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, 2024. 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, 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, fluids 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") and the Business to Business Products Group ("Business to Business"), as described in Note 10 of the Notes to the unaudited Condensed Consolidated Financial Statements. Each operating segment is discussed individually below. RESULTS OF OPERATIONS OVERVIEW For the Nine Months Ended April 30, For the Three Months Ended April 30, (in thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change Consolidated Results Net Sales $ 360,360 $ 323,885 $ 36,475 11% $ 115,501 $ 106,779 $ 8,722 8% Gross Profit $ 108,250 $ 92,070 $ 16,180 18% $ 33,022 $ 30,137 $ 2,885 10% Operating Income $ 52,576 $ 38,753 $ 13,823 36% $ 13,904 $ 10,432 $ 3,472 33% Net income $ 40,941 $ 30,901 $ 10,040 32% $ 11,644 $ 7,777 $ 3,867 50% Business to Business Net Sales $ 134,509 $ 111,591 $ 22,918 21% $ 42,678 $ 36,196 $ 6,482 18% Operating Income $ 44,814 $ 32,713 $ 12,101 37% $ 13,382 $ 10,605 $ 2,777 26% Retail & Wholesale Net Sales $ 225,851 $ 212,294 $ 13,557 6% $ 72,823 $ 70,583 $ 2,240 3% Operating Income $ 34,414 $ 34,080 $ 334 1% $ 9,709 $ 10,872 $ (1,163) (11)% Fiscal year 2025 continues to be a strong year with consolidated net sales, gross profit and net income growing in the nine months ended April 30, 2025, when compared to the nine months ended April 30, 2024. Net sales grew across both the Business to Business Products Group and the Retail and Wholesale Products Group. As described below, both operating segments grew due to favorable product mix, stronger demand and higher prices compared to the same period in fiscal year 2024. Consolidated net sales of $360.4 million increased $36.5 million, or 11%, in the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. Gross margin grew to 30% for the nine months ended April 30, 2025, compared to 28% for the nine months ended April 30, 2024. Despite higher SG&A and other expenses consolidated income from operations increased $13.8 million, or 36%, and, including the impact of tax, consolidated net income increased $10.0 million, or 32%, for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. 24 Our unaudited Condensed Consolidated Balance Sheet as of April 30, 2025 and our unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended April 30, 2025, show an increase of $12.0 million, or 49%, in total cash and cash equivalents from fiscal year-end 2024. The increase was driven primarily by positive cash flow from operations partially offset by cash used in investing and financing activities. Refer to the "Liquidity and Capital Resources" section below for more details. Stock Split On October 9, 2024, the Company announced that our Board approved a two-for-one stock split in the form of a stock dividend. Stockholders of record as of the close of business on December 20, 2024 received a distribution of one additional share of Common Stock for each share of Common Stock held by such stockholder and one additional share of Class B Stock for each share of Class B Stock held by such stockholder as of the record date. The additional shares were distributed on January 3, 2025, and our Common Stock began trading on a post-split basis on January 6, 2025. The stock split did not affect the par value of the Common Stock or Class B Stock, however, in order to implement the stock split we amended our Certificate of Incorporation on December 11, 2024 to increase the number of authorized shares of Common Stock from 15 million to 30 million. Proportionate adjustments were made to the number of shares that remain available for issuance pursuant to the 2006 Plan, as well as to the outstanding awards under the 2006 Plan. NINE MONTHS ENDED APRIL 30, 2025 COMPARED TO NINE MONTHS ENDED APRIL 30, 2024 CONSOLIDATED RESULTS Consolidated net sales for the nine months ended April 30, 2025, were $360.4 million, an 11% increase compared to net sales of $323.9 million for the nine months ended April 30, 2024. The increase across both our Business to Business and Retail and Wholesale product groups was primarily driven by a combination of favorable product mix, stronger demand for our products, and higher prices. Consolidated gross profit in the nine months ended April 30, 2025, was $108.3 million, an increase of $16.2 million, or 18%, from gross profit of $92.1 million in the nine months ended April 30, 2024. Our gross margin (defined as gross profit as a percentage of net sales) in the nine months ended April 30, 2025, increased to 30.0% from 28.4% in the nine months ended April 30, 2024. This gross margin expansion was mainly driven by volume growth, which led to improved fixed cost coverage, and favorable product mix. However, for the nine months ended April 30, 2025, the overall domestic per ton cost of goods sold increased 5% compared to the same period of fiscal year 2024. The increase was primarily driven by our product mix across the nine months which resulted in higher overall per ton transportation and material costs, which increased 8% and 7%, respectively. These increases were slightly offset by a 2% decrease in packaging costs for the nine months ended April 