Oil-Dri of America (ODC)

Q3 2012 Earnings Call

June 07, 2012 11:00 am ET


Daniel S. Jaffee - Chief Executive Officer, President, Director and Member of Executive Committee

Ronda Williams

Daniel T. Smith - Chief Financial Officer and Vice President


Robert Smith



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Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Oil-Dri Corporation of America Earnings Conference Call. My name is Carissa, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today's call, Mr. Daniel Jaffee, President and CEO. Please proceed

Daniel S. Jaffee

Thank you, Carissa. Welcome, everyone, to our third quarter teleconference. Joining me here in Chicago, Dan Smith, our CFO; Doug Graham, our chief -- our General Counsel and Vice President and Legal; and Ronda Williams, who heads up Investor Relations efforts. And Ronda, you're going to start us with the Safe Harbor.

Ronda Williams

Yes, thank you. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ. In our press release and our SEC filings, we highlighted a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investments in Oil-Dri stock. Thank you for joining.

Daniel S. Jaffee

Thanks, Ronda. And Dan, I would like to turn it over to you for a quarterly play-by-play.

Daniel T. Smith

Thanks, Dan, and good morning to all. I’m going to start from a total company perspective. Sales were up about 8% for the quarter and 6% for the year, roughly totaling $60 million for the quarter and $180 million for the year. Earnings per share were $0.26 for the quarter and $0.86 year-to-date. Those numbers are equal to the numbers we reported in similar periods last year.

The story. The past quarter has seen continued heavy spending on marketing and promotional expense for our Cat's Pride Fresh & Light launch. However, we've also seen strong performance in our B2B group, lower natural gas prices, a very profitable product mix, which have helped drive our gross profit up to 24.6% from 21.4%. B2B, as I mentioned, had a very strong quarter, sales were up 19% and contribution was up 46%. Animal health, especially agricultural carriers, all reported sales increases. Our co-packed litters were down a bit.

In our Retail and Wholesale group, sales were up 2% for the quarter due to the increase in branded cat litter sales, especially our Cat's Pride Fresh & Light scooping litter. Traditional coarse cat litter products were down. Group contribution was down 81% during the quarter due mostly to spending on advertising and promotion for our Fresh & Light product launch, and we plan on spending heavily on advertising and promotional expenses in the fourth quarter for that same product launch.

From a balance sheet perspective, our balance sheet remains very strong. Cash investments were almost $35 million, which exceed our net debt, so we have more cash investments than debt. We spent about $5.5 million in capital, which is $1.5 million less than our year-to-date depreciation. And with the completion of our capital project related to our Fresh & Light business, we expect our capital spending to be less than last year.

We remain committed to our dividends. Our quarterly dividend was $0.17 per common share, which represents a yield of a little bit more than 3% compared to our closing share price. Additionally, during the quarter, we spent $2.5 million on stock repurchases. And then, shortly after the end of the quarter, we spent an additional $3.4 million.

From a forward-looking perspective, as I already indicated, we're planning on spending heavily on promotion and advertising expenses for Fresh & Light in the fourth quarter. And then on May 30, we announced the relocation of our cat litter and floor absorbent business from our Mounds, Illinois plant to our Mississippi plants. We expect this to impact about 40 jobs in Mounds. And we expect a pretax charge of about $1.7 million, most of which will impact the fourth quarter.

Dan, I'm going to turn it back over to you.

Daniel S. Jaffee

Great. I'm not going to say a lot because I always like to respond to specific questions from our investors participating in the call. But suffice it to say, it was a great quarter on -- from many standpoints: quantitatively, when you take into account all the incremental advertising that we did in the quarter; qualitatively, a lot of good things were set in place to help us strategically grow going forward.

And clearly, our commitment to creating value from absorbent minerals is paying off because even though tonnage continues to slide, our sales, both on a per ton basis and in total, continue to grow, as does our gross margin. And ultimately, when we lap this onetime spending associated with launch of Fresh & Light, we're hopeful we'll start to see the bottom line do the exact same thing.

So Carissa, I'd like to open it up to questions. [Operator Instructions]

Question-and-Answer Session


[Operator Instructions] And your first question comes from the line of Ethan Starr [ph].

Unknown Analyst

I'm wondering how are retail sales for the new Fresh & Light litter products doing. And are you still adding new distribution?

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