What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-03-11 compared with 2025-12-08 · 168 added, 70 removed, 95 unchanged (71% of the section changed)

15 unchanged sentences

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.

THREE MONTHS ENDED OCTOBER 31, 2025 COMPARED TO

THREE MONTHS ENDED OCTOBER 31, 2024

Over a period of several days in January 2026, the southern and eastern United States was impacted by a significant weather event known as "Winter Storm Fern" that resulted in snow, freezing rain, and ice causing widespread damage and power outages (“Weather Event”).

During this time, due to safety concerns and interruptions that we experienced to power, natural gas, and water, we temporarily shut down operations of our facilities in the effected regions, which resulted in reduced production.

Our supply chain was also impacted, causing significant delays in delivery of materials and services necessary to resume production.

These shutdowns and delays resulted in decreased fixed cost absorption and an increase of backlog, which we define as purchase orders that we have received from customers and that we have accepted, but that have not shipped by the customers’ requested ship dates.

SIX MONTHS ENDED JANUARY 31, 2026 COMPARED TO

SIX MONTHS ENDED JANUARY 31, 2025

CONSOLIDATED RESULTS

For the Three Months Ended October 31,

For the Six Months Ended January 31,

(in thousands)

13 unchanged sentences

$ 23,171 $ 24,705 $ (1,534) (6)%

Oil-Dri experienced strong results in the first quarter of fiscal year 2026.

However, since net sales, gross profit and net income reached all-time highs in the first quarter of fiscal year 2025, we experienced a decrease when comparing the three months ended October 31, 2025 to the three months ended October 31, 2024.

Consolidated net sales for the three months ended October 31, 2025, were $120.5 million, a 6% decrease compared to net sales of $127.9 million for the three months ended October 31, 2024.

The decrease was driven by both our Business to Business and Retail and Wholesale product groups as further discussed below in the segment analysis.

Consolidated gross profit in the three months ended October 31, 2025, was $35.5 million, a decrease of $5.3 million, or 13%, from gross profit of $40.8 million in the three months ended October 31, 2024.

Gross margin (defined as gross profit as a percentage of net sales) in the three months ended October 31, 2025, decreased to 29.5% from 31.9% in the three months ended October 31, 2024.

This reduction in gross margin was mainly driven by softer volume and higher costs, which led to unfavorable fixed cost coverage.

For the three months ended October 31, 2025, the overall domestic per ton cost of goods sold increased 3% compared to the same period of fiscal year 2025.

The increase was primarily driven by higher per ton manufacturing costs, including materials, which increased 8% when compared to three months ended October 31, 2024.

These increases were slightly offset by a 6% decrease in per ton transportation costs, and 4% decrease in per ton packaging costs for the three months ended October 31, 2025, when compared to the three months ended October 31, 2024.

Total SG&A expenses of $18.5 million for the three months ended October 31, 2025, were $1.1 million, or 5%, lower compared to $19.6 million for the three months ended October 31, 2024.

The decrease was primarily driven by operating segment SG&A, which decreased by $0.8 million, and to a lesser extent a $0.2 million reduction in corporate unallocated expenses.

SG&A expenses at the operating segments level are discussed below.

Total other income, net was $0.7 million for the three months ended October 31, 2025, compared to other expenses, net of $1.0 million in the same period of fiscal year 2025.

The $1.7 million gain was driven in part by the positive outcome of a confidential legal settlement in the matter of Oil-Dri Corporation of America vs.

Entera Animal Health, et al.

Tax expense was $2.2 million for the three months ended October 31, 2025, compared to $3.8 million for the three months ended October 31, 2024.

Consolidated net sales for the six months ended January 31, 2026 were $238.2 million, a 3% decrease compared to net sales of $244.9 million for the six months ended January 31, 2025.

The decrease was driven primarily by softer volumes across both our Business to Business and Retail and Wholesale product groups when compared to the same period in fiscal year 2025.

Further details of the drivers are discussed below in the segment analysis.

Consolidated gross profit in the six months ended January 31, 2026 was $67.8 million, a decrease of $7.4 million, or 10%, from gross profit of $75.2 million in the six months ended January 31, 2025.

Gross margin (defined as gross profit as a percentage of net sales) in the six months ended January 31, 2026 decreased to 28.5% from 30.7% in the six months ended January 31, 2025.

