What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-10-13 compared with 2020-10-13 · 298 added, 163 removed, 702 unchanged (40% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS (in thousands)

Current Assets

2 unchanged sentences

in 2021 and 2020, respectively

40,923 34,911

Inventories, net 23,598 23,893

6 unchanged sentences

Office furniture and equipment 21,685 21,502

Vehicles 17,543 17,863

Gross depreciable assets 242,339 231,222

4 unchanged sentences

Total Property, Plant and Equipment, Net 95,940 92,948

Goodwill 9,262 9,262

Trademarks and patents, net of accumulated amortization

4 unchanged sentences

Operating lease right-of-use assets 8,619 9,816

Other 7,500 5,670

Total Other Assets 29,684 34,514

Total Assets $ 227,566 $ 235,882

OIL-DRI CORPORATION OF AMERICA

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY (in thousands)

Current Liabilities

4 unchanged sentences

Accrued expenses 24,883 28,700

Salaries, wages and commissions

Trade promotions and advertising

Real estate tax

Total Current Liabilities 38,990 46,207

4 unchanged sentences

Long-term operating lease liabilities 8,022 9,135

Other 4,152 3,448

Total Noncurrent Liabilities 29,344 41,711

11 unchanged sentences

Less treasury stock, at cost ( 3,192,702 Common and 346,491 Class B shares in 2021 and 3,090,230 Common and 335,816 Class B shares in 2020)

( 66,154 ) ( 62,269 )

Total Stockholders’ Equity 159,232 147,964

5 unchanged sentences

(in thousands, except for per share data)

Net Sales $ 304,981 $ 283,227

Cost of Sales (1) ( 239,740 ) ( 214,521 )

Gross Profit 65,241 68,706

Other Operating Income (2) — 13,000

1 unchanged sentence

Income from Operations 13,036 24,827

Other (Expense) Income

Other Income (Expense)

Interest income 71 259

2 unchanged sentences

Other, net (4) 1,076 ( 1,387 )

Total Other (Expense) Income, Net

Total Other Income (Expense), Net 332 ( 1,807 )

Income Before Income Taxes 13,368 23,020

Income Tax Expense ( 2,388 ) ( 4,280 )

Net (Loss) Income Attributable to Noncontrolling Interest

Net Income $ 10,980 $ 18,740

Net Loss Attributable to Noncontrolling Interest ( 133 ) ( 160 )

Net Income Attributable to Oil-Dri 11,113 18,900

Net Income Per Share

Basic Common $ 1.61 $ 2.70

Basic Class B Common $ 1.20 $ 2.02

2 unchanged sentences

Average Shares Outstanding

Basic Common 5,142 5,149

Basic Class B Common 1,926 2,020

3 unchanged sentences

(2) See Note 1 of the Notes to the Consolidated Financial Statements for further information about amounts included in this line item.

(3) See Notes 2 and 8 of the Notes to the Consolidated Financial Statements for further information about amounts included in this line item.

(3) See Note 9 of the Notes to the Consolidated Financial Statements for further information about amounts included in this line item.

(4) See Note 8 of the Notes to the Consolidated Financial Statements for further information about amounts included in this line item.

The accompanying notes are an integral part of the Consolidated Financial Statements.

7 unchanged sentences

Cumulative translation adjustment 571 ( 112 )

Other Comprehensive Income (Loss)

Other Comprehensive Income 8,137 2,785

Comprehensive Income $ 19,250 $ 21,685

2 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Number of Shares

(in thousands)

Number of Shares (in thousands)

Stock Treasury

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Non-Controlling Interest

Loss Non-Controlling Interest Total

Stockholders’

Balance, July 31, 2019 10,860,678 ( 3,251,288 ) $ 1,086 $ 41,300 $ 164,756 $ ( 56,543 ) $ ( 15,039 ) $ ( 14 ) $ 135,546

Other comprehensive loss

Net income — — — — 18,900 — — ( 160 ) 18,740

Other comprehensive income — — — — — — 2,785 — 2,785

Dividends declared

— — — — ( 7,077 ) — — — ( 7,077 )

Purchases of treasury stock

— ( 169,058 ) — — — ( 5,541 ) — — ( 5,541 )

Net issuance of stock under long-term incentive plans

25,727 ( 5,700 ) 3 183 — ( 185 ) — — 1

Amortization of restricted stock — — — 3,368 — — — — 3,368

Contributions from noncontrolling interests (1)

— — — 142 — — — — 142

Balance, July 31, 2020 10,886,405 ( 3,426,046 ) $ 1,089 $ 44,993 $ 176,579 $ ( 62,269 ) $ ( 12,254 ) $ ( 174 ) $ 147,964

Net income — — — — 11,113 — — ( 133 ) 10,980

Other comprehensive income — — — — — — 8,137 — 8,137

1 unchanged sentence

Purchases of treasury stock

— ( 87,647 ) — — — ( 3,130 ) — — ( 3,130 )

Net issuance of stock under long-term incentive plans

71,962 ( 25,500 ) 7 747 — ( 755 ) — — ( 1 )

Amortization of restricted stock — — — 2,531 — — — — 2,531

Contributions from noncontrolling interests (1)

Balance, July 31, 2021 10,958,367 ( 3,539,193 ) $ 1,096 $ 48,271 $ 180,443 $ ( 66,154 ) $ ( 4,117 ) $ ( 307 ) $ 159,232

7 unchanged sentences

Cash Flows from Operating Activities

Net income $ 10,980 $ 18,740

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 14,177 13,923

Amortization of investment discounts

Non-cash stock compensation expense 2,531 3,368

Deferred income taxes

Provision for deferred income taxes 2,760 ( 492 )

Provision for bad debts and cash discounts 147 423

3 unchanged sentences

Accounts receivable ( 5,955 ) ( 12 )

Inventories 518 213

Prepaid expenses ( 4,067 ) ( 949 )

Deferred income taxes 2,436 945

Other assets 544 ( 1,242 )

Increase (decrease) in:

9 unchanged sentences

Proceeds from sale of property, plant and equipment 9 63

Purchases of short-term investments

Dispositions of short-term investments

Net Cash Used in Investing Activities ( 18,830 ) ( 14,677 )

7 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 217 ( 7 )

Net Increase in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents ( 16,299 ) 19,028

Cash and Cash Equivalents, Beginning of Year 40,890 21,862

6 unchanged sentences

Interest payments, net of amounts capitalized $ 400 $ 273

Income tax payments (refund)

Income tax payments $ 6,151 $ 2,319

Noncash investing and financing activities:

17 unchanged sentences

These immaterial reclassifications had no effect on the previously reported net income.

I MMATERIAL CORRECTION OF AN ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the issuance of our Annual Report on Form 10-K for the fiscal year ended July 31, 2020, we identified an error in our historical financial statements related to the classification of certain costs as selling, general and administrative expenses relating to the production of our inventory that should be classified as cost of sales.

