<PAGE>
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, 1996.
( ) 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
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(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 234, Wayzata, MN 55391
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(Address of principal executive offices) (Zip Codes)
(612) 473-4102
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(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______________
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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, 1996, there were 2,362,263 shares of the Company's $.01 per
share par value common stock outstanding.
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NORTECH SYSTEMS INCORPORATED
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements 4-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 2 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND MARCH 31, 1995
MARCH 31 MARCH 31
1996 1995
(Unaudited) (Unaudited)
----------- -----------
Sales $ 5,574,986 $ 3,625,264
Cost of Sales 4,568,631 2,951,359
----------- -----------
Gross Profit $ 1,006,355 $ 673,905
18.1% 18.6%
Selling, General and Admin. 593,108 404,447
Engineering/Reseach & Development 73,366 29,303
Misc. (Income) Expense, net (58) (25,289)
Interest Expense 86,745 21,441
----------- -----------
Net Income (Loss) Before Tax
Provision $ 253,194 $ 244,003
Tax Provision 63,300 0
----------- -----------
Net Income $ 189,894 $ 244,003
=========== ===========
Income (Loss) per Share of Common Stock
Net income $ 0.08 $ 0.11
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Weighted Average Number of Shares
Outstanding 2,450,863 2,206,398
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NORTECH SYSTEMS INCORPORATED
' BALANCE SHEETS
MARCH 31, 1996 and DECEMBER 31, 1995
MARCH 31 DECEMBER 31
ASSETS 1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
Current Assets
Cash and cash equivalents $ 472,605 $ 924,590
Accounts receivable, net 2,870,570 1,856,219
Inventories:
Finished goods 200,705 205,879
Work in process 2,020,197 1,676,949
Raw materials 2,462,519 1,972,384
----------- ------------
Total inventories $ 4,683,421 $ 3,855,212
Prepaid expenses and other 651,623 561,701
----------- ------------
Total current assets $ 8,678,219 $ 7,197,722
----------- ------------
PLANT, Property, and Equipment (at Cost)
Land and Building/leaseholds $ 2,008,315 $ 2,005,859
Manufacturing equipment 2,321,675 2,389,201
Office and other equipment 1,835,097 1,701,640
----------- ------------
$ 6,165,087 $ 6,096,700
Less accumulated depreciation and
amortization (2,280,323) (2,256,862)
----------- ------------
$ 3,884,764 $ 3,839,838
----------- ------------
Other Assets
Goodwill and other intangible assets 987,732 998,254
Deferred tax asset 1,130,000 1,130,000
Other assets 57,250 57,250
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Total Other Assets $ 2,174,982 2,185,504
----------- ------------
Total Assets $14,737,965 $13,223,064
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
MARCH 31, 1996 and DECEMBER 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 31 DECEMBER 31
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
Current Lialilities:
Current maturities of long-term debt $ 288,748 $ 283,100
Line of credit 0 0
Accounts payable 2,140,595 1,054,880
Accured payrolls and commissions 574,793 407,016
Other 15,855 173,217
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Total Current Liabilities $ 3,019,991 $ 1,918,213
----------- -----------
Long-Term Debt
Notes Payable (net of current
maturities shown above) $ 3,961,730 $ 3,768,685
----------- -----------
Redeemable Stock $ 1,500,000 $ 1,500,000
Shareholders' Equity:
preferred stock, $1 par value;
1,000,000 shares authorized; 250,000
shares issued and outstanding in 1991 $ 250,000 $ 250,000
common stock - $.01 par value; 9,000,000
shares authorized; 2,200,863 and 2,194,305
shares issued and outstanding, net of
redeemable shares reported above, at
March 31, 1996 and December 31, 1995,
Respectively 22,009 22,009
additional paid-in capital 11,242,672 11,242,672
accumulated deficit (5,258,437) (5,478,515)
----------- -----------
Total Shareholders' Equity $ 6,256,244 $ 6,036,166
----------- -----------
Total Liabilities, Redeemable Stock and
Shareholders' Equity $14,737,965 $13,223,064
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND MARCH 31, 1995
MARCH 31 MARCH 31
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
Cash Flows from Operating Activities
Net Income $ 189,894 $ 244,003