This reduction in gross margin was mainly driven by softer volume and higher costs, which led to unfavorable fixed cost absorption.

This was in part driven by the Weather Event which impacted our plants' production and ability to fulfill orders.

For the six months ended January 31, 2026, the overall domestic per ton cost of goods sold increased 3% compared to the same period of fiscal year 2025.

The increase was primarily driven by higher per ton manufacturing costs, including materials, which increased 8% when compared to six months ended January 31, 2025.

These increases were slightly offset by a 5% decrease in per ton transportation costs, and 3% decrease in per ton packaging costs for the six months ended January 31, 2026, when compared to the six months ended January 31, 2025.

Total SG&A expenses of $35.2 million for the six months ended January 31, 2026 were $1.4 million, or 4%, lower compared to $36.6 million for the six months ended January 31, 2025.

The decrease was driven by a $1.5 million reduction in corporate unallocated expenses, primarily as a result of lower corporate human resource costs and a lower incentive bonus accrual.

The decrease was partially offset by SG&A expenses at the operating segments level, which increased by $0.1 million, as discussed below.

Total other income, net was $0.8 million for the six months ended January 31, 2026, a $3.0 million gain compared to other expenses, net of $2.2 million in the same period of fiscal year 2025.

$0.8 million of this change was driven by the reduction in the estimated landfill modification costs recognized in fiscal year 2026 compared to an increase in the estimated cost recognized during the first half of fiscal year 2025 and $0.8 million was driven by foreign exchange gains.

The gain was also in part driven by the positive outcome of a confidential legal settlement in the matter of Oil-Dri Corporation of America vs.

Entera Animal Health, et al., as well as $0.5 million due to higher interest income and $0.2 million due to lower interest expense.

Tax expense was $5.5 million for the six months ended January 31, 2026 compared to $7.2 million for the six months ended January 31, 2025.

$0.8 million of the decrease was due to a discrete tax benefit as a result of stock-based compensation recognized in the first quarter of fiscal year 2026.

The remaining decrease was primarily due to the conversion of certain legal entities from corporations to limited liability companies resulting in state tax benefits.

Our unaudited Condensed Consolidated Balance Sheet as of October 31, 2025 and our unaudited Condensed Consolidated Statement of Cash Flows for the three months ended October 31, 2025, show an $8.1 million decrease in total cash and cash equivalents from fiscal year-end 2025.

Our unaudited Condensed Consolidated Balance Sheet as of January 31, 2026 and our unaudited Condensed Consolidated Statement of Cash Flows for the six months ended January 31, 2026 show a $3.5 million decrease in total cash and cash

equivalents from fiscal year-end 2025.

The decrease was driven primarily by financing and investing activities, partially offset by positive cash flow from operations.

2 unchanged sentences

(in thousands)

For the Three Months Ended October 31,

For the Six Months Ended January 31,

Business to Business Products Group 2026 2025 $ Change

8 unchanged sentences

Operating Income $ 25,433 $ 31,432 $ (5,999) (19) %

Net sales of the Business to Business Products Group for the three months ended October 31, 2025, decreased $4.1 million, or 9%, compared to the three months ended October 31, 2024, driven primarily by a reduction in sales of our fluid purification and animal health products, partial offset by an increase in sales of our agricultural and horticultural products.

Net sales of our fluids purification products for the three months ended October 31, 2025, decreased $3.9 million, or 13%, compared to the three months ended October 31, 2024.

This decrease was due to lower volumes, primarily of our products used in renewable diesel filtration, which were significantly higher in the first quarter of fiscal year 2025 when several new customers began operations in new plants.

Net sales of our animal health & nutrition products for the three months ended October 31, 2025, decreased $1.5 million, or 25%, compared to the three months ended October 31, 2024, due to lower volume .

Net sales of our agricultural and horticultural chemical carrier products for the three months ended October 31, 2025, increased $1.3 million, or 12%, compared to the three months ended October 31, 2024, evenly due to favorable mix, higher volume and higher prices.

Gross profit decreased 18% in the three months ended October 31, 2025 compared to the three months ended October 31, 2024.

This decrease was mainly due to lower sales resulting in unfavorable fixed cost coverage, and higher per ton manufacturing and transportation costs.

