CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended January 31, 1996 Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 36-2048898
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
410 North Michigan Avenue
Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 321-1515
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
Common Stock - 5,162,518 Shares (Including 420,596 Treasury Shares)
Class B Stock - 2,071,000 Shares
<PAGE>
<TABLE>
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statement of Financial Position
ASSETS
January 31 July 31
(Unaudited)
<CAPTION>
1996 1995 1995
CURRENT ASSETS
<S> <C> <C> <C>
Cash and Cash Equivalents $ 6,599,621 $ 1,320,099 $ 8,829,667
Investment Securities, at Cost 1,406,467 2,739,496 2,332,665
Accounts Receivable 24,909,494 24,757,434 21,529,168
Allowance for Doubtful Accounts (278,405) (201,006) (180,602)
Inventories 11,191,258 12,888,361 10,917,099
Prepaid Expenses and Taxes 5,531,155 5,491,172 5,317,169
Total Current Assets 49,359,590 46,995,556 48,745,166
PROPERTY, PLANT AND EQUIPMENT - AT COST
Cost 109,441,705 104,526,298 106,957,911
Less Accumulated Depreciation and 51,404,271 43,647,659 47,498,516
Amortization
Total Property, Plant
and Equipment, Net 58,037,434 60,878,639 59,459,395
OTHER ASSETS
Goodwill (Net of Accumulated
Amortization) 4,238,406 4,370,454 4,304,286
Deferred Income Taxes 486,456 - 484,324
Other 4,258,418 3,472,126 3,994,512
Total Other 8,983,280 7,842,580 8,783,122
Assets
TOTAL ASSETS $116,380,304 $115,716,775 $116,987,683
</TABLE>
<TABLE>
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statement of Financial Position
LIABILITIES & STOCKHOLDERS EQUITY
January 31 July 31
(Unaudited)
<CAPTION>
<S> <C> <C> <C>
1996 1995 1995
CURRENT LIABILITIES
<S> <C> <C> <C> <C>
Current Maturities of Notes $2,247,886 $ 598,87 6 $1,097,976
Payable
Accounts Payable - Trade 5,899,993 6,023,047 4,710,251
Dividends Payable 519,286 520,552 511,166
Accrued Expenses
Trade Promotions and 3,024,416 2,631,418 4,272,740
Advertising
Salaries, Wages and 2,715,194 2,586,756 2,362,102
Advertising
Freight 883,451 1,686,276 747,042
Other 1,078,969 261,882 1,969,571
Total Current 16,369,195 14,308,807 15,670,848
Liabilities
NONCURRENT LIABILITIES
Notes Payable 19,104,000 21,006,966 20,422,265
Deferred Income Taxes - 320,616 -
Deferred Compensation 1,937,850 1,672,689 1,778,075
Other 1,201,885 1,001,816 778,112
Total Noncurrent 22,243,735 24,002,087 22,978,452
Liabilities
Total Liabilities 38,612,930 38,310,894 38,649,300
STOCKHOLDERS EQUITY
Common Stock 723,352 723,352 723,352
Paid-In Capital in Excess of Par 7,657,394 7,657,393 7,657,394
Value
Retained Earnings 76,895,401 74,428,396 76,033,462
Cumulative Translation Adjustment (1,050,695) (1,104,951) (987,781)
84,225,452 81,704,190 83,426,427
Less Treasury Stock, At Cost 6,458,078 4,298,309 5,088,044
Total Stockholders 77,767,374 77,405,881 78,338,383
Equity
TOTAL LIABILITIES & STOCKHOLDERS $116,380,304 $115,716,775 $116,987,683
EQUITY
</TABLE>
Certain prior year balances have been reclassified to be consistent with
the presentation in the current period.
<TABLE>
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statement of Income and Retained Earnings
Six Months Ended January 31
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net Sales* $81,105,246 $79,182,686
Cost Of Sales 57,123,845 54,621,099
Gross Profit* 23,981,401 24,561,589
Selling, General And Administrative 20,845,164 16,424,909
Expenses*
Operating Income 3,136,237 8,136,678
OTHER INCOME (EXPENSE)
Interest Expense (970,528) (984,908)
Interest Income 274,133 167,340
Foreign Exchange Gain (Loss) (870) (11,249)
Other, Net 187,724 (68,908)
(509,541) (897,725)
Income Before Income Taxes 2,626,696 7,238,953
Income Taxes 736,622 1,846,731
Net Income 1,890,074 5,392,222
RETAINED EARNINGS
Balance at Beginning of Year 76,024,301 70,077,278
Less: Cash Dividends Declared 1,018,974 1,041,104
Retained Earnings - January 31 $76,895,401 $74,428,396
Average Shares Outstanding 6,828,646 6,956,698
Net Income Per Share $0.28 $0.78
</TABLE>
*Net Sales, Gross Profit and Selling, General and Administrative
Expenses for fiscal 1995 reflect the reclassification of trade
marketing costs to be consistent with the presentation in the
current period.
