-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dlbb2I0jiVpSg/phUkBpaLpj4Xe6GO4QZbwsAem1+DasMjvzNMS8Dm+W7Au84dk5 BxEOSaNkM8KqRKxjeActPw== 0000897101-98-000021.txt : 19980114 0000897101-98-000021.hdr.sgml : 19980114 ACCESSION NUMBER: 0000897101-98-000021 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN TECHNOLOGIES INTERNATIONAL CORP CENTRAL INDEX KEY: 0000875582 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 410857886 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11038 FILM NUMBER: 98505434 BUSINESS ADDRESS: STREET 1: 6680 N HIGHWAY 49 CITY: LINO LAKES STATE: MN ZIP: 55014 BUSINESS PHONE: 6127841250 FORMER COMPANY: FORMER CONFORMED NAME: NORTHERN INSTRUMENTS CORP DATE OF NAME CHANGE: 19930328 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934 For the Quarterly Period Ended: Commission File Number November 30, 1997 1-11038 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 41-0857886 (State of Incorporation) (I.R.S. Employer Identification Number) 6680 N. Highway 49, Lino Lakes, MN 55014 (Address of principal executive offices) (612) 784-1250 (Registrant's telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of December 31, 1997 ----- ----------------------------------- Common Stock, $.02 par value 4,151,790 "This document consists of 11 pages. No exhibits are being filed." PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION BALANCE SHEETS (UNAUDITED) - --------------------------------------------------------------------------------
NOVEMBER 30, AUGUST 31, 1997 1997 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,010,049 $ 3,945,567 Receivables: Trade, less allowance for doubtful accounts of $30,000 and $27,000, respectively 1,419,259 1,164,660 Corporate joint ventures 518,114 517,551 Inventories 900,541 841,618 Prepaid expenses and other 87,886 77,196 Deferred income taxes 240,000 240,000 ------------ ------------ Total current assets 6,175,849 6,786,592 PROPERTY AND EQUIPMENT, net 968,919 962,328 OTHER ASSETS: Investments in corporate joint ventures 2,431,410 2,291,600 Investment in foreign company 128,916 132,000 Investment in European holding company 259,905 254,639 Deferred income taxes 130,000 130,000 Other 647,544 625,544 ------------ ------------ 3,597,775 3,433,783 ------------ ------------ $ 10,742,543 $ 11,182,703 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 169,988 $ 162,477 Income taxes payable 95,772 376,867 Dividends payable 621,798 -- Accrued liabilities: Payroll 228,600 230,951 Other 163,372 189,707 ------------ ------------ Total current liabilities 1,279,530 960,002 DEFERRED GROSS PROFIT 118,000 118,000 STOCKHOLDERS' EQUITY: Preferred stock, no par value, authorized 10,000 shares, none issued Common stock, $.02 par value per share; authorized 10,000,000 shares; issued and outstanding 4,145,322 and 4,202,508, respectively 82,906 84,050 Additional paid-in capital 5,053,826 5,185,828 Retained earnings 4,642,143 5,217,221 Cumulative foreign currency translation adjustments (304,055) (252,591) ------------ ------------ 9,474,820 10,234,508 Notes and related interest receivable from purchase of common stock (129,807) (129,807) ------------ ------------ Total stockholders' equity 9,345,013 10,104,701 ------------ ------------ $ 10,742,543 $ 11,182,703 ============ ============
See notes to financial statements. NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 - --------------------------------------------------------------------------------
1997 1996 SALES $ 2,682,741 $ 1,921,414 COST OF GOODS SOLD 1,387,515 912,702 ----------- ----------- GROSS PROFIT 1,295,226 1,008,712 OPERATING EXPENSES: Selling 272,735 268,421 General and administrative 524,401 466,443 Research, engineering, and technical support 112,128 100,032 ----------- ----------- 909,264 834,896 ----------- ----------- OPERATING INCOME 385,962 173,816 CORPORATE JOINT VENTURES, FOREIGN COMPANY, AND EUROPEAN HOLDING COMPANY: Equity in income of corporate joint ventures, foreign company, and European holding company 114,145 154,689 Fees for technical assistance to corporate joint ventures 466,821 511,939 Corporate joint ventures expense (185,638) (121,001) ----------- ----------- 395,328 545,627 OTHER INCOME: Interest income 32,716 7,722 Other income -- 4,157 ----------- ----------- 32,716 11,879 ----------- ----------- INCOME BEFORE INCOME TAXES 814,006 731,322 INCOME TAXES 250,000 210,000 ----------- ----------- NET INCOME $ 564,006 $ 521,322 =========== =========== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .13 $ .12 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,284,746 4,251,801 =========== ===========
See notes to financial statements. NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 - --------------------------------------------------------------------------------
