<PAGE> 1
CONFORMED COPY
(with Exhibits)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended July 31, 1994 Commission File No. 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 identifi-
incorporation or organization) cation no.)
410 North Michigan Avenue
Chicago, Illinois 60611
------------------------------ --------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (312) 321-1515
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, par value $.10 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
----
(Title of Class)
Number of Shares of each class of Registrant's common stock outstanding as
of September 30, 1994:
Common Stock - 5,100,623 shares (including 283,696 treasury shares)
Class B Stock - 2,132,895 shares
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Registrant's Common Stock owned by
non-affiliates - $88,884,934 (based on the closing price on September 30,
1994).
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference:
1. Registrant's Proxy Statement for its 1994 Annual Meeting of
Stockholders ("Proxy Statement"), which will be filed with the
Securities and Exchange Commission not later than November 28,
1994 (120 days after the end of Registrant's fiscal year ended
July 31, 1994), is incorporated into Part III of this Annual
Report on Form 10-K, as indicated herein.
2. The following portions of Registrant's 1994 Annual Report to
Stockholders ("Annual Report"), which is an exhibit to this
Annual Report on Form 10-K, are incorporated into Parts I, II
and IV oF this Annual Report on Form 10-K, as indicated herein
(page numbers refer to the Annual Report):
a) Common Stock on page 34.
b) Five-Year Summary of Financial Data on page 13.
c) Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 14 to 17.
d) Consolidated Statements of Income on page 20.
e) Consolidated Statements of Stockholders' Equity on
page 21.
f) Consolidated Statements of Financial Position on
pages 18 and 19.
g) Consolidated Statements of Cash Flows on page 22.
h) Notes to Consolidated Financial Statements on pages
23 to 33.
i) Independent Auditor's Report on page 34.
j) Selected Quarterly Financial Data on page 33.
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<PAGE> 3
PART I
Item 1. BUSINESS
Oil-Dri Corporation of America was incorporated in 1969 in Delaware as
the successor to an Illinois corporation incorporated in 1946 which was the
successor to a partnership which commenced business in 1941. Except as
otherwise indicated herein or as the context otherwise requires, references
herein to "Registrant" or to "Company" are to Oil-Dri Corporation of America
and its subsidiaries. The Registrant is a leading developer, manufacturer and
marketer of sorbent products and related services for the consumer, industrial
and environmental, agricultural and specialty markets. The Registrant's
products are principally produced from clay minerals and, to a lesser extent,
other sorbent materials. Consumer products, consisting primarily of cat litter,
are sold to the grocery products industry and to mass merchandising retail
outlets. Industrial and environmental products, consisting primarily of oil,
grease and water sorbents, are sold to distributors of industrial cleanup and
automotive products, environmental service companies, as well as retail
outlets. Agricultural products, which include carriers for crop protection
chemicals and fertilizers, drying agents, soil conditioners, pellet binders and
flowability aids, are sold to manufacturers of agricultural chemicals and
distributors of other agricultural products. Fluid purification products,
consisting primarily of bleaching, filtration and clarification clays, are sold
to processors and refiners of edible and petroleum-based oils.
The Registrant's sorbent technologies include absorbent and adsorbent
products. Absorbents, like sponges, draw liquids up into their many pores.
Examples of Oil-Dri's absorbent products are CAT'S PRIDE(R) Premium Cat Litter
and other cat litters, OIL-DRI ALL PURPOSE(R) mineral floor absorbent and
AGSORB(R) granular agricultural chemical carriers.
Adsorbent products, like magnets, attract liquids, impurities, metals
and surfactants to themselves and form low level chemical bonds. The
Registrant's adsorbents are used for cleanup and filtration mediums. The
Registrant's adsorbent products include OIL-DRI LITE(R) Sorbents for industrial
and environmental cleanup, PURE-FLO(R) and PURE-FLO(R) Supreme Bleaching Clays
for edible oils, fats and tallows, and ULTRA-CLEAR(R) Clarification Aids for
petroleum based oils and by-products.
The Registrant has pursued a strategy of developing value-added and
branded products for consumer, industrial and environmental, agricultural and
fluid purification uses, where the Registrant's marketing and research and
development capabilities can play important roles. The Registrant's products
are sold through its specialized divisional sales staffs supported by technical
service representatives and through a network of approximately 2000 industrial
distributors and 85 food brokers. The Registrant maintains its own research
and development facility and staff. The Registrant's transportation subsidiary
delivers Oil-Dri products and the products of its customers and other third
parties.
Certain financial information about Registrant's foreign and domestic
operations is contained in Note 2 of Notes to Consolidated Financial Statements
on page 25 of the Annual Report and is incorporated herein by reference.
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<PAGE> 4
Cat Box Absorbents
The Registrant's cat litter products, in both coarse granular and fine
granular clumping forms, are sold under the Registrant's CAT'S PRIDE(R) and
LASTING PRIDE(TM) brand names, FRESH STEP(R) and CONTROL(R) brands manufactured
for The Clorox Company and private label cat litters manufactured for mass
merchandisers, wholesale clubs, drug chains, pet superstores and retail grocery
stores. These products are sold through independent food brokers and the
Registrant's representatives to major grocery outlets such as Albertsons,
Fleming Foods, Safeway and others. LASTING PRIDE(TM) is principally sold to
mass merchandisers such as Wal-Mart, K-Mart and others and to wholesale clubs
such as Sam's.
The Registrant and The Clorox Company have long-term arrangements under which
they developed FRESH STEP(R) and CONTROL(R) premium-priced cat litter
products. FRESH STEP(R) and CONTROL(R) brands, which are owned, trademarked and
marketed by The Clorox Company, both utilize the Registrant's special low
density, highly absorbent clay mineral. FRESH STEP(R) contains
microencapsulated odor controllers which are activated by the cat. CONTROL(R),
developed by the Registrant and licensed to The Clorox Company, contains an
odor inhibiting agent. The Registrant has a long-term exclusive right
to supply The Clorox Company's requirements for FRESH STEP(R) and CONTROL(R) up
to certain levels. According to independently published supermarket industry
reports, FRESH STEP(R) was the largest dollar grossing cat litter brand sold
through grocery chains in the United States during the year ended July 17,
1994.
The cat litter market has undergone significant change over the past 4
years. Traditional coarse granular clay litters, once representing
approximately 98% of the market, are competing with new, fine granule clumping
products. These clumping products have the characteristic of binding together
and expanding when moisture is introduced. The Registrant's clumping cat
litter is based on naturally occurring organic ingredients which are
biodegradable. On an industry-wide basis, clumping cat litters have assumed
market shares in excess of 38% of retail dollar sales volume in the grocery
industry and 48% of retail dollar sales volume in the mass merchandiser
industry in the 52 week period ended July 17, 1994, compared with 34% and 42%,
respectively, in a similar period last year.
Industrial and Environmental Sorbents
Products for industrial users include the Registrant's oil, grease, and
water sorbents, which are cost effective floor maintenance products that
provide a nonslip and nonflammable surface for workers. These products are
sold to a wide range of distribution channels and have achieved a high level of
recognition. The Registrant distributes clay-based sorbents sold in granular
form and in the form of a pillow and a sock. The Registrant also distributes
non-clay sorbents including its OIL-DRI(R) Industrial Pad and OIL-DRI(R)
Industrial Rug, which are made of needle-punched polypropylene.
The Registrant has added polypropylene products to its industrial sorbents
product line and also entered the marine oil spill response market through its
acquisition of Industrial Environmental Products, Inc. ("IEP") in April, 1990.
IEP was a distributor and marketer of these products, primarily in the
southeast United States. The Registrant purchases the majority of these
polypropylene products under an agreement with a single unaffiliated supplier.
The Registrant has recently acquired equipment affording it the capability to
cut these polypropylene products, acquired in the bulk form, to customer
specifications. The polypropylene products will collect up to approximately 15
times their own weight in liquids and offer the added benefit of incinerability
and recyclability in accordance with environmentally permissible methods.
OIL-DRI(R) Sorbent Booms and OIL-DRI(R) Sorbent Pads, which are made from
meltblown polypropylene, will
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<PAGE> 5
selectively remove oil from the surface of any body of water. They can be
used for emergency spill response or for cleaning and maintenance. The
Registrant's needle-punched polypropylene products will adsorb oil and aqueous
liquids from industrial floors and surfaces.
The Registrant sells its industrial and environmental products to
approximately 2,000 distributors. These include industrial, auto parts,
safety, sanitary supply, chemical and paper distributors and environmental
service companies. The Registrant supports the efforts of the industrial
distributors with 7 specialized divisional sales personnel.
The Registrant also produces for the consumer market OIL-DRI(R) Automotive, a
floor absorbent for home and garage use. This product is sold through
automobile parts distributors and mass merchandisers.
Agricultural Carriers and Absorbents
The Registrant produces and markets a wide range of granular and powdered
mineral absorbent products that are used with crop protection chemicals, animal
feed and fertilizers. Products include AGSORB(R) agricultural chemical carriers
and drying agents; FLO-FRE(R), a highly absorbent microgranule flowability aid;
PEL-UNITE(R) and CONDITIONADE(TM), pelleting aids, used in the manufacture of
animal feeds, and TERRA GREEN(R) Soil Conditioner.
The AGSORB(R) Carriers are used as mediums of distribution for crop protection
chemicals and fertilizers. AGSORB(R) customized carriers are designed to
reduce dust and to increase accuracy of application. The Registrant's
AGSORB(R) Drying Agent is used to prevent clogging in specialized farm
machinery and enables farmers to evenly apply granular fertilizers and liquid
pesticides to their fields in one application. The Registrant has also
developed AGSORB(R) as a blending agent for fertilizers and chemicals used in
the lawn and garden market.
Agricultural products are marketed in the United States by seven technical
salesmen employed by the Company who sell to crop protection chemical
manufacturers, feed producers and agricultural product distributors. The
Registrant's principal customers for these products include the agricultural
groups of Monsanto, DowElanco, and Zeneca. The Registrant's service programs,
technical expertise and high product quality have increased sales of these
products.
Fluid Adsorbents
Fluid purification products include PURE-FLO(R) Bleaching Clays, ULTRA-CLEAR(R)
Clarification Aids, and PURE-FLO(R) Supreme. These products are supported by a
team of seven technical sales and support representatives employed by the
Company and the services of the Registrant's research and development group.
The products are marketed in the United States and international markets.
PURE-FLO(R) Bleaching Clays, used in the bleaching of edible oils, remove
impurities and color bodies from these oils. The primary customers for these
products are refiners of food oils. ULTRA-CLEAR(R) Clarification Aid is used
as a filtration and purification medium for jet fuel and other petroleum based
oils. This product adsorbs unwanted moisture and other impurities, and is
primarily sold to oil refiners.
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<PAGE> 6
Transportation Services
Oil-Dri Transportation Company leases or contracts for approximately 130
tractors, 260 trailers, 80 covered rail hopper cars and other special use
equipment for the delivery of the Registrant's products in package and bulk
form. Through this subsidiary, the Registrant is better able to control costs,
maintain delivery schedules and assure equipment availability. Oil-Dri
Transportation Company performs transportation services for the Registrant on
outbound movements from the Registrant's production plants. To offset costs
further, Oil-Dri Transportation Company transports third parties' products on
return trips.
Patents
Registrant has obtained or applied for patents for certain of its processes
and products. These patents expire at various times, beginning in 1996.
Patented processes and products are not material to Registrant's overall
business.
Foreign
SAULAR(R), manufactured and marketed by Favorite Products Company, Ltd., the
Registrant's wholly-owned Canadian subsidiary, is a leading brand of cat
litter sold in Canada. Favorite Products Company, Ltd. also packages and
markets the SAULAR KAT-KIT which contains cat litter in a disposable tray.
Certain of the products sold in Canada are blends of clay and synthetic sorbent
materials.
The Registrant's wholly-owned subsidiary in England, Oil-Dri, U.K., LTD.,
packages clay granules produced by the Registrant's domestic manufacturing
facilities and, for certain applications, blends a synthetic sorbent material
which it manufactures locally. Oil-Dri, U.K., LTD. markets these products,
primarily in the United Kingdom, as an oil and grease absorbent and as a cat
litter.
The Registrant's wholly-owned subsidiary in Switzerland, Oil-Dri S.A.,
performs various management, sales and administrative functions for the
Registrant's foreign subsidiaries.
The Company's foreign operations are subject to the normal risks of doing
business overseas, such as currency devaluations and fluctuations,
restrictions on the transfer of funds and import/export duties. The Registrant
to date has not been materially affected by these risks.
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<PAGE> 7
Backlog; Seasonality
At July 31, 1994 and 1993, Registrant's backlog of orders was approximately
$2,621,000 and $2,456,000, respectively. The Registrant does not consider
its clay sorbent business, taken as a whole, to be seasonal to any material
extent. However, certain business activities of certain customers of the
Registrant's (such as agricultural) are subject to such factors as crop acreage
planted and product formulation cycles.
Customers
Sales to The Clorox Company accounted for approximately 10% of the Registrant's
net sales for the fiscal year ended July 31, 1994. Clorox and the Registrant
are parties to long-term supply contracts. Sales to Wal-Mart accounted for
approximately 24% of the Registrant's net sales for the fiscal year ended July
31, 1994. The loss of any other of Registrant's customers would not have a
materially adverse effect on the Registrant.
Competition
Registrant has approximately seven principal competitors in the United States,
some of which compete with the Registrant only in certain markets and with
respect to certain products. Price, service and technical support, product
quality and delivery are the principal methods of competition in Registrant's
markets and competition has historically been very vigorous. The Registrant
believes that it can compete favorably in all its present markets.
Reserves
Registrant mines sorbent materials, consisting of either Montmorillonite,
Attapulgite or diatomaceous earth on leased or owned land near its mills in
Mississippi, Georgia and Oregon, and on leased and owned land in Florida (see
"Item 2- Properties" below). The Registrant estimates that its proven
recoverable reserves of these sorbent materials aggregate approximately
168,723,000 tons. Based on its rate of consumption during the 1994 fiscal
year, Registrant considers its proven recoverable reserves adequate to supply
Registrant's needs for approximately 51 years. It is the Registrant's policy
to add to reserves each year an amount at least equal to the amount of reserves
consumed in that year. Registrant has a program of exploration for additional
reserves and, although reserves have increased, Registrant cannot assure that
such reserves will continue to increase. The Registrant's use of these
reserves will be subject to compliance with existing and future federal and
state statute regulations regarding mining and environmental compliance and
certain product specifications. Among other things, requirements for
environmental compliance may restrict exploration or use of lands that might
otherwise be utilized as a source of reserves. During the fiscal year ended
July 31, 1994, the Registrant utilized these reserves to produce substantially
all of the sorbent minerals that it sold.
In April 1991, the Registrant acquired mineral reserves on approximately
709 acres in Washoe County, Nevada. The Registrant estimates that there are 26
million tons of proven reserves of sorbent materials on this acreage. Mining
these reserves requires the approval of federal, state and local agencies,
which approvals the Registrant is currently in the process of seeking. In the
future, the Registrant hopes to develop facilities so as to use these reserves
as a source of supply for its West Coast customers. However, there can be no
assurance to whether this will be accomplished.
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<PAGE> 8
Mining Operations
The Registrant has conducted mining operations in Ripley, Mississippi since
1963; in Ochlocknee, Georgia since 1971; in Christmas Valley, Oregon since
1979; and in Blue Mountain, Mississippi since 1989, which had been operated for
one year by Ami-Dri, Inc.
The Registrant's raw materials are open pit mined on a year round basis
generally using large earth moving scrapers and bulldozers to remove
overburden, and then loaded into dump trucks with backhoe or dragline equipment
for movement to the processing facilities. The mining and hauling of the
Registrant's clay is performed by the Registrant and by independent
contractors.
The Registrant's current operating mines range in distance from immediately
adjacent to several miles from its processing plants. Access to processing
facilities from the mining areas is generally by private road; and in some
instances public highways are utilized.
Each of the Registrant's processing facilities maintains stockpiles of
unprocessed clay of approximately one to three weeks production requirements.
Proven reserves are those reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from results of detailed sampling, and (b) the
sites for inspection, sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape, depth and mineral
content of reserves are well established. Probable reserves are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling, and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for
proven reserves, is high enough to assume continuity between points of
observation.
The Registrant employs a staff of geologists and mineral specialists who
estimate and evaluate existing and potential reserves in terms of quality,
quantity and availability.
The following schedule summarizes, for each of the Registrant's manufacturing
facilities the net book value of land and other plant and equipment.
<TABLE>
<CAPTION>
PLANT AND
LAND EQUIPMENT
----------- -----------
<S> <C> <C>
Ochlocknee, Georgia $ 1,572,115 $21,491,502
Ripley, Mississippi 1,067,237 14,633,224
Blue Mountain, Mississippi 792,977 8,060,432
Christmas Valley, Oregon 68,044 759,188
</TABLE>
Employees
As of July 31, 1994, the Registrant employed 698 persons, 46 of whom were
employed by the Registrant's foreign subsidiaries. The Registrant's
corporate offices, research and development center and manufacturing facilities
are adequately staffed and no material labor shortages are anticipated.
Approximately 70 of the Registrant's employees in the U.S. and approximately 20
of the Registrant's employees in Canada are represented by labor unions, which
have entered into separate collective bargaining agreements with the Company.
Employee relations are considered satisfactory.
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<PAGE> 9
Environmental Compliance
The Registrant's mining and manufacturing operations and facilities in
Georgia, Mississippi and Oregon are required to comply with state strip mining
statutes and various federal, state and local statutes, regulations and
ordinances which govern the discharge of materials, water and waste into the
environment and restrict mining on "wetlands" or otherwise regulate the
Registrant's operations. In recent years, environmental regulation has grown
increasingly stringent, a trend which the Registrant expects will continue.
The Registrant endeavors to stay in substantial compliance with applicable
environmental controls and regulations and to work with regulators to correct
any claimed deficiency. As a result, expenditures relating to environmental
compliance have increased. In the l994 fiscal year, the Registrant expended
approximately $1,500,000 on equipment and other aspects of environmental
control and compliance and expects that it will spend approximately $1,140,000
in the 1995 fiscal year and that these costs will continue at comparable levels
in the future. The Registrant continues, and will continue, to incur costs in
connection with reclaiming mined out areas; these costs are treated as part of
the Registrant's mining expense.
In addition to the environmental requirements relating to mining and
manufacturing operations and facilities, there is increasing federal and
state legislation and regulation with respect to the labeling, use, and
disposal after use, of various of the Registrant's products. The Registrant
endeavors to stay in substantial compliance with that legislation and
regulation and to assist its customers in that compliance.
The Registrant cannot assure that, despite its best efforts, it will always
be in compliance with environmental legislation and regulations or with
requirements regarding the labeling, use, and disposal after use, of its
products; nor can it assure that from time to time enforcement of such
requirements will not have an adverse impact on its business.
Energy
The Registrant uses natural gas and fuel oil as energy sources for the
processing of its clay products. In prior years, the Registrant has switched
from natural gas to fuel oil during the winter months due to the seasonal
unavailability and higher cost of natural gas relative to fuel oil. The
Registrant also utilizes a significant amount of diesel fuel in its
transportation operation.
Research and Development
At the Registrant's research facility, the research and development
staff develops new products and applications and improves existing products.
The staff and various consultants consist of geologists, mineralogists and
chemists. In the past several years, the Registrant's research efforts have
resulted in a number of new sorbent products and processes including
PURE-FLO(R), PURE-FLO(R) Supreme, CAT'S PRIDE(R) Scoopable, and LASTING
PRIDE(TM). The technical center produces prototype samples and test run
quantities of new products for customer trial and evaluation.
Registrant spent approximately $1,875,000, $1,509,000 and $1,450,000 during its
fiscal years ended July 31, 1994, 1993 and 1992, respectively, for
research and development. None of such research and development was customer
sponsored, and all research and development costs are expensed in the year in
which they are incurred.
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<PAGE> 10
Other
The Registrant holds approximately a 14% equity interest in Kamterter, Inc., a
research and development company located in Lincoln, Nebraska. Kamterter
applies biotechnology in the agricultural field and utilizes the Registrant's
clay products in a development-stage process to prime seeds. At July 31, 1994,
the Registrant's investment, at cost, in Kamterter was approximately $717,000.
Kamterter has a substantial negative net worth and for the 12 months ended
February 28, 1994, was generating operating losses. While Kamterter's business
is continuing, the Registrant cannot predict Kamterter's future financial
condition or results of operations.
Item 2. PROPERTIES
Registrant's properties are generally described below:
<TABLE>
<CAPTION>
LAND HOLDINGS & MINERAL RESERVES
LAND LAND PROVEN PROBABLE
OWNED LEASED TOTAL RESERVES RESERVES TOTAL
---------------------------------------------------------
(1,000's (1,000's (1,000's
(acres) (acres) (acres) of tons) of tons) of tons)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Georgia 1,193 2,004 3,197 45,505 9,836 55,341
Mississippi 1,969 1,423 3,392 115,085 121,701 236,786
Oregon 360 800 1,160 3,621 - 3,621
Florida 537 446 983 4,512 1,092 5,604
Nevada 709 - 709 26,292 - 26,292
Illinois 4 - 4 - - -
------- ------- ------- ------- ------- -------
4,772 4,673 9,445 195,015 132,629 327,644
</TABLE>
See "Item 1. Business-Reserves"
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<PAGE> 11
There are no mortgages on the property owned by Registrant. The Mississippi,
Georgia, Oregon and Florida land is used primarily for mining. Parcels of such
land are also sites of mills operated by Registrant. The Illinois land is the
site of Registrant's research and development facility. The Registrant owns
approximately one acre of land in Laval, Quebec, Canada, which is the site of
the processing and packaging facility for the Registrant's Canadian subsidiary.
The Registrant's mining operations are conducted on leased or owned land. The
Georgia, Florida and Mississippi mining leases, with expiration dates ranging
from 1999 to 2053, no one of which is material, generally provide for a
lease term which continues as long as the Registrant pays a minimum monthly
rental. This rental payment is applied against a royalty related to the number
of unprocessed, or in some cases processed, tons of mineral extracted from the
leased property.
The Registrant operates mills at Ripley, Mississippi, Ochlocknee, Georgia,
Christmas Valley, Oregon, and Blue Mountain, Mississippi; production and
packaging plants at Laval, Quebec, Canada and Wisbech, United Kingdom.
Registrant's facilities at Ripley, Mississippi, Christmas Valley, Oregon,
Laval, Quebec, Canada and Wisbech, United Kingdom are wholly owned by
Registrant and Registrant's mills at Ochlocknee, Georgia and Blue Mountain,
Mississippi are owned in-part by Registrant. Registrant is a party to leases
that relate to certain plant expansion projects at the Registrant's mill at
Ochlocknee, Georgia and certain plant acquisition and expansion projects at the
Registrant's mill at Blue Mountain, Mississippi. The Georgia lease was entered
into with The Thomasville Payroll Development Authority in 1982 in connection
with the issuance by the Authority of $4,000,000 in aggregate principal amount
of industrial revenue bonds, full payment of which is guaranteed by the
Registrant. At the end of the term of the lease, in fiscal 1995, and because
the bonds have been fully paid, a subsidiary of the Registrant has the right to
purchase, and is in the process of, purchasing the leased property for $10.
The Blue Mountain, Mississippi lease was entered into with the Town of Blue
Mountain, Mississippi in 1988 in connection with the issuance by the Town of
$7,500,000 in aggregate principal amount of industrial revenue bonds, full
payment of which is guaranteed by the Registrant. Upon expiration of the leases
in 2008, a subsidiary of the Registrant has the right to purchase the leased
property for $100 upon full payment of the bonds. The land on which the mill
at Wisbech, United Kingdom is located is leased pursuant to a long-term lease
arrangement with the Port Authority of Wisbech which expires in 2032.
All of Registrant's domestic mills, whether owned or leased, consist of related
steel frame, sheet steel covered or brick buildings of various heights, with
concrete floors and storage tanks. The buildings occupy approximately 201,000
square feet at Ripley, Mississippi, 247,000 square feet at Ochlocknee, Georgia,
18,000 square feet at Christmas Valley, Oregon and 140,000 square feet at Blue
Mountain, Mississippi. Registrant maintains railroad siding facilities near
the Ripley, Mississippi, Ochlocknee, Georgia and Blue Mountain, Mississippi
mills. Equipment at all mills is in good condition, well maintained and
adequate for current processing levels.
All of the Registrant's foreign facilities are owned and consist of related
steel frame, sheet steel covered or brick buildings of various heights, with
concrete floors and storage tanks. The buildings occupy 22,500 square feet at
Laval, Quebec, Canada and 32,500 square feet at Wisbech, United Kingdom.
Registrant's research and development facility is located on land in Vernon
Hills, Illinois and consists of brick buildings of approximately 19,100 square
feet, including a pilot plant facility.
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<PAGE> 12
Registrant's principal office, consisting of approximately 20,000 square
feet in Chicago, Illinois, is presently occupied under a lease expiring on June
30, 2008.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE> 13
Item 401(b) OF REGULATION S-K. EXECUTIVE OFFICERS OF REGISTRANT
The following table gives certain information with respect to the Executive
Officers of the Registrant.
