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 second quarter of fiscal
2019.
Second quarter fiscal 2019 highlights include
(with growth rates compared to second quarter fiscal
2018):
- Consolidated net sales increased 9.0% to $13,315,000
- ZERUST® product net sales decreased 10.6% to $9,108,000
- ZERUST® oil and gas sales decreased 38.3% to $357,000
- Natur-Tec® product net sales increased 108.0% to a quarterly
record $4,207,000
- Natur-Tec ® sales represent 31.6% of second quarter sales,
compared to 16.6% for the same period last fiscal year
- Joint venture operating income decreased 7.7% to
$3,152,000
- Net income attributable to NTIC increased 5.2% to
$1,402,000
- Net income attributable to NTIC was $0.30 per diluted share, an
increase of 3.9%
“North American ZERUST® industrial and NTIC
China sales continued to be soft during our fiscal 2019 second
quarter, due to a decelerating global economy compounded by ongoing
high-profile trade disputes like the one between the U.S. and
China,” said G. Patrick Lynch, President and Chief Executive
Officer of NTIC. “Nevertheless, net sales grew 9.0% thanks to the
record contribution and growth of Natur-Tec sales. Natur-Tec
benefitted from strong global demand for alternatives to
conventional plastics, and year-to-date Natur-Tec represented 32%
of our total sales, compared to 17% last fiscal year. Our
second quarter financial results demonstrate the strength of the
diversified foundation we have created spanning products, end
markets and geography.”
“The slower than expected start to fiscal 2019,
caused by economic uncertainty during the first half of our fiscal
year, is causing us to adjust our full-year guidance for fiscal
2019. As a result, we now expect fiscal 2019 sales to be
between $58 million and $60 million and earnings to be between
$1.70 and $1.80 per diluted share. We are closely monitoring
our markets for any further signs of weakness, but currently expect
the second half of our fiscal year will show accelerating sales and
earnings as a result of better global demand for our ZERUST®
industrial products and our strong pipeline of ZERUST® oil &
gas projects. We also anticipate continued strength from our
Natur-Tec compostable plastic solutions,” concluded Mr.
Lynch.
NTIC’s consolidated net sales increased 9.0% to
$13,315,000 during the three months ended February 28, 2019,
compared to $12,214,000 for the three months ended February 28,
2018. This increase was a result of significant global demand
for the company’s Natur-Tec® compostable products. For the
first half of fiscal 2019, consolidated net sales increased 15.4%
to $27,410,000, compared to $23,757,000 for the same period last
fiscal year.
The following table sets forth NTIC’s net sales
by product category for the three and six months ended February 28,
2019, and February 28, 2018, by segment:
|
Three Months Ended |
|
February 28,2019 |
|
% of NetSales |
|
|
February 28,2018 |
|
% of Net Sales |
|
%Change |
ZERUST® industrial net
sales |
$ |
8,042,154 |
|
60.4 |
% |
|
$ |
8,798,319 |
|
72.0 |
% |
|
(8.6 |
)% |
ZERUST® joint venture net
sales |
|
708,954 |
|
5.3 |
% |
|
|
814,122 |
|
6.7 |
% |
|
(12.9 |
)% |
ZERUST® oil & gas net
sales |
|
357,287 |
|
2.7 |
% |
|
|
579,018 |
|
4.7 |
% |
|
(38.3 |
)% |
Total ZERUST® net
sales |
$ |
9,108,395 |
|
68.4 |
% |
|
$ |
10,191,459 |
|
83.4 |
% |
|
(10.6 |
)% |
Total Natur-Tec®
sales |
|
4,207,009 |
|
31.6 |
% |
|
|
2,022,516 |
|
16.6 |
% |
|
108.0 |
% |
Total net
sales |
$ |
13,315,404 |
|
100.0 |
% |
|
$ |
12,213,975 |
|
100.0 |
% |
|
9.0 |
% |
|
Six Months Ended |
|
February 28, 2019 |
|
