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8-K - FORM 8-K - ENVIRONMENTAL TECTONICS CORP | w79272e8vk.htm |
Environmental Tectonics Corporation Announces First Quarter Fiscal 2011 Results | Page 1 of 3 | |
Exhibit 99.1
Environmental Tectonics Corporation Announces First Quarter Fiscal 2011 Results
Southampton, PA, July 14, 2010 Environmental Tectonics Corporation (OTC Bulletin Board:
ETCC) (ETC, we, or the Company) today announced financial results for the first quarter of
fiscal 2011 which ended on May 28, 2010.
The reader is referred to the Companys Quarterly Report on Form 10-Q for the period ended May 28,
2010, filed on July 12, 2010, for additional information on the Companys financial results.
Overview
ETC was incorporated in 1969 in Pennsylvania and we operate in two segments: the Training Services
Group (TSG) and the Control Systems Group (CSG). Product categories included in TSG are pilot
training and tactical flight simulators, disaster management systems and entertainment
applications. The CSG segment includes sterilizers, environmental control devices and hyperbaric
and hypobaric chambers along with parts and service support.
Financial Results
Summary Table of Results | ||||||||||||||||
13 weeks ended13 weeks endedVarianceVariance | ||||||||||||||||
May 28, 2010 | May 29, 2009 | $ | % | |||||||||||||
(amounts in thousands) | ( ) =Unfavorable | |||||||||||||||
Sales: |
||||||||||||||||
Domestic |
$ | 2,918 | $ | 1,959 | $ | 959 | 49.0 | % | ||||||||
US Government |
3,986 | 1,836 | 2,150 | 117.1 | ||||||||||||
International |
5,217 | 5,786 | (569 | ) | (9.8 | ) | ||||||||||
Total Sales |
12,121 | 9,581 | 2,540 | 26.5 | ||||||||||||
Gross Profit |
5,130 | 4,427 | 703 | 15.9 | ||||||||||||
Selling and marketing expenses |
1,102 | 1,254 | 152 | 12.1 | ||||||||||||
General and administrative expenses |
1,463 | 1,602 | 139 | 8.7 | ||||||||||||
Research and development expenses |
324 | 228 | (96 | ) | (42.1 | ) | ||||||||||
Operating income |
2,241 | 1,343 | 898 | 66.9 | ||||||||||||
Interest expense, net |
228 | 516 | 288 | 55.8 | ||||||||||||
Other expense, net |
72 | 55 | (17 | ) | (30.9 | ) | ||||||||||
Income taxes |
| | | n/a | ||||||||||||
Noncontrolling interest |
5 | 2 | (3 | ) | (150.0 | ) | ||||||||||
Net income |
$ | 1,936 | $ | 770 | $ | 1,166 | 151.4 | % | ||||||||
Net income per common share (basic) |
$ | 0.15 | $ | 0.06 | $ | 0.09 | 150.0 | % | ||||||||
Net income per common share (diluted) |
$ | 0.09 | $ | 0.06 | $ | 0.03 | 50.0 | % |
The Company had a net income of $1,936,000 or $0.15 per share (basic) and $0.09 (diluted) during
the first quarter of fiscal 2011 compared to net income of $770,000 or $0.06 per share (basic and
diluted), for the first quarter of fiscal 2010, representing an improvement of $1,166,000, 151.4%.
The improvement reflected a significant increase in gross profit (reflecting the higher sales
level) coupled with lower operating expenses and interest expense. Increased research and
development expenses acted as a partial offsets.
Sales increases in the first quarter of
fiscal 2011 were realized in the U.S. Government and
Domestic markets offset in part in by a decline in International sales. Increased domestic sales
reflected a significant increase in the sterilizer product line (up $1,507,000) of our Control
Systems Group, partially offset by declines in most other product areas. U.S. Government sales
increased as a result of sales of the Companys Pilot Training Systems products under significant
contracts from the U.S. Navy for a research disorientation trainer and the U.S. Air Force to
provide a high performance training and research human centrifuge. International sales reflected
lower simulation sales (down $1,048,000) primarily for a contract in the Middle East which was
completed in fiscal 2010.
Gross profit for the first quarter of fiscal 2011 increased reflecting the overall sales increase
which was
partially offset by a 3.9 percentage point reduction in the gross margin rate as a percentage of
sales primarily reflecting reductions in the ATS and
Environmental Tectonics Corporation Announces First Quarter Fiscal 2011 Results | Page 2 of 3 | |
simulation product areas.
Selling and marketing expenses decreased for the first quarter of fiscal 2011 primarily reflecting
reduced bid and proposal expenses and reduced commissions on the mix shift in sales to U.S.
Government sales. General and administrative expenses were down on lower spending for legal fees
and bad debt expense. Research and development expenses increased as the prior quarter reflected
higher grant funds from the Turkish Government. Interest expense reduced on lower bank borrowings
and the Companys July 2009 exchange of a $10 million convertible note for preferred stock. Other
expense, net, up slightly, consisted primarily of bank and letter of credit fees as well as foreign
currency exchange gains or losses. Due to the utilization of net operating loss carry forwards
available the Company did not record an income tax expense on the income in the current fiscal
quarter.
Liquidity and Capital Resources
The Companys liquidity position and borrowing availability improved significantly during the first
quarter of 2011. Cash flow from operations was a positive $8,244,000. Working capital (current
assets less current liabilities) was $10,940,000 and the Companys current ratio (current assets
divided by current liabilities) was 1.72. The Company repaid over $5 million under its line of
credit agreement and repurchased $1,000,000 of Series E Preferred Stock from H.F. Lenfest. The
positive cash from operations primarily reflected the net income in the period and milestone
payment collections under long term contracts. As of May 28, 2010, we had approximately $21.7
million of borrowing availability under our two lending facilities.
