Northern Technologies International Corporation (NASDAQ:NTIC), a
leading developer of corrosion inhibiting products and services, as
well as bio-based and biodegradable polymer resin compounds, today
reported its financial results for the third quarter of fiscal
2017.
Third quarter fiscal 2017 financial and operating results
include (with growth rates compared to third quarter of fiscal
2016):
- Consolidated net sales increased 17.7% to a quarterly record
$10,223,000
- ZERUST® net sales increased 16.5% to $8,368,000
- Natur-Tec® net sales increased 23.6% to $1,855,000
- Joint venture operating income increased 3.7% to
$3,128,000
- Net income attributable to NTIC increased 47.4% to
$1,352,000
- Net income per diluted share attributable to NTIC increased
50.0% to $0.30
“The ongoing execution of our business plan produced record
sales during the fiscal 2017 third quarter for NTIC along with
significantly higher earnings,” said G. Patrick Lynch, President
and Chief Executive Officer of NTIC. “Healthy global demand
for our core ZERUST® industrial products and services within our
industrial, agriculture, trucking, and automotive end markets
bolstered the orders we received from both existing and new
customers. Many of our Joint Venture Partners also
experienced higher sales, reflecting continued market share growth
across a number of geographies. Initial purchase orders from
several new NTIC China customers were delayed, which pushed back
anticipated NTIC China profitability until the fourth quarter.
Natur-Tec, on the other hand, received several purchase orders from
new customers earlier than expected during the third quarter,
pushing record Natur-Tec quarterly revenues as well as the first
full quarter of operating profitability.”
NTIC’s consolidated net sales increased 17.7% to $10,223,000
during the three months ended May 31, 2017, compared to $8,687,000
for the three months ended May 31, 2016. Higher fiscal 2017
third quarter sales was primarily a result of increased demand and
sales of ZERUST® industrial rust corrosion inhibiting packaging
products, sales to joint ventures, and sales of Natur-Tec®
products, partially offset by lower ZERUST® sales to oil and gas
customers. For the nine months ended May 31, 2017,
consolidated net sales increased 22.4% to $28,668,000, compared to
$23,416,000 for the same period last fiscal year.
The following table sets forth NTIC’s net sales by product
category for the three and nine months ended May 31, 2017 and May
31, 2016 by segment:
|
Three Months Ended |
|
May 31, 2017 |
|
% of Net Sales |
|
May 31, 2016 |
|
% of Net Sales |
|
% Change |
ZERUST® industrial net
sales |
$ |
7,170,802 |
|
70.1 |
% |
|
$ |
5,912,881 |
|
68.1 |
% |
|
21.3 |
% |
ZERUST® joint venture
net sales |
|
862,136 |
|
8.4 |
% |
|
|
761,218 |
|
8.8 |
% |
|
13.3 |
% |
ZERUST® oil & gas
net sales |
|
335,549 |
|
3.3 |
% |
|
|
511,856 |
|
5.9 |
% |
|
(34.4 |
)% |
Total
ZERUST® net sales |
$ |
8,368,487 |
|
81.9 |
% |
|
$ |
7,185,955 |
|
82.7 |
% |
|
16.5 |
% |
Total Natur-Tec®
sales |
|
1,854,532 |
|
18.1 |
% |
|
|
1,500,620 |
|
17.3 |
% |
|
23.6 |
% |
Total net
sales |
$ |
10,223,019 |
|
100.0 |
% |
|
$ |
8,686,575 |
|
100.0 |
% |
|
17.7 |
% |
|
Nine Months Ended |
|
May 31, 2017 |
|
% of Net Sales |
|
May 31, 2016 |
|
% of Net Sales |
|
% Change |
ZERUST® industrial net
sales |
$ |
20,277,892 |
|
70.7 |
% |
|
$ |
16,357,983 |
|
69.9 |
% |
|
24.0 |
% |
ZERUST® joint venture
net sales |
|
2,115,511 |
|
7.4 |
% |
|
|
1,961,565 |
|
8.4 |
% |
|
7.8 |
% |
ZERUST® oil & gas
net sales |
|
1,287,789 |
|
4.5 |
% |
|
|
1,229,426 |
|
5.3 |
% |
|
4.7 |
% |
Total
ZERUST® net sales |
$ |
23,681,192 |
|
82.6 |
% |
|
$ |
19,548,974 |
|
83.5 |
% |
|
21.1 |
% |
Total Natur-Tec®
sales |
|
4,986,753 |
|
17.4 |
% |
|
|
3,866,972 |
|
16.5 |
% |
|
29.0 |
% |
Total net
sales |
$ |
28,667,945 |
|
100.0 |
% |
|
$ |
23,415,946 |
|
100.0 |
% |
|
22.4 |
% |
NTIC anticipates that sales of ZERUST® products and services
into the oil and gas industry will continue to remain subject to
significant volatility from quarter to quarter as sales are
recognized.
