Changes in the Company’s restricted stock as of January 31, 2006 were as follows:
On December 16, 2005, the Company sold at face value $15,000,000 in senior promissory notes to The Prudential Insurance Company of America and to Prudential Retirement Insurance and Annuity Company pursuant to a Note Agreement dated December 16, 2005. The Notes bear interest at 5.89% per annum and matures on October 15, 2015. The proceeds of the sale may be used to fund future principal payments of the Company’s debt, acquisitions, stock repurchases, capital expenditures and for working capital purposes. The Note Agreement contains certain covenants that restrict the Company’s ability to, among other things, incur additional indebtedness, dispose of assets and merge or consolidate. The Note Agreement also requires the Company to maintain a minimum fixed coverage ratio and minimum consolidated net worth.
On January 27, 2006, the Company entered into a new unsecured revolving credit agreement with Harris N.A. that is effective until January 27, 2009. The credit agreement provides that the Company may select a variable rate based on either Harris’ prime rate or a LIBOR-based rate, plus a margin which varies depending on the Company’s debt to earnings ratio, or a fixed rate as agreed between the Company and Harris N.A. At January 31, 2006, the variable rates would have been 7.5% for the Harris’ prime-based rate or 5.4% for the LIBOR-based rate. As of January 31, 2006, the Company had $15,000,000 available under this credit facility. The credit agreement contains restrictive covenants that, among other things and under various conditions (including a limitation on capital expenditures), limit the Company’s ability to incur additional indebtedness or to dispose of assets. The agreement also requires the Company to maintain a minimum fixed coverage ratio and a minimum consolidated net worth.
Consolidated net sales for the six months ended January 31, 2006 were $101,752,000, an increase of 8.7% from net sales of $93,602,000 in the first six months of fiscal 2005. Net income for the first six months of fiscal 2006 was $2,895,000, a decrease of 15.5% from net income of $3,426,000 earned in the first six months of fiscal 2005.
Fiscal 2006’s net income was positively impacted by a 15.3% growth in sales for the Business to Business Products Group and a 5.5% increase in the sales for the Retail and Wholesale Products Group. These sales improvements were driven by both tons sold growth and pricing increases for the Business to Business Products Group and pricing increases in the Retail and Wholesale Products Group. Overall, the Company reported a 2.8% total tons sold increase for the first six months of fiscal 2006 from the first six months of fiscal 2005. Also, positively impacting net income for the six months was a gain on the sale of long-lived assets. See Note 6 of the Notes to the Consolidated Financial Statements for a discussion of this gain.
Negatively impacting the results for the first six months of fiscal 2006 were substantial material, packaging and freight cost increases, which were experienced throughout the Company. These cost increases were generally driven directly or indirectly by the higher cost of energy being experienced by the world economy. The impact of the cost increases were experienced by both the Company’s domestic and foreign operations and overcame the sales volume and price increases described above. Diluted net income per share for the first six months of fiscal 2006 was $0.50 versus $0.57 diluted net income per share reported for the first six months of fiscal 2005.
Net sales of the Business to Business Products Group for the first six months of fiscal 2006 were $35,109,000, an increase of $4,660,000 from net sales of $30,449,000 in the first six months of fiscal 2005. Strong sales growth was seen in agricultural, co-manufactured and fluids purification products. The agricultural product sales increased 24.5% due to 17.3% higher volumes and price increases. Agricultural products business returned to more normal levels of activity in the first six months of fiscal 2006. Co-manufactured products sales increased 12.2% due to price increases. Fluids purification products reported an 8% sales increase and animal health and nutrition products sales were even compared to the first six months of fiscal 2005. The Business to Business Products Group’s segment income increased 6.3% from $6,760,000 in the first six months of fiscal 2005 to $7,188,000 in the first six months of fiscal 2006. Like the Retail and Wholesale Products Group, the Business to Business Products Group experienced substantial increases in material and freight costs.
