What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-10-13 compared with 2020-10-13 · 147 added, 56 removed, 157 unchanged (56% of the section changed)

1 unchanged sentence

O VERVIEW O F B USINESS

In 1969, Oil-Dri Corporation of America was incorporated in Delaware as the successor to an Illinois corporation incorporated in 1946;

the Illinois corporation was the successor to a partnership that commenced business in 1941.

Except as otherwise indicated herein or as the context otherwise requires, references to “Oil-Dri,” the “Company,” “we,” “us” or “our” refer to Oil-Dri Corporation of America and its subsidiaries.

Oil-Dri is a leader in developing, manufacturing and/or marketing sorbent products.

Our sorbent products are principally produced from hydrated aluminosilicate minerals, primarily consisting of calcium bentonite, attapulgite and diatomaceous shale, which we refer to collectively as our “clay” or our “minerals.” We surface mine our clay on leased or owned land near our manufacturing facilities in Mississippi, Georgia, Illinois and California.

Our sorbent products are principally produced from hydrated aluminosilicate minerals, primarily consisting of calcium bentonite, attapulgite and diatomaceous shale, which we refer to collectively as our “clay,” our “minerals,” or “Fuller's Earth.” We surface mine our clay on leased or owned land near our manufacturing facilities in Mississippi, Georgia, Illinois and California.

We produce both absorbent and adsorbent products from our clay.

3 unchanged sentences

Adsorbent products attract impurities in liquids, such as metals and surfactants, and form low-level chemical bonds.

Examples of our adsorbent products are Pure-Flo, Perform and Select bleaching clay products, which act as a filtration media for edible oils, fats and tallows.

Also, our Ultra-Clear product serves as a purification aid for petroleum-based oils and by-products.

Examples of our adsorbent products are our Ultra-Clear clarification clays.

Our Pure-Flo, Perform and Select bleaching clay products act as filtration media for edible oils, fats and tallows.

Also, our Pure-Flo, Supreme, and Perform lines of bleaching clay products serve as a purification aid for vegetable oil products.

We also sell nonclay-based products, such as our Oil-Dri synthetic sorbents used for industrial cleanup and plastic cat litter box liners.

Our principal products are described in more detail below.

Oil-Dri Corporation of America was incorporated in 1969 in Delaware as the successor to an Illinois corporation incorporated in 1946 (which was the successor to a partnership that commenced business in 1941).

For additional information on recent business developments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7, incorporated herein by reference.

14 unchanged sentences

These products are sold primarily in the United States by our technical sales force.

Animal Health and Nutrition Products

We produce, or use contract processors to produce, Amlan brand name and private label products that manage the health and improve productivity of species in livestock industries.

For example, our products provide a number of solutions to health challenges of swine, poultry and dairy cattle.

Our Calibrin products are used in animal feed to help animals defend against a broad spectrum of biotoxins.

Our Varium and Neoprime products promote intestinal health in poultry and swine, respectively.

Our MD-09 moisture manager product is another feed additive for the reduction of wet droppings in poultry.

In addition, our Pel-Unite and Pel-Unite Plus products are specialized animal feed pellet binders.

Animal Health and Nutrition Solutions

We produce, or use contract processors to produce, Amlan brand name and private label products that support good health and productivity of species in livestock industries.

For example, our products, including our Calibrin, Varium and NeoPrime products, provide a number of solutions for swine, poultry and dairy cattle livestock production.

In addition, our MD-09 moisture manager product is a feed additive for the reduction of wet droppings in poultry and our Pel-Unite and Pel-Unite Plus products are specialized animal feed pellet binders.

Our animal health and nutrition products are sold both directly and through a network of distributors to livestock producers, feed mill operators, nutritionists and veterinarians in the United States, Latin America, Africa, Mexico, the Middle East and Asia.

The sales force for our subsidiary located in Shenzhen, China also sells these products, as further described in Foreign Operations below.

The sales force for our subsidiaries located in China, Mexico and Indonesia also sells these products, as further described in Foreign Operations below.

Bleaching Clay and Purification Aid Products

4 unchanged sentences

Our Select adsorbents are used to remove contaminants in vegetable oil processing and can also be used to prepare oil prior to the creation of biodiesel fuel.

Metal X is a highly efficient adsorbent for the renewable diesel market.

Our Ultra-Clear product is used as a purification and filtration medium for jet fuel and other petroleum-based products.

4 unchanged sentences

Scoopable litter products are further differentiated between lightweight and heavyweight.

