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 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
CONTENTS
<TABLE>
<S> <C> <C>
Page
PART I
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
-----------------------
<S> <C> <C>
CURRENT ASSETS
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 25,194 25,365
Inventories 17,837 15,165
Prepaid Expenses 8,494 6,963
-------- --------
Total Current Assets 53,732 53,080
-------- --------
PROPERTY, PANT 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 $133,181 $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
------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current Maturities of Notes Payable $ 2,000 $ 2,226
Accounts Payable 5,002 4,842
Dividends Payable 473 484
Accrued Expenses 6,783 8,387
-------- --------
Total Current Liabilities 14,258 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 59,147 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 91,756 90,430
Restricted Unearned Stock Compensation (19) (9)
Cumulative Translation Adjustment (1,238) (1,159)
-------- --------
98,921 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 74,034 74,507
-------- --------
Total Liabilities & Stockholders'
Equity $133,181 $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
-------------------------
<S> <C> <C>
NET SALES $133,832 $133,510
Cost Of Sales 95,308 91,202
-------- --------
GROSS PROFIT 38,524 42,308
Selling, General And Administrative Expenses 31,502 32,704
Restructuring Charge 1,239 --
-------- --------
INCOME FROM OPERATIONS 5,783 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 3,877 7,691
Income Taxes 1,124 2,192
-------- --------
NET INCOME 2,753 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 $ 91,756 $ 89,236
======== ========
Net Income Per Share
Basic $ 0.49 $ 0.94
======== ========
Dilutive $ 0.48 $ 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
-------------------------
<S> <C> <C>
Net Income $2,753 $5,499
Other Comprehensive Income:
Cumulative Translation Adjustments (79) 23
------ ------
Total Comprehensive Income $2,674 $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
-------------------------
<S> <C> <C>
NET SALES $ 42,780 $ 42,405
Cost Of Sales 30,543 29,390
-------- --------
Gross Profit 12,237 13,015
Selling, General And Administrative Expenses 10,302 10,743
-------- --------
INCOME FROM OPERATIONS 1,935 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 1,315 1,672
Income Taxes 381 477
-------- --------
NET INCOME $ 934 $ 1,195
======== ========
NET INCOME PER SHARE
Basic $ 0.17 $ 0.21
======== ========
Dilutive $ 0.17 $ 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
-------------------------
<S> <C> <C>
NET INCOME $ 934 $1,195
Other Comprehensive Income:
Cumulative Translation Adjustments (66) 63
------ ------
TOTAL COMPREHENSIVE INCOME $ 868 $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
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
-----------------------
<S> <C> <C>
NET INCOME $ 2,753 $ 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 69 (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 (2,009) (2,812)
Deferred Compensation (131) (66)
Special Charge Reserve -- (133)
Other (197) (64)
------- -------
TOTAL ADJUSTMENTS 291 (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. 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>
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method.
<PAGE> 11
3. 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):
Severance costs $ 604
Non-performing asset 635
------
Restructuring charge $1,239
======
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):
Reserve balance at January 31, 2000 $1,239
Severance costs (200)
Write-off of non-performing assets (635)
------
Balance at April 30, 2000 $ 404
======
4. 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
5. 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
------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Consumer Products........................ $ 87,411 $ 86,698 $ 12,274 $ 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............. $133,832 $133,510 $ 18,106 $ 21,050
======== ======== -------- --------
Less: Restructuring Charge (1)............................. 1,239 --
Corporate Expenses................................... 10,745 11,343
Interest Expense, net of Interest
Income............................................... 2,245 2,016
-------- --------
Income before Income Taxes.................................. 3,877 7,691
-------- --------
Income Taxes................................................ 1,124 2,192
-------- --------
Net Income.................................................. $2,753 $5,499
======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
Three Months Ended April 30
--------------------------------------
Net Sales Operating Income
--------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Consumer Products........................ $ 26,594 $ 26,772 $ 3,141 $ 3,504
Fluids Purification Products............. 5,388 5,527 834 1,257
Agricultural Products.................... 5,955 5,595 979 1,151
Industrial and Automotive Products....... 4,843 4,511 282 302
-------- -------- -------- --------
Total Sales/Operating Income............. $ 42,780 $ 42,405 5,236 6,214
======== ======== ======== ========
Less: Corporate Expenses................................... 3,190 $3,860
Interest Expense, net of Interest
Income............................................... 731 682
-------- --------
Income before Income Taxes.................................. 1,315 1,672
-------- --------
Income Taxes................................................ 381 477
-------- --------
Net Income.................................................. $ 934 $1,195
======== ========
</TABLE>
(1) See Note 3 above for a discussion of the restructuring charge
recorded in the second quarter of fiscal 2000.
<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
$133,832,000, an increase of 0.2% 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 $2,753,000, a decrease of 49.9% from
$5,499,000 earned in the first nine months of fiscal 1999. Basic net
income per share for the first nine months of fiscal 2000 was $0.49 and
diluted net income per share was $0.48, 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, manufacturing
costs associated with the startup of the Church & Dwight supply
arrangement and other unfavorable manufacturing variances, 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 $87,411,000, an increase of 0.8% over net sales of
$86,698,000 in the first nine months of fiscal 1999. This growth was
primarily due to incremental sales to Church & Dwight, as well as
increased sales to Clorox and the mass merchandiser market, partially
offset by reduced sales in the grocery market. Consumer Products'
operating income decreased 6.3% from $13,094,000 in the first nine
months of fiscal 1999 to $12,274,000 in the first nine months of fiscal
2000 due to 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 advertising expenditures and the increase in
sales discussed above.
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 28.8% from 31.7% in the first
nine months of fiscal 1999 due to an unfavorable sales mix in the
Agricultural Products segments, 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 were 24.5% for both the
first nine months of fiscal 2000 and 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 23.5% for the
first nine months of fiscal 2000. This decrease is primarily due to a
reduction in advertising expenditures and cost savings resulting from
the restructuring.
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 $569,000 or 0.4% during the first
nine months of fiscal 2000. Current assets increased $652,000 or 1.2%
from fiscal 1999 year-end balances primarily due to increases in
inventory levels and prepaid expenses, partially offset by decreased
cash and cash equivalents and accounts receivable. 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 decreased $96,000 or 0.2% during the first nine
months of fiscal 2000 due primarily to a decrease in current
liabilities, partially offset by increased levels of long term notes
payable. Current liabilities decreased $1,681,000 or 10.5% 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 sales 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 3.8 at April 30, 2000 from 3.3 at July
31, 1999. Working capital increased $2,333,000 during the first nine
months of fiscal 2000 to
$39,474,000 due to both higher levels of current assets and lower
levels of current liabilities, 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
$42,780,000, an increase of 0.9% 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 $934,000, a decrease of 21.8% from $1,195,000 earned
in last year's quarter. Net income per share for the three months
ended April 30, 2000 was $0.17 (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 decrease in sales and
profitability in the Fluids Purification Products segment, and
increases in fuel prices.
Net sales of the Consumer Products segment for the three months ended
April 30, 2000 were $26,594,000, a decrease of 0.7% 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 10.4%
from $3,504,000 in the third quarter of fiscal 1999 to $3,141,000 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, partially offset by a
decrease in advertising expenditures.
<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 28.6% from 30.7% in the third
quarter of fiscal 1999 due to 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 24.1% for
the three months ended April 30,2000 from 25.3% in the third quarter of
fiscal 1999. This decrease is due primarily to a decrease in
advertising expenditures and 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 7.7% 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 its
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>
Exhibit 11: Statement Re: Computation of per 21
share earnings
Exhibit 27: Financial Data Schedule 22
(b) During the quarter for which this report is filed, no
reports on Form 8-K were filed.
</TABLE>
<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: June 13, 2000
