<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 September 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
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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
Incorporation or organization) Identification Number)
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 October 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 SEPTEMBER 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
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
SEPT. 30 DECEMBER 31
ASSETS 1997 1996
(UNAUDITED) (AUDITED)
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Current Assets
Cash and cash equivalents $ 279,511 $ 1,235,127
Accounts receivable, net 4,644,933 3,695,763
Inventories:
Finished goods 1,169,360 1,265,588
Work in process 1,698,947 1,837,247
Raw materials 5,784,115 3,626,665
Total inventories $ 8,652,422 $ 6,729,500
Prepaid expenses and other 665,762 628,821
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Total current assets $ 14,242,628 $ 12,289,211
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PLANT, Property, and Equipment (at Cost)
Land and Building/leaseholds $ 3,860,506 $ 3,695,455
Manufacturing equipment 5,515,760 4,588,955
Office and other equipment 2,111,613 2,461,997
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$ 11,487,879 $ 10,746,407
Less accumulated depreciation and
amortization (3,692,774) (2,875,702)
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$ 7,795,105 $ 7,870,705
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Other Assets
Goodwill and other intangible assets 778,669 1,025,463
Deferred tax asset 910,000 910,000
Other assets 57,250 57,250
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Total Other Assets $ 1,745,919 1,992,713
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Total Assets $ 23,783,652 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPT. 30 DECEMBER 31
1996 1995
(UNAUDITED) (AUDITED)
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Current Liabilities:
Current maturities of long-term debt $ 234,848 $ 731,080
Line of credit 500,000 500,000
Accounts payable 2,524,762 1,596,326
Accured payrolls and commissions 699,543 673,303
Other 517,982 289,971
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Total Current Liabilities $ 4,477,135 $ 3,790,680
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Long-Term Debt
Notes Payable (net of current
maturities shown above) $ 11,429,970 $ 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
share; 30,000,000 shares
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
September 30, 1997 and December 31, 1996,
Respectively 23,124 23,124
additional paid-in capital 11,910,554 11,910,554
accumulated deficit (4,607,131) (5,032,486)
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Total Shareholders' Equity $ 7,576,547 $ 7,151,192
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Total Liabilities, Redeemable Stock and
Shareholders' Equity $ 23,783,652 $ 22,152,629
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NORTECH SYSTEMS INCORPORATED
STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
SEPT 30 SEPT 30
1997 1996
(UNAUDITED) (UNAUDITED)
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Sales $ 8,693,449 $ 6,143,457
Cost of Sales 7,128,714 5,047,285
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Gross Profit $ 1,564,735 $ 1,096,172
Selling, General and Admin. 1,071,529 672,247
Engineering/Reseach & Development 69,677 88,188
Misc. (Income) Expense, net (29,168) (10,894)
Interest Expense 236,459 88,463
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Net Income Before Tax Provision $ 216,238 $ 258,168
Tax Provision 75,683 54,542
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Net Income $ 140,555 $ 203,626
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Income (Loss) per Share of Common Stock
Net income per Share of Common Stock $ 0.06 $ 0.09
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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 NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
SEPT 30 SEPT 30
1997 1996
(UNAUDITED) (UNAUDITED)
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Sales $ 26,297,471 $ 18,341,346
Cost of Sales 21,556,931 15,024,544
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Gross Profit $ 4,740,540 $ 3,316,802
Selling, General and Admin. 3,130,090 1,895,551
Engineering/Reseach & Development 275,630 280,771
Misc. (Income) Expense, net (21,898) (7,283)
Interest Expense 680,394 251,649
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Net Income Before Tax Provision $ 676,324 $ 896,114
Tax Provision 235,761 215,710
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Net Income $ 440,563 $ 680,404
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Income per Share of Common Stock
Net income per share of Common Stock $ 0.19 $ 0.29
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Weighted Average Number of Shares
Outstanding 2,362,263 2,362,263
<PAGE>
NORTECH SYSTEMS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
SEPT 30 SEPT 30
1996 1995
(UNAUDITED) (UNAUDITED)
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Cash Flows from Operating Activities
Net Income $ 440,563 $ 680,404
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 817,072 406,789
Changes in Operating Assets and Liabilities:
Accounts receivable (949,170) (960,410)
Inventories (1,922,922) (1,121,874)
Prepaid expenses (36,941) 29,223
Other assets 246,794 171,594
Accounts payable 928,436 231,773
Accured payrolls 26,240 208,185
Other accruals 228,011 214,494
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Net cash used by operating act. (221,917) (139,822)
Cash Flows from Investing Activities:
Acquistion of equipment (741,472) (619,533)
Redemption of Stock/other 0 (531,600)
Payment of Pref. Stock Dividend (14,946) 0
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Net cash used by investing act. (756,418) (1,151,133)
Cash Flows from Financing Activities:
Net borrowing of Long Term debt 600,000 1,125,000
Payments of long term debt (580,787) (80,128)
Change in current debt 3,506 (88,570)
Net cash provided by financing -- --
activities 22,719 956,302
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Net (Decrease) in Cash (955,616) (334,653)
Cash at Beginning of Period 1,235,127 924,590
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Cash at End of Period $ 279,511 $ 589,937
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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 SEPTEMBER 30, 1997
For the quarter ended September 30, 1997, the Company had revenues of
$8,693,449 compared to revenues of $6,143,457 for the quarter ended September
30, 1997. 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 September 30, 1997 was $140,555 or $.06 per share,
compared to a net income of $203,626 or $.09 per share, for the three months
ended September 30, 1997. The net income for the quarter ended September 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 and lower Revenue and Profit in the
Cable & Harness Business.
For the nine month period ended September 30, 1997, the Company had revenue
of $26,297,471 compared to revenue of $18,341,346 for the nine months ended
September 30, 1997. The net income for the nine months ended September 30,
1997 was $440,563 of $ .19 per share compared to a net income of $680,404 or
$.29 per share, for the nine months ended September 30, 1997. The 1997 net
income reflects an income after recording a tax expense of $235,761 or 35%
compared to tax expense of $215,710 or 24% recorded in 1996.
The Company's 90 day order backlog was $8,647,000 as of September 30, 1997,
compared to $6,995,000 at the beginning of the quarter. Based on the
current conditions, the Company anticipates revenue levels in the fourth
quarter of 1997 to be higher than the third quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital increased to $9,765,493 during the third
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: November 10, 1997 NORTECH SYSTEMS INCORPORATED
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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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 279,511
<SECURITIES> 0
<RECEIVABLES> 4,644,933
<ALLOWANCES> 0
<INVENTORY> 8,652,422
<CURRENT-ASSETS> 14,242,628
<PP&E> 11,487,879
<DEPRECIATION> 3,692,774
<TOTAL-ASSETS> 23,783,652
<CURRENT-LIABILITIES> 4,477,135
<BONDS> 0
0
250,000
<COMMON> 23,124
<OTHER-SE> 7,603,423
<TOTAL-LIABILITY-AND-EQUITY> 23,783,652
<SALES> 8,693,449
<TOTAL-REVENUES> 8,693,449
<CGS> 7,128,714
<TOTAL-COSTS> 7,128,714
<OTHER-EXPENSES> 1,112,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236,459
<INCOME-PRETAX> 216,238
<INCOME-TAX> 75,683
<INCOME-CONTINUING> 140,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,555
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
