For Immediate Release
Financial Statement Highlights from the Fiscal 2018 Third Quarter:
- Net sales increased 16.7% to $12.0 million
- Gross profit increased 16.7% to $4.0 million
- Net income attributable to ETC increased 87.3% to $0.6 million
SOUTHAMPTON, PA, USA, January 8, 2018 - Environmental Tectonics Corporation (OTC Pink: ETCC) ("ETC" or the "Company") today reported its financial results for the thirteen week period ended November 24, 2017 (the "2018 third quarter") and the thirty-nine week period ended November 24, 2017 (the "2018 first three quarters").
Robert L. Laurent, Jr., ETC's Chief Executive Officer and President stated, "For the fourth consecutive quarter we are reporting increasing net income, a positive trend reflected in the $2 million year-over-year improvement and is attributable to our ongoing efforts to build and maintain backlog and control expenses."
Fiscal 2018 Third Quarter Results of Operations
Bookings / Sales Backlog
Bookings in the 2018 third quarter were $12.8 million, leaving our sales backlog as of November 24, 2017, for work to be performed and revenue to be recognized under written agreements after such date, at $58.5 million compared to $64.4 million as of February 24, 2017. The combined bookings by the Environmental Testing and Simulation Systems business unit, which included a $7.2 million contract to supply full vehicle test chambers to a major European based luxury automobile manufacture, and the Sterilization Systems business unit represented 85.6% of 2018 third quarter bookings.
Net Income Attributable to ETC
Net income attributable to ETC was $0.6 million, or $0.03 diluted earnings per share, in the 2018 third quarter, compared to $0.3 million during the 2017 third quarter, equating to $0.01 diluted earnings per share. The $0.3 million increase is due to the combined effect of a $0.6 million increase in gross profit and a $0.1 million decrease in other expense, offset, in part, by the $0.3 million variance between the interest expense recorded in the 2018 third quarter compared to the interest income recorded in the 2017 third quarter and a $0.1 million increase in operating expenses.
Net Sales
Net sales in the 2018 third quarter were $12.0 million, an increase of $1.7 million, or 16.7%, compared to 2017 third quarter net sales of $10.3 million. The increase reflects higher sales of our ADMS line of products, especially to International customers, and higher sales of simulator upgrade services and training devices provided by ETC-PZL within our Aerospace segment, and higher sales of Environmental Testing and Simulation Systems to Domestic customers within our CIS segment, offset, in part, by lower overall sales related to ATS products including Chambers within our Aerospace segment, especially to International customers, and an overall decrease in sales of monoplace chambers within the Hyperbaric Chambers business unit of our CIS segment.
Gross Profit
Gross profit for the 2018 third quarter was $4.0 million compared to $3.4 million in the 2017 third quarter, an increase of $0.6 million, or 16.7%. The increase in gross profit was due to higher net sales as the gross profit margin as a percentage of net sales was 33.6% for both the 2018 third quarter and the 2017 third quarter.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2018 third quarter were $3.1 million, an increase of $0.1 million, or 3.3%, compared to $3.0 million for the 2017 third quarter, which included a $0.3 million decrease in the allowance for doubtful accounts related to the recovery of a long overdue International receivable. Absent of this decrease in the allowance for doubtful accounts, operating expenses would have decreased by $0.2 million due primarily to a decrease in commission expense based on a lower concentration of International sales related to ATS products, the conclusion of a consulting agreement with the Company's former Chief Executive Officer, and a reduction in research and development expenses, offset, in part, by an increase in expenses related to the Company's process to explore strategic alternatives. Operating expenses as a percentage of net sales decreased by 3.3% to 25.6% for the 2018 third quarter compared to 28.9% for the 2017 third quarter.
Interest Expense (Income), Net
Interest expense for the 2018 third quarter was $0.2 million compared to interest income for the 2017 third quarter of $0.1 million, a variance of $0.3 million due primarily to the interest income associated with the recovery of the aforementioned two decade old International receivable during the 2017 third quarter.
Other Expense, Net
Other expense for the 2018 third quarter was $0.1 million compared to $0.2 million in the 2017 third quarter, a decrease of $0.1 million due primarily to a decrease in letter of credit fees.
Fiscal 2018 First Three Quarters Results of Operations
Bookings / Sales Backlog
Bookings in the 2018 first three quarters were $27.6 million, leaving our sales backlog as of November 24, 2017, for work to be performed and revenue to be recognized under written agreements after such date, at $58.5 million compared to $64.4 million as of February 24, 2017. The Sterilization Systems, Environmental Testing and Simulation Systems, and ETC Simulation business units have each seen the largest increases in year-over-year bookings.
Net Income (Loss) Attributable to ETC
Net income attributable to ETC was $1.2 million, or $0.05 diluted earnings per share, in the 2018 first three quarters, compared to a net loss attributable to ETC of $1.0 million during the 2017 first three quarters, equating to $0.09 diluted loss per share. The $2.2 million variance is due to the combined effect of a $2.6 million increase in gross profit and a $0.2 million decrease in other expense, offset, in part, by a $0.4 million increase in operating expenses and a $0.2 million increase in interest expense, net.
