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| Environmental Tectonics Corporation Announces Third Quarter and Year To Date Fiscal 2009 Results
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| Southampton, PA, January 14, 2009 - Environmental Tectonics Corporation (AMEX: ETC) ("ETC" or the "Company") today announced financial results for the third quarter and the first nine months of fiscal 2009 which ended on November 28, 2008. Thirteen weeks ended November 28, 2008 compared to thirteen weeks ended November 23, 2007: The Company had a net loss of $113,000, or $0.04 per share (basic and diluted), during the third quarter of fiscal 2009 compared to a net loss of $2,098,000, or $0.26 per share (basic and diluted), for the third quarter of fiscal 2008, representing a decrease in net loss of $1,985,000. This decrease in net loss is attributed to a significant increase in sales and corresponding gross profit coupled with reduced selling, general and administrative expenses. Acting as partial offsets were higher research and development expenses and slightly higher interest expense. Sales for the third quarter of fiscal 2009 were $8,706,000 as compared to $6,701,000 for the third quarter of fiscal 2008, an increase of $2,005,000, 29.9%. A significant increase in international sales completely offset decreases in domestic and government sales. Product line wise, all product areas showed improvement except sterilizers, environmental and service/spares. Domestic sales in the third quarter of fiscal 2009 were $2,702,000 as compared to $4,575,000 in the third quarter of fiscal 2008, a decrease of $1,873,000 or 40.9%, primarily reflecting significant decreases in environmental, sterilizers and service/spares. These three product areas were down a combined $2,005,000. Environmental in the prior period benefited from significant work under an automotive contract for conditioned air supply (CAS) units. Higher sterilizer performance in the prior period reflected multiple contracts for both small military and large steam sterilizers. Service/spares in the prior period benefited from higher installation work (consistent with the higher sterilizers´ production) and significant spares sales. Domestic sales represented 31.1% of the Company's total sales in the third quarter of fiscal 2009, as compared to 68.3% for the third quarter of fiscal 2008. U.S. Government sales in the third quarter of fiscal 2009 were $367,000 as compared to $443,000 in the third quarter of fiscal 2008 and represented 4.2% of total sales in the third quarter of fiscal 2009 versus 6.6% for the third quarter of fiscal 2008. International sales, which includes the Company´s foreign subsidiaries, for the third quarter of fiscal 2009 were $5,637,000 as compared to $1,683,000 in the third quarter of fiscal 2008, an increase of $3,954,000 or 234.9%, and represented 64.7% of total sales, as compared to 25.1% in the third quarter of fiscal 2008. The current reporting period benefited from significant percentage of completion ("POC") revenue recognition in ETC Southampton for three major ongoing pilot training services (PTS) contracts in the Middle East coupled with an almost five-fold increase in sales in ETC-PZL. Gross profit for the third quarter of fiscal 2009 was $2,957,000 as compared to $1,267,000 in the third quarter of fiscal 2008, an increase of $1,690,000 or 133.4%. This increase reflected the aforementioned increased sales level and corresponding gross profit coupled with an improvement in the gross profit rate as a percent of revenue to 34.0% compared to 18.9% in the prior period. The improved gross profit percentage was primarily the result of an improved product mix which included significant sales of higher margin pilot training equipment. Most product and geographic categories generated higher gross profit rates. Selling and administrative expenses for the third quarter of fiscal 2009 were $2,434,000 as compared to $2,830,000 in the third quarter of fiscal 2008, a decrease of $396,000 or 14.0%. Reduced legal and bid and proposal expenses (down a combined total of $641,000) were partially offset by increased commissions (up $423,000) on a higher level of commissionable sales. As a percentage of sales, selling and administrative expenses were 28.0% in the current period compared to 41.6% in the third quarter of fiscal 2008. Research and development expenses, which are charged to operations as incurred, were $247,000 for the third quarter of fiscal 2009 as compared to $64,000 in the prior period, primarily for work performed in the Company´s Turkish subsidiary. The prior period benefited from higher grant awards from the Turkish government. Interest expense for the third quarter of fiscal 2009 was $417,000 as compared to $406,000 for the third quarter of fiscal 2008, representing a slight increase of $11,000 or 2.7%. Other income/expense, net, was a net income of $27,000 for the third quarter of fiscal 2009 versus a net expense of $61,000 for the third quarter of fiscal 2008, an