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Oil-Dri Announces Third Quarter and Nine-Month Results of Fiscal 2014

CHICAGO, IL -- (Marketwired) -- 06/06/14 -- Oil-Dri Corporation of America (NYSE: ODC) today announced net sales of $67,417,000 for the third quarter of fiscal 2014 ended April 30, 2014, a 5% increase compared with net sales of $64,152,000 in the same quarter one year ago. Net income for the third quarter was $722,000, or $0.10 per diluted share, down 78% from net income of $3,251,000, or $0.46 per diluted share, in the third quarter of fiscal 2013.

Net sales for the nine-month period ended April 30, 2014 were $200,268,000, a 7% increase compared with net sales of $186,691,000 in the same period one year ago. Net income for the nine-month period was $7,890,000, or $1.11 per diluted share, down 21% from net income of $9,849,000, or $1.40 per diluted share, in the same period of fiscal 2013.

BUSINESS REVIEW

President and Chief Executive Officer Daniel S. Jaffee said, "The quarterly results reflect continued cost pressures, planned advertising and promotional support for our Retail and Wholesale products and weakness in the sales and profitability of certain Business to Business products.

"Quarterly earnings were negatively impacted by increased packaging, freight and manufacturing costs, which included mining, hauling, a 25% increase in natural gas and additional labor needed for the packaging of private label products obtained through the acquisition of certain assets of MFM Industries, Inc. (the "MFM acquisition").

"As previously disclosed, we implemented a robust marketing plan in support of Cat's Pride Fresh & Light and our other scoopable litters during the quarter. Our investment was in multiple touch point advertising and included print and digital advertising and feature in-store displays. We are optimistic about the velocity of our products as unit shipments of Fresh & Light products increased 28% and overall scoopable litter shipments increased 19% in the quarter. This increase significantly outpaced the overall category growth of 6% during the period, as reported by a third party market research company.

"While the quarterly results reflect a long-term investment in our Retail & Wholesale products, the performance of our Business to Business products did not meet our expectations. Sales and income were affected by a reduction in the sales of Agsorb as a carrier for Corn Rootworm insecticides and lower sales of our animal health products."

SEGMENT REVIEW

Third Quarter Results


----------------------------------------------------------------------------
       Business to Business             Three Month Period           Change
            Products                   February 1 - April 30
----------------------------------------------------------------------------
                                   Fiscal 2014       Fiscal 2013
           Net Sales               $22,470,000       $24,525,000       -8%
         Segment Income             $5,336,000        $7,957,000      -33%
----------------------------------------------------------------------------

Sales were up for Pure-Flo B80 bleaching clay used in palm oil processing and for MD-09, our new feed additive used to reduce wet droppings in poultry production. Sales were down 38% for our agricultural products and 11% for our animal health products. Co-packaged traditional coarse cat litter sales were also down slightly compared to the third quarter of the prior year.

Selling, general and administrative expenses increased 23% compared to the third quarter of fiscal 2013. These expenses included the startup costs for our new subsidiary in China, Amlan Trading (Shenzhen) Company, Ltd. Segment income was also negatively impacted by the reduction in sales and increased packaging, materials and freight costs.

Nine-Month Results


----------------------------------------------------------------------------
      Business to Business               Nine-Month Period           Change
            Products                    August 1 - April 30
----------------------------------------------------------------------------
                                   Fiscal 2014       Fiscal 2013
           Net Sales               $71,649,000       $68,022,000       5%
         Segment Income            $20,980,000       $22,581,000      -7%
----------------------------------------------------------------------------

Sales were up 17% for our animal health products primarily in foreign markets and 13% for our fluids purification products, including positive momentum of our fast filtering selective adsorbent, Select FF. Net sales of our agricultural products decreased 12% and co-packaged coarse cat litter sales were also down slightly compared to the first nine months of the prior year.

Operating income was affected by an approximate 10% increase in materials, freight and packaging costs per ton. The increase in freight costs can be primarily attributed to international shipments.

