For Immediate Release
SOUTHAMPTON, PA, USA, January 11, 2016 - Environmental Tectonics Corporation (OTC Pink: ETCC) ("ETC" or the "Company") today reported its financial results for the thirteen week period ended November 27, 2015 (the "2016 third quarter") and the thirty-nine week period ended November 27, 2015 (the "2016 first three quarters").
Fiscal 2016 Third Quarter Results of Operations
Sales Backlog
Our sales backlog as of November 27, 2015, for work to be performed and revenue to be recognized under written agreements after such date, was $50.0 million compared to $32.5 million as of February 27, 2015. The $17.5 million increase in sales backlog is due primarily to the 2016 first quarter award of multiple International contracts totaling $45.4 million.
Net Loss Attributable to ETC
Net loss attributable to ETC was $0.3 million, or $0.03 diluted loss per share, in the 2016 third quarter compared to $1.7 million during the 2015 third quarter, equating to $0.12 diluted loss per share. The $1.5 million variance reflects a decrease in loss before income taxes of $2.4 million due primarily to the $2.5 million increase in gross profit, offset in part, by a $0.1 million increase in other expense. The $2.4 million decrease in loss before income taxes was offset, in part, by a $0.9 million decrease in the income tax benefit recorded in the 2016 third quarter compared to the 2015 third quarter.
Net Sales
Net sales for the 2016 third quarter were $11.9 million, an increase of $4.1 million, or 51.4%, compared to 2015 third quarter net sales of $7.8 million. The increase reflects increased ATS sales to both International customers and the U.S. Government. Given the current progress made on U.S. Government contracts in the Company's sales backlog, coupled with significant fiscal 2015 International bookings and the 2016 first quarter award of multiple International contracts totaling $45.4 million, the Company anticipates that although sales to the U.S. Government will remain steady, the concentration of sales to the U.S. Government will continue to lessen in fiscal 2016 as International sales continue to increase.
Gross Profit
Gross profit for the 2016 third quarter was $3.4 million compared to $0.9 million in the 2015 third quarter, an increase of $2.5 million, or 278.9%. The significant increase in gross profit was a combination of both increased net sales and a higher gross profit margin percentage due primarily to the combination of a reduction in the amount of additional work required on several contracts and a higher concentration of net sales from more off-the-shelf type products requiring less initial design and engineering work. Gross profit margin as a percentage of net sales increased to 28.9% for the 2016 third quarter compared to 11.5% for the 2015 third quarter.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2016 third quarter were $3.4 million, a decrease of $0.1 million, or 1.4%, compared to $3.5 million for the 2015 third quarter. The slight decrease is due to a reduction in general and administrative expenses, offset in part, by an increase in research and development expenses.
Interest Expense, Net
Interest expense, net, for the 2016 third quarter was $224 thousand compared to $180 thousand in the 2015 third quarter, an increase of $44 thousand, or 24.4%, due to the combination of a higher level of bank borrowing and an increased interest rate.
Other Expense, Net
Other expense, net, for the 2016 third quarter was $218 thousand compared to $112 thousand in the 2015 third quarter, an increase of $106 thousand, or 94.6%, due to an increase in letter of credit fees associated with the 2016 first quarter award of multiple International contracts and an increase in realized foreign currency exchange net losses.
Fiscal 2016 First Three Quarters Results of Operations
Net Loss Attributable to ETC
Net loss attributable to ETC was $1.0 million, or $0.09 diluted loss per share, in the 2016 first three quarters compared to $2.8 million during the 2015 first three quarters, equating to $0.21 diluted loss per share. The $1.8 million variance reflects a decrease in loss before income taxes of $3.1 million due to the combined effect of a $3.3 million increase in gross profit and $0.2 million decrease in operating expenses, offset in part, by a $0.2 million increase in interest expense and a $0.2 million increase in other expense. The $3.1 million decrease in loss before income taxes was offset, in part, by a $1.3 million decrease in the income tax benefit recorded in the 2016 first three quarters compared to the 2015 first three quarters.
Net Sales
Net sales for the 2016 first three quarters were $31.4 million, an increase of $3.4 million, or 12.1%, compared to 2015 first three quarters net sales of $28.0 million. The increase reflects increased ATS sales to both International customers and the U.S. Government, increased ADMS and ILS sales to the U.S. Government, and increased sales of monoplace chambers to Domestic customers, offset in part, by decreased Sterilizers and Environmental sales to Domestic customers and decreased ADMS sales to both Domestic and International customers. Given the current progress made on U.S. Government contracts in the Company's sales backlog, coupled with significant fiscal 2015 International bookings and the 2016 first quarter award of multiple International contracts totaling $45.4 million, the Company anticipates that although sales to the U.S. Government will remain steady, the concentration of sales to the U.S. Government will continue to lessen in fiscal 2016 as International sales continue to increase.