These costs generally relate to our annual discretionary bonus and 401(k) employer match for our manufacturing teammates, teammate salaries for individuals in our support functions that spend a portion of their time related to our manufacturing operations such as IT, and other costs mostly related to consultants and outside services.

In accordance with FASB Accounting Standards Codification 250, Accounting Changes and Error Corrections , we evaluated the materiality of the error from both a quantitative and qualitative perspective, and concluded that the error was immaterial to our prior period interim and annual financial statements.

Since the error was not material to any prior period interim or annual financial statements, no amendments to previously filed interim or annual periodic reports are required.

Consequently, we have adjusted for these errors by revising our historical consolidated financial statements presented herein.

The revision to our historical consolidated financial statements did not result in any impact to our consolidated net income.

The effects of the corrections to each of the individual affected line items in our Consolidated Statements of Operations were as follows (in thousands):

Year Ended July 31, 2020

As Previously Reported Corrections As Corrected

Cost of Sales $ ( 207,404 ) $ ( 7,117 ) $ ( 214,521 )

Selling, General and Administrative Expenses $ ( 63,996 ) $ 7,117 $ ( 56,879 )

The related impacts to Inventory in our Consolidated Balance Sheets were not considered material and hence, were not adjusted.

The effects of the corrections to our Notes to the Consolidated Financial Statements for Operating Segments were as follows (in thousands):

Year Ended July 31, 2020

As Previously Reported

Corrections As Corrected

Business to Business Products $ 31,218 $ ( 2,781 ) $ 28,437

Retail and Wholesale Products $ 15,859 $ ( 4,336 ) $ 11,523

Corporate Expenses $ ( 35,250 ) $ 7,117 $ ( 28,133 )

M ANAGEMENT U SE OF E STIMATES

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Our estimates and assumptions are revised periodically.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period as well as the related disclosures.

Estimates and assumptions about future events cannot be made with certainty, including the potential impacts and duration of COVID-19 and its aftermath.

All of our estimates and assumptions are revised periodically.

Actual results could differ from these estimates.

For more information see Critical Accounting Policies and Estimates in Item 7 “ Management's Discussion and Analysis of Financial Condition and Results of Operations.

In March 2020, the World Health Organization declared COVID-19 a pandemic.

Despite the adverse effects of COVID-19 on the overall economy, we have not experienced a significant decline in customer orders and sales in fiscal year 2020.

However, the effects of COVID-19 are unprecedented, and therefore we are unable to ascertain the effects on our sales and net earnings in the future.

The COVID-19 pandemic continues to impact business activity across industries in the U.S.

and worldwide, including, but not limited to, workforce and supply chain disruptions.

The Company remains committed to taking actions to address the health, safety and welfare of its employees, customers, agents and suppliers.

Future developments, such as the actions taken by governmental authorities in response to future outbreaks that are highly uncertain and unpredictable, will determine the extent to which COVID-19 continues to impact the Company’s results of operations and financial conditions.

See the risk factor captioned “Our business could be adversely affected by a widespread threat to public health," in Item 1A, Risk Factors, included in Part I of this Annual Report on Form 10-K for an additional discussion of risks related to COVID-19.

C ASH AND C ASH E QUIVALENTS

1 unchanged sentence

T RADE R ECEIVABLES

We recognize trade receivables when the risk of loss and title pass to the customer.

We recognize trade receivables when control of finished products are transferred to our customers.

We record an allowance for doubtful accounts based on our historical experience and a periodic review of our accounts receivable, including a review of the overall aging of accounts, consideration of customer credit risk and analysis of facts and circumstances about specific accounts.

4 unchanged sentences

Finished goods $ 14,179 $ 14,500

Packaging 5,084 4,587

Other 4,335 4,806

Inventories $ 23,598 $ 23,893

Inventories are valued at the lower of cost (first-in, first-out) or net realizable value.

4 unchanged sentences

We recorded inventory obsolescence reserves of approximately $ 641,000 and $ 926,000 as of July 31, 2021 and 2020, respectively.

The higher obsolescence reserve and lower packaging inventories are attributed to our focus on inventory management and enhanced data available from our ERP system.

Other inventories increased mainly due to higher levels of raw and purchased materials.

The lower obsolescence reserve is attributed to our focus on inventory management.

The other category of inventories includes a variety of items including clay, additives, fragrances and other supplies and decreased from July 31, 2020 due to increased production.

Finished goods inventory decreased due to sales volume.

Conversely, packaging inventories increased from July 31, 2020 due to anticipated sales demand as well as an increase in the cost of packaging.

T RANSLATION OF F OREIGN C URRENCIES

26 unchanged sentences

A significant part of our overall mining cost is incurred during the process of removing the overburden from the mine site, thus exposing the sorbent material used in a majority of our production processes.

These stripping costs are treated as a variable inventory production cost and are included in cost of sales in the period they are incurred.

These stripping costs incurred during production are treated as a variable inventory production cost and are included in cost of sales in the period they are incurred.

Stripping costs included in cost of sales were approximately $ 1,920,000 and $ 1,722,000 for fiscal years 2021 and 2020, respectively.

Stripping costs decreased in fiscal year 2020 due to a decrease in fuel costs and repair costs.

We defer and amortize the pre-production overburden removal costs associated with opening a new mine.

$ 316,000 of pre-production overburden removal costs were deferred in fiscal year 2020.

There were no pre-production overburden removal costs deferred in fiscal year 2019.

Pre-production overburden removal costs associated with opening a new mine during the development phase are deferred.

Total pre-production costs, including the overburden removal costs, that were capitalized in fiscal years 2021 and 2020 were $ 1,810,000 and $ 535,000 respectively.

Capitalized development costs are amortized when the sorbent material is removed from the mine and used to produce product for sale.

At the end of fiscal year 2021, the amount of development costs that are being amortized is $ 478,000 .

Additionally, it is our policy to capitalize the purchase cost of land and mineral rights, including associated legal fees, survey fees and real estate fees.

1 unchanged sentence

The amount of land and mineral rights included in land on the Consolidated Balance Sheets were approximately $ 13,637,000 and $ 2,165,000 , respectively, as of July 31, 2021, and were $ 13,570,000 and $ 2,165,000 , respectively, as of July 31, 2020.

Pre-production development costs on new mines and any prepaid royalties that may be offset against future royalties due upon extraction of the mineral are also capitalized.

Total pre-production costs, including the overburden removal costs deferred above, that were capitalized in fiscal year 2020 were $ 535,000 .

No material capitalized pre-production development costs were recorded in fiscal year 2019 .

Any prepaid royalties that may be offset against future royalties due upon extraction of the mineral are also capitalized.

Prepaid royalties included in current prepaid expenses and in non-current other assets on the Consolidated Balance Sheets were approximately $ 1,605,000 and $ 1,232,000 as of July 31, 2021 and 2020, respectively.

