ETC Announces Completion Of Sale-Leaseback Transaction Generating $4.7 Million In Net Proceeds

Rhea-AI Summary

On June 15, 2022, Environmental Tectonics Corporation (OTC Pink: ETCC) completed a sale-leaseback of its property in Southampton, PA, which includes its corporate headquarters and production plant, for $4.7 million. The property had a net book value of $2.25 million, resulting in a gain of approximately $2.4 million. The company will lease the property back for an initial term of seven years at $420,000 annually, increasing 2.5% each year. Proceeds will be used to reduce debt under its credit facility with PNC Bank.

Positive

• Completed sale-leaseback transaction for $4.7 million, generating a net gain of approximately $2.4 million.
• Proceeds intended to reduce outstanding borrowings, improving financial position.

Negative

• Annual rent expense of $420,000 will increase 2.5% each year, impacting future cash flow.
• Property depreciation expense of approximately $165,000 was previously enjoyed.

SOUTHAMPTON, Pa., June 20, 2022 (GLOBE NEWSWIRE) -- Environmental Tectonics Corporation’s (OTC Pink: ETCC) (“ETC” or the “Company”) today announced that on June 15, 2022, the Company closed a transaction to sell and lease back our property located in Southampton, Pennsylvania. This property sold consists of our corporate headquarters, main production plant, and the NASTAR Center. Under the terms of the sale agreement, the land, buildings, and improvements, with a net book value of $2,250,000, were sold for pre-tax net proceeds of $4,700,000, resulting in a net gain on the sale of approximately $2,400,000. Existing training equipment in the NASTAR Center affixed to the building was not included in the sale. In connection with the sale, the Company entered into an Agreement of Lease ("Lease") with VV100 LLC as to an undivided 82.53% interest and The Irrevocable Agreement of Trust of Jerry D. Kratz for the Benefit of Descendants dated December 19, 2011, as to an undivided 17.47% interest, as tenants in common (collectively, "Lessor") for Lessor to lease back to the Company all the property sold. The property has been leased back for an initial term of seven (7) years (“Initial Term”), and the Lease includes specified renewal options for up to seven (7) additional years (“Renewal Term”). Net rent expense for the first year of the Lease is $420,000 annually, and increases 2.5% for each additional year of the Initial Term. At the outset of the Renewal Term, rent will reset to fair market value and will increase 3.0% for each additional year of the Renewal Term. The property sold had depreciation expense of approximately $165,000 annually. Net proceeds from the sale are being used initially to reduce outstanding borrowings under our credit facility with PNC Bank.

About ETC:

ETC designs, manufactures, and sells software driven products and services used to recreate and monitor the physiological effects of motion on humans, and equipment to control, modify, simulate and measure environmental conditions. Our products include aircrew training systems (aeromedical, tactical combat, and general), disaster management systems, sterilizers (steam and gas), environmental testing and simulation systems, and other products that involve similar manufacturing techniques and engineering technologies. 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/.

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 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 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.

Contact:	Joseph F. Verbitski, Jr., Chief Financial Officer
Phone:	(215) 355-9100 x1531
E-mail:	jverbitski@etcusa.com

FAQ

What was the date of Environmental Tectonics Corporation's property sale?

The property sale was completed on June 15, 2022.

What were the financial outcomes of the property sale by ETCC?

The property was sold for $4.7 million, resulting in a net gain of approximately $2.4 million.

What will ETCC do with the proceeds from the property sale?

The proceeds will be used to reduce outstanding borrowings under the credit facility with PNC Bank.

What is the initial rent expense for ETCC after the leaseback?

The initial rent expense is $420,000 annually.

How long is the lease term for the property sold by ETCC?

The lease has an initial term of seven years with options to renew.