Net sales of the Retail and Wholesale Products Group for the first six months of fiscal 2006 were $66,643,000, an increase of $3,490,000 from net sales of $63,153,000 reported in the first six months of fiscal 2005. Sales of branded cat litter increased 10.7% compared to the first six months of fiscal 2005. Branded scoop products drove the sales growth with a 27.8% increase due to 18.1% higher volumes and reduced trade spending. The Company’s floor absorbent net sales increased 4.9% due to increased prices. The Retail and Wholesale Products Group’s segment income decreased 33.8% from $5,946,000 in the first six months of fiscal 2005 to $3,937,000 in the first six months of fiscal 2006. Driving the segment income decline was a 13.8% increase in material costs, a 17.4% increase in packaging costs and a 7.6% increase in freight costs. Transportation and manufacturing fuel costs and resin prices have increased as the cost of oil has increased. Bag stock costs have also increased as the price of paper has increased. Price increases and reductions of selling and advertising expenses offset some of the increased freight, packaging and materials costs.
Consolidated gross profit as a percentage of net sales for the first six months of fiscal 2006 decreased to 18.7% from 22.7% in the first six months of fiscal 2005. As discussed above, freight, materials, fuel and packaging cost increases throughout the Company had a substantial negative impact on the gross profit reported in the first six months of fiscal 2006. Volume and price increases were insufficient to compensate for the change in the key cost factors. The cost of fuel used in the manufacturing processes for the first six months of fiscal 2006 increased 74.1% as compared to the first six months of fiscal 2005. Non-fuel manufacturing costs rose 4.4%, which had a negative impact on gross profit. The increases in non-fuel manufacturing costs were seen in repairs, electricity, labor and benefits.
Operating expenses as a percentage of net sales for the first six months of fiscal 2006 decreased to 14.3% compared to the 17.2% for the first six months of fiscal 2005. Excluding the gain on long-lived assets, the operating expenses for the first six months of fiscal 2006 would have been 14.7%. The reduction in fiscal 2006 operating expenses was due to a decrease of approximately $455,000 in costs associated with the Company’s Sarbanes-Oxley Section 404 readiness efforts. Also, the Retail and Wholesale Products Group costs decreased due to approximately $520,000 lower advertising expenses.
Interest expense was up $74,000 for the first six months of fiscal 2006 as compared to the same period in fiscal 2005 due to the new debt issuance described in Liquidity and Capital Resources. Interest income increased $216,000 from the first six months of fiscal 2005 due to increases in the market rates and increases in investment balances.
The Company’s effective tax rate was 26.8% of pre-tax income in the first six months of fiscal 2006 versus 26.0% in the first six months of fiscal 2005. The effective tax rate for the first six months of fiscal 2006 was consistent with the final rate for fiscal 2005.
Total assets of the Company increased $19,571,000 or 15.8% during the first six months of fiscal 2006. Current assets increased $18,512,000 or 29.3% from fiscal 2005 year-end balances, primarily due to increases in investments, accounts receivables, inventory, prepaid expenses and cash. The changes in accounts receivable and cash and investments are described in Liquidity and Capital Resources. Inventories increased due to higher cost of materials, normal seasonality and anticipated new business. The increase in prepaid expenses is due to normal seasonal timing.
Property, plant and equipment, net of accumulated depreciation, increased $720,000 or 1.5% during the first six months of fiscal 2006. The increase was driven by purchases of machinery and equipment and land.
Total liabilities increased $18,090,000 or 36.4% during the first six months of fiscal 2006. Current liabilities increased $2,263,000 or 10.0% during the first six months of fiscal 2006. The increase in current liabilities was mostly driven by an increase in other accrued expenses, accounts payable, accrued trade spending and accrued freight. The accrued trade spending increase is due to the timing of payments. The other increases follow the increases the Company has experienced in its energy and packaging costs. The decrease in salaries payable was consistent with the payment of the fiscal 2005 discretionary bonus. Non-current liabilities increased $15,827,000 or 58.2%. The $15,000,000 increase in notes payable was due to the new debt issuance described in Contractual Obligations. The increase in other non-current liabilities is primarily due to increased pension and reclamation liabilities.
18
EXPECTATIONS
Beginning with fiscal 2006, the Company is no longer providing quarterly or annual earnings per share guidance. This change allows management to focus on making the best decisions based on long-term strategies.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $16,249,000 during the first six months of fiscal 2006 to $56,811,000. The primary reasons for the change were increases in investments, accounts receivable, inventory, prepaid expenses and cash and a decrease in accrued salaries. These increases were offset by increases in other accrued expenses, accounts payable, accrued trade spending, dividends payable and accrued freight.
