Source: GlobeNewswire (MIL-OSI)
SOUTHAMPTON, Pa., June 09, 2025 (GLOBE NEWSWIRE) — Environmental Tectonics Corporation (OTC Pink: ETCC) (“ETC” or the “Company”) today reported its financial results for the fourteen week period ended February 28, 2025 (the “2025 fiscal fourth quarter”) and the fifty-three week period ended February 28, 2025 (“fiscal 2025”).
Robert L. Laurent, Jr., ETC’s Chief Executive Officer and President stated, “Our strong backlog and pipeline of opportunities once again translated into increases in net sales, gross profit margin, operating income and net income. These results reflect growth in each of our business units with sales increasing to $62.9 million, gross profit increasing to $18.5 million, and net income increasing to $13.1 million or $0.75 diluted earnings per share in fiscal 2025 as compared to net income of $1.8 million or $0.09 diluted earnings per share in fiscal 2024. We believe we remain well positioned for the future with a backlog of $87 million and strong pipeline of opportunities at February 28, 2025.”
Fiscal 2025 Results of Operations
Net Income
Net income was $13.1 million, or $0.75 diluted earnings per share, in fiscal 2025, compared to net income of $1.8 million during fiscal 2024, equating to $0.09 per diluted share. The $11.2 million variance is primarily attributable to a $19.6 million increase in sales, a $6.1 million increase in gross profit, slightly offset by a $0.8 million increase in operating expenses. Fiscal 2025 is also being positively impacted by an income tax benefit of $5.6 million, primarily associated with the partial reversal of valuation allowance previously recorded against the deferred tax asset. The deferred tax asset valuation allowance on federal deferred tax assets and certain state deferred tax assets was reversed in fiscal 2025, as it is now more likely than not that the Company will be able to fully realize these deferred tax assets.
Net Sales
Net sales for fiscal 2025 was $62.9 million, an increase of $19.6 million, or 45.3%, compared to fiscal 2024 net sales of $43.3 million. The increase is a result of higher International sales of $13.4 million, of which $9.3 million are within Aircrew Training Solutions (“ATS”) and $3.5 million are within Commercial Industrial Systems (“CIS”) as well as higher Domestic sales of $6.2 million, $6.0 million of which are within CIS. Further, sales in fiscal 2025 increased the greatest within the ATS business unit and Sterilizer Systems business unit, accounting for $9.9 and $7.4 million, respectively, of the overall increase of $19.6 million.
Gross Profit
Gross profit for fiscal 2025 was $18.5 million compared to $12.5 million in fiscal 2024, an increase of $6.1 million, or 48.7%. The increase in gross profit was primarily due to higher net sales within the ATS and Sterilizers System business units. Gross profit margin as a percentage of net sales increased to 29.4% in fiscal 2025 compared to 28.8% in fiscal 2024.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for fiscal 2025 was $10.3 million compared to $9.5 million in fiscal 2024, an increase of $0.8 million, or 8.1%. An increase in selling and marketing expenses, primarily driven by higher sales and an increase in general and administrative expenses, due primarily to an increase in salary and related expenses, along with an increase in professional fees was offset slightly by a decrease in research and development expenses.
Interest Expense, Net
Interest expense, net, for fiscal 2025 was $1.2 million compared to $0.9 million in fiscal 2024, an increase of $0.3 million, or 31.6%, due primarily to higher borrowing attributable to the leaseback of the Southampton, Pennsylvania demonstration equipment in fiscal 2025.
Other (Income) Expense, Net
Other income, net, for fiscal 2025 was ($0.4) million, compared to other expense, net, of $0.3 million in fiscal 2024 a favorable variance of ($0.7) million, or (221.5%) attributable to a gain realized from the sale of the Southampton, Pennsylvania demonstration equipment in fiscal 2025.
