CONFORMED COPY
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, 1996 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, 1996:
Common Stock - 5,193,150 shares (including 527,067 treasury shares)
Class B Stock - 2,042,368 shares
Class A Common Stock - 0 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 - $61,035,945 (based on the closing price on September 30,
1996).
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference:
1. Registrants Proxy Statement for its 1996 Annual Meeting of
Stockholders (Proxy Statement), which will be filed with the
Securities and Exchange Commission not later than November 28,
1996 (120 days after the end of Registrants fiscal year ended
July 31, 1996), is incorporated into Part III of this Annual
Report on Form 10-K, as indicated herein.
2. The following portions of Registrant's 1996 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.
<PAGE>
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 leader in developing,
manufacturing and marketing sorbent products and related services for the
consumer, industrial, environmental, agricultural and fluids purification
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 through the grocery
products industry, mass merchandising, warehouse clubs, and pet specialty
retail outlets. Industrial and environmental products, consisting
primarily of oil, grease and water sorbents (both clay and nonclay), are
sold to distributors of industrial cleanup and automotive products,
environmental service companies, and retail outlets. Agricultural
products, which include carriers for crop protection chemicals and
fertilizers, drying agents, soil conditioners, pellet binders for animal
feeds and flowability aids, are sold to manufacturers of agricultural
chemicals and distributors of other agricultural products. Fluids
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 Premium Cat
Litter and other cat litters, OIL-DRI ALL PURPOSE mineral floor absorbent
and AGSORB granular agricultural chemical carriers.
Adsorbent products 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 Sorbents for industrial and environmental
cleanup, PURE-FLO, PURE-FLO SUPREME, PERFORM and SELECT Bleaching Clays
for edible oils, fats and tallows, and ULTRA-CLEAR 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
fluids 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 industrial
distributors and food brokers. The Registrant maintains its own research
and development facility and staff. The Registrant's transportation
subsidiary ships 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.
Consumer Products
The Registrant's cat litter products, in both coarse granular and fine
granular clumping (scoopable) forms, are sold under the Registrant's CAT'S
PRIDE and LASTING PRIDE brand names, FRESH STEP and CONTROL 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, Publix, Winn Dixie, and
others. LASTING PRIDE is principally sold to mass merchandisers such as
Wal-Mart and K-Mart.
<PAGE>
During fiscal year 1996, the Registrant introduced CAT'S PRIDE Kat Kit, a
disposable cat litter tray. Made with 100% recycled plastic and filled
with the Registrant's CAT'S PRIDE Premium cat litter, the tray is designed
as a touchless system for cat box care.
The Registrant and The Clorox Company have long-term arrangements under
which they developed FRESH STEP and CONTROL premium-priced cat litter
products. FRESH STEP and CONTROL 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 contains
microencapsulated odor controllers which are activated by the cat. The
Registrant has a long-term exclusive right to supply The Clorox Company's
requirements for FRESH STEP and CONTROL up to certain levels. According
to independently published supermarket industry reports, FRESH STEP was
the largest dollar grossing branded cat litter sold through grocery chains
in the United States during the year ended July 14, 1996.
Traditional coarse granular clay litters once represented approximately 98%
of the market. Beginning in 1990, the cat litter market changed and
traditional course litters are now complemented by new, fine granule
clumping (scoopable) 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 42% of
retail dollar sales volume in the grocery industry and 56% of retail dollar
sales volume in the mass merchandiser industry in the 52 week period ended
July 14, 1996, compared with 39% and 49%, respectively, in a similar period
last year.
Industrial and Environmental Products
Products for industrial applications 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 through a wide range of distribution channels and have
achieved a high level of brand name recognition. The Registrant
distributes clay-based sorbents sold in granular form and in other
configurations such as pillows and socks. The Registrant also distributes
non-clay sorbents including its OIL-DRI Industrial Pad and OIL-DRI
Industrial Rug, which are made of needle-punched polypropylene.
The Registrant 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 materials from several unaffiliated
suppliers. The Registrant has acquired equipment affording it the
capability to cut polypropylene products, acquired in bulk form, to
customer specifications and to fill a variety of configurations. 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 Sorbent Booms and OIL-DRI Sorbent Pads, which are made from
meltblown polypropylene, will 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 through a
distributor network that includes industrial, auto parts, safety, sanitary
supply, chemical and paper distributors and environmental service
companies. The Registrant supports the efforts of the industrial
distributors with specialized divisional sales personnel.
<PAGE>
The Registrant also produces for the consumer market OIL-DRI Automotive, a
floor absorbent for home and garage use. This product is sold through
automobile parts distributors and mass merchandisers.
Agrisorbents Product Group
The Registrant produces and markets a wide range of granular and powdered
mineral absorbent products that are used with crop protection chemicals,
animal feed, fertilizers and other horticultural applications. Products
include AGSORB agricultural chemical carriers and drying agents; FLO-FRE,
a highly absorbent microgranule flowability aid; PEL-UNITE and
CONDITIONADE, pelleting aids, used in the manufacture of animal feeds, and
TERRA GREEN Soil Conditioner.
The AGSORB Carriers are used as mediums of distribution for crop
protection chemicals, including herbicides, fungicides, insecticides, and
fertilizers. AGSORB customized carriers are designed to reduce dust and
to increase accuracy of application. The Registrant's AGSORB 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 as a
blending agent for fertilizers and chemicals used in the lawn and garden
market.
Agricultural products are marketed in the United States by 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.
Fluids Purification Products Group
Fluids purification products include PURE-FLO Bleaching Clays,
ULTRA-CLEAR clarification aids, and PURE-FLO Supreme. These products are
supported by a team of 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 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 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.
Two new products introduced during the fiscal year, PERFORM and SELECT,
offer performance advances to refiners. The Perform products are the next
generation of bleaching clays, providing increased activity for hard-to-
bleach oils. The SELECT line of products is used earlier in the process
stream to remove a variety of impurities from edible oils. SELECT can
also be used to replace the water wash step in the caustic refining of
edible oils.
Transportation Services
Oil-Dri Transportation Company leases or contracts for 104 tractors, 277
trailers, 210 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 freight
costs, maintain delivery schedules and assure equipment availability.
Oil-Dri Transportation Company primarily performs transportation services
for the Registrant on outbound movements from the Registrant's production
plants. Oil-Dri Transportation Company also generates revenue from
transporting third parties' products on return trips.
<PAGE>
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, 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 and its 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.
Backlog; Seasonality
At July 31, 1996 and 1995, Registrant's backlog of orders was approximately
$3,150,000 and $2,765,000 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 (such as agricultural) are subject to such factors as crop
acreage planted and product formulation cycles.
Customers
Sales to Wal-Mart Stores, Inc. and its affiliate Sam's Club accounted for
approximately 26% of the Registrant's net sales for the fiscal year ended
July 31, 1996. Sales to The Clorox Company accounted for approximately 8%
of the Registrant's net sales for the fiscal year ended July 31, 1996.
Clorox and the Registrant are parties to a long term supply contract. 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 have substantially greater financial resources than
the Company, which compete with the Registrant 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 of its present
markets.
<PAGE>
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
239,324,000 tons. Based on its rate of consumption during the 1996 fiscal
year, Registrant considers its proven recoverable reserves adequate to
supply Registrant's needs for approximately 45 years. It is the
Registrant's policy to attempt 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 statutes and
regulations regarding mining and environmental compliance. Also,
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, 1996, 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
598 acres in Washoe County, Nevada. The Registrant estimates that there
are 23 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 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 that this will be accomplished.
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.
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.
<PAGE>
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> <C>
Ochlocknee, Georgia $1,784,543 $20,165,338
Ripley, Mississippi $1,167,211 $14,764,925
Blue Mountain, Mississippi $ 915,523 $ 8,277,627
Christmas Valley, Oregon $ 68,044 $ 607,393
</TABLE>
Employees
As of July 31, 1996, the Registrant employed 670 persons, 55 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 29 of the Registrant's employees in the U.S.
and approximately 13 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.
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 deficiency. As a result, expenditures
relating to environmental compliance have increased over the years,
however, in recent years expenditures have not been material. The
Registrant continues, and will continue, to incur costs in connection with
reclaiming exhausted mining sites. The costs of reclamation have not had a
material effect on its mining costs. 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.
<PAGE>
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 Supreme, PURE-FLO FP80, PERFORM, SELECT CAT'S PRIDE Scoopable
and LASTING PRIDE. The technical center produces prototype samples and
tests new products for customer trial and evaluation.
Registrant spent approximately $2,026,000, $1,826,000 and $1,875,000 during
its fiscal years ended July 31, 1996, 1995 and 1994, 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 incurred.
Other
The Registrant holds approximately a 13% 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, 1996, the Registrant's investment, at cost, in Kamterter was
approximately $752,000. Although Kamterter has a substantial negative net
worth, during the year ended February 29, 1996, and in recent interim
periods, Kamterter began to generate operating profits. While the
Registrant believes that Kamterters prospects have improved, Kamterter's
future financial condition and results of operations cannot be predicted.
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
(acres) (acres) (acres) (000's (000's (000's
of tons) of tons) of tons)
<S> <C> <C> <C> <C> <C> <C>
Geogia 1,484 1,804 3,288 44,305 8,436 52,741
<S> <C> <C> <C> <C> <C> <C>
Mississippi 2,134 1,423 3,557 130,358 116,673 247,031
Oregon 1,260 1,580 2,840 36,833 5,802 42,635
Florida 537 446 983 4,512 1,092 5,604
Nevada 598 - 598 23,316 2,976 26,292
Illinois 4 - 4 - - -
<C> <C> <C> <C> <C> <C>
6,017 5,253 11,270 239,324 134,979 374,303
</TABLE>
See Item 1. Business-Reserves
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.
<PAGE>
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; Ochlocknee, Georgia;
Christmas Valley, Oregon; Laval, Quebec, Canada and Wisbech, United Kingdom
are wholly owned by Registrant and Registrant's mill at Blue Mountain,
Mississippi is owned in-part by Registrant, with the balance leased as
herein after described. Registrant is a party to leases that relate to
certain plant acquisition and expansion projects at the Registrant's mill
at Blue Mountain, Mississippi. 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, ($5,000,000 of which has been
subsequently retired), 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 208,000 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.
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
There are no material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
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.
Principal Occupation
Name (5) For Last Five Years Age
Richard M. Chief Executive Officer and 60
Jaffee Chairman of the Board of the
Registrant; President from 1960
to June, 1995.
Daniel S. Jaffee President and Chief Operating 32
(2) Officer of the Registrant since
June, 1995; Chief Executive
Officer of Favorite Products
Company, Ltd., a subsidiary of
the Registrant since 1990; Chief
Financial Officer of the
Registant from 1990 to 1995;
Group Vice President, Consumer
Products of the Registrant from
1994 to 1995; Group Vice
President Canadian Operations and
Consumer Products - Grocery from
1992 until June, 1994; Group Vice
President, Domestic and Canadian
Operations from December, 1990
until August, 1992.
Joseph C. Miller Vice Chairman of The Board of the 54
Registrant; Senior Vice President
for Consumer, Industrial &
Environmental and Transportation
from 1993 to 1995; Group Vice
President for Sales, Marketing
and Distribution, from 1990 to
1993.
Louis T. Bland, Secretary, Legal Counsel and 65
Jr. (3) Director of Industrial Relations
of the Registrant. Assistant
Secretary and Legal Counsel and
Director of Industrial Relations
from 1991 to 1995.
Norman B. Vice President, International 60
Gershon (3) Operations of the Registrant;
Managing Director of Oil-Dri,
S.A., a subsidiary of the
Registrant.
Michael L. Vice President & Chief Financial 46
Goldberg (3) Officer of the Registrant since
May, 1996; Vice President &
Controller, Alberto-Culver USA,
Inc. from August 1991 until May,
1996.
Richard V. Group Vice President, Technology, 57
Hardin (1)(3) of the Registrant.
<PAGE>
The term of each executive officer expires at the 1996 Annual
Meeting of the Stockholders 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, Michael L. Goldberg,
Louis T. Bland and Norman B. Gershon.
<PAGE>
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, and
Class A Common Stock, which is not outstanding 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 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 18 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.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is (except for information in Part I,
hereof, concerning executive officers) contained in the Registrant's Proxy
Statement for its 1996 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 under the captions Executive Compensation, Compensation
Committee Report on Executive Compensation, Compensation Committee
Interlocks and Insider Participation and Performance Graph 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 under the caption General - Principal Stockholders 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 under the caption Compensation Committee Interlocks and
Insider Participation and is incorporated herein by this reference.
<PAGE>
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 33
of the Annual Report and are incorporated herein by this reference:
Consolidated Statements of Financial Position as of July 31,
1996 (audited) and July 31, 1995 (audited).
Consolidated Statements of Income for the fiscal years ended
July 31, 1996 (audited), July 31, 1995 (audited) and July 31,
1994 (audited).
Consolidated Statements of Stockholders' Equity for the fiscal
years ended July 31, 1996 (audited), July 31, 1995 (audited) and
July 31, 1994 (audited).
Consolidated Statements of Cash Flows for the fiscal years ended
July 31, 1996 (audited), July 31, 1995 (audited) and July 31,
1994 (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 VIII - Valuation and Qualifying Accounts, years ended
July 31, 1996, 1995 and 1994.
(a)(3) The following documents are exhibits to this Report:
(3)(a)1 Articles of Incorporation of
Registrant, as amended.
(3)(b)2 By-Laws of Registrant, as amended of June 16,
1995.
(10)(b)3 Guaranty Agreement, dated as of
September 1, 1982, between Registrant and
Continental Illinois National Bank and Trust
Company of Chicago.
(10)(c)(1)4 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)5 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)6 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).
<PAGE>
(10)(d)7 Description of 1987 Executive
Deferred Compensation Program.*
(10)(e)8 Salary Continuation Agreement dated
August 1, l989 between Richard M. Jaffee and
the Registrant.*
(10)(f)9 1988 Stock Option Plan.
(10)(g)10 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)11 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)12 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.
(10) (j)13 The Oil-Dri Corporation of America
Deferred Compensation Plan adopted November
15, 1995 and related resolution.
(10) (k) Oil-Dri Corporation of America 1995
Long Term Incentive Plan.
(10) (l) $10,000,000 unsecured line of credit
agreement dated as of July 25, 1996 between
Registrant and Harris Trust and Savings Bank.
<PAGE>
(11) Statement re: computation of per share
earnings.
(13) 1996 Annual Report to Stockholders of
Registrant.
(22) Subsidiaries of Registrant.
(24) Consent of Blackman Kallick Bartelstein.
(27) Financial Data Schedule.
*Management contract or compensatory plan or arrangement.
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, 1996.
<PAGE>
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,
Chief Executive Officer
Dated: October 18, 1996
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 18, 1996
Richard M. Jaffee
Chief Executive Officer
Director
/s/Daniel S. Jaffee October 18, 1996
Daniel S. Jaffee
President and Chief Operating Officer
Director
/s/Michael L. Goldberg October 18, 1996
Michael L. Goldberg
Vice President and Chief Financial
Officer
Principal Financial Officer
October 18, 1996
Robert D. Jaffee
Director
/s/Ronald B. Gordon October 18, 1996
Ronald B. Gordon
Director
/s/J. Steven Cole October 18, 1996
J. Steven Cole
Director
<PAGE>
/s/Joseph C. Miller October 18, 1996
Joseph C. Miller
Director
/s/Edgar D. Jannotta October 18, 1996
Edgar D. Jannotta
Director
/s/Paul J. Miller October 18, 1996
Paul J. Miller
Director
/s/Haydn H. Murray October 18, 1996
Haydn H. Murray
Director
/s/Allan H. Selig October 18, 1996
Allan H. Selig
Director
<PAGE>
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, 1996 and 1995 and for each of the three years in the
period ended July 31, 1996, which report thereon dated August 30,
1996 is incorporated by reference in this Annual Report on Form
10-K, we also examined the financial statement schedule listed
in the accompanying index at Item 14(A)(2). In our opinion,
this financial statement schedule presents fairly, when read in
conjunction with the related consolidated financial statements,
the financial data required to be set forth therein.
August 30, 1996
_______________________________
1Incorporated by reference to Exhibit (3) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended January 31, 1995.
2Incorporated by reference to Exhibit (3)(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1995.
3Incorporated by reference to Exhibit (4)(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1982.
4Incorporated 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.
5Incorporated by reference to Exhibit 10(e)(2) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
July 31, 1989.
6Incorporated by reference to Exhibt 10(e)(3) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31, 1991.
7Incorporated by reference to Exhibit 10(f) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1988.
8Incorporated by reference to Exhibit 10(g) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1989.
9Incorporated by reference to Exhibit 4(a) to Registrant's
Registion Statement on Form S-8, filed June 30, 1989, Registration
No.l 33-29650.
10 Incorporated by reference to Exhibit 10(h) to Registrant's
Annual Report on Form 10-K for the fiscal yer ended July 31, 1991.
11 Incorporated by reference to Exhibit 10(i) to Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31, 1993.
12 Incorporated by reference to Exhibit 10i to Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1994.
13 Incorporated by reference to Exhibit 10(j) to Registrant's
Annual Report on Form 10-K for the year ended July 31, 1995.
EXHIBIT 10 (K)
OilDri Corporation of America
1995 Long Term Incentive Plan
TABLE OF CONTENTS
1.Establishment, Purpose and Effective Date and Termination of the Oil-Dri
Corporation of America
1988 Stock Option Plan
(a) Establishment
(b) Purpose
(c) Effective Date
(d) Termination of Oil-Dri Corporation of America 1988 Stock Option Plan
2.Definitions
3.Scope of Plan
(a) Number of Shares Available Under the Plan
(b) Reduction in the Available Shares in Connection with Award Grants
(c) Effect of the Expiration or Termination of Awards
(d) Maximum Number of Options and Stock Appreciation Rights to any
Individual Grantee
4.Administration
(a) Committee Administration
(b) Board Reservation and Delegation
(c) Committee Authority
(d) Committee Determinations Final
5.Eligibility
6.Conditions to Grants
(a) General Conditions
(b) Grant Options and Option Price
(c) Grant of Incentive Stock Options
(d) Grant of Shares of Restricted Stock
(e) Grant of Stock Appreciation Rights
(f) Grant of Performance Units and Performance Shares
(g) Grant of Phantom Stock
(h) Grant of Stock Bonuses
(i)Tandem Awards
(j)Performance Goals
7.Non-transferability
8.Exercie
(a) Exercise of Options
(b) Exercise of Stock Appreciation Rights
(c) Exercise of Performance Units
(d) Payment of Performance Shares
(e) Payment of Phantom Stock Awards
(f) Full Vesting Upon Change of Control
(g) Pooling of Interest
(h) Special Rules for Section 16 Grantees
(i) Exercise, Cancellation, Expiration or Forfeiture of Tandem Awards
9.Effect of Certain Transactions
10.Mandatory Withholding Taxes
11.Termination of Employment
12.Securities Law Matters
13.No Funding Required
14.No Employment Rights
15.Rights as a Stockholder
<PAGE>
TABLE OF CONTENTS (CONT'D)
16.Nature of Payments
17.Non-Uniform Determinations
18.Adjustments
19.Amendment of the Plan
20.Termination of the Plan
21.No Illegal Transactions
22.Governing Law
23.Severability
<PAGE>
1. Establishment, Purpose and Effective Date and Termination of the Oil-
Dri Corporation of America 1988 Stock Option Plan.
(a) Establishment. The Company hereby establishes the Oil-Dri Corporation of
America 1995 Long-Term Incentive Plan (Plan).
(b) Purpose. The primary purpose of the Plan is to provide a means by which
key employees of the Company and its Subsidiaries can acquire and maintain
stock ownership, thereby strengthening their commitment to the success of
the Company and its Subsidiaries and their desire to remain employed by the
Company and its Subsidiaries, focusing their attention on managing the
Company as an equity owner, and aligning their interests with those of the
Company's stockholders. The Plan also is intended to attract and retain
key employees and to provide such employees with additional incentive and
reward opportunities designed to encourage them to enhance the profitable
growth of the Company and its Subsidiaries.
(c) Effective Date. The Plan shall become effective upon its adoption by the
Board, subject to the approval of the votes of a majority of the shares of
Common Stock and Class B Stock of the Company voting together present or
represented by proxy at the 1995 annual meeting of stockholders. Until
such approval shall have been obtained, no Option, stock appreciation
right, or performance unit shall be exercised, no stock bonus shall be
granted, no performance share shall be paid, and no shares of restricted
stock shall become nonforfeitable. If such shareholder approval is not
obtained at the 1995 annual meeting of shareholders, all Awards shall
automatically become null and void and no further Awards shall be granted.
(d) Termination of the Oil-Dri Corporation of America 1988 Stock Option Plan.
Effective upon stockholder approval of this Plan, the Oil-Dri Corporation
of America 1988 Stock Option Plan shall terminate and the shares of Stock
allotted for stock option grants under that plan, which are not the subject
of outstanding options granted under that plan, shall not be available for
the granting of any further options or other awards under that plan or any
other employee or director plan or arrangement of the Company. The options
outstanding under the Oil-Dri Corporation of America 1988 Stock Option Plan
shall remain outstanding and exercisable in accordance with their
respective terms.
2. Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by
such definitions and the terms set forth below shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
(a) Award means Options, shares of restricted Stock, stock appreciation
rights, performance units, or performance shares stock bonuses or shares of
phantom stock granted under the Plan.
(b) Award Agreement means the written agreement by which an Award is
evidenced.
(c) Beneficial Owner, Beneficially Owned, Beneficially Owning, and
Beneficial Ownership shall have the meanings applicable under Rule 13d-
3 promulgated under the 1934 Act.
(d) Board means the board of directors of the Company.
(e) Change in Capitalization means any increase or reduction in the
number of shares of Stock, or any change in the shares of Stock or exchange
of shares of Stock for a different number or kind of shares or other
securities by reason of a stock dividend (either as a dividend of the same
class of Stock or as a dividend of a different class of Stock), stock split,
reverse stock split, share combination, reclassification, recapitalization,
merger, consolidation, spin-off, split-up, reorganization, issuance of
warrants or rights, liquidation, exchange of shares, repurchase of shares,
change in corporate structure, or similar event, of or by the Company.