Lightweight scoopable litters offer superior performance with the added convenience of being lighter to carry and pour.

Lightweight scoopable litters offer high performance with the added convenience of being lighter to carry and pour.

Branded products .

1 unchanged sentence

Our Cat's Pride litters created the lightweight segment of the scoopable litter market.

In addition, we offer our non-clumping litter in a pre-packaged, disposable tray under the Cat’s Pride KatKit and Jonny Cat brands.

In addition, we offer our non-clumping litter in a pre-packaged, disposable tray under the Cat’s Pride KatKit brand.

Moreover, we offer litter box liners under the Cat's Pride and Jonny Cat product lines.

25 unchanged sentences

We have two reportable operating segments for financial reporting derived from the different characteristics of our two major customer groups:

Retail and Wholesale Products Group and Business to Business Products Group.

the Retail and Wholesale Products Group and the Business to Business Products Group.

The Retail and Wholesale Products Group customers include mass merchandisers, wholesale clubs, drugstore chains, pet specialty retail outlets, dollar stores, retail grocery stores, direct customers through e-commerce, distributors of industrial cleanup and automotive products, environmental service companies and users of sports field products and sports turf materials.

14 unchanged sentences

This subsidiary sells animal health and nutrition products under our Amlan brand name and under private label arrangements.

PT Amlan Perdagangan Internasional, another of our wholly-owned subsidiaries, is located in Indonesia and also distributes our animal health and nutrition products.

Our wholly-owned subsidiary, Oil-Dri SARL, is a Swiss company that performs various management, customer service and administrative functions for some of the international customers of our domestic operations.

1 unchanged sentence

This distributor sells, among other products, our animal health and nutrition products and swine feeding equipment and swine fertilization supplies.

In December 2018, a new wholly-owned subsidiary in Indonesia, PT Amlan Perdagangan Internasional, started operations to distribute our animal health and nutrition products.

Our foreign operations are subject to the normal risks of doing business in non-U.S.

14 unchanged sentences

These competitors may be able to spend more aggressively on advertising and promotional activities, introduce competing products more quickly and respond more effectively to changing business and economic conditions than us.

We have six principal competitors in our Retail and Wholesale Products Group, including one which is also our customer.

We have six principal competitors in our Retail and Wholesale Products Group, including one of which is also our customer.

Two of the principal competitors relate to our Industrial and Sports products.

The overall cat litter market has grown in recent years.

12 unchanged sentences

Competition for our crop protection products is primarily based on price, but competitor differentiation also exists in the ability to meet customer product specifications and enhancements in engineered granule technologies.

patents are currently granted for a term of 20 years from the date the patent application is filed.

We have obtained or applied for patents for certain of our processes and products sold to customers in both the Retail and Wholesale Products Group and the Business to Business Products Group.

Our patents are highly important to our business and we vigorously protect them from apparent infringement, although no single patent is considered material to the business as a whole.

The risks associated with our patents (and intellectual property, generally), are discussed in Item 1A, Risk Factors.

R ESEARCH AND D EVELOPMENT

We develop new products and applications and improve existing products at our research and development center in Vernon Hills, Illinois.

The center includes a pilot plant that simulates the production processes of our customers and our manufacturing plants.

In addition, our microbiology lab is within walking distance of our existing research and development center and is dedicated primarily to the development of our animal health products.

Our staff (and various consultants they engage from time to time) have experience in disciplines such as biology, microbiology, chemistry, physics, mathematics, geological and earth science, material science, geochemistry, physical catalysis, animal nutrition, animal science, oncological nutrition and transitional medicine.

In the past several years, our research efforts have resulted in a number of new sorbent products and processes.

The research and development center produces prototype samples and tests new products for customer trial and evaluation.

No significant research and development was customer sponsored, and all research and development costs are expensed in the period in which incurred.

See Note 1 of the Notes to the Consolidated Financial Statements for further information about research and development expenses.

As of July 31, 2021 and 2020, the value of our backlog of orders were approximately $22,543,000 and $15,692,000, respectively.

6 unchanged sentences

See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these costs.

We have obtained or applied for patents for certain of our processes and products sold to customers in both the Retail and Wholesale Products Group and the Business to Business Products Group.

patents are currently granted for a term of 20 years from the date the patent application is filed and durations of patents issued outside of the United States vary from country to country.

Our patents, particularly our U.S.

patents, are highly important to our business and we assert our patent rights and vigorously protect our patents them from apparent infringement where appropriate, although no single patent is considered material to the business as a whole.