<TABLE>
<CAPTION>
Principal Occupation
Name (5) For Last Five Years Age
- - - -------------- ------------------------------ ---
<S> <C> <C>
Richard M. Jaffee President and Chief Executive 58
Officer of the Registrant
Norman B. Gershon Vice President, International 58
Operations of the Registrant;
Managing Director of Oil-Dri,
S.A., a subsidiary of the Registrant;
Vice President, European Operations of
the Registrant from 1973 to 1991.
Bruce H. Sone Vice President, Consumer Products - 54
Mass Merchandising Division of
the Registrant; Vice President
and General Manager of
Consumer Products Division
of the Registrant from
1985 until 1992.
Joseph C. Miller Senior Vice President of the 52
Registrant for Consumer,
Industrial & Environmental
and Transportation; Group
Vice President of the Registrant
for Sales, Marketing and
Distribution, from 1990 to 1993;
Vice President of Corporate Planning
and Marketing for the Registrant
from 1989 to 1990; President of
Whiteford Systems, a transportation
service company, from 1989 to 1990;
Richard V. Hardin(1) Group Vice President, Technology, 55
(3) of the Registrant; Group Vice
President, New Technologies of the
Registrant from 1989 to 1991.
Herbert V. Pomerantz Senior Vice President, Agricultural 54
(3) and Specialty Products and Research
and Development of the Registrant;
Vice President, Polymers of Unocal
Corporation, a diversified energy
and natural gas resource company
from 1986 to 1993.
</TABLE>
-13-
<PAGE> 14
<TABLE>
<S> <C> <C>
Daniel S. Jaffee (2) Group Vice President, Canadian 30
Operations and Consumer
Products-Grocery Division of
the Registrant; Chief Financial
Officer of the Registrant; Chief
Executive Officer of Favorite
Products Company, Ltd., a
subsidiary of the Registrant;
Group Vice President, Canadian
Operations and Consumer Products -
Grocery Division of the Registrant
from 1992 until 1994; Group
Vice President, Domestic
and Canadian Operations of the
Registrant from 1990 until 1992;
Group Vice President of
Canadian Operations,
Management Information Systems
and Finance of the Registrant in
1990; Product Manager in the
Industrial and Agricultural
Divisions of the Registrant from
1987 to 1989.
</TABLE>
-14-
<PAGE> 15
The term of each executive officer expires at the 1994 Annual Meeting of the
Stockholders and Board of Directors respectively, and when his successor is
elected and qualified.
(1) Richard V. Hardin is Richard M. Jaffee's son-in-law.
(2) Daniel S. Jaffee is Richard M. Jaffee's son.
(3) Each person listed in this table is a director of the
Registrant except for Richard V. Hardin and Herbert V.
Pomerantz.
-15-
<PAGE> 16
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
Information concerning stock prices and dividends with regard to the Common
Stock of Registrant, which is traded on the New York Stock Exchange, and
information concerning dividends with regard to the Class B Stock of
Registrant, for which there is no established public trading market, is
contained on page 34 of the Annual Report under the caption "Common Stock"
and is incorporated herein by this reference. Registrant's ability to pay
dividends was limited by its Guaranty Agreement (entered into in connection
with the issuance of bonds by the Thomasville Payroll Development
Authority) with Continental Illinois National Bank and Trust and Company of
Chicago (now Bank of America Illinois which expired on August 1, 1994) and
is limited by the Registrant's Credit Agreement with Harris Trust and
Savings Bank dated September 21, 1994. See Note 3 of "Notes to Consolidated
Financial Statements" in the Annual Report, incorporated herein by
reference.
Item 6. SELECTED FINANCIAL DATA
See the "Five Year Summary of Financial Data" on page 13 of the Annual
Report, incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 14 to 17 of the Annual Report, incorporated
herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Consolidated Statements of Income," "Consolidated Statements of
Stockholders' Equity," "Consolidated Statements of Financial Position,"
"Consolidated Statements of Cash Flows," "Notes to Consolidated Financial
Statements" and "Independent Auditor's Report" on pages 23 to 34 of the Annual
Report, "Five Year Summary of Financial Data" on page 13 of the Annual Report,
and "Selected Quarterly Financial Data" on page 33 of the Annual Report,
incorporated herein by reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-16-
<PAGE> 17
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is (except for information in Part I,
thereof, concerning executive officers contained in the Registrant's Proxy
Statement for its 1994 Annual Meeting of stockholders ("Proxy Statement") under
the caption "Election of Directors" and is incorporated herein by this
reference.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is contained in the Registrant's Proxy
Statement for its 1994 Annual Meeting of stockholders ("Proxy Statement") under
the caption "Executive Compensation Committee Report on Executive Compensation"
and is incorporated herein by this reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is contained in the Registrant's Proxy
Statement for its 1994 Annual Meeting of stockholders ("Proxy Statement") under
the caption "Principal Shareholder" and "Election of Directors" and is
incorporated herein by this reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is contained in the Registrant's Proxy
Statement for its 1994 Annual Meeting of stockholders ("Proxy Statement") under
the caption "Compensation Committee Interlocks and Insider Participation" and
is incorporated herein by this reference.
17
<PAGE> 18
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a)(1) The following financial statements are contained on pages 18 to 34
of the Annual Report and are incorporated herein by this reference:
Consolidated Statements of Financial Position as of July 31, 1994
(audited) and July 31, 1993 (audited).
Consolidated Statements of Income for the fiscal years ended
July 31, 1994 (audited), July 31, 1993 (audited) and July 31,
1992 (audited).
Consolidated Statements of Stockholders' Equity for the fiscal
years ended July 31, 1994 (audited), July 31, 1993 (audited) and
July 31, 1992 (audited).
Consolidated Statements of Cash Flows for the fiscal years ended
July 31, 1994 (audited), July 31, 1993 (audited) and July 31,
1992 (audited).
Notes to Consolidated Financial Statements.
Independent Auditor's Report.
(a)(2) The following financial statement schedules are contained
herein:
Independent Auditor's Report on Schedules.
Schedules to Financial Statements, as follows:
Schedule I - Marketable Securities - Other
Investments, July 31, 1994.
Schedule V - Property, Plant and Equipment, years
ended July 31, 1994, 1993 and 1992.
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment,
years ended July 31, 1994, 1993 and 1992.
Schedule VIII - Valuation and Qualifying Accounts, years
ended July 31, 1994, 1993 and 1992.
Schedule IX - Bonds, Mortgages and Similar Debt,
July 31, 1994 and 1993.
Schedule X - Supplementary Income Statement
Information, years ended July 31, 1994, 1993
and 1992.
-18-
<PAGE> 19
(a)(3) The following documents are exhibits to this Report:
(3)(a)1 Certificate of Incorporation of Registrant, as amended.
(3)(b)2 By-Laws of Registrant, as amended.
(10)(a)3 Lease Agreement, dated as of September 1, 1982, between Oil-Dri
Corporation of Georgia, The Thomasville Development Authority
and Continental Illinois National Bank and Trust Company of
Chicago.
(10)(b)4 Guaranty Agreement, dated as of September 1, 1982, between
Registrant and Continental Illinois National Bank and Trust
Company of Chicago.
(10)(c)(1)5 Agreement ("Clorox Agreement") dated January 12, 1981 between
The Clorox Company and Registrant, as amended. (Confidential
treatment of certain portions of this Exhibit has been
granted.)
(10)(c)(2)6 Amendment to Clorox Agreement dated March 3, 1989, as accepted
by the Registrant on March 20, 1989, between The Clorox Company
and the Registrant (Confidential treatment of certain portions
of this Exhibit has been granted.)
(10)(c)(3)7 Amendment to Clorox Agreement dated February 14, 1991, between
The Clorox Company and Registrant (Confidential treatment
of certain portions of this Exhibit has been granted).
- - - ------------------
(1) Incorporated by reference to Exhibit 4 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1991.
(2) Incorporated by reference to Exhibit 3(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1988.
(3) Incorporated by reference to Exhibit (4)(a) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1982.
(4) Incorporated by reference to Exhibit (4)(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1982.
(5) Incorporated by reference to Exhibit 10(f) to Registrant's
Registration Statement on Form S-2 (Registration No. 2-97248) made effective on
May 29, 1985.
(6) Incorporated by reference to Exhibit 10(e)(2) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1989.
(7) Incorporated by reference to Exhibit 10(e)(3) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1991.
-19-
<PAGE> 20
(10)(d)8 Description of Deferred Compensation Plan.*
(10)(e)9 Salary Continuation Agreement dated August 1, l989 between
Richard M. Jaffee and the Registrant.*
(10)(f)10 1988 Stock Option Plan.
(10)(g)11 Note Agreement, dated April 5, 1991, between Registrant and the
Teacher's Insurance and Annuity Association of America
regarding $8,000,000 9.38% Senior Notes due November 15, 2001.
(10)(h)12 Note Agreement, dated as of April 15, 1993, between Registrant
and the Teacher's Insurance and Annuity Association of America
regarding $6,500,000 7.17% Senior Notes due August 15, 2004.
(10(i) Credit Agreement, dated as of September 21, 1994, between
Registrant and Harris Trust and Savings Bank regarding
$5,000,000 7.78% Term Loan Note and $5,000,000 Revolving Credit
Note.
(11) Statement re: computation of per share earnings.
(13) 1994 Annual Report to Stockholders of Registrant.
(22) Subsidiaries of Registrant.
(24) Consent of Blackman Kallick Bartelstein.
(27)
*Management contract or compensatory plan or arrangement.
- - - -----------------
(8) Incorporated by reference to Exhibit 10(f) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1988.
(9) Incorporated by reference to Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1989.
(10) Incorporated by reference to Exhibit 4(a) to Registrant's
Registration Statement on Form S-8, filed June 30, 1989, Registration No.
33-29650.
(11) Incorporated by reference to Exhibit 10(h) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1991.
(12) Incorporated by reference to Exhibit 10(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1993.
-20-
<PAGE> 21
The Registrant agrees to furnish the following agreements upon the request of
the Commission:
Exhibit 4(b) Letter of Credit Agreement, dated as of October 1, 1988 between
Harris Trust and Savings Bank and Blue Mountain Production
Company in the amount of $2,634,590 in connection with the
issuance by Town of Blue Mountain, Mississippi of
Variable/Fixed Rate Industrial Development Revenue Bonds,
Series 1988 B (Blue Mountain Production Company Project) in the
aggregate principal amount of $2,500,000 and related Indenture
of Trust, Lease Agreement, Remarketing Agreement and
Guaranties.
(b) No reports on Form 8-K were filed by Registrant with the Commission during
the last fiscal quarter of the fiscal year ended July 31, 1994.
-21-
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ Richard M. Jaffee
Richard M. Jaffee,
President
Dated: October 21, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Richard M. Jaffee October 21, 1994
Richard M. Jaffee
President and Director
(Principal executive officer)
/s/ Daniel S. Jaffee October 21, 1994
Daniel S. Jaffee
Group Vice President,
Canadian Operations and
Consumer Products/Grocery Division,
Chief Financial Officer,
Director
/s/ Donald J. Deegan October 21, 1994
Donald J. Deegan
Principal Accounting
Officer
-22-
<PAGE> 23
October 21, 1994
Robert D. Jaffee
Director
October 21, 1994
Norman B. Gershon
Director
October 21, 1994
Bruce H. Sone
Director
/s/ J. Steven Cole October 21, 1994
J. Steven Cole
Director
/s/ Joseph C. Miller October 21, 1994
Joseph C. Miller
Director
/s/ Edgar D. Jannotta October 21, 1994
Edgar D. Jannotta
Director
/s/ Paul J. Miller October 21, 1994
Paul J. Miller
Director
/s/ Haydn H. Murray October 21, 1994
Haydn H. Murray
Director
-23-
<PAGE> 24
October 21, 1994
Allan H. Selig
Director
-24-
<PAGE> 25
[LOGO]
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
Board of Directors
Oil-Dri Corporation of America
Chicago, Illinois
In connection with our audit of the consolidated financial
statements of OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as
of July 31, 1994 and 1993 and for each of the three years in the
period ended July 31, 1994, which report thereon dated August 26,
1994, except for the third and fourth paragraphs of Note 3 as to
which the date is September 21,1994, is incorporated by reference
in this Annual Report on Form 10-K, we also examined the financial
statement schedules listed in the accompanying index at Item
14(a)(2). In our opinion, these financial statement schedules
present fairly, when read in conjunction with the related
consolidated financial statements, the financial data required to
be set forth therein.
Blackman Kallick Bartelstein
August 26, 1994
[BLACKMAN KALLICK BARTELSTEIN LETTERHEAD]
<PAGE> 26
Schedule I
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Marketable Securities - Other Investments
July 31, 1994
<TABLE>
<CAPTION>
Number of
Shares or
Units - Amount Included in the
Principal Combined Balance Sheet as: Value Based
Amount of --------------------------- on Market
Bonds or Cost of Cash Marketable Quotations
Name of Issuer and Title of Each Issue Notes Each Issue Equivalent Securities at Year End
- - - -------------------------------------- ------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
U.S. Government Obligations (a) $1,448,666 $1,448,666 $ - $1,448,666 $1,448,666
Certificates of Deposit 103,913 103,913 - 103,913 103,913
Canadian Government Obligation (a)(b) 941,246 941,246 941,246 941,246
Demand Notes(a) 3,350,874 3,350,874 3,350,874 - 3,350,874
Tax Exempt Municipal Bonds 857,598 860,469 857,598 857,598
Money Market Funds 3,143,681 3,143,681 3,143,681 - 3,143,681
---------- ---------- ---------- ---------- ----------
$9,845,978 $9,848,849 $6,494,555(c) $3,351,423 $9,845,978
========== ========== ========== ========== ==========
</TABLE>
(a) No individual security issue exceeds 2% of total assets.
(b) Translated at July 31, 1994 exchange rate.
(c) Also included in the balance sheet caption "Cash and Cash Equivalents" are
cash, other deposits and outstanding checks of -$100,240.
<PAGE> 27
Schedule V
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Property, Plant and Equipment
Years Ended July 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Adjustment
of Account
Because of
Balance at Foreign Transfers Balance
Beginning Exchange Additions and at End
Classification of Period Variances at Cost Retirements of Period
- - - -------------- ---------- --------- --------- ---------- ---------
YEAR ENDED JULY 31, 1994
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $13,466,680 $(24,917) $1,565,131 $(264,877) $14,742,017
Machinery and
Equipment 60,638,523 (53,108) 5,567,417 (588,929) 65,563,903
Office Furniture and
Equipment 5,394,714 (16,829) 1,506,648 456,907 7,341,440
Vehicles 130,280 1,193 - (17,227) 114,246
Construction
in-Progress 3,178,584 - 11,282,736 (7,624,410) 6,836,910
Land and Mineral
Rights 5,054,263 (8,311) 548,343 - 5,594,295
---------- -------- --------- --------- -----------
Total $87,863,044 $(101,972) $20,470,275 $(8,038,536) $100,192,811
========== ======== ========== ========= ============
<CAPTION>
YEAR ENDED JULY 31, 1993
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $12,016,466 $(85,388) $1,807,579 $(271,977) $13,466,680
Machinery and
Equipment 53,937,023 (271,795) 8,557,937 (1,584,642) 60,638,523
Office Furniture and
Equipment 4,462,164 (35,425) 1,122,764 (154,789) 5,394,714
Vehicle 1,212,997 (29,185) 3,788 (1,057,320) 130,280
Construction
in-Progress 4,788,735 - 9,243,296 (10,853,447) 3,178,584
Land and Mineral
Rights 4,783,045 (1,322) 275,223 (2,683) 5,054,263
---------- -------- --------- ---------- -----------
Total $81,200,430 $(423,115) $21,010,587 $(13,924,858) $87,863,044
========== ========= ========== ========== ==========
<CAPTION>
YEAR ENDED JULY 31, 1992
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $ 9,712,230 $ 14,856 $2,702,962 $(413,582) $12,016,466
Machinery and
Equipment 57,077,414 83,424 4,135,891 (7,359,706) 53,937,023
Office Furniture and
Equipment 3,317,702 18,338 1,183,333 (57,209) 4,462,164
Vehicles 1,220,395 6,630 60,222 (74,250) 1,212,997
Construction
in-Progress 4,437,657 - 7,188,451 (6,837,373) 4,788,735
Land and Mineral
Rights 4,608,468 (606) 477,539 (302,356) 4,783,045
---------- ------- ---------- ---------- -----------
Total $80,373,866 $122,642 $15,748,398 $(15,044,476) $81,200,430
========== ======= ========== ========== ==========
</TABLE>
<PAGE> 28
Schedule VI
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Years Ended July 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Adjustment
of Account
Because of
Balance at Foreign Current Transfers Balance
Beginning Exchange Year's and at End
Classification of Period Variances Provision Retirements of Period
- - - -------------- ---------- --------- --------- ----------- ----------
YEAR ENDED JULY 31, 1994
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $ 2,827,059 $(7,249) $ 623,424 $(67,507) $3,375,727
Machinery and
Equipment 29,187,868 (45,872) 4,883,628 (360,487) 33,665,137
Office Furniture and
Equipment 1,972,188 (8,534) 887,375 (108,879) 2,742,150
Vehicles 144,898 2,115 34,580 (15,360) 166,233
---------- ------- --------- -------- ----------
Total $34,132,013 $(59,540) $6,429,007 $(552,233) $39,949,247
========== ======= ========= ======== ==========
<CAPTION>
YEAR ENDED JULY 31, 1993
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $ 2,541,247 $(32,251) $503,894 $(185,831) $2,827,059
Machinery and
Equipment 26,116,605 (216,815) 4,545,354 (1,257,276) 29,187,868
Office Furniture and
Equipment 1,602,299 (27,398) 489,379 (92,092) 1,972,188
Vehicles 613,306 (13,097) 81,934 (537,245) 144,898
---------- ------- --------- -------- ----------
Total $30,873,457 $(289,561) $5,620,561 $(2,072,444) $34,132,013
========== ======= ========= ========== ==========
<CAPTION>
YEAR ENDED JULY 31, 1992
<S> <C> <C> <C> <C> <C>
Building and Leasehold
Improvements $ 2,310,614 $ 10,771 $ 422,375 $(202,513) $ 2,541,247
Machinery and
Equipment 28,812,990 92,726 4,265,228 (7,054,339) 26,116,605
Office Furniture and
Equipment 1,301,223 7,143 347,902 (53,969) 1,602,299
Vehicles 492,241 5,250 141,049 (25,234) 613,306
---------- -------- --------- --------- ----------
Total $32,917,068 $ 115,890 $5,176,554 $(7,336,055) $30,873,457
========== ======== ========= ========= ==========
</TABLE>
<PAGE> 29
Schedule VIII
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended July 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions* of Period
- - - ----------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year Ended July 31, 1994 $195,098 $ 4,744 $ 27,902 $171,940
------- ------ ------ -------
Year Ended July 31, 1993 $173,393 $ 72,890 $ 51,185 $195,098
------- ------ ------ -------
Year Ended July 31, 1992 $180,340 $138,808 $145,755 $173,393
------- ------ ------ -------
</TABLE>
*Net of recoveries.
<PAGE> 30
Schedule IX
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Bonds, Mortgages and Similar Debt
July 31, 1994 and 1993
<TABLE>
<CAPTION> AMOUNT ISSUED AND
NOT RETIRED OR CANCELLED
-------------------------- NOT HELD
AMOUNT HELD BY OR BY OR FOR
AUTHORIZED FOR ACCOUNT ACCOUNT
NAME OF ISSUER AND BY OF ISSUER OF ISSUER
TITLE OF EACH ISSUE INDENTURE TOTAL THEREOF THEREOF
- - - ---------------------- ---------- ------- ---------- ---------
JULY 31, 1994
<S> <C> <C> <C> <C>
Thomasville Payroll
Development Authority $ 4,000,000 $ 592,593 None $ 592,593
Town of Blue Mountain,
Mississippi 2,500,000 2,500,000 None 2,500,000
Teachers Insurance and Annuity
Association of America 8,000,000 7,600,000 None 7,600,000
Teachers Insurance and Annuity
Association of America 6,500,000 6,500,000 None 6,500,000
Harris Trust and Savings
Bank 5,000,000 5,000,000 None 5,000,000
Other 969,180 572,129 None 572,129
------------ ----------- -----------
$ 26,969,180 $22,764,722 $22,764,722
============ =========== ===========
<CAPTION>
JULY 31, 1993
<S> <C> <C> <C> <C>
Thomasville Payroll
Development Authority $ 4,000,000 $ 1,185,185 None $ 1,185,185
Town of Blue Mountain,
Mississippi 2,500,000 2,500,000 None 2,500,000
Teachers Insurance and Annuity
Association of America 8,000,000 7,600,000 None 7,600,000
Teachers Insurance and Annuity
Association of America 6,500,000 6,500,000 None 6,500,000
Other 1,038,697 723,371 None 723,371
----------- ----------- -----------
$22,038,697 $18,508,556 $18,508,556
=========== =========== ===========
</TABLE>
*Not including current portions. See Note 3 of Notes to Financial
Statements in the 1994 or 1993 Annual Report to Stockholders.
<PAGE> 31
Schedule IX
(continued)
<TABLE>
<CAPTION>
Amount
Amount Included Amount in Held by Affiliates
In Sum Extended Sinking for Which Statements
Under Caption and Other are Filed Herewith
"Bonds, Mortgages Special Amount ------------------------
and Similar Debt" Funds of Pledged Persons Included
in Related Issuer by Issuer in Consolidated
Balance Sheet* Thereof Thereof Statements Other
- - - ------------------ --------- --------- --------------- -------
<S> <C> <C> <C> <C>
$ 2,500,000 None None None None
7,100,000 None None None None
6,500,000 None None None None
5,000,000 None None None None
421,243 None None None None
- - - -----------
$21,521,243
===========
$ 592,593 None None None None
2,500,000 None None None None
7,600,000 None None None None
6,500,000 None None None None
573,348 None None None None
- - - -----------
$17,765,941
===========
</TABLE>
<PAGE> 32
Schedule X
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Supplementary Income Statement Information
<TABLE>
<CAPTION>
Charged to Costs and Expenses
Year Ended July 31,
-------------------------------------
Item 1994 1993 1992
---- ---------- ---------- ----------
<S> <C> <C> <C>
1. Maintenance and Repairs $6,177,054 $5,889,421 $5,170,107
---------- ---------- ----------
2. Depreciation, Depletion, and
Amortization of Property, Plant
and Equipment $6,429,007 $5,620,561 $5,176,554
---------- ---------- ----------
3. Depreciation and Amortization
of Intangible Assets * * *
4. Taxes, Other than Income Taxes
Payroll $1,720,977 $1,595,929 $1,545,468
Other 955,237 734,957 554,713
---------- ---------- ----------
$2,676,214 $2,330,886 $2,100,181
---------- ---------- ----------
5. Rents $3,838,000 $3,679,000 $2,922,000
---------- ---------- ----------
6. Royalties * * *
7. Advertising Costs $2,829,908 $3,427,445 $4,620,175
---------- ---------- ----------
8. Research and Development Costs $1,875,000 $1,509,000 $1,450,000
---------- ---------- ----------
</TABLE>
*Less than 1% of total sales and revenues.
<PAGE> 33
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Number Exhibit Title Page
-------------- ------------- -------------
(3)(a)(1) Certificate of Incorporation
of Registrant, as amended.
(3)(b)(2) By-Laws of Registrant as
amended.
(10)(a)(3) Lease Agreement, dated as of
September 1, 1982, between
Oil-Dri Corporation of
Georgia, The Thomasville
Development Authority and
Continental Illinois National
Bank and Trust Company of
Chicago.
(10)(b)(4) Guaranty Agreement, dated as
of September 1, 1982, between
Registrant and Continental
Illinois National Bank and
Trust Company of Chicago.
(10)(c)(1)(5) Agreement ("Clorox
Agreement") dated January 12,
1981 between The Clorox
Company and Registrant, as
amended. (Confidential
treatment of certain portions
of this Exhibit has been
granted.)
(10)(c)(2)(6) Amendment to Clorox Agreement
dated March 3, 1989, as
accepted by the Registrant on
March 20, 1989, between The
Clorox Company and the
Registrant. (Confidential
treatment of certain portions
of this Exhibit has been
granted.)
(10)(c)(3)(7) Amendment to Clorox Agreement
dated February 14, 1991,
between the Clorox Company
and Registrant (Confidential
treatment of certain portions
of this Exhibit has been
granted).
(1) Incorporated by reference to Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1991.
(2) Incorporated by reference to Exhibit 3(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1988.
(3) Incorporated by reference to Exhibit (4)(a) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1982.
(4) Incorporated by reference to Exhibit (4)(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1982.
(5) Incorporated by reference to Exhibit 10(f) to Registrant's
Registration Statement on Form S-2 (Registration No. 2-97248)
made effective on May 29, 1985.
(6) Incorporated by reference to Exhibit 10(e)(2) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
July 31, 1989.
(7) Incorporated by reference to Exhibit 10(e)(3) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
July 31, 1991.
<PAGE> 34
Sequentially
Numbered
Exhibit Number Exhibit Title Page
-------------- ------------- ------------
(10)(d)(8) Description of Deferred
Compensation Plan.
(10)(e)(9) Salary Continuation Agreement
dated August 1, 1989 between
Richard M. Jaffee and the
Registrant.
(10)(f)(10) 1988 Stock Option Plan.
(10)(g)(11) Note Agreement, dated April
5, 1991, between Registrant
and the Teachers Insurance
and Annuity Association of
America regarding $8,000,000
9.38% Senior Notes due
November 15, 2001.
