Pennsylvania
|
23-1714256
|
|
(State of incorporation)
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(I.R.S. Employer Identification No.)
|
(Address of principal executive offices)
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Large Accelerated Filer
|
|
¨
|
|
Accelerated Filer
|
|
¨
|
Non-Accelerated Filer
|
|
¨ (Do not check if a smaller reporting company)
|
|
Smaller Reporting Company
|
|
x
|
3
|
|
3
|
|
17
|
|
26
|
|
27
|
|
27
|
|
28
|
|
28
|
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28
|
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28
|
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28
|
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28
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29
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Thirteen week
periods ended
|
Twenty-six week
periods ended
|
|||||||||||||||
August 26,
2011
|
August 27,
2010
|
August 26,
2011
|
August 27,
2010
|
|||||||||||||
Net sales
|
$ | 15,851 | $ | 13,244 | $ | 32,125 | $ | 25,365 | ||||||||
Cost of goods sold
|
9,932 | 8,450 | 19,708 | 15,441 | ||||||||||||
Gross profit
|
5,919 | 4,794 | 12,417 | 9,924 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
1,336 | 1,020 | 2,627 | 2,122 | ||||||||||||
General and administrative
|
1,788 | 1,623 | 3,875 | 3,086 | ||||||||||||
Research and development
|
136 | 240 | 381 | 564 | ||||||||||||
3,260 | 2,883 | 6,883 | 5,772 | |||||||||||||
Operating income
|
2,659 | 1,911 | 5,534 | 4,152 | ||||||||||||
Other expenses:
|
||||||||||||||||
Interest expense, net
|
207 | 189 | 357 | 417 | ||||||||||||
Other (income) expense, net
|
(24 | ) | 56 | 84 | 128 | |||||||||||
183 | 245 | 441 | 545 | |||||||||||||
Income before income taxes
|
2,476 | 1,666 | 5,093 | 3,607 | ||||||||||||
Provision for income taxes
|
952 | - | 1,944 | - | ||||||||||||
Net income
|
1,524 | 1,666 | 3,149 | 3,607 | ||||||||||||
Less: Income attributable to non-controlling interest
|
(2 | ) | - | (18 | ) | (5 | ) | |||||||||
Net income attributable to Environmental Tectonics Corporation
|
1,522 | 1,666 | 3,131 | 3,602 | ||||||||||||
Preferred Stock dividend
|
(552 | ) | (568 | ) | (1,104 | ) | (1,145 | ) | ||||||||
Income attributable to common and participating shareholders
|
$ | 970 | $ | 1,098 | $ | 2,027 | $ | 2,457 | ||||||||
Per share information:
|
||||||||||||||||
Basic earnings per common and participating share:
|
||||||||||||||||
Distributed earnings per share:
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Common
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.10 | ||||||||
Preferred
|
||||||||||||||||
Undistributed earnings per share:
|
||||||||||||||||
Common
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.12 | ||||||||
Preferred
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.12 | ||||||||
Diluted earnings per share
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.12 | ||||||||
Basic weighted average common shares:
|
||||||||||||||||
Common weighted average number of shares
|
9,106 | 9,090 | 9,106 | 9,088 | ||||||||||||
Participating preferred shares
|
11,095 | 11,475 | 11,095 | 11,555 | ||||||||||||
Total weighted average number of shares
|
20,201 | 20,565 | 20,201 | 20,643 | ||||||||||||
Diluted weighted average common shares:
|
||||||||||||||||
Basic common shares
|
20,201 | 20,565 | 20,201 | 20,643 | ||||||||||||
Dilutive effect of stock warrants and options
|
294 | 360 | 305 | 361 | ||||||||||||
Total number of shares
|
20,495 | 20,925 | 20,506 | 21,004 |
August 26,
2011
(unaudited)
|
February 25,
2011
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 4,685 | $ | 1,423 | ||||
Restricted cash
|
5,625 | 5,607 | ||||||
Accounts receivable, net
|
6,517 | 4,727 | ||||||
Costs and estimated earnings in excess of billings on uncompleted long-term contracts
|
16,758 | 10,371 | ||||||
Inventories, net
|
5,519 | 4,015 | ||||||
Deferred tax assets, current
|
4,143 | 3,807 | ||||||
Prepaid expenses and other current assets
|
1,235 | 691 | ||||||
Total current assets
|
44,482 | 30,641 | ||||||
Property, plant and equipment, net
|
14,687 | 13,359 | ||||||
Software development costs, net
|
774 | 802 | ||||||
Deferred tax assets, non-current, net
|
4,235 | 5,919 | ||||||
Other assets
|
4 | 70 | ||||||
Total assets
|
$ | 64,182 | $ | 50,791 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt obligations
|
$ | 161 | $ | 219 | ||||
Accounts payable, trade
|
4,775 | 4,308 | ||||||
Billings in excess of costs and estimated earnings on uncompleted long-term contracts
|
7,741 | 7,534 | ||||||
Customer deposits
|
3,968 | 3,907 | ||||||
Accrued income taxes
|
841 | 28 | ||||||
Accrued interest and dividends
|
819 | 725 | ||||||
Other accrued liabilities
|
3,236 | 2,857 | ||||||
Total current liabilities
|
21,541 | 19,578 | ||||||
