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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): January 7, 2016

___________________

 

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware 001-11038 41-0857886
(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))

 

 
 

Item 2.02. Results of Operations and Financial Condition.

 

On January 7, 2016, Northern Technologies International Corporation (“NTIC”) publicly announced its consolidated financial results for the fiscal quarter ended November 30, 2015. 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 January 7, 2016 (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

 

By:   /s/ Matthew C. Wolsfeld

Matthew C. Wolsfeld

Chief Financial Officer and Corporate Secretary

 

Dated: January 7, 2016

 

 

 

 
 

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

 

CURRENT REPORT ON FORM 8-K

 

Exhibit Index

 

Exhibit No.

Description

Method of Filing

     
99.1 Press release issued January 7, 2016 Furnished herewith

 

EdgarFiling

EXHIBIT 99.1

Northern Technologies International Corporation Reports Financial Results for First Quarter Fiscal 2016

MINNEAPOLIS, Jan. 07, 2016 (GLOBE NEWSWIRE) -- Northern Technologies International Corporation (NASDAQ:NTIC) today reported its financial results for the first quarter of fiscal 2016.  Highlights of NTIC’s financial and operating results include:  

This decrease in earnings was primarily a result of the three factors: (1) the change in NTIC’s Chinese operations; (2) the effect of foreign currency exchange rate fluctuations, particularly between the Euro and U.S. dollar; and (3) the decrease in sales and gross profit contribution of ZERUST® products. NTIC incurred $486,041 in expenses related to the termination of its license agreement with Tianjin Zerust and formation of NTIC China, through which NTIC now conducts business in China. These expenses, together with the lost equity income and fees for services that NTIC did not receive due to the termination of the license agreement in fiscal 2015, equaled a net negative pre-tax impact on NTIC’s earnings of approximately $862,000, or $0.19 per share, for the first quarter of fiscal 2016. NTIC estimates that the pre-tax impact of the weakening Euro and other currencies compared to the U.S. dollar on its joint venture operating income was approximately $175,809, or $0.04 per share, in the first quarter of fiscal 2016.

“The first quarter of fiscal 2016 was certainly disappointing due to a number of key factors, including the extensive business interference and litigation related to the termination of our previous joint venture in China, the significant decline in the value of key foreign currencies vis-à-vis the U.S. dollar, renewed instability in global oil prices, and a soft agricultural equipment manufacturing sector,” said G. Patrick Lynch, President and Chief Executive Officer of NTIC. “We continued to see strong positive movement in both China and the North American oil and gas sector. However, we do not expect these factors to positively affect our operating results before our third fiscal quarter.”

NTIC’s consolidated net sales decreased 2.6% to $7,024,437 during the three months ended November 30, 2015 compared to the three months ended November 30, 2014.  This decrease was primarily a result of a decrease in net sales to joint ventures. NTIC’s consolidated net sales to unaffiliated customers excluding NTIC’s joint ventures increased 0.3% to $6,501,410 during the three months ended November 30, 2015 compared to the same period in fiscal 2015.  This increase was primarily a result of increased demand from the addition of new customers at NTI China and an increase in sale of our Natur-Tec® products.  Net sales to joint ventures decreased 28.7% to $523,027 during the three months ended November 30, 2015 compared to the same period in fiscal 2015. This decrease was primarily a result of lower demand for our ZERUST®products and services and adverse effects of foreign currency exchange rates.

The following table sets forth NTIC’s net sales by product category for the three months ended November 30, 2015 and 2014 by segment:

  Three Months Ended
  November 30,   November 30,
   $
   %
  2015   2014
   Change
   Change
Total ZERUST® sales $   5,977,682   $   6,238,071   $   (260,389 )   (4.2 %)
Total Natur-Tec® sales   1,046,755     976,024     70,731     7.2 %
Total net sales $   7,024,437   $   7,214,095   $   (189,658 )   (2.6 %)

During the three months ended November 30, 2015, 85.1% of NTIC’s consolidated net sales were derived from sales of ZERUST®products and services, which decreased 4.2% to $5,977,682 during the three months ended November 30, 2015 compared to $6,238,071 during the same period in fiscal 2015.  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. 

The following table sets forth NTIC’s net sales of ZERUST®products for the three months ended November 30, 2015 and 2014:

  Three Months Ended
  November 30,
   November 30,
   $
   %
  2015
   2014
   Change
   Change
ZERUST® industrial net sales $   5,119,093   $   5,002,775   $   116,318     2.3 %
ZERUST® joint venture net sales     518,350       733,104     (214,754 )   (29.3 %)
ZERUST® oil & gas net sales     340,239       502,192     (161,953 )   (32.2 %)
Total ZERUST® net sales $   5,977,682   $   6,238,071   $   (260,389 )   (4.2 %)

NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized.

Mr. Lynch added, “Winter weather and low oil prices have postponed certain North American order installations, which we believe will continue until our third fiscal quarter. At the same time, we are quite pleased with the significant increase in interest for our proprietary ZERUST® Oil & Gas solutions in the Middle East, Africa and India. We are also pleased that our Natur-Tec® business continued to grow according to plan in both the U.S. and India.”

