SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)15 (d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended: Commission File Number
May 31, 1997November 30, 2000 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)(651) 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)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___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 July 9, 1997December 31, 2000
----- -----------------------------------
Common Stock, $.02 par value 4,202,308
This3,796,951
"This document consists of eleven12 pages.
No exhibits are being filed."
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
BALANCE SHEETS (UNAUDITED)
MAY 31,NOVEMBER 30, AUGUST 31,
MAY 31,
1997 1996 1996
------------ ------------ ------------
ASSETS2000 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,605,5053,565,043 $ 3,707,520 $ 3,392,6123,840,057
Receivables:
Trade, less allowance for doubtful accounts of $29,000, $26,000,$36,000 and $26,500,$30,000, respectively 1,294,850 1,127,975 979,167
Corporate1,535,059 1,390,264
International corporate joint ventures 484,650 524,577 409,817576,877 608,136
Inventories 573,536 584,212 627,264921,880 929,661
Prepaid expenses and other 51,708 78,603 59,23850,402 51,066
Deferred income taxes 170,000 170,000 110,000
------------220,000 220,000
------------ ------------
Total current assets 6,180,249 6,192,887 5,578,0986,869,261 7,039,184
PROPERTY AND EQUIPMENT, net 977,666 980,816 809,8151,298,562 1,219,189
OTHER ASSETS:
Investments in international corporate joint ventures 2,145,571 1,726,328 1,448,1613,492,335 3,602,692
Investment in European holding company 254,375 -- --
Investment in foreign company 159,879 159,879 155,068
Trading investment 250,000 -- --196,641 243,598
Deferred income taxes 90,000 90,000 100,000310,000 310,000
Other 114,140 164,140 103,092770,771 703,631
------------ ------------
------------
3,013,965 2,140,347 1,806,321
------------4,769,747 4,859,921
------------ ------------
$ 10,171,88012,937,570 $ 9,314,050 $ 8,194,234
============13,118,294
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 118,338100,789 $ 154,859 $ 116,591221,236
Income taxes 222,414 463,700 180,295payable 36,810 313,806
Dividends payable 644,972 -
Accrued liabilities:
Payroll 141,326 177,381 63,073and related benefits 176,945 224,445
Other 134,691 112,544 60,916
------------182,240 201,003
------------ ------------
Total current liabilities 616,769 908,484 420,8751,141,756 960,490
DEFERRED GROSS PROFIT 118,000 109,000 100,50050,000 50,000
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 4,206,308, 4,199,275,3,796,951 and 4,216,190 shares,3,803,118, respectively 84,126 83,985 84,32475,939 76,062
Additional paid-in capital 5,193,207 5,158,344 5,183,7174,533,482 4,532,550
Retained earnings 4,418,164 3,143,526 2,500,443
Cumulative foreign currency translation adjustments (128,579) 40,518 34,182
------------ ------------ ------------
9,566,918 8,426,373 7,802,666
Notes and related interest receivable from purchase of common stock (129,807) (129,807) (129,807)
------------7,849,205 8,093,286
Accumulated other comprehensive loss (see Note 7) (712,812) (594,094)
------------ ------------
Total stockholders' equity 9,437,111 8,296,566 7,672,859
------------11,745,814 12,107,804
------------ ------------
$ 10,171,88012,937,570 $ 9,314,050 $ 8,194,234
============13,118,294
============ ============
See notes to financial statements.