1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 564,006 $ 521,322 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 29,700 28,725 Equity in income of corporate joint ventures, foreign company and European holding company (114,145) (154,689) Dividend received from joint ventures -- 13,060 Change in current assets and liabilities: Receivables: Trade (254,599) (133,965) Corporate joint ventures (563) (8,802) Inventories (58,923) 62,917 Prepaid expenses and other (10,690) 50,356 Accounts payable 7,511 (34,128) Income taxes payable (281,095) (372,901) Accrued liabilities (28,686) 33,254 ----------- ----------- Total adjustments (711,490) (516,173) ----------- ----------- Net cash (used in) provided by operating activities (147,484) 5,149 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in corporate joint ventures (79,311) (24,000) Additions to property (36,291) (54,682) Increase in other assets (22,000) (250,000) ----------- ----------- Net cash used in investing activities (137,602) (328,682) CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of common stock (672,206) (24,600) Issuance of common stock 21,774 26,603 ----------- ----------- Net cash (used in) provided by financing activities (650,432) 2,003 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (935,518) (321,530) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,945,567 3,707,520 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,010,049 $ 3,385,990 =========== ===========
See notes to financial statements. NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996 - -------------------------------------------------------------------------------- 1. INTERIM FINANCIAL INFORMATION In the opinion of management, the accompanying unaudited financial statements contain all necessary adjustments, which are of a normal recurring nature, to present fairly the financial position of Northern Technologies International Corporation as of November 30, 1997 and the results of its operations and its cash flows for the three months ended November 30, 1997 and 1996, in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements and related notes as of and for the year ended August 31, 1997 contained in the Company's filing on Form 10-KSB dated November 25, 1997 and with Management's Discussion and Analysis or Plan of Operation appearing on pages 7 through 9 of this quarterly report. 2. INVENTORIES Inventories consist of the following: November 30, August 31, 1997 1997 Production materials $ 358,840 $ 276,631 Work in process 134,373 21,301 Finished goods 407,328 543,686 ---------- ---------- $ 900,541 $ 841,618 ========== ========== 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following: November 30, August 31, 1997 1997 Land $ 246,097 $ 246,097 Buildings and improvements 1,044,996 1,044,996 Machinery and equipment 632,158 603,919 ---------- ---------- 1,923,251 1,895,012 Less accumulated depreciation 954,332 932,684 ---------- ---------- $ 968,919 $ 962,328 ========== ========== 4. INVESTMENT IN CORPORATE JOINT VENTURES During the three months ended November 30, 1997, the Company invested $79,311 in foreign joint ventures. The Company has a 50% ownership in each entity. The entities had no significant operations prior to the Company's investment. 5. STOCKHOLDERS' EQUITY During the three months ended November 30, 1997, the Company acquired 64,020 shares of its common stock for $672,206. During the three months ended November 30, 1997, stock options for the purchase of 6,834 shares of the Company's common stock were exercised at prices between $3.00 and $5.38 per share. 6. SUPPLEMENTAL CASH FLOW INFORMATION During the three months ended November 30, 1997, the Company declared a cash dividend of $.15 per share payable on December 15, 1997 to shareholders of record on December 1, 1997. During the three months ended November 30, 1996, the Company declared a cash dividend of $.12 per share payable on December 20, 1996 to shareholders of record on December 6, 1996. 7. INCOME PER SHARE Income per share of common stock was computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during each period. This amount includes common stock equivalents of 90,282 and 53,164 in the first quarter of fiscal 1998 and 1997, respectively, resulting from the assumed exercise of outstanding options using the treasury stock method. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS GENERAL - The Company conducts all foreign transactions based on the U.S. dollar, except for its investments in foreign joint ventures. The exchange rate differential relating to investments in foreign joint ventures is accounted for under the requirements of SFAS No. 52. SALES - Net sales increased by $761,327 during the first quarter of fiscal 1998 from those in the first quarter of fiscal 1997. This increase was due to an increase in demand for corrosion inhibiting products. COST OF SALES - Cost of goods sold as a percentage of net sales was 52% for the first quarter of fiscal 1998 compared to 48% for the first quarter of fiscal 1997. The variation is primarily due to the mix of product sales. OPERATING EXPENSES - As a percentage of sales, total operating expenses decreased from 43% in the first quarter of fiscal 1997 to 34% in the first quarter of fiscal 1998. Operating expense classification percentages of sales were as follows: Three Months Ended November 30 1997 1996 Selling 10% 14% General and administrative 20% 24% Research, engineering, and technical support 4% 5% Selling expenses increased for the first three months of fiscal 1998 as compared to the same period in 1997 due primarily to increases in sales staff salaries and distributor commissions partially offset by a decrease in trade show expenses. Selling expenses as a percentage of sales decreased for the three months ended November 30, 1997 as compared to the same period in fiscal 1997 due to the increase in sales in fiscal 1998 offsetting the effect of the increase in fiscal 1998 selling expenses. General and administrative expenses increased for the first three months of fiscal 1998 as compared to the same period in 1997 due primarily to increases in salary expense, insurance expense, and travel expense. General and