(10)(h)(12) Note Agreement, dated April
5, 1993, between Registrant
and the Teachers Insurance
and Annuity Association of
America regarding $6,500,000
7.17% Senior Notes due August
15, 2004.
(10)(i) Credit Agreement, dated as of
September 2, 1994, between
Registrant and Harris Trust
and Savings Bank regarding
$5,000,000 7.78% Term Loan
Note and $5,000,000 Revolving
Credit Note.
(11) Statement re: computation of
per share earnings.
(13) 1994 Annual Report to
Stockholders of Registrant.
(22) Subsidiaries of Registrant.
(24) Consent of Blackman Kallick
Bartelstein.
(27) Financial Data Schedule.
- - - -------------------------------
(8) Incorporated by reference to Exhibit 10(g) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1988.
(9) Incorporated by reference to Exhibit 10(g) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1989.
(10) Incorporated by reference to Exhibit 4(a) to Registrant's
Registration Statement on Form S-8, filed June 30, 1989,
Registration No. 33-29650.
(11) Incorporated by reference to Exhibit 10(h) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1991.
(12) Incorporated by reference to Exhibit 10(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1993.
<PAGE> 1
EX-10(i)
CREDIT AGREEMENT
BY AND BETWEEN
OIL-DRI CORPORATION OF AMERICA
AND
HARRIS TRUST AND SAVINGS BANK
DATED AS OF SEPTEMBER 21, 1994
<PAGE> 2
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDITS 1
Section 1.1. Revolving Credit 1
Section 1.2. Term Loan 1
Section 1.3. Manner and Disbursement of Loans 2
SECTION 2. INTEREST ON REVOLVING CREDIT LOANS AND CHANGE IN
CIRCUMSTANCES
Section 2.1. Interest Rate Options 3
Section 2.2. Computation of Interest 3
Section 2.3. Manner of Rate Selection 4
Section 2.4. Change of Law 4
Section 2.5. Unavailability of Deposits or Inability to 4
Ascertain Adjusted LIBOR 4
Section 2.6. Taxes and Increased Costs 5
Section 2.7. Funding Indemnity 6
Section 2.8. Lending Branch 6
Section 2.9. Discretion of Bank as to Manner of Funding 6
SECTION 3. COMPENSATING BALANCES, PREPAYMENTS, TERMINATIONS,
EXTENSIONS, APPLICATIONS AND CAPITAL ADEQUACY 7
Section 3.1. Compensating Balances 7
Section 3.2. Voluntary Prepayments 7
Section 3.3. Terminations 8
Section 3.4. Extensions of the Revolving Credit Commitment 8
Section 3.5. Place and Application of Payments 8
Section 3.6. Notations 8
Section 3.7. Change in Capital Adequacy Requirements 9
SECTION 4. DEFINITIONS; INTERPRETATION 9
Section 4.1. Definitions 9
Section 4.2. Interpretation 15
SECTION 5. REPRESENTATIONS AND WARRANTIES 15
Section 5.1. Organization and Qualification 15
Section 5.2. Subsidiaries 15
Section 5.3. Corporate Authority and Validity of
Obligations 16
Section 5.4. Use of Proceeds; Margin Stock 16
Section 5.5. Financial Reports 17
-i-
<PAGE> 3
Section 5.6. No Material Adverse Change 17
Section 5.7. Full Disclosure 17
Section 5.8. Good Title 17
Section 5.9. Litigation and Other Controversies 17
Section 5.10. Taxes 17
Section 5.11. Approvals 18
Section 5.12. Affiliate Transactions 18
Section 5.13. Investment Company; Public Utility Holding Company 18
Section 5.14. ERISA 18
Section 5.15. Compliance with Laws 18
Section 5.16. Other Agreements 19
Section 5.17. No Default 19
SECTION 6. CONDITIONS PRECEDENT 19
Section 6.1. All Advances. 19
Section 6.2. Initial Advance 19
SECTION 7. COVENANTS 20
Section 7.1. Maintenance of Business 20
Section 7.2. Maintenance of Properties 21
Section 7.3. Taxes and Assessments 21
Section 7.4. Insurance 21
Section 7.5. Financial Reports 21
Section 7.6. Inspection 23
Section 7.7. Tangible Net Worth 23
Section 7.8. Leverage Ratio 23
Section 7.9. Liens 23
Section 7.10. Investments, Loans, Advances and Guaranties 24
Section 7.11. Mergers, Consolidations and Sales 25
Section 7.12. Maintenance of Subsidiaries 25
Section 7.13. ERISA 25
Section 7.14. Compliance with Laws 26
Section 7.15. Burdensome Contracts With Affiliates 26
Section 7.16. Change in the Nature of Business 26
SECTION 8. EVENTS OF DEFAULT AND REMEDIES 26
Section 8.1. Events of Default. 26
Section 8.2. Non-Bankruptcy Defaults. 28
Section 8.3. Bankruptcy Defaults 28
SECTION 9. MISCELLANEOUS 29
Section 9.1. Holidays 29
Section 9.2. No Waiver, Cumulative Remedies 29
Section 9.3. Amendments, Etc 29
-ii-
<PAGE> 4
Section 9.4. Costs and Expenses 29
Section 9.5. Documentary Taxes 29
Section 9.6. Survival of Representations 30
Section 9.7. Survival of Indemnities 30
Section 9.8. Notices 30
Section 9.9. Personal Jurisdiction 31
Section 9.10. Waiver of Jury Trial 32
Section 9.11. Construction 32
Section 9.12. Headings 32
Section 9.13. Severability of Provisions 32
Section 9.14. Counterparts 32
Section 9.15. Binding Nature, Governing Law, Etc. 32
Signature 33
Exhibit A - Revolving Credit Note
Exhibit B - Term Loan Note
Exhibit C - Compliance Certificate
Schedule 5.2 - Subsidiaries
-iii-
<PAGE> 5
OIL-DRI CORPORATION OF AMERICA
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
The undersigned, Oil-Dri Corporation of America, a Delaware
corporation (the "Company"), applies to you (the "Bank") for your commitment,
subject to the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, to make a revolving
credit (the "Revolving Credit") and a term loan available to the Company, all
as more fully hereinafter set forth.
Section 1. The Credits.
Section 1.1. Revolving Credit. Subject to the terms and conditions
hereof, the Bank agrees to extend a Revolving Credit to the Company which may
be availed of by the Company from time to time during the period from and
including the date hereof to but not including the Termination Date, at which
time the commitment of the Bank to extend credit under the Revolving Credit
shall expire. The Revolving Credit may be utilized by the Company in the form
of loans (individually a "Revolving Credit Loan" and collectively the
"Revolving Credit Loans"), provided that the aggregate principal amount of
Revolving Credit Loans outstanding at any one time shall not exceed $5,000,000
(the "Revolving Credit Commitment", as such amount may be reduced pursuant to
Section 3.3 hereof). Each Revolving Credit Loan shall be in a minimum amount
of $200,000 or such greater amount which is an integral multiple of $100,000.
Each Revolving Credit Loan shall be made against and evidenced by a single
promissory note of the Company in the form (with appropriate insertions)
attached hereto as Exhibit A (the "Revolving Credit Note") payable to the
order of the Bank in the principal amount of $5,000,000. The Revolving Credit
Note shall be dated the date of issuance thereof, be expressed to bear interest
as set forth in Section 2 hereof, and be expressed to mature on the Termination
Date. Without regard to the principal amount of the Revolving Credit Note
stated on its face, the actual principal amount at any time outstanding and
owing by the Company on account of the Revolving Credit Note shall be the sum
of all Revolving Credit Loans made under this Section less all payments of
principal actually received by the Bank. During the period from and including
the date hereof to but not including the Termination Date, the Company may use
the Revolving Credit Commitment by borrowing, repaying and reborrowing
Revolving Credit Loans in whole or in part, all in accordance with the terms
and conditions of this Agreement.
Section 1.2. Term Loan. Subject to the terms and conditions hereof,
the Bank also agrees to make a term loan (the "Term Loan") concurrently herewith
to the Company in a single advance in the principal amount of $5,000,000.
<PAGE> 6
The Term Loan shall be made against the evidenced by a single promissory
note of the Company in the form (with appropriate insertions) attached hereto as
Exhibit B (the "Term Note") dated the date of issuance thereof and payable to
the order of the Bank in the original principal amount of the Term Loan.
The Term Note shall be issued in substitution and replacement for, and
shall evidence the unpaid principal balance of that certain Promissory Note of
the Company dated April 20, 1994 payable to the order of the Bank in the face
principal amount of $5,000,000 (the "Present Note"). Upon the execution and
delivery to the Bank of the Term Note, the Present Note shall be deemed
cancelled without further action by the Company or the Bank.
The Term Note shall be expressed to bear interest (computed on the
basis of a year of 360 days for the actual number of days elapsed) on the
unpaid principal amount thereof from the date the Term Loan is made until
maturity (whether by lapse of time, acceleration or otherwise) at the rate per
annum equal at all times to 7.78% and after maturity until paid in full at the
rate per annum equal at all times to 10.78%. Interest on the Term Loan prior
to maturity shall be payable quarterly in arrears on the last day of each
March, June, September and December in each year (commencing September 30,
1994) and at maturity. Interest after maturity shall be due and payable upon
demand. The Term Note shall be expressed to mature in six installments,
commencing on June 20, 1996 and continuing on June 21, 1999 and on the 20th day
of June in the years 2000, 2001, 2002 and 2003, with the first installment in
the amount of $500,000, the second installment in the amount of $1,950,000, the
third installment in the amount of $900,000, the fourth and fifth installments
each in the amount of $650,000 and the last such installment in the full amount
of the then unpaid balance of the Term Note. No amount paid or prepaid on the
Term Note may be reborrowed.
Section 1.3. Manner and Disbursement of Loans. The Company shall give
written or telephonic notice to the Bank (which notice shall be irrevocable once
given and, if given by telephone, shall be promptly confirmed in writing) by no
later than 11:00 a.m. (Chicago time) on the date the Company requests the Bank
to make a Revolving Credit Loan hereunder; provided, however, that telephonic
notice may only be given by a Class A Authorized Representative. Each such
notice shall specify (i) the date of the Revolving Credit Loan requested (which
must be a Business Day) and (ii) and the amount of such Revolving Credit Loan.
The Company agrees that the Bank may rely upon any written or telephonic notice
given by any person the Bank reasonably and in good faith believes is an
Authorized Representative without the necessity of independent investigation
and, in the event any telephonic notice conflicts with the written confirmation,
such notice shall govern if the Bank has acted in reasonable reliance thereon.
Subject to the provisions of Section 6 hereof, the proceeds of each Loan shall
be made available to the Company at the principal office of the Bank in Chicago,
Illinois, in immediately available funds. Each Revolving Credit Loan shall
initially constitute part of the Domestic Rate Portion except to the extent the
Company has otherwise timely elected as provided in Section 2 hereof.
-2-
<PAGE> 7
SECTION 2. INTEREST ON REVOLVING CREDIT LOANS AND CHANGE IN
CIRCUMSTANCES.
Section 2.1. Interest Rate Options. (a) Subject to all of the terms
and conditions of this Section 2, portions of the principal indebtedness
evidenced by the Revolving Credit Note (all of the indebtedness evidenced by the
Revolving Credit Note bearing interest at the same rate for the same period of
time being hereinafter referred to as a "Portion") may, at the option of the
Company, bear interest with reference to the Domestic Rate (the "Domestic Rate
Portion") or with reference to an Adjusted LIBOR ("LIBOR Portions") and Portions
may be converted from time to time from one basis to the other. All of the
indebtedness evidenced by the Revolving Credit Note which is not part of a LIBOR
Portion shall constitute a single Domestic Rate Portion. All of the indebtedness
evidenced by the Revolving Credit Note which bears interest with reference to a
particular Adjusted LIBOR for a particular Interest Period shall constitute a
single LIBOR Portion. There shall not be more than eight (8) LIBOR Portions
applicable to the Revolving Credit Note outstanding at any one time. Anything
contained herein to the contrary notwithstanding, the obligation of the Bank to
create, continue or effect by conversion any LIBOR Portion shall be conditioned
upon the fact that at the time no Default or Event of Default shall have
occurred and be continuing. The Company hereby promises to pay interest on each
Portion at the rates and times specified in this Section 2.
(b) Domestic Rate Portion. The Domestic Rate Portion shall bear
interest at the rate per annum equal to the Domestic Rate as in effect from
time to time, provided that if the Domestic Rate Portion or any part thereof is
not paid when due (whether by lapse of time, acceleration or otherwise) such
Portion shall bear interest, whether before or after judgment, until payment in
full thereof at the rate per annum determined by adding 2% to the interest rate
which would otherwise be applicable thereto from time to time. Interest on the
Domestic Rate Portion shall be payable quarter-annually on the last day of each
March, June, September and December, in each year (commencing September 30,
1994) and at maturity of the Revolving Credit Note and interest after maturity
(whether by lapse of time, acceleration or otherwise) shall be due and payable
upon demand. Any change in the interest rate on the Domestic Rate Portion
resulting from a change in the Domestic Rate shall be effective on the date of
the relevant change in the Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding 1/2
of 1% to the Adjusted LIBOR for such Interest Period, provided that if any LIBOR
Portion is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full thereof through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding 2-1/2% to the
interest rate which would otherwise be applicable thereto, and effective at the
end of such Interest Period such LIBOR Portion shall automatically be converted
into and added to the Domestic Rate Portion and shall thereafter bear interest
at the interest rate applicable to the Domestic Rate Portion after default.
Interest on each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto and, with respect to any Interest Period
applicable to a LIBOR Portion in excess of three (3) months, on the date
-3-
<PAGE> 8
occurring every three (3) months after the date such Interest
Period began and at the end of such Interest Period, and interest after
maturity (whether by lapse of time, acceleration or otherwise) shall be
due and payable upon demand. The Company shall notify the Bank on or
before 11:00 a.m. (Chicago time) on the third Business Day preceding the end
of an Interest Period applicable to a LIBOR Portion whether such LIBOR
Portion is to continue as a LIBOR Portion, in which event the Company shall
notify the Bank of the new Interest Period selected therefor, and in the
event the Company shall fail to so notify the Bank, such LIBOR Portion
shall automatically be converted into and added to the Domestic Rate
Portion as of and on the last day of such Interest Period. Each LIBOR
Portion shall be in a minimum amount of $500,000 or such greater amount which
is an integral multiple of $100,000.
Section 2.2. Computation of Interest. All interest on the Revolving
Credit Note shall be computed on the basis of a year of 360 days for the actual
number of days elapsed.
Section 2.3. Manner of Rate Selection. The Company shall notify the
Bank by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the Domestic Rate Portion be converted into a LIBOR Portion (each
such notice to specify in each instance the amount thereof and the Interest
Period selected therefor). If any request is made to convert a LIBOR Portion
into the Domestic Rate Portion, such conversion shall only be made so as to
become effective as of the last day of the Interest Period applicable thereto.
All requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Bank is hereby authorized to honor telephonic requests for creations,
continuances and conversions received by it from any person the Bank reasonably
and in good faith believes to be a Class A Authorized Representative without the
need of independent investigation, the Company hereby indemnifying the Bank from
any liability or loss ensuing from so acting.
Section 2.4. Change of Law. Notwithstanding any other provisions of
this Agreement or the Revolving Credit Note, if at any time the Bank shall
determine reasonably and in good faith that any change in applicable laws,
treaties or regulations or in the interpretation thereof makes it unlawful for
the Bank to create or continue to maintain any LIBOR Portion, it shall promptly
so notify the Company and the obligation of the Bank to create, continue or
maintain any such LIBOR Portion under this Agreement shall terminate until it is
no longer unlawful for the Bank to create, continue or maintain such LIBOR
Portion. The Company, on demand, shall, if the continued maintenance of any
such LIBOR Portion is unlawful, thereupon prepay the outstanding principal
amount of the affected LIBOR Portion, together with all interest accrued thereon
and all other amounts payable to the Bank with respect thereto under this
Agreement; provided, however, that the Company may elect to convert the
principal amount of the affected LIBOR Portion into the Domestic Rate Portion,
subject to the terms and conditions of this Agreement.
Section 2.5. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or the
Revolving Credit Note, if prior to the commencement of any Interest Period, the
Bank shall determine reasonably and
-4-
<PAGE> 9
in good faith that deposits in the amount of any LIBOR
Portion scheduled to be outstanding during such Interest Period are not
readily available to the Bank in the interbank eurodollar market or, by
reason of circumstances affecting the interbank eurodollar market, adequate
and reasonable means do not exist for ascertaining Adjusted LIBOR,
then the Bank shall promptly give notice thereof to the Company and the
obligations of the Bank to create, continue or effect by conversion any such
LIBOR Portion in such amount and for such Interest Period shall
terminate until deposits in such amount and for the Interest Period selected by
the Company shall again be readily available in the interbank eurodollar
market and adequate and reasonable means exist for ascertaining Adjusted
LIBOR.
Section 2.6. Taxes and Increased Costs. With respect to any LIBOR
Portion, if the Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or its lending branch or the LIBOR Portions
contemplated by this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or disbursements
by, the Bank which is not in any instance already accounted for in
computing the Adjusted LIBOR
(ii) subject the Bank, any LIBOR Portion or the Revolving Credit
Note to the extent it evidences such a Portion to any tax (including,
without limitation, any United States interest equalization tax or
similar tax however named applicable to the acquisition or holding of debt
obligations and any interest or penalties with respect thereto), duty,
charge, stamp tax, fee, deduction or withholding in respect of
this Agreement, any LIBOR Portion or the Revolving Credit Note to the
extent it evidences such a Portion, except such taxes as may be measured by
the overall net income or gross receipts of the Bank or its lending
branches and imposed by the jurisdiction, or any political subdivision or
taxing authority thereof, in which the Bank's principal executive office
or its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to the Bank hereunder or under the
Revolving Credit Note to the extent it evidences any LIBOR Portion
(other than by a change in taxation of the overall net income or
gross receipts of the Bank); or
(iv) impose on the Bank any penalty with respect to the
foregoing or any other condition regarding this Agreement, its disbursement,
any LIBOR Portion or the Revolving Credit Note to the extent it evidences
any LIBOR Portion;
and the Bank shall determine reasonably and in good faith that the
result of any of the foregoing is to increase the cost (whether by incurring a
cost or adding to a cost) to the
-5-
<PAGE> 10
Bank of creating or maintaining any LIBOR Portion hereunder or to reduce the
amount of principal or interest received or receivable by the Bank (without
benefit of, or credit for, any prorations, exemption, credits or other
offsets available under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to the Bank from
time to time as specified by the Bank such additional amounts as are sufficient
to compensate and indemnify it for such increased cost or reduced amount. If
the Bank makes such a claim for compensation, it shall provide to the Company a
certificate setting forth the computation of the increased cost or reduced
amount as a result of any event mentioned herein in reasonable detail and such
certificate shall be prima facie correct.
Section 2.7. Funding Indemnity. In the event the Bank shall incur
any loss, cost or expense (including, without limitation, any loss (including
loss of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting
of such deposits or other funds or amounts paid or prepaid to the Bank) as a
result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement, but in any event excluding such a payment to
the extent required by Section 2.4 hereof; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement unless such failure results from the Bank's
inability or unwillingness pursuant to Sections 2.4 or 2.5 hereof to create,
continue or effect by conversion such LIBOR Portions;
then upon the demand of the Bank, the Company shall pay to the
Bank such amount as will reimburse the Bank for such loss, cost or expense.
If the Bank requests such a reimbursement, it shall provide to the
Company a certificate setting forth the computation of the loss, cost or
expense giving rise to the request for reimbursement in reasonable detail
and such certificate shall be prima facie correct.
Section 2.8. Lending Branch. The Bank may, at its option, elect to
make, fund or maintain Portions of the Revolving Credit Loans hereunder at such
of its branches or offices as the Bank may from time to time elect. To the
extent reasonably possible, the Bank shall designate an alternate branch or
funding office with respect to the LIBOR Portions to reduce any liability of the
Company to the Bank under Section 2.6 hereof or to avoid the unavailability of
an interest rate option under Section 2.5 hereof, so long as such designation is
not otherwise disadvantageous to the Bank.
Section 2.9. Discretion of Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
be entitled to fund and maintain its funding of all or any part of the Revolving
Credit Note in any manner it sees fit, it being understood, however, that for
the purposes of this Agreement all determinations hereunder
-6-
<PAGE> 11
(including, without limitation, determinations under Sections 2.5, 2.6
and 2.7 hereof) shall be made as if the Bank had actually funded and maintained
each LIBOR Portion during each Interest Period applicable thereto through the
purchase of deposits in the interbank eurodollar market in the amount of such
LIBOR Portion, having a maturity corresponding to such Interest Period, and
bearing an interest rate equal to the LIBOR for such Interest Period.
SECTION 3. COMPENSATING BALANCES, PREPAYMENTS, TERMINATIONS, EXTENSIONS,
APPLICATIONS AND CAPITAL ADEQUACY.
Section 3.1. Compensating Balances. The Company shall maintain with
the Bank a daily average deposit balance of at least $100,000.
Section 3.2. Voluntary Prepayments. (a) Term Loan. If the Company
prepays any principal amount of the Term Loan before its scheduled due date
(whether as the result of an acceleration, voluntary prepayment, or otherwise),
the Company shall pay to the Bank a funding indemnity equal to the cost to the
Bank of then acquiring an interest rate swap agreement (or an equivalent
instrument or instruments) with another interest rate swap dealer of the highest
credit standing in a notional principal amount equal to the amount of such
prepayment (including any scheduled amortization of such amount) to the
scheduled due date of such prepaid principal amount under which the Bank would
pay quarter-annually a floating rate of interest based upon three month LIBOR
and such other dealer would pay to the Bank on the regularly scheduled interest
payment dates for the Term Loan a fixed rate of interest equal to the interest
rate on the Term Loan.
(b) Domestic Rate Portions. The Company shall have the privilege of
prepaying without premium or penalty and in whole or in part (but if in part,
then in an amount not less than $200,000) the Domestic Rate Portion of the
Revolving Credit Note at any time upon notice to the Bank prior to 11:00 a.m.
(Chicago time) on the date fixed for prepayment, each such prepayment to be made
by the payment of the principal amount to be prepaid and accrued interest
thereon to the date of prepayment.
(c) LIBOR Portion. Except as otherwise required by Section 2.4 hereof,
the Company may prepay any LIBOR Portion of the Revolving Credit Note only on
the last date of the then applicable Interest Period, in whole or in part (but
if in part, then in an amount not less than $500,000 or such greater amount
which is an integral multiple of $100,000), upon three (3) Business Days' prior
notice to the Bank (which notice shall be irrevocable once given, must be
received by the Bank no later than 11:00 a.m. (Chicago time) on the third
Business Day preceding the date of such prepayment, and shall specify the
principal amount to be repaid); provided, however, that the outstanding
principal amount of any LIBOR Portion of the Revolving Credit Note prepaid in
part shall not be less than $500,000 or such greater amount which is an integral
multiple of $100,000 after giving effect to such prepayment. Any such
prepayment shall be effected by payment of the principal amount to be prepaid
and accrued interest thereon to the end of the applicable Interest Period.
-7-
<PAGE> 12
Section 3.3. Terminations. The Company shall have the right at any
time and from time to time, upon three (3) Business Days' prior notice to the
Bank, to terminate without premium or penalty and in whole or in part (but if in
part, then in an amount not less than $500,000) the Revolving Credit Commitment,
provided that the Revolving Credit Commitment may not bereduced to an amount
less than the aggregate principal amount of the Revolving Credit Loans then
outstanding. Any termination of the Revolving Credit Commitment pursuant to
this Section may not be reinstated.
Section 3.4. Extensions of the Revolving Credit Commitment. The
Termination Date (as the same may have been extended pursuant to this Section
3.4) shall be extended for additional one year periods (but not beyond August 1,
1999) unless either party hereto notifies the other in writing no later than
June 30th preceding the Termination Date then in effect of its intention not to
extend the Revolving Credit Commitment. It is specifically understood that the
Bank may, in its sole discretion, choose not to extend the Termination Date. If
the Termination Date is extended pursuant to this Section 3.4, the Company and
the Bank shall enter into such documents as the Bank may reasonably deem
necessary or appropriate to reflect such extension, all reasonable costs and
expenses incurred by the Bank in connection therewith to be paid by the Company.
Section 3.5. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and under
the other Loan Documents shall be made to the Bank at its office at 111 West
Monroe Street, Chicago, Illinois (or at such other place as the Bank may
specify) no later than 11:00 a.m. (Chicago time) on the date any such payment
is due and payable. Payments received by the Bank after 11:00 a.m. (Chicago
time) shall be deemed received as of the opening of business on the next
Business Day. All such payments shall be made in lawful money of the United
States of America, in immediately available funds at the place of payment,
without setoff or counterclaim and without reduction for, any and all present
or future taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions and conditions of any nature imposed by any
government or any political subdivision or taxing authority thereof (but
excluding any taxes imposed on or measured by the net income or gross receipts
of the Bank). Unless the Company otherwise directs, principal payments shall be
first applied to the Term Note until payment in full thereof, then to the
Domestic Rate Portion of the Revolving Credit Note until payment in full
thereof, with any balance applied to the LIBOR Portions of the Revolving Credit
Note in the order in which their Interest Periods expire.