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 65,524 61,246
Changes in Operating Assets and Liabilities:
Accounts receivable (1,014,351) (468,218)
Inventories (828,209) (518,928)
Prepaid expenses (89,922) (113,991)
Other assets 10,522 (552,707)
Accounts payable 1,085,715 476,621
Accured payrolls 167,777 (86,791)
Other accruals (157,362) (7,669)
------------ ------------
Net cash used by operating act. (570,412) (966,434)
Cash Flows from Investing Activities:
Acquistion of equipment (99,928) (42,629)
Acquistion of Comp. assets 0 (697,210)
Net Proceeds Under L/C 0 0
Proceeds from Sale of Stock 0 1,202,198
Other activities 19,661 0
Payment of Pref. Stock Dividend 0 (14,514)
------------ ------------
Net cash used by investing act. (80,267) 447,845
Cash Flows from Financing Activities:
Net borrowing of L/T debt 225,000 300,000
Payments of long term debt (31,954) (31,415)
Change in current debt 5,648 (41,260)
------------ ------------
Net cash provided by financing
activities 198,694 227,325
------------ ------------
Net Increase (Decrease) in Cash (451,985) (291,264)
Cash at Beginning of Period 924,590 841,702
------------ ------------
Cash at End of Period $ 472,605 $ 550,438
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PAGE 7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR PERIOD ENDED MARCH 31, 1996
For the quarter ended March 31, 1996, the Company had revenues of $5,574,986
compared to revenues of $3,625,264 for the quarter ended March 31, 1995. The
increase in revenues resulted primarily from the additional revenues generated
by the recently acquired Aerospace Division. The Company previously completed
this acquisition in August 1995. The net income for the three months ended
March 31, 1996 was $189,901 or $.08 per share, compared to a net income of
$244,003 or $.11 per share, for the three months ended March 31, 1995. The
net income for the quarter ended March 31, 1996 was primarily impacted by the
continuing expending funds on Company-sponsored research and development of
large-screen, high resolution video monitors for the imaging division and the
recognition of income tax expense. It is the Company's expectation that a
portion of the tax benefits will be realized during 1996 and the remaining
benefits will be carried forward. The net income for the quarter ended
March 31, 1995 includes a expenses associated with the reconfiguration of the
Bemidji Production facility.
Company's 90 day order backlog was $6,284,000 as of March 31, 1996, compared
to $4,513,000 at the beginning of the quarter. Based on the current
conditions, the Company anticipates revenue levels in the second quarter of
1996 to be higher than the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital increased to $5,933,226 during the first
quarter of 1996, compared to $5,279,509 as of December 31, 1995. The Company
believes that its financial stability will continue to improve during 1996
and would expect that its operating cash flow and available credit faculities
will be sufficient to fund the expected growth in the near term.
EQUITY
During April 1996, 88,600 common shares of the Company's stock was placed
back to the Company under the terms of the final agreement in the acquisition
of Monitor Technology Corporation. Under the terms of this agreement, the
stock had a repurchase price of $6.00 per share.
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PART II - OTHER INFORMATION
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K.
None
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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 13, 1996 NORTECH SYSTEMS INCORPORATED
By: Quentin E. Finkelson
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Quentin E. Finkelson
Its President and Chief
Executive Officer
By: Garry M. Anderly
------------------------------------
Garry M. Anderly
Principal Financial
Officer and Principal
Accounting Officer
PAGE 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 472,605
<SECURITIES> 0
<RECEIVABLES> 2,870,570
<ALLOWANCES> 0
<INVENTORY> 4,683,421
<CURRENT-ASSETS> 8,678,219
<PP&E> 6,165,087
<DEPRECIATION> 2,280,323
<TOTAL-ASSETS> 14,737,965
<CURRENT-LIABILITIES> 3,019,991
<BONDS> 0
0
250,000
<COMMON> 22,009
<OTHER-SE> 7,484,235
<TOTAL-LIABILITY-AND-EQUITY> 14,737,965
<SALES> 5,574,986
<TOTAL-REVENUES> 5,574,986
<CGS> 4,568,631
<TOTAL-COSTS> 4,568,631
<OTHER-EXPENSES> 666,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,745
<INCOME-PRETAX> 253,194
<INCOME-TAX> 63,300
<INCOME-CONTINUING> 189,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,894
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
