EXHIBIT 13
Financial Highlights
1996 1995 Change
Net Sales $153,786,754 $152,899,109 +0.6%
Income from Operations $6,115,233 $12,841,947 -52.4%
Income before Income Taxes $4,783,402 $11,147,425 -57.1%
Net Income $3,374,257 $8,002,828 -57.8%
Net Income per Share $ 0.50 $ 1.15 -56.5%
Net Income as a Percentage of 2.2% 5.2% -3.0%
Sales
Return on Average Stockholders' 4.3% 10.6% -6.3%
Equity
Working Capital $30,398,649 $33,074,318 -8.1%
Stockholders' Equity $77,229,496 $78,338,383 -1.4%
Book Value per Share $11.46 $11.35 +1.0%
Average Shares Outstanding 6,806,891 6,935,975 -1.9%
Dividends Declared $2,022,205 $2,046,644 -1.2%
Capital Expenditures $7,184,337 $7,032,064 +2.2%
Depreciation and Amortization $7,925,806 $7,808,496 +1.5%
Long-Term Debt $18,978,000 $20,422,265 -7.1%
SALES TRENDS (millions of dollars)
1996 1995 1994 1993 1992
Consumer Products $ 82.6 $ 82.9 $ 77.0 $ 73.3 $ 65.2
Industrial and Environmental 17.2 18.9 19.9 19.0 19.1
Products
Agrisorbents Products 19.9 16.6 18.3 18.4 14.9
Fluids Purification Products 12.6 13.0 13.2 10.1 6.1
Foreign Subsidiaries 11.9 12.2 11.2 12.4 11.0
Transportation Services 9.6 9.3 7.5 7.7 8.3
$153.8 $152.9 $147.1 $140.9 $124.6
Land Holdings & Mineral Reserves
Owned Leased Claims Total Proven
(acres) (acres) (acres) (acres) Reserves
(1,000's of
tons)
Georgia 1,484 1,804 - 3,288 44,305
Mississippi 2,134 1,423 - 3,557 130,358
Oregon 1,260 - 1,580 2,840 36,833
Florida 537 446 - 983 4,512
Nevada - - 598 598 23,316
Illinois 4 - - 4 -
5,419 3,673 2,178 11,270 239,324
Consumer Products
Fiscal 1996 was Oil-Dri's Year of the Cat. The cat litter category is an
important and growing consumer products area. Demographic trends continue
to influence the increasing popularity of cats as pets and total retail cat
litter sales are expected to reach $1 billion by the year 2001.
The introduction of the Cat's Pride Premium Scoopable Stretch Jug and
the Kat Kit were a great success. The Stretch Jug leverages a
significant competitive advantage provided by our low-density product. Each
jug contains 40% more volume than leading competitive scoopable products in
the same weight jug. The Kat Kit is a unique disposable cat tray made of
100% recycled plastic that contains Cat's Pride Premium cat litter.
Consumers simply use it for a week and then discard it; there's no
cleaning, deodorizing or mess.
The company's dollar share of the branded cat litter market increased
dramatically during the year. The investments made in marketing and
advertising have paid off in a stronger brand franchise.
Industrial & Environmental Products
The Oil-Dri brand has been the leading name in industrial cleanup for over
55 years. Industrial and Environmental products include both traditional
clay floor absorbents and Oil-Dri Lite sorbents. Oil-Dri Lite products are
highly absorptive, light-weight, non-clay materials. They come in a variety
of configurations and have different absorptive characteristics. Oil-Dri
Lite sorbents skim oil spills from water in marine applications and, more
commonly, soak up leaks and spills in industrial and automotive settings.
Innovations in products and packaging deliver benefits to customers. The
new Oil-Dri Premium Floor Absorbent combines the best of Oil-Dri's quality
floor absorbents with a new polybag. The stronger packaging will reduce
damage during shipping and handling and allow higher stacking, conserving
valuable warehouse space. The waterproof polybag can also be stored
outside.
Oil-Dri is the only supplier that provides the well-known Oil-Dri Floor
Absorbents and a selection of non-clay sorbents for a comprehensive line of
cleanup products.
Agrisorbents Product Group
The Agrisorbents Product Group delivers a variety of products to the
agricultural industry. Agsorb carriers are sold to crop protection
chemical manufacturers like DowElanco, DuPont and Zeneca. These carriers
are used to distribute herbicides, fungicides, insecticides and fertilizers
to agricultural fields.
ConditionAde is an animal feed additive which helps blend feed ingredients
without the usual stickiness and mess. This increases feed pellet
production by allowing the feed extruders to run more smoothly, lowering
energy costs and improving feed pellet durability. Flo-Fre absorbent
microgranules and Pel-Unite pelleting aid are also sold to the animal
health and nutrition market.
Terra-Green is used in a variety of sports turf and horticultural
applications. Thousands of tiny pores in each Terra-Green granule absorb
water, storing it for release into soils as they need it. The durability of
each granule also helps prevent compaction of soil, opening up airways and
water passages for improved root zone growth.
Fluids Purification Product Group
Used in the refining and purifying of sunflower, soybean, canola, palm and
many other oils, Pure-Flo bleaching clays offer process benefits to
refiners all over the world including ADM and Kraft Food Ingredients. The
Fluids Purification Group has customers in over 60 countries and continues
to expand its worldwide sales.
Two new products introduced during the year, Perform and Select, offer
performance advances to refiners and deliver enhanced margins. The Perform
products are the next generation of bleaching clays, providing increased
activity for hard-to-bleach oils. The Select line of products is used
earlier in the process stream to remove a variety of impurities from edible
oils. Select can also be used to replace an expensive water wash step in
the caustic refining of edible oils.
Oil-Dri has recently completed construction of a manufacturing facility
engineered to produce these innovative new products. We believe that the
quality and efficacy of Perform and Select will exceed the expectations of
our customers.
Dick Jaffee
Chairman and Chief Executive Officer
Fiscal 1996 was a year of transition and renewal. Dan Jaffee and the other
new members of our management group worked with our seasoned Oil-Dri
managers to create a team that will lead us into the future. The year was
also characterized by some outstanding successes and some significant
disappointments.
During the past year, our consumer business successfully launched two new
Cat's Pride products. Favorite Products, our Canadian subsidiary, also
continued to deliver solid performance and expand sales of our Saular cat
box products, the leading brand name in our Canadian market.
In our specialty products areas, the Agrisorbents Product Group broke
sales and profit records; the Industrial and Environmental Division
delivered a positive contribution to the bottom line, a significant reverse
of last year's loss; and our Fluids Purification business demonstrated
sales progress, particularly in some of our international markets.
Net sales for the year ended July 31, 1996, were $153,787,000, up slightly
from last year's sales of $152,899,000. Net income was $3,374,000, off 58%
from the $8,003,000 earned a year ago. Net income per share was $0.50
versus last year's $1.15. Earnings were negatively impacted by an after tax
charge of $0.10 per share associated with settlement of patent litigation.
Consumer Products
As anticipated, the launch of the new Cat's Pride Kat Kit and Stretch Jug
required approximately $6,500,000 in marketing and advertising support.
While the expenditures reduced earnings in the past year, the investment
has paid off with considerable gains in sales and distribution for our
Cat's Pride brand. The success of the launch is particularly gratifying in
light of the increased competition in the cat box filler category.
Unfortunately, the estimated $10,000,000 in sales generated by our new
products were largely offset by reduced sales to Sam's Club, our primary
warehouse club account.
On the positive side, during the fourth quarter Sam's reinstated our Cat's
Pride Premium and added our Cat's Pride Scoopable in approximately 70% of
their stores. They are evaluating various product offerings in the cat box
filler category, and, at the time of this report, we are enjoying renewed
volume.
Specialty Products
Despite a 9% reduction in sales, the Industrial and Environmental Division
made a positive contribution to the bottom line, a significant reversal
over last year's performance. Increased focus on profitability,
rationalization of our product line and consolidation of the divisional
functions in Alpharetta, Georgia paid off handsomely during the year.
The Agrisorbents Product Group had a wonderful year. Record sales of our
Agsorb products and expansion into animal health and nutrition and turf
markets increased overall divisional sales by 20%.
Monsanto Agricultural Company acknowledged the superior quality of our
products and services with the Monsanto Quality Supplier Award for the
fourth time in six years. Given to only a handful of the thousands of
suppliers that work with Monsanto, it is a distinct honor.
Our Fluids Purification Group successfully expanded business
geographically, particularly in Latin America, Asia, Africa and Europe.
Also, two new products were introduced during the year. Select products
remove soaps, metals and phospholipids from edible oils during the refining
process. Use of Select can also eliminate an expensive water wash
treatment, a cost advantage for caustic refiners.
Perform products, manufactured in a new processing facility at our Georgia
plant, deliver performance benefits that will open up additional market
niches in the edible oil refining market.
Operations and Transportation
Fiscal 1996 was a very good year for the support functions of the company.
Manufacturing continued to run environmentally responsible and safe
operations. Capital expenditures were $7,184,000, versus depreciation and
amortization charges of $7,926,000. We had record outputs in mining and
shipments and we also expanded our base of mineral reserves.
Oil-Dri Transportation delivered on its mission to ensure on-time
deliveries at affordable costs and to support our customer service
requirements. Additionally, the group reduced overall transportation costs
by expanding their backhaul business with outside customers.
The Logistics, Quality and Service team helped distinguish Oil-Dri in each
of our markets as a supplier that is flexible and responsive to customer
needs. Customer service and information management systems have seen
significant improvement.
Research and development activities, including technical service, were
provided by our team of scientists and technicians in Vernon Hills,
Illinois. They continue to play an important role in our existing markets
as well as in the identification of potential markets.
Financial
Our balance sheet remains strong with a current ratio of 2.7. Additionally,
fiscal 1996 was an outstanding year for generating cash. Balances of cash
and investments were $11,708,000 at July 31, 1996, an increase of 4.9% in
spite of spending $2,434,000 for the repurchase of 167,000 shares of Oil-
Dri stock. Dividend payout was $2,015,000 and $1,145,000 was used to reduce
debt.
In the last few years, the company has repurchased 300,000 shares of Oil-
Dri stock. At its meeting in June, the Board of Directors authorized a new
share repurchase program for an additional 400,000 shares. If we complete
this repurchase program and add another 400,000 shares to the treasury, we
will have reduced the total outstanding shares by 10%.
