SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 30,October 31, 2000 Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
------------------------------
(Exact name of the registrant as specified in its charter)
DELAWARE 36-2048898
------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 North Michigan Avenue, Suite 400
Chicago, Illinois 6061160611-4213
-------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
The Registrant's telephone number, including area code: (312) 321-1515
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
at least the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 5,470,435 Shares (Including 1,282,8071,281,769 Treasury Shares)
Class B Stock - 1,765,083 Shares (Including 342,241 Treasury Shares)
2
CONTENTS
Page
PART I
Item 1: Financial Statements And Supplementary Data.................. 3 - 12
Item 2: Management Discussion And Analysis Of Financial Condition
And The Results Of Operations................................13 - 18
Item 3: Quantitative And Qualitative Disclosures About Market Risk........18
PART II
Item 6: Exhibits And Reports On Form 8-K..................................19
Signatures................................................................20
PAGE
PART I
ITEM 1: Financial Statements And Supplementary Data................... 3 - 9
ITEM 2: Management Discussion And Analysis Of Financial Condition
And The Results Of Operations.................................. 10-12
ITEM 3: Quantitative And Qualitative Disclosures About Market
Risk.......................................................... 12
PART II
ITEM 6: Exhibits And Reports on Form 8-K.............................. 13
SIGNATURES............................................................ 14
Exhibit 10(m)(1)...................................................... 15
Exhibit 10(m)(2)..................................................... 16
3
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Balance Sheets
(in thousands of dollars)
(unaudited)CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
-----------------------
April 30 JulyASSETS OCTOBER 31 ASSETSJULY 31
2000 19992000
-----------------------
CURRENT ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 9883,160 $ 4,3621,388
Investment Securities 1,214 1,219 1,225
Accounts Receivable, less allowance of $431$878
and $358$836 at April 30, 2000October 31 and July 31, 1999,2000, 25,578 24,438
respectively
25,194 25,365
Inventories 17,837 15,16517,512 16,928
Income taxes receivable 1,919 2,267
Prepaid Expenses 8,494 6,963
-------- --------
Total Current Assets 53,732 53,080
-------- --------7,974 7,719
--------- ---------
TOTAL CURRENT ASSETS 57,357 53,959
--------- ---------
PROPERTY, PANTPLANT AND EQUIPMENT --- AT COST
Cost 134,620 132,479137,106 135,645
Less Accumulated Depreciation and Amortization (73,972) (69,631)
-------- --------
Total Property, Plant and
Equipment, Net 60,648 62,848
-------- --------(78,057) (76,033)
--------- ---------
TOTAL PROPERTY, PLANT AND 59,049 59,612
EQUIPMENT, NET --------- ---------
OTHER ASSETS
Goodwill & Intangibles, net of accumulated
amortization of $2,480$3,046 and $2,128$2,664 at
April
30, 2000,October 31 and July 31, 1999,2000, respectively 9,621 9,78010,286 10,324
Deferred Income Taxes 3,040 3,0452,606 2,606
Other 6,140 4,997
-------- --------
Total Other Assets 18,801 17,822
-------- --------
Total Assets $133,181 $133,750
======== ========6,407 6,343
--------- ---------
TOTAL OTHER ASSETS 19,299 19,273
--------- ---------
TOTAL ASSETS $ 135,705 $ 132,844
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
4
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Balance Sheets
(in thousands of dollars)
(unaudited)CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
------------------------
April 30 July 31
LIABILITIES & STOCKHOLDERS' EQUITY OCTOBER 31 JULY 31
2000 19992000
------------------------
CURRENT LIABILITIES
CURRENT LIABILITIES
Current Maturities of Notes Payable $ 2,0002,250 $ 2,2261,750
Accounts Payable 5,002 4,8424,804
Dividends Payable 473 484473
Accrued Expenses 6,783 8,387
-------- --------
Total Current Liabilities 14,258 15,939
-------- --------10,321 8,057
--------- ---------
TOTAL CURRENT LIABILITIES 18,046 15,084
--------- ---------
NONCURRENT LIABILITIES
Notes Payable 40,063 38,15039,707 39,434
Deferred Compensation 3,075 3,2062,763 3,112
Other 1,751 1,948
-------- --------
Total Noncurrent Liabilities 44,889 43,304
-------- --------
Total Liabilities 59,147 59,243
-------- --------2,313 2,250
--------- ---------
TOTAL NONCURRENT LIABILITIES 44,783 44,796
--------- ---------
TOTAL LIABILITIES 62,829 59,880
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 per share, issued
5,470,435 shares at April 30, 2000,October 31 and
5,470,252 shares at July
31, 19992000 547 547
Class B Stock, par value $.10 per share, issued
1,765,083 shares at April 30, 2000,October 31 and
1,765,266 shares at July
31, 19992000 177 177
Additional Paid-In Capital 7,687 7,698 7,702
Retained Earnings 91,756 90,43090,717 90,757
Restricted Unearned Stock Compensation (19) (9)(24) (10)
Cumulative Translation Adjustment (1,238) (1,159)(1,363) (1,310)
-------- --------
98,921 97,688---------
97,741 97,859
Less Treasury Stock, at cost (1,282,807(1,281,769
Common shares and 342,241 Class B shares
