SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 30, 2000 Commission File Number 0-8675
OIL-DRI CORPORATION OF AMERICA
------------------------------
(Exact name of the 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)
The 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 - 5,470,435 Shares (Including 1,282,807 Treasury Shares)
Class B Stock - 1,765,083 Shares (Including 342,241 Treasury Shares)
<PAGE> 2
INTRODUCTORY STATEMENT
On July 24, 2000 Oil-Dri Corporation of America filed a report on Form 8-K with
the Securities and Exchange Commission which disclosed that reported financial
results for each of the first three quarters of its fiscal year ending July 31,
2000 would be restated. The filing reported that the Company had not recognized
the impact on pricing and promotional allowances caused when a customer changed
from buying directly from Oil-Dri to purchasing through wholesalers.
Additionally, a review of trade spending showed that the Company's accruals for
marketing expenses should be increased. Both of these items impacted the
Consumer Products segment. The restatement had the effect of decreasing net
sales by $176,000, income before tax by $526,000, net income by $3734,000, and
basic and diluted earnings net income per share by $0.07 for the three months
ended April 30, 2000. For the nine months ended April 30, 2000, the restatement
had the effect of reducing net sales by $799,000, income before tax by
$1,849,000, net income by $1,313,000, and basic and fully diluted net income per
shareshares by $0.24 and $0.23, respectively. At April 30, 2000, the restatement
increased accrued expenses, net of the related income tax reduction, by $514,000
and decreased accounts receivable and retained earnings by $799,000 and
$1,313,000, respectively.
Except for Items 1, 2, and 6, no other amendments have been made to this filing.
CONTENTS
<TABLE>
PAGE
PART I
<S> <C>
ITEM 1: Financial Statements And Supplementary Data.................. 3-12
ITEM 2: Management Discussion And Analysis Of Financial Condition
And The Results Of Operations................................ 13-18
ITEM 3: Quantitative And Qualitative Disclosures About Market Risk... 18
PART II
ITEM 6: Exhibits And Reports On Form 8-K............................. 19
SIGNATURES........................................................... 20
</TABLE>
<PAGE> 3
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------
APRIL 30 JULY 31
ASSETS 2000 1999
(RESTATED)
-----------------------
CURRENT ASSETS
--------------
<S> <C> <C>
Cash and Cash Equivalents $ 988 $ 4,362
Investment Securities 1,219 1,225
Accounts Receivable, less allowance of $431 and
$358 at April 30, 2000 and July 31, 1999,
respectively 24,395 25,365
Inventories 17,837 15,165
Prepaid Expenses 8,494 6,963
-------- ---------
TOTAL CURRENT ASSETS 52,933 53,080
-------- ---------
PROPERTY, PLANT AND EQUIPMENT - AT COST
---------------------------------------
Cost 134,620 132,479
Less Accumulated Depreciation and Amortization (73,972) (69,631)
-------- --------
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET 60,648 62,848
-------- --------
OTHER ASSETS
------------
Goodwill & Intangibles, net of accumulated
amortization of $2,480 and $2,128 at April
30, 2000, and July 31, 1999, respectively 9,621 9,780
Deferred Income Taxes 3,040 3,045
Other 6,140 4,997
-------- --------
TOTAL OTHER ASSETS 18,801 17,822
-------- --------
TOTAL ASSETS $132,382 $133,750
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
------------------------
APRIL 30 JULY 31
LIABILITIES & STOCKHOLDERS' EQUITY 2000 1999
(RESTATED)
------------------------
CURRENT LIABILITIES
-------------------
<S> <C> <C>
Current Maturities of Notes Payable $ 2,000 $ 2,226
Accounts Payable 5,002 4,842
Dividends Payable 473 484
Accrued Expenses 7,297 8,387
-------- --------
TOTAL CURRENT LIABILITIES 14,772 15,939
-------- --------
NONCURRENT LIABILITIES
----------------------
Notes Payable 40,063 38,150
Deferred Compensation 3,075 3,206