Long-term debt obligations, less current portion:
|
||||||||
Credit facility payable to bank
|
12,430 | 3,041 | ||||||
Other long-term debt obligations
|
40 | 43 | ||||||
Total long-term debt obligations, less current portion:
|
12,470 | 3,084 | ||||||
Total liabilities
|
34,011 | 22,662 | ||||||
Commitments and contingencies
|
||||||||
Shareholders’ equity:
|
||||||||
Cumulative convertible participating Preferred Stock, Series D, $0.05 par value, 11,000 shares authorized; 386 shares outstanding at August 26, 2011 and February 25, 2011
|
386 | 386 | ||||||
Cumulative convertible participating Preferred Stock, Series E, $0.05 par value, 25,000 shares authorized; 21,741 shares outstanding at August 26, 2011 and February 25, 2011
|
21,741 | 21,741 | ||||||
Common Stock, $0.05 par value, 50,000,000 shares authorized; 9,116,093 and 9,104,601 shares issued and outstanding at August 26, 2011 and February 25, 2011, respectively
|
455 | 455 | ||||||
Additional paid-in capital
|
10,905 | 11,932 | ||||||
Accumulated other comprehensive loss
|
(452 | ) | (372 | ) | ||||
Accumulated deficit
|
(2,928 | ) | (6,059 | ) | ||||
Total shareholders’ equity
|
30,107 | 28,083 | ||||||
Non-controlling interest
|
64 | 46 | ||||||
Total shareholders’ equity attributable to ETC
|
30,171 | 28,129 | ||||||
Total liabilities and shareholders’ equity
|
$ | 64,182 | $ | 50,791 |
Twenty-six week periods ended
|
||||||||
August 26,
2011
|
August 27,
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 3,149 | $ | 3,607 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
||||||||
Depreciation and amortization
|
770 | 727 | ||||||
Decrease in valuation allowance for deferred tax assets
|
- | (867 | ) | |||||
Accretion of debt discount
|
105 | 55 | ||||||
Increase in allowances for accounts receivable and inventories, net
|
156 | 104 | ||||||
Stock compensation expense
|
49 | 49 | ||||||
Deferred tax assets, net
|
1,348 | 683 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,817 | ) | 14,434 | |||||
Costs and estimated earnings in excess of billings on uncompleted long-term contracts
|
(6,387 | ) | (4,532 | ) | ||||
Inventories
|
(2,613 | ) | 1,347 | |||||
Prepaid expenses and other assets
|
(607 | ) | (1,960 | ) | ||||
Accounts payable
|
468 | (229 | ) | |||||
Billings in excess of costs and estimated earnings on uncompleted long-term contracts
|
207 | (7,853 | ) | |||||
Customer deposits
|
61 | (112 | ) | |||||
Accrued income taxes
|
813 | - | ||||||
Accrued interest and dividends
|
94 | 86 | ||||||
Other accrued liabilities
|
402 | 181 | ||||||
Net cash (used in) provided by operating activities
|
(3,802 | ) | 5,720 | |||||
Cash flows from investing activities:
|
||||||||
Acquisition of equipment
|
(944 | ) | (636 | ) | ||||
Capitalized software development costs
|
(146 | ) | (322 | ) | ||||
Net cash used in investing activities
|
(1,090 | ) | (958 | ) | ||||
Cash flows from financing activities:
|
||||||||
Borrowings (repayments) under line of credit
|
9,389 | (1,155 | ) | |||||
Repurchase of Preferred Stock
|
- | (1,500 | ) | |||||
Issuance of Common Stock
|
28 | 20 | ||||||
Payment of Preferred Stock dividends
|
(1,104 | ) | (1,145 | ) | ||||
Payments of other debt obligations
|
(61 | ) | (175 | ) | ||||
Increase in restricted cash
|
(18 | ) | (2,726 | ) | ||||
Net cash provided by (used in) financing activities
|
8,234 | (6,681 | ) | |||||
Effect of exchange rate changes on cash
|
(80 | ) | 365 | |||||
Net increase (decrease) in cash
|
3,262 | (1,554 | ) | |||||
Cash at beginning of period
|
1,423 | 2,408 | ||||||
Cash at end of period
|
$ | 4,685 | $ | 854 | ||||
Supplemental schedule of cash flow information:
|
||||||||
Interest paid
|
$ | 153 | $ | 174 | ||||
Income taxes paid
|
$ | - | $ | 220 | ||||
Supplemental information on non-cash operating and investing activities:
|
||||||||
Accrued dividends on Preferred Stock
|
$ | 552 | $ | 569 |
|
·
|
Series D Preferred Stock of $55 at $0.94 per share, equating to 58,511 shares of Common Stock, issued in April 2009;
|
|
·
|
Series D Preferred Stock of $100 at $1.11 per share, equating to 90,090 shares of Common Stock, issued in July 2009;
|
|
·
|
Series D Preferred Stock of $231 at $3.02 per share, equating to 76,490 shares of Common Stock, issued in October 2010; and
|
|
·
|
Series E Preferred Stock of $21,741 at $2.00 per share, equating to 10,870,321 shares of Common Stock, issued in July 2009.
|
|
·
|
Series D Preferred Stock of $55 at $0.94 per share, equating to 58,511 shares of Common Stock, issued in April 2009;
|
|
·
|
Series D Preferred Stock of $100 at $1.11 per share, equating to 90,090 shares of Common Stock, issued in July 2009; and
|
|
·
|
Series E Preferred Stock of $22,241 at $2.00 per share, equating to 11,120,321 shares of Common Stock, issued in July 2009.
