NORTHERN TECHNOLOGIES INTERNATIONAL CORP Segments Disclosure

12.	SEGMENT AND GEOGRAPHIC INFORMATION

 

Segment Information

 

The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company’s business is organized into two reportable segments: ZERUST® and Natur-Tec®. The Company has been selling its proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive, general industrial, mechanical, mining, agricultural, and retail consumer markets for over 50 years and, more recently, has also expanded into the oil and gas industry. The Company also sells a portfolio of proprietary bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no intersegment sales and no operating segments have been aggregated.

 

The following tables present the Company’s net sales by segment:

 

		Fiscal 2025				Fiscal 2024
ZERUST® net sales		$	62,488,397			$	63,092,575
Natur-Tec® net sales			21,746,077				21,966,942
Total net sales		$	84,234,474			$	85,059,517

 

The following table sets forth the Company’s cost of goods sold by segment:

 

		Fiscal 2025				Fiscal 2024
Direct cost of goods sold
ZERUST®		$	35,535,306			$	33,623,834
Natur-Tec®			13,994,302				14,148,145
Indirect cost of goods sold			3,028,311				3,501,176
Total net cost of goods sold		$	52,557,919			$	51,273,155

 

The following table sets forth the Company’s gross profit by segment:

 

		Fiscal 2025				Fiscal 2024
ZERUST® gross profit		$	26,953,091			$	29,468,741
Natur-Tec® gross profit			7,751,775				7,818,797
Total segment gross profit			34,704,866				37,287,538
Indirect cost of goods sold			(3,028,311	)			(3,501,176	)
Total gross profit		$	31,676,555			$	33,786,362
Total joint venture operations			8,545,207				9,475,078
Selling expenses			(17,820,196	)			(16,413,672	)
General and administrative expenses			(14,792,988	)			(14,176,494	)
Research and development expenses			(5,038,281	)			(4,802,791	)
Interest income			308,054				118,827
Interest expense			(599,927	)			(340,129	)
Other income			752,971				—
Income before income tax expense		$	3,031,395			$	7,647,181

 

The Company utilizes product net sales, direct and indirect cost of goods sold, and gross profit for each product in reviewing the financial performance of a product type. Further allocation of Company expenses or assets, aside from amounts presented in the tables above, is not utilized in evaluating product performance, nor does such allocation occur for internal financial reporting. The CODM uses gross profit and considers budget-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment gross profit for evaluating pricing strategy to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for the company and the segments. Asset information, including capital expenditures are reviewed by the CODM at the consolidated entity level and not by segment. Refer to total assets on the consolidated balance sheets.

 

Geographic Information

 

Net sales by geographic location for fiscal 2025 and fiscal 2024 were as follows:

 

		Fiscal Year Ended August 31,
		2025				2024
Inside the U.S. to unaffiliated customers		$	29,547,889			$	30,492,665
Outside the U.S. to:
Joint ventures in which the Company is a shareholder directly and indirectly			2,368,099				2,228,894
Unaffiliated customers			52,318,486				52,337,958
		$	84,234,474			$	85,059,517

 

Net sales by geographic location are based on the location of the customer. No single customer accounted for more than 10% of consolidated revenue.

 

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during fiscal 2025 and fiscal 2024, respectively, were as follows:

 

		Fiscal 2025				% of Total Fees for Services Provided to Joint Ventures				Fiscal 2024				% of Total Fees for Services Provided to Joint Ventures
Germany		$	846,281				16.9	%		$	828,932				15.8	%
Poland			840,467				16.8	%			849,736				16.2	%
Japan			647,573				12.9	%			582,674				11.1	%
Finland			411,268				8.2	%			395,515				7.5	%
United Kingdom			404,342				8.1	%			375,150				7.1	%
Thailand			371,175				7.4	%			332,148				6.3	%
Sweden			330,205				6.6	%			445,560				8.5	%
France			320,546				6.4	%			485,627				9.2	%
Czech Republic			303,869				6.1	%			338,195				6.4	%
South Korea			186,669				3.7	%			258,314				4.9	%
Indonesia			137,125				2.7	%			166,053				3.2	%
Other			206,631				4.2	%			193,877				3.7	%
		$	5,006,151				100.0	%		$	5,251,782				100.0	%

 

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales recognized directly by the Company and sold in that geographic territory.

 

See Note 7 for additional details on geographical information regarding equity in income from joint ventures.

 

The geographical distribution of total property and equipment and net sales, which are based on the geographical location of the customer, is as follows:

 

		At August 31, 2025				At August 31, 2024
China		$	5,355,918			$	5,627,202
Other			1,296,988				1,217,400
United States			8,531,012				9,421,051
Total property and equipment		$	15,183,918			$	16,265,653

 

 

		Fiscal Year Ended August 31, 2025				Fiscal Year Ended August 31, 2024
China		$	16,239,889			$	14,245,238
Brazil			6,570,850				5,994,372
India			22,620,639				22,189,317
Other			9,255,207				12,137,925
United States			29,547,889				30,492,665
Total net sales		$	84,234,474			$	85,059,517

 

Long-lived assets consist of property and equipment. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted sales exceeds the carrying value of the assets.

 

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales recognized directly by the Company and sold in that geographic territory.

 

All joint venture operations, including equity in income, fees for services and related dividends, are primarily related to ZERUST® products and services.