at April
30, 2000,October 31 and 1,163,7641,283,769 Common shares
and 342,241 Class B shares at October 31
and 1,283,769 Common shares and 342,241
Class B shares at July 31, 1999) (24,887) (23,181)
-------- --------
Total Stockholders' Equity 74,034 74,507
-------- --------
Total Liabilities2000) (24,865) (24,895)
TOTAL STOCKHOLDERS' EQUITY 72,876 72,964
--------- ---------
TOTAL LIABILITIES & Stockholders'
Equity $133,181 $133,750
======== ========STOCKHOLDERS' EQUITY $ 135,705 $ 132,844
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
5
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
(in thousands, except for per share amounts)
(unaudited)CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
-------------------------
For The Nine Months
Ended April 30
---------------------------------------------------
FOR THE THREE MONTHS ENDED
OCTOBER 31
--------------------------
2000 1999
(RESTATED)
-------------------------
NET SALES $133,832 $133,510$ 43,349 $ 44,549
Cost Of Sales 95,308 91,20231,712 30,969
-------- --------
GROSS PROFIT 38,524 42,30811,637 13,580
Selling, General And Administrative Expenses 31,502 32,704
Restructuring Charge 1,239 --10,225 10,767
-------- --------
INCOME FROM OPERATIONS 5,783 9,6041,412 2,813
OTHER INCOME/EXPENSEINCOME (EXPENSE)
Interest Expense (2,409) (2,401)(769) (795)
Interest Income 164 38544 61
Other, Net 339 103(105) 4
-------- --------
TOTAL OTHER EXPENSE, NET (1,906) (1,913)(830) (730)
-------- --------
INCOME BEFORE INCOME TAXES 3,877 7,691582 2,083
Income Taxes 1,124 2,192149 604
-------- --------
NET INCOME 2,753 5,499433 1,479
RETAINED EARNINGS
Balance at Beginning of Year 90,757 90,430 85,158
Less Cash Dividends Declared 1,427 1,421473 481
-------- --------
RETAINED EARNINGS -- APRIL 30- OCTOBER 31 $ 91,75690,717 $ 89,23691,428
======== ========
Net Income Per Share
BasicNET INCOME PER SHARE
BASIC $ 0.490.08 $ 0.940.26
======== ========
DilutiveDILUTIVE $ 0.480.08 $ 0.920.25
======== ========
Average Shares Outstanding
Basic 5,660 5,846AVERAGE SHARES OUTSTANDING
BASIC 5,610 5,721
======== ========
Dilutive 5,736 5,995DILUTIVE 5,613 5,896
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
6
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Statements of Comprehensive Income
(in thousands of dollars)
(unaudited)STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
-------------------------
For The Nine Months
Ended April 30
---------------------------------------------------
FOR THE THREE MONTHS ENDED
OCTOBER 31
--------------------------
2000 1999
-------------------------(RESTATED)
--------------------------
Net Income $2,753 $5,499
Other Comprehensive Income:NET INCOME $ 433 $ 1,479
OTHER COMPREHENSIVE INCOME:
Cumulative Translation Adjustments (79) 23
------ ------
Total Comprehensive Income $2,674 $5,522
====== ======(53) (10)
------- --------
TOTAL COMPREHENSIVE INCOME $ 380 $ 1,469
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
7>7
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
(in thousands, except for per share amounts)
(unaudited)CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
-------------------------
For The Three Months
Ended April 30
---------------------------------------------------
FOR THE THREE MONTHS ENDED
OCTOBER 31
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
-------------------------- --------------------------------------- (RESTATED)
--------------------------
NET SALESINCOME $ 42,780433 $ 42,405
Cost Of Sales 30,543 29,390
-------- --------
Gross Profit 12,237 13,015
Selling, General And Administrative1,479
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 2,262 2,228
Provision for bad debts 40 41
(Increase) Decrease in:
Accounts Receivable (1,180) (1,107)
Inventories (584) (1,225)
Prepaid Expenses 10,302 10,743
-------- --------
INCOME FROM OPERATIONS 1,935 2,272
OTHER INCOME (EXPENSE)
Interest Expense (786) (807)
Interestand Taxes 92 67
Deferred Income 55 125Taxes -- 4
Other Net 111 82
--------Assets (200) (136)
Increase (Decrease) in:
Accounts Payable 198 58
Accrued Expenses 2,264 (2,343)
Deferred Compensation (349) (44)
Other 63 89
------- --------
TOTAL OTHER EXPENSE, NET (620) (600)
-------- --------
INCOME BEFORE INCOME TAXES 1,315 1,672
Income Taxes 381 477
--------ADJUSTMENTS 2,606 (2,368)
------- --------
NET INCOMECASH PROVIDED BY (USED IN) OPERATING Activities 3,039 (889)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,559) (1,908)
Proceeds from sale of property, plant and equipment 5 --
Purchases of Investment Securities (687) (583)
Dispositions of Investment Securities 692 548
Other 4 8
------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,545) (1,935)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt (7) --
Proceeds from Issuance of Long-Term Debt 780 --
Dividends Paid (473) (484)
Purchases of Treasury Stock -- (159)
Other (22) (32)
------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 278 (675)
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,772 (3,499)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,388 4,362
------- --------
CASH AND CASH EQUIVALENTS, OCTOBER 31 $ 9343,160 $ 1,195
======== ========
NET INCOME PER SHARE
Basic $ 0.17 $ 0.21
======== ========
Dilutive $ 0.17 $ 0.20
======== ========
