Note 12 - Segment and Geographic Information

12 Months Ended

Aug. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

12. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company’s business is organized into two reportable segments: ZERUST

®

and Natur-Tec

®

. The Company 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 more recently, has targeted and expanded into the oil and gas industry. The Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec

®

brand.

The following tables present the Company’s business segment information in fiscal 2016 and fiscal 2015:

	Fiscal 2016		Fiscal 2015
ZERUST ® net sales	$	27,577,566	$	26,042,909
Natur-Tec ® net sales		5,355,999		4,279,784
Total net sales	$	32,933,565	$	30,322,693

The following table sets forth the Company’s cost of goods sold for fiscal 2016 and fiscal 2015 by segment:

	Fiscal 2016		Fiscal 2015
Direct cost of goods sold
ZERUST ®	$	15,588,133	$	14,399,456
Natur-Tec ®		4,076,249		3,232,353
Indirect cost of goods sold		2,655,774		2,924,124
Total net cost of goods sold	$	22,320,156	$	20,555,932

The Company utilizes product net sales and direct and indirect cost of goods sold for each product in reviewing the financial performance of a product type. Further allocation of Company expenses or assets, aside from amounts presented in the tables above, is not utilized in evaluating product performance, nor does such allocation occur for internal financial reporting.

Sales to the Company’s joint ventures are included in the foregoing geographic and segment information, however, sales by the Company’s joint ventures to other parties are not included. The foregoing geographic and segment information represents only sales and cost of goods sold recognized directly by the Company.

All joint venture operations including equity in income, fees for services and related dividends are related to Zerust products and services.

Geographic Information

Net sales by geographic location were as follows:

	Fiscal Year Ended August 31,
	2016		2015
Inside the U.S.A. to unaffiliated customers	$	20,304,480	$	19,329,979
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		2,721,905		2,831,301
Unaffiliated customers		9,907,180		8,161,413
	$	32,933,565	$	30,322,693

Net sales by geographic location are based on the location of the customer.

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during fiscal 2016 and fiscal 2015, respectively, were as follows:

	Fiscal 2016		Fiscal 2015
Germany	$	845,857	$	873,400
Japan		646,015		599,108
Poland		599,391		600,255
Thailand		537,212		554,881
United Kingdom		386,761		396,514
Korea		352,393		192,539
France		329,805		412,608
India		300,506		277,548
Sweden		265,745		323,610
Finland		252,578		281,620
Czech		237,062		229,185
China		0		494,080
Other		384,385		480,143
	$	5,137,710	$	5,715,491

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales and cost of goods sold recognized directly by the Company.

See Note 6 for additional details on geographical information regarding equity in income from joint ventures.

The geographical distribution of key financial statement data is as follows:

	At August 31, 2016		At August 31, 2015
China	$	253,931	$	45,220
Brazil		66,938		46,918
India		13,645		16,402
United States		8,219,955		8,446,842
Total long-lived assets	$	8,554,469	$	8,555,382

	Fiscal Year Ended August 31, 2016		Fiscal Year Ended August 31, 2015
China	$	4,114,288	$	1,070,422
Brazil		2,172,297		2,623,938
India		1,104,947		967,241
Other		5,237,553		6,331,113
United States		20,304,480		19,329,979
Total net sales	$	32,933,565	$	30,322,693

Total long-lived assets located in China, Brazil and India primarily consist of property, plant and equipment. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted sales exceeds the carrying value of the assets.