ETC Announces Fiscal 2016 First Quarter Results
SOUTHAMPTON, PA, USA, July 13, 2015 – Environmental Tectonics Corporation (OTC Pink: ETCC) (“ETC” or the “Company”) today reported its financial results for the thirteen week period ended May 29, 2015 (the “2016 first quarter”).
Fiscal 2016 First Quarter Results of Operations
The 2016 first quarter results of operations only include a small percentage of the recently awarded International contracts totaling $45.4 million as our sales backlog as of May 29, 2015, for work to be performed and revenue to be recognized under written agreements after such date, was $66.2 million compared to $32.5 million as of February 28, 2015.
Net Loss Attributable to ETC
Net loss attributable to ETC was $240 thousand in the 2016 first quarter compared to $197 thousand during the 2015 first quarter, both of which equated to $0.02 diluted loss per share. The $43 thousand variance reflects a decrease in income before income taxes of $73 thousand due to a $266 thousand increase in operating expenses and a $71 thousand increase in interest expense, offset in part, by a $228 thousand increase in gross profit that was achieved despite a 10.7% decrease in net sales and a $36 thousand decrease in other expense. The $73 thousand decrease in income before income taxes was offset, in part, by a $28 thousand increase in the income tax benefit recorded in the 2016 first quarter compared to the 2015 first quarter and a $2 thousand decrease in income attributable to non-controlling interest.
Net sales in the 2016 first quarter were $9.5 million, a decrease of $1.2 million, or 10.7%, compared to 2015 first quarter net sales of $10.7 million. The reduction reflects decreased Sterilizers and Environmental sales to Domestic customers, offset in part, by increased ATS sales to International customers. Given the current progress made on U.S. Government contracts in the Company’s sales backlog, coupled with significant fiscal 2015 International bookings and the recent award of multiple International contracts totaling $45.4 million, the Company anticipates that although sales to the U.S. Government will remain steady, the concentration of sales to the U.S. Government will continue to lessen in fiscal
Gross profit for the 2016 first quarter was $3.0 million compared to $2.8 million in the 2015 first quarter, an increase of $0.2 million, or 8.1%. The increase in gross profit was achieved despite a 10.7% decrease in net sales due primarily to the combination of a reduction in the amount of additional work required on several contracts and a higher concentration of net sales from more off-the-shelf type products. Gross profit margin as a percentage of net sales increased to 32.0% for the 2016 first quarter compared to 26.4% for the 2015 first quarter.
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2016 first quarter were $3.2 million, an increase of $0.3 million, or 9.1%, compared to $2.9 million for the 2015 first quarter. The increase is due primarily to an increase in commissions expense directly related to a higher concentration of ATS sales to International customers.
Interest Expense, Net
Interest expense, net, for the 2016 first quarter was $220 thousand compared to $149 thousand in the 2015 first quarter, an increase of $71 thousand, or 47.7%, due to the combination of a higher level of bank borrowing and an increased interest rate.
Cash Flows from Operating, Investing, and Financing Activities
During the 2016 first quarter, as a result of an increase in billings in excess of costs and estimated earnings on uncompleted long-term percentage of completion (“POC”) contracts, offset in part, by an increase in accounts receivable and costs and estimated earnings in excess of billings on uncompleted long-term POC contracts, the Company generated $0.2 million of cash from operating activities compared to $5.1 million of cash used in operating activities during the 2015 first quarter. Under 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 $0.4 million in both the 2016 first quarter and the 2015 first quarter.
The Company’s financing activities used $0.1 million of cash in the 2016 first quarter on repayments under the Company’s various lines of credit. In the 2015 first quarter, the Company’s financing activities used $4.8 million of cash, which primarily reflected repayments under the Company’s various lines of credit and payments on the Term Loan, and was offset, in part, by a decrease in restricted cash.
ETC was incorporated in 1969 in Pennsylvania. For over four decades, we have provided our customers with products, service, 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 product 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) Aircrew Training Systems; (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. We offer integrated Aircrew Training Systems to commercial, governmental, and military defense agencies, and training devices, including altitude (hypobaric) and multiplace chambers (“Chambers”), to governmental and military defense agencies and civil aviation organizations both in the United States and internationally. We sell our ADMS line of products to state and local governments, fire and emergency training schools, and airports. We also provide integrated logistics support for customers who purchase these products or similar products manufactured by other parties.
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 sell our sterilizers to pharmaceutical and medical device manufacturers. We sell our environmental testing and simulation devices primarily to commercial automobile and heating, ventilation, and air conditioning (“HVAC”) manufacturers. We sell our hyperbaric products (primarily “monoplace” chambers) to hospitals and wound care clinics. We also provide upgrade, maintenance, and repair services for our products and similar products manufactured by other parties.
We presently have two operating subsidiaries. ETC-PZL Aerospace Industries Sp. z o.o. (“ETC-PZL”), our 95%-owned subsidiary in Warsaw, Poland, manufactures certain simulators and provides software to support products manufactured domestically within our Aerospace segment. Environmental Tectonics Corporation (Europe) Limited (“ETC-Europe”), our 99%-owned subsidiary, functions 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/.
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.