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Northern Technologies International Corporation Reports Sales and Earnings for Third Quarter Fiscal 2013



Northern Technologies International Corporation Reports Sales and Earnings for
Third Quarter Fiscal 2013

MINNEAPOLIS, July 11, 2013 (GLOBE NEWSWIRE) -- Northern Technologies
International Corporation (Nasdaq:NTIC) today reported its financial results
for third quarter of fiscal 2013.

NTIC's consolidated net sales decreased 24.7% and 6.8% during the three and
nine months ended May 31, 2013 compared to the three and nine months ended May
31, 2012, respectively. These decreases were primarily a result of decreases
in sales of ZERUST® rust and corrosion inhibiting packaging products and
services in Brazil. Zerust Brazil recorded a $2.3 million order during the
three months ended May 31, 2012 related to product sales to Petroleo
Brasileiro S.A. (Petrobras) and did not have any sales to Petrobras during the
three months ended May 31, 2013. As previously disclosed, NTIC believes that
Petrobras intends to place a number of smaller orders during the remainder of
fiscal 2013 and fiscal 2014, rather than one large order as Petrobras did
during the three months ended May 31, 2012.

"In the third quarter of fiscal 2013, NTIC continued to enjoy top-line sales
growth compared to each of the three consecutive prior quarters, as we
expanded our supply to several large new customers in both our ZERUST®
industrial as well as our Natur-Tec® businesses. During the quarter, we were
able to bring start-up costs under control that we previously incurred with
the production ramp up of a broad range of new products and products for new
customers and also implemented several other initiatives that we anticipate
will improve our margins overall," said G. Patrick Lynch, President and Chief
Executive Officer of NTIC. "Overall earnings from our international joint
venture operations also improved significantly compared to the first and
second quarters of fiscal 2013," continued Mr. Lynch, "despite continued
uncertainty in both Europe and Asia."

During the three and nine months ended May 31, 2013, 92.2% and 90.9% of NTIC's
consolidated net sales, respectively, were derived from sales of ZERUST®
products and services, which decreased 25.0% and 8.1% to $5,418,271 and
$14,923,966 during the three and nine months ended May 31, 2013, respectively,
compared to $7,220,258 and $16,243,683 during the three and nine months ended
May 31, 2012, respectively, due primarily to decreases in sales of ZERUST®
products and services in Brazil as noted above. NTIC has strategically focused
its sales efforts for ZERUST® products and services on customers with sizeable
corrosion problems in industry sectors that offer sizable growth
opportunities, including the oil and gas sector. NTIC's consolidated net sales
for the three and nine months ended May 31, 2013 included $567,615 and
$1,699,084, respectively, of sales made by Zerust Brazil, and of those sales,
$0 and $189,642, respectively, in sales were made to the oil and gas industry
in Brazil. Overall demand for ZERUST® products and services depends heavily on
the overall health of the markets in which NTIC sells its products, including
in particular the automotive market.

Mr. Lynch added, "We continue to add oil and gas industry companies to our
list of customers in several countries, including the United States. These new
orders and implementations are primarily for storage tank bottom protection
systems, and we expect to see initial revenues recognized for these in the
fourth quarter of fiscal 2013 as well as the first quarter or fiscal 2014.
With regard to our Natur-Tec® products, we are currently in the process of
improving our supply chain in order to improve our overall margins."

During the three and nine months ended May 31, 2013, 7.8% and 9.1%,
respectively, of NTIC's consolidated net sales were derived from sales of
Natur-Tec® products compared to 7.5% and 7.8% during the three and nine months
ended May 31, 2012, respectively. Net sales of Natur-Tec® products decreased
21.5% during the three months ended May 31, 2013 compared to the three months
ended May 31, 2012 due primarily to variable ordering patterns by distributors
and sales agents and a distributor change. Because of the typical size of
individual orders and overall size of NTIC's net sales derived from sales of
Natur-Tec® products, the timing of one or more orders can affect materially
NTIC's quarterly sales of Natur-Tec® products and the comparisons to prior
year quarters. Net sales of Natur-Tec® products increased 9.0% during the nine
months ended May 31, 2013 compared to the nine months ended May 31, 2012 due
primarily to increased sales to NTIC's Natur-Tec® distributors in the United
States. Additionally, NTIC continues to target key regional and national
retailers through independent sales agents. Demand for the Natur-Tec® products
depends primarily on market acceptance and the reach of NTIC's distribution
network.

