Circuits Assembly Online Magazine - Nortech Reports Slow Q4, Expects Softness Ahead

MINNEAPOLIS -- Nortech Systems today reported net sales of $29 million for the fourth quarter ended Dec. 31, down 7.6% from a year ago.

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 the quarter, 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.

The electronics manufacturing services provider said net sales for the year rose 1% to $116.6 million. Operating income was $629,000, an improvement of $1.1 million from 2015. Net income was $44,000, versus a net loss of $571,000 in 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% and defense sales rose 11%. Industrial sales declined 21%, 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 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,” said 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 US economic confidence, buoyed by the potential of tax reform, reduced regulations and increased spending on infrastructure and defense, contributes to this outlook.