5 unchanged sentences

The reclamation liabilities are increased based on a yearly accretion charge over the estimated useful lives of the mines.

As of July 31, 2021 and 2020, we have recorded an estimated net reclamation asset of $ 1,152,000 and $ 932,000 , respectively, and a corresponding estimated reclamation liability of $ 2,965,000 as of July 31, 2021 and $ 2,554,000 as of July 31, 2020.

These values represent the discounted present value of the estimated future mining reclamation costs at the production plants.

Additional mining activity in fiscal year 2021 and disturbance of land accounts for the increase in the reclamation liability.

P ROPERTY , P LANT AND E QUIPMENT

6 unchanged sentences

Machinery and equipment

Packaging 2 - 20

Processing 2 - 25

Mining and other 2 - 15

Office furniture and equipment 2 - 15

Vehicles 2 - 15

Property, plant and equipment are carried at cost on the Consolidated Balance Sheets and are reviewed for possible impairment on an annual basis or when circumstances indicate impairment that an asset may become impaired.

2 unchanged sentences

No impairment was recorded in either fiscal year 2021 or 2020.

O THER N ONCURRENT L IABILITIES

O THER C URRENT AND N ONCURRENT L IABILITIES

On March 27, 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into U.S.

The CARES Act provides for, among other things, deferral of the employer portion of social security taxes incurred through the end of calendar 2020.

As permitted by the CARES Act, we deferred approximately $ 864,000 in payroll taxes during the fiscal year ended July 31, 2020 and expect to defer the payment of payroll taxes each quarter for the remainder of calendar year 2020 to be paid equally in the fourth quarters of calendar years 2021 and 2022 representing approximately $ 2,100,000 in payroll taxes.

As permitted by the CARES Act, we deferred approximately $ 2,300,000 in payroll taxes in calendar year 2020.

The $ 2,300,000 will be paid equally in the fourth quarters of calendar years 2021 and 2022;

$ 1,150,000 in 2021 and $ 1,150,000 in 2022.

The current portion of the accrual for these payroll taxes is included in Other within Accrued Expenses and the noncurrent portion of the accrual is included in Other within Noncurrent Liabilities on the Consolidated Balance Sheet.

T RADE P ROMOTIONS

20 unchanged sentences

Taxes collected from customers and remitted to governmental authorities are excluded from net sales.

Sales returns and allowances are not material.

Sales returns are not material nor are warranties and any related obligations.

We have an unconditional right to consideration under the payment terms specified in the contract upon completion of the performance obligation.

7 unchanged sentences

Shipping and handling costs are included in cost of sales and were approximately $ 46,500,000 and $ 39,865,000 for fiscal years 2021 and 2020, respectively.

The decrease in fiscal year 2020 relates to the decrease in freight due to lower transportation rates from improved truck availability.

In addition, costs were higher in the first half of the prior fiscal year due to one-time events, including a greater number of product transfers between our plants and warehouses to support customer service during the implementation of our new ERP system on August 1, 2018 and disruptions due to Hurricane Michael.

The increase in fiscal year 2021 relates to the increase in freight due to higher transportation rates from tight truck availability.

S ELLING , G ENERAL AND A DMINISTRATIVE E XPENSES

15 unchanged sentences

The related compensation expense is recognized over the appropriate vesting period.

Forfeitures are recognized as they occur.

See Note 7 of the Notes to the Consolidated Financial Statements for additional information.

8 unchanged sentences

Where unremitted foreign earnings are indefinitely reinvested, no provision for federal or state tax expense is recorded.

When circumstances change and we determine that some or all of the undistributed

earnings will be remitted in the foreseeable future, a corresponding expense is accrued in the current period.

When circumstances change and we determine that some or all of the

undistributed earnings will be remitted in the foreseeable future, a corresponding expense is accrued in the current period.

See Note 5 of the Notes to the Consolidated Financial Statements for additional information about income taxes.

O THER O PERATING I NCOME

Included within Other Operating Income is revenue earned from a confidential license agreement.

Included within Other Operating Income in fiscal year 2020 is revenue earned from a confidential license agreement.

Pursuant to this agreement, the Company granted a non-exclusive, perpetual license to develop, manufacture, use, distribute and sell products produced using formulations under certain of our patents until their expiration and agreed to certain limitations on the ability of the parties to bring forth patent infringement claims or challenges relating to certain products in exchange for a one-time payment of $ 13,000,000 .

1 unchanged sentence

N EW A CCOUNTING P RONOUNCEMENTS

Recently Adopted Accounting Pronouncements

On August 1, 2019 we adopted ASC 842, Leases , using the modified retrospective transition approach and, accordingly, we did not restate prior comparative period financial statements.

As of the date of adoption, we elected the package of practical expedients that allowed us to forgo assessment under the ASC 842 guidance whether existing or expired contracts contained leases, the classification of expired or existing leases and the accounting for previously incurred initial direct costs.

We also elected the practical expedient to forgo assessment under ASC 842 whether existing or expired land easements not previously accounted for under legacy leasing GAAP contain leases.

The adoption of ASC 842 on August 1, 2019 resulted in the recognition of additional ROU assets and lease liabilities related to operating leases of $ 9,348,000 and $ 10,910,000 , respectively, on our Consolidated Balance Sheet.

There was no material impact to any of our other consolidated financial statements.

Recently Issued Accounting Standards

2 unchanged sentences

The guidance is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

We have debt agreements that reference LIBOR and to the extent that those agreements are modified to replace LIBOR with another interest rate index, ASC 848 will allow us to account for the modification as a continuation of the existing contract without additional analysis.

We are currently evaluating the potential effects of the adoption of this guidance on our Consolidated Financial Statements.

2 unchanged sentences

This guidance is effective for our first quarter of fiscal year 2022, with early adoption permitted.

We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements.

We have performed an initial analysis of the impacts of adopting this requirement and do not anticipate that it will be material to our Consolidated Financial Statements.

In June 2016, the FASB issued guidance under ASC 326, Financial Instruments-Credit Losses , which requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses.

15 unchanged sentences

Net sales for our principal products by segment are as follows (in thousands):

Business to Business Products Group

Retail and Wholesale Products Group

Business to Business Products Group Retail and Wholesale Products Group

Year Ended July 31,

Product 2021 2020 2021 2020

Cat Litter $ 14,868 $ 14,528 $ 161,251 $ 147,503

Industrial and Sports — — 31,724 29,035

2 unchanged sentences

Animal Health and Nutrition 17,766 17,729 — —

Net Sales $ 110,120 $ 104,260 $ 194,861 $ 178,967

Net sales and operating income for each segment are provided below.

6 unchanged sentences

Corporate expenses also include the annual incentive plan bonus accrual.

Other income in fiscal year 2019 included net proceeds upon resolution of legal proceedings.

