
relationships internally and in our communities.

 

About Nortech Systems Incorporated Nortech Systems is a leading provider of
design and manufacturing solutions for complex electromedical devices,
electromechanical systems, assemblies, and components. Nortech Systems primarily
serves the medical, aerospace & defense, and industrial markets. Its design
services span concept development to commercial design, and include medical
device, software, electrical, mechanical, and biomedical engineering. Its
manufacturing and supply chain capabilities are vertically integrated around
wire/cable/interconnect assemblies, printed circuit board assemblies, as well as
system-level assembly, integration, and final test. Headquartered in Maple
Grove, Minn., Nortech currently has seven manufacturing locations and design
centers across the U.S., Latin America, and Asia. Nortech Systems is traded on
the NASDAQ Stock Market under the symbol NSYS. Nortech’s website is
www.nortechsys.com.

 

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. Specifically, the Company states that the
consolidation of the Merrifield facility will be completed by year end yielding
operational efficiencies and that its booking trend is improving. Important
factors that could cause actual results to differ materially from the
forward-looking statements include, without limitation: government regulation,
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.

 

 

 

Contact Information is:

 

Chris Jones, CFO

 

cjones@nortechsys.com

 

952-345-2244

 

 

--------------------------------------------------------------------------------

 

logo.jpg [logo.jpg]

Condensed Consolidated Statements of Operations

 

(in thousands, except for share data)

   

THREE MONTHS ENDED

   

NINE MONTHS ENDED

     

September 30,

   

September 30,

     

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

     

2020

   

2019

   

2020

   

2019

                                   

Net Sales

  $ 26,362     $ 30,058     $ 80,263     $ 85,515                              
     

Cost of Goods Sold

    24,716       26,423       73,171       76,594                              
     

Gross Profit

    1,646       3,635       7,092       8,921         6.2 %     12.1 %     8.8 %
    10.4 %                                  

Operating Expenses

                               

Selling Expenses

    594       589       1,945       2,147  

General and Administrative Expenses

    2,164       2,333       5,819       7,374  

Gain on Sale of Property and Equipment

    (3,821 )     -       (3,821 )     -  

Total Operating Expenses

    (1,063 )     2,922       3,943       9,521                                  
 

Income (Loss) from Operations

    2,709       713       3,149       (600 )                                  

Interest Expense

    (126 )     (256 )     (526 )     (780 )                                  

Income (Loss) Before Income Taxes

    2,583       457       2,623       (1,380 )                                  

Income Tax (Benefit) Expense

    612       44       638       122                                    

Net Income (Loss)

  $ 1,971     $ 413     $ 1,985     $ (1,502 )                                  

Income (Loss) Per Common Share - Diluted

  $ 0.73     $ 0.16     $ 0.74     $ (0.56 )                                  

Weighted Average Number of Common Shares Outstanding - Diluted

    2,703,029       2,657,911       2,678,698       2,667,754  

 

 

--------------------------------------------------------------------------------

 

logo.jpg [logo.jpg]

Condensed Consolidated Balance Sheets

 

(in thousands)

   

September 30,

   

December 31,

     

2020

   

2019

     

Unaudited

   

Audited

 

Cash

  $ 328     $ 351  

Restricted Cash

    1,366       309  

Accounts Receivable

    16,019       18,558  

Inventories

    14,496       14,279  

Contract Assets

    7,334       7,659  

Prepaid Expenses and Other Current Assets

    1,274       2,128  

Property and Other Long-term Assets

    15,555       14,408  

Goodwill and Other Long-term Assets, Net

    3,585       3,718  

Total Assets

  $ 59,957     $ 61,410                    

Accounts Payable

  $ 11,213     $ 14,014  

Current Portion of Lease Obligation

    1,266       1,415  

Other Current Liabilities

    5,767       6,803  

Long Term Line of Credit

    2,546       10,088  

Long-term Debt and Other Liabilities

    6,887       3,297  

Long Term Lease Obligation

    10,152       5,817  

Shareholders’ Equity

    22,126       19,976  

Total Liabilities and Shareholders’ Equity

  $ 59,957     $ 61,410