Income (Benefit) Taxes
As of February 28, 2025, the Company reviewed the components of its deferred tax assets and determined, based upon all available information, that it is more likely than not that deferred tax assets relating to its federal deferred tax assets and certain state deferred tax assets will be realized. Accordingly, we reversed the previously recorded valuation allowance against these deferred tax assets. If in the future there is a change in our ability to realize these deferred tax assets, then our tax valuation allowance may increase in the period in which we determine that realization is no longer more likely than not. An income tax benefit of $5.6 million was recorded in fiscal 2025 compared to income tax benefit of $0.1 million recorded in fiscal 2024.
Fiscal 2025 Fourth Quarter Results of Operations
Net Income
Net income was $7.6 million, or $0.45 diluted earnings per share, in the 2025 fiscal fourth quarter, compared to net income of $2.8 million during the 2024 fiscal fourth quarter, equating to $0.17 diluted earnings per share. The $4.8 million variance is a result of $2.7 million of increased sales, $0.6 million increase in other income attributable to the sale of the Company’s demonstration equipment offset slightly by an 8.9% decrease in gross profit margin percentage, primarily attributable to increased aeromedical center building sales and higher interest expense attributable to the demonstration equipment lease. The 2025 fiscal fourth quarter is also being positively impacted by a $5.5 million increase in income tax benefit attributable to the reversal of the deferred tax asset valuation allowance.
Net Sales
Net sales for the 2025 fiscal fourth quarter were $19.1 million, an increase of $2.7 million, or 16.4%, compared to net sales of $16.4 million for the 2024 fiscal fourth quarter. The increase reflects higher overall sales within the ATS and Sterilizer Systems business units.
Gross Profit
Gross profit was $4.7 million in the 2025 fiscal fourth quarter, a decrease of $0.8 million, or 14.5% compared to gross profit of $5.5 million for the 2024 fiscal fourth quarter. Gross profit margin as a percentage of net sales decreased to 24.6% in the 2025 fiscal fourth quarter compared to 33.5% in 2024 fiscal fourth quarter. The majority of the decrease was a direct result of the increase in aeromedical center building sales, which is lower margin then ETC’s core business as the work is being performed by a sub-contracted construction firm. Excluding the aeromedical center building sales, gross profit margin would have been approximately 29.7%. As the building construction of the aeromedical center accelerates over the next year, ETC expects gross profit margin to be lower in fiscal 2026 as compared to fiscal 2025.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2025 fiscal fourth quarter were $2.7 million, an increase of $0.2 million, or 6.1%, compared to $2.5 million for the 2024 fiscal fourth quarter. The increase in operating expenses was due primarily to higher general and administrative expenses slightly offset by lower selling and marketing and research and development expenses in the 2025 fiscal fourth quarter compared to the 2024 fiscal fourth quarter.
Interest Expense, Net
Interest expense, net, for the 2025 fiscal fourth quarter was $0.6 million compared to $0.2 million in the 2024 fiscal fourth quarter, an increase of $0.4 million, or 146.6%, reflecting increased borrowing attributable to the leaseback of the demonstration equipment in 2025 fiscal fourth quarter.
Other (Income) Expense, Net
Other income, net, for 2025 fiscal fourth quarter was ($0.5) million, compared to other expense, net, of $0.1 million in 2024 fiscal fourth quarter, a favorable variance of ($0.6) million, or (721.0%) attributable to a gain realized from the sale of the Southampton, Pennsylvania demonstration equipment in the 2025 fiscal fourth quarter.
Income (Benefit) Taxes
An income tax benefit of $5.7 million was recorded in the fiscal 2025 fourth quarter compared to an income tax benefit of $0.2 million in the 2024 fiscal fourth quarter. The increase in the income tax provision in the 2025 fiscal fourth quarter was driven primarily by the reversal of the valuation allowance on federal deferred tax assets and certain state deferred tax assets. This reversal is attributable to the change in the Company’s operating profit and expected ability to realize these deferred tax assets.
Liquidity and Capital Resources
As of February 28, 2025, the Company’s availability under the PNC Revolving Line of Credit was $2.2 million. This reflected cash borrowings of $14.3 million and net outstanding standby letters of credit of approximately $3.5 million. As of June 9, 2025, the date of our most current Revolving Line of Credit statement, the Company’s availability under the PNC Revolving Line of Credit was approximately $1.2 million. The Company had working capital of $19.7 million as of February 28, 2025 compared to working capital of $8.7 million as of February 23, 2024. The increase in working capital was primarily the result of a significant increase in contract assets and reduction in contract liabilities partially offset by a decrease in prepaid assets and increase in accounts payable, trade and an increase in the current portion of lease obligations. With unused availability under the Company’s various current lines of credit, the further conversion of contract assets and inventory into cash, the collection of milestone payments associated with several International contracts, and expected deposits on fiscal 2026 bookings, the Company anticipates its sources of liquidity will be sufficient to fund its operating activities, anticipated capital expenditures, and debt repayment obligations throughout fiscal 2025.
On February 3, 2025, the Company entered into a Financing and Security Agreement with Coeur Capital, Inc. that provided for a line of credit of up to $3.0 million. The company is able to draw on the line transferring and assigning acceptable accounts receivable to Coeur Capital. The Financing and Security Agreement remains in full force until terminated by either party upon advanced written notice. As of February 28, 2025, the Company’s availability under this Financing and Security Agreement was $3.0 million. As of June 9, 2025, the date of our report, the Company’s availability under this Financing and Security Agreement with Coeur Capital was $3.0 million.
Cash flows from operating activities
During fiscal 2025, cash flows used by operating activities were $3.9 million, an increase of $0.2 million compared to fiscal 2024 cash flows used by operating activities of $3.7 million. Cash flows in fiscal 2025 increased as a result of the increase in contract assets and decrease in contract liabilities partially offset by net income for the fiscal year.
Cash flows from investing activities
Cash flows from investing activities primarily relates to funds for capital expenditures in property, plant, and equipment and software development. The Company’s fiscal 2025 investing activities provided $3.6 million as compared to fiscal 2024 investing activities which used $0.3 million. The change in investing activities is attributable to $4.0 million from the sale leaseback of the demonstration equipment in Southampton, Pennsylvania.
Cash flows from financing activities
During fiscal 2025, the Company’s financing activities provided $1.7 million from borrowings under the Company’s credit facility to support the significant increase in manufacturing, compared to fiscal 2024 borrowings of $2.7 million.
About ETC
ETC was incorporated in 1969 in Pennsylvania. For over five decades, we have provided our customers with products, services, 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 areas: (i) software driven products and services used to create and monitor the physiological effects of flight, including high performance jet tactical flight simulation, fixed and rotary wing upset prevention and recovery and spatial disorientation, and both suborbital and orbital commercial human spaceflight: altitude (hypobaric) chambers; hyperbaric chambers for multiple persons (multiplace chambers) collectively, Aircrew Training Systems (“ATS”);; (ii) Advanced Disaster Management Simulators (“ADMS”); (iii) steam and gas (ethylene oxide) sterilizer systems (“Sterilizer Systems” or “Sterilizers”); and (iv) Environmental Testing and Simulation Systems (“ETSS”).
We operate in two primary business segments, Aerospace Solutions (“Aerospace”) and Commercial/Industrial Systems (“CIS”). Aerospace encompasses the design, manufacture, and sale of: (i) ATS products; and (ii) 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. CIS encompasses the design, manufacture, and sale of: (i) sterilizer systems; and (ii) ETSS; 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.
ETC-PZL Aerospace Industries Sp. z o.o. (“ETC-PZL”), our 100%-owned subsidiary in Warsaw, Poland, is currently our only operating subsidiary. ETC-PZL manufactures certain simulators and provides software to support products manufactured domestically within our Aerospace segment.
The majority of our net sales are generated from long-term contracts with U.S. and foreign government agencies (including foreign military sales (“FMS”) contracted through the U.S. Government) for the research, design, development, manufacture, integration, and sustainment of ATS products, including Chambers and the simulators manufactured and sold through ETC-PZL, collectively, ATS. The Company also enters into long-term contracts with domestic and international customers for the sale of sterilizer systems and ETSS. Net sales of ADMS are generally much shorter term in nature and vary between domestic and international customers. We generally provide our products and services under fixed-price contracts.