(f) Change of Control means any of the following
(i) Class B Stock together with the Common Stock held by the
Beneficial Owner of the Class B Stock, has less than 50% of the
Voting Power of the Company, and
<PAGE>
(A) the acquisition by any person or group of Beneficial Ownership
of stock possessing more than 20% of the Voting Power of the
Company, except that (i) no such person or group shall be
deemed to own beneficially (a) any securities acquired
directly from the Company pursuant to a written agreement
with the Company, or (b) any securities held by the Company
or a Subsidiary or any employee benefit plan (or any related
trust) of the Company or a Subsidiary, and (ii) no Change of
Control shall be deemed to have occurred solely by reason of
any such acquisition by a corporation with respect to which,
after such acquisition, more than 60% of both the then-
outstanding common shares of such corporation and the Voting
Power of such corporation are then Beneficially Owned,
directly or indirectly, by the persons who were the
Beneficial Owners of the Stock and voting securities of the
Company immediately before such acquisition in substantially
the same proportions as their ownership, immediately before
such acquisition, of the then outstanding Stock or the Voting
Power of the Company, as the case may be; or
(B) individuals who, as of the Effective Date, constitute the
Board (the Incumbent Board) cease for any reason to
constitute at least a majority of the Board; provided that
any individual who becomes a director after the Effective
Date whose election or nomination for election by the
Company's stockholders was approved by a vote of at least two-
thirds of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the directors of the Company (as
such terms are used in Rule 14a-11 under the 1934 Act); or
(ii) approval by the stockholders of the Company of (A) a merger,
reorganization or consolidation with respect to which the
individuals and entities who were the respective Beneficial
Owners of the Stock and Voting Power of the Company
immediately before such merger, reorganization or
consolidation do not, immediately after such merger,
reorganization or consolidation, beneficially own, directly or
indirectly, more than 60% of, respectively, the then
outstanding common shares and the Voting Power of the
corporation resulting from such merger, reorganization or
consolidation, (B) a liquidation or dissolution of the Company
or (C) the sale or other disposition of all or substantially
all of the assets of the Company.
For purposes of this definition, person means such terms as used
in SEC Rule 13d-5(b) under the 1934 Act, and group means two or more
persons acting together in such a way to be deemed a person for
purposes of Section 13(d) of the 1934 Act.
Notwithstanding the foregoing, a Change of Control shall be deemed
not to have occurred with respect to any Grantee if such Grantee is, by
written agreement, a participant on such Grantee's own behalf in a
transaction in which the persons (or their affiliates) with whom such
Grantee has the written agreement cause the Change of Control to occur
and, pursuant to the written agreement, the Grantee has or is to
acquire an equity interest in the resulting entity.
(g) Committee means the committee of the Board appointed pursuant to
Article 4.
(h) Company means Oil-Dri Corporation of America, a Delaware
corporation.
(i) Disability means for purposes of the exercise of an incentive stock
option, a disability within the meaning of Section 22(e)(3) of the Code,
and for all other purposes, a mental or physical condition which, in the
opinion of the Committee, renders a Grantee unable or incompetent to
carry out the job responsibilities which such Grantee held or the duties
to which such Grantee was assigned at the time the disability was
incurred, and which is expected to be permanent or for an indefinite
duration.
(j) Effective Date means the date that the Plan is adopted by the Board.
(k) Fair Market Value of any security of the Company or any other issuer
means, as of any applicable date:
<PAGE>
(i) if the security is listed for trading on the New York Stock
Exchange, the closing price, regular way, of the security as reported
on the New York Stock Exchange Composite Tape, or if no such reported
sale of the security shall have occurred on such date, on the next
preceding date on which there was such a reported sale, or
(ii) if the security is not so listed, but is listed on another
national securities exchange or authorized for quotation on the
National Association of Securities Dealers Inc.'s NASDAQ National
Market Systems (NASDAQ/NMS), the closing price, regular way, of the
security on such exchange or NASDAQ/NMS, as the case may be, or if
no such reported sale of the security shall have occurred on such
date, on the next preceding date on which there was such a reported
sale, or
(iii) if the security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the
average of the closing bid and asked prices as reported by the National
Association of Securities Dealers Automated Quotation System
(NASDAQ) or, if no such prices shall have been so reported for
such date, on the next preceding date for which such prices were so
reported, or
(iv) if the security is not listed for trading on a national securities
exchange or is not authorized for quotation on NASDAQ/NMS or
NASDAQ, the fair market value of the Common Stock of the Company as
determined in good faith by the above terms.
(l) Grant Date means the date of grant of an Award determined in
accordance with Article 6.
(m) Grantee means an individual who has been granted an Award.
(n) Incentive Stock Option means an Option satisfying the requirements
of Section 422 of the Internal Revenue Code and designated by the
Committee as an Incentive Stock Option.
(o) Internal Revenue Code means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a
particular Section of the Internal Revenue Code shall include references
to successor provisions.
(p) Measuring Period has the meaning specified in Article 6(f)(ii)(B).
(q) Minimum Consideration means the $.10 par value per share of Stock or
such larger amount determined pursuant to resolution of the Board to be
capital within the meaning of Section 154 of the Delaware General
Corporation Law.
(r) 1934 Act means the Securities Exchange Act of 1934, as amended.
(s) Nonqualified Stock Option means an Option which is not an Incentive
Stock Option or other type of statutory stock option under the Internal
Revenue Code.
(t) Option means an option to purchase Stock granted under the Plan.
(u) Option Price means the per share purchase price of (i) Stock subject
to an Option or (ii) restricted Stock subject to an Option.
(v) Performance Goals has the meaning set forth in Article 6(j).
(w) Performance Percentage has the meaning specified in Article
6(f)(ii)(C).
(x) Person means a person within the meaning of Sections 13(d) or 14(d)
of the 1934 Act.
(y) Plan has the meaning set forth in Article 1(a).
(z) SEC means the Securities and Exchange Commission.
<PAGE>
(aa) Section 16 Grantee means a person subject to potential liability
with respect to equity securities of the Company under Section 16(b) of
the 1934 Act.
(bb) Stock means Class A Common Stock or if no Class A Common Stock is
issued and publicly traded on any securities market described in Article 2(k)
above, then Common Stock par value $.10 per share, of the Company.
Class A Common Stock, Class B Stock and Common Stock shall have the
meaning as provided in the Company's Certificate of Incorporation.
(cc) Subsidiary means for purposes of grants of incentive stock options, a
corporation as defined in Section 424(f) of the Internal Revenue Code,
with the Company being treated as the employer corporation for purposes
of this definition and, for all other purposes , a corporation with
respect to which the Company owns, directly or indirectly, 25% or the
then-outstanding common shares.
(dd) 10% Owner means a person who owns stock (including stock treated as
owned under Section 424(d) of the Internal Revenue Code) possessing more
than 10% of the Voting Power of the Company.
(ee) Termination of Employment occurs the first day on which an individual
is for any reason no longer employed by the Company or any of its
Subsidiaries, or with respect to an individual who is an employee of a
Subsidiary, the first day on which the Company no longer owns Voting
Securities possessing at least 25% of the Voting Power of such
Subsidiary.
(ff) Voting Power means the combined voting power of the then outstanding
Voting Securities.
(gg) Voting Securities means, with respect to the Company or any
Subsidiary, any securities issued by the Company or such Subsidiary,
respectively, which generally entitle the holder thereof to vote for the
election of directors of the Company.
3. Scope of the Plan.
(a) Number of Shares Available Under the Plan. The maximum number of
shares of Stock that may be made the subject of Awards granted under the
Plan is 500,000 (or the number and kind of shares of Stock or other
securities to which such shares of Stock are adjusted upon a Change in
Capitalization pursuant to Article 18). The Company shall reserve for
the purpose of the Plan, out of its authorized but unissued shares of
Stock or out of shares held in the Company's treasury, or partly out of
each, such number of shares as shall be determined by the Board. The
Board shall have the authority to cause the Company to purchase from time
to time shares of Stock to be held as treasury shares and used for or in
connection with Awards.
(b) Reduction in the Available Shares in Connection with Awards Grants.
Upon the grant of an Award, the number of shares of Stock available under
Article 3(a) for the granting of further Awards shall be reduced as follows:
(i) Performance Units Denominated in Dollars. In connection with the
granting of each performance unit denominated in dollars, the number
of shares of Stock available under Article 3(a) for the granting of
further Awards shall be reduced by the quotient of (x) the dollar
amount represented by the performance unit divided by (y) the Fair
Market Value of a share of Stock on the date immediately preceding the
Grant Date of the performance unit.
(ii) Other Awards. In connection with the granting of each Award,
other than a performance unit denominated in dollars, the number of
shares of Stock available under Article 3(a) for the granting of
further Awards shall be reduced by a number of shares equal to the
number of shares of Stock in respect of which the Award is granted or
denominated.
Notwithstanding the foregoing, where two or more Awards are granted
with respect to the same shares of Stock, such shares shall be taken
into account only once for purposes of this Article 3(b).
<PAGE>
(c) Effect of the Expiration or Termination of Awards. If and to the
extent an Award expires, terminates or is canceled or forfeited for any
reason without having been exercised in full (including, without limitation,
a cancellation of an Option pursuant to Article 4(c)(vi)), the shares of
Stock associated with the expired, terminated, canceled or forfeited
portion of the Award (to the extent the number of shares available for
the granting of Awards was reduced pursuant to Article 3(b)) shall again
become available for Awards under the Plan.
Notwithstanding anything contained in this Article 3, the number of
shares of Stock available for Awards at any time under the Plan shall be
reduced to such lesser amount as may be required pursuant to the methods
of calculation necessary so that the exemptions provided pursuant to
Rule 16b-3 under the 1934 Act will continue to be available for
transactions involving all current and future Awards. In addition,
during the period that any Awards remain outstanding under the Plan the
Committee may make good faith adjustments with respect to the number of
shares of Stock attributable to such Awards for purposes of calculating
the maximum number of shares available for the granting of future Awards
under the Plan, provided that following such adjustments the exemptions
provided pursuant to Rule 16b-3 under the 1934 Act will continue to be
available for transactions involving all current and future Awards.
(d) Maximum Number of Options and Stock Appreciation Rights to any
Individual Grantee. No individual Grantee may be granted Options and stock
appreciation rights to purchase more than one-fourth of the maximum
number of shares of Stock that may be made subject of Awards under the
Plan as set forth in Article 3(a).
4. Administration.
(a) Committee Administration. Subject to Article 4(b), the Plan shall be
administered by the Committee, which shall consist of not less than three
disinterested persons within the meaning of Rule 16b-3 under the 1934 Act;
provided, however, that the membership of the Committee shall be subject to
such changes (including, if appropriate, a change in the minimum number of
members of the Committee) as the Board deems appropriate and permissible to
permit transactions pursuant to the Plan to be exempt from potential
liability under Section 16(b) of the 1934 Act.
(b) Board Reservation and Delegation. The Board may, in its discretion,
reserve to itself or delegate to another committee of the Board any or all
of the authority and responsibility of the Committee with respect to Awards to
Grantees who are not Section 16 Grantees at the time any such delegated
authority or responsibility is exercised. Such other committee may consist
of one or more directors who may, but need not be, officers or employees of
the Company or of any of its Subsidiaries. To the extent that the Board
has reserved to itself or delegated the authority and responsibility of the
Committee to such other committee, all references to the Committee in the
Plan shall be to the Board or to such other committee.
(c) Committee Authority. The Committee shall have full and final
authority, in its discretion, but subject to the express provisions of the
Plan, as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted and (B) whether or not
specific Awards shall be identified with other specific Awards, and if
so, whether they shall be exercisable cumulatively with, or
alternatively to, such other specific Awards,
(iii) to interpret the Plan and to make all determinations necessary or
advisable for the administration of the Plan,
(iv) to prescribe, amend, and rescind rules and regulations relating
to the Plan, including without limitation, rules with respect to the
exercisability and non-forfeitability of Awards upon the Termination
of Employment of a Grantee,
(v) to determine the terms and provisions of the Award Agreements,
including Performance Goals, if any, which need not be identical and,
with the consent of the Grantee, to modify any such Award Agreement at
anytime, provided that the consent of the Grantee shall not be
required for any amendment which (A) does not adversely affect the
rights of the Grantee, or (B) is necessary or advisable (as determined
by the Committee) to carry out the purpose of the Award as a result of
any new or change in existing applicable law, regulation, ruling or
judicial decision; provided that any such change shall be applicable
only to Awards which have not been exercised;
<PAGE>
(vi) to cancel, with consent of the Grantee, outstanding Awards,
(vii) to accelerate or extend (subject to Article 6(a)(ii)) the time
during which any Award or Grant of Award may be exercised and to
accelerate or waive any or all of the restrictions and conditions
applicable to, any Award,
(viii) to make such adjustment or modifications to Awards to Grantees
working outside the United States as are necessary and advisable to
fulfill the purposes of the Plan,
(ix) to authorize any action of or make any determination by the
Company as the Committee shall deem necessary or advisable for
carrying out the purposes of the Plan, and
(x) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Committee may, before or concurrently with the grant thereof deem
appropriate, including, without limitation, requiring simultaneous
exercise of related identified Awards, and limiting the percentage of
Awards which may from time to time be exercised by a Grantee.
(d) Committee Determinations Final. The determination of the Committee on
all matters relating to the Plan or any Award Agreement shall be conclusive
and final. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award.
5. Eligibility. Awards may be granted to any employee of the Company or
any of its Subsidiaries. In selecting the individuals to whom Awards may
be granted, as well as in determining the number of shares of Stock subject
to, and the other terms and conditions applicable to, each Award, the
Committee shall take into consideration such factors as it deems relevant
in promoting the purposes of the Plan.
6. Conditions to Grants.
(a) General Conditions.
(i) The Grant Date of an Award shall be the date on which the Committee
grants the Award or such later date as specified in advance by the Committee.
(ii) The term of each Award (subject to Article 6(c) with respect to
Incentive Stock Options) shall be a period of not more than ten years from
the Grant Date, and shall be subject to earlier termination as provided
herein or in the applicable Award Agreement.
(iii) The Committee may grant Awards with terms and conditions which
differ among the Grantees thereof. To the extent not set forth in the
Plan, the terms and conditions of each Award shall be set forth in an Award
Agreement.
(b) Grant of Options and Option Price. The Committee may, in its
discretion, grant Options to acquire unrestricted Stock or restricted
Stock to any employee eligible under Article 5 to receive Awards. No
later than the Grant Date of any Option, the Committee shall determine
the Option Price which shall not be less than 100% of the Fair Market
Value of the Stock on the Grant Date.
(c) Grant of Incentive Stock Options. At the time of the grant of
any Option, the Committee may designate that such Option shall be an
Incentive Stock Option. Any Option designated as an Incentive Stock
Option:
(i) shall have an Option Price of (A) not less than 100% of the
Fair Market Value of the Stock on the Grant Date or (B) in the case of a
10% Owner, not less than 110% of the Fair Market Value of the Stock on
the Grant Date;
<PAGE>
(ii) shall have a term of not more than ten years (five years, in
the case of 10% Owner) from the Grant Date, and shall be subject to
earlier termination as provided herein or in the applicable Award
Agreement;
(iii) shall not have an aggregate Fair Market Value (determined for
each Incentive Stock Option at its Grant Date) of Stock with respect to
which Incentive Stock Options are exercisable for the first time by such
Grantee during any calendar year (under the Plan and any other employee
stock option plan of the Grantee's employer or any parent or subsidiary
thereof (other Plans)), determined in accordance with the provisions
of Section 422 of the Internal Revenue Code, which exceeds $100,000 (the
$100,000 Limit);
(iv) shall, if, with respect to any grant, the aggregate Fair Market
Value of Stock (determined on the Grant Date) of all Incentive Stock
Options previously granted under the Plan and any Other Plans (Prior
Grants) and any Incentive Stock Options under such grant (the Current
Grant) which are exercisable for the first time during any calendar
year would exceed the $100,000 Limit, be exercisable as follows:
(A) the portion of the Current Grant exercisable for the first
time by the Grantee during any calendar year which would be, when added
to any portions of any Prior Grants exercisable for the first time by
the Grantee during such calendar year with respect to Stock which would
have an aggregate Fair Market Value (determined as of the respective
Grant Date for such Options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable for the
first time by the Grantee in the first subsequent calendar year or
years in which it could be exercisable for the first time by the
Grantee when added to all Prior Grants without exceeding the $100,000
Limit; and
(B) if, viewed as of the date of the Current Grant, any portion
of a Current Grant could not be exercised under the provisions of
Article 6(c)(iv)(A) during any calendar year commencing with the
calendar year in which it is first exercisable through and including
the last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an Incentive Stock Option,
but shall be exercisable as a separate Nonqualified Stock Option at
such date or dates as are provided in the Current Grant;
(v) shall be granted within ten years from the earlier of the date
of the Plan is adopted by the Board or the date the Plan is approved by
the stockholders of the Company; and
(vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issue pursuant to the exercise of the Incentive
Stock Option under the circumstances described in Section 421(b) of the
Internal Revenue Code (relating to certain disqualifying dispositions)
within ten days of such disposition.
(d) Grant of Shares of Restricted Stock.
(i) The Committee may, in its discretion, grant shares of
restricted Stock to any employee eligible under Article 5 to receive
Awards.
(ii) Shares of restricted Stock will be Class A Common Stock or if
no Class A Common Stock is publicly traded on any securities market
described in Article 2(k) on the Grant Date of such shares of restricted
Stock, then such shares of restricted Stock shall be Common Stock.
(iii) Before the grant of any shares of restricted Stock, the
Committee shall determine, in its discretion:
(A) whether the certificates for such shares shall be delivered
to the Grantee or held (together with a stock power executed in blank
by the Grantee) in escrow by the Secretary of the Company until such
shares become nonforfeitable or are forfeited,
(B) the per share purchase price of such shares, which may be
zero, provided, however, that
(1) the per share purchase price of all such shares (other
than treasury shares) shall not be less than the Minimum
Consideration for each such share; and
<PAGE>
(2) if such shares are to be granted to a Section 16 Grantee
and the purchase price is to be in excess of the Minimum
Consideration, to the extent necessary so that such grant qualifies
for the exemption provided pursuant to Rule 16b-3 under the 1934
Act, the per share purchase price of any such shares shall be at
least 50% of the Fair Market Value of the Stock on the Grant Date;
(C) the restrictions applicable to such grant; and
(D) whether the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on such shares by the
Company shall be deferred until the lapsing of the restrictions imposed
upon such shares shall be held by the Company for the account of the
Grantee, whether such dividends shall be reinvested in additional
shares of restricted Stock (to the extent shares are available under
Article 3) subject to the same restrictions and other terms as apply to
the shares with respect to which such dividends are issued or otherwise
reinvested in Stock or held in escrow, whether interest will be
credited to the account of the Grantee with respect to any dividends
which are not reinvested in restricted or unrestricted Stock, and
whether any Stock dividends issued with respect to the restricted Stock
to be granted shall be treated as additional shares of restricted
Stock.
(iv) Payment of the purchase price (if greater than zero) for
shares of restricted Stock shall be made in full by the Grantee before
the delivery of such shares and, in any event, no later than ten days
after the Grant Date for such shares. Such payment may be made, as
determined by the Committee in its discretion, in any one or any
combination of the following:
(A) cash, or
(B) shares of restricted or unrestricted Stock owned by the
Grantee prior to such grant and valued at its Fair Market Value on the
business day immediately preceding the date of payment;
provided, however, that in the case of payments in shares of restricted
or unrestricted Stock,
(1) the use of shares of restricted or unrestricted Stock in
payment of such purchase price by a Section 16 Grantee is subject
to the prior receipt by the Company of either an option of counsel
for the Company or an interpretive or no action letter from the
staff of the SEC to the effect that such use of stock does not
raise the potential for liability under Section 16(b) of the 1934
Act or render inapplicable any exemption otherwise available
pursuant to Rule 16b-3 under the 1934 Act; and
(2) if the purchase price for restricted Stock (New
Restricted Stock) is paid with shares of restricted Stock (Old
Restricted Stock), the restrictions applicable to the New
Restricted Stock shall be the same as if the Grantee had paid for
the New Restricted Stock in cash unless, in the judgment of the
Committee, the Old Restricted Stock was subject to a greater risk
of forfeiture, in which case a number of shares of New Restricted
Stock equal to the number of shares of Old Restricted Stock
tendered in payment for New Restricted Stock shall be subject to
the same restrictions as the Old Restricted Stock, determined
immediately before such payment.
(v) Upon the date that shares of restricted Stock become non-
forfeitable, the Company shall exchange such shares of Common Stock
for an equal number of shares of Class A Common Stock if such
shares of restricted Stock have been granted as shares of Common
Stock and if such A Common Stock is issued and publicly traded on
any securities market as described in Article 2(k).
(vi) The Committee may, but need not, provide that all or any
portion of a Grantee's Award of restricted Stock shall be forfeited
(A) except as otherwise specified in the Award Agreement, upon
the Grantee's Termination of Employment within a specified time period
after the Grant Date, or
(B) if the Company or the Grantee does not achieve specified
performance goals within a specified time period after the Grant Date
and Before the Grantee's Termination of Employment, or
<PAGE>
(C) upon failure to satisfy such other restrictions as the
Committee may specify in the Award Agreement.
(vii) If a share of restricted Stock is forfeited, then
(A) the Grantee shall be deemed to have resold such share of
restricted Stock to the Company at the lesser (1) the purchase price
paid by the Grantee (such purchase price shall be deemed to be zero
dollars ($0) if no purchase price was paid) or (2) the Fair Market
Value of a share of Stock on the date of such forfeiture;
(B) the Company shall pay to the Grantee the amount determined
under clause (A) of this sentence, if not zero, as soon as is
administratively practicable, but in any case within 90 days after
forfeiture; and
(C) such share of restricted Stock shall cease to be outstanding,
and shall no longer confer on the Grantee thereof any rights as a
stockholder of the Company, from and after the date of the Company's
tender of the payment specified in clause (B) of this sentence, whether
or not such tender is accepted by the Grantee, or the date the
restricted Stock is forfeited if no purchase price was paid for the
restricted Stock.
(viii) Any share of restricted Stock shall bear an appropriate legend
specifying that such share is non-transferable and subject to the
restrictions set forth in the Plan. If any shares of restricted Stock
become nonforfeitable, the Company shall cause certificates for such
shares to be issued or reissued without such legend and delivered to the
Grantee or, at the request of the Grantee, shall cause such shares to be
credited to a brokerage account specified by the Grantee.
(e) Grant of Stock Appreciation Rights. The Committee may grant
stock appreciation rights to any employee eligible under Article 5 to
receive Awards. When granted, stock appreciation rights may, but need not,
be identified with shares of Stock subject to a specific Option awarded to
the Grantee (including any Option granted on or before the Grant Date of
the stock appreciation rights) in a number equal to or different from the
number of stock appreciation rights so granted. If stock appreciation
rights are identified with shares of Stock subject to an Option then,
unless otherwise provided in the applicable Award Agreement, the Grantee's
associated stock appreciation rights shall terminate upon the exercise,
expiration, termination, forfeiture, or cancellation of such Option.
(f) Grant of Performance Units and Performance Shares.
(i) The Committee may, in its discretion, grant performance units
or performance shares to any employee eligible under Article 5 to
receive Awards.
(ii) Before the grant of any performance unit or performance share,
the Committee shall:
(A) determine Performance Goals applicable to such grant,
(B) designate a period, of not less than one year nor more than
five years, for the measurement of the extent to which Performance
Goals are attained (the Measuring Period), and
(C) assign a Performance Percentage to each level of attainment
of Performance Goals during the Measuring Period, with the percentage
applicable to minimum attainment being zero percent (0%) and the
percentage applicable to optimum attainment to be determined by the
Committee from time to time.