Per ton manufacturing and transportation costs increased 13% and 2%, respectively, partially offset by a 7% reduction in per ton packaging costs.

SG&A expenses decreased by $0.4 million, or 8%, for the three months ended October 31, 2025, compared to the three months ended October 31, 2024.

The decrease was mainly a result of the foreign value-added tax ("VAT") assessment recognized in the first quarter of fiscal year 2025.

Net sales of the Business to Business Products Group for the six months ended January 31, 2026 decreased $5.6 million, or 6%, compared to the six months ended January 31, 2025, driven primarily by a reduction in sales of our fluid purification and animal health products, partially offset by an increase in sales of our agricultural and horticultural products.

Net sales of our fluids purification products for the six months ended January 31, 2026 decreased $5.0 million, or 9%, compared to the six months ended January 31, 2025.

This decrease was due to lower volumes, primarily of our products used in renewable diesel filtration, which were significantly higher in fiscal year 2025 when several new customers began operations in new plants.

Net sales of our animal health & nutrition products for the six months ended January 31, 2026 decreased $4.0 million, or 29%, compared to the six months ended January 31, 2025, due to lower volume primarily driven by the loss of a key customer at one of our distributors.

Net sales of our agricultural and horticultural chemical carrier products for the six months ended January 31, 2026 increased $3.4 million, or 16%, compared to the six months ended January 31, 2025 , due to a combination of favorable mix, higher volume and higher prices.

Gross profit decreased 14% in the six months ended January 31, 2026 compared to the six months ended January 31, 2025.

This decrease was mainly due to lower sales resulting in unfavorable fixed cost absorption and higher per ton manufacturing costs.

This was in part driven by the Weather Event which impacted our plants' production and ability to fulfill orders.

Per ton manufacturing and packaging costs increased 9% and 2%, respectively, while transportation costs remained flat.

SG&A expenses increased by $0.3 million, or 4%, for the six months ended January 31, 2026 compared to the six months ended January 31, 2025.

This increase is primarily driven by higher compensation costs.

RETAIL AND WHOLESALE PRODUCTS GROUP

(in thousands)

For the Three Months Ended October 31,

For the Six Months Ended January 31,

Retail and Wholesale Products Group 2026 2025 $ Change % Change

6 unchanged sentences

Operating Income $ 23,171 $ 24,705 $ (1,534) (6) %

Net sales of the Retail and Wholesale Products Group for the three months ended October 31, 2025, decreased $3.3 million, or 4%, compared to the three months ended October 31, 2024, mainly due to decrease in cat litter sales.

Domestic cat litter net sales, excluding co-packaged cat litter, were $56.2 million for the three months ended October 31, 2025, a decrease of $3.6 million, or 6%, when compared to the three months ended October 31, 2024.

$2.5 million of the decrease was tied to high demand in the first quarter of fiscal year 2025 due to a large promotion at a key account, and $1.2 million was due to a private label account that was lost in the second quarter of fiscal year 2025.

Net sales of co-packaged cat litter products increased 8% in the three months ended October 31, 2025, compared to the three months ended October 31, 2024.

This increase was driven primarily by higher volumes.

Net sales of our domestic industrial and sports products were $10.9 million for the three months ended October 31, 2025, a decrease of $0.1 million, or 1%, when compared to the three months ended October 31, 2024, mainly

driven by volume.

Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, remained relatively flat for the three months ended October 31, 2025, when compared to the three months ended October 31, 2024.

Gross profit decreased 7% in the three months ended October 31, 2025 compared to the three months ended October 31, 2024.

This decrease was mainly due to lower sales resulting in unfavorable fixed cost coverage, and higher per ton manufacturing costs.

Net sales of the Retail and Wholesale Products Group for the six months ended January 31, 2026 decreased $1.1 million, or 1%, compared to the six months ended January 31, 2025, mainly due to a decrease in cat litter sales.

Domestic cat litter net sales, excluding co-packaged cat litter, were $112.3 million for the six months ended January 31, 2026, a decrease of $3.3 million, or 3%, when compared to the six months ended January 31, 2025.

$2.1 million of the decrease was due to a private label account that was lost in the second quarter of fiscal year 2025, and $1.5 million decrease was tied to high demand in fiscal year 2025 due to a large promotion at a key account.

These losses were partially offset by revenue gains with other customers.

co-packaged cat litter products increased 20% in the six months ended January 31, 2026, compared to the six months ended January 31, 2025.

