ETCC Environmental Tectonics Corp (PK)

For Immediate Release

SOUTHAMPTON, PA, USA, July 11, 2014 - Environmental Tectonics Corporation (OTC Pink: ETCC) ("ETC" or the "Company") today reported its financial results for its fiscal 2015 first quarter ended May 30, 2014 (the "2015 first quarter").

Fiscal 2015 First Quarter Results of Operations

Net (Loss) Income Attributable to ETC

Net loss attributable to ETC was $197 thousand, or $0.02 diluted loss per share, in the 2015 first quarter, compared to $31 thousand of net income attributable to ETC during its fiscal 2014 first quarter ended May 31, 2013 (the "2014 first quarter"), equating to a $0.01 diluted loss per share.  The $0.2 million variance reflects a decrease in income before income taxes of $0.4 million due primarily to a $0.9 million decrease in gross profit, resulting from a combination of both lower net sales and lower gross profit margin percentage, offset in part, by a $0.5 million decrease in operating expenses, resulting from a decrease in commissions due to lower net sales and an on-going effort to reduce non-revenue generating expenses.  The $0.4 million decrease in income before income taxes was offset, in part, by a $0.2 million variance between the income tax benefit recorded in the 2015 first quarter and the income tax expense recorded in the 2014 first quarter.

Net Sales

Net sales in the 2015 first quarter were $10.7 million, a decrease of $1.9 million, or 15.1%, compared to 2014 first quarter net sales of $12.6 million.  The reduction reflects decreased ATS sales to the U.S. Government and International customers, and decreased sales of monoplace chambers to Domestic customers, offset in part, by increased sales of our other Commercial/Industrial products to Domestic customers.  Given the current progress made on U.S. Government contracts in the Company's sales backlog, the Company anticipates the concentration of sales to the U.S. Government will continue to lessen in fiscal 2015.

Gross Profit

Gross profit for the 2015 first quarter was $2.8 million compared to $3.7 million in the 2014 first quarter, a decrease of $0.9 million, or 23.9%.  The significant decrease in gross profit was a combination of both lower net sales and lower gross profit margin percentage due to inefficiencies as a result of additional work required on several contracts, for which we are currently pursuing recovery.  On April 24, 2014, we reached a favorable settlement agreement on the first of these recoveries that partially offset the effects of the additional work.  Gross profit margin as a percentage of net sales decreased to 26.4% for the 2015 first quarter compared to 29.5% for the 2014 first quarter.

Operating Expenses

Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2015 first quarter were $2.9 million, a decrease of $0.5 million, or 14.0%, compared to $3.4 million for the 2014 first quarter.  The decrease is primarily the result of a decrease in commissions due to lower net sales and an on-going effort to reduce non-revenue generating expenses, offset in part, by an increase in legal fees associated primarily with the aforementioned recovery effort.

Interest Expense, Net

Interest expense, net, for the 2015 first quarter was $149 thousand compared to $172 thousand in the 2014 first quarter, a decrease of $23 thousand, or 13.4%, due primarily to a lower level of bank borrowing, which was achieved by a significant increase in cash generated by operating activities.

Cash Flows from Operating, Investing, and Financing Activities

During the 2015 first quarter, as a result of a decrease in accounts receivable and costs and estimated earnings in excess of billings on uncompleted long-term percentage of completion ("POC") contracts, the Company generated $5.1 million of cash from operating activities compared to $4.9 million of cash used in operating activities during the 2014 first quarter.  Under POC revenue recognition, these accounts represent the timing differences of spending on production activities versus the 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 $0.4 million in the 2015 first quarter compared to $0.3 million in the 2014 first quarter.

The Company's financing activities used $4.8 million of cash in the 2015 first quarter, which primarily reflected repayments under the Company's various lines of credit and payments on the Term Loan, and was offset, in part, by a decrease in restricted cash.  In the 2014 first quarter, net cash provided by financing activities totaled $3.7 million, primarily from borrowings under the Company's various lines of credit and a decrease in restricted cash, offset in part, by payments on the Term Loan.

About ETC

ETC was incorporated in 1969 in Pennsylvania.  For over four decades, we have provided our customers with products, service, 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 product areas: (i) software driven products and services used to create and monitor the physiological effects of flight, including high performance jet tactical flight simulation, upset recovery and spatial disorientation, and both suborbital and orbital commercial human spaceflight; collectively, Aircrew Training Systems ("ATS"); (ii) altitude (hypobaric) chambers; (iii) Advanced Disaster Management Simulators ("ADMS"); (iv) steam and gas (ethylene oxide) sterilizers; (v) environmental testing and simulation devices; and (vi) hyperbaric (100% oxygen) chambers for one person (monoplace chambers).

We operate in two primary business segments, Aerospace Solutions ("Aerospace") and Commercial/ Industrial Systems ("CIS").  Aerospace encompasses the design, manufacture, and sale of: (i) Aircrew Training Systems; (ii) altitude (hypobaric) chambers; (iii) hyperbaric chambers for multiple persons (multiplace chambers); and (iv) 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.  CIS encompasses the design, manufacture, and sale of: (i) steam and gas (ethylene oxide) sterilizers; (ii) environmental testing and simulation devices; and (iii) hyperbaric (100% oxygen) chambers for one person (monoplace chambers), 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.

We presently have two operating subsidiaries.  ETC-PZL Aerospace Industries Sp. z o.o. ("ETC-PZL"), our 95%-owned subsidiary in Warsaw, Poland, manufactures certain simulators and provides software to support products manufactured domestically within our Aerospace segment.  Environmental Tectonics Corporation (Europe) Limited ("ETC-Europe"), our 99% owned subsidiary, functions as a sales office in the United Kingdom.

ETC's unique ability to offer complete systems, designed and produced to high technical standards, sets it apart from its competition.  ETC is headquartered in Southampton, PA.  For more information about ETC, visit http://www.etcusa.com/.

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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.

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