Third Quarter Results


----------------------------------------------------------------------------
      Retail and Wholesale              Three Month Period           Change
            Products                   February 1 - April 30
----------------------------------------------------------------------------
                                   Fiscal 2014       Fiscal 2013
           Net Sales               $44,947,000       $39,627,000      13%
         Segment Income            $(694,000)        $2,964,000       N/A
----------------------------------------------------------------------------

Net sales of Retail and Wholesale products increased despite an investment in consumer and trade promotional activities in the quarter. Total cat litter units shipped in the quarter were up approximately 18%. Net sales of industrial and automotive absorbents, including sports turf products, were up while sales by our foreign subsidiaries were down. Private label cat litter sales increased approximately 44% due primarily to additional sales from the MFM acquisition. Segment income was reduced by increased packaging, freight, manufacturing and advertising expenditures in the quarter.

Nine-Month Results


----------------------------------------------------------------------------
      Retail and Wholesale               Nine-Month Period           Change
            Products                    August 1 - April 30
----------------------------------------------------------------------------
                                   Fiscal 2014       Fiscal 2013
           Net Sales              $128,619,000      $118,669,000       8%
         Segment Income            $3,563,000        $9,424,000       -62%
----------------------------------------------------------------------------

Net sales for the segment in the nine-month period increased 8% also despite increased consumer and trade promotional spending. Total cat litter units shipped in the period were up 12%. Sales were relatively flat for industrial absorbents and declined for our foreign subsidiaries. Private label cat litter sales increased approximately 16% due, in part, to additional sales from the MFM acquisition.

Segment income in the period was also reduced by an increase in advertising expenditures. Packaging, freight and materials cost per ton increased approximately 4%. The increase in freight costs was primarily due to our service level enhancement efforts.

FINANCIAL REVIEW

Cash, cash equivalents and short-term investments at April 30, 2014, totaled $19,867,000, which was $20,228,000 less than $40,095,000 at April 30, 2013. Cash, cash equivalents and short-term investments were down primarily due to the MFM acquisition, higher capital expenditures, and lower net cash provided by operating activities.

Capital expenditures for the nine-month period totaled $13,291,000, which was $5,684,000 more than depreciation and amortization of $7,607,000. Capital expenditures were made for projects at our manufacturing facilities, including the capacity expansion project for our fluids purification products and purchases of mining and hauling equipment. Capital expenditures were $7,805,000 for the nine-month period of fiscal 2013.

Cash provided by operating activities was $10,710,000 in the period, which was lower than the $19,274,000 for the first nine months of fiscal 2013. The primary reason for the change between years was an increase in inventory, accounts receivable and prepaid expenses, and a decrease in accrued expenses.

On March 17, 2014, Oil-Dri's Board of Directors declared a quarterly cash dividend of $0.19 per share of outstanding Common Stock and $0.1425 per share of outstanding Class B Stock. The dividends were paid on May 30, 2014, to stockholders of record at the close of business on Friday, May 16, 2014. The Company has paid cash dividends continuously since 1974 and has increased dividends annually for each of the past ten years.

At the end of the third quarter, the annualized dividend yield on the Company's Common Stock was 2.3%, based on the quarter's closing stock price of $33.51 per share and an annual cash dividend of $0.76.

LOOKING FORWARD

Jaffee continued, "Over the last several months we have strengthened our management and sales team. In addition to Mark Lewry, who recently joined the company as Chief Operating Officer, overseeing the Business to Business Products Group, we have added to our field sales team in the consumer area and are staffing up our Chinese subsidiary. While these additions result in an increase in operational costs and will negatively impact earnings this fiscal year, we believe these investments will pay off in the future.

"We are pleased to announce that our Amlan subsidiary in China is open and fully operational. It has assumed the supply and sale of Amlan animal health products to our Chinese customers and will continue expanding distribution and sales moving forward.

"In each of our B2B product areas we are working on new product development to fuel growth in these markets in the next fiscal year and beyond.

"In the consumer side of the business, we are implementing price increases for our MFM customers and are working to complete the packaging transition for those customers. We plan to continue to focus on expanding the presence of our Cat's Pride Fresh & Light brand and grocery category growth through customer level marketing events. As a result, total advertising and promotional spending for the Retail and Wholesale group will be greater for fiscal 2014 than fiscal 2013."

