SEC Filing - Oil-Dri Corporation Of America

CONFORMED COPY 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, 1996 Commission File Number 0-8675 OIL-DRI CORPORATION OF AMERICA (Exact name of 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) 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 - 5,162,518 Shares (Including 420,596 Treasury Shares) Class B Stock - 2,071,000 Shares

OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statement of Financial Position ASSETS January 31 July 31 (Unaudited) 1996 1995 1995 CURRENT ASSETS Cash and Cash Equivalents $ 6,599,621 $ 1,320,099 $ 8,829,667 Investment Securities, at Cost 1,406,467 2,739,496 2,332,665 Accounts Receivable 24,909,494 24,757,434 21,529,168 Allowance for Doubtful Accounts (278,405) (201,006) (180,602) Inventories 11,191,258 12,888,361 10,917,099 Prepaid Expenses and Taxes 5,531,155 5,491,172 5,317,169 Total Current Assets 49,359,590 46,995,556 48,745,166 PROPERTY, PLANT AND EQUIPMENT - AT COST Cost 109,441,705 104,526,298 106,957,911 Less Accumulated Depreciation and 51,404,271 43,647,659 47,498,516 Amortization Total Property, Plant and Equipment, Net 58,037,434 60,878,639 59,459,395 OTHER ASSETS Goodwill (Net of Accumulated Amortization) 4,238,406 4,370,454 4,304,286 Deferred Income Taxes 486,456 - 484,324 Other 4,258,418 3,472,126 3,994,512 Total Other 8,983,280 7,842,580 8,783,122 Assets TOTAL ASSETS $116,380,304 $115,716,775 $116,987,683 OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statement of Financial Position LIABILITIES & STOCKHOLDERS EQUITY January 31 July 31 (Unaudited) 1996 1995 1995 CURRENT LIABILITIES Current Maturities of Notes $2,247,886 $ 598,87 6 $1,097,976 Payable Accounts Payable - Trade 5,899,993 6,023,047 4,710,251 Dividends Payable 519,286 520,552 511,166 Accrued Expenses Trade Promotions and 3,024,416 2,631,418 4,272,740 Advertising Salaries, Wages and 2,715,194 2,586,756 2,362,102 Advertising Freight 883,451 1,686,276 747,042 Other 1,078,969 261,882 1,969,571 Total Current 16,369,195 14,308,807 15,670,848 Liabilities NONCURRENT LIABILITIES Notes Payable 19,104,000 21,006,966 20,422,265 Deferred Income Taxes - 320,616 - Deferred Compensation 1,937,850 1,672,689 1,778,075 Other 1,201,885 1,001,816 778,112 Total Noncurrent 22,243,735 24,002,087 22,978,452 Liabilities Total Liabilities 38,612,930 38,310,894 38,649,300 STOCKHOLDERS EQUITY Common Stock 723,352 723,352 723,352 Paid-In Capital in Excess of Par 7,657,394 7,657,393 7,657,394 Value Retained Earnings 76,895,401 74,428,396 76,033,462 Cumulative Translation Adjustment (1,050,695) (1,104,951) (987,781) 84,225,452 81,704,190 83,426,427 Less Treasury Stock, At Cost 6,458,078 4,298,309 5,088,044 Total Stockholders 77,767,374 77,405,881 78,338,383 Equity TOTAL LIABILITIES & STOCKHOLDERS $116,380,304 $115,716,775 $116,987,683 EQUITY Certain prior year balances have been reclassified to be consistent with the presentation in the current period. OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statement of Income and Retained Earnings Six Months Ended January 31 1996 1995 (Unaudited) (Unaudited) Net Sales* $81,105,246 $79,182,686 Cost Of Sales 57,123,845 54,621,099 Gross Profit* 23,981,401 24,561,589 Selling, General And Administrative 20,845,164 16,424,909 Expenses* Operating Income 3,136,237 8,136,678 OTHER INCOME (EXPENSE) Interest Expense (970,528) (984,908) Interest Income 274,133 167,340 