Consolidated net sales for the nine months ended April 30, 2006 were $153,516,000, an increase of 8.2% from net sales of $141,851,000 in the first nine months of fiscal 2005. Net income for the first nine months of fiscal 2006 was $4,118,000, a decrease of 23.7% from net income of $5,398,000 in the first nine months of fiscal 2005.
Fiscal 2006’s net income was positively impacted by a 12.4% increase in sales for the Business to Business Products Group and a 6.1% 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 1.5% total tons sold increase for the first nine months of fiscal 2006 from the first nine months of fiscal 2005. Also, positively impacting net income for the nine months was a gain on the sale of long-lived assets. See Note 6 for a discussion of this gain.
Negatively impacting the results for the first nine 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 nine months of fiscal 2006 was $0.71 versus $0.91 diluted net income per share reported for the first nine months of fiscal 2005.
Net sales of the Business to Business Products Group for the first nine months of fiscal 2006 were $54,266,000, an increase of $5,986,000 from net sales of $48,280,000 in the first nine months of fiscal 2005. Strong sales growth was seen in agricultural carriers, co-manufactured and fluids purification products. Agricultural carrier sales increased 23.9% due to higher prices and 15.1% higher volumes. The agricultural carrier business returned to more normal levels, based on historical sales, in the first nine months of fiscal 2006 compared to fiscal 2005. Co-manufactured products sales increased 11.2% due to price increases. Fluids purification products reported a 13.1% sales increase due to price increases and 8.5% higher volumes. Bleaching earth and filtration products benefited from sales efforts to increase their presence in the marketplace. Sports products sales were down 8.9% due to lower sales to golf courses. Animal health and nutrition products sales were down slightly compared to the first nine months of fiscal 2005. The warm winter weather and a declining chicken market due to avian bird flu concerns resulted in lower sales of Poultry Guard. The Business to Business Products Group’s segment income increased 10.3% from $10,408,000 in the first nine months of fiscal 2005 to $11,483,000 in the first nine 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 nine months of fiscal 2006 were $99,250,000, an increase of $5,679,000 from net sales of $93,571,000 reported in the first nine months of fiscal 2005. Sales of branded cat litter increased 6.5% compared to the first nine months of fiscal 2005. The Company’s branded scoopable litter products drove the sales growth with an 18.2% increase due to reduced trade spending and 12.0% higher volumes. The higher volumes were driven by increases in existing base business, new distribution and new product offerings. Private label cat litter sales were up 5.7% compared to the first nine months of fiscal 2005. Private label sales were up due to price increases and a 4.3% volume increase. The Company’s floor absorbent net sales increased 7.0% due to increased prices. The Retail and Wholesale Products Group’s segment income decreased 31.6% from $8,386,000 in the first nine months of fiscal 2005 to $5,738,000 in the first nine months of fiscal 2006. Driving the segment income decline was a 12.0% increase in material costs, a 15.7% increase in packaging costs and a 7.5% 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 nine months of fiscal 2006 decreased to 18.9% from 21.9% in the first nine 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 nine 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 nine months of fiscal 2006 increased 62.7% as compared to the first nine months of fiscal 2005. Non-fuel manufacturing costs rose 3.4%, which had a negative impact on gross profit. The increases in non-fuel manufacturing costs were seen in repairs, electricity, and waste disposal costs.
Operating expenses as a percentage of net sales for the first nine months of fiscal 2006 decreased to 14.3% compared to the 16.2% for the first nine months of fiscal 2005. Excluding the gain on long-lived assets, the operating expenses for the first nine months of fiscal 2006 would have been 14.6%. The reduction in fiscal 2006 operating expenses was due to a decrease of approximately $547,000 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 $388,000 lower advertising expenses.
Interest expense was up $276,000 for the first nine 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 $423,000 from the first nine months of fiscal 2005 due to increases in the market rates and increases in investment balances.