(g) Grant of Phantom Stock. The Committee may, in its discretion,
grant shares of phantom stock to any employee who is eligible under Article
5 to receive Awards and is employed outside the United States. Such
phantom stock shall be subject to the terms and conditions established by
the Committee and set forth in the applicable Award Agreement.
(h) Grant of Stock Bonuses. The Committee may grant shares of Stock
as a bonus to any individual eligible under Article 5 to receive Awards.
(i) Tandem Awards. The Committee may grant and identify any Award
with any other Award granted under the Plan, on terms and conditions
determined by the Committee.
<PAGE>
(j) Performance Goals. Performance Goals shall mean the goals
applicable to an Award which shall be set forth in a written document prior
to the commencement of the Grantee's services to which the Performance
Goals under the Award relate and while the outcome is still substantially
uncertain. In establishing Performance Goals, the Committee may consider
such factor or factors relating to performance as it deems appropriate,
including net income, growth in net income, earnings per share, growth of
earnings per share return on equity, return on capital, or any other
business criteria as contemplated in Section 162(m) of the Code. The
Committee, if applicable, shall certify in writing prior to payment of
compensation related to any applicable performance unit, performance share,
restricted stock or share of phantom stock that the Performance Goals and
any other material terms were satisfied. The Committee may, at any time,
modify Performance Goals as a result of changes required in applicable
laws. If a Grantee is promoted, demoted or transferred to a different
business unit of the Company during a performance period, then, to the
extent the Committee determines the Performance Goals are no longer
appropriate, the Committee may adjust, change or eliminate the Performance
Goals or as it deems appropriate in order to make them appropriate and
comparable to the initial Performance Goals.
7. Non-transferability. Each Award (other than restricted Stock) granted
hereunder shall by its terms not be assignable or transferable, other than
as permitted pursuant to the applicable provisions of Rule 16b-3 under the
1934 Act and as provided in the applicable Award Agreement, and may be
exercised, during the Grantee's lifetime, only by the Grantee. Each share
of restricted Stock shall be non-transferable until such shares become
nonforfeitable. Notwithstanding the foregoing, the Grantee may, to the
extent provided in the Plan and in a manner specified by the Committee (a)
designate in writing a beneficiary to exercise his or her Options after the
Grantee's death, and (b) transfer an Option (other than an Incentive Stock
Option), stock appreciation right, performance unit or performance share to
a revocable, inter vivos trust as to which the Grantee is both the settlor
and the trustee, but in no event shall any such transfer be effective
unless the Company shall have received an opinion of counsel for the
Company or an interpretive or no action letter from the staff of the SEC
to the effect that such a transfer does not raise the potential for
liability under Section 16(b) of the 1934 Act or render inapplicable any
exemption otherwise available pursuant to Rule 16b-3 under the 1934 Act.
8. Exercise.
(a) Exercise of Options. Subject to Article 4(c)(vii), 11 and 12 and
such terms and conditions as the Committee may impose, each Option shall be
exercisable in one or more installments commencing not earlier than the
first anniversary of the Grant Date of such Option; provided, however, that
all Options held by each Grantee shall become fully (100%) exercisable upon
the occurrence of a Change of Control regardless of whether the
acceleration of the exercisability of such Options would cause such Options
to lose their eligibility for treatment as Incentive Stock Options.
Notwithstanding the foregoing, Options may not be exercised by a Grantee
for twelve months following a hardship distribution to the Grantee, to the
extent such exercise is prohibited under Treasury Regulation 1.401(k)-
1(d)(2)(iv)(B)(4). Each Option shall be exercised by delivery to the
Company of written notice of intent to purchase a specific number of shares
of Stock or restricted Stock subject to the Option. Such stock will be
Class A Common Stock or if no Class A Common Stock is publicly traded on
any securities market described in Article 2(k) on the date such options
are exercised, then Common Stock. The Option Price of any shares of Stock
or restricted Stock as to which an Option shall be exercised shall be paid
in full at the time of the exercise. Payment may be made, as determined by
the Committee in its discretion, in any one or any combination of the
following:
(i) cash,
(ii) shares of restricted or unrestricted Stock owned by the
Grantee prior to the exercise of the Option and valued at its Fair
Market Value on the last business day immediately preceding the date of
exercise, or
(iii) through simultaneous sale through a broker of shares of
unrestricted Stock acquired on exercise, as permitted under Regulation T
of the Federal Reserve Board.
Payment in Stock or restricted Stock may be made, with the consent of the
Committee and if the Company obtains an opinion of counsel for the Company
or an interpretive or no action letter from the staff of the SEC to the
effect that no potential liability under Section 16(b) of the 1934 Act
would result, by pyramiding (i.e. paying the Option Price with shares of
Stock simultaneously acquired by Option exercise).
<PAGE>
If restricted Stock (Tendered Restricted Stock) is used to pay the
Option Price for Stock, then a number of shares of Stock acquired on
exercise of the Option equal to the number of shares of Tendered Restricted
Stock shall be subject to the same restrictions as the Tendered Restricted
Stock, determined as of the date of exercise of the Option. If the Option
Price for restricted Stock is paid with Tendered Restricted Stock, and if
the Committee determines that the restricted Stock acquired on exercise of
the Option shall be subject to restrictions (Greater Restrictions) that
cause it to have a greater risk of forfeiture than the Tendered Restricted
Stock, then notwithstanding the preceding sentence, all the restricted
Stock acquired on exercise of the Option shall be subject to such Greater
Restrictions.
Shares of unrestricted Stock acquired by a Grantee on exercise of an
Option shall be delivered to the Grantee or, at the request of the Grantee,
shall be credited directly to a brokerage account specified by the Grantee.
(b) Exercise of Stock Appreciation Rights. Subject to Article
4(c)(vii), 11 and 12 and such terms and conditions as the Committee may
impose, each stock appreciation right shall be exercisable not earlier than
the first anniversary of the Grant Date of such stock appreciation right
and, if such stock appreciation right is identified with an Option, to the
extent such Option may be exercised unless otherwise provided by the
Committee, Stock appreciation rights shall be exercised by delivery to the
Company of written notice of intent to exercise a specific number of stock
appreciation rights. Unless otherwise provided in the applicable Award
Agreement, the exercise of stock appreciation rights which are identified
with shares subject to an Option shall result in the forfeiture of such
Option to the extent of such exercise.
The benefit for each stock appreciation right exercised shall be equal to
the excess, if any, of
(i) the Fair Market Value of a share of Stock on the date of such
exercise, over
(ii) an amount equal to
(A) in the case of a stock appreciation right identified with a
share of Stock subject to an Option, the Option Price of such Option,
unless the Committee in the grant of the stock appreciation right
specified a higher amount, or
(B) in the case of any other stock appreciation right, the Fair
Market Value of a share of Stock on the Grant Date of such stock
appreciation right, unless the Committee in the grant of the stock
appreciation right specified a higher amount;
provided that the Committee, in its discretion, may provide that the
benefit for any stock appreciation right shall not exceed a maximum amount
(i.e. a cap) set by Committee, which cap may be expressed as (i) a
percentage of the excess amount described above (not to exceed 100%), (ii)
a percentage of the Fair Market Value of a share of Stock on the Grant Date
of the stock appreciation right, or (iii) a fixed dollar amount. The
benefit upon the exercise of a stock appreciation right shall be payable
in cash, except that the Committee, with respect to any particular
exercise, may, in its discretion, pay benefits wholly or partly in Stock
delivered to the Grantee or credited to a brokerage account specified by
the Grantee.
(c) Exercise of Performance Units.
(i) Subject to Article 4(c)(vii), 11 and 12 and such terms and
conditions as the Committee may impose, and unless otherwise provided in
the applicable Award Agreement, if, with respect to any performance
unit, the minimum Performance Goals have been achieved during the
applicable Measuring Period, then such performance unit shall be deemed
exercised on the date on which it first becomes exercisable.
(ii) The benefit for each performance unit exercised shall be an
amount equal to the product of
(A) The Unit Value (as defined below), multiplied by
(B) the Performance Percentage attained during the Measuring
Period for such performance unit.
(iii) The Unit Value shall be, as specified by the Committee,
(A) a dollar amount,
<PAGE>
(B) an amount equal to the Fair Market Value of a share of Stock
on the Grant Date,
(C) an amount equal to the Fair Market Value of a share of Stock
on the exercise date of the performance unit, plus, if so provided in
the Award Agreement, an amount (Dividend Equivalent Amount) equal to
the Fair Market Value of the number of shares of Stock that would have
been purchased if each dividend paid on a share of Stock on or after
the Grant Date and on or before the exercise date were invested in
shares of Stock at a purchase price equal to its Fair Market Value on
the respective dividend payment date, or
(D) an amount equal to the Fair Market Value of a share of Stock
on the exercise date of the performance unit (plus, if so specified in
the Award Agreement, a Dividend Equivalent Amount), reduced by the Fair
Market Value of a share of Stock on the Grant Date of the performance
unit.
(iv) The benefit upon the exercise of a performance unit shall be
payable to the Grantee (or at the request of the Grantee, deliver to a
brokerage account specified by the Grantee), as soon as is
administratively practicable (but in any event within 90 days) after the
later of (A) the date the Grantee is deemed to exercise such performance
unit, or (B) the date (or dates in the event of installment payments) as
provided in the applicable Award Agreement. Such benefit shall be
payable in cash, except that the Committee, with respect to any
particular exercise, may, provide in the Award Agreement that benefits
may be paid wholly or partly in Stock. The number of shares of Stock
payable in lieu of cash shall be determined by valuing the Stock at its
Fair Market Value on the business day next preceding the date such
benefit is to be paid.
(d) Payment of Performance Shares. Subject to Article 4(c)(vii), 11
and 12 and such terms and conditions as the Committee may impose, and
unless otherwise provided in the applicable Award Agreement, if the minimum
Performance Goals specified by the Committee with respect to an Award of
performance shares have been achieved during the applicable Measuring
Period, then the Company shall pay to the Grantee of such Award (or, at the
request of the Grantee, deliver to a brokerage account specified by the
Grantee) shares of Stock equal in number to the product of the number of
the performance share(s) specified in the applicable Award Agreement
multiplied by the Performance Percentage achieved during such Measuring
Period, except to the extent that the Committee in its discretion
determines that cash be paid in lieu of some or all of such shares of
Stock. The amount of cash payable in lieu of a share of Stock shall be
determined by valuing such share at its Fair Market Value on the business
day next preceding the date such cash is to be paid. Payment pursuant to
this Article 8(d) shall be made as soon as administratively practicable
(but in any event within 90 days) after the end of the applicable Measuring
Period. Any performance shares with respect to which the Performance Goals
have not been achieved by the end of the applicable Measuring Period shall
expire.
(e) Payment of Phantom Stock Awards. Upon the vesting of a phantom
stock Award, the Grantee shall be entitled to receive a cash payment in
respect of each share of phantom stock which shall be equal to the Fair
Market Value of a share of Stock as of the date the phantom stock Award was
granted, or such other date as determined by the committee at the time the
phantom stock Award was granted. The Committee may at the time a phantom
stock Award is granted, provide a limitation on the amount payable in
respect of each share of phantom stock.
(f) Full Vesting upon Change of Control. In the event of a Change of
Control, all unvested Awards shall become immediately vested and
exercisable; provided that the benefit payable with respect to any
performance unit of performance share with respect to which the Measuring
Period has not ended as of the date of such Change of Control shall be
equal to the product of the Unit Value multiplied successively by each of
the following:
(1) a fraction, the numerator of which is the number of months
(including as a whole month any partial month) that have elapsed since
the beginning of such Measuring Period until the date of such Change of
Control and the denominator of which is the number of months (including
as a whole month any partial month) in the Measuring Period; and
(2) a percentage equal to the greater of the target percentage, if
any, specified in the applicable Award Agreement or the maximum
percentage, if any, that would be earned under the terms of the
applicable Award Agreement assuming that the rate at which the
performance goals have been achieved as of the date of such Change of
Control would continue until the end of the Measuring Period.
<PAGE>
(g) Pooling of Interests. If the Committee in its discretion
determines that the exercise of an Award would preclude the use of pooling
of interests accounting following a sale of the Company which is reasonably
likely to occur and that such preclusion of pooling would have a material
adverse effect on the sale of the Company, the Committee, in its
discretion, may take such action as it deems appropriate in order to
preserve the pooling of interests accounting including either unilaterally
barring the exercise of such Award by canceling the Award prior to the
Change of Control or by causing the Company to pay the Award rights benefit
in Stock if it determines that such payment would not cause the transaction
to be ineligible for pooling.
(h) Special Rules for Section 16 Grantees. No stock appreciation
right, Option, performance unit, performance share or share of phantom
stock (if the benefit payable with respect to such performance unit,
performance share or share of phantom stock is to be determined by
reference to the Fair Market Value of Stock on the date the performance
unit, performance share or share of phantom stock is deemed to be
exercised) shall be exercisable by a Section 16 Grantee during the first
six months after its Grant Date, except as may be exempt from Section 16(b)
of the 1934 Act pursuant to Rule 16a-2(d) under the 1934 Act.
(i) Exercise, Cancellation, Expiration or Forfeiture of Tandem
Awards. Upon the exercise, cancellation, expiration, forfeiture or payment
in respect of any Award which is identified with any other Award (the
Tandem Award) pursuant to Article 6(h), the Tandem Award shall
automatically terminate to the extent of the number of shares in respect of
which the Award is so exercised, canceled, expired, forfeited or paid,
unless otherwise provided by the Committee at the time of grant of the
Tandem Award or thereafter.
9. Effect of Certain Transactions. With respect to any Award which
relates to Stock, in the event of a merger or consolidation of the Company
(a Transaction), the Plan and the Awards issued hereunder shall continue
in effect in accordance with their respective terms and each Grantee shall
be entitled to receive in respect of each share of Stock subject to any
outstanding Awards, upon the vesting, payment or exercise of the Award (as
the case may be), the same number and kind of stock, securities, cash,
property, or other consideration that each holder of share of Stock was
entitled to receive in the Transaction in respect of a share of Stock.
With respect to any Award which relates to stock, in the event of a
liquidation or dissolution of the Company, the Committee may take such
actions as it deems appropriate.
10. Mandatory Withholding Taxes. The Company shall have the right to
deduct from any distribution of cash to any Grantee an amount equal to the
federal, state and local income taxes and other amounts as may be required
by law to be withheld (the Withholding Taxes) with respect to any Award.
If a Grantee is to experience a taxable event in connection with the
receipt of shares pursuant to an Option exercise or the vesting or payment
of another type of Award (a Taxable Event), the Grantee shall pay the
Withholding Taxes to the Company prior to the issuance, or release from
escrow, of such shares or payment of such Award. Payment of the applicable
Withholding Taxes may be made, as determined by the Committee in its
discretion, in any one or any combination of (i) cash, (ii) shares of
restricted or unrestricted Stock owned by the Grantee prior to the Taxable
Event and valued at its Fair Market Value on the business day immediately
preceding the date of exercise, or (iii) by making a Tax Election (as
described below). For purposes of this Article 10, a Grantee may make a
written election, which may be accepted or rejected at the discretion of
the Committee (the Tax Election), to have withheld a portion of the
shares then issuable to him or her having an aggregate Fair Market Value,
on the date preceding the date of such issuance, equal to the Withholding
Taxes, provided that in respect of a Section 16 Grantee either: (i) in the
case of a Taxable Event involving any Award (A) the Tax Election is made at
least six months prior to the date of the Taxable Event and (B) the Tax
Election is irrevocable with respect to all Taxable Events of a similar
nature occurring prior to the expiration of six months following a
revocation of the Tax Election; or (ii) in the case of the exercise of an
Option a stock appreciation (A) the Grantee makes the Tax Election at least
six months after the date the Option or stock appreciation right was
granted, (B) the Option or stock appreciation right is exercised during the
ten day beginning on the third business day and ending on the twelfth
business day following the release for publication of the Company's
quarterly or annual statement of sales and earnings (a Window Period) and
(C) the Tax Election is made during the Window Period in which the related
Option or stock appreciation right is exercised or prior to such Window
Period and subsequent to the immediately preceding Window Period; or (iii)
in the case of a Taxable Event relating to the payment or vesting of an
Award which does not involve the exercise of an Option or a stock
appreciation right (A) the Grantee makes the Tax Election at least six
months after the date the Award was granted and (B) the Tax Election is
made (x) in the case of a Taxable Event occurring within a Window Period,
during the Window Period in which the Taxable Event occurs, or (y) in the
case of a Taxable Event not occurring within a Window Period, during the
Window Period immediately preceding the Taxable Event relating to the
Award. Notwithstanding the foregoing, the Committee may, by the adoption
of rules or otherwise, (i) modify the provisions of this Article 10 or
impose such other restrictions or limitations on Tax Elections as may be
necessary to ensure that the Tax Elections will be exempt transactions
under Section 16(b) of the 1934 Act, and (ii) permit Tax Elections to be
made at such other times and subject to such other conditions as the
Committee determines will constitute exempt transactions under Section
16(b) of the 1934 Act.
<PAGE>
11. Termination of Employment. The Award Agreement pertaining to
each Award shall set forth the terms and conditions applicable to such
Award upon a Termination of Employment of the Grantee by the Company, a
Subsidiary or an operating division or unit, as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter;
provided however, that if a Grantee's employment is terminated as a result
of (i) the Grantee's conviction of a felony which is, in the opinion of the
Committee, likely to result in injury of a material nature to the Company
or a Subsidiary, or (ii) the gross and habitual negligence by the Grantee
in the performance of the Grantee's duties to the Company or is
Subsidiaries (termination for Cause), the Grantee's shares of restricted
stock that are forfeitable, subject to the provisions of Section 6(d)(vii)
regarding repayment of certain amounts to the Grantee, and any unexercised
option, stock appreciation right, performance unit, performance share or
share of phantom stock shall thereupon terminate.
12. Securities Law Matters.
(a) If the Committee deems it necessary to comply with the Securities
Act of 1933, the Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or non forfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities law or (ii) the listing
requirements of any national securities exchange on which are listed any of
the Company's equity securities, then the Committee may postpone any such
exercise, non-forfeitability or delivery, as the case may be, but the
Company shall use its best efforts to cause such exercise, non-
forfeitability or delivery to comply with all such provisions at the
earliest practicable date.
(c) Subject to Articles 13(a) and (b) above, no shares of Stock
shall be issued to any Grantee in respect of any Award prior to the time a
registration statement under the Securities Act of 1933 is effective with
respect to such shares.
13. No Funding Required. Benefits payable under the Plan to any
person shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment of,
benefits under the Plan.
14. No Employment Rights. Neither the establishment of the Plan, nor
the granting of any Award shall be construed to (a) give any Grantee the
right to remain employed by the Company or any of its Subsidiaries or to
any benefits not specifically provided by the Plan or (b) in any manner
modify the right of the Company or any of its Subsidiaries to modify,
amend, or terminate any of its employee benefit plans.
15. Rights as a Stockholder. A Grantee shall not, by reason of any
Award (other than restricted Stock), have any right as a stockholder of the
Company with respect to the shares of Stock which may be deliverable upon
exercise or payment of such Award until such shares have been delivered to
him. Shares of restricted Stock held by a Grantee or held in escrow by the
Secretary of the Company shall confer on the Grantee all rights of a
stockholder of the Company, except as otherwise provided in the Plan.
16. Nature of Payments. Any and all grants, payments of cash, or
deliveries of shares of Stock hereunder shall constitute special incentive
payments to the Grantee and shall not be taken into account in computing
the amount of salary or compensation of the Grantee for the purpose of
determining any pension, retirement, death or other benefits under (a) any
pension, retirement, profit-sharing, bonus, life insurance or other
employee benefit plan of the Company or any of its Subsidiaries or (b) any
agreement between the Company or any Subsidiary, on the one hand, and the
Grantee, on the other hand, except as such plan or agreement shall
otherwise expressly provide.
17. Non-Uniform Determinations. Neither the Committee's nor the
Board's determinations under the Plan need be uniform and may be made by
the Committee or the Board selectively among persons who receive, or are
eligible to receive, Awards (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee
shall be entitled, among other things, to make non-uniform and selective
determinations, to enter into non-uniform and selective Award Agreements as
to (a) the identity of the Grantees, (b) the terms and provisions of
Awards, and (c) the treatment of Terminations of Employment.
<PAGE>
18. Adjustments. In the event of Change in Capitalization, the
Committee shall, in its sole discretion, make equitable adjustment of
(a) the aggregate number and class of shares of Stock or other
stock or securities available under Article 3,
(b) the number and class of shares of Stock or other stock or
securities covered by an Award,
(c) the Option Price applicable to outstanding Options,
(d) the terms of performance unit and performance share grants,
and
(e) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of stock appreciation
rights, performance units, performance shares or phantom stock.
19. Amendment of the Plan. The Board may from time to time in its
discretion amend or modify the Plan without the approval of the
stockholders of the Company, except as such stockholder approval may be
required (a) to retain Incentive Stock Option treatment under Section 422
of the Internal Revenue Code, (b) to permit transactions in Stock pursuant
to the Plan to be exempt from potential liability under Section (16(b) of
the 1934 Act or (c) under the listing requirements of any securities
exchange on which any of the Company's equity securities are listed.
20. Termination of the Plan. The Plan shall terminate on the tenth
(10th) anniversary of the Effective Date or at such earlier time as the
Board may determine. Any termination, shall not affect any Award then
outstanding under the Plan.
21. No Illegal Transactions. The Plan and all Awards granted
pursuant to it are subject to all laws and regulations of any governmental
authority which may be applicable thereto; and notwithstanding any
provision of the Plan or any Award, Grantees shall not be entitled to
exercise Awards or receive the benefits thereof and the Company shall not
be obligated to deliver any Stock or pay any benefits to a Grantee if such
exercise, delivery, receipt or payment of benefits would constitute a
violation by the Grantee or the Company of any provision of any such law or
regulation.
22. Governing Law. Except where preempted by federal law, the law of
the State of Delaware shall be controlling in all matters relating to the
Plan, without giving effect to the conflicts of law principles thereof.
23. Severability. If all or any part of the Plan is declared by any
court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not sever to invalidate any portion of the
Plan not declared to be unlawful or invalid. Any Article or part of an
Article so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Article
or part of an Article to the fullest extent possible while remaining lawful
and valid.
EXHIBIT 10 (L)
PROCEDURES LETTER-FLOATING AND FIXED RATE LOANS
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Gentlemen:
Oil-Dri Corporation of America, a Delaware corporation (the "Company")
hereby requests that borrowings under its $10,000,000 line of credit
granted by Harris Trust and Savings Bank be made and documented upon the
following terms and conditions.
