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, 1997 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 - 5,193,150 Shares (Including 618,567 Treasury Shares) Class B Stock - 2,042,368 Shares

OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statements of Financial Position ASSETS January 31 July 31 (Unaudited) (Unaudited) 1997 1996 CURRENT ASSETS Cash and Cash Equivalents $ 7,815,625 $10,113,544 Investment Securities, at Cost 1,610,000 1,594,000 Accounts Receivable 24,366,103 20,666,623 Allowance for Doubtful Accounts (375,820) (225,970) Inventories 10,279,738 11,737,068 Prepaid Expenses and Taxes 5,416,923 4,325,061 Total Current Assets 49,112,569 48,210,326 PROPERTY, PLANT AND EQUIPMENT - AT COST Cost 112,994,491 112,943,046 Less Accumulated Depreciation and (56,248,350) (54,730,624) Amortization Total Property, Plant and Equipment, Net 56,746,141 58,212,422 OTHER ASSETS Goodwill (Net of Accumulated Amortization) 4,106,496 4,172,526 Deferred Income Taxes 2,282,260 2,264,291 Other 5,068,867 4,833,303 Total Other 11,457,623 11,270,120 Assets TOTAL ASSETS $117,316,333 $117,692,868 The accompanying notes are an integral part of the consolidated financial statements.

OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statements of Financial Position LIABILITIES & STOCKHOLDERS' EQUITY January 31 July 31 (Unaudited) (Unaudited) 1997 1996 CURRENT LIABILITIES Current Maturities of Notes $ 1,926,000 $ 1,626,762 Payable Accounts Payable - Trade 4,277,758 5,338,787 Dividends Payable 488,508 519,610 Accrued Expenses 10,719,937 10,326,518 Total Current 17,412,203 17,811,677 Liabilities NONCURRENT LIABILITIES Notes Payable 17,132,000 18,978,000 Deferred Compensation 2,359,317 2,253,313 Other 1,636,150 1,420,382 Total Noncurrent 21,127,467 22,651,695 Liabilities Total Liabilities 38,539,670 40,463,372 STOCKHOLDERS' EQUITY Common Stock 723,551 723,552 Paid-In Capital in Excess of Par 7,667,412 7,660,600 Value Retained Earnings 80,598,295 77,385,514 Cumulative Translation Adjustment (938,733) (1,018,416) 88,050,525 84,751,250 Less Treasury Stock, At Cost 9,273,862 7,521,754 Total Stockholders' 78,776,663 77,229,496 Equity TOTAL LIABILITIES & STOCKHOLDERS' $117,316,333 $117,692,868 EQUITY 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 Six Months Ended January 31 1997 1996 (Unaudited) (Unaudited) Net Sales $83,317,354 $81,105,246 Cost Of Sales 57,390,621 57,123,845 Gross Profit 25,926,733 23,981,401 Selling, General and Administrative Expenses 19,324,626 20,845,164 Operating Income 6,602,107 3,136,237 OTHER INCOME (EXPENSE) Interest Expense (916,745) (970,528) Interest Income 300,850 274,133 Foreign Exchange Gain (Loss) 4,180 (870) Other, Net (124,594) 187,724 (736,309) (509,541) Income Before Income Taxes 5,865,798 2,626,696 Income Taxes 1,671,752 736,622 Net Income 4,194,046 1,890,074 RETAINED EARNINGS Balance at Beginning of Year 77,385,514 76,033,462 Less: Cash Dividends Declared 981,265 1,018,974 Retained Earnings - January 31 $80,598,295 $76,904,562 Average Shares Outstanding 6,689,220 6,828,646 Net Income Per Share $0.63 $0.28 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 Three Months Ended January 31 1997 1996 (Unaudited) (Unaudited) Net Sales $42,792,216 $41,797,312 Cost Of Sales 29,157,368 29,474,959 Gross Profit 13,634,848 12,322,353 Selling, General and Administrative Expenses 10,114,152 11,532,883 Operating Income 3,520,696 789,470 OTHER INCOME (EXPENSE) Interest Expense (449,550) (480,367) Interest Income 150,274 121,539 Foreign Exchange Gain (Loss) 4,484 2,723 Other, Net (61,116) 242,150 (355,908) (113,955) Income Before Income Taxes 3,164,788 675,515 Income Taxes 901,045 198,329 Net Income $2,263,743 $477,186 Average Shares Outstanding 6,657,736 6,813,708 Net Income Per Share $0.34 $0.07 These accompanying notes are an integral part of the consolidated financial statements.

OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES Consolidated Statements of Cash Flows For the Six Months Ended January 31 1997 1996 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $4,194,046 $1,890,074 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 3,831,881 4,069,690 Provision for bad debts 150,000 86,472 (Increase) Decrease in: Accounts Receivable (3,699,630) (3,367,992) Inventories 1,457,330 (297,074) Prepaid Expenses and Taxes (1,103,290) (232,877) Other Assets (239,120) (268,541) Increase (Decrease) in: Accounts Payable (1,022,024) 466,539 Accrued Expenses 346,643 (886,029) Deferred Compensation 106,004 159,775 Other 215,767 423,773 Total Adjustments 43,561 153,736 Net Cash Provided By Operating 4,237,607 2,043,810 Activities CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (2,662,573) (2,599,529) Proceeds from disposition of property, plant and equipment 555,232 - Purchases of Investment Securities (311,000) - Dispositions of Investment Securities 295,000 908,874 Other (144,534) - Net Cash Used in Investing Activities (2,267,875) (1,690,655) CASH FLOWS FROM FINANCING ACTIVITIES Principal Payments on Long Term Debt (1,546,762) (168,355) Dividends Paid (985,068) (1,018,524) Foreign Currency Translation 16,287 (26,288) Adjustment Purchases of Treasury Stock (1,752,108) (1,370,034) Net Cash Used In Financing Activities (4,267,651) (2,583,201) Net (Decrease) in Cash and Cash (2,297,919) (2,230,046) Equivalents Cash and Cash Equivalents, Beginning of 10,113,544 8,829,667 Year Cash and Cash Equivalents, January 31 $7,815,625 $6,599,621 These 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, 1996, 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. 2. INVENTORIES The composition of inventories is as follows: January 31 July 31 (Unaudited) (Unaudited) 1997 1996 Finished goods $6,243,125 $6,728,150 Packaging 3,308,545 3,754,087 Other 728,068 1,254,831 $10,279,738 $11,737,068 Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JANUARY 31, 1997 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1996 RESULTS OF OPERATIONS Consolidated net sales for the six months ended January 31, 1997 were $83,317,000, an increase of $2,212,000, or 2.7%, over net sales of $81,105,000 in the first six months of fiscal 1996. Net income for the six months ended January 31, 1997 was $4,194,000 , or $0.63 per share, an increase of 121.9% from $1,890,000, or $0.28 per share, earned in the first six months of the prior year. Net sales of cat box absorbents increased $2,508,000, or 5.2% over prior year amounts, even though sales to Sam's Club were down approximately $3,600,000 in the first six months compared to the same period of last fiscal year. The growth resulted from increased sales of branded and private label products in both the grocery and mass merchandiser markets. Net sales of agricultural and fluids purification products increased $2,011,000, or 11.7%, from the comparable period in fiscal 1996. The higher sales resulted from increased demand of AGSORB carriers as well as PURE-FLO Supreme fluids purification products. Net sales of industrial and environmental sorbents decreased $878,000, or 9.9%, from prior year levels. The decrease resulted from lower net sales of industrial clay absorbents ($651,000) and non-clay sorbents ($227,000) due to an increased internal focus on profitability versus sales growth and open positions in the sales force responsible for these products during the first quarter. Net sales of transportation services decreased $824,000 or 17.6% from the first six months of fiscal 1996 due to lower backhaul revenue. Consolidated gross profit as a percentage of net sales for the six months ended January 31, 1997 increased to 31.1% from 29.6% in the comparable period of fiscal 1996. Changes in sales mix and a Company-wide effort to reduce costs contributed to this increase. Operating expenses as a percentage of net sales decreased to 23.2% in the first six months of fiscal 1997 from 25.7% in the same period of fiscal 1996. This decrease is primarily attributable to lower advertising and promotion costs for the new consumer products introduced last year and a charge in the second quarter of fiscal 1996 of $921,000, reflecting settlement cost and legal fees related to patent litigation. Interest expense decreased $54,000 while interest income increased $27,000. The Company's effective tax rate was 28.5% of pre-tax income in the first six months of 1997 as compared to 28.0% for the same period of fiscal 1996. The assets of the Company decreased $377,000 during the first six months of fiscal 1997. Current assets increased $902,000, or 1.9%, from fiscal 1996 year end balances primarily due to increased accounts receivable, and prepaid expenses partially offset by lower inventory and cash and cash equivalents levels. Property, plant and equipment, net of accumulated depreciation, decreased $1,466,000 during the first six months. Total liabilities in the six months ended January 31, 1997 decreased $1,923,000, due primarily to the repayment of long-term debt. Current liabilities decreased $400,000 or 2.2% from July 31, 1996 balances, due to lower accounts payable, partially offset by higher current maturities of notes payable.