The Company’s effective tax rate was 35.0% of pre-tax income in the first nine months of fiscal 2006 versus 26.5% in the first nine months of fiscal 2005. The tax expense for the first nine months of fiscal 2006 included an additional $525,000 estimated tax impact for the planned repatriation of previously accumulated untaxed foreign earnings and profits as discussed in Note 9. Excluding this additional tax expense, the Company’s effective tax rate would have been 26.7%, which was consistent with the final rate for fiscal 2005.
Total assets of the Company increased $15,539,000 or 12.6% during the first nine months of fiscal 2006. Current assets increased $14,285,000 or 22.6% from fiscal 2005 year-end balances, primarily due to increases in investments, inventory, accounts receivables, cash and cash equivalents and prepaid expenses. The changes in accounts receivable, cash and cash equivalents 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 timing of prepaid insurance premium payments.
Property, plant and equipment, net of accumulated depreciation, increased $841,000 or 1.8% during the first nine months of fiscal 2006. The increase was driven by purchases of machinery and equipment.
Total liabilities increased $13,546,000 or 27.2% during the first nine months of fiscal 2006. Current liabilities increased $1,831,000 or 8.1% during the first nine months of fiscal 2006. The increase in current liabilities was mostly driven by an increase in current maturities of notes payable, other accrued expenses and accounts payable. The increases in accrued expenses and accounts payable follow the increases the Company has experienced in its energy and packaging costs. The decrease in accrued trade spending is due to the reduction of programs. The decrease in salaries payable was consistent with the timing of the discretionary bonus accrual. Non-current liabilities increased $11,715,000 or 43.1%. The increase in notes payable was due to the $15,000,000 new debt issuance described in Contractual Obligations. The increase in other non-current liabilities is primarily due to increased pension, post-retirement health and royalty liabilities.
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 $12,454,000 during the first nine months of fiscal 2006 to $53,016,000 at April 30, 2006. The primary reasons for the change were increases in investments, accounts receivable, inventory, prepaid expenses and cash and a decrease in accrued salaries and accrued trade promotions and advertising. These increases were partially offset by increases in current maturities of notes payable, other accrued expenses, accounts payable and dividends payable.
Cash and cash equivalents increased $1,880,000 during the first nine months of fiscal 2006 to $7,825,000 at April 30, 2006. Investments in debt and treasury securities increased $5,485,000.
20
The following table sets forth certain elements of the Company’s Consolidated Statements of Cash Flows (in thousands):
| | Nine Months Ended | |
| |
| |
| | April 30,
2006 | | April 30,
2005 | |
| |
|
| |
|
| |
Net cash provided by operating activities | | $ | 3,374 | | $ | 7,819 | |
Net cash used in investing activities | | | (10,514 | ) | | (1,314 | ) |
Net cash provided by (used in) financing activities | | | 9,355 | | | (8,900 | ) |
Net increase (decrease) cash and cash equivalents | | | 1,880 | | | (2,637 | ) |
During the first nine months of fiscal 2006, cash flow generated from operations was primarily the result of net income of $4,118,000 and an aggregate of $4,952,000 of non-cash charges for depreciation and amortization and amortization of investment discount, offset by a net change in operating assets and liabilities. Cash was provided by increases in accounts payable of $1,089,000 due to timing of payments and increased energy and packaging costs. An offsetting increase in accounts receivable of $2,307,000 resulted from increased sales. The sales for the third quarter of fiscal 2006 were $51,764,000, while the sales for the fourth quarter of fiscal 2005 were $46,017,000. Inventories increased $3,396,000 due to higher cost of materials and normal seasonality. Prepaid expenses increased $1,291,000 due to normal seasonal timing.
Cash was used in investing activities during the nine months ended April 30, 2006 to fund capital expenditures of $6,464,000 and to purchase treasury securities of $5,149,000 (net of dispositions). The major increase in investments in treasury securities was the utilization of the funds from the new long-term debt agreement. Cash proceeds from investing activities came from the sale of property, plant and equipment of $1,003,000 and maturities of debt securities of $96,000 (net of purchases).
