ENVIRONMENTAL TECTONICS CORPORATION
ANNOUNCES THIRD QUARTER FISCAL 2006 RESULTS
Southampton, PA: January 11, 2006 - ENVIRONMENTAL TECTONICS CORPORATION ("ETC"
OR "THE COMPANY") (AMEX: ETC) today announced financial results for the third
quarter of fiscal 2006.
For the third quarter of fiscal 2006, which ended on November 25, 2005,
the Company had a net loss of $1,327,000, or ($0.15) per share (diluted), versus
a net loss of $3,249,000 or ($0.43) per share (diluted) for the third quarter of
fiscal 2005. Sales for the third quarter of fiscal 2006 were $6,206,000, as
compared to $7,751,000 for the third quarter of fiscal 2005, a decrease of
$1,545,000 or 19.9%, reflecting sales decreases in all product areas except
sterilizers and pilot training systems (PTS). The most significant decreases
were evidenced in environmental (down $1,007,000, 53.6%), which had less
activity both internationally and domestically for automotive applications, and
hyperbaric (down $906,000, 80.6%) on reduced percent of completion (POC) revenue
for a large hyperbaric chamber order. Partial offsets were increases in
sterilizers (up $280,000, 32.9%) and PTS (up $403,000, 13.5%). Sterilizers
improved primarily on increased steam chamber sales while the ATS improvement
reflected increased POC revenue for a large project for several F-16 aircraft
flight simulators and other equipment which is being produced by our Polish
subsidiary.
Geographically, domestic sales for the third quarter of fiscal 2006
were $2,332,000, down $1,666,000 or 41.7% from the third quarter of fiscal 2005,
primarily reflecting decreases in all product categories except sterilizers.
Domestic sales represented 37.6% of the Company's total sales for the third
quarter of fiscal 2006, down from 51.6% for the third quarter of fiscal 2005.
U.S. Government sales for the third quarter of fiscal 2006 were $249,000 as
compared to $1,157,000 for the third quarter of fiscal 2005. International sales
for the third quarter of fiscal 2006, including those made by the Company's
foreign subsidiaries, were $3,625,000, an increase of $1,029,000 or 39.6% from
international sales for the third quarter of fiscal 2005, and represented 58.4%
of total sales for the third quarter of fiscal 2006 as compared to 33.5% for the
third quarter of fiscal 2005. International sales in the current quarter
benefited from the aforementioned increase in sales by the Company's Polish
subsidiary.
Gross profit for the third quarter of fiscal 2006 was $1,367,000, as
compared to $1,637,000 for the third quarter of fiscal 2005, a decrease of
$270,000 or 16.5%, reflecting the sales decrease partially offset by a slight
(0.9 percentage point) improvement in the gross profit rate as a percent of
sales, which rose to 22.0% as compared to 21.1% for the prior year. The
quarter-to-quarter gross profit rate improvement resulted from improved
performance in most product areas, most notably sterilizers and environmental
products.
Selling and administrative expenses for the third quarter of fiscal
2006 were down $1,957,000, or 46.3%, from the third quarter of fiscal 2005,
primarily reflecting a significant reduction in legal costs associated with the
Company's ongoing litigation and contract claims activities.
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SELECTED FINANCIAL DATA
(UNAUDITED)
(THOUSANDS, EXCEPT SHARE AND
PER SHARE INFORMATION)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
NOV. 25, 2005 NOV. 26, 2004 NOV. 25, 2005 NOV. 26, 2004
------------- ------------- ------------- -------------
Sales $ 6,206 $ 7,751 $ 18,376 $ 20,449
Gross profit 1,367 1,637 4,102 3,652
Operating loss (986) (2,757) (3,287) (6,794)
Pre-tax loss (1,317) (3,254) (4,662) (8,147)
Income taxes 4 (4) 4 (1,453)
Minority interest (6) (1) (4) -
Net loss $ (1,327) (3,249) (4,670) $ (6,694)
LOSS PER SHARE
Basic and diluted $ (0.15) $ (0.43) $ (0.52) $ (0.88)
Average shares 9,021,000 7,641,000 9,020,000 7,604,000
William F. Mitchell, ETC's President and Chairman, stated, "Although
still in an operating and net loss position, generally speaking our financial
performance in the current year has shown a significant improvement from the
comparable prior periods. Despite the reduced sales, our gross profit fiscal
year-to-date was up both in dollars and in the rate as a percent of revenue. Our
operating loss for the current quarter and fiscal year-to-date decreased by 64%
and 52%, respectively. And our fiscal year-to-date net loss decreased by 30%
despite a large benefit from income taxes which was booked in the prior year. I
was particularly pleased with our current quarter's international sales,
including those made by the Company's foreign subsidiaries, which increased
$1,029,000 or 40%. Sales in our Polish subsidiary, ETC-PZL, more than tripled as
we continued work on several F-16 simulators and other equipment destined for
the Polish Air Force.
"During the current quarter we announced the construction of a Tactical
Flight Simulation and Aviation Training and Research Center. Expected to be open
in January 2007, this center will offer a complete range of aviation training
and research support services. It will include the Authentic Tactical Flight
Simulator (ATFS) 400B, our state-of-the-art simulator which provides
high-performance jet pilots with realistic combat practice in a real world
G-force environment. This announcement followed on the heels of completion of
onsite acceptance testing and commissioning of the first ATFS which is currently
installed in a Southeast Asia location.
"We also announced the award of a contract from the Pennsylvania
Southeast Region Counter-Terrorism Task Force for an Advanced Disaster
Management Simulator (ADMS(TM)). ADMS will allow this group to train in the four
"C's" of disaster management: command, control, coordination and communication.
This contract also includes a five-year support program during which they will
receive new training scenarios, allowing them to consistently challenge their
personnel with new training situations.
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"In response to our disappointing performance, we have instituted some
significant actions, including cost cutting measures and operating efficiencies,
which have reduced our annual payroll by 15-20% and resulted in a consolidation
of our selling efforts. We continue to re-focus some of our businesses and
introduce new business models in others. Our open proposal log has remained
strong in most of our product groups.
"We continue to be 100% committed to taking any actions which will
improve our Company's performance."
ETC designs, develops, installs and maintains aircrew training systems,
public entertainment systems, process simulation systems (sterilization and
environmental), clinical hyperbaric systems, environmental testing and
simulation systems, and related products for domestic and international
customers.
This press release may include 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. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about the Company that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any other future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should', "could", "would", "expect", "plan", "anticipate", "believe",
"estimate", "continue", or the negative of such terms or similar expressions.
Factors that might cause or contribute to such a discrepancy include, but are
not limited to, contract cancellations, failure to obtain new contracts,
political unrest in customer countries, unfavorable results in litigation,
general economic conditions, and those issues identified from time to time in
our Securities and Exchange Commission filings and other public documents,
including, without limitation, our Annual Report on Form 10-K for the fiscal
year ended February 25, 2005.
Contact: Duane D. Deaner, CFO TEL: 215-355-9100 (ext. 1203) FAX: 215-357-4000
ETC - INTERNET HOME PAGE: http://www.etcusa.com
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