NTIC’s joint venture operating income increased 3.7% to
$3,128,000 during the three months ended May 31, 2017, compared to
joint venture operating income of $3,016,000 during the three
months ended May 31, 2016. This increase was attributable to
a corresponding increase in total net sales of the joint ventures
as fees for services provided to joint ventures are primarily a
function of the net sales of NTIC’s joint ventures, which increased
7.1% to $25,935,000 during the three months ended May 31, 2017,
compared to $24,223,000 for the three months ended May 31,
2016. Year-to-date, NTIC’s joint venture operating income
increased 11.8% to $8,285,000, compared to joint venture operating
income of $7,409,000 during the nine months ended May 31,
2016. Net sales of NTIC’s joint ventures increased 10.4% to
$73,098,000 during the nine months ended May 31, 2017, compared to
$66,224,000 for the nine months ended May 31, 2016.
Operating expenses, as a percent of net sales, for the third
quarter of fiscal 2017 were 47.4%, compared to 54.1% for the same
period last fiscal year. This reduction was primarily due to
higher net sales, lower general and administrative expenses, and
reduced research and development expenses, partially offset by
higher selling expenses. Year-to-date, operating expenses, as
a percent of net sales, were 51.7%, compared to 58.9% for the same
period last fiscal year.
NTIC incurred legal expenses of $46,000 and $534,000 during the
nine months ended May 31, 2017 and 2016, respectively, related to
the litigation against Cortec Corporation. As mentioned last
quarter, the company re-filed its case against Cortec Corporation
in the state of Ohio. Upon re-filing in Ohio, the company
recently received a trial date, which is set for September 18-20,
2017.
NTIC reported net income attributable to NTIC for the third
quarter of fiscal 2017 of $1,352,000, or $0.30 per diluted share,
compared to net income attributable to NTIC of $917,000, or $0.20
per diluted share for the same period last fiscal year. For
the nine months ended May 31, 2017, the company reported net income
attributable to NTIC of $2,037,000, or $0.45 per diluted share,
compared to a net income attributable to NTIC of $575,000, or $0.13
per diluted share for the same period last fiscal year.
NTIC’s balance sheet remains strong, with no debt, and working
capital of $19,859,000 at May 31, 2017, including $3,500,000 in
cash and cash equivalents, and $3,757,000 in available for sale
securities, compared to $16,948,000 at August 31, 2016, including
$3,395,000 in cash and cash equivalents, and $2,244,000 in
available for sale securities.
Mr. Lynch added, “NTIC’s leading corrosion inhibiting
technologies and services, attractive market opportunities, global
presence, and emerging bioplastics business has created a
compelling platform for long-term, sustainable, and profitable
growth. Furthermore, NTIC’s strong balance sheet and
operating cash flows provide significant flexibility to support our
global footprint, and invest in new growth opportunities.
NTIC’s opportunities in the oil and gas market are significant and
we expect improving shipments in the fourth quarter as our pipeline
has continued to grow throughout the remainder of fiscal 2017 and
beyond. At the same time, this market remains volatile, and
is characterized by a long-sales cycle as well as significant
project delays during extended periods of low oil
prices. As we enter the last quarter of fiscal
2017, our business is on track to achieve our annual financial
expectations.”
Outlook
For the fiscal year ending August 31, 2017, NTIC is increasing
its annual total net sales to range between $39.0 million and $40.0
million, from its previous net sales guidance of $37.5 million to
$39.0 million. The company is maintaining its net income
attributable to NTIC guidance, which the company expects to range
between $3.4 million to $3.9 million, or between $0.75 and $0.85
per diluted share.
These estimates are subject to significant risks and
uncertainties, including without limitation to risks and
uncertainties relating to NTIC’s Chinese operations, its ongoing
litigation against its former Chinese joint venture partner and
Cortec Corporation, and other risks and uncertainties.
Conference Call and Webcast
NTIC will host a conference call today at 8:00 a.m. Central Time
to review its results of operations for the third quarter of fiscal
2017 and its future outlook, followed by a question and answer
session. The conference call will be available to interested
parties through a live audio webcast available through NTIC’s
website at www.ntic.com or
http://ir.ntic.com/events.cfm where the webcast will be
archived and accessible for at least 12 months. The dial-in
number for the conference call is (877) 670-9776 and the
confirmation code is 47708859.
About Northern Technologies International
Corporation
Northern Technologies International Corporation develops and
markets proprietary environmentally beneficial products and
services in over 60 countries either directly or via a network of
subsidiaries, joint ventures, independent distributors and
agents. NTIC’s primary business is corrosion prevention
marketed primarily under the ZERUST® brand. NTIC has been selling
its proprietary ZERUST® rust and corrosion inhibiting products and
services to the automotive, electronics, electrical, mechanical,
military and retail consumer markets, for over 40 years, and in
recent years has targeted and expanded into the oil and gas
industry. NTIC offers worldwide on-site technical consulting for
rust and corrosion prevention issues. NTIC’s technical
service consultants work directly with the end users of NTIC’s
products to analyze their specific needs and develop systems to
meet their technical requirements. NTIC also markets and sells a
portfolio of bio-based and biodegradable polymer resins and
finished products marketed under the Natur-Tec®
brand.
Forward-Looking Statements
Statements contained in this press release that are not
historical information are forward-looking statements as defined
within the Private Securities Litigation Reform Act of 1995. Such
statements include NTIC’s expectations regarding its financial
guidance for fiscal 2017, its expectations regarding the future
profitability of NTIC China, the success of its oil and gas
business, and other statements that can be identified by words such
as “believes,” “continues,” “expects,” “anticipates,” “intends,”
“potential,” “outlook,” “will,” “may,” “would,” “should,”
“guidance” or words of similar meaning, the use of future dates and
any other statements that are not historical facts. Such
forward-looking statements are based upon the current beliefs and
expectations of NTIC’s management and are inherently subject to
risks and uncertainties that could cause actual results to differ
materially from those projected or implied. Such potential
risks and uncertainties include, but are not limited to, in no
particular order: the effect on NTIC’s business and operating
results of the termination of NTIC’s joint venture relationship in
China and sale of products and services in China through NTIC
China; the ability of NTIC China to achieve significant sales;
costs and expenses incurred by NTIC in connection with its ongoing
litigation against its former Chinese joint venture partner and
Cortec Corporation; NTIC’s dependence on the success of its joint
ventures and fees and dividend distributions that NTIC receives
from them; NTIC’s relationships with its joint ventures and its
ability to maintain those relationships; NTIC’s dependence on its
joint venture in Germany in particular due to its significance and
the effect of a termination of this or NTIC’s other joint ventures