Other 1,751 1,948
-------- --------
TOTAL NONCURRENT LIABILITIES 44,889 43,304
-------- --------
TOTAL LIABILITIES 59,661 59,243
-------- --------
STOCKHOLDERS' EQUITY
--------------------
Common Stock, par value $.10 per share, issued
5,470,435 shares at April 30, 2000, and
5,470,252 shares at July 31, 1999 547 547
Class B Stock, par value $.10 per share, issued
1,765,083 shares at April 30, 2000, and
1,765,266 shares at July 31, 1999 177 177
Additional Paid-In Capital 7,698 7,702
Retained Earnings 90,443 90,430
Restricted Unearned Stock Compensation (19) (9)
Cumulative Translation Adjustment (1,238) (1,159)
------- -------
97,608 97,688
Less Treasury Stock, at cost (1,282,807 Common
shares and 342,241 Class B shares at April 30,
2000, and 1,163,764 Common shares and 342,241
Class B shares at July 31, 1999) (24,887) (23,181)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 72,721 74,507
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $132,382 $133,750
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE NINE MONTHS
ENDED APRIL 30
-------------------------
2000 1999
(RESTATED)
-------------------------
<S> <C> <C>
NET SALES $ 133,033 $133,510
Cost Of Sales 95,308 91,202
--------- --------
GROSS PROFIT 37,725 42,308
Selling, General And Administrative Expenses 32,552 32,704
Restructuring Charge 1,239 --
--------- --------
INCOME FROM OPERATIONS 3,934 9,604
OTHER INCOME (EXPENSE)
Interest Expense (2,409) (2,401)
Interest Income 164 385
Other, Net 339 103
-------- --------
TOTAL OTHER EXPENSE, NET (1,906) (1,913)
-------- --------
INCOME BEFORE INCOME TAXES 2,028 7,691
Income Taxes 588 2,192
--------- --------
NET INCOME 1,440 5,499
RETAINED EARNINGS
Balance at Beginning of Year 90,430 85,158
Less Cash Dividends Declared 1,427 1,421
-------- --------
RETAINED EARNINGS - APRIL 30 $ 90,443 $ 89,236
======== ========
NET INCOME PER SHARE
Basic $ 0.25 $ 0.94
======== ========
Dilutive $ 0.25 $ 0.92
======== ========
AVERAGE SHARES OUTSTANDING
Basic 5,660 5,846
======== ========
Dilutive 5,736 5,995
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 6
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE NINE MONTHS
ENDED APRIL 30
-------------------------
2000 1999
(RESTATED)
-------------------------
<S> <C> <C>
NET INCOME $1,440 $5,499
OTHER COMPREHENSIVE INCOME:
Cumulative Translation Adjustments (79) 23
------ ------
TOTAL COMPREHENSIVE INCOME $1,361 $5,522
====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 7
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE THREE MONTHS
ENDED APRIL 30
-------------------------
2000 1999
(RESTATED)
-------------------------
<S> <C> <C>
NET SALES $ 42,604 $ 42,405
Cost Of Sales 30,543 29,390
-------- --------
GROSS PROFIT 12,061 13,015
Selling, General And Administrative Expenses 10,652 10,743
-------- --------
INCOME FROM OPERATIONS 1,409 2,272
OTHER INCOME (EXPENSE)
Interest Expense (786) (807)
Interest Income 55 125
Other, Net 111 82
------- --------
TOTAL OTHER EXPENSE, NET (620) (600)
------- --------
INCOME BEFORE INCOME TAXES 789 1,672
Income Taxes 229 477
------- --------
NET INCOME $ 560 $ 1,195
======= ========
NET INCOME PER SHARE
Basic $ 0.10 $ 0.21
======= ========
Dilutive $ 0.10 $ 0.20
======= ========
AVERAGE SHARES OUTSTANDING
Basic 5,610 5,813
======= ========
Dilutive 5,611 6,036
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 8
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------
FOR THE THREE MONTHS
ENDED APRIL 30
-------------------------
2000 1999
(RESTATED)
-------------------------
<S> <C> <C>
NET INCOME $ 560 $1,195
Other Comprehensive Income:
Cumulative Translation Adjustments (66) 63
------ ------
TOTAL COMPREHENSIVE INCOME $ 494 $1,258
====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 9
OIL-DRI CORPORATION OF AMERICA & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------
FOR THE NINE MONTHS
ENDED APRIL 30
-----------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES (RESTATED)
------------------------------------ -----------------------