|
August 26,
2011
|
February 25,
2011
|
|||||||
(unaudited) | ||||||||
Raw materials
|
$ | - | $ | - | ||||
Work in process
|
5,306 | 3,919 | ||||||
Finished goods
|
213 | 96 | ||||||
$ | 5,519 | $ | 4,015 |
August 26,
2011
|
February 25,
2011
|
|||||||
(unaudited) | ||||||||
U.S. government
|
$ | 2,081 | $ | 1,936 | ||||
U.S. commercial
|
2,043 | 1,295 | ||||||
International
|
2,818 | 1,895 | ||||||
6,942 | 5,126 | |||||||
Less: allowance for doubtful accounts
|
(425 | ) | (399 | ) | ||||
$ | 6,517 | $ | 4,727 |
August 26,
2011
|
February 25,
2011
|
|||||||
(unaudited) | ||||||||
Note payable to bank
|
$ | 12,430 | $ | 3,041 | ||||
ETC-PZL project financing
|
145 | 202 | ||||||
Equipment lease
|
17 | 49 | ||||||
Other long-term debt obligations
|
39 | 11 | ||||||
Total long-term debt obligations
|
12,631 | 3,303 | ||||||
Less: Current portion of long-term debt obligations
|
(161 | ) | (219 | ) | ||||
Total long-term debt obligations, less current portion
|
$ | 12,470 | $ | 3,084 |
Thirteen weeks ended August 26, 2011:
|
Training Services Group (TSG)
|
Control Systems Group (CSG)
|
Corporate
|
Company Total
|
||||||||||||
Net sales
|
$ | 9,889 | $ | 5,962 | $ | - | $ | 15,851 | ||||||||
Interest expense, net
|
120 | 87 | - | 207 | ||||||||||||
Depreciation and amortization
|
247 | 159 | 12 | 418 | ||||||||||||
Operating income (loss)
|
1,939 | 1,109 | (389 | ) | 2,659 | |||||||||||
Provision for income taxes
|
- | - | 952 | 952 | ||||||||||||
Identifiable assets
|
30,067 | 14,140 | 19,975 | 64,182 | ||||||||||||
Expenditures for segment assets
|
519 | 89 | 91 | 699 | ||||||||||||
Thirteen weeks ended August 27, 2010:
|
||||||||||||||||
Net sales
|
$ | 8,675 | $ | 4,569 | $ | - | $ | 13,244 | ||||||||
Interest expense, net
|
183 | 6 | - | 189 | ||||||||||||
Depreciation and amortization
|
305 | 76 | - | 381 | ||||||||||||
Operating income (loss)
|
1,373 | 813 | (275 | ) | 1,911 | |||||||||||
Income tax benefit
|
- | - | - | - | ||||||||||||
Identifiable assets
|
21,101 | 3,611 | 19,688 | 44,400 | ||||||||||||
Expenditures for segment assets
|
198 | 119 | 62 | 379 | ||||||||||||
Reconciliation to consolidated
net income attributable to
Environmental Tectonics Corporation:
|
Thirteen weeks
ended August 26,
2011:
|
Thirteen weeks
ended August 27,
2010:
|
||||||||||||||
Operating income
|
$ | 2,659 | $ | 1,911 | ||||||||||||
Interest expense, net
|
(207 | ) | (189 | ) | ||||||||||||
Other income (expense), net
|
24 | (56 | ) | |||||||||||||
Provision for income taxes
|
(952 | ) | - | |||||||||||||
Less: Income attributable to non-controlling interest
|
(2 | ) | - | |||||||||||||
Net income attributable to Environmental Tectonics Corporation
|
$ | 1,522 | $ | 1,666 |
Twenty-six weeks ended August 26, 2011:
|
Training Services Group (TSG)
|
Control Systems Group (CSG)
|
Corporate
|
Company Total
|
||||||||||||
Net sales
|
$ | 20,060 | $ | 12,065 | $ | - | $ | 32,125 | ||||||||
Interest expense, net
|
222 | 135 | - | 357 | ||||||||||||
Depreciation and amortization
|
471 | 287 | 12 | 770 | ||||||||||||
Operating income (loss)
|
3,810 | 2,497 | (773 | ) | 5,534 | |||||||||||
Provision for income taxes
|
- | - | 1,944 | 1,944 | ||||||||||||
Identifiable assets
|
30,067 | 14,140 | 19,975 | 64,182 | ||||||||||||
Expenditures for segment assets
|
818 | 181 | 91 | 1,090 | ||||||||||||
Twenty-six weeks ended August 27, 2010:
|
||||||||||||||||
Net sales
|
$ | 16,607 | $ | 8,758 | $ | - | $ | 25,365 | ||||||||
Interest expense, net
|
317 | 100 | - | 417 | ||||||||||||
Depreciation and amortization
|
497 | 230 | - | 727 | ||||||||||||
Operating income (loss)
|
2,782 | 1,923 | (553 | ) | 4,152 | |||||||||||
Income tax benefit
|
- | - | - | - | ||||||||||||
Identifiable assets
|
21,101 | 3,611 | 19,688 | 44,400 | ||||||||||||
Expenditures for segment assets
|
574 | 200 | 184 | 958 | ||||||||||||
Reconciliation to consolidated
net income attributable to
Environmental Tectonics Corporation:
|
Twenty-six weeks
ended August 26,
2011:
|
Twenty-six weeks
ended August 27,
2010:
|
||||||||||||||
Operating income
|
$ | 5,534 | $ | 4,152 | ||||||||||||
Interest expense, net
|
(357 | ) | (417 | ) | ||||||||||||
Other income, net
|
(84 | ) | (128 | ) | ||||||||||||
Provision for income taxes
|
(1,944 | ) | - | |||||||||||||
Less: Income attributable to non-controlling interest
|
(18 | ) | (5 | ) | ||||||||||||
Net income attributable to Environmental Tectonics Corporation
|
$ | 3,131 | $ | 3,602 |
|
·
|
Increased production under U.S. Government contracts
|
|
·
|
Provisions for Income Tax
|
Summary Table of Results
|
||||||||||||||||
(amounts in thousands)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
13-weeks ended
August 26, 2011 |
13-weeks ended
August 27, 2010 |
Variance
$ |
Variance
% |
|||||||||||||
Sales:
|
||||||||||||||||
Domestic
|
$ | 2,756 | $ | 2,418 | $ | 338 | 14.0 | |||||||||
US Government
|
8,484 | 6,587 | 1,897 | 28.8 | ||||||||||||
International
|
4,611 | 4,239 | 372 | 8.8 | ||||||||||||
Total sales
|
15,851 | 13,244 | 2,607 | 19.7 | ||||||||||||
Gross profit
|
5,919 | 4,794 | 1,125 | 23.5 | ||||||||||||
Selling and marketing expenses
|
1,336 | 1,020 | 316 | 31.0 | ||||||||||||
General and administrative expenses
|
1,778 | 1,623 | 165 | 10.2 | ||||||||||||
Research and development expenses
|
136 | 240 | (104 | ) | (43.3 | ) | ||||||||||
Operating income
|
2,659 | 1,911 | 748 | 39.1 | ||||||||||||
Interest expense, net
|
207 | 189 | 18 | 9.5 | ||||||||||||
Other (income) expense, net
|
(24 | ) | 56 | (80 | ) | (142.9 | ) | |||||||||
Income before income taxes
|
2,476 | 1,666 | 810 | 48.6 | ||||||||||||
Income taxes
|
952 | - | 952 | |||||||||||||
Less: Income attributable to non-controlling interest
|
2 | - | 2 | |||||||||||||
Net income attributable to ETC
|
$ | 1,522 | $ | 1,666 | $ | (144 | ) | (8.6 | ) | |||||||
Per share information:
|
||||||||||||||||
Basic earnings per common and participating share:
|
||||||||||||||||
Distributed earnings per share:
|
||||||||||||||||
Common
|
$ | - | $ | - | $ | - | ||||||||||
Preferred
|
$ | 0.05 | $ | 0.05 | $ | - | ||||||||||
Undistributed earnings per share:
|
||||||||||||||||
Common
|
$ | 0.05 | $ | 0.05 | $ | - | ||||||||||
Preferred
|
$ | 0.05 | $ | 0.05 | $ | - | ||||||||||
Diluted earnings per share
|
$ | 0.05 | $ | 0.05 | $ | - |
Thirteen week period ended
August 26, 2011
|
Thirteen week period ended
August 27, 2010
|
|||||||||||||||||||||||||||||||
Segment sales:
|
Domestic
|
US
Gov’t
|
Inter-national
|
Total
|
Domestic
|
US
Gov’t
|
Inter-national
|
Total
|
||||||||||||||||||||||||
Training Services Group
|
