What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-12-06 compared with 2022-06-07 · 118 added, 285 removed, 395 unchanged (51% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheet

(in thousands, except share and per share amounts)

ASSETS April 30,

(in thousands, except for share and per share amounts)

ASSETS October 31,

2022 July 31,

2 unchanged sentences

Accounts receivable, less allowance of

$ 1,149 and $ 1,174 at April 30, 2022 and July 31, 2021, respectively

$ 882 and $ 922 at October 31, 2022 and July 31, 2022, respectively

53,062 51,683

Inventories 34,951 23,598

Inventories, net 40,419 35,562

Prepaid repairs 8,019 7,474

6 unchanged sentences

Goodwill 3,618 3,618

Other intangibles, net of accumulated amortization

of $ 497 and $ 385 at April 30, 2022 and July 31, 2021, respectively

Trademarks and patents, net of accumulated amortization

of $ 527 and $ 524 at October 31, 2022 and July 31, 2022, respectively

Customer list, net of accumulated amortization

of $ 7,536 and $ 7,321 at April 30, 2022 and July 31, 2021, respectively

of $ 7,647 and $ 7,608 at October 31, 2022 and July 31, 2022, respectively

Deferred income taxes 3,509 3,677

6 unchanged sentences

Condensed Consolidated Balance Sheet (continued)

(in thousands, except share and per share amounts)

LIABILITIES & STOCKHOLDERS’ EQUITY April 30,

(in thousands, except for share and per share amounts)

LIABILITIES & STOCKHOLDERS’ EQUITY October 31,

2022 July 31,

8 unchanged sentences

Notes payable, net of unamortized debt issuance costs

of $ 212 and $ 122 at April 30, 2022 and July 31, 2021, respectively

of $ 200 and $ 202 at October 31, 2022 and July 31, 2022, respectively

31,800 31,798

Deferred compensation 4,159 4,559

5 unchanged sentences

Stockholders’ Equity

Common Stock, par value $ .10 per share, issued 8,682,968 shares at April 30, 2022

Common Stock, par value $ .10 per share, issued 8,725,618 shares at October 31, 2022

and 8,686,768 shares at July 31, 2022

Class B Stock, par value $ .10 per share, issued 2,397,056 shares at April 30, 2022

Class B Stock, par value $ .10 per share, issued 2,397,056 shares at October 31, 2022

and 2,397,056 shares at July 31, 2022

7 unchanged sentences

Less Treasury Stock, at cost ( 3,617,298 Common and 351,641 Class B shares at

April 30, 2022 and 3,192,702 Common and 346,491 Class B shares at July 31, 2021)

October 31, 2022 and 3,609,938 Common and 351,641 Class B shares at July 31, 2022)

( 79,648 ) ( 79,428 )

5 unchanged sentences

(in thousands, except for per share amounts)

For the Nine Months Ended April 30,

For the Three Months Ended October 31,

Net Sales $ 98,539 $ 82,460

2 unchanged sentences

Selling, General and Administrative Expenses ( 15,741 ) ( 13,373 )

Loss on Impairment of Goodwill ( 5,644 ) —

(Loss) Income from Operations ( 1,664 ) 11,352

Other (Expense) Income

Income from Operations 6,569 445

Other Income (Expense)

Interest expense ( 364 ) ( 177 )

1 unchanged sentence

Other, net 176 433

Total Other Income, Net 892 722

(Loss) Income Before Income Taxes ( 772 ) 12,074

Income Tax Benefit (Expense) 1,195 ( 1,651 )

Total Other (Expense) Income, Net ( 132 ) 265

Income Before Income Taxes 6,437 710

Income Tax Expense ( 1,207 ) ( 115 )

Net Income 5,230 595

Net Loss Attributable to Noncontrolling Interest ( 55 ) ( 87 )

Net (Loss) Income Attributable to Noncontrolling Interest ( 11 ) 10

Net Income Attributable to Oil-Dri $ 5,241 $ 585

12 unchanged sentences

Basic Class B Common $ 0.2100 $ 0.2025

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

(1) The effect of Basic Common potential common stock equivalents related to non-vested restricted stock of 6 thousand shares was excluded from the computation of average diluted shares outstanding for the three months ended October 31, 2022 as inclusion would have been anti-dilutive.

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

1 unchanged sentence

Condensed Consolidated Statements of Comprehensive Income

(in thousands of dollars)

For the Nine Months Ended April 30,

(in thousands)

For the Three Months Ended October 31,

Net Income Attributable to Oil-Dri $ 5,241 $ 585

2 unchanged sentences

Cumulative translation adjustment ( 385 ) ( 34 )

Other Comprehensive (Loss) Income ( 108 ) 1,014

Other Comprehensive Loss ( 393 ) ( 7 )

Total Comprehensive Income $ 4,848 $ 578

1 unchanged sentence

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Operations

(in thousands, except for per share amounts)

For the Three Months Ended April 30,

Net Sales $ 85,761 $ 76,255

Cost of Sales (1) ( 70,131 ) ( 61,289 )

Gross Profit 15,630 14,966

Selling, General and Administrative Expenses (1) ( 14,013 ) ( 13,035 )