AVERAGE SHARES OUTSTANDING
Basic 5,610 5,813
======== ========
Dilutive 5,611 6,036
========863
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
8
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Statements of Comprehensive Income
(in thousands of dollars)
(unaudited)
-------------------------
For The Three Months
Ended April 30
-------------------------
2000 1999
-------------------------
NET INCOME $ 934 $1,195
Other Comprehensive Income:
Cumulative Translation Adjustments (66) 63
------ ------
TOTAL COMPREHENSIVE INCOME $ 868 $1,258
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
9
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands of dollars)
(unaudited)
-----------------------
For the Nine Months
Ended April 30
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
-----------------------
NET INCOME $ 2,753 $ 5,499
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 6,792 6,311
Non-Cash Restructuring Charge 1,039 --
Provision for bad debts 102 33
(Increase) Decrease in:
Accounts Receivable 69 (711)
Inventories (2,672) (1,758)
Prepaid Expenses and Taxes (1,531) (404)
Deferred Income Taxes 4 (39)
Other Assets (1,335) (678)
Increase (Decrease) in:
Accounts Payable 160 (764)
Accrued Expenses (2,009) (2,812)
Deferred Compensation (131) (66)
Special Charge Reserve -- (133)
Other (197) (64)
------- -------
TOTAL ADJUSTMENTS 291 (1,085)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,044 4,414
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (4,888) (6,200)
Proceeds from sale of property, plant and
equipment 12 22
Purchases of Investment Securities (1,219) (1,225)
Dispositions of Investment Securities 1,225 1,173
Other (9) (14)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,879) (6,244)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt (4,326) (134)
Proceeds from Issuance of Long-Term Debt 6,013 400
Dividends Paid (1,438) (1,375)
Purchases of Treasury Stock (1,727) (1,502)
Other (61) 14
------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,539) (2,597)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,374) (4,427)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,362 9,410
------- -------
CASH AND CASH EQUIVALENTS, APRIL 30 $ 988 $ 4,983
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
10
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be read
in conjunction with the consolidated financial statements and related notes for
the year ended July 31, 1999,2000, included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions are eliminated.
The unaudited financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the statements
contained herein.
Certain items in prior year financial statements have been reclassified to
conform to the presentation used in fiscal 2000.2001.
2. RESTATEMENT
On July 24, 2000 Oil-Dri Corporation of America filed a report on Form 8-K with
the Securities and Exchange Commission which disclosed that reported financial
results for each of the first three quarters of its fiscal year ending July 31,
2000 would be restated. The filing reported that a review of trade spending in
the Consumer Products segment showed that the Company's accruals for marketing
expenses should be increased. The restatement had the effect of decreasing
income before tax by $350,000, net income by $248,000, and basic and diluted net
income per share by $0.04 for the three months ended October 31, 1999. At
October 31, 1999, the restatement increased accrued expenses, net of the related
income tax reduction, by $248,000 and decreased retained earnings by $248,000.
3. INVENTORIES
The composition of inventories is as follows (in thousands):
-------------------------
April 30 JulyOCTOBER 31 (Unaudited) (Unaudited)JULY 31
(UNAUDITED) (AUDITED)
-------------------------
2000 19992000
-------------------------
Finished goods $ 10,925 $ 9,593$10,237 $10,251
Packaging 5,577 4,2675,464 5,273
Other 1,335 1,305
-------- --------
$ 17,837 $ 15,165
======== ========1,811 1,404
------- -------
$17,512 $16,928
======= =======
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method.
11
3. RESTRUCTURING CHARGE
During the second quarter of fiscal 2000, the Company recorded a
pre-tax restructuring charge of $1,239,000 against income from
operations, as follows (in thousands):
Severance costs $ 604
Non-performing asset 635
------
Restructuring charge $1,239
======
The severance costs are related to a realignment of the Company's
personnel costs to bring them more in line with current levels of sales
and profitability. The severance accrual represents 13 employees that
have been or will be terminated and will be completed by the fourth
quarter of fiscal 2000. The majority of the positions terminated are
at the selling, general and administrative level.
The net book value of the non-performing asset consisted of specific
production equipment that has been idled. The equipment had been used
in the Agricultural Products segment. Because management does not rely
on segment asset allocation, information regarding the results of
operations for this specific asset could not be identified. However,
the results were included in cost of sales. The net book value of this
asset was approximately 1% of the net book value of all fixed assets
outstanding as of January 31, 2000.