30, 2025, when compared to the same period of fiscal year 2024. Total SG&A expenses of $55.7 million for the nine months ended April 30, 2025, were $2.4 million, or 5%, higher compared to $53.3 million for the nine months ended April 30, 2024. The increase was primarily driven by operating segment SG&A, which increased by $3.8 million, partially offset by a $1.4 million reduction in corporate unallocated expenses. SG&A expenses at the operating segments level are discussed below in the discussion of our segments' operating income. The decrease in corporate unallocated for the nine months ended April 30, 2025, was primarily due to a decrease in acquisition-related expenses incurred in the same period of fiscal year 2024. Total other expenses, net were $1.9 million for the nine months ended April 30, 2025, compared to $1.1 million in the same period of fiscal year 2024. This increase was mainly due to an $0.8 million increase in interest expense. We had tax expense of $9.8 million for the nine months ended April 30, 2025, compared to $6.7 million for the nine months ended April 30, 2024. $2.3 million of the increase was due to higher pre-tax income and $0.7 million of the increase was due to the change in the estimated annual effective tax rate ("ETR"). For the nine months ended April 30, 2025, we used an estimated annual ETR of 19% compared to an ETR of 18% for the nine months ended April 30, 2024. The ETR is based on expected annual taxable income and the assessment of various tax adjustments, including depletion and discrete items. 25 BUSINESS TO BUSINESS PRODUCTS GROUP (in thousands) For the Nine Months Ended April 30, Business to Business Products Group 2025 2024 $ Change % Change Agricultural and Horticultural $ 32,396 $ 27,706 $ 4,690 17 % Fluids Purification 82,384 67,437 14,947 22 % Animal Health & Nutrition 19,729 16,448 3,281 20 % Net Sales $ 134,509 $ 111,591 $ 22,918 21 % Operating Income $ 44,814 $ 32,713 $ 12,101 37 % Net sales of the Business to Business Products Group for the nine months ended April 30, 2025, increased $22.9 million, or 21%, compared to the nine months ended April 30, 2024, with growth in all three principal products within this segment. Net sales of our fluids purification products for the nine months ended April 30, 2025, increased $14.9 million, or 22%, compared to the nine months ended April 30, 2024, primarily driven by the increase in demand for products used in renewable diesel filtration. Net sales of our agricultural and horticultural chemical carrier products for the nine months ended April 30, 2025, increased $4.7 million, or 17% compared to the nine months ended April 30, 2024, mainly as a result of stronger demand, primarily as key customers resumed purchasing after working through inventory surpluses. Net sales of our animal health & nutrition products for the nine months ended April 30, 2025, increased $3.3 million, or 20%, compared to the nine months ended April 30, 2024, with growth across all regions mainly driven by favorable product mix. SG&A expenses for the Business to Business Products Group increased by $0.6 million, or 5%, for the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. The increase was mainly driven by a preliminary foreign value-added tax ("VAT") assessment recognized in the first quarter of fiscal year 2025, and higher research and development costs and marketing spend, partially offset by cost reductions across other general and administrative expenses. The Business to Business Products Group’s operating income for the nine months ended April 30, 2025, was $44.8 million, an increase of $12.1 million, or 37%, from operating income of $32.7 million for the nine months ended April 30, 2024. The increase in operating income was mostly driven by higher net sales as described above. RETAIL AND WHOLESALE PRODUCTS GROUP (in thousands) For the Nine Months Ended April 30, Retail and Wholesale Products Group 2025 2024 $ Change % Change Cat Litter $ 190,656 $ 178,357 $ 12,299 7 % Industrial and Sports 35,195 33,937 1,258 4 % Net Sales $ 225,851 $ 212,294 $ 13,557 6 % Operating Income $ 34,414 $ 34,080 $ 334 1 % Net sales of the Retail and Wholesale Products Group for the nine months ended April 30, 2025, increased $13.6 million, or 6%, compared to the nine months ended April 30, 2024, primarily driven by the introduction of crystal cat litter products. Domestic cat litter net sales, excluding co-packaged cat litter, were $168.4 million for the nine months ended April 30, 2025, an increase of $12.0 million, or 8%, when compared to the nine months ended April 30, 2024. This increase was primarily driven by $15.2 million of net sales from the introduction of crystal cat litter products, partially offset by a $3.3 million decrease in clay-based cat litter products. $2.6 million of this decrease was driven by customer bankruptcies and $2.0 million was due to the loss of a private label account. These losses were partially offset by other revenue gains. Net sales of co-packaged cat litter products increased 4% in the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024. This increase was driven primarily by higher prices. Net sales of our domestic industrial and sports products were $33.2 million for the nine months ended April 30, 2025, an increase of $1.2 million, or 4%, when compared to the nine months ended April 30, 26 2024, mainly driven by the higher pricing to offset elevated costs. Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, decreased $0.2 million, as discussed below. SG&A expenses for the Retail and Wholesale Products Group increased $3.2 million, or 24% during the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024, primarily due to incremental SG&A expenses related to the recently acquired crystal cat litter business. These elevated costs were partially offset by lower advertising expenses compared to the same period of the previous fiscal year. We anticipate total advertising expense in fiscal year 2025 to be lower than fiscal year 2024. The Retail and Wholesale Products Group's operating income for the nine months ended April 30, 2025, was $34.4 million, an increase of $0.3 million, or 1%, from operating income of $34.1 million for nine months ended April 30, 2024. FOREIGN OPERATIONS Foreign operations include our subsidiaries in Canada and Netherlands, which are 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, 2025, were $14.9 million, a decrease of 7%, compared to net sales of $16.0 million during the nine months ended April 30, 2024. The decrease was driven mainly by our subsidiary in China, and to a lesser extent Canada, offset by an increase in net sales in Mexico and the UK. Net sales of our subsidiary in China decreased $1.7 million, or 100%, in the nine months ended April 30, 2025, compared to the same period of fiscal year 2024 due to a sell-off of all existing inventory to a 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 $0.2 million, or 2%, in the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024, primarily due to the impact of foreign exchange rates. However, excluding the impact of foreign currency translation, net sales in local currency increased 2%, driven primarily by revenues from cat litter sales. Total net sales of our subsidiary in Mexico increased $0.6 million, or 47%, in the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024, driven primarily by higher demand. Total net sales of our subsidiary in the UK increased $0.2 million, or 10%, in the nine months ended April 30, 2025, compared to the nine months ended April 30, 2024, primarily due to higher prices. Net sales by our foreign subsidiaries represented 4% and 5% of our consolidated net sales for the nine months ended April 30, 2025, and 2024, respectively. Our foreign subsidiaries reported net loss of $0.1 million for the nine months ended April 30, 2025, compared to net income of $0.6 million in the nine months ended April 30, 2024. The decrease in net income was primarily driven by the preliminary foreign VAT assessment recognized in the first quarter of fiscal year 2025 and the impact of foreign exchange in Canada. Identifiable assets of our foreign subsidiaries as of April 30, 2025, were $9.7 million, compared to $8.7 million as of July 31, 2024. THREE MONTHS ENDED APRIL 30, 2025 COMPARED TO THREE MONTHS ENDED APRIL 30, 2024 CONSOLIDATED RESULTS Consolidated net sales for the third quarter of fiscal year 2025 were $115.5 million, an 8% increase compared to net sales of $106.8 million for the third quarter of fiscal year 2024. The increase across both our Business to Business and Retail and Wholesale product groups was primarily driven by a combination of favorable product mix, higher volumes, and higher prices. Consolidated gross profit for the third quarter of fiscal year 2025 was $33.0 million, an increase of 10% when compared to $30.1 million for the third quarter of fiscal year 2024. Our gross margin (defined as gross profit as a percentage of net sales) increased to 28.6% from 28.2% in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024. This increase was mainly driven by higher net sales partially offset by higher per ton costs of goods sold. Domestic per ton cost of goods sold increased 5%, primarily driven by higher material and transportation costs partially offset by a reduction in packaging costs. Per ton material costs increased 7% driven primarily by product mix and certain higher expenses such as labor, natural gas and depreciation. Domestic transportation per ton costs increased 8% due to product mix and additional railcar usage to support our growing renewable diesel business. Packaging costs decreased 5%. Total SG&A expenses of $19.1 million for the third quarter of fiscal year 2025, decreased by $0.6 million, or 3%, compared to $19.7 million for the same period of fiscal year 2024, primarily due to the decrease in corporate unallocated expenses, partially offset by an increase in operating segments' SG&A expenses. Unallocated corporate expenses were $9.2 million, a decrease of 27 $1.9 million, or 17%, compared to the same period in fiscal year 2024, primarily as a result of acquisition-related expenses incurred in the third quarter of fiscal year 2024. SG&A expenses at the operating segments level are discussed below in the discussion of our segments' operating income. Total net other income was $0.3 million for the third quarter of fiscal year 2025, compared to net other expenses of $0.3 million for the third quarter of fiscal year 2024 mainly due to foreign exchange