Note 6 - Investments in Joint Ventures

3 Months Ended

Nov. 30, 2013

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6.	INVESTMENTS IN JOINT VENTURES

The 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 approximate U.S. GAAP in all material respects. All material profits recorded on sales from the Company to its joint ventures of goods that remain in inventory, 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), joint venture in China and all of the Company’s other joint ventures, are summarized as follows:

	At November 30, 2013
	Total		EXCOR		China		All Other
Current assets	$	69,537,387	$	28,620,328	$	13,276,704	$	27,640,355
Total assets		75,031,656		31,073,588		13,300,849		30,657,219
Current liabilities		18,698,770		3,679,090		4,819,611		10,200,069
Noncurrent liabilities		2,649,141		—		875,652		1,773,489
Joint ventures’ equity		53,683,746		27,394,498		7,605,586		18,683,661
Northern Technologies International Corporation’s share of joint ventures’ equity		26,628,577		13,697,250		3,802,793		9,128,534
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings	$	24,654,443	$	13,666,345	$	3,752,793	$	7,235,305

	At August 31, 2013
	Total		EXCOR		China		All Other
Current assets	$	63,052,410	$	25,955,136	$	11,200,355	$	25,896,919
Total assets		68,417,142		28,391,787		11,226,755		28,798,600
Current liabilities		16,107,597		3,572,004		3,080,118		9,455,475
Noncurrent liabilities		2,488,057		—		871,886		1,616,171
Joint ventures’ equity		49,821,488		24,819,783		7,274,751		17,726,954
Northern Technologies International Corporation’s share of joint ventures’ equity		24,702,981		12,409,893		3,637,375		8,655,713
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings	$	22,281,510	$	12,378,988	$	3,587,375	$	6,315,147

	Three Months Ended November 30, 2013
	Total		EXCOR		China		All Other
Net sales	$	29,661,218	$	9,476,403	$	4,294,138	$	15,890,677
Gross profit		14,166,070		5,063,662		2,016,809		7,085,599
Net income		2,837,565		1,853,307		298,708		685,550
Northern Technologies International Corporation’s share of equity in income of joint ventures	$	1,427,748	$	926,654	$	149,354	$	351,740

	Three Months Ended November 30, 2012
	Total		EXCOR		China		All Other
Net sales	$	27,524,934	$	8,609,463	$	3,568,798	$	15,346,673
Gross profit		13,127,067		4,434,290		1,730,402		6,962,375
Net income		2,440,560		1,570,374		294,003		576,183
Northern Technologies International Corporation’s share of equity in income of joint ventures	$	1,154,296	$	785,187	$	147,001	$	222,108

The Company records expenses that are directly attributable to the joint ventures on its consolidated statements of operations in the line item “Expenses incurred in support of joint ventures.” The expenses include items such as employee compensation and benefit expenses, travel expense and consulting expense.

The Company did not make any joint venture investments during the three months ended November 30, 2013 and 2012.

On November 30, 2013, the Company agreed to sell its indirect ownership interest in Mütec GmbH (“Mütec”), one of the Company’s joint ventures in Germany which manufactures proprietary electronic sensing instruments. Since the purchase price paid to the Company was less than the book value of the Company’s investment in Mütec, the Company recognized a $50,000 impairment charge during the three months ended November 30, 2013, which is included in the consolidated statements of operations in the line item “Equity income of joint ventures.” In connection with the transaction, the owner of Mütec borrowed $168,000 from the Company to be repaid over the next four years with no interest.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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