Oil-Dri Corporation of America (NYSE: ODC), producer and marketer of sorbent mineral products, today announced its second quarter fiscal 2020 earnings.
     
  Second Quarter Year to Date
  Ended January 31 Ended January 31
  F20 F19 Change F20 F19 Change
Consolidated Results            
Net Sales $71,005,000 $69,880,000 2% $142,127,000 $136,023,000 4%
Net Income Attributable to Oil-Dri $4,830,000 $2,287,000 111% $8,366,000 $3,193,000 162%
Earnings per Diluted Share $0.63 $0.30 110% $1.09 $0.42 160%
Business to Business            
Net Sales $24,471,000 $26,458,000 (8)% $50,949,000 $51,784,000 (2)%
Segment Operating Income $7,552,000 $7,272,000 4% $15,848,000 $14,304,000 11%
Retail and Wholesale            
Net Sales $46,534,000 $43,422,000 7% $91,178,000 $84,239,000 8%
Segment Operating Income $5,608,000 $2,653,000 111% $8,968,000 $2,662,000 237%
 

Daniel S. Jaffee, President and Chief Executive Officer, stated, “I am pleased with the results in the second quarter, including a triple-digit percentage increase in earnings per diluted share.  This was a welcome outcome as our performance in the same period last year was negatively impacted by the implementation of our new Enterprise Resource Planning (“ERP”) system and several significant cost increases.  Although we experienced slight sales declines within the Business to Business Group, we remain confident in the long term success of Amlan International.  Net sales within our Retail and Wholesale Group were strong and continue to grow at a consistent pace.  Record operating earnings in this segment reflect our cat litter business’ aforementioned sales growth along with improved margins.  Going forward, we will continue to focus our efforts on driving revenue and earnings growth within both business groups.

During the second quarter, Consolidated Net Income Attributable to Oil-Dri reached $4.8 million compared to $2.3 million last year.  In addition to higher sales, we continued to benefit from our manufacturing operations’ strong performance and improved natural gas and freight costs.  These favorable outcomes offset a 4% increase in Selling, General and Administrative (“SG&A”) expenses in the second quarter versus the prior year.  This increase represents the net effect of higher bonus accruals, a curtailment gain upon the freeze of our supplemental executive retirement plan, and lower consulting costs related to the ERP implementation in fiscal 2019.

Our Business to Business Products Group’s second quarter revenues decreased 8% compared to the prior year, primarily due to the loss of a large customer who purchased our traditional agricultural products.  This decline was partially offset by increased sales for our co-packaging coarse cat litter. Revenues of our fluid purification products were down 1% in the second quarter versus a year ago.  While we experienced an increase in demand for our edible oil purification products, primarily in Europe, a biodiesel processing customer closed its U.S. plant which negatively impacted sales.  Animal health and nutrition product revenues were flat for the quarter, reflecting growth of our feed additives in Mexico and Asia, excluding China, offset by declines in sales of our products in China.  Our business in Asia, including China, continues to be impacted by the African swine fever, as sales to pork producers have not fully recovered since the spread of the virus in fiscal 2019.  With the recent outbreak of the novel coronavirus (COVID-19), our sales office in China temporarily closed, due to restrictions from the Chinese government. The spread of the virus has also limited travel by our salesforce and delayed product shipments.

Operating Income in the Business to Business Group was up 4% in the second quarter versus the prior year.  Decreased natural gas and freight costs helped offset an 11% increase in SG&A expenses over the prior year.  These higher SG&A costs reflect elevated product development costs, support, and compensation related expenses.

The Retail and Wholesale Products Group experienced a 7% increase in revenues in the second quarter compared to the prior year.  Total domestic cat litter sales rose 10% in the quarter over last year, reflecting increases in both branded and private label litter products.  Revenues of our private label scoopable and coarse litter increased due to higher demand from both existing as well as new customers. In addition, we witnessed continued sales growth of our branded coarse cat litter and litter box liners.  Our subsidiary in Canada also contributed to this business segment’s increase with gains in cat litter and industrial absorbents sales.