EXPECTATIONS The Company anticipates increased sales during the remainder of fiscal 1997 as compared to the same period of fiscal 1996. Sales of branded cat box absorbents are expected to increase moderately. However this sales growth is subject to continuing competition for shelf space in the grocery, mass merchandiser and club markets. The Company expects the profitability of these products to favorably impact earnings as spending on advertising and promotion remains at lower levels throughout the remainder of the current fiscal year as compared to last year. Sales of the Company's fluids purification products are also expected to increase compared to the same period of fiscal 1996, and the Company expects sales of its agricultural products will remain strong in the foreseeable future due to strong export demand. The foregoing statements under this heading are "forward looking statements" within the meaning of that term in the Securities Exchange Act of 1934, as amended. Actual results may be lower than those reflected in these forward-looking statements, due primarily to: continued vigorous competition in the grocery, mass merchandiser and club markets; the level of success of new products; and the cost of new product introductions and promotions in consumer markets. These forward-looking statements also involve the risk of changes in market conditions in the overall economy and, for the agricultural and fluids purification division, in the planting activity, crop quality and overall agricultural demand, including export demand. LIQUIDITY AND CAPITAL RESOURCES The current ratio increased slightly to 2.8 at January 31, 1997 from 2.7 at July 31, 1996. Working capital increased $1,303,000 in the six months ended January 31, 1997 to $31,701,000. Cash provided by operations continues to be the Company's primary source of funds to finance operating needs and capital expenditures. During the six months ended January 31, 1997 the balances of cash, cash equivalents and other investments declined $2,282,000 due to capital expenditures ($2,663,000), purchases of the Company's common stock ($1,752,000), and reduction of debt ($1,547,000). Total cash and investment balances held by the Company's foreign subsidiaries at January 31, 1997 and 1996 were $2,629,000 and $2,505,000 respectively. THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1996 Consolidated net sales for the three months ended January 31, 1997 were $42,792,000, an increase of $995,000 or 2.4%, over net sales of $41,797,000 in the second quarter of fiscal 1996. Net income for the three months ended January 31, 1997 was $2,264,000 or $0.34 per share, an increase of 374.4% from $477,000, or $0.07 per share, earned in last year's quarter. Net sales of cat box absorbents increased $1,344,000 or 5.4% from fiscal 1996 second quarter results even though sales to Sam's Club were down approximately $1,600,000 in the current quarter compared to the same quarter of the prior year. The growth resulted from increased sales of branded and private label products in both the grocery and mass merchandiser markets. Net sales of agricultural and fluids purification products increased $662,000, or 7.1% from the comparable period in fiscal 1996. The higher sales resulted from increased demand for AGSORB carriers as well as PURE-FLO Supreme fluids purification products. Net sales of industrial and environmental sorbents decreased $261,000, or 6.2%, from prior year second quarter levels. The decrease resulted from lower net sales of industrial clay absorbents ($192,000) and non-clay sorbents ($69,000) due to an increased focus on profitability versus sales growth. Net sales of transportation services decreased $403,000 or 18.0% from the second quarter of fiscal 1996 due to lower backhaul revenue.

Consolidated gross profit as a percentage of net sales for the three months ended January 31, 1997 increased to 31.9% from 29.5% in the comparable period of fiscal 1996. Changes in sales mix and a Company-wide effort to reduce costs contributed to this increase. Operating expenses as a percentage of net sales decreased to 23.6% in the second quarter of fiscal 1997 from 27.6% in the same quarter of the prior year. This decrease is primarily due to lower advertising and promotion costs for the new consumer products introduced during the second quarter of last year, and a charge in the second quarter of fiscal 1996 of $921,000, reflecting settlement cost and legal fees related to patent litigation. Interest expense decreased $31,000 while interest income increased $29,000. The Company's effective tax rate was 28.5% of pre-tax income in the second quarter of 1997 as compared to 29.4% for the second quarter of fiscal 1996. FOREIGN OPERATIONS Net sales by the Company's foreign subsidiaries for the six months ended January 31, 1997 were $6,120,000, or 7.3% of total Company sales. This represents a decrease of $94,000, or 1.5%, from the same period of fiscal 1996 in which foreign subsidiary sales were $6,214,000, or 7.7% of total Company sales. Net income of the foreign subsidiaries for the first six months of fiscal 1997 was $431,000 compared with $275,000 in the same period of fiscal 1996. Identifiable assets of the Company's foreign subsidiaries as of January 31, 1997 were $9,991,000 an increase of $847,000 from $9,144,000 as of January 31, 1996. Net sales by the Company's foreign subsidiaries for the quarter ended January 31, 1997 were $3,119,000 or 7.3% of total Company sales. This represents a decrease of $187,000, or 5.7%, from the same quarter in fiscal 1996, in which foreign subsidiary sales were $3,306,000, or 7.9% of total Company sales. Net income of the foreign subsidiaries for the second quarter of fiscal 1997 was $286,000 compared to $51,000 in the same period of fiscal 1996.

