-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mdd/adr49bVBvARHTpPJ41b4u4h69lPdXIjayAKUaBf/O2gEFyIP6AMzUypx+NO5 ALw9i7fmzQLVNzAWLkqwBQ== 0001047469-99-020434.txt : 19990517 0001047469-99-020434.hdr.sgml : 19990517 ACCESSION NUMBER: 0001047469-99-020434 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTECH SYSTEMS INC CENTRAL INDEX KEY: 0000722313 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 411681094 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13257 FILM NUMBER: 99622193 BUSINESS ADDRESS: STREET 1: 641 EAST LAKE ST STREET 2: SUITE 234 CITY: WAYZATA STATE: MN ZIP: 55391 BUSINESS PHONE: 6124734102 FORMER COMPANY: FORMER CONFORMED NAME: DSC NORTECH INC DATE OF NAME CHANGE: 19901217 FORMER COMPANY: FORMER CONFORMED NAME: DIGIGRAPHIC SYSTEMS CORP DATE OF NAME CHANGE: 19881113 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities exchange Act of 1934 For the quarterly period ended March 31, 1999. ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ___________ to ___________. Commission File Number 0-13257. NORTECH SYSTEMS INCORPORATED ---------------------------- (Exact name of registrant as specified in its chapter) MINNESOTA 41-1681094 - ----------------------------- --------------------------- (State of other jurisdiction (I.R.S. Employer of Incorporation or organization) Identification No.) 641 East Lake St. Suite 244, Wayzata, MN 55391 - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Codes) (612) 473-4102 - ---------------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None - ---------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.01 per share per value. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ------ Page 1 APPLICABLE ONLY TO CORPORATE REGISTRANTS; Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of latest practicable data. As of April 30, 1999, there were 2,351,377 shares of the Company's $.01 per share par value common stock outstanding. (The remainder of this page was intentionally left blank.) Page 2 NORTECH SYSTEMS INCORPORATED FORM 10-Q QUARTER ENDED MARCH 31, 1999 INDEX
PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements 4-7 Item 2 - Management's Discussion and Analysis of Financial Condition And Results of Operations 8-9 PART II - OTHER INFORMATION Item 2 - Exhibits and Reports on Form 8-K 10 SIGNATURES 11
Page 3 NORTECH SYSTEMS INCORPORATED BALANCE SHEETS ASSETS FOR THE PERIOD ENDED MARCH 31, 1999 AND DECEMBER 31, 1998
MARCH 31 DECEMBER 31 ASSETS 1999 1998 (UNAUDITED) (AUDITED) ------------- -------------- Current Assets Cash and cash equivalents $ 202,049 $ 415,446 Accounts receivable, net 5,676,312 5,381,344 Inventories: Finished goods 870,432 1,737,483 Work in process 1,429,658 1,386,502 Raw materials 7,485,963 6,259,890 ----------- ------------ Total inventories $ 9,786,053 $ 9,383,875 Prepaid expenses and other 972,241 1,020,822 ----------- ------------ Total current assets $ 16,636,655 $ 16,201,487 ----------- ------------ PLANT, Property, and Equipment (at Cost) Land and Building/leaseholds $ 3,926,158 $ 3,919,873 Manufacturing equipment 5,399,102 4,577,838 Office and other equipment 2,359,979 3,052,834 ----------- ------------ $ 11,685,239 $ 11,550,545 Less accumulated depreciation and amortization (4,984,826) (4,785,474) ----------- ------------ $ 6,700,413 $ 6,765,071 ----------- ------------ Other Assets Goodwill and other intangible assets 1,208,129 1,229,754 Deferred tax asset 475,000 475,000 Other assets 57,250 57,250 ----------- ------------ Total Other Assets $ 1,740,379 1,762,004 ----------- ------------ Total Assets $ 25,077,447 $ 24,728,562 ----------- ------------ ----------- ------------
Page 4 NORTECH SYSTEMS INCORPORATED BALANCE SHEETS LIABILITIES FOR THE PERIOD ENDED MARCH 31, 1999 and DECEMBER 31, 1998