<TABLE>
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statement of Income and Retained Earnings
Three Months Ended January 31
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net Sales* $41,797,312 $40,157,478
Cost Of Sales 29,474,959 27,989,478
Gross Profit* 12,322,353 12,168,000
Selling, General And Administrative 11,532,883 8,203,327
Expenses*
Operating Income 789,470 3,964,673
OTHER INCOME (EXPENSE)
Interest Expense (480,367) (497,373)
Interest Income 121,539 63,801
Foreign Exchange Gain (Loss) 2,723 (14,618)
Other, Net 242,150 (47,412)
(113,955) (495,602)
Income Before Income Taxes 675,515 3,469,071
Income Taxes 198,329 895,781
Net Income $ 477,186 $2,573,290
Average Shares Outstanding 6,813,708 6,955,647
Net Income Per Share $0.07 $0.37
</TABLE>
*Net Sales, Gross Profit and Selling, General and Administrative
Expenses for fiscal 1995 reflect the reclassification of trade
marketing costs to be consistent with the presentation in the
current period.
<TABLE>
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Six Months Ended January 31
<CAPTION>
1996 1995
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $1,890,074 $5,392,222
Adjustments to Reconcile Net Income to
Net Cash
Provided by Operating Activities:
Depreciation and Amortization 4,069,690 3,828,110
Provision for bad debts 86,472 26,248
(Increase) Decrease in:
Accounts Receivable (3,367,992) (4,887,236)
Inventories (297,074) (1,676,260)
Prepaid Expenses and Taxes (232,877) (1,776,807)
Other Assets (268,541) (225,957)
Increase (Decrease) in:
Accounts Payable 466,539 1,344,951
Accrued Expenses (886,029) (1,307,29)
Deferred Compensation 159,775 (89,129)
Other 423,773 286,170
Total Adjustments 153,736 (4,477,201)
Net Cash Used In Operating Activities 2,043,810 915,021
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (2,599,529) (4,465,277)
Purchases of Investment Securities - (2,114,772)
Dispositions of Investment Securities 908,874 2,700,913
Other - 19,697
Net Cash Used in Investing Activities
(1,690,655) (3,859,439)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Short Term Borrowings -
Principal Payments on Long Term Debt (168,355) (1,158,880)
Proceeds from Issuance of Common Stock - -
Dividends Paid (1,018,524) (976,035)
Foreign Currency Translation (26,288) 5,117
Adjustment
Purchases of Treasury Stock
(1,370,034) -
Net Cash Used In Financing Activities
(2,583,201) (2,129,798)
Net (Decrease) in Cash and Cash (2,230,046) (5,074,216)
Equivalents
Cash and Cash Equivalents, Beginning of 8,829,667 6,394,315
Year
Cash and Cash Equivalents, January 31 $ 6,599,621 $1,320,099
</TABLE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996 COMPARED TO SIX
MONTHS ENDED JANUARY 31, 1995
RESULTS OF OPERATIONS
Consolidated net sales for the six months ended January 31, 1996 were
$81,105,000, an increase of $1,923,000, or 2.4%, over net sales of
$79,183,000 in the first six months of fiscal 1995. Net income for the six
months ended January 31, 1996 was $1,890,000 or $0.28 per share, a decrease
of 64.9% from $5,392,000 or $0.78 per share earned in the first six months
of fiscal 1995. Net income for the 1996 period reflects an after tax
charge to second quarter earnings of $700,000, or $0.10 per share, for the
costs of settlement (and legal expenses) of a patent lawsuit. (See Part
II, Item 1 in Legal Proceedings.)