||||||||||||||||||||||||||||||||
Pilot Training Services
|
$ | 110 | $ | 6,114 | $ | 2,454 | $ | 8,678 | $ | 59 | $ | 4,952 | $ | 2,868 | $ | 7,879 | ||||||||||||||||
Simulation
|
460 | - | 106 | 566 | 227 | - | 165 | 392 | ||||||||||||||||||||||||
ETC-PZL and other
|
15 | - | 630 | 645 | 94 | - | 310 | 404 | ||||||||||||||||||||||||
Total
|
585 | 6,114 | 3,190 | 9,889 | 380 | 4,952 | 3,343 | 8,675 | ||||||||||||||||||||||||
Control Systems Group
|
||||||||||||||||||||||||||||||||
Environmental
|
95 | 2,370 | 296 | 2,761 | 113 | 1,635 | 886 | 2,634 | ||||||||||||||||||||||||
Sterilizers
|
1,502 | - | - | 1.502 | 1,117 | - | - | 1,117 | ||||||||||||||||||||||||
Hyperbaric
|
4 | - | 1,081 | 1,085 | 355 | - | - | 355 | ||||||||||||||||||||||||
Service and spares
|
570 | - | 44 | 614 | 453 | - | 10 | 463 | ||||||||||||||||||||||||
Total
|
2,171 | 2,370 | 1,421 | 5,962 | 2,038 | 1,635 | 896 | 4,569 | ||||||||||||||||||||||||
Company Total
|
$ | 2,756 | $ | 8,484 | $ | 4,611 | $ | 15,851 | $ | 2,418 | $ | 6,587 | $ | 4,239 | $ | 13,244 |
Summary Table of Results
|
||||||||||||||||
(amounts in thousands)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
26-weeks ended
August 26, 2011 |
26-weeks ended
August 27, 2010 |
Variance
$ |
Variance
% |
|||||||||||||
Sales:
|
||||||||||||||||
Domestic
|
$ | 7,030 | $ | 5,336 | $ | 1,694 | 31.7 | |||||||||
US Government
|
16,117 | 10,573 | 5,544 | 52.4 | ||||||||||||
International
|
8,978 | 9,456 | (478 | ) | (5.1 | ) | ||||||||||
Total sales
|
32,125 | 25,365 | 6,760 | 26.7 | ||||||||||||
Gross profit
|
12,417 | 9,924 | 2,493 | 25.1 | ||||||||||||
Selling and marketing expenses
|
2,627 | 2,122 | 505 | 23.8 | ||||||||||||
General and administrative expenses
|
3,875 | 3,086 | 789 | 25.6 | ||||||||||||
Research and development expenses
|
381 | 564 | (183 | ) | (32.4 | ) | ||||||||||
Operating income
|
5,534 | 4,152 | 1,382 | 33.3 | ||||||||||||
Interest expense, net
|
357 | 417 | (60 | ) | (14.4 | ) | ||||||||||
Other expense, net
|
84 | 128 | (44 | ) | (34.4 | ) | ||||||||||
Income before income taxes
|
5,093 | 3,607 | 1,486 | 41.2 | ||||||||||||
Income taxes
|
1,944 | - | 1,944 | |||||||||||||
Less: Income attributable to non-controlling interest
|
18 | 5 | 13 | 260.0 | ||||||||||||
Net income attributable to ETC
|
$ | 3,131 | $ | 3,602 | $ | (471 | ) | (13.1 | ) | |||||||
Per share information:
|
||||||||||||||||
Basic earnings per common and participating share:
|
||||||||||||||||
Distributed earnings per share:
|
||||||||||||||||
Common
|
$ | - | $ | - | $ | - | ||||||||||
Preferred
|
$ | 0.10 | $ | 0.10 | $ | - | ||||||||||
Undistributed earnings per share:
|
||||||||||||||||
Common
|
$ | 0.10 | $ | 0.12 | $ | (0.02 | ) | |||||||||
Preferred
|
$ | 0.10 | $ | 0.12 | $ | (0.02 | ) | |||||||||
Diluted earnings per share
|
$ | 0.10 | $ | 0.12 | $ | (0.02 | ) |
Twenty-six week period ended
August 26, 2011
|
Twenty-six week period ended
August 27, 2010
|
|||||||||||||||||||||||||||||||
Segment sales:
|
Domestic
|
US
Gov’t
|
Inter-national
|
Total
|
Domestic
|
US
Gov’t
|
Inter-national
|
Total
|
||||||||||||||||||||||||
Training Services Group
|
||||||||||||||||||||||||||||||||
Pilot Training Services
|
$ | 537 | $ | 12,521 | $ | 5,098 | $ | 18,156 | $ | 60 | $ | 8,955 | $ | 6,601 | $ | 15,616 | ||||||||||||||||
Simulation
|
765 | - | 233 | 998 | 227 | - | 261 | 488 | ||||||||||||||||||||||||
ETC-PZL and other
|
10 | - | 896 | 906 | 127 | - | 376 | 503 | ||||||||||||||||||||||||
Total
|
1,312 | 12,521 | 6,227 | 20,060 | 414 | 8,955 | 7,238 | 16,607 | ||||||||||||||||||||||||
Control Systems Group
|
||||||||||||||||||||||||||||||||
Environmental
|
231 | 3,596 | 990 | 4,817 | 221 | 1,618 | 1,863 | 3,702 | ||||||||||||||||||||||||
Sterilizers
|
3,651 | - | 57 | 3,708 | 2,842 | - | - | 2,842 | ||||||||||||||||||||||||
Hyperbaric
|
672 | - | 1,611 | 2,283 | 965 | - | 199 | 1,164 | ||||||||||||||||||||||||
Service and spares
|
1,164 | - | 93 | 1,257 | 894 | - | 156 | 1,050 | ||||||||||||||||||||||||
Total
|
5,718 | 3,596 | 2,751 | 12,065 | 4,922 | 1,618 | 2,218 | 8,758 | ||||||||||||||||||||||||
Company Total
|
$ | 7,030 | $ | 16,117 | $ | 8,978 | $ | 32,125 | $ | 5,336 | $ | 10,573 | $ | 9,456 | $ | 25,365 |
As of August 26, 2011
|
As of February 25, 2011
|
|||||||||||||||||||||||
Credit facility*
|
Total
Facility
|
Amount
Borrowed
|
Amount
Available**
|
Total
Facility
|
Amount
Borrowed
|
Amount
Available**
|
||||||||||||||||||
PNC line of credit
|
$ | 20,000 | $ | 12,430 | $ | 6,786 | $ | 20,000 | $ | 3,041 | $ | 15,688 | ||||||||||||
Lenfest credit line
|
7,500 | - | 7,500 | 7,500 | - | 7,500 | ||||||||||||||||||
Dedicated line of credit
|
5,422 | 5,422 | - | 5,422 | 5,422 | - | ||||||||||||||||||
Total
|
$ | 32,922 | $ | 17,82 | $ | 14,286 | $ | 32,922 | $ | 8,463 | $ | 23,188 |
August 26, 2011
|
Business segment
|
|||||||||||||||
Geographic area:
|
TSG
|
CSG
|
Total
|
%
|
||||||||||||
Domestic
|
$ | 1,171 | $ | 11,164 | $ | 12,335 | 14.1 | |||||||||
US Government
|
18,928 | 31,407 | 50,335 | 57.5 | ||||||||||||
International
|
20,849 | 3,951 | 24,800 | 28.4 | ||||||||||||
Total
|
$ | 40,948 | $ | 46,522 | $ | 87,470 | 100.0 | |||||||||
% of total
|
46.8 | % | 53.2 | % | 100.0 | % |
February 25, 2011
|
Business segment
|
|||||||||||||||
Geographic area:
|
TSG
|
CSG
|
Total
|
%
|
||||||||||||
Domestic
|
$ | 1,352 | $ | 6,972 | $ | 8,324 | 7.9 | |||||||||
US Government
|
30,956 | 35,004 | 65,960 | 62.5 | ||||||||||||
International
|
25,785 | 5,465 | 31,250 | 29.6 | ||||||||||||
Total
|
$ | 58,093 | $ | 47,441 | $ | 105,534 | 100.0 | |||||||||
% of total
|
55.0 | % | 45.0 | % | 100.0 | % |
Number
|
Item
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 made by William F. Mitchell, Chief Executive Officer.
|
||
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 made by Robert L. Laurent, Jr., Chief Financial Officer.
|
||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by William F. Mitchell, Chief Executive Officer, and Robert L. Laurent, Jr., Chief Financial Officer.
|
||
101.INS*
|
XBRL Instance
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation
|
|
101.LAB*
|
XBRL Taxonomy Extension Labels
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition
|
Date: October 11, 2011
|
By:
|
/s/ William F. Mitchell
|
William F. Mitchell
|
||
President and Chief
|
||
Executive Officer
|
||
(Principal Executive Officer)
|
Date: October 11, 2011
|
By:
|
/s/ Robert L. Laurent, Jr.
|
Robert L. Laurent, Jr.,
|
||
Chief Financial Officer
|
||
(Principal Financial and Accounting Officer)
