What changed in this filing

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Item 1. Financial Statements

2023-12-11 compared with 2023-06-08 · 153 added, 268 removed, 370 unchanged (53% of the section changed)

3 unchanged sentences

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

ASSETS April 30,

ASSETS October 31,

2023 July 31,

2 unchanged sentences

Accounts receivable, net allowances of

$ 1,071 and $ 922 at April 30, 2023 and July 31, 2022, respectively

$ 1,115 and $ 1,087 at October 31, 2023 and July 31, 2023, respectively

60,663 59,287

Inventories, net 43,832 42,612

Prepaid repairs 8,470 7,474

Prepaid expenses and other assets 2,202 3,664

Prepaid expenses 2,692 2,854

Total Current Assets 136,766 136,507

5 unchanged sentences

Trademarks and patents, net of accumulated amortization

of $ 570 and $ 524 at April 30, 2023 and July 31, 2022, respectively

of $ 581 and $ 578 at October 31, 2023 and July 31, 2023, respectively

Customer list, net of accumulated amortization

of $ 7,724 and $ 7,608 at April 30, 2023 and July 31, 2022, respectively

of $ 7,785 and $ 7,763 at October 31, 2023 and July 31, 2023, respectively

Deferred income taxes 7,028 7,201

7 unchanged sentences

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

LIABILITIES & STOCKHOLDERS’ EQUITY April 30,

LIABILITIES & STOCKHOLDERS’ EQUITY October 31,

2023 July 31,

8 unchanged sentences

Notes payable, net of unamortized debt issuance costs

of $ 182 and $ 202 at April 30, 2023 and July 31, 2022, respectively

of $ 158 and $ 173 at October 31, 2023 and July 31, 2023, respectively

30,842 30,827

Deferred compensation 5,024 4,512

Pension and postretirement benefits 2,164 798

Long-term operating lease liabilities 8,345 8,810

3 unchanged sentences

Stockholders’ Equity

Common Stock, par value $ .10 per share, issued 8,745,523 shares at April 30, 2023

Common Stock, par value $ .10 per share, issued 8,807,223 shares at October 31, 2023

and 8,750,223 shares at July 31, 2023

Class B Stock, par value $ .10 per share, issued 2,397,056 shares at April 30, 2023

Class B Stock, par value $ .10 per share, issued 2,522,056 shares at October 31, 2023

and 2,397,056 shares at July 31, 2023

1 unchanged sentence

Retained earnings 209,585 200,796

Noncontrolling interest ( 437 ) ( 369 )

Accumulated Other Comprehensive Loss:

Pension and postretirement obligation (benefit) 705 ( 2,242 )

Cumulative translation adjustment ( 221 ) 59

Total Accumulated Other Comprehensive Income (Loss) 484 ( 2,183 )

Accumulated other comprehensive income 563 748

Less Treasury Stock, at cost ( 3,674,818 Common and 351,641 Class B shares at

April 30, 2023 and 3,609,938 Common and 351,641 Class B shares at July 31, 2022)

October 31, 2023 and 3,658,989 Common and 351,641 Class B shares at July 31, 2023)

( 82,111 ) ( 81,207 )

4 unchanged sentences

Condensed Consolidated Statements of Operations

(in thousands, except for per share amounts)

For the Nine Months Ended April 30,

(in thousands, except for per share amounts) For the Three Months Ended October 31,

Net Sales $ 111,438 $ 98,539

2 unchanged sentences

Selling, General and Administrative Expenses ( 17,835 ) ( 15,741 )

Loss on Impairment of Goodwill — ( 5,644 )

Income (Loss) from Operations 28,331 ( 1,664 )

Income from Operations 13,156 6,569

Other (Expense) Income

1 unchanged sentence

Interest income 175 56

Loss on pension termination ( 4,858 ) —

Other, net ( 140 ) 176

Total Other (Expense) Income, Net ( 6,874 ) 892

Income (Loss) Before Income Taxes 21,457 ( 772 )

Income Tax (Expense) Benefit ( 3,893 ) 1,195

Total Other Expense, Net ( 326 ) ( 132 )