Cost of goods sold as a percentage of net sales increased to 69.0% and 69.3%
during the three and nine months ended May 31, 2013 compared to 53.1% and
61.5% during the three and nine months ended May 31, 2012 primarily as a
result of increased sales during the prior year periods of ZERUST® products
for the oil and gas industry which carry higher margins than other ZERUST®
products and increased production expenses during the current year periods
associated with the production and shipping of ZERUST® products to a new
customer. The increase in production expenses is anticipated to be temporary
and should normalize during the fourth quarter of fiscal 2013.

NTIC's income from joint venture operations increased 31.3% and 17.6% during
the three and nine months ended May 31, 2013 compared to respective prior
fiscal year periods.

NTIC's equity in income of joint ventures decreased 21.0% and 15.3% to
$1,440,335 and $3,733,069, respectively, during the three and nine months
ended May 31, 2013 compared to $1,822,972 and $4,405,327 during the three and
nine months ended May 31, 2012, respectively. These decreases were primarily a
result of the consolidation of NTI Asian LLC (NTI Asean), which was included
in the current fiscal year periods, but not in the prior fiscal year
periods. NTIC Asean is NTIC's majority owned joint venture holding company for
NTIC's joint venture investments in the Association of Southeast Asian Nations
(ASEAN) region.

NTIC recognized a 161.2% and 59.2% increase in fees for services provided to
joint ventures during the three and nine months ended May 31, 2013 compared to
the three and nine months ended May 31, 2012, respectively. These increases
were primarily a result of the consolidation of fees for services earned by
NTI Asean which are included in the current fiscal year periods, but not in
the prior fiscal year periods. Fees for services provided to joint ventures
are a function of the net sales of NTIC's joint ventures which were
$28,541,576 and $82,788,711 during the three and nine months ended May 31,
2013 compared to $28,954,210 and $83,746,872 for the three and nine months
ended May 31, 2012, respectively. Total net sales of NTIC's joint ventures
were adversely affected in part by the European economic slowdown, which NTIC
believes adversely affected the net sales of NTIC's European joint ventures,
as well as certain of NTIC's other non-European joint ventures, and the
weakening of the EURO and other currencies compared to the U.S. dollar. 

NTIC's total operating expenses increased 4.5% to $10,966,765 during the nine
months ended May 31, 2013 compared to the nine months ended May 31, 2012. This
increase was primarily the result of increases in selling expenses and
expenses incurred in support of joint ventures, and overall reflected NTIC's
efforts to support its new business efforts.

NTIC expenses all costs related to product research and development as
incurred. NTIC incurred $2,853,250 and $2,856,536 of expense during the nine
months ended May 31, 2013 and 2012, respectively, in connection with its
research and development activities. These represent net amounts after being
reduced by reimbursements related to certain research and development
contracts. Such reimbursements totaled $206,046 and $297,258 for the nine
months ended May 31, 2013 and 2012, respectively. NTIC anticipates that it
will spend between $3,800,000 and $4,000,000 in total during fiscal 2013 on
research and development activities related to its new technologies. This
estimate is a net range after being reduced by anticipated reimbursements
related to certain research and development contracts.

Net income attributable to NTIC decreased 36.2% to $927,112, or $0.21 per
diluted common share, for the three months ended May 31, 2013 compared to
$1,454,037, or $0.33 per diluted common share, for the three months ended May
31, 2012. Net income attributable to NTIC decreased 42.0% to $1,751,144, or
$0.39 per diluted common share, for the nine months ended May 31, 2013
compared to $3,018,987, or $0.68 per diluted common share, for the nine months
ended May 31, 2012. These decreases were primarily the result of decreases in
gross profit, partially offset by increases in fees for services provided to
joint ventures.  NTIC anticipates that its quarterly net income will remain
subject to significant volatility primarily due to the sales performance of
its joint ventures, sales of its ZERUST® products and services into the oil
and gas industry, and sales of Natur-Tec® bioplastics products. Each of these
fluctuates more on a quarterly basis than the traditional ZERUST® business in
North America. 

NTIC anticipates that its net income attributable to NTIC will be positively
affected during fourth quarter of fiscal 2013 as a result of its receipt of
$500,000 and anticipated receipt of an additional $250,000 in life insurance
proceeds as a result of the death of a former NTIC officer.  

NTIC's working capital was $13,136,534 at May 31, 2013, including $3,176,157
in cash and cash equivalents, compared to $10,060,081 at August 31, 2012,
including $4,137,547 in cash and cash equivalents. 

Outlook

NTIC continues to expect that its net sales will range between $24.0 million
and $25.0 million, inclusive of sales made by NTIC's majority-owned subsidiary
in Brazil, for the fiscal year ending August 31, 2013. However, as a result of
the receipt of life insurance proceeds during fourth quarter of fiscal 2013,
NTIC is increasing its earnings guidance by $600,000, or $0.13 per share, and
now expects that its net income attributable to NTIC to range between $3.3
million and $3.6 million, or between $0.75 and $0.81 per diluted common share,
for the fiscal year ending August 31, 2013.

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 third quarter of fiscal 2013 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) 670-9779 and the confirmation code is
13017497.

About Northern Technologies International Corporation

Northern Technologies International Corporation develops and markets
proprietary environmentally beneficial products and services in over 55
countries either directly or via a network of majority-owned 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 35 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 resin compounds 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 future financial performance and other statements that can be
identified by words such as "believes," "anticipates," "expects," "intends,"
"continue," "potential," "outlook," "will," "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: 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; risks related
to 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; 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
Petrobras and other customers 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; 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 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 MAY 31, 2013 (UNAUDITED) 
AND AUGUST 31, 2012
                                                                
                                                  May 31, 2013 August 31, 2012
ASSETS                                                          
CURRENT ASSETS:                                                 
Cash and cash equivalents                         $3,176,157   $4,137,547
Receivables:                                                    
Trade excluding joint ventures, less allowance
for doubtful accounts of $20,000 at May 31, 2013  2,801,488    2,516,961
and August 31, 2012
Trade joint ventures                              1,120,085    734,543
Fees for services provided to joint ventures      2,459,487    1,316,933
Income taxes                                      174,092      58,129
Inventories                                       5,216,976    4,151,197
Prepaid expenses                                  352,395      548,331
Deferred income taxes                             596,085      596,085
Total current assets                              15,896,765   14,059,726
                                                                
 PROPERTY AND EQUIPMENT, NET                      5,126,133    4,288,618
                                                                
OTHER ASSETS:                                                   
Investments in joint ventures                     23,320,080   21,461,492
Deferred income taxes                             1,030,610    1,030,610
Patents and trademarks, net                       1,061,725    961,181
Other                                             76,000       76,000
Total other assets                                25,488,415   23,529,283
Total assets                                      $46,511,313  $41,877,627
                                                                
LIABILITIES AND EQUITY                                          
CURRENT LIABILITIES:                                            
Current portion of note payable                   76,119       76,120
Accounts payable                                  1,267,591    1,818,309
Accrued liabilities:                                            
Payroll and related benefits                      1,055,766    1,565,866
Deferred joint venture royalties                  288,000      288,000
Other                                             72,755       251,350
Total current liabilities                         2,760,231    3,999,645
                                                                
NOTE PAYABLE, NET OF CURRENT PORTION (Note 7)     876,325      933,413
                                                                
COMMITMENTS AND CONTINGENCIES (Note 13)                         
                                                                
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          88,561       88,073
outstanding 4,428,036 and 4,403,656, respectively
Additional paid-in capital                        11,557,585   11,130,966
Retained earnings                                 27,011,178   25,260,034
Accumulated other comprehensive income            334,236      277,583
Stockholders' equity                              38,991,560   36,756,656
Non-controlling interest                          3,883,197    187,913
Total equity                                      42,874,757   36,944,569
Total liabilities and equity                      $46,511,313  $41,877,627

 
 
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2013 AND 2012
                                                                   
                           Three Months Ended        Nine Months Ended
                           May 31, 2013 May 31, 2012 May 31, 2013 May 31, 2012
NET SALES:                                                         
Net sales, excluding joint $5,041,096   $7,175,825   $14,296,686  $15,579,086
ventures 
Net sales, to joint        835,937      629,079      2,118,444    2,032,260
ventures 
Total net sales            5,877,033    7,804,904    16,415,130   17,611,346
                                                                   
Cost of goods sold         4,054,364    4,143,514    11,379,249   10,833,072
Gross profit               1,822,669    3,661,390    4,935,881    6,778,274
                                                                   
JOINT VENTURE OPERATIONS:                                          
Equity in income of joint  1,440,335    1,822,972    3,733,069    4,405,327
ventures 
Fees for services provided 1,917,947    734,337      5,535,105    3,477,715
to joint ventures
Total joint venture        3,358,282    2,557,309    9,268,174    7,883,042
operations
                                                                   
OPERATING EXPENSES:                                                
Selling expenses           1,243,687    1,270,996    3,588,847    3,393,564
General and administrative 1,105,710    1,147,744    3,498,393    3,518,569
expenses
 Expenses incurred in      335,132      294,169      1,026,275    729,990
support of joint ventures
 Research and development  1,002,651    1,067,454    2,853,250    2,856,536
expenses
 Total operating expenses  3,687,180    3,780,363    10,966,765   10,498,659
                                                                   
OPERATING INCOME           1,493,771    2,438,336    3,337,290    4,162,657
                                                                   
INTEREST INCOME            2,984        15,726       50,618       36,417
INTEREST EXPENSE           (50,986)     (6,264)      (64,448)     (19,514)
OTHER INCOME               —            6,825        —            20,475
                                                                   
INCOME BEFORE INCOME TAX   1,445,769    2,454,623    3,323,460    4,200,035
EXPENSE
                                                                   
INCOME TAX EXPENSE         158,000      814,000      532,000      1,020,000
                                                                   
NET INCOME                 1,287,769    1,640,623    2,791,460    3,180,035
                                                                   
NET INCOME ATTRIBUTABLE TO 360,657      186,586      1,040,316    161,048
NON CONTROLLING INTEREST
                                                                   
NET INCOME ATTRIBUTABLE TO $927,112     $1,454,037   $1,751,144   $3,018,987
NTIC
                                                                   
NET INCOME PER COMMON                                              
SHARE:
Basic                      $0.21        $0.33        $0.40        $0.69
Diluted                    $0.21        $0.33        $0.39        $0.68
                                                                   
WEIGHTED AVERAGE COMMON                                            
SHARES
ASSUMED OUTSTANDING:                                               
Basic                      4,421,379    4,399,290    4,415,452    4,379,175
Diluted                    4,468,861    4,461,044    4,464,774    4,448,472

 
 
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2013 AND 2012
                                                                   
                           Three Months Ended        Nine Months Ended
                           May 31, 2013 May 31, 2012 May 31, 2013 May 31, 2012
NET INCOME                 $1,287,769   $1,640,623   $2,791,460   $3,180,035
OTHER COMPREHENSIVE INCOME
(LOSS) - FOREIGN CURRENCY  (292,001)    (1,346,222)  103,543      (2,600,098)
TRANSLATION ADJUSTMENT
                                                                   
COMPREHENSIVE INCOME       995,768      294,401      2,895,003    579,937
(LOSS)
COMPREHENSIVE INCOME
(LOSS) ATTRIBUTABLE TO     352,519      156,450      1,087,206    123,608
NONCONTROLLING INTERESTS
COMPREHENSIVE INCOME
(LOSS) ATTRIBUTABLE TO     $643,249     $137,951     $1,807,797   $456,329
STOCKHOLDERS

 
 
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MAY 31, 2013 AND 2012
                                                                    
                                                       Nine Months Ended 
                                                       May 31,     May 31,
                                                       2013        2012
CASH FLOWS FROM OPERATING ACTIVITIES:                               
Net income                                             $2,791,460  $3,180,035
Adjustments to reconcile net income to net cash used                
in operating activities:
Expensing of fair value of stock options vested        213,347     216,712
Depreciation expense                                   316,118     255,641
Amortization expense                                   53,264      113,624
Loss on disposal of assets                             13,842      —
Equity in income from joint ventures                   (3,733,069) (4,405,327)
Changes in current assets and liabilities:                          
Receivables:                                                        
Trade, excluding joint ventures                        (306,554)   (341,903)
Trade, joint ventures                                  (385,542)   41,562
Fees for services receivables, joint ventures          199,532     199,871
Income taxes                                           (116,816)   (6,403)
Inventories                                            (1,085,743) (117,023)
Prepaid expenses and other                             195,848     (539,868)
Accounts payable                                       (526,505)   (479,801)
Income tax payable                                     2,783       138,132
Accrued liabilities                                    (684,857)   571,824
Net cash used in operating activities                  (3,052,892) (1,172,924)
                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                               
Dividends received from joint ventures                 3,017,586   3,045,544
Additions to property and equipment                    (1,160,344) (402,620)
Effect of NTI Asean consolidation on cash (Note 2)     1,612,768   —
Additions to patents                                   (167,652)   (125,555)
Net cash provided by investing activities              3,302,358   2,517,369
                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                               
Repayment of note payable                              (57,089)    (57,089)
Dividend received by non-controlling interest          (1,352,841) —
Proceeds from employee stock purchase plan             56,739      55,410
Proceeds from exercise of stock options                157,021     15,040
 Net cash (used in) provided by financing activities   (1,196,170) 13,361
                                                                    
EFFECT OF EXCHANGE RATE CHANGES ON CASH:               (14,686)    (158,270)
                                                                    
                                                                    
NET INCREASE IN CASH AND CASH EQUIVALENTS              (961,390)   1,199,536
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD       4,137,547   3,266,362
                                                                    
CASH AND CASH EQUIVALENTS AT END OF PERIOD             $3,176,157  $4,465,898

CONTACT: Investor and Media Contacts:
         Matthew Wolsfeld, CFO
         NTIC
         (763) 225-6600

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