At April 30, 2000, $404,000 of the restructuring charges remained in
current liabilities. A summary of the balance sheet activity is
presented below (in thousands):
Reserve balance at January 31, 2000 $1,239
Severance costs (200)
Write-off of non-performing assets (635)
------
Balance at April 30, 2000 $ 404
======9
4. NEW ACCOUNTING STANDARDS
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires companies to
recognize all derivatives as assets or liabilities measured at their fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and whether it qualifies for hedge accounting.
Although the
impactImplementation of this statement, has not been fully assessed, the Company
believes adoption of this statement, as amended by SFAS No. 137, willwhich was adopted October 31, 2000, did not
have a material financial statement impact. Adoption of this
standard is required by July 2001.
12
5. SEGMENT REPORTING
The Company has four reportable operating segments: Consumer Products Fluids PurificationGroup,
Specialty Products AgriculturalGroup, Crop Production and Horticultural Products Group, and
Industrial and Automotive Products.Products Group. These segments are managed separately
because each business has different economic characteristics. The Specialty
Products Group was previously described as Fluids Purification Products, and the
Crop Production and Horticultural Products Group was described as Agricultural
Products. In addition, certain businesses were transferred between Crop
Production and Horticultural Products Group and Specialty Products Group as
described below.
The accounting policies of the segments are the same as those described in Note
1 of the Company's Annual Report for the year ended July 31, 19992000 on Form 10-K
filed with the Securities and Exchange Commission.
Because management does not rely on segment asset allocation, information
regarding segment assets is not meaningful and therefore is not reported.
-------------------------------------
Nine MonthsQuarter Ended April 30October 31
-------------------------------------
Net Sales Operating Income
-------------------------------------
2000 1999 2000 1999
(restated)
------- -------- -------- --------
(in thousands)
Consumer Products........................Products Group.............. $28,267 $29,243 $ 87,4112,746 $ 86,698 $ 12,274 $ 13,094
Fluids Purification Products............. 17,520 17,106 3,128 4,148
Agricultural Products.................... 14,992 16,804 1,885 3,2554,481
Specialty Products Group............. 6,472* 7,257* 1,174* 1,449*
Crop Production and Horticultural
Products Group..................... 3,726* 3,449* 394* 364*
Industrial and Automotive Products....... 13,909 12,902 819 553Products
Group.............................. 4,884 4,600 194 281
-------- -------- -------- --------
Total Sales/Operating Income............. $133,832 $133,510------- ------- -------
TOTAL SALES/OPERATING INCOME......... $43,349 $44,549 $ 18,1064,508 $ 21,0506,575
======== ======== -------- --------======= ------- -------
Less:
Restructuring Charge (1)............................. 1,239 --
Corporate Expenses................................... 10,745 11,343Expenses.................................... 3,200 3,758
Interest Expense, net of Interest Income............................................... 2,245 2,016
-------- --------Income.............. 726 734
------- -------
INCOME BEFORE INCOME Taxes.............................. 582 2,083
------- -------
Income before Income Taxes.................................. 3,877 7,691
-------- --------
Income Taxes................................................ 1,124 2,192
-------- --------
Net Income.................................................. $2,753 $5,499
======== ========Taxes............................................ 149 604
------- -------
NET INCOME.............................................. $ 433 $ 1,479
======= =======
--------------------------------------
Three Months Ended April 30
--------------------------------------
Net Sales Operating Income
--------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands)
Consumer Products........................ $ 26,594 $ 26,772 $ 3,141 $ 3,504
Fluids Purification Products............. 5,388 5,527 834 1,257
Agricultural Products.................... 5,955 5,595 979 1,151
Industrial and Automotive Products....... 4,843 4,511 282 302
-------- -------- -------- --------
Total Sales/Operating Income............. $ 42,780 $ 42,405 5,236 6,214
======== ======== ======== ========
Less: Corporate Expenses................................... 3,190 $3,860
Interest Expense, net of Interest
Income............................................... 731 682
-------- --------
Income before Income Taxes.................................. 1,315 1,672
-------- --------
Income Taxes................................................ 381 477
-------- --------
Net Income.................................................. $ 934 $1,195
======== ========
(1) See Note 3 above for a discussion* Includes reclassification of animal health & nutrition products from the restructuring charge
recorded inCrop
Production and Horticultural Products Group to the second quarterSpecialty Products Group
to take advantage of fiscal 2000.international opportunities and spread the
time-intensive burden of new product and market development between the
business units.
1310
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINETHREE MONTHS ENDED APRIL 30,OCTOBER 31, 2000 COMPARED TO
NINETHREE MONTHS ENDED APRIL 30,OCTOBER 31, 1999
RESULTS OF OPERATIONS
Consolidated net sales for the nine months ended April 30, 2000first quarter of fiscal 2001 were $133,832,000, an increase$43,349,000, a
decrease of 0.2% versus2.7% from net sales of $133,510,000$44,549,000 in the first nine monthsquarter of fiscal
1999.2000. Net income for the first nine
monthsquarter of fiscal 20002001 was $2,753,000,$433,000, a decrease
of 49.9%70.7% from $5,499,000$1,479,000 earned in the first nine monthsquarter of fiscal 1999.2000. Basic and
diluted net income per share for the first nine monthsquarter of fiscal 20002001 was $0.49 and
diluted net income per share was $0.48,$0.08
versus $0.94$0.26 basic net income per share and $0.92$0.25 diluted net income per share
earned in the first nine months of fiscal 1999. The decrease was due to a restructuring
charge recorded in the second quarter of fiscal 2000, manufacturing
costs associated with the startup of the Church & Dwight supply
arrangement and other unfavorable manufacturing variances, the decline
in demand for agricultural carriers, a decrease in profitability in the
Fluids Purification Products segment, and increases in fuel prices.