<S> <C> <C>
NET INCOME $ 1,440 $ 5,499
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 6,792 6,311
Non-Cash Restructuring Charge 1,039 --
Provision for bad debts 102 33
(Increase) Decrease in:
Accounts Receivable 868 (711)
Inventories (2,672) (1,758)
Prepaid Expenses and Taxes (1,531) (404)
Deferred Income Taxes 4 (39)
Other Assets (1,335) (678)
Increase (Decrease) in:
Accounts Payable 160 (764)
Accrued Expenses (1,495) (2,812)
Deferred Compensation (131) (66)
Special Charge Reserve -- (133)
Other (197) (64)
------- -------
TOTAL ADJUSTMENTS 1,604 (1,085)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,044 4,414
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Capital Expenditures (4,888) (6,200)
Proceeds from sale of property, plant and equipment 12 22
Purchases of Investment Securities (1,219) (1,225)
Dispositions of Investment Securities 1,225 1,173
Other (9) (14)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,879) (6,244)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Principal Payments on Long-Term Debt (4,326) (134)
Proceeds from Issuance of Long-Term Debt 6,013 400
Dividends Paid (1,438) (1,375)
Purchases of Treasury Stock (1,727) (1,502)
Other (61) 14
------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,539) (2,597)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,374) (4,427)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,362 9,410
------- -------
CASH AND CASH EQUIVALENTS, APRIL 30 $ 988 $ 4,983
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 10
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, 1999, 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.
Certain items in prior year financial statements have been reclassified to
conform to the presentation used in fiscal 2000.
2. RESTATEMENT
On July 24, 2000 Oil-Dri Corporation of America filed a report on Form 8-K with
the Securities and Exchange Commission which disclosed that reported financial
results for each of the first three quarters of its fiscal year ending July 31,
2000 would be restated. The filing reported that the Company had not recognized
the impact on pricing and promotional allowances caused when a customer changed
from buying directly from Oil-Dri to purchasing through wholesalers.
Additionally, a review of trade spending showed that the Company's accruals for
marketing expenses should be increased. Both of these items impacted the
Consumer Products segment. The restatement had the effect of decreasing net
sales by $176,000, income before tax by $526,000, net income by $374,000, and
basic and diluted net income per share by $0.07 for the three months ended April
30, 2000. For the nine months ended April 30, 2000, the restatement had the
effect of reducing net sales by $799,000, income before tax by $1,849,000, net
income by $1,313,000, and basic and fully diluted net income per share by $0.24
and $0.23, respectively. At April 30, 2000, the restatement increased accrued
expenses, net of the related income tax reduction, by $514,000 and decreased
accounts receivable and retained earnings by $799,000 and $1,313,000,
respectively.
3. INVENTORIES
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
-------------------------
APRIL 30 JULY 31
(UNAUDITED) (UNAUDITED)
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Finished goods $ 10,925 $ 9,593
Packaging 5,577 4,267
Other 1,335 1,305
-------- --------
$ 17,837 $ 15,165
======== ========
</TABLE>
<PAGE> 11
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method.
4. RESTRUCTURING CHARGE
During the second quarter of fiscal 2000, the Company recorded a pre-tax
restructuring charge of $1,239,000 against income from operations, as follows
(in thousands):
<TABLE>
<S> <C>
Severance costs $ 604
Non-performing asset 635
------
Restructuring charge $1,239
======
</TABLE>
The severance costs are related to a realignment of the Company's personnel
costs to bring them more in line with current levels of sales and profitability.