Foreign Exchange Gain (Loss) (870) (11,249) Other, Net 187,724 (68,908) (509,541) (897,725) Income Before Income Taxes 2,626,696 7,238,953 Income Taxes 736,622 1,846,731 Net Income 1,890,074 5,392,222 RETAINED EARNINGS Balance at Beginning of Year 76,024,301 70,077,278 Less: Cash Dividends Declared 1,018,974 1,041,104 Retained Earnings - January 31 $76,895,401 $74,428,396 Average Shares Outstanding 6,828,646 6,956,698 Net Income Per Share $0.28 $0.78 *Net Sales, Gross Profit and Selling, General and Administrative Expenses for fiscal 1995 reflect the reclassification of trade marketing costs to be consistent with the presentation in the current period. OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statement of Income and Retained Earnings Three Months Ended January 31 1996 1995 (Unaudited) (Unaudited) Net Sales* $41,797,312 $40,157,478 Cost Of Sales 29,474,959 27,989,478 Gross Profit* 12,322,353 12,168,000 Selling, General And Administrative 11,532,883 8,203,327 Expenses* Operating Income 789,470 3,964,673 OTHER INCOME (EXPENSE) Interest Expense (480,367) (497,373) Interest Income 121,539 63,801 Foreign Exchange Gain (Loss) 2,723 (14,618) Other, Net 242,150 (47,412) (113,955) (495,602) Income Before Income Taxes 675,515 3,469,071 Income Taxes 198,329 895,781 Net Income $ 477,186 $2,573,290 Average Shares Outstanding 6,813,708 6,955,647 Net Income Per Share $0.07 $0.37 *Net Sales, Gross Profit and Selling, General and Administrative Expenses for fiscal 1995 reflect the reclassification of trade marketing costs to be consistent with the presentation in the current period. OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statement of Cash Flows For the Six Months Ended January 31 1996 1995 Unaudited Unaudited CASH FLOWS FROM OPERATING ACTIVITIES Net Income $1,890,074 $5,392,222 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 4,069,690 3,828,110 Provision for bad debts 86,472 26,248 (Increase) Decrease in: Accounts Receivable (3,367,992) (4,887,236) Inventories (297,074) (1,676,260) Prepaid Expenses and Taxes (232,877) (1,776,807) Other Assets (268,541) (225,957) Increase (Decrease) in: Accounts Payable 466,539 1,344,951 Accrued Expenses (886,029) (1,307,29) Deferred Compensation 159,775 (89,129) Other 423,773 286,170 Total Adjustments 153,736 (4,477,201) Net Cash Used In Operating Activities 2,043,810 915,021 CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (2,599,529) (4,465,277) Purchases of Investment Securities - (2,114,772) Dispositions of Investment Securities 908,874 2,700,913 Other - 19,697 Net Cash Used in Investing Activities (1,690,655) (3,859,439) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Short Term Borrowings - Principal Payments on Long Term Debt (168,355) (1,158,880) Proceeds from Issuance of Common Stock - - Dividends Paid (1,018,524) (976,035) Foreign Currency Translation (26,288) 5,117 Adjustment Purchases of Treasury Stock (1,370,034) - Net Cash Used In Financing Activities (2,583,201) (2,129,798) Net (Decrease) in Cash and Cash (2,230,046) (5,074,216) Equivalents Cash and Cash Equivalents, Beginning of 8,829,667 6,394,315 Year Cash and Cash Equivalents, January 31 $ 6,599,621 $1,320,099 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JANUARY 31, 1996 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1995 RESULTS OF OPERATIONS Consolidated net sales for the six months ended January 31, 1996 were $81,105,000, an increase of $1,923,000, or 2.4%, over net sales of $79,183,000 in the first six months of fiscal 1995. Net income for the six months ended January 31, 1996 was $1,890,000 or $0.28 per share, a decrease of 64.9% from $5,392,000 or $0.78 per share earned in the first six months of fiscal 1995. Net income for the 1996 period reflects an after tax charge to second quarter earnings of $700,000, or $0.10 per share, for the costs of settlement (and legal expenses) of a patent lawsuit. (See Part II, Item 1 in Legal Proceedings.) Net sales of industrial and environmental sorbents decreased $337,000 from prior year levels: Net sales of industrial clay absorbents increased slightly, while net sales of nonclay sorbents decreased $565,000 or 21% reflecting continued competitive pressures and refocused sales and marketing efforts towards selected higher margin customers. Net sales of cat box absorbents increased $1,089,000 or 3% from fiscal 1995 first half results. This growth is the result of new product introductions and expanded distribution of existing coarse litter products in the grocery industry. Increased net sales to grocery customers were offset by slightly decreased sales to non-grocery customers. In particular, net sales to Sams Club declined due to the introduction of a private label scoopable litter that replaced the Companys branded scoopable product in a substantial number of Sams locations. Sams continues to sell other Company branded products. Net sales to other non-grocery customers, including Wal-Mart Stores, Inc., were up 14% in the 1996 period. Net sales of agricultural absorbents increased $973,000 or 10% from fiscal 1995 primarily because of increased demand for crop protection products, fueled by expectations of increased planting activity in the next year. Net sales of fluid filtration and purification products decreased slightly from prior year levels due to due to competitive pressures and continued sluggish demand in certain of the Companys markets. Net sales of transportation services increased $653,000 or 16% from fiscal 1995 because of increased third party mileage. Consolidated gross profit as a percentage of net sales for the six months ended January 31, 1996 decreased to 29.6% from 31.0% in the first six months of fiscal 1995. Changes in sales mix towards less profitable products and increased costs of packaging materials and shipping contributed to this decline. Operating expenses as a percentage of net sales increased to 25.7% in the first six months of fiscal 1996 from 20.7% in the first half of fiscal 1995. This change reflects the additional costs of approximately $3,500,000 for promotional and advertising programs associated with new product introductions. Interest expense decreased $14,400 while interest income increased $92,400. The Companys effective tax rate increased to 28.0% of income in the first half of 1996 as compared to 25.5% for the first half of fiscal 1995. Total assets of the Company decreased $607,400 during the six months ended January 31, 1996. Current assets increased $614,400 or 1.3% from fiscal year end balances reflecting increased accounts receivable and inventory balances offset against reduced cash and investments to fund increased sales. Property, plant and equipment, net of accumulated depreciation, decreased $1,422,000 due to lower capital expenditures, relative to depreciation expense.