The restructuring charge, which covered the costs of severance for
certain eliminated positions and the write-off of certain
non-performing assets, reduced income before taxes by $1,239,000, net
income by $879,000, and net income per share by $0.15 (basic and
diluted) for the first nine months of fiscal 2000.
Net sales of the Consumer Products segment for the first nine monthsquarter of fiscal 20002001
were $87,411,000, an increase$28,267,000, a decrease of 0.8% over3.3% from net sales of $86,698,000$29,243,000 in the first
nine months of fiscal 1999. This growth was
primarily due to incremental sales to Church & Dwight, as well as
increased sales to Clorox and the mass merchandiser market, partially
offset by reduced sales in the grocery market. Consumer Products'
operating income decreased 6.3% from $13,094,000 in the first nine
months of fiscal 1999 to $12,274,000 in the first nine monthsquarter of fiscal 2000 due to manufacturing costs associated with the startupreduced distribution and sales of the
Church & Dwight supply arrangement incurredpaper cat
litter items. The Consumer Products Group's operating income decreased 38.7%
from $4,481,000 in the first nine monthsquarter of fiscal 2000 to $2,746,000 in the first
quarter of fiscal 2001 due to a reduction of gross profit in the non-grocery and
otherco-packaging group. The reduction of gross profit was caused by unfavorable
manufacturing variances, partially
offset byproduct mix in non-grocery and reduced sales in the co-packaging group. Also,
fuel costs had a decrease in advertising expenditures andnegative impact on the increase in
sales discussed above.entire Consumer Products Group's income.
Net sales of the Fluids PurificationSpecialty Products Group segment for the first nine monthsquarter of
fiscal 20002001 were $17,520,000, an increase of 2.4% over
net sales of $17,106,000 in the first nine months of fiscal 1999.
Increased domestic sales of PURE-FLO(r) bleaching clays were the primary
driver of the segment's growth in sales, partially offset by
competitive pressures in many of our overseas markets that have led to
some defensive pricing strategies to maintain market share. Fluids
Purification Products' operating income decreased 24.6% from $4,148,000
in the first nine months of fiscal 1999 to $3,128,000 in the first nine
months of fiscal 2000, which is partially due to the changes in sales
mix discussed above, as well as unfavorable manufacturing variances and
costs associated with the startup of a new line of rheological products.
Net sales of the Agricultural Products segment for the first nine
months of fiscal 2000 were $14,992,000,$6,472,000, a decrease of 10.8% from net sales of $16,804,000$7,257,000 in
the first nine monthsquarter of fiscal 1999. This
overall decline is2000. Specialty Products Group's operating income
decreased 19.0% from $1,449,000 in the first quarter of fiscal 2000 to
$1,174,000 in the first quarter of fiscal 2001 due to selected price reductions,
increased fuel costs and unfavorable foreign exchange fluctuations. Fiscal year
2000 net sales and operating income reflect a reclassification of $854,000 and
$138,000 respectively for certain products and customers from the Crop
Production and Horticultural Products segment to the Specialty Products Group
segment.
Net sales of the Crop Production and Horticultural Products segment for the
first quarter of fiscal 2001 were $3,726,000, an increase of 8.0% from net sales
of $3,449,000 in the first quarter of fiscal 2000, led primarily to sharply reduced demand for
agricultural carriers as a result of a depressed farm economy.
Agriculturalby an increase
in PRO'S CHOICE(R) sports field products. Crop Production and Horticultural
Products' operating income decreased 42.1%increased 8.2% from $3,255,000$364,000 in the first 14
nine monthsquarter of
fiscal 19992000 to $1,885,000$394,000 in the first nine monthsquarter of fiscal 2000, primarily due to the decrease in sales of agricultural
carriers, unfavorable sales mix and manufacturing variances, partially
offset by the Company's return on investment in Kamterter II.2001.
Net sales of the Industrial and Automotive Products segment for the first
nine monthsquarter of fiscal 20002001 were $13,909,000,$4,884,000, an increase of 7.8%6.2% from net sales of
$12,902,000$4,600,000 in the first nine monthsquarter of fiscal 19992000 due to both increased sales volume of
clay-based industrialboth clay and automotive products and price increases put into effect during the past
year.non-clay products. Industrial and Automotive Products' operating
income increased
48.1%decreased 31.0% from $553,000$281,000 in the first nine monthsquarter of fiscal 19992000 to
$819,000$194,000 in the first nine monthsquarter of fiscal 20002001 due to the increase in sales
discussed above.increased fuel costs.
