Oil-Dri Corp of America 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes included herein and our Consolidated Financial Statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed herein under "Forward-Looking Statements" and "Risk Factors," and those discussed under Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 and those discussed under Part II, Item 1A, "Risk Factors," of our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2024. OVERVIEW We develop, mine, manufacture and market sorbent products principally produced from clay minerals, primarily consisting of calcium bentonite, attapulgite and diatomaceous shale. Our principal products include agricultural and horticultural chemical carriers, animal health and nutrition products, cat litter, fluid purification and filtration bleaching clays, industrial and automotive floor absorbents and sports field products. Our products are sold to two primary customer groups, including customers who resell our products as originally produced to the end consumer and other customers who use our products as part of their production process or use them as an ingredient in their final finished product. We have two reportable operating segments based on the different characteristics of our two primary customer groups: the Retail and Wholesale Products Group ("Retail and Wholesale" or "R&W") and the Business to Business Products Group ("Business to Business" or "B2B"), as described in Note 11 of the Notes to the unaudited Condensed Consolidated Financial Statements. Each operating segment is discussed individually below. RESULTS OF OPERATIONS OVERVIEW The three and nine months ended April 30, 2024 continued to be strong with growth in our net sales and gross profit across both the Retail and Wholesale Products Group and the Business to Business Products Group. Both operating segments grew due to higher prices and favorable mix compared to the same periods in fiscal year 2023. Consolidated net sales increased $1.4 million or 1% in the third quarter and $18.3 million or 6% in the nine months ended April 30, 2024 compared to the same periods of fiscal year 2023. Gross margin grew to 28% for the three and nine months ended April 30, 2024 compared to 26% and 24% for the three and nine months ended April 30, 2023, respectively. Higher third quarter SG&A expenses resulted in a $4.0 million decrease in consolidated income from operations for the three months ended April 30, 2024 compared to the same period in fiscal 2023. However, consolidated income from operations in the first nine months of fiscal year 2024 increased by $10.4 million compared to the same period in fiscal year 2023. Consolidated net income for the three and nine months ended April 30, 2024 was $7.8 million and $30.9 million, respectively, compared to $8.5 million and $17.6 million in the three and nine months ended April 30, 2023, respectively. Our Condensed Consolidated Balance Sheet as of April 30, 2024 and our Condensed Consolidated Statement of Cash Flows for the nine months ended April 30, 2024 show an increase in total cash and cash equivalents from fiscal year-end 2023. The increase was driven by higher earnings and the issuance of a $10 million in aggregate principal amount of notes to finance a portion of the purchase price paid for the acquisition of Ultra Pet. Refer to the "Liquidity and Capital Resources" section below for more details. NINE MONTHS ENDED APRIL 30, 2024 COMPARED TO NINE MONTHS ENDED APRIL 30, 2023 CONSOLIDATED RESULTS Consolidated net sales for the nine months ended April 30, 2024 were $323.9 million, a 6% increase compared to net sales of $305.6 million for the nine months ended April 30, 2023. Net sales increased due to higher prices and improved product mix partially offset by lower volumes across both product groups. 25 Consolidated gross profit in the nine months ended April 30, 2024 was $92.1 million, an increase of $19.3 million, or 27%, from gross profit of $72.8 million in the nine months ended April 30, 2023. Our gross margin (defined as gross profit as a percentage of net sales) in the nine months ended April 30, 2024 increased to 28% from 24% in the nine months ended April 30, 2023. Our domestic cost of goods sold per ton increased 5%, driven primarily by per ton increases in non-fuel manufacturing and freight costs offset by lower per ton natural gas and packaging costs. Non-fuel manufacturing costs per ton increased 9% during the nine months ended April 30, 2024 compared to nine months ended April 30, 2023, mainly due to higher per ton costs of labor, repairs and depreciation, offset by a reduction in purchased material costs. Domestic freight costs per ton increased 8% in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023 due to a significant customer in our cat litter business that altered shipping terms in January 2023 from collect to delivered which increased our overall freight cost. Excluding the impact of this specific customer, per ton domestic freight costs would have decreased 5% in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023. Ocean freight costs have also decreased due to both lower rates and export fees. In addition, our overall freight costs can vary between periods depending on the mix of products sold and the geographic distribution