SEC Filing - Oil-Dri Corporation Of America

SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended January 31, 2000 Commission File Number 0-8675 OIL-DRI CORPORATION OF AMERICA ------------------------------ (Exact name of the registrant as specified in its charter) DELAWARE 36-2048898 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 410 North Michigan Avenue CHICAGO, ILLINOIS 60611 -------------------------- ----- (Address of principal executive offices) (Zip Code) The Registrant's telephone number, including area code: (312) 321-1515 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Common Stock - 5,470,252 Shares (Including 1,282,807 Treasury Shares) Class B Stock - 1,765,266 Shares (Including 342,241 Treasury Shares)

2 CONTENTS PAGE PART I ITEM 1: Financial Statements And Supplementary Data..................3 - 12 ITEM 2: Management Discussion And Analysis Of Financial Condition And The Results Of Operations................................13 - 18 ITEM 3: Quantitative And Qualitative Disclosures About Market Risk...18 PART II ITEM 4: Submission Of Matters To A Vote Of Security Holders..........19 ITEM 6: Exhibits And Reports On Form 8-K.............................19 SIGNATURES...........................................................20

3 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS) (UNAUDITED) --------------------- JANUARY 31 JULY 31 ASSETS 2000 1999 ` --------------------- CURRENT ASSETS Cash and Cash Equivalents $ 2,988 $ 4,362 Investment Securities 1,219 1,225 Accounts Receivable, less allowance of $397 and $358 at January 31, 2000 and July 31, 1999, respectively 27,201 25,365 Inventories 16,360 15,165 Prepaid Expenses 7,919 6,963 -------- -------- TOTAL CURRENT ASSETS 55,687 53,080 -------- -------- PROPERTY, PLANT AND EQUIPMENT - AT COST Cost 135,846 132,479 Less Accumulated Depreciation and Amortization (73,811) (69,631) -------- -------- TOTAL PROPERTY, PLANT AND EQUIPMENT, NET 62,035 62,848 -------- -------- OTHER ASSETS Goodwill & Intangibles, net of accumulated amortization of $2,363 and $2,128 at January 31, 2000, and July 31, 1999, respectively 9,716 9,780 Deferred Income Taxes 3,040 3,045 Other 6,004 4,997 -------- -------- TOTAL OTHER ASSETS 18,760 17,822 -------- -------- TOTAL ASSETS $136,482 $133,750 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.

4 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS) (UNAUDITED) ------------------------ JANUARY 31 JULY 31 LIABILITIES & STOCKHOLDERS' EQUITY 2000 1999 ------------------------ CURRENT LIABILITIES Current Maturities of Notes Payable $ 2,080 $ 2,226 Accounts Payable 4,715 4,842 Dividends Payable 473 484 Accrued Expenses 8,309 8,387 --------- --------- TOTAL CURRENT LIABILITIES 15,577 15,939 --------- --------- NONCURRENT LIABILITIES Notes Payable 42,063 38,150 Deferred Compensation 3,086 3,206 Other 2,129 1,948 --------- --------- TOTAL NONCURRENT LIABILITIES 47,278 43,304 --------- --------- TOTAL LIABILITIES 62,855 59,243 --------- --------- STOCKHOLDERS' EQUITY Common Stock, par value $.10 per share, issued 5,470,252 shares at January 31, 2000, and July 31, 1999 547 547 Class B Stock, par value $.10 per share, issued 1,765,266 shares at January 31, 2000, and July 31, 1999 177 177 Additional Paid-In Capital 7,698 7,702 Retained Earnings 91,295 90,430 Restricted Unearned Stock Compensation (31) (9) Cumulative Translation Adjustment (1,172) (1,159) --------- --------- 98,514 97,688 Less Treasury Stock, at cost (1,282,807 Common shares and 342,241 Class B shares at January 31, 2000, and 1,163,764 Common shares and 342,241 Class B shares at July 31, 1999) (24,887) (23,181) --------- --------- TOTAL STOCKHOLDERS' EQUITY 73,627 74,507 --------- --------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 136,482 $ 133,750 ========= ========= The accompanying notes are an integral part of the consolidated financial statements.