Consolidated gross profit as a percentage of net sales for the first nine monthsquarter of
fiscal 2001 decreased to 26.8% from 30.5% in the first quarter of fiscal 2000
decreased to 28.8% from 31.7% in the first
nine months of fiscal 1999 due to an unfavorable sales mixincrease in the Agricultural Products segments, defensive pricing strategies in the
overseas marketscost of the Fluids Purification Products segment,fuel to operate our manufacturing costs associated with the startup of the Church & Dwight
supply arrangement incurred in the first nine months of fiscal 2000 as
well as other unfavorable manufacturing variances,plants and
increases in
fuel prices.distribution processes.
11
Operating expenses as a percentage of net sales were 24.5% for both the
first nine months of fiscal 2000 and the first nine months of fiscal
1999. Excluding the restructuring reserve taken in the second quarter,
operating expenses as a percentage of net sales were 23.5% for the first nine monthsquarter of fiscal
2000. This decrease is primarily2001 decreased to 23.6% from 24.2% in the first quarter of fiscal 2000 due to a
reduction in advertising expenditures and cost savings resulting from
the restructuring.corporate expenses, largely attributable to a $300,000 payout
waiver by Richard Jaffee upon his retirement. Mr. Jaffee has entered into a five
year consulting agreement under which Mr. Jaffee will be paid an annual
consulting fee. Also, a supplemental pension benefit will be paid to Mr. Jaffee
beginning February 1, 2006.
Interest expense increased $8,000, whileand interest income for the first nine monthsquarter of fiscal 2000 decreased $221,0002001 were
unchanged from fiscal 1999 levels,
primarily due to lower levels of funds available for investment.2000 levels.
The Company's effective tax rate was 29.0%25.6% of pre-tax income in the first
nine monthsquarter of fiscal 20002001 versus 28.5%29.0% in the first nine monthsquarter of fiscal 1999.2000. The
rate change was due to the Company's lower profit level.
Total assets of the Company decreased $569,000increased $2,861,000 or 0.4%2.2% during the first
nine monthsquarter of fiscal 2000.2001. Current assets increased $652,000$3,398,000 or 1.2%6.3% from fiscal
19992000 year-end balances primarily due to increases in
inventory levels and prepaid expenses, partially offset by decreasedincreased cash and cash equivalents,
inventories and accounts receivable. Property, plant and equipment, net of
accumulated depreciation, decreased $2,200,000$563,000 or 3.5%0.9% during the first nine monthsquarter as
depreciation expense exceeded new
capital expenditures and as a result of the write-off of non-performing
assets included in the restructuring charge.expenditures.
Total liabilities decreased $96,000increased $2,949,000 or 0.2%4.9% during the first nine
monthsquarter of
fiscal 2000 due primarily to a decrease in current
liabilities, partially offset by increased levels of long term notes
payable.2001. Current liabilities decreased $1,681,000increased $2,962,000 or 10.5%19.6% from fiscal 19992000
year-end balances due primarily to a decreaseincreases in accrued expensesinterest, trade promotions and in theadvertising
and current maturities of notes payable, partially offset by an
increase in accounts payable.
15debt maturities.
EXPECTATIONS
The Company anticipates netthat second quarter sales will outpace those of the same
quarter a year ago. The Company is optimistic that during the next three months,
which have traditionally been a busy period, our focus on increasing the quality
and productivity of our processes will contribute to profitability in both the
next quarter and over the long term. To recover the cost of fuel, the Company is
implementing an energy cost surcharge on some of our customers and increased
pricing on other customers to recoup the higher costs. The Company anticipates
that the energy surcharge will go into effect in the middle of the second
quarter.
Fluctuations in natural gas and other fuel prices will continue to have a very
significant impact on the Company's earnings. The difficulty in anticipating
future energy prices makes it difficult to forecast the Company's fully diluted
earnings per share beyond a broad range of $0.30 to $0.67 for the remainder of fiscal 2000 will
be approximately the same as net sales in the comparable period of
fiscal 1999. Sales of branded cat box absorbents are expected to
increase slightly due to the re-introduction of jug packaging on
branded scoopable products, which the Company believes will have
increased sales velocity. However, sales growth of cat box absorbents
is subject to continuing competition for shelf space in the grocery,
mass merchandiser and club markets. Sales of the Company's fluids
purification products and industrial and automotive products are also
expected to increase slightly in the remainder of fiscal 2000 from the
comparable period in fiscal 1999. Sales of the Company's agricultural
products for the remainder of fiscal 2000 are expected to be at least
equal to levels achieved in the comparable period of fiscal 1999.year.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio increaseddecreased to 3.83.2 at April 30,October 31, 2000 from 3.33.6 at July 31,
1999.2000. Working capital increased $2,333,000$436,000 during the first nine
monthsquarter of fiscal 20002001
to $39,474,000$39,311,000 primarily due to both higher levels of current assetscash and lower
levels of current liabilities, as previously discussed.cash equivalents, receivables
and inventories, offset by higher accrued expenses. During the first nine monthsquarter of
fiscal 2000,2001, the balances of cash, cash equivalents and investment securities
decreased $3,380,000.increased $1,767,000. Cash provided by operating activities ($3,044,000), increases in the
Company's borrowings ($6,000,000), and cash on hand ($4,362,000) werewas used to fund
capital expenditures ($4,888,000), principal payments on
long-term debt ($4,326,000), purchases of the Company's common stock
($1,728,000),1,559,000) and dividend payments ($1,438,000)473,000). Total cash 12
and investment balances held by the Company's foreign subsidiaries at April
30,October
31, 2000 and July 31, 19992000 were $2,438,000$2,845,000 and $2,692,000,$2,366,000, respectively.
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO
THREE MONTHS ENDED APRIL 30, 1999
RESULTS OF OPERATIONS
Consolidated net salesThe Company has received a waiver for the three monthsquarter ended April 30,October 31, 2000 were
$42,780,000, an increase of 0.9% over net sales of $42,405,000from
Teachers Insurance and Annuity Association and Cigna Investments, Inc. related
to the fixed charge coverage ratio as contained in the third quarterNote Purchase Agreement
dated as of fiscal 1999. Net income for the three months ended
April 30, 2000 was $934,000, a decrease of 21.8% from $1,195,000 earned
in last year's quarter. Net income per share for the three months
ended April 30, 2000 was $0.17 (basic and diluted) versus $0.21 basic
and $0.20 diluted net income per share earned in the same period last
year. The decrease was due to ongoing manufacturing costs associated
with the startup of the Church & Dwight supply arrangement and other
unfavorable manufacturing variances, a decrease in sales and
profitability in the Fluids Purification Products segment, and
increases in fuel prices.
Net sales of the Consumer Products segment for the three months ended
April 30, 2000 were $26,594,000, a decrease of 0.7% over net sales of
$26,772,000 in the third quarter of fiscal 1999. This decrease was
primarily due to decreased sales in the mass merchandiser market,
partially offset by increased sales to Clorox and incremental sales to
Church & Dwight. Consumer Products' operating income decreased 10.4%
from $3,504,000 in the third quarter of fiscal 1999 to $3,141,000 in
the third quarter of fiscal 2000 due to ongoing manufacturing costs
associated with the startup of the Church & Dwight supply arrangement
and other unfavorable manufacturing variances, partially offset by a
decrease in advertising expenditures.
16
Net sales of the Fluids Purification Products segment for the three
months ended April 30, 2000 were $5,388,000, a decrease of 2.5% from
net sales of $5,527,000 in the third quarter of fiscal 1999. This
decrease is due to competitive pressures in overseas markets that have
led to defensive pricing strategies to maintain market share, partially
offset by increased domestic sales of PURE-FLO(r) bleaching clays.
Fluids Purification Products' operating income decreased 33.7% from
$1,257,000 in the third quarter of fiscal 1999 to $834,000 in the third
quarter of fiscal 2000, which is partially due to the changes in sales
mix discussed above, unfavorable manufacturing variances and continuing
costs associated with the startup of a new line of rheological products.
Net sales of the Agricultural Products segment for the three months
ended April 30, 2000 were $5,955,000, an increase of 6.4% from net
sales of $5,595,000 in the third quarter of fiscal 1999. This growth
in sales is due to increased sales of animal health and nutrition
products, and clay granules used in turf and ornamental applications,
partially offset by reduced demand for agricultural carriers.
Agricultural Products' operating income decreased 14.9% from $1,151,000
in the third quarter of fiscal 1999 to $979,000 in the third quarter of
fiscal 2000, due to unfavorable manufacturing variances, partially
offset by a favorable sales mix.
Net sales of the Industrial and Automotive Products segment for the
three months ended April 30, 2000 were $4,843,000, an increase of 7.4%
from net sales of
$4,511,000 in the third quarter of fiscal 1999 due to increased sales
volume of automotive and hardware products. Industrial and Automotive
Products' operating income decreased 6.6% from $302,000 in the third
quarter of fiscal 1999 to $282,000 in the third quarter of fiscal 2000
due to unfavorable manufacturing variances.
Consolidated gross profit as a percentage of net sales for the three
months ended April 30, 2000 decreased to 28.6% from 30.7% in the third
quarter of fiscal 1999 due to defensive pricing strategies in the
overseas markets of the Fluids Purification Products segment, ongoing
manufacturing costs associated with the startup of the Church & Dwight
supply arrangement and other unfavorable manufacturing variances, and
increases in fuel prices.
Operating expenses as a percentage of net sales decreased to 24.1% for
the three months ended April 30,2000 from 25.3% in the third quarter of
fiscal 1999. This decrease is due primarily to a decrease in
advertising expenditures and cost savings realized from the
restructuring charge taken in the second quarter of fiscal 2000.
Interest expense decreased $21,000, while interest income for the three
months ended April 30, 2000 decreased $70,000 from fiscal 1999 levels,
primarily due to lower levels of funds available for investment.
The Company's effective tax rate was 29.0% of pre-tax income in the
three months ended April 30, 2000 versus 28.5% in the third quarter of
fiscal 1999.
1715, 1998.
