ETC Announces Fiscal 2019 First Quarter Results

For Immediate Release

Financial Statement Highlights from the Fiscal 2019 First Quarter:

• Gross profit increased 8.2% to $3.9 million
• Operating profit increased 209.5% to $1.0 million
• Net income attributable to ETC increased 417.4% to $0.6 million

SOUTHAMPTON, PA, USA, July 23, 2018 - Environmental Tectonics Corporation (OTC Pink: ETCC) ("ETC" or the "Company") today reported its financial results for the thirteen week period ended May 25, 2018 (the "2019 first quarter").

Robert L. Laurent, Jr., ETC's Chief Executive Officer and President stated, "Fiscal 2019 is off to a solid start with continued improvement in gross profit and operating margins."

Fiscal 2019 First Quarter Results of Operations

Net Income Attributable to ETC

Net income attributable to ETC was $0.6 million, or $0.03 diluted earnings per share, in the 2019 first quarter, compared to $0.1 million during the 2018 first quarter, equating to $0.00 diluted earnings per share. The $0.5 million increase is due to the combined effect of a $0.4 million decrease in operating expenses and a $0.3 million increase in gross profit, offset, in part, by a $0.1 million unfavorable variance in other (income) expense, net, and a $0.1 million increase in interest expense.

Net Sales

Net sales in the 2019 first quarter were $10.7 million, a decrease of $0.8 million, or 6.9%, compared to 2018 first quarter net sales of $11.5 million. The decrease reflects a reduction in International sales, especially within our Aerospace segment, offset, in part, by an increase in Domestic sales, especially within our CIS segment.

Gross Profit

Gross profit for the 2019 first quarter was $3.9 million compared to $3.6 million in the 2018 first quarter, an increase of $0.3 million, or 8.2%. The increase in gross profit was due to a higher blended gross profit margin as a percentage of net sales, which increased to 36.4% for the 2019 first quarter compared to 31.3% for the 2018 first quarter. 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 initial design and engineering work.

Operating Expenses

Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2019 first quarter were $2.9 million, a decrease of $0.4 million, or 11.2%, compared to $3.3 million for the 2018 first quarter. The decrease in operating expenses was due primarily to a decrease in commission expense based on a lower concentration of International sales related to ATS products and the conclusion of a consulting agreement with the Company's former Chief Executive Officer.

Interest Expense, Net

Interest expense, net for the 2019 first quarter was $0.3 million compared to $0.2 million in the 2018 first quarter, an increase of $0.1 million due to the combination of a higher level of bank borrowing and an increase in interest rates.

Other Expense (Income), Net

Other expense, net for the 2019 first quarter was $76 thousand compared to $21 thousand of other income, net in the 2018 first quarter, a variance of $0.1 million due to a net realized foreign currency exchange gain in the 2018 first quarter with no such corresponding gain in the 2019 first quarter.

Cash Flows from Operating, Investing, and Financing Activities

During the 2019 first quarter, as a result of an increase in contract assets and a decrease in contract liabilities and accounts payable, offset, in part by a decrease in accounts receivable, the Company used $2.1 million of cash for operating activities compared to $1.4 million during the 2018 first quarter. Under Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), commonly referred to as Accounting Standards Codification ("ASC") 606, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers, 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 $0.1 million in the 2019 first quarter compared to $0.2 million in the 2018 first quarter.

The Company's financing activities provided $2.6 million of cash in the 2019 first quarter from borrowings under the Company's various lines of credit compared to $1.6 million during the 2018 first quarter.

About ETC

ETC was incorporated in 1969 in Pennsylvania. For nearly five 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 systems ("ETSS"); 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) ETSS; 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.

ETC-PZL Aerospace Industries Sp. z o.o. ("ETC-PZL"), our 95%-owned subsidiary in Warsaw, Poland, is currently our only operating subsidiary. ETC-PZL 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:	[phone] x1531
E-mail:	[e-mail]

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- Financial Tables Follow -

Table A
ENVIRONMENTAL TECTONICS CORPORATION
SUMMARY TABLE OF RESULTS
(in thousands, except per share information)
	Thirteen weeks ended				Variance
	25-May-18		26-May-17		$		%
Net sales	$ 10,691		$ 11,489		$ (798)		-6.9
Cost of goods sold	6,795		7,888		(1,093)		-13.9
Gross profit	3,896		3,601		295		8.2
Gross profit margin %	36.4%		31.3%		5.1%		16.3%
Operating expenses	2,918		3,285		(367)		-11.2
Operating income	978		316		662		209.5
Operating margin %	9.1%		2.8%		6.3%		225.0%
Interest expense, net	250		197		53		26.9
Other expense (income), net	76		(21)		97
Income before income taxes	652		140		512		365.7
Pre-tax margin %	6.1%		1.2%		4.9%		408.3%
Income tax provision	28		18		10		55.6
Net income	624		122		502		411.5
Loss (income) attributable to non-controlling interest	2		(1)		3
Net income attributable to ETC	626		121		505		417.4
Preferred Stock dividends	(121)		(121)		-		0.0
Income attributable to common and participating shareholders	$ 505		$ -		$ 505
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		$ -		$ 0.03
Preferred	$ 0.03		$ -		$ 0.03
Diluted earnings per share	$ 0.03		$ -		$ 0.03
Total basic weighted average common and participating shares	15,553		15,427
Total diluted weighted average shares	15,557		15,427

Table B

ENVIRONMENTAL TECTONICS CORPORATION
OTHER SELECTED FINANCIAL HIGHLIGHTS
(amounts in thousands)
	Thirteen weeks ended
	25-May-18		26-May-17
EBITDA *	$ 1,215		$ 712
	As of
	25-May-18		23-Feb-18
Working capital	$ 21,619		$ 18,306
Total shareholders' equity	$ 10,102		$ 9,629

* 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.

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Source: ETC via Globenewswire