UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended January 31, 2021



x			~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~ ~~For the Quarterly Period Ended January 31, 2020~~



o☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to ______________

Commission File Number 001-12622

OIL-DRI CORPORATION OF AMERICA

(Exact name of the registrant as specified in its charter)



~~Delaware~~ ~~(State or other jurisdiction of incorporation or organization)~~		~~36-2048898~~ ~~(I.R.S. Employer Identification No.)~~
~~410 North Michigan Avenue, Suite 400~~ ~~Chicago, Illinois~~ ~~(Address of principal executive offices)~~		~~60611-4213~~ ~~(Zip Code)~~

Delaware36-2048898

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

410 North Michigan Avenue, Suite 400 60611-4213

Chicago, Illinois (Zip Code)

(Address of principal executive offices)

The registrant's telephone number, including area code: (312) 321-1515

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for at least the past 90 days. Yes x☒ No o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated filer~~ Accelerated Filer o

Accelerated ~~filer~~ Filer x

Non-accelerated ~~filer~~ Filer o

Smaller ~~reporting company~~ Reporting Company x

Emerging ~~growth company~~ Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	ODC	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of January 31, ~~2020.~~2021.

Common Stock – ~~5,415,926~~5,363,184 Shares and Class B Stock – ~~2,196,170~~2,066,650 Shares

CONTENTS




	PART I – FINANCIAL INFORMATION
		Page
Item 1:	Financial Statements	3

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results Of Operations	23



Item 4:	Controls and Procedures	2932

	PART II – OTHER INFORMATION

Item 1A:	Risk Factors	3032

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	3134

Item 4:	Mine Safety Disclosures	3134

Item 6:	Exhibits	3235

	Signatures	3336

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including, but not limited to, those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those statements elsewhere in this report and other documents that we file with the Securities and Exchange Commission (“SEC”), contain forward-looking statements that are based on 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 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,” “potential,” and 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, those described herein and in Item 1A, Risk Factors, ~~herein and~~ in our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~.2020. Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. 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 report, whether as a result of new information, future events, changes in assumptions or otherwise.

TRADEMARK NOTICE

~~Oil-Dri is a~~“Oil-Dri” and “Agsorb” are registered ~~trademark~~trademarks of Oil-Dri Corporation of America.

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Balance Sheet

(in thousands, except share and per share amounts)


	(unaudited)
ASSETS	January 31, 2021		July 31, 2020
Current Assets
Cash and cash equivalents	$	30,708	$	40,890
Accounts receivable, less allowance of $1,062 and $1,078 at January 31, 2021 and July 31, 2020, respectively	38,896		34,911
Inventories	23,655		23,893
Prepaid repairs expense	5,808		5,662
Prepaid expenses and other assets	3,720		3,064
Total Current Assets	102,787		$	108,420

Property, Plant and Equipment
Cost	265,713		261,988
Less accumulated depreciation and amortization	(174,060)		(169,040)
Total Property, Plant and Equipment, Net	91,653		92,948

Other Assets
Goodwill	9,262		9,262
Other intangibles, net of accumulated amortization of $518 and $457 at January 31, 2021 and July 31, 2020, respectively	1,683		1,566
Customer list, net of accumulated amortization of $7,104 and $6,887 at January 31, 2021 and July 31, 2020, respectively	681		898
Deferred income taxes	6,554		7,302
Operating lease right-of-use assets	8,741		9,816
Other	6,836		5,670
Total Other Assets	33,757		34,514

Total Assets	$	228,197	$	235,882

(unaudited)
ASSETS January 31,
2020 July 31,
2019
Current Assets
Cash and cash equivalents $ 21,569
$ 21,862
Accounts receivable, less allowance of
$851 and $644 at January 31, 2020 and July 31, 2019, respectively 35,699
35,459
Inventories 22,679
24,163
Prepaid repairs expense 4,679
4,708
Prepaid expenses and other assets 1,555
3,084
Total Current Assets 86,181
89,276

Property, Plant and Equipment

Cost 253,927
249,834
Less accumulated depreciation and amortization (164,096 ) (159,036 )
Total Property, Plant and Equipment, Net 89,831
90,798

Other Assets

Goodwill 9,262
9,262
Other intangibles, net of accumulated amortization
of $398 and $299 at January 31, 2020 and July 31, 2019, respectively 1,545
1,599
Customer list, net of accumulated amortization
of $6,592 and $6,297 at January 31, 2020 and July 31, 2019, respectively 1,193
1,488
Deferred income taxes 7,445
7,755
Operating lease right-of-use assets 8,535
—
Other 5,087
5,049
Total Other Assets 33,067
25,153

Total Assets $ 209,079
$ 205,227

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Balance Sheet (continued)

(in thousands, except share and per share amounts)


	(unaudited)
LIABILITIES & STOCKHOLDERS’ EQUITY	January 31, 2021		July 31, 2020
Current Liabilities
Current maturities of notes payable	$	1,000	$	1,000
Accounts payable	7,276		12,529
Dividends payable	1,799		1,808
Operating lease liabilities	2,043		2,170
Accrued expenses	22,811		28,700
Total Current Liabilities	34,929		46,207

Noncurrent Liabilities
Notes payable, net of unamortized debt issuance costs of $136 and $150 at January 31, 2021 and July 31, 2020, respectively	8,864		8,848
Deferred compensation	5,725		5,140
Pension and postretirement benefits	14,374		15,140
Long-term operating lease liabilities	8,165		9,135
Other	3,699		3,448
Total Noncurrent Liabilities	40,827		41,711

Total Liabilities	75,756		87,918

Stockholders’ Equity
Common Stock, par value $.10 per share, issued 8,524,476 shares at January 31, 2021 and 8,449,003 shares at July 31, 2020	853		845
Class B Stock, par value $.10 per share, issued 2,413,141 shares at January 31, 2021 and 2,437,402 shares at July 31, 2020	241		244
Additional paid-in capital	46,890		44,993
Retained earnings	181,265		176,579
Noncontrolling interest	(220)		(174)
Accumulated Other Comprehensive Loss:

Pension and postretirement benefits	(11,665)		(11,994)
Cumulative translation adjustment	148		(260)
Total Accumulated Other Comprehensive Loss	(11,517)		(12,254)
Less Treasury Stock, at cost (3,161,292 Common and 346,491 Class B shares at January 31, 2021 and 3,090,230 Common and 335,816 Class B shares at July 31, 2020)	(65,071)		(62,269)
Total Stockholders’ Equity	152,441		147,964

Total Liabilities & Stockholders’ Equity	$	228,197	$	235,882

(unaudited)
LIABILITIES & STOCKHOLDERS’ EQUITY January 31,
2020 July 31,
2019
Current Liabilities
Current maturities of notes payable, net of unamortized debt issuance costs
of $17 at January 31, 2020 $ 3,067
$ 3,083
Accounts payable 9,565
8,092
Dividends payable 1,766
1,761
Operating lease liabilities 1,461
—
Accrued expenses:
Salaries, wages and commissions 7,446
6,740
Trade promotions and advertising 1,387
1,588
Freight 1,862
2,635
Other 6,951
8,707
Total Current Liabilities 33,505
32,606

Noncurrent Liabilities

Notes payable, net of unamortized debt issuance costs
of $31 at July 31, 2019 —
3,052
Deferred compensation 4,881
6,014
Pension and postretirement benefits 12,637
23,721
Long-term operating lease liabilities 8,602
—
Other 2,525
4,288
Total Noncurrent Liabilities 28,645
37,075

Total Liabilities 62,150
69,681

Stockholders’ Equity

Common Stock, par value $.10 per share, issued 8,349,169 shares at January 31, 2020
and 8,284,199 shares at July 31, 2019 835
828
Class B Stock, par value $.10 per share, issued 2,531,986 shares at January 31, 2020
and 2,576,479 shares at July 31, 2019 253
258
Additional paid-in capital 43,149
41,300
Retained earnings 169,590
164,756
Noncontrolling interest (171 ) (14 )
Accumulated Other Comprehensive Loss:

Pension and postretirement benefits (9,343 ) (14,891 )
Cumulative translation adjustment (246 ) (148 )
Total Accumulated Other Comprehensive Loss (9,589 ) (15,039 )
Less Treasury Stock, at cost (2,933,243 Common and 335,816 Class B shares at
January 31, 2020 and 2,926,547 Common and 324,741 Class B shares at July 31, 2019) (57,138 ) (56,543 )
Total Stockholders’ Equity 146,929
135,546

Total Liabilities & Stockholders’ Equity $ 209,079
$ 205,227

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Income

(in thousands, except for per share amounts)


	(unaudited)
	For the Six Months Ended January 31,
	2021		2020

Net Sales	$	150,597	$	142,127
Cost of Sales	(112,121)		(103,234)
Gross Profit	38,476		38,893
Selling, General and Administrative Expenses	(29,055)		(28,899)
Income from Operations	9,421		9,994

Other Income (Expense)
Interest expense	(356)		(206)
Interest income	40		190
Other, net	807		(143)
Total Other Income (Expense), Net	491		(159)

Income Before Income Taxes	9,912		9,835
Income Tax Expense	(1,675)		(1,626)
Net Income	8,237		8,209
Net Loss Attributable to Noncontrolling Interest	(46)		(157)
Net Income Attributable to Oil-Dri	8,283		8,366

Net Income Per Share (1)
Basic Common	$	1.20	$	1.19
Basic Class B Common	$	0.89	$	0.89
Diluted Common	$	1.17	$	1.17
Diluted Class B Common	$	0.88	$	0.88
Average Shares Outstanding
Basic Common	5,149		5,164
Basic Class B Common	1,930		2,045
Diluted Common	5,265		5,251
Diluted Class B Common	1,972		2,070
Dividends Declared Per Share
Basic Common	$	0.5200	$	0.5000
Basic Class B Common	$	0.3900	$	0.3750

(unaudited)
For the Six Months Ended January 31,
2020 2019

Net Sales $ 142,127
$ 136,023
Cost of Sales (103,234 ) (104,609 )
Gross Profit 38,893
31,414
Selling, General and Administrative Expenses (28,899 ) (27,584 )
Income from Operations 9,994
3,830

Other Income (Expense)

Interest expense (206 ) (293 )
Interest income 190
96
Other, net (143 ) 39
Total Other Expense, Net (159 ) (158 )

Income Before Income Taxes 9,835
3,672
Income Tax Expense (1,626 ) (456 )
Net Income 8,209
3,216
Net (Loss) Income Attributable to Noncontrolling Interest (157 ) 23
Net Income Attributable to Oil-Dri 8,366
3,193

Net Income Per Share
Basic Common $ 1.19
$ 0.46
Basic Class B Common $ 0.89
$ 0.34
Diluted Common $ 1.09
$ 0.42
Average Shares Outstanding
Basic Common 5,164
5,099
Basic Class B Common 2,045
2,069
Diluted Common 7,321
7,242
Dividends Declared Per Share
Basic Common $ 0.5000
$ 0.4800
Basic Class B Common $ 0.3750
$ 0.3600