This increase was driven primarily by higher volumes as we expanded our co-packaged offerings to include lightweight cat litter.

Net sales of our domestic industrial and sports products were $21.2 million for the six months ended January 31, 2026, an increase of $0.3 million, or 1%, when compared to the six months ended January 31, 2025, mainly driven by higher prices to offset elevated costs.

Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, increased $0.1 million for the six months ended January 31, 2026 when compared to the six months ended January 31, 2025.

Due to the Weather Event, several of our plants were shut down and unable to ship products or allow for customers to pick up orders.

This drove our backlog of Retail and Wholesale products to increase by $2.8 million at the end of the second quarter when compared to the prior quarter.

Gross profit decreased 5% in the six months ended January 31, 2026 compared to the six months ended January 31, 2025.

This decrease was mainly due to lower sales resulting in unfavorable fixed cost absorption, and higher per ton manufacturing costs.

This was in part driven by the Weather Event which impacted our plants' production and ability to fulfill orders.

Per ton manufacturing costs, including purchased materials, increased 8%, this increase was partially offset by a 10% reduction in transportation and 4% reduction in per ton packaging costs.

Certain key customers shifting terms from delivery to pick-up was the primary driver of the reduction of transportation costs.

SG&A expenses decreased $0.5 million, or 8%, during the three months ended October 31, 2025, compared to the three months ended October 31, 2024, primarily due to less bad debt expense related to customer bankruptcies.

SG&A expenses decreased $0.2 million, or 2%, during the six months ended January 31, 2026, compared to the six months ended January 31, 2025, primarily due to less bad debt expense related to customer bankruptcies.

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 were $5.1 million for both the three months ended October 31, 2025, and October 31, 2024.

Net sales by our foreign subsidiaries represented 4% of our consolidated net sales for both the three months ended October 31, 2025, and October 31, 2024.

Our foreign subsidiaries reported net income of $0.2 million for the three months ended October 31, 2025, compared to net loss of $0.2 million in the three months ended October 31, 2024.

The increase in net income was primarily driven by the preliminary foreign VAT assessment recognized in the first quarter of fiscal year 2025.

Identifiable assets of our foreign subsidiaries as of October 31, 2025, were $8.9 million, compared to $9.0 million as of July 31, 2025.

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 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 six months ended January 31, 2026 were $9.9 million, a decrease of $0.2 million compared to net sales of $10.1 million in the same period ended January 31, 2025, driven primarily by net sales decrease in sales volume in Mexico.

Net sales by our foreign subsidiaries represented 4% of our consolidated net sales for both the six months ended January 31, 2026, and January 31, 2025.

Our foreign subsidiaries reported net income of $0.2 million for the six months ended January 31, 2026, compared to net loss of $0.3 million in the six months ended January 31, 2025.

The increase in net income was primarily driven by the preliminary foreign VAT assessment recognized in fiscal year 2025.

Identifiable assets of our foreign subsidiaries as of January 31, 2026 were $9.2 million, compared to $9.0 million as of July 31, 2025.

THREE MONTHS ENDED JANUARY 31, 2026 COMPARED TO

THREE MONTHS ENDED JANUARY 31, 2025

CONSOLIDATED RESULTS

For the Three Months Ended January 31,

(in thousands)

Consolidated Results

$ 117,737 $ 116,914 $ 823 1%

$ 32,302 $ 34,448 $ (2,146) (6)%

Income from Operations

$ 15,693 $ 17,482 $ (1,789) (10)%

$ 12,569 $ 12,921 $ (352) (3)%

Business to Business

$ 41,977 $ 43,416 $ (1,439) (3)%

Operating Income

$ 11,799 $ 14,322 $ (2,523) (18)%

Retail & Wholesale

$ 75,760 $ 73,498 $ 2,262 3%

Operating Income

$ 10,772 $ 11,328 $ (556) (5)%

Consolidated net sales for the second quarter of fiscal year 2026 were $117.7 million, a 1% increase compared to net sales of $116.9 million for the second quarter of fiscal year 2025 primarily driven by favorable product mix.

This increase was primarily driven by higher sales of our agriculture and horticultural products within our Business to Business products group and higher sales of our cat litter products within the Retail and Wholesale products group.

