Nortech Systems Announces 2020 Results


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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 $104.1 million for the year ended December 31, 2020, a decline of 10.5% compared to $116.3 for fiscal 2019. The decline was primarily due to reduced demand from medical and industrial customers impacted by COVID-19. Gross margin for fiscal 2020 was 8.1% compared to 10.8% in 2019, a decline of 2.7 percentage points. Gross margin in the fourth quarter was down approximately 6 percentage points versus the same period last year due to unabsorbed fixed overhead in the Company’s global manufacturing network. Net loss for fiscal year 2020 was ($1.5) million and ($0.58) per diluted share compared to a net loss of ($1.2) million and ($0.46) per diluted share in fiscal year 2019. Adjusted EBITDA was $0.1 million in fiscal 2020 compared to $2.4 million in fiscal 2019. The EBITDA decline was primarily due to reduced revenue in the fourth quarter related to COVID-19.

"The fourth quarter of 2020 was a significant challenge for Nortech due to the effects of COVID-19, related supply-chain challenges, and slower customer order volume. Our team battled through adversity, preserved our workforce with the help of a PPP loan, and continued supplying mission critical parts to our medical, industrial, and defense customers. Our monthly bookings trend improved late in the fourth quarter of 2020 and we are seeing those positive trends continue into the first quarter of 2021. The team has done a great job positioning the Company to return to profitable growth in 2021.” stated Jay D. Miller, Chief Executive Officer and President.

Revenue was $23.8 million for the fourth quarter ended December 31, 2020, compared with $30.8 million for the fourth quarter of 2019. Operating loss for the fourth quarter of 2020 was ($3.8) million which includes a $2.4 million non-cash charge due to the impairment of goodwill remaining from the acquisition of the Devicix business in 2015. During the fourth quarter of 2020 all aspects of Devicix engineering services were fully integrated into Nortech Systems to better facilitate our value proposition for providing innovative speed-to-market solutions for medical device customers. Excluding this one-time charge, adjusted operating loss for the fourth quarter of 2020 was ($1.4) million. This compares with operating income of $0.8 million for the fourth quarter of 2019. Net loss for the fourth quarter of 2020 was ($3.5) million, or ($1.33) per diluted common share compared with net income in the fourth quarter of 2019 of $0.3 million, or $0.10 per diluted common share. Adjusted EBITDA was a loss of ($0.9) million in the fourth quarter of 2020 compared to $1.4 million in fiscal 2019. The EBITDA decline was primarily due to reduced revenue related COVID-19. Nortech’s backlog at the end of the fourth quarter of 2020 was $48.7 million and is rebounding in the first quarter of 2021.

In the fourth quarter, Nortech’s Merrifield production facility consolidation was completed as planned. The Company shifted nearly all of its Printed Circuit Board (PCB) manufacturing to its Mankato, Minnesota production facility, and much of its complex wire and cable assembly production to its Bemidji, Minnesota production facility that recently achieved AS9100D certification. 

Miller continued, “This consolidation reflects Nortech’s strategy of focusing our investments in talent, equipment, and infrastructure in fewer core ‘center of excellence’ locations to improve foundational capabilities that matter most to our customers: high quality, reliable on-time delivery, innovative solutions, and exceptional value. I am also excited about recent additions to our leadership team as we welcome Lianne King as our VP of Human Resources, Christine LaPoint as our Senior Director of Quality & Regulatory, and John Koski as the Plant Manager at our medical device center of excellence in Milaca, Minnesota. Lianne, Christine, and John all bring a wealth of experience to our leadership team. I’m thrilled to have them on board, and I am energized about the operational improvements they will implement in 2021 in conjunction with our entire global team."

 

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