Results
Oil Dri Corporation of America
10/08/2026 | Press release | Distributed by Public on 10/08/2026 14:10
Annual Report for Fiscal Year Ending 7/31, 2026 (Form 10-K)
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 Consolidated Financial Statements and the related notes included elsewhere herein. 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 those discussed under "Forward-Looking Statements" and in Item 1A "Risk Factors" in this Annual Report on Form 10-K.
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 and the Business to Business Products Group. Each operating segment is discussed individually below. Additional detailed descriptions of the operating segments are included in Item 1 "Business" above.
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 Amended and Restated Oil-Dri Corporation of America 2006 Long Term Incentive Plan, as amended (the "2006 Plan"), as well as to the outstanding awards under the 2006 Plan.
While ongoing geopolitical tensions and conflict in the Middle East have contributed to broader market volatility in the second half of fiscal year 2026, these conditions did not have a direct, material impact on our results for the current fiscal year. 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.
RESULTS OF OPERATIONS
FISCAL YEAR 2026 COMPARED TO FISCAL YEAR 2025
CONSOLIDATED RESULTS
| For the Year Ended July 31, | |||||||||||||||||||||||
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(in thousands)
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2026 | 2025 |
$
Change
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%
Change
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Consolidated Results
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|||||||||||||||||||||||
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Net Sales
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$ | 493,844 | $ | 485,572 | $ | 8,272 | 2% | ||||||||||||||||
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Gross Profit
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$ | 137,510 | $ | 143,083 | $ | (5,573) | (4)% | ||||||||||||||||
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Operating Income
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$ | 67,982 | $ | 68,220 | $ | (238) | -% | ||||||||||||||||
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Net income
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$ | 56,969 | $ | 53,996 | $ | 2,973 | 6% | ||||||||||||||||
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Business to Business
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Net Sales
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$ | 180,198 | $ | 182,596 | $ | (2,398) | (1)% | ||||||||||||||||
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Operating Income
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$ | 55,348 | $ | 59,796 | $ | (4,448) | (7)% | ||||||||||||||||
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Retail & Wholesale
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Net Sales
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$ | 313,646 | $ | 302,976 | $ | 10,670 | 4% | ||||||||||||||||
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Operating Income
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$ | 43,730 | $ | 44,137 | $ | (407) | (1)% | ||||||||||||||||
Fiscal year 2026 was another record year, with consolidated net sales and net income reaching all-time highs. Consolidated net sales in fiscal year 2026 were $493.8 million, up 2% from net sales of $485.6 million in fiscal year 2025 driven by favorable mix. The Retail and Wholesale operating segment drove the overall increase with higher cat litter volumes. Although Business to Business net sales declined slightly due to softer volumes in fluid purification and animal health products, the decrease was partially offset by growth in demand of agriculture products.
Cost of goods sold increased $13.8 million, or 4% in fiscal year 2026 compared with fiscal year 2025, as domestic per-ton costs rose 4% compared to fiscal year 2025. The increase was driven by higher per ton manufacturing and transportation costs. Per ton manufacturing costs increased 6% in fiscal 2026 as compared to fiscal 2025, primarily due to higher labor, materials and depreciation costs. Per ton transportation costs increased 3% mainly due to higher diesel costs and fourth-quarter trucking market impacts. Per ton packaging costs remained flat, as many packaging supply contracts are subject to periodic price adjustments, which lag changes in underlying commodity prices. These cost pressures resulted in a $5.6 million, or 4% decrease in consolidated gross profit in fiscal year 2026 compared to the prior fiscal year. Gross margin (defined as gross profit as a percentage of net sales) declined to 27.8% in fiscal year 2026 from 29.5% in fiscal year 2025.
Operating income remained relatively flat as the decrease in SG&A offset the decrease in gross profit. Total SG&A decreased $5.3 million, or 7% in fiscal year 2026 compared to fiscal year 2025. The decrease was driven by a $4.6 million reduction in corporate unallocated expenses and, to a lesser extent, by SG&A incurred by the operating segments. The decrease in corporate unallocated expenses in fiscal year 2026 as compared to fiscal year 2025 was primarily as a result of lower human resource costs attributed to corporate functions, lower incentive bonus and a reduction of outside services costs. SG&A expenses at the operating segments level are discussed below in the discussion of our segments' operating income.
Total other income, net for fiscal year 2026 was $1.5 million, a $3.5 million change from other expense, net of $2.0 million in fiscal year 2025. This gain was driven by a number of items including $1.0 million due to a reduction in the landfill modification costs recognized in fiscal year 2026 compared to an increase in the estimated cost recognized during fiscal year 2025 and $0.9 million in higher interest income in fiscal year 2026 compared to the prior fiscal year. 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.