Income Before Income Taxes 12,830 6,437

Income Tax Expense ( 2,088 ) ( 1,207 )

Net Income 10,742 5,230

17 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

For the Nine Months Ended April 30,

(in thousands) For the Three Months Ended October 31,

Net Income Attributable to Oil-Dri $ 10,742 $ 5,241

Other Comprehensive Income (Loss):

Other Comprehensive Loss:

Pension and postretirement benefits (net of tax) ( 19 ) ( 8 )

Cumulative translation adjustment ( 166 ) ( 385 )

Other Comprehensive Income (Loss) 2,667 ( 108 )

Other Comprehensive Loss ( 185 ) ( 393 )

Total Comprehensive Income $ 10,557 $ 4,848

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 $ 105,425 $ 85,761

Cost of Goods Sold ( 77,958 ) ( 70,131 )

Gross Profit 27,467 15,630

Selling, General and Administrative Expenses ( 13,011 ) ( 14,013 )

Loss on Impairment of Goodwill — ( 5,644 )

Income (Loss) from Operations 14,456 ( 4,027 )

Other (Expense) Income

Interest expense ( 363 ) ( 378 )

Interest income 97 9

Loss on pension termination ( 4,858 ) —

Other, net 649 544

Total Other (Expense) Income, Net ( 4,475 ) 175

Income (Loss) Before Income Taxes 9,981 ( 3,852 )

Income Tax (Expense) Benefit ( 1,493 ) 1,719

Net Income (Loss) 8,488 ( 2,133 )

Net Loss Attributable to Noncontrolling Interest ( 47 ) ( 24 )

Net Income (Loss) Attributable to Oil-Dri $ 8,535 $ ( 2,109 )

Net Income (Loss) Per Share

Basic Common $ 1.28 $ ( 0.32 )

Basic Class B Common $ 0.96 $ ( 0.24 )

Diluted Common $ 1.24 $ ( 0.32 )

Diluted Class B Common $ 0.95 $ ( 0.24 )

Average Shares Outstanding

Basic Common 4,838 4,932

Basic Class B Common 1,964 1,939

Diluted Common 5,003 4,932

Diluted Class B Common 1,999 1,939

Dividends Declared Per Share

Basic Common $ 0.2800 $ 0.2700

Basic Class B Common $ 0.2100 $ 0.2025

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 Income (Loss) Attributable to Oil-Dri $ 8,535 $ ( 2,109 )

Other Comprehensive Income (Loss):

Pension and postretirement benefits (net of tax) 2,960 26

Cumulative translation adjustment ( 151 ) ( 93 )

Other Comprehensive Income (Loss) 2,809 ( 67 )

Total Comprehensive Income (Loss) $ 11,344 $ ( 2,176 )

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

OIL-DRI CORPORATION OF AMERICA

Consolidated Statements of Stockholders' Equity

For the Three Months Ended October 31

(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, 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

Balance, January 31, 2023 11,141,279 ( 3,976,318 ) $ 1,114 $ 54,328 $ 184,133 $ ( 79,886 ) $ ( 2,325 ) $ ( 390 ) $ 156,974

Net Income (Loss) — — — — 8,535 — — ( 47 ) 8,488

Other Comprehensive Income — — — — — — 2,809 — 2,809

Dividends Declared — — — — ( 1,868 ) — — — ( 1,868 )

Purchases of Treasury Stock — — — — — — — — —

Net issuance of stock under long-term incentive plans 1,300 ( 16,750 ) — 468 — ( 468 ) — — —

Amortization of Restricted Stock — — — 692 — — — — 692

Balance, April 30, 2023 11,142,579 ( 3,993,068 ) $ 1,114 $ 55,488 $ 190,800 $ ( 80,354 ) $ 484 $ ( 437 ) $ 167,095

For the Nine Months Ended April 30

Number of Shares

Common & Class B Stock Treasury Stock Common & Class B Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders' Equity

6 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

Balance, July 31, 2023 11,147,279 ( 4,010,630 ) $ 1,115 $ 55,624 $ 200,796 $ ( 81,207 ) $ 748 $ — $ 177,076