Section 3.6. Notations. All Loans made against the Notes, the status
of all amounts evidenced by the Revolving Credit Note as constituting part of
the Domestic Rate Portion or a LIBOR Portion and the rates of interest and
Interest Periods applicable thereto shall be recorded by the Bank on its books
and records or, at its option in any instance, endorsed on a schedule to the
Notes and the unpaid principal balance and status, rates and Interest Periods so
recorded or endorsed by the Bank shall be evidence in any court or other
proceeding brought to enforce the Notes of the principal amount remaining unpaid
thereon, the status of the Loans evidenced thereby and the interest rates and
Interest Periods applicable thereto; provided that the failure of the Bank to
record any of the foregoing shall not limit or otherwise affect the obligation
of the Company to repay the principal amount of such Note
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<PAGE> 13
together with accrued interest thereon. Prior to any negotiation of the
Revolving Credit Note, the Bank shall record on a schedule thereto the status of
all amounts evidenced thereby as constituting part of the Domestic Rate Portion
or a LIBOR Portion and the rates of interest and the Interest Periods applicable
thereto.
Section 3.7. Change in Capital Adequacy Requirements. If the Bank
shall determine that the adoption after the date hereof of any applicable law,
rule or regulation regarding capital adequacy of banks generally, or any change
in any existing law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank (or any of its branches) with any request or directive regarding
capital adequacy of banks generally (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Revolving Credit or on the Bank's
capital as a consequence of its obligations hereunder with respect to the
Revolving Credit to a level below that which the Bank could have achieved but
for such adoption, change or compliance (taking into consideration the Bank's
policies with respect to liquidity and capital adequacy) by an amount deemed by
the Bank to be material, then from time to time, within fifteen (15) days after
demand by the Bank, the Company shall pay to the Bank such additional amount or
amounts reasonably determined by the Bank as will compensate the Bank for such
reduction.
SECTION 4. DEFINITIONS, INTERPRETATION.
Section 4.1. Definitions. The following terms when used herein shall
have the following meanings:
"Adjusted LIBOR" means a rate per annum determined by the Bank in
accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR,
the maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as
defined in Regulation D without benefit of or credit for prorations, exemptions
or offsets under Regulation D. "LIBOR" means, for each Interest Period, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if
the LIBOR Index Rate cannot be determined, the arithmetic average of the rate of
interest per annum (rounded upward, if necessary, to the nearest 1/100th of
1%) at which
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<PAGE> 14
deposits in U.S. Dollars in immediately available funds are
offered to the Bank at 11:00 a.m. (London, England time) two Business
Days before the beginning of such Interest Period by major banks in the
interbank eurodollar market for a period equal to such Interest Period and in
an amount equal or comparable to the applicable LIBOR Portion scheduled to be
outstanding from the Bank during such Interest Period. "LIBOR Index Rate"
means, for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage point) for
deposits in U.S. Dollars for a period equal to such Interest Period, which
appears on the Telerate Page 3750 as of 11:00 (London, England time) on the day
two Business Days before the commencement of such Interest Period. "Telerate
Page 3750" means the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace Page 3750 on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of
LIBOR made by the Bank shall be conclusive and binding absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Acquisition" means (i) the acquisition of all or any substantial part
of the assets, property or business of any other person, firm or corporation or
(ii) any acquisition of a majority of the common stock or other equity
securities of any firm or corporation.
"Authorized Representative" means those persons identified as either a
Class A Authorized Representative or a Class B Authorized Representative.
"Bank" is defined in the introductory paragraph hereof.
"Business Day" means any day other than a Saturday or Sunday on which
the Bank is not authorized or required to close in Chicago, Illinois and, when
used with respect to LIBOR Portions, a day on which the Bank is also dealing in
United States Dollar deposits in London, England and Nassau, Bahamas.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease as determined
in accordance with GAAP.
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<PAGE> 15
"Class A Authorized Representative" means those persons shown on the
list of officers provided by the Company pursuant to Section 6.2(a) hereof and
so designated on such list, or on any update of any such list provided by the
Company to the Bank, or any further or different officer of the Company so named
and designated by any Class A Authorized Representative of the Company in a
written notice to the Bank.
"Class B Authorized Representative" means those persons shown on the
list of officers provided by the Company pursuant to Section 6.2(a) hereof and
so designated on such list, or on any update of any such list provided by the
Company to the Bank, or any further or different officer of the Company so named
and designated by any Class A or Class B Authorized Representative of the
Company in a written notice to the Bank.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Company" is defined in the introductory paragraph hereof.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control which, together with the Company or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Bank from time to time as its prime commercial rate,
as in effect on such day; and (ii) the sum of (x) the rate determined by the
Bank to be the average (rounded upwards, if necessary, to the next higher 1/100
of 1%) of the rates per annum quoted to the Bank at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day (or, if
such day is not a Business Day, on the immediately preceding Business Day) by
two or more Federal funds brokers selected by the Bank for the sale to the Bank
at face value of Federal funds in an amount equal or comparable to the principal
amount owed to the Bank for which such rate is being determined, plus (y) 1/2 of
1% (0.50%).
"Domestic Rate Portion" is defined in Section 2.1(a) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 8.1 hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis
consistent with the preparation
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<PAGE> 16
of the Company's most recent financial statements furnished to the Bank
pursuant to Section 5.5 hereof.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business which are not more than 120 days past due), (iii) all indebtedness
secured by any Lien upon Property of such Person, whether or not such Person has
assumed or become liable for the payment of such indebtedness, (iv) all
Capitalized Lease Obligations of such Person and (v) all obligations of such
Person on or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed money.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion
date with respect to such LIBOR Portion and ending one (1), two (2), three (3)
or six (6) months thereafter as selected by the Company in its notice as
provided herein; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding
Business Day, unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date
of the Revolving Credit Note;
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment scheduled to
be made during such Interest Period without paying part of a LIBOR
Portion on a date other than the last day of the Interest Period applicable
thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
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<PAGE> 17
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan" means a Revolving Credit Loan or the Term Loan, unless the
context in which such term is used shall otherwise require.
"Loan Documents" means this Agreement and the Notes.
"Material Plan" is defined in Section 8.1(g) hereof.
"Net Income" means, with reference to any period, the net income (or net
loss) of the Company and its Subsidiaries for such period as computed on a
consolidated basis in accordance with GAAP, and, without limiting the foregoing,
after deduction from gross income of all expenses and reserves, including
reserves for all taxes on or measured by income, but excluding any extraordinary
profits and also excluding any taxes on such profits.
"Note" means the Revolving Credit Note or the Term Note, unless the
context in which such term is used shall otherwise require.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (i) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group or (ii) is maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Portion" is defined in Section 2.1(a) hereof.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
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<PAGE> 18
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"Revolving Credit Note" is defined in Section 1.1 hereof.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Net Worth" means, as of any time the same is to be determined,
the total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock) which
would appear on the balance sheet of the Company and its Subsidiaries determined
on a consolidated basis in accordance with GAAP, less the sum of (i) all notes
receivable in excess of $1,000,000 from officers and employees of the Company
and its Subsidiaries, (ii) the aggregate book value of all assets which would be
classified as intangible assets under GAAP, including, without limitation,
goodwill, patents, trademarks, trade names, copyrights, franchises and deferred
charges (including, without limitation, unamortized debt discount and expense,
organization costs and deferred research and development expense) and similar
assets and (iii) the write-up of assets above cost.
"Term Loan" is defined in Section 1.2 hereof.
"Term Note" is defined in Section 1.2 hereof.
"Termination Date" means August 1, 1997, or such earlier date on which
the Revolving Credit Commitment is terminated in whole pursuant to Section 3.3,
8.2 or 8.3 hereof or such later date to which the Revolving Credit Commitment is
extended pursuant to Section 3.4 hereof.
"Total Liabilities" means, as of any time the same is to be determined,
the aggregate of all indebtedness, obligations, liabilities, reserves and any
other items which would be listed as a liability on a balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, and in any event including all indebtedness and liabilities of any
other Person which the Company or any Subsidiary may guarantee or otherwise be
responsible or liable for (other than any liability arising out of the
endorsement of commercial paper for deposit or collection received in the
ordinary course of business), all indebtedness and liabilities secured by any
Lien on any Property of the Company or any Subsidiary, whether or not the same
would be classified as a liability on a balance sheet, the liability of the
Company or any Subsidiary in respect of banker's acceptances and letters of
credit, and the aggregate amount of rentals or other consideration payable by
the Company or any Subsidiary in accordance with GAAP over the remaining
unexpired term of all Capital Leases, but excluding all general contingency
reserves and reserves for deferred income taxes and investment credit.
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<PAGE> 19
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Voting Stock" of any Person means the capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person,
other than stock or other equity interests having such power only by reason of
the happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying shares
as required by law) or other equity interests are owned by the Company and/or
one or more Wholly-Owned Subsidiaries within the meaning of this definition.
Section 4.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The
words "hereof", "herein", and "hereunder" and words of like import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All references to time of day herein
are references to Chicago, Illinois time unless otherwise specifically
provided. Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP except where such
principles are inconsistent with the specific provisions of this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Bank as follows:
Section 5.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to be so
licensed or qualified would not have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries, taken as a whole.
Section 5.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as
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<PAGE> 20
now conducted, and is duly licensed or qualified and in good standing in
each jurisdiction in which the nature of the business conducted by it or the
nature of the Property owned or leased by it requires such licensing or
qualifying, except where the failure to be so licensed or qualified would not
have a material adverse effect on the financial condition, Properties, business
or operations of the Company and its Subsidiaries, taken as a whole. Schedule
5.2 hereto identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Company and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized capital stock and other equity interests and the number of shares
of each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 5.2 as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens. There are no outstanding commitments or
other obligations of any Subsidiary to issue, and no options, warrants or other
rights of any Person to acquire, any shares of any class of capital stock or
other equity interests of any Subsidiary.
Section 5.3. Corporate Authority and Validity of Obligations. The
Company has full right and authority to enter into this Agreement and the other
Loan Documents, to make the borrowings herein provided for, to issue its Note in
evidence thereof, and to perform all of its obligations hereunder and under the
other Loan Documents. The Loan Documents delivered by the Company have been
duly authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Company of any of the matters and things herein or therein provided for,
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Company or any provision of the
charter, articles of incorporation or by-laws of the Company or any covenant,
indenture or agreement of or affecting the Company or any of its Properties, or
result in the creation or imposition of any Lien on any Property of the Company.
Section 5.4. Use of Proceeds; Margin Stock. The Company shall use
the proceeds of the Loans solely for general corporate purposes and for such
other legal and proper purposes as are consistent with all applicable laws.
Neither the Company nor any Subsidiary is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan will be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.
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<PAGE> 21
Section 5.5. Financial Reports. The consolidated balance sheet of the
Company and its Subsidiaries as at July 31, 1993 and the related consolidated
statements of income, retained earnings and cash flows of the Company and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of Blackman,
Kallick & Bartelstein, independent public accountants, and the unaudited interim
consolidated balance sheet of the Company and its Subsidiaries as at April 30,
1994 and the related consolidated statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the nine (9) months then
ended, heretofore furnished to the Bank, fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis; subject, in the case of an unaudited interim consolidated
balance sheet, to year-end adjustments, and provided that such unaudited interim
consolidated balance sheet was prepared without footnotes.
Section 5.6. No Material Adverse Change. Since April 30, 1994, there
has been no change in the condition (financial or otherwise) or business
prospects of the Company or any Subsidiary except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse to the Company and its Subsidiaries, taken as a whole.
Section 5.7. Full Disclosure. The statements and information furnished
to the Bank in connection with the negotiation of this Agreement and the other
Loan Documents and the commitment by the Bank to provide all or part of the
financing contemplated hereby do not contain any untrue statements of a material
fact or omit a material fact necessary to make the material statements contained
herein or therein not misleading, the Bank acknowledging that as to any
projections furnished to the Bank, the Company only represents that the same
were prepared on the basis of information and estimates the Company believed to
be reasonable.
Section 5.8. Good Title. The Company and its Subsidiaries each have
good and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Bank (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as are
permitted by Section 7.9 hereof.
Section 5.9. Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending, nor to the
knowledge of the Company threatened, against the Company or any Subsidiary which
if adversely determined would (a) impair the validity or enforceability of, or
impair the ability of the Company to perform its obligations under, this
Agreement or any other Loan Document or (b) result in any material adverse
change in the financial condition, Properties, business or operations of the
Company and its Subsidiaries, taken as a whole.
Section 5.10. Taxes;. All tax returns required to be filed by the
Company or any Subsidiary in any jurisdiction have, in fact, been filed, except
where the failure to file such tax returns would not have a material adverse
effect on the financial condition, Properties,
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<PAGE> 22
business or operations of the Company and its Subsidiaries, taken as a
whole, and all taxes, assessments, fees and other governmental charges upon the
Company or any Subsidiary or upon any of their respective Properties, income or
franchises, which are shown to be due and payable in such returns, have been
paid. The Company does not know of any proposed additional tax assessment
against it or its Subsidiaries for which adequate provision in accordance with
GAAP has not been made on its accounts. Adequate provisions in accordance with
GAAP for taxes on the books of the Company and each Subsidiary have been made
for all open years, and for its current fiscal period.
Section 5.11. Approvals;. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Company or any other Person, is or will be necessary to the
valid execution, delivery or performance by the Company of this Agreement or any
other Loan Document.
Section 5.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other.
Section 5.13. Investment Company; Public Utility Holding Company.
Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 5.14. ERISA. The Company and each other member of its
Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with ERISA and the
Code to the extent applicable to it and has not incurred any liability to the
PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Company nor any Subsidiary has
any contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 5.15. Compliance with Laws. The Company and its Subsidiaries
each are in compliance with the requirements of all federal, state and local
laws, rules and regulations applicable to or pertaining to their Properties or
business operations (including, without limitation, the Occupational Safety and
Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances), non-compliance with which could have
a material adverse effect on the financial condition, Properties, business or
operations of the Company or any Subsidiary. Neither the Company nor any
Subsidiary has received notice to the effect that its operations are not in
compliance with any of the requirements of applicable federal, state or local
environmental, health and safety statutes and regulations or
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<PAGE> 23
any are the subject of governmental investigation evaluating whether any
remedial action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which non-compliance or remedial action
could have a material adverse effect on the financial condition, Properties,
business or operations of the Company and its Subsidiaries, taken as a whole.
Section 5.16. Other Agreements. Neither the Company nor any
Subsidiary is in default under the terms of any covenant, indenture or agreement
of or affecting the Company, any Subsidiary or any of their Properties, which
default if uncured would have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries, taken as a whole.
Section 5.17. No Default. No Default or Event of Default has occurred
and is continuing.
SECTION 6. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan under this Agreement is
subject to the following conditions precedent:
Section 6.1. All Advances. As of the time of the making of each Loan
(including the initial Loan) hereunder:
(a) each of the representations and warranties set forth in
Section 5 hereof and in the other Loan Documents shall be true and correct
as of such time, except to the extent the same expressly relate to an
earlier date;
(b) the Company shall be in full compliance with all of the
terms and conditions of this Agreement and of the other Loan Documents, and
no Default or Event of Default shall have occurred and be continuing
or would occur as a result of making such Loan; and
(c) such Loan shall not violate any order, judgment or decree of any
court or other authority or any provision of law or regulation applicable
to the Bank (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System) as then in effect.
The Company's request for any Loan shall constitute its warranty as to the
foregoing effects.
Section 6.2. Initial Advance. At or prior to the making of the initial
Loan hereunder, the following conditions precedent shall also have been
satisfied:
(a) the Bank shall have received the following (each to be
properly executed and completed) and the same shall have been approved as
to form and substance by the Bank:
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(i) the Notes;
(ii) copies (executed or certified, as may be appropriate) of all
legal documents or proceedings taken in connection with the execution
and delivery of this Agreement and the other Loan Documents to the
extent the Bank or its counsel may reasonably request;
(iii) an incumbency certificate containing the name, title and
genuine signatures of each of the Company's Authorized Representatives;
(iv) evidence of insurance required by Section 7.4 hereof; and
(b) the Bank shall have received the initial fees called for
hereby;
(c) the Bank shall have received such valuations and certifications as
it may require in order to satisfy itself as to the financial condition of the
Company and its Subsidiaries, and the lack of material contingent liabilities of
the Company and its Subsidiaries;
(d) legal matters incident to the execution and delivery of this
Agreement and the other Loan Documents and to the transactions contemplated
hereby shall be satisfactory to the Bank and its counsel; and the Bank shall
have received the favorable written opinion of counsel for the Company in form
and substance satisfactory to the Bank and its counsel;
(e) the Bank shall have received a good standing certificate for the
Company (dated as of the date no earlier than September 6, 1994) from the office
of the secretary of state of the state of its incorporation; and
(f) such other agreements, instruments, documents, certificates and
opinions as the Bank may reasonably request.
SECTION 7. COVENANTS.
The Company agrees that, so long as any credit is available to or in use
by the Company hereunder, except to the extent compliance in any case or cases
is waived in writing by the Bank:
Section 7.1. Maintenance of Business. The Company shall, and shall
cause each Subsidiary to, preserve and maintain its existence. The Company
shall, and shall cause each Subsidiary to, preserve and keep in force and effect
all licenses, permits and franchises necessary to the proper conduct of its
business. The foregoing to the contrary notwithstanding, this Section 7.1 shall
not operate to prevent any merger or consolidation otherwise permitted by
Section 7.11 hereof.
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Section 7.2. Maintenance of Properties. The Company shall maintain,
preserve and keep its property, plant and equipment in good repair, working
order and condition (ordinary wear and tear excepted) and shall from time to
time make all needful and proper repairs, renewals, replacements, additions and
betterments thereto so that at all times the efficiency thereof shall be fully
preserved and maintained (ordinary wear and tear excepted), and shall cause each
Subsidiary to do so in respect of Property owned or used by it.
Section 7.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 7.4. Insurance. The Company shall insure and keep insured,
and shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually insured by Persons similarly situated and conducting similar
businesses. The Company shall upon request furnish to the Bank a certificate
setting forth in summary form the nature and extent of the insurance maintained
pursuant to this Section.
Section 7.5. Financial Reports. The Company shall, and shall cause
each Subsidiary to, maintain a standard system of accounting in accordance with
GAAP and shall furnish to the Bank and its duly authorized representatives such
information respecting the business and financial condition of the Company and
its Subsidiaries as the Bank may reasonably request; and without any request,
shall furnish to the Bank:
(a) as soon as available, and in any event within sixty (60) days
after the close of each quarterly accounting period of the Company, a copy
of the consolidated balance sheet of the Company and its Subsidiaries as of
the close of such period and the consolidated statements of income, retained
earnings and cash flows of the Company and its Subsidiaries for such period,
each in reasonable detail showing in comparative form the figures for the
corresponding date and period in the previous fiscal year, prepared by the
Company in accordance with GAAP (subject to year-end adjustment and provided
that such balance sheet was prepared without footnotes) and certified to by
the chief financial officer of the Company;
(b) as soon as available, and in any event within one hundred
twenty (120) days after the close of each annual accounting period of the
Company, a copy of the consolidated balance sheet of the Company and its
Subsidiaries as of the close of
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such period and the consolidated statements of income, retained earnings
and cash flows of the Company and its Subsidiaries for such period, and
accompanying notes thereto, each in reasonable detail showing in comparative
form the figures for the previous fiscal year, accompanied by an opinion
thereon of Blackman Kallick & Bartelstein or another firm of independent
public accountants of recognized standing, selected by the Company and
satisfactory to the Bank, to the effect that the consolidated financial
statements have been prepared in accordance with GAAP and present fairly in
accordance with GAAP the consolidated financial condition of the Company and
its Subsidiaries as of the close of such fiscal year and the results of their
operations and cash flows for the fiscal year then ended and that an
examination of such accounts in connection with such financial statements has
been made in accordance with generally accepted auditing standards and,
accordingly, such examination included such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(c) within the period provided in subsection (b) above, the written
statement of the accountants who certified the audit report thereby required
that in the course of their audit they have obtained no knowledge of any
Default or Event of Default, or, if such accountants have obtained knowledge
of any such Default or Event of Default, they shall disclose in such
statement the nature and period of the existence thereof;
(d) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports which the Company sends to its
shareholders, and copies of all other regular, periodic and special reports
and all registration statements which the Company files with the Securities
and Exchange Commission of the United States or any successor thereto, or
with any national securities exchange; and
(e) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Company, written notice of any threatened
or pending litigation or governmental proceeding or labor controversy against
the Company or any Subsidiary which, if adversely determined, would adversely
effect the financial condition, Properties, business or operations of the
Company and its Subsidiaries, taken as a whole, or of the occurrence of any
Default or Event of Default hereunder.
Each of the financial statements furnished to the Bank pursuant to
subsections (b) and (c) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit C signed by the chief
financial officer of the Company to the effect that to the best of the chief
financial officer's knowledge and belief no Default or Event of Default has
occurred during the period covered by such statements or, if any such Default
or Event of Default has occurred during such period, setting forth a
description of such Default or Event of Default and specifying the action, if
any, taken by the Company to remedy the same. Such certificate shall also set
forth the calculations supporting such statements in respect of Sections 7.7
and 7.8 of this Agreement.
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Section 7.6. Inspection. The Company shall, and shall cause each
Subsidiary to, permit the Bank and its duly authorized representatives and
agents, at the Bank's expense, to visit and inspect any of the Properties,
corporate books and financial records of the Company and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Company and each Subsidiary, and to discuss the affairs, finances and
accounts of the Company and each Subsidiary with, and to be advised as to the
same by, its officers and independent public accountants (and by this provision
the Company hereby authorizes such accountants to discuss with the Bank the
finances and affairs of the Company and of each Subsidiary) at such reasonable
times and reasonable intervals as the Bank may designate; provided, however,
that in the absence of any Default or Event of Default, there shall be no more
than one such inspection per calendar year.
Section 7.7. Tangible Net Worth. The Company will at all times
maintain Tangible Net Worth at not less than the Minimum Required Amount. For
purposes of this Section 7.7, the term "Minimum Required Amount" shall mean
$50,000,000 for the period from the date hereof through and including July 30,
1995 and shall increase as of July 31, 1995 and as of the last day of each July
occurring thereafter by an amount equal to 25% of Net Income (but only if
positive) for the fiscal year then ended.
Section 7.8. Leverage Ratio. The Company will at all times maintain a
ratio of Total Liabilities to Tangible Net Worth of not more than 1.0 to 1.0.
Section 7.9. Liens. The Company shall not, nor shall it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's compensation,
unemployment insurance, old age benefits, social security obligations,
taxes, assessments, statutory obligations or other similar charges, good
faith cash deposits in connection with tenders, contracts or leases to which
the Company or any Subsidiary is a party or other cash deposits required to
be made in the ordinary course of business, provided in each case that the
obligation is not for borrowed money and that the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and
adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or
other similar Liens arising in the ordinary course of business with respect
to obligations which are not due or which are being contested in good
faith by appropriate proceedings which prevent enforcement of the matter
under contest;
(c) the pledge of assets for the purpose of securing an appeal, stay or
discharge in the course of any legal proceeding, provided that the aggregate
amount of liabilities of the Company and its Subsidiaries secured by a
pledge of assets permitted
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under this subsection, including interest and penalties thereon, if any,
shall not be in excess of $5,000,000 at any one time outstanding;
(d) Liens on property of the Company or any of its Subsidiaries created
solely for the purpose of securing purchase money, indebtedness and
Capitalized Lease Obligations, representing or incurred to finance,
refinance or refund the purchase price of Property, provided that no such
Lien shall extend to or cover other Property of the Company or such
Subsidiary other than the respective Property so acquired, and the principal
amount of indebtedness secured by any such Lien shall at no time exceed the
original purchase price of such Property; and
(e) Liens on property of the Company securing currently outstanding
obligations of the Company in respect of those certain Town of Blue
Mountain, Mississippi Variable/Fixed Rate $2,500,000 Industrial Development
Revenue Bonds dated October 1, 1988.
Section 7.10. Investments, Loans, Advances and Guaranties;. The
Company shall not, nor shall it permit any Subsidiary to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances (other
than for travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or be or become liable as
endorser, guarantor, surety or otherwise for any debt, obligation or undertaking
of any other Person, or otherwise agree to provide funds for payment of the
obligations of another, or supply funds thereto or invest therein or otherwise
assure a creditor of another against loss, or apply for or become liable to the
issuer of a letter of credit which supports an obligation of another, or
subordinate any claim or demand it may have to the claim or demand of any other
Person; provided, however, that the foregoing provisions shall not apply to nor
operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America, provided
that any such obligations shall mature within one year of the date of
issuance thereof;
(b) investments in commercial paper rated at least P-1 by Moody's
Investors Services, Inc. and at least A-1 by Standard & Poor's Corporation
maturing within 270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any United States
commercial bank having capital and surplus of not less than $100,000,000
which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of commercial paper
received in the ordinary course of business;
(e) equity investments in Subsidiaries; and
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(f) investments, loans, advances and guaranties not otherwise permitted
by this Section 7.10, provided that the aggregate amount of all such
investments, loans, advances and guaranties permitted by this Section
7.10(f) does not at any time exceed an amount equal to 15% of tangible Net
Worth as then determined and computed.
In determining the amount of investments, acquisitions, loans, advances
and guarantees permitted under this Section, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.