Cash was provided by financing activities during the nine months ended April 30, 2006 primarily from proceeds from issuance of long-term debt of $15,000,000. A description of the new debt issuance is set forth below and additional information is available in Note 8. Cash was also provided by issuance of Common Stock of $2,332,000 and Treasury Stock of $631,000. Most of these proceeds were related to stock option exercises. Cash was used in financing operations to purchase Treasury Stock of $4,538,000, to make payments on long-term debt of $3,080,000 and to make dividend payments of $1,775,000.
Total cash and investment balances held by the Company’s foreign subsidiaries at April 30, 2006 and July 31, 2005 were $4,061,000 and $3,427,000, respectively.
CONTRACTUAL OBLIGATIONS
The table listed below depicts the Company’s Contractual Obligations and Commercial Commitments at April 30, 2006 for the timeframes listed:
| | Payments Due by Period | |
| |
|
Contractual Obligations | | Total | | Less Than
1 Year | | 1 – 3 Years | | 4 – 5 Years | | After 5 Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Long-Term Debt | | $ | 35,240,000 | | $ | 4,080,000 | | $ | 9,660,000 | | $ | 6,700,000 | | $ | 14,800,000 | |
Interest on Long-Term Debt | | | 10,013,000 | | | 2,123,000 | | | 3,382,000 | | | 2,380,000 | | | 2,128,000 | |
Pension & Post Retirement | | | 8,230,000 | | | 561,000 | | | 1,272,000 | | | 1,397,000 | | | 5,000,000 | |
Operating Leases | | | 11,785,000 | | | 2,872,000 | | | 2,402,000 | | | 1,748,000 | | | 4,763,000 | |
Unconditional Purchase Obligations | | | 7,879,000 | | | 6,562,000 | | | 1,317,000 | | | — | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total Contractual Cash Obligations | | $ | 73,147,000 | | $ | 16,198,000 | | $ | 18,033,000 | | $ | 12,225,000 | | $ | 26,691,000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
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.
21
The unconditional purchase obligations represent forward purchase contracts the Company has entered into for a portion of its natural gas fuel needs for fiscal 2006 and 2007. As of April 30, 2006, the remaining purchase obligation for fiscal 2006 contracts was $1,760,000 for 250,000 MMBtu and for fiscal 2007 contracts was $6,119,000 for 670,000 MMBtu. These contracts were entered into in the normal course of business and no contracts were entered into for speculative purposes.
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 | | | 9,068,000 | | | 9,068,000 | | | — | | | — | | | — | |
Guarantees | | | 3,426,000 | | | 769,000 | | | 157,000 | | | 2,500,000 | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total Commercial Commitments | | $ | 15,619,000 | | $ | 12,962,000 | | $ | 157,000 | | $ | 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 April 30, 2006, the variable rates would have been 7.8% for the Harris’ prime-based rate or 5.8% for the LIBOR-based rate. 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. As of April 30, 2006, the Company had $15,000,000 available under this credit facility and was in compliance with its covenants.
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 timing and size of any new business ventures or acquisitions that the Company completes may also impact the cash requirements.
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 April 30, 2006, the value of these guarantees was $500,000 of short-term liabilities, $426,000 of lease liabilities and $2,500,000 of long-term debt.
THREE MONTHS ENDED APRIL 30, 2006 COMPARED TO
THREE MONTHS ENDED APRIL 30, 2005
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended April 30, 2006 were $51,764,000, an increase of 7.3% from net sales of $48,249,000 in the third quarter of fiscal 2005. Net income for the third quarter of fiscal 2006 was $1,223,000, a decrease of 38.0% from net income of $1,972,000 earned in the third quarter of fiscal 2005.
Net income for the third quarter of fiscal 2006 was positively impacted by a 7.4% growth in sales for the Business to Business Products Group and a 7.2% increase in the sales for the Retail and Wholesale Products Group. These sales improvements were driven by price increases implemented to cover rising costs for both business segments.
22
Negatively impacting the results for the third quarter of fiscal 2006 were substantial material, packaging and freight cost increases. 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 price increases described above. Diluted net income per share for the third quarter of fiscal 2006 was $0.21 versus $0.33 diluted net income per share reported for the third quarter of fiscal 2005.