Cash and cash equivalents increased $928,000 during the first six months of fiscal 2006. Investments in debt and treasury securities increased $9,122,000.
Net cash provided by operating activities was $455,000 during the first six months of fiscal 2006. Cash was provided primarily by increases in accounts payable of $1,030,000 and accrued expenses of $1,283,000 due to timing of payments and increased energy and packaging costs. An offsetting increase in accounts receivable of $4,711,000 resulted from increased sales. The sales for the second quarter of fiscal 2006 were $53,963,000, while the sales for the fourth quarter of fiscal 2005 were $46,017,000. Inventories increased $2,758,000 due to higher cost of materials, anticipated new business and normal seasonality. Prepaid expenses increased $1,023,000 due to normal seasonal timing.
Net cash used in investing activities during the six months ended January 31, 2006 was $12,518,000. Cash was used to fund capital expenditures of $4,624,000, to purchase investments in debt securities of $528,000 (net) and to purchase treasury securities of $8,366,000 (net). The major increase in treasury securities was the utilization of the funds from the new long-term debt agreement. Cash proceeds from investing activities came from sale of property, plant and equipment of $1,000,000.
Net cash provided by financing activities during the six months ended January 31, 2006 was $13,236,000. Cash was provided primarily from proceeds from issuance of long-term debt of $15,000,000. A description of the new debt issuance is provided in Contractual Obligations. Cash was used in financing operations to make payments on long-term debt of $80,000, to purchase treasury stock of $1,487,000 (net) and to make dividend payments of $1,165,000. Most of the proceeds from issuance of common stock related to stock option exercises.
Total cash and investment balances held by the Company’s foreign subsidiaries at January 31, 2006 and July 31, 2005 were $4,069,000 and $3,427,000, respectively.
The table listed below depicts the Company’s Contractual Obligations and Commercial Commitments at January 31, 2006 for the timeframes listed:
CONTRACTUAL OBLIGATIONS
| | Payments Due by Period |
| |
|
Contractual Obligations | | Total | | Less Than 1 Year | | 1 – 3 Years | | 4 – 5 Years | | After 5 Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Long-Term Debt | | $ | 38,240,000 | | $ | 3,080,000 | | $ | 9,660,000 | | $ | 8,700,000 | | $ | 16,800,000 | |
Interest on Long-Term Debt | | | 10,881,000 | | | 2,070,000 | | | 3,718,000 | | | 2,581,000 | | | 2,512,000 | |
Pension & Post Retirement | | | 8,230,000 | | | 561,000 | | | 1,272,000 | | | 1,397,000 | | | 5,000,000 | |
Operating Leases | | | 12,940,000 | | | 2,810,000 | | | 2,617,000 | | | 2,029,000 | | | 5,484,000 | |
Unconditional Purchase Obligations | | | 2,238,000 | | | 2,238,000 | | | — | | | — | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total Contractual Cash Obligations | | $ | 72,529,000 | | $ | 10,759,000 | | $ | 17,267,000 | | $ | 14,707,000 | | $ | 29,796,000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
On December 16, 2005, the Company sold at face value $15,000,000 in senior promissory notes to The Prudential Insurance Company of America and to Prudential Retirement Insurance and Annuity Company pursuant to a Note Agreement dated December 16, 2005. The Notes bear interest at 5.89% per annum and mature on October 15, 2015. The proceeds of the sale may be used to fund future principal payments of the Company’s debt, acquisitions, stock repurchases, capital expenditures and for working capital purposes. The Note Agreement contains certain covenants that restrict the Company’s ability to, among other things, incur additional indebtedness, dispose of assets and merge or consolidate. The Note Agreement also requires the Company to maintain a minimum fixed coverage ratio and minimum consolidated net worth.