Section 7.11. Mergers, Consolidations and Sales. The Company shall
not, nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of all or any
substantial part of its Property (excluding any disposition of Property as part
of a sale and leaseback transaction) or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided, however,
that this Section shall not apply to nor prohibit:
(a) the merger or consolidation of any Subsidiary with or into the
Company or any other Subsidiary (including any corporation which, after
giving effect to such transaction, will become a Subsidiary) so long as in
any merger or consolidation involving the Company, the Company shall be the
surviving or continuing corporation and in any merger or consolidation not
involving the Company, a Subsidiary shall be the surviving or continuing
corporation;
(b) the merger or consolidation of the Company with or into any other
corporation if the Company shall be the surviving or continuing corporation
and at the time of such consolidation or merger and after giving effect
thereto no Default or Event of Default shall have occurred and be
continuing; and
(c) the sale, lease or other disposition by any Subsidiary of all or
any substantial part of its assets to the Company or any other Subsidiary.
The term "substantial" as used herein shall mean the sale, transfer,
lease or other disposition of 20% of the total assets of the Company.
Section 7.12. Maintenance of Subsidiaries. The Company shall not
assign, sell or transfer, or permit any Subsidiary to issue, assign, sell or
transfer, any shares of capital stock of a Subsidiary; provided that the
foregoing shall not operate to prevent the issuance, sale and transfer to any
person of any shares of capital stock of a Subsidiary solely for the purpose of
qualifying, and to the extent legally necessary to qualify, such person as a
director of such Subsidiary; further, provided, however, that this Section 7.12
shall not operate to prevent any transaction otherwise permitted by Section 7.11
hereof.
Section 7.13. ERISA. The Company shall, and shall cause each
Subsidiary to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character
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which if unpaid or unperformed might result in the imposition of a Lien
against any of its Properties. The Company shall, and shall cause each
Subsidiary to, promptly notify the Bank of (i) the occurrence of any reportable
event (as defined in ERISA) with respect to a Plan, (ii) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or appointment of
a trustee therefor, (iii) its intention to terminate or withdraw from any Plan,
and (iv) the occurrence of any event with respect to any Plan which would result
in the incurrence by the Company or any Subsidiary of any material liability,
fine or penalty, or any material increase in the contingent liability of the
Company or any Subsidiary with respect to any post-retirement Welfare Plan
benefit.
Section 7.14. Compliance with Laws. The Company shall, and shall
cause each Subsidiary to, comply in all respects with the requirements of all
federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to their Properties or business operations,
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries, taken as a whole, or could result in a Lien upon any of their
Property, which Lien is not otherwise permitted by Section 7.9 hereof.
Section 7.15. Burdensome Contracts With Affiliates. The Company shall
not, nor shall it permit any Subsidiary to, enter into any contract, agreement
or business arrangement with any of its Affiliates (other than with Wholly-Owned
Subsidiaries) on terms and conditions which are less favorable to the Company or
such Subsidiary than would be usual and customary in similar contracts,
agreements or business arrangements between Persons not affiliated with each
other.
Section 7.16. Change in the Nature of Business. The Company shall
not, and shall not permit any Subsidiary to, engage in any business or activity
if, as a result, the general nature of the business of the Company and its
Subsidiaries, taken as a whole, would be changed in any material respect from
the general nature of the business engaged in by the Company and its
Subsidiaries on the date of this Agreement. While the Company (and its Board of
Directors) cannot assure continued voting control of the Company by Richard M.
Jaffee and Robert D. Jaffee and their families, the Company recognizes the
Bank's strong preference that they and their families retain such voting
control. The Bank acknowledges that a change in voting control of the Company
shall not constitute a default under this Section 7.16.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default for a period of five days in the payment when due of all or
any part of the principal of or interest on any Note (whether at the stated
maturity thereof or at any other time provided for in this Agreement) or of
any fee or other Obligation payable by the Company hereunder; or
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(b) default in the observance or performance of any covenant set forth
in Sections 7.6, 7.7, 7.8, 7.10, 7.11 or 7.12 hereof which is not remedied
within five days after the earlier of (i) the date on which such failure
shall first become known to any officer of the Company or (ii) written
notice thereof is given to the Company by the Bank; or
(c) default in the observance or performance of any other provision
hereof which is not remedied within thirty (30) days after the earlier of
(i) the date on which such failure shall first become known to any officer
of the Company or (ii) written notice thereof is given to the Company by the
Bank; or
(d) any representation or warranty made by the Company herein or in any
statement or certificate furnished by it pursuant hereto, or in connection
with any Loan made hereunder, proves untrue in any material respect as of
the date of the issuance or making thereof; or
(e) default shall occur under any evidence of Indebtedness for Borrowed
Money issued, assumed or guaranteed by the Company or any Subsidiary
aggregating in excess of $1,000,000 or under any indenture, agreement or
other instrument under which the same may be issued, and such default shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any such Indebtedness for Borrowed Money (whether or not such
maturity is in fact accelerated) or any such Indebtedness for Borrowed Money
shall not be paid when due (whether by lapse of time, acceleration or
otherwise); or
(f) any judgment or judgments, writ or writs, or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in
excess of $1,000,000 shall be entered or filed against the Company or any
Subsidiary or against any of their Property and which remains unvacated,
unbonded, unstayed or unsatisfied for a period of thirty (30) days; or
(g) the Company or any member of its Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess $5,000,000 which it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans having aggregate
unfunded Vested Liabilities in excess of $5,000,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by the Company or
any other member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within thirty (30) days thereafter;
or a condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated; or
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(h) dissolution or termination of the existence of (i) the Company or
(ii) to the extent not otherwise permitted by Section 7.11 hereof, any
Subsidiary; or
(i) the Company or any Subsidiary shall (i) have entered involuntarily
against it an order for relief under the United States Bankruptcy Code, as
amended, (ii) not pay, or admit in writing its inability to pay, its debts
generally as they become due, (iii) make an assignment for the benefit of
creditors, (iv) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property, (v)
institute any proceeding seeking to have entered against it an order for
relief under the United States Bankruptcy Code, as amended, to adjudicate it
insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors or
fail to file an answer or other pleading denying the material allegations of
any such proceeding filed against it, or (vi) fail to contest in good faith
any appointment or proceeding described in Section 8.1(j) hereof; or
(j) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Subsidiary or any
substantial part of any of their Property, or a proceeding described in
Section 8.1(i)(v) shall be instituted against the Company or any Subsidiary,
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of sixty (60) days.
Section 8.2. Non-Bankruptcy Defaults. When any Event of Default
described in subsection (a) through (h), both inclusive, of Section 8.1 has
occurred and is continuing, the Bank may, by notice to the Company, take one or
more of the following actions:
(a) terminate the obligation of the Bank to extend any further credit
hereunder on the date (which may be the date thereof) stated in such notice;
(b) declare the principal of and the accrued interest on the Notes to
be forthwith due and payable and thereupon the Notes, including both
principal and interest and all fees, charges and other Obligations payable
hereunder, shall be and become immediately due and payable without further
demand, presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available to it under the
Loan Documents or applicable law.
Section 8.3. Bankruptcy Defaults. When any Event of Default described
in subsection (i) or (j) of Section 8.1 has occurred and is continuing, then the
Notes, including both principal and interest, and all fees, charges and other
Obligations payable hereunder, shall immediately become due and payable without
presentment, demand, protest or notice of any kind, and the obligation of the
Bank to extend further credit pursuant to any of the terms hereof shall
immediately terminate. In addition, the Bank may exercise any and all remedies
available to it under the Loan Documents or applicable law.
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SECTION 9. MISCELLANEOUS.
Section 9.1. Holidays. If any payment hereunder becomes due and
payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such
payment shall be due and payable. In the case of any payment of principal
falling due on a day which is not a Business Day, interest on such principal
amount shall continue to accrue during such extension at the rate per annum then
in effect, which accrued amount shall be due and payable on the next scheduled
date for the payment of interest.
Section 9.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of the Bank or on the part of the holder of the Obligations in the
exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Bank and of
the holder of the Obligations are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.
Section 9.3. Amendments, Etc. No amendment, modification, termination
or waiver of any provision of this Agreement or of any other Loan Document, nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank. No notice
to or demand on the Company in any case shall entitle the Company to any other
or further notice or demand in similar or other circumstances.
Section 9.4. Costs and Expenses. The Company agrees to pay on demand
the costs and expenses of the Bank in connection with the negotiation,
preparation, execution and delivery of this Agreement, the other Loan Documents
and the other instruments and documents to be delivered hereunder or thereunder,
and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the reasonable fees and expenses of Messrs. Chapman and
Cutler, counsel for the Bank, with respect to all of the foregoing (whether or
not the transactions contemplated hereby are consummated). In addition, at the
time of requesting any amendment hereof or consent or waiver hereunder, the
Company must negotiate with the Bank a fee to the Bank for engaging in and
documenting any such action. The Company further agrees to pay to the Bank or
any other holder of the Obligations all costs and expenses (including court
costs and reasonable attorneys' fees), if any, incurred or paid by the Bank or
any other holder of the Obligations in connection with any Default or Event of
Default or in connection with the enforcement of this Agreement or any of the
other Loan Documents or any other instrument or document delivered hereunder or
thereunder. The obligations of the Company under this Section shall survive the
termination of this Agreement.
Section 9.5. Documentary Taxes. The Company agrees to pay on demand
any documentary, stamp or similar taxes payable in respect of this Agreement or
any other Loan Document, including interest and penalties, in the event any such
taxes are assessed,
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irrespective of when such assessment is made and whether or not any
credit is then in use or available hereunder.
Section 9.6. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 9.7. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Bank of amounts sufficient to
protect the yield of the Bank with respect to the Loans, including, but not
limited to, Sections 2.6 and 2.7 hereof, shall survive the termination of this
Agreement and the payment of the Notes.
Section 9.8. Notices. Except as otherwise specified herein, all
notices hereunder shall be in writing (including cable, telecopy or telex) and
shall be given to the relevant party at its address, telecopier number or telex
number set forth below, or such other address, telecopier number or telex number
as such party may hereafter specify by notice to the other given by United
States certified or registered mail, by telecopy or by other telecommunication
device capable of creating a written record of such notice and its receipt.
Notices hereunder shall be addressed:
to the Company at:
Oil-Dri Corporation of America
410 North Michigan Avenue
Suite 400
Chicago, Illinois 60611
Attention: Treasurer
Telephone: (312) 321-1515
Telecopy: (312) 321-1271
with a copy to:
Sonnenschien, Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Paul J. Miller, Esq.
Telephone: (312) 876-8064
Telecopy: (312) 876-7934
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to the Bank at:
Harris Trust and Savings Bank
P.O. Box 755
111 West Monroe Street
Chicago, Illinois 60690
Attention: Division E, Mr. Daniel J. Gresla
Telephone: (312) 461-2735
Telecopy: (312) 461-2591
Telex: 254157
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the answer back is received by
sender, (iii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given
pursuant to Section 1 or Section 2 hereof shall be effective only upon receipt.
SECTION 9.9. PERSONAL JURISDICTION.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION
(B), THE COMPANY AND THE BANK AGREE THAT ALL DISPUTES BETWEEN THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS,BUT EACH OF THE
COMPANY AND THE BANK ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. THE
COMPANY AND THE BANK EACH WAIVE IN ALL DISPUTES ANY OBJECTION THAT EACH MAY
HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE BANK SHALL
HAVE THE RIGHT TO PROCEED AGAINST THE COMPANY OR ITS PROPERTY IN A COURT
IN ANY LOCATION TO ENABLE THE BANK TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE BANK. THE
COMPANY AGREES THAT IT SHALL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN
ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS PROVISION BY THE BANK
TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
IN FAVOR OF THE BANK. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE BANK HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION.
-31-
<PAGE> 36
SECTION 9.10. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANK AND THE COMPANY
ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO. THE COMPANY AND THE BANK EACH HEREBY AGREE
AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 9.11. Construction. The parties hereto acknowledge and agree
that this Agreement and the other Loan Documents shall not be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Loan Documents.
Section 9.12. Headings. Section headings used in this Agreement are
for convenience of reference only and are not a part of this Agreement for any
other purpose.
Section 9.13. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 9.14. Counterparts;. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 9.15. Binding Nature, Governing Law, Etc; This Agreement shall
be binding upon the Company and its permitted successors and assigns, and shall
inure to the benefit of the Bank and the benefit of its permitted successors and
assigns, including any subsequent holder of the Obligations. THIS AGREEMENT AND
THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and any
prior agreements, whether written or oral, with respect thereto are superseded
hereby. Neither the Company nor the Bank may assign its rights hereunder
without the written consent of the other party.
-32-
<PAGE> 37
Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall constitute a contract between us for the uses and
purposes hereinabove set forth.
Dated as of this 21st day of September, 1994.
OIL-DRI CORPORATION OF AMERICA
By /s/ Daniel S. Jaffee
Daniel S. Jaffee
Its Group Vice President
Accepted and agreed to at Chicago, Illinois as of the day and
year last above written.
HARRIS TRUST AND SAVINGS BANK
By /s/ David J. Gil
Its Vice President
-33-
<PAGE> 38
EXHIBIT A
OIL-DRI CORPORATION OF AMERICA
REVOLVING CREDIT NOTE
Chicago, Illinois
$5,000,000 September 21, 1994
On the Termination Date, for value received, the undersigned, Oil- Dri
Corporation of America, a Delaware corporation (the "Company"), hereby promises
to pay to the order of Harris Trust and Savings Bank (the "Bank") at its office
at 111 West Monroe Street, Chicago, Illinois, the principal sum of Five Million
and no/100 Dollars ($5,000,000), or (ii) such lesser amount as may at the time
of the maturity hereof, whether by acceleration or otherwise, be the aggregate
unpaid principal amount of all Loans owing from the Company to the Bank under
the Revolving Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences Loans made or to be made to the Company by the Bank
under the Revolving Credit provided for under that certain Credit Agreement
dated as of September 21, 1994 between the Company and the Bank (said Credit
Agreement, as the same may be amended, modified or restated from time to time,
being referred to herein as the "Credit Agreement") and the Company hereby
promises to pay interest at the office described above on such Loans evidenced
hereby at the rates and at the times and in the manner specified therefor in the
Credit Agreement.
Each Loan made under the Revolving Credit against this Note, any
repayment of principal hereon, the status of each such Loan from time to time as
part of the Domestic Rate Portion or a LIBOR Portion and, in the case of a LIBOR
Portion, the interest rate and Interest Period applicable thereto shall be
endorsed by the holder hereof on a schedule to this Note or recorded on the
books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof). The
Company agrees that in any action or proceeding instituted to collect or enforce
collection of this Note, the entries endorsed on a schedule to this Note or
recorded on the books and records of the holder hereof shall be prima facie
evidence of the unpaid principal balance of this Note, the status of each such
Loan from time to time as part of the Domestic Rate Portion or a LIBOR Portion
and, in the case of any LIBOR Portion, the interest rate and Interest Period
applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement, and this Note and the holder hereof are entitled to all of the
benefits provided for thereby or referred to therein, to which reference is
hereby made for a statement thereof. This Note may be declared to be, or be and
become, due prior to its expressed maturity and voluntary prepayments may be
made hereon, all in the events, on the terms and with the effects provided in
the Credit Agreement. All capitalized terms used herein without
<PAGE> 39
definition shall have the same meanings herein as such terms are defined
in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS.
The Company hereby promises to pay all costs and expenses (including
reasonable attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand.
OIL-DRI CORPORATION OF AMERICA
By
Daniel S. Jaffee
Its Group Vice President
-2-
<PAGE> 40
EXHIBIT B
OIL-DRI CORPORATION OF AMERICA
TERM LOAN NOTE
Chicago, Illinois
$5,000,000 September 21, 1994
FOR VALUE RECEIVED, Oil-Dri Corporation of America, a Delaware
corporation (the "Company"), promises to pay to the order of Harris Trust and
Savings Bank (the "Bank"), at its office at 111 West Monroe Street, Chicago,
Illinois, the principal sum of Five Million Dollars ($5,000,000), in six
installments due on the following dates in the amounts set forth below:
<TABLE>
<CAPTION>
INSTALLMENT IS IN THE
DUE ON AMOUNT OF
------------- ------------
<S> <C>
June 20, 1996 $ 500,000
June 21, 1999 $ 1,950,000
June 20, 2000 $ 900,000
June 20, 2001 $ 650,000
June 20, 2002 $ 650,000
June 20, 2003 $ 350,000
</TABLE>
The Company promises to pay interest (computed on the basis of a year of
360 days for the actual number of days elapsed) at said office on the balance of
principal remaining from time to time unpaid hereon at the rate per annum equal
to 7.78% on the last day of each March, June, September and December in each
year (commencing September 30, 1994) and on the final maturity date of this
Note. On demand, the Company promises to pay interest on any overdue principal
hereof (whether by lapse of time, acceleration or otherwise) until paid at the
rate per annum equal to 10.78%.
This Note is issued under the terms and provisions of that certain
Credit Agreement dated as of even date herewith by and between the Company and
the Bank (the "Credit Agreement"), and this Note and the holder hereof are
entitled to all of the benefits provided for by the Credit Agreement or referred
to therein, to which Credit Agreement reference is hereby made for a statement
thereof. The principal installments and interest hereon may be declared due
prior to their expressed maturities and voluntary prepayments may be made hereon
by the Company, all as specified in the Credit Agreement.
If the Company prepays any principal amount of this Note before its
scheduled due date (whether as the result of an acceleration, voluntary
prepayment, or otherwise), the Company shall pay to the Bank a funding indemnity
equal to the cost to the Bank of then acquiring an interest rate swap agreement
(or an equivalent instrument or instruments) with another interest rate swap
dealer of the highest credit standing in a notional principal amount equal to
the amount of such prepayment (including any scheduled amortization of such
<PAGE> 41
amount) to the scheduled due date of such prepaid principal amount under
which the Bank would pay quarter-annually a floating rate of interest based
upon three month LIBOR (i.e., the London interbank offered rate) and such other
dealer would pay to the Bank on the regularly scheduled interest payment dates
for this Note a fixed rate of interest equal to the interest rate on this Note.
This Note is issued in substitution and replacement for, and evidences
the indebtedness previously evidenced by, that certain Promissory Note of the
Company dated April 20, 1994 payable to the order of the Bank in the face
principal amount of $5,000,000 (the "Present Note"). Upon the execution and
delivery to the Bank of this Note, the Present Note shall be deemed cancelled
without further action by the Company or the Bank.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Illinois. The Company promises to pay all costs and
expenses (including reasonable attorneys' fees) suffered or incurred by the
holder hereof in collecting this Note or enforcing any rights in any collateral
therefor. The Company hereby waives presentment for payment and demand.
OIL-DRI CORPORATION OF AMERICA
By
Daniel S. Jaffee
Its Group Vice President
-2-
<PAGE> 42
Exhibit C
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Harris Trust and Savings
Bank (the "Bank") pursuant to that certain Credit Agreement dated as of
September 21, 1994, by and between Oil-Dri Corporation of America (the
"Company") and the Bank (the "Credit Agreement"). Unless otherwise defined
herein, the terms used in this Compliance Certificate have the meanings
ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ___________________________________
of the Company;
2. I have reviewed the terms of the Credit Agreement and I
have made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of the Company and its
Subsidiaries during the accounting period covered by the attached
financial statements;
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or
the occurrence of any event which constitutes a Default or Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate,
except as set forth below;
4. The financial statements required by Section 7.5 of the
Credit Agreement and being furnished to you concurrently with this
certificate are, to the best of my knowledge, true, correct and
complete as of the dates and for the periods covered thereby; and
5. The Attachment hereto sets forth financial data and
computations evidencing the Company's compliance with certain covenants
of the Credit Agreement, all of which data and computations are, to the
best of my knowledge, true, complete and correct and have been made in
accordance with the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:
_________________________________________________________________
_________________________________________________________________
<PAGE> 43
_________________________________________________________________
_________________________________________________________________
The foregoing certifications, together with the computations set forth
in the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
__________________________________________
_______________________, ______________
(Type or Print Name) (Title)
-2-
<PAGE> 44
ATTACHMENT TO COMPLIANCE CERTIFICATE
OIL-DRI CORPORATION OF AMERICA
Compliance Calculations for Credit Agreement
Dated as of September 21, 1994
Calculations as of__________, 19___
<TABLE>
<S> <C> <C>
A. TANGIBLE NET WORTH (SECTION 7.7)
1. Total shareholder's equity Less
-----------
(a) Notes receivable in excess
of $1,000,000 from
officers and employees
-----------
(b) Intangible assets
-----------
(c) Write-up of assets above cost
-----------
2. Line 1 minus Lines (a), (b) and (c)
("Tangible Net Worth")
-----------
3. As listed in Section 7.7, for the
date of this Certificate, Tangible
Net Worth must not be less than $
-----------
4. Company is in compliance? (Circle yes or no) Yes/No
===========
B. LEVERAGE RATIO (SECTION 7.8)
1. Total Liabilities as defined
-----------
2. Tangible Net Worth
(from Line A2 above)
-----------
3. Ratio of Total Liabilities (Line 1)
to Tangible Net Worth (Line 2)
("Leverage Ratio") :1
===========
4. As listed in Section 7.8, for the
date of this Certificate, the Leverage
Ratio shall not be greater than 1.0:1
===========
5. Company is in compliance?
(Circle yes or no)
Yes/No
===========
</TABLE>
<PAGE> 45
SCHEDULE 5.2
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP
<S> <C> <C>
Oil-Dri Corporation Georgia 100%
of Georgia
Oil-Dri Production Mississippi 100%
Company
Oil-Dri Transportation Delaware 100%
Co.
Oil-Dri (U.K.) Limited United Kingdom 100%
Oil-Dri S.A. Switzerland 100%
Favorite Products Canada 100%
Company, Ltd.
Blue Mountain Mississippi 100%
Production Company (by Favorite Products)
Ochlocknee Holding Spain 100%
Co., S.A.
Ochlocknee Mining Spain 100%
Co., S.A.