(1) Our Form 10-Q for the six months ended January 31, 2021 and 2020 reflects a change in presentation for net income per share. We have historically disclosed net income per share for our diluted Common and Class B Common shares in total. As we have two classes of common shares, we have elected to change our net income per share presentation to reflect net income per share for both of our classes of common shares - our diluted Common shares and our diluted Class B Common shares.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Comprehensive Income

(in thousands of dollars)


	(unaudited)
	For the Six Months Ended January 31,
	2021		2020

Net Income Attributable to Oil-Dri	$	8,283	$	8,366

Other Comprehensive Income:

Pension and postretirement benefits (net of tax)	329		5,548
Cumulative translation adjustment	408		(98)
Other Comprehensive Income	737		5,450
Total Comprehensive Income	$	9,020	$	13,816

(unaudited)
For the Six Months Ended January 31,
2020 2019

Net Income Attributable to Oil-Dri $ 8,366
$ 3,193

Other Comprehensive Income:
Pension and postretirement benefits (net of tax) 5,548
291
Cumulative translation adjustment (98 ) (36 )
Other Comprehensive Income 5,450
255
Total Comprehensive Income $ 13,816
$ 3,448

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Income

(in thousands, except for per share amounts)


	(unaudited)
	For the Three Months Ended January 31,
	2021		2020

Net Sales	$	74,500	$	71,005
Cost of Sales	(56,328)		(52,047)
Gross Profit	18,172		18,958
Selling, General and Administrative Expenses	(13,928)		(13,085)
Income from Operations	4,244		5,873

Other Income (Expense)
Interest expense	(164)		(103)
Interest income	15		92
Other, net	1,062		(104)
Total Other Income (Expense), Net	913		(115)

Income Before Income Taxes	5,157		5,758
Income Tax Expense	(869)		(1,009)
Net Income	4,288		4,749
Net Loss Attributable to Noncontrolling Interest	(11)		(81)
Net Income Attributable to Oil-Dri	4,299		4,830

Net Income Per Share (1)
Basic Common	$	0.62	$	0.68
Basic Class B Common	$	0.47	$	0.51
Diluted Common	$	0.61	$	0.67
Diluted Class B Common	$	0.46	$	0.51
Average Shares Outstanding
Basic Common	5,150		5,181
Basic Class B Common	1,934		2,039
Diluted Common	5,253		5,277
Diluted Class B Common	1,967		2,067
Dividends Declared Per Share
Basic Common	$	0.2600	$	0.2500
Basic Class B Common	$	0.1950	$	0.1875

(1) Our Form 10-Q for the three months ended January 31, 2021 and 2020 reflects a change in presentation for net income per share. We have historically disclosed net income per share for our diluted Common and Class B Common shares in total. As we have two classes of common shares, we have elected to change our net income per share presentation to reflect net income per share for both of our classes of common shares - our diluted Common shares and our diluted Class B Common shares.

(unaudited)
For the Three Months Ended January 31,
2020 2019

Net Sales $ 71,005
$ 69,880
Cost of Sales (52,047 ) (54,476 )
Gross Profit 18,958
15,404
Selling, General and Administrative Expenses (13,085 ) (12,577 )
Income from Operations 5,873
2,827

Other Income (Expense)

Interest expense (103 ) (142 )
Interest income 92
47
Other, net (104 ) 56
Total Other Expense, Net (115 ) (39 )

Income Before Income Taxes 5,758
2,788
Income Tax Expense (1,009 ) (506 )
Net Income 4,749
2,282
Net Loss Attributable to Noncontrolling Interest (81 ) (5 )
Net Income Attributable to Oil-Dri 4,830
2,287

Net Income Per Share
Basic Common $ 0.68
$ 0.33
Basic Class B $ 0.51
$ 0.25
Diluted Common $ 0.63
$ 0.30
Average Shares Outstanding
Basic Common 5,181
5,121
Basic Class B 2,039
2,068
Diluted Common 7,344
7,229
Dividends Declared Per Share
Basic Common $ 0.2500
$ 0.2400
Basic Class B $ 0.1875
$ 0.1800

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Comprehensive Income

(in thousands of dollars)


	(unaudited)						(unaudited)
	For the Three Months Ended January 31,						For the Three Months Ended January 31,
	2020			2019			2021		2020

Net Income Attributable to Oil-Dri	$	4,830		$	2,287	Net Income Attributable to Oil-Dri	$	4,299	$	4,830

Other Comprehensive Income:						Other Comprehensive Income:
Pension and postretirement benefits (net of tax)	5,277			124		Pension and postretirement benefits (net of tax)	201		5,277
Cumulative translation adjustment	(54		)	28		Cumulative translation adjustment	136		(54)
Other Comprehensive Income	5,223			152		Other Comprehensive Income	337		5,223
Total Comprehensive Income	$	10,053		$	2,439	Total Comprehensive Income	$	4,636	$	10,053

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)



	For the Three Months Ended January 31
	(unaudited)
	Number of Shares
	Common & Class B Stock	Treasury Stock	Common & Class B Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total Stockholders’ Equity
Balance, October 31, 2019	10,879,655	(3,268,057)	$	1,088	$	42,327	$	166,526	$	(57,103)	$	(14,812)	$	(90)	$	137,936
Net Income (Loss)	—	—	0		0		4,830		0		0		(81)		4,749
Other Comprehensive Income	—	—	0		0		0		0		5,223		0		5,223
Dividends Declared	—	—	0		0		(1,766)		0		0		0		(1,766)
Purchases of Treasury Stock	—	(602)	0		0		0		(23)		0		0		(23)
Net issuance of stock under long-term incentive plans	1,500	(400)	0		12		0		(12)		0		0		0
Amortization of Restricted Stock	—	—	0		810		0		0		0		0		810
Balance, January 31, 2020	10,881,155	(3,269,059)	$	1,088	$	43,149	$	169,590	$	(57,138)	$	(9,589)	$	(171)	$	146,929

Balance, October 31, 2020	10,919,617	(3,453,239)	$	1,092	$	45,779	$	178,761	$	(63,253)	$	(11,854)	$	(209)	$	150,316
Net Income (Loss)	—	—	0		0		4,299		0		0		(11)		4,288
Other Comprehensive Income	—	—	0		0		0		0		337		0		337
Dividends Declared	—	—	0		0		(1,795)		0		0		0		(1,795)
Purchases of Treasury Stock	—	(33,594)	0		0		0		(1,211)		0		0		(1,211)
Net issuance of stock under long-term incentive plans	18,000	(20,950)	2		605		0		(607)		0		0		0
Amortization of Restricted Stock	—	—	0		506		0		0		0		0		506
Balance, January 31, 2021	10,937,617	(3,507,783)	1,094		46,890		181,265		(65,071)		(11,517)		(220)		152,441


	For the Three Months Ended January 31																							For the Six Months Ended January 31, 2021
	(unaudited)																							(unaudited)
	Number of Shares																							Number of Shares
	Common & Class B Stock	Treasury Stock		Common & Class B Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total Stockholders’ Equity				Common & Class B Stock	Treasury Stock	Common & Class B Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Non-controlling Interest		Total Stockholders' Equity
Balance, October 31, 2018	10,705,328	(3,245,478	)	$	1,071	$	39,186	$	158,185		$	(56,154	)	$	(10,512	)	$	11		$	131,787
Balance, July 31, 2019																							Balance, July 31, 2019	10,860,678	(3,251,288)	$	1,086	$	41,300	$	164,756	$	(56,543)	$	(15,039)	$	(14)	$	135,546
Net Income (Loss)	—	—		—		—		2,287			—			—			(6		)	2,281			Net Income (Loss)	—	—	0		0		8,366		0		0		(157)		8,209
Other Comprehensive Income	—	—		—		—		—			—			152			—			152			Other Comprehensive Income	—	—	0		0		0		0		5,450		0		5,450
Dividends Declared	—	—		—		—		(1,684		)	—			—			—			(1,684		)	Dividends Declared	—	—	0		0		(3,532)		0		0		0		(3,532)
Purchases of Treasury Stock	—	—		—		—		—			—			—			—			—			Purchases of Treasury Stock	—	(15,621)	0		0		0		(523)		0		0		(523)
Net issuance of stock under long-term incentive plans	107,600	(4,250	)	10		315		—			(326		)	—			—			(1		)	Net issuance of stock under long-term incentive plans	20,477	(2,150)	2		70		0		(72)		0		0		0
Amortization of Restricted Stock	—	—		—		229		—			—			—			—			229			Amortization of Restricted Stock	—	—	0		1,779		0		0		0		0		1,779
Balance, January 31, 2019	10,812,928	(3,249,728	)	$	1,081	$	39,730	$	158,788		$	(56,480	)	$	(10,360	)	$	5		$	132,764
Balance, January 31, 2020																							Balance, January 31, 2020	10,881,155	(3,269,059)	$	1,088	$	43,149	$	169,590	$	(57,138)	$	(9,589)	$	(171)	$	146,929

Balance, July 31, 2020																							Balance, July 31, 2020	10,886,405	(3,426,046)	$	1,089	$	44,993	$	176,579	$	(62,269)	$	(12,254)	$	(174)	$	147,964
Net Income (Loss)																							Net Income (Loss)	—	—	0		0		8,283		0		0		(46)		8,237
Other Comprehensive Income																							Other Comprehensive Income	—	—	0		0		0		0		737		0		737
Dividends Declared																							Dividends Declared	—	—	0		0		(3,597)		0		0		0		(3,597)
Purchases of Treasury Stock																							Purchases of Treasury Stock	—	(60,587)	0		0		0		(2,189)		0		0		(2,189)
Net issuance of stock under long-term incentive plans																							Net issuance of stock under long-term incentive plans	51,212	(21,150)	5		607		0		(613)		0		0		(1)
Amortization of Restricted Stock																							Amortization of Restricted Stock	—	—	0		1,290		0		0		0		0		1,290
Balance, January 31, 2021																							Balance, January 31, 2021	10,937,617	(3,507,783)	$	1,094	$	46,890	$	181,265	$	(65,071)	$	(11,517)	$	(220)	$	152,441

Balance, October 31, 2019 10,879,655
(3,268,057 ) $ 1,088
$ 42,327
$ 166,526
$ (57,103 ) $ (14,812 ) $ (90 ) $ 137,936
Net Income (Loss) —
—
—
—
4,830
—
—
(81 ) 4,749
Other Comprehensive Income —
—
—
—
—
—
5,223
—
5,223
Dividends Declared —
—
—
—
(1,766 ) —
—
—
(1,766 )
Purchases of Treasury Stock —
(602 ) —
—
—
(23 ) —
—
(23 )
Net issuance of stock under long-term incentive plans 1,500
(400 ) —
12
—
(12 ) —
—
—
Amortization of Restricted Stock —
—
—
810
—
—
—
—
810
Balance, January 31, 2020 10,881,155
(3,269,059 ) $ 1,088
$ 43,149
$ 169,590
$ (57,138 ) $ (9,589 ) $ (171 ) $ 146,929

