<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, 1997.
( ) 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 or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
641 East Lake Street - Suite 244 - 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 July 31, 1997, 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, 1997
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, 1997 AND DECEMBER 31, 1996
JUNE 30 DECEMBER 31
ASSETS 1997 1996
(UNAUDITED) (AUDITED)
----------- -----------
Current Assets
Cash and cash equivalents $ 466,801 $ 1,235,127
Accounts receivable, net 5,068,214 3,695,763
Inventories:
Finished goods 1,153,906 1,265,588
Work in process 1,767,247 1,837,247
Raw materials 4,445,804 3,626,665
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Total inventories $ 7,366,957 $ 6,729,500
Prepaid expenses and other 548,870 628,821
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Total current assets $ 13,450,842 $ 12,289,211
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PLANT, Property, and Equipment (at Cost)
Land and Building/leaseholds $ 3,781,825 $ 3,695,455
Manufacturing equipment 5,370,769 4,588,955
Office and other equipment 2,074,599 2,461,997
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$ 11,227,193 $ 10,746,407
Less accumulated depreciation and
amortization (3,411,277) (2,875,702)
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$ 7,815,916 $ 7,870,705
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Other Assets
Goodwill and other intangible assets 798,463 1,025,463
Deferred tax asset 910,000 910,000
Other assets 57,250 57,250
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Total Other Assets $ 1,765,713 1,992,713
----------- -----------
Total Assets $ 23,032,471 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30 DECEMBER 31
1997 1996
(UNAUDITED) (AUDITED)
----------- -----------
Current Liabilities:
Current maturities of long-term debt $ 759,375 $ 731,080
Line of credit 500,000 500,000
Accounts payable 2,071,360 1,596,326
Accured payrolls and commissions 675,376 673,303
Other 237,954 289,971
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Total Current Liabilities $ 4,244,065 $ 3,790,680
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Long-Term Debt
Notes Payable (net of current
maturities shown above) $ 11,037,468 $ 10,910,757
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Redeemable Stock $ 300,000 $ 300,000
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; 2,312,262 and
2,312,262 shares issued and outstanding,
net of redeemable shares reported above,
at June 30, 1997 and December 31, 1996,
Respectively 23,124 23,124
additional paid-in capital 11,910,554 11,910,554
accumulated deficit (4,732,740) (5,032,486)
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Total Shareholders' Equity $ 7,450,938 $ 7,151,192
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Total Liabilities, Redeemable Stock
and Shareholders' Equity $ 23,032,471 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
JUNE 30 JUNE 30
1997 1996
(UNAUDITED) (UNAUDITED)
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Sales $ 9,039,176 $ 6,622,903
Cost of Sales 7,383,860 5,408,628
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Gross Profit $ 1,655,316 $ 1,214,275
Selling, General and Admin. 1,043,756 630,196
Engineering/Reseach & Development 93,458 119,217
Misc. (Income) Expense, net (1,493) 3,669
Interest Expense 260,264 76,441
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Net Income Before Tax Provision $ 259,331 $ 384,752
Tax Provision 92,079 96,200
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Net Income $ 167,252 $ 288,552
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----------- -----------
Income (Loss) per Share of Common Stock
Net income per Share of Common Stock $ 0.07 $ 0.12
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Weighted Average Number of Shares
Outstanding 2,362,263 2,362,263
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
JUNE 30 JUNE 30
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
Sales $ 17,604,022 $ 12,197,889
Cost of Sales 14,428,217 9,977,259
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Gross Profit $ 3,175,805 $ 2,220,630
Selling, General and Admin. 2,058,561 1,223,304
Engineering/Reseach & Development 205,953 192,583
Misc. (Income) Expense, net 7,270 3,611
Interest Expense 443,935 163,186
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Net Income Before Tax Provision $ 460,086 $ 637,946
Tax Provision 160,079 159,500