</TABLE>
<PAGE> 1
Page 1
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ----- ------------ -------- -----------------
<S> <C> <C> <C> <C> <C>
July 31, 1994 08/01/93 to 08/02/93 2 6,991,285 13,982,570
08/03/93 to 08/11/93 9 6,991,285 62,921,565
08/12/93 to 08/15/93 4 6,993,827 27,975,308
08/16/93 to 08/23/93 8 6,993,827 55,950,616
08/24/93 to 09/02/93 10 6,995,174 69,951,740
09/03/94 to 09/14/93 12 6,995,638 83,947,656
09/15/93 to 09/19/93 5 6,996,416 34,982,080
09/20/93 to 09/21/93 2 6,997,041 13,994,082
09/22/93 to 09/29/93 8 6,998,121 55,984,968
09/30/93 to 10/03/93 4 6,993,121 27,972,484
10/04/93 to 10/17/93 14 6,988,121 97,833,694
10/18/93 to 10/18/93 1 6,983,121 6,983,121
10/19/93 to 10/24/93 6 6,978,121 41,868,726
10/25/93 to 10/28/93 4 6,978,972 27,915,888
10/29/93 to 10/31/93 3 6,980,823 20,942,469
11/01/93 to 11/02/93 2 6,980,821 13,961,642
11/03/93 to 11/03/93 1 6,980,871 6,980,871
11/04/93 to 11/08/93 5 6,981,827 34,909,135
11/09/93 to 11/22/93 14 6,983,722 97,772,108
11/23/93 to 11/26/93 4 6,983,872 27,935,488
11/27/93 to 11/28/93 2 6,984,316 13,968,632
11/29/93 to 11/29/93 1 6,988,551 6,988,551
11/30/93 to 12/02/93 3 6,993,160 20,979,480
12/03/93 to 01/06/94 35 6,994,198 244,796,930
01/07/94 to 01/09/94 3 6,995,338 20,986,014
01/10/94 to 01/23/94 14 6,997,473 97,964,622
01/24/94 to 03/21/94 57 6,998,285 398,902,245
03/22/94 to 04/30/94 43 6,999,966 300,998,538
05/04/94 to 05/30/94 27 6,999,966 188,999,082
05/31/94 to 05/31/94 1 6,999,066 6,999,066
06/01/94 to 06/06/94 6 6,997,866 41,987,196
06/07/94 to 06/07/94 1 6,996,666 6,996,666
06/08/94 to 06/08/94 1 6,996,466 6,996,466
06/09/94 to 06/13/94 5 6,983,466 34,917,330
06/14/94 to 06/14/94 1 6,976,866 6,976,866
</TABLE>
EXHIBIT 11
<PAGE> 2
Page 1A
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ------ ------------ -------- -----------------
<S> <C> <C> <C> <C> <C>
July 31, 1994 (cont'd.) 06/15/94 to 06/20/94 6 6,971,666 41,829,996
06/21/94 to 07/10/94 20 6,971,822 139,436,440
07/11/94 to 07/13/94 3 6,961,822 20,885,466
07/14/94 to 07/31/94 18 6,951,822 125,132,796
--- -------------
365 2,551,508,593 6,990,435
--- -------------
Assuming exercise of option reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 20,289
=========
7,010,724
=========
</TABLE>
EXHIBIT 11
<PAGE> 3
Page 2
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ------ ------------ -------- ------------------
<S> <C> <C> <C> <C> <C>
July 31,1993 08/01/92 to 08/09/92 9 6,992,793 62,935,137
08/10/92 to 08/23/92 14 6,993,845 97,913,830
08/24/92 to 11/30/92 99 6,993,859 692,392,041
12/01/92 to 12/03/93 3 6,998,547 20,995,641
12/04/92 to 12/15/93 12 6,999,619 83,995,428
12/16/92 to 01/04/93 20 7,001,911 140,038,220
01/05/93 1 7,002,061 7,002,061
01/06/93 to 01/13/93 8 7,002,379 56,019,032
01/14/93 to 02/04/93 22 7,003,291 154,072,402
02/05/93 to 02/16/93 12 7,003,575 84,042,900
02/17/93 1 7,005,696 7,005,696
02/18/93 to 02/25/93 8 7,003,696 56,029,568
02/26/93 to 03/18/93 21 6,995,696 146,909,616
03/19/93 to 04/01/93 14 6,996,996 97,957,944
04/02/93 to 04/12/93 11 6,997,830 76,976,130
04/13/93 to 04/18/93 6 6,987,830 41,926,980
04/19/93 to 05/19/93 31 6,989,219 216,665,789
05/20/93 to 07/13/93 55 6,989,797 384,438,835
07/14/93 to 07/25/93 12 6,990,729 83,888,748
07/26/93 to 07/31/93 6 6,991,285 41,947,710
--- -------------
365 2,553,153,708 6,994,942
--- -------------
Assuming exercise of option reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 36,174
---------
7,031,116
=========
</TABLE>
EXHIBIT 11
<PAGE> 4
Page 3
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ------ ------------- -------- -----------------
<S> <C> <C> <C> <C> <C>
July 31, 1992 08/01/91 to 08/12/91 12 7,012,370 84,148,440
08/13/91 to 08/20/91 8 7,002,370 56,018,960
08/21/91 to 08/22/91 2 6,992,370 13,984,740
08/23/91 to 09/12/91 21 6,992,891 146,850,711
09/13/91 to 12/12/91 91 6,995,091 636,553,281
12/13/91 to 01/23/92 42 6,996,075 293,835,150
01/24/92 to 01/30/92 7 6,989,409 48,925,863
01/31/92 to 02/04/92 5 6,989,379 34,946,895
02/05/92 to 03/05/92 30 6,991,379 209,741,370
03/06/92 to 07/31/92 148 6,992,793 1,034,933,364
--- -------------
366 2,559,938,774 6,994,369
--- -------------
Assuming exercise of option reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 31,931
=========
7,026,300
=========
</TABLE>
EXHIBIT 11
<PAGE> 5
Page 4
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ----- ------------ -------- -------------------
<S> <C> <C> <C> <C> <C>
July 31, 1991 08/01/90 to 09/17/90 48 6,998,154 335,911,392
09/18/90 to 12/14/90 88 6,998,869 615,900,472
12/15/90 to 01/08/91 25 6,999,795 174,994,875
01/09/91 to 01/29/91 21 7,000,374 147,007,854
01/30/91 to 02/05/91 7 7,000,704 49,004,928
02/06/91 to 02/10/91 5 7,001,037 35,005,185
02/11/91 to 02/12/91 2 7,001,027 14,002,054
02/13/91 to 02/18/91 6 7,002,411 42,014,466
02/19/91 1 7,002,681 7,002,681
02/20/91 to 02/22/91 3 7,003,681 21,011,043
02/23/91 to 03/28/91 34 7,003,831 238,130,254
03/29/91 to 04/07/91 10 7,004,843 70,048,430
04/08/91 to 04/09/91 2 7,006,405 14,012,810
04/10/91 to 04/28/91 19 7,006,698 133,127,262
04/29/91 to 05/14/91 16 7,008,363 112,133,808
05/15/91 to 06/12/91 29 7,009,082 203,263,378
06/13/91 to 06/16/91 4 7,012,248 28,048,992
06/17/91 to 07/21/91 35 7,015,518 245,543,130
07/22/91 1 7,016,884 7,016,884
07/23/91 to 07/31/91 9 7,017,370 63,156,330
--- --------- -------------
365 2,556,336,228 7,003,661
--- -------------
Assuming exercise of option reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 51,129
---------
7,054,790
=========
</TABLE>
EXHIBIT 11
<PAGE> 6
Page 5
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Weighted Average
Number of Shares Outstanding
<TABLE>
<CAPTION>
Average Shares
Number Number of (Weighted Shares/
of Shares Weighted Number of Days)
Year Ended Period Days Outstanding* Shares as Adjusted
- - - ----------- ------ ----- ------------ -------- -----------------
<S> <C> <C> <C> <C> <C>
July 31, 1990 08/01/89 to 09/11/89 42 6,940,818 291,514,356
09/12/89 to 09/20/89 9 6,942,139 62,479,251
09/21/89 to 09/24/89 4 6,942,131 27,768,524
09/25/89 1 6,942,125 6,942,125
09/26/89 to 10/13/89 8 6,942,103 55,536,824
10/04/89 to 10/10/89 7 6,943,213 48,602,491
10/11/89 to 11/02/89 23 6,971,545 160,345,535
11/03/89 to 11/06/89 4 6,974,844 27,899,376
11/07/89 to 11/29/89 23 6,975,219 160,430,037
11/30/89 1 6,976,108 6,976,108
12/01/89 to 12/14/89 14 6,978,936 97,705,104
12/15/89 to 12/20/89 6 6,980,064 41,880,384
12/21/89 to 01/31/90 42 6,980,076 293,163,192
02/01/90 to 02/08/90 8 6,980,044 55,840,352
02/09/90 to 03/15/90 35 6,982,821 244,398,735
03/16/90 to 04/10/90 26 6,982,346 181,540,996
04/11/90 to 05/01/90 21 6,985,123 146,687,583
05/02/90 to 05/07/90 6 6,987,623 41,925,738
05/08/90 to 05/09/90 2 6,989,124 13,978,248
05/10/90 to 06/07/90 29 6,989,936 202,708,144
06/08/90 to 06/11/90 4 6,992,713 27,970,852
06/12/90 to 06/21/90 10 6,992,924 69,929,240
06/22/90 to 07/02/90 11 6,994,323 76,937,553
07/03/90 to 07/10/90 8 6,994,923 55,959,384
07/11/90 to 07/17/90 7 6,995,917 48,971,419
07/18/90 to 07/24/90 7 6,997,717 48,984,019
07/25/90 to 07/31/90 7 6,997,949 48,985,643
--- --------- -------------
365 2,546,061,213 6,975,510
--- -------------
Assuming exercise of option reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 66,866
---------
7,042,376
=========
</TABLE>
EXHIBIT 11
<PAGE> 1
EXHIBIT (13)
1994 ANNUAL REPORT TO STOCKHOLDERS OF REGISTRANT
OIL-DRI CORPORATION OF AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements And
Independent Auditors Report
Years Ended July 31, 1994, 1993 and 1992
<PAGE> 2
Financial Highlights
<TABLE>
<CAPTION>
1994 1993 Change
----------------------------------------------
<S> <C> <C> <C>
Net Sales $139,809,584 $134,759,583 +3.7%
Income from Operations $ 14,428,277 $ 14,048,716 +2.7%
Income before Income Taxes $ 13,159,384 $ 12,253,479 +7.4%
Net Income $ 9,852,200 $ 9,419,642 +4.6%
Net Income per Share $ 1.41 $ 1.34 +5.2%
Net Income as
a Percentage of Sales 7.0% 7.0% -
Return on Average
Stockholders' Equity 14.1% 14.9% -5.4%
Working Capital $ 28,760,765 $ 25,767,067 +$2,993,698
Stockholders' Equity $ 73,059,504 $ 66,442,512 +$6,616,992
Book Value per Share $ 10.51 $ 9.50 +10.6%
Average Shares Outstanding 7,010,724 7,031,116 -0.3%
Dividends Declared $ 1,806,736 $ 1,678,894 +7.6%
Capital Expenditures $ 13,559,232 $ 9,158,173 +48.1%
Depreciation and
Amortization $ 6,798,038 $ 5,834,854 +16.5%
Long-Term Debt $ 21,521,243 $ 17,765,941 +$3,755,302
</TABLE>
SALES TRENDS* (millions of dollars)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------------------------------------
<S> <C> <C> <C> <C> <C>
Cat Box Absorbents $ 70.9 $ 68.5 $ 60.5 $ 50.9 $ 45.3
Industrial and
Environmental Sorbents 19.4 18.7 19.0 18.5 18.2
Agricultural Carriers
and Absorbents 18.4 18.4 14.9 10.7 11.1
Fluid Purification Adsorbents 13.2 10.1 6.1 5.8 3.8
Foreign Subsidiaries 10.5 11.5 10.0 9.6 10.1
Transportation Services 7.4 7.6 8.3 6.8 5.7
---------------------------------------
$139.8 $134.8 $118.8 $102.3 $ 94.2
====== ====== ====== ====== ======
</TABLE>
*Prior years' sales figures reflect certain reclassifications to conform
with current year presentation.
LAND HOLDINGS & MINERAL RESERVES
<TABLE>
<CAPTION>
Land Owned Land Leased Total Proven
(acres) (acres) (acres) Reserves
(1,000's of tons)
---------------------------------------------------------
<S> <C> <C> <C> <C>
Georgia 1,193 2,004 3,197 45,505
Mississippi 1,969 1,423 3,392 115,085
Oregon 360 800 1,160 3,621
Florida 537 446 983 4,512
Nevada 709 - 709 26,292
Illinois 4 - 4 -
--------------------------------------------------
4,772 4,673 9,445 195,015
===== ===== ===== =======
</TABLE>
1
<PAGE> 3
To Our Shareholders
Since its initial public offering in 1971, Oil-Dri Corporation has had a
performance record characterized by consistent growth in sales and
earnings. We are very proud of our thirty year compounded annual growth
rate of approximately 14 percent. By combining our special mineral
resources with a commitment to and investment in research we have created
value-added products for each of our diverse markets. By delivering value
to our customers, we have built value for our shareholders.
Sales for the year were $139,810,000, an increase of 4 percent over the prior
year's sales of $134,760,000. Net income was $9,852,000, up 4 percent over
the $9,420,000 earned a year ago. Income per share was $1.41, up 5 percent
over last year's $1.34.
Over the last two years, Oil-Dri has increased earnings by 39 percent on
sales growth of 18 percent. While fiscal 1994 was a year of slower growth,
it was a year of important achievements. This year's two fastest growing
business segments, premium cat box absorbents and fluid purification
products, are expected to be growth drivers in the future.
CONSUMER PRODUCTS
Oil-Dri manufactures approximately one quarter of all the cat litter sold
annually in North America. All of our branded cat litter products, Cat's
Pride(TM), Lasting Pride(TM), Saular(R) and Saular(R) Kat Kit, continue to gain
consumer support in the marketplace. We have been particularly successful
in selling to the fastest growing retailers, the mass merchandisers and
club stores. These outlets, along with the new specialty pet retailers,
are increasing sales more rapidly than traditional grocery channels of
distribution.
Dan Jaffee has accepted an expanded role as Group Vice-President of the
Consumer Products Division. In this role he has management responsibility
for all our activities in this important area.
PERFORMANCE PRODUCTS
Demand for Agsorb(R) carriers was strong in fiscal 1994. Unfortunately,
capacity limitations and weather-related difficulties were a heavy burden
to our production facilities and we were unable to meet 100 percent of our
customers' needs. Because of these difficulties, and changes in the
formulating schedules of some key Agsorb(R) customers, sales for the
Agrisorbents(R) Product Group were flat this year.
Industrial and environmental sales were up 4 percent, led by Oil-Dri(R) branded
industrial floor absorbents, which were up 13 percent for the year. Oil-
Dri(R) floor absorbents are now offered in jugs and retail size packages
through mass merchandisers and club outlets, in addition to larger
industrial packages carried by traditional wholesale distributors. We have
also continued to develop our line of Oil-Dri Lite(R) sorbents and anticipate
starting-up conversion operations at our Alpharetta, Georgia location early
in the new fiscal year.
One of the most exciting areas of growth in the past year was the fluid
purification business. Pure-Flo(R) and Ultra-Clear(R) are sold on a worldwide
basis to bleach
2
<PAGE> 4
and clarify edible oils, petroleum and petrochemicals.
Sales were up 30 percent over the prior year. Considerable development
resources have been dedicated to this product line.
OPERATIONS
During the year, severe winter storms stimulated sales of cat box absorbents
and floor absorbents which were used as traction aids. This unusually high
demand depleted our inventory network. At the same time, Northern
Mississippi suffered its worst ice storm in 50 years. Power outages lasted
almost a week and shut down two of our manufacturing facilities.
In order to meet customer needs, large quantities of semi-finished product
were purchased at high costs. These materials, combined with product
finishing, overtime labor, round-the-clock production and excessive
shipping charges, greatly increased the cost of goods sold. These
difficulties, combined with the floods of mid-June which affected our
transportation activities, had an impact on limiting the Company's
performance for the year.
The Ripley, Mississippi plant, a primary source of Agsorb(R) and Oil-Dri(R)
floor absorbents, has been expanded and manufacturing costs have returned to
normal. Increased capacity and a more aggressive inventory building
program should eliminate the extraordinary costs seen in the past year and
allow us to meet our delivery standards in the year ahead.
CREATING, BUILDING AND DELIVERING VALUE
Well aware of the importance of continuous improvements and innovation, Oil-
Dri has increased research and development spending by more than 85 percent
over the last five years. The combination of this investment and the
Company's 178 million tons of proven mineral reserves is the most unique
strength of the corporation and will continue to be an invaluable asset in
the future.
Oil-Dri continues to emphasize a conservative financial posture. Sales,
general and administrative costs as a percentage of sales were 16.4
percent. This is the second year that we have reduced costs as a
percentage of sales. Total assets, net worth and working capital continued
to grow this past year. Net working capital at year end was $30 million,
with our current ratio improving to 2.8 from last year's 2.7.
As we close another year, we would like to thank our Directors for their long-
term commitment and guidance. In particular, Robert D. Jaffee, Edgar D.
Jannotta and Allen H. Selig, who have served on our Board for twenty-five
years or more.
I would also like to extend my personal thanks to all of those who continue
to support the Company - its customers, employees and shareholders. Oil-
Dri has enjoyed steady growth during our 53 year history and fiscal 1994
was no exception. We look forward to fiscal 1995 as a year of opportunity
and continued expansion.
Sincerely,
Richard M. Jaffee
President and Chief Executive Officer
3
<PAGE> 5
Cat Box Absorbents
Thirty million American households are home to some 70 million cats. This
resulted in annual retail cat litter sales of about $665 million last year.
Oil-Dri manufacturers approximately 25 percent of the cat litter sold
through grocery and non-food outlets in the U.S. The Company's branded cat
litter sales increased 14.5 percent over the prior year. Industry trends
impacting Oil-Dri's cat litter sales were the continued popularity of
scoopable cat litters and the growth of non-food channels of distribution.
Grocery cat litter sales represented about $475 million at retail and grew at
4 percent last year. Oil-Dri's branded Cat's Pride(R) products represented 5
percent of these retail sales nationally and an average of 14 percent in
Oil-Dri's top ten markets. In addition to its brands, Oil-Dri
manufacturers quality private label cat litter products and Fresh Step(R) and
Control(R) brands.*
The non-food sector of the cat litter business, which includes mass
merchandisers, clubs, drug chains and pet specialty chains, had retail
sales of approximately $190 million. This market grew at a significantly
faster rate than grocery, nearing 20 percent over the prior year. Cat's
Pride(R) and Lasting Pride(TM) brands and private label products manufactured
by Oil-Dri enjoy very strong representation in these distribution outlets.
Oil-Dri's strategy for growth in the Consumer Division is twofold. In the
grocery business, Cat's Pride(R) has distribution in only 40 percent of the
country, leaving a large geographic territory yet untapped. Expansion of
distribution and dollar share will be focused on targeted second and third
tier markets. In non-food channels, Oil-Dri will expand distribution along
with these channels as they continue their rapid growth and increase their
share of cat litter sales.
*Fresh Step(R) and Control(R) are registered trademarks of The Clorox Company.
4
<PAGE> 6
Industrial and Environmental Sorbents
Waste minimization and disposal are important issues to industrial customers
for both economic and environmental reasons. Oil-Dri's comprehensive
product line offers traditional clay floor absorbents and Oil-Dri Lite(R)
polypropylene sorbents. This combination, offered in a variety of
configurations and packaging forms, provides customers with the best in
industrial clean-up products.
Oil-Dri(R) Industrial and Oil-Dri All Purpose(R) clay absorbents have
cleaned oil and grease off factory and garage floors for more than 50 years.
These branded products increased sales by 13 percent during the last year. To
expand their market, smaller consumer packages that appeal to the home mechanic
have been added to the traditional 40 and 50 pound bag sizes.
To give customers a wider choice of products, the Company also offers Oil-Dri
Lite(R) sorbents. Made from a variety of polypropylenes, these Oil-Dri Lite(R)
sorbents are extremely absorbent, lightweight and offer disposal and reuse
options. These products are excellent for use near sensitive machinery or
in cleaning up oil off water surfaces.
The Alpharetta, Georgia distribution center is being outfitted with equipment
that will allow the conversion of bulk polypropylene into a variety of Oil-
Dri Lite(R) configurations.
A recent trend in the marketing of these industrial products has presented
Oil-Dri with a new growth opportunity. In addition to traditional
wholesale distribution, mass merchandisers and club stores have taken an
aggressive position in business to business marketing and sales. The
Company plans to increase sales by leveraging Oil-Dri(R) brand identity,
innovative packaging ideas and historic strength with these channels of
distribution.
5
<PAGE> 7
Agricultural Carriers and Absorbents
High yield farming today feeds twice as many people as the plant supported in
the 1950s. Use of crop protection products has tripled crop yield
potential without significantly increasing the number of acres planted.
Agsorb(R) carriers play an important role in the safe and targeted distribution
of herbicides, fungicides, insecticides and fertilizers, particularly as
manufacturers move toward more concentrated and safer formulas. Agsorb(R) is
specially processed to meet the demanding specifications of a broad range
of crop protection products. Because of product quality and consistency,
the Agrisorbents(TM) Product Group of Oil-Dri is the leading supplier of
carriers to the crop protection industry.
The agricultural industry has seen a trend toward soil conserving low-till
and no-till farming systems, using pesticides to target pests or weeds in
the soil without having to plow the fields. Using Agsorb(R) in this new
system is extremely effective in reducing soil erosion while assuring high
crop yields.
Oil-Dri's newest agricultural product, Conditionade(TM) feed conditioner,
has had an excellent reception among high fat animal feed producers,
doubling sales over last year. Pel-Unite(R) and Conditionade(R)
products improve the quality of pelleted animal feeds.
Sales of Agsorb(R) products were off this year due to product shortages during
the peak of demand and changes in the formulating schedules of some key
customers. The recently completed expansion of Oil-Dri's Ripley,
Mississippi facility has increased capacity by 40 percent, ensuring product
supply for the upcoming agricultural season.
6
<PAGE> 8
Fluid Purification Adsorbents
Every day and in every corner of the globe, Pure-Flo(R) adsorbents are
used to purify edible and inedible fats and oils. Pure-Flo(R) has been
shipped to forty-three countries across the globe for use in purifying numerous
oils including soybean, corn, canola, palm, olive, and coconut. The current
world market for these bleaching clays is estimated at $150 million, of which
Oil-Dri enjoys a rapidly growing share.
Unique mineral reserves and proprietary surface modification technology
have enabled Oil-Dri to establish itself as the low cost producer of quality
bleaching clays in the global market. Pure-Flo(R) Product Group sales were up
30 percent this fiscal year and the Company hopes to double these sales in the
next three years.
Ultra-Clear(R), Oil-Dri's filtration product for petroleum and
petrochemical products, is also enjoying global growth. Ultra-Clear(R) is
used in a variety of applications including the clarification of jet fuel.
Perhaps the most exciting aspect of these fluid purification products
is their potential in other high margin, niche applications. The same
characteristics that make Pure-Flo(R) effective in edible oils and Ultra-
Clear(R) effective in petroleum products, are being developed for myriad uses in
purification, filtration and catalysis applications. Ongoing research and
development will define these opportunities and identify enhancements that will
increase the value of these adsorbents.
7
<PAGE> 9
About The Company
Long before it became fashionable, Oil-Dri established a business team
strategy which broke down barriers between its internal groups. Promoting
communication between these teams has brought them closer to the markets which
they serve and encouraged the sharing of ideas. Whether it's a more effective
production technique, a better method of accounting, an improvement in customer
service or a new product development, each of Oil- Dri's support groups
contributes to the overall success of the business.
Oil-Dri's Research and Development scientists work closely with
marketing and manufacturing to define applications for our special mineral
reserves and optimize our mining and manufacturing processes. New technologies
and product improvements generated from Oil-Dri's laboratory contributed
significantly to sales in the last year. Specific examples include the new
Cat's Pride(R) Premium cat litter formula with improved odor control and Pure-
Flo(R) Supreme bleaching clays.
The Company owns and operates six manufacturing facilities in the
United States. Each of these plants is strategically located near Oil-Dri's
178 million tons of proven mineral reserves. Manufacturing facilities outside
the U.S. include Favorite Product, Ltd., in Canada and Oil-Dri (U.K.) Limited
in England. Oil-Dri S.A., a sales office located in Switzerland, facilitates
efforts throughout Europe, Asia, and Africa.
Oil-Dri Transportation Company (ODTC), one of the largest private
fleets in the U.S., coordinates over-the-road, rail and overseas shipping of
Oil-Dri products. ODTC provides timely and cost effective service to
customers.
Oil-Dri's Electronic Information Network (ODEIN) was brought on line in
August by the Management Information Services team. Custom written software,
greater data access, increased speed and greater capacity will improve customer
service and internal data management. As Oil-Dri continues to grow this system
will be invaluable.
Oil-Dri commits significant resources to environmental, health and
safety initiatives. The Company works in partnership with industry groups,
academic institutions and local communities to promote safety, environmental
responsibility and good practices.
8
<PAGE> 10
Five Year Summary of Financial Data
<TABLE>
<CAPTION>
Year Ended July 31
- - - ---------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- - - ---------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
NET SALES $139,809,584 $134,759,583 $118,750,370 $102,283,183 $ 94,192,088
COST OF SALES 102,456,815 97,396,563 85,116,335 74,370,331 68,110,144
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 37,352,769 37,363,020 33,634,035 27,912,852 26,081,944
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 22,924,492 23,314,304 23,001,545 17,875,988 16,430,729
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 14,428,277 14,048,716 10,632,490 10,036,864 9,651,215
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 440,796 451,519 514,756 601,608 632,910
Interest Expense (1,751,839) (1,728,817) (1,884,166) (1,363,039) (1,155,782)
Foreign Exchange
(Gains) Losses 3,009 (87,655) 63,471 (22,636) 36,629
Amortization of Goodwill (132,001) (131,799) (131,079) (131,079) (99,932)
Other, Net 171,142 (298,485) 15,198 50,178 72,601
------------ ------------ ------------ ------------ ------------
Total Other Expense,
Net (1,268,893) (1,795,237) (1,421,820) (864,968) (513,574)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME
TAXES 13,159,384 12,253,479 9,210,670 9,171,896 9,137,641
INCOME TAXES 3,307,184 2,833,837 2,110,262 2,092,130 2,350,924
------------ ------------ ------------ ------------ ------------
NET INCOME $ 9,852,200 $ 9,419,642 $ 7,100,408 $ 7,079,766 $ 6,786,717
============ ============ ============ ============ ============
AVERAGE SHARES
OUTSTANDING 7,010,724 7,031,116 7,026,300 7,054,790 7,042,376
NET INCOME PER SHARE $1.41 $1.34 $1.01 $1.00 $0.96
IMPORTANT HIGHLIGHTS
Total Assets $112,267,182 $102,116,632 $95,017,573 $ 89,393,673 $ 76,778,676
Long-Term Debt $ 21,521,243 $ 17,765,941 $18,831,133 $ 20,175,930 $ 11,893,048
Working Capital $ 28,760,765 $ 25,767,067 $24,358,769 $ 24,763,055 $ 16,148,783
Working Capital Ratio 2.8 2.7 2.8 3.4 2.3
Capital Expenditures $ 13,559,232 $ 9,158,173 $ 8,039,979 $ 10,415,543 $ 6,402,551
Depreciation and
Amortization $ 6,798,038 $ 5,834,854 $ 5,407,341 $ 4,830,835 $ 4,466,266
Long-Term Debt to
Equity Ratio 29.5% 26.7% 31.6% 36.9% 24.3%
Net Income as a Percent
of Sales 7.0% 7.0% 6.0% 6.9% 7.2%
Return on Average
Stockholders' Equity 14.1% 14.9% 12.4% 13.7% 14.8%
Gross Profit as a
Percent of Sales 26.7% 27.7% 28.3% 27.3% 27.7%
Operating Expenses as a
Percent of Sales 16.4% 17.3% 19.4% 17.5% 17.4%
</TABLE>
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Consolidated net sales for the year ended July 31, 1994 were $139,810,000, an
increase of 3.7% over net sales of $134,760,000 in fiscal 1993. Net income
for fiscal 1994 was $9,852,000 or $1.41 per share, increasing 4.6% from net
income of $9,420,000 or $1.34 per share in fiscal 1993.
