What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-08 compared with 2026-03-11 · 118 added, 126 removed, 137 unchanged (64% of the section changed)

10 unchanged sentences

Each operating segment is discussed individually below.

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.

RECENT EVENTS AFFECTING THE COMPANY

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.

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 affected 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

These shutdowns and delays resulted in decreased fixed cost absorption and an increase of backlog in the second quarter of fiscal year 2026.

All operations have since resumed normal activity and the backlog has decreased by $2.2 million at the end of the third quarter when compared to the prior quarter.

We define backlog 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.

While ongoing geopolitical tensions and conflict in the Middle East have contributed to broader market volatility, these conditions did not have a direct, material impact on our results for the current quarter.

However, continued uncertainty in the region may lead to increased input and transportation costs in future periods.

The Company continues to closely monitor developments and assess potential impacts on operations and costs.

NINE MONTHS ENDED APRIL 30, 2026 COMPARED TO

NINE MONTHS ENDED APRIL 30, 2025

CONSOLIDATED RESULTS

For the Six Months Ended January 31,

For the Nine Months Ended April 30,

(in thousands)

2 unchanged sentences

$ 101,525 $ 108,250 $ (6,725) (6)%

SG&A $ (51,785) $ (55,674) $ 3,889 (7)%

Income from Operations

9 unchanged sentences

$ 34,470 $ 34,414 $ 56 —%

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.

Consolidated net sales for the nine months ended April 30, 2026 were $364.6 million, representing a 1% increase compared to net sales of $360.4 million for the nine months ended April 30, 2025.

The increase was driven primarily by higher volumes of cat litter and agricultural and horticultural products, 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.

Consolidated gross profit in the nine months ended April 30, 2026 was $101.5 million, a decrease of $6.7 million, or 6%, from gross profit of $108.3 million in the nine months ended April 30, 2025.

Gross margin (defined as gross profit as a percentage of net sales) in the nine months ended April 30, 2026 decreased to 27.8% from 30.0% in the nine months ended April 30, 2025, driven primarily by higher per ton costs.

For the nine months ended April 30, 2026, the overall domestic per ton cost of goods sold increased 4% compared to the same period of fiscal year 2025.

The increase was primarily driven by higher per ton manufacturing costs which increased 8% when compared to nine months ended April 30, 2025.

Labor was the largest contributor to this increase, along with higher costs for repairs, depreciation, purchased materials, and natural gas.

These increases were slightly offset by a 3% decrease in per ton transportation costs, and 1% decrease in per ton packaging costs for the nine months ended April 30, 2026, when compared to the nine months ended April 30, 2025.

Total SG&A expenses of $51.8 million for the nine months ended April 30, 2026 were $3.9 million, or 7%, lower compared to $55.7 million for the nine months ended April 30, 2025.

The decrease was driven by a $3.5 million reduction in corporate unallocated expenses, primarily as a result of a lower incentive bonus accrual and lower corporate human resource costs.

The additional $0.4 million decrease in SG&A expenses at the operating segments level is discussed below.

Total other income, net was $1.7 million for the nine months ended April 30, 2026, roughly a $3.5 million gain compared to total other expenses, net of $1.9 million in the same period of fiscal year 2025.

This gain was driven by a number of items including, $0.9 million due to a reduction in the estimated landfill modification costs recognized in fiscal year 2026 compared to an increase in the estimated cost recognized during the nine months ended April 30, 2025 and $0.8 million due to 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 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.

Entera Animal Health, et al.

Tax expense was $8.8 million for the nine months ended April 30, 2026 compared to $9.8 million for the nine months ended April 30, 2025, mainly due to the impact of discrete items.

We used an effective tax rate of 17% for the nine months ended April 30, 2026 compared to a 19% effective tax rate in the same period of fiscal year 2025.

We adjust our effective tax rate based on expected annual taxable income and our assessment of various tax adjustments, including depletion and discrete items.

Our unaudited Condensed Consolidated Balance Sheet as of April 30, 2026 and our unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended April 30, 2026 show a $12.5 million increase in total cash and cash equivalents from fiscal year-end 2025.