19
OTHER COMMERCIAL COMMITMENTS
| | Amount of Commitment Expiration Per Period | |
| |
| |
Other Commercial Commitments | | Total Amounts
Committed | | Less Than 1
Year | | 1 – 3 Years | | 4 – 5 Years | | After 5 Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Standby Letters of Credit | | $ | 3,125,000 | | $ | 3,125,000 | | $ | — | | $ | — | | $ | — | |
Other Commercial Commitments | | | 8,334,000 | | | 8,334,000 | | | — | | | — | | | — | |
Guarantees | | | 3,561,000 | | | 769,000 | | | 292,000 | | | 2,500,000 | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total Commercial Commitments | | $ | 15,020,000 | | $ | 12,228,000 | | $ | 292,000 | | $ | 2,500,000 | | $ | — | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
The Company’s normal operating liquidity needs have been, and are expected to be, met through internally generated funds and, to the extent needed, borrowings under the Company’s revolving credit facility with Harris N.A. On January 27, 2006, the Company entered into a new unsecured revolving credit agreement with Harris N.A. that is effective until January 27, 2009. The credit agreement provides that the Company may select a variable rate based on either Harris’ prime rate or a LIBOR-based rate, plus a margin which varies depending on the Company’s debt to earnings ratio, or a fixed rate as agreed between the Company and Harris N.A. At January 31, 2006, the variable rates would have been 7.5% for the Harris’ prime-based rate or 5.4% for the LIBOR-based rate. As of January 31, 2006, the Company had $15,000,000 available under this credit facility. The credit agreement contains restrictive covenants that, among other things and under various conditions (including a limitation on capital expenditures), limit the Company’s ability to incur additional indebtedness or to dispose of assets. The agreement also requires the Company to maintain a minimum fixed coverage ratio and a minimum consolidated net worth.
The Company believes that cash flow from operations, availability under its revolving credit facility and current cash and investment balances will provide adequate cash funds for foreseeable working capital needs, capital expenditures at existing facilities and debt service obligations. The Company’s ability to fund operations, to make planned capital expenditures, to make scheduled debt payments and to remain in compliance with all of the financial covenants under debt agreements, including, but not limited to, the Credit Agreement, depends on its future operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors.
The Company, as part of its normal course of business, guarantees certain debts and trade payables of its wholly owned subsidiaries. These arrangements are made at the request of the subsidiaries’ creditors, as separate financial statements are not distributed for the wholly owned subsidiaries. As of January 31, 2006, the value of these guarantees was $500,000 of short-term liabilities, $628,000 of lease liabilities and $2,500,000 of long-term debt.
THREE MONTHS ENDED JANUARY 31, 2006 COMPARED TO
THREE MONTHS ENDED JANUARY 31, 2005
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended January 31, 2006 were $53,963,000, an increase of 9.1% from net sales of $49,481,000 in the second quarter of fiscal 2005. Net income for the second quarter of fiscal 2006 was $1,867,000, a decrease of 13.0% from net income of $2,146,000 earned in the second quarter of fiscal 2005.
Net income for the second quarter of fiscal 2006 was positively impacted by a 10.8% growth in sales for the Business to Business Products Group and an 8.2% increase in the sales for the Retail and Wholesale Products Group. These sales improvements were driven by both sales tons growth and pricing increases for both business segments. Overall, the Company reported a 2.0% total sales tons increase for the second quarter of 2006 from the second quarter of 2005.
Negatively impacting the results for the second quarter of fiscal 2006 were substantial material, packaging and freight cost increases, which were experienced throughout the Company. These cost increases were generally driven directly or indirectly by the higher cost of energy being experienced by the world economy. The impact of the cost increases were experienced by both the Company’s domestic and foreign operations and exceeded the sales volume and price increases described above. Diluted net income per share for the second quarter of fiscal 2006 was $0.32 versus $0.36 diluted net income per share reported for the second quarter of fiscal 2005.
20
Net sales of the Business to Business Products Group for the second quarter of fiscal 2006 were $18,298,000, an increase of $1,790,000 from net sales of $16,508,000 in the second quarter of fiscal 2005. Sales growth was seen in agricultural, co-manufactured and fluids purification products. The agricultural product sales increased 7.1% due to 2.9% higher volumes and price increases. Co-manufactured product sales increased 12.7% due to price increases. Fluids purification products reported a 13.3% sales increase due to 9.9% higher volumes and price increases. Expansion in foreign markets provided some of the additional volume. Offsetting these sales increases was a 9.5% decrease in animal health and nutrition products sales with a 5.2% decrease in volume. The Business to Business Products Group’s segment income increased 9.9% from $3,783,000 in the second quarter of fiscal 2005 to $4,157,000 in the second quarter of fiscal 2006. Like the Retail and Wholesale Products Group, the Business to Business Products Group experienced substantial increases in material and freight costs.
