Oil-Dri Corporation of America (ODC)

F4Q10 (Qtr End 07/31/2010) Earnings Call

October 13, 2010 11:00 am ET

Executives

Dan Jaffee - President and CEO

Andy Peterson - CFO

Charlie Brissman - VP and General Counsel

Ronda Williams - IR

Analysts

Ethan Starr - Private Investor

Robert Smith - Center for Performance Investing

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2010 Oil-Dri Corporation of America earnings conference call. (Operator Instructions)

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

Dan Jaffee

Okay, thank you. Welcome everybody to our fiscal yearend and fourth quarter investor teleconference. As usual with me here in the Chicago conference room are Andy Peterson, our CFO; and Charlie Brissman, our VP and General Counsel; and Ronda Williams, who runs all of our Investor Relations activities.

And, Ronda, if you could cover the Safe Harbor?

Ronda Williams

Welcome everyone. 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 ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock.

Thank you for joining us.

Dan Jaffee

Thank you. And, Andy, will you cover the highlights?

Andy Peterson

We had sales of $54.7 million in the quarter, down 2% compared with last year's fourth quarter of $55.9 million. For the fiscal year, we had sales of $219 million, down 7% from last year's $236 million.

We had a gross profit margin in the quarter of 21.1%, about the same as last year's fourth quarter of 21.2%. For the fiscal year, we had a gross profit margin of 22.7%, up from last year's 20.9%.

Operating expenses in the quarter were 15.8% of sales, up from 14.5% in last year's fourth quarter. For the fiscal year, operating expenses were 16.5% of sales, up from last year's 14.7%.

Our effective tax rate in the quarter was 14.4% of pre-tax income, down significantly from the 29.8% in last year's fourth quarter. The company utilized previously earned alternative minimum tax credits for the fiscal year. For the fiscal year, the effective tax rate was 26.2%, down from last year's 28%.

Net income in the quarter was 4.4% of sales, down from 4.6% in last year's fourth quarter. For the fiscal year, net income as a percentage of sales was 4.3%, up from last year's 4.1%.

EPS in the quarter was $0.33, down 6% compared with $0.35 in last year's fourth quarter. For the fiscal year, we had EPS of $1.30, down 2% from last year's $1.33.

Looking at balance sheet cash flow, cash provided from operations in fiscal 2010 of $26.2 million was up $10.4 million from last year. This positive was primarily due to positive changes in working capital component.

Capital expenditures of $10.4 million were down $4.8 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 $6.0 million were up $5.3 million compared with last year.

Dividends paid of $4 million were up $300,000 or 8.4% compared with last year. Cash and investments at July 31, 2010, was $24.6 million, up $4.8 million compared to last year. At yearend, we had $6.3 million more in cash and investments than we had in debt.

Dan Jaffee

Thank you, Andy. Reflecting a little bit before I open it up to Q&A, fiscal 2010 was the 15th year of me being President here at Oil-Dri, which is amazing. And in many ways, it was our most gratifying year.

You think about it against what could have been or what might have been when we were together a year ago and having to communicate the news of our largest customer are going in a different strategic direction and we were faced with all sort of strategic options, and the two that I'm most proud of have played out extremely well.

Number one, which again I would say almost no companies would have done, was we didn't lay off anybody. No full-time employee lost their job due to that short-term decision by a big account. We agreed to take no increases, and so it helped mitigate the pain. But we banded together and kept the team together. You can imagine what that did for morale and how everybody redoubled their efforts to try and overcome the financial hit that was going to be taken by that short-sighted decision.

Secondly, on the consumer front, we dubbed the year project comeback where we could have done two things. We could have retrenched, cut back on spending, cut back on our advertising, cut back on new product and unique points of difference emphasis. Or we could have done more. And we decided to do more. So in the year, we actually spent an extra $1.5 million on trade spending. We took dollars that would have been spent in one channel and moved it to another channel.

And again, very gratifying, both in terms of what happened outside of Bentonville and then what happened inside Bentonville during the year. So outside Bentonville, these are all publicly accessible data we subscribed to IRI for the most recent 52-week period. The category outside, it's really called food, drug and mass, but not including Wal-Mart, because they don't report their numbers.

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