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
2018.
Third quarter fiscal 2018 financial and operating results
include (with growth rates compared to third quarter of fiscal
2017):
- Consolidated net sales increased 26.4% to a quarterly record
$12,924,000
- ZERUST® net sales increased 24.1% to $10,383,000
- ZERUST® product net sales include sales of $2,872,000 from NTIC
China, which represents an increase of 69.4%
- Natur-Tec® net sales increased 37.0% to a quarterly record
$2,541,000
- Joint venture operating income increased 20.0% to
$3,755,000
- Net income attributable to NTIC increased 58.4% to
$2,143,000
- Net income per diluted share attributable to NTIC increased
53.3% to $0.46
“With only one quarter remaining, fiscal 2018 has continued to
be a strong year. ZERUST® demand has been at record levels, as
we’ve continued to grow market share and increase the contributions
of our emerging businesses, including NTIC China and Natur-Tec,”
said G. Patrick Lynch, President and Chief Executive Officer of
NTIC. “NTIC China sales were up 69.4% compared to the same
period a year ago, but declined slightly over second quarter as a
result of the conclusion of a larger customer project. Trends
in China remain strong; however, and we expect NTIC China sales
growth to accelerate again during our fourth quarter.”
NTIC’s consolidated net sales increased 26.4% to $12,924,000
during the three months ended May 31, 2018, compared to $10,223,000
for the three months ended May 31, 2017. Higher fiscal 2018
third quarter sales were primarily a result of increased demand and
sales of ZERUST® industrial rust corrosion inhibiting packaging
products, oil and gas products and Natur-Tec® products. For
the nine months ended May 31, 2018, consolidated net sales
increased 28.0% to $36,681,000, compared to $28,668,000 for the
same period last fiscal year.
The following tables set forth NTIC’s net sales by product
category for the three and nine months ended May 31, 2018 and May
31, 2017, by segment:
|
Three Months Ended |
|
May 31, 2018 |
|
% of NetSales |
|
May 31, 2017 |
|
% of NetSales |
|
%Change |
ZERUST® industrial net
sales |
$ |
8,947,847 |
|
69.2 |
% |
|
$ |
7,170,802 |
|
70.1 |
% |
|
24.8 |
% |
ZERUST® joint venture
net sales |
|
879,324 |
|
6.8 |
% |
|
|
862,136 |
|
8.4 |
% |
|
2.0 |
% |
ZERUST® oil & gas
net sales |
|
555,713 |
|
4.3 |
% |
|
|
335,549 |
|
3.3 |
% |
|
65.6 |
% |
Total
ZERUST® net sales |
$ |
10,382,884 |
|
80.3 |
% |
|
$ |
8,368,487 |
|
81.9 |
% |
|
24.1 |
% |
Total Natur-Tec®
sales |
|
2,540,953 |
|
19.7 |
% |
|
|
1,854,532 |
|
18.1 |
% |
|
37.0 |
% |
Total net
sales |
$ |
12,923,837 |
|
100.0 |
% |
|
$ |
10,223,019 |
|
100.0 |
% |
|
26.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
May 31, 2018 |
|
% of NetSales |
|
May 31, 2017 |
|
% of NetSales |
|
%Change |
ZERUST® industrial net
sales |
$ |
26,482,430 |
|
72.2 |
% |
|
$ |
20,277,892 |
|
70.7 |
% |
|
30.6 |
% |
ZERUST® joint venture
net sales |
|
2,201,077 |
|
6.0 |
% |
|
|
2,115,511 |
|
7.4 |
% |
|
4.0 |
% |
ZERUST® oil & gas
net sales |
|
1,418,573 |
|
3.9 |
% |
|
|
1,287,789 |
|
4.5 |
% |
|
10.2 |
% |
Total
ZERUST® net sales |
$ |
30,102,080 |
|
82.1 |
% |
|
$ |
23,681,192 |
|
82.6 |
% |
|
27.1 |
% |
Total Natur-Tec®
sales |
|
6,578,770 |
|
17.9 |
% |
|
|
4,986,753 |
|
17.4 |
% |
|
31.9 |
% |
Total net
sales |
$ |
36,680,850 |
|
100.0 |
% |
|
$ |
28,667,945 |
|
100.0 |
% |
|
28.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NTIC’s joint venture operating income increased 20.0% to
$3,755,000 during the three months ended May 31, 2018, compared to
joint venture operating income of $3,128,000 during the three
months ended May 31, 2017. 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
21.4% to a record $31,481,000 during the three months ended May 31,
2018, compared to $25,935,000 for the three months ended May 31,
2017. Year-to-date, NTIC’s joint venture operating income
increased 25.7% to $10,418,000, compared to joint venture operating
income of $8,285,000 during the nine months ended May 31,
2017. Net sales of NTIC’s joint ventures increased 23.4% to
$90,200,000 during the nine months ended May 31, 2018, compared to
$73,098,000 for the nine months ended May 31, 2017.