MARCH 31 DECEMBER 31 LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 (UNAUDITED) (AUDITED) ------------- -------------- Current Liabilities: Current maturities of long-term debt $ 716,769 $ 810,934 Line of Credit 0 0 Accounts payable 2,764,948 3,232,593 Accrued payrolls and commissions 1,182,136 682,539 Other 817,794 491,388 ----------- ------------ Total Current Liabilities $ 5,481,647 $ 5,217,454 ----------- ------------ Long-Term Debt Notes Payable (net of current maturities shown above) $ 10,982,527 $ 11,146,537 ----------- ------------ Redeemable Stock $ 0 $ 0 Shareholders' Equity: Preferred Stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and outstanding $ 250,000 $ 250,000 Common Stock - $.01 par value; 9,000,000 shares authorized; 2,312,262 and 2,312,262 shares issued and outstanding, net of redeemable shares reported above, at December 31, 1998 and December 31, 1997, respectively 23,514 23,514 Additional Paid-in Capital 12,131,045 12,131,045 Accumulated Deficit (3,791,286) (4,039,988) ----------- ------------ Total Shareholders' Equity $ 8,613,273 $ 8,364,571 ----------- ------------ Total Liabilities, Redeemable Stock and Shareholders' Equity $ 25,077,447 $ 24,728,562 ----------- ------------ ----------- ------------
Page 5 NORTECH SYSTEMS INCORPORATED STATEMENTS OF INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
MARCH 31 MARCH 31 1999 1998 (UNAUDITED) (UNAUDITED) ------------- -------------- Sales $ 10,539,316 $ 10,491,792 Cost of Sales 8,607,385 8,741,376 ----------- ------------ Gross Profit $ 1,931,931 $ 1,750,416 Selling, General and Admin. 1,248,549 1,044,518 Engineering/Reseach & Development 82,218 68,093 Misc. (Income) Expense, net (15,441) (20,845) Interest Expense 233,983 249,932 ----------- ------------ Net Income Before Tax Provision $ 382,622 $ 408,718 Income Tax Expense (Benefit) 133,918 162,288 ----------- ------------ Net Income $ 248,704 $ 246,430 ----------- ------------ ----------- ------------ Income (Loss) per Share of Common Stock Net income per Share of Common Stock $ 0.11 $ 0.11 ----------- ------------ ----------- ------------ Weighted Average Number of Shares Outstanding 2,351,377 2,345,262 ----------- ------------ ----------- ------------
Page 6 NORTECH SYSTEMS INCORPORATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
MARCH 31 MARCH 31 1999 1998 (UNAUDITED) (UNAUDITED) ------------- -------------- Cash Flows from Operating Activities Net Income $ 248,704 $ 246,430 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 199,352 205,162 Deferred Taxes Escrow held on Sale of Assets Gain on Sale of Assets Changes in Operating Assets and Liabilities: Accounts receivable (294,968) (520,859) Inventories (402,178) (925,639) Prepaid expenses 48,581 (50,386) Other assets 21,625 115,149 Accounts payable (467,645) (73,448) Accrued payrolls 499,597 (245,765) Other accruals 326,406 126,416 ----------- ------------ Net cash used by operating activity 179,474 (1,122,940) Cash Flows from Investing Activities: Acquistion of equipment (134,694) (52,517) Proceeds from sale of Assets Payment of Pref. Stock Dividend ----------- ------------ Net cash used by investing activity (134,694) (52,517) Cash Flows from Financing Activities: Net borrowing of Long Term debt 0 760,000 Payments of long term debt (164,012) (79,709) Change in current debt (94,165) (92,416) ----------- ------------ Net cash provided by financing activities (258,177) 587,875 ----------- ------------ Net (Decrease) in Cash (213,397) (587,582) Cash at Beginning of Period 415,446 714,169 ----------- ------------ Cash at End of Period $ 202,049 $ 126,587 ----------- ------------ ----------- ------------
Page 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS FOR PERIOD ENDED MARCH 31, 1999 For the quarter ended March 31, 1999, the Company had revenues of $10,539,316 compared to revenues of $10,491,782 for the quarter ended March 31, 1998. The increase in revenues resulted primarily from the additional revenues generated from internal growth. The net income for the three months ended March 31, 1999 was $248,704 or $.11 per share, compared to a net income of $246,430 or $.11 per share, for the three months ended March 31, 1998. The net income for the quarter ended March 31, 1999 was primarily impacted by increased gross profit from the