All borrowings made by us under our line of credit from you shall bear
interest prior to maturity either (i) at a rate per annum which is equal at
all times to the rate from time to time announced by you as your prime
commercial rate, with any change in the interest rate on such borrowings by
virtue of a change in such prime commercial rate to be and become effective
as of and on the date of the relevant change in such prime commercial rate
(such borrowings being hereinafter collectively referred to as the
"Floating Rate Loans" and individually as a "Floating Rate Loan") or (ii)
at our request, if you so agree, at a short term fixed rate of interest on
and subject to the terms hereinafter set forth (such borrowings being
hereinafter collectively referred to as the "Fixed Rate Loans" and
individually as a "Fixed Rate Loan"). The Floating Rate Loans and the
Fixed Rate Loans are sometimes hereinafter collectively referred to as the
"Loans" and individually as a "Loan".
You will from time to time receive telephonic requests for Fixed Rate Loans
from any one of the persons authorized to borrow on our behalf under the
terms of this letter, each such request to specify the amount and term of
the requested Fixed Rate Loan. If you are willing to make a Fixed Rate
Loan available to us for the amount and for the term requested, you shall
advise the requesting person of the interest rate at which you are prepared
to make such Fixed Rate Loan and if the person acting on our behalf
indicates that such rate is acceptable, the Loan shall be deemed
consummated. Each Fixed Rate Loan shall be in a minimum amount of
$1,000,000.00 and shall mature upon demand, but prior to demand, shall
mature on the last day of the period for which the interest rate applicable
to such Fixed Rate Loan shall have been fixed (each such period being
hereinafter referred to as an "Interest Period".) We acknowledge and agree
that you have no obligation to quote rates or to make or refund any Fixed
Rate Loan after receiving a request therefor from us and that any Fixed
Rate Loan made by you to us shall be subject to such other terms and
conditions as are mutually agreed upon between you and us.
<PAGE>
We agree that no Fixed Rate Loan may be voluntarily prepaid prior to its
express maturity date. In the event you shall incur any loss, cost or
expense (including, without limitation, any loss of profit and any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by you to fund or maintain any Fixed Rate
Loan or the relending or reinvesting of such deposits or amounts paid or
prepaid by us) as a result of any payment, (whether voluntary or as a
result of a demand hereunder) of a Fixed Rate Loan on a date other than the
last day of the Interest Period applicable thereto, then upon your demand,
we shall pay you such amounts as will reimburse you for such loss, cost or
expense. If you make such a claim for compensation, you shall provide to
us a certificate setting forth the amount of such loss, cost or expense in
reasonable detail and such certificates shall be conclusive and binding on
us as to the amount thereof except in the case of manifest error.
All borrowings made by us under our line of credit from you shall be
payable on demand but if no demand is made, each such borrowing shall
automatically mature (i) on the last day of the Interest Period applicable
thereto in the case of Fixed Rate Loans and (ii) in the case of Floating
Rate Loans, on the interest payment date next following the date the
Floating Rate Loan is made, provided that, the Floating Rate Loans will
automatically be refunded with new Floating Rate Loans maturing on demand
but if no demand is made, then on the interest payment date next following
the date such new Floating Rate Loan is made, unless the line of credit has
been terminated or expired or you have advised us that you do not desire to
effect such a renewal.
Interest on all borrowings hereunder shall be computed on the basis of a
year of 360 days and actual days elapsed and shall be payable, in the case
of Floating Rate Loans, on the 25th day of each month, and in the case of
Fixed Rate Loans, on the last day of their Interest Period and, if such
Interest Period is longer than three (3) months, every three (3) months
after the Loan is made, and, in the case of all Loans, upon demand.
In the event that the Company fails to pay any portion of a Loan when due
(whether by lapse of time, upon demand or otherwise), such unpaid amount
shall thereafter bear interest, which the Company hereby promises to pay at
your offices in Chicago, Illinois, at a rate per annum which is equal at
all times to the greater of (i) the rate per annum determined by adding
three percent (3%) to the rate applicable to such Loan prior to maturity
or, (ii) the rate per annum determined by adding three percent (3%) to the
rate from time to time announced by you as your prime commercial rate.
All borrowings hereunder shall be made against and evidenced by a
promissory note of the Company payable to your order in the aggregate
principal amount of $10,000,000, such note to mature upon demand, and to be
otherwise in the form of Exhibit A attached hereto (the "Note"). All
borrowings made hereunder, the status of such borrowings as Floating Rate
Loans or Fixed Rate Loans, the rates of interest and Interest Periods
applicable to Fixed Rate Loans and the repayment of any principal of the
borrowings hereunder shall be recorded by you on your books and records or,
at your option, endorsed on the reverse side of the Note or on a schedule
thereto and the unpaid principal balance, status and interest rates at any
time so recorded or endorsed shall be prima facie evidence in any court or
other proceedings brought to enforce the Note of the amount remaining
unpaid thereon, the interest rate applicable thereto and the status of
Loans evidenced thereby.
<PAGE>
You agree until further notice that upon oral advice by telephone received
by you from time to time from authorized persons listed in this letter that
we wish to borrow money, you will, lend and deposit to our general account
with you, known as Account Number 367-985-9 (the "Account") such sums of
money as may be mutually agreed upon. Each such request for a borrowing
shall specify whether we are requesting a Floating Rate Loan or a Fixed
Rate Loan. We agree to confirm such borrowings in writing by mailing on
the same day a letter in the form attached hereto as Exhibit B in the case
of any Floating Rate Loan and in the form attached hereto as Exhibit C in
the case of a Fixed Rate Loan, in each case signed by any one of the
following: Richard M. Jaffee and Daniel S. Jaffee. It is understood,
however, that pending receipt of such letter by you in the ordinary course
of the mails, that any sums of money borrowed by telephone on advice of an
authorized person or a person purporting to be an authorized person in
accordance with the foregoing arrangement shall immediately be credited to
the Account, and we shall be obligated to repay to you the sums so borrowed
at the times and with the interest as set forth in this letter
notwithstanding that any such borrowing is not confirmed as contemplated
above.
The persons authorized to give you telephonic instructions to lend money
and repay borrowings in accordance with the foregoing are Richard M.
Jaffee, Chairman and Chief Executive Officer (singly, by telephone or in
writing, including by telecopy or other facsimile means); Daniel S. Jaffee,
President and Chief Operating Officer (singly, by telephone or in writing,
including by telecopy or other facsimile means); *Joseph C. Miller, Vice
Chairman; *Michael L. Goldberg, Vice President and Chief Financial Officer;
*Donald J. Deegan, Vice President, Strategic Planning and Business Development;
*Richard L. Pietrowski, Treasurer; *Louis T. Bland, Jr., Secretary. In
accepting telephonic advices from any of such persons in accordance with
the terms of this Agreement, you shall be entitled to rely on advices given
by any person purporting to be any one of such persons and shall have no
liability to us on account of any action taken by you pursuant to such
telephonic advices provided you have acted in good faith in connection
therewith. You are, of course, authorized to lend money to us upon the
written (including telecopies or other facsimile) instructions of any
person and/or employees authorized to borrow funds by telephonic advice.
This Agreement and the arrangements and authorizations herein contemplated
shall remain in full force and effect, and shall be applicable to any
renewals of, or replacements or substitutions for, our present revolving
line of credit from you, unless and until you have received written notice
from the Company of the termination or modification of this Agreement at
your office in Chicago, Illinois or unless and until the Company has
received such a notice at its address as shown on your records from you;
provided that no such termination or modification by the Company shall
affect any transaction which occurred prior to the receipt of such notice
by you nor shall any such termination or modification become effective
without your written consent unless and until all amounts which shall have
been borrowed hereunder shall have been repaid in full. This Agreement and
your acceptance of this Agreement as hereinafter contemplated do not
constitute any commitment on your part to make any credit available to the
Company, it being understood that the making of credit available to the
Company by you from time to time shall be under and pursuant to the line of
credit arrangement that this Company has with you and shall be subject to
the terms and conditions incidental to such line of credit. This Agreement
and the rights and remedies of the parties hereto shall be governed by the
laws of Illinois.
*The following officers and/or employees of the Corporation are authorized
and empowered to give instructions to lend money and repay borrowings by
manual signature only with a signature of any one other included.
<PAGE>
If you are in agreement with the foregoing, please sign in the appropriate
place on the enclosed counterpart and return such counterpart to us,
whereupon this letter shall become a binding agreement between you and us.
Dated this 25th day of July, 1996.
Very truly yours,
OIL-DRI CORPORATION OF AMERICA
By: _/s/Daniel S. Jaffee________________
Its: President
Accepted as of the date last above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/Patrick J. McDonnell
Its Vice President
<PAGE>
UNSECURED
NOTE
$10,000,000 July 25, 1996.
ON DEMAND, for value received, the undersigned, 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 offices at 111
West Monroe Street, Chicago, Illinois, the principal sum of Ten Million and
00/100 Dollars ($10,000,000), or, if less, so much thereof as may be
advanced to the Company hereon pursuant to the Procedures Letter
hereinafter referred to.
This Note evidences both Floating Rate Loans and Fixed Rate Loans as such
terms are defined in that certain Procedures Letter-Floating and Fixed Rate
Loans bearing even date herewith (the "Procedures Letter") by and between
the Company and the Bank as the same may from time to time be amended,
renewed or extended and the Company hereby promises to pay interest on each
Loan evidenced hereby at the rate and time specified therefor in the
Procedures Letter. All capitalized terms used herein without definition
shall have the same meanings herein as such terms are defined in the
Procedures Letter.
Each Loan made under the Procedures Letter by the Bank to the Company, any
repayment of principal hereon, the status of each such Loan as a Floating
Rate Loan or a Fixed Rate Loan, the interest rate and, in the case of the
Fixed Rate Loans, the Interest Period applicable thereto shall be endorsed
by the holder hereof on the reverse side of this Note or (so long as this
Note is held by Harris Trust and Savings Bank) recorded on the books and
records of the holder hereof and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
amount so endorsed on the reverse side hereof or recorded on the books and
records of Harris Trust and Savings Bank shall be prima facie evidence of
all such amounts.
This Note and the holder hereof are entitled to all the benefits provided
for under the Procedures Letter, to which reference is hereby made for a
statement thereof. The Company hereby waives presentment and notice of
dishonor. The Company agrees to pay to the holder hereof all expenses
incurred or paid by such holder, including attorney's fees and court costs,
in connection with the collection of this Note. It is agreed that this
Note and the rights and remedies of the holder hereof shall be construed in
accordance with and governed by the laws of Illinois.
OIL-DRI CORPORATION OF AMERICA
By: _________________________
Its: __________________
EXHIBIT A
<PAGE>
UNSECURED
NOTE
$10,000,000 July 25, 1996.
ON DEMAND, for value received, the undersigned, 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 offices at 111
West Monroe Street, Chicago, Illinois, the principal sum of Ten Million and
00/100 Dollars ($10,000,000), or, if less, so much thereof as may be
advanced to the Company hereon pursuant to the Procedures Letter
hereinafter referred to.
This Note evidences both Floating Rate Loans and Fixed Rate Loans as such
terms are defined in that certain Procedures Letter-Floating and Fixed Rate
Loans bearing even date herewith (the "Procedures Letter") by and between
the Company and the Bank as the same may from time to time be amended,
renewed or extended and the Company hereby promises to pay interest on each
Loan evidenced hereby at the rate and time specified therefor in the
Procedures Letter. All capitalized terms used herein without definition
shall have the same meanings herein as such terms are defined in the
Procedures Letter.
Each Loan made under the Procedures Letter by the Bank to the Company, any
repayment of principal hereon, the status of each such Loan as a Floating
Rate Loan or a Fixed Rate Loan, the interest rate and, in the case of the
Fixed Rate Loans, the Interest Period applicable thereto shall be endorsed
by the holder hereof on the reverse side of this Note or (so long as this
Note is held by Harris Trust and Savings Bank) recorded on the books and
records of the holder hereof and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
amount so endorsed on the reverse side hereof or recorded on the books and
records of Harris Trust and Savings Bank shall be prima facie evidence of
all such amounts.
This Note and the holder hereof are entitled to all the benefits provided
for under the Procedures Letter, to which reference is hereby made for a
statement thereof. The Company hereby waives presentment and notice of
dishonor. The Company agrees to pay to the holder hereof all expenses
incurred or paid by such holder, including attorney's fees and court costs,
in connection with the collection of this Note. It is agreed that this
Note and the rights and remedies of the holder hereof shall be construed in
accordance with and governed by the laws of Illinois.
OIL-DRI CORPORATION OF AMERICA
By:/s/ Daniel S. Jaffee
Its: President
<PAGE>
CONFIRMATION
(FLOATING RATE LOAN)
___________________, 19___
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois
Attention: Emerging Majors-Illinois
Gentlemen:
This will confirm the telephone conversation Ms./Mr.___________________ had
with your office today whereby we arranged under the Procedures Letter
currently in effect between us for a $__________ Floating Rate Loan. We
promise to pay such Floating Rate Loan, together with interest thereon as
provided for in the terms of such Procedures Letter.
It is our understanding that the proceeds of this Loan have been deposited
in our account with you, or if the foregoing Loan represents a refunding or
extension of an outstanding Loan, you have noted the same on your books.
Very truly yours,
OIL-DRI CORPORATION OF AMERICA
By:_______________________________
Its:_____________________________
EXHIBIT B
<PAGE>
CONFIRMATION
(FIXED RATE LOAN)
___________________, 19___
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois
Attention: Emerging Majors-Illinois
Gentlemen:
This will confirm the telephone conversation Ms./Mr.____________________
had with your office today whereby we arranged under the Procedures Letter
currently in effect between us for a $__________ Fixed Rate Loan bearing
interest at the rate of _____% per annum and maturing _____ days from this
date. We promise to pay such Loan, together with interest thereon on such
maturity date, all as provided for in the terms of the Procedures Letter.
It is our understanding that the proceeds of this Loan have been deposited
in our account with you, or if the foregoing Loan represents a refunding or
extension of an outstanding Loan, that the same and the new interest rate
and maturity has been noted on your books.
Very truly yours,
OIL-DRI CORPORATION OF AMERICA
By: _______________________________
Authorized Signature
EXHIBIT C
<PAGE>
RESOLUTIONS
I, Louis T. Bland, Jr., do hereby certify that I am the duly elected,
qualified and acting Secretary of Oil-Dri Corporation of America, a
corporation duly organized and existing under the laws of the State of
Delaware, and that as such Secretary, I am the keeper of the records and
corporate seal of said Corporation.
I further certify that the following is a full, true and correct copy of
consent resolutions adopted by the Executive Committee of the Board of
Directors of said Corporation on the 23rd day of July, 1996, and that said
resolutions are still in full force and effect and do not in any manner
contravene the Charter or By-Laws of said Corporation:
WHEREAS, Harris Trust and Savings Bank, Chicago, Illinois (the "Bank") has
granted this Corporation a line of credit in the amount of $10,000,000 with
borrowings under such facility to bear interest prior to demand on the
balance of principal from time to time remaining unpaid thereon at the rate
per annum which is equal to the prime commercial rate of the Bank from time
to time in effect or at a fixed rate of interest, such borrowings to be
made and repaid on a revolving basis and this Corporation has requested
that all borrowings by this Corporation under such facility be evidenced by
a master promissory note of this Corporation; and
WHEREAS, there is now before this Board of Directors, a copy of a
Procedures Letter - Floating and Fixed Rate Loans (the "Agreement")
embodying the terms and conditions under which borrowings under the
aforesaid line of credit will be made and a form of demand promissory note
to evidence said borrowings (the "Note") and said Agreement and Note having
been examined by this Board are in the judgment of the Board in their
proper form for their intended purposes;
NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED BY THIS BOARD OF DIRECTORS
as follows:
1. Any one of the following officers and/or employees of this Corporation:
Richard M. Jaffee, Chairman and Chief Executive Officer (singly, by
telephone or in writing, including by telecopy or other facsimile means);
Daniel S. Jaffee, President and Chief Operating Officer (singly, by
telephone or in writing, including by telecopy or other facsimile means);
*Joseph C. Miller, Vice Chairman; *Michael L. Goldberg, Vice President and
Chief Financial Officer; *Donald J. Deegan, Vice President, Strategic
Planning and Business Development; *Richard L. Pietrowski, Treasurer;
*Louis T. Bland, Jr., Secretary be and each of them is hereby authorized,
empowered and directed for, in the name and on behalf of this Corporation
(and attested to by its Secretary and under its corporate seal if so
requested by the Bank), to execute and deliver to the Bank a Procedures
Letter - Floating and Fixed Rate Loans containing substantially the terms,
conditions and provisions as set forth in the form of Agreement now before
this meeting and hereby approved, and/or such additional, modified or
revised terms as may be acceptable to any of said officers and/or employees
as evidenced by his execution thereof and also to borrow from the Bank up
to $10,000,000 and in evidence thereof to execute and deliver a promissory
note of this Corporation in the form of the Note now before this meeting
and hereby approved or containing such additional, modified or revised
terms as may be acceptable to any of said officers and/or employees by his
execution thereof, and to enter into, execute and deliver such amendments
or modifications to said Agreement from time to time as may be acceptable
to any of said officers and/or employees as evidenced by his execution
thereof, including amendments changing the persons authorized to act on
behalf of this Corporation thereunder or under numbered paragraphs one and
two of these Resolutions and also to execute and deliver new promissory
notes and letter agreements to the Bank when from time to time appropriate
in order to continue the arrangements contemplated by the Note and
Agreement now before this meeting in effect through any changes (including
increases) in this Corporation's credit arrangement with the Bank.
<PAGE>
2. That any one of the following officers and/or employees of this
Corporation: Richard M. Jaffee, Chairman and Chief Executive Officer
(singly, by telephone or in writing, including by telecopy or other
facsimile means); Daniel S. Jaffee, President and Chief Operating Officer;
*Joseph C. Miller, Vice Chairman; *Michael L. Goldberg, Vice President and
Chief Financial Officer; *Donald J. Deegan, Vice President, Strategic
Planning and Business Development; *Richard L. Pietrowski, Treasurer;
*Louis T. Bland, Jr., Secretary be and each of them is hereby authorized,
directed and empowered for and on behalf and in the name of this
Corporation to, by telephone or in writing (including by telecopy or other
facsimile means) request borrowings from and direct repayment to, the Bank
from time to time pursuant to said Agreement in such amounts from time to
time as such officers and/or employees deem appropriate and to orally
direct the transfer by wire of funds so borrowed to the account of this
Corporation at the Bank and to select the interest rate options applicable
to the borrowings by this Corporation under its revolving line of credit in
accordance with the Agreement.
<PAGE>
3. Any of the officers, agents and employees of this Corporation be and
they are hereby authorized, empowered and directed to do and perform such
other acts and things, and to make, execute and deliver from time to time
such other documents and instruments on behalf of this Corporation in order
to comply with or evidence compliance with the terms of said Agreement and
any other documents as so executed.
4. The Secretary of this Corporation shall deliver a certified copy of
these resolutions to the Bank, and the Bank shall be entitled conclusively
to presume as against this Corporation that these resolutions remain in
full force and effect and said officers, employees and agents authorized
hereunder continue to be authorized to act pursuant to the authority herein
granted unless and until said Bank shall have actually received written
notification from the Secretary or other officer of this Corporation of the
rescission, modification or amendment of these resolutions or of the
authorization herein contained; but no such rescission, modification or
amendment shall affect any transaction occurring prior to the actual
receipt by the Bank of such written notice.
5. These Resolutions shall be in addition to and supplementary of all
resolutions of this Board of Directors now or hereafter on file with said
Bank and this Resolution shall not revoke, supersede or modify any of such
other resolutions.
*The following officers and/or employees of the Corporation are authorized
and empowered to give instructions to lend money and repay borrowings by
manual signature only with a signature of any one other included.
I further certify that the Agreement and Note referred to in said
resolutions as being before this meeting are in the same forms,
respectively, as the Procedures Letter - Floating and Fixed Rate Loans
dated as of July 25, 1996 and as the Demand Note dated as of July 25, 1996
each as executed by this Corporation and delivered to the Bank, excepting
only for such changes and amendments as are and were approved by the duly
authorized officer and/or employee as evidenced by his execution thereof.
I further certify that the persons named below are at the date hereof the
duly elected, qualified and acting incumbents of the respective offices
and/or job titles of this Corporation set out at the left of their
respective names, and the signatures at the right of said names,
respectively, are the genuine signatures of said officers and/or employees:
Title/Job Description Name Signature
Chairman and Chief Executive
Officer Richard M. Jaffee /s/Richard J. Jaffee
President and Chief Operating Daniel S. Jaffee /s/Daniel S. Jaffee
Officer
Vice Chairman Joseph C. Miller /s/Joseph C. Miller
Vice President and Chief
Financial Officer Michael L. Goldberg /s/Michael L. Goldberg
Vice President, Strategic Planning
and Business Development Donald J. Deegan /s/Donald J. Deegan
Treasurer Richard L. Pietrowski /s/Richard L. Pietrowski
Legal Counsel and Secretary Louis T. Bland, Jr. /s/Louis T. Bland, Jr.
IN WITNESS WHEREOF, I have hereunto set my hand and the corporate seal of
said Corporation this 25th day of July, 1996.
/s/Louis T. Bland, Jr.
Secretary as aforesaid
/s/Donald J. Deegan
Other Officer
(Corporate Seal)
Vice President
Title
This Resolution must also be signed by a second officer of the corporation
or a member of its Board of Directors if the Secretary (or other
certifying officer) is authorized to act alone by the above resolutions.
