<PAGE> 1
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 October 31, 1997 Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 36-2048898
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
410 North Michigan Avenue
Chicago, Illinois 60611
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 321-1515
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 5,417,130 Shares (Including 973,760 Treasury Shares)
Class B Stock - 1,818,388 Shares
<PAGE> 2
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31 JULY 31
1997 1997
---------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
- --------------
Cash and Cash Equivalents $ 4,100 $ 9,997
Investment Securities 1,553 1,544
Accounts Receivable 23,337 20,341
Allowance for Doubtful Accounts (245) (261)
Inventories 10,991 10,604
Prepaid Expenses and Taxes 4,710 4,685
-------- --------
TOTAL CURRENT ASSETS 44,446 46,910
-------- --------
PROPERTY, PLANT AND EQUIPMENT - AT COST
- ---------------------------------------
Cost 115,823 114,533
Less Accumulated Depreciation and
Amortization (60,574) (58,737)
-------- --------
TOTAL PROPERTY, PLANT
AND EQUIPMENT, NET 55,249 55,796
-------- --------
OTHER ASSETS
- ------------
Goodwill (Net of Accumulated Amortization) 4,008 4,040
Deferred Income Taxes 2,430 2,446
Other 5,264 5,366
-------- --------
TOTAL OTHER ASSETS 11,702 11,852
-------- --------
TOTAL ASSETS $111,397 $114,558
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -2-
<PAGE> 3
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31 JULY 31
1997 1997
----------- ---------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
- -------------------
Current Maturities of Notes Payable $ 1,943 $ 1,946
Accounts Payable 4,438 4,050
Dividends Payable 465 475
Accrued Expenses 7,214 9,274
-------- --------
TOTAL CURRENT LIABILITIES 14,060 15,745
-------- --------
NONCURRENT LIABILITIES
- ----------------------
Notes Payable 17,052 17,052
Deferred Compensation 2,723 2,750
Other 1,770 1,681
-------- --------
TOTAL NONCURRENT LIABILITIES 21,545 21,483
-------- --------
TOTAL LIABILITIES 35,605 37,228
-------- --------
STOCKHOLDERS' EQUITY
- --------------------
Common and Class B Stock 724 724
Paid-In Capital in Excess of Par Value 7,698 7,686
Restricted Unearned Stock Compensation (59) (18)
Retained Earnings 83,660 82,243
Cumulative Translation Adjustment (903) (907)
-------- --------
91,120 89,728
Less Treasury Stock, At Cost (15,328) (12,398)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 75,792 77,330
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $111,397 $114,558
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -3-
<PAGE> 4
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
OCTOBER 31
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
NET SALES $ 39,749 $ 40,525
Cost Of Sales 27,851 28,233
---------- ----------
GROSS PROFIT 11,898 12,292
Selling, General And Administrative Expenses 8,825 9,243
---------- ----------
INCOME FROM OPERATIONS 3,073 3,049
OTHER INCOME (EXPENSE)
Interest Expense (439) (467)
Interest Income 112 151
Foreign Exchange Gain (Loss) 1 (1)
Other, Net (147) (31)
---------- ----------
TOTAL OTHER EXPENSE, NET (473) (348)
INCOME BEFORE INCOME TAXES 2,600 2,701
Income Taxes 728 771
---------- ----------
NET INCOME 1,872 1,930
RETAINED EARNINGS
Balance at Beginning of Year 82,243 77,386
Less Cash Dividends Declared 455 493
---------- ----------
RETAINED EARNINGS - OCTOBER 31 $ 83,660 $ 78,823
========== ==========
AVERAGE SHARES OUTSTANDING 6,326,613 6,720,704
========== ==========
NET INCOME PER SHARE $ 0.30 $ 0.29
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -4-
<PAGE> 5
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
OCTOBER 31
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
NET INCOME $ 1,872 $ 1,930
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 1,920 1,927
Provision for bad debts (20) 75
(Increase) Decrease in:
Accounts Receivable (2,992) (2,667)
Inventories (387) 672
Prepaid Expenses and Taxes (24) (283)
Other Assets 21 (48)
Increase (Decrease) in:
Accounts Payable 388 (970)
Accrued Expenses (2,061) 382
Deferred Compensation (27) 121
Other 89 45
------- -------
TOTAL ADJUSTMENTS (3,093) (746)
------- -------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (1,221) 1,184
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Capital Expenditures (1,218) (1,503)
Proceeds from sale of property, plant and equipment 4 -
Purchases of Investment Securities (190) (311)
Dispositions of Investment Securities 181 -
Other (18) 21
------- -------
NET CASH USED IN INVESTING ACTIVITIES (1,241) (1,793)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Principal Payments on Long-Term Debt (3) -
Dividends Paid (466) (511)
Purchases of Treasury Stock (2,970) (835)
Other 4 74
------- -------
NET CASH USED IN FINANCING ACTIVITIES (3,435) (1,272)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,897) (1,881)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,997 10,114
------- -------
CASH AND CASH EQUIVALENTS, OCTOBER 31 $ 4,100 $ 8,233
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page -5-
<PAGE> 6
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be read
in conjunction with the consolidated financial statements and related notes for
the year ended July 31, 1997, included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions are eliminated.