Net sales of the Retail and Wholesale Products Group for the second quarter of fiscal 2006 were $35,665,000, an increase of $2,692,000 from net sales of $32,973,000 reported in the second quarter of fiscal 2005. Sales of branded cat litter increased 18.6% compared to the second quarter of fiscal 2005. Branded scoop products experienced continued sales growth with a 35.1% increase due to 22.4% higher volumes and reduced trade spending. Expanded distribution helped drive the volume increase. The Company’s floor absorbent business increased 5.4% due to price increases. The Retail and Wholesale Products Group’s segment income decreased 34.0% from $3,461,000 in the second quarter of fiscal 2005 to $2,284,000 in the second quarter of fiscal 2006. Driving the segment income decline was a 12.9% increase in material costs, a 19.2% increase in packaging costs and a 7.4% increase in freight costs. Transportation and manufacturing fuel costs and resin prices have increased as the cost of oil has increased. Bag stock costs have also increased as the price of paper has increased. Price increases and the reduction of selling and advertising expenses offset some of the increased freight, packaging and materials costs.
Consolidated gross profit as a percentage of net sales for the second quarter of fiscal 2006 decreased to 19.6% from 23.4% in the second quarter of fiscal 2005. As discussed above, freight, materials, fuel and packaging cost increases throughout the Company had a substantial negative impact on the gross profit reported in the second quarter of fiscal 2006. Volume and price increases were insufficient to compensate for the change in the key cost factors. The cost of fuel used in the manufacturing processes for the second quarter of fiscal 2006 increased 60.6% as compared to the second quarter of fiscal 2005. Non-fuel manufacturing costs rose 4.5%, which had a negative impact on gross profit. The increases in non-fuel manufacturing costs were seen in repairs, electricity, labor and benefits.
Operating expenses as a percentage of net sales for the second quarter of fiscal 2006 decreased to 14.4% compared to 17.1% for the second quarter of fiscal 2005. The reductions in operating expenses were due to a decrease of approximately $480,000 in costs associated with the Company’s Sarbanes-Oxley Section 404 readiness effort. Offsetting this decrease was an additional accrued expense for the incentive bonus plan.
Interest expense was up $86,000 for the second quarter of fiscal 2006 as compared to the same period in fiscal 2005 due to the new debt issuance discussed above in the Contractual Obligations section. Interest income increased $112,000 from the second quarter of fiscal 2005 due to increases in the market rates and increases in investment balances.
The Company’s effective tax rate was 26.8% of pre-tax income in the second quarter of fiscal 2006 versus 26.3% in the second quarter of fiscal 2005. The effective tax rate for fiscal 2006 was consistent with the final rate for fiscal 2005.
FOREIGN OPERATIONS
Net sales by the Company’s foreign subsidiaries during the six months ended January 31, 2006 were $8,165,000 or 8.0% of total Company sales. This represents an increase of 12.3% from the first six months of fiscal 2005, in which foreign subsidiary sales were $7,270,000 or 7.8% of total Company sales. This increase in sales was seen in both our UK and Canadian operations. Branded and private label cat litter products both reported sales increases in Canada. Expanded distribution contributed to part of this increase. The increase in the UK sales was partially driven by new customers for that location. Offsetting some of these increases in Canada was a decline in industrial products sales due to weaker industrial economic conditions in the market. Much of the revenue increase was offset by increased material costs. The Canadian operation faced material sourcing issues which contributed to part of the material cost increases. Escalating energy costs accounted for much of the rest of the increase. For the six months ended January 31, 2006, the foreign subsidiaries reported earnings of $95,000, a decrease of $153,000 from the $248,000 earnings reported in the first six months of fiscal 2005.
Identifiable assets of the Company’s foreign subsidiaries as of January 31, 2005 were $13,062,000 compared to $11,575,000 as of January 31, 2005. The increase was driven by increased cash and investments, inventories, accounts receivable, prepaid expenses and property, plant and equipment.