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

Refer to the "Liquidity and Capital Resources" section below for more details.

1 unchanged sentence

(in thousands)

For the Six Months Ended January 31,

For the Nine Months Ended April 30,

Business to Business Products Group 2026 2025 $ Change

8 unchanged sentences

Operating Income $ 38,392 $ 44,814 $ (6,422) (14) %

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.

Net sales of the Business to Business Products Group for the nine months ended April 30, 2026 decreased $4.4 million, or 3%, compared to the nine months ended April 30, 2025, driven primarily by a reduction in sales of our fluids 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 nine months ended April 30, 2026 decreased $5.2 million, or 6%, compared to the nine months ended April 30, 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.

Net sales of our animal health & nutrition products for the nine months ended April 30, 2026 decreased $3.4 million, or 17%, compared to the nine months ended April 30, 2025, due to lower volume primarily driven by a temporary loss of a key customer at one of our distributors.

Net sales of our agricultural and horticultural products for the nine months ended April 30, 2026 increased $4.2 million, or 13%, compared to the nine months ended April 30, 2025, due to a combination of favorable mix and higher volume.

Gross profit decreased 11% in the nine months ended April 30, 2026 compared to the nine months ended April 30, 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.

For the nine months ended April 30, 2026, the overall Business to Business domestic per ton cost of goods sold increased 5% compared to the same period of fiscal year 2025.

The increase was primarily driven by higher per ton manufacturing costs, including materials, which increased 9% when compared to nine months ended April 30, 2025.

Per ton transportation and packaging costs remained flat for the nine months ended April 30, 2026, when compared to the nine months ended April 30, 2025.

SG&A expenses increased by $0.4 million, or 3%, for the nine months ended April 30, 2026 compared to the nine months ended April 30, 2025, primarily driven by higher compensation costs.

RETAIL AND WHOLESALE PRODUCTS GROUP

(in thousands)

For the Six Months Ended January 31,

For the Nine Months Ended April 30,

Retail and Wholesale Products Group 2026 2025 $ Change % Change

6 unchanged sentences

Operating Income $ 34,470 $ 34,414 $ 56 — %

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.

Net sales of the Retail and Wholesale Products Group for the nine months ended April 30, 2026 increased $8.6 million, or 4%, compared to the nine months ended April 30, 2025, mainly due to an increase in cat litter sales.

Net sales of co-packaged cat litter products increased 43% in the nine months ended April 30, 2026, compared to the nine months ended April 30, 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 $0.2 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.

Domestic cat litter net sales, excluding co-packaged cat litter, were $170.2 million for the nine months ended April 30, 2026, an increase of $1.9 million, or 1%, when compared to the nine months ended April 30, 2025, mainly driven by higher volumes of

crystal cat litter products.

Net sales of our domestic industrial and sports products were $33.8 million for the nine months ended April 30, 2026, an increase of $0.6 million, or 2%, when compared to the nine months ended April 30, 2025, mainly driven by higher prices to offset elevated costs including higher transportation costs.

Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, increased $0.2 million, or 2%, for the nine months ended April 30, 2026, when compared to the nine months ended April 30, 2025.

Gross profit decreased 1% in the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025.

This decrease was mainly due to higher per ton manufacturing costs.

For the nine months ended April 30, 2026, the overall Retail and Wholesale domestic per ton cost of goods sold increased 4% 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 nine months ended April 30, 2025.

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

SG&A expenses decreased $0.7 million, or 4%, during the nine months ended April 30, 2026, compared to the nine months ended April 30, 2025, primarily due to timing of advertising spend.

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 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.

Net sales by our foreign subsidiaries for the nine months ended April 30, 2026 were $14.6 million, a decrease of $0.3 million compared to net sales of $14.9 million in the same period ended April 30, 2025, driven primarily by a decrease in sales volume in Mexico.

Net sales by our foreign subsidiaries represented 4% of our consolidated net sales for both the nine months ended April 30, 2026, and April 30, 2025.

Our foreign subsidiaries reported net income of $0.3 million for the nine months ended April 30, 2026, compared to net loss of $0.1 million in the nine months ended April 30, 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

Identifiable assets of our foreign subsidiaries as of April 30, 2026 were $10.3 million, compared to $9.0 million as of July 31, 2025.