Net Sales
Net sales in the 2018 first three quarters were $33.5 million, an increase of $5.1 million, or 17.9%, compared to 2017 first three quarters net sales of $28.4 million. The increase reflects higher sales of Environmental Testing and Simulation Systems to both Domestic and International customers within our CIS segment, and higher overall sales of our ADMS line of products and higher sales of simulator upgrade services and training devices provided by ETC-PZL within our Aerospace segment, offset, in part, by an overall decrease in sales of monoplace chambers within the Hyperbaric Chambers business unit of our CIS segment and by lower overall sales related to ATS products including Chambers within our Aerospace segment, especially to International customers.
Gross Profit
Gross profit for the 2018 first three quarters was $11.3 million compared to $8.7 million in the 2017 first three quarters, an increase of $2.6 million, or 29.3%. The increase in gross profit was due to both higher net sales and a higher blended gross profit margin as a percentage of net sales, which increased to 33.7% for the 2018 first three quarters compared to 30.7% for the 2017 first three quarters. The increase in gross profit margin as a percentage of net sales was due to the combination of a reduction in the amount of additional work required on three contracts and a higher concentration of net sales from more off-the-shelf type products requiring less design and engineering work.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2018 first three quarters were $9.1 million, an increase of $0.4 million, or 4.3%, compared to $8.7 million for the 2017 first three quarters, which included a $0.3 million decrease in the allowance for doubtful accounts related to the recovery of a long overdue International receivable. Absent of this decrease in the allowance for doubtful accounts, operating expenses would have increased by only $0.1 million due primarily to an increase in expenses related to the Company's process to explore strategic alternatives, offset, in part, by a decrease in commission expense based on a lower concentration of International sales related to ATS products, the conclusion of a consulting agreement with the Company's former Chief Executive Officer, and a reduction in research and development expenses. Operating expenses as a percentage of net sales decreased by 3.6% to 27.1% for the 2018 first three quarters compared to 30.7% for the 2017 first three quarters.
Interest Expense, Net
Interest expense, net for the 2018 first three quarters was $0.6 million compared to $0.4 million in the 2017 first three quarters, an increase of $0.2 million due primarily to the interest income associated with the recovery of the aforementioned two decade old International receivable during the 2017 third quarter.
Other Expense, Net
Other expense, net for the 2018 first three quarters was $0.3 million compared to $0.5 million in the 2017 first three quarters, a decrease of $0.2 million due primarily to a decrease in letter of credit fees.
Cash Flows from Operating, Investing, and Financing Activities
During the 2018 first three quarters, as a result of an increase in accounts receivable and costs and estimated earnings in excess of billings on uncompleted long-term contracts, offset, in part by an increase in accounts payable, the Company used $2.1 million of cash for operating activities compared to $3.1 million of cash provided by operating activities during the 2017 first three quarters. Under percentage-of-completion ("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 $0.3 million in the 2018 first three quarters compared to $0.6 million in the 2017 first three quarters.
The Company's financing activities provided $2.7 million of cash in the 2018 first three quarters from borrowings under the Company's various lines of credit. In the 2017 first three quarters, the Company's financing activities used $2.8 million of cash on payments towards the Term Loan, offset, in part, by borrowings under the Company's various lines of credit and a decrease in restricted cash.
About ETC
ETC was incorporated in 1969 in Pennsylvania. For over four decades, we have provided our customers with products, services, 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) ATS products; (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. 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 presently have one operating subsidiary, ETC-PZL Aerospace Industries Sp. z o.o. ("ETC-PZL"), our 95%-owned subsidiary in Warsaw, Poland that manufactures certain simulators and provides software to support products manufactured domestically within our Aerospace segment. Environmental Tectonics Corporation (Europe) Limited ("ETC-Europe"), our formerly 99%-owned subsidiary, which was officially dissolved on August 15, 2017, functioned 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/ (http://www.etcusa.com/).