With Thanks
I would like to recognize and thank Norman B. Gershon who served on our
Board of Directors for 20 years. While continuing in his capacity as Vice
President of European Operations and Managing Director of Oil-Dri, S.A.,
Nick did not stand for re-election to the board this past December.
Bruce Sone, after 35 years with the Company, has chosen to retire as of
August 1, 1996. In addition to his work in expanding our consumer business,
Bruce served as a director for 16 years. Bruce's contributions to the
development of Oil-Dri and the building of its management team are greatly
appreciated.
Ronald Gordon joined the Oil-Dri Board of Directors this year. Ron has many
years of experience in consumer packaged goods and we are grateful to have
the benefit of his counsel.
The Year Ahead
We look forward to fiscal 1997 as a year in which we will spend less on
advertising and see our investment in the consumer market deliver increased
sales and profits. Reduced capital requirements should continue to generate
cash, and a Company-wide cost reduction program will focus everyone's
attention on profitability. We also anticipate another record year from the
Agrisorbents Products Group and we hope to see continued progress in the
profitable development of the Industrial and Environmental and Fluids
Purification Groups.
Sincerely,
Dan Jaffee
President and Chief Operating Officer
We at Oil-Dri are focusing our efforts on building the teams, brands and
profits that will combine to increase our shareholder value. Building is
the most critical component of our vision because it conveys our intention
to systematically and methodically work our way towards our end result
creating shareholder value. To build anything properly, you need a blend of
the right materials, good blueprints and, most importantly, talented
individuals to execute the plan.
Between 1983 and 1993, my father led a team of talented, highly-motivated
people through a dynamic period of Company growth. During this eleven year
period, net sales grew from $34 million to $141 million; a compound annual
growth rate of 14%. Net income exploded, growing from $1.1 million to $9.4
million; a compound annual growth rate of 22%. Most impressive was our
stock price. Adjusted for all splits, it was selling for $1.69 per share on
July 31, 1982. On the same date, eleven years later, the stock was selling
for $24.50 per share.
I see a real similarity between where we were at the start of that growth
period in 1982 and where we are today. The catalyst behind that growth was
focusing senior managers on creating shareholder value over the long-term.
The vehicle to motivate these managers was the 1981 Incentive Stock Option
Plan. When used correctly, stock options provide an ideal tool for bringing
together the interests of both the shareholders and the senior leaders of
the business.
The option plan that you, the shareholders, voted into place a year ago is
giving me the device I need to build a successful team of managers. It has
been instrumental in attracting and retaining extremely talented
individuals. In the following pages of this annual report, you will be
introduced to many of the people who are critical to the success I am
confident we are going to achieve. You will see that we have a nice blend
of seasoned Oil-Dri veterans and energetic newcomers who learned their
trade at highly successful, sophisticated companies like Miles, Inc.,
Alberto-Culver and Amoco. The common thread is that all are proven winners
who see the opportunity to make the next ten to fifteen years the defining
period of their careers. The stock options will once again join your
interests with ours, as these managers focus on building our business and
creating shareholder value.
I once asked Ned Jannotta, a long-time board member and mentor, what Oil-
Dri needed to do to get our stock price back where it belonged. Did we need
to more aggressively market our stock? Should we be courting analysts to
follow our performance? What was the key? His answer was profound in its
simplicity. Ned told me, Dan, you need to deliver predictably outstanding
earnings growth on a long-term basis, and the rest will take care of
itself. Our business managers know that the sum of our parts equals our
whole. Their challenge is to grow their businesses profitably. Each and
every unit needs to deliver on its own annual plan and the rest will fall
into line.
Each unit has a powerful blend of a strong team, the highest quality
products and unparalleled service. All of these combine to satisfy the
demanding needs of our customers. We must leverage these strengths and
deliver new products to our existing customers and existing products to new
customers. The growth opportunities facing our business are endless, our
challenge is to determine which opportunities will deliver value to our
shareholders over the long-term.
The end of fiscal 1996 marks the completion of our first year of getting
Oil-Dri back on our historic path of growth. We accomplished many things
and, in a number of ways, we are in a better position today than we were at
the outset of the year, as evidenced by the achievements referenced in the
letter from our chairman. Additionally, the entire Oil-Dri team has never
been stronger.
Let's analogize our business to running an NCAA Division I football program
and you, the shareholders, are the alumni association. Your new head coach
finishes his first full season with three wins and eight defeats. In the
ensuing two seasons his team wins two, loses nine and then wins three,
loses seven and ties one. Do you start cheering for a different school or
do you hang onto your season tickets (shares of stock) because you know the
team has been getting stronger even though their record has not reflected
progress?
If you opted to change teams, you gave up a year too soon. However, if you
chose to stick with the program, you just found your team in Pasadena. This
scenario is not hypothetical. The head coach is Gary Barnett and the school
is Northwestern University. In Mr. Barnett's fourth year as head coach, his
Wildcats had ten victories and only one defeat on their way to the Rose
Bowl.
The point of this analogy is to illustrate that building a winning team
takes time. We have a good program at Oil-Dri and only recently have
suffered more defeats than we would like. We are blessed with a strong
and talented team of players throughout the organization. Each of our
business units is focused on building its teams, brands and profits to get
us back to our old winning ways. Fiscal 1997 will be the year to clearly
demonstrate that we are on the right track. We need to balance our
aggressiveness in taking advantage of opportunities that are right in front
of us with the necessity to deliver at the bottom line.
Sincerely,
Mike Goldberg
Vice President & Chief Financial Officer
As the newest member of the Oil-Dri management group, I have been given the
opportunity to be part of a team that is striving to build a stronger
company for the future. The philosophy of our team is clear - we are here
for the long-term. We must set financial goals to help build sustainable
and profitable businesses that will reward both our shareholders and
employees.
Last year we began the process of building a stronger finance department
that can better analyze the cost structure of the Company and develop tools
to improve the Company's financial planning and reporting capabilities. As
a result, the Company is better positioned today to financially plan for
its future than at any time in its history.
The strengths of the finance department are treasury management, its
ability to analyze and develop alternative financing opportunities and its
ability to develop solutions to internal and external financial reporting
issues. Future focus will be on understanding more clearly the cost
drivers in each individual business unit, delivering the financial data
that will help our business managers run their units and providing the
financial tools needed to plan and measure each group's performance. We
must continually ask ourselves if everything we do improves our chance to
grow the business or profits. At the same time, we must ensure that
adequate controls are in place to safeguard the Company's assets and work
towards maintaining those assets at optimum levels.
Richard Hardin
Group Vice President, Technology
Product innovations continue to increase sales and market opportunities at
Oil-Dri. My responsibilities involve fostering effective communication
between sales and marketing and research and development (R&D). This
ensures that we focus our efforts on creating the most effective match of
our resources and our opportunities to establish a market fit.
A drive to innovate and a sound understanding of the marketplace, filtered
through a screen of common sense and a thorough knowledge of our resource
base, are the basics for identifying new applications and opportunities.
The strongest part of our research program is the team of people. They
bring an outstanding base of education and experience to our effort. Our
researchers are highly responsive to our business units and clearly able to
communicate research results and their implications for the business.
During the past year, R&D was very responsive to the product support and
product improvement needs of our business units. This resulted in better
control of our quality, product performance advances, improved profit
margins and new products.
In the next few years, my most important contribution to the company will
be to help establish a corporate-driven commitment and mechanism for
defining new product application goals. The ongoing challenge is to
allocate our valuable R&D resources in a manner that ensures a healthy
stream of new innovations without compromising technical
support of our existing products.
Jim Davis
Vice President, Manufacturing
Our ability to locate, mine, process and sell mineral products to consumer,
agricultural, industrial, environmental and fluid purification markets is
exceptional. In addition to the marketing of such diverse products, there
are complicated manufacturing, engineering, exploration, mining,
environmental and health and safety issues. Oil-Dri has been in this
business for over half a century and has the greatest supply of quality
reserves in the industry. While we have some very reputable competition in
the markets in which we compete, I feel confident that none of these
companies can match our experience and know how.
During fiscal 1996, we reduced costs, improved environmental compliance
procedures, delivered better product quality and increased worker safety.
Emphasis on worker safety is good for our employees and our bottom line. We
had a 46% decrease in worker's compensation claims in the last year. All of
our plants met environmental compliance regulations and, by working with
the Mississippi Department of Environmental Quality, we were able to
implement a program that will deliver a cost saving of more than $200,000.
We also played a role in the development of new products and processes,
which ultimately deliver more profitability to the company and its
shareholders.
The vertical integration of Oil-Dri is one of the elements that has driven
our success. Because we control all aspects of our production, we are in a
position to control our destiny and deliver the best possible products at
the lowest
possible cost.
Tom Cofsky
Vice President, Logistics, Quality and Service
As a support group, Logistics, Quality and Service (LQS) adds value by
keeping our customers satisfied. This involves providing courteous service
and furnishing accurate and meaningful information as we strive to make
doing business with Oil-Dri simple and pleasurable. Additionally, LQS has
helped increase employee productivity through systems improvements. This
allows us to handle more business without adding staff.
In the last year, LQS kept expenses below plan while keeping our
information systems running and delivering excellent service to our
customers. Qualitative successes included increasing the involvement of our
customer service representatives with the business teams. They are now
participating and contributing at a higher level. Additionally, many small
steps were taken to improve our information systems and problem resolution
processes. With each small improvement we have made it easier for people to
do their jobs and we have taken action to prevent problems that impact our
profitability and our customers' satisfaction.
My philosophy is not to accept things as they are, but to focus on what
they could or should be. Seeing the positive impact of quality
improvements, both at the customer level and at the profit level, is very
motivating. Our corporate dedication to continuous improvement gives each
individual team member the power to say, We could do this better.
Steve Levy
Vice President and General Manager, Consumer Products
Oil-Dri's management team has the confidence required to make decisions
that provide for the longer-term success of the entire business rather than
focusing exclusively on delivering short-term results. This has allowed us
to begin building a brand franchise and a more dominant position in the cat
box filler category.
Our two new Cat's Pride products have generated $10 million in net sales.
These items helped drive retail sales in our grocery and mass merchandiser
accounts. IRI data that reflects the last six months of our fiscal year
shows retail sales of the Cat's Pride brand up 27%, greatly exceeding
category growth of 4%.
These gains in new product sales helped offset revenue declines of
approximately $7 million in our largest wholesale club account.
Unquestionably, there is more value in diversification. New sales of our
Cat's Pride products were spread across a much broader customer base. The
continued diversification of our customers and our branded product
offerings will provide Oil-Dri and its shareholders with more reliable
performance.
Building our brand franchise also allows us to work toward the company's
goal of building profits. Both products introduced in 1996 have higher
gross profit margins than the divisional average. These higher margins will
justify marketing support and deliver more profits.
Jim Van Vliet
Director of Marketing, Consumer Products
Introductions of the Cat's Pride Scoopable Stretch Jug and Kat Kit
required significant investment spending during the year. This product
launch has improved our retail position and increased our presence in the
grocery trade, which represents 70% of total U.S. cat litter sales. In a
time of category consolidation, the Cat's Pride franchise is the only cat
litter brand showing substantial retail growth. Despite constant
competitive pressure, investment in our brand franchise has delivered a
substantial return as indicated by IRI data coinciding with our fiscal year
end:
Total U.S. Grocery
12 week period ended 7/14/96
Dollar Sales ACV Weighted Distribution
% Change vs. Dollar Share Dollar Share Pt. Change Vs.
Year Ago of Category Pt. Change Distribution Year Ago
+42.6% 6.1% +1.8 56.1% +10.6
The new Cat's Pride products are not me too products easily duplicated by
our competition. As the fourth largest marketer of branded cat box filler
products, innovation is mandatory. It allows us to provide consumers with
both quality and value. Our challenge is to leverage our proven track
record as the innovator in the category and fill the marketing pipeline
with new product ideas or the next great marketing innovation. We must be
faster, smarter and more creative than the competition.
Peter Collins
Director of Grocery Sales, Consumer Products
In today's fast-paced world of information and technology, the
manufacturers and retailers that are going to survive in the consumer
market are the ones that can effectively manage the enormous amount of
market data, condense it, and most importantly interpret it to deliver
value to the retailer.
This data and an unbiased evaluation of consumer trends are demanded by
retailers. Oil-Dri Corporation of America is in a position to deliver this
information as well as the new product innovations that consumers want.
Consolidation has brought some large competitors into the cat box filler
market, but none of them have the same single-minded focus we deliver to
this category. We have the best quality reserves, the most sophisticated
research and highly innovative products.
This past year, the sales force expanded sales into new markets and
increased sales in our core markets by leveraging the new Cat's Pride
products. In the last three months of fiscal 1996, our dollar share of the
$488 million retail grocery market increased 43%, and our ACV weighted
distribution increased 23%.
For the new year, I have identified with each salesperson three major
business initiatives within their territories that, if successfully
executed, will deliver strong sales and profit growth. My goal is to keep
the sales plan simple, focused and deliverable.
Daniel Jones
Vice President, Favorite Products, Ltd.
Favorite Products, a wholly-owned subsidiary of Oil-Dri, supplies our
Canadian markets with quality cat litter products under the brand names
Saular and Cat's Pride. The Saular brand has had a very strong presence
in the Quebec market for many years and our goal is to expand upon this
success in other Canadian markets. Favorite also sells industrial and
environmental products in Canada.
The consumer business is focused on our most profitable and value-added
products; Saular Kat Kit, Saular Scoopable Plus and Saular Plus. The
Saular brand in the Quebec grocery market is very strong, with a 51% dollar
share. The A.C. Nielson report for the 52 weeks ended July 20, 1996,
illustrates the growth of our premium products. Saular Kat Kit increased
sales 41% over the prior year and Saular Plus was up 15%, while the
category remained flat.
Building long-term partnerships with our customers and assuring that the
products we offer increase category profitability while meeting the needs
and wants of consumers is vital. Innovative, value-added products are the
trademark of Oil-Dri and Favorite Products and they have been the growth
drivers for our business in Quebec. By adapting these programs for other
markets, we plan to build the Saular brand in the rest of Canada.
Chuck Boland
General Manager, Agrisorbents Product Group
Understanding a customer's decision-making process requires knowing as much
about their business as they do. It requires a level of relationship well
beyond the traditional buyer-seller structure. This understanding must be
used to deliver innovations that increase the value and satisfaction
delivered by Oil-Dri's agricultural products and services. Focus on
customer needs will also provide opportunities to grow sales of existing
products and create line extensions.
In the crop protection market we are recognized for quality products and
services. As we expand further into animal health and nutrition and turf
and ornamental applications, we can leverage the processing and technical
expertise acquired in the crop protection industry.
During the past year, strong demand from our customers allowed us to take
advantage of earlier investments in plant and marketing infrastructures.
Looking forward, we will identify new products and applications driven by
customer needs. The animal health and nutrition and the turf and ornamental
markets are growing in real terms and we have strengths in marketing, R&D
and logistics that can be leveraged. We are well positioned to bring value-
added products to the sophisticated buyers in these markets.
Wade Bradley
General Manager, Industrial & Environmental Product Group
Our divisional challenge has been to improve profitability, restructure for
more efficiency and identify opportunities for future growth. This year we
achieved our financial plan, delivered a contribution to the company,
reorganized the sales team based on targeted selling and distribution and
identified two solid market opportunities for growth.
Our position as the only supplier of a complete product line of clay floor
absorbents and non-clay sorbents is a major advantage. Other advantages
include our corporate capabilities such as management information services
and logistics. Oil-Dri has leveraged these and other internal capabilities
to service the needs of companies such as Wal-Mart, ADM and Monsanto. We
can learn from these successes and use the lessons to service the customers
in our industry.
We have also identified opportunities in the automotive and hardware
market. We are in the process of developing a family of products for use in
homes and garages. This line will build on the Oil-Dri brand name, the
professional's choice for over 55 years, and deliver quality products to
consumers as well as professionals.
Our mission is to be customer focused, profit driven and the leading U.S.
supplier of a comprehensive line of sorbent products and services.
Fielden Fraley
General Manager, Fluids Purification Group
Individual efforts directed towards shared goals and objectives enable a
team to meet its potential and deliver the best possible performance. The
Fluids Purification Group has built a very effective team that is focused
on expanding sales of our products on a worldwide basis.
Our success to date has come from identifying customer needs and delivering
products, some unique to the market, that improve processes and products.
We are fast and flexible. Knowledge of our markets, and the capabilities of
our raw materials allow us to recognize growth opportunities.
The competitive nature of the global marketplace demands continuous
improvement of our products. During the third quarter of fiscal 1996, we
introduced two new products for the oils and fats refining industry. These
products represent technical improvements and will deliver more
profitability. Our new manufacturing facility in Georgia will optimize our
unique processing methods and deliver future product innovations.
We hold a significant share of the market in North America, Latin America
and Asia. The goal of our team is to be the number one supplier of fluids
purification products to the industries and markets we serve on a global
basis. We must achieve this growth in the most profitable way we can in
order to deliver value to our customers and our shareholders.
Steve Azzarello
Commercial Manager, Latin America
Current trends are leading toward a truly global market. Technology has
made doing business all over the world not only possible but profitable.
Oil-Dri products fit into many markets outside the United States. We are
already doing business in over 60 countries, primarily with our fluids
purification products. The opportunity also exists to present some of our
other value-added products to these markets.
Business in Latin America increased 32% in the last year while expenses
remained flat. These increases in sales and profitability are evidence of
the shareholder value we are delivering from overseas markets. Oil-Dri's
challenge will be to develop strategies which address language and cultural
differences as well as the needs of the customers in each target market.
Sales of fluids purification products have the potential to continue double
digit growth in Latin America. Training outside agents to sell these and
other Oil-Dri products will increase our efficiency in these distant
markets, but we can't forget the value of firsthand experience. As the
novelist John le Carre wrote, A desk is a dangerous place from which to
view the world.
In 1986...
Gone With the Wind, by Margaret Mitchell,
turned 50. The novel, which sold 25,000,000 copies in its first half
century, hit the best seller list once again.
The space shuttle Challenger exploded, prompting renewed debate on the U.S.
space program.
The Statue of Liberty celebrated its 100th birthday in New York City. The
centennial celebration included a parade of ships from all over the world
and the relighting of the torch by President Reagan.
The Oreo cookie marked its 75th year.
And at Oil-Dri...
The Company reported record sales of $52,841,000.
Cat box absorbents represented 22% of net sales.
The Company acquired 100% ownership interest in Favorite Products Company,
Ltd. of Montreal, Quebec.
The Company acquired the Georgia South Plant to meet increased customer
demand for cat litter and floor absorbents.
Pure-Flo bleaching clays and Ultra-Clear clarification aids were
introduced to the fluid purification market.
Five Year Summary of Financial Data
Year Ended July 31
SUMMARY OF OPERATIONS 1996 1995 1994
Net Sales $153,786,754 $152,899,109 $147,146,793
Cost of Sales 107,729,770 108,268,431 102,456,815
Gross Profit 46,056,984 44,630,678 44,689,978
Selling, General and
Administrative Expenses* 39,941,751 31,788,731 30,261,701
Income from Operations 6,115,233 12,841,947 14,428,277
Other Income (Expense)
Interest Income 586,623 448,268 440,796
Interest Expense (1,916,569) (1,921,261) (1,751,839)
Foreign Exchange (Losses) ( 6,693) ( 5,463) 3,009
Gains
Amortization of Goodwill ( 131,160) ( 132,048) ( 132,001)
Other, Net 135,968 ( 84,018) 171,142
Total Other Expense, Net (1,331,831) (1,694,522) (1,268,893)
Income before Income Taxes 4,783,402 11,147,425 13,159,384
Income Taxes 1,409,145 3,144,597 3,307,184
Net Income $3,374,257 $8,002,828 $9,852,200
Average Shares Outstanding 6,806,891 6,935,975 7,010,724
Net Income per Share $0.50 $1.15 $1.41
Important Highlights
Total Assets $117,692,868 $116,987,683 $112,267,182
Long-Term Debt $18,978,000 $20,422,265 $21,521,243
Working Capital $30,398,649 $33,074,318 $29,337,449
Working Capital Ratio 2.7 3.1 3.0
Capital Expenditures $7,184,337 $7,032,064 $13,559,232
Depreciation and
Amortization $7,925,806 $7,808,496 $6,798,038
Long-Term Debt to Equity 24.6% 26.1% 29.5%
Ratio
Net Income as a Percent of
Net Sales 2.2% 5.2% 6.7%
Return on Average
Stockholders' Equity 4.3% 10.6% 14.1%
Gross Profit as a Percent of
Net Sales 29.9% 29.2% 30.4%
Sales
Operating Expenses as a
Percent 26.0% 20.8% 20.6%
of Net Sales
1993 1992
$140,866,110 $124,584,756
97,396,563 85,116,335
43,469,547 39,468,421
29,420,831 28,835,931
14,048,716 10,632,490
451,519 514,756
(1,728,817) (1,884,166)
( 87,655) 63,471
( 131,799) (131,079)
( 298,485) 15,198
(1,795,237) (1,421,820)
12,253,479 9,210,670
2,833,837 2,110,262
$9,419,642 $7,100,408
7,031,116 7,026,300
$1.34 $1.01
$102,116,632 $95,017,573
$17,765,941 18,831,133
$26,043,415 $24,358,769
2.7 2.8
$9,158,173 $8,039,979
5,834,854 5,407,341
26.7% 31.6%
6.7% 5.7%
14.9% 12.4%
30.9% 31.7%
20.9% 23.1%
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Fiscal 1996 Compared to Fiscal 1995
Consolidated net sales for the year ended July 31, 1996, were $153,787,000,
an increase of 0.6% over net sales of $152,899,000 in fiscal 1995. Net
income for fiscal 1996 was $3,374,000 or $0.50 per share, decreasing 57.8%
from net income of $8,003,000 or $1.15 per share in fiscal 1995.
Net sales of industrial and environmental sorbents, consisting of clay and
non-clay products, decreased $1,615,000 or 8.6% from prior year levels due
to decreased unit shipments of both clay and non-clay products. Net sales
of industrial clay products fell $557,000 or 4.2% from prior year levels.
Net sales of non-clay sorbents decreased $1,058,000 or 19.8%, reflecting
increased competition in the markets in which the Company participates and
a refocused sales and marketing effort towards higher margin products. Net
sales of cat box absorbents decreased $363,000 or 0.5% below fiscal 1995
levels. Although the Company expanded dollar share in the grocery and mass
merchandiser markets, these market share gains were offset by the decline
in sales to the Company's largest club account, Sam's Club, due to the
introduction of a private label scoopable litter that replaced the
Company's branded scoopable product in a substantial number of Sam's
stores. Although the Company's branded cat litter products were
reintroduced into Sam's stores during the fourth quarter, continued
distribution is not assured. Net sales of agricultural carriers and
absorbents increased $3,257,000 or 19.6% from the prior fiscal year due to
increased unit shipments caused by increased planting acreage. Net sales
of fluids purification adsorbents decreased $362,000 or 3.0% from fiscal
1995 due primarily to competitive pressures and continued sluggish demand
in certain of the Company's markets. Sales of transportation services
increased $357,000 or 3.8% from fiscal 1995 levels due to increased
backhaul revenue.
Consolidated gross profit as a percentage of net sales increased to 29.9%
of net sales in fiscal 1996 from 29.2% in fiscal 1995. This increase was
principally due to a greater portion of net sales being generated in the
agricultural market and net sales of higher value products in the grocery
market. Additionally, cost increases for packaging and fuel in fiscal 1995
have moderated in fiscal 1996.
Operating expenses as a percentage of net sales increased to 26.0% of net
sales in fiscal 1996 from 20.8% of net sales in fiscal 1995. This increase
includes $6.5 million for promotional and advertising programs associated
with new product introductions. Also included in operating expenses is a
charge of $921,000 reflecting the settlement of a patent infringement
action in the second quarter of fiscal 1996.
Interest expense remained unchanged in fiscal 1996. Increased interest-
bearing deferred compensation balances offset reductions in the balance of
current and long-term notes payable. Interest income increased $138,000
from fiscal 1995 due to higher invested balances.
The Company's effective income tax rate increased to 29.5% in fiscal 1996
from 28.2% in the prior fiscal year. This change is a result of two
factors: lower domestic income subject to depletion allowances and a
greater percentage of total income earned in higher tax jurisdictions. The
provision for income tax expense for the fourth quarter and year ended July
31, 1995 includes a charge of $263,000 reflecting a change in the estimated
amounts of depletion deductions and temporary differences between financial
reporting and tax reporting for the year ended July 31, 1994.
Total assets of the Company increased $705,000 or 0.6% during the year
ended July 31, 1996. Current assets decreased $535,000 or 1.1% from prior
fiscal year-end balances due to lower accounts receivable and prepaid
income taxes.
Property, plant and equipment, net of accumulated depreciation and
amortization, decreased $1,247,000 or 2.1% due primarily to depreciation
expense exceeding capital expenditures by $563,000 and the sale of fixed
assets with a net book value totaling $646,000. Investments in property,
plant and equipment included expenditures for increased productivity,
capacity enhancements, pollution control and equipment upgrades.
As of July 31, 1996, the Company has invested approximately $752,000 in
Kamterter, Inc., a company that researches and applies biotechnology in the
agricultural field. This investment, recorded at cost, represents a 13%
equity interest in Kamterter. During the year ended February 29, 1996, and
in subsequent interim periods, Kamterter has generated operating profits.
While the Company believes that Kamterter's prospects have improved,
Kamterter's future financial condition and results of operation cannot be
predicted.
Total liabilities increased $1,814,000 or 4.7% in the year ended July 31,
1996 due primarily to increased accounts payable, deferred compensation and
income taxes payable.
Expectations
The Company anticipates increased sales in fiscal 1997. Sales of branded
cat box absorbents are expected to increase as new product introductions
gain incremental distribution in the grocery and mass merchandise markets.
However, this overall sales growth is subject to continuing competition for
shelf space in the grocery, mass merchandiser and club markets. Investment
in the Company's consumer product launch is in line with original budgets,
and the Company expects the profitability of these products to favorably
impact earnings as spending on advertising and promotion returns to more
normal levels in fiscal 1997. High crop prices and strong export demand
indicate that the market for the Company's agricultural products will
remain strong in the foreseeable future. In fluids purification, a new
manufacturing facility will provide higher performance products, including
Perform and Select, which are expected to compete more effectively in the
market. The Company is going through an intensive review of its entire
cost structure, with a goal of significantly reducing costs.
The foregoing statements under this heading are forward-looking
statements within the meaning of that term in the Securities Exchange Act
of 1934, as amended. Actual results may be lower than 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; and the cost of new product introductions and
promotions in the consumer market. The forward-looking statements also
involve the risk of changes in market conditions in the overall economy
and, for the agricultural division, in planting activity and overall
agricultural demand, including export demand.
Liquidity and Capital Resources
In fiscal 1996, the current ratio decreased to 2.7 from 3.1 as of July 31,
1995. Working capital decreased $2,676,000 or 8.1% for the year ended July
31, 1996. Cash provided by operations continues to be the Company's
primary source of funds to finance operating activities and capital
expenditures. In fiscal 1996 net cash flows from operating activities
increased 1.2% to $12,469,000. This cash was used to fund capital
expenditures of $7,184,000, pay Company dividends of $2,015,000 and
repurchase shares of the Company's stock at a cost of $2,434,000. The
Company may continue to repurchase its Common Stock from time to time. As
of July 31, 1996, total consolidated cash and investments were $11,708,000,
up 4.9% from $11,162,000 as of July 31, 1995. Of this amount, balances
held by the Company's foreign subsidiaries as of July 31, 1996 and 1995
were $1,594,000 and $3,296,000, respectively.
The Company's long-term debt as of July 31, 1996 decreased $1,444,000 or
7.1% from fiscal 1995 balances, primarily due to scheduled debt repayments.
Long-term debt to equity decreased to 24.6% from 26.1% as of July 31, 1995.
The Company's line of credit arrangements are discussed in Note 3 to the
consolidated financial statements. During the year ended July 31, 1996,
there were no borrowings under the line of credit. Management believes
that funds generated from operations and available borrowing capacity are
adequate to meet the Company's cash needs for fiscal 1997.
Fiscal 1995 Compared to Fiscal 1994
Consolidated net sales for the year ended July 31, 1995 were $152,899,000,
an increase of 3.9% over net sales of $147,147,000 in fiscal 1994. Net
income for fiscal 1995 was $8,003,000 or $1.15 per share, decreasing 18.8%
from net income of $9,852,000 or $1.41 per share in fiscal 1994. Fiscal
1995 and prior year's net sales reflected a reclassification of trade
marketing costs to selling expenses. This classification is commonly used
by companies in consumer products industries and reflects the Company's
continued and planned growth in this area. Trade marketing costs were
previously classified as a reduction of revenues. The reclassification
increased sales, gross profits and selling expenses, each by the same
amount, and had no effect on reported income from operations, net income or
net income per share. The reclassification primarily affected reported
sales of the consumer division.
Sales increases were primarily the result of increased unit shipments and
slightly increased average sales per unit due to changes in product sales
mix. Net sales of industrial and environmental sorbents, consisting of
clay and non-clay products, decreased $1,043,000 or 5.2% from prior year
levels due to decreased unit shipments of clay products. Net sales of
industrial clay products fell $611,000 or 4.3% from prior year levels.
Sales of non-clay sorbents decreased $432,000 or 7.5%, reflecting increased
competition in the markets in which the Company participates. Net sales of
cat box absorbents increased $5,871,000 or 7.6% above fiscal 1994 levels.
This growth was driven by unit sales increases of private label litters in
the mass merchandising distribution channel and increased grocery market
penetration. Net sales of agricultural carriers and absorbents decreased
$1,719,000 or 9.4% from the prior fiscal year due to decreased unit
shipments caused by reduced planting, inventory carryover and higher
chemical loading of crop protection products. Net sales of fluids
purification adsorbents remained flat versus fiscal 1994. The high quality
of domestic crude vegetable oils and adverse growing conditions in certain
foreign markets reduced consumption of the Company's bleaching earth
products. Sales of transportation services increased $1,825,000 or 24.3%
from fiscal 1994 levels due to increased fleet size and backhaul revenue.
Consolidated gross profit as a percentage of net sales decreased to 29.2%
of net sales in fiscal 1995 from 30.4% in fiscal 1994. This decrease was
principally due to increased packaging and shipping costs and a shift in
product mix in the consumer business towards private label litters.
Operating expenses as a percentage of net sales increased slightly to 20.8%
of net sales in fiscal 1995 from 20.6% of net sales in fiscal 1994. This
change reflected management's continued focus on controlling overhead costs
while expanding sales and marketing efforts.
Interest expense increased $169,000 due to higher average debt outstanding,
and interest income remained substantially unchanged in fiscal 1995.
The Company's effective income tax rate increased to 28.2% of income in
fiscal 1995 from 25.1% in the prior fiscal year. The provision for income
tax expense for the fourth quarter and year ended July 31, 1995, included a
charge of $263,000 reflecting a change in the estimated amounts of
depletion deductions and temporary differences between financial reporting
and tax reporting for the year ended July 31, 1994.
Total assets of the Company increased $4,721,000 or 4.2% during the year
ended July 31, 1995. Current assets increased $4,383,000 or 9.9% from
prior fiscal year-end balances due to higher accounts receivable and
prepaid balances. Inventory balances decreased, primarily because a
capacity expansion at the Company's Ripley, Mississippi facility was
completed, reducing overall inventory needs.
Property, plant and equipment, net of accumulated depreciation and
amortization, decreased $784,000 or 1.3%. Investments in property, plant
and equipment included expenditures for increased productivity, capacity
expansion, pollution control, and equipment upgrades.
As of July 31, 1995, the Company had invested approximately $717,000 in
Kamterter, Inc., a company that researches and applies biotechnology in the
agricultural field. This investment, recorded at cost, represents a 14%
equity interest in Kamterter. During the year ended February 28, 1995, and
in recent interim periods, Kamterter began to generate operating profits.
While the Company believes that Kamterter's prospects have improved,
Kamterter's future financial condition and results of operation cannot be
predicted.
Total liabilities decreased $558,000 or 1.4% in the year ended July 31,
1995 due primarily to debt reduction.
Foreign Subsidiaries
Net sales by foreign subsidiaries during fiscal 1996 were $11,892,000
constituting 7.7% of net sales. This amount represents a decrease of
$356,000 from fiscal 1995, in which foreign net sales were $12,248,000 and
constituted 8.0% of net sales. The decrease in foreign subsidiary sales
resulted primarily from reduced sales in the United Kingdom due to lower
demand for the Company's animal nutrition products. Net income of the
Company's foreign subsidiaries during fiscal 1996 was $554,000, as compared
with $763,000 in fiscal 1995. Identifiable assets of the Company's foreign
subsidiaries as of July 31, 1996, were $9,036,000, a decrease of $535,000
from fiscal 1995 year-end balances.
Net sales made by the Company's foreign subsidiaries for the year ended
July 31, 1995, were $12,248,000, constituting 8.0% of net sales. This
amount represented an increase of $1,000,000 from fiscal 1994, in which
foreign subsidiary sales were $11,248,000 and constituted 7.6% of net
sales. This increase in foreign subsidiary sales resulted from increased
market share in Canadian cat litter markets and price increases at the
Company's United Kingdom subsidiary. Net income of the Company's foreign
subsidiaries during fiscal 1995 was $763,000, as compared to $403,000 in
fiscal 1994. The identifiable assets of the Company's foreign subsidiaries
as of July 31, 1995, were $9,571,000, a slight decrease from fiscal 1994
year-end balances.
Consolidated Statements of Financial Position
July 31
1996 1995
ASSETS
Current Assets
Cash and cash equivalents (Note 1) $10,113,544 $8,829,667
Investment securities, at cost, which
approximates market 1,594,000 2,332,665
Accounts receivable 20,666,623 21,529,168
Less allowance for doubtful accounts (225,970) (180,602)
Inventories (Note 1) 11,737,068 10,917,099
Prepaid expenses 4,325,061 5,317,169
Total Current Assets 48,210,326 48,745,166
Property, Plant and Equipment, at Cost (Notes
1 and 3)
Buildings and leasehold improvements 15,666,801 15,335,526
Machinery and equipment 78,918,785 76,721,765
Office furniture and equipment 8,181,596 7,831,961
Vehicles 119,622 117,906
102,886,804 100,007,158
Less accumulated depreciation and
amortization (54,730,624 (47,498,516)
48,156,180 52,508,642
Construction in progress 4,024,354 1,289,855
Land and mineral rights 6,031,888 5,660,898
Total Property, Plant and 58,212,422 59,459,395
Equipment, Net
Other Assets
Goodwill (Net of accumulated
amortization of
$1,204,564 in 1996 and $1,073,404 in 4,172,526 4,304,286
1995) (Note 1)
Deferred income taxes (Note 4) 2,264,291 484,324
Other 4,833,303 3,994,512
Total Other Assets 11,270,120 8,783,122
Total Assets $117,692,868 $116,987,683
The accompanying notes are an integral part of the consolidated financial state
ments.
JULY 31
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of notes payable
(Note 3) $1,626,762 $1,097,976
Accounts payable 5,338,787 4,710,251
Income taxes payable 691,106 -
Dividends payable 519,610 511,166
Accrued expenses
Salaries, wages and commissions 1,970,422 2,362,102
Trade promotions and advertising 4,188,756 4,272,740
Freight 711,513 747,042
Other 2,764,721 1,969,571
Total Current Liabilities 17,811,677 15,670,848
Noncurrent Liabilities
Notes payable (Note 3) 18,978,000 20,422,265
Deferred compensation (Note 5) 2,253,313 1,778,075
Other 1,420,382 778,112
Total Noncurrent Liabilities 22,651,695 22,978,452
Total Liabilities 40,463,372 38,649,300
Stockholders' Equity
Common and Class B Stock (Note 6) 723,552 723,352
Paid-in capital in excess of par value 7,660,600 7,657,394
Retained earnings 77,385,514 76,033,462
Cumulative translation adjustments
(Note 1) (1,018,416) (987,781)
84,751,250 83,426,427
Less treasury stock, at cost (Note 6) (7,521,754) (5,088,044)
Total Stockholders' Equity 77,229,496 78,338,383
Total Liabilities and Stockholders' $117,692,868 $116,987,683
Equity
Consolidated Statements of Income
Year Ended July 31
1996 1995 1994
Net Sales $153,786,754 $152,899,109 $147,146,793
Cost of Sales 107,729,770 108,268,431 102,456,815
Gross Profit 46,056,984 44,630,678 44,689,978
Selling, General and
Administrative 39,941,751 31,788,731 30,261,701
Expenses
Income from Operations 6,115,233 12,841,947 14,428,277
Other Income (Expense)
Interest income 586,623 448,268 440,796
Interest expense (1,916,569) (1,921,261) (1,751,839)
Foreign exchange (losses) gains ( 6,693) ( 5,463) 3,009
Amortization of goodwill (Note ( 131,160) ( 132,048) ( 132,001)
1)
Other, net 135,968 ( 84,018) 171,142
Total Other Expense, Net (1,331,831) (1,694,522) (1,268,893)
Income before Income Taxes 4,783,402 11,147,425 13,159,384
Income Taxes (Note 4) 1,409,145 3,144,597 3,307,184
Net Income $3,374,257 $8,002,8281 $ 9,852,200
Average Shares Outstanding (Note 6,806,891 6,935,975 7,010,724
6)
Net Income Per Share (Note 6) $0.50 $1.15 $1.41
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statements of Stockholders' Equity
Shares
Common Class B Amount
Balance, July 31, 1993 5,008,086 2,173,755 $718,184
Net income - - -
Dividends declared - - -
Issuance of stock under option
plans 50,641 - 5,064
(Note 7)
Awards of stock to employees 1,036 - 104
Reissuance of treasury shares - - -
Conversion of Class B Stock to
Common 40,860 ( 40,860) -
Stock (Note 6)
Balance, July 31, 1994 5,100,623 2,132,895 723,352
Net income - - -
Dividends declared - - -
Conversion of Class B Stock to
Common 18,201 ( 18,201) -
Stock (Note 6)
Balance, July 31, 1995 5,118,824 2,114,694 723,352
Net income - - -
Dividends declared - - -
Conversion of Class B Stock to
Common 72,326 ( 72,326) -
Stock (Note 6)
Issuance of stock under 1995
Long 2,000 - 200
Term Incentive Plan (Note 7)
Balance, July 31, 1996 5,193,150 2,042,368 $723,552
The accompanying notes are an integral part of the consolidated financial
statements.
Paid-In
Capital In
Excess of Retained
Par Value Earnings
$ 6,962,104 $62,031,814
- - 9,852,200
- - (1,806,736)
673,988 -
20,916 -
386 -
- -
7,657,394 70,077,278
- - 8,002,828
- - (2,046,644)
- -
7,657,394 76,033,462
- - 3,374,257
- - (2,022,205)
- - -
-
3,206
$7,660,600 $77,385,514
Consolidated Statements of Cash Flows
Year Ended July 31
1996 1995 1994
Cash Flows from Operating
Activities
Net income $ 3,374,257 $ 8,002,828 $ 9,852,200
Adjustments to reconcile net
income
to net cash provided by
operating
activities
Depreciation and 7,925,806 7,808,496 6,798,038
amortization
Deferred income taxes (1,791,247) (575,130) (944,905)
Provision for bad debts 202,690 51,013 4,744
(Increase) decrease in
Accounts receivable 692,363 (1,680,287) (1,502,865)
Inventories (838,308) 319,844 (3,186,879)
Prepaid expenses and taxes 1,190,548 (1,608,299) (1,114,801)
Other assets (830,161) (960,720) (474,637)
Increase (decrease) in
Accounts payable 636,215 774,083 (916,395)
Income taxes payable 456,708 - -
Accrued expenses 332,842 (32,319) 627,825
Deferred compensation 475,238 16,257 381,872
Other 642,270 201,428 300,336
Total Adjustments 9,094,964 4,314,366 (27,667)
Net Cash Provided by
Operating Activities 12,469,221 12,317,194 9,824,533
Cash Flows from Investing
Activities
Capital expenditures (7,184,337) (7,032,064) (13,559,232)
Proceeds from disposition of
property, plant and 923,437 - -
equipment
Purchases of investment (167,000) (3,691,201) (11,750,654)
securities
Dispositions of investment
securities 906,283 4,722,543 13,910,258
Other (267,693) 159,709 399,295
Net Cash Used in
Investing (5,789,310) (5,841,013) (11,000,333)
Activities
Cash Flows from Financing
Activities
Principal payments on long-term (1,145,479) (1,244,481) (743,834)
debt
Proceeds from issuance of long-
term 230,000 - 5,000,000
debt
Proceeds from issuance of
Common - - 700,458
Stock
Dividends paid (2,015,383) (1,983,291) (1,804,002)
Purchase of treasury stock (2,433,710) ( 825,475) (1,894,762)
Other ( 31,462) 12,418 1,025
Net Cash (Used in)
Provided by Financing (5,396,034) (4,040,829) 1,258,885
Activities
Net Increase in Cash and
Cash Equivalents 1,283,877 2,435,352 83,085
Cash and Cash Equivalents,
Beginning of Year 8,829,667 6,394,315 6,311,230
Cash and Cash Equivalents, End of $10,113,544 $8,829,667 $6,394,315
Year
The accompanying notes are an integral part of the consolidated financial
statements.
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Oil-Dri
Corporation of America and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated from the
consolidated financial statements.
No provision has been made for possible income taxes which may be paid on
the distribution of approximately $9,796,000 and $9,129,000 as of July 31,
1996 and 1995, respectively, of the retained earnings of foreign
subsidiaries, as substantially all such amounts are intended to be
indefinitely invested in these subsidiaries or no additional income taxes
would be incurred when such earnings are distributed. It is not
practicable to determine the amount of income taxes or withholding taxes
that would be payable upon the remittance of assets that represent those
earnings.
Management Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from sales of products and transportation services are recognized
upon shipment.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between
the assets and liabilities recognized for financial reporting purposes and
amounts recognized for tax purposes.
Interest Rate Derivative Instruments
An interest rate swap agreement is utilized in the management of interest
rate exposure.
Interest differentials on the swap contract (Note 3) are recorded as
interest expense in the contract period incurred. The Company recognized
additional interest expense of $58,100, $58,900 and $98,300 in fiscal years
1996, 1995 and 1994, respectively, as a result of this contract.
Reclassification
Certain items in prior year financial statements have been reclassified to
conform to the presentation used in fiscal 1996.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries, where the local currency is
the functional currency, are translated at the exchange rates in effect at
period end. Income statement items are translated at the average exchange
rate on a monthly basis. Resulting translation adjustments are recorded as
a separate component of stockholders' equity.
Changes in the cumulative translation adjustments account are as follows:
1996 1995 1994
Balance, at beginning of year $(987,781) (1,135,951) $(901,783)
Translation adjustments resulting
from
exchange rate changes and ( 30,635) 148,170 (234,168)
intercompany
transactions
Balance, at end of year $(1,018,416) $(987,781) $(1,135,951)
Cash Equivalents
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.
Inventories
The composition of inventories is as follows:
1996 1995
Finished $ 6,728,150 $ 6,849,536
goods
Bags 3,754,087 2,575,259
Supplies 1,018,304 1,272,443
Fuel oil 236,527 219,861
$11,737,068 $10,917,099
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash investments in government
backed instruments, both foreign and domestic, and with other high quality
institutions. Concentrations of credit risk with respect to accounts
receivable are subject to the financial condition of certain major
customers, principally the customer referred to in Note 2. The Company
generally does not require collateral to secure customer receivables.
Property, Plant and Equipment
Property, plant and equipment expenditures are generally depreciated using
the straight-line method over their estimated useful lives as follows:
Years
Buildings and leasehold improvements 5-30
Machinery and equipment 3-15
Office furniture and equipment 2-10
Vehicles 2-8
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research and development costs of $2,026,000 in 1996, $1,826,000 in 1995
and $1,875,000 in 1994 were charged to expense as incurred.
Acquisitions
The excess of the Company's original investment over the fair value of the
net assets acquired at the date of acquisition is being amortized by the
straight-line method over 40 years.
Advertising Costs
The Company defers recognition of advertising production costs until the
first time the advertising takes place; other advertising costs are
expensed as incurred.
Fair Value of Financial Instruments
Non-derivative financial instruments included in the consolidated
statements of financial position are cash and cash equivalents, investment
securities and notes payable. These instruments, except for notes payable,
were carried at amounts approximating fair value as of July 31, 1996. The
fair value of notes payable was estimated based on future cash flows
discounted at current interest rates available to the Company for debt with
similar maturities and characteristics. The fair value of notes payable as
of July 31, 1996, exceeded its carrying value by approximately $600,000.
Stock Options
The Company has completed an initial review of Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, which will become effective for the 1997 fiscal year. As is
permitted under SFAS 123, the Company has decided to continue accounting
for employee stock compensation under the rules of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, but will
disclose pro forma results using the SFAS 123 alternative accounting
method.
Net Income per Share and Common Share Equivalents
Net income per share and common share equivalents are computed based upon
the weighted average number of shares outstanding during each year and
includes outstanding options, when dilutive.
NOTE 2 - BUSINESS AND GEOGRAPHIC REGION INFORMATION
Nature of Business
The Company is a leader in developing, manufacturing and marketing sorbent
products for consumer, industrial, environmental, agricultural and fluids
purification markets. The Company operates within a single segment. The
Company has operations in the United States, Canada and the United Kingdom
and exports goods worldwide.
The Company had net sales in excess of 10% of total net sales to one
unaffiliated customer in 1996, 1995 and 1994. Accounts receivable related
to this major customer amounted to $4,905,000, $5,083,000 and $4,845,000 as
of July 31, 1996, 1995 and 1994, respectively.
Notes to Consolidated Financial Statements
NOTE 2 - BUSINESS AND GEOGRAPHIC REGION INFORMATION
Nature of Business (Continued)
The net sales to this customer were as follows:
1996 1995 1994
(Thousands of Dollars)
Amount $39,916 $40,884 $35,848
Percent of net 26% 27% 24%
sales
The following is a summary of financial information by geographic region:
FISCAL YEAR ENDED JULY 31
(Thousands of Dollars)
1996 1995 1994
Sales to unaffiliated customers:
Domestic $141,895 $140,651 $135,899
Foreign subsidiaries 11,892 12,248 11,248
Sales or transfers between
geographic areas:
Domestic $ 5,039 $ 4,067 $ 3,891
Income before income taxes:
Domestic $ 3,920 $ 10,094 $ 12,257
Foreign subsidiaries 863 1,053 902
Net Income:
Domestic $ 2,820 $ 7,240 $ 9,449
Foreign subsidiaries 554 763 403
Identifiable assets:
Domestic $108,657 $107,417 $102,659
Foreign subsidiaries 9,036 9,571 9,608
Notes to Consolidated Financial Statements
NOTE 3 - NOTES PAYABLE
The composition of notes payable is as follows:
1996 1995
Town of Blue Mountain, Mississippi
Principal payable on October 1, 2008.
Interest payable monthly at a variable
interest rate set weekly based on market
conditions for similar instruments. The
average rates were 3.98% and
4.00% in fiscal 1996 and fiscal 1995,
respectively. Payment of these bonds by
the Company is guaranteed by a letter
of credit issued by Harris Trust and
Savings Bank. In May 1991, the Company
entered into a seven-year interest rate
swap contract. Under this agreement, the
Company receives a floating interest rate
based on LIBOR and pays interest at a fixed
rate of 6.53%. $2,500,000 $2,500,000
Teachers Insurance and Annuity Association of
America Payable in annual principal
installments on November 15; $1,500,000 in
fiscal 1997; $1,800,000 in fiscal 1998;
$1,200,000 in fiscal 2000; $1,100,000 in
fiscal 2001; and $1,000,000 in
fiscal 2002. Interest is payable
semiannually at an annual rate of 9.38%. 6,600,000 7,100,000
Teachers Insurance and Annuity Association of
America Payable in annual principal installments,
on August 15; $500,000 in fiscal 2002;
$1,000,000 in fiscal 2003; $2,500,000 in
fiscal 2004; and $2,500,000 in fiscal 2005.
Interest is payable semiannually at an annual
rate of 7.17%. 6,500,000 6,500,000
Harris Trust and Savings Bank
Payable in annual principal installments,
on June 20; $1,950,000 in fiscal 1999;
$900,000 in fiscal 2000; $650,000 in fiscal
years 2001 and 2002; and $350,000 in fiscal
2003. Interest is payable quarterly at an
annual rate of 7.78%. 4,500,000 5,000,000
Other 504,762 420,241
20,604,762 21,520,241
Less current maturities of notes payable (1,626,762) (1,097,976)
$18,978,000 $20,422,265
Notes to Consolidated Financial Statements
NOTE 3 - NOTES PAYABLE (Continued)
During fiscal 1995, the Company executed a Credit Agreement with Harris
Trust and Savings Bank which replaced the Term Note Agreement dated April
20, 1994. In addition to providing continued term financing, the Credit
Agreement provides for a $5,000,000 committed unsecured revolving line of
credit which expires on August 1, 1999, at certain short-term rates. In
July 1996, the Company entered into a $10,000,000 unsecured line of credit
agreement with Harris Trust and Savings Bank. This line of credit provides
for either floating rate or fixed rate borrowing through May 31, 1997.
During fiscal 1996, no borrowings were made against either line.
The agreements with the Town of Blue Mountain, Mississippi, Teachers
Insurance and Annuity Association of America and Harris Trust and Savings
Bank impose working capital requirements, dividend and financing limita
tions, minimum tangible net worth requirements and other restrictions. The
Company's Credit Agreement with Harris Trust and Savings Bank indirectly
restricts dividends by requiring the Company to maintain tangible net
worth, as defined, in the amount of $50,000,000 plus 25% of cumulative
annual earnings from July 31, 1994.
In prior years, the Town of Blue Mountain, Mississippi issued long-term
bonds to finance the purchase of substantially all of the assets of certain
plant expansion projects and leased the projects to the Company and various
of its subsidiaries (with the Company and various of its wholly owned
subsidiaries as guarantors) at rentals sufficient to pay the debt service
on the bonds.
The following is a schedule by year of future maturities of notes payable
as of July 31, 1996:
Year Ending July 31:
1998 $1,926,000
1999 2,076,000
2000 2,226,000
2001 1,750,000
2002 2,150,000
Later years 8,850,000
$18,978,000
Notes to Consolidated Financial Statements
NOTE 4 - INCOME TAXES
The provision for income tax expense consists of the following:
1996 1995 1994
Current
Federal $2,284,869 $2,756,283 $3,221,911
Foreign 332,127 292,664 163,897
State 583,396 670,780 866,281
3,200,392 3,719,727 4,252,089
Deferred
Federal ( 340,572) ( 535,093) ( 855,699)
Operating loss carryforward (1,367,991) - -
Foreign ( 22,709) ( 2,142) 1,153
State ( 59,975) ( 37,895) ( 90,359)
(1,791,247) ( 575,130) ( 944,905)
Total Income Tax Provision $1,409,145 $3,144,597 $3,307,184
The provision for income tax expense for the fourth quarter and year ended
July 31, 1995, includes a charge of $263,000 reflecting a change in the
estimated amounts of depletion deductions and temporary differences between
financial reporting and tax reporting for the year ended July 31, 1994.