gains offset by higher interest expense, and lower interest income. Tax expense was $2.6 million for the third quarter of fiscal year 2025 compared to $2.4 million for the third quarter of fiscal year 2024. $1.0 million of the year-over-year increase in tax expense was driven by higher pre-tax income partially offset another $0.7 million decrease due to changes in the annual ETR for the quarter. For the third quarter of fiscal year 2025 we used an estimated ETR of 18% compared to an ETR of 23% for the third quarter of fiscal year 2024. We adjust our ETR quarterly based on expected annual taxable income and our assessment of various tax adjustments, including depletion and discrete items. BUSINESS TO BUSINESS PRODUCTS GROUP (in thousands) For the Three Months Ended April 30, Business to Business Products Group 2025 2024 $ Change % Change Agricultural and Horticultural $ 11,639 $ 8,113 $ 3,526 43 % Fluids Purification 25,269 22,322 2,947 13 % Animal Health & Nutrition 5,770 5,761 9 — % Net Sales $ 42,678 $ 36,196 $ 6,482 18 % Operating Income $ 13,382 $ 10,605 $ 2,777 26 % Net sales of the Business to Business Products Group increased $6.5 million, or 18%, in the third quarter of fiscal year 2025, compared to the same period in 2024, driven by an increase in net sales of our agriculture and horticultural products and fluids purification products. Net sales of our agricultural and horticultural chemical carrier products in the third quarter of fiscal year 2025 increased $3.5 million, or 43%, compared to the third quarter of fiscal year 2024, primarily due to higher volumes. Net sales of our fluids purification products in the third quarter of fiscal year 2025 increased $2.9 million, or 13%, compared to the third quarter of fiscal year 2024, primarily driven by the increase in demand for products used in renewable diesel filtration. Net sales of our animal health and nutrition products in the third quarter of fiscal year 2025 remained flat compared to the third quarter of fiscal year 2024. Total SG&A expenses for the Business to Business Products Group in the third quarter of fiscal year 2025 increased $0.3 million, or 8%, compared to the same period of fiscal year 2024. The Business to Business Products Group’s operating income for the third quarter of fiscal year 2025 was $13.4 million, an increase of $2.8 million, or 26%, from operating income of $10.6 million for the third quarter of fiscal year 2024. The overall increase in operating income was primarily due to higher net sales as described above. RETAIL AND WHOLESALE PRODUCTS GROUP (in thousands) For the Three Months Ended April 30, Retail and Wholesale Products Group 2025 2024 $ Change % Change Cat Litter $ 59,743 $ 58,170 $ 1,573 3 % Industrial and Sports 13,080 12,413 667 5 % Net Sales $ 72,823 $ 70,583 $ 2,240 3 % Operating Income $ 9,709 $ 10,872 $ (1,163) (11) % Net sales of the Retail and Wholesale Products Group increased $2.2 million, or 3%, in the third quarter of fiscal year 2025, compared to the same period in 2024, driven primarily by the introduction of crystal cat litter products. Domestic cat litter net 28 sales, excluding sales of co-packaged cat litter, were $52.8 million for the third quarter of fiscal year 2025, an increase of $1.6 million, or 3%, when compared to the third quarter of fiscal year 2024. This increase was driven by $4.8 million in net sales from the introduction of crystal cat litter products, offset by a $1.4 million decrease due to the loss of a private label account, $0.8 million driven by customer bankruptcies, and the remainder due to other net decreases in revenue from sales of clay-based cat litter products. Net sales of co-packaged cat litter products decreased 2% compared to the third quarter of fiscal year 2024, due to softer volumes. Net sales of our domestic industrial and sports products in the third quarter of fiscal year 2025 were $12.3 million, an increase of $0.6 million, or 5%, when compared to the third quarter of fiscal year 2024, mainly driven by the higher pricing to offset elevated costs. Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, in the third quarter of fiscal year 2025, increased $0.1 million, or 4%, compared to the same period in 2024, as discussed below. SG&A expenses for the Retail and Wholesale Products Group increased by $1.0 million, or 21%, during the third quarter of fiscal year 2025, compared to the same period in fiscal year 2024. This increase was driven by incremental SG&A expenses related to the recently acquired crystal cat litter business. These elevated costs were partially offset by lower advertising expenses compared to the same period of the previous fiscal year. We anticipate total advertising expense in fiscal year 2025 to be lower than fiscal year 2024. The Retail and Wholesale Products Group's operating income was $9.7 million for the third quarter of fiscal year 2025, a decrease of $1.2 million from operating income of $10.9 million for the same period of fiscal year 2024. This was driven primarily by a $3.4 million increase in operating costs, which offset the $2.2 million increase in net sales in the quarter. FOREIGN OPERATIONS Foreign operations include our subsidiaries in Canada and the Netherlands, which are 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 