Exhibit 11
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
<TABLE>
<CAPTION>
Average
Shares-
(Weighted
Number Number of Shares)Number
Twelve Months of Shares Weighted of Days
Ended Period Days Outstanding Shares As Adjusted
<C> <C> <C> <C> <S> <C> <C> <C>
July 31, 1996 08/01/95 to 8 6,901,322 55,210,578
08/08/95
08/09/95 to 63 6,841,322 431,003,286
10/10/95
10/11/95 to 1 6,814,922 6,814,922
10/11/95
10/12/95 to 145 6,812,922 987,873,690
03/04/96
03/05/96 to 2 6,809,422 13,618,844
03/06/96
03/07/96 to 12 6,802,922 81,635,064
03/18/96
03/19/96 to 43 6,796,122 292,233,246
04/30/96
05/01/96 to 28 6,798,122 190,347,416
05/28/96
05/29/96 to 2 6,793,022 13,586,044
05/30/96
05/31/96 to 3 6,792,022 20,376,066
06/02/96
06/03/96 to 1 6,789,022 6,789,022
06/03/96
06/04/96 to 1 6,787,022 6,787,022
06/04/96
06/05/96 to 6 6,785,022 40,710,132
06/10/96
06/11/96 to 3 6,778,022 20,334,066
06/13/96
06/14/96 to 4 6,772,422 27,089,688
06/17/96
06/18/96 to 2 6,760,422 13,520,844
06/19/96
06/20/96 to 11 6,753,122 74,284,342
06/30/96
07/01/96 to 14 6,744,351 94,420,914
07/14/96
07/15/96 to 1 6,741,451 6,741,451
07/15/96
07/16/96 to 16 6,736,451 107,783,216
07/31/96
366 2,491,159,853
<C>
6,806,448
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
443
<C>
6,806,891
</TABLE>
<TABLE>
<CAPTION>
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
Average
Shares-
(Weighted
Number Number of Shares)Number
of Shares Weighted of Days
Year End Period Days Outstanding Shares As Adjusted
<C> <C> <C> <C> <S> <C> <C>
July 31, 1995 08/01/94 to 8 6,951,822 55,614,576
08/08/94
08/09/94 to 204 6,949,822 1,417,763,688
02/28/95
03/01/95 1 6,946,922 6,946,922
03/02/95 1 6,945,922 6,945,922
03/03/95 to 3 6,943,922 20,831,766
03/05/95
03/06/95 1 6,942,722 6,942,722
03/07/95 1 6,936,522 6,936,522
03/08/95 to 2 6,934,822 13,869,644
03/09/95
03/10/95 to 4 6,932,822 27,731,288
03/13/95
03/14/95 1 6,932,322 6,932,322
03/15/95 1 6,931,322 6,931,322
03/16/95 to 4 6,929,822 27,719,288
03/19/95
03/20/95 1 6,928,822 6,928,822
03/21/95 1 6,928,322 6,928,322
03/22/95 1 6,927,822 6,927,822
03/23/95 1 6,927,322 6,927,322
03/24/95 to 3 6,911,322 20,733,966
03/26/95
03/27/95 to 127 6,901,322 876,467,894
07/31/95
<C> <C> <C>
365 2,530,080,130 6,931,726
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
4,249
<C>
6,935,975
</TABLE>
<TABLE>
<CAPTION>
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
Average
Shares-
(Weighted
Number Number of Shares)
of Shares Weighted Number of
Period Days Outstanding Shares Days As
Year End Adjusted
<C> <C> <C> <C> <S> <C> <C> <C>
July 31, 1994 08/01/93 to 2 6,991,285 13,982,570
08/02/93
08/03/93 to 9 6,991,285 62,921,565
08/11/93
08/12/93 to 4 6,993,827 27,975,308
08/15/93
08/16/93 to 8 6,993,827 55,950,616
08/23/93
08/24/93 to 10 6,995,174 69,951,740
09/02/93
09/03/94 to 12 6,995,638 83,947,656
09/14/93
09/15/93 to 5 6,996,416 34,982,080
09/19/93
09/20/93 to 2 6,997,041 13,994,082
09/21/93
09/22/93 to 8 6,998,121 55,984,968
09/29/93
09/30/93 to 4 6,993,121 27,972,484
10/03/93
10/04/93 to 14 6,988,121 97,833,694
10/17/93
10/18/93 to 1 6,983,121 6,983,121
10/18/93
10/19/93 to 6 6,978,121 41,868,726
10/24/93
10/25/93 to 4 6,978,972 27,915,888
10/28/93
10/29/93 to 3 6,980,823 20,942,469
10/31/93
11/01/93 to 2 6,980,821 13,961,642
11/02/93
11/03/93 to 1 6,980,871 6,980,871
11/03/93
11/04/93 to 5 6,981,827 34,909,135
11/08/93
11/09/93 to 14 6,983,722 97,772,108
11/22/93
11/23/93 to 4 6,983,872 27,935,488
11/26/93
11/27/93 to 2 6,984,316 13,968,632
11/28/93
11/29/93 to 1 6,988,551 6,988,551
11/29/93
11/30/93 to 3 6,993,160 20,979,480
12/02/93
12/03/93 to 35 6,994,198 244,796,930
01/06/94
01/07/94 to 3 6,995,338 20,986,014
01/09/94
01/10/94 to 14 6,997,473 97,964,622
01/23/94
01/24/94 to 57 6,998,285 398,902,245
03/21/94
03/22/94 to 43 6,999,966 300,998,538
04/30/94
05/04/94 to 27 6,999,966 188,999,082
05/30/94
05/31/94 to 1 6,999,066 6,999,066
05/31/94
06/01/94 to 6 6,997,866 41,987,196
06/06/94
06/07/94 to 1 6,996,666 6,996,666
06/07/94
06/08/94 to 1 6,996,466 6,996,466
06/08/94
06/09/94 to 5 6,983,466 34,917,330
06/13/94
06/14/94 to 1 6,976,866 6,976,866
06/14/94
06/15/90 to 6 6,971,666 41,829,996
06/20/94
06/21/94 to 20 6,971,822 139,436,440
07/10/94
07/11/94 to 3 6,961,822 20,885,466
07/13/94
07/14/94 to 18 6,951,822 125,132,796
07/31/94
<C> <C> <C>
365 2,551,508,593 6,990,435
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
20,289
<C>
7,010,724
</TABLE>
<TABLE>
<CAPTION>
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
Average
Shares-
(Weighted
Number Number of Shares)
of Shares Weighted Number of
Period Days Outstanding Shares Days As
Year End Adjusted
<C> <C> <C> <C> <S> <C> <C> <C>
July 31, 1993 08/01/92 to 9 6,992,793 62,935,137
08/09/92
08/10/92 to 14 6,993,845 97,913,830
08/23/92
08/24/92 to 99 6,993,859 692,392,041
11/30/92
12/01/92 to 3 6,998,547 20,995,641
12/03/93
12/04/92 to 12 6,999,619 83,995,428
12/15/93
12/16/92 to 20 7,001,911 140,038,220
01/04/93
01/05/93 1 7,002,061 7,002,061
01/06/93 to 8 7,002,379 56,019,032
01/13/93
01/14/93 to 22 7,003,291 154,072,402
02/04/93
02/05/93 to 12 7,003,575 84,042,900
02/16/93
02/17/93 1 7,005,696 7,005,696
02/18/93 to 8 7,003,696 56,029,568
02/25/93
02/26/93 to 21 6,995,696 146,909,616
03/18/93
03/19/93 to 14 6,996,996 97,957,944
04/01/93
04/02/93 to 11 6,997,830 76,976,130
04/12/93
04/13/93 to 6 6,987,830 41,926,980
04/18/93
04/19/93 to 31 6,989,219 216,665,789
05/19/93
05/20/93 to 55 6,989,797 384,438,835
07/13/93
07/14/93 to 12 6,990,729 83,888,748
07/25/93
07/26/93 to 6 6,991,285 41,947,710
07/31/93
<C> <C> <C>
365 2,553,153,708 6,994,942
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
36,174
<C>
7,031,116
</TABLE>
<TABLE>
<CAPTION>
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
Average
Shares-
(Weighted
Number Number of Shares)
of Shares Weighted Number of
Period Days Outstanding Shares Days As
Year End Adjusted
<C> <C> <C> <C> <S> <C> <C> <C>
July 31, 1992 08/01/91 to 12 7,012,370 84,148,440
08/12/91
08/13/91 to 8 7,002,370 56,018,960
08/20/91
08/21/91 to 2 6,992,370 13,984,740
08/22/91
08/23/91 to 21 6,992,891 146,850,871
09/12/91
09/13/91 to 91 6,995,091 636,553,281
12/12/91
12/13/91 to 42 6,996,075 293,835,150
01/23/92
01/24/92 to 7 6,989,409 48,925,863
01/30/92
01/13/93 to 5 6,989,379 34,946,895
02/04/92
02/05/92 to 30 6,991,379 209,741,370
03/95/92
03/06/92 to 148 6,992,793 1,034,933,364
<C> <C> <C>
366 2,559,938,934 6,994,369
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
31,931
<C>
7,026,300
</TABLE>
EXHIBIT 13
<TABLE>
<CAPTION>
Financial Highlights
1996 1995 Change
<S> <C> <C> <C>
Net Sales $153,786,754 $152,899,109 +0.6%
Income from Operations $6,115,233 $12,841,947 -52.4%
Income before Income Taxes $4,783,402 $11,147,425 -57.1%
Net Income $3,374,257 $8,002,828 -57.8%
Net Income per Share $ 0.50 $ 1.15 -56.5%
Net Income as a Percentage of 2.2% 5.2% -3.0%
Sales
Return on Average Stockholders' 4.3% 10.6% -6.3%
Equity
Working Capital $30,398,649 $33,074,318 -8.1%
Stockholders' Equity $77,229,496 $78,338,383 -1.4%
Book Value per Share $11.46 $11.35 +1.0%
Average Shares Outstanding 6,806,891 6,935,975 -1.9%
Dividends Declared $2,022,205 $2,046,644 -1.2%
Capital Expenditures $7,184,337 $7,032,064 +2.2%
Depreciation and Amortization $7,925,806 $7,808,496 +1.5%
Long-Term Debt $18,978,000 $20,422,265 -7.1%
</TABLE>
<TABLE>
<CAPTION>
SALES TRENDS (millions of dollars)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Consumer Products $ 82.6 $ 82.9 $ 77.0 $ 73.3 $ 65.2
Industrial and Environmental 17.2 18.9 19.9 19.0 19.1
Products
Agrisorbents Products 19.9 16.6 18.3 18.4 14.9
Fluids Purification Products 12.6 13.0 13.2 10.1 6.1
Foreign Subsidiaries 11.9 12.2 11.2 12.4 11.0
Transportation Services 9.6 9.3 7.5 7.7 8.3
<C> <C> <C> <C> <C>
$153.8 $152.9 $147.1 $140.9 $124.6
</TABLE>
<TABLE>
<CAPTION>
Land Holdings & Mineral Reserves
Owned Leased Claims Total Proven
(acres) (acres) (acres) (acres) Reserves
(1,000's of
tons)
<S> <C> <C> <S> <C> <C>
Georgia 1,484 1,804 - 3,288 44,305
<S> <C> <C> <S> <C> <C>
Mississippi 2,134 1,423 - 3,557 130,358
<S> <C> <S> <C> <C> <C>
Oregon 1,260 - 1,580 2,840 36,833
<S> <C> <C> <S> <C> <C>
Florida 537 446 - 983 4,512
<S> <C> <C> <C>
Nevada - - 598 598 23,316
<S> <C> <S> <C> <S>
Illinois 4 - - 4 -
<C> <C> <C> <C> <C>
5,419 3,673 2,178 11,270 239,324
</TABLE>
Consumer Products
Fiscal 1996 was Oil-Dri's Year of the Cat. The cat litter category is an
important and growing consumer products area. Demographic trends continue
to influence the increasing popularity of cats as pets and total retail cat
litter sales are expected to reach $1 billion by the year 2001.
The introduction of the Cat's Pride Premium Scoopable Stretch Jug and
the Kat Kit were a great success. The Stretch Jug leverages a
significant competitive advantage provided by our low-density product. Each
jug contains 40% more volume than leading competitive scoopable products in
the same weight jug. The Kat Kit is a unique disposable cat tray made of
100% recycled plastic that contains Cat's Pride Premium cat litter.
Consumers simply use it for a week and then discard it; there's no
cleaning, deodorizing or mess.
The company's dollar share of the branded cat litter market increased
dramatically during the year. The investments made in marketing and
advertising have paid off in a stronger brand franchise.
Industrial & Environmental Products
The Oil-Dri brand has been the leading name in industrial cleanup for over
55 years. Industrial and Environmental products include both traditional
clay floor absorbents and Oil-Dri Lite sorbents. Oil-Dri Lite products are
highly absorptive, light-weight, non-clay materials. They come in a variety
of configurations and have different absorptive characteristics. Oil-Dri
Lite sorbents skim oil spills from water in marine applications and, more
commonly, soak up leaks and spills in industrial and automotive settings.
Innovations in products and packaging deliver benefits to customers. The
new Oil-Dri Premium Floor Absorbent combines the best of Oil-Dri's quality
floor absorbents with a new polybag. The stronger packaging will reduce
damage during shipping and handling and allow higher stacking, conserving
valuable warehouse space. The waterproof polybag can also be stored
outside.
Oil-Dri is the only supplier that provides the well-known Oil-Dri Floor
Absorbents and a selection of non-clay sorbents for a comprehensive line of
cleanup products.
Agrisorbents Product Group
The Agrisorbents Product Group delivers a variety of products to the
agricultural industry. Agsorb carriers are sold to crop protection
chemical manufacturers like DowElanco, DuPont and Zeneca. These carriers
are used to distribute herbicides, fungicides, insecticides and fertilizers
to agricultural fields.
ConditionAde is an animal feed additive which helps blend feed ingredients
without the usual stickiness and mess. This increases feed pellet
production by allowing the feed extruders to run more smoothly, lowering
energy costs and improving feed pellet durability. Flo-Fre absorbent
microgranules and Pel-Unite pelleting aid are also sold to the animal
health and nutrition market.
Terra-Green is used in a variety of sports turf and horticultural
applications. Thousands of tiny pores in each Terra-Green granule absorb
water, storing it for release into soils as they need it. The durability of
each granule also helps prevent compaction of soil, opening up airways and
water passages for improved root zone growth.
<PAGE>
Fluids Purification Product Group
Used in the refining and purifying of sunflower, soybean, canola, palm and
many other oils, Pure-Flo bleaching clays offer process benefits to
refiners all over the world including ADM and Kraft Food Ingredients. The
Fluids Purification Group has customers in over 60 countries and continues
to expand its worldwide sales.
Two new products introduced during the year, Perform and Select, offer
performance advances to refiners and deliver enhanced margins. The Perform
products are the next generation of bleaching clays, providing increased
activity for hard-to-bleach oils. The Select line of products is used
earlier in the process stream to remove a variety of impurities from edible
oils. Select can also be used to replace an expensive water wash step in
the caustic refining of edible oils.
Oil-Dri has recently completed construction of a manufacturing facility
engineered to produce these innovative new products. We believe that the
quality and efficacy of Perform and Select will exceed the expectations of
our customers.
Dick Jaffee
Chairman and Chief Executive Officer
Fiscal 1996 was a year of transition and renewal. Dan Jaffee and the other
new members of our management group worked with our seasoned Oil-Dri
managers to create a team that will lead us into the future. The year was
also characterized by some outstanding successes and some significant
disappointments.
During the past year, our consumer business successfully launched two new
Cat's Pride products. Favorite Products, our Canadian subsidiary, also
continued to deliver solid performance and expand sales of our Saular cat
box products, the leading brand name in our Canadian market.
In our specialty products areas, the Agrisorbents Product Group broke
sales and profit records; the Industrial and Environmental Division
delivered a positive contribution to the bottom line, a significant reverse
of last year's loss; and our Fluids Purification business demonstrated
sales progress, particularly in some of our international markets.
Net sales for the year ended July 31, 1996, were $153,787,000, up slightly
from last year's sales of $152,899,000. Net income was $3,374,000, off 58%
from the $8,003,000 earned a year ago. Net income per share was $0.50
versus last year's $1.15. Earnings were negatively impacted by an after tax
charge of $0.10 per share associated with settlement of patent litigation.
Consumer Products
As anticipated, the launch of the new Cat's Pride Kat Kit and Stretch Jug
required approximately $6,500,000 in marketing and advertising support.
While the expenditures reduced earnings in the past year, the investment
has paid off with considerable gains in sales and distribution for our
Cat's Pride brand. The success of the launch is particularly gratifying in
light of the increased competition in the cat box filler category.
Unfortunately, the estimated $10,000,000 in sales generated by our new
products were largely offset by reduced sales to Sam's Club, our primary
warehouse club account.
On the positive side, during the fourth quarter Sam's reinstated our Cat's
Pride Premium and added our Cat's Pride Scoopable in approximately 70% of
their stores. They are evaluating various product offerings in the cat box
filler category, and, at the time of this report, we are enjoying renewed
volume.
<PAGE>
Specialty Products
Despite a 9% reduction in sales, the Industrial and Environmental Division
made a positive contribution to the bottom line, a significant reversal
over last year's performance. Increased focus on profitability,
rationalization of our product line and consolidation of the divisional
functions in Alpharetta, Georgia paid off handsomely during the year.
The Agrisorbents Product Group had a wonderful year. Record sales of our
Agsorb products and expansion into animal health and nutrition and turf
markets increased overall divisional sales by 20%.
Monsanto Agricultural Company acknowledged the superior quality of our
products and services with the Monsanto Quality Supplier Award for the
fourth time in six years. Given to only a handful of the thousands of
suppliers that work with Monsanto, it is a distinct honor.
Our Fluids Purification Group successfully expanded business
geographically, particularly in Latin America, Asia, Africa and Europe.
Also, two new products were introduced during the year. Select products
remove soaps, metals and phospholipids from edible oils during the refining
process. Use of Select can also eliminate an expensive water wash
treatment, a cost advantage for caustic refiners.
Perform products, manufactured in a new processing facility at our Georgia
plant, deliver performance benefits that will open up additional market
niches in the edible oil refining market.
Operations and Transportation
Fiscal 1996 was a very good year for the support functions of the company.
Manufacturing continued to run environmentally responsible and safe
operations. Capital expenditures were $7,184,000, versus depreciation and
amortization charges of $7,926,000. We had record outputs in mining and
shipments and we also expanded our base of mineral reserves.
Oil-Dri Transportation delivered on its mission to ensure on-time
deliveries at affordable costs and to support our customer service
requirements. Additionally, the group reduced overall transportation costs
by expanding their backhaul business with outside customers.
The Logistics, Quality and Service team helped distinguish Oil-Dri in each
of our markets as a supplier that is flexible and responsive to customer
needs. Customer service and information management systems have seen
significant improvement.
Research and development activities, including technical service, were
provided by our team of scientists and technicians in Vernon Hills,
Illinois. They continue to play an important role in our existing markets
as well as in the identification of potential markets.
Financial
Our balance sheet remains strong with a current ratio of 2.7. Additionally,
fiscal 1996 was an outstanding year for generating cash. Balances of cash
and investments were $11,708,000 at July 31, 1996, an increase of 4.9% in
spite of spending $2,434,000 for the repurchase of 167,000 shares of Oil-
Dri stock. Dividend payout was $2,015,000 and $1,145,000 was used to reduce
debt.
In the last few years, the company has repurchased 300,000 shares of Oil-
Dri stock. At its meeting in June, the Board of Directors authorized a new
share repurchase program for an additional 400,000 shares. If we complete
this repurchase program and add another 400,000 shares to the treasury, we
will have reduced the total outstanding shares by 10%.
<PAGE>
With Thanks
I would like to recognize and thank Norman B. Gershon who served on our
Board of Directors for 20 years. While continuing in his capacity as Vice
President of European Operations and Managing Director of Oil-Dri, S.A.,
Nick did not stand for re-election to the board this past December.
Bruce Sone, after 35 years with the Company, has chosen to retire as of
August 1, 1996. In addition to his work in expanding our consumer business,
Bruce served as a director for 16 years. Bruce's contributions to the
development of Oil-Dri and the building of its management team are greatly
appreciated.
Ronald Gordon joined the Oil-Dri Board of Directors this year. Ron has many
years of experience in consumer packaged goods and we are grateful to have
the benefit of his counsel.
The Year Ahead
We look forward to fiscal 1997 as a year in which we will spend less on
advertising and see our investment in the consumer market deliver increased
sales and profits. Reduced capital requirements should continue to generate
cash, and a Company-wide cost reduction program will focus everyone's
attention on profitability. We also anticipate another record year from the
Agrisorbents Products Group and we hope to see continued progress in the
profitable development of the Industrial and Environmental and Fluids
Purification Groups.
Sincerely,
Dan Jaffee
President and Chief Operating Officer
We at Oil-Dri are focusing our efforts on building the teams, brands and
profits that will combine to increase our shareholder value. Building is
the most critical component of our vision because it conveys our intention
to systematically and methodically work our way towards our end result
creating shareholder value. To build anything properly, you need a blend of
the right materials, good blueprints and, most importantly, talented
individuals to execute the plan.
Between 1983 and 1993, my father led a team of talented, highly-motivated
people through a dynamic period of Company growth. During this eleven year
period, net sales grew from $34 million to $141 million; a compound annual
growth rate of 14%. Net income exploded, growing from $1.1 million to $9.4
million; a compound annual growth rate of 22%. Most impressive was our
stock price. Adjusted for all splits, it was selling for $1.69 per share on
July 31, 1982. On the same date, eleven years later, the stock was selling
for $24.50 per share.
I see a real similarity between where we were at the start of that growth
period in 1982 and where we are today. The catalyst behind that growth was
focusing senior managers on creating shareholder value over the long-term.
The vehicle to motivate these managers was the 1981 Incentive Stock Option
Plan. When used correctly, stock options provide an ideal tool for bringing
together the interests of both the shareholders and the senior leaders of
the business.
<PAGE>
The option plan that you, the shareholders, voted into place a year ago is
giving me the device I need to build a successful team of managers. It has
been instrumental in attracting and retaining extremely talented
individuals. In the following pages of this annual report, you will be
introduced to many of the people who are critical to the success I am
confident we are going to achieve. You will see that we have a nice blend
of seasoned Oil-Dri veterans and energetic newcomers who learned their
trade at highly successful, sophisticated companies like Miles, Inc.,
Alberto-Culver and Amoco. The common thread is that all are proven winners
who see the opportunity to make the next ten to fifteen years the defining
period of their careers. The stock options will once again join your
interests with ours, as these managers focus on building our business and
creating shareholder value.
I once asked Ned Jannotta, a long-time board member and mentor, what Oil-
Dri needed to do to get our stock price back where it belonged. Did we need
to more aggressively market our stock? Should we be courting analysts to
follow our performance? What was the key? His answer was profound in its
simplicity. Ned told me, Dan, you need to deliver predictably outstanding
earnings growth on a long-term basis, and the rest will take care of
itself. Our business managers know that the sum of our parts equals our
whole. Their challenge is to grow their businesses profitably. Each and
every unit needs to deliver on its own annual plan and the rest will fall
into line.
Each unit has a powerful blend of a strong team, the highest quality
products and unparalleled service. All of these combine to satisfy the
demanding needs of our customers. We must leverage these strengths and
deliver new products to our existing customers and existing products to new
customers. The growth opportunities facing our business are endless, our
challenge is to determine which opportunities will deliver value to our
shareholders over the long-term.
The end of fiscal 1996 marks the completion of our first year of getting
Oil-Dri back on our historic path of growth. We accomplished many things
and, in a number of ways, we are in a better position today than we were at
the outset of the year, as evidenced by the achievements referenced in the
letter from our chairman. Additionally, the entire Oil-Dri team has never
been stronger.
Let's analogize our business to running an NCAA Division I football program
and you, the shareholders, are the alumni association. Your new head coach
finishes his first full season with three wins and eight defeats. In the
ensuing two seasons his team wins two, loses nine and then wins three,
loses seven and ties one. Do you start cheering for a different school or
do you hang onto your season tickets (shares of stock) because you know the
team has been getting stronger even though their record has not reflected
progress?
If you opted to change teams, you gave up a year too soon. However, if you
chose to stick with the program, you just found your team in Pasadena. This
scenario is not hypothetical. The head coach is Gary Barnett and the school
is Northwestern University. In Mr. Barnett's fourth year as head coach, his
Wildcats had ten victories and only one defeat on their way to the Rose
Bowl.