2
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
- --------------------------------------------------------------------------------
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MAY 31 MAY 31
-------------------------- --------------------------
1997 1996 1997 19962000 1999
SALES $ 2,518,5822,500,312 $ 1,751,478 $ 6,532,957 $ 4,977,3962,831,864
COST OF GOODS SOLD 1,201,326 809,361 3,084,004 2,330,574
----------- ----------- ----------- -----------1,288,410 1,348,520
------------- --------------
GROSS PROFIT 1,317,256 942,117 3,448,953 2,646,8221,211,902 1,483,344
OPERATING EXPENSES:
Selling 241,033 191,778 832,336 597,862434,646 451,409
General and administrative 529,735 315,945 1,349,132 830,773512,346 679,798
Research, engineering, and technical support 107,199 108,959 326,627 297,883
----------- ----------- ----------- -----------
877,967 616,682 2,508,095 1,726,518
----------- ----------- ----------- -----------156,848 115,173
------------- --------------
1,103,840 1,246,380
------------- --------------
OPERATING INCOME 439,289 325,435 940,858 920,304108,062 236,964
INTERNATIONAL CORPORATE JOINT VENTURES AND
FOREIGNEUROPEAN HOLDING COMPANY:
Equity in income of international corporate joint ventures and
foreignEuropean holding company 185,740 116,214 469,828 338,84592,754 159,317
Fees for technical assistancesupport and other service provided to
international corporate joint ventures 573,841 344,094 1,555,212 1,017,072
Corporate601,605 696,572
Expenses incurred in support of international corporate joint venture expense (127,034) (97,678) (379,029) (386,226)
----------- ----------- ----------- -----------
632,547 362,630 1,646,011 969,691
OTHER INCOME:
Interest income 36,311 41,519 101,505 112,921
Other income 113 7,455 7,997 11,182
----------- ----------- ----------- -----------
36,424 48,974 109,502 124,103
----------- ----------- ----------- -----------ventures (186,288) (163,979)
------------- --------------
508,071 691,910
INTEREST INCOME 38,393 34,917
------------- --------------
INCOME BEFORE INCOME TAXES 1,108,260 737,039 2,696,371 2,014,098654,526 963,791
INCOME TAXES 375,000 230,000 900,000 630,000
----------- ----------- ----------- -----------200,000 290,000
------------- --------------
NET INCOME $ 733,260454,526 $ 507,039 $ 1,796,371 $ 1,384,098
=========== =========== =========== ===========673,791
============= =============
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .17SHARE:
Basic $ .12 $ .42.17
============= ==============
Diluted $ .32
=========== =========== =========== ===========.12 $ .17
============= ==============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,274,164 4,300,718 4,266,742 4,310,226
=========== =========== =========== ===========OUTSTANDING:
Basic 3,796,175 3,867,379
============= ==============
Diluted 3,804,058 3,870,919
============= ==============
See notes to financial statements.
3
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
- --------------------------------------------------------------------------------
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
MAY 31
--------------------------
1997 19962000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,796,371454,526 $ 1,384,098673,791
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 86,175 57,76052,371 37,379
Equity in income of international corporate joint ventures and
foreignEuropean holding company (469,828) (338,845)(92,754) (159,317)
Dividends received from international corporate joint ventures 39,555 184,101
Deferred gross profit 9,000 --226,660 362,549
Change in current assets and liabilities:
Receivables:
Trade (166,875) (147,730)
Corporate(144,795) (239,736)
International corporate joint ventures 39,927 (3,187)31,259 (130,206)
Income tax receivable - (175,412)
Inventories 10,676 (96,670)7,781 (59,846)
Prepaid expenses and other 76,895 (3,375)(19,519) (7,102)
Accounts payable (36,521) (17,952)(120,447) (2,552)
Income taxes (241,286) 37,915payable (276,996) (307,188)
Accrued liabilities 1,468 (101,416)
----------- -----------(66,263) 100,492
------------- --------------
Total adjustments (650,814) (429,399)
----------- -----------(402,703) (580,939)
------------- --------------
Net cash provided by operating activities 1,145,557 954,69951,823 92,852
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (83,025) (525,326)
Trading investment (250,000) --
Investment in European holding company (254,375) --
Investment ininternational corporate joint ventures (158,067) --
Payment on note receivable from purchase(142,267) (50,000)
Additions to property (131,744) (64,332)
Increase in other assets - (56,661)
------------- --------------
Net cash used in investing activities (274,011) (170,993)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock -- 743,875
----------- -----------(72,825) -
Issuance of common stock 19,999 8,332
------------- --------------
Net cash (used in) provided by investing activities (745,467) 218,549
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants 27,228 39,960
Dividends paid (504,733) (424,877)
Repurchase of common stock (24,600) (227,020)
----------- -----------
Net cash used in financing activities (502,105) (611,937)
----------- -----------(52,826) 8,332
------------- --------------
NET (DECREASE) INCREASEDECREASE IN CASH AND CASH EQUIVALENTS (102,015) 561,311(275,014) (69,809)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,707,520 2,831,301
----------- -----------3,840,057 2,750,209
------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,605,5053,565,043 $ 3,392,612
=========== ===========2,680,400
============= ==============
See notes to financial statements.
