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Nortech Systems Incorporated reported net sales of $112.3 million for the year ended December 31, 2017, compared with $116.6 million for fiscal 2016.
The reported fiscal 2017 loss from operations was $1.3 million and includes a year-end goodwill impairment charge of $0.9 million; this compares with operating income of $0.6 million for fiscal 2016. The net loss for fiscal 2017 was $2.4 million, or $0.89 per diluted common share, including $1.4 million of unfavorable impact from tax reform and discrete tax-related adjustments. This compares with net income of $44,000, or $0.02 per diluted common share, for fiscal 2016.
For the fourth quarter of 2017, net sales were $25.6 million, compared with $29.0 million for the prior-year period. The fourth quarter operating loss of $1.8 million includes the $0.9 million goodwill write-off; this compares with $0.3 million of operating income for the fourth quarter of 2016. The fourth quarter net loss of $2.5 million, or $0.90 per diluted common share, includes the significant year-end, non-cash charges and compares with net income of $0.1 million, or $0.04 per diluted common share, for the fourth quarter of 2016.
“The revenue decline in the quarter was primarily due to our larger medical customers adjusting orders to year-end demand and market conditions,” said Rich Wasielewski, Nortech Systems’ president and CEO, adding that the four percent decrease in annual revenue was mainly attributed to specific transportation and medical device customers.
“Despite the negative year-end factors impacting our revenue and income, we are encouraged by the increased sales for industrial and defense customers in the fourth quarter, up 12 and 20 percent respectively,” noted Wasielewski. He commented that both defense and industrial markets also saw sizable year-over-year 90-day backlog gains of greater than 35 percent, softening the impact of the 42 percent medical backlog decline. The lower order position should persist through the first half of 2018 as two large medical customers work through on-hand inventory.
Given the positive momentum with industrial and defense customers, along with cost structure changes made over the past six months, the company expects to improve profitability and cash flow in 2018.
“We’ll continue focusing on managing cash, working capital and costs,” Wasielewski stated, citing a $2.1 million inventory reduction and better alignment of accounts payable with customer terms and conditions at year end. There was $0.2 million in positive operating cash flow generated for the fourth quarter and $0.8 million for the year.
The company’s recent investments in Asia and new Surface Mount Technology capabilities are now accretive and ahead of their expected ROI. Additional investments are planned for 2018 in the areas of automation, targeted marketing, ERP software and facility upgrades, including the recently announced expansion in Mexico that will offer improved workflow, productivity and an enhanced customer experience.
“The goal remains the same, to outperform the EMS industry with profitable growth,” concluded Wasielewski. “Our global strategy is successfully transforming Nortech from being a commodity-oriented supplier to an early engagement valued partner.”
About Nortech Systems Incorporated
Nortech Systems Incorporated (www.nortechsys.com), based in Maple Grove, Minn., is a full-service 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.