Gross Profit
Gross profit for the 2016 first three quarters was $9.0 million compared to $5.7 million in the 2015 first three quarters, an increase of $3.3 million, or 59.3%. The significant increase in gross profit was a combination of both increased net sales and a higher gross profit margin percentage due primarily to the combination of a reduction in the amount of additional work required on several contracts and a higher concentration of net sales from more off-the-shelf type products requiring less initial design and engineering work. Gross profit margin as a percentage of net sales increased to 28.8% for the 2016 first three quarters compared to 20.2% for the 2015 first three quarters.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2016 first three quarters were $9.5 million, a decrease of $0.2 million, or 1.7%, compared to $9.7 million for the 2015 first three quarters. The slight decrease is due to a reduction in general and administrative expenses, offset in part, by an increase in research and development expenses.
Interest Expense, Net
Interest expense, net, for the 2016 first three quarters was $681 thousand compared to $477 thousand in the 2015 first three quarters, an increase of $204 thousand, or 42.8%, due to the combination of a higher level of bank borrowing and an increased interest rate.
Other Expense, Net
Other expense, net, for the 2016 first three quarters was $502 thousand compared to $286 thousand in the 2015 first three quarters, an increase of $216 thousand, or 75.5%, due to an increase in letter of credit fees associated with the 2016 first quarter award of multiple International contracts and an increase in realized foreign currency exchange net losses.
Cash Flows from Operating, Investing, and Financing Activities
During the 2016 first three quarters, as a result of an increase in billings in excess of costs and estimated earnings on uncompleted long-term percentage of completion ("POC") contracts and accounts payable, trade, as well as a decrease in costs and estimated earnings in excess of billings on uncompleted long-term POC contracts, the Company, despite a significant increase in accounts receivable due to a significant open receivable as of November 27, 2015 that is expected to be received shortly after the date of issuance of our consolidated financial statements, generated $3.4 million of cash from operating activities compared to $1.7 million during the 2015 first three quarters. Under POC revenue recognition, these accounts represent the timing differences of spending on production activities versus the billing and collecting of customer payments.
Cash used for investing activities primarily relates to funds used for capital expenditures of equipment and software development. The Company's investing activities used $1.0 million in the 2016 first three quarters compared to $1.1 million in the 2015 first three quarters.
In the 2016 first three quarters, the Company's financing activities used $2.5 million of cash, which primarily reflected an increase in restricted cash, offset in part, by borrowings under the Company's various lines of credit. The Company's financing activities used $0.5 million of cash in the 2015 first three quarters on Term Loan payments and repayments under the Company's various lines of credit, offset in part, by a decrease in restricted cash.
Robert L. Laurent, Jr., ETC's Chief Executive Officer and President stated, "We are pleased with the third quarter improvements in sales and margins and look forward to continued improvements."
About ETC
ETC was incorporated in 1969 in Pennsylvania. For over four decades, we have provided our customers with products, service, and support. Innovation, continuous technological improvement and enhancement, and product quality are core values that are critical to our success. We are a significant supplier and innovator in the following areas: (i) software driven products and services used to create and monitor the physiological effects of flight, including high performance jet tactical flight simulation, upset recovery and spatial disorientation, and both suborbital and orbital commercial human spaceflight, collectively, Aircrew Training Systems ("ATS"); (ii) altitude (hypobaric) chambers; (iii) hyperbaric chambers for multiple persons (multiplace chambers); (iv) Advanced Disaster Management Simulators ("ADMS"); (v) steam and gas (ethylene oxide) sterilizers; (vi) environmental testing and simulation devices; and (vii) hyperbaric (100% oxygen) chambers for one person (monoplace chambers). We operate in two primary business segments, Aerospace Solutions ("Aerospace") and Commercial/Industrial Systems ("CIS").
Aerospace encompasses the design, manufacture, and sale of: (i) Aircrew Training Systems; (ii) altitude (hypobaric) chambers; (iii) hyperbaric chambers for multiple persons (multiplace chambers); and (iv) ADMS, as well as integrated logistics support ("ILS") for customers who purchase these products or similar products manufactured by other parties. These products and services provide customers with an offering of comprehensive solutions for improved readiness and reduced operational costs. Sales of our Aerospace products are made principally to U.S. and foreign government agencies and to civil aviation organizations. We offer integrated Aircrew Training Systems to commercial, governmental, and military defense agencies, and training devices, including altitude (hypobaric) and multiplace chambers ("Chambers"), to governmental and military defense agencies and civil aviation organizations both in the United States and internationally. We sell our ADMS line of products to state and local governments, fire and emergency training schools, universities, and airports. We also provide integrated logistics support for customers who purchase these products or similar products manufactured by other parties.