Net sales of the Business to Business Products Group for the third quarter of fiscal 2006 were $19,157,000, an increase of $1,326,000 from net sales of $17,831,000 in the third quarter of fiscal 2005. Sales growth was seen in fluids purification products, co-manufactured products and agricultural carrier products. Fluids purification products reported a 24.3% sales increase due to 19.6% higher volumes and price increases. Bleaching earth and filtration products experienced growth in both foreign and domestic markets. Co-manufactured product sales increased 9.1% and agricultural carrier sales increased 6.8% due to higher prices. Offsetting these sales increases were decreases in animal health and nutrition and sports products. Animal health and nutrition products sales decreased 9.3% with a 6.2% decrease in volume. The warm winter weather and a declining chicken market due to avian flu concerns resulted in lower sales of Poultry Guard. Sports product sales were down 14.8% due to lower sales to golf courses. The Business to Business Products Group’s segment income increased 17.7% from $3,648,000 in the third quarter of fiscal 2005 to $4,295,000 in the third quarter of fiscal 2006. The higher net selling price overcame the increases in material and freight costs.
Net sales of the Retail and Wholesale Products Group for the third quarter of fiscal 2006 were $32,607,000, an increase of $2,189,000 from net sales of $30,418,000 reported in the third quarter of fiscal 2005. Sales of private label cat litter increased 13.7% compared to the third quarter of fiscal 2005 due to a 9.6% increase in volume and price increases. The Company’s branded scoopable litter products experienced continued sales growth due to increases in existing base business, new distribution and new products. The Company’s floor absorbent business increased 11.0% due to price increases. The Retail and Wholesale Products Group’s segment income decreased 26.2% from $2,440,000 in the third quarter of fiscal 2005 to $1,801,000 in the third quarter of fiscal 2006. Driving the segment income decline was an 8.3% increase in material costs, a 12.3% 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 offset some of the increased freight, packaging and materials costs.
Consolidated gross profit as a percentage of net sales for the third quarter of fiscal 2006 decreased to 19.4% from 20.2% in the third 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 third 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 third quarter of fiscal 2006 increased 43.6% as compared to the third quarter of fiscal 2005.
Operating expenses as a percentage of net sales for the third quarter of fiscal 2006 were 14.3%, which is consistent with the 14.1% for the third quarter of fiscal 2005.
Interest expense was up $202,000 for the third quarter of fiscal 2006 as compared to the same period in fiscal 2005 due to the new debt issuance discussed in the Contractual Obligations section. Interest income increased $207,000 from the third quarter of fiscal 2005 due to increases in the market rates and increases in investment balances.
The Company’s effective tax rate was 48.7% of pre-tax income in the third quarter of fiscal 2006 versus 27.3% in the third quarter of fiscal 2005. The tax expense for the third quarter of fiscal 2006 included an additional $525,000 estimated tax impact for the planned repatriation of previously accumulated untaxed foreign earnings and profits as discussed in Note 9. Excluding this additional tax expense, the Company’s effective tax rate would have been 26.7%, which was consistent with the final rate for fiscal 2005.
FOREIGN OPERATIONS
Net sales by the Company’s foreign subsidiaries during the nine months ended April 30, 2006 were $12,155,000 or 7.9% of total Company sales. This represents an increase of 10.5% from the first nine months of fiscal 2005, in which foreign subsidiary sales were $10,998,000 or 7.8% of total Company sales. This increase in sales was seen in both the United Kingdom and Canadian operations. The Canadian operations reported sales increases in both branded and private label cat litter products.. Expanded distribution and price increases contributed to part of this increase. The increase in the United Kingdom 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 nine months ended April 30, 2006, the foreign subsidiaries reported earnings of $237,000, a decrease of $74,000 from the $311,000 earnings reported in the first nine months of fiscal 2005.
23
Identifiable assets of the Company’s foreign subsidiaries as of April 30, 2006 were $13,230,000 compared to $12,148,000 as of April 30, 2005. The increase was driven by increased cash and investments, inventories, accounts receivable, prepaid expenses and property, plant and equipment.