5 unchanged sentences

Amortization of Restricted Stock — — — 1,108 — — — — 1,108

Balance, April 30, 2023 11,142,579 ( 3,993,068 ) $ 1,114 $ 55,488 $ 190,800 $ ( 80,354 ) $ 484 $ ( 437 ) $ 167,095

Balance, October 31, 2023 11,329,279 ( 4,026,459 ) $ 1,133 $ 56,746 $ 209,585 $ ( 82,111 ) $ 563 $ — $ 185,916

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

(in thousands)

For the Nine Months Ended April 30,

(in thousands) For the Three Months Ended October 31,

CASH FLOWS FROM OPERATING ACTIVITIES 2023 2022

3 unchanged sentences

Non-cash stock-based compensation 1,108 794

Loss on pension termination 4,858 —

Deferred income taxes 174 168

Provision for bad debts and cash discounts 28 55

Impairment of patents 61 323

Impairment of Goodwill — 5,644

Loss on Impairment of Fixed Assets 810 —

Accretion of Asset Retirement Obligation 53 40

Loss on the disposals of property, plant and equipment 26 54

8 unchanged sentences

Deferred compensation 512 ( 400 )

Pension and postretirement benefits ( 981 ) ( 924 )

Other liabilities ( 427 ) ( 581 )

3 unchanged sentences

Capital expenditures ( 8,064 ) ( 6,737 )

Proceeds from sale of property, plant and equipment 10 —

Net Cash Used in Investing Activities ( 8,064 ) ( 6,737 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of notes payable — 25,000

Payment of debt issuance costs ( 7 ) ( 114 )

Dividends paid ( 1,927 ) ( 1,851 )

Purchases of treasury stock ( 872 ) ( 92 )

Net Cash (Used in) Provided by Financing Activities ( 5,806 ) 8,807

Net Cash Used in Financing Activities ( 2,799 ) ( 1,943 )

Effect of exchange rate changes on Cash and Cash Equivalents 124 38

Net Increase (Decrease) in Cash and Cash Equivalents 13,448 ( 1,766 )

Net Decrease in Cash and Cash Equivalents ( 2,175 ) ( 5,828 )

Cash and Cash Equivalents, Beginning of Period 31,754 16,298

Cash and Cash Equivalents, End of Period $ 29,579 $ 10,470

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

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Cash Flows - Continued

(in thousands)

For the Nine Months Ended April 30,

(in thousands) For the Three Months Ended October 31,

Supplemental disclosures:

Interest payments, net of amounts capitalized $ 569 $ 178

Income tax payments $ 2,284 $ 219

Other cash flows:

Income tax payments (refunds) 12 ( 87 )

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, 2023 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, 2023.

Operating results for the three months ended October 31, 2023 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, 2024.

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

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

Management Use of Estimates

4 unchanged sentences

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

7 unchanged sentences

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

Overburden Removal and Mining Costs.

We mine sorbent materials on property that we either own or lease as part of our overall operations.

Property, Plant and Equipment.

Property, plant and equipment includes depreciable assets such as building, machinery, equipment, furniture, and vehicles.

These assets are depreciated using the straight-line method over their estimated useful lives.

Major improvements are capitalized, while maintenance and repairs that do not extend the useful life of the applicable assets are expensed as incurred.

Interest expense may also be capitalized for assets that require a period of time to get them ready for their intended use.

These assets 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.

We take into consideration idle and underutilized equipment and review business plans for possible impairment.

When impairment is indicated, an impairment charge is recorded for the difference between the carrying value of the asset and its fair market value.

Capital parts are long-lived spare parts that are recorded net of a valuation reserve based on aging.

The capital parts reserve was $ 1.7 million as of October 31, 2023 and $ 2.0 million as of July 31, 2023.

Land, Mining Property and Mineral Rights.

We surface mine sorbent materials on property that we either own or lease as part of our overall operations.

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

33 unchanged sentences

We have completed our performance obligation when control is transferred and we recognize revenue accordingly.

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

Taxes collected from

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

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.

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

performance obligation.

