Nortech shows improved 2Q profitability – plans operational reshuffle
The electronics manufacturer managed to make significant improvement to its operating profitability during the second quarter – all in the midst of challenging market conductions brought forth by the current pandemic.
Nortech Systems reported net sales of USD 26.5 million for the second quarter ended June 30, 2020, compared with USD 27.3 million for the second quarter of 2019. Operating income for the second quarter of 2020 was USD 49,000, which compares with an operating loss of USD 1.2 million for the second quarter of 2019. Net loss for the second quarter of 2020 was USD 123,000, compared to a net loss of USD 1.6 million during the same period last year. The company’s backlog at the end of the second quarter 2020 was USD 46.6 million. As the same time as the company announces its second quarter results, Nortech Systems also detailed that it has entered into sale and leaseback agreements with Essjay Investment Company which to the company’s manufacturing facilities in Bemidji and Mankato, Minnesota. These agreements are expected to close during the Nortech’s fiscal third quarter. Nortech expects net proceeds from the sale – excluding expenses and expected taxes – of approximately USD 5 million. The company intends to use the funds to pay down debt, provide additional liquidity for initiatives, capital investments and working capital as well as to strengthen its overall financial position. At closing, the company will enter into a lease agreement for the Bemidji and Mankato, Minnesota facilities for an initial 15-year term. However, to further improve operational efficiencies and lower overhead costs, Nortech says that it is closing its Merrifield, Minnesota, production facility, shifting wire and cable assembly, system-level assembly and printed circuit board manufacturing to its other Minnesota locations. The consolidation of the Merrifield production facility is expected to be completed on or before December 31, 2020, and will impact approximately 60 employees, who will be offered positions at its facilities in Minnesota. Adding to these measures, by the end of 2020, the company will shift its PCB manufacturing from its Monterrey, Mexico, location to its Mankato, Minnesota production facility, the Nortech’s PCB center of excellence. “Given the challenging economic environment, we are pleased with the significant improvement in operating profitability for the second quarter, our sale and leaseback agreements with Essjay and the Company’s plans to drive PCB manufacturing productivity. Our balance sheet continues to strengthen, and the sale leaseback and plant consolidation will provide significant liquidity to make further investments in the business. Our goal through these essential moves is to enhance Nortech’s ability to operate through the current COVID-19 pandemic and succeed long term.” says Jay D. Miller, Chief Executive Officer and President, in a press release.