The unaudited financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the statements
contained herein.
2. INVENTORIES
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31 JULY 31
(UNAUDITED) (UNAUDITED)
1997 1997
----------- -----------
<S> <C> <C>
Finished goods $ 6,882 $ 6,684
Packaging 3,221 3,168
Other 888 752
------- -------
$10,991 $10,604
======= =======
</TABLE>
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method.
3. SUBSEQUENT EVENT
Subsequent to the close of the first quarter, the company divested its trucking
business which generated net sales of $8.9 million during fiscal 1997, but
operated on a break-even basis. At the same time, the Company signed an
agreement with CRST, Inc., in Cedar Rapids, Iowa, to outsource all of its
trucking requirements effective November 22, 1997. In conjunction with the
divestiture of the trucking business, the Company announced that it planned to
take a restructuring charge of approximately $2,500,000 to $3,000,000 in the
second quarter of fiscal 1998 to cover the costs of exiting the trucking
business and to write off certain other non-performing assets.
Page -6-
<PAGE> 7
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1997 COMPARED TO THREE
MONTHS ENDED OCTOBER 31, 1996
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended October 31, 1997 were
$39,749,000, a decrease of 1.9% from net sales of $40,525,000 in the first
three months of fiscal 1997. Net income for the first three months of fiscal
1998 was $1,872,000 or $0.30 per share, compared to $1,930,000 or $0.29 per
share earned in last year's quarter. Net income decreased 3.0% versus a 3.4%
increase in earnings per share due to 394,000 fewer shares outstanding during
the first quarter of fiscal 1998 as compared to the first quarter of fiscal
1997.
Net sales of cat box absorbents decreased $482,000, or 2.0% from prior year
amounts, due in part to a short-term trial of Cat's Pride(R) Premium Scoopable
product in Sam's stores in the first quarter of fiscal 1997. Net sales of
agricultural and fluids purification products decreased $193,000, or 2.1%, from
the comparable period in fiscal 1997. The lower sales resulted from decreased
demand for AGSORBR carriers partially offset by an increase in sales of fluids
purification products. Net sales of industrial and environmental sorbents
increased $157,000, or 3.6%, from prior year levels. The increase was due
primarily to higher floor absorbent sales in the United Kingdom. Net sales of
transportation services decreased $258,000 or 10.4% from the first quarter of
fiscal 1997 due to lower backhaul revenue resulting from a reduction in the
Company's fleet.
Consolidated gross profit as a percentage of net sales for the three months
ended October 31, 1997 decreased to 29.9% from 30.3% in the comparable period
of fiscal 1997. Changes in sales mix and higher natural gas prices contributed
to this decrease.
Operating expenses as a percentage of net sales decreased to 22.2% in the first
three months of fiscal 1998 from 22.8% in the same period of fiscal 1997. This
decrease is primarily attributable to first quarter fiscal 1997 expenses
related to the development of the Company's strategic planning initiatives.
Interest expense decreased $28,000 and interest income decreased $39,000.
The Company's effective tax rate was 28.0% of pre-tax income in the first
quarter of fiscal 1998 as compared to 28.5% for the same period of fiscal 1997.
The assets of the Company decreased $3,161,000 during the first quarter of
fiscal 1998. Current assets decreased $2,464,000, or 5.3%, from fiscal 1997
year end balances primarily due to decreased cash and cash equivalents,
partially offset by higher accounts receivable. Property, plant and equipment,
net of accumulated depreciation, decreased $547,000 during the first quarter
due to depreciation expense exceeding capital expenditures.
Total liabilities in the quarter ended October 31, 1997 decreased $1,623,000,
due primarily to lower compensation-related accruals. Current liabilities
decreased $1,685,000 or 10.7% from July 31, 1997 balances, also due to lower
compensation-related accruals.