of our customers. Packaging costs per ton decreased 4% in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023 due to lower commodity costs, particularly as it relates to resin and pallet costs. Many of our contracts for packaging purchases are subject to periodic price adjustments, which trail changes in underlying commodity prices. Per ton cost of natural gas decreased 34% in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023 due to a decrease in natural gas prices. Total SG&A expenses of $53.3 million for the nine months ended April 30, 2024 were higher by $8.9 million, or 20%, compared to $44.5 million for the nine months ended April 30, 2023. Corporate unallocated expenses increased $4.6 million, or 20% mainly due to higher anticipated compensation costs including increased performance-based incentives and acquisition-related expenses incurred in the current period. Additional expenses related to the integration of Ultra Pet are expected to be incurred in the fourth quarter of fiscal year 2024. The discussion of the segments' operating incomes below describes the changes in SG&A expenses that were allocated to the operating segments. Total other expenses were $1.1 million for the nine months ended April 30, 2024 compared to $6.9 million in the same period of fiscal year 2023. The decrease was mainly due to the $4.9 million loss from the termination of the Company's pension plan in the third quarter of fiscal year 2023 and the $2.5 million accrual for the landfill modification charged in the second quarter of fiscal year 2023, partially offset by higher interest income. Refer to Note 7 of the Notes to the unaudited Condensed Consolidated Financial Statements for additional details regarding the landfill modification accrual. Consolidated net income before taxes for the nine months ended April 30, 2024 was $37.7 million compared to $21.5 million for the nine months ended April 30, 2023. Results for the nine months ended April 30, 2024 were driven by the factors discussed above. We had tax expense of $6.7 million for the nine months ended April 30, 2024 compared to $3.9 million for the nine months ended April 30, 2023. Our tax expense was driven primarily by higher net income. We used an estimated annual effective tax rate ("ETR") of 18% in determining our provision for income taxes, which is based on expected annual taxable income and the assessment of various tax adjustments, including depletion. BUSINESS TO BUSINESS PRODUCTS GROUP Net sales of the Business to Business Products Group for the nine months ended April 30, 2024 were $111.6 million, an increase of $7.3 million, or 7%, from net sales of $104.3 million for the nine months ended April 30, 2023, driven by sales of our fluid purification products. Net sales of our fluids purification products increased $12.4 million, or 23%, in the nine months ended April 30, 2024 compared to the nine months ended April 30, 2023. The increase was primarily driven by new customers in the renewable diesel business in North America, as well as continued demand for our products used in the filtration of edible oil and jet-fuel, and to a lesser extent higher prices. Net sales increased in North America, our subsidiary in the UK, and the Asia region partially offset by a decrease in Latin America and the Europe, Middle East and Africa ("EMEA") regions. Net sales of our agricultural and horticultural chemical carrier products decreased $2.8 million, or 9%, for the nine months ended April 30, 2024 compared to the same period in fiscal year 2023 as a result of softer volumes offset partially by higher prices. This decline in volume was primarily due to reduced demand from a key customer that was still working through inventory from last year. Net sales of our animal health and nutrition products decreased $2.3 million, or 12%, during the nine months ended April 30, 2024 compared to the same period of fiscal year 2023. The decrease was driven by Latin America, our subsidiary in Mexico, and Asia (including China), partially offset by an increase in net sales in North America. Net sales were down in most regions due to softer demand, while North America sales increased due to higher prices when compared to the same period in fiscal year 2023. 26 SG&A expenses for the Business to Business Products Group decreased by $0.3 million, or 3%, for the nine months ended April 30, 2024 compared to the same period of the prior fiscal year. The decrease was mainly driven by a reduction in technical service support costs from the Innovation Center and Microbiology Lab. The Business to Business Products Group’s operating income for the nine months ended April 30, 2024 was $32.7 million, an increase of $7.9 million, or 32%, from operating income of $24.8 million for the nine months ended April 30, 2023. The increase in operating income was mostly driven by higher sales and favorable product mix. RETAIL AND WHOLESALE PRODUCTS GROUP Net sales of the Retail and Wholesale Products Group for the nine months ended April 30, 2024 were $212.3 million, an increase of $10.9 million, or 5%, from net sales of $201.4 million for the same period of fiscal year 2023, mainly driven by higher prices from our cat litter products. Total global cat litter net sales for the nine months ended April 