MINNEAPOLIS, Jan. 07, 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 first quarter of fiscal 2020.

First quarter fiscal 2020 financial and operating highlights include (with growth rates compared to first quarter of fiscal 2019):  

• Consolidated net sales increased 3.8% to a first quarter record of $14,631,000
• ZERUST^® product net sales decreased 1.1% to $9,950,000
• ZERUST^® oil and gas net sales decreased 47.2% to $521,000
• NTIC China product net sales increased 21.9% to $3,862,000
• Natur-Tec^® product net sales increased 16.2% to $4,682,000
• Joint venture operating income decreased 22.7% to $2,652,000
• Net income attributable to NTIC decreased 19.0% to $1,213,000
• Net income per diluted share attributable to NTIC decreased 18.8% to $0.13

“Consolidated net sales set a new first quarter record, despite continued challenges for our ZERUST^® industrial products across our global joint venture network,” said G. Patrick Lynch, President and Chief Executive Officer of NTIC. “Over the past three months, demand appears to have stabilized in both North America and China, allowing ZERUST^® industrial net sales to increase 9.0% and 18.0% in North America and China, respectively, compared to fiscal 2019 fourth quarter.  In addition, we continued to benefit from year-over-year sales growth for Natur-Tec.  The timing of several ZERUST^® oil & gas projects impacted first quarter performance.  However, based on expected shipments and installations for the second quarter, we believe we will see a year-over-year increase in ZERUST^® oil & gas net sales for both the second quarter and first half of fiscal 2020.” 

NTIC’s consolidated net sales increased 3.8% to $14,631,000 during the three months ended November 30, 2019, compared to $14,094,000 for the three months ended November 30, 2018.  The increase in consolidated net sales was primarily a result of higher ZERUST^® industrial sales and sales of Natur-Tec^® products. 

The following table sets forth NTIC’s net sales by product category for the three months ended November 30, 2019 and 2018, by segment:

NTIC’s joint venture operating income decreased 22.7% to $2,652,000 during the three months ended November 30, 2019, compared to joint venture operating income of $3,433,000 during the three months ended November 30, 2018.  The decrease was attributable to the corresponding decrease in total sales of the joint ventures, as fees for services provided to joint ventures are a function of the net sales of NTIC’s joint ventures, which were $25,460,000 during the three months ended November 30, 2019, compared to $30,480,000 for the three months ended November 30, 2018. 

Operating expenses, as a percent of net sales, for the first quarter of fiscal 2020 were 40.3%, compared to 43.8% for the same period last fiscal year.  This reduction was primarily a result of lower general and administrative expenses, combined with operating leverage on increased net sales. 

The company reported net income attributable to NTIC for the first quarter of fiscal 2020 of $1,213,000, or $0.13 per diluted share, compared to net income attributable to NTIC of $1,497,000, or $0.16 per diluted share, for the same period last fiscal year.  

NTIC’s balance sheet remains strong, with no debt, and working capital of $25,253,000 at November 30, 2019, including $4,107,000 in cash and cash equivalents and $2,987,000 in available for sale securities, compared to $25,461,000 at August 31, 2019, including $5,857,000 in cash and cash equivalents and $3,565,000 in available for sale securities. 

At November 30, 2019, the company had $25,403,000 of investments in joint ventures, of which over $14,200,000 or 56% is cash, with the remaining balance mostly made up of other working capital. 

Mr. Lynch added, “Customer demand remained soft at many of our global joint ventures, and this had a material impact on first quarter profitability. Based on current market feedback, we believe global ZERUST^® industrial sales will remain challenging during the second quarter.  Despite the effect of lower joint venture operating income, we believe we are still well positioned to increase profitability overall this fiscal year as a result of continued growth at NTIC China and Natur-Tec, as well as improving demand for ZERUST^® oil & gas products and services.”

Outlook

For the fiscal year ending August 31, 2020, NTIC continues to expect net sales to be in the range of $62 million and $66 million.  The company also continues to anticipate net income attributable to NTIC to be in the range of $5.6 million to $7.5 million, or $0.60 and $0.80 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 first quarter of 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 8647749.

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 expectations regarding its financial guidance for fiscal 2020, its belief that ZERUST^® oil & gas sales will increase for the second quarter and first half of fiscal 2020 compared to the prior fiscal year periods and anticipated continued growth at NTIC China and Natur-Tec, as well as improving demand for ZERUST^® oil & gas products and services, 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 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 report 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.

*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 Contact:
Matthew Wolsfeld, CFO                                                                   
NTIC                                                                                                     
(763) 225-6600

Source: Northern Technologies International Corporation