Loss on Impairment of Goodwill ( 5,644 ) —

(Loss) Income from Operations ( 4,027 ) 1,931

Other (Expense) Income

Interest expense ( 378 ) ( 186 )

Interest income 9 14

Other, net 544 403

Total Other Income, Net 175 231

(Loss) Income Before Income Taxes ( 3,852 ) 2,162

Income Tax Benefit 1,719 24

Net (Loss) Income ( 2,133 ) 2,186

Net Loss Attributable to Noncontrolling Interest ( 24 ) ( 41 )

Net (Loss) Income Attributable to Oil-Dri $ ( 2,109 ) $ 2,227

Net (Loss) Income Per Share

Basic Common $ ( 0.32 ) $ 0.32

Basic Class B Common $ ( 0.24 ) $ 0.24

Diluted Common $ ( 0.32 ) $ 0.32

Diluted Class B Common $ ( 0.24 ) $ 0.24

Average Shares Outstanding (2)

Basic Common 4,932 5,133

Basic Class B Common 1,939 1,925

Diluted Common 4,932 5,242

Diluted Class B Common 1,939 1,965

Dividends Declared Per Share

Basic Common $ 0.2700 $ 0.2600

Basic Class B Common $ 0.2025 $ 0.1950

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

(2) The effect of Basic Common and Basic Class B Common potential common stock equivalents related to non-vested restricted stock of 101 and 19 , respectively, were excluded from the computation of average diluted shares outstanding for the three months ended April 30, 2022 as inclusion would have been anti-dilutive.

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

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Comprehensive (Loss) Income

(in thousands of dollars)

For the Three Months Ended April 30,

Net (Loss) Income Attributable to Oil-Dri $ ( 2,109 ) $ 2,227

Other Comprehensive (Loss) Income:

Pension and postretirement benefits (net of tax) 26 165

Cumulative translation adjustment ( 93 ) 112

Other Comprehensive (Loss) Income ( 67 ) 277

Total Comprehensive (Loss) Income $ ( 2,176 ) $ 2,504

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

OIL-DRI CORPORATION OF AMERICA

Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

For the Three Months Ended April 30

Number of Shares

Stock Treasury

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Loss Non-Controlling Interest Total

Stockholders’

Balance, January 31, 2021 10,937,617 ( 3,507,783 ) $ 1,094 $ 46,890 $ 181,265 $ ( 65,071 ) $ ( 11,517 ) $ ( 220 ) $ 152,441

Net Income (Loss) — — — — 2,227 — — ( 41 ) 2,186

Other Comprehensive Income — — — — — — 277 — 277

Dividends Declared — — — — ( 1,789 ) — — — ( 1,789 )

Purchases of Treasury Stock — ( 21,159 ) — — — ( 736 ) — — ( 736 )

Net issuance of stock under long-term incentive plans 5,000 ( 4,350 ) — 142 — ( 141 ) — — 1

Amortization of Restricted Stock — — — 559 — — — — 559

Balance, April 30, 2021 10,942,617 ( 3,533,292 ) $ 1,094 $ 47,591 $ 181,703 $ ( 65,948 ) $ ( 11,240 ) $ ( 261 ) $ 152,939

Balance, January 31, 2022 11,065,024 ( 3,732,596 ) $ 1,107 $ 50,220 $ 179,322 $ ( 72,862 ) $ ( 4,158 ) $ ( 338 ) $ 153,291

Net Loss — — — — ( 2,109 ) — — ( 24 ) ( 2,133 )

Other Comprehensive Loss — — — — — — ( 67 ) — ( 67 )

Dividends Declared — — — — ( 1,845 ) — — — ( 1,845 )

Purchases of Treasury Stock — ( 151,913 ) — — — ( 4,305 ) — — ( 4,305 )

Net issuance of stock under long-term incentive plans 15,000 ( 2,700 ) 1 83 — ( 84 ) — — —

Amortization of Restricted Stock — — — 814 — — — — 814

Balance, April 30, 2022 11,080,024 ( 3,887,209 ) $ 1,108 $ 51,117 $ 175,368 $ ( 77,251 ) $ ( 4,225 ) $ ( 362 ) $ 145,755

For the Nine Months Ended April 30

For the Three Months Ended October 31

Number of Shares

2 unchanged sentences

Net Income (Loss) — — — — 585 — — 10 595

Other Comprehensive Income — — — — — — 1,014 — 1,014

Other Comprehensive Loss — — — — — — ( 7 ) — ( 7 )

Dividends Declared — — — — ( 1,864 ) — — — ( 1,864 )

2 unchanged sentences

Amortization of Restricted Stock — — — 636 — — — — 636

Balance, April 30, 2021 10,942,617 ( 3,533,292 ) $ 1,094 $ 47,591 $ 181,703 $ ( 65,948 ) $ ( 11,240 ) $ ( 261 ) $ 152,939

Balance, October 31, 2021 11,033,024 ( 3,618,510 ) $ 1,103 $ 49,377 $ 179,164 $ ( 68,922 ) $ ( 4,124 ) $ ( 297 ) $ 156,301