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

We recorded a liability for these advance payments of $ 0.3 million and $ 0.5 million as of April 30, 2023 and July 31, 2022, respectively.

We recorded a

liability for these advance payments of $ 0.1 million as of October 31, 2023, and no liability as of July 31, 2023.

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, 2023 that was included in the liability for advance payments at the beginning of the period was $ 0.1 million.

There was no revenue recognized during the three months ended October 31, 2023, that was included in the liability for advance payments at the beginning of the period.

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.

6 unchanged sentences

Other Current and Noncurrent Liabilities.

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

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

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

Included in current liabilities within Accrued Expenses on the unaudited Condensed Consolidated Balance Sheet is $ 2.5 million for the Georgia landfill modification reserve which began in the third quarter of fiscal year 2023.

Refer to Note 7 for further details.

Included in Other noncurrent liabilities on the unaudited Condensed Consolidated Balance Sheet is $ 4.5 million for the reclamation liability and $ 1.8 million for postretirement health benefits as of October 31, 2023.

Earnings Per Share.

We utilize the two-class method to report our earnings per share ("EPS").

The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings.

Common Stock is entitled to cash dividends equal to at least 133.33 % on a per share basis of the cash dividend paid on Class B Stock.

In computing earnings per share, the Company has allocated dividends declared to Common and Class B shares based on amounts actually declared for each class of stock and 33.33 % more of the undistributed earnings have been allocated to Common Stock than to the Class B shares on a per share basis.

Common Stock is entitled to one vote per share and Class B Stock is entitled to ten votes per share.

Common Stock have no conversion rights.

Class B Stock is convertible on a share-by-share basis into Common Stock at any time and is subject to mandatory conversion under certain circumstances.

Basic EPS is computed by dividing net earnings, reduced for any distributed and undistributed earnings allocated to unvested restricted shares, by the weighted-average number of shares outstanding during the period for each class of share.

Diluted EPS, for each class of common stock, is computed by dividing net earnings by the weighted-average number of common shares and potential common shares outstanding during the period.

Dilution for common stock takes into consideration the effect of both unvested restricted shares and convertible Class B shares, if the effect is dilutive.

Dilution for Class B takes into consideration the effect of unvested restricted shares, if the effect is dilutive.

Below is a reconciliation of the calculation of basic and diluted EPS.

For the Three Months Ended October 31, 2023

(in thousands, except for per share data)

Total Common Class B

Net income $ 10,742 $ 8,236 $ 2,506

Distributed and undistributed earnings on restricted shares ( 570 ) ( 453 ) ( 117 )

Income available to stockholders $ 10,172 $ 7,783 $ 2,389

Net Income (Numerator) $ 7,783 $ 2,389

Weighted Average Shares Outstanding (Denominator) 4,827 1,967

Basic EPS $ 1.61 $ 1.21

Effect of dilution - Net Income (1)

Net income assuming dilution (Numerator) $ 10,172 $ 2,389

Effect of dilution - Shares (1)

Shares assuming dilution (Denominator) 6,794 $ 1,967

Diluted EPS $ 1.50 $ 1.21

(1) The impact of unvested restricted stock was anti-dilutive therefore not included in the calculation of diluted EPS

NEW ACCOUNTING PRONOUNCEMENTS AND REGULATIONS

Recently Adopted Accounting Pronouncements

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

This guidance provides optional expedients and exceptions to account for debt, leases, contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met.

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.

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.

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

The composition of inventories is as follows (in thousands):

2 unchanged sentences

Packaging 7,434 8,007

Spare parts, net 6,379 5,981

Other 6,285 6,681

2 unchanged sentences

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

The inventory obsolescence reserve was $ 0.8 million at both April 30, 2023 and July 31, 2022, respectively.

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

Included in Other is the inventory obsolescence reserve of $ 0.7 million as of October 31, 2023, and $ 0.8 million as of July 31, 2023.

Spare parts in inventory are recorded net of a valuation reserve based on aging.

The spare parts reserve was $ 3.0 million as of October 31, 2023, and $ 2.9 million as of July 31, 2023.

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, 2023 and July 31, 2022.

Balances of accounts receivable and accounts payable approximated their fair values at April 30, 2023 and July 31, 2022 due to the short maturity and nature of those balances.

We had $ 15.4 million cash equivalents as of October 31, 2023 and July 31, 2023.

Balances of accounts receivable and accounts payable approximated their fair values at October 31, 2023 and July 31, 2023 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 $ 31.5 million and $ 31.8 million as of April 30, 2023 and July 31, 2022, respectively, and are classified as Level 2.

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

The estimated fair value of notes payable, including current maturities, was $ 29.0 million and $ 29.7 million as of October 31, 2023 and July 31, 2023, respectively, and are classified as Level 2.

The fair value was estimated using the exit price notion by discounting future cash flows based on an observable market rate.

We apply fair value techniques on at least an annual basis associated with:

2 unchanged sentences

GOODWILL AND OTHER INTANGIBLE ASSETS

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

Intangible amortization expense was $ 66 thousand and $ 116 thousand in the third quarter of fiscal years 2023 and 2022, respectively.

Intangible amortization expense was $ 200 thousand and $ 369 thousand in the first nine months of fiscal years 2023 and 2022, respectively.

Estimated intangible amortization for the remainder of fiscal year 2023 is $ 65 thousand.

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

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

Estimated intangible amortization for fiscal year 2024 is $ 0.1 million.

Estimated intangible amortization for each of the next five fiscal years is $ 0.1 million.

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.

There have been no triggering events in fiscal year 2023 that would indicate a new impairment analysis is needed.

There have been no triggering events in fiscal years 2024 or 2023 that would indicate a new impairment analysis is needed.

ACCRUED EXPENSES

4 unchanged sentences

Georgia Landfill Modification Reserve 2,469 2,469

Income Tax 2,359 521

Trade Promotions and Advertising 2,352 2,292

2 unchanged sentences

$ 32,613 $ 36,868

The increase in salaries, wages, commissions and employee benefits relates primarily to higher compensation expenses and annual bonus accrual for the first nine months of fiscal year 2023.

The decrease in freight cost is primarily due to decreased fuel prices and the timing of charges for international ocean freight.

Refer to Note 7 for details of the Georgia landfill modification reserve recorded in the second quarter of fiscal year 2023.

Trade promotions and advertising accruals have increased with marketing spend due to timing.

Real estate tax decreased due to the timing of payments which typically occur in the second quarter of the fiscal year.

Other is higher at April 30, 2023 compared to July 31, 2022 due to an increase in accruals for income taxes, interest expense, and other contingencies offset by a reduction in other accrued expenses due to timing of purchases.

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.

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

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 2022 or the nine months ended April 30, 2023, that would have changed this estimate.

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

However, the outcome of this legal matter is subject to significant uncertainties.

The ability to predict the ultimate outcome of this legal matter involves judgments, estimates and inherent uncertainties.

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

In the second quarter of fiscal year 2023, we recorded a reserve of $ 2.5 million for anticipated modification costs that we expect to incur to address capacity issues at our sole landfill located in Ochlocknee, Georgia.

1 unchanged sentence

The amount of the reserve represents management’s best estimate of the costs for the modification with respect to this matter.

There have been no changes to the reserve estimate in the third quarter of fiscal year 2023.

There have been no changes to the reserve estimate in the first quarter of fiscal year 2024.

Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards, and emerging technologies for handling site modification.

Consequently, it is reasonably possible that modification costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows.

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 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 are party to an Amended and Restated Note Purchase and Private Shelf Agreement (as amended, the "Note Agreement") with PGIM, Inc.

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

Pursuant to the Note Agreement on May 15, 2021 we issued $ 10 million in aggregate principal amount of our 3.95 % Series B Senior Notes due May 15, 2030 , of which $ 7 million aggregate principal amount remained outstanding as of October 31, 2023.

On December 16, 2021 , under the Note Agreement we issued an additional $ 25 million in aggregate principal amount of our 3.25 % Series C Senior Notes due December 16, 2031 , all of which remained outstanding as of October 31, 2023.

The Amended Note Agreement also provides us with the ability to request, from time to time, that Prudential affiliate(s) purchase, at Prudential’s discretion and on an uncommitted basis, additional senior unsecured notes of Oil-Dri (the “Shelf Notes,” and collectively with the Series A Notes, Series B Notes, and Series C Notes, the “Notes”) in an aggregate principal amount of up to $ 75 million minus the aggregate principal amount of Notes then outstanding and Shelf Notes that have been accepted for purchase.

Interest payable on any Shelf Note agreed to be purchased under the Note Agreement will be at a rate determined by Prudential and will mature no more than fifteen years after the date of original issue of such Shelf Note.

On August 30, 2022, we entered into Amendment No.

3 (the "Third Amendment") to the Note Agreement.

The Third Amendment modified the existing fixed charge coverage financial covenant and replaced the existing consolidated debt financial covenant with a maximum debt to earnings ratio and effected certain changes consistent with the Sixth Amendment to the Credit Agreement (defined below), including modifying the method for calculating consolidated EBITDA and the excess leverage fee.

On September 21, 2023, the Company entered into Amendment No.

4 (the “Fourth Amendment”) to the Note Agreement.

The Fourth Amendment extended the time frame for issuing and selling Shelf Notes to September 21, 2026 .

We are party to 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.

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

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.

On August 30, 2022, we entered into the Sixth Amendment to the Credit Agreement (the "Sixth Amendment").

The Sixth Amendment extended the facility termination date to August 30, 2027 ;

replaced the LIBOR-based reference rate with an adjusted term Secured Overnight Financing Rate ("SOFR");

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

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

and revised 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.

As of October 31, 2023, and July 31, 2023, we were in compliance with the covenants.

There were no borrowings during the first quarter of fiscal year 2024.

However, we had $ 1.0 million of letters of credit outstanding as of October 31, 2023 and July 31, 2023 under this agreement.

The Credit Agreement states that we may select a variable interest rate based on either the BMO Harris prime rate or an adjusted SOFR-based rate, plus a margin that varies depending on our debt to earnings ratio, or a fixed rate as agreed between us and BMO Harris.

As of October 31, 2023, the variable rates would have been 8.50 % for the BMO Harris prime-based rate or 5.38 % for the adjusted SOFR-based rate.

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, 2023.

We have no material finance leases, and variable costs for operating leases are immaterial for the three months ended October 31, 2023.

Operating lease costs are included in Cost of Goods Sold 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,

2023 2022 2023 2022

For the Three Months Ended October 31,

Operating Lease Cost

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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,

2023 2022 2023 2022

For the Three Months Ended October 31,

Other Information

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

$ 592 $ 633 $ 1,772 $ 1,830

Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ 21

1 unchanged sentence

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

April 30, 2023 July 31, 2022

October 31, 2023 July 31, 2023

Weighted-average remaining lease term - operating leases 7.1 years 7.7 years

Weighted-average discount rate - operating leases 4.19 % 4.03 %

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, 2023, (in thousands):

Thereafter 3,825

2 unchanged sentences

PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension and Postretirement Health Benefits

The Oil-Dri Corporation of America Pension Plan ("Pension Plan") was a defined benefit pension plan for eligible salaried and hourly employees.

3 unchanged sentences

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

On April 20, 2023, Oil-Dri settled $ 14 million of the pension obligation through the purchase of an annuity.

The remaining $ 16 million of the pension obligation was settled on April 28, 2023, via lump-sum payments.

All pension assets were remeasured immediately before settlement resulting in a net surplus amount of $ 3.6 million and net unrealized loss of $ 2.0 million included in accumulated other comprehensive income.

Upon settlement of the pension obligations Oil-Dri recognized through net income all unrealized losses resulting in a $ 2.0 million reduction to net income included in "Loss on pension termination" within "Other Income (Expense), Net".

On April 27, 2023, the Executive Committee of the Company's Board of Directors approved the distribution of the surplus to a qualified defined contribution retirement fund.

A portion of the surplus to be distributed to pension participants was irrevocably distributed to the 401(k) plan on April 28, 2023, which resulted in an additional $ 2.8 million charge to net income included in "Loss on pension termination" within "Other Income (Expense), Net".

The remaining $ 0.8 million to be held by the 401(k) plan to cover qualified future plan expenses was recognized as a prepaid asset.

The pension obligations were fully settled in April 2023.

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.

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(in thousands)

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

2023 2022 2023 2022

For the Three Months Ended October 31,

Interest cost $ — $ 335

2 unchanged sentences

Other actuarial loss — 9

Loss on pension termination $ 4,858 $ — $ 4,858 $ —

Net periodic benefit cost $ — $ ( 214 )

1 unchanged sentence

(in thousands)

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

2023 2022 2023 2022

For the Three Months Ended October 31,

Service cost $ 19 $ 22

5 unchanged sentences

The non-service cost components of net periodic benefit cost are included in Other Income (Expense) in the line item Other, net on the unaudited Condensed Consolidated Statements of Income.

Assumptions used in the previous calculations were as follows:

Pension Benefits Postretirement Health Benefits

For the Three and Nine Months Ended April 30,

2023 2022 2023 2022

Discount rate for net periodic benefit cost 4.05 % 2.57 % 3.82 % 2.10 %

Rate of increase in compensation levels — % — % — % — %

Long-term expected rate of return on assets 6.50 % 6.50 % — % — %

The discount rate for the net periodic benefit cost used in the calculation of the postretirement health benefits was 4.90 % and 3.82 % for the three months ended October 31, 2023, and 2022, respectively.

The medical cost trend assumption for postretirement health benefits was 8.20 %.

1 unchanged sentence

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:

(1) Business to Business Products Group and (2) Retail and Wholesale Products Group.

(1) Retail and Wholesale Products Group and (2) Business to Business Products Group.

These operating segments are managed separately and each segment's major customers have different characteristics.

The Retail and Wholesale Products Group customers include:

mass merchandisers;

wholesale clubs;

drugstore chains;

pet specialty retail outlets;

dollar stores;

retail grocery stores;

e-commerce retailers;

distributors of industrial cleanup and automotive products;

environmental service companies;

and sports field product users;

and marketers of consumer products.

The Retail and Wholesale Products Group customers include mass merchandisers, the farm and fleet channel, drugstore chains, pet specialty retail outlets, dollar stores, retail grocery stores, distributors of industrial cleanup and automotive products, environmental service companies, sports field product users and marketers of consumer products.

The Business to Business Products Group customers include:

processors and refiners of edible oils, petroleum-based oils and biodiesel fuel;

processors and refiners of edible oils, renewable diesel, petroleum-based oils and biodiesel fuel;

manufacturers of animal feed and agricultural chemicals;

4 unchanged sentences

Business to Business Products Group Retail and Wholesale Products Group

For the Nine Months Ended April 30,

Product 2023 2022 2023 2022

Cat Litter $ — $ — $ 167,841 $ 145,753

Industrial and Sports — — 33,539 $ 28,528

Agricultural and Horticultural 30,507 21,469 — —

Bleaching Clay and Fluids Purification 55,012 45,260 — $ —

Animal Health and Nutrition 18,734 14,421 — —

Net Sales $ 104,253 $ 81,150 201,380 $ 174,281

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 2023 2022 2023 2022

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The unallocated asset category is the remainder of our total assets.

We have refined the basis of allocation for certain of our assets as of April 30, 2023 and we have restated the allocation of assets as of July 31, 2022 presented below to enhance comparability.

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, 2023 July 31, 2022

October 31, 2023 July 31, 2023

(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 information systems, finance, legal, human resources and customer service.