For the Six Months Ended January 31
(unaudited)
Number of Shares

Common
& Class B
Stock

Treasury
Stock

Common
& Class B
Stock

Additional
Paid-In
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Loss
Non-Controlling Interest
Total
Stockholders’
Equity
Balance, July 31, 2018 10,555,828
(3,238,833 ) $ 1,056
$ 38,473
$ 158,935
$ (55,946 ) $ (10,615 ) $ (18 ) $ 131,885
Net Income —
—
—
—
3,193
—
—
23
3,216
Other Comprehensive Income —
—
—
—
—
—
255
—
255
Dividends Declared —
—
—
—
(3,340 ) —
—
—
(3,340 )
Purchases of Treasury Stock —
(4,545 ) —
—
—
(135 ) —
—
(135 )
Net issuance of stock under long-term incentive plans 257,100
(6,350 ) 25
373
—
(399 ) —
—
(1 )
Amortization of Restricted Stock —
—
—
884
—
—
—
—
884
Balance, January 31, 2019 10,812,928
(3,249,728 ) $ 1,081
$ 39,730
$ 158,788
$ (56,480 ) $ (10,360 ) $ 5
$ 132,764

Balance, July 31, 2019 10,860,678
(3,251,288 ) $ 1,086
$ 41,300
$ 164,756
$ (56,543 ) $ (15,039 ) $ (14 ) $ 135,546
Net Income (Loss) —
—
—
—
8,366
—
—
(157 ) 8,209
Other Comprehensive Income —
—
—
—
—
—
5,450
—
5,450
Dividends Declared —
—
—
—
(3,532 ) —
—
—
(3,532 )
Purchases of Treasury Stock —
(15,621 ) —
—
—
(523 ) —
—
(523 )
Net issuance of stock under long-term incentive plans 20,477
(2,150 ) 2
70
—
(72 ) —
—
—
Amortization of Restricted Stock —
—
—
1,779
—
—
—
—
1,779
Balance, January 31, 2020 10,881,155
(3,269,059 ) $ 1,088
$ 43,149
$ 169,590
$ (57,138 ) $ (9,589 ) $ (171 ) $ 146,929

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Cash Flows

(in thousands)


	(unaudited)
	For the Six Months Ended January 31,
CASH FLOWS FROM OPERATING ACTIVITIES	2021		2020
Net Income	$	8,237	$	8,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,065		6,929

Stock-based compensation	1,290		1,779
Deferred income taxes	742		312
Provision for bad debts and cash discounts	(38)		221
Loss on the sale of fixed assets	12		116
Curtailment gain on SERP Plan	0		(1,296)
(Increase) Decrease in assets:
Accounts receivable	(3,798)		(434)
Inventories	412		1,508
Prepaid expenses	(760)		1,561
Other assets	(266)		731
Increase (Decrease) in liabilities:
Accounts payable	(3,901)		2,661
Accrued expenses	(5,201)		(1,602)
Deferred compensation	585		163
Pension and postretirement benefits	(437)		(5,536)
Other liabilities	(857)		(1,052)
Total Adjustments	(5,152)		6,061
Net Cash Provided by Operating Activities	3,085		14,270

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(7,598)		(7,286)
Proceeds from sale of property, plant and equipment	3		0


Net Cash Used in Investing Activities	(7,595)		(7,286)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable	0		(3,083)
Dividends paid	(3,606)		(3,527)
Purchases of treasury stock	(2,189)		(523)


Net Cash Used in Financing Activities	(5,795)		(7,133)
Effect of exchange rate changes on Cash and Cash Equivalents	123		(144)
Net Decrease in Cash and Cash Equivalents	(10,182)		(293)
Cash and Cash Equivalents, Beginning of Period	40,890		21,862
Cash and Cash Equivalents, End of Period	$	30,708	$	21,569

(unaudited)
For the Six Months Ended January 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2020 2019
Net Income $ 8,209
$ 3,216
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 6,929
6,539
Amortization of investment net discount —
(10 )
Stock-based compensation 1,779
898
Deferred income taxes 312
106
Provision for bad debts and cash discounts 221
(168 )
Loss on the sale of fixed assets 116
1
Curtailment gain on SERP Plan (1,296 ) —
(Increase) Decrease in assets:

Accounts receivable (434 ) (4,529 )
Inventories 1,508
(5,607 )
Prepaid expenses 1,561
970
Other assets 731
(422 )
Increase (Decrease) in liabilities:

Accounts payable 2,661
2,295
Accrued expenses (1,602 ) (1,390 )
Deferred compensation 163
(436 )
Pension and postretirement benefits (5,536 ) 859
Other liabilities (1,052 ) 370
Total Adjustments 6,061
(524 )
Net Cash Provided by Operating Activities 14,270
2,692

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures (7,286 ) (6,199 )
Purchases of short-term investments —
(3,948 )
Dispositions of short-term investments —
10,602
Net Cash (Used in) Provided by Investing Activities (7,286 ) 455

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on notes payable (3,083 ) (3,083 )
Dividends paid (3,527 ) (3,287 )
Purchase of treasury stock (523 ) (135 )
Net Cash Used in Financing Activities (7,133 ) (6,505 )
Effect of exchange rate changes on Cash and Cash Equivalents (144 ) (24 )
Net Decrease in Cash and Cash Equivalents (293 ) (3,382 )
Cash and Cash Equivalents, Beginning of Period 21,862
12,757
Cash and Cash Equivalents, End of Period $ 21,569
$ 9,375

OIL-DRI CORPORATION OF AMERICA

Condensed Consolidated Statements of Cash Flows - Continued

(in thousands)


	(unaudited)
	For the Six Months Ended January 31,
	2021		2020
Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures accrued, but not paid	$	829	$	628
Cash dividends declared and accrued, but not paid	$	1,799	$	1,766

(unaudited)
For the Six Months Ended January 31,
2020 2019
Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures accrued, but not paid $ 628
$ 416
Cash dividends declared and accrued, but not paid $ 1,766
$ 1,680

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

OIL-DRI CORPORATION OF AMERICA

Notes To Condensed Consolidated Financial Statements

(Unaudited)

1.BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial statements and the related notes are condensed and should be read in conjunction with the Consolidated Financial Statements and related notes for the fiscal year ended July 31, ~~2019~~2020 included in our Annual Report on Form 10-K filed with the SEC.

The unaudited Condensed Consolidated Financial Statements include the accounts of Oil-Dri Corporation of America and its subsidiaries. All significant intercompany transactions are eliminated. Except as otherwise indicated herein or as the context otherwise requires, references to “Oil-Dri,” the “Company,” “we,” “us” or “our” refer to Oil-Dri Corporation of America and its subsidiaries.

The unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals and reclassifications which are, in the opinion of management, necessary for a fair presentation of the statements contained herein. In addition, certain prior year reclassifications were made to conform to the current year presentation. Operating results for the three and six months ended January 31, ~~2020~~2021 are not necessarily an indication of the results that may be expected for the fiscal year ending July 31, ~~2020~~.2021.

In March 2020, the World Health Organization declared the recent novel coronavirus outbreak (“the coronavirus” or “COVID-19”) a pandemic. Despite its continued spread and the adverse effects of COVID-19 on the overall economy and certain of the industries we serve, we have not experienced a significant decline in customer orders and sales in the first six months of fiscal year 2021. However, the effects of COVID-19 are unprecedented, and therefore we are unable to ascertain the effects on our sales and net earnings for the balance of fiscal year 2021.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These immaterial reclassifications had no effect on the previously reported net income.

Management Use of Estimates

The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period, as well as the related disclosures. All of our estimates and assumptions are revised periodically. Actual results could differ from these estimates.

Summary of Significant Accounting Policies

Our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~2020 have not materially ~~changed, except as described herein, including policies associated with the August 1, 2019 adoption of Accounting Standards Codification (“ASC”) 842,~~ ~~Leases~~. Changes to our accounting policies as a result of the ASC 842 adoption are discussed below and further information is also provided in Note 2 of the Notes to unaudited Condensed Consolidated Financial Statements. Followingchanged. The following is a description of certain of our significant accounting policies.

Trade Receivables. We record an allowance for doubtful accounts based on our historical experience and a periodic review of our accounts receivable, including a review of the overall aging of accounts, consideration of customer credit risk and analysis of facts and circumstances about specific customer accounts. A customer account is determined to be uncollectible when it is probable that a loss will be incurred after we have completed our internal collection procedures, including termination of shipments, direct customer contact and formal demand of payment.

Overburden Removal and Mining Costs. We mine sorbent materials on property that we either own or lease as part of our overall operations. A significant part of our overall mining cost is incurred during the process of removing the overburden (non-usable material) from the mine site, thus exposing the sorbent material used in a majority of our production processes. These

stripping costs are treated as a variable inventory production cost and are included in cost of sales in the period they are incurred. We defer and amortize the pre-production overburden removal costs associated with opening a new mine.

Additionally, it is our policy to capitalize the purchase cost of land and mineral rights, including associated legal fees, survey fees and real estate fees. The costs of obtaining mineral patents, including legal fees and drilling expenses, are also capitalized. Pre-production development costs on new mines and any prepaid royalties that may be offset against future royalties due upon extraction of the minerals are also capitalized. All exploration related costs are expensed as incurred.

We perform ongoing reclamation activities during the normal course of our overburden removal. As overburden is removed from a mine site, it is hauled to previously mined sites and is used to refill older sites. This process allows us to continuously reclaim older mine sites and dispose of overburden simultaneously, therefore minimizing the costs associated with the reclamation process.

Leases. ASC 842,Leases, provides that a contract is, or contains, a lease if it conveys the right to control the use of an identified asset and, accordingly, a lease liability and a related right-of-use (“ROU”) asset is recognized at the commencement date on our consolidated balance sheet. As provided in ASC 842, we have elected not to apply these measurement and recognition requirements to short-term leases (i.e., leases with a term of 12 months or less). Short-term leases will not be recorded as ROU assets or lease liabilities on our consolidated balance sheet, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term. For leases other than short-term leases, the lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The lease term may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, we used an incremental borrowing rate, which is defined as the rate of interest we would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After a ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life. After the lease commencement date, we evaluate lease modifications, if any, that could result in a change in the accounting for leases.

Certain of our leases provide for variable lease payments that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer

Price Index) are included in the initial measurement of the lease liability and the ROU asset. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset, are expensed as incurred. Our variable lease payments primarily include common area maintenance charges based on the percentage of the total square footage leased and the usage of assets, such as photocopiers.

Some of our contracts may contain lease components as well as non-lease components, such as an agreement to purchase services. As allowed under ASC 842, we have elected not to separate the lease components from non-lease components for all asset classes and we will not allocate the contract consideration to these components. This policy was applied to all existing leases upon adoption of ASC 842 and will be applied to new leases on an ongoing basis.

Revenue Recognition. We recognize revenue when performance obligations under the terms of the contracts with customers are satisfied. Our performance obligation generally consists of the promise to sell finished products to wholesalers, distributors and retailers or consumers and our obligations have an original duration of one year or less. Control of the finished products are transferred upon shipment to, or receipt at, customers' locations, as determined by the specific terms of the contract. We have completed our performance obligation when control is transferred and we recognize revenue accordingly.

We have an unconditional right to consideration under the payment terms specified in the contract upon completion of the performance obligation. We may require certain customers to provide payment in advance of product shipment. We recorded a liability for these advance payments of ~~$313,000~~$406,000 and ~~$259,000~~$247,000 as of January 31, ~~2020~~2021 and July 31, ~~2019,~~2020, respectively. This liability is reported in Other within Accrued Expenses on the unaudited Condensed Consolidated Balance Sheet. Revenue recognized during the six months ended January 31, ~~2020~~2021 that was included in the liability for advance payments at the beginning of the period was ~~$234,000.~~$197,000.

We routinely commit to one-time or ongoing trade promotion programs directly with consumers, such as coupon programs, and with customers, such as volume discounts, cooperative marketing and other arrangements. We estimate and accrue the expected costs of these programs. These costs are considered variable consideration under ASC 606, Revenue from Contracts with Customers, and are netted against sales when revenue is recorded. The accruals are based on our best estimate of the amounts

necessary to settle future and existing obligations on products sold as of the balance sheet date. To estimate these accruals, we rely on our historical experience of trade spending patterns and that of the industry, current trends and forecasted data.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) include salaries, wages and benefits associated with staff outside the manufacturing and distribution functions, all marketing related costs, any miscellaneous trade spending expenses not required to be included in net sales, research and development costs, depreciation and amortization related to assets outside the manufacturing and distribution process and all other non-manufacturing and non-distribution expenses.

~~Trade Receivables.~~ ~~We record an allowance~~Other Current and Noncurrent Liabilities

On March 27, 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into U.S. law. The CARES Act provides for, ~~doubtful accounts based on our historical experience and a periodic review of our accounts receivable, including a review~~among other things, deferral of the ~~overall aging~~employer portion of ~~accounts, consideration~~social security taxes incurred through the end of ~~customer credit risk and analysis~~calendar 2020. As permitted by the CARES Act, we deferred approximately $400,000 of ~~facts and circumstances about specific customer accounts. A customer account is determined to be uncollectible when it is probable that a loss~~payroll taxes for the quarter ended January 31, 2021 (through December 2020) for an aggregate amount of approximately $2,300,000 in payroll taxes in calendar year 2020. The $2,300,000 will be ~~incurred after we have completed our internal collection procedures, including termination~~paid equally in the fourth quarters of ~~shipments, direct customer contact~~calendar years 2021 and ~~formal demand~~2022. The current portion of ~~payment.~~

~~Overburden Removal and Mining Costs.~~ ~~We mine sorbent materials on property that we either own or lease as part of our overall operations. A significant part of our overall mining cost~~the accrual for these payroll taxes is incurred during the process of removing the overburden (non-usable material) from the mine site, thus exposing the sorbent material used in a majority of our production processes. These stripping costs are treated as a variable inventory production cost and are included in ~~cost of sales in~~Other within Accrued Expenses and the ~~period they are incurred. We defer and amortize the pre-production overburden removal costs associated with opening a new mine.~~

Additionally, it is our policy to capitalize the purchase cost of land and mineral rights, including associated legal fees, survey fees and real estate fees. The costs of obtaining mineral patents, including legal fees and drilling expenses, are also capitalized. Pre-production development costs on new mines and any prepaid royalties that may be offset against future royalties due upon extractionnoncurrent portion of the ~~minerals are also capitalized. All exploration related costs are expensed as incurred.~~accrual is included in Other within Noncurrent Liabilities on the unaudited Condensed Consolidated Balance Sheet.

2.NEW ACCOUNTING PRONOUNCEMENTS AND REGULATIONS

~~Recently Adopted Pronouncements~~

~~On August 1, 2019 we adopted ASC 842,~~ ~~Leases~~, using the modified retrospective transition approach and, accordingly, we did not restate prior comparative period financial statements. As of the date of adoption, we elected the package of practical expedients that allowed us to forgo assessment under the ASC 842 guidance whether existing or expired contracts contained leases, the classification of expired or existing leases and the accounting for previously incurred initial direct costs. We also elected the practical expedient to forgo assessment under ASC 842 whether existing or expired land easements not previously accounted for under legacy leasing GAAP contain leases.

The adoption of ASC 842 on August 1, 2019 resulted in the recognition of additional ROU assets and lease liabilities related to operating leases of $9,348,000 and $10,910,000, respectively, on our unaudited Condensed Consolidated Balance Sheet. There was no material impact to any of our other unaudited consolidated financial statements.

Recently Issued Pronouncements

In March 2020, the FASB issued guidance under ASC 848, Reference Rate Reform. This guidance provides optional expedients and exceptions to account for debt, leases, contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. The guidance is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We have debt agreements that reference LIBOR and to the extent that those agreements are modified to replace LIBOR with another interest rate index, ASC 848 will allow us to account for the modification as a continuation of the existing contract without additional analysis. We are currently evaluating the potential effects of the adoption of this guidance on our Consolidated Financial Statements.

In December 2019, the FASB issued guidance under ASC 740, Income Taxes, which simplifies the accounting for income taxes. The guidance removes several specific exceptions to the general principles in ASC 740 and clarifies and makes amendments to improve consistent application of and simplify existing accounting for other areas in ASC 740. This guidance is effective for our first quarter of fiscal year 2022, with early adoption permitted. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements.

In June 2016, the FASB issued guidance under ASC 326, Financial Instruments-Credit Losses, which requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this new guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, as well as additional disclosures. In general, this guidance will require modified retrospective adoption for all outstanding instruments that fall under this guidance. This guidance is effective for our first quarter of fiscal year ~~2021.~~2023. We are currently evaluating the impact of the adoption of this requirement on our Consolidated Financial Statements.

There have been no other accounting pronouncements issued but not yet adopted by us which are expected to have a material impact on our Consolidated Financial Statements.

3.~~INVENTORIES~~

3.INVENTORIES

The composition of inventories is as follows (in thousands):


	January 31, 2021		July 31, 2020
Finished goods	$	14,231	$	14,500
Packaging	5,029		4,587
Other	4,395		4,806
Total Inventories	$	23,655	$	23,893

January 31,
2020 July 31,
2019
Finished goods $ 13,353
$ 13,957
Packaging 5,122
5,681
Other 4,204
4,525
Total Inventories $ 22,679
$ 24,163

Inventories are valued at the lower of cost (first-in, first-out) or net realizable value. Inventory costs include the cost of raw materials, packaging supplies, labor and other overhead costs. We performed a detailed review of our inventory items to determine if an obsolescence reserve adjustment was necessary. The review surveyed all of our operating facilities and sales groups to ensure that both historical issues and new market trends were considered. The obsolescence reserve not only considered specific items, but also took into consideration the overall value of the inventory as of the balance sheet date. The inventory obsolescence reserve values at January 31, ~~2020~~2021 and July 31, ~~2019~~2020 were ~~$1,362,000~~$772,000 and ~~$704,000,~~$926,000, respectively. The ~~higher~~ obsolescence reserve ~~is attributed~~decreased due to ~~our focus on inventory~~better management of inventory. Other inventories includes a variety of items including clay, additives, fragrances and ~~enhanced data available~~other supplies and decreased from ~~our enterprise resource planning (“ERP”) system.~~July 31, 2020 due to increased production. Conversely, packaging inventories increased from July 31, 2020 due to anticipated sales demand.

4.FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized into categories based on the lowest level of input that is significant to the fair value measurement. The categories in the fair value hierarchy are as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs for similar assets or liabilities or valuation models whose inputs are observable, directly or indirectly.

Level 3: Unobservable inputs.

Cash equivalents are primarily money market mutual funds classified as Level 1. We had ~~$26,000~~$6,000 of cash equivalents as of ~~both~~ January 31, ~~2020~~2021 and July 31, ~~2019,~~2020, respectively, which are included in Cash and cash equivalents on the unaudited Condensed Consolidated Balance Sheet.

Balances of accounts receivable and accounts payable approximated their fair values at January 31, ~~2020~~2021 and July 31, ~~2019~~2020 due to the short maturity and nature of those balances.

Notes payable are reported at the face amount of future maturities. The estimated fair value of notes payable, including current maturities, was ~~$3,176,000~~$11,541,000 and ~~$6,357,000~~$11,631,000 as of January 31, ~~2020~~2021 and July 31, ~~2019,~~2020, respectively, and are classified as Level 2. The fair value was estimated using the exit price notion of fair value.

We apply fair value techniques on at least an annual basis associated with: (1) valuing potential impairment loss related to goodwill, trademarks and other indefinite-lived intangible assets and (2) valuing potential impairment loss related to long-lived assets. See Note 5 of the Notes to the unaudited Condensed Consolidated Financial Statements for further information about goodwill and other intangible assets.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets, other than goodwill, include trademarks, patents, customer lists and product registrations. Intangible amortization expense was ~~$249,000~~$150,000 and ~~$209,000~~$249,000 in the second quarter of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. Intangible amortization expense was ~~$416,000~~$305,000 and ~~$419,000~~$416,000 in the first six months of fiscal years ~~2020~~2021 and ~~2019.~~2020. Estimated intangible amortization for the remainder of fiscal year ~~2020~~2021 is ~~$370,000.~~$290,000. Estimated intangible amortization for the next five fiscal years is as follows (in thousands):


2022	$	433
2023	$	227
2024	$	91
2025	$	66
2026	$	64

2021 $ 556
2022 $ 406
2023 $ 202
2024 $ 67
2025 $ 47

We have one acquired trademark recorded at a cost of $376,000 that was determined to have an indefinite life and is not amortized.

We performed our annual goodwill impairment analysis in the fourth quarter of fiscal year ~~2019~~2020 and no0 impairment was identified. There have been no triggering events that would indicate a new impairment analysis is needed.Although we have not identified any triggering events relating to goodwill or our intangibles, the ultimate effects of COVID-19 could change this assessment in the future.

6. ACCRUED EXPENSES

Accrued expenses is as follows (in thousands):


	January 31, 2021		July 31, 2020
Salaries, Wages, Commissions and Employee Benefits	$	8,825	$	14,798
Trade promotions and advertising	1,537		2,349
Freight	2,714		1,313
Real Estate Tax	222		1,658
Other	9,513		8,582
	$	22,811	$	28,700

The decrease in salaries, wages, commissions and employee benefits relates primarily to the payment of annual discretionary bonuses during the first quarter of fiscal year 2021. The accrual for trade promotions and advertising is lower at January 31, 2021 than at July 31, 2020 due to a shift in timing of advertising programs and expense. Freight rates increased during the six months ended January 31, 2021 resulting in a higher accrual at January 31, 2021. Accrued real estate tax at January 31, 2021 is lower than at July 31, 2020 due to timing of payments as well as an adjustment to account for lower real estate taxes for one of our facilities.

7.OTHER CONTINGENCIES

We are party to various legal actions from time to time that are ordinary in nature and incidental to the operation of our business, including ongoing litigation. While it is not possible at this time to determine with certainty the ultimate outcome of these or other lawsuits, we believe that none of the pending proceedings will have a material adverse effect on our business, financial condition, results of operations or cash flows. In June 2020, the Company received notice from a former service provider alleging a breach of contract regarding the payment of a contingency fee. Such party subsequently, in July 2020, filed a lawsuit seeking to require the Company to participate in binding mediation regarding this matter. Although we believe this claim to be without merit, as of July 31, 2020, we have determined a reasonable estimate of this liability within a range, with no amount within that range being a better estimate than any other amount, and have therefore recorded that estimate in Other within Accrued expenses. There have been no changes during the six months ended January 31, 2021 that would have changed this estimate. We believe that any loss related to this matter is unlikely to be material. However, the outcome of this legal matter is subject to significant uncertainties. The ability to predict the ultimate outcome of this legal matter involves judgments, estimates and inherent uncertainties. The actual outcome could differ materially from management’s estimates.

8. LEASES

We have operating leases primarily for real estate properties, including corporate headquarters, customer service and sales offices, manufacturing and packaging facilities, warehouses, and research and development facilities, as well as for rail tracks, railcars and office equipment. Certain of our leases for a shared warehouse and office facility, rail track and railcars have options to extend which we are reasonably certain we will exercise and, accordingly, have been considered in the lease term used to recognize our ROU assets and lease liabilities. To determine the present value of the lease liability, we use an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. Further information about our accounting policy for leases is included in Note 1 of the Notes to the unaudited Condensed Consolidated Financial Statements.

We have no material finance leases, and variable costs for operating leases are immaterial for the second quarter of fiscal year ~~2020.~~2021. Operating lease costs are included in Cost of Sales or SG&A expenses based on the nature of the lease. The following table summarizes total lease costs for our operating leases (in thousands):


	For the Three Months Ended January 31,				For the Six Months Ended January 31,

	2021		2020		2021		2020
Operating Lease Cost
Operating lease cost	$	657	$	517	$	1,352	$	1,034
Short-term operating lease cost	176		195		362		400

For the Three Months Ended January 31, 2020 For the Six Months Ended January 31, 2020
Operating Lease Cost

Operating lease cost $ 517
$ 1,034
Short-term operating lease cost 195
400

Supplemental cash flow information related to leases was as follows (in thousands):


						For the Three Months Ended January 31,						For the Six Months Ended January 31,

	For the Three Months Ended January 31, 2020		For the Six Months Ended January 31, 2020					2021			2020			2021			2020
Other Information					Other Information
Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	430	$	855	Operating cash flows from operating leases	$	567		$	430		$	1,169		$	855

Operating lease ROU assets and operating lease liabilities are separately presented on the unaudited Condensed Consolidated Balance Sheet, excluding leases with an initial term of twelve months or less. Other supplemental balance sheet information related to leases was as follows:


	January 31, 2021	July 31, 2020









Weighted-average remaining lease term - operating leases	9.5 years	9.4 years


Weighted-average discount rate - operating leases	3.93%	3.87%



	~~For the Six Months Ended January 31, 2020~~
~~Weighted-average remaining lease term - operating leases~~	~~10.8 years~~
~~Weighted-average discount rate - operating leases~~	~~4.01%~~

The following table summarizes scheduled minimum future lease payments due within twelve months for operating leases with terms longer than one year for which cash flows are fixed and determinable as of January 31, (in thousands):




2021	$	1,188
2022	2,092
2023	1,121
2024	981
2025	900
Thereafter	6,140
Total	12,422
Less: imputed interest	(2,214)
Net lease obligation	$	10,208

2020 $ 1,823
2021 1,512
2022 1,141
2023 812
2024 773
Thereafter 6,523
Total 12,584
Less: imputed interest (2,521 )
Net lease obligation $ 10,063

2020 $ 2,255
2021 1,640
2022 1,513
2023 1,038
2024 899
Thereafter 7,422

7.9.PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension and Postretirement Health Benefits

The Oil-Dri Corporation of America Pension Plan (“Pension Plan”) is a defined benefit pension plan for eligible salaried and hourly employees. Pension benefits are based on a formula of years of credited service and levels of compensation or stated amounts for each year of credited service. On January 9, 2020, we amended the Pension Plan to freeze participation, all future benefit accruals and accrual of benefit service, including consideration of compensation increases, effective March 1, 2020. Consequently, the Pension Plan is closed to new participants and current participants will no longer earn additional benefits on or after March 1, 2020.

The amendment of the Pension Plan triggered a pension curtailment, which required a remeasurement of the Pension Plan's obligation. The remeasurement resulted in a decrease in the benefit obligation of approximately $6,632,000, which has been recorded in Other Comprehensive Income, net of taxes of $1,592,000.

The components of net periodic pension and postretirement health benefit costs were as follows:


	Pension Benefits
	(in thousands)
	For the Three Months Ended January 31,				For the Six Months Ended January 31,
	2021		2020		2021		2020
Service cost	$	0	$	363	$	0	$	851
Interest cost	583		503		583		1,012
Expected return on plan assets	(1,444)		(716)		(1,444)		(1,414)
Amortization of:
Other actuarial loss	265		313		435		670
Net periodic benefit cost	$	(596)	$	463	$	(426)	$	1,119

	Postretirement Health Benefits
	(in thousands)
	For the Three Months Ended January 31,				For the Six Months Ended January 31,
	2021		2020		2021		2020
Service cost	$	34	$	28	$	69	$	58
Interest cost	12		20		25		41
Amortization of:
Prior service costs	(2)		(2)		(3)		(3)
Other actuarial loss	2		0		2		0
Net periodic benefit cost	$	46	$	46	$	93	$	96

Pension Benefits
(in thousands)
For the Three Months Ended January 31, For the Six Months Ended January 31,
2020 2019 2020 2019
Service cost $ 363
$ 391
$ 851
$ 813
Interest cost 503
517
1,012
1,057
Expected return on plan assets (716 ) (703 ) (1,414 ) (1,405 )
Amortization of:
  Prior service costs —
1
—
1
  Other actuarial loss 313
165
670
386
Net periodic benefit cost $ 463
$ 371
$ 1,119
$ 852

Postretirement Health Benefits
(in thousands)
For the Three Months Ended January 31, For the Six Months Ended January 31,
2020 2019 2020 2019
Service cost $ 28
$ 25
$ 58
$ 52
Interest cost 20
24
41
49
Amortization of:
  Prior service costs (2 ) (2 ) (3 ) (3 )
Net periodic benefit cost $ 46
$ 47
$ 96
$ 98

The non-service cost components of net periodic benefit cost are included in Other Income (Expense) in the line item Other, net on the unaudited Condensed Consolidated Statements of Income.

The Pension Plan is funded based upon actuarially determined contributions that take into account the amount deductible for income tax purposes, the normal cost and the minimum contribution required and the maximum contribution allowed under applicable regulations.We were not required to make, ~~but~~and did not voluntarily make, a ~~$5,000,000 voluntary~~ contribution to the Pension Plan during the ~~second quarter~~first six months of fiscal year ~~2020.~~2021. We have no0 minimum funding requirements for the remainder of fiscal year ~~2020 but we may consider making an additional voluntary contribution.~~2021.

The postretirement health plan is an unfunded plan. We pay insurance premiums and claims from our assets.

Assumptions used in the previous calculations were as follows:


	Pension Benefits				Postretirement Health Benefits					Pension Benefits				Postretirement Health Benefits
	For the Three and Six Months Ended January 31,									For the Three and Six Months Ended January 31,
	2020		2019		2020		2019			2021		2020		2021		2020
Discount rate for net periodic benefit cost	3.35	%	4.04	%	2.93	%	3.81	%	Discount rate for net periodic benefit cost	2.14	%	3.35	%	1.63	%	2.93	%
Rate of increase in compensation levels	3.50	%	3.50	%	—		—		Rate of increase in compensation levels	0	%	3.50	%	0		0
Long-term expected rate of return on assets	7.00	%	7.00	%	—		—		Long-term expected rate of return on assets	6.50	%	7.00	%	0		0

The medical cost trend assumption for postretirement health benefits was ~~7.35%~~7.20%. The graded trend rate is expected to decrease to an ultimate rate of 4.50% in fiscal year ~~2038~~.2038.

Supplemental Executive Retirement Plan

The Oil-Dri Corporation of America Supplemental Executive Retirement Plan (“SERP”) provides certain retired participants in the Pension Plan with the amount of benefits that would have been provided under the Pension Plan but for: (1) the limitations on benefits imposed by Section 415 of the Internal Revenue Code (“Code”) and/or (2) the limitation on compensation for purposes of calculating benefits under the Pension Plan imposed by Section 401(a)(17) of the Code. The SERP liability is actuarially determined at the end of each fiscal year using assumptions similar to those used for the Pension Plan. The SERP is unfunded and benefits will be funded when payments are made.

On January 9, 2020, we amended the SERP to freeze participation and any excess benefit, supplemental benefit or additional benefit effective March 1, 2020. Consequently, the SERP is closed to new participants and current participants no longer earn additional benefits on or after March 1, 2020.

The ~~amendment~~SERP was terminated effective June 30, 2020. Any payment of benefits that would otherwise have been payable pursuant to the SERP ~~triggered a pension curtailment which required a remeasurement of the SERP's obligation. The remeasurement resulted in a decrease~~plan on or after June 30, 2021 will instead be paid to each participant in the ~~SERP liability~~form of ~~approximately $1,296,000, which has been recorded in SG&A in the second quarter of fiscal year 2020.~~one lump sum, with such lump sum payment payable no earlier than June 30, 2021 and no later than June 8, 2022.

8.10. OPERATING SEGMENTS

We have ~~two~~2 operating segments: (1) Business to Business Products Group and (2) Retail and Wholesale Products Group. These operating segments are managed separately and each segment's major customers have different characteristics. The Retail and Wholesale Products Group customers include: mass merchandisers; wholesale clubs; drugstore chains; pet specialty retail outlets; dollar stores; retail grocery stores; e-commerce retailers; distributors of industrial cleanup and automotive products; environmental service companies; and sports field product users. The Business to Business Products Group customers include: processors and refiners of edible oils, petroleum-based oils and biodiesel fuel; manufacturers of animal feed and agricultural chemicals; distributors of animal health and nutrition products; and marketers of consumer products. Our operating segments are also our reportable segments. The accounting policies of the segments are the same as those described in Note 1 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~.2020.

Net sales for our principal products by segment are as follows (in thousands):


	Business to Business Products Group				Retail and Wholesale Products Group
	For the Six Months Ended January 31,
Product	2021		2020		2021		2020
Cat Litter	$	7,612	$	7,247	$	81,879	$	74,970
Industrial and Sports	0		0		13,972		15,012
Agricultural and Horticultural	12,033		10,296		0		0
Bleaching Clay and Fluids Purification	25,406		24,605		941		1,196
Animal Health and Nutrition	8,754		8,801		0		0
Net Sales	$	53,805	$	50,949	$	96,792	$	91,178

	Business to Business Products Group				Retail and Wholesale Products Group
	For the Three Months Ended January 31,
Product	2021		2020		2021		2020
Cat Litter	$	3,736	$	3,550	$	41,085	$	38,591
Industrial and Sports	0		0		6,710		7,412
Agricultural and Horticultural	5,046		4,577		0		0
Bleaching Clay and Fluids Purification	12,765		12,382		422		531
Animal Health and Nutrition	4,736		3,962		0		0
Net Sales	$	26,283	$	24,471	$	48,217	$	46,534

Business to Business Products Group Retail and Wholesale Products Group
For the Six Months Ended January 31,
Product 2020 2019 2020 2019
Cat Litter $ 7,247
$ 6,502
$ 74,970
$ 67,613
Industrial and Sports —
—
15,012
15,429
Agricultural and Horticultural 10,296
12,698
—
—
Bleaching Clay and Fluids Purification 24,605
24,454
1,196
1,197
Animal Health and Nutrition 8,801
8,130
—
—
Net Sales $ 50,949
$ 51,784
$ 91,178
$ 84,239

Business to Business Products Group Retail and Wholesale Products Group
For the Three Months Ended January 31,
Product 2020 2019 2020 2019
Cat Litter $ 3,550
$ 3,287
$ 38,591
$ 35,218
Industrial and Sports —
—
7,412
7,652
Agricultural and Horticultural 4,577
6,646
—
—
Bleaching Clay and Fluids Purification 12,382
12,559
531
552
Animal Health and Nutrition 3,962
3,966
—
—
Net Sales $ 24,471
$ 26,458
$ 46,534
$ 43,422

We do not rely on any segment asset allocations and we do not consider them meaningful because of the shared nature of our production facilities; however, we have estimated the segment asset allocations below for those assets for which we can reasonably determine. The unallocated asset category is the remainder of our total assets. ~~We have refined the basis of allocation for certain of our assets as of January 31, 2020 and we have restated the allocation of assets as of July 31, 2019 presented below to enhance comparability.~~ The asset allocation is estimated and is not a measure used by our chief operating decision maker about allocating resources to the operating segments or in assessing their performance.


	Assets
	January 31, 2021		July 31, 2020
	(in thousands)
Business to Business Products Group	$	71,528	$	72,987
Retail and Wholesale Products Group	101,327		95,838
Unallocated Assets	55,342		67,057
Total Assets	$	228,197	$	235,882

Assets
January 31, 2020 July 31, 2019
(in thousands)
Business to Business Products Group $ 63,744
$ 66,655
Retail and Wholesale Products Group 96,043
95,593
Unallocated Assets 49,292
42,979
Total Assets $ 209,079
$ 205,227

Net sales and operating income for each segment are provided below. The corporate expenses line includes certain unallocated expenses, including primarily salaries, wages and benefits, purchased services, rent, utilities and depreciation and amortization associated with corporate functions such as research and development, information systems, finance, legal, human resources and customer service. Corporate expenses also include the estimated annual incentive plan bonus accrual.


	For the Six Months Ended January 31,											For the Six Months Ended January 31,
	Net Sales				Income							Net Sales				Income
	2020		2019		2020			2019				2021		2020		2021		2020
	(in thousands)											(in thousands)
Business to Business Products Group	$	50,949	$	51,784	$	15,848		$	14,304		Business to Business Products Group	$	53,805	$	50,949	$	15,859	$	15,848
Retail and Wholesale Products Group	91,178		84,239		8,968			2,662			Retail and Wholesale Products Group	96,792		91,178		8,589		8,968
Net Sales	$	142,127	$	136,023							Net Sales	$	150,597	$	142,127
Corporate Expenses	Corporate Expenses				(14,822		)	(13,136		)	Corporate Expenses					(15,027)		(14,822)
Income from Operations	Income from Operations				9,994			3,830			Income from Operations					9,421		9,994
Total Other Expense, Net					(159		)	(158		)
Total Other Income (Expense), Net											Total Other Income (Expense), Net					491		(159)
Income before Income Taxes	Income before Income Taxes				9,835			3,672			Income before Income Taxes					9,912		9,835
Income Tax Expense	Income Tax Expense				(1,626		)	(456		)	Income Tax Expense					(1,675)		(1,626)
Net Income	Net Income				8,209			3,216			Net Income					8,237		8,209
Net (Loss) Income Attributable to Noncontrolling Interest					(157		)	23
Net Loss Attributable to Noncontrolling Interest											Net Loss Attributable to Noncontrolling Interest					(46)		(157)
Net Income Attributable to Oil-Dri	Net Income Attributable to Oil-Dri				$	8,366		$	3,193		Net Income Attributable to Oil-Dri					$	8,283	$	8,366


	For the Three Months Ended January 31,											For the Three Months Ended January 31,
	Net Sales				Income							Net Sales				Income
	2020		2019		2020			2019				2021		2020		2021		2020
	(in thousands)											(in thousands)
Business to Business Products Group	$	24,471	$	26,458	$	7,552		$	7,272		Business to Business Products Group	$	26,283	$	24,471	$	7,663	$	7,552
Retail and Wholesale Products Group	46,534		43,422		5,608			2,653			Retail and Wholesale Products Group	48,217		46,534		4,111		5,608
Net Sales	$	71,005	$	69,880							Net Sales	$	74,500	$	71,005
Corporate Expenses	Corporate Expenses				(7,287		)	(7,098		)	Corporate Expenses					(7,530)		(7,287)
Income from Operations	Income from Operations				5,873			2,827			Income from Operations					4,244		5,873
Total Other Expense, Net					(115		)	(39		)
Total Other Income (Expense), Net											Total Other Income (Expense), Net					913		(115)
Income before Income Taxes	Income before Income Taxes				5,758			2,788			Income before Income Taxes					5,157		5,758
Income Tax Expense	Income Tax Expense				(1,009		)	(506		)	Income Tax Expense					(869)		(1,009)
Net Income	Net Income				4,749			2,282			Net Income					4,288		4,749
Net Loss Attributable to Noncontrolling Interest	Net Loss Attributable to Noncontrolling Interest				(81		)	(5		)	Net Loss Attributable to Noncontrolling Interest					(11)		(81)
Net Income Attributable to Oil-Dri	Net Income Attributable to Oil-Dri				$	4,830		$	2,287		Net Income Attributable to Oil-Dri					$	4,299	$	4,830

9.11.STOCK-BASED COMPENSATION

The Oil-Dri Corporation of America 2006 Long Term Incentive Plan, as amended (the “2006 Plan”), permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based and cash-based awards. Our employees and outside directors are eligible to receive grants under the 2006 Plan. The total number of shares of stock subject to grants under the 2006 Plan may not exceed 1,219,500. As of January 31, 2021, there were 357,096 shares available for future grants under this plan.

Restricted Stock

All of our non-vested restricted stock as of January 31, ~~2020~~2021 was issued under the 2006 Plan with vesting periods generally between one and five ~~years~~.years. We determined the fair value of restricted stock as of the grant date. We recognize the related compensation expense over the period from the date of grant to the date the shares vest.

There were ~~1,500~~18,000 and ~~117,000~~1,500 restricted shares of Common Stock granted during the second quarter of fiscal years 2021 and 2020, ~~and 2019,~~ respectively. There were no restricted shares of Class B Stock granted during the second quarter of fiscal year 2020 and 7,000 restricted shares of Class B Stock granted during the second quarter of fiscal year 2019. Stock-based compensation expense ~~related to non-vested restricted stock~~ was ~~$810,000~~$506,000 and ~~$229,000~~$810,000 for the second quarter of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. Stock-based compensation expense ~~related to non-vested restricted stock~~ was ~~$1,779,000~~$1,290,000 and ~~$889,000~~$1,779,000 for the first six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively.

A summary of restricted stock transactions is shown below:


	Restricted Shares (in thousands)	Weighted Average Grant Date Fair Value
Non-vested restricted stock outstanding at July 31, 2020	390	$	33.19
Granted	51	$	35.80
Vested	(60)	$	33.05
Forfeitures	(21)	$	28.96
Non-vested restricted stock outstanding at January 31, 2021	360	$	33.83

Restricted Shares
(in thousands)
Weighted Average Grant Date Fair Value
Non-vested restricted stock outstanding at July 31, 2019 414
$ 33.09
Granted 21
$ 33.51
Vested (41 ) $ 32.34
Forfeitures (2 ) $ 33.51
Non-vested restricted stock outstanding at January 31, 2020 392
$ 33.19

~~10.~~12. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME


	Pension and Postretirement Health Benefits			Cumulative Translation Adjustment		Total Accumulated Other Comprehensive (Loss) Income
Balance as of July 31, 2020	$	(11,994)		$	(260)	$	(12,254)
Other comprehensive income before reclassifications, net of tax	0			408		408
Amounts reclassified from accumulated other comprehensive income, net of tax	329		(a)	0		329

Net current-period other comprehensive income, net of tax	329			408		737
Balance as of January 31, 2021	$	(11,665)		$	148	$	(11,517)

Pension and Postretirement Health Benefits Cumulative Translation Adjustment Total Accumulated Other Comprehensive (Loss) Income
Balance as of July 31, 2019 $ (14,891 ) $ (148 ) $ (15,039 )
Other comprehensive loss before reclassifications, net of tax —
(98 ) (98 )
Amounts reclassified from accumulated other comprehensive income, net of tax 508
(a) —
508
Curtailment on Pension Plan $ 5,040
(b) $ —
$ 5,040
Net current-period other comprehensive income (loss), net of tax 5,548
(98 ) 5,450
Balance as of January 31, 2020 $ (9,343 ) $ (246 ) $ (9,589 )

(a) Amount is net of tax expense of ~~$160,138~~.$104,060. Amount is included in the components of net periodic benefit cost for the pension and postretirement health plans. See Note ~~7 of the Notes to unaudited Condensed Consolidated Financial Statement-s for further information.~~

~~(b) Amount is net of tax expense of $1,592,000. See Note 7~~9 of the Notes to the unaudited Condensed Consolidated Financial Statements for further information.

13. RELATED PARTY TRANSACTIONS

One member of our Board of Directors (the “Board”)~~, and our Lead Independent Director,~~ retired from the role of President and Chief Executive Officer of a customer of ours in September ~~2019. That company was~~2019 and is currently party to a ~~customer of ours before~~post-employment agreement with the ~~board member joined that company and before he became a member of our Board.~~customer. Total net sales to that customer, including sales to subsidiaries of that customer, were ~~$49,000~~$71,000 and ~~$105,000~~$49,000 for the second quarter of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively and were ~~$160,000~~$181,000 and ~~$202,000~~$160,000 for the first six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. Outstanding accounts receivable from that customer, and its subsidiaries, were ~~$10,000~~$21,000 at ~~both~~ January 31, ~~2020~~2021. There were 0 outstanding accounts receivable from that customer, and its subsidiaries, as of July 31, ~~2019.~~2020.

One member of our Board ~~and of the Compensation Committee of our Board,~~ is currently the President and Chief Executive Officer ~~as well as a director and shareholder~~ of a ~~law firm that regularly provides services to us.~~vendor of ours. Total payments to ~~that~~this vendor for fees and

cost reimbursements were ~~$25,000~~$109,000 and ~~$51,000~~$25,000 for the second quarter of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively and were ~~$63,000~~$201,000 and ~~$97,000~~$63,000 for the first six months of fiscal years ~~2020~~2021 and ~~2019,~~2020, respectively. There were no0 outstanding accounts payable to that vendor as of January 31, ~~2020~~2021 or July 31, ~~2019.~~2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes included herein and our Consolidated Financial Statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~.2020. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under “Forward-Looking Statements” and Item 1A, Risk Factors of this quarterly report on Form 10-Q for the quarter ended January 31, ~~2020~~2021 and of our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~.2020.

We develop, mine, manufacture and market sorbent products principally produced from clay minerals and, to a lesser extent, other clay-like sorbent materials. Our principal products include agricultural and horticultural chemical carriers, animal health and nutrition products, bleaching clay and fluid purification aids, cat litter, industrial and automotive floor absorbents and sports field products. Our products are sold to two primary customer groups, including customers who resell our products as originally produced to the end consumer and those who use our products as part of their production process or use them as an ingredient in their final finished product. We have two reportable operating segments based on the different characteristics of our two primary customer groups: Retail and Wholesale Products Group and Business to Business Products Group, as described in Note 810 of the Notes to the unaudited Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

In December 2019, COVID-19 was reported in China and subsequently spread worldwide. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and it continues to have a worldwide impact. While we saw changes to consumer purchasing patterns for certain products in response to the pandemic and certain increases in our costs arising out of the pandemic outbreak and continued spread of COVID-19, there has not, to date, been a significant impact to our business as a whole. All of our facilities, with the exception of our subsidiary in China (which, as noted below, has subsequently resumed operations), have continued to operate as essential businesses as permitted under exceptions in the applicable shelter-in-place mandates due to our inclusion in the Critical Manufacturing Sector as defined by the U.S. Department of Homeland Security and other functions defined as essential by government authorities. Our subsidiary in China, which experienced certain disruptions as a result of government restrictions at the onset of the pandemic, returned to operations in the third quarter of fiscal year 2020. Our top priority has been, and continues to be, the safety and health of our employees, contractors, and customers. We have adhered and continue to adhere to guidance from the U.S. Centers for Disease Control and Prevention (CDC) and local health and governmental authorities with respect to social distancing and physical separation. Additionally, we have increased cleaning and sanitation programs at each of our facilities. As a result, we have not experienced any shut downs due to workforce absences or illnesses.

As further discussed below, our consolidated net sales have increased in the second quarter of fiscal year 2021 and in the first six months of fiscal year 2021 compared to the second quarter and first six months of fiscal year 2020. Despite the increase in net sales, we have not experienced any significant issues collecting amounts duefrom customers to date. However, parts of our business have been negatively impacted by the COVID-19 outbreak. Net sales of our industrial and sports businesses declined as many businesses and sports fields remain shut down. In the long-term, we foresee that our sports product sales will improve back to pre-pandemic volumes aided by the expected re-opening of baseball and softball at all levels in 2021. As discussed below in “Foreign Operations,” net sales for our industrial granules in the United Kingdom are lower due to restrictions imposed by the United Kingdom government in response to COVID-19. In addition, while net sales of our fluids purification products are higher in the second quarter of fiscal year 2021 and the first six months of fiscal year 2021 than in the same periods of fiscal year 2020, COVID-19 has negatively impacted the sales of these products. Reduced travel and, to a lesser extent, our inability due to COVID-19 to participate in our customers' plant tests of our fluids purification products and the continued closures of schools and restaurants has impeded our sales.

Consolidated gross profit has not been significantly impacted by COVID-19. We did experience some delays of incoming materials from three suppliers due to COVID-19 during the first six months of fiscal 2021. However, it did not impact our ability to fulfill customer orders and we continue to monitor our suppliers. In general, our suppliers have either remained open or we have found new suppliers. While we have experienced an increase in transportation costs as discussed further below, we

have continued to meet the increase in customer demand for our products. In addition, we have been able to successfully navigate delays in overseas vessel deliveries of our products by increasing our safety stock as well as finding other providers. We have incurred additional cleaning and sanitation costs to comply with the CDC guidelines, but these costs did not have a significant impact on our consolidated gross profit. In addition, we have experienced a decrease in travel costs as our employees have been traveling at reduced levels during the outbreak.

We are closely monitoring the continued spread and effects of the outbreak of COVID-19 on all aspects of our business, including how it has and may impact our suppliers and customers as well as the effects of the pandemic on economic conditions and the financial markets. We have not experienced any significant impacts or interruptions and we will continue to closely monitor our inventory levels to mitigate the risk of any potential supply interruptions or changes in customer demand. However, it is possible that significant disruptions could occur if the pandemic continues to put pressure on transportation and shipping as a result of an imbalance of supply and demand. The impacts of COVID-19 and related economic conditions on our future results are uncertain at this time. The scope, duration and magnitude of the direct and indirect effects of COVID-19 continue to evolve (and in many cases, rapidly) and in ways that are difficult or impossible to anticipate. In addition, because COVID-19 did not materially impact our financial results to date and it remains uncertain whether and how consumers will modify their purchasing habits in response to COVID-19 and continued or reduced government restrictions, these results may not be indicative of the impact that COVID-19 may have on our results for the remainder of fiscal year 2021.

The impacts of COVID-19 to our specific operating segments are discussed below.

SIX MONTHS ENDED JANUARY 31, ~~2020~~2021 COMPARED TO

SIX MONTHS ENDED JANUARY 31, ~~2019~~2020

CONSOLIDATED RESULTS

Consolidated net sales for the six months ended January 31, ~~2020~~2021 were ~~$142,127,000~~,$150,597,000, a 4%6% increase compared to net sales of ~~$136,023,000~~$142,127,000 for the six months ended January 31, ~~2019~~.2020. Net sales increased for both our Retail and Wholesale Products Group ~~but decreased for our~~and Business to Business Products Group. Segment results are discussed further below.

Consolidated gross profit for the first six months of fiscal year ~~2020~~2021 was ~~$38,893,000,~~$38,476,000, or ~~27%~~26% of net sales, compared to ~~$31,414,000,~~$38,893,000, or ~~23%~~27% of net sales, for the first six months of fiscal year ~~2019. Lower~~2020. Higher freight, packaging and ~~natural gas~~non-fuel costs per manufactured ton drove the ~~increase~~decrease in gross profit. Freight costs ~~declined approximately 21%~~ per manufactured ton ~~for~~increased approximately 10% in the first six months of fiscal year ~~2020~~2021 compared to the same period inof fiscal year ~~2019~~2020 as the result of ~~lower~~higher transportation rates ~~from improved truck availability. In addition, costs were higher in the first half of the prior fiscal year~~ due to ~~other one-time events, including~~ a ~~greater number~~national driver shortage and tight trucking capacity in part caused by the continued return of ~~product transfers between our plants and warehouses to support customer service during the implementation of our new ERP system on August 1, 2018 and disruptions due to Hurricane Michael.~~non-essential businesses. Our overall freight costs also vary between periods depending on the mix of products sold and the geographic distribution of our customers. ~~The cost of natural gas used~~Despite the tight trucking capacity we have been able to ~~operate kilns that dry our clay was approximately 29% lower per manufactured ton~~continue to meet the increase in the first six months of fiscal year 2020 compared to the first six months of fiscal year 2019. Non-fuel manufacturing costs per manufactured ton were flat compared to the first six months of the prior fiscal year. In contrast, packagingcustomer demand. Packaging costs per manufactured ton for the first six months of fiscal year ~~2020~~2021 were ~~slightly~~approximately 10% higher compared to the first six months of fiscal year ~~2019,~~2020 due ~~in part~~ to ~~the~~product mix ~~of products produced. In addition, many~~and higher commodity costs, particularly as it relates to resin. Many of our contracts for packaging purchases are subject to periodic price adjustments, which trail changes in underlying commodity prices. Non-fuel costs per manufactured ton such as repairs and purchased materials also increased during the first six months of fiscal year 2021 compared to fiscal year 2020. In contrast, the cost of natural gas per manufactured ton used to operate kilns that dry our clay was flat in the first six months of fiscal year 2021 compared to the first six months of fiscal year 2020. While we incurred additional employee compensation costs to meet increased customer demand as well as cleaning and sanitation costs due to COVID-19, these costs did not have a significant impact on our consolidated gross profit. In addition, the majority of our suppliers have remained open and have been able to meet our increased demand.

Total SG&A expenses of $29,055,000 for the first six months of fiscal year 2021 were essentially flat compared to $28,899,000 for the first six months of fiscal year ~~2020, a 5% increase compared to $27,584,000 for the first six months of fiscal year 2019.~~2020. The discussion of the segments' operating incomes below describes the changes in SG&A expenses that were allocated to the operating segments. The remaining unallocated corporate expenses ~~included~~includes a ~~higher~~lower estimated annual incentive bonus accrual ~~which was based on performance targets established~~ for ~~each~~ fiscal ~~year. The increased bonus expense was partially offset by a curtailment gain reported upon the freeze of our SERP in the second quarter of~~year 2021 compared to fiscal year 2020 ~~(see Note 7 of the Notes~~offset by additional expense related to the ~~unaudited Condensed Consolidated Financial Statements).~~increase in employer match for our 401(k) plan. In addition, ~~higher SG&A expenses were reported in~~ the ~~first half of fiscal year 2019 for consulting costs related to our~~ ~~ERP system implemented in the first~~second quarter of the prior fiscal year ~~and legal costs~~included a curtailment gain of $1,296,000 related to the freeze of our Supplemental Executive Retirement Plan, which has since been terminated.

Other income of $491,000 for ~~legal proceedings resolved in~~ the ~~third quarter~~first six months of fiscal year 2021 includes approximately $800,000 related to a gain upon the ~~prior fiscal year.~~annual actuarial valuation of our pension plan.

Consolidated net income before taxes for the first six months of fiscal year ~~2020~~2021 was ~~$9,835,000,~~$9,912,000, a ~~168%~~1% increase from net income before taxes of ~~$3,672,000~~$9,835,000 for the first six months of fiscal year ~~2019.~~2020. Results for the first six months of fiscal year ~~2020~~2021 were driven by the factors discussed ~~above, including higher sales and lower freight and natural gas costs, which more than offset the increase in SG&A expenses.~~above.