The severance accrual represents 13 employees that have been or will be
terminated and will be completed by the fourth quarter of fiscal 2000. The
majority of the positions terminated are at the selling, general and
administrative level.
The net book value of the non-performing asset consisted of specific production
equipment that has been idled. The equipment had been used in the Agricultural
Products segment. Because management does not rely on segment asset allocation,
information regarding the results of operations for this specific asset could
not be identified. However, the results were included in cost of sales. The net
book value of this asset was approximately 1% of the net book value of all fixed
assets outstanding as of January 31, 2000.
At April 30, 2000, $404,000 of the restructuring charges remained in current
liabilities. A summary of the balance sheet activity is presented below (in
thousands):
<TABLE>
<S> <C>
Reserve balance at January 31, 2000 $1,239
Severance costs (200)
Write-off of non-performing assets (635)
------
Balance at April 30, 2000 $ 404
======
</TABLE>
5. NEW ACCOUNTING STANDARDS
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires companies to
recognize all derivatives as assets or liabilities measured at their fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and whether it qualifies for hedge accounting.
Although the impact of this statement has not been fully assessed, the Company
believes adoption of this statement, as amended by SFAS No. 137, will not have a
material financial statement impact. Adoption of this standard is required by
July 2001.
<PAGE> 12
6. SEGMENT REPORTING
The Company has four reportable operating segments: Consumer Products, Fluids
Purification Products, Agricultural Products, and Industrial and Automotive
Products. These segments are managed separately because each business has
different economic characteristics.
The accounting policies of the segments are the same as those described in Note
1 of the Company's Annual Report for the year ended July 31, 1999 on Form 10-K
filed with the Securities and Exchange Commission.
Because management does not rely on segment asset allocation, information
regarding segment assets is not meaningful and therefore is not reported.
<TABLE>
<CAPTION>
-------------------------------------
Nine Months Ended April 30
-------------------------------------
Net Sales Operating Income
-------------------------------------
2000 1999 2000 1999
(Restated) (Restated)
------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Consumer Products..................... $ 86,612 $ 86,698 $ 10,425 $ 13,094
Fluids Purification Products.......... 17,520 17,106 3,128 4,148
Agricultural Products................. 14,992 16,804 1,885 3,255
Industrial and Automotive Products.... 13,909 12,902 819 553
-------- -------- -------- --------
TOTAL SALES/OPERATING INCOME.......... $133,033 $133,510 16,257 21,050
======== ======== -------- --------
Less: Restructuring Charge (1)<F1>
................................................... 1,239 --
Corporate Expenses................................. 10,745 11,343
Interest Expense, net of Interest Income........... 2,245 2,016
-------- --------
INCOME BEFORE INCOME TAXES................................ 2,028 7,691
-------- --------
Income Taxes.............................................. 588 2,192
-------- --------
NET INCOME................................................ $ 1,440 $ 5,499
======== ========
-------------------------------------
Three Months Ended April 30
-------------------------------------
Net Sales Operating Income
-------------------------------------
2000 1999 2000 1999
(Restated) (Restated)
------- -------- -------- --------
(in thousands)
Consumer Products..................... $ 26,418 $ 26,772 $ 2,615 $ 3,504
Fluids Purification Products 5,388 5,527 834 1,257
Agricultural Products 5,955 5,595 979 1,151
Industrial and Automotive 4,843 4,511 282 302
-------- -------- -------- --------
TOTAL SALES/OPERATING INCOME.......... $ 42,604 $ 42,405 4,710 6,214
======== ======== -------- --------
Less: Corporate Expenses................................. 3,190 3,860
Interest Expense, net of Interest Income........... 731 682
-------- --------
INCOME BEFORE INCOME TAXES................................ 789 1,672
-------- --------
Income Taxes.............................................. 229 477
-------- --------
NET INCOME................................................ $ 560 $ 1,195
======== ========
</TABLE>
[FN]
<F1>
(1) See Note 4 above for a discussion of the restructuring charge recorded in
the second quarter of fiscal 2000.