Sales increases were primarily the result of increased unit shipments and
increased sales per unit due to changes in product sales mix. Net sales of
industrial and environmental sorbents, consisting of clay and non-clay
products, increased $706,000 or 3.8% from prior year levels due to
increased unit shipments of clay products. Net sales of industrial clay
products rose $1,187,000 or 9.6% from prior year levels. Mass
merchandisers and warehouse clubs have increased their importance as
distribution outlets for traditional clay floor absorbents. Increased
sales in this area are due in part to the Company's strong position in
these growing distribution channels. Sales of non-clay sorbents decreased
$481,000 or 7.6%, reflecting increased competition in the markets in which
the Company participates.
Net sales of cat box absorbents increased $2,411,000 or 3.5% above fiscal
1993 levels. This growth was driven by unit sales increases of scoopable
cat litters in the mass merchandising and wholesale club markets. Net
sales of agricultural carriers and absorbents remained unchanged from the
prior fiscal year. While demand for these products was strong, capacity
limitations and weather related difficulties prevented the Company from
meeting customer demand. Net sales of fluid purification absorbents
increased $3,035,000 or 29.9% versus fiscal 1993 due to the increased
global market penetration of PURE-FLO(R) Supreme. Sales of transportation
services decreased $200,000 or 2.6% from fiscal 1993 levels. This
reduction was due to the national shortage of qualified over the road
drivers and longer running times due to weather conditions. The Company
does not believe that this shortage will have a material adverse effect on
the business.
Consolidated gross profit as a percentage of net sales decreased slightly to
26.7% of net sales in fiscal 1994 from 27.7% in fiscal 1993. This decline
was principally due to increased material and shipping costs. Severe
winter storms, particularly in the Northeast United States, stimulated
sales of cat box absorbents and floor absorbents for use as traction aids.
This unusually high demand reduced inventory levels while weather related
manufacturing and delivery disruptions occurred. In order to meet customer
needs, large quantities of semi-finished product were purchased at high
costs. These purchases, combined with additional finishing costs, overtime
labor and increased shipping charges adversely affected cost of goods sold.
Finally, to overcome certain capacity limitations, meet shipping
commitments and retain customer goodwill, the Company shifted production
between manufacturing facilities, the effect of which was to increase
production and shipping costs. As discussed below, the Company has expanded
plant capacity and increased inventory to address these matters.
Operating expenses as a percentage of net sales decreased to 16.4% of net
sales in fiscal 1994 from 17.3% of net sales in fiscal 1993. This change
reflects management's continued focus on controlling overhead costs.
10
<PAGE> 12
Interest expense increased $23,000 due to higher average debt levels netted
against lower interest rates achieved through debt restructuring in fiscal
1993. Interest income decreased $11,000.
The Company's effective tax rate was 25.1% of income in fiscal 1994 compared
to 23.1% in the prior fiscal year. This increase was the result of reduced
depletion deductions related to mining activities and the elimination of
amortization of investment credits which benefited prior years.
Total assets of the Company increased $10,151,000 or 9.9% during the year
ended July 31, 1994. Current assets increased $3,335,000 or 8.1% from
prior fiscal year end balances due to higher accounts receivable balances
from increased sales. In addition, inventory balances increased as a
result of a new inventory management initiative designed to minimize
product shortages discussed above.
Property, plant and equipment, net of accumulated depreciation and
amortization, increased $6,513,000 or 12.1%. Investments in property,
plant and equipment included expenditures for increased productivity, major
capacity enhancements, pollution control, and equipment upgrades.
As of July 31, 1994, the Company had invested approximately $717,000 in
Kamterter, Inc., a company which researches and applies biotechnology in
the agricultural field. This investment, recorded at cost, represents a
14% equity interest in Kamterter. Current operating losses have increased
Kamterter's negative net worth. While sales and operations are continuing,
the company cannot predict Kamterter's future financial condition and
results of operations.
Total liabilities increased $3,534,000 or 9.9% in the year ended July 31,
1994. In April, 1993, the Company entered into a $5,000,000 fixed-rate
term loan agreement with the Harris Trust and Savings Bank. These proceeds
are being used to fund capital expenditures, including a major capacity
increase of the Company's Ripley, Mississippi facility. Current
liabilities increased $341,000 or 2.2%.
The Company expects recent sales patterns to continue in fiscal 1995. Growth
is expected to come primarily from the cat box and fluid purification
product lines. Consumer growth is expected to be achieved through
increased distribution in the grocery industry and by maintaining the
Company's strong position in the fast growing mass merchandising and
warehouse club outlets. Growth of specialty absorbents is expected to
continue with increased market penetration of the Company's value-added
fluid filtration and purification products. Finally, the Company's
expansion of its Ripley, Mississippi manufacturing facility is expected to
provide significant new capacity for the agricultural product line,
relieving capacity constraints experienced during fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1994, the current ratio increased to 2.8 from 2.7 as of July 31,
1993 and 2.8 as of July 31, 1992. Working capital increased $2,994,000 or
11.6% for the year ended July 31, 1994, while increasing $1,408,000 or 5.8%
in fiscal 1993. Cash provided by operations continued to be the Company's
primary source of funds to finance operating needs and capital
expenditures. In fiscal 1994, net cash
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
flows from operating activities decreased 31.0% to $9,825,000 reflecting
increased inventory and accounts receivable balances. This cash was used
to partially fund capital expenditures of $13,559,000, pay Company dividends
of $1,804,000 and repurchase shares of the Company's common stock at a cost
of $1,895,000. The Company may continue to repurchase its common stock from
time to time. As of July 31, 1994, total consolidated cash and investments
were $9,746,000, down 18.7% from $11,984,000 as of July 31, 1993. Of this
amount, balances held by the company's foreign subsidiaries as of July 31, 1994
and 1993 were $3,220,000 and $4,928,000, respectively.
The Company's long-term debt at July 31, 1994 increased $3,755,000 or 21.1%
from fiscal 1993 balances, primarily due to the additional borrowings from
Harris Trust and Savings Bank. Long term debt to equity increased to 29.5%
from 26.7% at July 31, 1993.
The Company's line of credit arrangements are discussed in Note 3 to the
consolidated financial statements. During the year ended July 31, 1994
there were no borrowings under the line of credit. Management believes
that funds generated from operations and available borrowing capacity are
adequate to meet the Company's cash needs for fiscal 1995.
Proceeds from the issuance of common stock were directly related to
activities in the Company's stock option plans. During fiscal years 1994,
1993 and 1992, options for 50,641, 28,095 and 7,498 shares were exercised,
creating an additional $163,800, $131,500 and $53,500, respectively, of
stockholders' equity.
FISCAL 1993 COMPARED TO FISCAL 1992
Consolidated net sales for the year ended July 31, 1993 were $134,760,000, an
increase of 13% over net sales of $118,750,000 in fiscal 1992. Net income
for fiscal 1993 was $9,420,000 or $1.34 per share, increasing 33% from net
income of $7,100,000 or $1.01 per share in fiscal 1992.
Sales increases were chiefly the result of increased unit shipments and
increased sales per unit due to changes in product sales mix. Net sales of
industrial and environmental sorbents decreased $300,000 or 2% from prior
year levels due to decreased unit shipments of clay products. Net sales of
industrial clay products fell $600,000 or 5% while sales of non-clay
sorbents increased $300,000 or 5% reflecting the continued transition in
the industrial market from clay-based to poly-based products. Net sales of
consumer absorbents increased $7,600,000 or 13% above fiscal 1992 levels.
This growth was fueled by unit sales increases of scoopable cat litters in
the non-grocery mass merchandise market. Net sales of agricultural
absorbents increased $3,500,000 or 23% above the prior fiscal year because
of increased unit shipments as a result of new products and existing
product improvements. Net sales of specialty adsorbents increased
$4,000,000 or 66% versus fiscal 1992 due to increased sales of PURE-FLO(R)
Supreme.
Consolidated gross profit as a percentage of net sales decreased to 27.7% of
net sales in fiscal 1993 from 28.3% in fiscal 1992. This decline was due
to increased natural gas cost, which is a major component in the cost of
manufacturing. Additionally, price increases during the fiscal year were
significantly constrained by market factors.
Operating expenses as a percentage of net sales decreased to 17.3% in fiscal
1993 from 19.4% in fiscal 1992. This change reflects the significantly
reduced promotion and marketing costs associated with new product
introductions in fiscal 1992. Although the Company continues to support
these products with market and customer specific programs, non-recurring
start-up costs incurred during fiscal 1992 increased operating expenses
over normal levels.
12
<PAGE> 14
Interest expense decreased $155,000 due to lower interest rates from debt
restructuring and reduced debt levels. Interest income decreased $63,000.
Other expenses in fiscal 1993 include write-offs of prepaid loan placement
fees and early retirement penalties related to debt refinancing of $204,000
and $192,000, respectively.
The Company's effective tax rate was 23.1% of income in fiscal 1993 compared
to 22.9% of income in fiscal 1992.
Total assets of the company increased $7,099,000 or 7.5% during the year
ended July 31, 1993. Current assets increased $3,396,000 or 9.0% from prior
fiscal year end balances due to higher accounts receivable balances from
increased sales and greater inventory balances to support these sales.
Property, plant and equipment, net of accumulated depreciation and
amortization, increased $3,404,000 or 6.8%. Investments in property, plant
and equipment included expenditures for additional warehousing, shipping
and transportation facilities, productivity and capacity enhancements,
pollution control, and equipment upgrades.
As of July 31, 1993, the Company had invested approximately $700,000 in
Kamterter, Inc., a company which researches and applies biotechnology in
the agricultural field. This investment, recorded at cost, represents a
14% equity interest in Kamterter. Current operating losses have increased
Kamterter's negative net worth. While sales and operations are continuing,
the Company cannot predict Kamterter's future financial condition and
results of operations.
Total liabilities increased $312,000 or 0.9% in the year ended July 31, 1993
because of an increase in current liabilities. Current liabilities
increased $1,987,000 or 15.0% due to increased accounts payable from higher
inventory levels and accrued wages.
FOREIGN SUBSIDIARIES
Net sales made by the Company's foreign subsidiaries for the year ended July
31, 1994 were $10,478,000, constituting 7.5% of sales. This amount
represented a decrease of $940,000 or 8.2% from fiscal 1993, in which
foreign subsidiary sales were $11,418,000 and constituted 8.5% of sales.
Net income of the Company's foreign subsidiaries during fiscal 1994 was
$403,000, as compared to $617,000 in fiscal 1993. This decrease is
principally due to the decline in value of the Canadian Dollar and English
Pound Sterling versus the U.S. dollar. The identifiable assets of the
Company's foreign subsidiaries as of July 31, 1994 were $9,608,000, a
decrease of 15% from fiscal 1993 year end balances, also due to the falling
Canadian dollar.
Net sales by foreign subsidiaries during fiscal 1993 were $11,418,000
constituting 8.5% of sales. This amount represented an increase of
$1,399,000 from fiscal 1992, in which foreign sales were $10,019,000 and
constituted 8% of sales. The increase in foreign subsidiary sales,
particularly in Canada, resulted from the introduction of scoopable cat
litter to the market. Net income of the Company's foreign subsidiaries
during fiscal 1993 was $617,000, as compared with $771,000 in fiscal 1992.
The identifiable assets of the Company's foreign subsidiaries as of July
31, 1993 were $11,301,000, a decrease of 5% from fiscal 1992 year end
balances.
13
<PAGE> 15
Consolidated Statements of Financial Position
<TABLE>
<CAPTION>
ASSETS
July 31
- - - ---------------------------------------------------------------------
1994 1993
- - - ---------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 6,394,315 $ 6,311,230
Investment securities, at cost, which
approximates market 3,351,423 5,672,483
Accounts receivable 19,854,899 18,413,022
Less allowance for doubtful accounts ( 171,940) ( 195,098)
Inventories (Note 1) 11,203,008 8,023,871
Prepaid expenses 3,730,298 2,801,458
------------ ------------
Total Current Assets 44,362,003 41,026,966
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
(NOTES 1 AND 3)
Buildings and leasehold improvements 14,742,017 13,466,680
Machinery and equipment 65,563,903 60,638,523
Office furniture and equipment 7,341,440 5,394,714
Vehicles 114,246 130,280
------------ ------------
87,761,606 79,630,197
Less accumulated depreciation and
amortization (39,949,247) (34,132,013)
------------ ------------
47,812,359 45,498,184
Construction in progress 6,836,910 3,178,584
Land and mineral rights 5,594,295 5,054,263
------------ ------------
Total Property, Plant and
Equipment, Net 60,243,564 53,731,031
------------ ------------
OTHER ASSETS
Excess of investment in subsidiaries
over fair value of assets (Net of
accumulated amortization of $941,356
in 1994 and $809,355 in 1993)
(Note 9) 4,436,334 4,560,799
Other 3,225,281 2,797,836
------------ ------------
Total Other Assets 7,661,615 7,358,635
------------ ------------
Total Assets $112,267,182 $102,116,632
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE> 16
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31
- - - -----------------------------------------------------------------------------
1994 1993
- - - -----------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of notes payable (Note 3) $ 1,243,479 $ 742,615
Accounts payable 4,677,793 5,608,033
Income taxes payable - 133,257
Accrued expenses
Salaries, wages and commissions 3,180,455 3,557,570
Trade promotions and advertising 3,257,985 2,870,546
Dividends payable 449,302 452,749
Other 1,953,464 1,423,552
Freight 838,760 471,577
------------ ------------
Total Current Liabilities 15,601,238 15,259,899
------------ ------------
NONCURRENT LIABILITIES
Notes payable (Note 3) 21,521,243 17,765,941
Deferred income taxes (Notes 1 and 4) 323,379 1,268,334
Deferred compensation (Note 5) 1,761,818 1,379,946
------------ ------------
Total Noncurrent Liabilities 23,606,440 20,414,221
------------ ------------
Total Liabilities 39,207,678 35,674,120
------------ ------------
STOCKHOLDERS' EQUITY
Common and Class B stock (Note 6) 723,352 718,184
Paid-in capital in excess of par value 7,657,394 6,962,104
Retained earnings 70,077,278 62,031,814
Cumulative translation adjustments (Note 1) (1,135,951) (901,783)
------------ ------------
77,322,073 68,810,319
Less treasury stock, at cost (Note 6) (4,262,569) (2,367,807)
------------ ------------
Total Stockholders' Equity 73,059,504 66,442,512
------------ ------------
Total Liabilities and Stockholders'
Equity $112,267,182 $102,116,632
============ ============
</TABLE>
15
<PAGE> 17
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended July 31
------------------------------------------
1994 1993 1992
------------------------------------------
<S> <C> <C> <C>
Net Sales $139,809,584 $134,759,583 $118,750,370
Cost of Sales 102,456,815 97,396,563 85,116,335
==========================================
Gross Profit 37,352,769 37,363,020 33,634,035
Selling, General and
Administrative Expenses 22,924,492 23,314,304 23,001,545
==========================================
Income from Operations 14,428,277 14,048,716 10,632,490
------------------------------------------
Other Income (Expense)
Interest income 440,796 451,519 514,756
Interest expense (1,751,839) (1,728,817) (1,884,166)
Foreign exchange gains (losses) 3,009 ( 87,655) 63,471
Amortization of goodwill (Note 9) ( 132,001) ( 131,799) ( 131,079)
Other, net 171,142 ( 298,485) 15,198
------------------------------------------
Total Other Expense, Net (1,268,893) (1,795,237) (1,421,820)
------------------------------------------
Income before Income Taxes 13,159,384 12,253,479 9,210,670
Income Taxes (Note 4) 3,307,184 2,833,837 2,110,262
==========================================
Net Income $ 9,852,200 $ 9,419,642 $ 7,100,408
============ ============ ===========
Average Shares Outstanding (Note 6) 7,010,724 7,031,116 7,026,300
============ ============ ===========
Net Income Per Share (Note 6) $1.41 $1.34 $1.01
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Stock
------------------------------ Paid-In
Shares Capital In
------------------ Excess of Retained
Common Class B Amount Par Value Earnings
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
BALANCE, JULY 31, 1991 4,970,167 2,174,055 $714,422 $6,492,483 $48,738,552
Net income - - - - 7,100,408
Dividends declared - - - - (1,547,894)
Issuance of stock under option
plans (Note 7) 7,498 - 750 82,729 -
Award of stock to employees 954 - 95 16,852 -
Conversion of Class B stock
to common stock (Note 6) 300 (300) - - -
-------------------------------------------------------------
BALANCE, JULY 31, 1992 4,978,919 2,173,755 715,267 6,592,064 54,291,066
Net income - - - - 9,419,642
Dividends declared - - - - (1,678,894)
Issuance of stock under option
plans (Note 7) 28,095 - 2,810 349,014 -
Award of stock to employees 1,072 - 107 21,026 -
-------------------------------------------------------------
BALANCE, JULY 31, 1993 5,008,086 2,173,755 718,184 6,962,104 62,031,814
Net income - - - - 9,852,200
Dividends declared - - - - (1,806,736)
Issuance of stock under option
plans (Note 7) 50,641 - 5,064 673,988 -
Award of stock to employees 1,036 - 104 20,916 -
Reissuance of treasury shares - - - 386 -
Conversion of Class B stock
to common stock (Note 6) 40,860 (40,860) - - -
-------------------------------------------------------------
BALANCE, JULY 31, 1994 5,100,623 2,132,895 $723,352 7,657,394 $70,077,278
========= ========= ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE> 19
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended July 31
-------------------------------------
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES -------------------------------------
<S> <C> <C> <C>
Net income $ 9,852,200 $ 9,419,642 $ 7,100,408
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 6,798,038 5,834,854 5,407,341
Provision for bad debts 4,744 72,890 138,808
(Increase) decrease in
Accounts receivable ( 1,502,865) ( 2,827,243) ( 2,851,603)
Inventories ( 3,186,879) ( 1,156,110) ( 753,354)
Prepaid expenses and taxes ( 1,114,801) 1,149,110 ( 1,305,418)
Other assets ( 473,484) ( 512,544) ( 485,046)
Increase (decrease) in
Accounts payable ( 916,395) 1,335,395 259,695
Income taxes payable - ( 2,974) ( 40,967)
Accrued expenses 928,161 1,533,027 1,985,381
Deferred income taxes ( 946,058) ( 808,092) ( 939,628)
Deferred investment tax credits - ( 114,816) ( 97,547)
Deferred compensation 381,872 314,690 267,158
-------------------------------------
Total Adjustments ( 27,667) 4,818,187 1,584,820
-------------------------------------
Net Cash Provided by Operating
Activities 9,824,533 14,237,829 8,685,228
=====================================
Cash Flows from Investing Activities
Capital expenditures (13,559,232) ( 9,158,173) ( 8,039,979)
Purchases of investment securities (11,750,654) (11,084,764) ( 2,975,634)
Dispositions of investment
securities 13,910,258 8,126,841 5,084,969
Other 399,295 (28,422) ( 141,110)
-------------------------------------
Net Cash Used in Investing
Activities (11,000,333) (12,144,518) (6,071,754)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt ( 743,834) ( 8,408,802) ( 950,294)
Proceeds from issuance of long-term
debt 5,000,000 6,510,720 202,440
Proceeds from issuance of common stock 700,458 372,957 100,426
Net payments of loan issuance costs - ( 43,047) -
Dividends paid ( 1,804,002) ( 1,613,106) ( 1,549,364)
Purchase of treasury stock ( 1,894,762) ( 668,205) ( 633,305)
Other 1,025 ( 210,980) ( 40,559)
-------------------------------------
Net Cash Provided by (Used in)
Financing Activities 1,258,885 ( 4,060,463) ( 2,870,656)
-------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 83,085 ( 1,967,152) ( 257,182)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 6,311,230 8,278,382 8,535,564
-------------------------------------
CASH AND CASH EQUIVALENTS, END
OF YEAR $ 6,394,315 $ 6,311,230 $ 8,278,382
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 20
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Oil-Dri
Corporation of America and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
No provision has been made for possible income taxes which may be paid on
the distribution of approximately $6,576,000 and $6,991,000 as of July 31,
1994 and 1993, respectively, of the retained earnings of foreign
subsidiaries, as substantially all such amounts are intended to be
indefinitely invested in these subsidiaries or no additional income taxes
would be incurred when such earnings are distributed. It is not
practicable to determine the amount of income taxes or withholding taxes
that would be payable upon the remittance of assets that represent those
earnings.
REVENUE RECOGNITION
Revenues from sales of products and transportation services are recognized
upon shipment.
INCOME TAXES
During fiscal 1993 the Company adopted Financial Accounting Standards Board
("FASB") Statement No. 109 "Accounting for Income Taxes". Under this
standard, deferred income taxes reflect the impact of temporary differences
between the assets and liabilities recognized for financial reporting
purposes and amounts recognized for tax purposes. Previously the Company
had adopted FASB No. 96, a prior version of FASB No. 109.
INTEREST RATE DERIVATIVE INSTRUMENTS
Interest differentials on a swap contract (Note 3) are recorded as interest
expense in the contract period incurred. The Company recognized additional
interest expense of $98,300, $103,100, and $75,700 in fiscal years 1994,
1993 and 1992, respectively, as a result of this contract.
TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities of foreign subsidiaries are translated at the
current exchange rate and income statement items are translated at the
average exchange rate on a monthly basis. Resulting translation adjustments
are recorded as a separate component of stockholders' equity.
Changes in the cumulative translation adjustments account are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance, at beginning of year $ (901,783)$ (243,537) $(209,982)
Translation adjustments resulting from
exchange rate changes and intercompany
transactions (234,168) (658,246) ( 33,555)
--------- ------- -------
Balance, at end of year $(1,135,951) $(901,783) $(243,537)
========= ======= =======
</TABLE>
19
<PAGE> 21
Notes
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include interest and noninterest bearing demand
deposits at commercial banks, investment grade demand and term notes, and
certificates of deposit.
The Company considers all highly liquid investment securities purchased
with maturities of three months or less to be cash equivalents.
INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Finished goods $ 5,257,765 $3,414,171
Bags 3,431,828 2,636,196
Supplies 2,329,938 1,716,138
Fuel oil 183,477 257,366
$11,203,008 $8,023,871
</TABLE>
Inventories are valued at the lower of cost (first-in, first-out) or
market.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash investments in government
backed instruments, both foreign and domestic, and with other high quality
institutions. Concentrations of credit risk with respect to accounts
receivable is subject to the financial condition of certain major
customers, principally those referred to in Note 2.
The Company generally does not require collateral or other security to
support customer receivables.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment expenditures are generally depreciated by the
straight-line method over their estimated useful lives as follows:
Years
Buildings and leasehold improvements 5-30
Machinery and equipment 3-15
Office furniture and equipment 2-10
Vehicles 2-8
RESEARCH AND DEVELOPMENT
Research and development costs of $1,875,000 in 1994, $1,509,000 in 1993
and $1,450,000 in 1992 were charged to income as incurred.
20
<PAGE> 22
NOTE 2 - BUSINESS AND GEOGRAPHIC REGION INFORMATION
The Company develops, manufactures and markets sorbent products and
technologies for use in industry, home and agriculture. The company
operates in the United States, Canada and the United Kingdom and exports
goods worldwide.
The Company had sales in excess of 10% of total sales to two unaffiliated
customers in 1994, 1993 and 1992. Accounts receivable related to these
major customers amounted to $7,185,000, $7,050,000 and $5,614,000 as of
July 31, 1994, 1993 and 1992, respectively.
The sales to these customers were as follows:
<TABLE>
<CAPTION>
-------------------------------
1994 1993 1992
-------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Amount $33,403 $27,019 $18,964
Percent of net sales 24% 20% 16%
Amount $13,780 $15,329 $17,453
Percent of net sales 10% 11% 15%
-------------------------------
</TABLE>
The following is a summary of financial information by geographic region:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31
-----------------------------------------
(Thousands of Dollars)
-----------------------------------------
1994 1993 1992
-----------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Domestic $129,332 $123,342 $108,731
Foreign 10,478 11,418 10,019
Export sales:
Domestic $8,252 $6,162 $2,636
Sales or transfers between
geographic areas:
Domestic $3,891 $3,741 $2,734
Income before income taxes:
Domestic $12,257 $11,441 $8,100
Foreign 902 812 1,111
Net Income:
Domestic $9,449 $8,803 $6,329
Foreign 403 617 771
Identifiable assets:
Domestic $102,659 $90,816 $83,134
Foreign 9,608 11,301 11,884
</TABLE>
21
<PAGE> 23
NOTES
NOTE 3 - NOTES PAYABLE
The composition of notes payable is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Thomasville Payroll Development Authority
Payable in annual principal installments of
$592,593 for the years 1993 to 1995, inclusive.
Interest is payable semiannually at a rate of 68%
of the prime rate. $ 592,593 $ 1,185,185
Town of Blue Mountain, Mississippi
Principal payable on October 1, 2008. Interest
payable monthly at a variable interest rate set
weekly based on market conditions for similar
instruments. The average rates were 2.80% and 2.88%
in 1994 and 1993, respectively. Payment of these
bonds by the Company is guaranteed by a letter of
credit issued by the Harris Trust and Savings Bank.