Notes to Consolidated Financial Statements
NOTE 4 - INCOME TAXES (Continued)
Principal reasons for variations between the statutory federal rate and the
effective rates were as follows:
1996 1995 1994
U.S. federal statutory income tax 34.00% 34.00% 34.00%
rate
Depletion deductions allowed for (27.57) (12.24) (12.48)
mining
State income taxes, net of federal
tax 6.78 5.68 4.42
benefit
Valuation allowance without income
tax 18.61 - -
benefit
Difference in effective tax rate of
foreign ( 0.11) ( 0.61) ( 0.16)
subsidiaries
Other ( 2.25) 1.38 ( 0.65)
29.46% 28.21% 25.13%
The consolidated balance sheets as of July 31, 1996 and 1995, included the
following tax effects of cumulative temporary differences:
1996 1995
Assets Liabilities Assets Liabilities
Depreciation $ - $1,528,266 $ - $1,552,223
Deferred Compensation 844,992 - 689,893 -
Postretirement Benefits 356,656 - 218,406 -
Trade Promotions and 269,200 - 179,662 -
Advertising
Accrued Expenses 408,986 - 377,368 -
Tax Credits 398,576 - 470,206 -
Operating Loss Carryforward 2,257,958 - - -
Other 146,156 - 101,012 -
Subtotal 4,682,524 1,528,266 2,036,547 1,552,223
Valuation Allowance (889,967) - - -
Total Deferred Taxes $3,792,557 $1,528,266 $2,036,547 $1,552,223
The valuation allowance represents operating loss carryforwards not
anticipated to be utilized. As of July 31, 1996, for federal income tax
purposes there were regular tax operating loss carryforwards of
approximately $5,816,000 which expire in the year 2011. A valuation
allowance has been established for $889,967 of the deferred tax benefit
related to those loss carryforwards for which it is considered more likely
than not the benefit will not be realized.
NOTE 5 - DEFERRED COMPENSATION
In December 1995, the Company adopted the Oil-Dri Corporation of America
Deferred Compensation Plan. Deferrals are no longer being made under the
original plan, The Oil-Dri Corporation of America Key Employee and
Directors Deferred Compensation Plan. The new plan permits Directors and
certain management employees to defer portions of their compensation and
earn interest on the deferred amounts. The compensation, which has been
deferred since the inception of the original plan, has been accrued as well
as interest thereon. The Company has purchased life insurance contracts on
some participants to partially fund the original plan. The new plan is
unfunded.
Notes to Consolidated Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY
On December 13, 1994, the stockholders of the Company approved an amendment
to the Company's Certificate of Incorporation authorizing 30,000,000 shares
of a new class of common stock, par value $.10, which has been designated
as Class A Common Stock, in addition to the currently authorized 15,000,000
shares of Common Stock and 7,000,000 shares of Class B Stock, each with a
par value of $.10. There are no Class A shares currently outstanding.
The Common Stock and Class B Stock are equal, on a per share basis, in all
respects except as to voting rights, conversion rights, cash dividends and
stock splits or stock dividends. The Class A Common Stock is equal, on a
per share basis, in all respects, to the Common Stock except as to voting
rights and stock splits or stock dividends. In the case of voting rights,
Common Stock is entitled to one vote per share and Class B Stock is
entitled to ten votes per share, while Class A Common Stock generally has
no voting rights. Common Stock and Class A Common Stock have no conversion
rights. Class B Stock is convertible on a share-for-share basis into
Common Stock at any time and is subject to mandatory conversion under
certain circumstances.
Common Stock is entitled to cash dividends, as and when declared or paid,
equal to 133 1/3% on a per share basis of the cash dividend paid on Class B
Stock. Class A Common Stock is entitled to cash dividends on a per share
basis equal to the cash dividend on Common Stock. Additionally, while shares of
Common Stock, Class A Common Stock and Class B Stock are outstanding, the
sum of the per share cash dividend paid on shares of Common Stock and Class
A Common Stock, must be equal to at least 133 1/3% of the sum of the per
share cash dividend paid on Class B Stock and Class A Common Stock. See
Note 3 regarding dividend restrictions.
Shares of Common Stock, Class A Common Stock and Class B Stock are equal in
respect of all rights to dividends (other than cash) and distributions in
the form of stock or other property (including stock dividends and split-
ups) in each case in the same ratio except in the case of a Special Stock
Dividend. The Special Stock Dividend, which can be issued only once, is
either a dividend of one share of Class A Common Stock for each share of
Common Stock and Class B Stock outstanding or a recapitalization, in which
half of each outstanding share of Common Stock and Class B Stock would be
converted into a half share of Class A Common Stock.
All per share amounts included in the financial statements and notes
reflect the dilutive effect of all common share equivalents. See Note 7
for information regarding common share equivalents.
In June 1996, the Board of Directors of the Company authorized the
repurchase, from time to time, of up to 400,000 shares of the Company's
stock. This authorization, in addition to previous authorizations, total
700,000 shares. As of July 31, 1996, 337,337 shares have been repurchased
under these authorizations.
NOTE 6 - STOCKHOLDERS' EQUITY (Continued)
The following reflects the changes in treasury stock (Common) over the last
three years:
Shares Amount
Balance, July 31, 1993 190,556 $2,367,807
Purchased during fiscal 1994 91,190 1,895,364
Reissued during fiscal 1994 (50) (602)
Balance, July 31, 1994 281,696 4,262,569
Purchased during fiscal 1995 50,500 825,475
Balance, July 31, 1995 332,196 5,088,044
Purchased during fiscal 1996 166,871 2,433,710
Balance, July 31, 1996 499,067 $7,521,754
NOTE 7 - STOCK OPTION PLANS
The Company instituted the Oil-Dri Corporation of America 1995 Long Term
Incentive Plan during the fiscal year ended July 31, 1996. The Plan was
approved by the stockholders of the Company at the annual meeting on
December 12, 1995. All shares of stock awarded under the 1995 Plan will be
Class A Common Stock, except that, if there is no Class A Common Stock
issued or publicly traded on a securities exchange when such awards are
exercised, the shares awarded would be Common Stock. The Plan provides for
various types of awards. During the fiscal year ended July 31, 1996, 2,000
shares of restricted stock, which vest on May 1, 1998, were issued under
the Plan.
The Oil-Dri Corporation of America 1988 Stock Option Plan terminated on
December 12, 1995, for purposes of future grants. The outstanding options
under this plan will remain outstanding and exercisable in accordance with
their respective terms.
The 1981 Oil-Dri Corporation of America Stock Option Plan expired on
October 31, 1991. No options were outstanding as of July 31, 1996.
Notes to Consolidated Financial Statements
NOTE 7 - STOCK OPTION PLANS (Continued)
A summary of option transactions under the plans follows:
1981 Option Plan 1988 Option Plan
Number of Shares Number of Shares
(Weighted Average Option (Weighted Average Option
Price) Price)
1996 1995 1994 1996 1995 1994
Outstanding, - - 61,150 267,409 138,659 158,785
Beginning of Year - - $(10.80) $(18.66) $(19.61) $(19.17)
Granted - - - - 197,250 4,000
- - - - $(19.22) $(23.00)
Exercised - - 29,515 - - 21,126
- - $(10.80 - - $(17.05)
Canceled/Terminated - - 31,635 16,500 68,500 3,000
- - $(10.80) $(19.13) $(22.21) $(19.00)
Outstanding, - - - 250,909 267,409 138,659
End of Year - - - $(18.63) $(18.66) $(19.61)
1995
Option
Plan
Number
of
Shares
(Weight
ed
Average
Option
Price)
1996
Outstanding, -
Beginning of Year -
Granted 199,000
$(14.93)
Exercised -
-
Canceled/Terminated 4,000
$(15.13)
Outstanding, 195,000
End of Year $(14.92)
The Company has reserved 303,000 shares of Common Stock for future grants
and issuances under the Oil-Dri Corporation of America 1995 Long Term
Incentive Plan.
As of July 31, 1996, a total of 147,509 options are exercisable under the
1988 Option Plan. No options are exercisable under the Oil-Dri Corporation
of America 1995 Long Term Incentive Plan as of July 31, 1996.
Combined Plans
Number of Shares
(Weighted Average Option Price)
1996 1995 1994
Outstanding, Beginning of Year 267,409 138,659 219,935
$(18.66) $(19.61) $(16.84)
Granted 199,000 197,250 4,000
$(14.93) $(19.22) $(23.00)
Exercised - - 50,641
- - $(13.41)
Canceled/Terminated 20,500 68,500 34,635
$(18.34) $(22.21) $(11.51)
Outstanding, End of Year 445,909 267,409 138,659
$(17.00) $(18.66) $(19.61)
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have defined benefit pension plans for
eligible salaried and hourly employees. Benefits are based on a formula of
years of credited service and levels of compensation or stated amounts for
each year of credited service. The assets of these plans are invested in
various high quality marketable securities.
The net periodic pension cost for the years ended July 31, 1996, 1995 and
1994, consists of the following:
1996 1995 1994
Service cost $349,232 $326,650 $325,626
Interest cost on projected benefit
obligations 426,730 384,901 358,027
(Earnings) losses on plan assets (561,276) (836,171) 80,058
Net amortization and deferral 153,900 495,586 (422,948)
Net pension cost $368,586 $370,966 $340,763
Notes to Consolidated Financial Statements
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
The funded status of the plans at July 31 is as follows:
1996 1995
Actuarial Present Value of Benefit
Obligations
Accumulated Benefit Obligations
Vested $4,329,417 $4,076,780
Nonvested 457,959 491,222
Total Accumulated Benefit Obligations $4,787,376 $4,568,002
Projected Benefit Obligations $6,287,994 $5,989,916
Plan Assets at Fair Value 5,706,087 5,334,851
Deficiency of Plan Assets Over Projected
Benefit Obligations (581,907) (655,065)
Unrecognized Net Gain (626,115) (197,423)
Unrecognized Prior Service Cost 574,726 614,402
Unrecognized Net Excess Plan Assets as of
August 1, 1987 Being Recognized
Principally (317,800) (344,424)
Over 21 Years
Adjustment Required to Recognize Minimum ( 91,161) (183,547)
Liability
Accrued Pension Included in
Noncurrent Liabilities - Other $(1,042,257) $( 766,057)
Assumptions used in the previous calculations are as follows:
1996 1995
Discount rate 7.50% 7.25%
Rate of increase in compensation 5.00% 5.00%
levels
Long-term expected rate of return on 8.00% 8.00%
assets
Notes to Consolidated Financial Statements
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
The Company has funded the plans based upon actuarially determined
contributions that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee
Retirement Income Security Act of 1974 (ERISA), as amended.