CIS encompasses the design, manufacture, and sale of: (i) steam and gas (ethylene oxide) sterilizers; (ii) environmental testing and simulation devices; and (iii) hyperbaric (100% oxygen) chambers for one person (monoplace chambers), as well as parts and service support for customers who purchase these products or similar products manufactured by other parties. Sales of our CIS products are made principally to the healthcare, pharmaceutical, and automotive industries. We sell our sterilizers to pharmaceutical and medical device manufacturers. We sell our environmental testing and simulation devices primarily to commercial automobile and heating, ventilation, and air conditioning ("HVAC") manufacturers. We sell our hyperbaric products (primarily "monoplace" chambers) to hospitals and wound care clinics. We also provide upgrade, maintenance, and repair services for our products and similar products manufactured by other parties.
We presently have two operating subsidiaries. ETC-PZL Aerospace Industries Sp. z o.o. ("ETC-PZL"), our 95%-owned subsidiary in Warsaw, Poland, manufactures certain simulators and provides software to support products manufactured domestically within our Aerospace segment. Environmental Tectonics Corporation (Europe) Limited ("ETC-Europe"), our 99%-owned subsidiary, functions as a sales office in the United Kingdom.
ETC's unique ability to offer complete systems, designed and produced to high technical standards, sets it apart from its competition. ETC is headquartered in Southampton, PA. For more information about ETC, visit http://www.etcusa.com/.
______________
Forward-looking Statements
This news release contains forward-looking statements, which are based on management's expectations and are subject to uncertainties and changes in circumstances. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements, and these statements may include terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "future", "predict", "potential", "intend", or "continue", and similar expressions. We base our forward-looking statements on our current expectations and projections about future events or future financial performance. Our forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about ETC and its subsidiaries that may cause actual results to be materially different from any future results implied by these forward-looking statements. We caution you not to place undue reliance on these forward-looking statements.
| Contact: | Mark Prudenti, CFO |
| Phone: | (215) 355-9100 x1531 |
| E-mail: | mprudenti@etcusa.com |
###
- Financial Tables Follow -
| Table A | | | | | | | |
| ENVIRONMENTAL TECTONICS CORPORATION |
| SUMMARY TABLE OF RESULTS |
| (in thousands, except per share information) |
| | | | | | | | |
| | Thirteen weeks ended | | Variance |
| | 27-Nov-15 | | 28-Nov-14 | | $ | | % |
| Net sales | $ 11,881 | | $ 7,845 | | $ 4,036 | | 51.4 |
| Cost of goods sold | 8,448 | | 6,939 | | 1,509 | | 21.7 |
| Gross profit | 3,433 | | 906 | | 2,527 | | 278.9 |
| Gross profit margin % | 28.9% | | 11.5% | | 17.4% | | 151.3% |
| | | | | | | | |
| Operating expenses | 3,432 | | 3,480 | | (48) | | -1.4 |
| Operating income (loss) | 1 | | (2,574) | | 2,575 | | -100.0 |
| Operating margin % | 0.0% | | -32.8% | | 32.8% | | -100.0% |
| | | | | | | | |
| Interest expense, net | 224 | | 180 | | 44 | | 24.4 |
| Other expense, net | 218 | | 112 | | 106 | | 94.6 |
| Loss before income taxes | (441) | | (2,866) | | 2,425 | | -84.6 |
| Pre-tax margin % | -3.7% | | -36.5% | | 32.8% | | -89.9% |
| | | | | | | | |
| Income tax benefit | (176) | | (1,161) | | 985 | | -84.8 |
| Net loss | (265) | | (1,705) | | 1,440 | | -84.5 |
| Income attributable to non-controlling interest | (27) | | (37) | | 10 | | -27.0 |