Oil-Dri Corporation of America is a leading supplier of specialty sorbent products for agricultural, horticultural, fluids purification, specialty markets, industrial and automotive, and is the world's largest manufacturer of cat litter.

The Company will offer a live webcast of the third quarter earnings teleconference on Monday, June 9, 2014 from 10:00 am to 10:30 am, Central Time. To listen via the web, visit www.streetevents.com or www.oildri.com. An archived recording of the call and written transcripts of all teleconferences are posted on the Oil-Dri website.

Agsorb, Amlan, Cat's Pride, Fresh & Light, Pure-Flo and Select are registered trademarks of Oil-Dri Corporation of America. MD-09 is a trademark of Oil-Dri Corporation of America.

Certain statements in this press release, including the reasons for comparisons between fiscal 2014 and 2013 earnings, 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 for per share amounts)
(unaudited)
                                        Third Quarter Ended April 30,
                                 ------------------------------------------
                                               % of                  % of
                                    2014      Sales       2013      Sales
                                 ---------  ---------  ---------  ---------
Net Sales                        $  67,417      100.0% $  64,152      100.0%
Cost of Sales                      (53,533)      79.4%   (47,261)      73.7%
                                 ---------  ---------  ---------  ---------
Gross Profit                        13,884       20.6%    16,891       26.3%
Operating Expenses                 (12,894)      19.1%   (12,209)      19.0%
Capacity Rationalization Charges        --        0.0%        (8)       0.0%
                                 ---------  ---------  ---------  ---------

Operating Income                       990        1.5%     4,674        7.3%
Interest Expense                      (377)       0.6%      (447)       0.7%
Other Income                           250        0.4%       214        0.3%
                                 ---------  ---------  ---------  ---------

Income Before Income Taxes             863        1.3%     4,441        6.9%
Income Taxes                          (141)       0.2%    (1,190)       1.9%
                                 ---------  ---------  ---------  ---------
Net Income                       $     722        1.1% $   3,251        5.1%
                                 =========  =========  =========  =========


Net Income Per Share:
    Basic Common                 $    0.11             $    0.50
    Basic Class B Common         $    0.08             $    0.37
    Diluted                      $    0.10             $    0.46

Average Shares Outstanding:
    Basic Common                     4,987                 4,923
    Basic Class B Common             2,004                 1,980
    Diluted                          7,013                 6,938



                                         Nine Months Ended April 30,
                                 ------------------------------------------
                                               % of                  % of
                                    2014      Sales       2013      Sales
                                 ---------  ---------  ---------  ---------
Net Sales                        $ 200,268      100.0% $ 186,691      100.0%
Cost of Sales                     (152,991)      76.4%  (136,300)      73.0%
                                 ---------  ---------  ---------  ---------
Gross Profit                        47,277       23.6%    50,391       27.0%
Operating Expenses                 (36,211)      18.1%   (35,863)      19.2%
Capacity Rationalization Charges        --        0.0%       (70)       0.0%
                                 ---------  ---------  ---------  ---------

Operating Income                    11,066        5.5%    14,458        7.7%
Interest Expense                    (1,186)       0.6%    (1,374)       0.7%
Other Income                           406        0.2%       445        0.2%
                                 ---------  ---------  ---------  ---------

Income Before Income Taxes          10,286        5.1%    13,529        7.2%
Income Taxes                        (2,396)       1.2%    (3,680)       2.0%
                                 ---------  ---------  ---------  ---------
Net Income                       $   7,890        3.9% $   9,849        5.3%
                                 =========  =========  =========  =========


Net Income Per Share:
    Basic Common                 $    1.20             $    1.52
    Basic Class B Common         $    0.90             $    1.14
    Diluted                      $    1.11             $    1.40

Average Shares Outstanding:
    Basic Common                     4,974                 4,899
    Basic Class B Common             2,000                 1,966
    Diluted                          6,998                 6,916



