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 first quarter of fiscal
2018.
First quarter fiscal 2018 financial and operating highlights
include (with growth rates compared to first quarter of fiscal
2017):
- Consolidated net sales increased 19.0% to a quarterly record
$11,543,000
- ZERUST® product net sales increased 17.8% to $9,528,000
- ZERUST® product sales include sales of $2,912,000 from NTIC
China, which represents an increase of 88.2%
- Natur-Tec® product net sales increased 24.6% to a quarterly
record $2,015,000
- Joint venture operating income increased 25.4% to
$3,248,000
- Net income attributable to NTIC increased 264.1% to
$1,084,000
- Net income attributable to NTIC was $0.24 per diluted share an
increase of 242.9%
“Our positive momentum allowed NTIC to achieve both record sales
and our most profitable first quarter ever,” said G. Patrick Lynch,
President and Chief Executive Officer of NTIC. “Healthy global
demand continued to drive sales of ZERUST® corrosion inhibiting
solutions in North America, China, and throughout most of our joint
venture countries. NTIC's global ZERUST® and Natur-Tec® sales,
including all joint venture sales, passed $40 million for the first
time in the history of the company in the first quarter of fiscal
2018. Sales at NTIC China were up 88.2% in the first quarter
compared to the same period last fiscal year, and were up 30.3%
from the fiscal 2017 fourth quarter. We are extremely pleased with
the performance at NTIC China, but it is important to note NTIC
China’s second quarter sales may be slightly off first quarter
levels as a result of the Chinese New Year holiday period.
Natur-Tec first quarter sales exceeded $2,000,000, as sales were up
24.6% during the fiscal 2018 first quarter compared to the same
quarter last fiscal year. We are encouraged by this strong start to
the year, as we enjoyed increased demand for our core corrosion
inhibiting solutions, favorable currency exchange rates, and the
positive contribution of our emerging businesses.”
NTIC’s consolidated net sales increased 19.0% to $11,543,000
during the three months ended November 30, 2017, compared to
$9,702,000 for the three months ended November 30, 2016. The
increase in consolidated net sales was primarily a result of an
increase in sales of ZERUST® rust and corrosion inhibiting
packaging products, the contribution of NTIC China, and sales of
Natur-Tec® products.
The following table sets forth NTIC’s net sales by product
category for the three months ended November 30, 2017 and 2016, by
segment:
|
|
|
Three Months Ended |
|
November 30, 2017 |
|
% of NetSales |
|
November 30, 2016 |
|
% of NetSales |
|
% Change |
|
ZERUST® industrial net
sales |
$ |
8,736,264 |
|
75.7 |
% |
|
$ |
6,518,289 |
|
67.2 |
% |
|
34.0 |
% |
|
ZERUST® joint venture
net sales |
|
507,631 |
|
4.4 |
% |
|
|
820,058 |
|
8.4 |
% |
|
(38.1 |
)% |
|
ZERUST® oil & gas
net sales |
|
283,842 |
|
2.4 |
% |
|
|
746,331 |
|
7.7 |
% |
|
(62.0 |
)% |
|
Total ZERUST®
net sales |
$ |
9,527,737 |
|
82.5 |
% |
|
$ |
8,084,678 |
|
83.3 |
% |
|
17.8 |
% |
|
Total Natur-Tec®
sales |
|
2,015,301 |
|
17.5 |
% |
|
|
1,617,345 |
|
16.7 |
% |
|
24.6 |
% |
|
Total net
sales |
$ |
11,543,038 |
|
100.0 |
% |
|
$ |
9,702,023 |
|
100.0 |
% |
|
19.0 |
% |
|
|
|
|
|
|
|
NTIC’s joint venture operating income increased 25.4% to
$3,248,000 during the three months ended November 30, 2017,
compared to joint venture operating income of $2,590,000 during the
three months ended November 30, 2016. The increase was attributable
to the corresponding increase in total sales of the joint ventures
as fees for services provided to joint ventures are a function of
the net sales of NTIC’s joint ventures, which were $28,499,000
during the three months ended November 30, 2017, compared to
$24,200,000 for the three months ended November 30, 2016.
Operating expenses, as a percent of net sales, for the first
quarter of fiscal 2018 were 48.7%, compared to 53.1% for the same
period last fiscal year. This reduction was primarily a result of
higher personnel and research and development expenses, partially
offset by lower general and administrative expenses.