The risks associated with our patents (and intellectual property, generally), are discussed in Item 1A, Risk Factors.

We mine our clay on leased or owned land near our manufacturing facilities in Mississippi, Georgia, Illinois and California;

1 unchanged sentence

We estimate that our proven mineral reserves as of July 31, 2021 were approximately 102,953,000 tons in aggregate and our probable reserves were approximately 176,352,000 tons in aggregate, for a total of 279,305,000 tons of mineral reserves.

Based on our rate of consumption during fiscal year 2020 , and without regard to any of our reserves in Nevada, Oregon and Tennessee, we consider our proven reserves adequate to supply our needs for over 40 years.

Based on our rate of consumption during fiscal year 2021, and without regard to any of our reserves in Nevada, Oregon and Tennessee, we consider our proven and probable reserves adequate to supply our needs for over 40 years.

Although we consider these reserves to be extremely valuable to our business, only a small portion of the reserves, those which were acquired in acquisitions, are reflected at cost on our balance sheet.

It is our policy to attempt to add to reserves in most years, but not necessarily in every year, an amount at least equal to the amount of reserves consumed in that year.

We have a program of exploration for additional reserves and, although reserves have been acquired, we cannot assure that additional reserves will continue to become available.

It is our policy to attempt to maintain a minimum of forty years of proven and probable reserves of each type of clay at each location.

We have an ongoing program of exploration for additional reserves but we cannot assure that additional reserves will continue to become available.

Our use of these reserves, and our ability to explore for additional reserves, are subject to compliance with existing and future federal and state statutes and regulations regarding mining and environmental compliance.

4 unchanged sentences

The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

We use geologists and mineral specialists who estimate and evaluate existing and potential reserves in terms of quality, quantity and availability.

M INING O PERATIONS

We have conducted mining operations in Ripley, Mississippi since 1963, in Ochlocknee, Georgia since 1968, in Blue Mountain, Mississippi since 1989, in Mounds, Illinois since 1998 and in Taft, California since 2002.

Our clay is surface mined on a year-round basis, generally using large earth moving scrapers, bulldozers, or excavators and off-road trucks to remove overburden (non-usable material), and then loaded into dump trucks with backhoes or front end loaders for movement to the processing facilities.

The mining and hauling of our clay is performed by us and by independent contractors.

We use certified professional geologists and mineral specialists who estimate and evaluate existing and potential reserves in terms of quality, quantity and availability.

Mining Operations

We have continuously conducted mining operations in Ripley, Mississippi since 1963, in Ochlocknee, Georgia since 1968, in Blue Mountain, Mississippi since 1989, in Mounds, Illinois since 1998 and in Taft, California since 2002.

Our clay is surface mined on a year-round basis, using large earth moving scrapers, bulldozers, or excavators and off-road trucks to strip off overburden (non-usable material atop desired clay).

The desired clay is then loaded into dump trucks and transported to the processing facilities.

The stripping, mining and hauling of our clay is performed in-house as well as by independent contractors.

Our current operating mines range in distance from immediately adjacent to approximately 13 miles from the related processing plants.

Processing facilities are generally accessed from the mining areas by private roads and in some instances by public highways.

Processing facilities are generally accessed from the mining areas by private and public roads and in some instances by public highways.

Each of our processing facilities maintains inventories of unprocessed clay of approximately one week of production requirements.

1 unchanged sentence

The following schedule summarizes the net book value of land and other plant and equipment for each of our manufacturing facilities as of July 31, 2021 (in thousands).

Land & Mineral Rights

Land & Mineral Rights Plant and

Ochlocknee, Georgia $ 9,074 $ 34,800

3 unchanged sentences

Taft, California $ 1,854 $ 8,222

We primarily used natural gas in the processing kilns to dry our clay products during fiscal year 2021.

We monitor gas market trends and we may contract for a portion of our anticipated fuel needs using forward purchase contracts to mitigate the volatility of our kiln fuel prices.

We do not have any forward purchase contracts as of the fiscal year ended July 31, 2021.

H UMAN CAPITAL MANAGEMENT AND RESOURCES

During fiscal year 2021, we had approximately 847 employees, who we refer to as our teammates, 46 of whom were employed by our foreign subsidiaries.

We believe our corporate offices, research and development center and manufacturing facilities are adequately staffed and no material labor shortages are anticipated.

111, 22, and 668 of our teammates work at our corporate offices, research and development center and manufacturing facilities, respectively.