4
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
- --------------------------------------------------------------------------------
1. INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all necessary adjustments, which are of a
normal recurring nature, to present fairly the consolidated financial
position of Northern Technologies International Corporation and
Subsidiaries as of May 31, 1997November 30, 2000 and 1996, the results of their operations
for the three and nine months ended May 31, 1997
and 1996, and thetheir cash flows for the ninethree months ended May 31, 1997November 30, 2000 and
1996,1999, in conformity with generally accepted accounting principles.
Operating results for the nine months ended May 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1997.
These financial statements should be read in conjunction with the
financial statements and related notes as of and for the year ended
August 31, 19962000 contained in the Company's filing on Form 10-KSB dated
November 26, 199617, 2000 and with Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing on pages 78
through 910 of this quarterly report.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On September 1, 2000, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 requires companies to
record derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains or losses resulting from changes in the
values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting.
Implementation of SFAS No. 133 did not have a material impact on the
Company's financial position or the results of its operations.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 101 that provides the staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. The Company is required to modify its revenue
recognition policy to comply with SAB No. 101, as amended, no later than
August 31, 2001. Management has not yet determined the effects of SAB No.
101 will have on the Company's financial position or the results of its
operations.
3. INVENTORIES
Inventories consist of the following:
May 31, August 31, May 31,
1997 1996 1996
Production materials $ 142,395 $ 150,139 $ 125,453
Work in process 20,205 22,619 31,363
Finished goods 410,936 411,454 470,448
----------- ----------- -----------
$ 573,536 $ 584,212 $ 627,264
=========== =========== ===========
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
May 31, August 31, May 31,
1997 1996 1996
Land $ 246,097 $ 246,097 $ 241,196
Buildings and improvements 1,044,996 979,369 553,907
Machinery and equipment 604,935 587,537 587,657
Deposits - - 249,083
----------- ----------- -----------
1,896,028 1,813,003 1,631,843
Less accumulated depreciation 918,362 832,187 822,028
----------- ----------- -----------
$ 977,666 $ 980,816 $ 809,815
===========Inventories consist of the following:
November 30, August 31,
2000 2000
Production materials $ 230,434 $ 267,175
Work in process 19,991 23,947
Finished goods 671,455 638,539
----------- -----------
$ 921,880 $ 929,661
=========== ===========
5
4. INVESTMENTSPROPERTY AND EQUIPMENT
Property and equipment consist of the following:
November 30, August 31,
2000 2000
Land $ 246,097 $ 246,097
Buildings and improvements 1,217,363 1,180,938
Machinery and equipment 1,264,131 1,168,812
------------- --------------
2,727,591 2,595,847
Less accumulated depreciation 1,429,029 1,376,658
------------- --------------
$ 1,298,562 $ 1,219,189
============= ==============
5. INVESTMENT IN INTERATIONAL CORPORATE JOINT VENTURES AND
EUROPEAN HOLDING COMPANY
During the nine months ended May 31, 1997, the Company invested $158,067
in foreign joint ventures. The Company has a 50% ownership interest in
each entity. The entities had no significant operations prior to the
Company's investment.
During the nine months ended May 31, 1997, the Company invested $254,375
for a 50% ownership interest in a European holding company. To date, the
entity has been inactive.
5. TRADING INVESTMENT
During the three months ended November 30, 1996,2000, the Company entered
intoinvested an
agreement (the Agreement) with a company to start a day trading
program. The program's objectives generally are to make purchases and
sales of shares on the New York Stock Exchange involving turnover of
market positions within a trading day. The Agreement required the
Company to deposit $250,000additional $142,267 in a trading account at a broker for an
indefinite period of time.existing international corporate joint ventures.
6. STOCKHOLDERS' EQUITY
During the ninethree months ended May 31, 1997, the Company acquired and
retired 5,000 shares of common stock for $24,600.
In November 1996, the Company declared a cash dividend of $.12 per share
payable on December 20, 1996 to shareholders of record on December 6,
1996.
In November 1996, six employees received a total of 3,000 shares of
common stock for services provided in fiscal 1996. The fair value of the
common stock issued was determined based on the fair market value of the
Company's common stock on the grant date and was accrued in fiscal 1996.
During the nine months ended May 31, 1997,30, 2000, stock options for the
purchase of 9,0333,333 shares of the Company's common stock were exercised at
prices between $3.00$5.00 and $3.13.$6.25 per share.
During the three months ended November 30, 2000, the Company acquired
and retired 9,500 shares of common stock for $72,825.
7. COMPREHENSIVE INCOME
The Company's comprehensive income were as follows:
Three Months Ended
November 30
2000 1999
Net income $ 454,526 $ 673,791
Other comprehensive loss - foreign currency translation adjustment (118,718) (25,157)
----------- -----------
Total comprehensive income $ 335,808 $ 648,634
=========== ===========
8. INCOME PER SHARE
IncomeBasic income per common and common equivalent share wasis computed by dividing net income by the
weighted average number of common shares of common and common
equivalent shares outstanding during each period. Common equivalent
shares include common stock equivalents of 63,334 and 67,950 foroutstanding. Diluted income per
share assumes the
nine months ended May 31, 1997 and 1996, respectively, and 67,856 and
65,413 for the third quarter of fiscal 1997 and 1996, respectively, from
the assumed exercise of outstanding warrants andstock options using the treasury stock
method.method, if dilutive.
6
9. SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended November 30, 2000, the Company declared a
cash dividend of $.17 per share payable on December 15, 2000 to
shareholders of record on December 6, 2000.
During the three months ended November 30, 1999, the Company declared a
cash dividend of $.16 per share payable on December 17, 1999 to
shareholders of record on December 3, 1999.
7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 increaseddecreased by $767,104 or 44% in$331,552 during the thirdfirst quarter of fiscal 1997 as compared to2001
from those in the thirdfirst quarter of fiscal 1996. Net sales increased by
$1,555,561 or 31%2000. This decrease was due to a
decrease in the nine months ended May 31, 1997 as compared to the same
period of fiscal 1996. These increases in sales aredemand for materials science based industrial packaging products.
The decrease was due to the volume of
corrosion inhibiting products sold to new and existing customers. Fiscal 1997
year to date sales to an existing customer increased significantly over fiscal
1996 and represents approximately 13% of total net salesslow down in fiscal 1997. There
has been no change in product pricing or introduction of new products during
fiscal 1997.the industrial sector we serve.
COST OF SALES - Cost of goods sold as a percentage of net sales was 52% for the
first quarter of fiscal 2001 compared to 48% for the thirdfirst quarter of fiscal
1997 as compared to 46% for the third quarter of fiscal
1996.2000. The cost of goods sold percentage was 47% for the nine months ended May
31, 1997 and 1996. Variations arevariation is primarily due primarily to the mix of product sales.
OPERATING EXPENSES - As a percentage of net sales, total operating expenses remained consistent at 35%was 44%
in the thirdfirst quarters of fiscal 19962001 and 1997.
Operating expenses were 38% and 35% of net sales for the nine months ended May
31, 1997 and 1996, respectively.2000.
Operating expense classification percentages of net sales were as follows:
Three Months Nine Months
Ended
Ended
May 31 May 31
-------------- --------------
1997 1996 1997 1996November 30
2000 1999
Selling expenses 10% 11% 13% 12%17% 16%
General and administrative 21% 18% 20% 17%24%
Research, engineering, and technical support 4% 6% 5% 6%4%
Selling expenses increased indecreased for the third quarterfirst three months of fiscal 19972001 as compared
to the same period in fiscal 19962000 due primarily to a decrease in commissions
partially offset by increases in distributor commissions,
salaries,sales promotion expense, trade show expense,
travel expense, and travel. Selling expenses increased for the nine months ended May
31, 1997 as compared to the same period in fiscal 1996 due to increases in
promotional expenses in addition to the factors impacting the third quarter.
Sellingemployee benefit expense. Such expenses as a percentage of
net sales increased for the ninefirst three months ended May 31, 1997of fiscal 2001 as compared to the
same period in fiscal 19962000 due to the increaseddecreased level of net sales in fiscal 1997 not fully offsetting the effect of
increased fiscal 1997 selling expenses.2001.