NTIC incurred legal expenses of $350,000 and $320,000 during the
first quarter ended November 30, 2017 and 2016, respectively,
related to the litigation against Cortec Corporation. On September
20, 2017, the United States District Court for the Northern
District of Ohio dismissed with prejudice all claims asserted by
NTIC in litigation against Cortec Corporation. At this time, NTIC
does not anticipate any meaningful legal expenses going forward
related to the litigation against Cortec Corporation.
The company reported net income attributable to NTIC for the
first quarter of fiscal 2018 of $1,084,000, or $0.24 per diluted
share, compared to net income attributable to NTIC of $298,000, or
$0.07 per diluted share for the same period last fiscal year.
NTIC’s balance sheet remains strong, with no debt, and working
capital of $20,383,000 at November 30, 2017, including $4,627,000
in cash and cash equivalents and $3,770,000 in available for sale
securities, compared to $21,173,000 at August 31, 2017, including
$6,360,000 in cash and cash equivalents and $3,767,000 in available
for sale securities.
At November 30, 2017, the company had $21,702,000 of investments
in joint ventures, of which over $13,300,000 or 61% is cash, with
the remaining balance mostly made up of other working
capital.
Mr. Lynch added, “While oil and gas net sales were down in the
first quarter, we expect oil and gas sales to improve in the second
quarter. The anticipated higher oil and gas sales should further
increase profitability in the second quarter, despite the slight
impact of anticipated lower NTIC China sales due to Chinese New
Year. In addition, profitability in the second half of the fiscal
year should be better than the first half of the fiscal year, as
NTIC historically experiences higher seasonal sales in the later
part of the fiscal year.”
Outlook
For the fiscal year ending August 31, 2018, NTIC continues to
expect its net sales to be in the range of $46.0 million to $47.0
million. The company also continues to anticipate net income
attributable to NTIC to be in the range of $5.0 million to $5.3
million, or $1.10 to $1.15 per diluted share. NTIC’s annual net
income guidance does not take into consideration any non-cash write
down to its deferred tax asset that NTIC expects will occur in the
second quarter of fiscal 2018 as a result of the recent enactment
of the Tax Cuts and Jobs Act.
These estimates are subject to significant risks and
uncertainties, including those described below under the heading
“Forward-Looking Statements.”
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 first quarter
of 2018 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 3393317.
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 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 2018, the anticipated growth of its ZERUST® 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 ability of NTIC to achieve its annual financial guidance
and continue to pay dividends; 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 its other
joint ventures on NTIC’s business and operating results; 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; the effect of United Kingdom’s exit from the
European Union, 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 the new tax reform law, which could
result in a write-down of our deferred tax assets, and 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 the company’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,
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 BALANCE
SHEETS AS OF NOVEMBER 30, 2017
(UNAUDITED)AND AUGUST 31, 2017
(AUDITED) |
|
|
|
|
|
|
|
|
|
November 30, 2017 |
|
August 31, 2017 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,627,213 |
|
|
$ |
6,360,201 |
|
|
Available for sale securities |
|
|
3,770,241 |
|
|
|
3,766,984 |
|
|
Receivables: |
|
|
|
|
|
Trade excluding joint ventures, less allowance for doubtful
accounts |
|
|
|
|
|
of
$40,000 at November 30, 2017 and August 31, 2017 |
|
|
