x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended January 31, 2017 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to ______________ |
Delaware (State or other jurisdiction of incorporation or organization) | 36-2048898 (I.R.S. Employer Identification No.) | |
410 North Michigan Avenue, Suite 400 Chicago, Illinois (Address of principal executive offices) | 60611-4213 (Zip Code) |
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o |
PART I – FINANCIAL INFORMATION | ||
Page | ||
Item 1: | ||
Item 2: | ||
Item 3: | ||
Item 4: | ||
PART II – OTHER INFORMATION | ||
Item 4: | ||
Item 6: | ||
(unaudited) | |||||||
ASSETS | January 31, 2017 | July 31, 2016 | |||||
Current Assets | |||||||
Cash and cash equivalents | $ | 17,560 | $ | 18,629 | |||
Short-term investments | 7,358 | 10,184 | |||||
Accounts receivable, less allowance of $881 and $753 at January 31, 2017 and July 31, 2016, respectively | 32,047 | 30,386 | |||||
Inventories | 23,217 | 23,251 | |||||
Deferred income taxes | 3,884 | 3,884 | |||||
Prepaid repairs expense | 4,054 | 3,938 | |||||
Prepaid expenses and other assets | 4,658 | 901 | |||||
Total Current Assets | 92,778 | 91,173 | |||||
Property, Plant and Equipment | |||||||
Cost | 217,359 | 218,025 | |||||
Less accumulated depreciation and amortization | (135,861 | ) | (137,314 | ) | |||
Total Property, Plant and Equipment, Net | 81,498 | 80,711 | |||||
Other Assets | |||||||
Goodwill | 9,034 | 9,034 | |||||
Trademarks and patents, net of accumulated amortization of $279 and $261 at January 31, 2017 and July 31, 2016, respectively | 999 | 916 | |||||
Customer list, net of accumulated amortization of $4,031 and $3,460 at January 31, 2017 and July 31, 2016, respectively | 3,754 | 4,325 | |||||
Deferred income taxes | 12,319 | 12,754 | |||||
Other | 6,192 | 5,902 | |||||
Total Other Assets | 32,298 | 32,931 | |||||
Total Assets | $ | 206,574 | $ | 204,815 |
(unaudited) | |||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | January 31, 2017 | July 31, 2016 | |||||
Current Liabilities | |||||||
Current maturities of notes payable | $ | 3,083 | $ | 3,083 | |||
Accounts payable | 7,316 | 6,635 | |||||
Dividends payable | 1,485 | 1,477 | |||||
Accrued expenses: | |||||||
Salaries, wages and commissions | 6,675 | 8,656 | |||||
Trade promotions and advertising | 2,487 | 2,855 | |||||
Freight | 1,699 | 1,579 | |||||
Other | 6,753 | 6,455 | |||||
Total Current Liabilities | 29,498 | 30,740 | |||||
Noncurrent Liabilities | |||||||
Notes payable, net of unamortized debt issuance costs of $103 and $118 at January 31, 2017 and July 31, 2016, respectively | 9,147 | 12,215 | |||||
Deferred compensation | 10,991 | 10,504 | |||||
Pension and postretirement benefits | 32,915 | 32,492 | |||||
Other | 3,518 | 3,313 | |||||
Total Noncurrent Liabilities | 56,571 | 58,524 | |||||
Total Liabilities | 86,069 | 89,264 | |||||
Stockholders’ Equity | |||||||
Common Stock, par value $.10 per share, issued 8,015,166 shares at January 31, 2017 and 7,982,243 shares at July 31, 2016 | 802 | 798 | |||||
Class B Stock, par value $.10 per share, issued 2,513,512 shares at January 31, 2017 and 2,515,735 shares at July 31, 2016 | 251 | 252 | |||||
Additional paid-in capital | 35,288 | 34,294 | |||||
Retained earnings | 153,240 | 149,945 | |||||
Accumulated other comprehensive loss: | |||||||
Pension and postretirement benefits | (13,289 | ) | (13,867 | ) | |||
Cumulative translation adjustment | (106 | ) | (155 | ) | |||
Total accumulated other comprehensive loss | (13,395 | ) | (14,022 | ) | |||
Less Treasury Stock, at cost (2,906,777 Common and 324,741 Class B shares at January 31, 2017 and 2,912,953 Common and 324,741 Class B shares at July 31, 2016) | (55,681 | ) | (55,716 | ) | |||
Total Stockholders’ Equity | 120,505 | 115,551 | |||||
Total Liabilities & Stockholders’ Equity | $ | 206,574 | $ | 204,815 |
(unaudited) | |||||||
For the Six Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Net Sales | $ | 131,786 | $ | 133,162 | |||
Cost of Sales | (91,936 | ) | (93,447 | ) | |||
Gross Profit | 39,850 | 39,715 | |||||
Selling, General and Administrative Expenses | (31,217 | ) | (26,539 | ) | |||
Income from Operations | 8,633 | 13,176 | |||||
Other Income (Expense) | |||||||
Interest expense | (489 | ) | (511 | ) | |||
Interest income | 16 | 9 | |||||
Other, net | (237 | ) | (65 | ) | |||
Total Other Expense, Net | (710 | ) | (567 | ) | |||
Income Before Income Taxes | 7,923 | 12,609 | |||||
Income Taxes | (1,664 | ) | (3,365 | ) | |||
Net Income | 6,259 | 9,244 | |||||
Retained Earnings: | |||||||
Balance at beginning of period | 149,945 | 142,095 | |||||
Cash dividends declared and treasury stock issuances | (2,964 | ) | (2,846 | ) | |||
Balance at End of Period | $ | 153,240 | $ | 148,493 | |||
Net Income Per Share | |||||||
Basic Common | $ | 0.93 | $ | 1.39 | |||
Basic Class B Common | $ | 0.70 | $ | 1.04 | |||
Diluted Common | $ | 0.86 | $ | 1.28 | |||
Average Shares Outstanding | |||||||
Basic Common | 5,011 | 4,978 | |||||
Basic Class B Common | 2,077 | 2,046 | |||||
Diluted Common | 7,145 | 7,074 | |||||
Dividends Declared Per Share | |||||||
Basic Common | $ | 0.4400 | $ | 0.4200 | |||
Basic Class B Common | $ | 0.3300 | $ | 0.3150 |
(unaudited) | |||||||
For the Six Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Net Income | $ | 6,259 | $ | 9,244 | |||
Other Comprehensive Income: | |||||||
Pension and postretirement benefits (net of tax) | 578 | 308 | |||||
Cumulative translation adjustment | 49 | (150 | ) | ||||
Other Comprehensive Income | 627 | 158 | |||||
Total Comprehensive Income | $ | 6,886 | $ | 9,402 |
(unaudited) | |||||||
For the Three Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Net Sales | $ | 65,174 | $ | 65,367 | |||
Cost of Sales | (46,049 | ) | (46,305 | ) | |||
Gross Profit | 19,125 | 19,062 | |||||
Selling, General and Administrative Expenses | (13,538 | ) | (13,662 | ) | |||
Income from Operations | 5,587 | 5,400 | |||||
Other Income (Expense) | |||||||
Interest expense | (238 | ) | (252 | ) | |||
Interest income | 8 | 6 | |||||
Other, net | (113 | ) | (85 | ) | |||
Total Other Expense, Net | (343 | ) | (331 | ) | |||
Income Before Income Taxes | 5,244 | 5,069 | |||||
Income Taxes | (994 | ) | (1,248 | ) | |||
Net Income | 4,250 | 3,821 | |||||
Net Income Per Share | |||||||
Basic Common | $ | 0.63 | $ | 0.57 | |||
Basic Class B | $ | 0.47 | $ | 0.43 | |||
Diluted Common | $ | 0.58 | $ | 0.53 | |||
Average Shares Outstanding | |||||||
Basic Common | 5,019 | 4,982 | |||||
Basic Class B | 2,088 | 2,055 | |||||
Diluted Common | 7,155 | 7,096 | |||||
Dividends Declared Per Share | |||||||
Basic Common | $ | 0.2200 | $ | 0.2100 | |||
Basic Class B | $ | 0.1650 | $ | 0.1575 |
(unaudited) | |||||||
For the Three Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Net Income | $ | 4,250 | $ | 3,821 | |||
Other Comprehensive Income (Loss): | |||||||
Pension and postretirement benefits (net of tax) | 309 | 130 | |||||
Cumulative translation adjustment | 63 | (139 | ) | ||||
Other Comprehensive Income (Loss) | 372 | (9 | ) | ||||
Total Comprehensive Income | $ | 4,622 | $ | 3,812 |
(unaudited) | |||||||
For the Six Months Ended January 31, | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | 2017 | 2016 | |||||
Net Income | $ | 6,259 | $ | 9,244 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 6,389 | 5,914 | |||||
Amortization of investment net discount | (5 | ) | (2 | ) | |||
Non-cash stock compensation expense | 777 | 638 | |||||
Excess tax benefits for share-based payments | (207 | ) | (55 | ) | |||
Deferred income taxes | 354 | 189 | |||||
Provision for bad debts and cash discounts | 131 | 131 | |||||
Loss on the sale of fixed assets | 276 | 202 | |||||
(Increase) Decrease in assets: | |||||||
Accounts receivable | (1,829 | ) | 521 | ||||
Inventories | 11 | (1,674 | ) | ||||
Prepaid expenses | (3,784 | ) | (2,671 | ) | |||
Other assets | (156 | ) | (118 | ) | |||
Increase (Decrease) in liabilities: | |||||||
Accounts payable | 852 | (201 | ) | ||||
Accrued expenses | (1,698 | ) | 3,295 | ||||
Deferred compensation | 487 | 104 | |||||
Pension and postretirement benefits | 1,001 | 554 | |||||
Other liabilities | 235 | 980 | |||||
Total Adjustments | 2,834 | 7,807 | |||||
Net Cash Provided by Operating Activities | 9,093 | 17,051 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Capital expenditures | (7,279 | ) | (4,795 | ) | |||
Proceeds from sale of property, plant and equipment | 2 | 249 | |||||
Purchases of short-term investments | (11,555 | ) | (14,125 | ) | |||
Dispositions of short-term investments | 14,386 | 1,225 | |||||
Net Cash Used in Investing Activities | (4,446 | ) | (17,446 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Principal payments on notes payable | (3,083 | ) | (3,484 | ) | |||
Dividends paid | (2,956 | ) | (2,783 | ) | |||
Purchase of treasury stock | (122 | ) | (18 | ) | |||
Proceeds from issuance of treasury stock | — | 185 | |||||
Proceeds from issuance of common stock | 170 | 96 | |||||
Excess tax benefits for share-based payments | 207 | 55 | |||||
Net Cash Used in Financing Activities | (5,784 | ) | (5,949 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 68 | 33 | |||||
Net Decrease in Cash and Cash Equivalents | (1,069 | ) | (6,311 | ) | |||
Cash and Cash Equivalents, Beginning of Period | 18,629 | 20,138 | |||||
Cash and Cash Equivalents, End of Period | $ | 17,560 | $ | 13,827 |
(unaudited) | |||||||
For the Six Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Capital expenditures accrued, but not paid | $ | 657 | $ | 924 | |||
Cash dividends declared and accrued, but not paid | $ | 1,485 | $ | 1,407 |
January 31, 2017 | July 31, 2016 | ||||||
Finished goods | $ | 14,189 | $ | 14,032 | |||
Packaging | 4,811 | 4,672 | |||||
Other | 4,217 | 4,547 | |||||
Total Inventories | $ | 23,217 | $ | 23,251 |
2018 | $ | 1,014 | |
2019 | $ | 827 | |
2020 | $ | 657 | |
2021 | $ | 473 | |
2022 | $ | 323 |
Pension Benefits | |||||||||||||||
(in thousands) | |||||||||||||||
For the Three Months Ended January 31, | For the Six Months Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Service cost | $ | 446 | $ | 267 | $ | 913 | $ | 756 | |||||||
Interest cost | 474 | 484 | 931 | 967 | |||||||||||
Expected return on plan assets | (411 | ) | (485 | ) | (887 | ) | (962 | ) | |||||||
Amortization of: | |||||||||||||||
Prior service costs | — | 2 | 1 | 4 | |||||||||||
Other actuarial loss | 485 | 209 | 914 | 496 | |||||||||||
Net periodic benefit cost | $ | 994 | $ | 477 | $ | 1,872 | $ | 1,261 | |||||||
Postretirement Health Benefits | |||||||||||||||
(in thousands) | |||||||||||||||
For the Three Months Ended January 31, | For the Six Months Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Service cost | $ | 33 | $ | 21 | $ | 63 | $ | 43 | |||||||
Interest cost | 21 | 21 | 39 | 41 | |||||||||||
Amortization of: | |||||||||||||||
Prior service costs | (1 | ) | (1 | ) | (3 | ) | (3 | ) | |||||||
Other actuarial loss | 14 | — | 20 | — | |||||||||||
Net periodic benefit cost | $ | 67 | $ | 41 | $ | 119 | $ | 81 |
Pension Benefits | Postretirement Health Benefits | ||||||||||
For the Three and Six Months Ended January 31, | |||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Discount rate for net periodic benefit cost | 3.36 | % | 4.22 | % | 2.71 | % | 3.51 | % | |||
Rate of increase in compensation levels | 3.50 | % | 3.50 | % | — | — | |||||
Long-term expected rate of return on assets | 7.00 | % | 7.50 | % | — | — |
Assets | |||||||||||||||
January 31, 2017 | July 31, 2016 | ||||||||||||||
(in thousands) | |||||||||||||||
Business to Business Products | $ | 59,727 | $ | 61,007 | |||||||||||
Retail and Wholesale Products | 92,191 | 91,626 | |||||||||||||
Unallocated Assets | 54,656 | 52,182 | |||||||||||||
Total Assets | $ | 206,574 | $ | 204,815 | |||||||||||
For the Six Months Ended January 31, | |||||||||||||||
Net Sales | Income | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Business to Business Products | $ | 50,734 | $ | 48,446 | $ | 17,223 | $ | 16,745 | |||||||
Retail and Wholesale Products | 81,052 | 84,716 | 4,480 | 9,697 | |||||||||||
Total Sales | $ | 131,786 | $ | 133,162 | |||||||||||
Corporate Expenses | (13,070 | ) | (13,266 | ) | |||||||||||
Income from Operations | 8,633 | 13,176 | |||||||||||||
Total Other Expense, Net | (710 | ) | (567 | ) | |||||||||||
Income before Income Taxes | 7,923 | 12,609 | |||||||||||||
Income Taxes | (1,664 | ) | (3,365 | ) | |||||||||||
Net Income | $ | 6,259 | $ | 9,244 |
For the Three Months Ended January 31, | |||||||||||||||
Net Sales | Income | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Business to Business Products | $ | 23,261 | $ | 22,625 | $ | 7,815 | $ | 7,576 | |||||||
Retail and Wholesale Products | 41,913 | 42,742 | 4,987 | 4,295 | |||||||||||
Total Sales | $ | 65,174 | $ | 65,367 | |||||||||||
Corporate Expenses | (7,215 | ) | (6,471 | ) | |||||||||||
Income from Operations | 5,587 | 5,400 | |||||||||||||
Total Other Expense, Net | (343 | ) | (331 | ) | |||||||||||
Income before Income Taxes | 5,244 | 5,069 | |||||||||||||
Income Taxes | (994 | ) | (1,248 | ) | |||||||||||
Net Income | $ | 4,250 | $ | 3,821 |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||
(in thousands) | (Years) | (in thousands) | ||||||||||
Options outstanding and exercisable, July 31, 2016 | 10 | $ | 17.00 | 0.3 | $ | 205 | ||||||
Exercised | (10 | ) | $ | 17.00 | $ | 211 | ||||||
Options outstanding and exercisable, January 31, 2017 | — |
Restricted Shares (in thousands) | Weighted Average Grant Date Fair Value | |||||
Non-vested restricted stock outstanding at July 31, 2016 | 194 | $ | 29.09 | |||
Granted | 31 | $ | 36.84 | |||
Vested | (36 | ) | $ | 26.09 | ||
Forfeitures | (1 | ) | $ | 31.48 | ||
Non-vested restricted stock outstanding at January 31, 2017 | 188 | $ | 30.95 |
Pension and Postretirement Health Benefits | Cumulative Translation Adjustment | Total Accumulated Other Comprehensive (Loss) Income | |||||||||
Balance as of July 31, 2016 | $ | (13,867 | ) | $ | (155 | ) | $ | (14,022 | ) | ||
Other comprehensive income before reclassifications, net of tax | — | 49 | 49 | ||||||||
Amounts reclassified from accumulated other comprehensive income, net of tax | 578 | a) | — | 578 | |||||||
Net current-period other comprehensive income, net of tax | 578 | 49 | 627 | ||||||||
Balance as of January 31, 2017 | $ | (13,289 | ) | $ | (106 | ) | $ | (13,395 | ) |
For the Six Months Ended January 31, | |||||||
2017 | 2016 | ||||||
Net cash provided by operating activities | $ | 9,093 | $ | 17,051 | |||
Net cash used in investing activities | (4,446 | ) | (17,446 | ) | |||
Net cash used in financing activities | (5,784 | ) | (5,949 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 68 | 33 | |||||
Net decrease in cash and cash equivalents | $ | (1,069 | ) | $ | (6,311 | ) |
Payments Due by Period | |||||||||||||||||||
Contractual Obligations | Total | Less Than 1 Year | 1 – 3 Years | 4 – 5 Years | After 5 Years | ||||||||||||||
Notes Payable | $ | 12,333 | $ | 3,083 | $ | 6,167 | $ | 3,083 | $ | — | |||||||||
Interest on Notes Payable | 1,231 | 498 | 611 | 122 | — | ||||||||||||||
Operating Leases | 14,708 | 1,854 | 2,511 | 1,538 | 8,805 | ||||||||||||||
Total Contractual Cash Obligations | $ | 28,272 | $ | 5,435 | $ | 9,289 | $ | 4,743 | $ | 8,805 |
Amount of Commitment Expiration Per Period | |||||||||||||||||||
Total | Less Than 1 Year | 1 – 3 Years | 4 – 5 Years | After 5 Years | |||||||||||||||
Other Commercial Commitments | $ | 24,427 | $ | 24,427 | $ | — | $ | — | $ | — |
Exhibit No. | Description | SEC Document Reference | ||
11 | Statement re: Computation of Earnings per Share. | Filed herewith. | ||
31 | Certifications pursuant to Rule 13a–14(a). | Filed herewith. | ||
32 | Certifications pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002. | Furnished herewith. | ||
95 | Mine Safety Disclosures | Filed herewith. | ||
101.INS | XBRL Taxonomy Instance Document | Filed herewith. | ||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. | ||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | Filed herewith. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith. |
Exhibit No. | Description | ||
11 | Statement re: Computation of Earnings per Share. | ||
31 | Certifications pursuant to Rule 13a–14(a). | ||
32 | Certifications pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002. | ||
95 | Mine Safety Disclosures | ||
101.INS | XBRL Taxonomy Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
For the Three Months Ended January 31, | For the Six Months Ended January 31, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
Net income available to stockholders | $ | 4,250 | $ | 3,821 | $ | 6,259 | $ | 9,244 | |||||
Less: Distributed and undistributed earnings allocated to non-vested restricted stock | (100 | ) | (90 | ) | (145 | ) | (185 | ) | |||||
Earnings available to common shareholders | $ | 4,150 | $ | 3,731 | $ | 6,114 | $ | 9,059 | |||||
Shares Calculation | |||||||||||||
Average shares outstanding - Basic Common | 5,019 | 4,982 | 5,011 | 4,978 | |||||||||
Average shares outstanding - Basic Class B Common | 2,088 | 2,055 | 2,077 | 2,046 | |||||||||
Potential Common Stock relating to stock options and non-vested restricted stock | 48 | 59 | 57 | 50 | |||||||||
Average shares outstanding - Assuming dilution | 7,155 | 7,096 | 7,145 | 7,074 | |||||||||
Net Income Per Share: Basic Common | $ | 0.63 | $ | 0.57 | $ | 0.93 | $ | 1.39 | |||||
Net Income Per Share: Basic Class B Common | $ | 0.47 | $ | 0.43 | $ | 0.70 | $ | 1.04 | |||||
Net Income Per Share: Diluted Common | $ | 0.58 | $ | 0.53 | $ | 0.86 | $ | 1.28 |
I. | I, Daniel S. Jaffee, certify that: |
1. | I have reviewed this quarterly report on Form 10-Q of Oil-Dri Corporation of America (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | March 10, 2017 |
By: | /s/ Daniel S. Jaffee |
Daniel S. Jaffee President and Chief Executive Officer |
I. | I, Daniel T. Smith, certify that: |
1. | I have reviewed this quarterly report on Form 10-Q of Oil-Dri Corporation of America (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | March 10, 2017 |
By: | /s/ Daniel T. Smith |
Daniel T. Smith Vice President and Chief Financial Officer |
Dated: | March 10, 2017 |
/s/ Daniel S. Jaffee | |
Name: Daniel S. Jaffee Title: President and Chief Executive Officer |
Dated: | March 10, 2017 |
/s/ Daniel T. Smith | |
Name: Daniel T. Smith Title: Vice President and Chief Financial Officer |
Legal Actions | |||||||||
Mine location | Section 104 “Significant and Substantial” Violations | Section 104(b) Orders | Section 104(d) Citations and Orders | Section 110(b)(2)Flagrant Violations | Section 107(a) Imminent Danger Orders | Total Dollar Value of Proposed MSHA Assessments | Pending as of Last Day of Period | Initiated During Period | Resolved During Period |
(#) | (#) | (#) | (#) | (#) | ($) | (#) | (#) | (#) | |
Ochlocknee, Georgia | — | — | — | — | — | — | — | — | — |
Ripley, Mississippi | — | — | — | — | — | — | 2 | — | 2 |
Mounds, Illinois | — | — | — | — | — | — | 5 | — | — |
Blue Mountain, Mississippi | — | — | — | — | — | — | — | — | 1 |
Taft, California | — | — | — | — | — | — | — | — | 1 |
Document and Entity Information |
6 Months Ended |
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Jan. 31, 2017
shares
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Entity Information | |
Entity Registrant Name | OIL DRI CORP OF AMERICA |
Entity Central Index Key | 0000074046 |
Current Fiscal Year End Date | --07-31 |
Entity Filer Category | Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Jan. 31, 2017 |
Document Fiscal Year Focus | 2017 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Common Stock | |
Entity Information | |
Entity Common Stock, Shares Outstanding | 5,108,389 |
Common Class B | |
Entity Information | |
Entity Common Stock, Shares Outstanding | 2,188,771 |
Condensed Consolidated Balance Sheet Parenthetical - USD ($) |
Jan. 31, 2017 |
Jul. 31, 2016 |
---|---|---|
Current Assets | ||
Allowance for doubtful accounts | $ 881,000 | $ 753,000 |
Other Assets | ||
Accumulated amortization of trademarks and patents | 279,000 | 261,000 |
Accumulated amortization of customer lists | 4,031,000 | 3,460,000 |
Noncurrent Liabilities | ||
Net unamortized debt issuance costs | $ 103,000 | $ 118,000 |
Common Stock | ||
Stockholder's Equity | ||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares issued | 8,015,166 | 7,982,243 |
Treasury stock, common shares | 2,906,777 | 2,912,953 |
Common Class B | ||
Stockholder's Equity | ||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares issued | 2,513,512 | 2,515,735 |
Treasury stock, common shares | 324,741 | 324,741 |
Condensed Consolidated Statements of Income and Retained Earnings - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2017 |
Jan. 31, 2016 |
Jan. 31, 2017 |
Jan. 31, 2016 |
|
Net Sales | $ 65,174 | $ 65,367 | $ 131,786 | $ 133,162 |
Cost of Sales | (46,049) | (46,305) | (91,936) | (93,447) |
Gross Profit | 19,125 | 19,062 | 39,850 | 39,715 |
Selling, General and Administrative Expenses | (13,538) | (13,662) | (31,217) | (26,539) |
Income from Operations | 5,587 | 5,400 | 8,633 | 13,176 |
Other Income (Expense) | ||||
Interest expense | (238) | (252) | (489) | (511) |
Interest income | 8 | 6 | 16 | 9 |
Other, net | (113) | (85) | (237) | (65) |
Total Other Expense, Net | (343) | (331) | (710) | (567) |
Income Before Income Taxes | 5,244 | 5,069 | 7,923 | 12,609 |
Income Taxes | (994) | (1,248) | (1,664) | (3,365) |
Net Income | 4,250 | 3,821 | 6,259 | 9,244 |
Retained Earnings: | ||||
Balance at beginning of period | 149,945 | 142,095 | ||
Cash dividends declared and treasury stock issuances | (2,964) | (2,846) | ||
Balance at End of Period | $ 153,240 | $ 148,493 | $ 153,240 | $ 148,493 |
Net Income Per Share | ||||
Diluted Common (in dollars per share) | $ 0.58 | $ 0.53 | $ 0.86 | $ 1.28 |
Average Shares Outstanding | ||||
Diluted Common (in shares) | 7,155 | 7,096 | 7,145 | 7,074 |
Common Stock | ||||
Net Income Per Share | ||||
Basic Common (in dollars per share) | $ 0.63 | $ 0.57 | $ 0.93 | $ 1.39 |
Average Shares Outstanding | ||||
Basic Common (in shares) | 5,019 | 4,982 | 5,011 | 4,978 |
Dividends Declared Per Share (in dollars per share) | $ 0.2200 | $ 0.2100 | $ 0.4400 | $ 0.4200 |
Common Class B | ||||
Net Income Per Share | ||||
Basic Common (in dollars per share) | $ 0.47 | $ 0.43 | $ 0.70 | $ 1.04 |
Average Shares Outstanding | ||||
Basic Common (in shares) | 2,088 | 2,055 | 2,077 | 2,046 |
Dividends Declared Per Share (in dollars per share) | $ 0.1650 | $ 0.1575 | $ 0.3300 | $ 0.3150 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jan. 31, 2017 |
Jan. 31, 2016 |
Jan. 31, 2017 |
Jan. 31, 2016 |
|
Net Income | $ 4,250 | $ 3,821 | $ 6,259 | $ 9,244 |
Other Comprehensive Income (Loss): | ||||
Pension and postretirement benefits (net of tax) | 309 | 130 | 578 | 308 |
Cumulative translation adjustment | 63 | (139) | 49 | (150) |
Other Comprehensive Income (Loss) | 372 | (9) | 627 | 158 |
Total Comprehensive Income | $ 4,622 | $ 3,812 | $ 6,886 | $ 9,402 |
Basis of Statement Presentation |
6 Months Ended |
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Jan. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Statement Presentation | BASIS OF STATEMENT PRESENTATION The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial statements and the related notes are condensed and should be read in conjunction with the Consolidated Financial Statements and related notes for the fiscal year ended July 31, 2016 included in our Annual Report on Form 10-K filed with the SEC. The unaudited Condensed Consolidated Financial Statements include the accounts of Oil-Dri Corporation of America and its subsidiaries. All significant intercompany transactions are eliminated. Except as otherwise indicated herein or as the context otherwise requires, references to “Oil-Dri,” the “Company,” “we,” “us” or “our” refer to Oil-Dri Corporation of America and its subsidiaries. The unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals and reclassifications which are, in the opinion of management, necessary for a fair presentation of the statements contained herein. Operating results for the three and six months ended January 31, 2017 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, 2017. The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Estimates and assumptions are revised periodically. Actual results could differ from these estimates. We recognize revenue when risk of loss and title are transferred under the terms of our sales agreements with customers at a fixed and determinable price and collection of payment is probable. Trade promotion 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. Such trade promotion costs are netted against sales. Sales returns and allowances are not material. Selling, general and administrative expenses include salaries, wages and benefits associated with staff outside the manufacturing and distribution functions, all advertising and marketing-related costs, any miscellaneous trade spending expenses not required to be included in net sales, research and development costs, depreciation and amortization related to assets outside the manufacturing and distribution process and all other non-manufacturing and non-distribution expenses. We record an allowance for doubtful accounts based on our historical experience and a periodic review of our accounts receivable, including a review of the overall aging of accounts and analysis of specific customer accounts. A customer account is determined to be uncollectible when we have completed our internal collection procedures, including termination of shipments, direct customer contact and formal demand of payment. We mine sorbent materials on property that we either own or lease as part of our overall operations. A significant part of our overall mining cost is incurred during the process of removing the overburden (non-usable material) from the mine site, thus exposing the sorbent material used in a majority of our production processes. These stripping costs are treated as a variable inventory production cost and are included in cost of sales in the period they are incurred. We defer and amortize the pre-production overburden removal costs associated with opening a new mine. Additionally, it is our policy to capitalize the purchase cost of land and mineral rights, including associated legal fees, survey fees and real estate fees. The costs of obtaining mineral patents, including legal fees and drilling expenses, are also capitalized. Pre-production development costs on new mines and any prepaid royalties that may be offset against future royalties due upon extraction of the minerals are also capitalized. All exploration related costs are expensed as incurred. We perform ongoing reclamation activities during the normal course of our overburden removal. As overburden is removed from a mine site, it is hauled to previously mined sites and is used to refill older sites. This process allows us to continuously reclaim older mine sites and dispose of overburden simultaneously, thereby minimizing the costs associated with the reclamation process. |
New Accounting Pronouncements |
6 Months Ended |
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Jan. 31, 2017 | |
NEW ACCOUNTING PRONOUNCEMENTS [Abstract] | |
New Accounting Pronouncements | NEW ACCOUNTING PRONOUNCEMENTS Recently Issued Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance under Accounting Standard Codification (“ASC”) 606, Revenue from Contract with Customers, which establishes a single comprehensive revenue recognition model for all contracts with customers and will supersede most existing revenue guidance. This guidance requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange. In March, April, May and December of 2016, the FASB issued amended guidance that further clarifies the principles for recognizing revenue. We are currently in the process of performing a comprehensive evaluation of these requirements, including the impact on how we record certain incentives and advertising arrangements. The implementation date for this guidance was deferred and will now be effective at the beginning of our first quarter of fiscal year 2019. Transition options to implement this guidance include either a full or modified retrospective approach and early adoption is permitted. We have not yet selected an implementation method. In August 2014, the FASB issued guidance under ASC 205, Presentation of Financial Statements - Going Concern, which defines management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. This guidance will be effective for the fourth quarter of fiscal year 2017. This pronouncement requires additional disclosures only in certain circumstances, and we do not expect a significant impact on our Consolidated Financial Statements. In July 2015, the FASB issued guidance under ASC 330, Simplifying the Measurement of Inventory. The new guidance requires inventory to be measured at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. This new guidance is effective for our first quarter of fiscal year 2018 and early adoption is permitted. The guidance must be applied prospectively. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. In November 2015, the FASB issued guidance under ASC 740, Balance Sheet Classification of Deferred Taxes, which requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. This guidance is effective for our first quarter of fiscal year 2018 and early adoption is permitted. The guidance may be applied either prospectively or retrospectively to all periods presented. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. In January 2016, the FASB issued guidance under ASC 825, Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The provisions relevant to us at this time require the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes, as well as eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value in such disclosure. This guidance is effective for our first quarter of fiscal year 2019 and early adoption is generally not permitted. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. In February 2016, the FASB issued guidance under ASC 842, Leases, which provides that, for leases with a term greater than 12 months, a lessee must recognize in the statement of financial position both a liability to make lease payments and an asset representing its right to use the underlying asset. Other requirements describe expense recognition, as well as financial statement presentation and disclosure. This guidance is effective for our first quarter of fiscal year 2020 using a modified retrospective approach, which includes a number of optional practical expedients. Early adoption is permitted. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. In March 2016, the FASB issued guidance under ASC 718, Compensation-Stock Compensation, which simplifies several aspects of the accounting for share-based payment transactions, including accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. The new guidance also clarifies the statement of cash flows presentation for certain components of share-based awards. This guidance is effective for our first quarter of fiscal year 2018, with early adoption permitted. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. In June 2016, the FASB issued guidance under ASC 326, Financial Instruments-Credit Losses, which requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this new guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, as well as additional disclosures. In general, this guidance will require modified retrospective adoption for all outstanding instruments that fall under this guidance. This guidance is effective for our first quarter of fiscal year 2021. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements. There have been no other accounting pronouncements issued but not yet adopted by us which are expected to have a material impact on our Consolidated Financial Statements. Recently Adopted Pronouncements For the first quarter of fiscal 2017, we adopted FASB guidance under ASC 835, Simplifying the Presentation of Debt Issuance Cost, which requires debt issuance costs related to notes payable to be presented as a direct deduction from the associated debt liability rather than as an asset. Amortization of these costs will continue to be reported as interest expense. We adopted this guidance retrospectively, which resulted in a decrease in Other Assets of $118,000 with a corresponding decrease in Noncurrent Liabilities in our Condensed Consolidated Balance Sheets as of July 31, 2016. The new requirements had no impact on our results of operations or cash flows. |
Inventories |
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Jan. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES The composition of inventories is as follows (in thousands):
Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory costs include the cost of raw materials, packaging supplies, labor and other overhead costs. We perform a detailed review of our inventory items to determine if an obsolescence reserve adjustment is necessary. The review surveys all of our operating facilities and sales groups to ensure that both historical issues and new market trends are considered. The obsolescence reserve not only considers specific items, but also takes into consideration the overall value of the inventory as of the balance sheet date. The inventory obsolescence reserve values at January 31, 2017 and July 31, 2016 were $720,000 and $806,000, respectively. |
Fair Value Measurements |
6 Months Ended |
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Jan. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized into categories based on the lowest level of input that is significant to the fair value measurement. The categories in the fair value hierarchy are as follows: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs for similar assets or liabilities or valuation models whose inputs are observable, directly or indirectly. Level 3: Unobservable inputs. Cash equivalents of $4,194,000 and $7,626,000 as of January 31, 2017 and July 31, 2016, respectively, were classified as Level 1. These cash instruments are primarily money market mutual funds and are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets. Short-term investments included U.S. Treasury securities and certificates of deposit. We intend and have the ability to hold our short-term investments to maturity; therefore, these investments were reported at amortized cost, which approximated fair value as of January 31, 2017 and July 31, 2016. Accounts receivable and accounts payable balances approximated their fair values at January 31, 2017 and July 31, 2016 due to the short maturity and nature of those balances. Notes payable are reported at the face amount of future maturities. The estimated fair value of notes payable, including current maturities, was $13,194,000 and $16,651,000 as of January 31, 2017 and July 31, 2016, respectively. Our debt does not trade on a daily basis in an active market, therefore the fair value estimate is based on market observable borrowing rates currently available for debt with similar terms and average maturities and is classified as Level 2. We apply fair value techniques on at least an annual basis associated with: (1) valuing potential impairment loss related to goodwill, trademarks and other indefinite-lived intangible assets and (2) valuing potential impairment loss related to long-lived assets. See Note 5 for further information about goodwill and other intangible assets. |
Goodwill and Other Intangibles (Notes) |
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Jan. 31, 2017 | |||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Intangible amortization expense was $307,000 and $364,000 in the second quarter of fiscal 2017 and 2016, respectively. Intangible amortization expense was $612,000 and $727,000 for the first six months of fiscal 2017 and 2016, respectively. Estimated intangible amortization for the remainder of fiscal 2017 is $612,000. Estimated intangible amortization for the next five fiscal years is as follows (in thousands):
We have one acquired trademark recorded at a cost of $376,000 that was determined to have an indefinite life and is not amortized. We performed our annual goodwill impairment analysis in the fourth quarter of fiscal 2016 and no impairment was identified. There have been no triggering events that would indicate a new impairment analysis is needed. |
Pension and Other Postretirement Benefits |
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Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefits Disclosure | PENSION AND OTHER POSTRETIREMENT BENEFITS The components of net periodic pension and postretirement health benefit costs were as follows:
The postretirement health plan is an unfunded plan. We pay insurance premiums and claims from our assets. The pension plan is funded based upon actuarially determined contributions that take into account the amount deductible for income tax purposes, the normal cost and the minimum contribution required and the maximum contribution allowed under applicable regulations. We contributed $335,000 and $636,000 to our pension plan during the second quarter and first six months of fiscal 2017, respectively. We estimate contributions will be $840,000 for the remainder of fiscal 2017. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for a discussion of the potential impact of financial market fluctuations on pension plan assets and future funding contributions. Assumptions used in the previous calculations were as follows:
The medical cost trend assumption for postretirement health benefits was 7.35%. The graded trend rate is expected to decrease to an ultimate rate of 4.5% in fiscal 2036. |
Operating Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segment Disclosure | OPERATING SEGMENTS We have two operating segments: (1) Retail and Wholesale Products Group and (2) Business to Business Products Group. These operating segments are managed separately and each segment's major customers have different characteristics. The Retail and Wholesale Products Group customers include: mass merchandisers; wholesale clubs; drugstore chains; pet specialty retail outlets; dollar stores; retail grocery stores; distributors of industrial cleanup and automotive products; environmental service companies; and sports field product users. The Business to Business Products Group customers include: processors and refiners of edible oils, petroleum-based oils and biodiesel fuel; manufacturers of animal feed and agricultural chemicals; distributors of animal health and nutrition products; and marketers of consumer products. Our operating segments are also our reportable segments. Net sales and operating income for each segment are provided below. Revenues by product line are not provided because it would be impracticable to do so. The accounting policies of the segments are the same as those described in Note 1 of the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2016. We do not rely on any segment asset allocations and we do not consider them meaningful because of the shared nature of our production facilities; however, we have estimated the segment asset allocations below for those assets for which we can reasonably determine. The unallocated asset category is the remainder of our total assets. The asset allocation is estimated and is not a measure used by our chief operating decision maker about allocating resources to the operating segments or in assessing their performance. The corporate expenses line includes certain unallocated expenses, including primarily salaries, wages and benefits, purchased services, rent, utilities and depreciation and amortization associated with corporate functions such as research and development, information systems, finance, legal, human resources and customer service. Corporate expenses also include the estimated annual incentive plan bonus accrual.
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Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments | STOCK-BASED COMPENSATION We determine the fair value of stock options and restricted stock issued under our long term incentive plans as of the grant date. We recognize the related compensation expense over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service to the Company. The Oil-Dri Corporation of America 2006 Long Term Incentive Plan (the “2006 Plan”) permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based and cash-based awards. Our employees and outside directors are eligible to receive grants under the 2006 Plan. The total number of shares of stock subject to grants under the 2006 Plan may not exceed 937,500. Stock options have been granted to our outside directors with a vesting period of one year and stock options granted to employees generally vest 25% two years after the grant date and in each of the three following anniversaries of the grant date. In addition, restricted shares have been issued under the 2006 Plan as described in the restricted stock section below. Stock Options A summary of stock options is shown below:
The amount of cash received from the exercise of stock options during the second quarter of fiscal years 2017 and 2016 was $170,000 and $96,000, respectively, and the related tax benefit was $80,000 and $40,000, respectively. The amount of cash received from the exercise of stock options during the first six months of fiscal years 2017 and 2016 was $170,000 and $281,000, respectively, and the related tax benefit was $80,000 and $68,000, respectively. No stock options were granted during the first six months of either fiscal year 2017 or 2016. Restricted Stock All of our non-vested restricted stock as of January 31, 2017 was issued under the 2006 Plan with vesting periods between two years and five years. Under the 2006 Plan, 18,000 and 400 restricted shares of Common Stock were granted during the second quarter of fiscal years 2017 and 2016, respectively. Stock-based compensation expense related to non-vested restricted stock for the second quarter of fiscal years 2017 and 2016 was $346,000 and $306,000, respectively. Stock-based compensation expense related to non-vested restricted stock for the first six months of fiscal years 2017 and 2016 was $777,000 and $638,000, respectively. A summary of restricted stock transactions is shown below:
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Accumulated Other Comprehensive (Loss) Income (Notes) |
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Accumulated Other Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive (Loss) Income | ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME The following table summarizes the changes in accumulated other comprehensive income by component as of January 31, 2017 (in thousands):
a) Amount is net of tax expense of $354,000. Amount is included in the components of net periodic benefit cost for the pension and postretirement health plans. See Note 6 for further information. |
Basis of Statement Presentation Level 2 (Policies) |
6 Months Ended |
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Jan. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Revenue Recognition | We recognize revenue when risk of loss and title are transferred under the terms of our sales agreements with customers at a fixed and determinable price and collection of payment is probable. Trade promotion 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. Such trade promotion costs are netted against sales. Sales returns and allowances are not material. |
Selling, General and Administrative Expenses | Selling, general and administrative expenses include salaries, wages and benefits associated with staff outside the manufacturing and distribution functions, all advertising and marketing-related costs, any miscellaneous trade spending expenses not required to be included in net sales, research and development costs, depreciation and amortization related to assets outside the manufacturing and distribution process and all other non-manufacturing and non-distribution expenses. |
Trade Receivable | We record an allowance for doubtful accounts based on our historical experience and a periodic review of our accounts receivable, including a review of the overall aging of accounts and analysis of specific customer accounts. A customer account is determined to be uncollectible when we have completed our internal collection procedures, including termination of shipments, direct customer contact and formal demand of payment. |
Overburden Removal and Mining Costs | We mine sorbent materials on property that we either own or lease as part of our overall operations. A significant part of our overall mining cost is incurred during the process of removing the overburden (non-usable material) from the mine site, thus exposing the sorbent material used in a majority of our production processes. These stripping costs are treated as a variable inventory production cost and are included in cost of sales in the period they are incurred. We defer and amortize the pre-production overburden removal costs associated with opening a new mine. Additionally, it is our policy to capitalize the purchase cost of land and mineral rights, including associated legal fees, survey fees and real estate fees. The costs of obtaining mineral patents, including legal fees and drilling expenses, are also capitalized. Pre-production development costs on new mines and any prepaid royalties that may be offset against future royalties due upon extraction of the minerals are also capitalized. All exploration related costs are expensed as incurred. |
Reclamation | We perform ongoing reclamation activities during the normal course of our overburden removal. As overburden is removed from a mine site, it is hauled to previously mined sites and is used to refill older sites. This process allows us to continuously reclaim older mine sites and dispose of overburden simultaneously, thereby minimizing the costs associated with the reclamation process |
Inventories Level 2 (Policies) |
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Jan. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory costs include the cost of raw materials, packaging supplies, labor and other overhead costs. We perform a detailed review of our inventory items to determine if an obsolescence reserve adjustment is necessary. The review surveys all of our operating facilities and sales groups to ensure that both historical issues and new market trends are considered. The obsolescence reserve not only considers specific items, but also takes into consideration the overall value of the inventory as of the balance sheet date. |
Fair Value Measurements Fair Value Measurements (Policies) |
6 Months Ended |
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Jan. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement, Policy | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized into categories based on the lowest level of input that is significant to the fair value measurement. The categories in the fair value hierarchy are as follows: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs for similar assets or liabilities or valuation models whose inputs are observable, directly or indirectly. Level 3: Unobservable inputs. |
Operating Segments Level 2 (Policies) |
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Jan. 31, 2017 | |
Segment Reporting [Abstract] | |
Operating Segments | We have two operating segments: (1) Retail and Wholesale Products Group and (2) Business to Business Products Group. These operating segments are managed separately and each segment's major customers have different characteristics. The Retail and Wholesale Products Group customers include: mass merchandisers; wholesale clubs; drugstore chains; pet specialty retail outlets; dollar stores; retail grocery stores; distributors of industrial cleanup and automotive products; environmental service companies; and sports field product users. The Business to Business Products Group customers include: processors and refiners of edible oils, petroleum-based oils and biodiesel fuel; manufacturers of animal feed and agricultural chemicals; distributors of animal health and nutrition products; and marketers of consumer products. Our operating segments are also our reportable segments. Net sales and operating income for each segment are provided below. Revenues by product line are not provided because it would be impracticable to do so. The accounting policies of the segments are the same as those described in Note 1 of the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2016. |
Stock-Based Compensation Level 2 (Policies) |
6 Months Ended |
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Jan. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation Policy | We determine the fair value of stock options and restricted stock issued under our long term incentive plans as of the grant date. We recognize the related compensation expense over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service to the Company. |
Inventories Level 3 (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | The composition of inventories is as follows (in thousands):
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Goodwill and Other Intangibles (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated intangible amortization for the next five fiscal years is as follows (in thousands):
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Pension and Other Postretirement Benefits (Tables) |
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Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | The components of net periodic pension and postretirement health benefit costs were as follows:
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Schedule of Assumptions Used | Assumptions used in the previous calculations were as follows:
The medical cost trend assumption for postretirement health benefits was 7.35%. The graded trend rate is expected to decrease to an ultimate rate of 4.5% in fiscal 2036. |
Operating Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segments Information |
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Stock-Based Compensation (Tables) |
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Jan. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Transactions | A summary of stock options is shown below:
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Schedule of Restricted Stock Transactions | A summary of restricted stock transactions is shown below:
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Accumulated Other Comprehensive (Loss) Income (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive (Loss) Income by Component | The following table summarizes the changes in accumulated other comprehensive income by component as of January 31, 2017 (in thousands):
a) Amount is net of tax expense of $354,000. Amount is included in the components of net periodic benefit cost for the pension and postretirement health plans. See Note 6 for further information. |
New Accounting Pronouncements Narrative (Details) - USD ($) |
Jan. 31, 2017 |
Jul. 31, 2016 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle | ||
Net unamortized debt issuance costs | $ 103,000 | $ 118,000 |
Inventories (Details) - USD ($) $ in Thousands |
Jan. 31, 2017 |
Jul. 31, 2016 |
---|---|---|
Inventory | ||
Finished goods | $ 14,189 | $ 14,032 |
Packaging | 4,811 | 4,672 |
Other | 4,217 | 4,547 |
Total Inventories | $ 23,217 | $ 23,251 |
Inventories Narrative (Details) - USD ($) |
Jan. 31, 2017 |
Jul. 31, 2016 |
---|---|---|
Inventory | ||
Inventory obsolescence reserve | $ 720,000 | $ 806,000 |
Fair Value Measurements Narrative (Details) - USD ($) |
Jan. 31, 2017 |
Jul. 31, 2016 |
---|---|---|
Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Cash Equivalents | $ 4,194,000 | $ 7,626,000 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Notes Payable, Fair Value | $ 13,194,000 | $ 16,651,000 |
Goodwill and Other Intangibles (Details) $ in Thousands |
Jan. 31, 2017
USD ($)
|
---|---|
Finite-Lived Intangible Assets, Future Amortization Expense | |
2018 | $ 1,014 |
2019 | 827 |
2020 | 657 |
2021 | 473 |
2022 | $ 323 |
Goodwill and Other Intangibles Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jan. 31, 2017 |
Jan. 31, 2016 |
Jan. 31, 2017 |
Jan. 31, 2016 |
Jul. 31, 2016 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Amortization of intangible assets | $ 307,000 | $ 364,000 | $ 612,000 | $ 727,000 | |
Amortization expense for remainder of current fiscal year | 612,000 | 612,000 | |||
Indefinite-lived trademarks | $ 376,000 | $ 376,000 | |||
Goodwill impairment loss | $ 0 |
Pension and Other Postretirement Benefits (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2017 |
Jan. 31, 2016 |
Jan. 31, 2017 |
Jan. 31, 2016 |
|
Pension Plan | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||||
Service cost | $ 446 | $ 267 | $ 913 | $ 756 |
Interest cost | 474 | 484 | 931 | 967 |
Expected return on plan assets | (411) | (485) | (887) | (962) |
Amortization of Prior service costs | 0 | 2 | 1 | 4 |
Amortization of Other actuarial loss | 485 | 209 | 914 | 496 |
Net periodic benefit cost | 994 | 477 | 1,872 | 1,261 |
Postretirement Health Plan | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||||
Service cost | 33 | 21 | 63 | 43 |
Interest cost | 21 | 21 | 39 | 41 |
Amortization of Prior service costs | (1) | (1) | (3) | (3) |
Amortization of Other actuarial loss | 14 | 0 | 20 | 0 |
Net periodic benefit cost | $ 67 | $ 41 | $ 119 | $ 81 |
Pension and Other Postretirement Benefits Assumptions (Details) |
6 Months Ended | |
---|---|---|
Jan. 31, 2017 |
Jan. 31, 2016 |
|
Pension Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||
Discount rate for net periodic benefit cost | 3.36% | 4.22% |
Rate of increase in compensation levels | 3.50% | 3.50% |
Long-term expected rate of return on assets | 7.00% | 7.50% |
Postretirement Health Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||
Discount rate for net periodic benefit cost | 2.71% | 3.51% |
Rate of increase in compensation levels | 0.00% | 0.00% |
Long-term expected rate of return on assets | 0.00% | 0.00% |
Pension and Other Postretirement Benefits Narrative (Details) |
3 Months Ended | 6 Months Ended |
---|---|---|
Jan. 31, 2017
USD ($)
|
Jan. 31, 2017
USD ($)
|
|
Pension Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||
Employer contributions | $ 335,000 | $ 636,000 |
Estimated contributions in remainder of current fiscal year | $ 840,000 | |
Postretirement Health Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans | ||
Medical Cost Trend Assumption | 7.35% | |
Ultimate Health Care Cost Trend Rate | 4.50% | |
Year that Rate Reaches Ultimate Trend Rate | 2036 | 2036 |
Operating Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 31, 2017 |
Jan. 31, 2016 |
Jan. 31, 2017 |
Jan. 31, 2016 |
Jul. 31, 2016 |
|
Segment Reporting Information | |||||
Assets | $ 206,574 | $ 206,574 | $ 204,815 | ||
Total Sales | 65,174 | $ 65,367 | 131,786 | $ 133,162 | |
Corporate Expenses | (7,215) | (6,471) | (13,070) | (13,266) | |
Income from Operations | 5,587 | 5,400 | 8,633 | 13,176 | |
Total Other Expense, Net | (343) | (331) | (710) | (567) | |
Income before Income Taxes | 5,244 | 5,069 | 7,923 | 12,609 | |
Income Taxes | (994) | (1,248) | (1,664) | (3,365) | |
Net Income | 4,250 | 3,821 | 6,259 | 9,244 | |
Business to Business Products | |||||
Segment Reporting Information | |||||
Assets | 59,727 | 59,727 | 61,007 | ||
Segment Net Sales | 23,261 | 22,625 | 50,734 | 48,446 | |
Segment Income | 7,815 | 7,576 | 17,223 | 16,745 | |
Retail and Wholesale Products | |||||
Segment Reporting Information | |||||
Assets | 92,191 | 92,191 | 91,626 | ||
Segment Net Sales | 41,913 | 42,742 | 81,052 | 84,716 | |
Segment Income | 4,987 | $ 4,295 | 4,480 | $ 9,697 | |
Unallocated Assets | |||||
Segment Reporting Information | |||||
Assets | $ 54,656 | $ 54,656 | $ 52,182 |
Operating Segments Narrative (Details) |
6 Months Ended |
---|---|
Jan. 31, 2017
segment
| |
Segment Reporting Information | |
Number of Reportable Segments | 2 |
Stock-Based Compensation Summary of Restricted Stock Transactions (Details) - Restricted Stock shares in Thousands |
6 Months Ended |
---|---|
Jan. 31, 2017
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award | |
Non-vested restricted stock outstanding, beginning balance | shares | 194 |
Granted, number of shares | shares | 31 |
Vested, number of shares | shares | (36) |
Forfeitures, number of shares | shares | 1 |
Non-vested restricted stock outstanding, ending balance | shares | 188 |
Non-vested restricted stock outstanding, weighted average grant date fair value, beginning balance | $ / shares | $ 29.09 |
Granted, weighted average grant date fair value | $ / shares | 36.84 |
Vested, weighted average grant date fair value | $ / shares | 26.09 |
Forfeitures, weighted average grant date fair value | $ / shares | 31.48 |
Non-vested restricted stock outstanding, weighted average grant date fair value, ending balance | $ / shares | $ 30.95 |
Accumulated Other Comprehensive (Loss) Income Narrative (Details) |
6 Months Ended |
---|---|
Jan. 31, 2017
USD ($)
| |
Accumulated Other Comprehensive Income | |
Tax for reclassification adjustment from AOCI for pension and other postretirement benefits | $ 354,000 |
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