The amount received under a confidential agreement resolving these legal proceedings was material to our financial results for the period.

Other operating income in fiscal year 2020 relates to revenue earned from a license arrangement of our intellectual property.

In addition, Income from our Business to Business and Retail and Wholesale Products as well as Corporate Expenses for the year ended July 31, 2020 were adjusted for an immaterial correction of an error.

See Note 1 of the Notes to the Consolidated Financial Statements.

3 unchanged sentences

Unallocated assets 55,275 73,335

Total Assets $ 227,566 $ 235,882

Year Ended July 31,

Net Sales Income

2021 2020 2021 2020

(in thousands)

1 unchanged sentence

Retail and Wholesale Products 194,861 178,967 11,916 11,523

Net Sales $ 304,981 $ 283,227

Other Operating Income — 13,000

1 unchanged sentence

Income from Operations 13,036 24,827

Total Other (Expense) Income, Net

Total Other Income (Expense), Net 332 ( 1,807 )

Income Before Income Taxes 13,368 23,020

Income Tax Expense ( 2,388 ) ( 4,280 )

Net (Loss) Income Attributable to Noncontrolling Interest

Net Income $ 10,980 $ 18,740

Net Loss Attributable to Noncontrolling Interest $ ( 133 ) $ ( 160 )

Net Income Attributable to Oil-Dri $ 11,113 $ 18,900

5 unchanged sentences

Domestic operations $ 5,347 $ 6,457

Income before income taxes:

Foreign subsidiaries $ 112 $ 109

Income (Loss) before income taxes:

Domestic operations $ 14,144 $ 24,494

14 unchanged sentences

The composition of notes payable is as follows as of July 31 (in thousands):

Senior notes payable in annual installments on August 1.

Final payment made in fiscal year 2020.

Interest was payable semi-annually at an annual rate of 3.96%.

Amended and Restated Note Purchase and Private Shelf Agreement.

2 unchanged sentences

Interest is payable semi-annually at an annual rate of 3.95 %

$ 9,000 $ 10,000

Less current maturities of notes payable ( 1,000 ) ( 1,000 )

3 unchanged sentences

The note agreement provided that the proceeds could be used to fund future principal payments on debt, acquisitions, stock repurchases, capital expenditures, and working capital purposes.

The note agreement contained restrictions against certain activities, among other things and under various conditions, as well as financial covenants, including a minimum fixed charges coverage ratio and a minimum consolidated debt ratio.

As further described below, these notes were amended in May 2020 and paid in full in July 2020.

On May 15, 2020 (the “Effective Date”), we entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the “Amended Note Agreement”) with PGIM, Inc.

The note agreement contained restrictions against certain activities, among other things and under various conditions, further described below, these notes were amended in May 2020 and paid in full in July 2020.

On May 15, 2020 (the “Effective Date”), we entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the “Amended and Restated Note Agreement”) with PGIM, Inc.

(“Prudential”) and certain existing noteholders and purchasers affiliated with Prudential named therein.

9 unchanged sentences

The agreement provides for a $ 45,000,000 unsecured revolving credit agreement, including a maximum of $ 10,000,000 for letters of credit.

Under the credit agreement, we

may select a variable rate based on either BMO Harris’ prime rate or a LIBOR-based rate, plus a margin which varies depending on our debt to earnings ratio, or a fixed rate as agreed between us and BMO Harris.

Under the credit agreement, we may select a variable rate based on either BMO Harris’ prime rate or a LIBOR-based rate, plus a margin which varies depending on our debt to earnings ratio, or a fixed rate as agreed between us and BMO Harris.

As of July 31, 2021, the variable rates would have been 3.50 % for the BMO Harris’ prime-based rate or 1.38 % for the LIBOR-based rate.

As of July 31, 2021 and 2020, there were no outstanding borrowings under this credit agreement.

However, we had outstanding letters of credit of $1,284,000 as of July 31, 2020 under this agreement.

However, we had outstanding letters of credit of $ 964,000 and $ 1,284,000 as of July 31, 2021 and 2020, respectively, under this agreement.

The credit agreement contains restrictive covenants that, among other things and under various conditions, limit our ability to incur additional indebtedness or to dispose of assets.

1 unchanged sentence

Our debt agreements also contain provisions such that if we default on one debt agreement, the others will automatically default.

If we default on any guaranteed debt with a balance greater than $ 1,000,000 , our unsecured revolving credit agreement with BMO Harris will be considered in default.

If we default on any guaranteed debt with a balance greater than $ 1,000,000 , our unsecured revolving credit agreement with BMO Harris will be considered in

If we default on any debt with a balance greater than $ 5,000,000 we will also be considered in default with the senior promissory notes.

6 unchanged sentences

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs for similar assets or liabilities or valuation models whose inputs are observable,

directly or indirectly.

Observable market-based inputs for similar assets or liabilities or valuation models whose inputs are observable, directly or indirectly.

Unobservable inputs.

Cash equivalents are classified as Level 1 of the fair value hierarchy because they were valued using quoted market prices in active markets.

Cash equivalents were $ 6,000 and $ 26,000 as of July 31, 2020 and 2019 , respectively.

There were no cash equivalents as of July 31, 2021 and cash equivalents of $ 6,000 as of July 31, 2020.

These cash instruments are primarily money market funds and are included in cash and cash equivalents on the Consolidated Balance Sheets.

16 unchanged sentences

The provision for income tax expense by fiscal year consists of the following (in thousands):

Federal $ ( 683 ) $ 3,768

State 309 999

Current Income Tax Total ( 372 ) 4,772

Federal 2,440 ( 610 )

Foreign ( 48 ) ( 3 )

State 368 121

Deferred Income Tax Total 2,760 ( 492 )

4 unchanged sentences

State income tax expense, net of federal tax expense 5.1 4.3

Difference in effective tax rate of foreign subsidiaries

Nondeductible Officer Compensation 4.0 0.5

Tax Credits ( 2.5 ) ( 1.1 )

Statutory rate change of foreign subsidiaries ( 0.7 ) —

Valuation Allowance - Foreign 2.5 1.3

Foreign Tax Differential ( 1.5 ) ( 0.1 )

Prior year income taxes ( 4.0 ) ( 1.0 )

Other ( 0.8 ) ( 1.5 )

Effective income tax rate 17.7 % 18.6 %

effective tax rate for the year ended July 31, 2021 and July 31, 2020 were 17.7 % and 18.6 %, based on income before taxes.

The items impacting the effective tax rate were permanent items, return to provision adjustments, a deferred tax asset true-up and an increase in the foreign valuation allowance.

The tax impact of the items comprising the permanent adjustments primarily consisted of depletion, stock-based compensation and tax credits.