Consolidated gross profit for the second quarter of fiscal year 2026 was $32.3 million, a decrease of 6% when compared to $34.4 million for the second quarter of fiscal year 2025.

Our gross margin (defined as gross profit as a percentage of net sales) decreased to 27.4% from 29.5% in the second quarter of fiscal year 2026 compared to the second quarter of fiscal year 2025.

This decrease was mainly driven by higher per ton costs of goods sold.

Domestic per ton cost of goods sold increased 4%, due to an 8% increase in per ton manufacturing costs, including materials, which was driven primarily by product mix and certain higher expenses such as labor and depreciation.

This increase was partially offset by a 5% reduction in per ton transportation costs and 2% reduction in packaging costs.

Total SG&A expenses of $16.6 million for the second quarter of fiscal year 2026 decreased by $0.4 million, or 2%, compared to $17.0 million for the same period of fiscal year 2025, primarily due to the decrease in corporate unallocated expenses, partially offset by an increase in operating segments' SG&A expenses.

Unallocated corporate expenses were $6.9 million, a decrease of $1.3 million, or 16%, compared to the same period in fiscal year 2025, primarily as a result of a lower corporate bonus accrual.

SG&A expenses at the operating segments level are discussed below in the discussion of our segments' operating income.

Total net other income was $0.1 million for the second quarter of fiscal year 2026, compared to net other expenses of $1.2 million for the second quarter of fiscal year 2025.

This change was driven by $0.6 million of foreign exchange gains, along with $0.4 million from the reduction in the estimated landfill modification costs recognized this quarter compared to an increase in the estimated cost recognized during the second quarter of fiscal year 2025.

Tax expense was $3.2 million for the second quarter of fiscal year 2026 compared to $3.3 million for the second quarter of fiscal year 2025.

We used an effective tax rate of 21% in both the second quarter of fiscal year 2026 and 2025.

We adjust our effective tax rate 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 January 31,

Business to Business Products Group 2026 2025 $ Change % Change

Agricultural and Horticultural $ 11,242 $ 9,175 $ 2,067 23 %

Fluids Purification 25,473 26,512 (1,039) (4) %

Animal Health & Nutrition 5,262 7,729 (2,467) (32) %

Net Sales $ 41,977 $ 43,416 $ (1,439) (3) %

Cost of Goods Sold $ (26,095) $ (25,711) $ (384) 1 %

Gross Profit $ 15,882 $ 17,705 $ (1,823) (10) %

SG&A $ (4,083) $ (3,383) $ (700) 21 %

Operating Income $ 11,799 $ 14,322 $ (2,523) (18) %

Net sales of the Business to Business Products Group decreased $1.4 million, or 3%, in the second quarter of fiscal year 2026, compared to the same period in 2025, driven primarily by a reduction in sales of our animal health and fluids purification products, partially offset by an increase in net sales of our agriculture and horticultural products.

Net sales of our animal health and nutrition products in the second quarter of fiscal year 2026 decreased $2.5 million, or 32%, compared to the second quarter of fiscal year 2025, due to lower volume primarily driven by the loss of a key customer at one of our distributors.

Net sales of our fluids purification products in the second quarter of fiscal year 2026 decreased $1.0 million, or 4%, compared to the second quarter of fiscal year 2025.

This decrease was due to lower volumes, primarily of our products used in renewable diesel filtration.

Net sales of our agricultural and horticultural chemical carrier products in the second quarter of fiscal year 2026 increased $2.1 million, or 23%, compared to the second quarter of fiscal year 2025, due to a combination of favorable mix, higher prices and increased demand.

Gross profit decreased 10% in the second quarter of fiscal year 2026, compared to the same period in 2025.

This decrease was mainly due to a combination of lower sales resulting in unfavorable fixed cost absorption and higher per ton costs.

This was in part driven by the Weather Event which impacted our plants' production and ability to fulfill orders.

Domestic per ton manufacturing and packaging costs increased 5% and 11%, respectively, partially offset by a 2% reduction in per ton transportation costs.

The increase in packaging was primarily due to mix and selling more packaged agricultural and horticultural products.

Total SG&A expenses for the Business to Business Products Group in the second quarter of fiscal year 2026 increased $0.7 million, or 21%, compared to the same period of fiscal year 2025.

This increase is primarily driven by higher compensation and consultant costs.