| Net loss attributable to ETC | (292) | | (1,742) | | 1,450 | | -83.2 |
| Preferred Stock dividends | (121) | | (121) | | - | | 0.0 |
Loss attributable to common and
participating shareholders | $ (413) | | $ (1,863) | | $ 1,450 | | -77.8 |
| | | | | | | | |
| Per share information: | | | | | | | |
Basic earnings (loss) per common and
participating share: | | | | | | | |
| Distributed earnings per share: | | | | | | | |
| Common | $ - | | $ - | | $ - | | |
| Preferred | $ 0.02 | | $ 0.02 | | $ - | | 0.0 |
| Undistributed loss per share: | | | | | | | |
| Common | $ (0.03) | | $ (0.12) | | $ 0.09 | | -75.0 |
| Preferred | $ (0.03) | | $ (0.12) | | $ 0.09 | | -75.0 |
| | | | | | | | |
| Diluted loss per share | $ (0.03) | | $ (0.12) | | $ 0.09 | | -75.0 |
| | | | | | | | |
Total basic weighted average common and
participating shares | 15,248 | | 15,248 | | | | |
| | | | | | | | |
| Total diluted weighted average shares | 15,248 | | 15,540 | | | | |
| Table B | | | | | | | |
| ENVIRONMENTAL TECTONICS CORPORATION |
| SUMMARY TABLE OF RESULTS |
| (in thousands, except per share information) |
| | | | | | | | |
| | Thirty-nine weeks ended | | Variance |
| | 27-Nov-15 | | 28-Nov-14 | | $ | | % |
| Net sales | $ 31,386 | | $ 27,986 | | $ 3,400 | | 12.1 |
| Cost of goods sold | 22,360 | | 22,320 | | 40 | | 0.2 |
| Gross profit | 9,026 | | 5,666 | | 3,360 | | 59.3 |
| Gross profit margin % | 28.8% | | 20.2% | | 8.6% | | 42.6% |
| | | | | | | | |
| Operating expenses | 9,528 | | 9,692 | | (164) | | -1.7 |
| Operating loss | (502) | | (4,026) | | 3,524 | | -87.5 |
| Operating margin % | -1.6% | | -14.4% | | 12.8% | | -88.9% |
| | | | | | | | |
| Interest expense, net | 681 | | 477 | | 204 | | 42.8 |
| Other expense, net | 502 | | 286 | | 216 | | 75.5 |
| Loss before income taxes | (1,685) | | (4,789) | | 3,104 | | -64.8 |
| Pre-tax margin % | -5.4% | | -17.1% | | 11.7% | | -68.4% |
| | | | | | | | |
| Income tax benefit | (674) | | (1,940) | | 1,266 | | -65.3 |
| Net loss | (1,011) | | (2,849) | | 1,838 | | -64.5 |
| Income attributable to non-controlling interest | (27) | | (29) | | 2 | | -6.9 |
| Net loss attributable to ETC | (1,038) | | (2,878) | | 1,840 | | -63.9 |
| Preferred Stock dividends | (363) | | (363) | | - | | 0.0 |
Loss attributable to common and
participating shareholders | $ (1,401) | | $ (3,241) | | $ 1,840 | | -56.8 |
| | | | | | | | |
| Per share information: | | | | | | | |
Basic earnings (loss) per common and
participating share: | | | | | | | |
| Distributed earnings per share: | | | | | | | |
| Common | $ - | | $ - | | $ - | | |
| Preferred | $ 0.06 | | $ 0.06 | | $ - | | 0.0 |
| Undistributed loss per share: | | | | | | | |
| Common | $ (0.09) | | $ (0.21) | | $ 0.12 | | -57.1 |
| Preferred | $ (0.09) | | $ (0.21) | | $ 0.12 | | -57.1 |
| | | | | | | | |
| Diluted loss per share | $ (0.09) | | $ (0.21) | | $ 0.12 | | -57.1 |
| | | | | | | | |
Total basic weighted average common and
participating shares | 15,248 | | 15,248 | | | | |
| | | | | | | | |
| Total diluted weighted average shares | 15,281 | | 15,518 | | | | |
Table C
| ENVIRONMENTAL TECTONICS CORPORATION |
| OTHER SELECTED FINANCIAL HIGHLIGHTS |
| (amounts in thousands) |
| | | | | | | | |
| | Thirteen weeks ended | | Twenty-six weeks ended |
| | 27-Nov-15 | | 28-Nov-14 | | 27-Nov-15 | | 28-Nov-14 |
| EBITDA | $ 225 | | $ (2,232) | | $ 328 | | $ (2,943) |
| | | | | | | | |
| | As of | | | | |
| | 27-Nov-15 | | 27-Feb-15 | | | | |
| Working capital | $ 6,429 | | $ 8,029 | | | | |
| | | | | | | | |
| Total shareholders' equity | $ 19,268 | | $ 20,253 | | | | |
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: ETC via Globenewswire
HUG#1978183