Balance, July 31, 2022 11,083,824 ( 3,961,579 ) $ 1,108 $ 52,467 $ 178,754 $ ( 79,428 ) $ ( 2,183 ) $ ( 369 ) $ 150,349

5 unchanged sentences

Amortization of Restricted Stock — — — 794 — — — — 794

Balance, April 30, 2022 11,080,024 ( 3,887,209 ) $ 1,108 $ 51,117 $ 175,368 $ ( 77,251 ) $ ( 4,225 ) $ ( 362 ) $ 145,755

Balance, October 31, 2022 11,122,674 ( 3,968,939 ) $ 1,112 $ 53,385 $ 182,135 $ ( 79,648 ) $ ( 2,576 ) $ ( 380 ) $ 154,028

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

2 unchanged sentences

(in thousands)

For the Nine Months Ended April 30,

For the Three Months Ended October 31,

CASH FLOWS FROM OPERATING ACTIVITIES 2022 2021

5 unchanged sentences

Provision for bad debts and cash discounts 55 89

Loss on impairment of goodwill 5,644 —

Loss on impairment of patent applications 323 —

Loss on the disposals of property, plant and equipment 54 34

11 unchanged sentences

Total Adjustments ( 1,562 ) ( 1,191 )

Net Cash Provided by Operating Activities 5,460 8,340

Net Cash Provided by (Used in) Operating Activities 3,668 ( 596 )

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures ( 7,521 ) ( 6,736 )

Proceeds from sale of property, plant and equipment — 4

Net Cash Used in Investing Activities ( 7,521 ) ( 6,736 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of notes payable 25,000 —

Payment of debt issuance costs ( 114 ) —

Dividends paid ( 1,851 ) ( 1,865 )

Purchases of treasury stock ( 92 ) ( 2,291 )

Net Cash Provided by (Used in) Financing Activities 8,807 ( 8,324 )

Net Cash Used in Financing Activities ( 1,943 ) ( 4,156 )

Effect of exchange rate changes on Cash and Cash Equivalents ( 32 ) ( 48 )

5 unchanged sentences

(in thousands)

For the Nine Months Ended April 30,

For the Three Months Ended October 31,

Supplemental disclosures:

Interest payments, net of amounts capitalized $ — $ —

Income tax payments $ 219 $ 1,482

Income tax (refunds) payments $ ( 87 ) $ 15

Non-cash investing and financing activities:

15 unchanged sentences

The unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals and reclassifications which are, in the opinion of management, necessary for a fair presentation of the statements contained herein.

Operating results for the three and nine months ended April 30, 2022 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, 2022.

Immaterial 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 (“SG&A”) 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 employees, employee 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 condensed consolidated financial statements presented herein.

The revision to our historical condensed 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 unaudited Condensed Consolidated Statements of Operations were as follows (in thousands):

For the Three Months Ended April 30, 2021

As Previously Reported Corrections As Corrected

Cost of Sales $ ( 59,732 ) $ ( 1,557 ) $ ( 61,289 )

Selling, General and Administrative Expenses $ ( 14,592 ) $ 1,557 $ ( 13,035 )

For the Nine Months Ended April 30, 2021

As Previously Reported Corrections As Corrected

Cost of Sales $ ( 171,853 ) $ ( 4,564 ) $ ( 176,417 )

Selling, General and Administrative Expenses $ ( 43,647 ) $ 4,564 $ ( 39,083 )

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

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

For the Three Months Ended April 30, 2021

As Previously Reported Reclassifications Corrections As Corrected

Business to Business Products $ 7,146 $ ( 161 ) $ ( 564 ) $ 6,421

Retail and Wholesale Products $ 2,898 $ ( 50 ) $ ( 993 ) $ 1,855

Corporate Expenses $ ( 8,113 ) $ 211 $ 1,557 $ ( 6,345 )

For the Nine Months Ended April 30, 2021

As Previously Reported Reclassifications Corrections As Corrected

Business to Business Products $ 23,005 $ ( 479 ) $ ( 1,710 ) $ 20,816

Retail and Wholesale Products $ 11,487 $ ( 150 ) $ ( 2,854 ) $ 8,483

Corporate Expenses $ ( 23,140 ) $ 629 $ 4,564 $ ( 17,947 )

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

These reclassifications related to the transition of personnel, were not corrections of an error, and had no effect on the previously reported net income.

Operating results for the three months ended October 31, 2022 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, 2023.

Management Use of Estimates

The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with U.S.

GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, 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 the novel coronavirus pandemic (“the coronavirus” or “COVID-19” or “the pandemic”) and its aftermath.

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

Estimates and assumptions about future events cannot be made with certainty.

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 2 “ Management's Discussion and Analysis of Financial Condition and Results of Operations.

Summary of Significant Accounting Policies

Our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, have not materially changed.

Our significant accounting policies, which are summarized in detail in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022, have not materially changed.

The following is a description of certain of our significant accounting policies.

1 unchanged sentence

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 customer accounts.

We record an allowance for credit losses based on our expectations 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.