THREE MONTHS ENDED APRIL 30, 2026 COMPARED TO

THREE MONTHS ENDED APRIL 30, 2025

CONSOLIDATED RESULTS

For the Three Months Ended January 31,

For the Three Months Ended April 30,

(in thousands)

2 unchanged sentences

$ 33,728 $ 33,022 $ 706 2%

SG&A $ (16,635) $ (19,118) $ 2,483 (13)%

Income from Operations

9 unchanged sentences

$ 11,299 $ 9,709 $ 1,590 16%

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.

Consolidated net sales for the third quarter of fiscal year 2026 were $126.3 million, a 9% increase compared to net sales of $115.5 million for the third quarter of fiscal year 2025, primarily driven by higher volume of cat litter within our Retail and Wholesale operating segment.

Consolidated gross profit for the third quarter of fiscal year 2026 was $33.7 million, an increase of 2% when compared to $33.0 million for the third quarter of fiscal year 2025, mainly due to higher net sales.

Our gross margin (defined as gross profit as a percentage of net sales) decreased to 26.7% from 28.6% in the third quarter of fiscal year 2026 compared to the third 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.

Domestic per ton cost of goods sold increased 6%, due to a 9% increase in per ton manufacturing costs when compared to the same period in fiscal year 2025.

The largest driver of this increase was purchased materials, along with higher repair, natural gas and labor costs.

There was also a 3% increase in per ton packaging, and 1% higher transportation costs.

These increases were also partially driven by additional costs incurred during recovery from the Weather Event.

Total SG&A expenses of $16.6 million for the third quarter of fiscal year 2026 decreased by $2.5 million, or 13%, compared to $19.1 million for the same period of fiscal year 2025.

This decrease was primarily due to unallocated corporate expenses which decreased $2.0 million, or 22%, 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 also decreased and are discussed below in the discussion of our segments' operating income.

Total net other income was $0.8 million for the third quarter of fiscal year 2026, compared to $0.3 million for the third quarter of fiscal year 2025.

Tax expense was $3.4 million for the third quarter of fiscal year 2026 compared to $2.6 million for the third quarter of fiscal year 2025, mainly due to higher pre-tax income.

We used an effective tax rate of 19% in the third quarter of fiscal year 2026, compared to an 18% effective tax rate in the third quarter of fiscal year 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.

1 unchanged sentence

(in thousands)

For the Three Months Ended January 31,

For the Three Months Ended April 30,

Business to Business Products Group 2026 2025 $ Change % Change

7 unchanged sentences

Operating Income $ 12,959 $ 13,382 $ (423) (3) %

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.

Net sales of the Business to Business Products Group increased $1.2 million, or 3%, in the third quarter of fiscal year 2026, compared to the same period in 2025, driven primarily by agricultural and horticultural and animal health sales, offset partially by a slight decrease in fluids purification sales.

Net sales of our agricultural and horticultural products in the third quarter of fiscal year 2026 increased $0.8 million, or 7%, compared to the third quarter of fiscal year 2025, due to higher volume from increased demand by new and existing customers.

Net sales of our animal health and nutrition products in the third quarter of fiscal year 2026 increased $0.6 million, or 10%, compared to the third quarter of fiscal year 2025, driven by higher volumes due to increased demand, including new end-users and partial recovery of sales from a previously lost customer at one of our distributors.

Net sales of our fluids purification products in the third quarter decreased $0.2 million, or 1%, compared to the third quarter of fiscal year 2025.

Gross profit for the Business to Business Products Group decreased 2% in the third quarter of fiscal year 2026, compared to the same period in 2025, mainly driven by higher manufacturing costs.

Domestic per ton manufacturing costs for Business to Business products increased 8%.

This was partially offset by lower per ton packaging cost, which decreased 4%.

Per ton freight cost in the third quarter remained flat compared to the same period in fiscal 2025.

Total SG&A expenses for the Business to Business Products Group in the third quarter of fiscal year 2026 remained flat compared to the same period of fiscal year 2025.

