Core Insights - Northern Technologies International Corporation (NTIC) reported record first-quarter consolidated sales of $21,338,000 for fiscal 2025, representing a 5.7% increase year-over-year from $20,182,000 in the same period last year [3][5] - The growth was primarily driven by strong sales in Natur-Tec® products, which saw a 22.8% increase, and stable performance in ZERUST® oil and gas and industrial sales [3][5] - NTIC's CEO expressed cautious optimism regarding the continued improvement in global trends within ZERUST® industrial markets throughout fiscal 2025 [1] Financial Performance - Consolidated net sales increased to $21,338,000, with ZERUST® industrial net sales at $13,962,000 (up 0.4%) and ZERUST® oil and gas net sales at $1,514,000 (up 0.7%) [5][21] - Natur-Tec® product net sales reached a record of $5,863,000, marking a significant increase of 22.8% [5][21] - NTIC China reported its highest quarterly sales in nearly three years, amounting to $3,995,000, an increase of 8.6% [5] Operating Expenses and Profitability - Operating expenses rose by 14.0% year-over-year to $9,470,000, primarily due to strategic investments in ZERUST® oil and gas sales infrastructure [2][5] - Gross profit margin improved by 200 basis points to 38.3%, reflecting successful quality system improvement initiatives [2][5] - Net income attributable to NTIC decreased to $561,000, or $0.06 per diluted share, compared to $896,000, or $0.09 per diluted share in the prior year [8][21] Joint Ventures and Cash Flow - Joint venture operating income increased by 2.7% to $2,414,000, with net sales from joint ventures rising by 1.2% to $23,837,000 [6][21] - Cash provided by operating activities for the first quarter was $2,395,000, indicating strong operational cash flow [5] Balance Sheet Strength - As of November 30, 2024, NTIC's working capital stood at $22,183,000, with cash and cash equivalents of $5,570,000 [9][18] - The company maintained a strong balance sheet, with total assets of $94,037,655 and total liabilities of $19,730,606 [9][19]

Financial Data and Key Metrics Changes - For fiscal 2024, total consolidated net sales increased by 6.5% to a record annual figure, with fourth quarter net sales rising by 12.7% to $23.3 million compared to the same quarter last year [21][10] - Gross profit for fiscal 2024 increased by nearly $6 million or 21.5% year-over-year, with gross profit as a percentage of net sales improving to 39.7% from 34.8% in the prior fiscal year [6][24] - Net income for the fourth quarter was $1.8 million or $0.19 per diluted share, compared to $939,000 or $0.10 per diluted share for the same quarter last year [24] Business Line Data and Key Metrics Changes - ZERUST Oil and Gas net sales surged by 76.6% in the fourth quarter, reaching $4.2 million, while Natur-Tec sales increased by 16.4% to $5.7 million [10][15] - ZERUST Industrial net sales saw a marginal increase of 0.1% [10] - Sales from joint ventures decreased by 3.6% in the fourth quarter, with EXCOR Germany experiencing a 15% decline due to softer demand [10][11] Market Data and Key Metrics Changes - Demand in North America for ZERUST industrial products remains stable, while the company is cautiously optimistic about improving demand and profitability in Europe for fiscal 2025 [8][7] - The Chinese market has shown signs of stabilization with a 1.1% increase in sales from NTIC's China subsidiary, and the company expects further growth in fiscal 2025 [11][12] Company Strategy and Development Direction - The company is focused on strategic investments in workforce and infrastructure to support growth opportunities across global markets [8] - NTIC is committed to enhancing operations in China and expanding its presence in the bioplastics market, particularly in India and Brazil [12][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal 2025, anticipating further sales growth and improved profitability despite a fluid economic environment [28] - The company is navigating challenges in Europe, particularly related to the transition to electric vehicles affecting demand [34] Other Important Information - As of August 31, 2024, working capital was $23.7 million, with outstanding debt of $7.1 million, reflecting a strategic focus on reducing debt through positive operating cash flow [26] - The Board of Directors declared a quarterly cash dividend of $0.07 per common share payable on August 14, 2024 [27] Q&A Session Summary Question: Insights on Natur-Tec wins - Management noted growth across all regions and market segments, particularly in North America and India, with increased demand for compostable products [32] Question: Trends in ZERUST Industrial in Europe - Management indicated ongoing headwinds in Europe, particularly due to macroeconomic conditions and the transition to electric vehicles [34] Question: Future gross margin expectations - Management expects gross margins to remain stable, with improvements driven by higher sales in the Oil and Gas business [36] Question: Growth expectations for Oil and Gas in fiscal 2025 - Management anticipates significant growth in the Oil and Gas sector, projecting a year-over-year increase of 20% to 30% [39] Question: Certification timeline for Oil and Gas ZERUST technology - Management confirmed an API change expected to take effect in late fiscal 2025, which may impact adoption rates in the U.S. market [43]

Core Insights - Northern Technologies (NTIC) reported quarterly earnings of $0.20 per share, exceeding the Zacks Consensus Estimate of $0.19 per share, and significantly up from $0.03 per share a year ago, indicating a 566.67% year-over-year increase [1] - The company achieved revenues of $23.35 million for the quarter ended August 2024, surpassing the Zacks Consensus Estimate by 3.77% and up from $20.71 million in the same quarter last year, reflecting a 7.88% increase [2] - Northern Technologies has seen its shares increase by approximately 12.3% since the beginning of the year, while the S&P 500 has gained 23.6%, indicating underperformance relative to the broader market [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.17 on revenues of $22.2 million, and for the current fiscal year, it is $0.80 on revenues of $93.9 million [7] - The estimate revisions trend for Northern Technologies is mixed, resulting in a Zacks Rank 3 (Hold), suggesting that the stock is expected to perform in line with the market in the near future [6] Industry Context - The Chemical - Diversified industry, to which Northern Technologies belongs, is currently ranked in the bottom 18% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - In fiscal 2024, NTIC's consolidated net sales reached $63,092,575 from ZERUST® rust and corrosion inhibiting products, marking a 2.2% increase from fiscal 2023[33]. - 74.2% of NTIC's consolidated net sales were derived from ZERUST® corrosion prevention solutions in fiscal 2024[32]. - NTIC's consolidated net sales in fiscal 2024 included $9,229,279 in sales to customers in the oil and gas industry, representing an 18.3% increase from fiscal 2023[41]. - 25.8% of NTIC's consolidated net sales in fiscal 2024 were derived from Natur-Tec® bioplastic packaging solutions, totaling $21,966,942, which is a 20.9% increase compared to fiscal 2023[50]. - NTIC recognized $5,251,782 in fees and $2,997,164 in dividend distributions from its joint ventures during fiscal 2024[154]. - Approximately 40-45% of ZERUST® industrial net sales in North America and 55-60% of net sales of NTIC's joint ventures came from the automotive sector in fiscal 2024[151]. - NTIC's equity in income from joint ventures was $4,223,296 during fiscal 2024, with $2,299,274 attributable to its significant joint venture in Germany, EXCOR[164]. Market Focus and Product Development - NTIC has expanded its market focus significantly on the oil and gas industry, which is highly susceptible to corrosion, to minimize maintenance downtime and extend infrastructure life[23]. - NTIC's corrosion prevention solutions include a variety of products such as packaging, liquids, coatings, rust removers, and engineered solutions for the oil and gas industry[33]. - The Natur-Tec® product line is expected to grow substantially due to new regulations mandating recyclable or compostable packaging by 2032 in California and similar bans in other states[63]. - NTIC's strategy includes enhancing existing products and developing new products to respond to customer needs, which requires significant research and development resources[195]. - NTIC has invested in expanding its corrosion prevention solutions into the oil and gas industry and launching Natur-Tec® resin compounds, although success is not guaranteed[196][197]. Operational Structure and Workforce - NTIC operates 11 subsidiaries and 15 active joint ventures across North America, Europe, and Asia, consolidating their financial results in their statements[28][29]. - NTIC's subsidiaries and joint ventures are strategically positioned in key markets, including China, India, and various ASEAN countries, enhancing their global reach[22][29]. - As of August 31, 2024, NTIC employed a total of 95 employees in North America, with 93 full-time and 2 part-time employees[85]. - The average tenure of NTIC's employees is nine years, indicating a stable workforce[87]. - NTIC's management team has an average tenure of 17 years, reflecting strong leadership continuity[88]. Challenges and Risks - NTIC's business may be negatively impacted by weaknesses in the global economy, particularly in the automotive industry[118]. - Supply chain disruptions have historically affected NTIC's product manufacturing and could lead to increased costs and lost sales[118]. - The evolution of the automotive industry towards electric vehicles could adversely affect NTIC's business[118]. - NTIC's liquidity and financial position depend on fees and dividends from joint ventures, which may not be guaranteed in the future[119]. - NTIC's international operations face risks from economic, political, and legal factors, particularly in Germany and China, which could adversely affect operating results[120]. - The ongoing war between Russia and Ukraine has resulted in commodity price fluctuations, negatively impacting NTIC's margins and joint venture profitability[138]. - Economic uncertainty in developing markets may adversely affect NTIC's revenue and earnings[121]. - Changes in trade regulations and tariffs could materially impact NTIC's business and financial condition due to the evolving geopolitical landscape[143]. Research and Development - NTIC anticipates spending between $4,800,000 and $5,000,000 on research and development activities in fiscal 2025[71]. - NTIC holds 5 patents and patent applications in the United States covering various applications for biobased and compostable plastics[73]. - The Natur-Tec® resin compounds are produced using a patented ReX Process, allowing for high performance and reduced costs compared to other bio-plastic materials[51]. Employee Benefits and Compensation - NTIC's compensation program is designed to attract and retain talent, offering competitive pay levels based on local markets and job descriptions[96]. - Employees are immediately eligible to participate in NTIC's 401(k) savings plan, with NTIC matching contributions and potentially providing profit-sharing contributions[97]. - NTIC offers cash bonuses and an employee stock purchase plan allowing employees to buy stock at a 10% discount to fair market value[98]. - The medical plan provided by NTIC has no co-pay, and employees are not required to contribute towards premium costs[99]. - Full-time employees are eligible for paid holidays and vacation time ranging from 15 to 25 days based on service length[101]. Competitive Landscape - NTIC faces intense competition in almost all product lines, with competitors having substantially greater resources[189]. - The company's strategy to expand its corrosion prevention solutions into the oil and gas industry carries risks and may not be successful, potentially harming financial results[122]. - NTIC's ability to compete effectively may be hindered by intense competition and the need to keep up with new technologies and product offerings[194][195]. Environmental and Regulatory Factors - NTIC's Natur-Tec® bio-based and compostable plastics are designed to replace conventional petroleum-based plastics, with a focus on reducing carbon footprints[25]. - The market for biodegradable plastics is expanding, driven by environmental awareness and regulatory support, which may benefit NTIC's Natur-Tec® products[203][204]. - The commercial success of Natur-Tec® products depends on market acceptance and potential government regulations promoting sustainable practices[204][205].

Financial Performance - Consolidated net sales for fiscal 2024 increased 6.5% to a record $85,060,000 compared to $79,903,000 in the prior fiscal year[3]. - ZERUST oil and gas net sales increased 18.3% to a record $9,229,000, while ZERUST industrial net sales decreased 0.1% to $53,863,000[3]. - Natur-Tec product net sales increased 20.9% to a record $21,967,000, contributing to overall sales growth[3]. - Net income attributable to NTIC increased 85.7% to $5,409,000, or $0.55 per diluted share, compared to $2,912,000, or $0.30 per diluted share in the previous year[3][10]. - Net sales for the three months ended August 31, 2024, were $23,349,107, representing a 12.5% increase from $20,709,635 in the same period of 2023[22]. - Net income attributable to NTIC for the three months ended August 31, 2024, was $938,947, compared to $1,846,984 in the same period of 2023, reflecting a decrease of 49.2%[23]. - Adjusted net income attributable to NTIC for the fiscal year ended August 31, 2024, was $5,832,214, a significant increase from $2,570,488 in 2023[26]. Profitability and Expenses - Gross profit as a percentage of net sales increased 490 basis points to 39.7% for fiscal 2024[3]. - Operating expenses as a percentage of net sales decreased to 41.6% for the full fiscal year 2024, compared to 41.8% in the prior year[9]. - Gross profit for the twelve months ended August 31, 2024, was $33,786,362, up 21.5% from $27,803,831 in 2023[22]. - Research and development expenses for the twelve months ended August 31, 2024, were $4,802,791, slightly down from $4,967,922 in 2023[23]. Cash Flow and Assets - Cash provided by operating activities increased 6.2% to $5,883,000 for the full fiscal year 2024[3]. - Total current assets increased to $41,579,219 as of August 31, 2024, from $39,671,556 in 2023, marking a growth of 4.8%[21]. - Total assets increased to $94,676,502 as of August 31, 2024, from $89,344,303 in 2023, reflecting a growth of 6.5%[21]. - Cash and cash equivalents decreased to $4,952,184 as of August 31, 2024, from $5,406,173 in 2023, a decline of 8.4%[21]. Liabilities and Financial Position - Total liabilities decreased to $19,501,181 as of August 31, 2024, down from $18,645,506 in 2023, indicating a reduction of 4.4%[22]. - NTIC's consolidated balance sheet remains strong with working capital of $23,682,000 as of August 31, 2024[12]. Future Outlook - The company anticipates further sales growth and improved profitability in fiscal 2025, driven by strategic investments and global demand for Natur-Tec products[5][18]. - NTIC's joint venture operating income decreased 18.6% to $9,475,000 for fiscal 2024, compared to $11,642,000 in the previous year[8]. Shareholder Returns - The company reported a diluted net income per share of $0.19 for the three months ended August 31, 2024, compared to $0.10 in the same period of 2023, an increase of 90%[23].

Group 1 - Northern Technologies International Corporation (NTIC) is set to release its fiscal 2024 fourth-quarter financial results on November 19, 2024, before the market opens [1] - A conference call with management will take place on the same day at 9:00 a.m. Eastern Time, where the President and CEO, Patrick Lynch, and CFO, Matt Wolsfeld, will discuss the financial results and outlook [2] - Participants must register in advance to join the live call and will receive a dial-in number and unique PIN after registration [3] Group 2 - NTIC develops and markets environmentally beneficial products and services in over 65 countries, primarily focusing on corrosion prevention under the ZERUST® brand [5] - The company has been selling its proprietary rust and corrosion inhibiting products for nearly 50 years, targeting various markets including automotive, electronics, and oil and gas [5] - NTIC also offers bio-based and biodegradable polymer resin compounds and finished products under the Natur-Tec® brand [5]

MINNEAPOLIS, July 17, 2024 (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 announced that the Board of Directors declared a quarterly cash dividend of $0.07 per share payable on August 14, 2024, to shareholders of record at the close of business on July 31, 2024. Northern Technologies International Corporation develops and markets propri ...

olaser/E+ via Getty Images As we will see, NTIC's fiscal Q3 results were not out of the ordinary. However, the stock was trading down 7% despite a mainly positive day for small caps. I believe this partly evidences the risk I commented about in my previous article, that a high P/E requires excellent results to be sustained and that even ordinary results can lead to capital losses. Industrials down with Europe leading the fall: NTIC's largest segment, industrial anti-corrosion, posted revenues down about 1.5 ...

Northern Technologies (NTIC) came out with quarterly earnings of $0.11 per share, missing the Zacks Consensus Estimate of $0.24 per share. This compares to earnings of $0.17 per share a year ago. These figures are adjusted for non-recurring items. Over the last four quarters, the company has surpassed consensus EPS estimates just once. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commenta ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for Northern Technologies International Corporation [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents NTIC's unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed notes for Q3 FY2024 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Summarizes NTIC's financial position, detailing assets, liabilities, and equity as of May 31, 2024, and August 31, 2023 | Metric | May 31, 2024 ($) | August 31, 2023 ($) | | :---------------------- | :--------------- | :------------------ | | Total Current Assets | 37,903,269 | 39,671,556 | | Total Assets | 89,265,544 | 89,344,303 | | Total Current Liabilities | 14,794,433 | 16,721,372 | | Total Long-Term Liabilities | 1,897,636 | 1,924,134 | | Stockholders' Equity | 68,851,469 | 66,356,273 | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Details NTIC's revenues, expenses, and net income for the three and nine months ended May 31, 2024 and 2023 **Three Months Ended May 31:** | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | 20,686,197 | 20,969,726 | (283,529) | (1.4%) | | Gross Profit | 7,893,094 | 7,579,853 | 313,241 | 4.1% | | Operating Income | 1,523,917 | 1,906,586 | (382,669) | (20.1%) | | Net Income Attributable to NTIC | 976,604 | 1,059,590 | (82,986) | (7.8%) | | Diluted EPS | 0.10 | 0.11 | (0.01) | (9.1%) | **Nine Months Ended May 31:** | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | 61,710,410 | 59,193,317 | 2,517,093 | 4.3% | | Gross Profit | 23,566,532 | 20,236,045 | 3,330,487 | 16.5% | | Operating Income | 5,106,621 | 3,549,718 | 1,556,903 | 43.9% | | Net Income Attributable to NTIC | 3,573,294 | 1,973,329 | 1,599,965 | 81.1% | | Diluted EPS | 0.36 | 0.20 | 0.16 | 80.0% | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Presents NTIC's net income and other comprehensive income components for the three and nine months ended May 31, 2024 and 2023 **Three Months Ended May 31:** | Metric | 2024 ($) | 2023 ($) | | :------------------------------------------ | :-------- | :-------- | | Net Income | 1,155,322 | 1,236,999 | | Other Comprehensive Income (Loss) – Foreign Currency Translation Adjustment | (251,995) | (92,228) | | Comprehensive Income | 903,327 | 1,144,771 | **Nine Months Ended May 31:** | Metric | 2024 ($) | 2023 ($) | | :------------------------------------------ | :-------- | :-------- | | Net Income | 4,108,791 | 2,390,747 | | Other Comprehensive Income (Loss) – Foreign Currency Translation Adjustment | (296,281) | 388,568 | | Comprehensive Income | 3,812,510 | 2,779,315 | [Consolidated Statements of Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Equity) Outlines changes in NTIC's stockholders' equity, including net income, dividends, and other adjustments, for the nine months ended May 31, 2024 **Equity Changes (Nine Months Ended May 31, 2024):** | Metric | Amount ($) | | :-------------------------------------- | :---------- | | Balance at August 31, 2023 | 70,698,797 | | Stock issued for ESPP | 79,967 | | Stock options exercised | 0 | | Stock option expense | 1,038,022 | | Dividends paid to stockholders | (1,980,745) | | Dividend received by non-controlling interest | (1,075,076) | | Net income | 4,108,791 | | Other comprehensive income | (296,281) | | Balance at May 31, 2024 | 72,573,475 | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports NTIC's cash inflows and outflows from operating, investing, and financing activities for the nine months ended May 31, 2024 and 2023 **Nine Months Ended May 31:** | Cash Flow Activity | 2024 ($) | 2023 ($) | | :---------------------- | :---------- | :---------- | | Operating Activities | 7,583,905 | 3,505,803 | | Investing Activities | (2,601,176) | (2,678,748) | | Financing Activities | (4,587,474) | 81,773 | | Effect of Exchange Rate Changes | (6,604) | (47,524) | | Net Increase in Cash | 388,651 | 861,304 | | Cash at End of Period | 5,794,824 | 6,195,194 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of NTIC's accounting policies, financial instruments, and segment information supporting the financial statements - The Company adopted ASU No. 2016-13 (CECL model) on September 1, 2023, which did not have a material impact on its financial position or operating results[45](index=45&type=chunk) **Inventories (as of May 31, 2024 vs. August 31, 2023):** | Category | May 31, 2024 ($) | August 31, 2023 ($) | | :----------------- | :--------------- | :------------------ | | Production materials | 4,887,783 | 4,960,355 | | Finished goods | 8,354,598 | 8,136,134 | | Total | 13,242,381 | 13,096,489 | **Intangible Assets, Net (as of May 31, 2024 vs. August 31, 2023):** | Category | May 31, 2024 Net ($) | August 31, 2023 Net ($) | | :--------------------- | :------------------- | :---------------------- | | Patents and trademarks | 619,055 | 658,752 | | Customer relationships | 5,183,383 | 5,500,733 | | Total | 5,802,438 | 6,159,485 | Amortization expense for intangible assets was **$147,749** (three months) and **$442,975** (nine months) ended May 31, 2024[10](index=10&type=chunk) - NTIC's revolving line of credit with JPMorgan Chase Bank, N.A. was renewed to extend the maturity date to January 6, 2025[13](index=13&type=chunk)[14](index=14&type=chunk) - Outstanding borrowings were **$1,988,380** as of May 31, 2024, and the Company was in compliance with all covenants[18](index=18&type=chunk) - NTIC China has two term loans with China Construction Bank Corporation, totaling **$2,762,049** as of May 31, 2024, with an annual interest rate of **3.25%**[49](index=49&type=chunk) **Net Income Attributable to NTIC Per Common Share (Diluted):** | Period | 2024 ($) | 2023 ($) | | :---------------------- | :------- | :------- | | Three Months Ended May 31 | 0.10 | 0.11 | | Nine Months Ended May 31 | 0.36 | 0.20 | **Net Sales by Segment (Nine Months Ended May 31):** | Segment | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :----------- | :----------- | :----------- | :----------- | :--------- | | ZERUST® | 45,461,075 | 45,929,422 | (468,347) | (1.0%) | | Natur-Tec® | 16,249,335 | 13,263,895 | 2,985,440 | 22.5% | | Total | 61,710,410 | 59,193,317 | 2,517,093 | 4.3% | - Two joint ventures (Korea and Thailand) accounted for **54.8%** of the Company's trade joint venture receivables as of May 31, 2024[100](index=100&type=chunk) - Income tax expense for the nine months ended May 31, 2024, was **$848,391**, largely due to foreign operations, with the Company recording a full valuation allowance against U.S. deferred tax assets[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes NTIC's financial condition, operating results, liquidity, and capital resources for Q3 FY2024, including segment performance and risks [Business Overview](index=22&type=section&id=Business%20Overview) Introduces NTIC's core businesses, ZERUST® corrosion prevention and Natur-Tec® bio-based polymer resins, and strategic initiatives - NTIC develops and markets proprietary, environmentally beneficial products and services in over 65 countries, primarily under the ZERUST® brand for corrosion prevention and Natur-Tec® for bio-based and compostable polymer resins[136](index=136&type=chunk) - A strategic initiative is to expand ZERUST® corrosion prevention technologies into the oil and gas industry, aiming to minimize maintenance downtime and extend infrastructure life[137](index=137&type=chunk) - Natur-Tec® products, including biopolymer resin compounds and finished products, are designed to replace petroleum-based plastics and are certified fully biodegradable in commercial composting environments[138](index=138&type=chunk) [Financial Overview](index=23&type=section&id=Financial%20Overview) Summarizes NTIC's key financial performance, including sales trends, operating expenses, and profitability for Q3 FY2024 - Consolidated net sales decreased **1.4%** for the three months ended May 31, 2024, but increased **4.3%** for the nine months, driven by increased Natur-Tec® sales partially offset by decreased ZERUST® demand[85](index=85&type=chunk) - Total operating expenses increased **7.1%** and **7.3%** for the three and nine months, respectively, primarily due to increased personnel expenses, benefits, and travel[86](index=86&type=chunk) - Cost of goods sold as a percentage of net sales decreased to **61.8%** for both periods, primarily due to lower raw material prices and insourcing of finished goods production[140](index=140&type=chunk) **Net Income Attributable to NTIC (Diluted EPS):** | Period | 2024 ($) | 2023 ($) | | :---------------------- | :------- | :------- | | Three Months Ended May 31 | 0.10 | 0.11 | | Nine Months Ended May 31 | 0.36 | 0.20 | [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Details NTIC's financial performance by segment, analyzing sales, expenses, and joint venture contributions for Q3 FY2024 **Net Sales by Product Segment (Three Months Ended May 31):** | Segment | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :----------- | :----------- | :----------- | :----------- | :--------- | | ZERUST® | 14,837,235 | 16,100,674 | (1,263,439) | (7.8%) | | Natur-Tec® | 5,848,962 | 4,869,052 | 979,910 | 20.1% | | Total | 20,686,197 | 20,969,726 | (283,529) | (1.4%) | **Net Sales by Product Segment (Nine Months Ended May 31):** | Segment | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :----------- | :----------- | :----------- | :----------- | :--------- | | ZERUST® | 45,461,075 | 45,929,422 | (468,347) | (1.0%) | | Natur-Tec® | 16,249,335 | 13,263,895 | 2,985,440 | 22.5% | | Total | 61,710,410 | 59,193,317 | 2,517,093 | 4.3% | - ZERUST® net sales decreased due to lower demand in North American industrial and oil & gas sectors[114](index=114&type=chunk)[143](index=143&type=chunk) - Natur-Tec® sales increased significantly due to increased global demand[115](index=115&type=chunk)[144](index=144&type=chunk) - Equity in income from joint ventures increased **3.7%** (three months) and **0.3%** (nine months), driven by profitability efforts, despite a decrease in net income from the German joint venture (EXCOR) due to customer loss and softer regional demand[146](index=146&type=chunk) - Fees for services provided to joint ventures decreased **10.9%** (three months) and **0.8%** (nine months), primarily due to decreased net sales at the German joint venture[117](index=117&type=chunk) - Selling expenses increased **8.7%** and **9.6%** for the three and nine months, respectively, mainly due to higher personnel expenses[147](index=147&type=chunk) - General and administrative expenses rose **9.2%** and **8.3%** due to increased professional services, travel, and personnel costs[118](index=118&type=chunk) - Interest income increased significantly due to changes in invested cash balances at subsidiaries, while interest expense decreased due to lower outstanding borrowings[119](index=119&type=chunk)[120](index=120&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses NTIC's working capital, cash flows, funding strategies, and capital expenditures for the nine months ended May 31, 2024 - Working capital was **$23,178,836** as of May 31, 2024, up from **$22,950,184** as of August 31, 2023, with cash and cash equivalents at **$5,794,824**[124](index=124&type=chunk) - NTIC plans to fund operations, investments, capital expenditures, and debt repayments through existing cash, forecasted cash flows, JV distributions, and fees[153](index=153&type=chunk) - Future investments include Zerust India, NTIC China, NTI Europe, R&D, oil & gas technology, and Natur-Tec® bio-plastics[153](index=153&type=chunk) - Net cash provided by operating activities for the nine months ended May 31, 2024, was **$7,583,904**, primarily from net income, JV dividends, and non-cash adjustments[158](index=158&type=chunk) - Trade receivables, excluding joint ventures, decreased by **$1,270,274**, with average days outstanding decreasing from **71** to **66** days[177](index=177&type=chunk) - Trade receivables from joint ventures increased by **$416,419**, with average days outstanding increasing from **34** to **127** days, mainly due to balances at Thailand and South Korea[178](index=178&type=chunk) - NTIC's Board declared cash dividends of **$0.07** per common share for each of the three quarters ended May 31, 2024, totaling **$0.21** per share for the nine-month period[180](index=180&type=chunk) - No shares were repurchased under the stock repurchase program during the nine months ended May 31, 2024, with **$2,640,548** remaining available for repurchase[161](index=161&type=chunk) - Capital expenditures for the nine months ended May 31, 2024, were **$2,515,248**, primarily for facility improvements and a new ERP software system[182](index=182&type=chunk) - Expected fiscal 2024 capital expenditures range from **$600,000** to **$1,100,000**[182](index=182&type=chunk) [Inflation and Seasonality](index=31&type=section&id=Inflation%20and%20Seasonality) Discusses the impact of inflationary pressures on gross margins and the seasonal nature of NTIC's business operations - Inflationary pressures adversely affected gross margins in Q3 fiscal 2024[163](index=163&type=chunk) - The business experiences seasonality, with Q2 typically impacted by Chinese New Year, North American holidays, and lower winter temperatures reducing corrosion[163](index=163&type=chunk) [Market Risk](index=31&type=section&id=Market%20Risk) Identifies NTIC's exposure to foreign currency, commodity price, and interest rate risks, and the company's approach to them - NTIC is exposed to **foreign currency exchange rate risk** (Euro, Yen, Rupee, Renminbi, Won, Pound vs. USD) for JV fees and dividends, but does not hedge this risk[165](index=165&type=chunk)[183](index=183&type=chunk) - **Commodity price risk** exists for plastic and bioplastic resins[184](index=184&type=chunk) - **Interest rate risk** applies to floating-rate debt under the JPM Credit Facility and fixed-rate term loans for NTIC China[166](index=166&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Confirms no material changes to NTIC's critical accounting policies and estimates since the prior fiscal year-end report - There have been no material changes to NTIC's critical accounting policies and estimates from those reported in the annual report on Form 10-K for the fiscal year ended August 31, 2023[167](index=167&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 2 of the consolidated financial statements for details on recently adopted accounting pronouncements - Refer to Note 2 of the consolidated financial statements for a discussion of recently adopted accounting pronouncements[168](index=168&type=chunk) [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) Highlights various uncertainties and factors that could impact NTIC's future performance, including market and operational risks - The report contains forward-looking statements subject to various uncertainties and factors, including the impact of COVID-19, ongoing wars (Russia-Ukraine, Israel-Hamas), China operations, variability in ZERUST® oil & gas and Natur-Tec® sales, dependence on joint ventures, market acceptance, competition, raw material costs, and the implementation of a new ERP system[170](index=170&type=chunk)[171](index=171&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details NTIC's exposure to foreign currency, commodity price, and interest rate risks, noting the company does not hedge currency risk - NTIC's primary exchange rate exposure is with the **Euro**, **Japanese Yen**, **Indian Rupee**, **Chinese Renminbi**, **South Korean Won**, and **English Pound** against the U.S. Dollar, affecting fees and dividend distributions from foreign entities[174](index=174&type=chunk)[183](index=183&type=chunk) - Commodity price exposure primarily relates to **plastic** and **bioplastic resins** used in NTIC's products[190](index=190&type=chunk) - Interest rate risk stems from the floating rate on the JPMorgan Chase Credit Facility (**$1,988,380** outstanding as of May 31, 2024) and fixed-rate term loans for NTIC China (**USD $2,762,049** outstanding at **3.25%** annual interest)[207](index=207&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in ERC accounting, with remediation efforts underway - NTIC's disclosure controls and procedures were deemed **not effective** as of May 31, 2024, due to a material weakness in internal control over financial reporting[208](index=208&type=chunk) - The material weakness relates to ineffective controls over the probability assessment for recognizing income from Employee Retention Credits (ERCs), leading to a restatement of prior financial statements[209](index=209&type=chunk)[210](index=210&type=chunk) - Management is remediating the material weakness by preparing technical accounting memorandums for material unusual transactions and carefully evaluating probability assessments[211](index=211&type=chunk) - Other than the remediation steps for the ERCs, there were no other changes in internal control over financial reporting during the quarter ended May 31, 2024, that materially affected or are reasonably likely to materially affect NTIC's internal control over financial reporting[212](index=212&type=chunk) [PART II—OTHER INFORMATION](index=38&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) Presents additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 12 for legal proceedings, with management believing any liabilities will not materially impact financial results - Refer to Note 12 of the consolidated financial statements for details on legal proceedings[101](index=101&type=chunk)[213](index=213&type=chunk) - Management believes that any liability from these matters will not materially affect the Company's consolidated results of operations, financial position, or cash flows[101](index=101&type=chunk)[213](index=213&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Discloses a new risk factor regarding the implementation of a new ERP system, citing potential disruptions and unexpected costs - A new risk factor has been disclosed regarding the installation of a new Enterprise Resource Planning (ERP) software system, which could cause business disruption, be more costly or time-consuming than expected, and may not yield anticipated benefits[214](index=214&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered equity sales or stock repurchases during Q3 FY2024, with **$2,640,548** remaining for repurchases - NTIC did not issue any shares of common stock or other equity securities that were not registered under the Securities Act of 1933 during the three months ended May 31, 2024[215](index=215&type=chunk) - No shares were repurchased under NTIC's stock repurchase program during the three months ended May 31, 2024[216](index=216&type=chunk) - As of May 31, 2024, **$2,640,548** remained available for repurchase[200](index=200&type=chunk)[217](index=217&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to NTIC for the current reporting period - This item is not applicable[219](index=219&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to NTIC for the current reporting period - This item is not applicable[220](index=220&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 FY2024 - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended May 31, 2024[221](index=221&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the quarterly report, including CEO/CFO certifications and Inline XBRL financial data - Exhibits include certifications from the President and CEO (**31.1**, **32.1**) and Chief Financial Officer (**31.2**, **32.2**) as per SEC rules, and Inline XBRL formatted financial statements (**101**, **104**)[201](index=201&type=chunk)[222](index=222&type=chunk) [SIGNATURES](index=40&type=section&id=SIGNATURES) The report is signed by Matthew C. Wolsfeld, CPA, Chief Financial Officer, on behalf of NTIC - The report is signed by Matthew C. Wolsfeld, CPA, Chief Financial Officer, on July 11, 2024[224](index=224&type=chunk)