We believe our corporate offices, research and development center and manufacturing facilities are currently adequately staffed but there is no guarantee that, given the current state of the on-going novel coronavirus pandemic ("the coronavirus" or "COVID-19") and macro-economic environment, that this will always be possible.

Approximately 52 of our teammates in the U.S.

1 unchanged sentence

We consider our employee relations to be satisfactory.

E NVIRONMENTAL C OMPLIANCE

Our mining and manufacturing operations and facilities in Georgia, Mississippi, California and Illinois are required to comply with state surface mining and environmental protection statutes.

These domestic locations and our Canadian operations are subject to various federal, state and local statutes, regulations and ordinances which govern the discharge of materials, water and waste into the environment or otherwise regulate our operations.

In recent years, environmental regulation has grown increasingly stringent, a trend that we expect will continue.

We endeavor to be in compliance at all times and in all material respects with all applicable environmental controls and regulations.

As a result, expenditures relating to environmental compliance have increased over the years;

however, these expenditures have not been material.

Oil-Dri’s culture and values, along with its teammates, are our most valuable assets.

We take pride in building a culture that emphasizes high moral and ethical values and conducts business with honesty, integrity and a passion for excellence.

Our approach is centered on collaboration, communication, and transparency, and we believe in the value of an open and accessible corporate structure.

We expect all our teammates to conduct business in an ethical and fair manner using our “WE CARE” values framework.

Oil-Dri's culture and the objectives that we focus on in managing our business are based on our “WE CARE” values.

“WE CARE” is an acronym for remembering our core values, which is the moral standard that we endeavor to apply to our teammates, customers, vendors, and other stakeholders.

We continuously work to reinforce these values through leading by example, training, and rewarding positive behaviors.

We use “WE CARE” values as a moral compass to constantly strive for continuous improvement.

These values are embedded into everything we do and are reflected in our Code of Ethics and Business Conduct, formal policies and procedures, annual training, and a strong governance structure.

Our WE CARE values are also the basis of our formal teammate recognition process.

Our Code of Ethics and Business Conduct details how we act in accordance with these fundamental standards.

The first “E” in WE CARE stands for Ethics.

Oil-Dri’s ethical culture is one of our greatest strengths and areas of emphasis by our Board of Directors and management team.

Our CEO is frequently asked to speak on this topic at local business schools, including the Kellogg School of Management at Northwestern, and Marquette University.

Our CEO’s continued messaging to all Oil-Dri teammates about the importance of our ethical culture helps maintain a strong Tone at the Top for our entire organization.

Our Compliance Committee meets quarterly and is comprised of members of Oil-Dri leadership as well as the owners of our three compliance functions:

Trade, Regulatory, and Anti-Corruption.

Our Trade compliance function works to make sure we are in alignment with all applicable export laws and regulations, and screens all new international customers, distributors and/or agents against the various restricted and denied party lists before they can do business with Oil-Dri.

Our Regulatory compliance team ensures our product registrations meet the complex and multiple requirements of the various countries, as well as U.S.

states, in which we do business.

Our Anti-Corruption compliance team works with Human Resources to ensure that teammates attest to Oil-Dri’s Code of Ethics and Business Conduct, which was updated in 2021.

These two groups also work together to make sure teammates understand the specific requirements around Conflicts of Interest, including any disclosures where relevant.

Our Board of Directors also annually attests to Oil-Dri’s Code of Ethics and Business Conduct .

The Anti-Corruption team also conducts a thorough Third-Party Due Diligence process that includes the use of compliance software.

Third parties are selected for this process based on a risk analysis that includes potential interaction with government officials as well as the Corruption Perception Index published by Transparency International (an international non-profit) of the countries in which they do business.

Oil-Dri has strong policies and procedures in place for Anti-Corruption and Conflicts of Interest.

This includes training and attestation requirements where appropriate.

Oil-Dri is committed to whistleblower protection and has a third-party anonymous hotline where teammates across the globe can reach out via phone or internet with any concerns they may have and be ensured of anonymity in reporting if they so desire.

Our Anti-Corruption training emphasizes the necessity of whistleblower protection and zero tolerance for retaliation.

Diversity, Equity and Inclusion

WE CARE for all.

Our strength as a company comes from leveraging the uniqueness of all teammates and those in our communities.

We strive to promote a diverse and inclusive workforce for all.

Oil-Dri’s success is enhanced by striving for a workforce that reflects the diversity of the communities and countries in which we live and work.

We embrace all people, regardless of race, sex, gender identity, age, religion, nationality, physical ability or sexual orientation.

Diverse perspectives are encouraged and needed in order help our company achieve its vision and continue to grow.

We are committed to cultivating and preserving a culture of inclusion.

That is why we created a Diversity, Equity and Inclusion Committee during fiscal year 2021 to help us live up to our WE CARE core values.

This committee represents a diverse group of colleagues across locations, functions and communities who are the Company’s champions for our diversity, equity, and inclusion initiatives.

The committee strives to bring awareness and understanding of human diversity as a corporate imperative by engaging teammates in pertinent conversation, training, and education.

As the committee evolves, additional programs will be introduced.

We believe our success largely depends upon our continued ability to attract and retain highly skilled teammates.

We have demonstrated a history of investing in our teammates by providing competitive salaries and bonuses at all levels of the Company, including a deferred compensation plan and executive deferred bonuses for our executives, and opportunities for equity ownership through our restricted stock program under our long-term incentive plan.

We also provide access to training and development and an attractive employment package that promotes well-being, including health care, retirement plans, and paid time off.

We support our employees’ desire to save for retirement by providing a 401(k) savings plan in which we contribute 100% of every employee dollar contributed, up to six percent (6%) of earnings and for which employees are fully vested after two (2) years of employment.

The competitive compensation and benefit package have been key to the strong retention of our employees.

Teammate Health and Wellness

The success of our business is fundamentally connected to the well-being of our teammates.

As such, the health and wellness of our teammates is a top priority of ours.

We offer robust and generous benefit programs, to those who qualify, which include, but are not limited to, health, prescription drug, dental, life insurance and disability insurance.

We also offer wellness programs, to those who qualify, to help our teammates live healthy lives.

Smoking cessation programs are offered to teammates at no cost.

We also offer gym and weight loss reimbursement in order to encourage a healthy lifestyle.

Our employee assistance program provides face-to-face, telephonic and online counseling services for a variety of potential needs that our teammates may have.

Our commitment to the wellness of our teammates is further evidenced by our paid time off and sick days program which are part of the work/life balance component of our WE CARE values framework.

Continuous Teammate Development

We encourage our teammates to reach their potential with continuous learning and improvement.

All teammates have access to our online training and development library for on-demand courses, webinars, books and podcasts.

Teammates may attend conferences and programs and/or obtain certifications that relate to their positions at no cost.

For teammates looking to further their education, we offer varying levels of tuition reimbursement programs after one year of employment.

This is designed to provide financial support to help teammates reach their educational goals, while also providing a way to support academic activities that directly relate to the organization’s identified knowledge, skills, and behaviors which support the mission, vision, and values of the Company.

Teammate Engagement

Oil-Dri maintains an open-door policy that encourages conversations between teammates at all levels.

Communication goes both ways - ideas are shared and feedback is encouraged.

We engage with teammates on a regular basis through newsletters, townhalls, video announcements, meetings, and new hire luncheons with our CEO.

On occasion, anonymous online surveys are issued to solicit feedback on various work-related topics.

We come together to celebrate work anniversaries, birthdays, retirements and other special occasions.

We believe that safety must be the first and foremost consideration in the decisions made by and on behalf of the Company.

We believe safety is everyone’s responsibility - from senior management to frontline workers.

As part of our company-wide safety policies, it is expected that all teammates identify safety risks and take action by implementing interim controls, ensuring that controls are maintained, and recommending permanent solutions.

Additionally, as part of our annual budget and capital planning process, our businesses identify additional safety investments required for training, education, equipment, and processes.

We are committed to operating in a manner that protects the health and safety of our workforce and our communities and ensures decisions are consistent with a long-term view of sustainability and stewardship.

Through our corporate safety department, we implemented a safety auditing program for adherence to local, state and federal safety standards and regulations including MSHA and OSHA.

These audits are conducted annually for global operations by third-party consultants enforcing a rigorous assessment of regulatory standards, internal procedures and program performance.

Audit assessments and inspections are scored and are currently indicating high levels of compliance in our operations.

The auditing program confirms the Company’s commitment to best management practices and principles.

We continually increase the rigor and level of scrutiny to drive continuous improvement in our operations.

In response to COVID-19, we implemented significant safety changes which comply with government regulations.

This included having the vast majority of our teammates who can perform their jobs offsite work from home and additional safety measures for teammates continuing critical on-site work.