The Consolidated Balance Sheets included the following tax effects of cumulative temporary differences as of July 31 (in thousands):

Assets Liabilities Assets Liabilities

Depreciation $ — $ 5,870 $ — $ 3,926

Deferred compensation 1,593 — 1,779 —

Postretirement benefits 1,296 — 3,293 —

Goodwill — 1,073 — 1,000

Lease right of use assets — 2,160 — 2,534

2 unchanged sentences

Deferred marketing expenses — 133 — 194

Other assets 289 — — 9

Accrued expenses 2,402 — 4,131 —

Tax credits 87 — 147 —

Amortization 1,028 — 1,048 —

Inventories 351 — 343 —

Depletion — 166 — 173

Stock-based compensation 1,340 — 987 —

Reclamation 498 — 447 —

Other liabilities - foreign — 86 — 133

Other assets – foreign 1,362 — 1,029 —

1 unchanged sentence

Total deferred taxes $ 11,584 $ 9,488 $ 15,271 $ 7,969

Deferred taxes for postretirement benefits were also affected by employer contributions and the freeze of our pension plan that significantly reduced our pension liability.

Deferred tax liabilities for depreciation increased due to the election of bonus depreciation that the Company took in fiscal year 2021.

Deferred tax assets for post retirement benefits were affected by the freeze of our pension plan as well as the Lump Sum Option both of which significantly reduced our pension liability.

See Note 8 of the Notes to the Consolidated Financial Statements for further information about postretirement benefits.

Deferred taxes for lease right of use assets and liabilities were recorded upon the implementation of ASC 842, Leases , on August 1, 2019.

See Notes 1 and 11 of the Notes to the Consolidated Financial Statements for further information about leases.

Deferred taxes for accrued expenses reflected a higher accrual for the annual discretionary bonus.

We recorded a valuation allowance of $ 923,000 and $ 732,000 as of July 31, 2020 and July 31, 2019 , respectively, for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards since we believe it is unlikely we will realize the benefit of these tax attributes in the future.

Deferred tax assets and liabilities related to lease decreased as leases are expiring.

Deferred tax assets for accrued expenses reflected a lower accrual for the annual discretionary bonus.

We recorded a valuation allowance of $ 1,362,000 and $ 1,029,000 as of July 31, 2021 and 2020, respectively, for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards since we believe it is unlikely we will realize the benefit of these tax attributes in the future.

As of July 31, 2021, we have total net operating loss carryforwards from state jurisdictions of approximately $ 4,000,000 .

1 unchanged sentence

No valuation allowance has been established for these carryforwards since we expect our future profitability will allow us to fully realize these tax benefits.

Our foreign subsidiaries in the United Kingdom and China have not generated any untaxed foreign income, therefore we have not provided for any related income taxes.

With the exception of our foreign subsidiary in Canada, none of our foreign subsidiaries have generated any untaxed foreign income, therefore we have not provided for any related income taxes for these subsidiaries.

We had no material liability for unrecognized tax benefits based on tax positions related to the current and prior fiscal years as of July 31, 2021 and 2020;

2 unchanged sentences

federal income tax as well as income tax in multiple state and foreign jurisdictions.

We have no income tax returns under examination as of July 31, 2020 and federal tax returns for fiscal years 2018 and 2019 remain open for examination.

We have no income tax returns under examination as of July 31, 2021 and federal tax returns for fiscal years 2018-2020 remain open for examination.

Foreign and U.S.

6 unchanged sentences

The following table summarizes the changes in accumulated other comprehensive income by component (in thousands):

Pension and Postretirement Health Benefits

Cumulative Translation Adjustment

Total Accumulated Other Comprehensive (Loss) Income

Balance as of July 31, 2018

Other comprehensive (loss) income before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive income, net of tax

Net current-period other comprehensive (loss) income, net of tax

Pension and Postretirement Health Benefits Cumulative Translation Adjustment Total Accumulated Other Comprehensive (Loss) Income

Balance as of July 31, 2019 $ ( 14,891 ) $ ( 148 ) ( 15,039 )

Other comprehensive loss before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive income, net of tax

Curtailment/Settlement on Pension Plan

Other comprehensive (loss) before reclassifications, net of tax ( 4,431 ) a) ( 112 ) ( 4,543 )

Amounts reclassified from accumulated other comprehensive income, net of tax 758 b) — 758

Curtailment/Settlement on Pension Plan 6,570 c) — 6,570

Net current-period other comprehensive income (loss), net of tax 2,897 ( 112 ) 2,785

Balance as of July 31, 2020 $ ( 11,994 ) $ ( 260 ) $ ( 12,254 )

Amounts are net of taxes of $ 1,359,000 and $ 1,607,000 in fiscal years 2020 and 2019 , respectively, and are included in Other Comprehensive Loss.

Amounts are net of taxes of $ 242,000 and $ 185,000 in fiscal years 2020 and 2019 , respectively.

Other comprehensive income before reclassifications, net of tax 6,592 a) 571 7,163

Amounts reclassified from accumulated other comprehensive income, net of tax 494 b) — 494

Settlement on Pension Plan 480 c) — 480

Net current-period other comprehensive income, net of tax 7,566 571 8,137

Balance as of July 31, 2021 $ ( 4,428 ) $ 311 $ ( 4,117 )

a) Amounts are net of taxes of $ 2,095,000 and $ 1,359,000 in fiscal years 2021 and 2020, respectively, and are included in Other Comprehensive Loss.

b) Amounts are net of taxes of $ 156,000 and $ 242,000 in fiscal years 2021 and 2020, respectively.

Amounts are included in the components of net periodic benefit cost for the pension and postretirement health plans.

Amount is net of taxes of $ 2,075,000 in fiscal year 2020 .

c) Amount is net of taxes of $ 151,000 and $ 2,075,000 in fiscal years 2021 and 2020, respectively.

Amounts are included in the components of net periodic benefit cost for the pension and postretirement health plans.

9 unchanged sentences

A summary of restricted stock transactions under the plans is shown below.

(in thousands)

(in thousands) Weighted

Fair Value Weighted

(Years) Unamortized

(in thousands)

Non-vested restricted stock outstanding at July 31, 2019 414 $ 33.09 4.5 $ 10,474

Granted 26 $ 33.57

Vested ( 44 ) $ 32.53

Forfeited ( 6 ) $ 32.46

Non-vested restricted stock outstanding at July 31, 2020 390 $ 33.19 4.0 $ 7,784

Granted 72 $ 35.76

Vested ( 67 ) $ 33.11

Forfeited ( 25 ) $ 29.58

Non-vested restricted stock outstanding at July 31, 2021 370 $ 33.96 3.3 $ 7,073

10 unchanged sentences

We made payments in the fourth quarter of fiscal year 2020 to those participants who elected the Lump Sum Option by the May 15, 2020 election deadline.

The settlement expense was $ 2,012,000 and was recorded net of tax in Other, net in the Consolidated Statements of Operation.

The settlement expense was $ 2,012,000 and was recorded net of tax in Other, net in the Consolidated Statements of Operations.

On May 4, 2021 we purchased an annuity for $ 8,530,000 which decreased both our projected benefit obligation and the fair value of plan assets and resulted in no change in the funded status of the pension plan.

The settlement expense related to the annuity purchase was $ 631,000 and was recorded net of tax in Other, net in the Consolidated Statements of Operations.

A postretirement health benefits plan is also provided to domestic salaried employees who meet specific age, participation and length of service requirements at the time of retirement.

7 unchanged sentences

The following tables provide a reconciliation of changes in the plans’ benefit obligations, asset fair values and funded status by fiscal year (in thousands):

Pension Benefits

Postretirement Health Benefits

Pension Benefits Postretirement Health Benefits

2021 2020 2021 2020

Change in benefit obligation :

Benefit obligation, beginning of year $ 57,280 $ 61,553 $ 3,291 $ 2,958

Service cost — 1,096 139 116

Interest cost 1,168 1,900 51 82

Actuarial loss

Actuarial (gain)/loss ( 6,091 ) 8,570 ( 313 ) 247

Benefits paid ( 1,603 ) ( 1,663 ) ( 43 ) ( 112 )

Curtailments — ( 6,632 ) — —

Settlements ( 8,487 ) ( 7,544 ) — —

Benefit obligation, end of year 42,267 57,280 3,125 3,291

4 unchanged sentences

Benefits paid ( 1,603 ) ( 1,663 ) ( 43 ) ( 8 )

Settlements ( 8,487 ) ( 7,544 ) — —

Fair value of plan assets, end of year 40,388 45,334 — —

Funded status, recorded in Consolidated Balance Sheets $ ( 1,879 ) $ ( 11,946 ) $ ( 3,125 ) $ ( 3,291 )

The change in actuarial (gain)/loss from fiscal year 2020 to fiscal year 2021 relates to a change in discount rate as well as actual participant demographic experience vs.

assumed experience.

See “Cash Flows” below for further information about employer contributions and benefits payments.

1 unchanged sentence

The following table shows amounts recognized in the Consolidated Balance Sheets as of July 31 (in thousands):

Pension Benefits

Postretirement Health

Pension Benefits Postretirement Health

2021 2020 2021 2020

Deferred income taxes $ 504 $ 2,443 $ 792 $ 850

3 unchanged sentences

Net actuarial loss $ 4,311 $ 11,642 $ 117 $ 352

Prior service cost (income)

Benefit Costs and Amortizations

The following table shows the components of the net periodic pension and postretirement health benefit costs by fiscal year (in thousands):

Postretirement Health Benefit Cost

Pension Cost Postretirement Health Benefit Cost

2021 2020 2021 2020

Service cost $ — $ 1,096 $ 139 $ 116

Interest cost 1,168 1,900 51 82

5 unchanged sentences

Net periodic benefit cost $ ( 364 ) $ 3,223 $ 187 $ 192

Service cost is recorded in Other, net within Other Income (Expense) in the Consolidated Statements of Operations.

As the pension plan is frozen, there was no service cost recorded in fiscal year 2021.

The following table shows amounts, net of tax, that are recognized in other comprehensive income by fiscal year (in thousands):

Pension Benefits

Postretirement Health Benefits

Net actuarial loss

Pension Benefits Postretirement Health Benefits

2021 2020 2021 2020

Net actuarial (gain) loss $ ( 6,355 ) $ 4,243 $ ( 237 ) $ 188

Amortization of:

Prior service (cost) income

Prior service income — — 5 5

Amortization of actuarial loss ( 496 ) ( 763 ) ( 3 ) —

1 unchanged sentence

Total recognized in other comprehensive (income) loss $ ( 7,331 ) $ ( 3,090 ) $ ( 235 ) $ 193

The following table shows amortization amounts, net of tax, expected to be recognized in fiscal year 2021 in accumulated other comprehensive income (in thousands):

Amortization of:

Pension Benefits

Postretirement Health Benefits

Net actuarial loss

Prior service income

Total to be recognized as other comprehensive loss (income)

We have funded the Pension Plan based upon actuarially determined contributions that take into account the amount deductible for income tax purposes, the normal cost and the minimum contribution required and the maximum contribution allowed under applicable regulations.

During fiscal 2020, we made two voluntary contributions for $ 5,000,000 and $ 3,000,000 in excess of the minimum required amount.

The first contribution was made within eight and one-half months after the end of our fiscal year 2019 and therefore was deductible for our 2019 tax year.

The voluntary contributions also improved our funded status and contributed to a lower net periodic benefit expense.

We do not expect to make a contribution to the Pension Plan in fiscal year 2021 .

During fiscal year 2020, we made two voluntary contributions for $ 5,000,000 and $ 3,000,000 in excess of the minimum required amount.

The voluntary contributions improved our funded status and contributed to a lower net periodic benefit expense.

We made no contributions in fiscal year 2021 and we do not expect to make a contribution to the Pension Plan in fiscal year 2022.

The postretirement health plan is an unfunded plan.

1 unchanged sentence

The following table shows the estimated future benefit payments by fiscal year (in thousands):

Postretirement

Benefits Postretirement

Health Benefits

2022 $ 1,181 $ 82

2023 $ 1,192 $ 108

2024 $ 1,225 $ 173

2025 $ 1,315 $ 214

2026 $ 1,445 $ 210

2027-31 $ 8,780 $ 1,360

Our pension benefit and postretirement health benefit obligations and the related effects on operations are calculated using actuarial models.

4 unchanged sentences

The assumptions used in the previous calculations by fiscal year were as follows:

Pension Benefits

Postretirement Health Benefits

Pension Benefits Postretirement Health Benefits

2021 2020 2021 2020

Discount rate for net periodic benefit costs 2.14 % 3.35 % 1.63 % 2.93 %

7 unchanged sentences

The graded trend rate is expected to decrease to an ultimate rate of 4.5 % in fiscal year 2038 .

The following table reflects the effect on postretirement health costs and accruals in fiscal year 2020 of a one-percentage point change in the assumed health care cost trend (in thousands):

One-Percentage Point

One-Percentage

Point Decrease

Effect on total service and interest cost

Effect on accumulated postretirement benefit obligation

Pension Plan Assets

5 unchanged sentences

The targeted allocation percentages of plan assets is shown below for fiscal year 2022 and the actual allocation as of July 31:

Asset Allocation

Target fiscal 2021

Asset Allocation Target fiscal 2022 2021 2020

Cash and accrued income 2 % — % 1 %

In anticipation of the Lump Sum Option payments we adjusted our asset allocation in fiscal year 2020 and plan to revert back to our historical asset allocations in fiscal year 2021.

Fixed income 38 % 38 % 68 %

Equity 60 % 62 % 31 %

In anticipation of the Lump Sum Option payments we adjusted our asset allocation in fiscal year 2020 and reverted back to our historical asset allocations in fiscal year 2021.

The following table sets forth by level, within the fair value hierarchy, the Pension Plan's assets carried at fair value (in thousands):

Fair Value At July 31, 2021

(Level 1) Significant

Cash and cash equivalents (a)

$ 16 $ 16 $ —

Equity securities (b) :

companies 15,241 4,290 10,951

International companies 806 806 —

1 unchanged sentence

Developed market (c)

5,622 — 5,622

Emerging markets (d)

2,389 — 2,389

Commodities (e)

Fixed Income:

Treasuries 1,543 — 1,543

Debt securities (f)

2,258 — 2,258

Government sponsored entities (g)

1,730 — 1,730

Multi-strategy bond fund (h)

8,257 — 8,257

Money market fund (i)

Total $ 40,388 $ 5,112 $ 35,276

Fair Value At July 31, 2020

(Level 1) Significant

Cash and cash equivalents (a)

$ 557 $ 557 $ —

Equity securities (b) :

companies 9,401 2,093 7,308

International companies 495 495 —

1 unchanged sentence

Developed market (c)

2,867 — 2,867

Emerging markets (d)

1,022 — 1,022

Commodities (e)

Fixed Income:

Treasuries 3,014 — 3,014

Debt securities(f) 10,131 — 10,131

Government sponsored entities (g)

5,131 — 5,131

Multi-strategy bond fund (h)

10,547 — 10,547

Money market fund (i)

Cash and cash equivalents consists of highly liquid investments which are traded in active markets.

This class represents equities traded on regulated exchanges, as well as funds that invest in a portfolio of such stocks.

These mutual funds seek long-term capital growth by investing no less than 80 % of their assets in stocks of non- U.S.

1,683 — 1,683

Total $ 45,334 $ 3,145 $ 42,189

(a) Cash and cash equivalents consists of highly liquid investments which are traded in active markets.

(b) This class represents equities traded on regulated exchanges, as well as funds that invest in a portfolio of such stocks.

(c) These mutual funds seek long-term capital growth by investing no less than 80 % of their assets in stocks of non- U.S.

companies that are primarily in developed markets, but also may invest in emerging and less developed markets.

These mutual funds seek to track the performance of a benchmark index that measures the investment return of stock issued by companies located in emerging market countries.

These investments seek attractive total return by investing primarily in a diversified portfolio of commodity futures contracts and fixed income investments.

This class includes bonds and loans of U.S.

(d) These mutual funds seek to track the performance of a benchmark index that measures the investment return of stock issued by companies located in emerging market countries.

(e) These investments seek attractive total return by investing primarily in a diversified portfolio of commodity futures contracts and fixed income investments.

(f) This class includes bonds and loans of U.S.

corporate issuers from diverse industries and bonds of domestic and foreign municipalities.

This class represents a beneficial ownership interest in a pool of single-family residential mortgage loans.

(g) This class represents a beneficial ownership interest in a pool of single-family residential mortgage loans.

These investments are generally not backed by the full faith and credit of the United States government, except for securities valued at $ 176,000 in our portfolio as of July 31, 2021 and $ 289,000 as of July 31, 2020.

This class invests at least 80% of its net assets in bonds and other fixed income instruments issued by governmental or private-sector entities.

More than 50% of its net assets are invested in mortgage-backed securities.

The fund may invest up to 33 1/3% of its net assets in high-yield bonds, bank loans and assignments and credit default swaps.

These money market mutual funds seek to provide current income consistent with liquidity and stability of principal by investing in a diversified portfolio of high quality, short-term, dollar-denominated debt securities.

(h) This class invests at least 80% of its net assets in bonds and other fixed income instruments issued by governmental or private-sector entities.

More than 50% of its net assets are invested in asset-backed and mortgage-backed securities.

The fund may invest up to 20% of its net assets in securities below investment grade.

(i) These money market mutual funds seek to provide current income consistent with liquidity and stability of principal by investing in a diversified portfolio of high quality, short-term, dollar-denominated debt securities.

These funds may include securities issued or guaranteed as to principal and interest by the U.S.

government or its agencies, short-term securities issued by domestic or foreign banks, domestic and dollar-denominated foreign commercial papers, and other short-term corporate obligations and obligations issued or guaranteed by one or more foreign governments.

This class includes funds that use a number of other strategies, including arbitrage, to obtain long-term positive returns.

(j) This class includes funds that use a number of other strategies, including arbitrage, to obtain long-term positive returns.

The portfolio of instruments may include equities, debt securities, real estate properties, warrants, options, swaps, future contracts, forwards or other types of derivative instruments.

5 unchanged sentences

The Oil-Dri Corporation of America Annual Incentive Plan provides certain executives with the opportunity to receive a deferred executive bonus award if certain financial goals are met.

A total of $ 1,352,000 and $ 513,000 were awarded to certain executives for fiscal years 2020 and 2019 , respectively.

No executive bonus was awarded for fiscal year 2021 as financial targets under the provisions of the plan were not achieved.

$ 1,352,000 was awarded to certain executives for fiscal year 2020.

These awards will vest and accrue interest over a three-year period.

1 unchanged sentence

We fund these benefits when payments are made, and the timing and amount of the payments are determined according to the plans' provisions and, for certain plans, according to individual employee agreements.

Our SERP provides certain retired participants in the Pension Plan with the amount of benefits that would have been provided under the Pension Plan but for:

Our SERP, which was terminated in fiscal year 2020, provided certain retired participants in the Pension Plan with the amount of benefits that would have been provided under the Pension Plan but for:

(1) the limitations on benefits imposed by Section 415 of the Internal Revenue Code (“Code”), and/or (2) the limitation on compensation for purposes of calculating benefits under the Pension Plan imposed by Section 401(a)(17) of the Code.

The SERP is unfunded and benefits will be funded when payments are made.

The SERP liability is actuarially determined at the end of each fiscal year using assumptions similar to those used for the Pension Plan, see Note 8 of the Notes to the Consolidated Financial Statements.

The SERP liability was $ 1,447,000 and $ 2,708,000 as of July 31, 2020 and July 31, 2019 , respectively.

We recorded expense related to the SERP of $ 34,000 and $ 539,000 in fiscal years 2020 and 2019 , respectively.

The SERP liability was actuarially determined at the end of each fiscal year using assumptions similar to those used for the Pension Plan, see Note 8 of the Notes to the Consolidated Financial Statements.

The SERP liability was $ 1,447,000 as of July 31, 2020, and we recorded expense related to the SERP of $ 34,000 in fiscal year 2020.

On January 9, 2020, we amended the SERP to freeze participation and any excess benefit, supplemental benefit or additional benefit effective March 1, 2020.

Consequently, the SERP is closed to new participants and current participants no longer earn additional benefits on or after March 1, 2020.

Consequently, the SERP was closed to new participants and current participants no longer earned additional benefits on or after March 1, 2020.

The amendment of the SERP triggered a curtailment which required a remeasurement of the SERP's obligation.

The remeasurement resulted in a decrease in the SERP liability and recognition of a curtailment gain of approximately $ 1,296,000 , which has been recorded in SG&A.

Subsequent to the curtailment, the SERP was terminated effective June 30, 2020.

Any payments that would otherwise have been payable pursuant to the SERP plan on or after June 30, 2021, will instead be paid in the form of one lump sum, with such lump sum payable no earlier than June 30, 2021 and no later than June 8, 2022.

The remeasurement resulted in a decrease in the SERP liability and recognition of a curtailment gain of approximately $ 1,296,000 in fiscal year 2020, which was recorded in Selling, General & Administrative Expenses.

Subsequent to the curtailment, the SERP was terminated effective June 30, 2020 and all participants were paid in the form of one lump sum in July 2021.

NOTE 10 - ACCRUED EXPENSES

Accrued expenses is as follows (in thousands):

2021 July 31,

Salaries, Wages, Commissions and Employee Benefits 10,806 $ 14,798

Trade promotions and advertising 1,653 2,349

Freight 2,845 1,313

Real Estate Tax 1,002 1,658

Other 8,577 8,582

$ 24,883 $ 28,700

The decrease in salaries, wages, commissions and employee benefits relates primarily to the payment of annual discretionary bonuses related to fiscal year 2020 during the first quarter of fiscal year 2021 and a lower discretionary bonus as of the end of fiscal year 2021.

The accrual for trade promotions and advertising is lower at July 31, 2021 than at July 31, 2020 due to a shift in timing of advertising programs and expense.

Freight rates increased during fiscal year 2021 resulting in a higher accrual at July 31, 2021 than at July 31, 2020.

Accrued real estate tax at July 31, 2021 is lower than at July 31, 2020 due to timing of payments as well as an adjustment to account for lower real estate taxes for one of our facilities.

NOTE 11 – OTHER CONTINGENCIES

1 unchanged sentence

While it is not possible at this time to determine with certainty the ultimate outcome of these or other lawsuits, we believe that none of the pending proceedings will have a material adverse effect on our business, financial condition, results of operations or cash flows.

In June 2020, the Company received notice from a former service provider alleging a breach of contract regarding the payment of a contingency fee.

In June 2020, the Company received notice from a former service

provider alleging a breach of contract regarding the payment of a contingency fee.

Such party subsequently, in July 2020, filed a lawsuit seeking to require the Company to participate in binding mediation regarding this matter.

12 unchanged sentences

The following table summarizes total lease costs for our operating leases (in thousands):

For the Twelve Months Ended July 31, 2020

For the Twelve Months Ended July 31, For the Twelve Months Ended July 31,

Operating Lease Cost

2 unchanged sentences

Supplemental cash flow information related to leases was as follows (in thousands):

For the Twelve Months Ended July 31, 2020

For the Twelve Months Ended July 31, For the Twelve Months Ended July 31,

Other Information

3 unchanged sentences

Other supplemental balance sheet information related to leases was as follows:

For the Twelve Months Ended July 31, 2020

Weighted-average remaining lease term - operating leases

For the Twelve Months Ended July 31, For the Twelve Months Ended July 31,

Weighted-average remaining lease term - operating leases 9.1 years 9.4 years

Weighted-average discount rate - operating leases 3.88 % 3.87 %

The following table summarizes scheduled minimum future lease payments due within twelve months for operating leases with terms longer than one year for which cash flows are fixed and determinable as of July 31, 2021 (in thousands):

Thereafter 5,355

imputed interest ( 2,072 )

Net lease obligation $ 10,058

Rent expense for the fiscal year ended July 31, 2019 was $ 2,873,000 .

NOTE 13 – SUBSEQUENT EVENTS

4 unchanged sentences

Total net sales to that customer, including sales to subsidiaries of that customer, were $ 327,000 and $ 388,000 for fiscal years 2021 and 2020, respectively.

There were no outstanding accounts receivable due from that customer, and its subsidiaries, as of July 31, 2020 and $ 10,000 outstanding as of July 31, 2019 .

There was $ 4,000 of outstanding accounts receivable due from that customer, and its subsidiaries, as of July 31, 2021 and no outstanding accounts receivable as of July 31, 2020.

One member of our Board of Directors is currently the President and Chief Executive Officer of a vendor of ours.

13 unchanged sentences

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Oil-Dri Corporation of America (a Delaware corporation) and subsidiaries (the “Company”) as of July 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the two years in the period ended July 31, 2020, and the related notes and financial statement schedule included under Item 15(a)) (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Oil-Dri Corporation of America (a Delaware corporation) and subsidiaries (the “Company”) as of July 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended July 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of July 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

1 unchanged sentence

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in the current year due to the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases .

Basis for opinions

18 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Annual goodwill impairment analysis

As described further in Note 1 to the financial statements, the Company’s consolidated goodwill balance was $9,262,000 as of July 31, 2021 and the goodwill assigned to the Retail and Wholesale Products Group and Business to Business Products Group was $5,497,000 and $3,765,000, respectively.

Goodwill is tested annually for impairment in the fourth quarter of the fiscal year or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.

We identified the Company’s annual goodwill impairment analysis of both of the Company’s reporting units as a critical audit matter.

The principal considerations for our determination that the annual goodwill impairment analysis is a critical audit matter are that the significant estimates and assumptions made by management involve subjectivity and judgment in determining the fair value of the reporting units using the discounted future cash flows valuation technique.

The reporting unit discounted future cash flows include certain management assumptions that are complex and have a higher degree of estimation uncertainty and changes in these assumptions could have a significant impact on the results of the impairment analysis.

These assumptions include forward-looking projections related to volume, revenue, and expenses as well as certain allocations between reporting units and determination of discount rates.

Performing audit procedures to evaluate management’s assumptions required a high degree of auditor judgement and an increased extent of effort, including the need to involve valuation specialists.

Our audit procedures related to the annual goodwill impairment analysis included the following, among others:

• We tested the design and operating effectiveness of controls relating to management’s goodwill impairment test, including the controls over the determination of key inputs such as the forecasting of future cash flows and determination of the discount rate;

• We tested the reasonableness of management’s forecasts of future revenues and operating margin by comparing to third-party industry projections and historical operating results;

• We performed sensitivity analysis on the Company’s future revenue, operating margins, and expense allocations to evaluate the reasonableness of management’s forecasts;

• We utilized a valuation specialist to assist in recalculating the Company’s discounted future cash flows model and in evaluating the reasonableness of significant assumptions including the discount rate;

• We evaluated the competency and objectivity of management’s specialists who assisted with preparing the discounted cash flow analysis.

/s/ GRANT THORNTON LLP

4 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 8. Financial Statements and Supplementary Data