ETC’s unique ability to offer complete systems, designed and produced to high technical standards, sets it apart from its competition. ETC’s headquarters is located in Southampton, PA. For more information about ETC, visit http://www.etcusa.com/.
Forward-looking Statements
This news release contains forward-looking statements, which are based on management’s current 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 words 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, the economy and other factors 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.
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| Table A |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Environmental Tectonics Corporation |
| Consolidated Comprehensive Statement of Operations and Comprehensive Income |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| (in thousands, except per share information) |
|
Fifty-three / Fifty-two weeks ended |
|
Variance |
| |
|
February 28, 2025 |
February 23, 2024 |
|
($) |
|
(%) |
| Net sales |
|
$ |
62,943 |
|
|
$ |
43,307 |
|
|
$ |
19,636 |
|
|
45.3 |
|
| Cost of goods sold |
|
|
44,420 |
|
|
|
30,848 |
|
|
|
13,572 |
|
|
44.0 |
|
| Gross Profit |
|
|
18,523 |
|
|
|
12,459 |
|
|
|
6,064 |
|
|
48.7 |
|
| Gross profit margin % |
|
|
29.4 |
% |
|
|
28.8 |
% |
|
|
0.6 |
% |
|
2.1 |
% |
| |
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
10,260 |
|
|
|
9,494 |
|
|
|
766 |
|
|
8.1 |
|
| Operating income |
|
|
8,263 |
|
|
|
2,965 |
|
|
|
5,298 |
|
|
178.7 |
|
| Operating margin % |
|
|
13.1 |
% |
|
|
6.8 |
% |
|
|
6.3 |
% |
|
92.6 |
% |
| |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
|
1,183 |
|
|
|
899 |
|
|
|
284 |
|
|
31.6 |
|
| Other (income) expense, net |
|
|
(361 |
) |
|
|
297 |
|
|
|
(658 |
) |
|
-221.5 |
|
| Income before income taxes |
|
|
7,441 |
|
|
|
1,769 |
|
|
|
5,672 |
|
|
320.6 |
|
| Pre tax margin % |
|
|
11.8 |
% |
|
|
4.1 |
% |
|
|
7.7 |
% |
|
187.8 |
% |
| |
|
|
|
|
|
|
|
|
| Income tax provision (benefit) |
|
|
(5,622 |
) |
|
|
(51 |
) |
|
|
(5,571 |
) |
|
10923.5 |
|
| Net income |
|
|
13,063 |
|
|
|
1,820 |
|
|
|
11,243 |
|
|
617.7 |
|
| Preferred Stock Dividends |
|
|
(493 |
) |
|
|
(484 |
) |
|
|
(9 |
) |
|
1.9 |
|
| Income attributable to common and participating shareholders |
|
$ |
12,570 |
|
|
$ |
1,336 |
|
|
$ |
11,234 |
|
|
840.9 |
|
| |
|
|
|
|
|
|
|
|
| Per share information: |
|
|
|
|
|
|
|
|
| Basic earnings per common and participating share: |
|
|
|
|
|
|
| Distributed earnings per share: |
|
|
|
|
|
|
|
|
| Common |
|
$ |
– |
|
|
$ |
– |
|
|
|
|
|
| Preferred |
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
– |
|
|
0.0 |
|
| Undistributed earnings per share: |
|
|
|
|
|
|
|
|
| Common |
|
$ |
0.81 |
|
|
$ |
0.09 |
|
|
$ |
0.72 |
|
|
800.0 |
|
| Preferred |
|
$ |
0.81 |
|
|
$ |
0.09 |
|
|
$ |
0.72 |
|
|
800.0 |
|
| Diluted earnings per share |
|
$ |