A customer account is determined to be uncollectible when it is probable that a loss will be incurred after we have completed our internal collection procedures, including termination of shipments, direct customer contact and formal demand of payment.

We retain outside collection agencies to facilitate our collection efforts.

Past due status is determined based on contractual terms and customer payment history.

Overburden Removal and Mining Costs.

2 unchanged sentences

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

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

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

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.

5 unchanged sentences

This process allows us to continuously reclaim older mine sites and dispose of overburden simultaneously, therefore minimizing the costs associated with the reclamation process.

On an annual basis we evaluate our potential reclamation liability in accordance with ASC 410, Asset Retirement and Environmental Obligations.

The reclamation assets are depreciated over the estimated useful lives of the various mines.

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

ASC 842, Leases , provides that a contract is, or contains, a lease if it conveys the right to control the use of an identified asset and, accordingly, a lease liability and a related right-of-use (“ROU”) asset is recognized at the commencement date on our consolidated balance sheet.

24 unchanged sentences

We may require certain customers to provide payment in advance of product shipment.

We recorded a liability for these advance payments of $ 531,000 and $ 256,000 as of April 30, 2022 and July 31, 2021, respectively.

We recorded a liability for these advance payments of $ 0.5 million at both October 31, 2022 and July 31, 2022.

This liability is reported in Other within Accrued Expenses on the unaudited Condensed Consolidated Balance Sheet.

Revenue recognized during the nine months ended April 30, 2022 that was included in the liability for advance payments at the beginning of the period was $ 187,000 .

Revenue recognized during the three months ended October 31, 2022 that was included in the liability for advance payments at the beginning of the period was $ 0.3 million.

We routinely commit to one-time or ongoing trade promotion programs directly with consumers, such as coupon programs, and with customers, such as volume discounts, cooperative marketing and other arrangements.

4 unchanged sentences

Selling, General and Administrative Expenses.

and amortization related to assets outside the manufacturing and distribution process and all other non-manufacturing and non-distribution expenses.

Selling, general and administrative expenses (“SG&A”) include salaries, wages and benefits associated with staff outside the manufacturing and distribution functions, all marketing related costs, any miscellaneous trade spending expenses not required to be included in net sales, research and development costs, depreciation and amortization related to assets outside the manufacturing and distribution process and all other non-manufacturing and non-distribution expenses.

Other Current and Noncurrent Liabilities.

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 year (December) 2020.

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

$ 1,150,000 of the $ 2,300,000 was paid in the fourth quarter of calendar year (December) 2021 and $ 1,150,000 will be paid in the fourth quarter of calendar year (December) 2022.

The remaining $ 1,150,000 accrual for these payroll taxes is included in Other within Accrued Expenses on the unaudited Condensed Consolidated Balance Sheet.

Other liabilities include the accruals for general expenses not yet paid, cash collected not yet vouchered, legal reserves, and reclamation liability accrual.

Current liabilities are due to be paid within the next 12 months.

Included in current Other within Accrued Expenses on the unaudited Condensed Consolidated Balance Sheet is the remaining $ 1.2 million accrual for payroll taxes which were originally deferred as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which was signed into U.S.

Noncurrent other liabilities is primarily comprised of our reclamation liability.

NEW ACCOUNTING PRONOUNCEMENTS AND REGULATIONS

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment (ASC 350).

The standard eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (the Step 2 test) from the goodwill impairment test.

Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit.

The guidance is effective for us beginning with the first quarter of fiscal year 2023.

Early adoption is permitted.

We adopted this standard during the third quarter of fiscal year 2022 in conjunction with testing for our goodwill impairment.

See Note 5 for additional information regarding the results of the impairment test performed.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued guidance under ASC 848, Reference Rate Reform.

1 unchanged sentence

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.

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.

In addition, this new guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, as well as additional disclosures.

In general, this guidance will require modified retrospective adoption for all outstanding instruments that fall under this guidance.

This guidance is effective for our first quarter of fiscal year 2023.

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

On August 30, 2022 we amended our debt agreements to replace the LIBOR-based reference rate with an adjusted term Secured Overnight Financing Rate (SOFR), ASC 848 will allow us to account for the modification as a continuation of the existing contract without additional analysis.

There have been no other accounting pronouncements issued but not yet adopted by us which are expected to have a material impact on our Consolidated Financial Statements.

7 unchanged sentences

Inventory costs include the cost of raw materials, packaging supplies, labor and other overhead costs.

The inventory obsolescence reserve values at April 30, 2022 and

July 31, 2021 were $ 610,000 and $ 641,000 , respectively.

Inventories, in all categories, have increased due to a combination of rising costs and building inventory levels for anticipated demand.

The inventory obsolescence reserve was $ 0.8 million at both October 31, 2022 and July 31, 2022.

Inventories have increased due to a combination of rising costs and building inventory levels for anticipated demand.

FAIR VALUE MEASUREMENTS

6 unchanged sentences

Cash equivalents are primarily money market mutual funds classified as Level 1.

We had no cash equivalents as of April 30, 2022 and July 31, 2021.