NTIC’s working capital was $14,756,128 at November 30, 2015, including $3,072,015 in cash and cash equivalents and $528,867 in available for sale securities, compared to $15,603,771 at August 31, 2015, including $2,623,981 in cash and cash equivalents and $2,027,441 in available for sale securities.

Outlook

NTIC lowered its annual financial guidance and now expects for the fiscal year ending August 31, 2016 its net sales to range between $34 million and $37.0 million and its net income to range between $2.0 million to $3.2 million, or between $0.40 and $0.70 per diluted share.

These estimates are subject to significant risks and uncertainties, including without limitation risks and uncertainties related to the change in NTIC’s Chinese operations, pending litigation against NTIC’s former Chinese joint venture partner, a possible future impairment charge on NTIC’s investment in Tianjin Zerust, and other risks and uncertainties.

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 fiscal 2016 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 6500805.

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 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 financial guidance for fiscal 2016 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 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, including without limitation a possible future impairment of NTIC’s investment in Tianjin Zerust; the ability of NTIC China to achieve significant sales; costs and expenses incurred by NTIC in connection with its pending litigation against its former Chinese joint venture partner and Cortec Corporation; 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 NTIC’s other joint ventures on NTIC’s business and operating results; 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, 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 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; 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. 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 NOVEMBER 30, 2015 (UNAUDITED)  
  AND AUGUST 31, 2015 (AUDITED)  
      November 30, 2015   August 31, 2015  
ASSETS          
  CURRENT ASSETS:          
  Cash and cash equivalents $   3,072,015   $   2,623,981    
  Available for sale securities     528,867         2,027,441    
  Receivables:          
  Trade excluding joint ventures, less allowance for doubtful accounts          
    of $40,000 at November 30, 2015 and August 31, 2015     3,637,387       4,027,167    
  Trade joint ventures     599,616       645,377    
  Fees for services provided to joint ventures     1,496,054       1,449,162    
  Income taxes     323,817       198,462    
  Inventories     7,628,754       7,468,441    
  Prepaid expenses     573,018       411,473    
  Deferred income taxes     424,108       424,108    
  Total current assets     18,283,636       19,275,612    
             
  PROPERTY AND EQUIPMENT, NET     7,394,484       7,293,163    
             
  OTHER ASSETS:          
  Investments in joint ventures     20,369,002       20,544,238    
  Investments at carrying value     1,883,668       1,883,668    
  Deferred income taxes     1,175,928       1,176,012    
  Patents and trademarks, net     1,245,060       1,262,219    
  Other     240,913       130,736    
  Total other assets     24,914,571       24,996,873    
  Total assets $   50,592,691   $   51,565,648    
             
LIABILITIES AND EQUITY          
  CURRENT LIABILITIES:          
  Accounts payable     2,324,787       2,101,175    
  Accrued liabilities:          
  Payroll and related benefits     768,783       1,056,257    
  Other     433,938       514,409    
  Total current liabilities     3,527,508       3,671,841    
                     
  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 10,000,000                  
  shares; issued and outstanding 4,538,317 and 4,539,045, respectively     90,766       90,781    
  Additional paid-in capital     13,550,424       13,441,264    
  Retained earnings     34,288,520       34,522,871    
  Accumulated other comprehensive loss     (4,049,004 )     (3,180,811 )  
  Stockholders’ equity     43,880,706       44,874,105    
  Non-controlling interest     3,184,477       3,019,702    
  Total equity     47,065,183       47,893,807    
  Total liabilities and equity $   50,592,691   $   51,565,648    
             
   


NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2015 AND 2014
  Three Months Ended
  November 30, 2015   November 30, 2014
NET SALES:      
  Net sales, excluding joint ventures $   6,501,410     $   6,480,991  
  Net sales, to joint ventures   523,027       733,104  
  Total net sales   7,024,437       7,214,095  
       
  Cost of goods sold   4,875,423       4,806,611  
    Gross profit   2,149,014       2,407,484  
       
JOINT VENTURE OPERATIONS:      
  Equity in income of joint ventures   983,753       1,606,683  
  Fees for services provided to joint ventures   1,485,429       2,133,670  
  Total joint venture operations   2,469,182       3,740,353  
       
OPERATING EXPENSES:      
  Selling expenses   1,525,083       1,394,887  
  General and administrative expenses   1,857,613       1,538,262  
  Expenses incurred in support of joint ventures   316,994       527,117  
  Research and development expenses   1,004,097       1,049,913  
  Total operating expenses   4,703,787       4,510,179  
       
OPERATING (LOSS) INCOME   (85,591 )     1,637,658  
       
INTEREST INCOME   14,173       15,127  
INTEREST EXPENSE   (4,726 )     (5,005 )
       
(LOSS) INCOME BEFORE INCOME TAX EXPENSE   (76,144 )     1,647,780  
       
INCOME TAX (BENEFIT) EXPENSE   (3,502 )     183,684  
       
NET (LOSS) INCOME     (72,642 )       1,464,096  
       
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS     161,709         455,831  
       
NET (LOSS) INCOME ATTRIBUTABLE TO NTIC $   (234,351 )   $   1,008,265  
       
NET (LOSS) INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:       
  Basic $   (0.05 )   $   0.22  
  Diluted $   (0.05 )   $   0.22  
       
WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:      
  Basic     4,538,371         4,518,973  
  Diluted     4,538,371         4,659,621  

 

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