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Net Income $ 300,007 $ 478,446
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Income per Share of Common Stock
Net income per share of Common Stock $ 0.13 $ 0.20
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Weighted Average Number of Shares
Outstanding 2,362,263 2,362,263
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
JUNE 30 JUNE 30
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
Cash Flows from Operating Activities
Net Income $ 300,007 $ 478,446
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 535,575 257,536
Changes in Operating Assets and Liabilities:
Accounts receivable (1,372,451) (1,174,911)
Inventories (637,457) (845,611)
Prepaid expenses 79,951 (137,219)
Other assets 227,000 18,762
Accounts payable 475,034 664,351
Accured payrolls 2,073 265,784
Other accruals (52,017) 10,289
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Net cash used by operating act. (442,285) (462,573)
Cash Flows from Investing Activities:
Acquistion of equipment (480,786) (291,428)
Redemption of Stock/other 0 (531,600)
Payment of Pref. Stock Dividend 0 0
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Net cash used by investing act. (480,786) (823,028)
Cash Flows from Financing Activities:
Net borrowing of Long Term debt 500,000 925,000
Payments of long term debt (373,289) (52,781)
Change in current debt 28,034 (30,319)
----------- -----------
Net cash provided by financing
activities 154,745 841,900
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Net (Decrease) in Cash (768,326) (443,701)
Cash at Beginning of Period 1,235,127 924,590
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Cash at End of Period $ 466,801 $ 480,889
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<PAGE>
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 $9,039,176
compared to revenues of $6,622,903 for the quarter ended June 30, 1996. The
increase in revenues resulted primarily from the additional revenues
generated by the recently acquired Zercom Division. The Company previously
completed this acquisition in November,1996. The net income for the three
months ended June 30, 1997 was $167,252 or $.07 per share, compared to a net
income of $288,552 or $.12 per share, for the three months ended June 30,
1996. The net income for the quarter ended June 30, 1997 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, lower Revenue and Profit in the Cable & Harness Business.
For the six month period ended June 30, 1997, the Company had revenue of
$17,604,022 compared to revenue of $12,197,889 for the six months ended June 30,
1996. The net income for the six months ended June 30, 1997 was $300,007 of
$.13 per share compared to a net income of $478,446 or $.20 per share, for the
six months ended June 30, 1996. The 1997 net income reflects an income after
recording a tax expense of $160,079 or 35% compared to tax expense of $159,500
or 25% recorded in 1996.
The Company's 90 day order backlog was $6,995,000 as of June 30, 1997, compared
to $6,668,000 at the beginning of the quarter. Based on the current
conditions, the Company anticipates revenue levels in the third quarter of 1997
to be slightly higher than the second quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital increased to $9,206,777 during the second quarter
of 1997, compared to $8,498,531 as of December 31, 1996. The Company believes
that its financial stability will continue to improve during 1997 and would
expect that its operating cash flow and available credit facilities will be
sufficient to fund the expected growth in the near term.
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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, 1997 NORTECH SYSTEMS INCORPORATED
By: Quentin E. Finkelson
---------------------------------------
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-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 466,801
<SECURITIES> 0
<RECEIVABLES> 5,068,214
<ALLOWANCES> 0
<INVENTORY> 7,366,957
<CURRENT-ASSETS> 13,450,842
<PP&E> 11,227,193
<DEPRECIATION> 3,411,277
<TOTAL-ASSETS> 23,032,471
<CURRENT-LIABILITIES> 4,244,065
<BONDS> 0
0
250,000
<COMMON> 23,124
<OTHER-SE> 7,477,814
<TOTAL-LIABILITY-AND-EQUITY> 23,032,471
<SALES> 9,039,176
<TOTAL-REVENUES> 9,039,176
<CGS> 7,383,860
<TOTAL-COSTS> 7,383,860
<OTHER-EXPENSES> 1,135,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,264
<INCOME-PRETAX> 259,331
<INCOME-TAX> 92,079
<INCOME-CONTINUING> 167,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,252
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