21
Net sales by the Company’s foreign subsidiaries during the second quarter of fiscal 2006 were $4,078,000 or 7.6% of total Company sales. This represents an increase of 7.9% from the second quarter of fiscal 2005, in which foreign subsidiary sales were $3,781,000 or 7.6% of total Company sales. For the second quarter of fiscal 2006, the foreign subsidiaries reported a loss of $147,000, a reduction of $262,000 from the $115,000 earnings reported in the second quarter of fiscal 2005.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following chart summarizes Common Stock repurchases for the three months ended January 31, 2006.
| | ISSUER PURCHASES OF EQUITY SECURITIES | |
| |
| |
For the Three Months Ended January 31, 2006 | | (a) Total
Number of
Shares Purchased | | (b) Average
Price Paid
per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | (d) Maximum Number of Shares that may yet be Purchased Under Plans or Programs | |
| |
|
| |
|
| |
|
| |
|
| |
November 1, 2005 to
November 30, 2005 | | | 6,600 | | $ | 17.72 | | | 6,600 | | | 677,004 | |
December 1, 2005 to
December 31, 2005 | | | 34,900 | | $ | 18.03 | | | 34,900 | | | 642,104 | |
January 1, 2006 to
January 31, 2006 | | | 25,600 | | $ | 17.61 | | | 25,600 | | | 616,504 | |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk and employs policies and procedures to manage its exposure to changes in the market risk of its cash equivalents and short-term investments. The Company had two interest rate swap agreements as of January 31, 2006. The Company believes that the market risk arising from holding its financial instruments is not material.
The Company is exposed to currency risk as it relates to certain accounts receivables and from the Company’s foreign operations. The Company believes that the currency risk is immaterial to the overall presentation of the financial statements.
The Company is exposed to regulatory risk in the fluid purification and agricultural markets, principally as a result of the risk of increasing regulation of the food chain in the United States and Europe. The Company actively monitors developments in this area, both directly and through trade organizations of which it is a member.
The Company is exposed to commodity price risk with respect to natural gas. The Company has contracted for a portion of its fuel needs for fiscal 2006 using forward purchase contracts to manage the volatility related to this exposure. These contracts will reduce the volatility in fuel prices, and the weighted average cost of these contracts has been estimated to be approximately 20.8% higher than the contracts for fiscal 2005. These contracts were entered into during the normal course of business and no contracts were entered into for speculative purposes.
The table below provides information about the Company’s natural gas future contracts, which are sensitive to changes in commodity prices, specifically natural gas prices. For the future contracts the table presents the notional amounts in MMBtu’s, the weighted average contract prices, and the total dollar contract amount, which will mature by July 31, 2006. The Fair Value was determined using the “Most Recent Settle” price for the “Henry Hub Natural Gas” option contract prices as listed by the New York Mercantile Exchange on February 24, 2006.
22
Commodity Price Sensitivity Natural Gas Future Contracts For the Year Ending July 31, 2006 | |
| |
| | | Expected 2006
Maturity | | | Fair Value | |
| |
|
| |
|
| |
Natural Gas Future Volumes (MMBtu) | | | 610,000 | | | — | |
Weighted Average Price (Per MMBtu) | | $ | 7.62 | | | — | |
Contract Amount ($U.S., in thousands) | | $ | 4,646.0 | | $ | 5,699.9 | |
| |
|
| |
|
| |
Factors that could influence the fair value of the natural gas contracts, include, but are not limited to, the creditworthiness of the Company’s natural gas suppliers, the overall general economy, developments in world events, and the general demand for natural gas by the manufacturing sector, seasonality and the weather patterns throughout the United States and the world. Some of these same events have allowed the Company to mitigate the impact of the natural gas contracts by the continued and in some cases expanded use of recycled oil in our manufacturing processes. Accurate estimates of the impact that these contracts may have on the Company’s fiscal 2006 financial results are difficult to make due to the inherent uncertainty of future fluctuations in option contract prices in the natural gas options market.