FOREIGN OPERATIONS
Net sales by the Company's foreign subsidiaries forduring the nine months
ended April 30, 2000first quarter of
fiscal 2001 were $10,351,000$3,149,000 or 7.7%7.3% of total Company sales. This represents a
decrease of $799,000 or 7.2%12.7% from the same periodfirst quarter of fiscal 1999,2000 in which foreign
subsidiary sales were $11,150,000$3,609,000 or 8.4%8.1% of total Company sales. ThisThe decrease is
due to reduced salesprice reductions caused by the strong dollar as compared to the Euro and
the loss of fluids purification products in our overseas markets due to defensive
pricing strategies implemented to maintain share and reduceda major bleaching clay usage by a major customer through increased efficiency of its
operations.in the United Kingdom. Net income of
the foreign subsidiaries for the first nine
monthsquarter of fiscal 20002001 was $261,000, a decreaseloss of
$99,000 or 27.5%$184,000, which was a reduction from $360,000the $246,000 profit earned in the same periodfirst
quarter of fiscal 1999.2000. This decreaseloss was primarily due todriven by the reduced sales of fluids purification products in
our overseas markets discussedpricing and customer loss
stated above. Identifiable assets of the Company's foreign subsidiaries as of
April 30,October 31, 2000 were $10,332,000, a
decrease$10,509,000, an increase of $709,0004.2% from $11,041,000$10,083,000 as of
April 30, 1999, due
primarily to decreased levels of inventories.
Net sales by the Company's foreign subsidiaries during the three months
ended April 30, 2000 were $3,040,000 or 7.1% of total Company sales.
This represents a decrease of $413,000 or 12.0% from the third quarter
of fiscal 1999 in which foreign subsidiary sales were $3,453,000 or
8.1% of total Company sales.July 31, 2000. The decreaseincrease is due primarily to reduced
sales of fluids purification products in overseas markets, as discussed
above. Net income of the foreign subsidiaries for the three months
ended April 30, 2000 was ($85,000), a decrease of $166,000 or 204.9%
from $81,000 earned in the third quarter of fiscal 1999. This decrease
was primarily due to the reduced sales of fluids purification products
in overseas markets discussed above, as well as increased operating
expenses at the Canadiancash and United Kingdom subsidiaries.
18
YEAR 2000
The Year 2000 ("Y2K") issue was a result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year.
Such computer systems would have been unable to interpret dates beyond
1999, which could have caused a system failure or application errors,
leading to disruptions in operations.
As of the date of this report, the Company has not experienced any
material problems related to Y2K, nor has the Company received any
significant complaints regarding Y2K issues related to its products.
Also, the Company is not aware of any significant Y2K issues affecting
the Company's major customers or suppliers.
The project to address Y2K had been underway since fiscal 1998. Total
pre-tax costs incurred were not material.cash
equivalents.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, including, but not limited to, those under
the heading "Expectations" and those statements elsewhere in this report that
use forward-looking terminology such as "expect," "would," "could," "should,"
"estimates," and "believes" are "forward-looking statements" within the meaning
of that term in the Securities Exchange Act of 1934, as amended. Actual results
may differ materially from those reflected in these forward-looking statements,
due primarily to continued vigorous competition in the grocery, mass
merchandiser and club markets, the level of success of new products,increases in energy prices and the
costlevel of product introductionssuccess in implementing price increases and promotions in the consumer market.energy surcharges. These
forward-looking statements also involve the risk of changes in market conditions
in the overall economy and, for the fluids purification and agricultural
markets, in planting activity, crop quality, crop prices and overall
agricultural demand, including export demand, and foreign exchange rate
fluctuations. Other factors affecting these forward-looking statements may be
detailed from time to time in reports filed with the Securities and Exchange
Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company did not have any derivative financial instruments as of April 30,October 31,
2000. However, the Company is exposed to interest rate risk. The Company employs
policies and procedures to manage its exposure to changes in the market risk of
its cash equivalents and short term investments. The Company believes that the
market risk arising from holdings of its financial instruments is not material.
1913
PART II - OTHER INFORMATION
ITEM 6. (a)EXHIBITS: The following documents are an exhibit to this report.
Exhibit
Index
--------
Exhibit Letter dated November 8, 2000 from 15
10(m)(1) Teachers Insurance and Annuity
Association waiving any Event of Default
for the quarter ended October 31,
2000 under the Note Purchase Agreement
resulting from the Company's violation,
if any, of Section 10.1 of the Note
Purchase Agreement for the period.
Exhibit Letter dated November 9, 2000 from CIGNA 16
10(m)(2) Investment Management waiving any Event
of Default for the quarter ended October
31, 2000 under the Note Purchase Agreement
resulting from the Company's violation,
if any, of Section 10.1 of the Note
Purchase Agreement.
Exhibit 11: Statement Re: Computation of per 21
share 17
earnings
Exhibit 27: Financial Data Schedule 22
(b) During the quarter for which this report is filed, no
reports on Form 8-K were filed.18
2014
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
(Registrant)
BY /s/ Jeffrey/S/JEFFREY M. Libert
------------------------------LIBERT
----------------------------
Jeffrey M. Libert
Chief Financial Officer
BY /s/ Daniel/S/DANIEL S. Jaffee
------------------------------JAFFEE
----------------------------
Daniel S. Jaffee
President and Chief Executive Officer
Dated: June 13,December 15, 2000