Net sales of industrial and environmental sorbents decreased $337,000 from
prior year levels: Net sales of industrial clay absorbents increased
slightly, while net sales of nonclay sorbents decreased $565,000 or 21%
reflecting continued competitive pressures and refocused sales and
marketing efforts towards selected higher margin customers. Net sales of
cat box absorbents increased $1,089,000 or 3% from fiscal 1995 first half
results. This growth is the result of new product introductions and
expanded distribution of existing coarse litter products in the grocery
industry. Increased net sales to grocery customers were offset by slightly
decreased sales to non-grocery customers. In particular, net sales to
Sams Club declined due to the introduction of a private label scoopable
litter that replaced the Companys branded scoopable product in a
substantial number of Sams locations. Sams continues to sell other
Company branded products. Net sales to other non-grocery customers,
including Wal-Mart Stores, Inc., were up 14% in the 1996 period. Net sales
of agricultural absorbents increased $973,000 or 10% from fiscal 1995
primarily because of increased demand for crop protection products, fueled
by expectations of increased planting activity in the next year. Net sales
of fluid filtration and purification products decreased slightly from prior
year levels due to due to competitive pressures and continued sluggish
demand in certain of the Companys markets. Net sales of transportation
services increased $653,000 or 16% from fiscal 1995 because of increased
third party mileage.
Consolidated gross profit as a percentage of net sales for the six months
ended January 31, 1996 decreased to 29.6% from 31.0% in the first six
months of fiscal 1995. Changes in sales mix towards less profitable
products and increased costs of packaging materials and shipping
contributed to this decline.
Operating expenses as a percentage of net sales increased to 25.7% in the
first six months of fiscal 1996 from 20.7% in the first half of fiscal
1995. This change reflects the additional costs of approximately
$3,500,000 for promotional and advertising programs associated with new
product introductions.
Interest expense decreased $14,400 while interest income increased $92,400.
The Companys effective tax rate increased to 28.0% of income in the first
half of 1996 as compared to 25.5% for the first half of fiscal 1995.
Total assets of the Company decreased $607,400 during the six months ended
January 31, 1996. Current assets increased $614,400 or 1.3% from fiscal
year end balances reflecting increased accounts receivable and inventory
balances offset against reduced cash and investments to fund increased
sales. Property, plant and equipment, net of accumulated depreciation,
decreased $1,422,000 due to lower capital expenditures, relative to
depreciation expense.
<PAGE>
Total liabilities in the six months ended January 31, 1996 decreased
$36,300. Current liabilities increased $698,400 or 4.5% from July 31, 1995
balances while noncurrent liabilities decreased $734,700 or 3.2% from year
end.
EXPECTATIONS
The Company anticipates sales growth, primarily from branded cat box
absorbent products, as new product introductions take hold. The Company
expects that earnings over the remainder of fiscal 1996 will be
approximately equal to that of fiscal 1995. However, actual results may be
materially lower than those reflected in these forward-looking statements,
due primarily to continued vigorous competition in the grocery and,
particularly, in the mass merchandising markets, the level of success of
new products and the cost of new product introductions and promotions in
the consumer market.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio decreased slightly to 3.02 at January 31, 1996 from 3.11
at July 31, 1994. Working capital decreased $83,900 in the six months
ended January 31, 1996 to $32,990,400. Cash provided by operations
continues to be the Companys primary source of funds to finance operating
needs and capital expenditures. During the six months ended January 31,
1996 the balances of cash and cash equivalents declined $2,230,000. This
reduction in cash, cash equivalents and investments was used to fund
capital expenditures of $2,599,500, to pay dividends of $1,018,500 and to
reduce debt by $168,400. Total cash and investment balances held by the
Companys foreign subsidiaries at January 31, 1996 and 1995 were $2,505,200
and $3,132,400 respectively.
The Companys long term debt at January 31, 1996 decreased $1,318,265 from
year end balances. Long term debt to equity decreased to 24.6% from 26.1%
at July 31, 1995.
THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO
THREE MONTHS ENDED JANUARY 31, 1995
Consolidated net sales for the three months ended January 31, 1996 were
$41,797,300, an increase of 4.1% from net sales of $40,157,500 in the same
period last year. Net income for the quarter ended January 31, 1996 was
$477,200, or $0.07 per share, a decrease of 81.5% from net income of
$2,573,300 or $0.37 per share reported in the quarter ended January 31,
1995. Net income in the 1996 period reflects an after-tax charge to
earnings of $700,000 or $0.10 per share, for the costs of settlement and
legal expenses of a patent lawsuit. (See Part II, Item 1 - Legal
Proceedings.)
