<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 June 30, 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
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
641 East Lake Street - 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
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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 July 31, 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 JUNE 30, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements............................... 4-8
Item 2 - Management's Discussion, 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
BALANCE SHEETS
JUNE 30, 1996 and DECEMBER 31, 1995
JUNE 30 DECEMBER 31
ASSETS 1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
Current Assets
Cash and cash equivalents $ 480,889 $ 924,590
Accounts receivable, net 3,031,130 1,856,219
Inventories:
Finished goods 158,485 205,879
Work in process 1,981,359 1,676,949
Raw materials 2,560,979 1,972,384
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Total inventories $ 4,700,823 $ 3,855,212
Prepaid expenses and other 698,920 561,701
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Total current assets $ 8,911,762 $ 7,197,722
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PLANT, Property, and Equipment (at Cost)
Land and Building/leaseholds $ 2,017,172 $ 2,005,859
Manufacturing equipment 2,493,832 2,389,201
Office and other equipment 1,877,124 1,701,640
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$ 6,388,128 $ 6,096,700
Less accumulated depreciation and
amortization (2,514,398) (2,256,862)
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$ 3,873,730 $ 3,839,838
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Other Assets
Goodwill and other intangible assets 979,492 998,254
Deferred tax asset 1,130,000 1,130,000
Other assets 57,250 57,250
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Total Other Assets $ 2,166,742 2,185,504
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Total Assets $14,952,234 $13,223,064
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
JUNE 30, 1996 and DECEMBER 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30 DECEMBER 31
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
Current Liabilities:
Current maturities of long-term debt $ 256,091 $ 283,100
Line of credit 0 0
Accounts payable 1,719,231 1,054,880
Accured payrolls and commissions 672,800 407,016
Other 183,506 173,217
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Total Current Liabilities $ 2,831,628 $ 1,918,213
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Long-Term Debt
Notes Payable (net of current
maturities shown above) $ 4,640,903 $ 3,768,685
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Redeemable Stock $ 968,400 $ 1,500,000
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; 2,200,863 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 (5,003,378) (5,478,515)
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Total Shareholders' Equity $ 6,511,303 $ 6,036,166
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Total Liabilities, Redeemable
Stock and Shareholders' Equity $14,952,234 $13,223,064
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
JUNE 30 JUNE 30
1996 1995
(UNAUDITED) (UNAUDITED)
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Sales $6,622,903 $4,374,899
Cost of Sales 5,408,628 3,410,099
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Gross Profit $1,214,275 $ 964,800
Selling, General and Admin. 630,196 580,877
Engineering/Reseach & Development 119,217 43,157
Misc. (Income) Expense, net 3,669 (30,801)
Interest Expense 76,441 27,612
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Net Income Before Tax Provision $ 384,752 $ 343,955
Tax Provision 96,200 99,906
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Net Income $ 288,552 $ 244,049
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Income (Loss) per Share of Common Stock
Net income per Share of Common Stock $ 0.12 $ 0.10
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Weighted Average Number of Shares
Outstanding 2,362,263 2,522,852
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
JUNE 30 JUNE 30
1996 1995
(UNAUDITED) (UNAUDITED)
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Sales $12,197,889 $ 8,000,163
Cost of Sales 9,977,259 6,361,458
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Gross Profit $ 2,220,630 $ 1,638,705
Selling, General and Admin. 1,223,304 985,325
Engineering/Reseach & Development 192,583 72,460
Misc. (Income) Expense, net 3,611 (56,090)
Interest Expense 163,186 49,054
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Net Income Before Tax Provision $ 637,946 $ 587,956
Tax Provision 159,500 99,906
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Net Income $ 478,446 $ 488,050
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Income (Loss) per Share of Common Stock
Net income $ 0.20 $ 0.21
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Weighted Average Number of Shares
Outstanding 2,362,263 2,328,658
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995
JUNE 30 JUNE 30
1996 1995
(UNAUDITED) (UNAUDITED)
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Cash Flows from Operating Activities
Net Income $ 478,446 $ 488,050
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 257,536 141,382
Changes in Operating Assets and Liabilities:
Accounts receivable (1,174,911) (853,174)
Inventories (845,611) (1,134,498)
Prepaid expenses (137,219) (633,347)
Other assets 18,762 (566,629)
Accounts payable 664,351 652,628
Accured payrolls 265,784 133,086
Other accruals 10,289 2,691
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Net cash used by operating act. (462,573) 1,199,811
Cash Flows from Investing Activities:
Acquistion of equipment (291,428) (184,420)
Acquistion of Comp. assets 0 697,210
Net Proceeds Under line line of credit 0 0
Proceeds from Sale of Stock 0 1,202,198
Redemption of Stock/other (531,600) 0
Payment of Pref. Stock Dividend 0 (14,514)
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Net cash provided (used) by
investing act. (823,028) 306,054
Cash Flows from Financing Activities:
Net borrowing of L/T debt 925,000 340,601
Payments of long term debt (52,781) (59,763)
Change in current debt (30,319) (11,121)
Net cash provided by financing ----------- -----------
activities 841,900 269,717
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Net (Decrease) in Cash (443,701) (629,040)
Cash at Beginning of Period 924,590 841,702
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Cash at End of Period $ 480,889 $ 217,662
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Page 8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR PERIOD ENDED JUNE 30, 1996
For the quarter ended June 30, 1996, the Company had revenues of $6,622,903
compared to revenues of $4,374,899 for the quarter ended June 30, 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 June 30, 1996 was $288,552 or $.12 per share, compared
to a net income of $244,049 or $.10 per share, for the three months ended
June 30, 1995. The net income for the quarter ended June 30, 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.
For the six month period ended June 30, 1996, the Company had revenue of
$12,197,889 compared to revenue of $8,000,163 for the six months ended June
30, 1995. The net income for the six months ended June 30, 1996 was
$478,446 or $.20 per share compared to a net income of $488,050 or $.21 per
share, for the six months ended June 30, 1995. The 1996 net income reflects
an income after recording a tax expense of $159,500 compared to tax expense
of $99,906 recorded in 1995.
The Company's 90 day order backlog was $5,972,900 as of June 30, 1996,
compared to $6,284,000 at the beginning of the quarter. Based on the
current conditions, the Company anticipates revenue levels in the third
quarter of 1996 to be about the same as the second quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital increased to $6,080,134 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 facilities
will be sufficient to fund the expected growth in the near term.
EQUITY
During April 1996, 88,600 shares of the Company's common 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: August 13, 1996 NORTECH SYSTEMS INCORPORATED
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By: Quentin E. Finkelson
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Quentin E. Finkelson
President & Chief Executive Officer
By: Garry M. Anderly
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Garry M. Anderly
Principal Financial & Accounting
Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 480,889
<SECURITIES> 0
<RECEIVABLES> 3,031,130
<ALLOWANCES> 0
<INVENTORY> 4,700,823
<CURRENT-ASSETS> 8,911,762
<PP&E> 6,388,128
<DEPRECIATION> 2,514,398
<TOTAL-ASSETS> 14,952,234
<CURRENT-LIABILITIES> 2,831,628
<BONDS> 0
0
250,000
<COMMON> 22,009
<OTHER-SE> 7,207,694
<TOTAL-LIABILITY-AND-EQUITY> 14,952,234
<SALES> 6,622,903
<TOTAL-REVENUES> 6,622,903
<CGS> 5,408,628
<TOTAL-COSTS> 5,408,628
<OTHER-EXPENSES> 753,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,441
<INCOME-PRETAX> 384,752
<INCOME-TAX> 96,200
<INCOME-CONTINUING> 288,552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288,552
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