In May, 1991 the Company entered into a seven
year interest rate swap contract. Under this
agreement, the Company receives a floating
interest rate based on LIBOR and pays
interest at a fixed rate at 6.53%. 2,500,000 2,500,000
Teachers Insurance and Annuity Association of America
Payable in annual principal installments on
November 15; $400,000 for 1993; $500,000 for the years
1995 and 1996; $1,500,000 for 1997; $1,800,000
for 1998;$1,200,000 for 2000; $1,100,000 for 2001;
and $1,000,000 for 2002. Interest is payable semi-
annually at an annual rate of 9.38%. 7,600,000 7,600,000
Teachers Insurance and Annuity Association of America
Payable in annual principal installments, the first
payment due August 15, 2001; $500,000 for 2002;
$1,000,000 for 2003; $2,500,000 for 2004; and
$2,500,000 for 2005. Interest is payable semiannually
at an annual rate of 7.17%. 6,500,000 6,500,000
Harris Trust and Savings Bank
Payable in annual principal installments, the first
payment due June 20, 1996; $500,000 for 1996;
$1,950,000 for 1999; $900,000 for 2000; $650,000 for
years 2001 and 2002; $350,000 for 2003. Interest is
payable quarterly at an annual rate of 7.78%. 5,000,000 -
Other 572,129 723,371
----------- ------------
22,764,722 18,508,556
Less current maturities of notes payable (1,243,479) ( 742,615)
----------- ------------
$21,521,243 $ 17,765,941
=========== ============
</TABLE>
22
<PAGE> 24
In May, 1993, the Company privately placed $6,500,000 of 7.17% notes, due
2004, with Teachers Insurance and Annuity Association of America. The
proceeds of this fixed rate note were used to call various industrial
revenue bonds issued on the Company's behalf and to retire capitalized
equipment leases.
On September 21, 1994 the Company executed a Credit Agreement with the
Harris Trust and Savings Bank which replaced the Term Note Agreement dated
April 20, 1994 which appears in the previous schedule in this note. The
Credit Agreement provides $5,000,000 in term financing at the same interest
rate and repayment schedule note above, and a $5,000,000 committed
revolving line of credit.
The agreements with the Thomasville Payroll Development Authority, the Town
of Blue Mountain, Mississippi, Teachers Insurance and Annuity Association
of America and Harris Trust and Savings Bank impose working capital
requirements, dividend and financing limitations, minimum tangible net
worth requirements and other restrictions. The Thomasville Agreement
expired on August 1, 1994. The Company's Credit Agreement with Harris
Trust and Savings Bank indirectly restricts dividends by requiring the
Company to maintain tangible net worth, as defined, in the amount of
$50,000,000 plus 25% of cumulative annual earnings from July 31, 1994.
The Thomasville Payroll Development Authority and the Town of Blue
Mountain, Mississippi acquired, in prior years, substantially all of the
assets of certain plant expansion projects, issued long-term bonds to
finance the purchase and leased the projects to the company and various of
its subsidiaries (with the company and various of its wholly owned
subsidiaries as guarantors) at rentals sufficient to pay the debt service
on the bonds.
The following is a schedule by year of future maturities of notes payable
and capital leases as of July 31, 1994:
<TABLE>
<CAPTION>
Year Ending July 31:
<S> <C>
1996 1,098,977
1997 1,582,266
1998 1,880,000
1999 2,030,000
Later years 14,930,000
-----------
$21,521,243
===========
</TABLE>
NOTE 4 - INCOME TAXES
The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
----------------------------------
1994 1993 1992
----------------------------------
<S> <C> <C> <C>
Current
Federal, net of amortization of
investment tax credits $3,221,911 $2,522,761 $1,849,435
Foreign 163,897 206,923 277,523
State 866,281 685,922 481,499
---------- ---------- ----------
$4,252,089 $3,415,606 $2,608,457
========== ========== ==========
Deferred - net
Federal ( 855,699) ( 465,865) ( 484,272)
Foreign 1,153 ( 11,833) 62,497
State ( 90,359) ( 104,071) ( 76,420)
---------- ---------- ----------
( 944,905) ( 581,769) ( 498,195)
---------- ---------- ----------
Total income tax provision $3,307,184 $2,833,837 $2,110,262
========== ========== ==========
</TABLE>
23
<PAGE> 25
NOTES
The components of the deferred tax (benefit) provisions occurring as a
result of transactions being reported in different years for financial and
tax reporting are as follows:
<TABLE>
<CAPTION>
----------------------------------------
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Depreciation $(304,437) $(479,415) $(58,902)
Deferred compensation (148,242) (125,876) (104,939)
Postretirement benefits (129,081) - -
Trade promotions and advertising 112,578 (102,000) (192,472)
Accrued expenses (164,694) ( 70,603) ( 41,033)
Other, net (270,990) 196,125 (100,849)
Alternative-minimum tax ( 40,039) - -
--------- --------- ---------
$(944,905) $(581,769) $(498,195)
========= ========= =========
</TABLE>
Principal reasons for variations between the statutory federal rate and the
effective rates were as follows:
<TABLE>
<CAPTION>
----------------------------------------
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
U.S. federal statutory income tax rate 34.00% 34.00% 34.00%
Depletion deductions allowed for mining (12.48) (13.86) (13.14)
State income taxes, net of federal tax benefit 4.42 4.75 4.40
Amortization of investment credits - ( .94) ( 1.06)
Difference in effective tax rate of foreign
subsidiaries ( .16) ( .66) ( .41)
Other ( .65) ( .16) ( .88)
------ ------ ------
25.13% 23.13% 22.91%
===== ===== =====
</TABLE>
The consolidated balance sheet as of July 31, 1994 and 1993 included the
following cumulative temporary differences:
<TABLE>
<CAPTION>
-----------------------------------------------------------
1994 1993
-----------------------------------------------------------
Assets Liabilities Assets Liabilities
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation $ - $1,768,521 $ - $2,328,424
Deferred compensation 680,062 - 532,659 -
Postretirement benefits 131,535 - - -
Trade promotions and
advertising 223,880 - 335,820 -
Accrued expenses 330,754 - 107,729 -
Other 78,911 - 83,882 -
---------- ---------- ---------- ----------
$1,445,142 $1,768,521 $1,060,090 $2,328,424
========== ========== ========== ==========
</TABLE>
24
<PAGE> 26
NOTE 5 - DEFERRED COMPENSATION
The Company maintains a deferred compensation plan which permits directors
and certain management employees to defer portions of their compensation
and earn a guaranteed interest rate on the deferred amounts. The
compensation, which has been deferred since the plan's inception, has been
accrued as well as interest thereon. The Company has purchased whole life
insurance contracts on the participants to fund the plan.
NOTE 6 - STOCKHOLDERS' EQUITY
The Company's certificate of incorporation authorizes 15,000,000 shares of
common stock and 7,000,000 shares of Class B stock, each with a par value
of $.10. The Class B stock is entitled to 10 votes per share on most
matters, but has limited transfer rights. It is convertible into common
stock on a share-for-share basis at any time and is subject to mandatory
conversion under certain circumstances.
The common stock is entitled to at least 133-1/3% of the per share cash
dividends paid on the Class B stock as and when such dividends may be
declared or paid. See Note 3 regarding dividend restrictions.
All per share amounts included in the financial statements and notes
reflect the dilutive effect of all common stock equivalents. See Note 7
for information regarding common stock equivalents.
The following reflects the changes in treasury stock (common) over the last
three years:
<TABLE>
<CAPTION>
Shares Amount
<S> <C> <C>
Balance, July 31, 1991 126,852 $ 1,066,297
Purchased during fiscal 1992 33,029 633,305
Balance, July 31, 1992 159,881 1,699,602
Purchased during fiscal 1993 30,675 668,205
Balance, July 31, 1993 190,556 2,367,807
Purchased during fiscal 1994 91,190 1,895,364
Reissued during fiscal 1994 (50) (602)
Balance, July 31, 1994 281,696 $ 4,262,569
</TABLE>
NOTE 7 - STOCK OPTION PLANS
The Company maintains two stock option plans, the 1988 Option Plan and
the 1981 Option Plan. Under the 1988 Option Plan, a total of 312,500
shares of common stock and 312,500 stock appreciation rights were made
available for issuance. No stock appreciation rights have been granted
as of July 31, 1994. The options are exercisable one year after the date
granted. The plan expires on June 8, 1998.
The options available under the 1981 Option Plan were exercisable one
year after the grant by employees who have been employed for at least
three years; however, initially only 50% of the options could be
exercised without restriction. The balance of the options were
exercisable upon attainment of certain earnings levels. An earnings
level was attained in fiscal year 1986 and subsequent years that allowed
for exercise of another 25% of the options. Consequently, 75% of the
total outstanding options were considered common stock equivalents
through July 31, 1994. The remaining 25% of the options expired during
fiscal 1994. The plan expired on October 31, 1991.
25
<PAGE> 27
NOTES
A summary of option transactions under the plans follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1981 OPTION PLAN 1988 OPTION PLAN
---------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
(WEIGHTED AVERAGE OPTION PRICE) (WEIGHTED AVERAGE OPTION PRICE)
------------------------------------ ------------------------------------
1994 1993 1992 1994 1993 1992
------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, 61,150 85,919 99,378 158,785 162,872 164,393
Beginning of
Year $(10.80) $(10.80) $(10.66) $(19.17) $(18.96) $(18.91)
Granted - - - 4,000 5,000 500
- - - $(23.00) $(22.38) $(18.50)
Exercised 29,515 20,882 6,977 21,126 7,213 521
$(10.80) $(10.80) $(10.80) $(17.05) $(17.51) $(15.60)
Canceled/
terminated 31,635 3,887 6,482 3,000 1,874 1,500
$(10.80) $(10.80) $( 8.70) $(19.00) $(15.60) $(18.83)
Outstanding, - 61,150 85,919 138,659 158,785 162,872
End of Year - $(10.80) $(10.80) $(19.61) $(19.17) $(18.96)
</TABLE>
The company has reserved 134,270 shares of common stock for future grants
and issuances under the 1988 Option Plan.
As of July 31, 1994, a total of 134,659 options are exercisable under the
1988 Option Plan.
<TABLE>
<CAPTION>
COMBINED PLANS
--------------------------------------
NUMBER OF SHARES
(WEIGHTED AVERAGE OPTION PRICE)
--------------------------------------
1994 1993 1992
--------------------------------------
<S> <C> <C> <C>
Outstanding, 219,935 248,791 263,771
Beginning of Year $(16.84) $(16.14) $(15.80)
Granted 4,000 5,000 500
$(23.00) $(22.38) $(18.50)
Exercised 50,641 28,095 7,498
$(13.41) $(12.39) $(11.13)
Canceled/terminated 34,635 5,761 7,982
$(11.51) $(12.36) $(10.60)
Outstanding, 138,659 219,935 248,791
End of Year $(19.61) $(16.84) $(16.14)
</TABLE>
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have defined benefit pension plans for
eligible salaried and hourly employees. Benefits are based on a formula of
years of credited service and levels of compensation or stated amounts for
each year of credited service. The assets of these plans are invested in
various high quality marketable securities.
26
<PAGE> 28
The net periodic pension cost for the years ended July 31, 1994, 1993 and 1992
consists of the following:
<TABLE>
<CAPTION>
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Service cost $ 325,626 $ 308,012 $ 218,826
Interest cost on projected
benefit obligations 358,027 325,735 252,681
Losses (Earnings) on plan assets 80,058 (641,108) (431,820)
Net amortization and deferral (422,948) 344,700 93,337
--------- --------- ---------
Net Pension Cost $ 340,763 $ 337,339 $ 133,024
========= ========= =========
</TABLE>
The funded status of the plans at July 31 is as follows:
<TABLE>
<CAPTION>
------------------------
1994 1993
---------- ----------
<S> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligations
Vested $3,623,589 $3,204,801
Nonvested 337,493 289,846
---------- ----------
Total Accumulated Benefit Obligations $3,961,082 $3,494,647
========== ==========
Projected benefit obligations $5,532,033 $5,023,494
Plan Assets at Fair Value 4,426,791 4,474,314
---------- ----------
Deficiency of plan assets over projected
benefit obligations (1,105,242) (549,180)
Unrecognized net loss (gain) 317,405 (83,391)
Unrecognized prior service cost 691,721 734,700
Unrecognized net excess plan assets as of
August 1, 1987 being recognized principally
over 21 years (371,048) (397,672)
Adjustment required to recognize minimum
liability (190,784) (73,573)
---------- ----------
Accrued pension included in
Accrued Expenses - Other $(657,948) $(369,116)
========== ==========
</TABLE>
During the year ended July 31, 1993, the company amended the benefit formula
for the defined benefit pension plan for salaried employees, the effect of
which was to increase projected retirement benefits for most salaried employees.
Assumptions used in the previous calculations are as follows:
<TABLE>
<CAPTION>
------------
1994 1993
----- -----
<S> <C> <C>
Discount rate 7.25% 7.25%
Rate of increase in compensation levels 5.00% 5.00%
Long-term expected rate of return on assets 8.00% 8.00%
</TABLE>
The Company has funded the plans based upon actuarially determined
contributions that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee Retirement
Income Security Act of 1974 (ERISA), as amended.
For the years ended July 31, 1994, 1993 and 1992, the Company maintained a
profit sharing/401(k) savings plan under which the Company matches a portion of
employee contributions. The plan is available to essentially all employees
who have completed one year of continuous service and are at least 21 years of
age. Total contributions by the Company for the years ended July 31, 1994,
1993 and 1992 were $74,476, $74,767 and $66,105, respectively.
POST-RETIREMENT BENEFITS
In addition to providing pension benefits, the Company provides certain medical
benefits, until a participant attains age 65, to domestic salaried employees
who elect early retirement, meet minimum age, service and other requirements.
The Company reserves the right to amend or terminate this plan at anytime. The
plan is contributory and contains cost sharing features such as deductibles and
coinsurance.
FASB NO. 106 "Employers" Accounting for Postretirement Benefits Other Than
Pensions" requires, among other things, the accrual of retirement benefit costs
over the active service period of employees to the date of full eligibility for
these benefits. The new standard requires the accumulated plan benefit
obligation existing at the date of adoption (transition obligation) either be
recognized immediately or deferred and amortized over future periods.
Effective August 1, 1993 the Company adopted the new standard and is amortizing
the resulting transition obligation over 20 years. The adoption of this
standard does not have a material effect on the consolidated results of
operations or financial position of the Company.
-27-
<PAGE> 29
Notes
NOTE 9 - ACQUISITIONS
The excess of the Company's original investment over the fair value of the
net assets acquired at the date of acquisition is being amortized by the
straight-line method over 40 years.
The terms of a prior year acquisition required additional payments based on
achievements of earnings above base amounts. Payments for the years ended
July 31, 1994 and 1993 were approximately $7,500 and $28,400, respectively.
NOTE 10 - LEASES
The Company's mining operations are conducted on leased and owned property.
These leases generally provide the Company with the right to mine as long
as the Company continues to pay a minimum monthly rental, which is applied
against the per ton royalty when the property is mined.
The Company leases its corporate offices (approximately 20,000 square feet
in 1994 and 1993; 18,000 square feet in prior years) in Chicago, Illinois
and additional office facilities in Europe. The office space in Chicago is
subject to leases expiring in 2008. Office facilities in Europe are leased
on a year-to-year basis.
In addition, the Company leases vehicles, data processing and other office
equipment. In most cases, the Company expects that, in the normal course
of business, leases will be renewed or replaced by other leases.
The following is a schedule by year of future minimum rental requirements
under operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of July 31, 1994:
<TABLE>
<S> <C>
Year Ending July 31:
1995 $ 3,414,048
1996 2,423,674
1997 1,678,596
1998 1,057,805
1999 828,749
Later years 4,401,108
----------
$13,803,980
</TABLE> ===========
The following schedule shows the composition of total rental expense for
all operating leases, including those with terms of one month or less that
were not renewed:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Transportation equipment $2,710,000 $2,758,000 $2,283,000
Office facilities 184,000 190,000 222,000
Mining properties
Minimum 196,000 193,000 115,000
Contingent 183,000 180,000 150,000
Other 565,000 358,000 152,000
--------- --------- ---------
$3,838,000 $3,679,000 $2,922,000
</TABLE> ========== ========= =========
28
<PAGE> 30
NOTE 11 - OTHER CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------
<S> <C> <C> <C>
Interest $1,390,014 $1,534,795 $1,710,408
========== ========== ==========
Income Taxes $5,624,987 $3,528,503 $3,238,900
========== ========== ==========
</TABLE>
NOTE 12 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected information for 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Fiscal 1994 Quarter Ended
(Thousands Except per Share Amounts)
-----------------------------------------------
Oct. 31 Jan. 31 April 30 July 31 Total
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $33,554 $37,450 $37,291 $31,515 $139,810
Gross Profit 9,729 10,699 9,273 7,652 37,353
Net Income 2,575 3,251 2,356 1,670 9,852
Net Income Per Share $ .37 $ .46 $ .34 $ .24 $ 1.41
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1993 Quarter Ended
(Thousands Except per Share Amounts)
-----------------------------------------------
Oct. 31 Jan. 31 April 30 July 31 Total
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $33,426 $35,101 $34,113 $32,120 $134,760
Gross Profit 9,503 9,931 9,702 8,227 37,363
Net Income 2,401 2,984 2,255 1,780 9,420
Net Income Per Share $ .34 $ .42 $ .32 $ .26 $ 1.34
</TABLE>
29
<PAGE> 31
INDEPENDENT AUDITOR'S REPORT
COMMON STOCK
STOCKHOLDERS AND BOARD OF DIRECTORS
OIL-DRI CORPORATION OF AMERICA
We have audited the consolidated statements of financial position of
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1994
and 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended July 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1994
and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended July 31, 1994, in
conformity with generally accepted accounting principles.
BLACKMAN KALLICK BARTELSTEIN
Chicago, Illinois
August 26, 1994, except for the third and fourth paragraphs of Note 3,
as to which the date is September 21, 1994
COMMON STOCK
On December 20, 1993, the common stock of the Company began trading on the
New York Stock Exchange under the ticker symbol ODC. Prior to December 20,
1993, the common stock was quoted in the NASDAQ National Market System
under the ticker symbol OILC. The following table sets forth the closing
high and low prices as quoted on the New York Stock Exchange and the NASDAQ
National Market System for the period indicated. NASDAQ National Market
System prices reflect interdealer prices without retail mark-up, mark-down
or commissions, and may not necessarily reflect actual transactions.
The number of holders of record of common stock on August 19, 1994 was
1,346.
There is no established public trading market for the Class B stock.
The number of holders of record of Class B stock on August 19, 1994 was 23.
<TABLE>
<CAPTION>
DIVIDENDS
Amount Per Share
----------------
Date Paid Common Class B
---------------------------
<S> <C> <C> <C>
Quarterly 9/17/93 $0.07 $0.0525
Quarterly 12/17/93 $0.07 $0.0525
Quarterly 3/17/94 $0.07 $0.0525
Quarterly 6/17/94 $0.07 $0.0525
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICES
Fiscal 1994 Closing Prices
- - - --------------------------------------------------
High Low
<S> <C> <C>
1st Quarter 25 19 3/4
2nd Quarter 23 3/8 18 3/4
3rd Quarter 23 1/8 19 3/8
4th Quarter 21 1/2 17 7/8
<CAPTION>
Fiscal 1993 Closing Prices
- - - --------------------------------------------------
High Low
<S> <C> <C>
1st Quarter 19 1/2 16
2nd Quarter 21 3/4 17 3/4
3rd Quarter 24 1/4 21
4th Quarter 24 1/2 21 3/4
-------------------------------------
</TABLE>
30
<PAGE> 32
Board of Directors
Officers
Senior Management
BOARD OF DIRECTORS
Richard M. Jaffee, Chairman
Robert D. Jaffee, Chairman/Amco Corporation
J. Steven Cole, President/Cole & Associates and Sav-A-Life Systems, Inc.
Norman B. Gershon, Vice-President
Daniel S. Jaffee, Group Vice-President
Edgar D. Jannotta, Managing Partner/William Blair & Company
Joseph C. Miller, Senior Vice-President
Paul J. Miller, Partner/Sonnenschein Nath & Rosenthal
Haydn H. Murray, Professor Emeritus of Geology, Indiana University
Allan H. Selig, President/Milwaukee Brewers Baseball Club, Inc.,
Selig Executive Leasing, Inc.,
Chairman of the Executive Council of Major League Baseball
Bruce H. Sone, Vice-President
CORPORATE OFFICERS
Richard M. Jaffee, President and Chief Executive Officer
Joseph C. Miller, Senior Vice-President/Consumer, Industrial &
Environmental and Transportation
Herbert V. Pomerantz, Senior Vice-President/Agricultural & Specialty
Products and Research & Development
Daniel S. Jaffee, Group Vice-President/Consumer Products and Chief
Financial Officer
Richard V. Hardin, Group Vice-President/Technology
Bruce H. Sone, Vice-President/Consumer Mass Merchandise
James T. Davis, Vice-President/Manufacturing
Norman B. Gershon, Vice-President/International Operations, Managing
Director/Oil-Dri S.A.
Louis T. Bland, Jr., Legal Counsel, Assistant Secretary and
Director/Industrial Relations
Donald J. Deegan, Director/Finance & Accounting
Richard L. Pietrowski, Treasurer
Albert L. Swerdlik, Secretary
Heidi M. Jaffee, Assistant Secretary
ADDITIONAL SENIOR MANAGEMENT
Elwyn J. Albritton, Vice-President/Operational Development
Roger Bergh, Jr., General Manager/Industrial & Environmental Product Group
Karen Jaffee Cofsky, Manager/Human Resources
Thomas F. Cofsky, General Manager/Agrisorbents(TM) Product Group
Sam J. Colello, Director/Information Systems
B. Fielden Fraley, General Manager/Pure-Flo Product Group
Fred G. Heivilin, Vice-President/Raw Materials Development
Richard D. Johnsonbaugh, Eastern Regional Manager/Manufacturing
Robert E. Messersmith, Vice-President/Engineering
William F. Moll, Vice-President/Research & Development
Dennis E. Peterson, President/Oil-Dri Transportation Company
V.R. Roskam, Vice-President/Agrisorbents(TM) Product Group
William O. Thompson, Western Regional Manager/Manufacturing
Michael A. Woodrow, Director/Material Management and Sales Services
31
<PAGE> 33
CORPORATE HEADQUARTERS
Oil-Dri Corporation of America
410 North Michigan Avenue, Suite 400
Chicago, Illinois 60611
(312) 321-1515
LISTING TICKER SYMBOL
New York Stock Exchange ODC
INTERIM REPORTS
Starting in fiscal 1995, Oil-Dri Corporation will replace its three
quarterly reports to shareholders, traditionally distributed with dividend
checks, with distribution of the Company's earnings news releases. These
news releases will be sent to shareholders at the time they are released to
the media. We hope shareholders will find this more timely and economic
dissemination of information useful.
REGISTRAR/TRANSFER AGENT
Harris Trust and Savings Bank
311 West Monroe
Chicago, Illinois 60606
(312) 461-2288
INDEPENDENT PUBLIC ACCOUNTANTS
Blackman Kallick Bartelstein
LEGAL COUNSEL
Sonnenschein Nath & Rosenthal
SUBSIDIARIES
Oil-Dri Corporation of Georgia Oil-Dri (U.K.) Limited
Georgia United Kingdom
Oil-Dri Production Company Oil-Dri Corporation of Nevada
Mississippi/Oregon Nevada
Oil-Dri Transportation Company Blue Mountain Production Company
Georgia Mississippi
Oil-Dri S.A. Favorite Products Company, Ltd.
Switzerland Quebec, Canada
32
<PAGE> 34
This annual report is printed entirely on recycled paper.
<PAGE> 1
Exhibit 22
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
State or Country
Subsidiary of Incorporation
<S> <C>
Oil-Dri Corporation of Georgia Georgia
Oil-Dri Production Company Mississippi
Oil-Dri Transportation Company Delaware
Oil-Dri, S.A Switzerland
Favorite Products Company, Ltd. Canada
Blue Mountain Production Co. Mississippi
Oil-Dri (U.K.) Limited United Kingdom
Ochlocknee Holding Co., S.A. Spain
Ochlocknee Mining Co., S.A. Spain
Oil-Dri Corporation of Nevada Nevada
</TABLE>
<PAGE> 1
Exhibit 24
[LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our reports and to all references to our Firm included in or
by incorporation by reference made a part of the Annual Report on
Form 10-K of Oil-Dri Corporation of America for the fiscal year
ended July 31, 1994 and the Registration Statement of Form S-8
relating to the Oil-Dri Corporation of America Stock Option
Plan.
BLACKMAN KALLICK BARTELSTEIN
October 21, 1994
[BLACKMAN KALLICK BARTELSTEIN LETTERHEAD]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 6,394,315
<SECURITIES> 3,351,423
<RECEIVABLES> 19,854,899
<ALLOWANCES> (171,940)
<INVENTORY> 11,203,008
<CURRENT-ASSETS> 44,362,003
<PP&E> 100,192,811
<DEPRECIATION> (39,949,247)
<TOTAL-ASSETS> 112,267,182
<CURRENT-LIABILITIES> 15,601,238
<BONDS> 21,521,243
<COMMON> 723,352
0
0
<OTHER-SE> 72,336,152
<TOTAL-LIABILITY-AND-EQUITY> 112,267,182
<SALES> 139,809,584
<TOTAL-REVENUES> 139,809,584
<CGS> 102,456,815
<TOTAL-COSTS> 129,957,384
<OTHER-EXPENSES> 1,268,893
<LOSS-PROVISION> 4,744
<INTEREST-EXPENSE> 1,741,839
<INCOME-PRETAX> 13,159,384
<INCOME-TAX> 3,307,184
<INCOME-CONTINUING> 9,852,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,852,200
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