% of Net Sales |
|
February 28,
2018 |
|
% of Net Sales |
|
% Change |
ZERUST® industrial net
sales |
$ |
16,637,968 |
|
60.7 |
% |
|
$ |
17,534,583 |
|
73.8 |
% |
|
(5.1 |
)% |
ZERUST® joint venture net
sales |
|
1,192,141 |
|
4.4 |
% |
|
|
1,321,753 |
|
5.6 |
% |
|
(9.8 |
)% |
ZERUST® oil & gas net
sales |
|
1,343,460 |
|
4.9 |
% |
|
|
862,860 |
|
3.6 |
% |
|
55.7 |
% |
Total ZERUST® net
sales |
$ |
19,173,569 |
|
70.0 |
% |
|
$ |
19,719,196 |
|
83.0 |
% |
|
(2.8 |
)% |
Total Natur-Tec®
sales |
|
8,235,887 |
|
30.0 |
% |
|
|
4,037,817 |
|
17.0 |
% |
|
104.0 |
% |
Total net
sales |
$ |
27,409,546 |
|
100.0 |
% |
|
$ |
23,757,013 |
|
100.0 |
% |
|
15.4 |
% |
NTIC’s joint venture operating income was
$3,152,000 during the three months ended February 28, 2019,
compared to joint venture operating income of $3,415,000 during the
three months ended February 28, 2018. This $263,000 decrease
was attributable to a decline 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 were $27,750,000 during the three months ended February 28,
2019, compared to $30,221,000 for the three months ended February
28, 2018. Year-to-date, NTIC’s joint venture operating income
was $6,585,000, compared to joint venture operating income of
$6,663,000 during the six months ended February 28, 2018. Net
sales of NTIC’s joint ventures were $58,230,000 during the six
months ended February 28, 2019, compared to $58,719,000 for the six
months ended February 28, 2018.
Operating expenses, as a percent of net sales,
for the second quarter of fiscal 2019 were 40.5%, compared to 44.0%
for the same period last fiscal year. This reduction was
primarily a result of operating leverage on increased net sales as
total operating expenses in the second quarter remained flat with
the same period last fiscal year. Year-to-date, operating
expenses, as a percent of net sales, were 42.2%, compared to 46.3%
for the same period last fiscal year.
Net income attributable to NTIC for the second
quarter of fiscal 2019 increased 5.2% to $1,402,000, or $0.30 per
diluted share, from $1,333,000, or $0.29 per diluted share for the
same period last fiscal year. Net income attributable to NTIC
for the first half of fiscal 2019 increased 20.0% to $2,898,000, or
$0.61 per diluted share, from $2,416,000, or $0.52 per diluted
share, for the same period last fiscal year.
NTIC’s balance sheet remains strong, with no
debt, and working capital of $24,180,000 at February 28, 2019,
including $4,936,000 in cash and cash equivalents and $1,227,000 in
available for sale securities, compared to $22,838,000 at August
31, 2018, including $4,163,000 in cash and cash equivalents and
$3,300,000 in available for sale securities.
At February 28, 2019, the company had
$24,418,000 of investments in joint ventures, of which over
$12,800,000, or 52%, was cash, with the remaining balance mostly
made up of other working capital.
Outlook
For the fiscal year ending August 31, 2019, NTIC
now expects net sales to be in the range of $58.0 million to $60.0
million compared to previous guidance of $60.0 million to $61.5
million. The company also anticipates net income attributable
to NTIC to now be in the range of $8.0 million to $8.5 million, or
$1.70 and $1.80 per diluted share, compared to previous guidance of
$9.4 million to $9.8 million, or $2.00 and $2.10 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 to review its results of operations for the
second quarter of fiscal 2019 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
https://ntic.gcs-web.com/events-presentations 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 3478925.
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, anticipated accelerating sales
and earnings during the second half of the fiscal year and
anticipated continued strength from Natur-Tec products, 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; the effect of economic uncertainty and
trade disputes; 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 the 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 and tariffs,
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,
2018 and subsequent quarterly reports on Form 10-Q. 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 FEBRUARY 28, 2019
(UNAUDITED)AND AUGUST 31, 2018
(AUDITED)
|
|
February 28, 2019 |
|
August 31, 2018 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash
and cash equivalents |
$ |
4,936,377 |
|
|
$ |
4,163,023 |
|
|
Available for sale securities |
|
1,227,268 |
|
|
|
3,300,110 |
|
|
Receivables: |
|
|
|
|
Trade excluding joint ventures, less allowance for doubtful
accounts |
|
|
|
|
of $65,000 at
February 28, 2019 and $50,000 at August 31, 2018 |
|
9,329,725 |
|
|
|
9,920,108 |
|
|
Trade joint ventures |
|
679,349 |
|
|
|
761,506 |
|
|
Fees for services provided to joint ventures |
|
1,338,493 |
|
|
|
1,357,255 |
|
|
Income taxes |
|
515,448 |
|
|
|
273,333 |
|
|
Inventories |
|
11,304,475 |
|
|
|
9,130,861 |
|
|
Prepaid expenses |
|
1,457,059 |
|
|
|
1,661,577 |
|
|
Total current assets |
|
30,788,194 |
|
|
|
30,567,773 |
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
7,229,398 |
|
|
|
7,168,826 |
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
Investments in joint ventures |
|
24,418,491 |
|
|
|
22,950,995 |
|
|
Deferred income taxes |
|
1,420,791 |
|
|
|
1,551,536 |
|
|
Patents and trademarks, net |
|
1,084,313 |
|
|
|
1,156,257 |
|
|
Other |
|
153,846 |
|
|
|
153,849 |
|
|
Total other assets |
|
27,077,441 |
|
|
|
25,812,637 |
|
|
Total assets |
$ |
65,095,033 |
|
|
$ |
63,549,236 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
Accounts payable |
$ |
4,307,450 |
|
|
$ |
3,905,034 |
|
|
Income taxes payable |
|
8,555 |
|
|
|
70,892 |
|
|
Accrued liabilities: |
|
|
|
|
Payroll and related benefits |
|
1,137,209 |
|
|
|
2,747,303 |
|
|
Other |
|
1,154,948 |
|
|
|
1,006,953 |
|
|
Total current liabilities |
|
6,608,162 |
|
|
|
7,730,182 |
|
|
|
|
|
|
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; issued and outstanding 4,542,177 and 4,541,303,
respectively |
|
90,844 |
|
|
|
90,826 |
|
|
Additional paid-in capital |
|
15,353,400 |
|
|
|
14,619,777 |
|
|
Retained earnings |
|
43,771,843 |
|
|
|
41,963,341 |
|
|
Accumulated other comprehensive loss |
|
(3,742,258 |
) |
|
|
(3,597,199 |
) |
|
Stockholders’
equity |
|
55,473,829 |
|
|
|
53,076,745 |
|
|
Non-controlling
interest |
|
3,013,042 |
|
|
|
2,742,309 |
|
|
Total
equity |
|
58,486,871 |
|
|
|
55,819,054 |
|
|
Total
liabilities and equity |
$ |
65,095,033 |
|
|
$ |
63,549,236 |
|
|
|
|
|
|
NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)FOR THE THREE AND SIX MONTHS
ENDED FEBRUARY 28, 2019 AND 2018
|
Three Months Ended |
|
Six Months Ended |
|
February 28, 2019 |
|
February 28, 2018 |
|
February 28, 2019 |
|
February 28, 2018 |