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Environmental Tectonics Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ William F. Mitchell
|
|
William F. Mitchell
|
||
President and Chief Executive Officer
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Environmental Tectonics Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ Robert L. Laurent, Jr.
|
|
Robert L. Laurent, Jr.
|
||
Chief Financial Officer
|
Consolidated Balance Sheets (Parenthetical) (USD $)
|
Aug. 26, 2011
|
Feb. 25, 2011
|
---|---|---|
Consolidated Balance Sheets [Abstract] | Â | Â |
Common Stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Common Stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common Stock, issued (in shares) | 9,116,093 | 9,104,601 |
Common Stock, outstanding (in shares) | 9,116,093 | 9,104,601 |
Series D Preferred Stock [Member]
|
 |  |
Consolidated Balance Sheets [Abstract] | Â | Â |
Preferred stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Preferred stock, shares authorized (in shares) | 11,000 | 11,000 |
Preferred stock, shares outstanding (in shares) | 386 | 386 |
Series E Preferred Stock [Member]
|
 |  |
Consolidated Balance Sheets [Abstract] | Â | Â |
Preferred stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Preferred stock, shares authorized (in shares) | 25,000 | 25,000 |
Preferred stock, shares outstanding (in shares) | 21,741 | 21,741 |
Document And Entity Information (USD $)
|
3 Months Ended | ||
---|---|---|---|
Aug. 26, 2011
|
Oct. 11, 2011
|
Aug. 28, 2010
|
|
Entity Registrant Name | ENVIRONMENTAL TECTONICS CORP | Â | Â |
Entity Central Index Key | 0000033113 | Â | Â |
Current Fiscal Year End Date | --02-25 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Smaller Reporting Company | Â | Â |
Entity Public Float | Â | Â | $ 16,966,000 |
Entity Common Stock, Shares Outstanding | Â | 9,116,093 | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Document Type | 10-Q | Â | Â |
Amendment Flag | false | Â | Â |
Document Period End Date | Aug. 26, 2011 |
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Commitments and Contingencies
|
3 Months Ended |
---|---|
Aug. 26, 2011
|
|
Commitments and Contingencies [Abstract] | Â |
Commitments and Contingencies | 7. Commitments and Contingencies Mends International, Ltd. On May 29, 2008, a Request for Arbitration was filed against the Company with the Secretariat of the International Court of Arbitration by Mends International Ltd. (“Mends”). Mends' Request for Arbitration arose out of a February 3, 1999 contract between the Company and Mends wherein Mends purchased aeromedical equipment for sale to the Nigerian Air Force (the “First Arbitration”). Mends asserted a claim for breach of contract and demanded approximately $797, plus interest and costs. On September 16, 2008, Mends filed an Amended Request for Arbitration, adding tort claims for conversion and breach of fiduciary duty and seeking punitive damages of approximately $2,400. In response, the Company asserted a counterclaim seeking damages for other disputes with Mends that have arisen under the contract that Mends has put at issue in this arbitration. On July 1, 2010 and October 18, 2010, the International Court of Arbitration issued a Partial Final Award and an Award on Costs, which have been fully accrued. In September 2010, a second arbitration involving ETC and Mends was heard by the International Court of Arbitration (the “Second Arbitration”). In the Second Arbitration, the Company alleged the breach of a separate contract between the parties and sought monetary damages. On September 5, 2011, the International Court of Arbitration issued an award in the Second Arbitration, which is the final arbitration award involving ETC and Mends. The awards in the First Arbitration and Second Arbitration, taken together, require the Company to pay Mends approximately $950, an amount which has been fully accrued and, accordingly, did not have a material adverse effect on the Company's financial condition or results of operation. ITAR Disclosure Subsequent to February 25, 2011, the Company submitted an initial notification of voluntary disclosure to the Directorate of Defense Trade Controls within the U.S. Department of State (DDTC) concerning the potential export of technical data and defense services to foreign persons. The services at issue (which constitute less than 0.5% of the Company's total annual sales) consisted of the provision of low gravitational force training in a human-rated centrifuge. The human-rated centrifuge is subject to the jurisdiction of DDTC in accordance with the International Traffic in Arms Regulations (ITAR). The Company filed the initial notification because we determined that the training programs may be subject to the jurisdiction of the ITAR. On June 30, 2011, we provided a full disclosure to DDTC. On July 20, 2011, the Enforcement Division of the Office of Defense Trade Controls Compliance notified the Company that the case would be closed without further action and without the assessment of any fines or other penalties. Other Matters Certain other claims, suits, and complaints arising in the ordinary course of business have been filed or are pending against us. We believe, after consultation with legal counsel handling these specific matters, all such matters are reserved for or adequately covered by insurance or, if not so covered, are without merit or are of such kind, or involve such amounts, as would not be expected to have a significant effect on our financial position or results of operations if determined adversely against us. |
Inventories
|
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 26, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | 3. Inventories Inventories are valued at the lower of cost or market using the first in, first out (FIFO) method and consist of the following:
Inventory is presented net of an allowance for obsolescence of $1,413 (raw material $124 and work in process $1,289), and $1,283 (raw material $133 and work in process $1,150) at August 26, 2011 and February 25, 2011, respectively. In accordance with United States generally accepted accounting principles, the Company may capitalize into property, plant and equipment certain of the costs of simulation equipment. This equipment may be used to provide training or as a demonstration device to market the technology, and may be sold as a product if appropriate. Upon receipt of a contract or contracts for products which are based on this technology, certain of these costs will be transferred initially into inventory and subsequently charged to the cost of sales for that particular contract as manufacturing costs. |