30, 2024 increased $10.5 million, or 6%, compared to the nine months ended April 30, 2023, driven by higher pricing and favorable product mix. Domestic net sales increased across all products except for private label heavyweight litter. Net sales of co-packaged cat litter products increased $0.1 million, or 1%, compared to the same period in fiscal year 2023. The increase was driven by price as volumes were impacted by the cyberattack on one of our customers in the first quarter of fiscal year 2024. Net sales of cat litter by our subsidiary in Canada decreased slightly period over period, as discussed in "Foreign Operations" below. Net sales of our global industrial and sports products increased $0.4 million, or 1%, compared to the nine months ended April 30, 2023, primarily driven by increased demand of our synthetic absorbent products and higher prices of our clay-based floor absorbent products, partially offset by a decrease in volume of sports products. This was further supplemented by an increase in pricing of industrial products by our subsidiary in Canada. SG&A expenses for the Retail and Wholesale Products Group were $3.6 million, or 36%, higher during the nine months ended April 30, 2024 compared to the nine months ended April 30, 2023, primarily due to increased advertising spend and compensation related costs. We anticipate total advertising expense in fiscal year 2024 to be higher than fiscal year 2023 as we continue to focus on marketing our retail and wholesale product lines. The Retail and Wholesale Products Group's operating income for the nine months ended April 30, 2024 was $34.1 million, an increase of $7.1 million, or 26%, from operating income of $27.0 million for the same period of fiscal year 2023. This was driven primarily by the increase in gross margins due to price increases and favorable product mix, partially offset by higher cost of goods sold and elevated SG&A expenses, as discussed above. FOREIGN OPERATIONS Foreign operations include our subsidiary in Canada, which is reported in the Retail and Wholesale Products Group, and our subsidiaries in the United Kingdom ("UK"), Mexico, China and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries for the nine months ended April 30, 2024 were $16.0 million, a decrease of 5%, compared to net sales of $16.8 million during the nine months ended April 30, 2023. The decrease was driven by all of our foreign operations, with the exception of our subsidiary in the UK which experienced higher net sales when compared to the same period in fiscal year 2023. Net sales of our subsidiary in the UK increased by $0.5 million, or 29%, compared to net sales in the same period in fiscal year 2023. The increase was driven by a combination of higher demand of edible oil filtration products and price increases. Net sales of our subsidiary in China decreased $0.3 million, or 16%, in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023 due to the sell off of all existing inventory to the new master distributor, which occurred in the first quarter of fiscal year 2024. Sales to China are now directly through the Company and not through our subsidiary in China. Total net sales of our subsidiary in Canada decreased $0.1 million, or 1%, in the nine months ended April 30, 2024 compared to the same period in fiscal year 2023, driven by softer sales volumes of cat litter partially offset by higher net sales of floor absorbents due to pricing. Net sales of our subsidiary in Mexico decreased $0.9 million, or 42% in the nine months ended April 30, 2024 compared to the same period of fiscal year 2023. Net sales by our foreign subsidiaries represented 5% of our consolidated net sales for the nine months ended April 30, 2024 and 2023. Our foreign subsidiaries reported net income of $0.6 million for the nine months ended April 30, 2024, compared to $1.1 million in the nine months ended April 30, 2023. The decrease in net income was primarily driven by revenue decreases in China and Mexico partially offset by increases in net income within Canada and the UK, as discussed above. Identifiable assets of our foreign subsidiaries as of April 30, 2024, were $11.1 million, compared to $14.6 million as of July 31, 2023. 27 THREE MONTHS ENDED APRIL 30, 2024 COMPARED TO THREE MONTHS ENDED APRIL 30, 2023 CONSOLIDATED RESULTS Consolidated net sales for the third quarter of fiscal year 2024 were $106.8 million, a 1% increase compared to net sales of $105.4 million for the third quarter of fiscal year 2023. Mainly driven by product mix and pricing in our Business to Business operating segment, and to a lesser extent higher pricing in our Retail and Wholesale operating segment, partially offset by softer volumes across both products groups. Further analysis of the segment sales are discussed below. Consolidated gross profit for the third quarter of fiscal year 2024 was $30.1 million, or 28% of net sales, compared to $27.5 million, or 26% of net sales, for the third quarter of fiscal year 2023. The increase was driven by higher selling prices across multiple products and improved product mix. Domestic per ton cost of goods sold increased 3%, driven primarily by per ton increases in non-fuel manufacturing and freight costs, partially offset by a decrease in natural gas and packaging