SOUTHAMPTON, PA — Environmental Tectonics Corp. (OTCID: ETCC) reported fiscal 2026 net income of $3.0 million, down 77% from the prior year, as a large tax-related benefit recorded in fiscal 2025 created a difficult comparison despite the company’s third consecutive year of profitability and a growing contract backlog.
The aerospace, defense and training systems manufacturer earned $0.15 per diluted share for the fiscal year ended Feb. 27, compared with $0.75 per diluted share in fiscal 2025.
Much of the decline stemmed from tax accounting changes. Fiscal 2025 results included a $5.6 million tax benefit tied to the reversal of valuation allowances on deferred tax assets, while fiscal 2026 included a $1.2 million income tax provision.
Revenue was largely unchanged at $62.7 million, compared with $62.9 million a year earlier. Lower international sales within the company’s Commercial/Industrial Systems segment were mostly offset by stronger domestic demand and increased aerospace-related sales.
Gross profit declined 5.2% to $17.6 million, while operating expenses increased 6.2% to $10.9 million, reflecting higher sales and marketing costs associated with proposals, trade shows and commissions.
Interest expense rose 89% to $2.2 million due primarily to higher borrowing levels related to a sale-leaseback transaction involving demonstration equipment and finished-goods inventory.
Fourth-quarter results showed similar pressure. Net income totaled approximately $100,000, compared with $7.6 million in the year-earlier period. Revenue fell 19% to $15.5 million, driven primarily by lower sterilizer system sales and reduced aeromedical center building revenue.
Despite the earnings decline, management pointed to a strengthening order book. Chief Executive Officer Robert Laurent said the company ended fiscal 2026 with a backlog of approximately $61 million and expects that figure to exceed $80 million following the addition of roughly $37 million in recently announced contract awards during the first quarter of fiscal 2027.
Liquidity remained constrained but improved modestly. ETC reported $1.2 million of availability under its revolving credit facility at fiscal year-end, increasing to approximately $1.9 million as of June 12.
The company also secured additional financing flexibility after extending the maturity date of its PNC credit facilities by two years to June 30, 2028.
Working capital increased to $22.0 million from $19.7 million a year earlier, supported by higher accounts receivable and contract assets. Management indicated existing credit availability, expected contract collections and anticipated customer deposits should provide sufficient liquidity to fund operations, capital expenditures and debt obligations through fiscal 2027.
ETC develops and manufactures training, simulation, sterilization and environmental testing systems for aerospace, defense, healthcare and commercial markets.
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