on NTIC’s business and operating results; risks related to the
impending exit of the United Kingdom from the European Union and
the European sovereign debt crisis, economic slowdown and political
unrest; risks associated with NTIC’s international operations;
exposure to fluctuations in foreign currency exchange rates,
including in particular the Euro compared to the U.S. dollar; the
health of the U.S. and worldwide economies, including in particular
the U.S. automotive industry; the level of growth in NTIC’s
markets; NTIC’s investments in research and development efforts;
acceptance of existing and new products; timing of NTIC’s receipt
of purchase orders under supply contracts; variability in sales to
customers in the oil and gas industry and the effect on NTIC’s
quarterly financial results; increased competition; the costs and
effects of complying with changes in tax, fiscal, government and
other regulatory policies, including rules relating to
environmental, health and safety matters; pending and potential
litigation; and NTIC’s reliance on its intellectual property rights
and the absence of infringement of the intellectual property rights
of others. More detailed information on these and additional
factors which could affect NTIC’s operating and financial results
is described in NTIC’s filings with the Securities and Exchange
Commission, including its most recent annual report on Form 10-K
for the fiscal year ended August 31, 2016 filed by NTIC with the
SEC on November 22, 2016 and its most recent quarterly report on
Form 10-Q for the quarter ended February 28, 2017 filed by NTIC
with the SEC on April 11, 2017. NTIC urges all interested parties
to read these reports to gain a better understanding of the many
business and other risks that the company faces. Additionally, NTIC
undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements, which may be made to
reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
|
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) |
FOR THE THREE AND NINE MONTHS ENDED
MAY 31, 2017 AND 2016 |
|
|
Three Months Ended |
|
Nine Months Ended |
|
May 31, 2017 |
|
May 31, 2016 |
|
May 31, 2017 |
|
May 31, 2016 |
NET
SALES: |
|
|
|
|
|
|
|
Net sales, excluding joint ventures |
$ |
9,360,883 |
|
|
$ |
7,925,357 |
|
|
$ |
26,552,434 |
|
|
$ |
21,454,381 |
|
Net sales, to joint ventures |
|
862,136 |
|
|
|
761,218 |
|
|
|
2,115,511 |
|
|
|
1,961,565 |
|
Total net sales |
|
10,223,019 |
|
|
|
8,686,575 |
|
|
|
28,667,945 |
|
|
|
23,415,946 |
|
Cost of goods sold |
|
6,774,001 |
|
|
|
5,777,249 |
|
|
|
19,256,953 |
|
|
|
15,920,896 |
|
Gross profit |
|
3,449,018 |
|
|
|
2,909,326 |
|
|
|
9,410,992 |
|
|
|
7,495,050 |
|
|
|
|
|
|
|
|
|
JOINT
VENTURE OPERATIONS: |
|
|
|
|
|
|
|
Equity in income of joint ventures |
|
1,686,016 |
|
|
|
1,664,464 |
|
|
|
4,343,159 |
|
|
|
3,600,884 |
|
Fees for services provided to joint ventures |
|
1,442,048 |
|
|
|
1,351,913 |
|
|
|
3,941,667 |
|
|
|
3,808,384 |
|
Total joint venture operations |
|
3,128,064 |
|
|
|
3,016,377 |
|
|
|
8,284,826 |
|
|
|
7,409,268 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Selling expenses |
|
2,430,824 |
|
|
|
1,507,200 |
|
|
|
6,716,390 |
|
|
|
4,507,716 |
|
General and administrative expenses |
|
1,682,669 |
|
|
|
1,957,868 |
|
|
|
5,996,977 |
|
|
|
5,939,032 |
|
Research and development expenses |
|
733,651 |
|
|
|
1,231,950 |
|
|
|
2,118,210 |
|
|
|
3,349,572 |
|
Total operating expenses |
|
4,847,144 |
|
|
|
4,697,018 |
|
|
|
14,831,577 |
|
|
|
13,796,320 |
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
1,729,938 |
|
|
|
1,228,685 |
|
|
|
2,864,241 |
|
|
|
1,107,998 |
|
|
|
|
|
|
|
|
|
INTEREST INCOME |
|
10,996 |
|
|
|
29,868 |
|
|
|
19,075 |
|
|
|
58,425 |
|
INTEREST EXPENSE |
|
(7,409 |
) |
|
|
(15,465 |
) |
|
|
(15,502 |
) |
|
|
(30,987 |
) |
OTHER INCOME |
|
— |
|
|
|
6,294 |
|
|
|
— |
|
|
|
7,255 |
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME
TAX EXPENSE |
|
1,733,525 |
|
|
|
1,249,382 |
|
|
|
2,867,814 |
|
|
|
1,142,691 |
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
237,801 |
|
|
|
225,395 |
|
|
|
480,423 |
|
|
|
262,359 |
|
|
|
|
|
|
|
|
|
NET INCOME |
|
1,495,724 |
|
|
|
1,023,987 |
|
|
|
2,387,391 |
|
|
|
880,332 |
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NON- |
|
|
|
|
|
|
|
CONTROLLING INTERESTS |
|
143,308 |
|
|
|
106,614 |
|
|
|
350,370 |
|
|
|
305,099 |
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC |
$ |
1,352,416 |
|
|
$ |
917,373 |
|
|
$ |
2,037,021 |
|
|
$ |
575,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
$ |
0.20 |
|
|
$ |
0.45 |
|
|
$ |
0.13 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.20 |
|
|
$ |
0.45 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSUMED OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
4,526,771 |
|
|
|
4,538,970 |
|
|
|
4,528,523 |
|
|
|
4,538,005 |
|
Diluted |
|
4,591,527 |
|
|
|
4,563,801 |
|
|
|
4,571,395 |
|
|
|
4,587,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS AS OF MAY
31, 2017 (UNAUDITED) |
AND AUGUST 31, 2016
(AUDITED) |
|
|
|
|
May 31, 2017 |
|
August 31, 2016 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
$ |
3,500,164 |
|
|
$ |
3,395,274 |
|
|
Available for sale securities |
|
3,756,680 |
|
|
|
2,243,864 |
|
|
Receivables: |
|
|
|
|
|
Trade excluding joint ventures, less allowance for doubtful
accounts of |
|
|
|
|
|
$40,000 at May 31, 2017 and August 31, 2016 |
|
6,190,096 |
|
|
|
4,755,320 |
|
|
Trade joint ventures |
|
1,295,766 |
|
|
|
791,903 |
|
|
Fees for services provided to joint ventures |
|
1,224,977 |
|
|
|
1,406,587 |
|
|
Income taxes |
|
375,531 |
|
|
|
215,905 |
|
|
Inventories |
|
7,879,656 |
|
|
|
7,711,287 |
|
|
Prepaid expenses |
|
421,708 |
|
|
|
422,031 |
|
|
Total current assets |
|
24,644,578 |
|
|
|
20,942,171 |
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
7,451,899 |
|
|
|
7,275,872 |
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
Investments in joint ventures |
|
18,903,473 |
|
|
|
19,840,774 |
|
|
Deferred income taxes |
|
1,614,229 |
|
|
|
1,639,762 |
|
|
Patents and trademarks, net |
|
1,314,103 |
|
|
|
1,278,597 |
|
|
Other |
|
71,685 |
|
|
|
92,874 |
|
|
Total other assets |
|
21,903,490 |
|
|
|
22,852,007 |
|
|
Total assets |
$ |
53,999,967 |
|
|
$ |
51,070,050 |
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable |
$ |
3,558,280 |
|
|
$ |
2,753,903 |
|
|
Accrued liabilities: |
|
|
|
|
|
Payroll and related benefits |
|
984,789 |
|
|
|
938,363 |
|
|
Other |
|
247,597 |
|
|
|
301,836 |
|
|
Total current liabilities |
|
4,790,666 |
|
|
|
3,994,102 |
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
Preferred stock, no par value; authorized 10,000 shares; none
issued and outstanding |
|
— |
|
|
|
— |
|
|
Common stock, $0.02 par value per share; authorized 10,000,000 |
|
|
|
|
|
shares; issued and outstanding 4,527,018 and 4,533,416,
respectively |
|
90,540 |
|
|
|
90,668 |
|
|
Additional paid-in capital |
|
13,983,754 |
|
|
|
13,798,567 |
|
|
Retained earnings |
|
35,692,376 |
|
|
|
33,655,357 |
|
|
Accumulated other comprehensive loss |
|
(3,251,765 |
) |
|
|
(3,009,617 |
) |
|
Stockholders’ equity |
|
46,514,905 |
|
|
|
44,534,975 |
|
|
Non-controlling interest |
|
2,694,396 |
|
|
|
2,540,973 |
|
|
Total equity |
|
49,209,301 |
|
|
|
47,075,948 |
|
|
Total liabilities and equity |
$ |
53,999,967 |
|
|
$ |
51,070,050 |
|
|
|
|
|
|
|
Investor and Media Contacts:
Matthew Wolsfeld, CFO
NTIC
(763) 225-6600
Northern Technologies (NASDAQ:NTIC)
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Northern Technologies (NASDAQ:NTIC)
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From Sep 2023 to Sep 2024