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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 words 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 | ||||||
| 24-Nov-17 | 25-Nov-16 | $ | % | ||||
| Net sales | $ 11,953 | $ 10,244 | $ 1,709 | 16.7 | |||
| Cost of goods sold | 7,939 | 6,803 | 1,136 | 16.7 | |||
| Gross profit | 4,014 | 3,441 | 573 | 16.7 | |||
| Gross profit margin % | 33.6% | 33.6% | 0.0% | 0.0% | |||
| Operating expenses | 3,061 | 2,964 | 97 | 3.3 | |||
| Operating income | 953 | 477 | 476 | 99.8 | |||
| Operating margin % | 8.0% | 4.7% | 3.3% | 70.2% | |||
| Interest expense (income), net | 219 | (48) | 267 | 556.3 | |||
| Other expense, net | 68 | 169 | (101) | -59.8 | |||
| Income before income taxes | 666 | 356 | 310 | 87.1 | |||
| Pre-tax margin % | 5.6% | 3.5% | 2.1% | 60.0% | |||
| Income tax provision | 25 | 25 | - | 0.0 | |||
| Net income | 641 | 331 | 310 | 93.7 | |||
| Income attributable to non-controlling interest | (23) | (1) | (22) | 2200.0 | |||
| Net income attributable to ETC | 618 | 330 | 288 | 87.3 | |||
| Preferred Stock dividends | (121) | (121) | - | 0.0 | |||
| Income attributable to common and participating shareholders | $ 497 | $ 209 | $ 288 | 137.8 | |||
| Per share information: | |||||||
| Basic earnings per common and participating share: | |||||||
| Distributed earnings per share: | |||||||
| Common | $ - | $ - | $ - | ||||
| Preferred | $ 0.02 | $ 0.02 | $ - | 0.0 | |||
| Undistributed earnings per share: | |||||||
| Common | $ 0.03 | $ 0.01 | $ 0.02 | 200.0 | |||
| Preferred | $ 0.03 | $ 0.01 | $ 0.02 | 200.0 | |||
| Diluted earnings per share | $ 0.03 | $ 0.01 | $ 0.02 | 200.0 | |||
| Total basic weighted average common and participating shares | 15,553 | 15,248 | |||||
| Total diluted weighted average shares | 15,558 | 15,249 | |||||
| Table B | |||||||
| ENVIRONMENTAL TECTONICS CORPORATION | |||||||
| SUMMARY TABLE OF RESULTS | |||||||
| (in thousands, except per share information) | |||||||
| Thirty-nine weeks ended | Variance | ||||||
| 24-Nov-17 | 25-Nov-16 | $ | % | ||||
| Net sales | $ 33,527 | $ 28,426 | $ 5,101 | 17.9 | |||
| Cost of goods sold | 22,233 | 19,691 | 2,542 | 12.9 | |||
| Gross profit | 11,294 | 8,735 | 2,559 | 29.3 | |||
| Gross profit margin % | 33.7% | 30.7% | 3.0% | 9.8% | |||
| Operating expenses | 9,085 | 8,713 | 372 | 4.3 | |||
| Operating income | 2,209 | 22 | 2,187 | 9940.9 | |||
| Operating margin % | 6.6% | 0.1% | 6.5% | 6500.0% | |||
| Interest expense, net | 629 | 383 | 246 | 64.2 | |||
| Other expense, net | 307 | 522 | (215) | -41.2 | |||
| Income (loss) before income taxes | 1,273 | (883) | 2,156 | ||||
| Pre-tax margin % | 3.8% | -3.1% | 6.9% | ||||
| Income tax provision | 68 | 75 | (7) | -9.3 | |||
| Net income (loss) | 1,205 | (958) | 2,163 | ||||
| Income attributable to non-controlling interest | (50) | (1) | (49) | 4900.0 | |||
| Net income (loss) attributable to ETC | 1,155 | (959) | 2,114 | ||||
| Preferred Stock dividends | (363) | (363) | - | 0.0 | |||
| Income (loss) attributable to common and participating shareholders | $ 792 | $ (1,322) | $ 2,114 | ||||
| Per share information: | |||||||
| Basic earnings (loss) per common and participating share: | |||||||
| Distributed earnings per share: | |||||||
| Common | $ - | $ - | $ - | ||||
| Preferred | $ 0.06 | $ 0.06 | $ - | 0.0 | |||
| Undistributed earnings (loss) per share: | |||||||
| Common | $ 0.05 | $ (0.09) | $ 0.14 | ||||
| Preferred | $ 0.05 | $ (0.09) | $ 0.14 | ||||
| Diluted earnings (loss) per share | $ 0.05 | $ (0.09) | $ 0.14 | ||||
| Total basic weighted average common and participating shares | 15,526 | 15,248 | |||||
| Total diluted weighted average shares | 15,528 | 15,250 | |||||
Table C
| ENVIRONMENTAL TECTONICS CORPORATION | |||||||
| OTHER SELECTED FINANCIAL HIGHLIGHTS | |||||||
| (amounts in thousands) | |||||||
| Thirteen weeks ended | Thirty-nine weeks ended | ||||||
| 24-Nov-17 | 25-Nov-16 | 24-Nov-17 | 25-Nov-16 | ||||
| EBITDA * | $ 1,261 | $ 683 | $ 3,029 | $ 617 | |||
| As of | |||||||
| 24-Nov-17 | 24-Feb-17 | ||||||
| Working capital | $ (2,993) | $ 13,242 | |||||
| Total shareholders' equity | $ 8,673 | $ 7,976 | |||||
* In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), we also disclose Earnings Before Income Taxes, Depreciation, and Amortization ("EBITDA"). The presentation of a non-U.S. GAAP financial measure such as EBITDA is intended to enhance the usefulness of financial information by providing a measure that management uses internally to evaluate our expenses and operating performance and factors into several of our financial covenant calculations.
A reader may find this item important in evaluating our performance. Management compensates for the limitations of using non-U.S. GAAP financial measures by using them only to supplement our U.S. GAAP results to provide a more complete understanding of the factors and trends affecting our business.
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