NET
SALES: |
|
|
|
|
|
|
|
Net sales, excluding joint ventures |
$ |
12,606,449 |
|
|
$ |
11,399,853 |
|
|
$ |
26,217,314 |
|
|
$ |
22,435,260 |
|
Net sales, to joint ventures |
|
708,955 |
|
|
|
814,122 |
|
|
|
1,192,142 |
|
|
|
1,321,753 |
|
Total net sales |
|
13,315,404 |
|
|
|
12,213,975 |
|
|
|
27,409,456 |
|
|
|
23,757,013 |
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
9,284,099 |
|
|
|
8,012,836 |
|
|
|
18,745,236 |
|
|
|
15,901,306 |
|
Gross profit |
|
4,031,305 |
|
|
|
4,201,139 |
|
|
|
8,664,220 |
|
|
|
7,855,707 |
|
|
|
|
|
|
|
|
|
JOINT
VENTURE OPERATIONS: |
|
|
|
|
|
|
|
Equity in income from joint ventures |
|
1,715,216 |
|
|
|
1,805,997 |
|
|
|
3,719,378 |
|
|
|
3,547,325 |
|
Fees for services provided to joint ventures |
|
1,436,774 |
|
|
|
1,608,890 |
|
|
|
2,865,209 |
|
|
|
3,116,032 |
|
Total joint venture operations |
|
3,151,990 |
|
|
|
3,414,887 |
|
|
|
6,584,587 |
|
|
|
6,663,357 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Selling expenses |
|
2,505,081 |
|
|
|
2,643,636 |
|
|
|
5,316,175 |
|
|
|
5,243,585 |
|
General and administrative expenses |
|
1,963,537 |
|
|
|
1,805,216 |
|
|
|
4,459,334 |
|
|
|
4,024,961 |
|
Research and development expenses |
|
927,537 |
|
|
|
922,746 |
|
|
|
1,799,694 |
|
|
|
1,721,477 |
|
Total operating expenses |
|
5,396,155 |
|
|
|
5,371,598 |
|
|
|
11,575,203 |
|
|
|
10,990,023 |
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
1,787,140 |
|
|
|
2,244,428 |
|
|
|
3,673,604 |
|
|
|
3,529,041 |
|
|
|
|
|
|
|
|
|
INTEREST INCOME |
|
15,122 |
|
|
|
24,883 |
|
|
|
27,909 |
|
|
|
48,939 |
|
INTEREST EXPENSE |
|
(3,835 |
) |
|
|
(5,779 |
) |
|
|
(6,192 |
) |
|
|
(10,868 |
) |
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAX EXPENSE |
|
1,798,427 |
|
|
|
2,263,532 |
|
|
|
3,695,321 |
|
|
|
3,567,112 |
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
246,371 |
|
|
|
841,909 |
|
|
|
502,074 |
|
|
|
946,900 |
|
|
|
|
|
|
|
|
|
NET INCOME |
|
1,552,056 |
|
|
|
1,421,623 |
|
|
|
3,193,247 |
|
|
|
2,620,212 |
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO NON-
CONTROLLING INTERESTS |
|
150,488 |
|
|
|
88,776 |
|
|
|
294,620 |
|
|
|
203,739 |
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO NTIC |
$ |
1,401,568 |
|
|
$ |
1,332,847 |
|
|
$ |
2,898,627 |
|
|
$ |
2,416,473 |
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO NTIC PER COMMON
SHARE: |
|
|
|
|
|
|
|
Basic |
$ |
0.31 |
|
|
$ |
0.29 |
|
|
$ |
0.64 |
|
|
$ |
0.53 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.29 |
|
|
$ |
0.61 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES |
|
|
|
|
|
|
|
ASSUMED OUTSTANDING: |
|
|
|
|
|
|
|
Basic |
|
4,542,177 |
|
|
|
4,537,408 |
|
|
|
4,542,175 |
|
|
|
4,537,368 |
|
Diluted |
|
4,723,930 |
|
|
|
4,673,338 |
|
|
|
4,731,608 |
|
|
|
4,641,042 |
|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
$ |
0.12 |
|
|
$ |
0.10 |
|
|
$ |
0.24 |
|
|
$ |
0.20 |
|
Investor and Media Contacts:Matthew Wolsfeld,
CFO
NTIC
(763) 225-6600
Northern Technologies (NASDAQ:NTIC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Northern Technologies (NASDAQ:NTIC)
Historical Stock Chart
From Apr 2023 to Apr 2024