For the Nine Months Ended April 30,

For the Three Months Ended October 31,

Net Sales Income

5 unchanged sentences

Corporate Expenses ( 9,298 ) ( 8,262 )

Income (Loss) from Operations 28,331 ( 1,664 )

Total Other (Expense) Income, Net ( 6,874 ) 892

Income (Loss) before Income Taxes 21,457 ( 772 )

Income Tax (Expense) Benefit ( 3,893 ) 1,195

Income from Operations 13,156 6,569

Total Other Expenses, Net ( 326 ) ( 132 )

Income before Income Taxes 12,830 6,437

Income Tax Expense ( 2,088 ) ( 1,207 )

Net Income 10,742 5,230

1 unchanged sentence

Net Income Attributable to Oil-Dri $ 10,742 $ 5,241

For the Three Months Ended April 30,

Net Sales Income

2023 2022 2023 2022

(in thousands)

Business to Business Products Group $ 35,412 $ 27,888 $ 9,803 $ 4,952

Retail and Wholesale Products Group 70,013 57,873 10,744 ( 2,349 )

Net Sales $ 105,425 $ 85,761

Corporate Expenses ( 6,091 ) ( 6,630 )

Income (Loss) from Operations 14,456 ( 4,027 )

Total Other (Expense) Income, Net ( 4,475 ) 175

Income (Loss) before Income Taxes 9,981 ( 3,852 )

Income Tax (Expense) Benefit ( 1,493 ) 1,719

Net Income (Loss) 8,488 ( 2,133 )

Net Loss Attributable to Noncontrolling Interest ( 47 ) ( 24 )

Net Income (Loss) Attributable to Oil-Dri $ 8,535 $ ( 2,109 )

STOCK-BASED COMPENSATION

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

As of April 30, 2023, there were 245,209 shares available for future grants under this plan.

As of October 31, 2023, there were 120,805 Common Stock or Class B shares available for future grants under this plan.

Restricted Stock

All of our non-vested restricted stock as of April 30, 2023 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, 2023 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 59 thousand and 122 thousand restricted shares of Common Stock granted during the third quarter of fiscal years 2023 and 2022, respectively.

Stock-based compensation was $ 0.7 million and $ 0.8 million for the third quarter of fiscal years 2023 and 2022, respectively.

Stock-based compensation expense was $ 2.3 million for the first nine months of both fiscal years 2023 and 2022, respectively.

There were 57 thousand and 40 thousand restricted shares of Common Stock granted during the first quarter of fiscal years 2024 and 2023, respectively.

There were 125 thousand restricted shares of Class B shares granted during the first quarter of fiscal year 2024 and none in fiscal year 2023.

Stock-based compensation was $ 0.8 million for the first quarter of fiscal years 2024 and 2023, respectively.

A summary of restricted stock transactions is shown below:

5 unchanged sentences

Forfeitures ( 1 ) $ 64.00

Non-vested restricted stock outstanding at April 30, 2023 348 $ 32.83

Non-vested restricted stock outstanding at October 31, 2023 472 $ 43.75

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table summarizes the changes in accumulated other comprehensive (loss) income by component as of April 30, 2023 (in thousands):

The following table summarizes the changes in accumulated other comprehensive (loss) income by component as of October 31, 2023 (in thousands):

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

2 unchanged sentences

Amounts reclassified from accumulated other comprehensive income, net of tax ( 19 ) — ( 19 )

Net current-period other comprehensive income (loss), net of tax 2,947 ( 280 ) 2,667

Balance as of April 30, 2023 $ 705 $ ( 221 ) $ 484

Net current-period other comprehensive loss, net of tax ( 19 ) ( 166 ) ( 185 )

Balance as of October 31, 2023 $ 993 $ ( 430 ) $ 563

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 $ 56 thousand and $ 111 thousand for the third quarter of fiscal years 2023 and 2022, respectively, and were $ 183 thousand and $ 268 thousand for the first nine months of fiscal years 2023 and 2022, respectively.

Outstanding accounts receivable from that customer, and its subsidiaries, were $ 6 thousand as of both April 30, 2023, and 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 $ 30 thousand and $ 64 thousand for the third quarter of fiscal years 2023 and 2022, respectively, and were $ 143 thousand and $ 629 thousand for the first nine months of fiscal years 2023 and 2022, respectively.

There were no outstanding accounts payable to that vendor as of April 30, 2023, or July 31, 2022.

Total payments to this vendor for fees and cost reimbursements were $ 0.1 million for the first three months of fiscal years 2024 and 2023.

There were no outstanding accounts payable to that vendor as of October 31, 2023, or July 31, 2023.

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