5 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) (UNAUDITED) ------------------------- FOR THE SIX MONTHS ENDED JANUARY 31 ------------------------- 2000 1999 ------------------------- NET SALES $ 91,052 $ 91,105 Cost Of Sales 64,765 61,812 --------- --------- GROSS PROFIT 26,287 29,293 Selling, General And Administrative Expenses 21,200 21,961 Restructuring Charge 1,239 -- --------- --------- INCOME FROM OPERATIONS 3,848 7,332 OTHER INCOME (EXPENSE) Interest Expense (1,623) (1,594) Interest Income 109 260 Other, Net 228 21 --------- --------- TOTAL OTHER EXPENSE, NET (1,286) (1,313) --------- --------- INCOME BEFORE INCOME TAXES 2,562 6,019 Income Taxes 743 1,715 --------- --------- NET INCOME 1,819 4,304 RETAINED EARNINGS Balance at Beginning of Year 90,430 85,158 Less Cash Dividends Declared 954 948 --------- --------- RETAINED EARNINGS - JANUARY 31 $ 91,295 $ 88,514 ========= ========= NET INCOME PER SHARE BASIC $ 0.32 $ 0.73 ========= ========= DILUTIVE $ 0.31 $ 0.72 ========= ========= AVERAGE SHARES OUTSTANDING BASIC 5,684 5,862 ========= ========= DILUTIVE 5,851 5,979 ========= ========= The accompanying notes are an integral part of the consolidated financial statements.

6 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS OF DOLLARS) (UNAUDITED) ------------------------- FOR THE SIX MONTHS ENDED JANUARY 31 ------------------------- 2000 1999 ------------------------- NET INCOME $ 1,819 $ 4,304 OTHER COMPREHENSIVE INCOME: Cumulative Translation Adjustments (13) (40) -------- -------- TOTAL COMPREHENSIVE INCOME $ 1,806 $ 4,264 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.

7 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) (UNAUDITED) ------------------------- FOR THE THREE MONTHS ENDED JANUARY 31 ------------------------- 2000 1999 ------------------------- NET SALES $ 46,503 $ 47,435 Cost Of Sales 33,796 32,227 --------- --------- GROSS PROFIT 12,707 15,208 Selling, General And Administrative Expenses 10,783 11,385 Restructuring Charge 1,239 -- --------- --------- INCOME FROM OPERATIONS 685 3,823 OTHER INCOME (EXPENSE) Interest Expense (828) (802) Interest Income 48 116 Other, Net 224 46 --------- --------- TOTAL OTHER EXPENSE, NET (556) (640) --------- --------- INCOME BEFORE INCOME TAXES 129 3,183 Income Taxes 37 907 --------- --------- NET INCOME $ 92 $ 2,276 ========= ========= NET INCOME PER SHARE BASIC $ 0.02 $ 0.39 ========= ========= DILUTIVE $ 0.02 $ 0.38 ========= ========= AVERAGE SHARES OUTSTANDING BASIC 5,646 5,843 ========= ========= DILUTIVE 5,804 6,055 ========= ========= The accompanying notes are an integral part of the consolidated financial statements.

8 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS OF DOLLARS) (UNAUDITED) ------------------------- FOR THE THREE MONTHS ENDED JANUARY 31 ------------------------- 2000 1999 ------------------------- NET INCOME $ 92 $ 2,276 OTHER COMPREHENSIVE INCOME: Cumulative Translation Adjustments (3) (11) -------- -------- TOTAL COMPREHENSIVE INCOME $ 89 $ 2,265 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.

9 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) (UNAUDITED) ----------------------- FOR THE SIX MONTHS ENDED JANUARY 31 ----------------------- CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999 ----------------------- NET INCOME $ 1,819 $ 4,304 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 4,547 4,261 Non-Cash Restructuring Charge 1,239 -- Provision for bad debts 59 39 (Increase) Decrease in: Accounts Receivable (1,895) (3,783) Inventories (1,195) 233 Prepaid Expenses and Taxes (956) (544) Deferred Income Taxes 4 (43) Other Assets (1,178) (556) Increase (Decrease) in: Accounts Payable (127) (322) Accrued Expenses (1,317) (402) Deferred Compensation (120) (126) Special Charge Reserve -- (62) Other 181 281 -------- -------- TOTAL ADJUSTMENTS (758) (1,024) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,061 3,280 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (3,493) (3,565) Proceeds from sale of property, plant and equipment 12 22 Purchases of Investment Securities (1,219) (1,225) Dispositions of Investment Securities 1,225 1,173 Other (8) (14) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (3,483) (3,609) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal Payments on Long-Term Debt (1,246) (51) Proceeds from Issuance of Long-Term Debt 5,013 400 Dividends Paid (965) (883) Purchases of Treasury Stock (1,727) (1,131) Other (27) (17) -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,048 (1,682) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,374) (2,011) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,362 9,410 -------- -------- CASH AND CASH EQUIVALENTS, JANUARY 31 $ 2,988 $ 7,399 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.