increased revenue offset by increased expenses related to engineering and development costs of the new autosync monitor. Company's 90 day order backlog was $9,175,000 as of March 31, 1999, compared to $9,210,000 at the beginning of the quarter. Based on the current conditions, the Company anticipates revenue levels in the second quarter of 1999 to be about the same as the first quarter of 1999. LIQUIDITY AND CAPITAL RESOURCES. The Company's working capital increased to $11,155,008 during the first quarter of 1999, compared to $10,984,033 as of December 31, 1998. The Company believes that its financial stability will continue to improve during 1999 and would expect that its operating cash flow and available credit faculities will be sufficient to fund the expected growth in the near term. UPDATE ON YEAR 2000 STATUS Nortech Systems, Inc recognizes the dangers of the "Year 2000 Problem". To ensure a minimum negative impact on business operations, Nortech has established a Y2K Initiative. The Y2K Initiative addresses the effect on the company, our vendors and our customers. We have completed the inventory and evaluation phase, and are nearing completion of the implementation phase. Testing is nearly completed on most systems. Monitoring and evaluation will continue throughout 1999 and into 2000 until we are sure all issues have been properly resolved. Page 8 SEGMENT REPORTING INFORMATION Nortech Systems, Inc manufactures and sells a variety of products used in the computer, medical, government and defense industries, primarily for the commercial industrial market. The Company's principal businesses are based upon the nature of the manufacturing operations of the respective location. 1. CONTRACT MANUFACTURING - Includes the manufacture of wire harnesses, cable and electromechanical assemblies, printed circuit board assemblies, and higher-level assemblies, all of which are manufactured under contract specifications. These products are sold primarily to the commercial and defense industries. 2. DISPLAY PRODUCTS - Includes the design, manufacture, and marketing of high performance display monitors. The products are sold primarily to the medical, industrial, and service industries. 3. MEDICAL MANAGEMENT - Provides service bureau and office management services to physicians and clinics. Each of these is a business segment, with its respective financial performance detailed in this report.
MARCH 31 MARCH 31 1999 1998 (UNAUDITED) (UNAUDITED) ------------------- ------------------ BUSINESS SEGMENT NET REVENUES Contract Manufacturing $ 9,467,338 $ 9,229,349 Display Products 969,018 1,163,560 Medical Management 102,960 98,883 ------- ------ Total $ 10,539,316 $ 10,491,792 BUSINESS SEGMENT PROFIT/(LOSS) Contract Manufacturing $ 346,184 $ 271,640 Display Products (76,279) (3,880) Medical Management (21,201) (21,330) ------- ------ Total $ 248,704 $ 246,430 MARCH 31 DECEMBER 31 1999 1998 (UNAUDITED) (AUDITED) ------------------- ------------------ BUSINESS SEGMENT ASSETS Contract Manufacturing $ 20,778,329 $ 20,737,352 Display Products 4,108,653 3,846,402 Medical Management 190,465 144,808 ---------- ---------- Total $ 25,077,447 $ 24,728,562
Page 9 PART II - OTHER INFORMATION ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K. None (The remainder of this page was intentionally left blank.) Page 10 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 10, 1999 NORTECH SYSTEMS INCORPORATED By: Quentin E. Finkelson --------------------------------- Quentin E. Finkelson Its President and Chief Executive Officer By: Garry M. Anderly --------------------------------- Garry M. Anderly Principal Financial Officer and Principal Accounting Officer Page 11 EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 202,049 0 5,819,489 143,177 9,786,053 16,636,655 11,685,239 4,984,826 25,077,447 5,481,647 0 0 250,000 23,514 8,339,759 25,077,447 10,539,316 10,539,316 8,607,385 8,607,385 1,315,326 0 233,983 382,622 133,918 248,704 0 0 0 248,704 .11 .11
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