Subsequent Events
|
3 Months Ended |
---|---|
Aug. 26, 2011
|
|
Subsequent Events [Abstract] | Â |
Subsequent Events | 9. Subsequent Events We have evaluated events and transactions that occurred subsequent to August 26, 2011 through the date the financial statements were issued, for potential recognition or disclosure. Other than the disclosures in Note 7 above, we did not identify any events or transactions that should be recognized or disclosed in the accompanying financial statements. |
Segment Information (unaudited)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 26, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information (unaudited) [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information (unaudited) | 8. Segment Information (unaudited) The Company operates in two business segments – TSG and CSG. Product groups within TSG include flight simulators, aircrew training devices and services, and disaster management training and systems. Product groups within CSG include sterilizers, environmental control devices, hyperbaric chambers, and parts and service support. The following unaudited segment information reflects the accrual basis of accounting.
Approximately 68.1% of sales in the thirteen weeks ended August 26, 2011, totaling $10,796, were made to the U.S. Government under three contracts, to one Domestic commercial customer, and to one International customer. Approximately 74.4% of sales in the thirteen weeks ended August 27, 2010, totaling $9,860, were made to the U.S. Government under three contracts and to one International customer. The segment information for the thirteen weeks ended August 26, 2011 includes export sales of $4,611, including sales to the Korean government for $1,846. The segment information for the thirteen weeks ended August 27, 2010 includes export sales of $4,239, including sales to the Korean government for $3,373. Approximately 68.5% of sales in the twenty-six weeks ended August 26, 2011, totaling $22,016, were made to the U.S. Government under three contracts, to one Domestic commercial customer, and to one International customer. Approximately 71.5% of sales in the twenty-six weeks ended August 27, 2010, totaling $18,139, were made to the U.S. Government under three contracts and to one International customer. The segment information for the twenty-six weeks ended August 26, 2011 includes export sales of $8,978, including sales to the Korean government for $3,904. The segment information for the twenty-six weeks ended August 27, 2010 includes export sales of $9,456, including sales to the Korean government for $7,847. As of both August 26, 2011 and August 27, 2010, substantially all of the Company's long-lived assets were located in the United States. |
Summary of Significant Accounting Policy
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Aug. 26, 2011
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Summary of Significant Accounting Policy [Abstract] | Â |
Summary of Significant Accounting Policy | 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying interim consolidated financial statements include the accounts of ETC, our wholly-owned subsidiaries (i.e., NASTAR Center LLC, ETC Delaware, and ETC International Corporation), our 95%-owned subsidiary, ETC-PZL Aerospace Industries SP. Z 0.0, (“ETC-PZL”), and our 99%-owned subsidiary, ETC Europe. “ETC SH” refers to the Company's corporate headquarters and main production plant located in Southampton, Pennsylvania, USA. All significant inter-company accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared by ETC, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information in footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America has been condensed or omitted pursuant to such rules and regulations and the financial results for the periods presented may not be indicative of the full year's results. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 25, 2011. References to 2012 second quarter are references to the 13-week period ended August 26, 2011. References to 2011 second quarter are references to the 13-week period ended August 27, 2010. References to the 2012 first half are references to the 26-week period ended August 26, 2011. References to the 2011 first half are references to the 26-week period ended August 27, 2010. References to fiscal 2012 or the 2012 fiscal year are references to the fifty-two week period ending February 24, 2012. References to fiscal 2011 or the 2011 fiscal year are references to the fifty-two week period ended February 25, 2011. Significant Accounting Policies There have been no material changes in the Company's significant accounting policies during fiscal 2012 as compared to what was previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended February 25, 2011. Recent Accounting Pronouncements In June 2011, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 amends the FASB Accounting Standards CodificationTM (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. |
Accounts Receivable
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Accounts Receivable [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | 4. Accounts Receivable The components of accounts receivable are as follows:
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Long-Term Obligations and Credit Arrangements
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Long-Term Obligations and Credit Arrangements [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Obligations and Credit Arrangements | 5. Long-Term Obligations and Credit Arrangements Lenfest Financing Transaction On April 24, 2009, the Company entered into a transaction (the “Lenfest Financing Transaction”), which was approved by shareholders on July 2, 2009, with H.F. Lenfest (“Lenfest”), a major shareholder and member of our Board of Directors, that provided for the following: (i) a $7,500 credit facility provided by Lenfest to ETC, which expires on December 31, 2012; (ii) exchange of the $10,000 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, National Association (“PNC Bank”) in connection with an increase of the Company's existing $15,000 revolving line of credit with PNC Bank (the “2007 PNC Credit Facility”) to $20,000, and in connection with this guarantee, the pledge by Lenfest to PNC Bank of $10,000 in marketable securities. Lenfest Credit Facility As part of the Lenfest Financing Transaction, the Company established a credit facility in the maximum amount of $7,500 with Lenfest (the “Lenfest Credit