General and administrative expenses increaseddecreased for the first three and nine months ended May 31, 1997of
fiscal 2001 as compared to the same periodsperiod in 19962000 due primarily to a decrease
in consulting fees partially offset by increases in salaries, travel, legal expense, general
insurance expense, depreciation expense, and real estate taxes and other expenses associated with
the Company's expanded warehouse facility completed in December 1996. General
and administrativegeneral office expense. Such
expenses as a percentage of net sales increaseddecreased for the first three and nine months ended May 31, 1997of fiscal
2001 as compared to the same periodsperiod in 1996fiscal 2000 due to the increaseddecrease in
expenses offsetting the decreased level of net sales in fiscal 1997 not fully offsetting the
effect of increased fiscal 1997 general and administrative expenses.2001.
Research, engineering and technical support expenses inincreased for the third quarterfirst
three months of fiscal 1997 were comparable2001 compared to the same period in 1996. Such expenses for the
nine month period ended May 31, 1997 increased over the comparable fiscal 1996
period2000 due
primarily to increases in salaries, employee benefit expense, and travel. Research, engineering
and technical supportconsulting
fees. Such expenses as a percentage of sales were substantially
unchangedincreased for the first three
and nine months ended May 31, 1997of fiscal 2001 as compared to the same periodsperiod in 1996.fiscal 2000 due to the
increase in expenses and the decreased level of sales in fiscal 2001.
INTERNATIONAL CORPORATE JOINT VENTURES AND FOREIGNEUROPEAN HOLDING COMPANY - Net
earnings from international corporate joint ventures and foreignEuropean holding
company were $632,547decreased in the first three months of fiscal 2001 to $508,071 from
$691,910 in the first three months of fiscal 2000. This net decrease is
8
due to decreased sales of some of the international corporate joint ventures
resulting in a decrease in fees for technical support and $1,646,011 forother services and
higher expenses incurred by some of the threeinternational corporate joint ventures.
The decrease in net earnings is a result of the general slowing of the
industrial sector served and the nine
months ended May 31, 1997, respectively,strengthening of the U.S. Dollar compared to
$362,630 and $969,691 for
the three and the nine months ended May 31, 1996, respectively. The net
increases primarily reflect increased sales volume and net earnings at the
Company's corporate joint ventures.foreign currencies.
INCOME TAXES - Income tax expense for the three and nine months ended May 31,
1997November 30, 2000
and 19961999 was calculated based onupon management's estimate of the Company's
annual effective
rates. The effective income tax rate. The Company's effective income tax rate isrates for fiscal 2001 and 2000 are lower than
the statutory rate primarily due to the Company's equity in income of international corporate
joint ventures and foreign company being recognized based on an after tax earnings ofbasis for these entities. To the
extent the joint ventureventures' 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 May 31, 1997,November 30, 2000, the Company's working capital was $5,563,480,$5,727,505, including
$3,605,505$3,565,043 in cash and cash equivalents, compared to working capital of
$5,284,403$6,078,694 including cash and $5,157,223 atcash equivalents of $3,840,057 as of August 31,
1996 and May 31, 1996, respectively.2000.
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 international corporate joint ventures operations.ventures. Cash
flowflows from operations for the ninethree months ended May 31, 1997 and 1996November 30, 2000 was $1,145,557 and $954,699,
respectively.$51,823.
The net cash flow from operations for the ninethree months ended May
31, 1997November 30, 2000
was principally from net income and 1996dividends received from international
corporate joint ventures offset by equity in income of international corporate
joint ventures and European holding company and decreases in current
liabilities. Cash flows from operations for the three months ended November 30,
1999 was $92,852. The net cash flow from operations for the three months ended
November 30, 1999 resulted principally from net income and dividends received
from international corporate joint venture
dividendsventures offset by equity income of
international corporate joint ventures and European holding company and
increases in trade
receivables. During the nine months ended May 31, 1997, net cash flow from
operations was further reduced by payments onreceivables and income tax liabilities.
Net cashpayments.
Cash used in investing activities for the ninethree months ended May 31, 1997November 30, 2000
was $745,467$274,011, which resulted from investments in international corporate joint
ventures and additions to property. Cash used in investing activities for the
three months ended November 30, 1999 was $170,993, which resulted principally
from investments in corporate joint ventures, and a
European holding company, purchases of property and equipment and deposit to a
trading investment account. Net cash provided by investing activities for the
nine months ended May 31, 1996 was $218,549 of which $743,875 related to the
payments received on notes receivable offset by additions to property, of
$525,326.
Net cashand an
investment in a corporation owning real estate.