10 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF STATEMENT PRESENTATION The financial statements and the related notes are condensed and should be read in conjunction with the consolidated financial statements and related notes for the year ended July 31, 1999, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions are eliminated. The unaudited financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the statements contained herein. Certain items in prior year financial statements have been reclassified to conform to the presentation used in fiscal 2000. 2. INVENTORIES The composition of inventories is as follows (in thousands): ---------------------------- JANUARY 31 JULY 31 (UNAUDITED) (UNAUDITED) ---------------------------- 2000 1999 ---------------------------- Finished goods $ 9,468 $ 9,593 Packaging 5,062 4,267 Other 1,830 1,305 -------- -------- $ 16,360 $ 15,165 ======== ======== Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method.

11 3. RESTRUCTURING CHARGE During the second quarter of fiscal 2000, the Company recorded a pre-tax restructuring charge of $1,239,000 against income from operations, as follows: Severance costs $604,000 Non-performing asset 635,000 ---------- Restructuring charge $1,239,000 ========== The severance costs are related to a realignment of the Company's personnel costs to bring them more in line with current levels of sales and profitability. The severance accrual represents 13 employees to be terminated and will be completed by the fourth quarter of fiscal 2000. The majority of the positions to be terminated are at the selling, general and administrative level. The net book value of the non-performing asset consists of specific production equipment that has been idled. The equipment had been used in the Agricultural Products segment. Because management does not rely on segment asset allocation, information regarding the results of operations for this specific asset cannot be identified. However, the results are included in cost of sales. The net book value of this asset is approximately 1% of the net book value of all fixed assets outstanding as of January 31, 2000. 4. NEW ACCOUNTING STANDARDS In June, 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" which requires companies to recognize all derivatives as assets or liabilities measured at their fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and whether it qualifies for hedge accounting. Although the impact of this statement has not been fully assessed, the Company believes adoption of this statement, as amended by SFAS No. 137, which will occur by July 2001, will not have a material financial statement impact.

12 5. SEGMENT REPORTING The Company has four reportable operating segments: Consumer Products, Fluids Purification Products, Agricultural Products, and Industrial and Automotive Products. These segments are managed separately because each business has different economic characteristics. The accounting policies of the segments are the same as those described in Note 1 of the Company's Annual Report for the year ended July 31, 1999 on Form 10-K filed with the Securities and Exchange Commission. Because management does not rely on segment asset allocation, information regarding segment assets is not meaningful and therefore is not reported. ------------------------------------- Six Months Ended January 31 ------------------------------------- Net Sales Operating Income ------------------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- (IN THOUSANDS) Consumer Products....................... $60,817 $59,926 $ 9,133 $ 9,590 Fluids Purification Products............ 12,132 11,579 2,294 2,891 Agricultural Products................... 9,037 11,209 906 2,104 Industrial and Automotive Products...... 9,066 8,391 537 251 ------- ------- ------- ------- TOTAL SALES/OPERATINGINCOME............. $91,052 $91,105 $12,870 $14,836 ======= ======= ------- ------- Less: Restructuring Charge(1)............................. 1,239 0 Corporate Expenses.................................. 7,555 7,483 Interest Expense, net of Interest Income............ 1,514 1,334 ------- ------- INCOME BEFORE INCOME TAXES................................. 2,562 6,019 ------- ------- Income Taxes............................................... 743 1,715 ------- ------- NET INCOME................................................. $1,819 $4,304 ======= ======= ------------------------------------- Three Months Ended January 31 ------------------------------------- Net Sales Operating Income ------------------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- (IN THOUSANDS) Consumer Products....................... $31,574 $32,050 $ 4,302 $ 4,945 Fluids Purification Products............ 5,729 5,572 983 1,379 Agricultural Products................... 4,734 5,608 405 1,023 Industrial and Automotive Products...... 4,466 4,205 256 187 ------- ------- ------- ------- TOTAL SALES/OPERATINGINCOME............. $46,503 $47,435 $ 5,946 $ 7,534 ======= ======= ------- ------- Less: Restructuring Charge(1)............................. 1,239 0 Corporate Expenses.................................. 3,798 3,665 Interest Expense, net of Interest Income............ 780 686 ------- ------- INCOME BEFORE INCOME TAXES................................. 129 3,183 ------- ------- Income Taxes............................................... 37 907 ------- ------- NET INCOME................................................. $ 92 $ 2,276 ======= ======= (1) See Note 3 above for a discussion of the restructuring charge recorded in the second quarter of fiscal 2000.

13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JANUARY 31, 2000 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1999 RESULTS OF OPERATIONS Consolidated net sales for the six months ended January 31, 2000 were $91,052,000, a decrease of 0.1% versus net sales of $91,105,000 in the first six months of fiscal 1999. Net income for the first six months of fiscal 2000 was $1,819,000, a decrease of 57.7% from $4,304,000 earned in the first six months of fiscal 1999. Basic net income per share for the first six months of fiscal 2000 was $0.32 and diluted net income per share was $0.31, versus $0.73 basic net income per share and $0.72 diluted net income per share earned in the first six months of fiscal 1999. The decrease was due to a restructuring charge recorded in the second quarter of fiscal 2000, manufacturing costs associated with the startup of the Church & Dwight supply arrangement, the decline in demand for agricultural carriers, a decrease in profitability in the Fluids Purification Products segment, and increases in fuel prices. The restructuring charge, which covered the costs of severance for certain eliminated positions and the write-off of certain non-performing assets, reduced income before taxes by $1,239,000, net income by $879,000, and net income per share by $0.15 (basic and diluted) for the first six months of fiscal 2000. Net sales of the Consumer Products segment for the first six months of fiscal 2000 were $60,817,000, an increase of 1.5% over net sales of $59,926,000 in the first six months of fiscal 1999. This growth was primarily due to incremental sales to Church & Dwight and increased sales in the mass merchandiser market, partially offset by reduced sales in the grocery market. Consumer Products' operating income decreased 4.8% from $9,590,000 in the first six months of fiscal 1999 to $9,133,000 in the first six months of fiscal 2000 due to an unfavorable sales mix, and manufacturing costs associated with the startup of the Church & Dwight supply arrangement incurred in the first six months of fiscal 2000, partially offset by a decrease in advertising expenditures. Net sales of the Fluids Purification Products segment for the first six months of fiscal 2000 were $12,132,000, an increase of 4.8% over net sales of $11,579,000 in the first six months of fiscal 1999. Increased domestic sales of PURE-FLO(R) bleaching clays were the primary driver of the segment's growth in sales, partially offset by competitive pressures in many of our overseas markets that have led to some defensive pricing strategies to maintain market share. Fluids Purification Products' operating income decreased 20.7% from $2,891,000 in the first six months of fiscal 1999 to $2,294,000 in the first six months of fiscal 2000 due to a reduction in gross profit margins in our overseas markets resulting from the defensive pricing strategies mentioned previously, unfavorable manufacturing variances and costs associated with the startup of a new line of rheological products. Net sales of the Agricultural Products segment for the first six months of fiscal 2000 were $9,037,000, a decrease of 19.4% from net sales of $11,209,000 in the first six months of fiscal 1999. This overall decline is due primarily to sharply reduced demand for agricultural carriers as a result of a depressed farm economy. Agricultural Products' operating income decreased 56.9% from $2,104,000 in the first

14 six months of fiscal 1999 to $906,000 in the first six months of fiscal 2000, primarily due to a decrease in sales of agricultural carriers, and unfavorable sales mix and manufacturing variances, partially offset by the Company's return on investment in Kamterter II. Net sales of the Industrial and Automotive Products segment for the first six months of fiscal 2000 were $9,066,000, an increase of 8.0% from net sales of $8,391,000 in the first six months of fiscal 1999 due to increased sales volume of clay-based industrial and automotive products. Industrial and Automotive Products' operating income increased 113.9% from $251,000 in the first six months of fiscal 1999 to $537,000 in the first six months of fiscal 2000 due to incremental gross profit resulting from the increase in sales volume and price increases put into effect during the past year, combined with a decrease in operating expenses. Consolidated gross profit as a percentage of net sales for the first six months of fiscal 2000 decreased to 28.9% from 32.2% in the first six months of fiscal 1999 due to an unfavorable sales mix in the Consumer and Agricultural Products segments, defensive pricing strategies in the overseas markets of the Fluids Purification Products segment, manufacturing costs associated with the startup of the Church & Dwight supply arrangement incurred in the first six months of fiscal 2000, and increases in fuel prices. Operating expenses as a percentage of net sales increased to 24.6% for the first six months of fiscal 2000 from 24.1% in the first six months of fiscal 1999. This increase is due primarily to the pre-tax restructuring charge of $1,239,000 recorded in the second quarter of fiscal 2000, partially offset by a lower level of advertising expenses in fiscal 2000 versus fiscal 1999. Interest expense increased $29,000, while interest income for the first six months of fiscal 2000 decreased $151,000 from fiscal 1999 levels, primarily due to lower levels of funds available for investment. The Company's effective tax rate was 29.0% of pre-tax income in the first six months of fiscal 2000 versus 28.5% in the first six months of fiscal 1999. Total assets of the Company increased $2,732,000 or 2.0% during the first six months of fiscal 2000. Current assets increased $2,607,000 or 4.9% from fiscal 1999 year-end balances primarily due to increases in accounts receivable and inventory levels, partially offset by decreased cash and cash equivalents. Property, plant and equipment, net of accumulated depreciation, decreased $813,000 or 1.3% during the first half as depreciation expense exceeded new capital expenditures. Total liabilities increased $3,612,000 or 6.1% during the first six months of fiscal 2000 due primarily to increased levels of long term notes payable, partially offset by a decrease in current liabilities. Current liabilities decreased $362,000 or 2.3% from fiscal 1999 year-end balances due to a decrease in the current maturitites of notes payable, accounts payable and accrued expenses. EXPECTATIONS The Company anticipates net sales for the remainder of fiscal 2000 will be approximately the same as net sales in the comparable period of fiscal 1999. Sales of branded cat box absorbents are expected to increase slightly as existing products and new product introductions gain incremental distribution. However, sales growth

15 of cat box absorbents is subject to continuing competition for shelf space in the grocery, mass merchandiser and club markets. Sales of the Company's fluids purification products and industrial and automotive products are also expected to increase slightly in the remainder of fiscal 2000 from the comparable period in fiscal 1999. Sales of the Company's agricultural products are expected to be lower in the remainder of fiscal 2000 than in the comparable period of fiscal 1999 due primarily to low domestic crop prices and depressed export demand. LIQUIDITY AND CAPITAL RESOURCES The current ratio increased to 3.6 at January 31, 2000 from 3.3 at July 31, 1999. Working capital increased $2,969,000 during the first six months of fiscal 2000 to $40,110,000 due to both higher levels of current assets and lower levels of current liabilities, as previously discussed. During the first six months of fiscal 2000, the balances of cash, cash equivalents and investment securities decreased $1,380,000. Cash provided by operating activities ($1,061,000), increases in the Company's line of credit ($5,000,000), and cash on hand ($4,362,000) were used to fund capital expenditures ($3,493,000), purchases of the Company's common stock ($1,727,000), principal payments on long-term debt ($1,246,000), and dividend payments ($965,000). Total cash and investment balances held by the Company's foreign subsidiaries at January 31, 2000 and July 31, 1999 were $2,705,000 and $2,692,000, respectively. THREE MONTHS ENDED JANUARY 31, 2000 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1999 RESULTS OF OPERATIONS Consolidated net sales for the three months ended January 31, 2000 were $46,503,000, a decrease of 2.0% over net sales of $47,435,000 in the second quarter of fiscal 1999. Net income for the three months ended January 31, 2000 was $92,000, a decrease of 96.0% from $2,276,000 earned in last year's quarter. Net income per share for the three months ended January 31, 2000 was $0.02 (basic and diluted) versus $0.39 basic net income per share and $0.38 diluted net income per share earned in the same period last year. The decrease was due to a restructuring charge recorded in the second quarter of fiscal 2000, ongoing manufacturing costs associated with the startup of the Church & Dwight supply arrangement, the decline in demand for agricultural carriers, a decrease in profitability in the Fluids Purification Products segment, and increases in fuel prices. The restructuring charge, which covered the costs of severance for certain eliminated positions and the write-off of certain non-performing assets, reduced income before income taxes by $1,239,000, net income by $879,000, and net income per share by $0.15 (basic and diluted) for the second quarter of fiscal 2000. Net sales of the Consumer Products segment for the three months ended January 31, 2000 were $31,574,000, a decrease of 1.5% over net sales of $32,050,000 in the second quarter of fiscal 1999. This decrease was primarily due to decreased sales in the grocery market, partially offset by increased sales in the mass merchandiser market and incremental sales to Church & Dwight. Consumer Products' operating income decreased 13.0% from $4,945,000 in the second quarter of fiscal 1999 to $4,302,000 in the second quarter of fiscal 2000 due to a reduction in gross profit margins resulting from reduced sales, an unfavorable sales mix, and ongoing manufacturing costs associated with the startup of the Church & Dwight supply arrangement, partially offset by a decrease in advertising expenditures.

16 Net sales of the Fluids Purification Products segment for the three months ended January 31, 2000 were $5,729,000, an increase of 2.8% over net sales of $5,572,000 in the second quarter of fiscal 1999. Increased domestic sales of PURE-FLO(R) bleaching clays were the primary driver of the segment's growth in sales, partially offset by competitive pressures in many of our overseas markets that have led to some defensive pricing strategies to maintain market share. Fluids Purification Products' operating income decreased 28.7% from $1,379,000 in the second quarter of fiscal 1999 to $983,000 in the second quarter of fiscal 2000 due to a reduction in gross profit margins in our overseas markets resulting from the defensive pricing strategies mentioned previously, unfavorable manufacturing variances and continuing costs associated with the startup of a new line of rheological products. Net sales of the Agricultural Products segment for the three months ended January 31, 2000 were $4,734,000, a decrease of 15.6% from net sales of $5,608,000 in the second quarter of fiscal 1999. This overall decline is due to sharply reduced demand for agricultural carriers as a result of a depressed farm economy. Agricultural Products' operating income decreased 60.4%from $1,023,000 in the second quarter of fiscal 1999 to $405,000 in the second quarter of fiscal 2000, primarily due to a decrease in sales of agricultural carriers, and unfavorable sales mix and manufacturing variances, partially offset by the Company's pro rata share of Kamterter II's net income. Net sales of the Industrial and Automotive Products segment for the three months ended January 31, 2000 were $4,466,000, an increase of 6.2% from net sales of $4,205,000 in the second quarter of fiscal 1999 due to increased sales volume of clay-based automotive and hardware products. Industrial and Automotive Products' operating income increased 36.9% from $187,000 in the second quarter of fiscal 1999 to $256,000 in the second quarter of fiscal 2000 due to incremental gross profit resulting from the increase in sales volume and price increases put into effect during the past year, combined with a decrease in operating expenses. Consolidated gross profit as a percentage of net sales for the three months ended January 31, 2000 decreased to 27.3% from 32.1% in the second quarter of fiscal 1999 due to unfavorable sales mixes in the Consumer and Agricultural Products segments, defensive pricing strategies in the overseas markets of the Fluids Purification Products segment, ongoing manufacturing costs associated with the startup of the Church & Dwight supply arrangement, and increases in fuel prices. Operating expenses as a percentage of net sales increased to 25.9% for the three months ended January 31,2000 from 24.0% in the second quarter of fiscal 1999. This increase is due primarily to the pre-tax special charge of $1,239,000 recorded in the second quarter of fiscal 2000, partially offset by a lower level of advertising expense in fiscal 2000 versus fiscal 1999. Interest expense increased $26,000, while interest income for the three months ended January 31, 2000 decreased $68,000 from fiscal 1999 levels, primarily due to lower levels of cash and cash equivalents and the consequently lower level of funds available for investment. The Company's effective tax rate was 29.0% of pre-tax income in the three months ended January 31, 2000 versus 28.5% in the second quarter of fiscal 1999.

