DEBT Level 1 (Notes)

12 Months Ended

Jul. 31, 2022

Notes Payable [Abstract]

Debt

DEBT

The composition of notes payable is as follows as of July 31 (in thousands):

	2022		2021
Amended and Restated Note Purchase and Private Shelf Agreement. Annual principal installments on May 15: $1,000 in each fiscal year 2021 through 2030. Interest is payable semi-annually at an annual rate of 3.95%	$	8,000	$	9,000
Amended and Restated Note Purchase and Private Shelf Agreement. Annual principal installments on Dec 15: $5,000 in each fiscal year 2028 through 2032. Interest is payable semi-annually at an annual rate of 3.25%	25,000		—
Less current maturities of notes payable	(1,000)		(1,000)
Less unamortized debt issuance costs	$	(202)	$	(122)
Noncurrent notes payable	$	31,798	$	7,878

On May 15, 2020 (the “Effective Date”), we entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the “Amended Note Agreement”) with PGIM, Inc. (“Prudential”) and certain existing noteholders and purchasers affiliated with Prudential named therein. The Amended Note Agreement amends and restates the Note Agreement between Oil-Dri, Prudential and certain existing noteholders named therein, dated as of November 12, 2010 (the “Prior Note Agreement”), under which our 3.96% Series A Senior Notes (the “Series A Notes”) were previously issued in an original aggregate principal amount of $18,500,000.

    Pursuant to the Amended Note Agreement, (i) the Series A Notes, in an aggregate principal amount of $3,100,000 as of immediately prior to the Effective Date, were paid in full in July 2020 and (ii) we issued $10,000,000 in aggregate principal amount of our 3.95% Series B Senior Notes due May 15, 2030 (the “Series B Notes”) and (iii) we issued $25,000,000 in aggregate principal amount of our 3.25% Series C Senior Notes due December 16, 2031 (the “Series C Notes”). In addition, the Amended Note Agreement provided us with the ability to request, from time to time until May 15, 2023 (or such earlier date as provided for in the Amended Note Agreement), that Prudential affiliate(s) purchase, at Prudential’s discretion and on an uncommitted basis, additional senior unsecured notes of Oil-Dri (the “Shelf Notes,” and collectively with the Series A Notes and Series B Notes, and Series C Notes, the “Notes”) in an aggregate principal amount of up to $75,000,000 minus the aggregate principal amount of Notes then outstanding and Shelf Notes that have been accepted for purchase. Interest payable on any Shelf Note agreed to be purchased under the Amended Note Agreement will be at a rate determined by Prudential and will mature not more than fifteen years after the date of original issue of such Shelf Note.

    Like the Prior Note Agreement, the Amended Note Agreement is guaranteed, on an unsecured basis, by certain U.S. subsidiaries of Oil-Dri, and contains customary covenants, including but not limited to, limitations on our and certain of our subsidiaries’ ability to incur indebtedness, incur liens, engage in mergers, and sell or transfer assets and stock, as well as financial covenants, including a minimum fixed charges coverage ratio and consolidated debt ratio that remain the same as those contained in the Prior Note Agreement. Upon the occurrence of certain events of default, our obligations under the Amended Note Agreement may be accelerated. Such events of default include payment defaults, covenant defaults and other enumerated defaults.

Effective June 3, 2022, we entered into Amendment No. 2 (the “Amendment”) to the Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Agreement”) with PGIM, Inc. (“Prudential”) and certain existing noteholders affiliated with Prudential named therein. The Amendment, among other things, revises the definition of Consolidated EBITDA (Earnings Before Interest, Depreciation, and Amortization) within the Note Agreement.

The revised definitions of Consolidated EBITDA are relevant to our covenant calculations based on the amended definitions noted above. The goodwill impairment recorded in the third quarter was excluded from the quarterly covenant calculations based on the amended definitions summarized above. See Note 1 of the Notes to the Consolidated Financial Statements for additional information on goodwill impairment.

We have a credit agreement with BMO Harris that expires on January 31, 2024 (the "Credit Agreement"). The agreement provides for a $45,000,000 unsecured revolving credit agreement, including a maximum of $10,000,000 for letters of credit. Under the credit agreement, we may select a variable rate based on either BMO Harris’ prime rate or a LIBOR-based rate, plus a margin which varies depending on our debt to earnings ratio, or a fixed rate as agreed between us and BMO Harris. As of July 31, 2022, the variable rates would have been 5.75% for the BMO Harris’ prime-based rate or 4.04% for the LIBOR-based rate.

Effective June 6, 2022, we entered into a modification (the “Modification”) to the credit agreement (the “Credit Agreement”) with BMO Harris N.A. The Modification, among other things, revises the definition of Consolidated EBITDA and Consolidated EBITR (Earnings Before Interest, Taxes, and Rent) within the Credit Agreement.

The revised definitions of Consolidated EBITDA and consolidated EBITR are relevant to our covenant calculations based on the amended definitions noted above. The goodwill impairment recorded in the third quarter was excluded from the quarterly covenant calculations based on the amended definitions summarized above. See Note 1 of the Notes to the Consolidated Financial Statements for additional information on goodwill impairment.

As of July 31, 2022 and 2021, there were no outstanding borrowings under this credit agreement. However, we had $964,000 of letters of credit outstanding at July 31, 2022 and 2021 under this agreement.

    The credit agreement contains restrictive covenants that, among other things and under various conditions, limit our ability to incur additional indebtedness or to dispose of assets. The agreement also requires us to maintain a minimum fixed coverage ratio, a minimum consolidated net worth and a minimum consolidated debt ratio. Our debt agreements also contain provisions such that if we default on one debt agreement, the others will automatically default. If we default on any guaranteed debt with a balance greater than $1,000,000, our unsecured revolving credit agreement with BMO Harris will be considered in default. If we default on any debt with a balance greater than $5,000,000 we will also be considered in default with the senior promissory notes. We were in compliance with all restrictive covenants and limitations as of July 31, 2022.

The following is a schedule by fiscal year of future principal maturities of notes payable as of July 31, 2022 (in thousands):

2023	$	1,000
2024	1,000
2025	1,000
2026	1,000
2027	1,000

On August 30, 2022, the Company entered into (i) the Sixth Amendment to the Credit Agreement (the “Sixth Amendment”), which amends the Credit Agreement, among BMO Harris, the Company and certain domestic subsidiaries of the Company; and (ii) Amendment No. 3 (the “Third Amendment”) to the Amended Note Agreement with Prudential and certain existing noteholders affiliated with Prudential named therein. See Note 13 of the Notes to the Consolidated Financial Statements for additional information.