WAYZATA, MN – Nortech Systems reported net sales of $26.3 million for the third quarter, down 12.6% year-over-year.

Net income was $2 million, compared to $400,000 in the third quarter of 2019. Operating income was $2.7 million, including a gain on sale of property and equipment of $3.8 million, compared to operating income of $700,000 in the prior-year quarter.

Backlog as of Sept. 30 was $45.8 million.

The company closed on sale and leaseback agreements with Essjay Investment relating to manufacturing facilities in Bemidji and Mankato, MN. Nortech received net proceeds from the sale, excluding closing costs, of approximately $6 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 and Mankato facilities for an initial 15-year term, with multiple five-year renewal options.

The Merrifield production facility consolidation is expected to be completed by Dec. 31. By the end of 2020, the company will shift nearly all of its PCB manufacturing to Mankato and much of its wire and cable assembly production to Bemidji. 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," said CEO and president Jay D. Miller.