For the years ended July 31, 1996, 1995 and 1994, the Company maintained a
profit sharing/401(k) savings plan under which the Company matches a
portion of employee contributions. The plan is available to essentially
all domestic employees who have completed one year of continuous service
and are at least 21 years of age. The Company's contributions to this
plan, and to similar plans maintained by the Company's foreign
subsidiaries, were $140,967, $137,570 and $142,030 for fiscal years 1996,
1995 and 1994, respectively.
Postretirement Benefits
In addition to providing pension benefits, the Company provides certain
medical benefits, until a participant is eligible for Medicare, to domestic
salaried employees who elect early retirement and meet minimum age, service
and other requirements. The Company reserves the right to amend or
terminate this plan at any time. The plan is contributory and contains
cost-sharing features such as deductibles and coinsurance.
SFAS No. 106 Employers Accounting for Postretirement Benefits Other Than
Pensions requires, among other things, the accrual of retirement benefit
costs over the active service period of employees to the date of full
eligibility for these benefits. This standard requires that the
accumulated plan benefit obligation existing at the date of adoption
(transition obligation) either be recognized immediately or deferred and
amortized over future periods.
The Company is amortizing the resulting transition obligation over 20
years. The adoption of this standard did not have a material effect on the
consolidated results of operations or financial position of the Company.
NOTE 9 - CONTINGENT LIABILITIES
The Company is involved in various legal claims of a nature which are
considered normal to its business, including patent and intellectual
property issues. While it is not feasible to predict or determine the
final outcome of these issues, management believes that they will not have
a material adverse effect on the financial position or liquidity of the
Company.
Notes to Consolidated Financial Statements
NOTE 10 - LEASES
The Company's mining operations are conducted on leased or owned property.
These leases generally provide the Company with the right to mine as long
as the Company continues to pay a minimum monthly rental, which is applied
against the per ton royalty when the property is mined.
The Company leases its corporate offices (approximately 20,000 square feet)
in Chicago, Illinois and additional office facilities in Europe. The
office space in Chicago is subject to leases expiring in 2008. Office
facilities in Europe are leased on a year-to-year basis.
In addition, the Company leases vehicles, data processing and other office
equipment. In most cases, the Company expects that, in the normal course
of business, leases will be renewed or replaced by other leases.
The following is a schedule by year of future minimum rental requirements
under operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of July 31, 1996:
Year Ending July 31:
1997 $3,628,000
1998 2,237,000
1999 1,664,000
2000 990,000
2001 901,000
Later years 4,289,000
$13,709,000
The following schedule shows the composition of total rental expense for
all operating leases, including those with terms of one month or less which
were not renewed:
1996 1995 1994
Transportation equipment $3,770,000 $3,439,000 $2,710,000
Office facilities 377,000 373,000 184,000
Mining properties
Minimum 168,000 180,000 196,000
Contingent 239,000 162,000 183,000
Other 688,000 649,000 565,000
$5,242,000 $4,803,000 $3,838,000
Notes to Consolidated Financial Statements
NOTE 11 - OTHER CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows:
1996 1995 1994
Interest $1,706,424 $1,750,054 $1,390,014
Income Taxes $1,352,594 $4,013,110 $5,624,987
NOTE 12 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected information for 1996 and 1995 is as follows:
Fiscal 1996 Quarter Ended
(Thousands Except Per Share Amounts)
Oct. 31 Jan. 31 April 30 July 31 Total
Net Sales $39,308 $41,797 $36,427 $36,255 $153,787
Gross Profit 11,659 12,322 11,153 10,923 46,057
Net Income 1,413 477 670 814 3,374
Net Income Per $0.21 $0.07 $0.10 $0.12 $0.50
Share
Fiscal 1995 Quarter Ended
(Thousands Except Per Share Amounts)
Oct. 31 Jan. 31 April 30 July 31 Total
Net Sales $39,025 $40,157 $37,179 $36,538 $152,899
Gross Profit 12,394 12,168 10,328 9,741 44,631
Net Income 2,819 2,573 1,540 1,071 8,003
Net Income Per $0.41 $0.37 $0.22 $0.15 $1.15
Share
INDEPENDENT AUDITOR'S REPORT
Stockholders and Board of Directors
Oil-Dri Corporation of America
We have audited the consolidated statements of financial position of
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1996
and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended July 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1996
and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended
July 31, 1996 in conformity with generally accepted accounting
principles.
BLACKMAN KALLICK BARTELSTEIN, LLP
Chicago, Illinois
August 30, 1996
Common Stock
The following table sets forth the closing high and low prices as quoted on
the New York Stock Exchange for the period indicated.
The number of holders of record of Common Stock on July 31, 1996 was 1,281.
There is no established public trading market for the Class B Stock.
The number of holders of record of Class B Stock on July 31, 1996 was 21.
Dividends
Amount Per Share
Date Paid Common Class B
Quarterly 09/15/95 $0.08 $0.06
Quarterly 12/15/95 $0.08 $0.06
Quarterly 03/15/96 $0.08 $0.06
Quarterly 06/14/96 $0.08 $0.06
Market
Prices
Fiscal 1996 Closing Prices
High Low
1st Quarter 16 141/8
2nd Quarter 161/8 14
3rd Quarter 16 131/4
4th Quarter 147/8 12
Market
Prices
Fiscal 1995 Closing Prices
High Low
1st Quarter 20 173/8
2nd Quarter 191/8 163/4
3rd Quarter 183/8 157/8
4th Quarter 167/8 141/8
Board of Directors
Officers
Senior Management
Board of Directors
Richard M. Jaffee, Chairman and Chief Executive Officer
Daniel S. Jaffee, President and Chief Operating Officer
Robert D. Jaffee, Chairman Amco Corporation
J. Steven Cole, President, Cole & Associates, Chairman Sav-A-Life Systems,
Inc.
Ronald B. Gordon, President, Gordon Investment Group
Edgar D. Jannotta, Senior Director, William Blair & Company, L.L.C.
Joseph C. Miller, Vice Chairman
Paul J. Miller, Partner, Sonnenschein Nath & Rosenthal
Haydn H. Murray, Professor Emeritus of Geology, Indiana University
Allan H. Selig, President, Milwaukee Brewers Baseball Club, Inc., President
and Chairman, Selig Executive Leasing, Inc., Chairman of the Executive
Council of Major Leagvue Baseball
Officers
Richard M. Jaffee, Chairman and Chief Executive Officer
Daniel S. Jaffee, President and Chief Operating Officer
Joseph C. Miller, Vice Chairman
Michael L. Goldberg, Vice President and Chief Financial Officers
Richard V. Hardin, Group Vice President, Technology
Norman B. Gershon, Vice President, International Operations, Managing
Director, Oil-Dri S.A.
Daniel J. Jones, Vice President, Favorite Products, Ltd.
Dennis E. Peterson, President, Oil-Dri Transportation Company
Thomas F. Cofsky, Vice President, Logistics, Quality & Service
James T. Davis, Vice President, Manufacturing
Donald J. Deegan, Vice President, Corporate Development & Planning
Steven M. Levy, Vice President and General Manager, Consumer Products Group
Louis T. Bland, Jr., Legal Counsel, Secretary
Richard L. Pietrowski, Treasurer
Senior Management
Elwyn J. Allbritton, Vice President, Operational Development
Charles M. Boland, General Manager, Agrisorbents Products Group
Wade R. Bradley, General Manager, Industrial & Environmental Product Group
Karen Jaffee Cofsky, Director, Human Resources
Sam J. Colello, Director, Information Systems
Brian P. Curtis, Assistant General Counsel
B. Fielden Fraley, General Manager, Fluids Purification Group
Fred G. Heivilin, Vice President, Raw Materials Development
Heidi M. Jaffee, Corporate Attorney, Assistant Secretary
Richard D. Johnsonbaugh, Eastern Regional Manager, Manufacturing
Kelly A. McGrail, Manager, Corporate Communications
William F. Moll, Vice President, Research & Development
V.R. Roskam, Vice President, Agrisorbents Products Group
William O. Thompson, Western Regional Manager, Manufacturing
Corporate Headquarters
Oil-Dri Corporation of America
410 North Michigan Avenue, Suite 400
Chicago, Illinois 60611-4211
(312) 321-1515
Investor Inquiries
Securities analyst, portfolio managers representatives of financial
institutions seeking information about the corporation should contact Kelly
McGrail, Manager, Corporate Communications, at the corporate headquarters.
Stockholders with inquiries related to stockholder records, stock
transfers, change of ownership, change of address or dividend payments
should write to Kelly McGrail at corporate headquarters, or contact the
Company's registrar and transfer agent:
Harris Trust and Savings Bank
Shareholder Services Department
311 W. Monroe, 11th Floor,
P.O. Box A-3504
Chicago, Illinois 60690-9502
Stock Listing
Oil-Dri Corporation of America's Common Stock is listed under the ticker
symbol ODC on the New York Stock Exchange. The corporation's daily trading
activity, stock price and dividend information are in the financial
sections of most major newspapers.
Annual Meeting
Oil-Dri Corporation of America will hold its 1996 Annual Meeting of
Stockholders on Tuesday, December 10, 1996 at 10:30 a.m. (Local Time) at
the Standard Club, 320 South Plymouth Court, Chicago, Illinois
Independent Public Accountants
Blackman Kallick Bartelstein, LLP
Legal Counsel
Sonnenschein Nath & Rosenthal
Oil-Dri Subsidiaries
Oil-Dri Corporation of Georgia Oil-Dri U.K. Limited
Georgia, U.S.A. Wisbech, United Kingdom
Oil-Dri Production Company Blue Mountain Production Company
Mississippi and Oregon Mississippi, U.S.A.
Oil-Dri Transportation Company Favorite Products Company, Ltd.
Georgia, U.S.A. Quebec, Canada
Oil-Dri S.A.
Coppet, Switzerland