Balances of accounts receivable and accounts payable approximated their fair values at April 30, 2022 and July 31, 2021 due to the short maturity and nature of those balances.

We had no cash equivalents as of October 31, 2022 and July 31, 2022.

Balances of accounts receivable and accounts payable approximated their fair values at October 31, 2022 and July 31, 2022 due to the short maturity and nature of those balances.

Notes payable are reported at the face amount of future maturities.

The estimated fair value of notes payable, including current maturities, was $ 35,051,000 and $ 10,231,000 as of April 30, 2022 and July 31, 2021, respectively, and are classified as Level 2.

The estimated fair value of notes payable, including current maturities, was $ 30.1 million and $ 31.8 million as of October 31, 2022 and July 31, 2022, respectively, and are classified as Level 2.

The fair value was estimated using the exit price notion of fair value.

4 unchanged sentences

Intangible assets, other than goodwill, include trademarks, patents, customer lists and product registrations.

Intangible amortization expense was $ 116,000 and $ 146,000 in the third quarter of fiscal years 2022 and 2021, respectively.

Intangible amortization expense was $ 369,000 and $ 451,000 in the first nine months of fiscal years 2022 and 2021, respectively.

Estimated intangible amortization for the remainder of fiscal year 2022 is $ 116,000 .

Intangible amortization expense was $ 0.1 million in both the first three months of fiscal years 2023 and 2022.

Estimated intangible amortization for the remainder of fiscal year 2023 is $ 0.2 million.

Estimated intangible amortization for the next five fiscal years is as follows (in thousands):

We have one acquired trademark recorded at a cost of $ 376,000 that was determined to have an indefinite life and is not amortized.

Much of our goodwill cannot be specifically assigned to one of our operating segments because of the shared nature of our production facilities;

however, for purposes of our impairment analysis we estimated the goodwill allocation and assigned $ 5,644,000 to the Retail and Wholesale Products Group and $ 3,618,000 to the Business to Business Products Group.

Our goodwill impairment test is based on cash flow considerations and other approaches that require significant judgment with respect to volume, revenue, expenses and allocations.

We determined that, as a result of lower share prices and the continued adverse impacts of rising costs and additional expenses to prevent supply chain disruptions, that we had a triggering event during the third quarter of fiscal 2022 that necessitated a goodwill impairment test.

We performed a goodwill impairment test on our Retail and Wholesale Products Group and Business to Business Products Group reporting units and determined that the carrying value of our Retail and Wholesale Products Group reporting unit was higher than its fair value.

As a result, we recorded goodwill impairment of $ 5,644,000 which left no remaining goodwill in the Retail and Wholesale Products Group reporting unit.

We also performed a quantitative impairment analysis on the Business to Business Products Group reporting unit and concluded there was excess fair value over carrying value, therefore no impairment was recorded on this reporting unit.

We will continue to consider the need to re-perform impairment testing throughout the year when circumstances such as the ultimate effects of COVID-19, unexpected adverse economic factors, inflation, unanticipated technological changes, competitive activities and acts by governments and courts indicate that goodwill may become impaired.

We have one acquired trademark recorded at a cost of $ 0.4 million that was determined to have an indefinite life and is not amortized.

We performed our goodwill impairment analysis on our Retail and Wholesale Products Group and Business to Business Products Group reporting units in the third quarter of fiscal year 2022.

As a result we identified goodwill impairment of $ 5.6 million which left no remaining goodwill in the Retail and Wholesale Products Group reporting unit and no impairment was identified for the Business to Business Products Group.

We are not aware of any triggering events in the first quarter of fiscal year 2023 that would indicate a new impairment analysis is needed.

ACCRUED EXPENSES

7 unchanged sentences

$ 28,336 $ 30,085

The decrease in salaries, wages, commissions and employee benefits relates primarily to the payment of annual bonuses during the first quarter of fiscal year 2023.

Real estate tax increased with regular accruals of property tax for various locations including plants and is offset by payments typically made in the second quarter of the fiscal year.

The increase in freight cost is primarily due to increase in fuel prices, tight truck capacity, ongoing driver shortages, and supply chain issues.

The accrual for other is higher at April 30, 2022 than July 31, 2021 due to an increase in accrual for rising natural gas costs and timing of certain plant purchases and expenses.

The accrual for other is lower at October 31, 2022 than July 31, 2022 due to a decrease in the legal accrual offset by increases in other payables due to rising costs and timing of certain purchases and expenses.

OTHER CONTINGENCIES

4 unchanged sentences

Although we believe this claim to be without merit, as of July 31, 2020, we determined a reasonable estimate of this liability within a range, with no amount within that range being a better estimate than any other amount, and therefore recorded that estimate in Other within Accrued expenses.

There have been no changes during fiscal 2021 or the nine months ended April 30, 2022 that would have changed this estimate.

There have been no changes during fiscal 2022 or the three months ended October 31, 2022 that would have changed this estimate.

We believe that any loss related to this matter is unlikely to be material.

2 unchanged sentences

The actual outcome could differ materially from management’s estimates.

Effective December 16, 2021 (the “Effective Date”), we entered into Amendment No.

