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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
July 24, 2000
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Date of Report (Date of earliest event reported)
Oil-Dri Corporation of America
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(Exact name of registrant as specified in its charter)
Delaware 0-8675 36-204 8898
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(State or other jurisdiction (Commission IRS Employer
of incorporation) File Number) Identification No.)
410 North Michigan Avenue, Chicago, Illinois 60611
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(Address of principal executive offices) (Zip Code)
312-321-1515
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Registrant's telephone number
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ITEM 5. OTHER EVENTS
At the request of the President, the Company's outside auditors and outside
counsel reviewed certain accounting issues for report to the Company's Audit
Committee. These issues had first come to the attention of Oil-Dri's President
and Chairman in late May, 2000, and had been generally reported by the President
to the Board at its June 9, 2000, meeting, where the Board had confirmed his
proposal to conduct a review.
The review found that sometime during October or November of 1999 a large
customer (the "Customer"), that had previously bought cat litter products
directly from the Company, began to buy through two wholesalers who were buying,
for distribution, the same cat litter products from the Company at higher net
prices. As a result, the Marketing Department could not readily check the amount
of product being purchased by the Customer and the two wholesalers. In March,
2000 chargebacks were received from the Customer for the trade allowances due
the Customer. The Company's Marketing Department personnel did not regard the
Customer's chargebacks as accurate and began a process of checking them through
the broker that had handled the sale. In the interim, no report was made to the
Company's Accounting Department, so that no reduction of revenues was recorded.
It was not until after mid-June that the chargeback was finally confirmed to the
satisfaction of the Marketing Department.
In late December, 1999, and early January, 2000, the same Customer ran two "Buy
One, Get One Free" ("BOGO") promotions. The fact that these sales were BOGO's
was not reported by the Marketing Department to the Accounting Department so
that it could make the expense charges that would reflect the "one free". The
person in the Marketing Department who usually sees that this type of promotion
is reported to the Accounting Department first learned of these BOGO's in March
of 2000, when the Customer asked why bills that it had sent aggregating $433,000
for the "one free" had not been paid. She reviewed the Customer's own sales
reports and, on that basis, believed that approximately $100,000 was involved.
It was not until June 5, 2000 that the Marketing Department received
satisfactory confirmation of the Customer's claim. In the interim, no report was
made to the Company's Accounting Department so the expense charges were not
recorded.
On May 19, 2000 the Company's President learned that outstanding expense charges
for these BOGO's had not been entered. He immediately inquired of the person in
the Marketing Department dealing with the issue, who advised that she believed
that the most reliable figure was $103,000. The President reviewed the matter
with the Chief Financial Officer and those involved and, on the basis of that
review concluded that the amount of the charge should not be sufficiently
material to require revision of the results for the 3rd quarter of fiscal 2000.
The President advised the Chairman of this conclusion, advised the Board of the
problem at its June 9, 2000 meeting and told the Board that he would request a
review by the Company's outside counsel and outside auditors and a report to the
Audit Committee.
The accountants also reviewed the Company's accruals for marketing expenses and
concluded that they should be revised to reflect increased expenses of $350,000
for each of the first three fiscal quarters, a total of $1,050,000 for the
nine-month period.
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In the course of the review the accountants also re-examined information
relating to Oil-Dri's accruals, both for trade spending and other accounts, at
fiscal year-end 1999 and concluded that no restatement of fiscal 1999 was
required. They also made a number of suggestions for improvements in controls in
the area of the problems examined and both counsel and the accountants suggested
a thorough review of the Company's internal controls.
The review by counsel and the accountants also concluded that in their opinion
there was no intentional misstatement of financial information, but rather a
breakdown of required communication between the Marketing Department and the
Accounting Department.
The results of this review were reported to the Company's Audit Committee on
July 21, 2000.
On July 24, 2000, the release attached as Exhibit 99 and incorporated herein by
reference was issued.
ITEM 7. FINANCIAL STATEMENTS AN EXHIBITS
Exhibit Description
Number -----------
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99. Press Release, July 24, 2000
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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 hereunto duly authorized.
OIL-DRI CORPORATION OF AMERICA
By /s/ Daniel S. Jaffee
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Name: Daniel S. Jaffee
Title: President and Chief Executive Officer
Date: July 24, 2000
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EXHIBIT INDEX
Exhibit
Number Description
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99 Press Release, July 24, 2000
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