Tax expense for fiscal year 2026 was $12.5 million compared to $12.2 million with an effective tax rate of 18% in both fiscal year 2026 and fiscal year 2025. Our effective tax rate is based on annual taxable income and our assessment of various tax adjustments, including depletion and discrete items. See Note 6 of the Notes to the Consolidated Financial Statements for additional information about our income taxes.
Consolidated net income for fiscal year 2026 was $57.0 million, or $3.92 per share of diluted Common Stock, compared to $54.0 million, or $3.70 per share of diluted Common Stock in fiscal year 2025.
Our Consolidated Balance Sheets as of July 31, 2026, and our Consolidated Statements of Cash Flows for fiscal year 2026 show an increase of $23.2 million in total cash and cash equivalents from fiscal year-end 2025. The increase is mainly due to cash flows from operating activities. Refer to the "Liquidity and Capital Resources" section below for additional information about our cash and cash equivalents.
BUSINESS TO BUSINESS PRODUCTS GROUP
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(in thousands)
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For the Year Ended July 31, | |||||||||||||||||||||||||
| Business to Business Products Group | 2026 | 2025 |
$ Change
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% Change | ||||||||||||||||||||||
| Agricultural and Horticultural | $ | 49,232 | $ | 44,338 | $ | 4,894 | 11 | % | ||||||||||||||||||
| Fluids Purification | 104,753 | 110,105 | (5,352) | (5) | % | |||||||||||||||||||||
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Animal Health & Nutrition
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26,213 | 28,153 | (1,940) | (7) | % | |||||||||||||||||||||
| Net Sales | $ | 180,198 | $ | 182,596 | $ | (2,398) | (1) | % | ||||||||||||||||||
| Cost of Goods Sold | $ | (108,603) | $ | (106,691) | (1,912) | 2 | % | |||||||||||||||||||
| Gross Profit | $ | 71,595 | $ | 75,905 | $ | (4,310) | (6) | % | ||||||||||||||||||
| SG&A | $ | (16,247) | $ | (16,109) | (138) | 1 | % | |||||||||||||||||||
| Operating Income | $ | 55,348 | $ | 59,796 | $ | (4,448) | (7) | % | ||||||||||||||||||
Net sales of the Business to Business Products Group for fiscal year 2026 were $180.2 million, a decrease of $2.4 million, or 1%, from net sales of $182.6 million in fiscal year 2025, driven primarily by a reduction in sales of our fluids purification and animal health products and partially offset by an increase in sales of agricultural and horticultural products. Net sales of fluids purification products decreased $5.4 million or 5% in fiscal year 2026 compared with fiscal year 2025, driven primarily by the decrease in demand for our products used in renewable diesel filtration, which was significantly higher in fiscal year 2025 when several new customers began operations in new plants. Net sales of our animal health and nutrition products decreased $1.9 million, or 7%, in fiscal year 2026 compared to the fiscal year 2025, due to lower volume primarily driven by the temporary loss of a key customer at one of our distributors. Net sales of our agricultural and horticultural products increased $4.9 million, or 11%, for fiscal year 2026 compared to fiscal year 2025 mainly as a result of stronger demand from key customers.
Gross profit and operating income decreased in fiscal year 2026 compared to fiscal year 2025, due to lower net sales and higher cost of goods sold and SG&A. Cost of goods sold increased $1.9 million, or 2%, mainly due to per ton cost of goods sold which increased 4% in the fiscal year 2026 compared to fiscal year 2025. This increase was primarily due to higher per ton manufacturing costs, including materials, which increased 6%. SG&A expenses for the Business to Business Products Group increased $0.1 million, or 1%, for fiscal year 2026 compared to fiscal year 2025.