ITEM 4. CONTROLS AND PROCEDURES
| (a) | Evaluation of disclosure controls and procedures. The Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report, and concluded that disclosure controls and procedures were effective to ensure that information Oil-Dri is required to disclose in the reports that it files or submits with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and to ensure that information required to be disclosed by Oil-Dri in the reports that it files or submits under the Exchange Act is accumulated and communicated to Oil-Dri’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. |
| | |
| (b) | Changes in internal control over financial reporting. During the quarter ended January 31, 2006, there were no changes in Oil-Dri’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, Oil-Dri’s internal control over financial reporting. |
23
PART II – OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
| On December 6, 2005, the 2005 Annual Meeting of Stockholders of Oil-Dri Corporation of America was held for the purpose of considering and voting on two matters, summarized below. |
| | |
| 1. | Election of Directors |
| |
| The following schedule sets forth the results of the vote to elect directors. A total of 18,596,530 shares were eligible to vote. At the Meeting, shares were represented in person or by proxy with a total of 17,241,848 votes. |
Director | | Votes For | |
| |
|
| |
J. Steven Cole | | | 17,189,175 | |
Arnold W. Donald | | | 17,181,575 | |
Ronald B. Gordon | | | 16,662,588 | |
Daniel S. Jaffee | | | 16,685,319 | |
Richard M. Jaffee | | | 16,662,019 | |
Joseph C. Miller | | | 16,670,735 | |
Allan H. Selig | | | 17,187,812 | |
Paul E. Suckow | | | 17,208,785 | |
| 2. | Ratification of Registered Public Accounting Firm |
| |
| The Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s registered public accounting firm for the fiscal year ending July 31, 2006 was ratified by receiving 17,182,757 votes of a total 18,596,530 shares eligible to vote. |
ITEM 6. EXHIBITS
| (a) | EXHIBITS: | |
| | | |
| | Exhibit 10(e)(4): | Third Amendment to Agreement, dated as of January 31, 2006, between Richard M. Jaffee and the Company. |
| | | |
| | Exhibit 10(m)(7): | Third Amendment dated as of January 27, 2006 to Note Agreement dated as of April 15, 1998. |
| | | |
| | Exhibit 10(t): | Note Agreement dated as of December 16, 2005, among the Company, The Prudential Insurance Company of America and Prudential Retirement Insurance and Annuity Company. |
| | | |
| | Exhibit 10(u): | Credit Agreement dated January 27, 2006, among the Company, certain subsidiaries of the Company and Harris N.A. |
| | | |
| | Exhibit 11: | Statement Re: Computation of per share earnings |
| | | |
| | Exhibit 31: | Rule 13a – 14(a) Certifications |
| | | |
| | Exhibit 32: | Section 1350 Certifications |
24
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/ Andrew N. Peterson |
| |
|
| | Andrew N. Peterson |
| | Vice President and Chief Financial Officer |
| | |
| | |
| BY | /s/ Daniel S. Jaffee |
| |
|
| | Daniel S. Jaffee |
| | President and Chief Executive Officer |
| | |
| | |
Dated: March 9, 2006
25
EXHIBITS
Exhibit 10(e)(4)1: | Third Amendment to Agreement, dated as of January 31, 2006, between Richard M. Jaffee and the Company. |
| |
Exhibit 10(m)(7)3 : | Third Amendment dated as of January 27, 2006 to Note Agreement dated as of April 15, 1998. |
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Exhibit 10(t)2: | Note Agreement dated as of December 16, 2005, among the Company, The Prudential Insurance Company of America and Prudential Retirement Insurance and Annuity Company. |
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Exhibit 10(u)3: | Credit Agreement dated January 27, 2006, among the Company, certain subsidiaries of the Company and Harris N.A. |
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Exhibit 11: | Statement Re: Computation of per share earnings |
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Exhibit 31: | Rule 13a – 14(a) Certifications |
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Exhibit 32: | Section 1350 Certifications |
Note: | Stockholders may receive copies of the above listed exhibits, without fee, by written request to Investor Relations, Oil-Dri Corporation of America, 410 North Michigan Avenue, Suite 400, Chicago, Illinois 60611-4213. |
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1 | Incorporated by reference to Company’s Current Report on Form 8-K dated February 7, 2006. |
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2 | Incorporated by reference to Company’s Current Report on Form 8-K dated December 16, 2005. |
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3 | Incorporated by reference to Company’s Current Report on Form 8-K dated January 27, 2006. |
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