</FN>
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 2000 COMPARED TO
NINE MONTHS ENDED APRIL 30, 1999
RESULTS OF OPERATIONS
Consolidated net sales for the nine months ended April 30, 2000 were
$133,033,000, a decrease of 0.4% versus net sales of $133,510,000 in the first
nine months of fiscal 1999. Net income for the first nine months of fiscal 2000
was $1,440,000, a decrease of 73.8% from $5,499,000 earned in the first nine
months of fiscal 1999. Basic and diluted net income per share for the first nine
months of fiscal 2000 was $0.490.25 versus $0.94 basic net income per share and
$0.92 diluted net income per share earned in the first nine months of fiscal
1999. The decrease was due to a restructuring charge recorded in the second
quarter of fiscal 2000,increased trade spending accruals, manufacturing costs
associated with the startup of the Church & Dwight supply arrangement and other
unfavorable manufacturing variances, a decrease in sales and profitability in
the Consumer Products segment, the decline in demand for agricultural carriers,
a decrease in profitability in the Fluids Purification Products segment, and
increases in fuel prices. The restructuring charge, which covered the costs of
severance for certain eliminated positions and the write-off of certain
non-performing assets, reduced income before taxes by $1,239,000, net income by
$879,000, and net income per share by $0.15 (basic and diluted) for the first
nine months of fiscal 2000.
Net sales of the Consumer Products segment for the first nine months of fiscal
2000 were $86,612,000, a decrease of 0.1% over net sales of $86,698,000 in the
first nine months of fiscal 1999. This decrease was primarily due to reduced
sales in the grocery and mass merchandiser market, partially offset by
incremental sales to Church & Dwight, as well as increased sales to Clorox.
Consumer Products' operating income decreased 20.4% from $13,094,000 in the
first nine months of fiscal 1999 to $10,425,000 in the first nine months of
fiscal 2000 due toincreased trade spending accruals, manufacturing costs
associated with the startup of the Church & Dwight supply arrangement incurred
in the first nine months of fiscal 2000 and other unfavorable manufacturing
variances, partially offset by a decrease in promotional expenditures.
Net sales of the Fluids Purification Products segment for the first nine months
of fiscal 2000 were $17,520,000, an increase of 2.4% over net sales of
$17,106,000 in the first nine months of fiscal 1999. Increased domestic sales of
PURE-FLO(R) bleaching clays were the primary driver of the segment's growth in
sales, partially offset by competitive pressures in many of our overseas markets
that have led to some defensive pricing strategies to maintain market share.
Fluids Purification Products' operating income decreased 24.6% from $4,148,000
in the first nine months of fiscal 1999 to $3,128,000 in the first nine months
of fiscal 2000, which is partially due to the changes in sales mix discussed
above, as well as unfavorable manufacturing variances and costs associated with
the startup of a new line of rheological products.
Net sales of the Agricultural Products segment for the first nine months of
fiscal 2000 were $14,992,000, a decrease of 10.8% from net sales of $16,804,000
in the first nine months of fiscal 1999. This overall decline is due primarily
to sharply reduced demand for agricultural carriers as a result of a depressed
farm economy. Agricultural Products' operating income decreased 42.1% from
$3,255,000 in the first
<PAGE> 14
nine months of fiscal 1999 to $1,885,000 in the first nine months of fiscal
2000, primarily due to the decrease in sales of agricultural carriers,
unfavorable sales mix and manufacturing variances, partially offset by the
Company's return on investment in Kamterter II.
Net sales of the Industrial and Automotive Products segment for the first nine
months of fiscal 2000 were $13,909,000, an increase of 7.8% from net sales of
$12,902,000 in the first nine months of fiscal 1999 due to both increased sales
volume of clay-based industrial and automotive products and price increases put
into effect during the past year. Industrial and Automotive Products' operating
income increased 48.1% from $553,000 in the first nine months of fiscal 1999 to
$819,000 in the first nine months of fiscal 2000 due to the increase in sales
discussed above.
Consolidated gross profit as a percentage of net sales for the first nine months
of fiscal 2000 decreased to 28.4% from 31.7% in the first nine months of fiscal
1999 due to an unfavorable sales mix in the Agricultural Products segments, a
decline in profitability in the Consumer Products segment, increased trade
allowances, defensive pricing strategies in the overseas markets of the Fluids
Purification Products segment, manufacturing costs associated with the startup
of the Church & Dwight supply arrangement incurred in the first nine months of
fiscal 2000 as well as other unfavorable manufacturing variances, and increases
in fuel prices.
Operating expenses as a percentage of net sales wereincreased to 25.4% for the
first nine months of fiscal 2000 from 24.5% in the first nine months of fiscal
1999. Excluding the restructuring reserve taken in the second quarter, operating
expenses as a percentage of net sales were 24.5% for the first nine months of
fiscal 2000.
Interest expense increased $8,000, while interest income for the first nine
months of fiscal 2000 decreased $221,000 from fiscal 1999 levels, primarily due
to lower levels of funds available for investment.
The Company's effective tax rate was 29.0% of pre-tax income in the first nine
months of fiscal 2000 versus 28.5% in the first nine months of fiscal 1999.
Total assets of the Company decreased $1,368,000 or 1.0% during the first nine
months of fiscal 2000. Current assets decreased $147,000 or 0.3% from fiscal
1999 year-end balances primarily due to decreases in cash and cash equivalents
and accounts receivable, partially offset by decreasedincreased inventory levels
and prepaid expenses. Property, plant and equipment, net of accumulated
depreciation, decreased $2,200,000 or 3.5% during the first nine months as
depreciation expense exceeded new capital expenditures and as a result of the
write-off of non-performing assets included in the restructuring charge.
Total liabilities increased $418,000 or 0.1% during the first nine months of
fiscal 2000 due primarily to increased levels of long term notes payable
partially offset by a decrease in current liabilities, deferred compensation,
and other noncurrent liabilities. Current liabilities decreased $1,167,000 or
7.3% from fiscal 1999 year-end balances due primarily to a decrease in accrued
expenses and in the current maturities of notes payable, partially offset by an
increase in accounts payable.
<PAGE> 15
EXPECTATIONS
The Company anticipates net sales for the remainder of fiscal 2000 will be
approximately the same as net sales in the comparable period of fiscal 1999.
Sales of branded cat box absorbents are expected to increase slightly due to the
re-introduction of jug packaging on branded scoopable products, which the
Company believes will have increased velocity. However, sales growth of cat box
absorbents is subject to continuing competition for shelf space in the grocery,
mass merchandiser and club markets. Sales of the Company's fluids purification
products and industrial and automotive products are also expected to increase
slightly in the remainder of fiscal 2000 from the comparable period in fiscal
1999. Sales of the Company's agricultural products for the remainder of fiscal
2000 are expected to be at least equal to levels achieved in the comparable
period of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio increased to 3.6 at April 30, 2000 from 3.3 at July 31, 1999.
Working capital increased $1,020,000 during the first nine months of fiscal 2000
to $38,161,000 due to lower levels of current liabilities, partially offset by
slightly lower levels of current assets, as previously discussed. During the
first nine months of fiscal 2000, the balances of cash, cash equivalents and
investment securities decreased $3,380,000. Cash provided by operating
activities ($3,044,000), increases in the Company's borrowings ($6,000,000), and
cash on hand ($4,362,000) were used to fund capital expenditures ($4,888,000),
principal payments on long-term debt ($4,326,000), purchases of the Company's
common stock ($1,728,000), and dividend payments ($1,438,000). Total cash and
investment balances held by the Company's foreign subsidiaries at April 30, 2000
and July 31, 1999 were $2,438,000 and $2,692,000, respectively.