RETAIL AND WHOLESALE PRODUCTS GROUP

(in thousands)

For the Three Months Ended January 31,

For the Three Months Ended April 30,

Retail and Wholesale Products Group 2026 2025 $ Change % Change

6 unchanged sentences

Operating Income $ 11,299 $ 9,709 $ 1,590 16 %

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.

Net sales of the Retail and Wholesale Products Group increased $9.7 million, or 13%, in the third quarter of fiscal year 2026, compared to the same period in 2025, primarily due to cat litter sales.

Domestic cat litter net sales, excluding sales of co-packaged cat litter, were $57.9 million for the third quarter of fiscal year 2026, an increase of $5.2 million when compared to the third quarter of fiscal year 2025.

This was primarily driven by higher volume, including sales shifted into the third quarter due to delays caused by the Weather Event.

Net sales of co-packaged cat litter products increased 94% compared to the third quarter of fiscal year 2025, due to higher volumes as we expanded our co-packaged offerings to include lightweight cat litter.

Net sales of our domestic industrial and sports products in the third quarter of fiscal year 2026 were $12.7 million, an increase of $0.3 million, or 3%, when compared to the third quarter of fiscal year 2025, mainly driven by the higher pricing to offset elevated costs including higher transportation costs.

Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, in the third quarter of fiscal year 2026, increased $0.1 million, or 2%, compared to the same period in 2025.

Gross profit increased 7% in the third quarter of fiscal year 2026, compared to the same period in 2025.

This increase is primarily due to higher net sales which offset the impact of higher per ton cost of goods sold.

Domestic per-ton manufacturing costs, including materials, increased by 9%.

Per ton transportation and packaging costs increased 4% and 2%, respectively.

SG&A expenses for the Retail and Wholesale Products Group decreased by $0.5 million, or 9%, during the third quarter of fiscal year 2026, compared to the same period in fiscal year 2025, primarily due to timing of advertising spend.

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.

Net sales by our foreign subsidiaries during the third quarter of fiscal year 2026 were $4.7 million, a decrease of $0.1 million compared to net sales of $4.8 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.

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

Our foreign subsidiaries reported net income of $0.1 million for the third quarter of fiscal year 2026 as compared to $0.2 million in the third quarter of fiscal year 2025.

LIQUIDITY AND CAPITAL RESOURCES

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

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.

During the nine months ended April 30, 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.

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.

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.

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

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

Cash and cash equivalents totaled $62.9 million and $36.5 million as of April 30, 2026, and 2025, respectively.

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

For the Six Months Ended January 31,

For the Nine Months Ended April 30,

Net cash provided by operating activities $ 53,208 $ 54,988

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Effect of exchange rate changes on cash and cash equivalents 44 38

Net decrease in cash and cash equivalents $ (3,525) $ (1,892)

Net increase in cash and cash equivalents $ 12,483 $ 11,994

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 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.

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, 2026, were as follows:

Accounts receivable, net of allowances increased by $6.2 million in the nine months ended April 30, 2026.

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.

Inventory increased by $0.8 million in the nine months ended April 30, 2026, 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 $0.6 million in the nine months ended April 30, 2026.

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.

In the nine months ended April 30, 2026, 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, 2025.

Excluding the impact of payments made related to capital expenditures, accrued expenses decreased $5.5 million in the nine months ended April 30, 2026.

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 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.

In the nine months ended April 30, 2026, there was a $1.0 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, 2025.

Net cash used in investing activities

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.

Cash used in investing activities totaled $20.6 million in the nine months ended April 30, 2026, primarily driven by capital expenditures.

During this period, we continued to invest in expanding our plant equipment and enhance our facilities to improve manufacturing efficiency and support customer demand.

Net cash used in financing activities

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.

Cash used in financing activities of $20.2 million in the nine months ended April 30, 2026 included $12.5 million for stock repurchases and $7.6 million for dividend payments.

Total cash balances held by our foreign subsidiaries were $7.1 million as of April 30, 2026, compared to $4.7 million as of July 31, 2025.

As of April 30, 2026, we had remaining authority to repurchase 172,261 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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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis