UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended October 31, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to ______________
Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
------------------------------
(Exact name of the registrant as specified in its charter)
DELAWARE 36-2048898
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 North Michigan Avenue, Suite 400
CHICAGO, ILLINOIS 60611-4213
-------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
The Registrant's telephone number, including area code: (312) 321-1515
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 5,470,435 Shares (Including 1,279,110 Treasury Shares)
Class B Stock - 1,765,083 Shares (Including 342,241 Treasury Shares)
CONTENTS
PAGE
PART I
ITEM 1: Financial Statements And Supplementary Data....................3-10
ITEM 2: Management Discussion And Analysis Of Financial Condition
And The Results Of Operations.................................11-13
ITEM 3: Quantitative And Qualitative Disclosures About Market Risk....13-14
PART II
ITEM 6: Exhibits And Reports on Form 8-K.................................15
SIGNATURES...............................................................16
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
---------------------
OCTOBER 31 JULY 31
ASSETS 2001 2001
---------------------
CURRENT ASSETS
Cash and Cash Equivalents $ 2,659 $ 4,444
Investment Securities 1,257 1,257
Accounts Receivable, less allowance of $1,563
and $1,858 at October 31 and July 31, 2001, 24,858 24,267
respectively
Other Receivables 2,800 2,497
Inventories 16,478 15,445
Prepaid Stripping Expense 3,966 3,797
Prepaid Expenses 4,503 4,035
--------- ---------
TOTAL CURRENT ASSETS 56,521 55,742
--------- ---------
PROPERTY, PLANT AND EQUIPMENT - AT COST
Cost 141,129 139,730
Less Accumulated Depreciation and Amortization (85,759) (83,694)
-------- ---------
TOTAL PROPERTY, PLANT AND Equipment, Net 55,370 56,036
-------- ---------
OTHER ASSETS
Goodwill & Intangibles, net of accumulated
amortization of $3,752 and $3,569 at October
31, 2001 and July 31, 2001, respectively 9,515 9,691
Deferred Income Taxes 3,155 3,155
Other 5,899 5,900
--------- ---------
TOTAL OTHER ASSETS 18,569 18,746
--------- ---------
TOTAL ASSETS $ 130,460 $ 130,524
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
------------------------
LIABILITIES & STOCKHOLDERS' EQUITY OCTOBER 31 JULY 31
2001 2001
------------------------
CURRENT LIABILITIES
Current Maturities of Notes Payable $ 2,650 $ 2,150
Accounts Payable 4,422 5,791
Dividends Payable 473 473
Accrued Expenses
Salaries, wages and commissions 1,862 1,524
Trade promotions and advertising 4,907 4,006
Freight 1,754 1,312
Other 4,582 4,386
-------- --------
TOTAL CURRENT LIABILITIES 20,650 19,642
-------- --------
NONCURRENT LIABILITIES
Notes Payable 33,250 34,256
Deferred Compensation 2,754 2,769
Other 2,112 2,011
-------- --------
TOTAL NONCURRENT LIABILITIES 38,116 39,036
-------- --------
TOTAL LIABILITIES 58,766 58,678
-------- --------
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 per share, issued
5,470,435 shares at October 31 and July
31, 2001 547 547
Class B Stock, par value $.10 per share, issued
1,765,083 shares at October 31 and July
31, 2001 177 177
Additional Paid-In Capital 7,667 7,667
Retained Earnings 89,572 89,778
Restricted Unearned Stock Compensation (20) (25)
Cumulative Translation Adjustment (1,425) (1,474)
-------- --------
96,518 96,670
Less Treasury Stock, at cost (1,279,110 Common
shares and 342,241 Class B shares at October
31, 2001, and at July 31, 2001) (24,824) (24,824)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 71,694 71,846
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $130,460 $130,524
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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 OCTOBER 31
-----------------------
2001 2000
-----------------------
NET SALES $ 41,638 $ 42,531
Cost Of Sales 32,166 32,199
--------- ---------
GROSS PROFIT 9,472 10,332
Selling, General And Administrative Expenses (8,549) (8,920)
--------- ---------
INCOME FROM OPERATIONS 923 1,412
OTHER INCOME (EXPENSE)
Interest Expense (679) (769)
Interest Income 52 44
Other, Net 77 (105)
--------- ---------
TOTAL OTHER EXPENSE, NET (550) (830)
--------- ---------
INCOME BEFORE INCOME TAXES 373 582
Income Tax 106 149
--------- ---------
NET INCOME 267 433
RETAINED EARNINGS
BALANCE AT BEGINNING OF YEAR 89,778 90,757
LESS CASH DIVIDENDS DECLARED 473 473
--------- ---------
RETAINED EARNINGS - OCTOBER 31 $ 89,572 $ 90,717
========= =========
NET INCOME PER SHARE
BASIC $ 0.05 $ 0.08
======= =======
DILUTIVE $ 0.05 $ 0.08
======= =======
AVERAGE SHARES OUTSTANDING
BASIC 5,614 5,610
======= =======
DILUTIVE 5,625 5,613
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
-----------------------
For The Three Months
Ended October 31
-----------------------
2001 2000
-----------------------
NET INCOME $ 267 $ 433
Other Comprehensive Income:
Cumulative Translation Adjustments 49 (53)
------ ------
TOTAL COMPREHENSIVE INCOME $ 316 $ 380
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
-------------------------
FOR THE THREE MONTHS
ENDED OCTOBER 31
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000
- ------------------------------------ -------------------------
NET INCOME $ 267 $ 433
-------- --------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 2,222 2,262
Provision for Bad Debts (5) 40
(Increase) Decrease in:
Accounts Receivable (585) (1,180)
Inventories (1,033) (584)
Prepaid Stripping (169) (379)
Prepaid Expenses and Taxes (772) 471
Other Assets (7) (200)
Increase (Decrease) in:
Accounts Payable (1,369) 198
Accrued Expenses 1,885 2,264
Deferred Compensation (15) (349)
Other 94 63
-------- --------
TOTAL ADJUSTMENTS 246 2,606
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 513 3,039
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,352) (1,559)
Proceeds from Sale of Property, Plant and
Equipment -- 5
Purchases of Investment Securities -- (687)
Dispositions of Investment Securities -- 692
Other 5 4
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,347) (1,545)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt (507) (7)
Proceeds from Issuance of Long-Term Debt -- 780
Dividends Paid (473) (473)
Other 29 (22)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (951) 278
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,785) 1,772
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,444 1,388
-------- --------
CASH AND CASH EQUIVALENTS, OCTOBER 31 $ 2,659 $ 3,160
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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, 2001, 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 2002.
2. INVENTORIES
The composition of inventories is as follows (in thousands):
-------------------------
OCTOBER 31 JULY 31
(UNAUDITED) (AUDITED)
-------------------------
2001 2001
-------------------------
Finished goods $ 10,428 $ 9,473
Packaging 4,111 4,029
Other 1,939 1,943
--------- ---------
$ 16,478 $ 15,445
========= =========
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method.
3. NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 2000, the FASB issues SFAS No.
138, "Accounting for Derivative Instruments and Certain Hedging Activities an
amendment of SFAS No. 133," (SFAS No. 138), which was required to be adopted
in years beginning after June 15, 2000. One of the primary amendments to
SFAS No. 133 establishes a "normal purchases and normal sales" exception.
This exception permits companies to exclude contracts which provide for the
purchase or sale of something other than a financial derivative instrument
that will be delivered in quantities expected to be used or sold by the
entity over a reasonable period of time in the normal course of business
operations. The Company has forward purchase contracts for certain natural
gas commodities that qualify for the "normal purchase" exception provisions
of the amended statement. The adoption of SFAS No. 133 as amended by SFAS
No. 138 had no material impact on either the financial position or results of
operations.
In September 2000, the Emerging Issues Task Force (EITF) issued EITF 00-10,
"Accounting for Shipping and Handling Fees and Costs." Under the provisions
of EITF 00-10, amounts billed to a customer in a sales transaction related to
shipping and handling should be classified as revenue. Effective May 1,
2001, the Company
adopted EITF 00-10, which did not have an effect on the amounts classified as
revenue or costs of other services. The adoption had no impact on the
determination of net income.
Effective May 1, 2001, the Company adopted Staff Accounting Bulletin No. 101
(SAB 101), "Revenue Recognition in Financial Statements." SAB 101 provides
the Securities and Exchange Commission's views in applying accounting
principles generally accepted in the United States to revenue recognition in
the financial statements. The adoption of SAB 101 did not have an effect on
the financial statements of the Company.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets", effective for years
beginning after December 15, 2001. Under the new rules, goodwill will no
longer be amortized, but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. The pooling of interest method is no
longer permitted for business combinations after June 30, 2001. Adoption is
required for fiscal years beginning after December 15, 2001. Based upon
management's preliminary analysis, we do not expect any impairment of
goodwill under the new FASB 142. Upon adoption, the Company's amortization
expense will be reduced by approximately $202,000 annually.
In April 2001, the EITF reached a final consensus on Issue 00-25, "Accounting
for Consideration from a Vendor to a Retailer in Connection with the Purchase
or Promotion of the Vendor's Products." The consensus addresses the
accounting treatment and income statement classification for certain sales
incentives, including cooperative advertising arrangements, buydowns and
slotting fees. The consensus requires that slotting fees, now classified by
the Company as selling, general and administrative expense, be reclassified
as a reduction of gross sales. These guidelines will become effective for
the Company during the third quarter of fiscal 2002. The adoption of EITF
00-25 is not expected to materially impact the Company's financial statements.
In 2000, the EITF discussed a number of topics related to certain expenses
that the Company reports in merchandising expenses, a component of SG&A
expenses. In January 2001, the EITF issued No. 00-22, which requires certain
rebate offers and free products that are delivered subsequent to a single
exchange transaction to be recognized when incurred and reported as a
reduction of revenue. EITF No. 00-14 was issued in May 2000 and subsequently
amended in November 2000. This guidance requires certain coupon, rebate
offers and free products offered concurrently with a single exchange
transaction with a customer to be recognized when incurred and reported as
revenue. The Company was required to adopt EITF No. 00-22 and No. 00-14 for
the third quarter ending April 30, 2001, and the fourth quarter ending July
31, 2001, respectively. The effect of the adoptions of EITF No. 00-22 and
No. 00-14 resulted in a reclassification of expenses and a restatement to
reduce previously reported net sales and SG&A expenses. The effect of these
reclassifications resulted in a reduction in net sales and a corresponding
decrease in SG&A expenses of $3,449,000 and $3,388,000 for the years ended
July 31, 2001 and 2000, respectively.
4. SEGMENT REPORTING
The Company has four reportable operating segments: Consumer Products Group,
Specialty Products Group, Crop Production and Horticultural Products Group,
and Industrial and Automotive Products Group. These segments are managed
separately because each business has different economic characteristics.
The accounting policies of the segments are the same as those described in
Note 1 of the Company's Annual Report for the year ended July 31, 2001 on
Form 10-K filed with the Securities and Exchange Commission.
Because management does not rely on segment asset allocation, information
regarding segment assets is not meaningful and therefore is not reported.
--------------------------------------
Quarter Ended October 31
--------------------------------------
Net Sales Income
--------------------------------------
2001 2000 2001 2000
-------- -------- -------- --------
(in thousands)
Consumer Products Group..................$ 26,812 $ 27,449 $ 2,036 $ 2,611
Specialty Products Group................. 6,430 6,472 1,591 1,197
Crop Production and Horticultural
Products Group......................... 3,488 3,726 201 172
Industrial and Automotive Products Group. 4,908 4,884 182 40
-------- -------- -------- --------
TOTAL SALES/OPERATING INCOME.............$ 41,638 $ 42,531 $ 4,010 $ 4,020
======== ======== -------- --------
Less:
Corporate Expenses....................................... 3,010 2,712
Interest Expense, net of Interest ncome.................. 627 726
-------- --------
INCOME BEFORE INCOME Taxes................................. 373 582
-------- --------
Income Taxes............................................... 106 149
-------- --------
NET INCOME................................................. $ 267 $ 433
======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2001 COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 2000
RESULTS OF OPERATIONS
Consolidated net sales for the first quarter ended October 31, 2001 were
$41,638,000, a decrease of 2.1% from net sales of $42,531,000 in the first
quarter of fiscal 2001. Net income for the first quarter of fiscal 2002 was
$267,000, a decrease of 38.3% from $433,000 earned in the first quarter of
fiscal 2001. Basic and diluted net income per share for the first quarter of
fiscal 2002 was $0.05 versus $0.08 basic and diluted net income per share
earned in the first quarter of fiscal 2001.
Net sales of the Consumer Products segment for the first quarter of fiscal
2002 were
$26,812,000, a decrease of 2.3% from net sales of $27,449,000 in the first
quarter of fiscal 2001 due to reduced sales of branded cat litter items,
offset somewhat by increased sales of private label cat litter. The Consumer
Products Group's operating income decreased 22.0% from $2,611,000 in the
first quarter of fiscal 2001 to $2,036,000 in the first quarter of fiscal
2002 due to a reduction of gross profit in the non-grocery and
co-manufacturing areas, but partially offset by better expense control. The
reduction of gross profit was caused by unfavorable product mix in the
non-grocery area and higher manufacturing costs in the co-manufacturing group.
Net sales of the Specialty Products Group segment for the first quarter of
fiscal 2002 were $6,430,000, a decrease of 0.7% from net sales of $6,472,000
in the first quarter of fiscal 2001. Specialty Products Group's operating
income increased 32.9% from $1,197,000 in the first quarter of fiscal 2001 to
$1,591,000 in the first quarter of fiscal 2002 due to increased sales of
POULTRY GUARD(R) and bleaching clay, which were partially offset by a reduction
of ULTRA CLEAR(R) sales.
Net sales of the Crop Production and Horticultural Products Group for the
first quarter of fiscal 2002 were $3,488,000, a decrease of 6.4% from net
sales of $3,726,000 in the first quarter of fiscal 2001, led primarily by a
decrease in AGSORB(R) product sales. This decline is the result of continued
economic softness in the crop protection category. This segment's operating
income increased 16.9% from $172,000 in the first quarter of fiscal 2001 to
$201,000 in the first quarter of fiscal 2002 due to selling price increases.
Net sales of the Industrial and Automotive Products Group for the first
quarter of fiscal 2002 were $4,908,000, an increase of 0.5% from net sales of
$4,884,000 in the first quarter of fiscal 2001. Lower volumes of clay based
products were offset by higher selling prices. This segment's operating
income increased 355% from $40,000 in the first quarter of fiscal 2001 to
$182,000 in the first quarter of fiscal 2002 due to increased selling prices.
Consolidated gross profit as a percentage of net sales for the first quarter
of fiscal 2002 decreased to 22.7% from 24.3% in the first quarter of fiscal
2001 due to an unfavorable mix in our Consumer Products group.
Operating expenses as a percentage of net sales for the first quarter of
fiscal 2002 decreased to 20.5% from 21.0% in the first quarter of fiscal 2001
due to better expense control in our Consumer Products group. Also, the
Consumer Products group's mix led to a reduction in trade spending.
Interest expense and interest income for the first quarter of fiscal 2002
were better by $98,000 from fiscal 2001, due to lower debt levels.
The Company's effective tax rate was 28.5% of pre-tax income in the first
quarter of fiscal 2002 versus 25.6% in the same period of fiscal 2001.
Total assets of the Company decreased $64,000 or 0.1% during the first three
months of fiscal 2002. Current assets increased $779,000 or 1.4% from fiscal
2001 year-end balances primarily due to increased accounts receivable and
inventory, offset by a reduction of cash and equivalents. Property, plant
and equipment, net of accumulated depreciation, decreased $666,000 or 1.2%
during the first three months as depreciation expense exceeded capital
expenditures.
Total liabilities increased $88,000 or 0.1% during the first three months of
fiscal 2002. Current liabilities increased $1,008,000 or 5.1% from fiscal
2001 year-end balances due to increases in freight accruals, trade spending
and current debt maturities. Non-current liabilities decreased $920,000 or
2.4% from fiscal 2001 year-end. The decrease was driven by a reduction in
our long term debt.
EXPECTATIONS
The Company anticipates that second quarter sales will be in line with the
level achieved in the second quarter of fiscal 2001. The Company continues
to emphasize cost control and productivity improvements in its processes,
which should contribute to profitability in both the next quarter and over
the long term. During the second quarter, the Company will assume production
of The Clorox Company's requirements for Jonny Cat(R) cat litter for the
eastern half of the U.S. The Company expects annual revenues from this
product will approximate $4,000,000.
Because of the uncertainties of the general economy, it is difficult to
forecast the Company's fully diluted earnings per share beyond a broad range
of $0.15 to $0.35 per diluted share for the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio decreased to 2.7:1 at October 31, 2001 from 2.8:1 at July
31, 2001. Working capital decreased $229,000 during the first three months
of fiscal 2002 to $35,871,000, primarily due to higher accrued expenses,
offset by higher receivables. During the first three months of fiscal 2002,
the balances of cash, cash equivalents and investment securities decreased
$1,785,000.
Cash provided by operating activities was used to fund capital expenditures
of $1,352,000, payments on long-term debt of $507,000 and dividend payments
of $473,000. Total cash and investment balances held by the Company's
foreign subsidiaries at October 31, 2001 and July 31, 2001 were $2,232,000
and $2,241,000, respectively.
Liquidity needs have been, and are expected to be, met through internally
generated funds and, to the extent needed, borrowings under the Company's
revolving credit facility with Harris Trust and Savings. The credit
agreement contains restrictive covenants that, among other things and under
various conditions, limit the Company's ability to incur additional
indebtedness, to acquire (including a limitation on capital expenditures) or
dispose of assets and to pay dividends.
Accounts receivable, less allowance for doubtful accounts, increased 2.4%
during the first three months of fiscal 2002. Days outstanding receivables
decreased from 58.3 at July 31, 2001 to 54.3 at October 31, 2001. The
Company maintains policies and practices to monitor the creditworthiness of
its customers. Such policies include maintenance of a list of customers
whose creditworthiness has diminished. The total balance of accounts
receivable for accounts on that list represents less than 5% of the Company's
outstanding receivables.
The Company believes that cash flow from operations and availability under
its revolving credit facility will provide adequate funds for foreseeable
working capital needs, capital expenditures at existing facilities and debt
service obligations. However, should new facility construction occur, it is
anticipated that additional borrowings of a long-term nature will be required
outside the existing credit facility.
The Company's ability to fund operations, make planned capital expenditures,
including new facility construction, to make scheduled debt payments and to
remain in compliance with all of the financial covenants under debt
agreements depends on its future operating performance, which, in turn, is
subject to prevailing economic conditions and to financial, business and
other factors.
FOREIGN OPERATIONS
Net sales by the Company's foreign subsidiaries during the three months ended
October 31, 2001 were $3,140,000 or 7.5% of total Company sales. This
represents a decrease of 0.3% from the same period of fiscal 2001 in which
foreign subsidiary sales were $3,149,000 or 7.4% of total Company sales. For
the first three months of fiscal 2002, the foreign subsidiaries experienced a
loss of $119,000, which was an improvement of $65,000 from the $184,000 loss
reported from the same period of fiscal 2001. This improvement was due to
higher gross profit margins resulting from selective price increases and also
better expense control. Identifiable assets of the Company's foreign
subsidiaries as of October 31, 2001 were $10,255,000, vs. $9,809,000 as of
July 31, 2001. The increase from the fiscal 2001 year-end balance was caused
by an increase in inventory and equipment.
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 and specialty product
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, and overall agricultural demand, including
export demand, fluctuations of energy costs 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 October
31, 2001. 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.
The Company is exposed to commodity price risk with respect to natural gas.
The Company has contracted for a major portion of its fuel needs for fiscal
2002 using forward purchase contracts to manage the volatility related to
this exposure. These contracts are consistent with the Company's policy to
contract for approximately 50% of its estimated annual fuel usage prior to
the beginning of the following fiscal year. Business custom permits delivery
of the fuel to be taken under the monthly contracts or settlement of the
contracts at the then prevailing market rates. This determination is made by
the Company depending on the economic conditions and business considerations,
including, but not limited to, the prices of available alternative fuels. No
contracts were entered into for speculative purposes. These contracts will
reduce the volatility in fuel prices, and the weighted average cost of these
contracts will be consistent with the increased prices paid in fiscal 2001.
The table below provides information about the Company's natural gas future
contracts, which are sensitive to changes in commodity prices, specifically
natural gas prices. For the future contracts the table presents the notional
amounts in MMBtu's, the weighted average contract prices, and the total
dollar contract amount, which will mature by July 31, 2002. The Fair Value
was determined using the "Most Recent Settle" price for the "Henry Hub
Natural Gas" option contract prices as listed by the New York Mercantile
Exchange on November 30, 2001.
-------------------------------------------------------------
COMMODITY PRICE SENSITIVITY
NATURAL GAS FUTURE CONTRACTS
FOR THE YEAR ENDING JULY 31, 2002
-------------------------------------------------------------
Expected 2002 Fair
Maturity Value
-------------------------------------------------------------
Natural Gas Future Volumes (MMBtu's) 1,420,000 --
Weighted Average Price (Per MMBtu) $4.61 --
Contract Amount ($ U.S., in thousands $6,541.3 $3,844.4
-------------------------------------------------------------
Factors which could influence the fair value of the natural gas
contracts include, but are not limited to, the overall general economy, the
recent events which occurred on September 11, 2001 in New York and
Washington, the general demand of natural gas by the manufacturing sector,
seasonality and the weather patterns throughout the United States and the
world. Some of these same events have allowed the Company to mitigate the
impact of the natural gas contracts, by the continued and in some cases
expanded use of recycled oil in our manufacturing processes. Accurate
estimates of the impact that these contracts may have on the Company's fiscal
2002 financial results are difficult to make due to the inherent uncertainty
of future fluctuations in option contract prices in the natural gas options
market.
PART II - OTHER INFORMATION
6. (a)EXHIBITS: The following documents are an exhibit to this report.
Exhibit
Index
--------
Exhibit 11: Statement Re: Computation of per share 17
earnings
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
(Registrant)
BY /S/JEFFREY M. LIBERT
----------------------------------------
Jeffrey M. Libert
Chief Financial Officer
BY /S/DANIEL S. JAFFEE
----------------------------------------
Daniel S. Jaffee
President and Chief Executive Officer
Dated: December 5, 2001
Exhibit 11
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
--------------------
THREE MONTHS ENDED
OCTOBER 31
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2001 2000
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Net income available to Stockholders
(numerator) $ 267 $ 433
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Shares Calculation (denominator): 5,614 5,610
Average shares outstanding - basic
Effect of Dilutive Securities:
Potential Common Stock
relating to stock options 11 3
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Average shares outstanding- assuming dilution 5,625 5,613
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Earnings per share-basic $ 0.05 $ 0.08
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Earnings per share-assuming dilution $ 0.05 $ 0.08
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