Operating expenses, as a percent of net sales, for the third
quarter of fiscal 2018 were 43.6%, compared to 47.4% for the same
period last fiscal year. This reduction was primarily due to
higher net sales and reduced research and development expenses,
partially offset by higher selling, and general and administrative
expenses. Year-to-date, operating expenses, as a percent of
net sales, were 45.3%, compared to 51.7% for the same period last
fiscal year.
Net income attributable to NTIC for the third quarter of fiscal
2018 increased 58.4% to $2,143,000, or $0.46 per diluted share,
from $1,352,000, or $0.30 per diluted share for the same period
last fiscal year. For the nine months ended May 31, 2018, net
income attributable to NTIC increased 123.8% to $4,559,000, or
$0.98 per diluted share, from $2,037,000, or $0.45 per diluted
share for the same period last fiscal year.
NTIC’s balance sheet remains strong, with no debt, and working
capital of $22,812,000 at May 31, 2018, including $4,610,000 in
cash and cash equivalents and $3,283,000 in available for sale
securities, compared to $21,173,000 of working capital at August
31, 2017, including $6,360,000 in cash and cash equivalents and
$3,767,000 in available for sale securities.
At May 31, 2018, the company had $22,413,000 of investments in
joint ventures, of which over $12,508,000 or 55.8%, is cash, with
the remaining balance mostly made up of other working
capital.
Mr. Lynch added, “We remain confident in the continued strength
of our business model and financial performance. Third
quarter financial results reflect the success of our growth
initiatives combined with cost control measures. Oil and gas
sales demonstrated continued year-over-year improvement, and fourth
quarter oil and gas sales are expected to ramp up considerably due
to a significant order for new pipeline corrosion control
products. We remain on track to achieve our long-standing
fiscal 2019 goals of exceeding $60 million in net sales and $2.00
per diluted share in net income attributable to NTIC.”
Outlook
For the fiscal year ending August 31, 2018, NTIC is increasing
its net sales expectations to be in the range of $49.5 million to
$50.5 million, compared to its previous net sales expectations of
$48.0 million to $49.0 million. The company is also
increasing its earnings guidance, and now anticipates net income
attributable to NTIC to be in the range of $6.7 million to $7.0
million, or $1.43 to $1.48 per diluted share, which includes the
$0.15 per diluted share one-time charge associated with U.S. tax
reform. This compares to previous earnings guidance of $6.5 million
to $6.8 million, or $1.40 to $1.45 per diluted share.
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
on Thursday, July 12, 2018, to review its results of operations for
the third quarter of fiscal 2018 and its 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 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
8685248.
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 future success of its oil and gas business and
overall business model, ability to achieve its fiscal 2019 goals,
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, 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
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, 2017 filed by NTIC with the SEC on November
21, 2017 and its most recent quarterly report on Form 10-Q for the
quarter ended February 28, 2018 filed by NTIC with the SEC on April
16, 2018. 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, 2018 AND 2017
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
May 31, 2018 |
|
May 31, 2017 |
|
May 31, 2018 |
|
May 31, 2017 |
|
NET
SALES: |
|
|
|
|
|
|
|
|
Net sales, excluding joint ventures |
$ |
12,044,513 |
|
|
$ |
9,360,883 |
|
|
$ |
34,479,773 |
|
|
$ |
26,552,434 |
|
|
Net sales, to joint ventures |
|
879,324 |
|
|
|
862,136 |
|
|
|
2,201,077 |
|
|
|
2,115,511 |
|
|
Total net sales |
|
12,923,837 |
|
|
|
10,223,019 |
|
|
|
36,680,850 |
|
|
|
28,667,945 |
|
|
Cost of goods
sold |
|
8,592,366 |
|
|
|
6,774,001 |
|
|
|
24,493,672 |
|
|
|
19,256,953 |
|
|
Gross profit |
|
4,331,471 |
|
|
|
3,449,018 |
|
|
|
12,187,178 |
|
|
|
9,410,992 |
|
|
|
|
|
|
|
|
|
|
|
JOINT VENTURE
OPERATIONS: |
|
|
|
|
|
|
|
|
Equity in income
of joint ventures |
|
2,246,066 |
|
|
|
1,686,016 |
|
|
|
5,793,391 |
|
|
|
4,343,159 |
|
|
Fees for
services provided to joint ventures |
|
1,508,500 |
|
|
|
1,442,048 |
|
|
|
4,624,532 |
|
|
|
3,941,667 |
|
|
Total
joint venture operations |
|
3,754,566 |
|
|
|
3,128,064 |
|
|
|
10,417,923 |
|
|
|
8,284,826 |
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
Selling
expenses |
|
2,784,694 |
|
|
|
2,430,824 |
|
|
|
8,028,279 |
|
|
|
6,716,390 |
|
|
General and
administrative expenses |
|
1,987,785 |
|
|
|
1,682,669 |
|
|
|
6,012,746 |
|
|
|
5,996,977 |
|
|
Research and
development expenses |
|
860,347 |
|
|
|
733,651 |
|
|
|
2,581,824 |
|
|
|
2,118,210 |
|
|
Total
operating expenses |
|
5,632,826 |
|
|
|
4,847,144 |
|
|
|
16,622,849 |
|
|
|
14,831,577 |
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
2,453,211 |
|
|
|
1,729,938 |
|
|
|
5,982,252 |
|
|
|
2,864,241 |
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME |
|
35,630 |
|
|
|
10,996 |
|
|
|
84,569 |
|
|
|
19,075 |
|
|
INTEREST EXPENSE |
|
(3,139 |
) |
|
|
(7,409 |
) |
|
|
(14,007 |
) |
|
|
(15,502 |
) |
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME
TAX EXPENSE |
|
2,485,702 |
|
|
|
1,733,525 |
|
|
|
6,052,814 |
|
|
|
2,867,814 |
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
181,683 |
|
|
|
237,801 |
|
|
|
1,128,583 |
|
|
|
480,423 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
2,304,019 |
|
|
|
1,495,724 |
|
|
|
4,924,231 |
|
|
|
2,387,391 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NON- CONTROLLING INTERESTS |
|
161,267 |
|
|
|
143,308 |
|
|
|
365,006 |
|
|
|
350,370 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC |
$ |
2,142,752 |
|
|
$ |
1,352,416 |
|
|
$ |
4,559,225 |
|
|
$ |
2,037,021 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE
TO NTIC PER COMMON SHARE: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.47 |
|
|
$ |
0.30 |
|
|
$ |
1.00 |
|
|
$ |
0.45 |
|
|
Diluted |
$ |
0.46 |
|
|
$ |
0.30 |
|
|
$ |
0.98 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES |
|
|
|
|
|
|
|
|
ASSUMED
OUTSTANDING: |
|
|
|
|
|
|
|
|
Basic |
|
4,539,353 |
|
|
|
4,526,771 |
|
|
|
4,538,838 |
|
|
|
4,528,523 |
|
|
Diluted |
|
4,707,032 |
|
|
|
4,591,527 |
|
|
|
4,663,847 |
|
|
|
4,571,395 |
|
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.10 |
|
|
$ |
0.00 |
|
|
$ |
0.30 |
|
|
$ |
0.00 |
|
|
|
|
NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS AS OF MAY 31, 2018 (UNAUDITED)AND AUGUST
31, 2017 (AUDITED)
|
|
|
May 31, 2018 |
|
August 31, 2017 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,610,325 |
|
|
$ |
6,360,201 |
|
|
Available for sale securities |
|
|
3,282,915 |
|
|
|
3,766,984 |
|
|
Receivables: |
|
|
|
|
|
Trade excluding joint ventures, less allowance for doubtful
accounts of |
|
|
|
|
|
$50,000 at May 31, 2018 and $40,000 at August 31,
2017 |
|
|
8,692,708 |
|
|
|
5,912,631 |
|
|
Trade joint ventures |
|
|
597,805 |
|
|
|
691,752 |
|
|
Fees for services provided to joint ventures |
|
|
1,352,249 |
|
|
|
1,302,944 |
|
|
Income taxes |
|
|
369,136 |
|
|
|
137,256 |
|
|
Inventories |
|
|
9,174,743 |
|
|
|
7,456,552 |
|
|
Prepaid expenses |
|
|
1,081,190 |
|
|
|
439,298 |
|
|
Total current assets |
|
|
29,161,071 |
|
|
|
26,067,618 |
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
7,233,307 |
|
|
|
7,359,662 |
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
Investments in joint ventures |
|
|
22,412,792 |
|
|
|
20,035,074 |
|
|
Deferred income taxes |
|
|
1,056,565 |
|
|
|
1,756,565 |
|
|
Patents and trademarks, net |
|
|
1,196,222 |
|
|
|
1,322,089 |
|
|
Other |
|
|
153,846 |
|
|
|
71,685 |
|
|
Total other assets |
|
|
24,819,425 |
|
|
|
23,185,413 |
|
|
Total assets |
|
$ |
61,213,803 |
|
|
$ |
56,612,693 |
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable |
|
$ |
3,316,169 |
|
|
$ |
2,676,610 |
|
|
Income taxes payable |
|
|
112,686 |
|
|
|
— |
|
|
Accrued liabilities: |
|
|
|
|
|
Payroll and related benefits |
|
|
1,804,451 |
|
|
|
1,540,386 |
|
|
Other |
|
|
1,115,595 |
|
|
|
677,621 |
|
|
Total current liabilities |
|
|
6,348,901 |
|
|
|
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
15,000,000 |
|
|
|
|
|
Shares as of May 31, 2018 and 10,000,000 shares as of August 31,
2017; issued and outstanding 4,541,303 and 4,535,018,
respectively |
|
|
90,826 |
|
|
|
90,700 |
|
|
Additional paid-in capital |
|
|
14,516,510 |
|
|
|
14,163,509 |
|
|
Retained earnings |
|
|
40,275,326 |
|
|
|
37,077,483 |
|
|
Accumulated other comprehensive loss |
|
|
(3,058,672 |
) |
|
|
(2,471,064 |
) |
|
Stockholders’ equity |
|
|
51,823,990 |
|
|
|
48,860,628 |
|
|
Non-controlling
interest |
|
|
3,040,912 |
|
|
|
2,857,448 |
|
|
Total equity |
|
|
54,864,902 |
|
|
|
51,718,076 |
|
|
Total liabilities and equity |
|
$ |
61,213,803 |
|
|
$ |
56,612,693 |
|
|
|
|
|
|
|
Investor and Media Contacts: Matthew Wolsfeld,
CFO
NTIC
(763) 225-6600
Northern Technologies (NASDAQ:NTIC)
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From Aug 2024 to Sep 2024
Northern Technologies (NASDAQ:NTIC)
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From Sep 2023 to Sep 2024