Net sales of industrial environmental sorbents decreased $456,000, or 10%
from prior year levels. Net sales of industrial clay absorbents decreased
slightly, while net sales of nonclay sorbents decreased $412,000 or 30%
reflecting continued competitive pressures and refocused sales and
marketing efforts towards selected higher margin customers. Net sales of
cat box absorbents increased $897,000 or 4% from fiscal 1995 second quarter
results. This growth is the result of new product introductions and
expanded distribution of existing coarse litter products in the grocery
industry. Increased net sales to grocery customers were offset by a
decrease of 7% in net sales to non-grocery customers. In particular, net
sales to Sams Club declined due to the introduction of a private label
scoopable litter that replaced the Companys branded scoopable product in a
substantial number of Sams locations. Sams continues to sell other
Company branded products. Net sales to other non-grocery customers,
including Wal-Mart Stores, Inc., were up 7% in the 1996 period.
Net sales of agricultural absorbents increased $1,312,000 or 27% from
fiscal 1995 primarily because of agricultural absorbents increased demand
for crop protection products, fueled by expectations of increased planting
activity in the next year. Net sales of fluid filtration and
purification products decreased $264,000 from prior year levels due to
competitive pressures and continued sluggish demand in certain of the
Companys markets. Net sales of transportation services increased $190,000
in the second quarter of fiscal 1996 as compared to the second quarter of
fiscal 1995.
Consolidated gross profit for the three months ended January 31, 1996
decreased to 29.5% of net sales as compared to 30.3% in the second quarter
of fiscal 1995 due to increased costs of packaging material and shipping.
Selling, General and Administrative Expenses increased to 27.6% of net
sales as compared to 20.4% of net sales in the second quarter of fiscal
1996 and 1995 respectively.
Interest expense for the second quarter of fiscal 1996 compared to the
second quarter of fiscal 1995 decreased $17,000. Interest income increased
$57,700 in the same period as a result of larger invested balances.
The Companys effective tax rate in the second quarter of fiscal 1996 was
29.4% of income as compared to 25.8% in the same period last year.
FOREIGN OPERATIONS
Net sales by the Companys foreign subsidiaries for the six months ended
January 31, 1996 were $6,213,900, constituting 7.7% of sales. This
represents a decrease of $128,200 or 2.0%, from the first half of fiscal
1995, in which foreign subsidiary sales were $6,342,100 and constituted
8.0% of sales. This decrease is primarily due to slightly reduced sales in
Canada. Net income of the Companys foreign subsidiaries for the six
months ended January 31, 1996 was $274,700, compared with $220,900 in the
second quarter of fiscal 1995. Identifiable assets of the Companys
foreign subsidiaries as of January 31, 1996 were $9,144,700, a decrease of
$1,076,700 from $10,221,400 as of January 31, 1995.
<PAGE>
The Companys net sales by its foreign subsidiaries for the three months
ended January 31, 1996 were $3,305,900, constituting 7.9% of sales. This
represents a decrease of $65,400 or 1.9% from the second quarter of fiscal
1995 in which foreign subsidiary sales were $3,371,300 and constituted 8.4%
of sales. This decrease is primarily due to slightly decreased sales in
Canada. Net income of the Companys foreign subsidiaries for the three
months ended January 31, 1996 was $131,700 compared with $126,900 in the
second quarter of fiscal 1995.
<PAGE>
Part II - Other Information
ITEM 1.Legal Proceedings - On February 13, 1996 the Company entered into a
settlement agreement related to a patent infringement action that
had been initiated by Edward Lowe Industries, Inc. in the United
States District Court for the Northern District of Illinois,
Eastern Division against the Company and Marcal Paper Mills, Inc.
The settlement prohibits the Company and Marcal Paper Mills, Inc.
from producing and marketing cellulosic granules as carriers for
use in agricultural applications for a period of eight years.
Additionally the Company and Marcal have been licensed to develop,
produce and market cellulosic granules as cat litter and other
absorbent granular products. The total pre-tax cost of the
settlement, including legal expenses, was $921,000 and has been
charged against earnings in the quarter ended January 31, 1996.
Item 4.Submission of matters to a votes of security holders - On December
12, 1995 the 1995 Annual Meeting of Stockholders of Oil-Dri
Corporation of America was held for the purpose of considering and
voting on:
1. The election of ten directors.
2. The approval of the Oil-Dri Corporation of America 1995
Long Term Incentive Plan.