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO
THREE MONTHS ENDED APRIL 30, 1999
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended April 30, 2000 were
$42,604,000, an increase of 0.5% over net sales of $42,405,000 in the third
quarter of fiscal 1999. Net income for the three months ended April 30, 2000 was
$560,000, a decrease of 53.1% from $1,195,000 earned in last year's quarter. Net
income per share for the three months ended April 30, 2000 was $0.10 (basic and
diluted) versus $0.21 basic and $0.20 diluted net income per share earned in the
same period last year. The decrease was due to ongoing manufacturing costs
associated with the startup of the Church & Dwight supply arrangement and other
unfavorable manufacturing variances, a decline in sales and profitability in the
Consumer and Fluids Purification Products segments and increases in fuel prices.
Net sales of the Consumer Products segment for the three months ended April 30,
2000 were $26,418,000, a decrease of 1.3% over net sales of $26,772,000 in the
third quarter of fiscal 1999. This decrease was primarily due to decreased sales
in the mass merchandiser market, partially offset by increased sales to Clorox
and incremental sales to Church & Dwight. Consumer Products' operating income
decreased 25.4% from $3,504,000 in the third quarter of fiscal 1999 to
$2,615,000 in the third quarter of fiscal 2000 due to ongoing manufacturing
costs associated with the startup of the Church & Dwight supply arrangement and
other unfavorable manufacturing variances.
<PAGE> 16
Net sales of the Fluids Purification Products segment for the three months ended
April 30, 2000 were $5,388,000, a decrease of 2.5% from net sales of $5,527,000
in the third quarter of fiscal 1999. This decrease is due to competitive
pressures in overseas markets that have led to defensive pricing strategies to
maintain market share, partially offset by increased domestic sales of
PURE-FLO(R) bleaching clays. Fluids Purification Products' operating income
decreased 33.7% from $1,257,000 in the third quarter of fiscal 1999 to $834,000
in the third quarter of fiscal 2000, which is partially due to the changes in
sales mix discussed above, unfavorable manufacturing variances and continuing
costs associated with the startup of a new line of rheological products.
Net sales of the Agricultural Products segment for the three months ended April
30, 2000 were $5,955,000, an increase of 6.4% from net sales of $5,595,000 in
the third quarter of fiscal 1999. This growth in sales is due to increased sales
of animal health and nutrition products, and clay granules used in turf and
ornamental applications, partially offset by reduced demand for agricultural
carriers. Agricultural Products' operating income decreased 14.9% from
$1,151,000 in the third quarter of fiscal 1999 to $979,000 in the third quarter
of fiscal 2000, due to unfavorable manufacturing variances, partially offset by
a favorable sales mix.
Net sales of the Industrial and Automotive Products segment for the three months
ended April 30, 2000 were $4,843,000, an increase of 7.4% from net sales of
$4,511,000 in the third quarter of fiscal 1999 due to increased sales volume of
automotive and hardware products. Industrial and Automotive Products' operating
income decreased 6.6% from $302,000 in the third quarter of fiscal 1999 to
$282,000 in the third quarter of fiscal 2000 due to unfavorable manufacturing
variances.
Consolidated gross profit as a percentage of net sales for the three months
ended April 30, 2000 decreased to 28.3% from 30.7% in the third quarter of
fiscal 1999 due to a decline in profitability in the Consumer Products segment,
defensive pricing strategies in the overseas markets of the Fluids Purification
Products segment, ongoing manufacturing costs associated with the startup of the
Church & Dwight supply arrangement and other unfavorable manufacturing
variances, and increases in fuel prices.
Operating expenses as a percentage of net sales decreased to 25.0% for the three
months ended April 30,2000 from 25.3% in the third quarter of fiscal 1999. This
decrease is due primarily to cost savings realized from the restructuring charge
taken in the second quarter of fiscal 2000.
Interest expense decreased $21,000, while interest income for the three months
ended April 30, 2000 decreased $70,000 from fiscal 1999 levels, primarily due to
lower levels of funds available for investment.
The Company's effective tax rate was 29.0% of pre-tax income in the three months
ended April 30, 2000 versus 28.5% in the third quarter of fiscal 1999.
<PAGE> 17
FOREIGN OPERATIONS
Net sales by the Company's foreign subsidiaries for the nine months ended April
30, 2000 were $10,351,000 or 7.8% of total Company sales. This represents a
decrease of $799,000 or 7.2% from the same period of fiscal 1999, in which
foreign subsidiary sales were $11,150,000 or 8.4% of total Company sales. This
decrease is due to reduced sales of fluids purification products in our overseas
markets due to defensive pricing strategies implemented to maintain share and
reduced bleaching clay usage by a major customer through increased efficiency of
operations. Net income of the foreign subsidiaries for the first nine months of
fiscal 2000 was $261,000, a decrease of $99,000 or 27.5% from $360,000 earned in
the same period of fiscal 1999. This decrease was primarily due to the reduced
sales of fluids purification products in our overseas markets discussed above.
Identifiable assets of the Company's foreign subsidiaries as of April 30, 2000
were $10,332,000, a decrease of $709,000 from $11,041,000 as of April 30, 1999,
due primarily to decreased levels of inventories.
Net sales by the Company's foreign subsidiaries during the three months ended
April 30, 2000 were $3,040,000 or 7.1% of total Company sales. This represents a
decrease of $413,000 or 12.0% from the third quarter of fiscal 1999 in which
foreign subsidiary sales were $3,453,000 or 8.1% of total Company sales. The
decrease is due primarily to reduced sales of fluids purification products in
overseas markets, as discussed above. Net income of the foreign subsidiaries for
the three months ended April 30, 2000 was ($85,000), a decrease of $166,000 or
204.9% from $81,000 earned in the third quarter of fiscal 1999. This decrease
was primarily due to the reduced sales of fluids purification products in
overseas markets discussed above, as well as increased operating expenses at the
Canadian and United Kingdom subsidiaries.
<PAGE> 18
YEAR 2000
The Year 2000 ("Y2K") issue was a result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Such computer systems
would have been unable to interpret dates beyond 1999, which could have caused a
system failure or application errors, leading to disruptions in operations.
As of the date of this report, the Company has not experienced any material
problems related to Y2K, nor has the Company received any significant complaints
regarding Y2K issues related to its products. Also, the Company is not aware of
any significant Y2K issues affecting the Company's major customers or suppliers.
The project to address Y2K had been underway since fiscal 1998. Total pre-tax
costs incurred were not material.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, including, but not limited to, those under
the heading "Expectations" and those statements elsewhere in this report that
use forward-looking terminology such as "expect," "would," "could," "should,"
"estimates," and "believes" are "forward-looking statements" within the meaning
of that term in the Securities Exchange Act of 1934, as amended. Actual results
may differ materially from 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 product introductions and promotions in the consumer market. These
forward-looking statements also involve the risk of changes in market conditions
in the overall economy and, for the fluids purification and agricultural
markets, in planting activity, crop quality, crop prices and overall
agricultural demand, including export demand, and foreign exchange rate
fluctuations. Other factors affecting these forward-looking statements may be
detailed from time to time in reports filed with the Securities and Exchange
Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company did not have any derivative financial instruments as of April 30,
2000. However, the Company is exposed to interest rate risk. The Company employs
policies and procedures to manage its exposure to changes in the market risk of
its cash equivalents and short term investments. The Company believes that the
market risk arising from holdings of its financial instruments is not material.
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 6. (A) EXHIBITS: The following documents are an exhibit to this
report.
<TABLE>
<CAPTION>
Exhibit
Index
-------
<S> <C> <C>
Exhibit 11: Statement Re: Computation of per 21
share earnings (Restated)
Exhibit 27: Financial Data Schedule (Restated) 22
</TABLE>
(B) During the quarter for which this report is filed, no reports on
Form 8-K were filed.
<PAGE> 20
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/ JEFFREY M. LIBERT
-------------------------------
Jeffrey M. Libert
Chief Financial Officer
BY /S/ DANIEL S. JAFFEE
-------------------------------
Daniel S. Jaffee
President and Chief Executive Officer
Dated: August 14, 2000
