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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): July 8, 2020  

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in Charter)

Delaware001-1103841-0857886
(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)

(763) 225-6600
(Registrant's telephone number, including area code)

Not Applicable
(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))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.02 per shareNTICNasdaq Global Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 

 

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 July 8, 2020, Northern Technologies International Corporation (“NTIC”) announced its consolidated financial results for the three months ended May 31, 2020. 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.

         (d) Exhibits.

Exhibit No. Description
   
99.1 Press Release issued July 8, 2020 (furnished herewith)

SIGNATURE

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: July 8, 2020By: /s/ Matthew C. Wolsfeld        
  Matthew C. Wolsfeld
  Chief Financial Officer and Corporate Secretary
  

EdgarFiling

EXHIBIT 99.1

Northern Technologies International Corporation Reports Financial Results for Third Quarter Fiscal 2020

MINNEAPOLIS, July 08, 2020 (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 third quarter of fiscal 2020. 

Third quarter fiscal 2020 financial and operating results include (with growth rates compared to third quarter fiscal 2019 results):  

“Although our operations were deemed essential and remained open throughout, the COVID-19 pandemic had an unprecedented impact on our worldwide business during the third quarter, as the majority of our global customers operated at significantly lower capacities or were locked down altogether.  Furthermore, our joint venture network experienced challenging market conditions, as joint venture net sales for the third quarter declined 32.4% and we experienced a 49.0% decrease in joint venture operating income, in each case compared to the same period last fiscal year. During the quarter, we focused on providing uninterrupted order fulfillment, while simultaneously safeguarding and supporting both our employees and our customers, and proactively managing expenses,” said G. Patrick Lynch, President and Chief Executive Officer of NTIC.

“As global economies have been re-opening, business trends have started to improve.  We currently believe our fourth quarter financial results will regain ground from third quarter levels, but sales and earnings will likely be lower than they were during the same period in 2019. We continued to benefit from our product and end-market diversification strategies in the third quarter, and intend to continue to partially offset market weakness by gaining new customers, developing new applications of our corrosion prevention solutions, and expanding into new market segments. While the timing and pace of the global economic recovery remain uncertain, we intend to proceed on course, maintain a strong balance sheet, and invest in our technologies, people, and global platform,” concluded Mr. Lynch. 

NTIC’s consolidated net sales decreased 34.6% to $9,745,000 during the three months ended May 31, 2020, compared to $14,893,000 for the three months ended May 31, 2019.  The global economic slowdown as a result of the COVID-19 crisis significantly reduced demand across the Company’s global customer base.  For the nine months ended May 31, 2020, consolidated net sales decreased 11.1% to $37,610,000, compared to $42,303,000 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, 2020 and May 31, 2019, by segment:

 Three Months Ended
 May 31, 2020
 % of Net Sales
 May 31, 2019
 % of Net Sales
 % Change
ZERUST® industrial net sales...........................$  6,258,348 64.2% $  8,244,759 55.4% -24.1%
ZERUST® joint venture net sales......................   673,752 6.9%    950,414 6.4% -29.1%
ZERUST® oil & gas net sales............................   424,681 4.4%    882,030 5.9% -51.9%
  Total ZERUST® net sales............................$  7,356,781 75.5% $  10,077,203 67.7% -27.0%
Total Natur-Tec® net sales.................................   2,388,042 24.5%    4,815,914 32.3% -50.4%
  Total net sales...............................................$  9,744,823 100.0% $  14,893,117 100.0% -34.6%


 Nine Months Ended
 May 31, 2020
 % of Net Sales
 May 31, 2019
 % of Net Sales
 % Change
ZERUST® industrial net sales...........................$  22,804,975 60.6% $  24,882,727 58.8% -8.4%
ZERUST® joint venture net sales......................   1,504,997 4.0%    2,142,555 5.1% -29.8%
ZERUST® oil & gas net sales............................   2,012,543 5.4%    2,225,490 5.3% -9.6%
  Total ZERUST® net sales............................$  26,322,515 70.0% $  29,250,772 69.1% -10.0%
Total Natur-Tec® net sales.................................   11,287,491 30.0%    13,051,801 30.9% -13.5%
  Total net sales...............................................$  37,610,006 100.0% $  42,302,573 100.0% -11.1%