17 FOREIGN OPERATIONS Net sales by the Company's foreign subsidiaries for the six months ended January 31, 2000 were $7,311,000 or 8.0% of total Company sales. This represents a decrease of $386,000 or 5.0% from the same period of fiscal 1999, in which foreign subsidiary sales were $7,697,000 or 8.4% of total Company sales. This decrease is due to reduced sales of fluids purification products in our overseas markets due to defensive pricing strategies implemented to maintain share and reduced bleaching clay usage by a major customer through increased efficiency of operations. Net income of the foreign subsidiaries for the first six months of fiscal 2000 was $346,000, an increase of $66,000 or 23.6% from $280,000 earned in the same period of fiscal 1999. This increase was primarily due to improved gross profit margins resulting from favorable changes in sales mix. Identifiable assets of the Company's foreign subsidiaries as of January 31, 2000 were $11,135,000, in line with identifiable assets of $11,129,000 as of January 31, 1999. Net sales by the Company's foreign subsidiaries during the three months ended January 31, 2000 were $3,702,000 or 8.0% of total Company sales. This represents an increase of $61,000 or 1.7% from the second quarter of fiscal 1999 in which foreign subsidiary sales were $3,641,000 or 7.7% of total Company sales. The increase is due to increased sales of cat litter products in Canada and industrial products in the United Kingdom, partially offset by reduced sales of fluids purification products in overseas markets, as discussed above. Net income of the foreign subsidiaries for the three months ended January 31, 2000 was $99,000 an increase of $26,000 or 35.6% from $73,000 earned in the second quarter of fiscal 1999. This increase was primarily due to the incremental gross profit resulting from the growth in sales, as well as a reduction in advertising expenditures in Canada. RESTRUCTURING CHARGE During the second quarter of fiscal 2000, the Company recorded a pre-tax restructuring charge of $1,239,000 against income from operations, as follows: Severance costs $604,000 Non-performing asset 635,000 ---------- Restructuring charge $1,239,000 ========== The severance costs are related to a realignment of the Company's personnel costs to bring them more in line with current levels of sales and profitability. The severance accrual represents 13 employees to be terminated and will be completed by the fourth quarter of fiscal 2000. The majority of the positions to be terminated are at the selling, general and administrative level. The net book value of the non-performing asset consists of specific production equipment that has been idled. The equipment had been used in the Agricultural Products segment. Because management does not rely on segment asset allocation, information regarding the results of operations for this specific asset cannot be identified. However, the results are included in cost of sales. The net book value of this asset is approximately 1% of the net book value of all fixed assets outstanding as of January 31, 2000. At the present time, the estimated annualized pre-tax payroll savings and depreciation reduction expected to be realized from the charge is $1,500,000. Approximately $1,200,000 of the cost reductions will be in Selling, General and Administrative

18 Expenses, with the remainder to Cost of Sales. The realization of these benefits will begin in the third quarter of fiscal 2000. The pre-tax cash flow benefit expected to be realized on an annualized basis approximates $1,250,000. Of the total pre-tax annualized savings, approximately $250,000 will end by August 1, 2002. YEAR 2000 The Year 2000 ("Y2K") issue was a result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems would have been unable to interpret dates beyond 1999, which could have caused a system failure or application errors, leading to disruptions in operations. As of the date of this report, the Company has not experienced any material problems related to Y2K, nor has the Company received any significant complaints regarding Y2K issues related to its products. Also, the Company is not aware of any significant Y2K issues affecting the Company's major customers or suppliers. The project to address Y2K had been underway since fiscal 1998. Total pre-tax costs incurred were not material. FORWARD-LOOKING STATEMENTS Certain statements in this report, including, but not limited to, those under the heading "Expectations" and those statements elsewhere in this report that use forward-looking terminology such as "expect," "would," "could," "should," "estimates," and "believes" are "forward-looking statements" within the meaning of that term in the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those reflected in these forward-looking statements, due primarily to continued vigorous competition in the grocery, mass merchandiser and club markets, the level of success of new products, and the cost of product introductions and promotions in the consumer market. These forward-looking statements also involve the risk of changes in market conditions in the overall economy and, for the fluids purification and agricultural markets, in planting activity, crop quality, crop prices and overall agricultural demand, including export demand, and foreign exchange rate fluctuations. Other factors affecting these forward-looking statements may be detailed from time to time in reports filed with the Securities and Exchange Commission. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company did not have any derivative financial instruments as of January 31, 2000. However, the Company is exposed to interest rate risk. The Company employs policies and procedures to manage its exposure to changes in the market risk of its cash equivalents and short term investments. The Company believes that the market risk arising from holdings of its financial instruments is not material.