Total liabilities in the six months ended January 31, 1996 decreased $36,300. Current liabilities increased $698,400 or 4.5% from July 31, 1995 balances while noncurrent liabilities decreased $734,700 or 3.2% from year end. EXPECTATIONS The Company anticipates sales growth, primarily from branded cat box absorbent products, as new product introductions take hold. The Company expects that earnings over the remainder of fiscal 1996 will be approximately equal to that of fiscal 1995. However, actual results may be materially lower than those reflected in these forward-looking statements, due primarily to continued vigorous competition in the grocery and, particularly, in the mass merchandising markets, the level of success of new products and the cost of new product introductions and promotions in the consumer market. LIQUIDITY AND CAPITAL RESOURCES The current ratio decreased slightly to 3.02 at January 31, 1996 from 3.11 at July 31, 1994. Working capital decreased $83,900 in the six months ended January 31, 1996 to $32,990,400. Cash provided by operations continues to be the Companys primary source of funds to finance operating needs and capital expenditures. During the six months ended January 31, 1996 the balances of cash and cash equivalents declined $2,230,000. This reduction in cash, cash equivalents and investments was used to fund capital expenditures of $2,599,500, to pay dividends of $1,018,500 and to reduce debt by $168,400. Total cash and investment balances held by the Companys foreign subsidiaries at January 31, 1996 and 1995 were $2,505,200 and $3,132,400 respectively. The Companys long term debt at January 31, 1996 decreased $1,318,265 from year end balances. Long term debt to equity decreased to 24.6% from 26.1% at July 31, 1995. THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1995 Consolidated net sales for the three months ended January 31, 1996 were $41,797,300, an increase of 4.1% from net sales of $40,157,500 in the same period last year. Net income for the quarter ended January 31, 1996 was $477,200, or $0.07 per share, a decrease of 81.5% from net income of $2,573,300 or $0.37 per share reported in the quarter ended January 31, 1995. Net income in the 1996 period reflects an after-tax charge to earnings of $700,000 or $0.10 per share, for the costs of settlement and legal expenses of a patent lawsuit. (See Part II, Item 1 - Legal Proceedings.) Net sales of industrial environmental sorbents decreased $456,000, or 10% from prior year levels. Net sales of industrial clay absorbents decreased slightly, while net sales of nonclay sorbents decreased $412,000 or 30% reflecting continued competitive pressures and refocused sales and marketing efforts towards selected higher margin customers. Net sales of cat box absorbents increased $897,000 or 4% from fiscal 1995 second quarter results. This growth is the result of new product introductions and expanded distribution of existing coarse litter products in the grocery industry. Increased net sales to grocery customers were offset by a decrease of 7% in net sales to non-grocery customers. In particular, net sales to Sams Club declined due to the introduction of a private label scoopable litter that replaced the Companys branded scoopable product in a substantial number of Sams locations. Sams continues to sell other Company branded products. Net sales to other non-grocery customers, including Wal-Mart Stores, Inc., were up 7% in the 1996 period. Net sales of agricultural absorbents increased $1,312,000 or 27% from fiscal 1995 primarily because of agricultural absorbents increased demand for crop protection products, fueled by expectations of increased planting activity in the next year. Net sales of fluid filtration and purification products decreased $264,000 from prior year levels due to competitive pressures and continued sluggish demand in certain of the Companys markets. Net sales of transportation services increased $190,000 in the second quarter of fiscal 1996 as compared to the second quarter of fiscal 1995. Consolidated gross profit for the three months ended January 31, 1996 decreased to 29.5% of net sales as compared to 30.3% in the second quarter of fiscal 1995 due to increased costs of packaging material and shipping. Selling, General and Administrative Expenses increased to 27.6% of net sales as compared to 20.4% of net sales in the second quarter of fiscal 1996 and 1995 respectively. Interest expense for the second quarter of fiscal 1996 compared to the second quarter of fiscal 1995 decreased $17,000. Interest income increased $57,700 in the same period as a result of larger invested balances. The Companys effective tax rate in the second quarter of fiscal 1996 was 29.4% of income as compared to 25.8% in the same period last year. FOREIGN OPERATIONS Net sales by the Companys foreign subsidiaries for the six months ended January 31, 1996 were $6,213,900, constituting 7.7% of sales. This represents a decrease of $128,200 or 2.0%, from the first half of fiscal 1995, in which foreign subsidiary sales were $6,342,100 and constituted 8.0% of sales. This decrease is primarily due to slightly reduced sales in Canada. Net income of the Companys foreign subsidiaries for the six months ended January 31, 1996 was $274,700, compared with $220,900 in the second quarter of fiscal 1995. Identifiable assets of the Companys foreign subsidiaries as of January 31, 1996 were $9,144,700, a decrease of $1,076,700 from $10,221,400 as of January 31, 1995.