Election of Directors
The following schedule sets forth the results of the vote to
elect directors.
<TABLE>
<CAPTION>
Director Votes For Votes Withheld
<S> <C> <C>
J. Steven Cole 23,905,437 362,754
Ronald B. Gordon 23,904,937 363,254
Daniel S. Jaffee 23,899,130 369,061
Richard M. Jaffee 23,899,107 369,084
Robert D. Jaffee 23,899,130 369,061
Edgar D. Jannotta 23,905,437 362,754
Joseph C. Miller 23,905,437 362,754
Paul J. Miller 23,905,437 362,754
Haydn H. Murray 23,905,437 362,754
Allan H. Selig 23,904,987 363,204
</TABLE>
Approval of The Oil-Dri Corporation of America 1995 Long
Term Incentive Plan
The following schedule sets forth the results of the vote to
approve The Oil-Dri Corporation of America 1995 Long Term Incentive
Plan.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-
VOTES
<S> <C> <C> <C> <C>
Total Votes 22,580,557 938,083 160,332 589,219
</TABLE>
ITEM 6. (a)Exhibits: The following documents are an exhibit to this
report.
Exhibit 11: Statement Re: Computation of
per share earnings.
Exhibit 27: Financial Data Schedule
(b) During the quarter for which this report is filed, no
reports on Form 8-K were filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
(Registrant)
BY Donald J. Deegan
Director of Finance and Accounting,
Chief Accounting Officer
BY Daniel S. Jaffee
President
Dated: March 14, 1996
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE SEQUENTIALLY NUMBER PAGE
(11) Statement Re:
Computation of Per Share
Earnings
(27) Financial Data Schedule
<TABLE>
Exhibit 11
OIL-DRI CORPORATION OF AMERICA
Computation of Weighted Average Number
of Shares Outstanding
<CAPTION>
Average
Shares-
(Weighted
Number Number of Shares)Number
of Shares Weighted of Days
Quarter End Period Days Outstanding Shares As Adjusted
<S> <C> <C> <C> <S><C> <C> <C> <C> <C>
January 31, 1996 11/1/95 to 1/31/96 92 6,812,922 626,788,824 6,812,922
92 626,788,824
<C>
786
6,813,708
<S> <C> <C> <C> <S><C> <C> <C> <C>
January 31, 1995 11/1/94 to 1/31/95 92 6,949,822 639,383,624
92 639,383,624 6,949,822
<C>
5,825
6,955,647
Six Months Ended
<S> <C> <C> <S> <C> <C> <C> <C>
January 31, 08/01/95 to 8 6,901,322 55,210,578 6,826,500
1996 08/08/95
08/09/95 to 63 6,841,322 431,003,286
10/10/95
10/11/95 to 1 6,814,922 6,814,922
10/11/95
10/12/95 to 112 6,812,922 763,047,264
01/01/96
184 1,256,076,048
<C>
2,146
6,828,646
Six Months Ended
<S> <C> <C> <S> <C> <C> <C> <C>
January 31, 08/01/94 to 8 6,951,822 55,614,576 6,949,909
1995 08/08/94
11/30/94 114 6,949,822 792,279,708
12/01/94 to 62 6,949,822 430,888,964
01/31/95
184 1,278,783,248
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options.
<C>
6,789
6,956,698
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 6,599,621
<SECURITIES> 1,406,467
<RECEIVABLES> 24,909,494
<ALLOWANCES> (278,405)
<INVENTORY> 11,191,258
<CURRENT-ASSETS> 49,359,590
<PP&E> 109,441,705
<DEPRECIATION> (51,404,271)
<TOTAL-ASSETS> 116,380,304
<CURRENT-LIABILITIES> 16,369,195
<BONDS> 19,104,000
0
0
<COMMON> 723,352
<OTHER-SE> 77,044,022
<TOTAL-LIABILITY-AND-EQUITY> 116,380,304
<SALES> 81,105,246
<TOTAL-REVENUES> 81,105,246
<CGS> 57,123,845
<TOTAL-COSTS> 77,969,009
<OTHER-EXPENSES> (547,459)
<LOSS-PROVISION> 86,472
<INTEREST-EXPENSE> 970,528
<INCOME-PRETAX> 2,626,696
<INCOME-TAX> 736,622
<INCOME-CONTINUING> 1,890,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,890,074
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