1 (the “Amendment”) to the Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Agreement”) with PGIM, Inc.

On August 30, 2022, we entered into (i) the Sixth Amendment to Credit Agreement (the “Sixth Amendment”), which amends the Credit Agreement, dated as of January 27, 2006 (as previously amended, the “Credit Agreement”), among us, BMO Harris Bank N.A (“BMO”), and certain of our domestic subsidiaries;

and (ii) Amendment No.

3 (the “Third Amendment”) to our Amended and Restated Note Purchase and Private Shelf Agreement, dated as of May 15, 2020 (as previously amended, the “Note Agreement”), with PGIM, Inc.

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

The Amendment provides that, among other things, an excess leverage fee will be applied to the interest rate applicable to the outstanding daily average principal amount of Notes issued on or after December 15, 2021 as follows:

(i) an additional 0.25% in the event the Net Leverage Ratio (as defined in the Amendment) is 2.00:1.00 or greater as of the last day of any fiscal quarter, or (ii) an additional 1.00% in the event that the Net Leverage Ratio is greater than 2.50:1.00 as of the last day of any fiscal quarter.

Concurrent with entering into the Amendment, we issued $ 25,000,000 in aggregate principal amount of Series C Senior Notes (the “Series C Notes”).

The Series C Notes bear interest at an annual rate of 3.25 % (subject to the application of the excess leverage fee in the event the Net Leverage Ratio exceeds certain thresholds as described above) and will mature on December 16, 2031 .

Annual principal payments of $ 5,000,000 are due December 16 of each fiscal year beginning in 2027 and ending in 2031.

Interest is payable semi-annually beginning June 16, 2022.

The Sixth Amendment amended the Credit Agreement to, among other things:

extend the facility termination date to August 30, 2027 ;

replace the LIBOR-based reference rate with an adjusted term Secured Overnight Financing Rate (“SOFR”);

revise the method for calculating consolidated EBITDA and consolidated debt for purposes of the Credit Agreement;

modify certain restrictive covenants, including increasing the unsecured indebtedness basket from $ 50 million to $ 75 million;

and revise the existing financial covenants by replacing the consolidated debt covenant with a covenant to maintain a maximum debt to earnings ratio, lowering the minimum fixed charge coverage ratio level and revising the method for calculating the fixed charge coverage ratio.

The Third Amendment amended the Note Agreement to, among other things, modify the existing fixed charge coverage financial covenant and replace the existing consolidated debt financial covenant with a maximum debt to earnings ratio and effect certain changes consistent with the Sixth Amendment, including modifying the method for calculating consolidated EBITDA and the excess leverage fee.

We have operating leases primarily for real estate properties, including corporate headquarters, customer service and sales offices, manufacturing and packaging facilities, warehouses, and research and development facilities, as well as for rail tracks, railcars and office equipment.

2 unchanged sentences

Further information about our accounting policy for leases is included in Note 1 of the Notes to the unaudited Condensed Consolidated Financial Statements.

We have no material finance leases, and variable costs for operating leases are immaterial for the three and nine months ended April 30, 2022.

We have no material finance leases, and variable costs for operating leases are immaterial for the three months ended October 31, 2022.

Operating lease costs are included in Cost of Sales or SG&A expenses based on the nature of the lease.

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

For the Three Months Ended April 30, For the Nine Months Ended April 30,

2022 2021 2022 2021

For the Three Months Ended October 31,

Operating Lease Cost

2 unchanged sentences

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

For the Three Months Ended April 30, For the Nine Months Ended April 30,

2022 2021 2022 2021

For the Three Months Ended October 31,

Other Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 633 $ 579 $ 1,830 $ 1,748

Cash paid for amounts included in the measurement of operating lease liabilities:

Right-of-use assets obtained in exchange for new operating lease liabilities $ 23 $ 241

Operating lease ROU assets and operating lease liabilities are separately presented on the unaudited Condensed Consolidated Balance Sheet, excluding leases with an initial term of twelve months or less.

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

April 30, 2022 July 31, 2021

October 31, 2022 July 31, 2022

Weighted-average remaining lease term - operating leases 7.6 years 7.7 years

Weighted-average discount rate - operating leases 3.90 % 3.91 %

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 April 30, (in thousands):

Thereafter 4,574

7 unchanged sentences

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

On May 4, 2021, we purchased a pension annuity which settled $ 8.5 million of projected benefit obligations and recognized a settlement loss of approximately $ 0.6 million due to the annuity purchase.

On September 20, 2022, the Company's Board of Directors approved a resolution to terminate the Company's defined benefit pension plan.

The Company expects to complete the termination over a period of eighteen months.

The components of net periodic pension and postretirement health benefit costs were as follows:

1 unchanged sentence

(in thousands)

For the Three Months Ended April 30, For the Nine Months Ended April 30,

2022 2021 2022 2021

For the Three Months Ended October 31,

Interest cost $ 335 $ 268

5 unchanged sentences

(in thousands)

For the Three Months Ended April 30, For the Nine Months Ended April 30,

2022 2021 2022 2021

For the Three Months Ended October 31,

Service cost $ 22 $ 33

6 unchanged sentences

The Pension Plan is funded 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.

We were not required to make, and did no t voluntarily make, a contribution to the Pension Plan during the first nine months of fiscal year 2022.

We were not required to make, and did no t voluntarily make, a contribution to the Pension Plan during the first three months of fiscal year 2023.

We have no minimum funding requirements for the remainder of fiscal year 2023.

3 unchanged sentences

Pension Benefits Postretirement Health Benefits

For the Three and Nine Months Ended April 30,

For the Three Months Ended October 31,

2022 2021 2022 2021

4 unchanged sentences

The graded trend rate is expected to decrease to an ultimate rate of 4.90 % in fiscal year 2044 .

Supplemental Executive Retirement Plan

The Oil-Dri Corporation of America Supplemental Executive Retirement Plan (“SERP”) 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 liability was actuarially determined at the end of each fiscal year using assumptions similar to those used for the Pension Plan.

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

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

OPERATING SEGMENTS

As a result of a change in management organization during fiscal year 2022 and as part of our routine assessments of our segments, our wholly owned subsidiary located in the United Kingdom (UK) is now included in our Business to Business Products Group and our co-packaged coarse cat litter is now included in the Retail and Wholesale Products Group.

Prior year net sales and operating income have also been reclassified to reflect these changes.

The organization change was intended to better serve our customers and the segment information presented reflects the information regularly reviewed by our chief operating decision maker.

We have two operating segments:

21 unchanged sentences

Business to Business Products Group Retail and Wholesale Products Group

For the Nine Months Ended April 30,

Product 2022 2021 2022 2021

Cat Litter $ 13,353 $ 10,826 $ 132,400 $ 121,820

Industrial and Sports — — 28,528 $ 23,477

Agricultural and Horticultural 21,469 18,665 — —

Bleaching Clay and Fluids Purification 43,685 37,577 1,575 $ 1,457

Animal Health and Nutrition 14,421 13,030 — —

Net Sales $ 92,928 $ 80,098 162,503 $ 146,754

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

Business to Business Products Group Retail and Wholesale Products Group

For the Three Months Ended April 30,

For the Three Months Ended October 31,

Product 2022 2021 2022 2021

9 unchanged sentences

The asset allocation is estimated and is not a measure used by our chief operating decision maker about allocating resources to the operating segments or in assessing their performance.

April 30, 2022 July 31, 2021

October 31, 2022 July 31, 2022

(in thousands)

5 unchanged sentences

The corporate expenses line includes certain unallocated expenses, including primarily salaries, wages and benefits, purchased services, rent, utilities and depreciation and amortization associated with corporate functions such as research and development, information systems, finance, legal, human resources and customer service.

Corporate expenses also include the estimated annual incentive plan bonus accrual for employees dedicated to corporate operations.

In addition, Income from our Business to Business and Retail and Wholesale Products as well as Corporate Expenses for the three and six months ended April 30, 2021 were adjusted for an immaterial correction of an error.

Corporate expenses also include the estimated annual incentive plan bonus accrual for employees.

In addition, Income from our Business to Business and Retail and Wholesale Products as well as Corporate Expenses for the three months ended October 31, 2021 were adjusted for a change in management organization.

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

For the Nine Months Ended April 30,

For the Three Months Ended October 31,

Net Sales Income

5 unchanged sentences

Corporate Expenses ( 8,262 ) ( 6,375 )

(Loss) Income from Operations ( 1,664 ) 11,352

Total Other Income, Net 892 722

(Loss) Income before Income Taxes ( 772 ) 12,074

Income Tax Benefit (Expense) 1,195 ( 1,651 )

Income from Operations 6,569 445

Total Other (Expense) Income, Net ( 132 ) 265

Income before Income Taxes 6,437 710

Income Tax Expense ( 1,207 ) ( 115 )

Net Income 5,230 595

Net Loss Attributable to Noncontrolling Interest ( 55 ) ( 87 )

Net (Loss) Income Attributable to Noncontrolling Interest ( 11 ) 10

Net Income Attributable to Oil-Dri $ 5,241 $ 585

For the Three Months Ended April 30,

Net Sales Income

2022 2021 2022 2021

(in thousands)

Business to Business Products Group $ 31,375 $ 26,293 $ 5,716 $ 6,421

Retail and Wholesale Products Group 54,386 49,962 ( 3,113 ) 1,855

Net Sales $ 85,761 $ 76,255

Corporate Expenses ( 6,630 ) ( 6,345 )

(Loss) Income from Operations ( 4,027 ) 1,931

Total Other Income, Net 175 231

(Loss) Income before Income Taxes ( 3,852 ) 2,162

Income Tax Benefit 1,719 24

Net (Loss) Income ( 2,133 ) 2,186

Net Loss Attributable to Noncontrolling Interest ( 24 ) ( 41 )

Net (Loss) Income Attributable to Oil-Dri $ ( 2,109 ) $ 2,227

STOCK-BASED COMPENSATION

2 unchanged sentences

The total number of shares of stock subject to grants under the 2006 Plan may not exceed 1,219,500 .