Backlog
Our sales backlog at May 28, 2010 and February 26, 2010, for work to be performed and revenue to be
recognized under written agreements after such dates, was $91,928,000 and $96,964,000,
respectively. Of the May 28, 2010 sales backlog, approximately $33,014,000 represents one
international contract for multiple aircrew training simulators. Approximately 97% of the U.S.
Government backlog represents two contracts.
Subsequent to fiscal quarter end, on June 12, 2010, we were awarded an additional $38.3 million
contract by the U. S. Air Force to provide a suite of altitude chambers. This contract is not
included in the above totals.
Commentary
William F. Mitchell, ETCs President and Chairman, stated, This financial report reflects the
significant impact of numerous major contracts which were booked in the last 12 months. Awards have
been received from the U.S. Navy and Air Force for state-of-the-art simulators and from a long time
customer in Southeast Asia for multiple aircrew training simulators.
Subsequent to fiscal quarter end, on June 12, 2010, we were awarded an additional $38.3 million
contract by the U. S. Air Force to provide a suite of altitude chambers. This contract is not
included in the first quarters summary.
The impact of our positive cash flow from operations and availability under our lines cannot be
underestimated. Multi-year long-term contracts require significant cash outlays during certain
phases of execution. A growing company requires cash to expand its operation. I am very encouraged
that ETC is finally benefiting from our many years of product development and engineering
innovation.
ETC designs, develops, installs and maintains aircrew training systems (aeromedical,
tactical combat and general), disaster management training systems and services, entertainment
products, sterilizers (steam and gas), environmental testing products, hyperbaric chambers and
related products for domestic and international customers.
tactical combat and general), disaster management training systems and services, entertainment
products, sterilizers (steam and gas), environmental testing products, hyperbaric chambers and
related products for domestic and international customers.
This press release includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are based on ETCs current expectations and projections
about future events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about ETCs and its subsidiaries that may cause actual results,
levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements.
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are based on ETCs current expectations and projections
about future events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about ETCs and its subsidiaries that may cause actual results,
levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements.
These forward-looking statements include statements with respect to the Companys vision,
mission, strategies, goals, beliefs, plans, objectives, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and business of the
company, including but not limited to, (i) potential additional funding by Lenfest, (ii) the
potential delisting of the Companys common stock from the American Stock Exchange as a result of
the Companys failure to comply with the AMEX listing standards, (iii) projections of revenues,
costs of materials, income or loss, earnings or loss per share, capital expenditures, growth
prospects, dividends, capital structure, other financial items and the effects of currency
fluctuations, (iv) statements of our plans and objectives of the Company or its management or Board
of Directors, including the introduction of new products, or estimates or predictions of actions of
customers, suppliers, competitors or regulatory authorities, (v) statements of future economic
performance, (vi) statements of assumptions and other statements about the Company or its business,
(vii) statements made about the possible outcomes of litigation involving the Company; (viii)
statements regarding the Companys ability to obtain financing to support its operations and other
expenses, and (ix) statements preceded by, followed by or that include the words, may, could,
should, looking forward, would, believe, expect, anticipate, estimate, intend,
plan, or the negative of such terms or similar expressions. These forward-looking statements
involve risks and uncertainties which are subject to change based on various important factors.
Some of these risks and uncertainties, in whole or in part, are beyond the Companys control.
Factors that might cause or contribute to such a material difference include, but are not limited
to, those discussed in the Companys Annual Report on Form 10 K for the fiscal year ended February
29, 2008, in the section entitled Risks Particular to Our Business. Shareholders are urged to
review these risks carefully prior to making an investment in the Companys common stock.
mission, strategies, goals, beliefs, plans, objectives, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and business of the
company, including but not limited to, (i) potential additional funding by Lenfest, (ii) the
potential delisting of the Companys common stock from the American Stock Exchange as a result of
the Companys failure to comply with the AMEX listing standards, (iii) projections of revenues,
costs of materials, income or loss, earnings or loss per share, capital expenditures, growth
prospects, dividends, capital structure, other financial items and the effects of currency
fluctuations, (iv) statements of our plans and objectives of the Company or its management or Board
of Directors, including the introduction of new products, or estimates or predictions of actions of
customers, suppliers, competitors or regulatory authorities, (v) statements of future economic
performance, (vi) statements of assumptions and other statements about the Company or its business,
(vii) statements made about the possible outcomes of litigation involving the Company; (viii)
statements regarding the Companys ability to obtain financing to support its operations and other
expenses, and (ix) statements preceded by, followed by or that include the words, may, could,
should, looking forward, would, believe, expect, anticipate, estimate, intend,
plan, or the negative of such terms or similar expressions. These forward-looking statements
involve risks and uncertainties which are subject to change based on various important factors.
Some of these risks and uncertainties, in whole or in part, are beyond the Companys control.
Factors that might cause or contribute to such a material difference include, but are not limited
to, those discussed in the Companys Annual Report on Form 10 K for the fiscal year ended February
29, 2008, in the section entitled Risks Particular to Our Business. Shareholders are urged to
review these risks carefully prior to making an investment in the Companys common stock.
Environmental Tectonics Corporation Announces First Quarter Fiscal 2011 Results | Page 3 of 3 | |
The Company cautions that the foregoing list of important factors is not exclusive. Except as
required by federal securities law, the Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on behalf of the
Company.
required by federal securities law, the Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on behalf of the
Company.
Contact: Duane D. Deaner, CFO
Tel: 215-355-9100 (ext.1203)
Fax: 215-357-4000
http://www.etcusa.com
http://www.etcusa.com