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 10, 1996 the 1996 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. Election of Directors The following schedule sets forth the results of the vote to elect directors. Director Votes For Votes Withheld J. Steven Cole 23,865,355 27,512 Ronald B. Gordon 23,865,355 27,512 Daniel S. Jaffee 23,865,355 27,512 Richard M. Jaffee 23,865,344 27,523 Robert D. Jaffee 23,865,355 27,512 Edgar D. Jannotta 23,865,155 27,712 Joseph C. Miller 23,865,355 27,512 Paul J. Miller 23,865,355 27,512 Haydn H. Murray 23,865,355 27,512 Allan H. Selig 23,865,351 27,516 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 /s/Michael L. Goldberg Michael L. Goldberg Vice President and Chief Financial Officer BY /s/Daniel S. Jaffee Daniel S. Jaffee President and Chief Operating Officer Dated: March 12, 1997

INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT TITLE SEQUENTIALLY NUMBER PAGE (11) Statement Re: 14 Computation of Per Share Earnings

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, 11/01/96 to 25 6,670,051 166,751,275 1997 11/25/96 11/26/96 to 6 6,666,551 39,999,306 12/01/96 12/02/96 to 4 6,664,051 26,656,204 12/05/96 12/06/96 to 7 6,661,551 46,630,857 12/12/96 12/13/96 to 6 6,660,651 39,963,906 12/18/96 12/19/96 to 15 6,658,751 99,881,265 01/02/97 01/03/97 to 4 6,648,751 26,595,004 01/06/97 01/07/97 to 13 6,646,851 86,409,063 01/19/97 01/20/97 to 1 6,646,751 6,646,751 01/20/97 01/21/97 to 11 6,616,951 72,786,461 92 612,320,092 6,655,653 2,083 6,657,736 January 31, 11/01/95 to 92 6,812,922 626,788,824 1996 01/31/96 92 626,788,824 6,812,922 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options. 786 6,813,708

Average Shares- (Weighted Number Number of Shares) of Shares Weighted Number of Six Months Period Days Outstanding Shares Days As Ended Adjusted January 31, 08/01/96 to 55 6,736,451 370,504,805 1997 09/24/96 09/25/96 to 1 6,733,951 6,733,951 09/25/96 09/26/96 to 1 6,717,551 6,717,551 09/26/96 09/27/96 to 3 6,710,451 20,131,353 09/29/96 09/30/96 to 1 6,708,451 6,708,451 09/30/96 10/01/96 to 1 6,705,251 6,705,251 10/01/96 10/02/96 to 1 6,702,251 6,702,251 10/02/96 10/03/96 to 12 6,701,751 80,421,012 10/14/96 10/15/96 to 1 6,698,451 6,698,451 10/15/96 10/16/96 to 1 6,695,751 6,695,751 10/16/96 10/17/96 to 1 6,690,251 6,690,251 10/17/96 10/18/96 to 11 6,678,051 73,458,561 10/28/96 10/29/96 to 28 6,670,051 186,761,428 11/25/96 11/26/96 to 6 6,666,551 39,999,306 12/01/96 12/02/96 to 4 6,664,051 26,656,204 12/05/96 12/06/96 to 7 6,661,551 46,630,857 12/12/96 12/13/96 to 6 6,660,651 39,963,906 12/18/96 12/19/96 to 15 6,658,751 99,881,265 01/02/97 01/03/97 to 4 6,648,751 26,595,004 01/06/97 01/07/97 to 13 6,646,851 86,409,063 01/19/97 01/20/97 to 1 6,646,751 6,646,751 01/20/97 01/21/97 to 11 6,616,951 72,786,461 01/31/97 184 1,230,497,884 6,687,489 1,731 6,689,220 Six Months Ended January 31, 08/01/95 to 8 6,901,322 55,210,576 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 6,826,500 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options. 2,146 6,828,646

5 6-MOS JUL-31-1997 JAN-31-1997 7,815,625 1,610,000 24,366,103 375,820 10,279,738 49,112,569 112,994,491 (56,248,350) 117,316,333 17,412,203 17,132,000 0 0 723,551 78,776,663 117,316,333 83,317,354 83,317,354 57,390,621 57,390,621 18,994,190 150,000 916,745 5,865,798 1,671,752 4,194,046 0 0 0 4,194,046 0.63 0.63