We substantially restricted non-essential travel, required social distancing, supplied masks, implemented vigorous cleaning and sanitation protocols, and provided information to all of our teammates on a regular basis regarding the Company’s approach to COVID-19 and other beneficial health and vaccine related information.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations" for information on Human Capital Management actions taken by the Company in response to the COVID-19 pandemic.

G OVERNMENT AND E NVIRONMENTAL R EGULATION AND C OMPLIANCE

We are subject to a variety of federal, state, local and foreign laws and regulatory requirements relating to the environment and to health and safety matters.

In particular, our mining and manufacturing operations and facilities in Georgia, Mississippi, California and Illinois are required to comply with state surface mining and environmental protection statutes as well as the workplace safety requirements of the Mine Safety and Health Administration (“MSHA”).

These domestic locations and our Canadian operations are subject to various federal, state and local statutes, regulations, ordinances, building codes, and permitting and licensing requirements which govern the discharge, storage and disposal of materials, water and waste into the environment, maintenance of our locations or otherwise regulate our operations.

In recent years, regulation and enforcement have grown increasingly stringent, a trend that we expect will continue.

We endeavor to be in compliance at all times and in all material respects with all applicable environmental, health and safety controls and regulations.

As a result, compliance with the various statutes, regulations, ordinances, codes, and other requirements have required continuing management efforts and the expenditures relating to such compliance have varied over the years;

however, these expenditures have not had a material adverse effect on our capital expenditures, earnings, or competitive position.

As part of our ongoing environmental compliance activities, we incur expenses in connection with reclaiming mining sites.

Historically, reclamation expenses have not had a material effect on our cost of sales.

In addition to the environmental requirements related to our mining and manufacturing operations and facilities, there has been increased federal and state regulation with respect to the content, labeling, use, and disposal after use of various products that we sell.

In addition to the environmental, health and safety requirements related to our mining and manufacturing operations and facilities, there has been increased federal, state and international regulation with respect to the content, labeling, use, packaging, registration, trade compliance, advertising, and disposal of products that we sell.

For example, in the United States, some of our operations, products, product claims, labeling and advertising are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Occupational Health and Safety Administration, the Mine Safety and Health Administration, the Environmental Protection Agency and the Federal Trade Commission.

Most states have agencies that regulate in parallel to these federal agencies.

In addition, our international sales and operations are subject to regulation in each of the foreign jurisdictions in which we manufacture, distribute or sell our products.

There is increasing federal and state regulation with respect to the content, labeling, use, and disposal after use of various products we sell.

Throughout the world, but particularly in the United States and Europe, there is also increasing government scrutiny and regulation of the food chain and products entering or affecting the food chain.

We endeavor to be in compliance at all times and in all material respects with those regulations and to assist our customers in that compliance.

We cannot assure that, despite all commercially reasonable efforts, we will always be in compliance in all material respects with all applicable environmental regulations or with requirements regarding the content, labeling, use, and disposal after use of our products;

nor can we assure that from time to time enforcement of such requirements will not have a material adverse effect on our business.

See Item 1A “Risk Factors” below for a discussion of these and other risks to our business.

We primarily used natural gas in the processing kilns to dry our clay products during fiscal year 2020 .

We monitor gas market trends and we may contract for a portion of our anticipated fuel needs using forward purchase contracts to mitigate the volatility of our kiln fuel prices.

We do not have any forward purchase contracts as of the fiscal year ended July 31, 2020.

R ESEARCH AND D EVELOPMENT

We develop new products and applications and improve existing products at our research and development center in Vernon Hills, Illinois.

The facility includes a pilot plant that simulates the production processes of our customers and our manufacturing plants.

In fiscal year 2019 we opened a new microbiology lab within walking distance of our existing research and development center that is dedicated to the development of our animal health products.

In the past several years, our research efforts have resulted in a number of new sorbent products and processes.

The facility produces prototype samples and tests new products for customer trial and evaluation.

No significant research and development was customer sponsored, and all research and development costs are expensed in the period in which incurred.

See Note 1 of the Notes to the Consolidated Financial Statements for further information about research and development expenses.

We cannot assure that, despite all commercially reasonable efforts, we will always be in compliance in all material respects with all applicable environmental laws and requirements nor can we assure that from time to time enforcement of such requirements will not have a material adverse effect on our business.

The imposition of more stringent standards or requirements under such regulations could result in increased expenditures.

Additionally, we could be required to alter our operations in order to comply with any new standards or requirements under environmental laws or regulations.

See Item 1A “Risk Factors” below for a discussion of the impact of government regulations on our business and other risks to our business.

A VAILABLE I NFORMATION

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business