The point of this analogy is to illustrate that building a winning team
takes time. We have a good program at Oil-Dri and only recently have
suffered more defeats than we would like. We are blessed with a strong
and talented team of players throughout the organization. Each of our
business units is focused on building its teams, brands and profits to get
us back to our old winning ways. Fiscal 1997 will be the year to clearly
demonstrate that we are on the right track. We need to balance our
aggressiveness in taking advantage of opportunities that are right in front
of us with the necessity to deliver at the bottom line.
Sincerely,
<PAGE>
Mike Goldberg
Vice President & Chief Financial Officer
As the newest member of the Oil-Dri management group, I have been given the
opportunity to be part of a team that is striving to build a stronger
company for the future. The philosophy of our team is clear - we are here
for the long-term. We must set financial goals to help build sustainable
and profitable businesses that will reward both our shareholders and
employees.
Last year we began the process of building a stronger finance department
that can better analyze the cost structure of the Company and develop tools
to improve the Company's financial planning and reporting capabilities. As
a result, the Company is better positioned today to financially plan for
its future than at any time in its history.
The strengths of the finance department are treasury management, its
ability to analyze and develop alternative financing opportunities and its
ability to develop solutions to internal and external financial reporting
issues. Future focus will be on understanding more clearly the cost
drivers in each individual business unit, delivering the financial data
that will help our business managers run their units and providing the
financial tools needed to plan and measure each group's performance. We
must continually ask ourselves if everything we do improves our chance to
grow the business or profits. At the same time, we must ensure that
adequate controls are in place to safeguard the Company's assets and work
towards maintaining those assets at optimum levels.
Richard Hardin
Group Vice President, Technology
Product innovations continue to increase sales and market opportunities at
Oil-Dri. My responsibilities involve fostering effective communication
between sales and marketing and research and development (R&D). This
ensures that we focus our efforts on creating the most effective match of
our resources and our opportunities to establish a market fit.
A drive to innovate and a sound understanding of the marketplace, filtered
through a screen of common sense and a thorough knowledge of our resource
base, are the basics for identifying new applications and opportunities.
The strongest part of our research program is the team of people. They
bring an outstanding base of education and experience to our effort. Our
researchers are highly responsive to our business units and clearly able to
communicate research results and their implications for the business.
During the past year, R&D was very responsive to the product support and
product improvement needs of our business units. This resulted in better
control of our quality, product performance advances, improved profit
margins and new products.
In the next few years, my most important contribution to the company will
be to help establish a corporate-driven commitment and mechanism for
defining new product application goals. The ongoing challenge is to
allocate our valuable R&D resources in a manner that ensures a healthy
stream of new innovations without compromising technical
support of our existing products.
Jim Davis
Vice President, Manufacturing
Our ability to locate, mine, process and sell mineral products to consumer,
agricultural, industrial, environmental and fluid purification markets is
exceptional. In addition to the marketing of such diverse products, there
are complicated manufacturing, engineering, exploration, mining,
environmental and health and safety issues. Oil-Dri has been in this
business for over half a century and has the greatest supply of quality
reserves in the industry. While we have some very reputable competition in
the markets in which we compete, I feel confident that none of these
companies can match our experience and know how.
<PAGE>
During fiscal 1996, we reduced costs, improved environmental compliance
procedures, delivered better product quality and increased worker safety.
Emphasis on worker safety is good for our employees and our bottom line. We
had a 46% decrease in worker's compensation claims in the last year. All of
our plants met environmental compliance regulations and, by working with
the Mississippi Department of Environmental Quality, we were able to
implement a program that will deliver a cost saving of more than $200,000.
We also played a role in the development of new products and processes,
which ultimately deliver more profitability to the company and its
shareholders.
The vertical integration of Oil-Dri is one of the elements that has driven
our success. Because we control all aspects of our production, we are in a
position to control our destiny and deliver the best possible products at
the lowest
possible cost.
Tom Cofsky
Vice President, Logistics, Quality and Service
As a support group, Logistics, Quality and Service (LQS) adds value by
keeping our customers satisfied. This involves providing courteous service
and furnishing accurate and meaningful information as we strive to make
doing business with Oil-Dri simple and pleasurable. Additionally, LQS has
helped increase employee productivity through systems improvements. This
allows us to handle more business without adding staff.
In the last year, LQS kept expenses below plan while keeping our
information systems running and delivering excellent service to our
customers. Qualitative successes included increasing the involvement of our
customer service representatives with the business teams. They are now
participating and contributing at a higher level. Additionally, many small
steps were taken to improve our information systems and problem resolution
processes. With each small improvement we have made it easier for people to
do their jobs and we have taken action to prevent problems that impact our
profitability and our customers' satisfaction.
My philosophy is not to accept things as they are, but to focus on what
they could or should be. Seeing the positive impact of quality
improvements, both at the customer level and at the profit level, is very
motivating. Our corporate dedication to continuous improvement gives each
individual team member the power to say, We could do this better.
Steve Levy
Vice President and General Manager, Consumer Products
Oil-Dri's management team has the confidence required to make decisions
that provide for the longer-term success of the entire business rather than
focusing exclusively on delivering short-term results. This has allowed us
to begin building a brand franchise and a more dominant position in the cat
box filler category.
Our two new Cat's Pride products have generated $10 million in net sales.
These items helped drive retail sales in our grocery and mass merchandiser
accounts. IRI data that reflects the last six months of our fiscal year
shows retail sales of the Cat's Pride brand up 27%, greatly exceeding
category growth of 4%.
These gains in new product sales helped offset revenue declines of
approximately $7 million in our largest wholesale club account.
<PAGE>
Unquestionably, there is more value in diversification. New sales of our
Cat's Pride products were spread across a much broader customer base. The
continued diversification of our customers and our branded product
offerings will provide Oil-Dri and its shareholders with more reliable
performance.
Building our brand franchise also allows us to work toward the company's
goal of building profits. Both products introduced in 1996 have higher
gross profit margins than the divisional average. These higher margins will
justify marketing support and deliver more profits.
Jim Van Vliet
Director of Marketing, Consumer Products
Introductions of the Cat's Pride Scoopable Stretch Jug and Kat Kit
required significant investment spending during the year. This product
launch has improved our retail position and increased our presence in the
grocery trade, which represents 70% of total U.S. cat litter sales. In a
time of category consolidation, the Cat's Pride franchise is the only cat
litter brand showing substantial retail growth. Despite constant
competitive pressure, investment in our brand franchise has delivered a
substantial return as indicated by IRI data coinciding with our fiscal year
end:
<TABLE>
<CAPTION>
Total U.S. Grocery
12 week period ended 7/14/96
Dollar Sales ACV Weighted Distribution
% Change vs. Dollar Share Dollar Share Pt. Change Vs.
Year Ago of Category Pt. Change Distribution Year Ago
<C> <C> <C> <C> <C>
+42.6% 6.1% +1.8 56.1% +10.6
</TABLE>
The new Cat's Pride products are not me too products easily duplicated by
our competition. As the fourth largest marketer of branded cat box filler
products, innovation is mandatory. It allows us to provide consumers with
both quality and value. Our challenge is to leverage our proven track
record as the innovator in the category and fill the marketing pipeline
with new product ideas or the next great marketing innovation. We must be
faster, smarter and more creative than the competition.
Peter Collins
Director of Grocery Sales, Consumer Products
In today's fast-paced world of information and technology, the
manufacturers and retailers that are going to survive in the consumer
market are the ones that can effectively manage the enormous amount of
market data, condense it, and most importantly interpret it to deliver
value to the retailer.
This data and an unbiased evaluation of consumer trends are demanded by
retailers. Oil-Dri Corporation of America is in a position to deliver this
information as well as the new product innovations that consumers want.
Consolidation has brought some large competitors into the cat box filler
market, but none of them have the same single-minded focus we deliver to
this category. We have the best quality reserves, the most sophisticated
research and highly innovative products.
This past year, the sales force expanded sales into new markets and
increased sales in our core markets by leveraging the new Cat's Pride
products. In the last three months of fiscal 1996, our dollar share of the
$488 million retail grocery market increased 43%, and our ACV weighted
distribution increased 23%.
<PAGE>
For the new year, I have identified with each salesperson three major
business initiatives within their territories that, if successfully
executed, will deliver strong sales and profit growth. My goal is to keep
the sales plan simple, focused and deliverable.
Daniel Jones
Vice President, Favorite Products, Ltd.
Favorite Products, a wholly-owned subsidiary of Oil-Dri, supplies our
Canadian markets with quality cat litter products under the brand names
Saular and Cat's Pride. The Saular brand has had a very strong presence
in the Quebec market for many years and our goal is to expand upon this
success in other Canadian markets. Favorite also sells industrial and
environmental products in Canada.
The consumer business is focused on our most profitable and value-added
products; Saular Kat Kit, Saular Scoopable Plus and Saular Plus. The
Saular brand in the Quebec grocery market is very strong, with a 51% dollar
share. The A.C. Nielson report for the 52 weeks ended July 20, 1996,
illustrates the growth of our premium products. Saular Kat Kit increased
sales 41% over the prior year and Saular Plus was up 15%, while the
category remained flat.
Building long-term partnerships with our customers and assuring that the
products we offer increase category profitability while meeting the needs
and wants of consumers is vital. Innovative, value-added products are the
trademark of Oil-Dri and Favorite Products and they have been the growth
drivers for our business in Quebec. By adapting these programs for other
markets, we plan to build the Saular brand in the rest of Canada.
Chuck Boland
General Manager, Agrisorbents Product Group
Understanding a customer's decision-making process requires knowing as much
about their business as they do. It requires a level of relationship well
beyond the traditional buyer-seller structure. This understanding must be
used to deliver innovations that increase the value and satisfaction
delivered by Oil-Dri's agricultural products and services. Focus on
customer needs will also provide opportunities to grow sales of existing
products and create line extensions.
In the crop protection market we are recognized for quality products and
services. As we expand further into animal health and nutrition and turf
and ornamental applications, we can leverage the processing and technical
expertise acquired in the crop protection industry.
During the past year, strong demand from our customers allowed us to take
advantage of earlier investments in plant and marketing infrastructures.
Looking forward, we will identify new products and applications driven by
customer needs. The animal health and nutrition and the turf and ornamental
markets are growing in real terms and we have strengths in marketing, R&D
and logistics that can be leveraged. We are well positioned to bring value-
added products to the sophisticated buyers in these markets.
Wade Bradley
General Manager, Industrial & Environmental Product Group
Our divisional challenge has been to improve profitability, restructure for
more efficiency and identify opportunities for future growth. This year we
achieved our financial plan, delivered a contribution to the company,
reorganized the sales team based on targeted selling and distribution and
identified two solid market opportunities for growth.
<PAGE>
Our position as the only supplier of a complete product line of clay floor
absorbents and non-clay sorbents is a major advantage. Other advantages
include our corporate capabilities such as management information services
and logistics. Oil-Dri has leveraged these and other internal capabilities
to service the needs of companies such as Wal-Mart, ADM and Monsanto. We
can learn from these successes and use the lessons to service the customers
in our industry.
We have also identified opportunities in the automotive and hardware
market. We are in the process of developing a family of products for use in
homes and garages. This line will build on the Oil-Dri brand name, the
professional's choice for over 55 years, and deliver quality products to
consumers as well as professionals.
Our mission is to be customer focused, profit driven and the leading U.S.
supplier of a comprehensive line of sorbent products and services.
Fielden Fraley
General Manager, Fluids Purification Group
Individual efforts directed towards shared goals and objectives enable a
team to meet its potential and deliver the best possible performance. The
Fluids Purification Group has built a very effective team that is focused
on expanding sales of our products on a worldwide basis.
Our success to date has come from identifying customer needs and delivering
products, some unique to the market, that improve processes and products.
We are fast and flexible. Knowledge of our markets, and the capabilities of
our raw materials allow us to recognize growth opportunities.
The competitive nature of the global marketplace demands continuous
improvement of our products. During the third quarter of fiscal 1996, we
introduced two new products for the oils and fats refining industry. These
products represent technical improvements and will deliver more
profitability. Our new manufacturing facility in Georgia will optimize our
unique processing methods and deliver future product innovations.
We hold a significant share of the market in North America, Latin America
and Asia. The goal of our team is to be the number one supplier of fluids
purification products to the industries and markets we serve on a global
basis. We must achieve this growth in the most profitable way we can in
order to deliver value to our customers and our shareholders.
Steve Azzarello
Commercial Manager, Latin America
Current trends are leading toward a truly global market. Technology has
made doing business all over the world not only possible but profitable.
Oil-Dri products fit into many markets outside the United States. We are
already doing business in over 60 countries, primarily with our fluids
purification products. The opportunity also exists to present some of our
other value-added products to these markets.
Business in Latin America increased 32% in the last year while expenses
remained flat. These increases in sales and profitability are evidence of
the shareholder value we are delivering from overseas markets. Oil-Dri's
challenge will be to develop strategies which address language and cultural
differences as well as the needs of the customers in each target market.
Sales of fluids purification products have the potential to continue double
digit growth in Latin America. Training outside agents to sell these and
other Oil-Dri products will increase our efficiency in these distant
markets, but we can't forget the value of firsthand experience. As the
novelist John le Carre wrote, A desk is a dangerous place from which to
view the world.
<PAGE>
In 1986...
Gone With the Wind, by Margaret Mitchell,
turned 50. The novel, which sold 25,000,000 copies in its first half
century, hit the best seller list once again.
The space shuttle Challenger exploded, prompting renewed debate on the U.S.
space program.
The Statue of Liberty celebrated its 100th birthday in New York City. The
centennial celebration included a parade of ships from all over the world
and the relighting of the torch by President Reagan.
The Oreo cookie marked its 75th year.
And at Oil-Dri...
The Company reported record sales of $52,841,000.
Cat box absorbents represented 22% of net sales.
The Company acquired 100% ownership interest in Favorite Products Company,
Ltd. of Montreal, Quebec.
The Company acquired the Georgia South Plant to meet increased customer
demand for cat litter and floor absorbents.
Pure-Flo bleaching clays and Ultra-Clear clarification aids were
introduced to the fluid purification market.
<PAGE>
<TABLE>
<CAPTION>
Five Year Summary of Financial Data
Year Ended July 31
SUMMARY OF OPERATIONS 1996 1995 1994
<S> <C> <C> <C>
Net Sales $153,786,754 $152,899,109 $147,146,793
Cost of Sales 107,729,770 108,268,431 102,456,815
Gross Profit 46,056,984 44,630,678 44,689,978
Selling, General and
<S> <C> <C> <C> <C>
Administrative Expenses* 39,941,751 31,788,731 30,261,701
<S> <C> <C> <C>
Income from Operations 6,115,233 12,841,947 14,428,277
Other Income (Expense)
<S> <C> <C> <C>
Interest Income 586,623 448,268 440,796
Interest Expense (1,916,569) (1,921,261) (1,751,839)
Foreign Exchange (Losses) ( 6,693) ( 5,463) 3,009
Gains
<S> <C> <C> <C>
Amortization of Goodwill ( 131,160) ( 132,048) ( 132,001)
Other, Net 135,968 ( 84,018) 171,142
Total Other Expense, Net (1,331,831) (1,694,522) (1,268,893)
Income before Income Taxes 4,783,402 11,147,425 13,159,384
<S> <C> <C> <C>
Income Taxes 1,409,145 3,144,597 3,307,184
<S> <C> <C> <C>
Net Income $3,374,257 $8,002,828 $9,852,200
Average Shares Outstanding 6,806,891 6,935,975 7,010,724
Net Income per Share $0.50 $1.15 $1.41
Important Highlights
<S> <C> <C> <C>
Total Assets $117,692,868 $116,987,683 $112,267,182
Long-Term Debt $18,978,000 $20,422,265 $21,521,243
Working Capital $30,398,649 $33,074,318 $29,337,449
Working Capital Ratio 2.7 3.1 3.0
Capital Expenditures $7,184,337 $7,032,064 $13,559,232
Depreciation and
<S> <C> <C> <C>
Amortization $7,925,806 $7,808,496 $6,798,038
Long-Term Debt to Equity 24.6% 26.1% 29.5%
Ratio
Net Income as a Percent of
<S> <C> <C> <C>
Net Sales 2.2% 5.2% 6.7%
Return on Average
<S> <C> <C> <C> <C>
Stockholders' Equity 4.3% 10.6% 14.1%
Gross Profit as a Percent of
<S> <C> <C> <C>
Net Sales 29.9% 29.2% 30.4%
Sales
Operating Expenses as a
<S> <C> <C> <C>
Percent 26.0% 20.8% 20.6%
of Net Sales
</TABLE>
<TABLE>
<CAPTION>
1993 1992
<C> <C>
$140,866,110 $124,584,756
<C> <C>
97,396,563 85,116,335
<C> <C>
43,469,547 39,468,421
<C> <C>
29,420,831 28,835,931
<C> <C>
14,048,716 10,632,490
<C> <C>
451,519 514,756
<C> <C>
(1,728,817) (1,884,166)
<C> <C> <C>
( 87,655) 63,471
<C> <C>
( 131,799) (131,079)
<C> <C>
( 298,485) 15,198
<C> <C>
(1,795,237) (1,421,820)
<C> <C>
12,253,479 9,210,670
<C> <C>
2,833,837 2,110,262
<C> <C>
$9,419,642 $7,100,408
<C> <C>
7,031,116 7,026,300
<C> <C>
$1.34 $1.01
<C> <C>
$102,116,632 $95,017,573
<C> <C>
$17,765,941 18,831,133
<C> <C>
$26,043,415 $24,358,769
<C> <C>
2.7 2.8
<C> <C>
$9,158,173 $8,039,979
<C> <C>
5,834,854 5,407,341
<C> <C>
26.7% 31.6%
<C> <C>
6.7% 5.7%
<C> <C>
14.9% 12.4%
<C> <C>
30.9% 31.7%
<C> <C>
20.9% 23.1%
</TABLE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Fiscal 1996 Compared to Fiscal 1995
Consolidated net sales for the year ended July 31, 1996, were $153,787,000,
an increase of 0.6% over net sales of $152,899,000 in fiscal 1995. Net
income for fiscal 1996 was $3,374,000 or $0.50 per share, decreasing 57.8%
from net income of $8,003,000 or $1.15 per share in fiscal 1995.
Net sales of industrial and environmental sorbents, consisting of clay and
non-clay products, decreased $1,615,000 or 8.6% from prior year levels due
to decreased unit shipments of both clay and non-clay products. Net sales
of industrial clay products fell $557,000 or 4.2% from prior year levels.
Net sales of non-clay sorbents decreased $1,058,000 or 19.8%, reflecting
increased competition in the markets in which the Company participates and
a refocused sales and marketing effort towards higher margin products. Net
sales of cat box absorbents decreased $363,000 or 0.5% below fiscal 1995
levels. Although the Company expanded dollar share in the grocery and mass
merchandiser markets, these market share gains were offset by the decline
in sales to the Company's largest club account, Sam's Club, due to the
introduction of a private label scoopable litter that replaced the
Company's branded scoopable product in a substantial number of Sam's
stores. Although the Company's branded cat litter products were
reintroduced into Sam's stores during the fourth quarter, continued
distribution is not assured. Net sales of agricultural carriers and
absorbents increased $3,257,000 or 19.6% from the prior fiscal year due to
increased unit shipments caused by increased planting acreage. Net sales
of fluids purification adsorbents decreased $362,000 or 3.0% from fiscal
1995 due primarily to competitive pressures and continued sluggish demand
in certain of the Company's markets. Sales of transportation services
increased $357,000 or 3.8% from fiscal 1995 levels due to increased
backhaul revenue.
Consolidated gross profit as a percentage of net sales increased to 29.9%
of net sales in fiscal 1996 from 29.2% in fiscal 1995. This increase was
principally due to a greater portion of net sales being generated in the
agricultural market and net sales of higher value products in the grocery
market. Additionally, cost increases for packaging and fuel in fiscal 1995
have moderated in fiscal 1996.
Operating expenses as a percentage of net sales increased to 26.0% of net
sales in fiscal 1996 from 20.8% of net sales in fiscal 1995. This increase
includes $6.5 million for promotional and advertising programs associated
with new product introductions. Also included in operating expenses is a
charge of $921,000 reflecting the settlement of a patent infringement
action in the second quarter of fiscal 1996.
Interest expense remained unchanged in fiscal 1996. Increased interest-
bearing deferred compensation balances offset reductions in the balance of
current and long-term notes payable. Interest income increased $138,000
from fiscal 1995 due to higher invested balances.
The Company's effective income tax rate increased to 29.5% in fiscal 1996
from 28.2% in the prior fiscal year. This change is a result of two
factors: lower domestic income subject to depletion allowances and a
greater percentage of total income earned in higher tax jurisdictions. The
provision for income tax expense for the fourth quarter and year ended July
31, 1995 includes a charge of $263,000 reflecting a change in the estimated
amounts of depletion deductions and temporary differences between financial
reporting and tax reporting for the year ended July 31, 1994.
<PAGE>
Total assets of the Company increased $705,000 or 0.6% during the year
ended July 31, 1996. Current assets decreased $535,000 or 1.1% from prior
fiscal year-end balances due to lower accounts receivable and prepaid
income taxes.
Property, plant and equipment, net of accumulated depreciation and
amortization, decreased $1,247,000 or 2.1% due primarily to depreciation
expense exceeding capital expenditures by $563,000 and the sale of fixed
assets with a net book value totaling $646,000. Investments in property,
plant and equipment included expenditures for increased productivity,
capacity enhancements, pollution control and equipment upgrades.
As of July 31, 1996, the Company has invested approximately $752,000 in
Kamterter, Inc., a company that researches and applies biotechnology in the
agricultural field. This investment, recorded at cost, represents a 13%
equity interest in Kamterter. During the year ended February 29, 1996, and
in subsequent interim periods, Kamterter has generated operating profits.
While the Company believes that Kamterter's prospects have improved,
Kamterter's future financial condition and results of operation cannot be
predicted.
Total liabilities increased $1,814,000 or 4.7% in the year ended July 31,
1996 due primarily to increased accounts payable, deferred compensation and
income taxes payable.
Expectations
The Company anticipates increased sales in fiscal 1997. Sales of branded
cat box absorbents are expected to increase as new product introductions
gain incremental distribution in the grocery and mass merchandise markets.
However, this overall sales growth is subject to continuing competition for
shelf space in the grocery, mass merchandiser and club markets. Investment
in the Company's consumer product launch is in line with original budgets,
and the Company expects the profitability of these products to favorably
impact earnings as spending on advertising and promotion returns to more
normal levels in fiscal 1997. High crop prices and strong export demand
indicate that the market for the Company's agricultural products will
remain strong in the foreseeable future. In fluids purification, a new
manufacturing facility will provide higher performance products, including
Perform and Select, which are expected to compete more effectively in the
market. The Company is going through an intensive review of its entire
cost structure, with a goal of significantly reducing costs.
The foregoing statements under this heading are forward-looking
statements within the meaning of that term in the Securities Exchange Act
of 1934, as amended. Actual results may be lower than those reflected in
these forward-looking statements, due primarily to: continued vigorous
competition in the grocery, mass merchandiser and club markets; the level
of success of new products; and the cost of new product introductions and
promotions in the consumer market. The forward-looking statements also
involve the risk of changes in market conditions in the overall economy
and, for the agricultural division, in planting activity and overall
agricultural demand, including export demand.
Liquidity and Capital Resources
In fiscal 1996, the current ratio decreased to 2.7 from 3.1 as of July 31,
1995. Working capital decreased $2,676,000 or 8.1% for the year ended July
31, 1996. Cash provided by operations continues to be the Company's
primary source of funds to finance operating activities and capital
expenditures. In fiscal 1996 net cash flows from operating activities
increased 1.2% to $12,469,000. This cash was used to fund capital
expenditures of $7,184,000, pay Company dividends of $2,015,000 and
repurchase shares of the Company's stock at a cost of $2,434,000. The
Company may continue to repurchase its Common Stock from time to time. As
of July 31, 1996, total consolidated cash and investments were $11,708,000,
up 4.9% from $11,162,000 as of July 31, 1995. Of this amount, balances
held by the Company's foreign subsidiaries as of July 31, 1996 and 1995
were $1,594,000 and $3,296,000, respectively.
<PAGE>
The Company's long-term debt as of July 31, 1996 decreased $1,444,000 or
7.1% from fiscal 1995 balances, primarily due to scheduled debt repayments.
Long-term debt to equity decreased to 24.6% from 26.1% as of July 31, 1995.
The Company's line of credit arrangements are discussed in Note 3 to the
consolidated financial statements. During the year ended July 31, 1996,
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 1997.
Fiscal 1995 Compared to Fiscal 1994
Consolidated net sales for the year ended July 31, 1995 were $152,899,000,
an increase of 3.9% over net sales of $147,147,000 in fiscal 1994. Net
income for fiscal 1995 was $8,003,000 or $1.15 per share, decreasing 18.8%
from net income of $9,852,000 or $1.41 per share in fiscal 1994. Fiscal
1995 and prior year's net sales reflected a reclassification of trade
marketing costs to selling expenses. This classification is commonly used
by companies in consumer products industries and reflects the Company's
continued and planned growth in this area. Trade marketing costs were
previously classified as a reduction of revenues. The reclassification
increased sales, gross profits and selling expenses, each by the same
amount, and had no effect on reported income from operations, net income or
net income per share. The reclassification primarily affected reported
sales of the consumer division.
Sales increases were primarily the result of increased unit shipments and
slightly increased average sales per unit due to changes in product sales
mix. Net sales of industrial and environmental sorbents, consisting of
clay and non-clay products, decreased $1,043,000 or 5.2% from prior year
levels due to decreased unit shipments of clay products. Net sales of
industrial clay products fell $611,000 or 4.3% from prior year levels.
Sales of non-clay sorbents decreased $432,000 or 7.5%, reflecting increased
competition in the markets in which the Company participates. Net sales of
cat box absorbents increased $5,871,000 or 7.6% above fiscal 1994 levels.
This growth was driven by unit sales increases of private label litters in
the mass merchandising distribution channel and increased grocery market
penetration. Net sales of agricultural carriers and absorbents decreased
$1,719,000 or 9.4% from the prior fiscal year due to decreased unit
shipments caused by reduced planting, inventory carryover and higher
chemical loading of crop protection products. Net sales of fluids
purification adsorbents remained flat versus fiscal 1994. The high quality
of domestic crude vegetable oils and adverse growing conditions in certain
foreign markets reduced consumption of the Company's bleaching earth
products. Sales of transportation services increased $1,825,000 or 24.3%
from fiscal 1994 levels due to increased fleet size and backhaul revenue.
Consolidated gross profit as a percentage of net sales decreased to 29.2%
of net sales in fiscal 1995 from 30.4% in fiscal 1994. This decrease was
principally due to increased packaging and shipping costs and a shift in
product mix in the consumer business towards private label litters.
Operating expenses as a percentage of net sales increased slightly to 20.8%
of net sales in fiscal 1995 from 20.6% of net sales in fiscal 1994. This
change reflected management's continued focus on controlling overhead costs
while expanding sales and marketing efforts.
Interest expense increased $169,000 due to higher average debt outstanding,
and interest income remained substantially unchanged in fiscal 1995.
The Company's effective income tax rate increased to 28.2% of income in
fiscal 1995 from 25.1% in the prior fiscal year. The provision for income
tax expense for the fourth quarter and year ended July 31, 1995, included a
charge of $263,000 reflecting a change in the estimated amounts of
depletion deductions and temporary differences between financial reporting
and tax reporting for the year ended July 31, 1994.
<PAGE>
Total assets of the Company increased $4,721,000 or 4.2% during the year
ended July 31, 1995. Current assets increased $4,383,000 or 9.9% from
prior fiscal year-end balances due to higher accounts receivable and
prepaid balances. Inventory balances decreased, primarily because a
capacity expansion at the Company's Ripley, Mississippi facility was
completed, reducing overall inventory needs.
Property, plant and equipment, net of accumulated depreciation and
amortization, decreased $784,000 or 1.3%. Investments in property, plant
and equipment included expenditures for increased productivity, capacity
expansion, pollution control, and equipment upgrades.
As of July 31, 1995, the Company had invested approximately $717,000 in
Kamterter, Inc., a company that researches and applies biotechnology in the
agricultural field. This investment, recorded at cost, represents a 14%
equity interest in Kamterter. During the year ended February 28, 1995, and
in recent interim periods, Kamterter began to generate operating profits.
While the Company believes that Kamterter's prospects have improved,
Kamterter's future financial condition and results of operation cannot be
predicted.
Total liabilities decreased $558,000 or 1.4% in the year ended July 31,
1995 due primarily to debt reduction.
Foreign Subsidiaries
Net sales by foreign subsidiaries during fiscal 1996 were $11,892,000
constituting 7.7% of net sales. This amount represents a decrease of
$356,000 from fiscal 1995, in which foreign net sales were $12,248,000 and
constituted 8.0% of net sales. The decrease in foreign subsidiary sales
resulted primarily from reduced sales in the United Kingdom due to lower
demand for the Company's animal nutrition products. Net income of the
Company's foreign subsidiaries during fiscal 1996 was $554,000, as compared
with $763,000 in fiscal 1995. Identifiable assets of the Company's foreign
subsidiaries as of July 31, 1996, were $9,036,000, a decrease of $535,000
from fiscal 1995 year-end balances.
Net sales made by the Company's foreign subsidiaries for the year ended
July 31, 1995, were $12,248,000, constituting 8.0% of net sales. This
amount represented an increase of $1,000,000 from fiscal 1994, in which
foreign subsidiary sales were $11,248,000 and constituted 7.6% of net
sales. This increase in foreign subsidiary sales resulted from increased
market share in Canadian cat litter markets and price increases at the
Company's United Kingdom subsidiary. Net income of the Company's foreign
subsidiaries during fiscal 1995 was $763,000, as compared to $403,000 in
fiscal 1994. The identifiable assets of the Company's foreign subsidiaries
as of July 31, 1995, were $9,571,000, a slight decrease from fiscal 1994
year-end balances.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Financial Position
July 31
1996 1995
ASSETS
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents (Note 1) $10,113,544 $8,829,667
Investment securities, at cost, which
<S> <C> <C> <C>
approximates market 1,594,000 2,332,665
Accounts receivable 20,666,623 21,529,168
Less allowance for doubtful accounts (225,970) (180,602)
Inventories (Note 1) 11,737,068 10,917,099
Prepaid expenses 4,325,061 5,317,169
Total Current Assets 48,210,326 48,745,166
Property, Plant and Equipment, at Cost (Notes
1 and 3)
<S> <C> <C>
Buildings and leasehold improvements 15,666,801 15,335,526
<S> <C> <C>
Machinery and equipment 78,918,785 76,721,765
<S> <C> <C>
Office furniture and equipment 8,181,596 7,831,961
<S> <C> <C>
Vehicles 119,622 117,906
<C> <C>
102,886,804 100,007,158
Less accumulated depreciation and
<S> <C> <C>
amortization (54,730,624 (47,498,516)
48,156,180 52,508,642
Construction in progress 4,024,354 1,289,855
Land and mineral rights 6,031,888 5,660,898
Total Property, Plant and 58,212,422 59,459,395
Equipment, Net
Other Assets
Goodwill (Net of accumulated
amortization of
$1,204,564 in 1996 and $1,073,404 in 4,172,526 4,304,286
1995) (Note 1)
Deferred income taxes (Note 4) 2,264,291 484,324
Other 4,833,303 3,994,512
Total Other Assets 11,270,120 8,783,122
<S> <C> <C>
Total Assets $117,692,868 $116,987,683
</TABLE>
The accompanying notes are an integral part of the consolidated financial state
ments.
<TABLE>
<CAPTION>
JULY 31
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of notes payable
<C> <C> <C> <C>
(Note 3) $1,626,762 $1,097,976
Accounts payable 5,338,787 4,710,251
Income taxes payable 691,106 -
Dividends payable 519,610 511,166
Accrued expenses
Salaries, wages and commissions 1,970,422 2,362,102
Trade promotions and advertising 4,188,756 4,272,740
Freight 711,513 747,042
Other 2,764,721 1,969,571
Total Current Liabilities 17,811,677 15,670,848
Noncurrent Liabilities
<S> <C> <C> <C> <C>
Notes payable (Note 3) 18,978,000 20,422,265
Deferred compensation (Note 5) 2,253,313 1,778,075
Other 1,420,382 778,112
Total Noncurrent Liabilities 22,651,695 22,978,452
Total Liabilities 40,463,372 38,649,300
Stockholders' Equity
<S> <C> <C>
Common and Class B Stock (Note 6) 723,552 723,352
Paid-in capital in excess of par value 7,660,600 7,657,394
Retained earnings 77,385,514 76,033,462
Cumulative translation adjustments
<C> <C> <C> <C>
(Note 1) (1,018,416) (987,781)
84,751,250 83,426,427
<S> <C> <C>
Less treasury stock, at cost (Note 6) (7,521,754) (5,088,044)
Total Stockholders' Equity 77,229,496 78,338,383
Total Liabilities and Stockholders' $117,692,868 $116,987,683
Equity
</TABLE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended July 31
1996 1995 1994
<S> <C> <C> <C>
Net Sales $153,786,754 $152,899,109 $147,146,793
Cost of Sales 107,729,770 108,268,431 102,456,815
<S> <C> <C> <C>
Gross Profit 46,056,984 44,630,678 44,689,978
Selling, General and
<S> <C> <C> <C>
Administrative 39,941,751 31,788,731 30,261,701
Expenses
<S> <C> <C> <C>
Income from Operations 6,115,233 12,841,947 14,428,277
Other Income (Expense)
<S> <C> <C> <C>
Interest income 586,623 448,268 440,796
Interest expense (1,916,569) (1,921,261) (1,751,839)
Foreign exchange (losses) gains ( 6,693) ( 5,463) 3,009
Amortization of goodwill (Note ( 131,160) ( 132,048) ( 132,001)
1)
<S> <C> <C> <C>
Other, net 135,968 ( 84,018) 171,142
<S> <C> <C> <C>
Total Other Expense, Net (1,331,831) (1,694,522) (1,268,893)
<S> <C> <C> <C>
Income before Income Taxes 4,783,402 11,147,425 13,159,384
<S> <C> <C> <C>
Income Taxes (Note 4) 1,409,145 3,144,597 3,307,184
<S> <C> <C> <C>
Net Income $3,374,257 $8,002,8281 $ 9,852,200
<S> <C> <C> <C> <C>
Average Shares Outstanding (Note 6,806,891 6,935,975 7,010,724
6)
<S> <C> <C> <C>
Net Income Per Share (Note 6) $0.50 $1.15 $1.41
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Shares
Common Class B Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1993 5,008,086 2,173,755 $718,184
Net income - - -
Dividends declared - - -
Issuance of stock under option
<S> <C> <S> <C>
plans 50,641 - 5,064
(Note 7)
<S> <C> <S> <C>
Awards of stock to employees 1,036 - 104
Reissuance of treasury shares - - -
Conversion of Class B Stock to
<S> <C> <C> <C> <S>
Common 40,860 ( 40,860) -
Stock (Note 6)
<S> <C> <C> <C>
Balance, July 31, 1994 5,100,623 2,132,895 723,352
Net income - - -
Dividends declared - - -
Conversion of Class B Stock to
<S> <C> <C> <C> <S>
Common 18,201 ( 18,201) -
Stock (Note 6)
<S> <C> <C> <C>
Balance, July 31, 1995 5,118,824 2,114,694 723,352
Net income - - -
Dividends declared - - -
Conversion of Class B Stock to
<S> <C> <C> <S>
Common 72,326 ( 72,326) -
Stock (Note 6)
Issuance of stock under 1995
<S> <C> <S> <C>
Long 2,000 - 200
Term Incentive Plan (Note 7)
<S> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1996 5,193,150 2,042,368 $723,552
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
Paid-In
Capital In
Excess of Retained
Par Value Earnings
<C> <C>
$ 6,962,104 $62,031,814
- - 9,852,200
- - (1,806,736)
673,988 -
20,916 -
386 -
- -
<C> <C>
7,657,394 70,077,278
- - 8,002,828
- - (2,046,644)
- -
7,657,394 76,033,462
- - 3,374,257
- - (2,022,205)
- - -
-
<C>
3,206
<C> <C>
$7,660,600 $77,385,514
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Year Ended July 31
1996 1995 1994
Cash Flows from Operating
Activities
<S> <C> <C> <C>
Net income $ 3,374,257 $ 8,002,828 $ 9,852,200
Adjustments to reconcile net
income
to net cash provided by
operating
activities
<S> <C> <C> <C>
Depreciation and 7,925,806 7,808,496 6,798,038
amortization
<S> <C> <C> <C>
Deferred income taxes (1,791,247) (575,130) (944,905)
<S> <C> <C> <C>
Provision for bad debts 202,690 51,013 4,744
(Increase) decrease in
<S> <C> <C> <C>
Accounts receivable 692,363 (1,680,287) (1,502,865)
<S> <C> <C> <C>
Inventories (838,308) 319,844 (3,186,879)
<S> <C> <C> <C>
Prepaid expenses and taxes 1,190,548 (1,608,299) (1,114,801)
<S> <C> <C> <C>
Other assets (830,161) (960,720) (474,637)
Increase (decrease) in
<S> <C> <C> <C>
Accounts payable 636,215 774,083 (916,395)
Income taxes payable 456,708 - -
Accrued expenses 332,842 (32,319) 627,825
<S> <C> <C> <C>
Deferred compensation 475,238 16,257 381,872
Other 642,270 201,428 300,336
<S> <C> <C> <C>
Total Adjustments 9,094,964 4,314,366 (27,667)
Net Cash Provided by
<S> <C> <C> <C>
Operating Activities 12,469,221 12,317,194 9,824,533
Cash Flows from Investing
Activities
<S> <C> <C> <C>
Capital expenditures (7,184,337) (7,032,064) (13,559,232)
Proceeds from disposition of
property, plant and 923,437 - -
equipment
<S> <C> <C> <C>
Purchases of investment (167,000) (3,691,201) (11,750,654)
securities
Dispositions of investment
securities 906,283 4,722,543 13,910,258
Other (267,693) 159,709 399,295
Net Cash Used in
<S> <C> <C> <C>
Investing (5,789,310) (5,841,013) (11,000,333)
Activities
Cash Flows from Financing
Activities
<S> <C> <C> <C>
Principal payments on long-term (1,145,479) (1,244,481) (743,834)
debt
Proceeds from issuance of long-
<S> <C> <S> <C>
term 230,000 - 5,000,000
debt
Proceeds from issuance of
<S> <C>
Common - - 700,458
Stock
<S> <C> <C> <C>
Dividends paid (2,015,383) (1,983,291) (1,804,002)
<S> <C> <C> <C>
Purchase of treasury stock (2,433,710) ( 825,475) (1,894,762)
<S> <C> <C> <C> <C>
Other ( 31,462) 12,418 1,025
Net Cash (Used in)
<C> <C> <C>
Provided by Financing (5,396,034) (4,040,829) 1,258,885
Activities
Net Increase in Cash and
<S> <C> <C> <C>
Cash Equivalents 1,283,877 2,435,352 83,085
Cash and Cash Equivalents,
<S> <C> <C> <C>
Beginning of Year 8,829,667 6,394,315 6,311,230
<S> <C> <C> <C>
Cash and Cash Equivalents, End of $10,113,544 $8,829,667 $6,394,315
Year
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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 from the
consolidated financial statements.
No provision has been made for possible income taxes which may be paid on
the distribution of approximately $9,796,000 and $9,129,000 as of July 31,
1996 and 1995, 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.
Management Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
Revenues from sales of products and transportation services are recognized
upon shipment.
Income Taxes
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.
Interest Rate Derivative Instruments
An interest rate swap agreement is utilized in the management of interest
rate exposure.
Interest differentials on the swap contract (Note 3) are recorded as
interest expense in the contract period incurred. The Company recognized
additional interest expense of $58,100, $58,900 and $98,300 in fiscal years
1996, 1995 and 1994, respectively, as a result of this contract.
Reclassification
Certain items in prior year financial statements have been reclassified to
conform to the presentation used in fiscal 1996.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries, where the local currency is
the functional currency, are translated at the exchange rates in effect at
period end. 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>
1996 1995 1994
<S> <C> <C> <C>
Balance, at beginning of year $(987,781) (1,135,951) $(901,783)
Translation adjustments resulting
from
<S> <C> <C> <C> <C>
exchange rate changes and ( 30,635) 148,170 (234,168)
intercompany
transactions
<S> <C> <C> <C>
Balance, at end of year $(1,018,416) $(987,781) $(1,135,951)
</TABLE>
<PAGE>
Cash Equivalents
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.
Inventories
The composition of inventories is as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Finished $ 6,728,150 $ 6,849,536
goods
<S> <C> <C>
Bags 3,754,087 2,575,259
Supplies 1,018,304 1,272,443
Fuel oil 236,527 219,861
$11,737,068 $10,917,099
</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 are subject to the financial condition of certain major
customers, principally the customer referred to in Note 2. The Company
generally does not require collateral to secure customer receivables.
Property, Plant and Equipment
Property, plant and equipment expenditures are generally depreciated using
the straight-line method over their estimated useful lives as follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Buildings and leasehold improvements 5-30
Machinery and equipment 3-15
Office furniture and equipment 2-10
Vehicles 2-8
</TABLE>
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research and development costs of $2,026,000 in 1996, $1,826,000 in 1995
and $1,875,000 in 1994 were charged to expense as incurred.
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.
Advertising Costs
The Company defers recognition of advertising production costs until the
first time the advertising takes place; other advertising costs are
expensed as incurred.
Fair Value of Financial Instruments
Non-derivative financial instruments included in the consolidated
statements of financial position are cash and cash equivalents, investment
securities and notes payable. These instruments, except for notes payable,
were carried at amounts approximating fair value as of July 31, 1996. The
fair value of notes payable was estimated based on future cash flows
discounted at current interest rates available to the Company for debt with
similar maturities and characteristics. The fair value of notes payable as
of July 31, 1996, exceeded its carrying value by approximately $600,000.
Stock Options
The Company has completed an initial review of Statement of Financial
Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, which will become effective for the 1997 fiscal year. As is
permitted under SFAS 123, the Company has decided to continue accounting
for employee stock compensation under the rules of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, but will
disclose pro forma results using the SFAS 123 alternative accounting
method.
Net Income per Share and Common Share Equivalents
Net income per share and common share equivalents are computed based upon
the weighted average number of shares outstanding during each year and
includes outstanding options, when dilutive.
NOTE 2 - BUSINESS AND GEOGRAPHIC REGION INFORMATION
Nature of Business
The Company is a leader in developing, manufacturing and marketing sorbent
products for consumer, industrial, environmental, agricultural and fluids
purification markets. The Company operates within a single segment. The
Company has operations in the United States, Canada and the United Kingdom
and exports goods worldwide.
The Company had net sales in excess of 10% of total net sales to one
unaffiliated customer in 1996, 1995 and 1994. Accounts receivable related
to this major customer amounted to $4,905,000, $5,083,000 and $4,845,000 as
of July 31, 1996, 1995 and 1994, respectively.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 2 - BUSINESS AND GEOGRAPHIC REGION INFORMATION
Nature of Business (Continued)
The net sales to this customer were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(Thousands of Dollars)
<S> <C> <C> <C>
Amount $39,916 $40,884 $35,848
Percent of net 26% 27% 24%
sales
</TABLE>
The following is a summary of financial information by geographic region:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31
(Thousands of Dollars)
1996 1995 1994
Sales to unaffiliated customers:
<S> <C> <C> <C>
Domestic $141,895 $140,651 $135,899
Foreign subsidiaries 11,892 12,248 11,248
Sales or transfers between
geographic areas:
<S> <C> <C> <C>
Domestic $ 5,039 $ 4,067 $ 3,891
Income before income taxes:
<S> <C> <C> <C> <C>
Domestic $ 3,920 $ 10,094 $ 12,257
<S> <C> <C> <C>
Foreign subsidiaries 863 1,053 902
Net Income:
<S> <C> <C> <C>
Domestic $ 2,820 $ 7,240 $ 9,449
<S> <C> <C> <C>
Foreign subsidiaries 554 763 403
Identifiable assets:
<S> <C> <C> <C>
Domestic $108,657 $107,417 $102,659
<S> <C> <C> <C>
Foreign subsidiaries 9,036 9,571 9,608
</TABLE>
<TABLE>
<CAPTION>
Notes to Consolidated Financial Statements
NOTE 3 - NOTES PAYABLE
The composition of notes payable is as follows:
1996 1995
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 3.98% and
4.00% in fiscal 1996 and fiscal 1995,
respectively. Payment of these bonds by
the Company is guaranteed by a letter
of credit issued by 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
<S> <C> <C>
rate of 6.53%. $2,500,000 $2,500,000
Teachers Insurance and Annuity Association of
America Payable in annual principal
installments on November 15; $1,500,000 in
fiscal 1997; $1,800,000 in fiscal 1998;
$1,200,000 in fiscal 2000; $1,100,000 in
fiscal 2001; and $1,000,000 in
fiscal 2002. Interest is payable
<S> <C> <C>
semiannually at an annual rate of 9.38%. 6,600,000 7,100,000
Teachers Insurance and Annuity Association of
America Payable in annual principal installments,
on August 15; $500,000 in fiscal 2002;
$1,000,000 in fiscal 2003; $2,500,000 in
fiscal 2004; and $2,500,000 in fiscal 2005.