Net sales by the Company’s foreign subsidiaries during the third quarter of fiscal 2006 were $3,990,000 or 7.7% of total Company sales. This represents an increase of 7.0% from the third quarter of fiscal 2005, in which foreign subsidiary sales were $3,728,000 or 7.7% of total Company sales. For the third quarter of fiscal 2006, the foreign subsidiaries reported net income of $142,000, a reduction of $79,000 from the $63,000 income reported in the third quarter of fiscal 2005.
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 April 30, 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 and 2007 using forward purchase contracts to manage the volatility related to this exposure. These contracts will reduce the volatility in fuel prices. The weighted average cost of the fiscal 2006 contracts has been estimated to be approximately 18.9% higher than the contracts for fiscal 2005. The weighted average cost of the fiscal 2007 contracts has been estimated to be approximately 21.7% higher than the contracts for fiscal 2006. 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 and July 31, 2007. 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 May 12, 2006.
Commodity Price Sensitivity
Natural Gas Future Contracts
For the Year Ending July 31, 2006
| | Expected 2006
Maturity | | Fair Value | |
| |
|
| |
|
| |
Natural Gas Future Volumes (MMBtu) | | | 740,000 | | | — | |
Weighted Average Price (Per MMBtu) | | $ | 7.50 | | | — | |
Contract Amount ($U.S., in thousands) | | $ | 5,550.1 | | $ | 6,437.3 | |
Commodity Price Sensitivity
Natural Gas Future Contracts
For the Year Ending July 31, 2007
| | Expected 2007
Maturity | | Fair Value | |
| |
|
| |
|
| |
Natural Gas Future Volumes (MMBtu) | | | 670,000 | | | — | |
Weighted Average Price (Per MMBtu) | | $ | 9.13 | | | — | |
Contract Amount ($U.S., in thousands) | | $ | 6,118.8 | | $ | 6,192.9 | |
24
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 and 2007 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 April 30, 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. |
25
PART II – OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following chart summarizes Common Stock repurchases for the three months ended April 30, 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 | |
| |
|
| |
|
| |
|
| |
|
| |
February 1, 2006 to February 28, 2006 | | | — | | | — | | | — | | | 616,504 | |
March 1, 2006 to March 31, 2006 | | | 81,400 | | $ | 19.06 | | | 81,400 | | | 535,104 | |
April 1, 2006 to April 30, 2006 | | | 54,000 | | $ | 21.48 | | | 54,000 | | | 481,104 | |
ITEM 6. EXHIBITS
| (a) | EXHIBITS: | |
| | | |
| | Exhibit 10(v)1: | Oil-Dri Corporation of America 2006 Long Term Incentive Plan.* |
| | | |
| | Exhibit 10(w)1: | Restricted Stock Agreement, dated as of March 14, 2006, between Oil-Dri Corporation of America and Daniel S. Jaffee.* |
| | | |
| | Exhibit 11: | Statement Re: Computation of per share earnings |
| | | |
| | Exhibit 31: | Rule 13a – 14(a) Certifications |
| | | |
| | Exhibit 32: | Section 1350 Certifications |
| | | |
|
* | | Management contract or compensatory plan or arrangement. |
| | | |
1 | | Incorporated by reference to Company’s Current Report on Form 8-K dated March 14, 2006. |
26
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: June 9, 2006 | |
27
EXHIBITS
Exhibit 10(v)1: | | Oil-Dri Corporation of America 2006 Long Term Incentive Plan.* |
| | |
Exhibit 10(w)1: | | Restricted Stock Agreement, dated as of March 14, 2006, between Oil-Dri Corporation of America and Daniel S. Jaffee.* |
| | |
Exhibit 11: | | Statement Re: Computation of per share earnings |
| | |
Exhibit 31: | | Rule 13a – 14(a) Certifications |
| | |
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. |
|
* | Management contract or compensatory plan or arrangement. |
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1 | Incorporated by reference to Company’s Current Report on Form 8-K dated March 14, 2006. |
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