0.75 |
|
|
$ |
0.09 |
|
|
$ |
0.66 |
|
|
733.3 |
|
| |
|
|
|
|
|
|
|
|
| Total basic weighted average common and participating shares |
|
|
15,572 |
|
|
|
15,569 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Total diluted weighted average shares |
|
|
16,655 |
|
|
|
15,569 |
|
|
|
|
|
| Table B |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Environmental Tectonics Corporation |
| Consolidated Comprehensive Statement of Operations and Comprehensive Income |
| |
|
|
|
|
|
|
|
|
| |
|
Fourteen / Thirteen weeks ended |
|
Variance |
| (in thousands, except per share information) |
|
February 28, 2025 |
|
February 23, 2024 |
|
($) |
|
(%) |
| Net sales |
|
$ |
19,098 |
|
|
$ |
16,414 |
|
|
$ |
2,684 |
|
|
16.4 |
|
| Cost of goods sold |
|
|
14,394 |
|
|
|
10,915 |
|
|
|
3,479 |
|
|
31.9 |
|
| Gross Profit |
|
|
4,704 |
|
|
|
5,500 |
|
|
|
(795 |
) |
|
-14.5 |
|
| Gross profit margin % |
|
|
24.6 |
% |
|
|
33.5 |
% |
|
|
-8.9 |
% |
|
-26.7 |
% |
| |
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
2,665 |
|
|
|
2,513 |
|
|
|
153 |
|
|
6.1 |
|
| Operating income |
|
|
2,039 |
|
|
|
2,987 |
|
|
|
(948 |
) |
|
-31.6 |
|
| Operating margin % |
|
|
10.7 |
% |
|
|
18.2 |
% |
|
|
-7.5 |
% |
|
-40.8 |
% |
| |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
|
613 |
|
|
|
249 |
|
|
|
365 |
|
|
146.6 |
|
| Other (income) expense, net |
|
|
(504 |
) |
|
|
81 |
|
|
|
(584 |
) |
|
-721.0 |
|
| Income before income taxes |
|
|
1,930 |
|
|
|
2,658 |
|
|
|
(728 |
) |
|
-27.4 |
|
| Pre-tax margin % |
|
|
10.1 |
% |
|
|
16.2 |
% |
|
|
-6.2 |
% |
|
(38.2 |
) |
| |
|
|
|
|
|
|
|
|
| Income tax provision (benefit) |
|
|
(5,682 |
) |
|
|
(171 |
) |
|
|
(5,511 |
) |
|
3222.8 |
|
| Net income |
|
|
7,612 |
|
|
|
2,829 |
|
|
|
4,783 |
|
|
169.1 |
|
| Preferred Stock dividends |
|
|
(130 |
) |
|
|
(121 |
) |
|
|
(9 |
) |
|
7.4 |
|
| Income attributable to common and participating shareholders |
|
$ |
7,482 |
|
|
$ |
2,708 |
|
|
$ |
4,774 |
|
|
176.3 |
|
| |
|
|
|
|
|
|
|
|
| Per share information: |
|
|
|
|
|
|
|
|
| Basic earnings per common and participating share: |
|
|
|
|
|
|
|
|
| Distributed earnings per share: |
|
|
|
|
|
|
|
|
| Common |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
|
| Preferred |
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
– |
|
|
0.0 |
|
| Undistributed earnings per share: |
|
|
|
|
|
|
|
|
| Common |
|
$ |
0.48 |
|
|
$ |
0.17 |
|
|
$ |
0.31 |
|
|
182.4 |
|
| Preferred |
|
$ |
0.48 |
|
|
$ |
0.17 |
|
|
$ |
0.31 |
|
|
182.4 |
|
| Diluted earnings per share |
|
$ |
0.45 |
|
|
$ |
0.17 |
|
|
$ |
0.28 |
|
|
164.7 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Total basic weighted average common and participating shares |
|
|
15,582 |
|
|
|
15,569 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Total diluted weighted average shares |
|
|
16,725 |
|
|
|
15,569 |
|
|
|
|
|
The MIL Network –