administrative expenses as a percentage of sales decreased for the three months ended November 30, 1997 as compared to the same period in fiscal 1997 due to the increase in sales in fiscal 1998 offsetting the effect of the increase in fiscal 1998 general and administrative expenses. Research, engineering and technical support expenses for the first three months of fiscal 1998 were higher than the comparable period in fiscal 1997 due primarily to increases in staff salaries and travel. Such expenses, as a percentage of sales, were substantially unchanged for the first three months of fiscal 1998 as compared to the same period in fiscal 1997. JOINT VENTURES AND FOREIGN COMPANY - Net earnings from joint ventures and foreign company decreased in the first three months of fiscal 1998 to $395,328 from $545,627 in the first three months of fiscal 1997. This net decrease is due to the strengthening of the U.S. dollar when compared to the local currencies of the Company's corporate joint ventures and higher travel and legal expenses incurred by the Company in its corporate joint ventures and in establishing new corporate joint ventures. INCOME TAXES - Income tax expense for the three months ended November 30, 1997 and 1996 was calculated based upon management's estimate of the annual effective rates. The effective income tax rates for fiscal 1998 and 1997 is lower than the statutory rate primarily due to equity in income of joint ventures and foreign company being recognized on an after tax basis for these entities. To the extent the joint ventures' undistributed earnings are distributed to the Company, it does not result in any material additional income tax liability after the application of foreign tax credits. LIQUIDITY AND CAPITAL RESOURCES At November 30, 1997, the Company's working capital was $4,896,319, including $3,010,049 in cash and cash equivalents, compared to working capital of $5,826,590 including cash and cash equivalents of $3,945,567 as of August 31, 1997. Net cash provided from past operations has been sufficient to meet liquidity requirements, capital expenditures, research and development costs and expansion of operations of the Company's joint ventures. Cash flows used in operations for the three months ended November 30, 1997 was $147,484. The net cash flow used in operations for the three months ended November 30, 1997 was principally from an increase in trade receivables, a decrease in income taxes payable, and equity in income of corporate joint ventures, foreign company, and European holding company partially offset by net income. Cash flows from operations for the three months ended November 30, 1996 was $5,149. The net cash flow from operations for the three months ended November 30, 1996 resulted principally from net income offset by equity income of corporate joint ventures, foreign company, and a decrease in income taxes payable. Cash used in investing activities for the three months ended November 30, 1997 was $137,602, which resulted principally from additions to property and investments in corporate joint ventures. Cash used in investing activities for the three months ended November 30, 1996 was $328,682, which resulted from investments in corporate joint ventures, additions to property and an increase in other assets. Cash used in financing activities for the three months ended November 30, 1997 was $650,432, which resulted from the purchase of common stock for $672,206 partially offset by $21,774 from the exercise of stock options. Cash provided by financing activities for the three months ended November 30, 1996 was $2,003, which resulted from payments received of $26,603 from the exercise of stock options offset by the repurchase of common stock of $24,600. The Company expects to meet future liquidity requirements with its existing cash and cash equivalents and from cash flows of future operating earnings and distributions of earnings and technical assistance fees from the corporate joint venture investments. The Company has no long-term debt and no material lease commitments at November 30, 1997. The Company has no postretirement benefit plan and does not anticipate establishing any post retirement benefit program. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, which is effective for interim and annual reporting periods ending after December 15, 1997. SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, EARNINGS PER SHARE, and replaces the presentation of primary earnings per share with a presentation of basic earnings per share. It also requires dual presentation for all entities with complex capital structures and provides guidance on other computational changes. The implementation of SFAS No. 128 is expected to increase earnings per share by an immaterial amount. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS None ITEM 2 - CHANGES IN SECURITIES None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 - OTHER INFORMATION None ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION January 13, 1998 /s/ Loren M. Ehrmanntraut ------------------------- Loren M. Ehrmanntraut Chief Financial Officer and Corporate Secretary EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS AUG-31-1998 SEP-01-1997 NOV-30-1997 3,010,049 0 1,967,373 30,000 900,541 6,175,849 1,923,251 954,332 10,742,543 1,279,530 0 0 0 82,906 9,262,107 10,742,543 2,682,741 2,682,741 1,387,515 1,387,515 0 1,000 0 814,006 250,000 564,006 0 0 0 564,006 .13 .13
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