As of April 30, 2022, there were 249,969 shares available for future grants under this plan.

As of October 31, 2022, there were 239,985 shares available for future grants under this plan.

Restricted Stock

All of our non-vested restricted stock as of April 30, 2022 was issued under the 2006 Plan with vesting periods generally between one and five years .

All of our non-vested restricted stock as of October 31, 2022 was issued under the 2006 Plan with vesting periods generally between one and five years .

We determined the fair value of restricted stock as of the grant date.

We recognize the related compensation expense over the period from the date of grant to the date the shares vest.

There were 15,000 and 5,000 restricted shares of Common Stock granted during the third quarter of fiscal years 2022 and 2021, respectively.

Stock-based compensation expense was $ 814,000 and $ 559,000 for the third quarter of fiscal years 2022 and 2021, respectively.

Stock-based compensation expense was $ 2,267,000 and $ 1,849,000 for the first nine months of fiscal years 2022 and 2021, respectively.

There were 40,000 and 75,000 restricted shares of Common Stock granted during the first quarter of fiscal years 2023 and 2022, respectively.

Stock-based compensation expense was $ 0.8 million and $ 0.6 million for the first quarter of fiscal years 2023 and 2022, respectively.

A summary of restricted stock transactions is shown below:

5 unchanged sentences

Forfeitures ( 4 ) $ 32.03

Non-vested restricted stock outstanding at April 30, 2022 407 $ 33.73

Non-vested restricted stock outstanding at October 31, 2022 376 $ 32.58

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table summarizes the changes in accumulated other comprehensive (loss) income by component as of April 30, 2022 (in thousands):

The following table summarizes the changes in accumulated other comprehensive (loss) income by component as of October 31, 2022 (in thousands):

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

1 unchanged sentence

Other comprehensive loss before reclassifications, net of tax — ( 385 ) ( 385 )

Amounts reclassified from accumulated other comprehensive income, net of tax 79 (a) — 79

Net current-period other comprehensive income (loss), net of tax 79 ( 187 ) ( 108 )

Balance as of April 30, 2022 $ ( 4,349 ) $ 124 $ ( 4,225 )

(a) Amount is net of tax expense of $ 24,930 .

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

See Note 10 of the Notes to the unaudited Condensed Consolidated Financial Statements for further information.

Amounts reclassified from accumulated other comprehensive income, net of tax ( 8 ) — ( 8 )

Net current-period other comprehensive loss, net of tax ( 8 ) ( 385 ) ( 393 )

Balance as of October 31, 2022 $ ( 2,250 ) $ ( 326 ) $ ( 2,576 )

RELATED PARTY TRANSACTIONS

One member of our Board of Directors (the “Board”) retired from the role of President and Chief Executive Officer of a customer of ours in September 2019 and is currently party to a post-employment agreement with the customer.

Total net sales to that customer, including sales to subsidiaries of that customer, were $ 112,000 and $ 72,000 for the third quarter of fiscal years 2022 and 2021, respectively and were $ 268,000 and $ 253,000 for the first nine months of fiscal years 2022 and 2021, respectively.

Outstanding accounts receivable from that customer, and its subsidiaries, were $ 5,000 as of April 30, 2022 and $ 4,000 as of July 31, 2021.

Total net sales to that customer, including sales to subsidiaries of that customer, were $ 55,158 and $ 75,296 for the first quarter of fiscal years 2023 and 2022 respectively.

Outstanding accounts receivable from that customer, and its subsidiaries, were $ 863 as of October 31, 2022 and $ 5,608 as of July 31, 2022.

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

Total payments to this vendor for fees and cost reimbursements were $ 64,000 and $ 72,000 for the third quarter of fiscal years 2022 and 2021, respectively and were $ 629,000 and $ 273,000 for the first nine months of fiscal years 2022 and 2021, respectively.

There were no outstanding accounts payable to that vendor as of April 30, 2022 or July 31, 2021.

SUBSEQUENT EVENTS

Effective June 3, 2022, we entered into Amendment No.

2 (the “Amendment”) to the Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Agreement”) with PGIM, Inc.

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

The Amendment, among other things, revises the definition of Consolidated EBITDA (Earnings Before Interest, Depreciation, and Amortization) within the Note Agreement.

Effective June 6, 2022, we entered into a modification (the “Modification”) to the credit agreement (the “Credit Agreement”) with BMO Harris N.A.

The Modification, among other things, revises the definition of Consolidated EBITDA and Consolidated EBITR (Earnings Before Interest, Taxes, and Rent) within the Credit Agreement.

The revised definitions of Consolidated EBITDA and consolidated EBITR are relevant to our quarterly covenant calculations based on the amended definitions noted above.

The goodwill impairment recorded in the three months ended April 30, 2022, described in Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements was excluded from the quarterly covenant calculations based on the amended definitions summarized above.

Total payments to this vendor for fees and cost reimbursements were $ 62,360 and $ 215,418 for the first quarter of fiscal years 2022 and 2021 respectively .

There were no outstanding accounts payable to that vendor as of October 31, 2022 or July 31, 2022.

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-Q

Item 1. Financial Statements