2025 were $4.8 million, an increase of $0.3 million compared to net sales of $4.5 million during the same period of fiscal year 2024, driven primarily by increases in net sales in Canada, the UK and Mexico. Net sales by our subsidiary in Canada increased $0.1 million, or 4%, driven by higher volumes of cat litter sales, partially offset by a $0.2 million negative effect of foreign exchange rates. Net sales of our fluids purification products by our subsidiary in the UK during the third quarter of fiscal year 2025 increased $0.1 million, or 12%, compared to the same period in fiscal year 2024, primarily due to higher volume. Net sales of our animal health and nutrition products by our subsidiary in Mexico during the third quarter of fiscal year 2025 increased $0.1 million, or 24%, compared to fiscal year 2024, due to higher volume. Net sales by our foreign subsidiaries represented 4% of our consolidated net sales during the third quarter of both fiscal years 2025 and 2024. Our foreign subsidiaries reported net income of $0.2 million for the third quarter of fiscal year 2025 compared to a net loss of $0.1 million in the third quarter of fiscal year 2024. 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, 2025, 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 B, C and D Senior Notes and Credit Agreement. On September 30, 2024, we amended the Credit Agreement to, among other things, increase our line of credit from $45 million to $75 million, providing more financial flexibility. See Note 8 of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information relating to our existing borrowings. 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 the foreseeable future. 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 29 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. 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, 2025 2024 Net cash provided by operating activities $ 54,988 $ 36,929 Net cash used in investing activities (24,509) (23,536) Net cash (used in)/provided by financing activities (18,523) 1,462 Effect of exchange rate changes on cash and cash equivalents 38 212 Net increase in cash and cash equivalents $ 11,994 $ 15,067 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, 2025, were as follows: Accounts receivable, net of allowances increased by $3.8 million in the nine months ended April 30, 2025, as compared to the nine months ended April 30, 2024. The increase in accounts receivable was driven primarily by higher net sales, offset by the level and timing of collections due to payment terms. Inventory increased by $2.5 million in the nine months ended April 30, 2025, as compared to the nine months ended April 30, 2024, mainly due to the building of finished goods inventory to meet anticipated demand. Prepaid expenses decreased by $1.2 million in the nine months ended April 30, 2025, as compared to the nine months ended April 30, 2024, mainly due to the timing of tax and insurance payments. Excluding the impact of payments related to capital expenditures, accounts payable increased by $0.5 million in the nine months ended April 30, 2025, as compared to the nine months ended April 30, 2024. The increase was mainly due to the timing of payments, cost of goods and services we purchase, production volume levels and vendor payment terms. In the nine months ended April 30, 2025, there was a $2.3 million decrease in accounts payable related to capital expenditures recognized as cash used in investing activities as compared to the nine months ended April 30, 2024. Excluding the impact of payments made related to capital expenditures, accrued expenses decreased $2.3 million in the nine months ended April 30, 2025, as compared to 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. In the nine months ended April 30, 2025, there was a $4.6 million decrease in accrued expenses related to capital expenditures recognized as cash used in investing activities as compared to the nine months ended April 30, 2024. Net cash used in investing activities Cash used in investing activities of $24.5 million in the nine months ended April 30, 2025, was driven by capital expenditures. During the nine months ended April 30, 2025, we continued to expand our plant equipment and improve our facilities to support increased demand for our products. 30 Net cash used in financing activities Cash used in financing activities of $18.5 million in the nine months ended April 30, 2025, was primarily driven by a $10 million payment of our borrowings under the Credit Agreement, as well as $6.3 million used for dividend payments and $2.2 million for treasury stock repurchases. Other Total cash balances held by our foreign subsidiaries of $5.2 million as of April 30, 2025, increased $0.7 million compared to $4.5 million as of July 31, 2024. See further discussion in "Foreign Operations" above. As of April 30, 2025, we had remaining authority to repurchase 362,938 shares of Common Stock and 244,113 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. 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, 2024. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in our exposure to market risk from that discussed in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2024.