Facility”) to be used to finance certain government projects that ETC has been awarded. The terms of the Lenfest Credit Facility are set forth in a Secured Credit Facility and Warrant Purchase Agreement between the Company and Lenfest, dated as of April 24, 2009 (the “Lenfest Credit Agreement”). In connection with the Lenfest Credit Agreement, the Company has executed, and will in the future execute, promissory notes in favor of Lenfest, in the aggregate principal amount of up to $7,500 (the “Lenfest Credit Facility Note”) based on the amount borrowed by the Company pursuant to the Lenfest Credit Agreement. Each Lenfest Credit Facility Note issued under the Lenfest Credit Facility will accrue interest at the rate of 10% per annum, payable in cash or, at the option of Lenfest, in shares of Series D Preferred Stock of the Company, as described below. The Lenfest Credit Facility expires on December 31, 2012. As of August 26, 2011, the Company had not utilized any of the $7,500 available funding under this facility. Preferred Stock Presently, the Company has two classes of Cumulative Convertible Participating Preferred Stock: Series D (11,000 shares authorized) and Series E (25,000 shares authorized) (together, the “Preferred Stock”). The Preferred Stock was authorized by the Company's Board of Directors in April 2009 and approved by the Company's shareholders in July 2009. The Preferred Stock has a par value of $0.05 per share and a stated value of $1,000 per share. The Preferred Stock is entitled to receive cumulative dividends at the rate of 10% per year in preference to the holders of the Company's Common Stock with respect to dividends. These dividends are payable only upon a liquidation event or when otherwise declared by the Board of Directors of the Company. The Company cannot declare or pay any dividends on its Common Stock until the dividends on the Preferred Stock have been paid. The Preferred Stock holders are entitled to receive any dividends paid with respect to the Common Stock on an “as-converted” basis. The Preferred Stock may be converted by the holder at any time and from time to time into the Company's Common Stock by dividing the stated value of the Preferred Stock by the conversion price established at the time of issuance (see Series D Preferred Stock and Series E Preferred Stock, below). Upon a liquidation event, the holders of the Preferred Stock would be entitled to participate in any proceeds in preference to any common stock holders. The Preferred Stock would also participate in any liquidation event with the Common Stock holders on an “as-converted” basis. The Preferred Stock conversion price is subject to adjustment for certain transactions including stock splits and issuance of equity securities below the conversion prices. The Company has reviewed the generally accepted accounting principles applicable to the Preferred Stock; specifically, the Company has reviewed both ASC 480 – Distinguishing Liabilities from Equity and ASC 815 – Derivatives and Hedging. Upon its review, the Company determined that the Preferred Stock is within the control of the Company and that the attributes of the Preferred Stock are more akin to equity than debt. The specific attributes considered by the Company include the designation of the instruments, the conversion of the instruments to the Company's Common Stock, the participation feature, the non-mandatory conversion, the voting rights, and the ability to appoint directors. Secondly, the Company determined that the Preferred Stock qualifies as permanent equity because the Preferred Stock is not mandatorily redeemable, and there is no obligation to either repurchase the instruments or issue a variable amount of common shares. Lastly, the Company determined that the conversion feature qualifies for the scope exception of ASC 815 – Derivatives and Hedging as it is clearly and closely related to the Preferred Stock instrument. Issuances of the Preferred Stock are as follows: Series D Preferred Stock Lenfest Credit Facility On April 24, 2009, the Company paid to Lenfest an origination fee of 1% of the committed amount of the Lenfest Credit Facility. The value of the origination fee was $55. The origination fee was paid in 55 shares of Series D Preferred Stock, which have a conversion price of $0.94 per share, equaling 58,511 shares of the Company's Common Stock. PNC Credit Facility In connection with the execution of the documents to increase the Company's existing $15,000 revolving line of credit with PNC Bank to $20,000, ETC paid to Lenfest an origination fee of 100 shares of Series D Preferred Stock, which is equal to one percent (1%) of the market value of the $10,000 in marketable securities pledged by Lenfest to PNC Bank to secure ETC's obligations to PNC Bank. The 100 shares of Series D Preferred Stock have a stated value of $1,000 per share, or $100 in the aggregate. These shares of Series D Preferred Stock have a conversion price per share equal to $1.11, equaling the average closing price of the Company's Common Stock during the 120 days preceding the issuance of such shares and would convert into 90,090 shares of the Company's Common Stock. Interest Payment On October 6, 2010, the Company issued to Lenfest 231 shares of Series D Preferred Stock with a stated value of $1,000 per share in payment of $231 of interest due under the Lenfest Pledge Agreement for the period July 2, 2009 through August 27, 2010. The 231 shares have a conversion price per share equal to $3.02 equaling the average closing price of the Company's Common Stock during the 120 days preceding the issuance of such shares, and would convert into 76,490 shares of the Company's Common Stock. Preferred Stock Dividends As of August 26, 2011, the Series D Preferred Stock totaled $386 and was convertible into 225,091 shares of the Company's Common Stock. All Series D Preferred Stock dividends accruing through August 26, 2011 were paid in September 2011. Series E Preferred Stock In July 2009, the Company issued 23,741 shares of Series E Preferred Stock to Lenfest in connection with the Lenfest Financing Transaction. The shares of Series E Preferred Stock are convertible to Common Stock at a conversion price per share equal to $2.00 and would convert into 11,870,391 shares of the Company's Common Stock. On March 10, 2010, August 12, 2010 and February 9, 2011, ETC entered into three separate agreements with Lenfest to repurchase and retire a total of 2,000 shares of Series E Preferred Stock owned by Lenfest. In the three agreements, the repurchases