costs. Per ton non-fuel manufacturing costs rose 7% in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023, due to higher per ton costs of labor, repairs, depreciation, and purchased materials. Domestic freight costs per ton increased 2% in the third quarter of fiscal year 2024 compared to the same period of fiscal year 2023 due to mix of products sold and additional railcar usage to support our growing renewable diesel business. Ocean freight costs have decreased due to favorable rates and reduction in export fees when compared to the same period in fiscal year 2023. In general, our overall freight costs can vary between periods depending on the mix of products sold and the geographic distribution of our customers. The cost of natural gas per ton used to operate kilns that dry our clay was 2% lower in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 as fuel prices have decreased. Packaging costs per ton decreased 2% in the third quarter of fiscal year 2024 compared to the same period of fiscal year 2023 due to lower commodity costs, particularly as it relates to resin and pallet costs. Many of our contracts for packaging purchases are subject to periodic price adjustments, which trail changes in underlying commodity prices. Total selling, general and administrative expenses of $19.7 million for the third quarter of fiscal year 2024 increased by 51% compared to $13.0 million for the same period of fiscal year 2023. Unallocated corporate expenses were up by $5.0 million, or 81%, compared to the same period in fiscal year 2023 due to higher anticipated compensation costs, as well as acquisition-related expenses incurred in the current period. In addition to elevated wages and benefits, the expected annual payout percentage for our performance-based incentives increased in the third quarter resulting in higher compensation costs. Additional expenses related to the integration of Ultra Pet are expected to be incurred in the fourth quarter of fiscal year 2024. The discussion of the segments' operating incomes below describes the changes in SG&A expenses that were allocated to the operating segments. Total net other expense of $0.3 million for the third quarter of fiscal year 2024 decreased compared to $4.5 million in the same period of fiscal year 2023 mainly due to the loss in connection with the pension termination that occurred in the third quarter of fiscal year 2023. Consolidated net income before taxes for the third quarter of fiscal year 2024 was $10.1 million compared to $10.0 million for the same period of fiscal year 2023. Results for the third quarter of fiscal year 2024 were driven by the factors discussed above. Tax expense was $2.4 million for the third quarter of fiscal year 2024 compared to $1.5 million for the third quarter of fiscal year 2023. The year-over-year increase in tax expense was driven primarily by the increase in the estimated annual ETR in the third quarter and higher pre-tax income. Conversely, during the third quarter of fiscal year 2023 we decreased our annual ETR which decreased tax expense for the third quarter of fiscal year 2023. We adjust our ETR quarterly based on expected annual taxable income and our assessment of various tax adjustments. BUSINESS TO BUSINESS PRODUCTS GROUP Net sales of the Business to Business Products Group for the third quarter of fiscal year 2024 were $36.2 million, an increase of $0.8 million, or 2%, from net sales of $35.4 million for the third quarter of fiscal year 2023, driven by an increase in net sales of our fluid purification products. Net sales of our fluids purification products increased $4.6 million, or 26%, compared to the third quarter of fiscal year 2023 driven primarily by the North America region. The increase in North America was due to new customers using our products for renewable diesel filtration as well as higher demand by existing customers in edible oil and jet-fuel filtration. There was also an increase in EMEA driven by higher volume and timing of orders. The increase was partially offset by softer sales volumes in Latin America and Asia. Net sales of our agricultural and horticultural chemical carrier products decreased $2.6 million, or 24%, for the third quarter of fiscal year 2024 compared to the same period in fiscal year 2023, primarily due to softer volumes. This decline was primarily due to reduced demand from a key customer that was 28 still working through inventory from last year. Net sales of our animal health and nutrition products decreased $1.2 million, or 17%, during the third quarter of fiscal year 2024, compared to the same period in fiscal year 2023. The decrease was driven by lower demand in all regions and timing of orders to some foreign countries. Total SG&A expenses for the Business to Business Products Group in the third quarter of fiscal year 2024 decreased $0.3 million, or 7%, compared to the same period of fiscal year 2023. The reduction was mainly driven by a decrease in technical service support costs from the Innovation Center and Microbiology Lab offset by an increase in compensation-related expenses to teammates and consultants. The Business to Business Products Group’s operating income for the third quarter of fiscal year 2024 was $10.6 million, an increase of $0.8 million, or 8%, from operating income of $9.8 million for the third quarter of fiscal year 2023. The overall increase in operating income was primarily due to higher pricing and favorable product mix. RETAIL AND WHOLESALE PRODUCTS GROUP Net sales of the Retail and Wholesale Products Group for the third quarter of fiscal year 2024 were $70.6 million, an increase of $0.6 million, or 1%, from net sales of $70.0 million for the third quarter of fiscal year 2023, driven by higher prices of domestic and co-packaged cat litter product offerings. Global cat litter net sales were $0.9 million, or 2%, higher compared to the third quarter of fiscal year 2023 driven by higher prices. Domestic cat litter net sales were $51.1 million, an increase of $1.2 million driven mainly by higher prices. Higher net sales of coarse cat litter were partially offset by softer revenue from total lightweight scoopable litter. The decline in lightweight scoopable litter sales was primarily due to reduced demand from a key customer that had temporarily increased purchases last year to avoid out-of-stock items from another supplier. However, Oil-Dri achieved lightweight litter sales gains at several new and existing customers, including the growing e-commerce, dollar, farm & fleet and drug distribution channels, which partially offset these declines. Net sales of co-packaged products remained flat compared to the same period in fiscal year 2023, as higher prices offset the decrease in volume. Net sales of our global industrial and sports products were $12.4 million for third quarter of fiscal year 2024, of which $11.8 million represented domestic net sales. Domestic industrial and sports sales were down $0.4 million due to softer sales across all products except for synthetic floor absorbents, partially offset by higher prices. Net sales by our subsidiary in Canada decreased $0.3 million, as discussed below. SG&A expenses for the Retail and Wholesale Products Group increased by $1.6 million, or 51%, during the third quarter of fiscal year 2024 compared to the same period in fiscal year 2023. The increase was primarily driven by an increase in advertising spend and compensation-related expenses, partially offset by a reduction in broker commissions. We anticipate total advertising expense in fiscal year 2024 to be higher than fiscal year 2023. The Retail and Wholesale Products Group's operating income was $10.9 million for the third quarter of fiscal year 2024, an increase of $0.1 million from operating income of $10.7 million for the same period of fiscal year 2023. This was driven primarily by higher prices, partially offset by higher SG&A expenses, as discussed above. FOREIGN OPERATIONS Foreign operations include our subsidiary in Canada, which is reported in the Retail and Wholesale Products Group, and our subsidiaries in the UK, Mexico, China and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries during the third quarter of fiscal year 2024 were $4.5 million, a decrease of $1.0 million, or 19%, compared to net sales of $5.5 million during the same period of fiscal year 2023, driven primarily by decreases in net sales in China, Canada and Mexico, partially offset by an increase in net sales in the UK. Sales of our subsidiary in China were down $0.7 million as a result of transitioning to a distributor model in China rather than sales through our subsidiary. Sales to China are now sold directly through the Company and captured the Asia region, and not through our subsidiary in China. Net sales by our subsidiary in Canada decreased $0.3 million driven by lower cat litter sales, partially offset by an increase in industrial product sales when compared to the same period of fiscal year 2023. Net sales of our subsidiary in Mexico decreased during the third quarter of fiscal year 2024 compared to the same period of fiscal year 2023 by $0.2 million, or 36%, due to softer volumes. Total net sales of our subsidiary in the UK increased by $0.1 million in the third quarter of fiscal year 2024 compared to the same period in 2023 due to higher pricing. Net sales by our foreign subsidiaries represented 4% and 5% of our consolidated net sales during the third quarter of fiscal years 2024 and 2023, respectively. Our foreign subsidiaries reported net loss of $0.1 million for the third quarter of fiscal year 2024 compared to net income of $0.5 million in the third quarter of fiscal year 2023. This was driven by the decrease in sales in China, Canada and Mexico, offset by the increase in net income in the UK due to higher net sales. 