RETAIL AND WHOLESALE PRODUCTS GROUP

(in thousands)

For the Three Months Ended January 31,

Retail and Wholesale Products Group 2026 2025 $ Change % Change

Cat Litter $ 65,110 $ 63,237 $ 1,873 3 %

Industrial and Sports 10,650 10,261 389 4 %

Net Sales $ 75,760 $ 73,498 $ 2,262 3 %

Cost of Goods Sold $ (59,340) $ (56,755) $ (2,585) 5 %

Gross Profit $ 16,420 $ 16,743 $ (323) (2) %

SG&A $ (5,648) $ (5,415) $ (233) 4 %

Operating Income $ 10,772 $ 11,328 $ (556) (5) %

Net sales of the Retail and Wholesale Products Group increased $2.3 million, or 3%, in the second quarter of fiscal year 2026, compared to the same period in 2025, primarily due to cat litter sales.

Net sales of co-packaged cat litter products increased 31% compared to the second quarter of fiscal year 2025, due to higher volumes as we expanded our co-packaged offerings to include lightweight cat litter.

Domestic cat litter net sales, excluding sales of co-packaged cat litter, were $56.0 million for the second quarter of fiscal year 2026, an increase of $0.3 million, when compared to the second quarter of fiscal year 2025.

This was primarily driven by higher sales of our crystal cat litter.

Net sales of our domestic industrial and sports products in the second quarter of fiscal year 2026 were $10.2 million, an increase of $0.4 million, or 4%, when compared to the second quarter of fiscal year 2025, 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 second quarter of fiscal year 2026, increased $0.1 million, or 4%, compared to the same period in 2025.

Due to the Weather Event, several of our plants were shut down and unable to ship products or allow for customers to pick up orders.

This drove our backlog of Retail and Wholesale products to increase by $2.8 million at the end of the second quarter when compared to the prior quarter.

Gross profit decreased 2% in the second quarter of fiscal year 2026, compared to the same period in 2025.

This decrease was mainly due to a combination of unfavorable fixed cost absorption which was in part driven by the Weather Event that impacted our plants' production and ability to fulfill orders, and higher per ton manufacturing costs, including materials.

Domestic per ton manufacturing costs increased 9%, primarily due to higher per ton labor and depreciation costs.

This was partially offset by a 7% reduction in per ton transportation costs and a 3% reduction in per ton packaging costs.

Certain key customers shifting terms from delivery to pick-up was the primary driver of the reduction of transportation costs.

SG&A expenses for the Retail and Wholesale Products Group increased by $0.2 million, or 4%, during the second quarter of fiscal year 2026, compared to the same period in fiscal year 2025.

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 second quarter of fiscal year 2026 were $4.8 million, a decrease of $0.1 million compared to net sales of $4.9 million during the same period of fiscal year 2025.

This decrease was driven primarily by a $0.2 million decrease in net sales in Mexico, partially offset by a $0.1 million increase in net sales in Canada.

Net sales by our foreign subsidiaries represented 4% of our consolidated net sales during the second quarter of both fiscal years 2026 and 2025.

Our foreign subsidiaries reported an increase of $0.1 million for the second quarter of fiscal year 2026 as compared to a net loss of $0.1 million in the second quarter of fiscal year 2025.

LIQUIDITY AND CAPITAL RESOURCES

6 unchanged sentences

and, from time to time, business acquisitions, and funding our debt service requirements.

During the three months ended October 31, 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 Credit Agreement and Series B, C and D Senior Notes issued under the Note Agreement.

During the six months ended January 31, 2026, 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 Credit Agreement and Series B, C and D Senior Notes issued under the Note Agreement.

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.

3 unchanged sentences

The timing and size of any new business ventures or acquisitions that we complete may also impact our cash requirements.

Cash and cash equivalents, including restricted cash, totaled $42.4 million and $13.5 million as of October 31, 2025, and 2024, respectively.

Cash and cash equivalents totaled $46.9 million and $22.6 million as of January 31, 2026, and 2025, respectively.