Operating Income for the Retail and Wholesale Products Group reached a record $5.6 million in the second quarter compared to $2.7 million last year. Increased sales combined with lower natural gas and freight costs offset slightly higher SG&A costs.  A reduction in advertising expenses also occurred within the quarter.  However, we expect advertising spending in the remainder of the fiscal year to result in a higher total advertising expense for fiscal 2020 than for fiscal 2019.”

The Company will host its second quarter of fiscal 2020 earnings teleconference on Friday, March 6, 2020 at 10:00 a.m. Central Time. Participation details are available on our website’s events page.

While Oil-Dri’s founding product was granular clay floor absorbents, it has since greatly diversified its portfolio. The Company’s mission to “Create Value from Sorbent Minerals” is supported by its wide array of consumer and business to business product offerings. In 2016, Oil-Dri celebrated its seventy-fifth year of business and looks forward to the next milestone.

“Oil-Dri ”, “Amlan”, and “Cat’s Pride”  are registered trademarks of Oil-Dri Corporation of America.

Certain statements in this press release may contain forward-looking statements that are based on our current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs, and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in other press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, and conference calls. Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,” or variations of such words and similar expressions are intended to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially including, but not limited to, the dependence of our future growth and financial performance on successful new product introductions, intense competition in our markets, volatility of our quarterly results, risks associated with acquisitions, our dependence on a limited number of customers for a large portion of our net sales and other risks, uncertainties and assumptions that are described in Item 1A (Risk Factors) of our most recent Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission. Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except to the extent required by law, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this press release, whether as a result of new information, future events, changes in assumptions, or otherwise.

Category: Earnings

CONSOLIDATED STATEMENTS OF INCOME        
(unaudited)    
(in thousands, except per share amounts)       Second Quarter Ended January 31     
       2020      % of Sales        2019      % of Sales  
Net Sales   $ 71,005     100.0 %   $ 69,880     100.0 %
Cost of Sales   (52,047 )   (73.3 )%   (54,476 )   (78.0 )%
Gross Profit   18,958     26.7 %   15,404     22.0 %
Selling, General and Administrative Expenses   (13,085 )   (18.4 )%   (12,577 )   (18.0 )%
Operating Income   5,873     8.3 %   2,827     4.0 %
Interest Expense   (103 )   (0.1 )%   (142 )   (0.2 )%
Other (Expense) Income   (12 )   %   103     0.1 %
Income Before Income Taxes   5,758     8.1 %   2,788     4.0 %
Income Tax Expense   (1,009 )   (1.4 )%   (506 )   (0.7 )%
Net Income   4,749     6.7 %   2,282     3.3 %
Net Loss Attributable to Noncontrolling Interest   (81 )   (0.1 )%   (5 )   %
Net Income Attributable to Oil-Dri   $ 4,830     6.8 %   $ 2,287     3.3 %
Net Income Per Share:      Basic Common $ 0.68         $ 0.33      
                                        Basic Class B Common $ 0.51         $ 0.25      
  Diluted Common $ 0.63         $ 0.30      
Avg Shares Outstanding: Basic Common 5,181         5,121      
                                        Basic Class B Common 2,039         2,068      
                                        Diluted Common 7,344         7,229      
                 
    Six Months Ended January 31
    2020   % of Sales   2019   % of Sales
Net Sales   $ 142,127     100.0 %   $ 136,023     100.0 %
Cost of Sales   (103,234 )   (72.6 )%   (104,609 )   (76.9 )%
Gross Profit   38,893     27.4 %   31,414     23.1 %
Selling, General and Administrative Expenses   (28,899 )   (20.3 )%   (27,584 )   (20.3 )%
Operating Income   9,994     7.0 %   3,830     2.8 %
Interest Expense   (206 )   (0.1 )%   (293 )   (0.2 )%
Other Income   47     %   135     0.1 %
Income Before Income Taxes   9,835     6.9 %   3,672     2.7 %
Income Tax Expense   (1,626 )   (1.1 )%   (456 )   (0.3 )%
Net Income   8,209     5.8 %   3,216     2.4 %
Net (Loss) Income Attributable to Noncontrolling Interest (157 )   (0.1 )%   23     %
Net Income Attributable to Oil-Dri   $ 8,366     5.9 %   $ 3,193     2.4 %
Net Income Per Share:      Basic Common $ 1.19         $ 0.46      
  Basic Class B Common $ 0.89         $ 0.34      
                                        Diluted Common $ 1.09         $ 0.42      
Avg Shares Outstanding:  Basic Common 5,164         5,099      
                                        Basic Class B Common 2,045         2,069      
                                        Diluted Common 7,321         7,242      
                     
         
CONSOLIDATED BALANCE SHEETS        
(in thousands, except per share amounts)        
(unaudited)        
         
    As of January 31
    2020   2019
Current Assets        
Cash and Cash Equivalents   $ 21,569     $ 9,375  
Short-term Investments       480  
Accounts Receivable, Net   35,699     38,282  
Inventories   22,679     28,123  
Prepaid Expenses and Other   6,234     6,040  
Total Current Assets   86,181     82,300  
Property, Plant and Equipment, Net   89,831     86,193  
Other Noncurrent Assets (1)   33,067     24,644  
Total Assets   $ 209,079     $ 193,137  
         
Current Liabilities        
Current Maturities of Notes Payable   $ 3,067     $ 3,083  
Accounts Payable   9,565     7,882  
Dividends Payable   1,766     1,680  
Other Current Liabilities   19,107     18,444  
Total Current Liabilities   33,505     31,089  
Noncurrent Liabilities        
Notes Payable       3,038  
Other Noncurrent Liabilities (1)   28,645     26,246  
Total Noncurrent Liabilities   28,645     29,284  
Stockholders' Equity   146,929     132,764  
Total Liabilities and Stockholders' Equity   $ 209,079     $ 193,137  
         
Book Value Per Share Outstanding   $ 20.38     $ 18.52  
         
Acquisitions of:        
Property, Plant and Equipment Second Quarter $ 3,386     $ 2,141  
  Year To Date $ 7,286     $ 6,199  
Depreciation and Amortization Charges Second Quarter $ 3,460     $ 3,234  
  Year To Date $ 6,929     $ 6,539  
                 

(1) Amounts as of January 31, 2020 include right-of-use operating lease assets and related liabilities required by adoption of Accounting Standards Codification 842, Leases.

CONSOLIDATED STATEMENTS OF CASH FLOWS      
(in thousands)      
(unaudited)      
       
  For the Six Months Ended
  January 31
  2020   2019
CASH FLOWS FROM OPERATING ACTIVITIES      
Net Income $ 8,209     $ 3,216  
Adjustments to reconcile net income to net cash      
provided by operating activities:      
Depreciation and Amortization 6,929     6,539  
(Increase) in Accounts Receivable (434 )   (4,529 )
Decrease (Increase) in Inventories 1,508     (5,607 )
Increase in Accounts Payable 2,661     2,295  
(Decrease) in Accrued Expenses (1,602 )   (1,390 )
(Decrease) Increase in Pension and Postretirement Benefits (5,536 )   859  
Other 2,535     1,309  
Total Adjustments 6,061     (524 )
Net Cash Provided by Operating Activities 14,270     2,692  
       
CASH FLOWS FROM INVESTING ACTIVITIES      
Capital Expenditures (7,286 )   (6,199 )
Net Dispositions of Investment Securities     6,654  
Net Cash (Used in) Provided by Investing Activities (7,286 )   455  
       
CASH FLOWS FROM FINANCING ACTIVITIES      
Principal Payments on Long-Term Debt (3,083 )   (3,083 )
Dividends Paid (3,527 )   (3,287 )
Purchase of Treasury Stock (523 )   (135 )
Net Cash Used in Financing Activities (7,133 )   (6,505 )
       
Effect of exchange rate changes on Cash and Cash Equivalents (144 )   (24 )
       
Net Decrease in Cash and Cash Equivalents (293 )   (3,382 )
Cash and Cash Equivalents, Beginning of Period 21,862     12,757  
Cash and Cash Equivalents, End of Period $ 21,569     $ 9,375  
               

Contact:Leslie A. GarberManager of Investor RelationsOil-Dri Corporation of AmericaInvestorRelations@oildri.com(312) 321-1515

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