RETAIL AND WHOLESALE PRODUCTS GROUP
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(in thousands)
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For the Year Ended July 31, | |||||||||||||||||||||||||
| Retail and Wholesale Products Group | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||
| Cat Litter | $ | 265,318 | $ | 255,926 | $ | 9,392 | 4 | % | ||||||||||||||||||
| Industrial and Sports | 48,328 | 47,050 | 1,278 | 3 | % | |||||||||||||||||||||
| Net Sales | $ | 313,646 | $ | 302,976 | $ | 10,670 | 4 | % | ||||||||||||||||||
| Cost of Goods Sold | $ | (247,731) | $ | (235,798) | $ | (11,933) | 5 | % | ||||||||||||||||||
| Gross Profit | $ | 65,915 | $ | 67,178 | $ | (1,263) | (2) | % | ||||||||||||||||||
| SG&A | $ | (22,185) | $ | (23,041) | $ | 856 | (4) | % | ||||||||||||||||||
| Operating Income | $ | 43,730 | $ | 44,137 | $ | (407) | (1) | % | ||||||||||||||||||
Net sales of the Retail and Wholesale Products Group for fiscal year 2026 were $313.6 million, an increase of $10.7 million, or 4%, from net sales of $303.0 million in fiscal year 2025, primarily driven by increased sales of our cat litter products. Net sales of co-packaged products increased 47% in fiscal year 2026 compared to fiscal year 2025, mainly due to higher volumes as we expanded our co-packaged offerings to include lightweight cat litter. Domestic cat litter net sales, excluding co-packaged cat litter, were $226.1 million for fiscal year 2026, which remained relatively flat when compared to fiscal year 2025. However, crystal cat litter sales increased $3.2 million due to higher volumes, while overall clay-based litter sales declined when compared to the prior fiscal year. The decrease in clay-based litter was driven by a $3.9 million decrease due to changes in private label distribution and a $1.7 million decrease related to the absence of non-recurring promotional activity from the prior year. These losses were partially offset by revenue gains with other customers. Net sales of our domestic industrial and sports products increased by $1.4 million, or 3%, compared to fiscal year 2025, primarily driven by higher pricing to offset increased costs including transportation costs. Net sales by our subsidiary in Canada increased $0.3 million in fiscal year 2026 compared to fiscal year 2025.
Gross profit and operating income decreased in fiscal year 2026 compared to fiscal year 2025, primarily due to higher cost of goods sold. Cost of goods sold increased $11.9 million, or 5%, driven by the per ton cost of goods sold which increased 4% in the fiscal year 2026 compared to fiscal year 2025. This increase was primarily driven by higher per ton manufacturing costs, including materials, which increased 6% and per ton transportation costs, which increased 7% when compared to fiscal year 2025. SG&A expenses for the Retail and Wholesale Products Group decreased $0.9 million in fiscal year 2026 compared to fiscal year 2025, primarily due to reduced advertising and R&D expenses.
FOREIGN SUBSIDIARIES
Foreign operations include our subsidiaries in Canada and the Netherlands, which are included in the Retail and Wholesale Products Group, and our subsidiaries in the United Kingdom, China, Mexico and Indonesia, which are included in the Business to Business Products Group. Net sales by our foreign subsidiaries during fiscal year 2026 were $19.8 million, a decrease of $0.3 million, or 1%, from net sales of $20.1 million during fiscal year 2025. The decrease in net sales was driven mainly by our subsidiaries in Mexico and the United Kingdom, partially offset by an increase in Canada. Net sales of our subsidiary in Mexico decreased $0.4 million, or 20%, during fiscal year 2026 compared to fiscal year 2025 primarily due decreased sales volumes and lower prices. Net sales of our subsidiary in the United Kingdom decreased $0.1 million, or 3% during fiscal year 2026 compared to fiscal year 2025, due primarily to lower volume. Net sales of our subsidiary in Canada in fiscal year 2026 increased by $0.3 million, or 2%, compared to net sales in fiscal year 2025, driven by higher sales of lightweight litter. Net sales by our foreign subsidiaries represented 4% of our consolidated net sales in both fiscal year 2026 and fiscal year 2025.
For fiscal year 2026, our foreign subsidiaries reported a pre-tax net income of $0.1 million, compared to $0.1 million of pre-tax net loss in fiscal year 2025. The increase was primarily driven by the foreign VAT assessment recognized in fiscal year 2025.
Identifiable assets of our foreign subsidiaries as of July 31, 2026, were $1.1 million compared to $1.2 million as of July 31, 2025.
FISCAL YEAR 2025 COMPARED TO FISCAL YEAR 2024
For a discussion of our fiscal year 2024 Results of Operations, including a discussion of our financial results for the fiscal year ended July 31, 2025 compared to the fiscal year ended July 31, 2024, refer to Part II, Item 7 of our annual report on Form 10-K filed with the SEC on October 9, 2025.
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 fiscal year 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 the Series B, C and D Senior Notes issued under the Note Agreement. On October 7, 2026, we amended the Note Agreement to increase the aggregate principal amount of Shelf Notes from $75 million to $150 million and the Credit Agreement to increase our line of credit from $45 million to $75 million, among other things, providing more financial flexibility. See Note 4 of the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K 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 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.
Cash and cash equivalents, including restricted cash, totaled $73.7 million and $50.5 million as of July 31, 2026, and 2025, respectively. The following table sets forth certain elements of our Consolidated Statements of Cash Flows for the fiscal year (in thousands):
| 2026 | 2025 | |||||||||||||
| Net cash provided by operating activities | $ | 80,106 | $ | 80,183 | ||||||||||
| Net cash used in investing activities | (32,875) | (32,526) | ||||||||||||
| Net cash used in financing activities | (23,950) | (21,744) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (39) | 64 | ||||||||||||
| Net increase in cash and cash equivalents | $ | 23,242 | $ | 25,977 | ||||||||||
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 flow for fiscal year 2026 were as follows:
Accounts receivables, less allowance for credit losses and cash discounts, were $5.8 million higher at fiscal year-end 2026 compared to fiscal year-end 2025. The increase in accounts receivable balances is primarily driven by the increase in net sales and timing of collections.
Inventories were $1.9 million higher at fiscal year-end 2026 compared to fiscal year-end 2025. The increase compared to fiscal 2025 is primarily due to an increase in purchases of additives and packaging to meet anticipated demand. See Note 1 of the Notes to the Consolidated Financial Statements for further information regarding our inventory.
Excluding the impact of payments related to capital expenditures, accounts payable at fiscal year-end 2026 were flat
compared to fiscal year-end 2025. Changes in trade accounts payable in all periods are subject to normal fluctuations in the timing of payments, the cost of goods and services we purchased, production volume levels and vendor payment terms. In fiscal year 2026, there was a $0.7 million decrease in accounts payable related to capital expenditures which increased the cash used in investing activities as compared to fiscal year 2025.
Excluding the impact of payments related to capital expenditures, accrued expenses were $0.1 million lower at fiscal year-end 2026 compared to fiscal year-end 2025. In fiscal year 2026, there was a $0.5 million decrease in accrued expenses related to capital expenditures recognized as cash used in investing activities as compared to the fiscal year 2025. See Note 10 of the Notes to the Consolidated Financial Statements for further information regarding our accrued expenses.
Net cash used in investing activities
Cash used in investing activities was $32.9 million in fiscal year 2026. Cash used in investing activities primarily related to capital expenditures to expand our plant equipment and improve our facilities in order to support increased demand for our products.
Net cash used in financing activities
Cash used in financing activities was $24.0 million in fiscal year 2026, primarily driven by $12.6 million used for share repurchases and $10.4 million used for dividend payments.
Other
Total cash and investment balances held by our foreign subsidiaries were $5.1 million as of July 31, 2026, and $4.7 million as of July 31, 2025. See further discussion in the "Foreign Subsidiaries" section above.
As of July 31, 2026, we had remaining authority to repurchase 171,909 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. The timing and number of shares repurchased will be determined by our management pursuant to the repurchase plan approved by our Board. In fiscal years 2026 and 2025, we made repurchases of stock as further discussed in Item 5 "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."
OFF BALANCE SHEET ARRANGEMENTS
We do not have any unconsolidated special purpose entities. As of July 31, 2026, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of the financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with the generally accepted accounting principles of the United States ("U.S. GAAP"). We review our financial reporting and disclosure practices and accounting policies annually to ensure that our financial reporting and disclosures provide accurate and transparent information relative to the current economic and business environment. See Note 1 of the Notes to the Consolidated Financial Statements for a discussion of our significant accounting policies.
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that have had, or are reasonably likely to have, a material impact on the reported amounts. The critical accounting policies that reflect our more significant estimates include income taxes, trade promotion, reclamation, impairment of goodwill and other intangible assets, valuation of acquired goodwill and other intangible assets. Actual results could differ from these estimates.
Income Taxes. Our effective tax rate on earnings was based on income, statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we operate. Significant judgment was required in determining our effective tax rate and in evaluating our tax positions, and in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of expenses for tax and financial statement purposes. Significant changes in these estimates may result in an increase or decrease to our tax provision in a subsequent period.
We determine our current and deferred taxes in accordance with Accounting Standards Codification ("ASC") 740 Income Taxes. The tax effect of the expected reversal of tax differences was recorded at rates currently enacted for each jurisdiction in which we operate. To the extent that temporary differences will result in future tax benefits, we must estimate the timing of their reversal and whether taxable operating income in future periods will be sufficient to fully recognize any deferred tax assets.
We maintain valuation allowances where it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the income tax provision in the period of change. In determining whether a valuation allowance is warranted, we take into account such factors as prior earnings history, expected future earnings and other factors that could affect the realization of deferred tax assets. A change in the assessment of the realizability of deferred tax assets may materially impact our tax provision in the period in which a change of assessment occurs.
We recorded valuation allowances of $2.4 million and $2.8 million for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards and certain state net operating loss carryforwards as of July 31, 2026 and 2025, respectively, because we believe it is unlikely we will realize the benefit of these tax attributes in the future.
In addition to valuation allowances, we may provide for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted when new information becomes available or when positions are effectively settled. We did not record a liability for unrecognized tax benefits at either July 31, 2026, or 2025. See Note 6 of the Notes to the Consolidated Financial Statements for further discussion.
Trade Promotions. We routinely commit to one-time or ongoing trade promotion programs in our Retail and Wholesale Products Group. Promotional reserves are provided for sales incentives made directly to consumers, such as coupons, and sales incentives made to customers, such as slotting, discounts based on sales volume, cooperative marketing programs and other arrangements. All such trade promotion costs are netted against sales. Promotional reserves are established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. To estimate trade promotion reserves, we rely on our historical experience of trade spending patterns and that of the industry, current trends and forecasted data. While we believe our promotional reserves are reasonable and that appropriate judgments have been made, estimated amounts could differ from future obligations. We have accrued liabilities at the end of each period for the estimated trade spending programs. We recorded liabilities of approximately $3.3 million and $3.1 million for trade promotions as of July 31, 2026, and 2025, respectively.
Reclamation. During the normal course of our mining process, we remove overburden and perform on-going reclamation activities. As overburden is removed from a mine site, it is hauled to a previously mined site and used to refill older sites. This process allows us to continuously reclaim older mine sites and dispose of overburden simultaneously, therefore minimizing the costs associated with the reclamation process. On an annual basis we evaluate our potential reclamation liability in accordance with ASC 410, Asset Retirement and Environmental Obligations. Reclamation assets are depreciated over the estimated useful lives of the various mines. Reclamation liabilities are increased based on a yearly accretion charge over the estimated useful lives of the mines. We have recorded an estimated net reclamation asset of $3.0 million as of July 31, 2026, and $3.1 million, as of July 31, 2025, and a corresponding estimated reclamation liability of $5.8 million as of July 31, 2026, and $5.9 million as of July 31, 2025. These values represent the discounted present value of the estimated future mining reclamation and landfill closure and monitoring costs at the production plants. In fiscal year 2026 we released a portion of our asset retirement obligation based on our annual evaluation of the future costs, resulting in a net decrease of the liability.
Accounting for reclamation obligations requires that we make estimates unique to each mine site of the future costs we will incur to complete the reclamation work required to comply with existing laws and regulations. These estimates are based on a variety of factors for each mine site such as, but not limited to, the size and unique nature of each property including the acreage and depth of our mines, costs for leveling, filling, and reseeding land, and the applicable laws and regulations the mine site is subject to. Actual future costs incurred could significantly differ from estimated amounts. Future changes to environmental laws and the length of the period between the estimate and incurrence of actual costs could increase the extent of
reclamation work required. Any such increases in future costs could materially impact the amount incurred for reclamation costs.
Impairment of goodwill and other intangible assets. We review carrying values of goodwill, trademarks and other indefinite-lived intangible assets periodically for possible impairment in accordance with ASC 350, Intangibles - Goodwill and Other. We first consider qualitative factors which include macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments and historical performance. If it is determined that further quantitative assessment is required, it would be based on cash flow considerations and other approaches that would require significant judgment with respect to factors such as volume, revenue and expenses. Impairment occurs when the carrying value exceeds the fair value. Our impairment analysis is performed in the third quarter of the fiscal year and may be re-performed during the year when indicators such as unexpected adverse economic factors, unanticipated technological changes, competitive activities and acts by governments and courts indicate that an asset may become impaired. In fiscal year 2026 we had goodwill associated with both our Business to Business and Retail and Wholesale operating segments. Based on our qualitative assessment there were no indicators that required us to perform further quantitative assessment of the fair value of our goodwill or other indefinite-lived assets. Accordingly, no impairment of goodwill was identified in fiscal year 2026, however this could change in the future, as outlined under Item 1A "Risk Factors."
Valuation of acquired goodwill and intangible assets. We account for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The identifiable assets acquired, and liabilities assumed are recorded at their fair values on the date of acquisition. The difference in the fair value of consideration transferred over the fair values of the assets and liabilities is recorded as goodwill. We make significant estimates and assumptions when determining the fair values of assets and liabilities obtained through a business combination, especially regarding intangible assets. We utilize various approaches to establish the fair value of intangible assets acquired. The Company believes its estimates of the fair value of intangible assets to be reasonable. However, actual financial results may differ from the estimates because of the inherent uncertainty involved.
NEW ACCOUNTING PRONOUNCEMENTS
For recent accounting pronouncements, see Note 1 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
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