ETC Announces Fiscal 2021 First Quarter Results
SOUTHAMPTON, PA, USA, January 21, 2021 – Environmental Tectonics Corporation (OTC Pink: ETCC) (“ETC” or the “Company”) today reported its financial results for the thirteen week period ended May 29, 2020 (the “2021 first quarter”).
Robert L. Laurent, Jr., ETC’s Chief Executive Officer and President stated, “Fiscal 2020 was a challenging year as future projects were delayed and that challenge was compounded in the 2021 first quarter due to COVID-19 global pandemic related lockdowns, which delayed orders and our ability to deliver.”
Fiscal 2021 First Quarter Results of Operations
Net Loss Attributable to ETC
Net loss attributable to ETC was $1.6 million, or $0.11 diluted loss per share, in the 2021 first quarter, compared to $0.5 million during the 2020 first quarter, equating to $0.04 diluted loss per share. The $1.1 million variance is due to the combined effect of a $2.0 million decrease in gross profit, offset, in part, by a $0.6 million decrease in operating expenses, a $0.2 million decrease in other expense, net, a $22 thousand decrease in interest expense, net, and a $28 thousand increase in loss attributable to non-controlling interest.
Net sales in the 2021 first quarter were $4.9 million, a decrease of $5.9 million, or 54.6%, compared to 2020 first quarter net sales of $10.8 million. The decrease reflects lower International sales, especially within Aeromedical Training Solutions, lower Domestic sales, especially within Simulation, lower overall Sterilizers sales, and lower monoplace chambers sales as a result of the asset sale on November 27, 2019, offset, in part, by an increase in U.S. Government sales within Aeromedical Training Solutions in conjunction with the U.S. Air Force’s final acceptance of the RAC Contract.
Gross profit for the 2021 first quarter was $0.5 million compared to $2.5 million in the 2020 first quarter, a decrease of $2.0 million, or 79.0%. The decrease in gross profit was due to lower net sales not being able to support fixed overhead expenses. Lower net sales were generated due to the combination of a lower backlog entering fiscal 2021 compounded with the effects of the COVID-19 global pandemic, which not only impacted the Company’s ability to generate bookings, especially internationally, but also forced the closure of our corporate headquarters and main production plant for about one-third of the 2021 first quarter in accordance with Pennsylvania state mandates. Gross profit margin as a percentage of net sales decreased to 10.6% for the 2021 first quarter compared to 22.9% for the 2020 first quarter.
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2021 first quarter were $2.0 million, a decrease of $0.6 million, or 22.9%, compared to $2.6 million for the 2020 first quarter. The decrease in operating expenses was due primarily to lower selling and marketing expenses, which included a decrease in commission expense based on a lower concentration of International sales related to ATS products, a reduction in headcount, and a decrease in travel caused by the COVID-19 global pandemic.
Other (Income) Expense, Net
Other income, net for the 2021 first quarter was $17 thousand compared to other expense, net of $150 thousand for the 2020 first quarter, a variance of $0.2 million due primarily to lower letter of credit fees and realized exchange gains on foreign currency.
Cash Flows from Operating, Investing, and Financing Activities
During the 2021 first quarter, due primarily from the net loss incurred, the increase in contract assets, and the decrease in accounts payable, offset, in part by the decrease in accounts receivable, the Company used $2.6 million of cash for operating activities compared to $6.7 million during the 2020 first quarter. Under Accounting Standards Codification (“ASC”) 606, 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 $14 thousand during the 2021 first quarter compared to $0.1 million during the 2020 first quarter.
The Company’s financing activities provided $3.4 million of cash during the 2021 first quarter with proceeds from the Payroll Protection Program loan and borrowings under the Company’s credit facility compared to $5.6 million during the 2020 first quarter exclusively from borrowings under the Company’s credit facility.
Financial Tables Follow
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.