were made at the stated price of $1,000 per share for a total of $2,000. As of August 26, 2011, the Series E Preferred Stock totaled $21,741 and was convertible into 10,870,391 shares of the Company's Common Stock. All Series E Preferred Stock dividends accruing through August 26, 2011 were paid in September 2011. Common Stock Warrants In February 2009, in connection with a $2,000 loan made by Lenfest to the Company, the Company issued to Lenfest warrants to purchase 143,885 shares of ETC Common Stock, which shares were equal in value to 10% of the $2,000 note. The warrants are exercisable for seven years following issuance at an exercise price of $1.39, which price equaled the average closing price of ETC Common Stock during the 120 days prior to the issuance of the warrant. In July 2009, in consideration of Lenfest's agreement to guarantee the $5,000 increase to the Company's line of credit with PNC Bank, ETC issued to Lenfest warrants to purchase 450,450 shares of ETC Common Stock, which shares were equal in value to ten percent (10%) of the amount of the $5,000 increase. The warrants are exercisable for seven years following issuance at an exercise price per share equal to $1.11, equaling the average closing price of ETC Common Stock during the 120 days preceding the issuance of the warrant. On January 4, 2011, the Company entered into amendments to each of the warrants issued to Lenfest (i.e. the $2 Million Loan Warrant and the $5 Million Warrant) pursuant to which Lenfest agreed to remove a provision in each of the warrants which provided anti-dilution protection in the event the Company issued securities at a price below the exercise price set forth in the warrants. Bank Credit and Facility The Company has a line of credit facility with PNC Bank (“PNC Credit Agreement”) of $20,000, which expires on June 30, 2013. The PNC Credit Agreement is subject to the condition that Lenfest continue to personally guarantee all of ETC's obligations to PNC Bank (the “Lenfest Guaranty”) and that Lenfest pledge $10,000 in marketable securities as collateral security for his guarantee (the “Lenfest Pledge”). In connection with the PNC Credit Agreement and the Lenfest Pledge, ETC paid to Lenfest an origination fee of 100 shares of Series D Convertible Preferred Stock of the Company (the “Series D Preferred Stock”), which is equal to one percent (1%) of the market value of the $10,000 in marketable securities pledged by Lenfest to PNC Bank to secure ETC's obligations to PNC Bank. The 100 shares of Series D Preferred Stock have a stated value of $1,000 per share, or $100 in the aggregate. These shares of Series D Preferred Stock have a conversion price per share equal to $1.11, which price equaled the average closing price of ETC Common Stock during the 120 days preceding the date of this warrant. Additionally, ETC will pay Lenfest annual interest equal to 2% of the amount of the Lenfest Pledge, payable in Series D Preferred Stock. In consideration of Lenfest entering into the PNC Credit Agreement and Lenfest Pledge, ETC issued to Lenfest warrants to purchase shares of ETC Common Stock equal to 10% of the amount of a $5,000 increase under the 2007 PNC Bank Credit Facility. The warrants are exercisable for seven years following issuance at an exercise price per share equal to $1.11, which was equal to the average price of ETC Common Stock during the 120 days preceding the date of this warrant. The Company recorded a loan origination deferred charge associated with these warrants of $487 using the Black-Scholes options-pricing model with the following weighted average assumptions: expected volatility of 91.9%; risk-free interest rate of 0.49%; and an expected life of seven years. As of August 26, 2011, the unamortized balance of the deferred charge was $187. As of August 26, 2011, the Company's availability under the PNC Credit Agreement was $6,786. This reflected cash borrowing under the PNC Credit Agreement of $12,430 and outstanding letters of credit of approximately $784. Amounts borrowed under the PNC Credit Agreement can be borrowed, repaid and reborrowed from time-to-time until June 30, 2013, and bears interest at either the prime rate plus 0.50 percentage points or the London Interbank Offered Rate (“LIBOR”) plus 2.50 percentage points. Additionally, ETC is obligated to pay a fee of 0.125% per year for unused but available funds under the line of credit. The PNC Credit Agreement has the following affirmative covenants: (i) a Consolidated Tangible Net Worth covenant, for which the Company must maintain a minimum Consolidated Tangible Net Worth of at least $10,000 and (ii) an EBITDA covenant for which the Company must maintain a minimum cumulative aggregate Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $4,000 for the fiscal quarter then ending and the three preceding fiscal quarters. The Company is in full compliance of its covenants as of August 26, 2011. Due to the Company's accumulated deficit, all dividends accruing for the Series D and E Preferred Stock issuances have been recorded in the accompanying financial statements as a reduction in additional paid-in capital. Dedicated Line of Credit Agreement with PNC Bank The Company has a committed line of credit in the amount of $5,422 with PNC Bank (the “Dedicated Line of Credit”). The Company uses the Dedicated Line of Credit to satisfy performance bond and repayment guarantee requirements for an international contract. Use of this Dedicated Line of Credit is restricted to funding contract performance and repayment guarantee requirements under this specific contract. As security for the Dedicated Line of Credit, the Company has deposited with PNC $5,422 in a certificate of deposit. ETC is obligated to pay a fee of 3% per year for the Dedicated Line of Credit. ETC-PZL Project Financing In September 2009, ETC-PZL, located in Warsaw, Poland, entered into a project financing agreement with a Warsaw bank to fund a research and development contract with the Polish government. The amount of this facility was $604, and it was being repaid in quarterly installments of approximately $70, which commenced in September 2009. This facility expired in September 2011, at which time it was fully paid. Use of this line of credit was restricted to funding contract requirements under a specific research and development contract with the Polish government. Summary of Long-Term Debt Obligations Long-term debt obligations at August 26, 2011 and February 25, 2011 consist of the following:
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