SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): April 12, 2018
Northern Technologies International Corporation
(Exact Name of Registrant as Specified in Charter)
|(State or Other Jurisdiction of Incorporation)||(Commission File Number)||(I.R.S. Employer Identification Number)|
|4201 Woodland Road|
P.O. Box 69, Circle Pines, Minnesota 55014
|(Address of Principal Executive Offices) (Zip Code)|
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
|Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:|
|[ ]||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|[ ]||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|[ ]||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|[ ]||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On April 12, 2018, Northern Technologies International Corporation (“NTIC”) publicly announced its consolidated financial results for the quarter ended February 28, 2018. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and the information set forth therein is incorporated herein by reference and constitutes a part of this report. The information contained in Item 2.02 of this report and Exhibit 99.1 to this report shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by NTIC under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
On April 12, 2018, Northern Technologies International Corporation (“NTIC”) publicly announced its consolidated financial results for the quarter ended February 28, 2018. A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and the information set forth therein is incorporated herein by reference and constitutes a part of this report.
The information contained in Item 2.02 of this report and Exhibit 99.1 to this report shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by NTIC under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description 99.1 Press Release issued April 12, 2018 (furnished herewith)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Northern Technologies International Corporation|
|Date: April 12, 2018||By:||/s/ Matthew C. Wolsfeld|
|Matthew C. Wolsfeld|
|Chief Financial Officer and Corporate Secretary|
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
CURRENT REPORT ON FORM 8-K
|Exhibit No.||Description||Method of Filing|
|99.1||Press release issued April 12, 2018||Furnished herewith|
Northern Technologies International Corporation Reports Financial Results for Second Quarter Fiscal 2018
MINNEAPOLIS, April 12, 2018 (GLOBE NEWSWIRE) -- 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 2018.
Second quarter fiscal 2018 financial and operating results include (with growth rates compared to second quarter of fiscal 2017):
“NTIC achieved record quarterly sales and net income due to strong global demand and market share growth,” said G. Patrick Lynch, President and Chief Executive Officer of NTIC. “I’m also very encouraged by the 82.6% sales increase at NTIC China over the prior fiscal year period and nearly 10% growth from the first quarter of fiscal 2018. Higher net sales combined with stable expenses drove significant improvements in profitability.”
NTIC’s consolidated net sales increased 39.7% to $12,214,000 during the three months ended February 28, 2018, compared to $8,743,000 for the three months ended February 28, 2017. This increase was a result of increased demand across all NTIC segments. For the first half of fiscal 2018, consolidated net sales increased 28.8% to $23,757,000, compared to $18,445,000 for the same period last fiscal year.
The following table sets forth NTIC’s net sales by product category for the three and six months ended February 28, 2018, and February 28, 2017, by segment:
|Three Months Ended|
|% of Net |
|% of Net |
|ZERUST® industrial net sales||$||8,798,319||72.0||%||$||6,588,801||75.4||%||33.5||%|
|ZERUST® joint venture net sales||814,122||6.7||%||433,317||5.0||%||87.9||%|
|ZERUST® oil & gas net sales||579,018||4.7||%||205,909||2.3||%||181.2||%|
|Total ZERUST® net sales||$||10,191,459||83.4||%||$||7,228,027||82.7||41.0||%|
|Total Natur-Tec® sales||2,022,516||16.6||%||1,514,876||17.3||%||33.5||%|
|Total net sales||$||12,213,975||100.0||%||$||8,742,903||100.0||%||39.7||%|
|Six Months Ended|
|February 28, |
|% of Net |
|February 28, |
|% of Net |
|ZERUST® industrial net sales||$||17,534,583||73.8||%||$||13,107,090||71.0||%||33.8||%|
|ZERUST® joint venture net sales||1,321,753||5.6||%||1,253,375||6.8||%||5.5||%|
|ZERUST® oil & gas net sales||862,860||3.6||%||952,240||5.2||%||(9.4||)%|
|Total ZERUST® net sales||$||19,719,196||83.0||%||$||15,312,705||83.0||%||28.8||%|
|Total Natur-Tec® sales||4,037,817||17.0||%||3,132,221||17.0||%||28.9||%|
|Total net sales||$||23,757,013||100.0||%||$||18,444,926||100.0||%||28.8||%|
NTIC’s joint venture operating income increased 33.0% to $3,415,000 during the three months ended February 28, 2018, compared to joint venture operating income of $2,567,000 during the three months ended February 28, 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 were $30,221,000 during the three months ended February 28, 2018, compared to $22,963,000 for the three months ended February 29, 2017. Year-to-date, NTIC’s joint venture operating income increased 29.2% to $6,663,000, compared to joint venture operating income of $5,157,000 during the six months ended February 28, 2017. Net sales of NTIC’s joint ventures increased 24.5% to $58,719,000 during the six months ended February 28, 2018, compared to $47,163,000 for the six months ended February 28, 2017.
Operating expenses, as a percent of net sales, for the second quarter of fiscal 2018 were 44.0%, compared to 55.3% for the same period last fiscal year. This reduction was primarily due to higher net sales and lower general and administrative expenses, partially offset by higher selling and research and development expenses. Year-to-date, operating expenses, as a percent of net sales, were 46.3%, compared to 54.1% for the same period last fiscal year.
Net income attributable to NTIC for the second quarter of fiscal 2018 increased 256.6% to $1,333,000, or $0.29 per diluted share, from $387,000, or $0.09 per diluted share for the same period last fiscal year. Excluding the $700,000, or $0.15 per diluted share one-time impact of U.S. tax reform, second quarter fiscal 2018 non-GAAP net income attributable to NTIC was $2,033,000, or $0.44 per diluted share.
Net income attributable to NTIC for the first half of fiscal 2018 increased 259.8% to $2,416,000, or $0.52 per diluted share, from $685,000, or $0.15 per diluted share, for the same period last fiscal year. Excluding the $700,000, or $0.15 per diluted share one-time provisional impact of U.S. tax reform, net income attributable to NTIC for the first half of fiscal 2018 was $3,116,000, or $0.67 per diluted share.
Please see the tables and information below for a reconciliation of non-GAAP adjusted net income attributable to NTIC and adjusted net income attributable to NTIC per diluted share to the comparable GAAP measures.
NTIC’s balance sheet remains strong, with no debt, and working capital of $22,194,000 at February 28, 2018, including $5,067,000 in cash and cash equivalents and $3,268,000 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 February 28, 2018, the company had $22,260,000 of investments in joint ventures, of which over $12,400,000, or 55.7%, is cash, with the remaining balance mostly made up of other working capital.
Mr. Lynch added, “As expected, oil and gas sales improved in the second quarter. We believe our oil and gas products provide compelling solutions within this large and growing market segment and we expect improving sales in the coming quarters. Momentum throughout NTIC’s business segments remains strong and I am excited about our opportunities for the remainder of the fiscal year and beyond. We are on track towards achieving our fiscal 2019 goals of over $60 million in net sales and $2.00 per diluted share in net income attributable to NTIC that we outlined two years ago.”
For the fiscal year ending August 31, 2018, NTIC is increasing its net sales expectations to be in the range of $48.0 million to $49.0 million, compared to its previous net sales expectations of $46.0 million to $47.0 million. The company is also increasing is earnings guidance, and now anticipates net income attributable to NTIC to be in the range of $6.5 million to $6.8 million, or $1.40 to $1.45 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 $5.0 million to $5.3 million, or $1.10 to $1.15 per diluted share, which did not take into consideration any impact from U.S. tax reform.
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 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 5967489.
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.
Use of Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), NTIC uses certain non-GAAP financial measures. In this release, NTIC uses the non-GAAP financial measures, net income attributable to NTIC, as adjusted to exclude the one-time impact due to U.S. tax reform and net income attributable to NTIC per diluted share, as adjusted to exclude the one-time impact due to U.S. tax reform. NTIC uses non-GAAP financial measures as supplemental measures of performance and believes these measures facilitate operating performance comparisons from period to period and company to company by factoring out potential differences caused by non-recurring, unusual or infrequent charges not related to NTIC’s regular, ongoing business. NTIC also believes that the presentation of certain non-GAAP financial measures provides useful information to investors in evaluating the company’s operations, period over period. Non-GAAP measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of the company’s results as reported under GAAP. When analyzing NTIC’s operating performance, investors should not consider NTIC’s adjusted net income as a substitute for NTIC’s net income prepared in accordance with GAAP. In addition, investors should note that any non-GAAP financial measures used by NTIC may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever NTIC uses non-GAAP financial measures, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Reconciliations of adjusted non-GAAP measures to reported GAAP measures are included in the financial tables contained in this release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
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, 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 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 November 30, 2017 filed by NTIC with the SEC on January 12, 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 BALANCE SHEETS AS OF FEBRUARY 28, 2018 (UNAUDITED)|
|AND AUGUST 31, 2017 (AUDITED)|
|February 28, 2018||August 31, 2017|
|Cash and cash equivalents||$||5,067,087||$||6,360,201|
|Available for sale securities||3,268,426||3,766,984|
|Trade excluding joint ventures, less allowance for doubtful accounts|
|of $40,000 at February 28, 2018 and August 31, 2017||8,310,043||5,912,631|
|Trade joint ventures||447,380||691,752|
|Fees for services provided to joint ventures||1,365,325||1,302,944|
|Total current assets||28,918,463||26,067,618|
|PROPERTY AND EQUIPMENT, NET||7,155,946||7,359,662|
|Investments in joint ventures||22,259,526||20,035,074|
|Deferred income taxes||1,056,565||1,756,565|
|Patents and trademarks, net||1,241,618||1,322,089|
|Total other assets||24,557,709||23,185,413|
|LIABILITIES AND EQUITY|
|Income taxes payable||342,853||—|
|Payroll and related benefits||1,435,921||1,540,386|
|Total current liabilities||6,677,157||4,894,617|
|COMMITMENTS AND CONTINGENCIES|
|Preferred stock, no par value; authorized 10,000 shares; none issued and |
|Common stock, $0.02 par value per share; authorized 15,000.000 shares |
at February 28, 2018 and 10,000,000 shares; issued and outstanding
4,537,408 and 4,535,018, respectively
|Additional paid-in capital||14,397,851||14,163,509|
|Accumulated other comprehensive loss||(2,070,752||)||(2,471,064||)|
|Total liabilities and equity||$||60,632,118||$||56,612,693|
|NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)|
|FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2018 AND 2017|
|Three Months Ended||Six Months Ended|
|February 28, 2018||February 28, 2017||February 28, 2018||February 28, 2017|
|Net sales, excluding joint ventures||$||11,399,853||$||8,309,586||$||22,435,260||$||17,191,551|
|Net sales, to joint ventures||814,122||433,317||1,321,753||1,253,375|
|Total net sales||12,213,975||8,742,903||23,757,013||18,444,926|
|Cost of goods sold||8,012,836||5,870,186||15,901,306||12,482,952|
|JOINT VENTURE OPERATIONS:|
|Equity in income from joint ventures||1,805,997||1,383,139||3,547,325||2,657,143|
|Fees for services provided to joint ventures||1,608,890||1,184,028||3,116,032||2,499,619|
|Total joint venture operations||3,414,887||2,567,167||6,663,357||5,156,762|
|General and administrative expenses||1,805,216||1,842,528||4,024,961||4,314,308|
|Research and development expenses||922,746||742,037||1,721,477||1,384,559|
|Total operating expenses||5,371,598||4,831,047||10,990,023||9,984,433|
|INCOME BEFORE INCOME TAX EXPENSE||2,263,532||609,883||3,567,112||1,134,289|
|INCOME TAX EXPENSE||841,909||124,909||946,900||242,622|
|NET INCOME ATTRIBUTABLE TO NON-|
|NET INCOME ATTRIBUTABLE TO NTIC||$||1,332,847||$||386,966||$||2,416,473||$||684,605|
|NET INCOME ATTRIBUTABLE TO NTIC PER|
|WEIGHTED AVERAGE COMMON SHARES|
|CASH DIVIDENDS DECLARED PER COMMON SHARE||$||0.10||$||0.00||$||0.20||$||0.00|
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Unaudited)
NTIC has provided non-GAAP financial measures, which are not calculated or presented in accordance with accounting principles generally accepted in the United States (GAAP), as information supplemental and in addition to the financial measures presented in the accompanying release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the release. The non-GAAP financial measures in the accompanying release may differ from similar measures used by other companies.
The following table provides reconciliations of financial measures calculated and reported in accordance with GAAP as well as adjusted non-GAAP financial measures presented in the accompanying release. NTIC believes these measures may be useful in performing meaningful comparisons of past and present operating results, to understand the performance of its ongoing operations, and how management views the business. The following is a reconciliation of NTIC’s reported net income attributable to NTIC and reported net income attributable to NTIC per common share to adjusted net income attributable to NTIC and adjusted net income attributable to NTIC per common share.
|Three Months Ended |
|Six Months Ended |
|Net income attributable to NTIC, as reported||$||1,332,847||$||386,966||$||2,416,473||$||684,605|
|Net income attributable to NTIC per diluted |
common share, as reported
|Impact of U.S. tax reform on net income |
attributable to NTIC(1):
|Impact of U.S. tax reform on net income |
attributable to NTIC per diluted common
|Non-GAAP net income attributable to NTIC, |
|Weighted average common shares assumed |
|Non-GAAP net income attributable to NTIC |
per diluted common share, as adjusted
(1) On December 22, 2017, the Tax Cuts and Jobs Act (Tax Reform Act), was enacted, which among other things, lowered the U.S. corporate tax rate from 35% to 21%, implemented a territorial tax system from a worldwide system and imposed a tax on deemed repatriation of earnings of foreign subsidiaries. During second quarter of fiscal 2018, NTIC recorded provisional tax amounts for the one-time deemed repatriation tax on NTIC’s historical undistributed earnings and profits of foreign affiliates and the re-measurement of certain deferred tax assets. NTIC’s accounting for the Tax Reform Act will be completed during the one-year measurement period allowed under Staff Accounting Bulletin 118. The actual impact of the Tax Reform Act may differ from NTIC’s estimates, due to, among other things, changes in interpretations and assumptions NTIC has made, guidance that may be issued, and changes in its structure or business model. In addition, the anticipated impact does not include the ongoing impacts of the lower U.S. statutory rate on current year earnings. The Tax Reform Act required the re-measurement of NTIC’s net deferred taxes as of the date of enactment which resulted in a one-time non-cash charge of $700,000.
Investor and Media Contacts:
Matthew Wolsfeld, CFO