Oil Dri Corporation of America

12/08/2025 | Press release | Distributed by Public on 12/08/2025 15:09

Quarterly Report for Quarter Ending 10/31/2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes included herein and our Consolidated Financial Statements, accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed herein under "Forward-Looking Statements" and "Risk Factors," and those discussed under Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended July 31, 2025.
OVERVIEW
We develop, mine, manufacture and market sorbent products principally produced from clay minerals, primarily consisting of calcium bentonite, attapulgite and diatomaceous shale. Our principal products include agricultural and horticultural chemical carriers, animal health and nutrition products, cat litter, fluids purification and filtration bleaching clays, industrial and automotive floor absorbents and sports field products. Our products are sold to two primary customer groups, including customers who resell our products as originally produced to the end consumer and other customers who use our products as part of their production process or use them as an ingredient in their final finished product. We have two reportable operating segments based on the different characteristics of our two primary customer groups: the Retail and Wholesale Products Group ("Retail and Wholesale") and the Business to Business Products Group ("Business to Business"), as described in Note 10 of the Notes to the unaudited Condensed Consolidated Financial Statements. Each operating segment is discussed individually below.
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.
THREE MONTHS ENDED OCTOBER 31, 2025 COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 2024
CONSOLIDATED RESULTS
For the Three Months Ended October 31,
(in thousands)
2025 2024
$
Change
%
Change
Consolidated Results
Net Sales
$ 120,486 $ 127,945 $ (7,459) (6)%
Gross Profit
$ 35,495 $ 40,780 $ (5,285) (13)%
Income from Operations
$ 16,954 $ 21,190 $ (4,236) (20)%
Net income
$ 15,456 $ 16,376 $ (920) (6)%
Business to Business
Net Sales
$ 44,286 $ 48,415 $ (4,129) (9)%
Operating Income
$ 13,634 $ 17,110 $ (3,476) (20)%
Retail & Wholesale
Net Sales
$ 76,200 $ 79,530 $ (3,330) (4)%
Operating Income
$ 12,399 $ 13,377 $ (978) (7)%
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. $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. The decrease was driven primarily by financing and investing activities, partially offset by positive cash flow from operations. Refer to the "Liquidity and Capital Resources" section below for more details.
BUSINESS TO BUSINESS PRODUCTS GROUP
(in thousands)
For the Three Months Ended October 31,
Business to Business Products Group 2025 2024
$ Change
% Change
Agricultural and Horticultural $ 12,931 $ 11,582 $ 1,349 12 %
Fluids Purification 26,667 30,603 (3,936) (13) %
Animal Health & Nutrition
4,688 6,230 (1,542) (25) %
Net Sales $ 44,286 $ 48,415 $ (4,129) (9) %
Cost of Goods Sold $ (26,545) $ (26,820) $ 275 (1) %
Gross Profit $ 17,741 $ 21,595 $ (3,854) (18) %
SG&A $ (4,107) $ (4,485) $ 378 (8) %
Operating Income $ 13,634 $ 17,110 $ (3,476) (20) %
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.
RETAIL AND WHOLESALE PRODUCTS GROUP
(in thousands)
For the Three Months Ended October 31,
Retail and Wholesale Products Group 2025 2024 $ Change % Change
Cat Litter $ 64,566 $ 67,676 $ (3,110) (5) %
Industrial and Sports 11,634 11,854 (220) (2) %
Net Sales $ 76,200 $ 79,530 $ (3,330) (4) %
Cost of Goods Sold $ (58,446) $ (60,345) $ 1,899 (3) %
Gross Profit $ 17,754 $ 19,185 $ (1,431) (7) %
SG&A $ (5,355) $ (5,808) $ 453 (8) %
Operating Income $ 12,399 $ 13,377 $ (978) (7) %
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. Per ton manufacturing costs, including purchased materials, increased 6%, this increase was partially offset by a 13% reduction in transportation and 5% 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.
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.
LIQUIDITY AND CAPITAL RESOURCES
Our principal liquidity needs are to fund our capital requirements, including funding working capital needs; purchasing and upgrading equipment, facilities, information systems, and real estate; supporting new product development; investing in infrastructure; repurchasing stock; paying dividends; and, from time to time, business acquisitions, and funding our debt service requirements. During the 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. See Note 8 of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information relating to our existing borrowings.
We believe that cash flow from operations, availability under our Note Agreement and revolving credit facility under our Credit Agreement, current cash balances and our ability to obtain other financing, if necessary, will provide sufficient liquidity for foreseeable working capital needs, capital expenditures at existing facilities, deferred compensation payouts, dividend payments and debt service obligations for the foreseeable future.
We continually evaluate our liquidity position and anticipated cash needs, as well as the financing options available to obtain additional cash reserves. Our ability to fund operations, to make planned capital expenditures, to make scheduled debt payments and to remain in compliance with all financial covenants under debt agreements, including, but not limited to, the Credit Agreement, depends on our future operating performance, which, in turn, is subject to prevailing economic conditions and to 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 $42.4 million and $13.5 million as of October 31, 2025, and 2024, 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,
2025 2024
Net cash provided by operating activities $ 10,349 $ 10,919
Net cash used in investing activities (9,066) (12,817)
Net cash used in by financing activities (9,404) (9,080)
Effect of exchange rate changes on cash and cash equivalents 47 3
Net decrease in cash and cash equivalents $ (8,074) $ (10,975)
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. 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.
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.
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.
Other
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. Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing, number and manner of share repurchases will be determined by our management pursuant to the repurchase plan approved by our Board.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of financial condition and results of operations is based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP for interim financial information and in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Estimates and assumptions are revised periodically. Actual results could differ from these estimates. See the information concerning our critical accounting policies included under "Management's Discussion of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025.
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