Cash used in financing activities for the ninethree months ended May 31, 1997November 30, 2000
was $502,105$52,826, which resulted from the payment of dividends to stockholders of
$504,733 and the repurchase of common stock of $24,600$72,825
offset by proceeds from the exercise of stock options of $27,228. Net cash used in$19,999. Cash provided
by financing activities for the ninethree months ended May 31, 1996November 30, 1999 was $8,332,
which resulted from the payment of dividends to
stockholders of $424,877 and the repurchase of common stock of $227,020 offset
by proceeds of $39,960payments received from the exercise of stock options.
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 fees for technical assistance feessupport and other services from
the international corporate joint venture investments.
The Company has no long-term debt and no material lease commitments at May 31,
1997.November
30, 2000, except for an office, manufacturing, laboratory, and warehouse lease
requiring monthly payments of $13,194, which can be adjusted annually according
to the annual consumer price index through November 2014.
The Company has no postretirement benefit plan and does not anticipate
establishing any postretirementpost retirement benefit program.
RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995,9
EURO CURRENCY ISSUE
On January 1, 1999, eleven of the Financial Accounting Standards Board (FASB) issued SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123 encourages companiesfifteen member countries of the European Union
established fixed conversion rates between their respective existing currencies
and the Euro and to adopt athe Euro as their common legal currency on that date
(the Euro Conversion). Following the Euro Conversion, however, the previously
existing currencies of the participating countries are scheduled to remain legal
tender in the participating countries between January 1, 1999 and January 2002.
During this transition period, public and private parties may pay for goods and
services using either the Euro or the previously existing currencies. Beginning
January 1, 2002, the participating countries will issue new accounting method that accountsEuro-denominated
bills and coins for stock compensation awards
baseduse in cash transactions. No later than July 1, 2002, the
participating countries will withdraw all bills and coins denominated in the
previously existing currencies making Euro Conversion complete.
The Company, its international corporate joint ventures, and the European
holding company have been evaluating the potential impact the Euro Conversion to
the Euro Currency may have on their estimated fair value at the date they are granted. However,
companies are permitted to continue following current accounting requirements
for employee stock-based transactions, which generally do not result in an
expense charge for most options if the exercise price is at least equal to the
fair market valueresults of the stock at the date of grant. Companies that continue to
follow existing standards would be required to disclose in a note to theoperations, liquidity or
financial statements the effect on net income and net income per share had the
Company recognized expense for options issued to employees based on SFAS No.
123. SFAS No. 123 is effective for the Company's fiscal year ending August 31,
1997 and will require disclosure information in those financial statements about
stock options granted in fiscal 1996 and thereafter.condition. The Company has determined that itexpected costs for
compliance will not adoptbe material to its results of operations, liquidity,
financial condition or capital expenditures. However, significant noncompliance
by the fair value method prescribed byCompany's international corporate joint ventures and their customers or
suppliers could adversely impact the Company's results of operations, liquidity
or financial condition. Accordingly, until the Company completes its assessment
of the Euro Conversion impact, there can be no assurance that the Euro
Conversion will not have a material impact on the overall business operations of
the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On September 1, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS No. 123 for
employee stock-based transactions. The "as if " disclosures will be included133 requires companies to record derivatives on the balance
sheet as assets and liabilities, measured at fair value. Gains or losses
resulting from changes in the Company's annual financial statementsvalues of those derivatives would be accounted for
depending on the year ending August 31, 1997.
In February 1997,use of the FASB issued SFAS No. 128, EARNINGS PER SHARE, which is
effectivederivative and whether it qualifies 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 implementationhedge
accounting. Implementation of SFAS No. 128133 did not have a material impact on the
Company's financial position or the results of its operations.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 101 that provides the staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The Company is expectedrequired to increase earnings per share by an immaterial amount.modify its revenue recognition policy to comply with
SAB No. 101, as amended, no later than August 31, 2001. Management has not yet
determined the effects of SAB No. 101 will have on the Company's financial
position or the results of its operations.
10
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
11
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
July 11, 1997
/S/ Loren M. Ehrmanntraut
-----------------------------------------------
Loren M. EhrmanntrautJanuary 12, 2001 /s/ Matjaz Korosec
---------------------------
Matjaz Korosec
Chief Financial Officer
and Corporate Secretary12