Page -7-
<PAGE> 8
EXPECTATIONS
The Company anticipates sales during the remainder of fiscal 1998 will be at
about the same level as sales in the comparable period of fiscal 1997 after
taking into account the approximately $2 million per quarter of backhaul
revenue previously generated by the Company's trucking business, which was
divested on November 21, 1997. Moderately higher sales of cat box absorbents
and fluid purification products should substantially offset the lost backhaul
revenue. However, sales growth of cat box absorbents is subject to continuing
competition for shelf space in the grocery, mass merchandiser and club
markets. Demand for AGSORB(R) carriers is expected to improve slightly through
the remainder of the fiscal year.
The foregoing statements under this heading are "forward looking statements"
within the meaning of that term in the Securities Exchange Act of 1934, as
amended. Actual results may be lower than those reflected in these
forward-looking statements, due primarily to: continued vigorous competition
in the grocery, mass merchandiser and club markets; the level of success of new
products; and the cost of new product introductions and promotions in consumer
markets. These forward-looking statements also involve the risk of changes in
market conditions in the overall economy and, for the agricultural and fluids
purification division, in the planting activity, crop quality and overall
agricultural demand, including export demand.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio increased to 3.2 at October 31, 1997 from 3.0 at July 31,
1997. Working capital decreased $779,000 during the three months ended October
31, 1997 to $30,386,000. Cash provided by operations continues to be the
Company's primary source of funds to finance investing needs and financing
activities. During the three months ended October 31, 1997, the balances of
cash, cash equivalents and other investments decreased $5,888,000, primarily
due to purchases of the Company's common stock ($2,970,000), capital
expenditures ($1,218,000) and payment of dividends ($466,000). Total cash and
investment balances held by the Company's foreign subsidiaries at October 31,
1997 and July 31, 1997 were $2,942,000 and $2,803,000 respectively.
FOREIGN OPERATIONS
Net sales by the Company's foreign subsidiaries for the three months ended
October 31, 1997, were $3,064,000, or 7.7% of total Company sales. This
represents an increase of $63,000 from the same period of fiscal 1997, in which
foreign subsidiary sales were $3,001,000, or 7.4% of total Company sales. Net
income of the foreign subsidiaries for the first quarter of fiscal 1998 was
$186,000 compared with $145,000 in the same period of fiscal 1997.
Identifiable assets of the Company's foreign subsidiaries as of October 31,
1997, were $10,532,000, an increase of $666,000 from $9,866,000 as of July 31,
1997. The increase is primarily due to higher prepaid expenses, inventories,
and cash and cash equivalents.
Page -8-
<PAGE> 9
Part II - Other Information
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
Page -9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
(Registrant)
BY /s/Michael L. Goldberg
------------------------------
Michael L. Goldberg
Executive Vice President and Chief Financial Officer
BY /s/Daniel S. Jaffee
------------------------------
Daniel S. Jaffee
President and Chief Executive Officer
Dated: December 12, 1997
Page -10-
<PAGE> 11
EXHIBIT 11
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES
Computation of Earnings Per Share
(in thousands of dollars except for per share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED OCTOBER 31
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Average number of shares outstanding during the period 6,274,031 6,719,324
Options exercisable, less shares that could have been
purchased based on the average market value for the
period 52,582 1,380
----------- ----------
Average number of common and common equivalent shares
outstanding during the period (a) 6,326,613 6,720,704
=========== ==========
Net earnings $ 1,872 $ 1,930
=========== ==========
Net earnings per share $ 0.30 $ 0.29
=========== ==========
</TABLE>
(a) Excludes options which are not dilutive. Effect under fully diluted
computations is not material.
Page -11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 4,100,000
<SECURITIES> 1,553,000
<RECEIVABLES> 23,337,000
<ALLOWANCES> 245,000
<INVENTORY> 10,991,000
<CURRENT-ASSETS> 44,446,000
<PP&E> 115,823,000
<DEPRECIATION> (60,574,000)
<TOTAL-ASSETS> 111,397,000
<CURRENT-LIABILITIES> 14,060,000
<BONDS> 17,052,000
0
0
<COMMON> 724,000
<OTHER-SE> 75,068,000
<TOTAL-LIABILITY-AND-EQUITY> 111,397,000
<SALES> 39,749,000
<TOTAL-REVENUES> 39,749,000
<CGS> 27,851,000
<TOTAL-COSTS> 27,851,000
<OTHER-EXPENSES> 8,879,000
<LOSS-PROVISION> (20,000)
<INTEREST-EXPENSE> 439,000
<INCOME-PRETAX> 2,600,000
<INCOME-TAX> 728,000
<INCOME-CONTINUING> 1,872,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,872,000
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
