Oil-Dri Corporation of America (ODC)

F3Q10 (Qtr End 04/30/10) Earnings Call

June 9, 2010 11:00 am ET


Daniel Jaffee – President and CEO

Ronda Williams – IR

Andy Peterson – VP and CFO

Charlie Brissman – VP, General Counsel and Secretary


Robert Smith – Center for Performance

Ethan Starr [ph]

Kathy Buck – Wayne Hummer Asset



Good day, ladies and gentlemen, and welcome to the third quarter 2010 Oil-Dri Corporation of America earnings conference call. My name is Chantelle and I will be your coordinator for today's call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Daniel Jaffee, President and CEO. Please proceed, sir.

Daniel Jaffee

Okay, thank you. And welcome, everybody, to the third quarter and nine months teleconference. Joining me today on the call, representing Oil-Dri is Andy Peterson, our CFO; and Charlie Brissman, our VP and General Counsel; and Ronda Williams, who heads up our Investor Relations activities.

And Ronda, would you cover the Safe Harbor, please?

Ronda Williams

I sure will. Thanks, Dan. 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 highlight a number of important risk factors, trends, and uncertainties that may affect our future performance. We urge you to review and consider those factors in evaluating the company’s comments and in evaluating any investment in Oil-Dri stock.

Thanks again. Back to you.

Daniel Jaffee

Great, thanks. And before I turn it over to Andy for a snapshot of the quarter and the nine months, let me just cover one thing that seems to – or could potentially be a hot topic of conversation, which is our potential involvement in helping to clean up the spill in the Gulf.

We have clearly made ourselves available to BP and the governmental agencies there. To date, we've had no direct involvement in that cleanup whatsoever. Indirectly, through distributors, we certainly have sold product into that effort, but from a direct standpoint, we have had no involvement in the cleanup.


Andy Peterson

Thanks, Dan. We had sales of $56.3 million in the quarter, down 3% compared with last year's $58.1 million. We had a gross profit margin in the quarter of 23.4%, up from last year's 22.8%. The margin improvement was due to a favorable sales mix of our higher-value products combined with lower fuel costs used to dry our clay-based products.

Operating expenses were 16.7% of sales, which was about the same at 16.6% in last year's third quarter. Our effective tax rate in the quarter was 30% of pretax income, up slightly from 29% in last year's third quarter. Net income was 4.6% of sales, up from 4.2% in last year's third quarter. EPS in the quarter was $0.35, up 6% compared with $0.33 last year.

Through the first nine months of fiscal 2010, $20.1 million of cash was provided from operations, up from $8.3 million last year. This was primarily due to positive changes in working capital components. Capital expenditures of $8 million were down $4.7 million compared with last year. Debt payments of $3.2 million were down $2.4 million compared with last year. Purchases of treasury stock of $2 million were up $1.3 million compared with last year. Dividends paid of $3 million were $200,000 or 8.5% – or up 8.5% compared with last year.

Cash and investments at April 30th was $25.6 million, which was up $10 million compared to last year. At quarter-end, we had $7.3 million more in cash and investments than notes payable.


Daniel Jaffee

Andy, thank you. Before I open up to the Q&A, just some comments on what you presented. I'm very proud of what the team has delivered in the first nine months. When you think about when you make investment decisions, you are trying to find something that resonates with you and why is this investment different from other investments.

And I would say one of the things that makes Oil-Dri most different as an investment opportunity is our long-term view. You look at all of our fellow companies when the market started – or the economy started to slip, it was just mass layoffs. It was, we were laying off 10%, 15%, 20% of our workforce and we are going to manage for the next quarter, the next 90 days, the next 180 days. We didn’t do that and we got peppered for not laying off anybody.

Here, we lost a big piece of business with our single largest account and as I said back then in either one or two teleconferences ago, we are not laying off anybody. We didn’t take any increases, but we didn’t lay off any full-time workers, and because we are in this for the long haul. Certainly, if a year or two or three years from now the business is truly down that much that it requires a reduction in force, well, we are prudent business people, we'll have to do what we have to do. But we are not in it for the long run and then making knee-jerk decisions based on very short-term input.

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