The following table sets forth certain elements of our unaudited Condensed Consolidated Statements of Cash Flows (in thousands):

For the Three Months Ended October 31,

For the Six Months Ended January 31,

Net cash provided by operating activities $ 28,435 $ 32,330

Net cash used in investing activities (14,817) (17,921)

Net cash used in by financing activities (9,404) (9,080)

Net cash used in financing activities (17,241) (16,358)

Effect of exchange rate changes on cash and cash equivalents 98 57

1 unchanged sentence

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 three months ended October 31, 2025, were as follows:

Accounts receivable, net of allowances decreased by $3.1 million in the three months ended October 31, 2025, as compared to the three months ended October 31, 2024.

The decrease in accounts receivable was driven primarily by a decrease in net sales and timing of collections due to payment terms.

Inventory increased by $5.1 million in the three months ended October 31, 2025, as compared to the three months ended October 31, 2024, mainly due to the building of finished goods inventory and other additives to meet anticipated demand.

Prepaid expenses decreased by $1.4 million in the three months ended October 31, 2025, as compared to the three months ended October 31, 2024, mainly due to the timing of tax and insurance payments.

Excluding the impact of payments related to capital expenditures, accounts payable increased by $0.3 million in the three months ended October 31, 2025, as compared to the three months ended October 31, 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 three months ended October 31, 2025, there was a $3.2 million decrease in accounts payable related to capital expenditures recognized as cash used in investing activities as compared to the three months ended October 31, 2024.

Excluding the impact of payments made related to capital expenditures, accrued expenses decreased $13.8 million in the three months ended October 31, 2025, as compared to the three months ended October 31, 2024.

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 six months ended January 31, 2026, were as follows:

Accounts receivable, net of allowances increased by $0.6 million in the six months ended January 31, 2026, as compared to the six months ended January 31, 2025.

The increase in accounts receivable was driven primarily by net sales and timing of collections.

Inventory increased by $2.1 million in the six months ended January 31, 2026, as compared to the six months ended January 31, 2025, mainly due to the building of finished goods inventory and purchases of other additives to meet anticipated demand.

Excluding the impact of payments related to capital expenditures, accounts payable decreased by $2.9 million in the six months ended January 31, 2026, as compared to the six months ended January 31, 2025.

The decrease was mainly due to the timing of payments, cost of goods and services we purchase, production volume levels and vendor payment terms.

In the six months ended January 31, 2026, there was a $3.7 million decrease in accounts payable related to capital expenditures recognized as cash used in investing activities as compared to the six months ended January 31, 2025.

Excluding the impact of payments made related to capital expenditures, accrued expenses decreased $10.6 million in the six months ended January 31, 2026, as compared to the six months ended January 31, 2025.

The decrease was mainly due to the payout of annual bonuses 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 three months ended October 31, 2025, there was a $1.3 million decrease in accrued expenses related to capital expenditures recognized as cash used in investing activities as compared to the three months ended October 31, 2024.

In the six months ended January 31, 2026, there was a $1.1 million decrease in accrued expenses related to capital expenditures recognized as cash used in investing activities as compared to the six months ended January 31, 2025.

Net cash used in investing activities

Cash used in investing activities of $9.1 million in the three months ended October 31, 2025, was driven by capital expenditures.

During the three months ended October 31, 2025, we continued to expand our plant equipment and improve our facilities to improve efficiency of our manufacturing process and meet customer demands.

Cash used in investing activities of $14.8 million in the six months ended January 31, 2026 was driven by capital expenditures.

During the six months ended January 31, 2026, we continued to expand our plant equipment and improve our facilities to improve efficiency of our manufacturing process and meet customer demands.

Net cash used in financing activities

Cash used in financing activities of $9.4 million in the three months ended October 31, 2025, included $7.0 million for stock repurchases and $2.4 million for dividend payments.

Total cash balances held by our foreign subsidiaries of $4.8 million as of October 31, 2025, compared to $4.7 million as of July 31, 2025.

See further discussion in "Foreign Operations" above.

As of October 31, 2025, we had remaining authority to repurchase 279,623 shares of Common Stock and 208,197 shares of Class B Stock under a repurchase plan approved by our Board.

Cash used in financing activities of $17.2 million in the six months ended January 31, 2026, included $12.4 million for stock repurchases and $4.9 million for dividend payments.

Total cash balances held by our foreign subsidiaries were $5.8 million as of January 31, 2026, compared to $4.7 million as of July 31, 2025.

As of January 31, 2026, we had remaining authority to repurchase 174,742 shares of Common Stock and 208,197 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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis