Good day, ladies and gentlemen, and welcome to the NTIC Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will have a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC’s future financial and operating results, as well as their business plans, objectives and expectations. Please be advised that these forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the Safe Harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC’s most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements. It is now my pleasure to turn the call over to Mr. Patrick Lynch, President and Chief Executive Officer. Please go ahead, sir.

Good morning. I’m Patrick Lynch, NTIC’s CEO, and I’m here with Matt Wolsfeld, NTIC’s CFO. Please note that we issued a press release regarding our fiscal 2018 fourth quarter financial results earlier this morning, and this information is also available at NTIC.com. During this call, we will review various key aspects of our fiscal 2018 fourth quarter financial results, give a brief business update, comment on our net sales and earnings guidance for 2019 fiscal year, and then conclude with a question-and-answer session. This morning I'm very pleased to report, NTIC's exceptionally strong financial results for fiscal 2018. This includes during the fourth quarter, net sales increasing over 35% and net income attributable to NTIC growing by approximately 55%. Fiscal 2018 record financial results were driven by continued market share growth for our ZERUST industrial solutions as many of our joint venture partners around the world achieved record fourth quarter and full-year sales. At the same time, our emerging Natur-Tec business segment completed its sixth consecutive profitable quarter while NTIC China completed its fifth consecutive profitable quarter and closed the quarter with significant year-over-year sales growth. We are encouraged by this operating success and believe that fiscal 2019 will be an even stronger year for the Company. So with these highlights, let's examine the drivers for the fourth quarter. Global demand remained strong for our core ZERUST industrial products while our Natur-Tec product also continued to perform well. For the fourth quarter ended August 31, 2018, total consolidated net sales increased 35.3% to a quarterly record of $14.7 million as compared to the three months ended August 31, 2017, specifically ZERUST industrial net sales increased 17.8%, oil and gas net sales increased over 280% and Natur-Tec net sales increased nearly 94%. The growth in ZERUST industrial sales during the fiscal…

Thanks, Patrick. NTIC net sales increased 30% in fiscal 2018 as a result of the 26.2% or $8.6 million increase in NTIC's net sales of ZERUST corrosion inhibiting product, which includes the contribution of NTIC China and ZERUST oil and gas. In addition, Natur-Tec sales increased 48.2% or $3.3 million during fiscal 2018. Higher sales and profitability across many of our joint ventures drove strong double-digit growth in joint venture operating income. Income from joint venture operations increased 20.4% and 6% for the fiscal year 2018 full year and fourth quarter, respectively, compared to corresponding prior fiscal year period. Our total operating expenses increased 14.5% to $22.9 million during fiscal 2018, but decreased as a percentage of net sales to 44.6% compared to 50.6% last fiscal year. The increase in operating expenses was primarily result of higher selling, general administrative and research and development expenses. However, higher sales allowed us to leverage the increase in operating expenses which drove a 600 basis point reduction in operating expenses as a percentage of net sales. We continue to invest in developing new corrosion solutions as well as bioplastic products and during the year NTIC invested $3.5 million in R&D activities compared to $2.9 million last fiscal year. NTIC reported net income of $2.1 million or $0.45 per diluted share for the fiscal 2018 fourth quarter compared to nearly $1.4 million or $0.30 per diluted share for fiscal 2017 fourth quarter. For the year, NTIC reported net income of $6.7 million or $1.43 per diluted share, which is in line with our full-year guidance and compares favorably to last year's net income of $3.4 million or $0.75 per diluted share. As of August 31, 2018, working capital was nearly $23 million, including 4.2 million in cash and cash equivalents and $3.3 million in…

[Operator Instructions] And our first question comes from Tim Clarkson of Van Clemens Capital. Your line is now open.

Just a few questions on the China thing, do you get any blowback being an American company in China with all the political stuff going back and forth?

Not yet.

How about in terms of the tariffs has that really affected your business?

We’re cautiously optimistic that everything will be fine, but we're waiting to see how things pan out over the next few months.

And in terms of the oil and gas, it sounds like you've had some additional breakthroughs in terms of getting into the pipeline business.

Correct.

Just a couple other questions here real briefly. Is there potential of stock split sometime in the foreseeable future?

That something that we’re looking at Tim, I think you see when we file a preliminary proxy and then our final proxy that we’re ratifying the increased authorization for the number of shares. So, stock split will be an option that the Company has going forward, but nothing has been finalized or determined by the board as of yet.

Yes, I would encourage you to do it. The last question is. What's the status, I know, you guys have being working and trying to get a compostable straw, how’s that going?

As I mentioned on last call, we are already supplying various straw manufacturers in Southeast Asia with our resin mixture. So, we won't be selling straws ourselves. We would just be supplying the raw materials -- excuse me, we are supplying the raw materials to manufacturers of compostable straws.

So, you're in that business right now.

Yes.

[Operator Instructions] Our next question comes from Joe Vidich of Manalapan Oracle Advisors. Your line is now open.

I was wondering, so you have this deal with this fashion retailer for packaging, I was wondering, if that is something that could be expanded on with other retailers or grocery stores. I know a lot of -- seems like a lot of grocery stores are trying to move away from plastic bags. I am just wondering, if you could comment on that?

Sure, first of all, we are already supplying a number of fashion brands with our bags, so this is just in addition to something we've already been doing. And as far as carryout bags go, that’s not a market that is really ideal for a compostable solution because that goes to individual consumers who do not operate in a closed-loop system where the ultimate disposal lineup in a compost site. So, certainly, we are trying to supply that market if possible, but it's not really a primary focus of our marketing efforts.

Could you maybe highlight a little bit about where you're focused on the compostable recycling market?

Sure, in the United States, our primary focus is on distribution to large institutional users of compostable bags, which would include sporting arenas, universities, large food service organizations, the cafeteria systems in large corporations because what they've learned is that by diverting their waste -- their food waste in compostable bags to a compost site is cheaper than sending everything to a landfill. So at least in North America, our primary focus is on waste diversion from landfills to compost sites, and that infrastructure really is only in place for very large corporations at this time, probably fairly large institutions at this time, not so much for the individual consumers. In Southeast Asia, we are focusing on primarily on supplying the garment industry with our compostable solutions. And as Tim asked, we’re also supplying resin to for example straw manufacturers as well as cutlery manufacturers, who take our resin systems and turn them into compostable forks, knives, spoons things of that nature.

Thank you. Our next question comes from Charles Neuhauser of Mainwall. Your line is now open.

You've said something like the improvement in the oil and gas application segments was as expected. I guess I hadn't been aware that you were expecting a big improvement there. So my question is I gather the progress on the pipeline side of things is new and exciting, but how do you feel about the tank bottom protection aspects of the oil and gas products?

That still is the cornerstone of our oil and gas business right now, and right now, our sales for the first quarter have already exceeded our sales for first quarter from last year. So, I think we are seeing a good business trend at this point, which is primarily bolstered by tank bottom solutions. The pipeline solutions will be a little bit more choppy because those projects don’t come up as often as tank bottoms do.

I guess it's been a long time years since so you tried to or expected to make that sort of progress in tank bottom application. So, is it fair to say that finally after a fair amount of time you're feeling more positive about the industry accepting your products and looking to forward to continued progress?

We are getting more repeat orders from existing large companies, so that gives us -- that bolsters our view that we're headed in the right direction. And we also continue to add new geographies on a regular basis. So, it's more companies and more geographies adding more tanks, so cumulatively we expect this business to grow going forward.

So that should be an important source of revenue growth over the near-to intermediate-term I would think?

Yes, we agree.

Thank you. Our next question comes from Charlie Pine of Van Clemens & Company. Your line is now open.

My question was partially answered by prior individuals going to be about the oil and gas segment. And but let me just see if I can maybe come at it in a different way. Pat, what percentage of this fixed sales increase in the quarter in oil and gas? How much was from tank bottoms? And how much was it from these new pipeline solutions if you are able to discuss that?

It's about 50-50.

And going forward, just as far as let's just say that your visibility over the next few quarters do you think that a mix of that nature will probably continue or do you think it will isolate more and you are going to be seeing that some of those pipeline things will normal early onetime and you are going to probably just see a greater step change in tank bottom business in the first couple quarters of the fiscal year?

I would certainly say based on what we've seen so far in the first quarter to expect more tank bottom sales to be the regular bread and butter business while the pipeline is going to come in more occasionally as those projects emerge.

Our next question comes from Walter Ramsley of Walrus Partners. Your line is now open.

I have a few housekeeping questions kind of going through the numbers quickly. You said, the joint venture operating income was about 6% in the fourth quarter and 18% for the entire year. Can you explain, if that had to do with the currency impact? Or what was the currency impact for the quarter and year?

There wasn’t -- for the most part there wasn’t the kind of volatility in the euro and in fiscal '18 that we saw in prior years. So if you're comparing euro that was kind of fluctuated between about 1.13 to 1.16 or 1.17, so there isn’t a significant amount of currency volatility when it comes to the joint venture income that played into that growth from a quarter basis or from an annual basis. The growth that we saw at the joint venture level was unit growth at each to various joint ventures. It didn’t have anything to do with currency.

And for the taxes, back in the second quarter there was $700,000 one-time charge for the new tax scheme. So if you pull that out, it looks like for the entire year the tax rate was only 2.2%, is that correct? And can you tell us what you are estimating the tax rates will be next year when you're putting together the guidance figures?

Sure, that is correct, you pull it out it's a very low tax rate, that just has to do with how the Company is structured with all the joint ventures, with all the foreign tax credit and valuation allowances and things like that. I would expect that we are going to have a single digit tax rate going forward for some time. So that is built into the guidance. So in total tax rate, if you would put a number on itm maybe put it between 8% to 10% for fiscal '19.

Just one last thing the stock compensation expense has been running approximately $100,000 every quarter. Was that about -- what it was in the fourth quarter and do you foresee that trend continuing next year?

Yes, there is no change in stock option expense between first quarter, second quarter, third quarter, fourth quarter it would have been same amount each quarter. The only thing I can say from a stock options expense standpoint going forward is that more management bonus expense is going to be in the form of stock options compared to cash. So stock option expense will go up, but it's just going to be dollars otherwise would have been paid out in cash, hope that makes sense.

Thank you. Our next question comes from Joe Furst of First Associates. Your line is open.

My question had to do with the fact that you have a great story to tell. What are you doing to try to get the invest community to more aware of your company because most people never heard of it and it would be helpful if they did?

Well, one, we're trying to grow sales and grow income, so we get on everybody's radar screen. Two, I think next year as the Company grows, it's going to start to be included in more and more indexes, specifically in Russell and things like that, which I think will give the Company more exposure. Third, as you aware we -- couple of year ago started working with an IR firm, we tend to do more, call it, organic IR work as far as various non deal road shows and things like that. I think we have tried to increase our visibility, so that as we achieve the sales and earnings success that we have in certain quite consistent results forward that people understand what the Company does and what the market potential is for the products and solutions that we sell. I think people specifically institutional investors are starting to see the potential opportunity for oil and gas success, Natur-Tec success and really when you look at the amount of operating income that is generated from the joint ventures in North American business it’s a very profitable company that still has the biggest gains that we’re going to see from investor standpoint coming in the next 2 to 3 years. So, I talk to a lot of people a lot of people call here and have direct conversations with them to help to explain what’s probably a slightly complicated balance sheet and income statement for a microcap company, but I think we get on the road and I think we try to tell our story as best as we can.

Ladies and gentlemen, at this time that concludes our question-and-answer session for today. I would like to turn the call back over to Patrick Lynch for any closing remarks.

I would like to thank everyone for participating today and for your interest in NTIC. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program and you may all disconnect. Everyone have a great day.