The Companys net sales by its foreign subsidiaries for the three months ended January 31, 1996 were $3,305,900, constituting 7.9% of sales. This represents a decrease of $65,400 or 1.9% from the second quarter of fiscal 1995 in which foreign subsidiary sales were $3,371,300 and constituted 8.4% of sales. This decrease is primarily due to slightly decreased sales in Canada. Net income of the Companys foreign subsidiaries for the three months ended January 31, 1996 was $131,700 compared with $126,900 in the second quarter of fiscal 1995.

Part II - Other Information ITEM 1.Legal Proceedings - On February 13, 1996 the Company entered into a settlement agreement related to a patent infringement action that had been initiated by Edward Lowe Industries, Inc. in the United States District Court for the Northern District of Illinois, Eastern Division against the Company and Marcal Paper Mills, Inc. The settlement prohibits the Company and Marcal Paper Mills, Inc. from producing and marketing cellulosic granules as carriers for use in agricultural applications for a period of eight years. Additionally the Company and Marcal have been licensed to develop, produce and market cellulosic granules as cat litter and other absorbent granular products. The total pre-tax cost of the settlement, including legal expenses, was $921,000 and has been charged against earnings in the quarter ended January 31, 1996. Item 4.Submission of matters to a votes of security holders - On December 12, 1995 the 1995 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. The approval of the Oil-Dri Corporation of America 1995 Long Term Incentive Plan. Election of Directors The following schedule sets forth the results of the vote to elect directors. Director Votes For Votes Withheld J. Steven Cole 23,905,437 362,754 Ronald B. Gordon 23,904,937 363,254 Daniel S. Jaffee 23,899,130 369,061 Richard M. Jaffee 23,899,107 369,084 Robert D. Jaffee 23,899,130 369,061 Edgar D. Jannotta 23,905,437 362,754 Joseph C. Miller 23,905,437 362,754 Paul J. Miller 23,905,437 362,754 Haydn H. Murray 23,905,437 362,754 Allan H. Selig 23,904,987 363,204 Approval of The Oil-Dri Corporation of America 1995 Long Term Incentive Plan The following schedule sets forth the results of the vote to approve The Oil-Dri Corporation of America 1995 Long Term Incentive Plan. FOR AGAINST ABSTAIN BROKER NON- VOTES Total Votes 22,580,557 938,083 160,332 589,219 ITEM 6. (a)Exhibits: The following documents are an exhibit to this report. Exhibit 11: Statement Re: Computation of per share earnings. Exhibit 27: Financial Data Schedule (b) During the quarter for which this report is filed, no reports on Form 8-K were filed.

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 Donald J. Deegan Director of Finance and Accounting, Chief Accounting Officer BY Daniel S. Jaffee President Dated: March 14, 1996

INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT TITLE SEQUENTIALLY NUMBER PAGE (11) Statement Re: Computation of Per Share Earnings (27) Financial Data Schedule

Exhibit 11 OIL-DRI CORPORATION OF AMERICA Computation of Weighted Average Number of Shares Outstanding Average Shares- (Weighted Number Number of Shares)Number of Shares Weighted of Days Quarter End Period Days Outstanding Shares As Adjusted January 31, 1996 11/1/95 to 1/31/96 92 6,812,922 626,788,824 6,812,922 92 626,788,824 786 6,813,708 January 31, 1995 11/1/94 to 1/31/95 92 6,949,822 639,383,624 92 639,383,624 6,949,822 5,825 6,955,647 Six Months Ended January 31, 08/01/95 to 8 6,901,322 55,210,578 6,826,500 1996 08/08/95 08/09/95 to 63 6,841,322 431,003,286 10/10/95 10/11/95 to 1 6,814,922 6,814,922 10/11/95 10/12/95 to 112 6,812,922 763,047,264 01/01/96 184 1,256,076,048 2,146 6,828,646 Six Months Ended January 31, 08/01/94 to 8 6,951,822 55,614,576 6,949,909 1995 08/08/94 11/30/94 114 6,949,822 792,279,708 12/01/94 to 62 6,949,822 430,888,964 01/31/95 184 1,278,783,248 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options. 6,789 6,956,698

5 6-MOS JUL-31-1996 JAN-31-1996 6,599,621 1,406,467 24,909,494 (278,405) 11,191,258 49,359,590 109,441,705 (51,404,271) 116,380,304 16,369,195 19,104,000 0 0 723,352 77,044,022 116,380,304 81,105,246 81,105,246 57,123,845 77,969,009 (547,459) 86,472 970,528 2,626,696 736,622 1,890,074 0 0 0 1,890,074 0.28 0.28