SOUTHAMPTON, Pa., May 13 /PRNewswire-FirstCall/ -- Environmental
Tectonics Corporation (NYSE AMEX LLC: ETC) ("ETC" or the "Company")
today announced financial results for the fourth quarter and fiscal
year 2009. The reader is encouraged to read this press release in
conjunction with the Company's Annual Report on Form 10-K as this
report includes important background information on the Company for
the relevant fiscal periods. We were incorporated in 1969 in
Pennsylvania and are principally engaged in the design, manufacture
and sale of (1) software driven products and services used to
create and monitor the physiological effects of flight; (2) high
performance jet tactical flight simulation; (3) steam and gas
sterilization; (4) testing and simulation devices for the
automotive industry; (5) hyperbaric and hypobaric chambers; and (6)
driving and disaster simulation systems. The Company considers its
business activities to operate in two segments: the Training
Services Group (TSG) and the Control Systems Group (CSG). Product
categories included in TSG are Aircrew Training Systems (ATS) and
flight simulators, disaster management systems and entertainment
applications. CSG includes sterilizers, environmental control
devices and hyperbaric chambers along with parts and service
support. Fiscal fourth quarter ended February 27, 2009 For the
fiscal fourth quarter of fiscal 2009, ETC had net income of
$1,223,000, or $0.11 per share (diluted) versus a net loss of
$3,102,000 or $(0.37) per share (diluted) for the corresponding
period of fiscal 2008. Sales for the fourth quarter of fiscal 2009
were $9,282,000, as compared to $7,435,000 for the fourth quarter
of fiscal 2008, an increase of $1,847,000, or 24.8%. The sales
increase reflected double digit percentage increases in the ATS,
hyperbaric and simulation product groups as well as favorable sales
performance in the Company's Polish subsidiary. Most of the
increase in ATS and simulation resulted from international
contracts while hyperbaric reflected higher domestic sales. Gross
profit for the fourth quarter of fiscal 2009 was $4,364,000 versus
$1,586,000 for the corresponding quarter of fiscal 2008, an
increase of $2,778,000 or 175.2% representing the sales increase
coupled with a 25.7 percentage point increase in the rate as a
percentage of sales. The gross profit dollar increase reflected the
aforementioned impact of increased sales and corresponding gross
profit. The increase in the rate as a percentage of sales resulted
from favorable gross profit rates primarily in ATS with smaller
contributions from the sterilizer and hyperbaric product groups.
Operating income for the fourth quarter of fiscal 2009 was
$1,608,000 versus an operating loss of $2,490,000 for the prior
period reflecting the aforementioned improvement in gross profit
coupled with a 31.0% decrease in selling, general and
administrative expenses. The decrease in selling, general and
administrative expenses primarily reflected significant reductions
in legal and bad debt expenses between the periods and an asset
impairment charge in the fourth quarter of fiscal 2008 related to
the carrying value of the Company's Polish subsidiary, ETC-PZL.
Earnings before interest, taxes, depreciation and amortization
expense ("EBITDA") were $1,737,000 for the fourth quarter of fiscal
2009 versus a negative EBITDA of $1,853,000 for fiscal 2008. Fiscal
year ended February 27, 2009 Operating Results ETC had a net loss
of $1,974,000, or $(0.32) per share (diluted), in fiscal 2009
versus a net loss of $13,895,000, or $(1.61) per share (diluted),
in fiscal 2008, a decrease in net loss of $11,921,000, or 85.8%.
Operating loss in fiscal 2009 was $346,000 versus an operating loss
of $12,043,000 in fiscal 2008, a decrease in operating loss of
$11,697,000 or 97.1%. The decrease in operating loss resulted
primarily from the higher sales level and resulting increased gross
profit along with a reduction of claim settlement costs
($3,638,000) and impairment expense ($455,000). The Company also
reported EBITDA of $1,451,000 for fiscal 2009, compared to a
negative EBITDA of $10,047,000 for fiscal 2008. For the fiscal year
ended February 27, 2009, total sales were $36,687,000, an increase
of $13,957,000 or 61.4% from fiscal 2008. The increase primarily
reflected favorable performance in all geographic areas and in the
ATS, hyperbaric and simulation product lines. Geographically,
domestic sales were $14,442,000, up $964,000, or 7.2%, from fiscal
2008, and represented 39.4% of total sales, down from 59.3% in
fiscal 2008, reflecting favorable performance in hyperbaric (up
117.3%) and simulation (up 93.5%) products, offset in part by
declines in sterilizer (down 17.4%) and environmental (down 15.8%)
products. U.S. Government sales increased $1,268,000 or 69.4% from
the prior fiscal year reflecting contracted research work for two
TacModules. U.S. Government sales represented 8.4% of total sales,
up from 8.0% in fiscal 2008. International sales, including those
in the Company's foreign subsidiaries, were $19,149,000, up
$11,725,000 or 157.9%, from the prior fiscal period and represented
52.2% of total sales, up from 32.7% in fiscal 2008, primarily due
to increased sales of ATS products to customers in Saudi Arabia and
Turkey. International sales totaling at least $500,000 per country
were made to customers in Saudi Arabia, Turkey, Thailand, Malaysia
and Egypt. Our sales backlog at February 27, 2009 and February 29,
2008, for work to be performed and revenue to be recognized under
written agreements after such dates, was $44,324,000 and
$38,281,000, respectively. Of the February 27, 2009 sales backlog,
two product lines each represented at least 10% of the total
backlog: ATS ($29,231,000, 66.0%) and disaster management
simulation products ($6,397,000, 14.4%). Additionally, one customer
represented $19,089,000, or 43.1%, of the total backlog. From a
business segment perspective, sales of our Training Services Group
products were $20,608,000 in fiscal 2009, an increase of
$12,764,000, or 162.7% from fiscal 2008. Sales of these products
accounted for 56.2% of our sales versus 34.5% in fiscal 2008. Sales
in our other segment, the Control Systems Group, increased
$1,193,000 or 8.0%, and constituted 43.8% of our total sales
compared to 65.5% in fiscal 2008. Gross profit for fiscal 2009
increased by $7,478,000, or 170.7%, from fiscal 2008, reflecting
the favorable sales performance and resulting gross profit.
Additionally, a favorable product and contract mix resulted in an
increase in the gross profit rate as a percent of sales to 32.3%
for fiscal 2009 versus 19.3% for fiscal 2008. Significantly
favorable margin rates were realized in simulation, aircrew
training systems and sterilizers. Within the ATS product group, one
specific international contract for aeromedical equipment
contributed significantly to both the favorable gross profit dollar
and improvement in the gross profit rate as a percentage of revenue
increase. Selling, general and administrative expenses decreased
$558,000, or 4.8%, from fiscal 2008, reflecting a reduction in bad
debt expense and legal fees. Claim settlement costs in fiscal 2008
were $3,638,000. This expense directly related to the claim
settlement with the U.S. Navy. Impairment expense in fiscal 2008
reflected the write down of the remaining goodwill associated with
the Company's purchase of ETC-PZL in 1998. Research and development
expenses increased $432,000, or 63.7%, in fiscal 2009 as compared
to fiscal 2008. This increase reflected reduced reimbursement for
government grants in our Turkish subsidiary under government
research awards. Operating loss was $346,000 in fiscal 2009
compared to an operating loss of $12,043,000 in fiscal 2008, a
decrease in the operating loss of $11,697,000, or 97.1%. This
improvement in operating results represented a combination of
higher sales volume and gross profit coupled with reduced claim
settlement costs and impairment expenses. On a segment basis, TSG
had an operating income of $2,431,000, a $6,360,000 improvement
over the segment operating loss of $3,929,000 in fiscal 2008. The
CSG had an operating loss of $1,497,000 in fiscal 2009, a decrease
in operating loss of $4,054,000, or 73.0%, from fiscal 2008. These
segment operating results were offset, in part, by unallocated
corporate expenses of $1,280,000 which were down $805,000, or
38.6%, from fiscal 2008. Interest expense (net of interest income)
decreased $13,000, or 0.8%, in fiscal 2009 from fiscal 2008. Other
expense, net, decreased $169,000 for fiscal 2009 versus fiscal 2008
reflecting miscellaneous income from insurance and other
settlements. The Company recorded no income tax expense in fiscal
2009. Income tax expense in fiscal 2008 resulted from expense
timing differences in ETC-PZL as, although ETC-PZL had a book loss
for reporting purposes, it reported a profit for tax purposes.
Reflecting the Company's significant losses in the current and
prior fiscal years, the Company has approximately $39.8 million of
federal and approximately $46.2 million of state net loss carry
forwards available to offset future income tax liabilities,
beginning to expire in 2025. However, due to the uncertain nature
of their ultimate realization based on past performance, and the
potential that sufficient taxable income may not be generated in
the near future, we have established a full valuation allowance of
the same amount against these carry forward benefits and will
recognize these benefits only as reassessment demonstrates that
they are realizable. In addition, the Company may be subject to
limitation on the use of its net operating losses based on the
potential ownership change that may have occurred as defined by
Section 382 of the Internal Revenue Code. Liquidity and Capital
Resources During fiscal 2009, the Company used $739,000 of cash for
operating activities versus a usage of $5,761,000 for fiscal 2008.
The usage in fiscal 2009 primarily reflected the net loss, an
increase in accounts receivable and a reduction in billing in
excess of costs and estimated earnings on uncompleted long-term
contracts which was partially offset by cash from depreciation and
amortization and reduced inventories. The Company's investing
activities used $1,908,000 in fiscal 2009 and consisted primarily
of costs for the continued construction activities and the
manufacturing of demonstration simulators for our NASTAR Center
coupled with higher software enhancements for our Advanced Tactical
Fighter Systems technology. The Company's financing activities
generated $1,504,000 of cash during fiscal 2009. This primarily
reflected the proceeds from borrowings under the Company's bank
line. Subsequent Event Effective April 24, 2009, ETC entered into a
transaction with H.F. Lenfest ("Lenfest"), a member of the
Company's Board of Directors and a significant shareholder, that
provides for the following upon the satisfaction of certain
conditions, including the receipt of the approval of the Company's
shareholders to certain components of the transaction: (i) a
$7,500,000 credit facility to be provided by Lenfest to ETC; (ii)
exchange of the Subordinated Note held by Lenfest, together with
all accrued interest and warrants issuable under the Subordinated
Note, and all Series B Preferred Stock and Series C Preferred Stock
held by Lenfest, together with all accrued dividends thereon, for a
new class of preferred stock, Series E Preferred Stock, of the
Company; and (iii) the guarantee by Lenfest of all of ETC's
obligations to PNC Bank, ETC's main lender, in connection with an
increase of the existing $15,000,000 revolving line of credit with
PNC to $20,000,000, and in connection with this guarantee, the
pledge by Lenfest to PNC Bank of $10,000,000 in marketable
securities. The reader is encouraged to read the Company's Annual
Report on Form 10-K for important background information on this
transaction and the Company for the relevant fiscal periods.
Selected Financial Data (thousands, except share and per share
information) Fiscal Quarter Fiscal Year Ended Ended (unaudited)
Feb. 27, Feb. 29, Feb. 27, Feb. 29, 2009 2008 2009 2008 Sales
$9,282 $7,435 $36,687 $22,730 Gross profit 4,364 1,586 11,858 4,380
Operating profit/(loss) 1,608 (2,490) (346) (12,043) EBITDA 1,737
(1,853) 1,451 (10,047) Pre-tax profit/(loss) 1,221 (3,060) (1,982)
(13,861) Income taxes - 37 - 37 Minority interest (4) 5 (8) (3) Net
income/(loss) $1,223 $(3,102) $(1,974) $(13,895) Preferred stock
dividends (232) (250) (927) (661) Income/(loss) applicable to
common shareholders $991 $(3,352) $(2,901) $(14,556) Income/(loss)
per share Basic $0.11 $(0.37) $(0.32) $(1.61) Average shares
9,041,000 9,030,000 9,037,000 9,030,000 Diluted $0.11 $(0.37)
$(0.32) $(1.61) Average shares 9,041,000 9,030,000 9,037,000
9,030,000 We were incorporated in 1969 in Pennsylvania and are
principally engaged in the design, manufacture and sale of (1)
software driven products and services used to create and monitor
the physiological effects of flight; (2) high performance jet
tactical flight simulation ;(3) steam and gas sterilization; (4)
testing and simulation devices for the automotive industry; (5)
hyperbaric and hypobaric chambers; and (6) driving and disaster
simulation systems. This press release includes forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements are based on
ETC's current expectations and projections about future events.
These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about ETC's and its
subsidiaries that may cause actual results, levels of activity,
performance or achievements to be materially different from any
future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. These
forward-looking statements include statements with respect to the
Company's vision, mission, strategies, goals, beliefs, plans,
objectives, expectations, anticipations, estimates, intentions,
financial condition, results of operations, future performance and
business of the company, including but not limited to, (i)
potential additional funding by H.F. Lenfest, a member of our Board
of Directors and a significant shareholder and PNC Bank, (ii) the
delisting of the Company's common stock from the NYSE AMEX LLC
(formerly the American Stock Exchange) (iii) projections of
revenues, costs of materials, income or loss, earnings or loss per
share, capital expenditures, growth prospects, dividends, capital
structure, other financial items and the effects of currency
fluctuations, (iv) statements of our plans and objectives of the
Company or its management or Board of Directors, including the
introduction of new products, or estimates or predictions of
actions of customers, suppliers, competitors or regulatory
authorities, (v) statements of future economic performance, (vi)
statements of assumptions and other statements about the Company or
its business, (vii) statements made about the possible outcomes of
litigation involving the Company, (viii) statements regarding the
Company's ability to obtain financing to support its operations and
other expenses, and (ix) statements preceded by, followed by or
that include the words, "may," "could," "should," "looking
forward," "would," "believe," "expect," "anticipate," "estimate,"
"intend," "plan," or the negative of such terms or similar
expressions. These forward-looking statements involve risks and
uncertainties which are subject to change based on various
important factors. Some of these risks and uncertainties, in whole
or in part, are beyond the Company's control. Factors that might
cause or contribute to such a material difference include, but are
not limited to, those discussed in the Company's Annual Report on
Form 10K for the fiscal year ended February 27, 2009, in the
section entitled "Risks Particular to Our Business." Shareholders
are urged to review these risks carefully prior to making an
investment in the Company's common stock. The Company cautions that
the foregoing list of important factors is not exclusive. Except as
required by federal securities law, the Company does not undertake
to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the Company.
Contact: Duane D. Deaner, CFO Tel: 215-355-9100 (ext. 1203) Fax:
215-357-4000 ETC - Internet Home Page: http://www.etcusa.com/
DATASOURCE: Environmental Tectonics Corporation CONTACT: Duane D.
Deaner, CFO, +1-215-355-9100 (ext. 1203), Fax: +1-215-357-4000 Web
Site: http://www.etcusa.com/
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