increase in income of $88,000. The prior period included a significant local license charge related to an ATS contract in Turkey. Thirty nine weeks ended November 28, 2008 compared to thirty nine weeks ended November 23, 2007 The Company had a net loss of $3,197,000, or $0.43 per share (basic and diluted), during the first nine months of fiscal 2009 compared to a net loss of $10,793,000, or $1.24 per share (basic and diluted), for the first nine months of fiscal 2008, representing a decrease in net loss of $7,596,000, 70.4%. This decrease in net loss resulted from significant improvements at the sales and gross profit levels which was partially offset by higher selling, general and administrative expenses, research and development expenses and interest charges. Additionally, the prior period included claims costs of $3,639,000 associated with a settlement with the U.S. Government under a contract for submarine rescue chambers. Overall, sales were up 79.2% and gross profit was up 168.2%. Sales for the first nine months of fiscal 2009 were $27,405,000 as compared to $15,295,000 for the first nine months of fiscal 2008, an increase of $12,110,000 or 79.2%, reflecting significant increases in all geographic areas and most product areas. Volume wise, combined ATS government and international sales, which includes those in the Company´s foreign subsidiaries, showed the most improvement, up $8,312,000, 182.8%. Overall, only two product areas evidenced sales decreases, sterilizers and service/spares, which were down a combined $310,000, 5.9%. Overall, domestic sales in the first nine months of fiscal 2009 were $12,348,000 as compared to $9,416,000 in the first nine months of fiscal 2008, an increase of $2,932,000 or 31.1%, primarily reflecting increases in the hyperbaric (up $1,773,000, 116.4%), environmental (up $958,000, 33.9%) and simulation (up $430,000, 1,195.1%) product areas. Domestic sales represented 45.1% of the Company's total sales in the first nine months of fiscal 2009, down from 61.6% for the first nine months of fiscal 2008. U.S. Government sales in the first nine months of fiscal 2009 were $1,742,000 as compared to $1,090,000 in the first nine months of fiscal 2008 and represented 6.4% of total sales in the first nine months of fiscal 2009 versus 7.1% for the first nine months of fiscal 2008. International sales, which includes those in the Company´s foreign subsidiaries, were $13,315,000 as compared to $4,789,000 in the first nine months of fiscal 2008, an increase of $8,526,000 or 178.0%, and represented 48.5% of total sales, as compared to 31.3% in the first nine months of fiscal 2008. Only two product areas evidenced sales decreases, sterilizers and service/spares, which were down a combined $312,000, 73.4%. Gross profit for the first nine months of fiscal 2009 was $7,494,000 as compared to $2,794,000 in the first nine months of fiscal 2008, an increase of $4,700,000 or 168.2%. This increase reflected the aforementioned increased sales level and corresponding gross profit coupled with an improvement in the gross profit rate as a percent of revenue to 27.4% compared to 18.3% in the prior period. The improved gross profit percentage was primarily the result of an improved product mix which included significant sales of higher margin pilot training equipment. Most product and geographic categories generated higher gross profit rates. Selling and administrative expenses for the first nine months of fiscal 2009 were $8,502,000 as compared to $8,353,000 in the first nine months of fiscal 2008, an increase of $149,000 or 1.8%. Higher commissions on the higher sales levels and increased accounting fees were partially offset by lower legal costs. As a percentage of sales, selling and administrative expenses were 31.0% for the first nine months of fiscal 2009 compared to 54.6% in the first nine months of fiscal 2008. Claims settlement costs in the first nine months of fiscal 2008 consisted of a write off of contract accounts receivables of $89,000 and a reserve for a tentative payment to the Government of $3,550,000. Research and development expenses, which are charged to operations as incurred, were $946,000 for the first nine months of fiscal 2009 compared to $355,000 for the first nine months of fiscal 2008. The prior period benefited from the receipt of monies under a NASA grant and higher grant awards from the Turkish government. Interest expense for the first nine months of fiscal 2009 was $1,287,000 as compared to $1,146,000 for the first nine months of fiscal 2008, representing an increase of $141,000 or 12.3%. The increase reflected higher interest expense on additional borrowing. Other income/expense, net, was a net income of $38,000 for the first nine months of fiscal 2009 versus a net expense of $102,000 for the first nine months of fiscal 2008, an increase in income of $140,000. The prior period included a significant local license charge related to an ATS contract in Turkey.
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