Consolidated Balance Sheets
(in thousands, except for per share amounts)
(unaudited)

                                                          As of April 30,
                                                       ---------------------
                                                          2014       2013
                                                       ---------- ----------
Current Assets
  Cash and Cash Equivalents                            $   16,436 $   22,649
  Restricted Cash                                             191         --
  Short-term Investments                                    3,240     17,446
  Accounts Receivable, Net                                 32,854     29,784
  Inventories                                              24,401     21,349
  Prepaid Expenses                                         10,635      8,193
                                                       ---------- ----------
    Total Current Assets                                   87,757     99,421
                                                       ---------- ----------
Property, Plant and Equipment, Net                         71,969     65,758
Other Assets                                               24,911     15,675
                                                       ---------- ----------
Total Assets                                           $  184,637 $  180,854
                                                       ========== ==========

Current Liabilities
  Current Maturities of Notes Payable                  $    3,500 $    3,500
  Accounts Payable                                          7,102      6,742
  Dividends Payable                                         1,243         --
  Accrued Expenses                                         17,949     20,021
                                                       ---------- ----------
    Total Current Liabilities                              29,794     30,263
                                                       ---------- ----------
Noncurrent Liabilities
  Notes Payable                                            18,900     22,400
  Other Noncurrent Liabilities                             27,951     34,741
                                                       ---------- ----------
    Total Noncurrent Liabilities                           46,851     57,141
                                                       ---------- ----------
Stockholders' Equity                                      107,992     93,450
                                                       ---------- ----------
Total Liabilities and Stockholders'
 Equity                                                $  184,637 $  180,854
                                                       ========== ==========

Book Value Per Share Outstanding                       $    15.48 $    13.61


Acquisitions of
Property, Plant and Equipment            Third Quarter $    6,509 $    2,796
                                         Year To Date  $   13,291 $    7,805
Depreciation and Amortization Charges    Third Quarter $    2,747 $    2,220
                                         Year To Date  $    7,607 $    6,695



Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

                                                      For the Nine Months
                                                             Ended
                                                           April 30,
                                                    -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES                    2014        2013
                                                    ----------- -----------

Net Income                                          $     7,890 $     9,849

Adjustments to reconcile net income to net cash
 provided by operating activities, net of
 acquisition:
  Depreciation and Amortization                           7,607       6,695
  Capacity Rationalization Plan Charges                      --          70
  (Increase) Decrease in Accounts Receivable             (1,742)        385
  Increase in Inventories                                (2,884)     (1,676)
  Increase in Accounts Payable                              415         357
  (Decrease) Increase in Accrued Expenses                (1,981)      2,481
  Increase in Pension and Postretirement Benefits           638         949
  Other                                                     767         164
                                                    ----------- -----------
    Total Adjustments                                     2,820       9,425
                                                    ----------- -----------
  Net Cash Provided by Operating Activities              10,710      19,274
                                                    ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital Expenditures                                  (13,291)     (7,805)
  Acquisition of Business                               (12,814)         --
  Restricted Cash                                          (191)         --
  Net Dispositions (Purchases) of Investment
   Securities                                            15,221      (8,278)
  Other                                                      91          62
                                                    ----------- -----------
  Net Cash Used in Investing Activities                 (10,984)    (16,021)
                                                    ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from Issuance of Long-Term Debt                    -           -
  Principal Payments on Long-Term Debt                   (3,500)     (3,800)
  Dividends Paid                                         (3,719)     (4,630)
  Purchase of Treasury Stock                                (63)       (175)
  Other                                                     116         896
                                                    ----------- -----------
  Net Cash Used in Financing Activities                  (7,166)     (7,709)
                                                    ----------- -----------

Effect of exchange rate changes on cash and cash
 equivalents                                               (159)         12

Net Decrease in Cash and Cash Equivalents                (7,599)     (4,444)
Cash and Cash Equivalents, Beginning of Period           24,035      27,093
                                                    ----------- -----------
Cash and Cash Equivalents, End of Period            $    16,436 $    22,649
                                                    =========== ===========

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