NTIC’s joint venture operating income decreased 49.0% to $1,688,000 during the three months ended May 31, 2020, compared to joint venture operating income of $3,311,000 during the three months ended May 31, 2019.  This decrease was attributable to a corresponding reduction 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 decreased 32.4% to $18,782,000 during the three months ended May 31, 2020, compared to $27,774,000 for the three months ended May 31, 2019.  Year-to-date, NTIC’s joint venture operating income decreased 29.7% to $6,958,000, compared to joint venture operating income of $9,896,000 during the nine months ended May 31, 2019.  Net sales of NTIC’s joint ventures decreased 20.3% to $68,532,000 during the nine months ended May 31, 2020, compared to $86,004,000 for the nine months ended May 31, 2019. 

Operating expenses, as a percent of net sales, for the third quarter of fiscal 2020 were 58.0%, compared to 42.3% for the same period last fiscal year due to the reduction in third quarter net sales.  On a dollar basis, third quarter operating expenses declined 10.2% because of reduced selling, general and administrative, and research and development expenses.  Year-to-date, operating expenses, as a percent of net sales, were 47.9%, compared to 42.2% for the same period last fiscal year. 

The company reported a net loss attributable to NTIC for the third quarter of fiscal 2020 of $965,000, or a loss of $0.11 per diluted share, compared to net income of $1,482,000, or $0.16 per diluted share for the same period last fiscal year.  For the nine months ended May 31, 2020, net income attributable to NTIC was $427,000, or $0.05 per diluted share, from $4,381,000, or $0.46 per diluted share for the same period last fiscal year. 

NTIC’s balance sheet remains strong, with no debt, and working capital of $28,135,000 at May 31, 2020, including $5,051,000 in cash and cash equivalents and $5,451,000 in available for sale securities, compared to $25,461,000 of working capital at August 31, 2019, including $5,857,000 in cash and cash equivalents and $3,565,000 in available for sale securities. 

At May 31, 2020, the company had $21,942,000 of investments in joint ventures, of which over $10,800,000 or 50%, is cash, with the remaining balance primarily invested in other working capital. 

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 third quarter of fiscal 2020 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 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 9542688.

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 within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include NTIC’s belief that while fourth quarter results will continue to be adversely affected by the COVID-19 pandemic, they will regain ground from third quarter levels, but sales and earnings will likely be lower than they were during the same period in 2019 and NTIC’s intent to partially offset market weakness by gaining new customers, developing new applications of its corrosion prevention solutions, and expanding into new market segments and its intent to proceed on course, maintain a strong balance sheet, and invest in its technologies, people, and global platform, 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 effects of the COVID-19 pandemic on NTIC’s business and operating results; the ability of NTIC 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 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 proposed 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, 2019 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, 2020 (UNAUDITED)
AND AUGUST 31, 2019 (AUDITED)

   
May 31, 2020		 August 31, 2019
ASSETS   
  CURRENT ASSETS:   
 Cash and cash equivalents$    5,050,722  $  5,856,758 
 Available for sale securities   5,450,693     3,565,258 
 Receivables:   
 Trade excluding joint ventures, less allowance for doubtful accounts   
   of $65,000 at May 31, 2020 and August 31, 2019   7,544,886     9,779,518 
 Trade joint ventures   857,377     824,473 
 Fees for services provided to joint ventures   876,120     1,268,000 
 Income taxes   48,861     457,018 
 Inventories   12,080,765     10,488,728 
 Prepaid expenses   696,010     1,062,609 
 Total current assets   32,605,434     33,302,362 
     
  PROPERTY AND EQUIPMENT, NET   6,963,968     7,358,159 
     
  OTHER ASSETS:   
 Investments in joint ventures   21,942,063     24,207,339 
 Deferred income taxes   1,728,946     1,634,258 
 Patents and trademarks, net   839,535     1,008,969 
 Operating lease right of use asset   451,188     — 
   Total other assets   24,961,732     26,850,566 
   Total assets$  64,531,134  $  67,511,087 
     