19 PART II - OTHER INFORMATION ITEM 4. (A) SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: On December 7, 1999, the 1999 Annual Meeting of Stockholders of Oil-Dri Corporation of America was held for the purpose of considering and voting on: 1. The election of ten directors. 2. An amendment to the Company's 1995 Long Term Incentive Plan to authorize an additional 500,000 shares (consisting of Common Stock, Class A Common Stock and/or Class B Stock) for use under the Plan. ELECTION OF DIRECTORS The following schedule sets forth the results of the vote to elect directors. VOTES DIRECTOR VOTES FOR ABSTAINED* --------------------- ---------- --------- J. Steven Cole 17,379,578 395,874 Arnold W. Donald 17,379,868 395,584 Ronald B. Gordon 17,380,413 395,039 Daniel S. Jaffee 17,379,113 396,339 Richard M. Jaffee 17,379,113 396,339 Thomas D. Kuczmarski 17,380,413 395,039 Joseph C. Miller 17,380,407 395,045 Paul J. Miller 17,377,578 397,874 Haydn H. Murray 17,377,378 398,074 Allan H. Selig 17,378,578 396,874 *All votes abstained were common shares. APPROVAL OF AMENDMENT TO THE OIL-DRI CORPORATION OF AMERICA 1995 LONG TERM INCENTIVE PLAN COMMON CLASS B TOTAL --------- ---------- ---------- Votes For: 2,207,931 14,082,740 16,290,671 Votes Against: 989,203 -- 989,203 Votes Abstained: 27,536 -- 27,536 Votes Withheld: 468,042 -- 468,042 ITEM 6. (A) EXHIBITS: The following documents are an exhibit to this report. Exhibit Index ------- Exhibit 11: Statement Re: Computation of per 21 share earnings Exhibit 27: Financial Data Schedule 22 (B) During the quarter for which this report is filed, no reports on Form 8-K were filed.

20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OIL-DRI CORPORATION OF AMERICA (Registrant) BY /S/JAMES F. JAPCZYK ---------------------------- James F. Japczyk Vice President, Controller Chief Accounting Officer BY /S/DANIEL S. JAFFEE ---------------------------- Daniel S. Jaffee President and Chief Executive Officer Dated: March 16, 2000

Exhibit 11 OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) ---------------------------------------- (in thousands, except per share amounts) ---------------------------------------- Three Months Six Months Ended January 31 Ended January 31 ------------------ ------------------ 2000 1999 2000 1999 ------------------ ------------------ Net income available to Stockholders (numerator) $ 92 $2,276 $1,819 $4,304 ====== ====== ====== ====== Shares Calculation (denominator): Average shares outstanding - basic 5,646 5,843 5,684 5,862 Effect of Dilutive Securities: Potential Common Stock relating to stock options 158 212 167 117 ----- ----- ----- ----- Average shares outstanding - assuming dilution 5,804 6,055 5,851 5,979 ====== ====== ====== ====== Earnings per share-basic $ 0.02 $ 0.39 $ 0.32 $ 0.73 ====== ====== ====== ====== Earnings per share- assuming dilution $ 0.02 $ 0.38 $ 0.31 $ 0.72 ====== ====== ====== ======

5 6-MOS JUL-31-2000 JAN-31-2000 2,988,000 1,219,000 27,598,000 397,000 16,360,000 55,687,000 135,846,000 73,811,000 136,482,000 15,577,000 42,063,000 0 0 724,000 72,903,000 136,482,000 91,052,000 91,052,000 64,765,000 64,765,000 22,043,000 59,000 1,623,000 2,562,000 743,000 1,819,000 0 0 0 1,819,000 0.32 0.31