Note 6 - Investments in Joint Ventures

6 Months Ended

Feb. 28, 2015

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6. INVESTMENTS IN JOINT VENTURES

Financial information from the financial statements of the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), joint venture in China, Tianjin-Zerust Anticorrosion Co., Ltd. (Tianjin Zerust), for the periods for which it was accounted for under the equity method (See Note 7) and all of the Company’s other joint ventures, are summarized as follows:

	At February 28, 2015
	Total		EXCOR		All Other
Current assets	$	46,802,727	$	19,669,250	$	27,133,477
Total assets		50,375,058		21,662,648		28,712,410
Current liabilities		12,347,251		2,837,566		9,509,685
Noncurrent liabilities		1,080,425		—		1,080,425
Joint ventures’ equity		36,947,382		18,825,082		18,122,300
Northern Technologies International Corporation’s share of joint ventures’ equity		18,377,038		9,412,543		8,964,499
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings	$	16,252,890	$	9,381,638	$	6,871,252

	At August 31, 2014
	Total		EXCOR		Tianjin Zerust		All Other
Current assets	$	61,491,957	$	24,361,157	$	9,774,680	$	27,356,120
Total assets		65,466,964		26,652,165		9,793,803		29,020,996
Current liabilities		17,542,634		3,512,143		4,438,380		9,592,111
Noncurrent liabilities		1,929,488		—		868,377		1,061,111
Joint ventures’ equity		45,994,842		23,140,022		4,487,046		18,367,775
Northern Technologies International Corporation’s share of joint ventures’ equity		22,961,989		11,570,013		2,243,524		9,148,452
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings	$	20,540,523	$	11,539,108	$	2,193,524	$	6,807,891

	Six Months Ended February 28, 2015
	Total		EXCOR		Tianjin Zerust		All Other
Net sales	$	52,178,238	$	18,383,653	$	3,735,457	$	30,059,128
Gross profit		25,540,546		9,766,973		1,783,673		13,989,900
Net income		6,152,182		3,924,547		265,648		1,961,987
Northern Technologies International Corporation’s share of equity in income of joint ventures	$	3,081,331	$	1,962,047	$	132,824	$	986,460

	Six Months Ended February 28, 2014
	Total		EXCOR		Tianjin Zerust		All Other
Net sales	$	58,050,376	$	18,963,579	$	8,257,630	$	30,829,167
Gross profit		27,600,668		10,072,948		3,834,419		13,693,301
Net income		5,479,724		3,763,017		553,963		1,162,744
Northern Technologies International Corporation’s share of equity in income of joint ventures	$	2,823,199	$	1,881,705	$	276,948	$	664,546

All material profits recorded on sales from the Company to its joint ventures have been eliminated for financial reporting purposes.

On January 2, 2015, the Company announced that, effective as of December 31, 2014, the Company terminated its joint venture agreements with its previous joint venture in China, Tianjin Zerust, and began the process of liquidating the joint venture entity. The Company intends to conduct future business in China through a newly formed wholly owned subsidiary, NTIC (Shanghai) Co. Ltd. (NTIC China). As of December 31, 2014, the Company started recognizing Tianjin Zerust based on its carrying value instead of the equity method since the Company no longer expects to significantly affect the joint venture’s operations or decision making during its anticipated liquidation.

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 six months ended February 28, 2015 and 2014.

On November 30, 2013, the Company agreed to sell its indirect ownership interest in Mütec GmbH (Mütec), the Company’s former joint venture 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 four years with no interest. As of February 28, 2015 and August 31, 2014, $142,277 and $156,854 was due to the Company related to this transaction.

- 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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