7,251,821 |
|
|
|
5,912,631 |
|
|
Trade joint ventures |
|
|
520,653 |
|
|
|
691,752 |
|
|
Fees for services provided to joint ventures |
|
|
1,310,818 |
|
|
|
1,302,944 |
|
|
Income taxes |
|
|
— |
|
|
|
137,256 |
|
|
Inventories |
|
|
7,969,328 |
|
|
|
7,456,552 |
|
|
Prepaid expenses |
|
|
760,567 |
|
|
|
439,298 |
|
|
Total current assets |
|
|
26,210,641 |
|
|
|
26,067,618 |
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
7,235,301 |
|
|
|
7,359,662 |
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
Investments in joint ventures |
|
|
21,701,913 |
|
|
|
20,035,074 |
|
|
Deferred income taxes |
|
|
1,756,565 |
|
|
|
1,756,565 |
|
|
Patents and trademarks, net |
|
|
1,291,335 |
|
|
|
1,322,089 |
|
|
Other |
|
|
— |
|
|
|
71,685 |
|
|
Total other assets |
|
|
24,749,813 |
|
|
|
23,185,413 |
|
|
Total assets |
|
$ |
58,195,755 |
|
|
$ |
56,612,693 |
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable |
|
$ |
3,797,674 |
|
|
$ |
2,676,610 |
|
|
Income taxes payable |
|
|
15,565 |
|
|
|
— |
|
|
Accrued liabilities: |
|
|
|
|
|
Payroll and related benefits |
|
|
955,903 |
|
|
|
1,540,386 |
|
|
Other |
|
|
1,058,793 |
|
|
|
677,621 |
|
|
Total current liabilities |
|
|
5,827,935 |
|
|
|
4,894,617 |
|
|
|
|
|
|
|
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 4,537,408 and 4,535,018,
respectively |
|
|
90,748 |
|
|
|
90,700 |
|
|
Additional paid-in capital |
|
|
14,294,584 |
|
|
|
14,163,509 |
|
|
Retained earnings |
|
|
37,706,367 |
|
|
|
37,077,483 |
|
|
Accumulated other comprehensive loss |
|
|
(2,518,243 |
) |
|
|
(2,471,064 |
) |
|
Stockholders’ equity |
|
|
49,573,456 |
|
|
|
48,860,628 |
|
|
Non-controlling interest |
|
|
2,794,364 |
|
|
|
2,857,448 |
|
|
Total equity |
|
|
52,367,820 |
|
|
|
51,718,076 |
|
|
Total liabilities and equity |
|
$ |
58,195,755 |
|
|
$ |
56,612,693 |
|
|
|
|
|
|
|
|
|
|
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)FOR THE
THREE MONTHS ENDED NOVEMBER 30, 2017 AND 2016 |
|
|
|
Three Months Ended |
|
November 30, 2017 |
|
November 30, 2016 |
NET
SALES: |
|
|
|
Net sales, excluding joint ventures |
$ |
11,035,407 |
|
|
$ |
9,000,224 |
|
Net sales, to joint ventures |
|
507,631 |
|
|
|
701,799 |
|
Total net sales |
|
11,543,038 |
|
|
|
9,702,023 |
|
|
|
|
|
Cost of
goods sold |
|
7,888,470 |
|
|
|
6,612,766 |
|
Gross
profit |
|
3,654,568 |
|
|
|
3,089,257 |
|
|
|
|
|
JOINT
VENTURE OPERATIONS: |
|
|
|
Equity in income from joint ventures |
|
1,741,328 |
|
|
|
1,274,004 |
|
Fees for services provided to joint ventures |
|
1,507,142 |
|
|
|
1,315,591 |
|
Total joint venture operations |
|
3,248,470 |
|
|
|
2,589,595 |
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
Selling expenses |
|
2,599,949 |
|
|
|
2,039,084 |
|
General and administrative expenses |
|
2,219,745 |
|
|
|
2,471,780 |
|
Research and development expenses |
|
798,731 |
|
|
|
642,522 |
|
Total
operating expenses |
|
5,618,425 |
|
|
|
5,153,386 |
|
|
|
|
|
OPERATING INCOME |
|
1,284,613 |
|
|
|
525,466 |
|
|
|
|
|
INTEREST INCOME |
|
24,056 |
|
|
|
3,563 |
|
INTEREST EXPENSE |
|
(5,089 |
) |
|
|
(4,623 |
) |
|
|
|
|
INCOME BEFORE INCOME
TAX EXPENSE |
|
1,303,580 |
|
|
|
524,406 |
|
|
|
|
|
INCOME TAX EXPENSE |
|
104,991 |
|
|
|
117,713 |
|
|
|
|
|
NET INCOME |
|
1,198,589 |
|
|
|
406,693 |
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NON-CONTROLLING INTERESTS |
|
114,963 |
|
|
|
109,054 |
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC |
$ |
1,083,626 |
|
|
$ |
297,639 |
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC PER COMMON SHARE: |
|
|
|
Basic |
$ |
0.24 |
|
|
$ |
0.07 |
|
Diluted |
$ |
0.24 |
|
|
$ |
0.07 |
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES ASSUMED OUTSTANDING: |
|
|
|
Basic |
|
4,537,368 |
|
|
|
4,531,950 |
|
Diluted |
|
4,608,788 |
|
|
|
4,558,878 |
|
|
|
|
|
|
|
|
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.10 |
|
|
$ |
0.00 |
|
Investor and Media Contacts:
Matthew Wolsfeld, CFO
NTIC
(763) 225-6600
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