NORTHERN TECHNOLOGIES INTERNATIONAL CORP - 10-Q filing on 2022-07-08

Note 7 - Investments in Joint Ventures

9 Months Ended

May 31, 2022

Equity Method Investments and Joint Ventures Disclosure [Text Block]

7. INVESTMENTS IN JOINT VENTURES

The consolidated financial statements of the Company’s foreign joint ventures are initially prepared using the accounting principles accepted in the respective joint ventures’ countries of domicile. Amounts related to foreign joint ventures reported in the below tables and the accompanying consolidated financial statements have subsequently been adjusted to conform with U.S. GAAP in all material respects. All material profits on sales recorded that remain on the consolidated balance sheet from the Company to its joint ventures and from joint ventures to other joint ventures have been eliminated for financial reporting purposes.

Financial information from the audited and unaudited financial statements of the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), and all the Company’s other joint ventures are summarized as follows:

	As of May 31, 2022
	Total		EXCOR		All Other
Current assets	$	55,305,950	$	25,677,287	$	29,628,663
Total assets		59,037,744		27,727,623		31,310,121
Current liabilities		13,289,392		2,978,114		10,311,279
Noncurrent liabilities		1,223,185		—		1,223,185
Joint ventures’ equity		44,601,335		24,749,509		19,851,826
Northern Technologies International Corporation’s share of joint ventures’ equity		22,194,433		12,374,756		9,819,677
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		20,844,284		12,343,851		8,500,433

	Three Months Ended May 31, 2022
	Total		EXCOR		All Other
Net sales	$	26,594,077	$	10,397,916	$	16,196,160
Gross profit		10,626,570		4,990,697		5,635,873
Net income		2,714,979		1,654,389		1,060,590
Northern Technologies International Corporation’s share of equity in income from joint ventures		1,364,597		824,784		539,813
Northern Technologies International Corporation’s dividends received from joint ventures		252,000		—		252,000

	Nine Months Ended May 31, 2022
	Total		EXCOR		All Other
Net sales	$	78,218,839	$	31,010,578	$	47,208,261
Gross profit		31,504,531		15,118,133		16,386,398
Net income		7,344,175		4,646,123		2,698,052
Northern Technologies International Corporation’s share of equity in income from joint ventures		3,662,178		2,324,605		1,337,572
Northern Technologies International Corporation’s dividends received from joint ventures		5,723,176		4,255,200		1,467,976

	As of August 31, 2021
	Total		EXCOR		All Other⁽¹⁾
Current assets	$	69,394,796	$	33,886,655	$	35,508,141
Total assets		73,814,402		36,211,520		37,602,882
Current liabilities		16,366,398		5,386,377		10,980,021
Noncurrent liabilities		1,455,524		—		1,455,524
Joint ventures’ equity		55,992,480		30,825,144		25,167,336
Northern Technologies International Corporation’s share of joint ventures’ equity		27,623,768		15,412,574		12,211,194
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		24,702,778		14,697,490		10,005,288

	Three Months Ended May 31, 2021
	Total		EXCOR		All Other⁽¹⁾
Net sales	$	31,959,539	$	12,103,263	$	19,856,276
Gross profit		14,280,775		6,863,786		7,416,989
Net income		4,051,518		2,068,326		1,983,192
Northern Technologies International Corporation’s share of equity in income from joint ventures		2,033,536		1,039,576		993,960
Northern Technologies International Corporation’s dividends received from joint ventures		181,952		—		181,952

	Nine Months Ended May 31, 2021
	Total		EXCOR		All Other⁽¹⁾
Net sales	$	87,795,284	$	32,196,843	$	55,598,441
Gross profit		39,802,014		18,661,980		21,140,034
Net income		11,540,949		6,351,721		5,189,228
Northern Technologies International Corporation’s share of equity in income from joint ventures		5,779,260		3,182,691		2,596,569
Northern Technologies International Corporation’s dividends received from joint ventures		3,505,455		1,809,900		1,695,555

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(1) Includes Zerust India since Zerust India was not a consolidated subsidiary of the Company as of August 31, 2021 or May 31, 2021. See Note 3 entitled “Business Combination.”