Interest is payable semiannually at an annual
<S> <C> <C>
rate of 7.17%. 6,500,000 6,500,000
Harris Trust and Savings Bank
Payable in annual principal installments,
on June 20; $1,950,000 in fiscal 1999;
$900,000 in fiscal 2000; $650,000 in fiscal
years 2001 and 2002; and $350,000 in fiscal
2003. Interest is payable quarterly at an
<S> <C> <C>
annual rate of 7.78%. 4,500,000 5,000,000
<S> <C> <C>
Other 504,762 420,241
<C> <C>
20,604,762 21,520,241
<S> <C> <C>
Less current maturities of notes payable (1,626,762) (1,097,976)
<C> <C>
$18,978,000 $20,422,265
</TABLE>
Notes to Consolidated Financial Statements
NOTE 3 - NOTES PAYABLE (Continued)
During fiscal 1995, the Company executed a Credit Agreement with Harris
Trust and Savings Bank which replaced the Term Note Agreement dated April
20, 1994. In addition to providing continued term financing, the Credit
Agreement provides for a $5,000,000 committed unsecured revolving line of
credit which expires on August 1, 1999, at certain short-term rates. In
July 1996, the Company entered into a $10,000,000 unsecured line of credit
agreement with Harris Trust and Savings Bank. This line of credit provides
for either floating rate or fixed rate borrowing through May 31, 1997.
During fiscal 1996, no borrowings were made against either line.
The agreements with 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 limita
tions, minimum tangible net worth requirements and other restrictions. 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.
In prior years, the Town of Blue Mountain, Mississippi issued long-term
bonds to finance the purchase of substantially all of the assets of certain
plant expansion projects 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
as of July 31, 1996:
<TABLE>
<CAPTION>
Year Ending July 31:
<C> <C>
1998 $1,926,000
1999 2,076,000
2000 2,226,000
2001 1,750,000
2002 2,150,000
Later years 8,850,000
<C>
$18,978,000
</TABLE>
Notes to Consolidated Financial Statements
NOTE 4 - INCOME TAXES
The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
Current
<S> <C> <C> <C>
Federal $2,284,869 $2,756,283 $3,221,911
Foreign 332,127 292,664 163,897
State 583,396 670,780 866,281
3,200,392 3,719,727 4,252,089
Deferred
<S> <C> <C> <C>
Federal ( 340,572) ( 535,093) ( 855,699)
Operating loss carryforward (1,367,991) - -
Foreign ( 22,709) ( 2,142) 1,153
State ( 59,975) ( 37,895) ( 90,359)
(1,791,247) ( 575,130) ( 944,905)
Total Income Tax Provision $1,409,145 $3,144,597 $3,307,184
</TABLE>
The provision for income tax expense for the fourth quarter and year ended
July 31, 1995, includes a charge of $263,000 reflecting a change in the
estimated amounts of depletion deductions and temporary differences between
financial reporting and tax reporting for the year ended July 31, 1994.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 4 - INCOME TAXES (Continued)
Principal reasons for variations between the statutory federal rate and the
effective rates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
U.S. federal statutory income tax 34.00% 34.00% 34.00%
rate
Depletion deductions allowed for (27.57) (12.24) (12.48)
mining
State income taxes, net of federal
tax 6.78 5.68 4.42
benefit
Valuation allowance without income
tax 18.61 - -
benefit
Difference in effective tax rate of
foreign ( 0.11) ( 0.61) ( 0.16)
subsidiaries
Other ( 2.25) 1.38 ( 0.65)
29.46% 28.21% 25.13%
</TABLE>
The consolidated balance sheets as of July 31, 1996 and 1995, included the
following tax effects of cumulative temporary differences:
<TABLE>
<CAPTION>
1996 1995
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Depreciation $ - $1,528,266 $ - $1,552,223
Deferred Compensation 844,992 - 689,893 -
Postretirement Benefits 356,656 - 218,406 -
Trade Promotions and 269,200 - 179,662 -
Advertising
Accrued Expenses 408,986 - 377,368 -
Tax Credits 398,576 - 470,206 -
Operating Loss Carryforward 2,257,958 - - -
Other 146,156 - 101,012 -
Subtotal 4,682,524 1,528,266 2,036,547 1,552,223
Valuation Allowance (889,967) - - -
<S> <C> <C> <C> <C>
Total Deferred Taxes $3,792,557 $1,528,266 $2,036,547 $1,552,223
</TABLE>
The valuation allowance represents operating loss carryforwards not
anticipated to be utilized. As of July 31, 1996, for federal income tax
purposes there were regular tax operating loss carryforwards of
approximately $5,816,000 which expire in the year 2011. A valuation
allowance has been established for $889,967 of the deferred tax benefit
related to those loss carryforwards for which it is considered more likely
than not the benefit will not be realized.
NOTE 5 - DEFERRED COMPENSATION
In December 1995, the Company adopted the Oil-Dri Corporation of America
Deferred Compensation Plan. Deferrals are no longer being made under the
original plan, The Oil-Dri Corporation of America Key Employee and
Directors Deferred Compensation Plan. The new plan permits Directors and
certain management employees to defer portions of their compensation and
earn interest on the deferred amounts. The compensation, which has been
deferred since the inception of the original plan, has been accrued as well
as interest thereon. The Company has purchased life insurance contracts on
some participants to partially fund the original plan. The new plan is
unfunded.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 6 - STOCKHOLDERS' EQUITY
On December 13, 1994, the stockholders of the Company approved an amendment
to the Company's Certificate of Incorporation authorizing 30,000,000 shares
of a new class of common stock, par value $.10, which has been designated
as Class A Common Stock, in addition to the currently authorized 15,000,000
shares of Common Stock and 7,000,000 shares of Class B Stock, each with a
par value of $.10. There are no Class A shares currently outstanding.
The Common Stock and Class B Stock are equal, on a per share basis, in all
respects except as to voting rights, conversion rights, cash dividends and
stock splits or stock dividends. The Class A Common Stock is equal, on a
per share basis, in all respects, to the Common Stock except as to voting
rights and stock splits or stock dividends. In the case of voting rights,
Common Stock is entitled to one vote per share and Class B Stock is
entitled to ten votes per share, while Class A Common Stock generally has
no voting rights. Common Stock and Class A Common Stock have no conversion
rights. Class B Stock is convertible on a share-for-share basis into
Common Stock at any time and is subject to mandatory conversion under
certain circumstances.
Common Stock is entitled to cash dividends, as and when declared or paid,
equal to 133 1/3% on a per share basis of the cash dividend paid on Class B
Stock. Class A Common Stock is entitled to cash dividends on a per share
basis equal to the cash dividend on Common Stock. Additionally, while shares of
Common Stock, Class A Common Stock and Class B Stock are outstanding, the
sum of the per share cash dividend paid on shares of Common Stock and Class
A Common Stock, must be equal to at least 133 1/3% of the sum of the per
share cash dividend paid on Class B Stock and Class A Common Stock. See
Note 3 regarding dividend restrictions.
Shares of Common Stock, Class A Common Stock and Class B Stock are equal in
respect of all rights to dividends (other than cash) and distributions in
the form of stock or other property (including stock dividends and split-
ups) in each case in the same ratio except in the case of a Special Stock
Dividend. The Special Stock Dividend, which can be issued only once, is
either a dividend of one share of Class A Common Stock for each share of
Common Stock and Class B Stock outstanding or a recapitalization, in which
half of each outstanding share of Common Stock and Class B Stock would be
converted into a half share of Class A Common Stock.
All per share amounts included in the financial statements and notes
reflect the dilutive effect of all common share equivalents. See Note 7
for information regarding common share equivalents.
In June 1996, the Board of Directors of the Company authorized the
repurchase, from time to time, of up to 400,000 shares of the Company's
stock. This authorization, in addition to previous authorizations, total
700,000 shares. As of July 31, 1996, 337,337 shares have been repurchased
under these authorizations.
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY (Continued)
The following reflects the changes in treasury stock (Common) over the last
three years:
<TABLE>
<CAPTION>
Shares Amount
<S> <C> <C>
Balance, July 31, 1993 190,556 $2,367,807
Purchased during fiscal 1994 91,190 1,895,364
Reissued during fiscal 1994 (50) (602)
<S> <C> <C>
Balance, July 31, 1994 281,696 4,262,569
Purchased during fiscal 1995 50,500 825,475
<S> <C> <C>
Balance, July 31, 1995 332,196 5,088,044
Purchased during fiscal 1996 166,871 2,433,710
Balance, July 31, 1996 499,067 $7,521,754
</TABLE>
NOTE 7 - STOCK OPTION PLANS
The Company instituted the Oil-Dri Corporation of America 1995 Long Term
Incentive Plan during the fiscal year ended July 31, 1996. The Plan was
approved by the stockholders of the Company at the annual meeting on
December 12, 1995. All shares of stock awarded under the 1995 Plan will be
Class A Common Stock, except that, if there is no Class A Common Stock
issued or publicly traded on a securities exchange when such awards are
exercised, the shares awarded would be Common Stock. The Plan provides for
various types of awards. During the fiscal year ended July 31, 1996, 2,000
shares of restricted stock, which vest on May 1, 1998, were issued under
the Plan.
The Oil-Dri Corporation of America 1988 Stock Option Plan terminated on
December 12, 1995, for purposes of future grants. The outstanding options
under this plan will remain outstanding and exercisable in accordance with
their respective terms.
The 1981 Oil-Dri Corporation of America Stock Option Plan expired on
October 31, 1991. No options were outstanding as of July 31, 1996.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 7 - STOCK OPTION PLANS (Continued)
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 (Weighted Average Option
Price) Price)
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C>
Outstanding, - - 61,150 267,409 138,659 158,785
Beginning of Year - - $(10.80) $(18.66) $(19.61) $(19.17)
<S> <C> <C>
Granted - - - - 197,250 4,000
- - - - $(19.22) $(23.00)
<S> <C> <C>
Exercised - - 29,515 - - 21,126
- - $(10.80 - - $(17.05)
<S> <C> <C> <C> <C>
Canceled/Terminated - - 31,635 16,500 68,500 3,000
- - $(10.80) $(19.13) $(22.21) $(19.00)
<S> <C> <C> <C>
Outstanding, - - - 250,909 267,409 138,659
End of Year - - - $(18.63) $(18.66) $(19.61)
</TABLE>
<TABLE>
<CAPTION>
1995
Option
Plan
Number
of
Shares
(Weight
ed
Average
Option
Price)
1996
<S>
Outstanding, -
Beginning of Year -
<S> <C>
Granted 199,000
$(14.93)
Exercised -
-
<S> <C> <C>
Canceled/Terminated 4,000
$(15.13)
<S> <C> <C>
Outstanding, 195,000
End of Year $(14.92)
</TABLE>
The Company has reserved 303,000 shares of Common Stock for future grants
and issuances under the Oil-Dri Corporation of America 1995 Long Term
Incentive Plan.
As of July 31, 1996, a total of 147,509 options are exercisable under the
1988 Option Plan. No options are exercisable under the Oil-Dri Corporation
of America 1995 Long Term Incentive Plan as of July 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
Combined Plans
Number of Shares
(Weighted Average Option Price)
1996 1995 1994
<S> <C> <S> <C> <C> <C>
Outstanding, Beginning of Year 267,409 138,659 219,935
$(18.66) $(19.61) $(16.84)
Granted 199,000 197,250 4,000
$(14.93) $(19.22) $(23.00)
Exercised - - 50,641
- - $(13.41)
Canceled/Terminated 20,500 68,500 34,635
$(18.34) $(22.21) $(11.51)
Outstanding, End of Year 445,909 267,409 138,659
$(17.00) $(18.66) $(19.61)
</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.
The net periodic pension cost for the years ended July 31, 1996, 1995 and
1994, consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $349,232 $326,650 $325,626
Interest cost on projected benefit
obligations 426,730 384,901 358,027
(Earnings) losses on plan assets (561,276) (836,171) 80,058
Net amortization and deferral 153,900 495,586 (422,948)
Net pension cost $368,586 $370,966 $340,763
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
The funded status of the plans at July 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
Actuarial Present Value of Benefit
Obligations
Accumulated Benefit Obligations
<S> <C> <C>
Vested $4,329,417 $4,076,780
Nonvested 457,959 491,222
Total Accumulated Benefit Obligations $4,787,376 $4,568,002
Projected Benefit Obligations $6,287,994 $5,989,916
Plan Assets at Fair Value 5,706,087 5,334,851
Deficiency of Plan Assets Over Projected
Benefit Obligations (581,907) (655,065)
Unrecognized Net Gain (626,115) (197,423)
Unrecognized Prior Service Cost 574,726 614,402
Unrecognized Net Excess Plan Assets as of
August 1, 1987 Being Recognized
Principally (317,800) (344,424)
Over 21 Years
Adjustment Required to Recognize Minimum ( 91,161) (183,547)
Liability
Accrued Pension Included in
Noncurrent Liabilities - Other $(1,042,257) $( 766,057)
</TABLE>
Assumptions used in the previous calculations are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Discount rate 7.50% 7.25%
Rate of increase in compensation 5.00% 5.00%
levels
Long-term expected rate of return on 8.00% 8.00%
assets
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
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, 1996, 1995 and 1994, 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 domestic employees who have completed one year of continuous service
and are at least 21 years of age. The Company's contributions to this
plan, and to similar plans maintained by the Company's foreign
subsidiaries, were $140,967, $137,570 and $142,030 for fiscal years 1996,
1995 and 1994, respectively.
Postretirement Benefits
In addition to providing pension benefits, the Company provides certain
medical benefits, until a participant is eligible for Medicare, to domestic
salaried employees who elect early retirement and meet minimum age, service
and other requirements. The Company reserves the right to amend or
terminate this plan at any time. The plan is contributory and contains
cost-sharing features such as deductibles and coinsurance.
SFAS 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. This standard requires that the
accumulated plan benefit obligation existing at the date of adoption
(transition obligation) either be recognized immediately or deferred and
amortized over future periods.
The Company is amortizing the resulting transition obligation over 20
years. The adoption of this standard did not have a material effect on the
consolidated results of operations or financial position of the Company.
NOTE 9 - CONTINGENT LIABILITIES
The Company is involved in various legal claims of a nature which are
considered normal to its business, including patent and intellectual
property issues. While it is not feasible to predict or determine the
final outcome of these issues, management believes that they will not have
a material adverse effect on the financial position or liquidity of the
Company.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 10 - LEASES
The Company's mining operations are conducted on leased or 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 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, 1996:
<TABLE>
<CAPTION>
Year Ending July 31:
<C> <C>
1997 $3,628,000
1998 2,237,000
1999 1,664,000
2000 990,000
2001 901,000
Later years 4,289,000
<C>
$13,709,000
</TABLE>
The following schedule shows the composition of total rental expense for
all operating leases, including those with terms of one month or less which
were not renewed:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Transportation equipment $3,770,000 $3,439,000 $2,710,000
Office facilities 377,000 373,000 184,000
Mining properties
Minimum 168,000 180,000 196,000
Contingent 239,000 162,000 183,000
Other 688,000 649,000 565,000
$5,242,000 $4,803,000 $3,838,000
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
NOTE 11 - OTHER CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Interest $1,706,424 $1,750,054 $1,390,014
Income Taxes $1,352,594 $4,013,110 $5,624,987
</TABLE>
NOTE 12 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of selected information for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Fiscal 1996 Quarter Ended
(Thousands Except Per Share Amounts)
Oct. 31 Jan. 31 April 30 July 31 Total
<S> <C> <C> <C> <C> <C>
Net Sales $39,308 $41,797 $36,427 $36,255 $153,787
Gross Profit 11,659 12,322 11,153 10,923 46,057
Net Income 1,413 477 670 814 3,374
Net Income Per $0.21 $0.07 $0.10 $0.12 $0.50
Share
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1995 Quarter Ended
(Thousands Except Per Share Amounts)
Oct. 31 Jan. 31 April 30 July 31 Total
<S> <C> <C> <C> <C> <C>
Net Sales $39,025 $40,157 $37,179 $36,538 $152,899
Gross Profit 12,394 12,168 10,328 9,741 44,631
Net Income 2,819 2,573 1,540 1,071 8,003
Net Income Per $0.41 $0.37 $0.22 $0.15 $1.15
Share
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
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, 1996
and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the
period ended July 31, 1996. 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, 1996
and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended
July 31, 1996 in conformity with generally accepted accounting
principles.
BLACKMAN KALLICK BARTELSTEIN, LLP
Chicago, Illinois
August 30, 1996
<PAGE>
Common Stock
The following table sets forth the closing high and low prices as quoted on
the New York Stock Exchange for the period indicated.
The number of holders of record of Common Stock on July 31, 1996 was 1,281.
There is no established public trading market for the Class B Stock.
The number of holders of record of Class B Stock on July 31, 1996 was 21.
<TABLE>
<CAPTION>
Dividends
Amount Per Share
Date Paid Common Class B
<S> <C> <C> <C>
Quarterly 09/15/95 $0.08 $0.06
Quarterly 12/15/95 $0.08 $0.06
Quarterly 03/15/96 $0.08 $0.06
Quarterly 06/14/96 $0.08 $0.06
</TABLE>
<TABLE>
<CAPTION>
Market
Prices
Fiscal 1996 Closing Prices
High Low
<C> <S> <C> <C>
1st Quarter 16 141/8
2nd Quarter 161/8 14
3rd Quarter 16 131/4
4th Quarter 147/8 12
</TABLE>
<TABLE>
<CAPTION>
Market
Prices
Fiscal 1995 Closing Prices
High Low
<C> <S> <C> <C>
1st Quarter 20 173/8
2nd Quarter 191/8 163/4
3rd Quarter 183/8 157/8
4th Quarter 167/8 141/8
</TABLE>
<PAGE>
Board of Directors
Officers
Senior Management
Board of Directors
Richard M. Jaffee, Chairman and Chief Executive Officer
Daniel S. Jaffee, President and Chief Operating Officer
Robert D. Jaffee, Chairman Amco Corporation
J. Steven Cole, President, Cole & Associates, Chairman Sav-A-Life Systems,
Inc.
Ronald B. Gordon, President, Gordon Investment Group
Edgar D. Jannotta, Senior Director, William Blair & Company, L.L.C.
Joseph C. Miller, Vice Chairman
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., President
and Chairman, Selig Executive Leasing, Inc., Chairman of the Executive
Council of Major Leagvue Baseball
Officers
Richard M. Jaffee, Chairman and Chief Executive Officer
Daniel S. Jaffee, President and Chief Operating Officer
Joseph C. Miller, Vice Chairman
Michael L. Goldberg, Vice President and Chief Financial Officers
Richard V. Hardin, Group Vice President, Technology
Norman B. Gershon, Vice President, International Operations, Managing
Director, Oil-Dri S.A.
Daniel J. Jones, Vice President, Favorite Products, Ltd.
Dennis E. Peterson, President, Oil-Dri Transportation Company
Thomas F. Cofsky, Vice President, Logistics, Quality & Service
James T. Davis, Vice President, Manufacturing
Donald J. Deegan, Vice President, Corporate Development & Planning
Steven M. Levy, Vice President and General Manager, Consumer Products Group
Louis T. Bland, Jr., Legal Counsel, Secretary
Richard L. Pietrowski, Treasurer
Senior Management
Elwyn J. Allbritton, Vice President, Operational Development
Charles M. Boland, General Manager, Agrisorbents Products Group
Wade R. Bradley, General Manager, Industrial & Environmental Product Group
Karen Jaffee Cofsky, Director, Human Resources
Sam J. Colello, Director, Information Systems
Brian P. Curtis, Assistant General Counsel
B. Fielden Fraley, General Manager, Fluids Purification Group
Fred G. Heivilin, Vice President, Raw Materials Development
Heidi M. Jaffee, Corporate Attorney, Assistant Secretary
Richard D. Johnsonbaugh, Eastern Regional Manager, Manufacturing
Kelly A. McGrail, Manager, Corporate Communications
William F. Moll, Vice President, Research & Development
V.R. Roskam, Vice President, Agrisorbents Products Group
William O. Thompson, Western Regional Manager, Manufacturing
<PAGE>
Corporate Headquarters
Oil-Dri Corporation of America
410 North Michigan Avenue, Suite 400
Chicago, Illinois 60611-4211
(312) 321-1515
Investor Inquiries
Securities analyst, portfolio managers representatives of financial
institutions seeking information about the corporation should contact Kelly
McGrail, Manager, Corporate Communications, at the corporate headquarters.
Stockholders with inquiries related to stockholder records, stock
transfers, change of ownership, change of address or dividend payments
should write to Kelly McGrail at corporate headquarters, or contact the
Company's registrar and transfer agent:
Harris Trust and Savings Bank
Shareholder Services Department
311 W. Monroe, 11th Floor,
P.O. Box A-3504
Chicago, Illinois 60690-9502
Stock Listing
Oil-Dri Corporation of America's Common Stock is listed under the ticker
symbol ODC on the New York Stock Exchange. The corporation's daily trading
activity, stock price and dividend information are in the financial
sections of most major newspapers.
Annual Meeting
Oil-Dri Corporation of America will hold its 1996 Annual Meeting of
Stockholders on Tuesday, December 10, 1996 at 10:30 a.m. (Local Time) at
the Standard Club, 320 South Plymouth Court, Chicago, Illinois
Independent Public Accountants
Blackman Kallick Bartelstein, LLP
Legal Counsel
Sonnenschein Nath & Rosenthal
Oil-Dri Subsidiaries
Oil-Dri Corporation of Georgia Oil-Dri U.K. Limited
Georgia, U.S.A. Wisbech, United Kingdom
Oil-Dri Production Company Blue Mountain Production Company
Mississippi and Oregon Mississippi, U.S.A.
Oil-Dri Transportation Company Favorite Products Company, Ltd.
Georgia, U.S.A. Quebec, Canada
Oil-Dri S.A.
Coppet, Switzerland
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
State or Country
Subsidiary of Incorporation
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
<PAGE>
EXHIBIT 24
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, 1996 and the
Registration Statement of Form S-8 relating to the Oil-Dri Corporation of
America Stock Option Plan.
October 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 10,113,544
<SECURITIES> 1,594,000
<RECEIVABLES> 20,666,623
<ALLOWANCES> (225,970)
<INVENTORY> 11,737,068
<CURRENT-ASSETS> 48,210,326
<PP&E> 112,943,046
<DEPRECIATION> (54,730,624)
<TOTAL-ASSETS> 117,692,868
<CURRENT-LIABILITIES> 17,811,677
<BONDS> 18,978,000
0
0
<COMMON> 723,552
<OTHER-SE> 76,505,944
<TOTAL-LIABILITY-AND-EQUITY> 117,692,868
<SALES> 153,786,754
<TOTAL-REVENUES> 153,786,754
<CGS> 107,729,770
<TOTAL-COSTS> 107,729,770
<OTHER-EXPENSES> 39,154,323
<LOSS-PROVISION> 202,690
<INTEREST-EXPENSE> 1,916,569
<INCOME-PRETAX> 4,783,402
<INCOME-TAX> 1,409,145
<INCOME-CONTINUING> 3,374,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,374,257
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