LIABILITIES AND EQUITY   
  CURRENT LIABILITIES:   
 Accounts payable$  2,348,016  $  4,505,531 
 Income taxes payable   43,580     6,759 
 Accrued liabilities:   
 Payroll and related benefits   1,132,918     1,857,971 
 Other   809,028     1,471,532 
 Current portion of operating lease   136,714     — 
 Total current liabilities   4,470,256     7,841,793 
  LONG-TERM LIABILITIES:   
 Operating lease, less current portion   314,474     — 
 Total long-term liabilities   314,474     — 
     
  COMMITMENTS AND CONTINGENCIES   
     
  EQUITY:   
 Preferred stock, no par value; authorized 10,000 shares; none issued and outstanding   —     — 
 Common stock, $0.02 par value per share; authorized 15,000,000 shares as of   
 May 31, 2020 and August 31, 2019; issued and outstanding 9,099,990 and 9,086,816, respectively   182,000     181,736 
 Additional paid-in capital   17,075,391     16,013,338 
 Retained earnings   44,237,682     44,992,719 
 Accumulated other comprehensive loss   (4,829,337)    (4,593,178)
   Stockholders’ equity   56,665,736     56,594,615 
 Non-controlling interests   3,080,668     3,074,679 
   Total equity   59,746,404     59,669,294 
   Total liabilities and equity$  64,531,134  $  67,511,087 

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.


NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2020 AND 2019

 
Three Months Ended		 
Nine Months Ended
 May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
NET SALES:       
  Net sales, excluding joint ventures$  9,071,072  $  13,780,804 $  36,105,009 $  39,998,118
  Net sales, to joint ventures 673,751   1,112,313  1,504,997  2,304,455
Total net sales 9,744,823   14,893,117  37,610,006  42,302,573
  Cost of goods sold 6,499,102   10,138,353    24,991,487    28,883,589
Gross profit 3,245,721   4,754,764    12,618,519  13,418,984
        
JOINT VENTURE OPERATIONS:       
  Equity in income from joint ventures 811,787   1,877,410    3,466,581  5,596,788
  Fees for services provided to joint ventures 876,706   1,433,823    3,491,244  4,299,032
  Total joint venture operations 1,688,493   3,311,233    6,957,825  9,895,820
        
OPERATING EXPENSES:       
  Selling expenses 2,487,396   2,761,488    8,484,928  8,077,663
  General and administrative expenses 2,213,552   2,527,192    6,608,352  6,986,526
  Research and development expenses 950,127   1,005,045    2,918,163  2,804,739
  Total operating expenses 5,651,075   6,293,725    18,011,443  17,868,928
        
OPERATING (LOSS) INCOME (716,861)  1,772,272    1,564,901  5,445,876
        
INTEREST INCOME (EXPENSE) (73,738)  18,949    15,881  40,666
        
(LOSS) INCOME BEFORE INCOME TAX EXPENSE (790,239)  1,791,221    1,580,782  5,486,542
        
INCOME TAX EXPENSE 142,285   150,257    869,945  652,331
        
NET (LOSS) INCOME (932,524)  1,640,964    710,837  4,834,211
        
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 32,697   158,815    283,674  453,435
        
NET (LOSS) INCOME ATTRIBUTABLE TO NTIC$  (965,221) $  1,482,149 $  427,163 $  4,380,776
        
NET (LOSS) INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:       
  Basic$  (0.11) $  0.16 $  0.05 $  0.48
  Diluted$  (0.11) $  0.16 $  0.05 $  0.46
        
WEIGHTED AVERAGE COMMON SHARES       
  ASSUMED OUTSTANDING:       
  Basic 9,099,990   9,084,354  9,096,981  9,085,584
  Diluted 9,099,990   9,392,444  9,312,914  9,440,858
CASH DIVIDENDS DECLARED PER COMMON SHARE$  0.00  $  0.06 $  0.13 $  0.18

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

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