ETC Announces Financial Restructuring to Improve Earnings and Cash Flow
Southampton, PA, September 28, 2012: Environmental Tectonics Corporation (“ETC” or the “Company”) (OTCQB: ETCC) today announced a financial restructuring, made possible by continued positive results and a strengthening balance sheet, to reduce its annual net cash payments for dividends and interest by approximately $1.5 million per year. The restructuring also reduces the number of participating preferred shares in the amount equivalent to 5,032,091 shares of Common Stock, or nearly 25% of the total outstanding common and participating shares, and is expected to have a positive impact on the Company’s earnings.
As part of this restructuring, the Company’s revolving line of credit with PNC Bank was reduced from $20 million to $15 million, while the term of the revolving line was extended twenty eight months to October 31, 2015. PNC Bank also provided a five-year term loan of $15 million. ETC used $10 million of the proceeds from the term loan to repurchase and retire 10,000 shares of 10% Preferred Stock, which was convertible to 5,032,091 shares of Common Stock. The revolving line of credit will no longer be guaranteed by H.F. Lenfest, one of the Company’s Directors and largest shareholder, and will instead be secured by substantially all of the Company’s assets. Mr. Lenfest will provide a guarantee on the new $15 million term-loan for a period of thirty months, after which his guarantee will be removed.
Following the close of the transaction, the dividends on the remaining Series E Preferred Stock will be reduced from ten percent (10%) to four percent (4%), subject to shareholder approval.
“Today’s announcement represents a major accomplishment for ETC,” said William F. Mitchell, Sr., ETC’s President and CEO. “This financial restructuring, including the repurchase and retirement of the Preferred Stock, is an indication of ETC’s growing financial strength over the last few years. This restructuring benefits our common shareholders by increasing income attributable to them and by significantly reducing the dilutive effect of the Preferred Stock being retired. We are very grateful for the support we have received from Mr. Lenfest over the last decade, and for his sharing of our vision for ETC’s technologies. Without Mr. Lenfest’s support it is unlikely that ETC would now be the leader it is in motion-based flight simulation. Once we complete our restructuring, we believe we will be in an excellent position to leverage the strength of the ETC brand, our deep customer relationships, and reputation for industry leading products to take advantage of improving market conditions and global growth opportunities.”
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.