Oil-Dri Announces Third Quarter and Nine-Month Results of Fiscal 2017

Company Release - 6/7/2017 4:04 PM ET

CHICAGO, June 07, 2017 (GLOBE NEWSWIRE) -- Oil-Dri Corporation of America (NYSE:ODC) today announced net income of $3,211,000 or $0.44 of earnings per diluted share for the third quarter of fiscal 2017, compared to a net loss of $892,000 or $(0.13) per diluted share in the same period of the prior year. Net sales for the quarter were $64,745,000 compared to net sales of $64,235,000 in the third quarter of fiscal 2016.

Net income for the nine-months was $9,470,000 or $1.29 of earnings per diluted share, a 12% increase compared to net income of $8,352,000 or $1.15 of earnings per diluted share in the same period of the prior year. Net sales for the nine-months were $196,531,000 compared to net sales of $197,397,000 in the same period of fiscal 2016.

BUSINESS REVIEW

President and Chief Executive Officer, Daniel S. Jaffee said, “While sales were sluggish in the quarter and nine-month periods, our profits continue to improve. Our Business-to-Business products showed top line and bottom line growth in both periods.

In the Retail and Wholesale segment, advertising expenses were substantially reduced compared to expenses in the third quarter of fiscal 2016. This was due in large part to a strategic shift away from mass media towards targeted trade promotions throughout the balance of the year.

Year over year, we experienced a nearly 17% increase in Cash and Investments. This increase is attributed to the increase of income over the nine-month period.

Third party market research data for retail sales1 (which does not include e-commerce sales) indicates that total cat litter category sales experienced modest growth in both the latest 52 and 12-week periods ending May 20, 2017.

While combined sales of all of our branded products were down in both periods, we have gained a larger share of the private label lightweight litter segment. According to the same third party market research data, our private label retail sales were up approximately 43% for the latest 52-week period and 107% for the latest 12-week period.”


SEGMENT REVIEW
 
BUSINESS TO BUSINESS
 
Third Quarter
  Three-Month Period  
  February 1 - April 30 Change
  Fiscal 2017 Fiscal 2016  
Net Sales $24,159,000  $22,473,000  8%
Segment Income $7,810,000  $7,304,000  7%
       
Year-To-Date
  Nine-Month Period  
  August 1 - April 30 Change
  Fiscal 2017 Fiscal 2016  
Net Sales $74,893,000  $70,919,000  6%
Segment Income $25,033,000  $24,049,000  4%


Net sales of fluids purification products increased in both periods driven by sales to the edible oil refining market.

Net sales of animal health products were up both domestically and internationally. Strong growth continued for our Chinese subsidiary, Amlan Trading (Shenzhen) Company, Ltd. and strengthened sales in Asia. A change in distribution negatively impacted Latin America nine-month sales. This change was made in anticipation of growing our Latin American business in Fiscal 2018 and beyond.

Segment income reflected higher sales, which more than offset higher natural gas and other manufacturing costs. Lower marketing costs for animal health products also contributed to the increase in segment income for the nine-month period.


RETAIL AND WHOLESALE
 
Third Quarter
  Three-Month Period  
  February 1 - April 30 Change
  Fiscal 2017 Fiscal 2016  
Net Sales $40,586,000  $41,762,000   -3%
Segment Income $1,516,000  $(4,015,000)  N/M
       
Year-To-Date
  Nine-Month Period  
  August 1 - April 30 Change
  Fiscal 2017 Fiscal 2016  
Net Sales $121,638,000  $126,478,000   -4%
Segment Income $5,996,000  $5,682,000   6%


The removal of low margin cat litter business significantly contributed to lower net sales of branded and private label cat litters in the nine-month period. Sales of coarse cat litter and branded scoopable cat litter decreased in the third quarter. Increased sales of private label lightweight scoopable litters in both the third quarter and nine-month periods partially offset these sales declines.

Improved segment income included a reduction in advertising expense of approximately $6,400,000 for the third quarter and $1,400,000 for the nine-months, compared to the same periods in the prior year.

FINANCIAL REVIEW
(Nine-Month Period of Fiscal 2017 Ended April 30)

At April 30, 2017, cash, cash equivalents, and short-term investments totaled $32,303,000 compared to $27,687,000 one year ago.

Cash provided by operating activities was $21,033,000, which was $1,624,000 higher than the $19,409,000 for the same period last year. This increase was primarily the result of higher net income.

Capital expenditures for the period totaled $10,418,000 which was $865,000 more than depreciation and amortization of $9,553,000. Capital expenditures included the ongoing implementation and testing of a new enterprise resource planning system and related infrastructure improvements, as well as equipment replacement at our manufacturing facilities. By comparison, capital expenditures totaled $7,052,000 one year ago.

On March 16, 2017, Oil-Dri’s Board of Directors declared quarterly cash dividends of $0.22 per share of outstanding Common Stock and $0.165 per share of outstanding Class B Stock. The dividends were paid on June 2, 2017, to stockholders of record at the close of business on May 19, 2017. The Company has paid cash dividends continuously since 1974 and has increased dividends annually for each of the last thirteen years. At the end of the third quarter, the annualized dividend yield on the Company’s Common Stock was 2.2%, based on the closing stock price on April 30, 2017 of $40.69 per share and the latest quarterly cash dividend of $0.22 per share.

LOOKING FORWARD

President and Chief Executive Officer, Daniel Jaffee continued, “We remain focused on harnessing the potential of our value-added Business-to-Business products. We will continue to invest in sales and innovation for our animal health, fluids purification and agricultural ingredient products.

According to the aforementioned third-party market research report for the latest 12-week period ending May 20, 2017, Cat’s Pride Fresh & Light Ultimate Care products have a 5.1% share of the lightweight litter segment and Oil-Dri’s private label lightweight litters have a 2.4% share. All of Oil-Dri’s private label products account for 30.6% of the private label segment within the cat litter category. Our goal is to continue to gain further market share with both our Ultimate Care and private label products.

Our integrated marketing campaign will continue to feature Ultimate Care television advertisements through July. Additionally, we are utilizing trade deals to drive additional consumer trial.”

While granular clay floor absorbents were Oil-Dri’s founding product, it has since diversified its portfolio to include both consumer and business to business product offerings that supply pet care, animal health, fluids purification, agricultural ingredient, sports field, industrial and automotive markets. In 2016, Oil-Dri celebrated its seventy-fifth year of business and looks forward to the next milestone.

The Company will offer a live webcast of the third quarter earnings teleconference on Thursday, June 8, 2017 from 10:00 am to 10:30 am, Central Time. Teleconference details will be communicated via web alert approximately one week prior to the call.

1Based in part on data reported by Nielsen through its Nielsen Answers Core Service for the Pet Care Category for the 52 and 12 week periods ended April 22, 2017, for the U.S. market. Copyright © 2017 Nielsen.

“Oil-Dri,” “Cat’s Pride,” “Fresh & Light,” “Fresh & Light Ultimate Care,” and “Amlan” 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,” 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.



CONSOLIDATED STATEMENTS OF INCOME    
(in thousands, except per share amounts)      
(unaudited)       
        
 Third Quarter Ended April 30,
 2017 % of Sales 2016 % of Sales
Net Sales$64,745  100.0% $64,235  100.0%
Cost of Sales(46,964) (72.5)% (45,667) (71.1)%
Gross Profit17,781  27.5% 18,568  28.9%
Selling, General and Administrative Expenses(14,035) (21.7)% (19,803) (30.8)%
Operating Income (Loss)3,746  5.8% (1,235) (1.9)%
Interest Expense(233) (0.4)% (257) (0.4)%
Other Income255  0.4% 259  0.4%
Income (Loss) Before Income Taxes3,768  5.8% (1,233) (1.9)%
Income Tax (Expense) Benefit(557) (0.9)% 341  0.5%
Net Income (Loss)$3,211  4.9% $(892) (1.4)%
Net Income (Loss) Per Share:       
Basic Common$0.48    $(0.14)  
Basic Class B Common$0.36    $(0.10)  
Diluted Common$0.44    $(0.13)  
Average Shares Outstanding:       
Basic Common5,022    4,986   
Basic Class B Common2,088    2,055   
Diluted Common7,164    7,041   
        
 Nine-Months Ended April 30,
 2017 % of Sales 2016 % of Sales
Net Sales$196,531  100.0% $197,397  100.0%
Cost of Sales(138,900) (70.7)% (139,114) (70.5)%
Gross Profit57,631  29.3% 58,283  29.5%
Selling, General and Administrative Expenses(45,252) (23.0)% (46,342) (23.5)%
Operating Income12,379  6.3% 11,941  6.0%
Interest Expense(722) (0.4)% (768) (0.4)%
Other Income34  % 203  0.1%
Income Before Income Taxes11,691  5.9% 11,376  5.7%
Income Tax Expense(2,221) (1.1)% (3,024) (1.5)%
Net Income$9,470  4.8% $8,352  4.2%
Net Income Per Share:       
Basic Common$1.41    $1.25   
Basic Class B Common$1.06    $0.94   
Diluted Common$1.29    $1.15   
Average Shares Outstanding:       
Basic Common5,015    4,981   
Basic Class B Common2,081    2,049   
Diluted Common7,151    7,085   



CONSOLIDATED BALANCE SHEETS    
(in thousands, except per share amounts)    
(unaudited)    
     
  As of April 30,
  2017 2016
Current Assets    
Cash and Cash Equivalents $13,603  $17,194 
Short-Term Investments 18,700  10,493 
Accounts Receivable, Net 31,969  29,161 
Inventories 23,813  25,025 
Prepaid Expenses 9,992  8,072 
Total Current Assets 98,077  89,945 
Property, Plant and Equipment, Net 81,543  79,489 
Other Assets 32,433  26,590 
Total Assets $212,053  $196,024 
     
Current Liabilities    
Current Maturities of Notes Payable $3,083  $3,083 
Accounts Payable 8,105  6,002 
Dividends Payable 1,485  1,407 
Accrued Expenses 20,098  20,155 
Total Current Liabilities 32,771  30,647 
Noncurrent Liabilities    
Notes Payable 9,154  12,208 
Other Noncurrent Liabilities 47,340  36,618 
Total Noncurrent Liabilities 56,494  48,826 
Stockholders' Equity 122,788  116,551 
Total Liabilities and Stockholders' Equity $212,053  $196,024 
     
Book Value Per Share Outstanding $17.30  $16.58 
     
     
Property, Plant and EquipmentThird Quarter $3,139  $2,257 
 Year To Date$10,418  $7,052 
Depreciation and Amortization ChargesThird Quarter$3,164  $3,077 
 Year To Date$9,553  $8,991 



CONSOLIDATED STATEMENTS OF CASH FLOWS   
(in thousands)   
(unaudited)   
    
 For the Nine-Months Ended
 April 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net Income$9,470  $8,352 
Adjustments to Reconcile Net Income to Net Cash   
Provided By Operating Activities, Net of Acquisition:   
Depreciation and Amortization9,553  8,991 
(Increase) Decrease in Accounts Receivable(1,665) 2,140 
Increase in Inventories(617) (3,653)
Increase (Decrease) in Accounts Payable1,848  (1,383)
Increase in Accrued Expenses627  3,365 
Increase in Pension and Postretirement Benefits1,133  757 
Other684  840 
Total Adjustments11,563  11,057 
Net Cash Provided by Operating Activities21,033  19,409 
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Capital Expenditures(10,418) (7,052)
Net Purchase of Investment Securities(8,500) (8,297)
Other60  256 
Net Cash Used in Investing Activities(18,858) (15,093)
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Principal Payments on Long-Term Debt(3,083) (3,484)
Dividends Paid(4,441) (4,190)
Purchase of Treasury Stock(135) (18)
Other398  349 
Net Cash Used in Financing Activities(7,261) (7,343)
    
Effect of Exchange Rate Changes on Cash and Cash Equivalents60  83 
    
Net Decrease in Cash and Cash Equivalents(5,026) (2,944)
Cash and Cash Equivalents, Beginning of Period18,629  20,138 
Cash and Cash Equivalents, End of Period$13,603  $17,194 


Reagan B. Culbertson
Investor Relations Manager
Oil-Dri Corporation of America
reagan.culbertson@oildri.com
(312) 706-3256

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Source: Oil-Dri Corporation of America
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