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ETC Announces Fiscal 2014 First Quarter Results

Net sales of $12.6 million

• EBITDA of $0.7 million
• Sales bookings of $8.4 million

 
SOUTHAMPTON, PA, USA, July 12, 2013 – Environmental Tectonics Corporation (OTC Pink: ETCC) (“ETC” or the “Company”) today reported its financial results for its fiscal 2014 first quarter ended May 31, 2013.
 
Fiscal 2014 First Quarter Results of Operations:
 
Net Income Attributable to ETC
Net income attributable to ETC was $31 thousand, or ($0.01) diluted loss per share, in the fourteen week period ended May 31, 2013 (“2014 first quarter”), compared to $1.7 million or $0.06 diluted earnings per share, during the thirteen week period ended May 25, 2012 (“2013 first quarter”), representing a decrease of $1.6 million, or 98.2%. The decrease in net income attributable to ETC reflects a decrease in income before income taxes of $2.6 million due primarily to a $2.7 million decrease in gross profit, resulting from a combination of both lower net sales and lower gross profit margin percentage.
 
Net Sales
Net sales in the 2014 first quarter were $12.6 million, a decrease of $3.5 million, or 21.7%, compared to 2013 first quarter net sales of $16.1 million. The decrease reflects decreased Aircrew Training System (“ATS”) sales to the U.S. Government and decreased sterilizer sales to Domestic customers, offset in part, by increased ATS and sterilizer sales to International customers. Given the continued progress made on U.S. Government sales contracts in the Company’s backlog, the Company anticipates the concentration of sales to the U.S. Government will continue to lessen in fiscal 2014.
 
Gross Profit
Gross profit for the 2014 first quarter was $3.7 million compared to $6.4 million in the 2013 first quarter, a decrease of $2.7 million, or 42.5%. The significant decrease in gross profit was a combination of both lower net sales and lower gross profit margin percentage due to increased costs as a result of damage to one of our devices associated with a U.S. Government contract during the testing phase and inefficiencies as a result of additional work required on several other contracts.
 
Operating Expenses
Operating expenses, including sales and marketing, general and administrative and research and development, for the 2014 first quarter were $3.4 million, a decrease of $0.1 million, or 3.5%, compared to $3.5 million for the 2013 first quarter. The decrease is primarily the result of an on-going effort to reduce non-revenue generating expenses, offset in part, by an increase in research and development expenses.
 
Interest Expense, Net
Interest expense, net, for the 2014 first quarter was $172 thousand compared to $214 thousand in the 2013 first quarter, a decrease of $42 thousand despite a higher level of bank borrowing due primarily to the results of the 2012 Financial Restructuring.
 
Cash Flows from Operating, Investing, and Financing Activities:
 
During the 2014 first quarter, as a result of an increase in costs and estimated earnings in excess of billings on uncompleted long-term percentage of completion (“POC”) contracts and a decrease in accounts payable, the Company used $4.8 million of cash in operating activities compared to $0.6 million of cash used in operating activities in the 2013 first quarter. Under POC revenue recognition, these accounts represent the timing differences of spending on production activities versus collecting on long-term contracts.
 
Cash used for investing activities primarily relates to funds used for capital expenditures in equipment and software development. The Company’s investing activities used $0.3 million in the 2014 first quarter compared to $0.5 million in the 2013 first quarter.
 
The Company’s financing activities provided $3.5 million of cash in the 2014 first quarter, which primarily reflected borrowings under the Company’s various lines of credit, and was offset, in part, by payments on the Term Loan. In the 2013 first quarter, net cash provided by financing activities totaled $0.8 million, primarily for borrowings under the line of credit, offset in part, by dividends paid on Preferred Stock.
 
Financial Tables Follow

Forward-looking Statements
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.