29 LIQUIDITY AND CAPITAL RESOURCES Our principal liquidity needs are to fund our capital requirements, including funding working capital needs; purchasing and upgrading equipment, facilities, information systems, and real estate; supporting new product development; investing in infrastructure; repurchasing stock; paying dividends; and, from time to time, business acquisitions, and funding our debt service requirements. During the nine months ended April 30, 2024, we principally funded these short and long-term capital requirements using cash from current operations as well as cash generated from previous borrowings under our Series C Senior Notes. To meet cash requirements for the Transaction we issued $10 million in aggregate principal amount of Series D Senior Notes during the third quarter of fiscal year 2024. See Note 15 of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information relating to the cash requirements for the Transaction. We currently anticipate cash flows from operations and our available sources of liquidity will be sufficient to meet our cash requirements. In addition, we are actively monitoring the timing and collection of our accounts receivable. The following table sets forth certain elements of our unaudited Condensed Consolidated Statements of Cash Flows (in thousands): For the Nine Months Ended April 30, 2024 2023 Net cash provided by operating activities $ 36,929 $ 36,041 Net cash used in investing activities (23,536) (16,735) Net cash provided by (used in) financing activities 1,462 (5,806) Effect of exchange rate changes on cash and cash equivalents 212 (52) Net increase in cash and cash equivalents $ 15,067 $ 13,448 Net cash provided by operating activities In addition to net income, as adjusted for depreciation and amortization and other non-cash operating activities, the primary sources and uses of operating cash flows for the nine months ended April 30, 2024 were as follows: Inventory increased by $3.0 million in the nine months ended April 30, 2024 due to a combination of rising costs, specifically due to labor and repairs and the building of inventory levels for anticipated demand and to avoid any potential supply chain disruptions. Prepaid expenses increased by $3.7 million in the nine months ended April 30, 2024. The increase is mainly due to the timing of income tax and insurance payments. Accounts payable decreased by $1.0 million in the nine months ended April 30, 2024. The decrease was mainly due to the timing of payments, cost of goods and services we purchase, production volume levels and vendor payment terms. Accrued expenses decreased $3.9 million in the nine months ended April 30, 2024. The decrease was mainly due to the payout of annual bonuses and taxes, and other miscellaneous expenses which fluctuate due to timing of payments, changes in the cost of goods and services we purchase, production volume levels and vendor payment terms including freight. Net cash used in investing activities Cash used in investing activities of $23.5 million in the nine months ended April 30, 2024 was driven by capital expenditures. During the nine months ended April 30, 2024 we expanded our plant equipment and improved our facilities to support increased demand for our products. 30 Net cash used in financing activities Cash provided by financing activities of $1.5 million in the nine months ended April 30, 2024 was primarily driven by the issuance of a $10 million note offset by cash used for dividend payments and treasury stock repurchases. Other Total cash balances held by our foreign subsidiaries of $5.0 million as of April 30, 2024 decreased compared to $5.2 million as of July 31, 2023. See further discussion in "Foreign Operations" above. As of April 30, 2024, we had remaining authority to repurchase 380,753 shares of Common Stock and 262,092 shares of Class B Stock under a repurchase plan approved by our Board. Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing, number and manner of share repurchases will be determined by our management pursuant to the repurchase plan approved by our Board. We believe that cash flow from operations, availability under our Note Agreement and revolving credit facility under our Credit Agreement, current cash balances and our ability to obtain other financing, if necessary, will provide sufficient liquidity for foreseeable working capital needs, capital expenditures at existing facilities, deferred compensation payouts, dividend payments and debt service obligations for at least the next 12 months. See Note 8 of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. We expect capital expenditures in fiscal year 2024 to be greater than in fiscal year 2023. We do not believe that these increased capital expenditures will dramatically impact our cash position; however, our cash requirements are subject to change as business conditions warrant and opportunities arise. We continually evaluate our liquidity position and anticipated cash needs, as well as the financing options available to obtain additional cash reserves. Our ability to fund operations, to make planned capital expenditures, to make scheduled debt payments and to remain in compliance with all financial covenants under debt agreements, including, but not limited to, the Credit Agreement, depends on our future operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors. The timing and size of any new business ventures or acquisitions that we complete may also impact our cash requirements. CRITICAL ACCOUNTING POLICIES AND ESTIMATES This discussion and analysis of financial condition and results of operations is based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP for interim financial information and in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Estimates and assumptions are revised periodically. Actual results could differ from these estimates. See the information concerning our critical accounting policies included under "Management’s Discussion of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023.