The tax expense for the first six months of fiscal year ~~2020~~2021 was ~~$1,626,000 (an effective tax rate of 16.5%)~~$1,675,000 compared to ~~$456,000~~$1,626,000 for the first six months of fiscal year ~~2019 (an~~2020 (both periods have an effective tax rate of ~~12.4%~~approximately 17%). An estimated annual effective tax rate was used in both periods to determine the provision for income taxes, which is based on expected annual taxable income and the assessment of various tax deductions, including depletion. ~~The lower tax rate in fiscal year 2019 primarily relates to the discrete benefit recorded relating to the completion of a federal income tax return examination in the first quarter of that year.~~

BUSINESS TO BUSINESS PRODUCTS GROUP

Net sales of the Business to Business Products Group for the first six months of fiscal year ~~2020~~2021 increased compared to the first six months of fiscal year 2020. Net sales were ~~$50,949,000, a decrease~~$53,805,000, an increase of ~~$835,000,~~$2,856,000, or 2%6%, from net sales of ~~$51,784,000~~$50,949,000 for the first six months of fiscal year ~~2019.~~2020. Net sales of our agricultural and horticultural chemical carrier products ~~decreased~~increased approximately ~~19%~~$1,737,000 or 17% for the first six months of fiscal year ~~2020~~2021 compared to the same period in fiscal year ~~2019. Sales~~2020. The increase in net sales was attributable to an expected shift in timing of ~~traditional granules declined~~sales to one of our largest customers from the last three months of fiscal year 2020 to fiscal year 2021 due ~~primarily~~ to ~~the loss~~that customer resuming its production schedule after it experienced various supplier delays due to COVID-19. Additionally, agricultural sales increased due to a new business application of aour Agsorb product to an existing customer, ~~which was partially offset by~~ increased sales to an existing ~~customer. These lower sales were significantly offset by higher~~customers in the first six months of fiscal year 2021 and to some extent, product mix. Net sales of ~~other~~our fluids purification products ~~in the Business to Business Group, including an increase of~~increased approximately ~~11%~~$801,000 or 3% compared to the first six months of the prior fiscal year despite the negative impacts of COVID-19. Reduced travel due to COVID-19 decreased the net sales of our jet fuel fluids purification products. However, we experienced sales improvement in Latin America, Europe, and Africa for a variety of reasons, primarily due to either customer wins or increased sales to existing customers. The increases in net sales to Latin America and Europe were partially offset by lower sales to North America due to the high quality of oil and therefore less need for our clay products and lower sales to Asia due to price competition. Net sales of our co-packaged coarse cat litter increased approximately $365,000 or 5% during the first six months of fiscal year 2021 compared to the same period in the prior fiscal year as consumers continued to buy more cat litter. Net sales of our animal health and nutrition products ~~also increased approximately 8%~~were essentially flat during the first six months of fiscal year 2021 compared to the first six months of the prior ~~year. Sales growth occurred for~~year as the increases in net sales of our animal feed additives ~~primarily~~ in ~~Africa,~~China and Mexico ~~and Asia, excluding China.~~offset the decreases in net sales in other countries. See “Foreign Operations” below for a discussion of net sales in China ~~which were impacted by the spread of the African swine fever in the prior year~~ and ~~the recent novel coronavirus (COVID-19) outbreak (“the coronavirus”). Net~~Mexico. While net sales of our ~~fluids purification~~animal health and nutrition products ~~increased approximately 1% compared to~~are flat for the first six months of ~~the prior~~ fiscal year ~~as higher sales to edible oil producers offset lower sales that resulted from~~2021, we experienced a ~~biodiesel processing customer closing operations.~~strong second quarter of fiscal year 2021 which is further described below in “Results of Operations for the Three Months ended January 31, 2021”.

SG&A expenses for the Business to Business Products Group ~~were~~increased approximately ~~7% higher~~9% or $447,000 for the first six months of fiscal year ~~2020~~2021 compared to the same period of the prior fiscal year ~~including~~but are consistent as a percentage of sales. The increase in SG&A expenses correlates to the higher ~~costs for product development~~sales of our animal health products in the second quarter of fiscal year 2021. In the first six months of fiscal year 2021 we made a concentrated effort to invest in our animal health business through increased sales personnel, leadership, and ~~support, increased compensation-related expenses and additional costs to establish~~marketing of our ~~subsidiary in Indonesia.~~animal health products.

The Business to Business Products Group’s operating income for the first six months of fiscal year ~~2020~~2021 of $15,859,000 was ~~$15,848,000, an increase of $1,544,000, or 11%, from~~flat compared to operating income of ~~$14,304,000~~$15,848,000 for the first six months of fiscal year ~~2019. The improved operating income was driven primarily by the lower~~2020. While there were higher freight, packaging and ~~natural gas~~non-fuel costs per manufactured ton as discussed in “Consolidated Results” ~~above.~~above as well as higher SG&A expenses, the increase in net sales offset these costs.

RETAIL AND WHOLESALE PRODUCTS GROUP

Net sales of the Retail and Wholesale Products Group for the first six months of fiscal year ~~2020~~2021 were ~~$91,178,000,~~$96,792,000, an increase of ~~$6,939,000,~~$5,614,000, or 8%6%, from net sales of ~~$84,239,000~~$91,178,000 for the first six months of fiscal year ~~2019. Sales~~2020 driven by sales of cat ~~litter drove the sales increase.~~litter. Total cat litter net sales were approximately ~~11%~~$6,909,000 or 9% higher compared to the first six months of the prior fiscal year, with increased sales of both private label and branded scoopable litter. We gained business from both new customers and from new items sold to existing customers for both private label and branded ~~litters. Sales~~scoopable litter. In addition, in-store promotions resulted in increased sales. Further, an increase in e-commerce sales, where the customer base differs from brick and mortar customers, continues to increase cat litter sales. The impact of ~~private label scoopable litter~~COVID-19 on increased pet adoption continues to ~~existing customers, some~~boost sales as well as the overall macro trend of whom had expanded their selection of our products during the prior fiscal year. Higher sales of private label coarse litter included incremental sales to customers who added these products in the second half of the prior fiscal year. Branded coarse litter and litter box liners sales were also higher compared to the first half of the prior fiscal year.increased spending on pets. Cat litter sales by our subsidiary in Canada further contributed to the sales increase, as discussed in “Foreign Operations” below. Also included in the Retail and Wholesale Products Group's results were ~~slightly~~ lower sales ~~for~~of our industrial and ~~automotive~~sports products compared to the first six months of fiscal year ~~2019.~~2020. Net sales of our industrial and sports products decreased approximately $1,040,000 or 7% compared to the first six months of fiscal year

2020, primarily driven by the continued impact of businesses and sports fields shutting down and/or reducing operations due to COVID-19 subsequent to the first half of our fiscal year 2020. Additionally, a number of sports customers still have inventory on hand from previous seasons which is causing current net sales to be lower.

SG&A expenses for the Retail and Wholesale Products Group were ~~approximately 7% lower in~~flat during the first six months of fiscal year ~~2020~~2021 compared to the first six months of fiscal year 2019. Lower advertising expense in the first six months of fiscal year 2020 contributed to the reduction in costs compared to the same period in the prior year; however, we expect spending for advertising in the remainder of fiscal 2020 to result in a higher expense for the full year of fiscal 2020 compared to fiscal year 2019. In addition, non-recurring expenses were incurred in the first half of fiscal year 2019 for customer compliance fees related to shipping and data communication incurred in connection with the implementation of the ERP system.2020.

The Retail and Wholesale Products Group's operating income for the first six months of fiscal year ~~2020~~2021 was ~~$8,968,000, an increase~~$8,589,000, a decrease of ~~$6,306,000~~$379,000, or 4%, from operating income of ~~$2,662,000~~$8,968,000 for the first six months of fiscal year ~~2019.~~2020. The ~~improved~~decrease in operating income was driven by the higher ~~sales~~freight, packaging and ~~lower SG&A described above, and by lower freight and natural gas~~non-fuel costs as discussed in “Consolidated Results”. above.

Foreign operations include our subsidiaries in Canada and the United Kingdom, which are reported in the Retail and Wholesale Products Group, and our subsidiaries in China, Mexico and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries during the first six months of fiscal year ~~2020~~2021 were ~~$7,154,000,~~$8,839,000, an increase of ~~$672,000,~~$1,685,000, or ~~10%~~24%, compared to net sales of ~~$6,482,000~~$7,154,000 during the first six months of fiscal year ~~2019. This~~2020. All of our foreign operations, with the exception of the United Kingdom, experienced an increase ~~was attributable primarily~~in net sales during the first six months of fiscal year 2021 compared to ~~new cat~~fiscal year 2020. Cat litter ~~business~~sales for our Canada ~~subsidiary.~~subsidiary increased by approximately $784,000 or 31% in the first six months of fiscal year 2021 compared to the same period in the prior fiscal year due to new product sales; higher sales to existing customers; in-store promotions; and some anticipatory purchasing by customers ("pantry loading") in eastern Canada due to a second wave of COVID-19 infections and lockdown restrictions during the first three months of fiscal year 2021. Sales of our animal health products by our foreign operations grew during the first six months of fiscal year 2021 compared to the same period in fiscal year 2020, particularly in China and Mexico. Net sales in China increased approximately $831,000 or 81% during the first six months of fiscal year 2021 as compared to the same period in fiscal year 2020. Despite the continued impacts of the African Swine Fever to pork consumption, sales of our animal health products in China were higher during the first six months of fiscal year 2021 compared to fiscal year 2020 due to a ~~lesser~~new contract with an existing customer; increased sales to existing customers; winning back several distributors and implementing a concentrated sales and marketing effort. To some extent, the increase in net sales also relates to the economy starting to recover in China from the six month period last year when the pandemic and lockdowns were already prevalent in China. Sales of our animal health products in Mexico also increased during the first six months of fiscal year 2021 compared to fiscal year 2020 due to several small customer wins as ~~higher~~well as increased sales to existing customers. Higher sales for ~~our~~these subsidiaries ~~in Mexico and Indonesia~~ were ~~mostly~~partially offset by lower net sales for our subsidiary in ~~China. Sales~~the United Kingdom. The effect of ~~animal health products~~COVID-19 lockdowns and restrictions on the industry in Europe has, to ~~pork producers~~some extent, reduced demand for our industrial floor granules. Also contributing to the decrease in ~~China have not fully recovered since the spread~~sales of ~~African swine fever in fiscal year 2019. In addition,~~ our ~~Chinese subsidiary's business operations have been impacted~~subsidiary in the ~~second quarter~~United Kingdom was one of ~~fiscal year 2020 by the recent outbreak of the coronavirus. Chinese government restrictions to control the spread of the coronavirus disrupted~~ our ~~sales office, limited travel by~~customers discontinuing a product that used our ~~salesforce and delayed product shipments.~~clay granules. Net sales by our foreign subsidiaries represented 6% and 5%, respectively, of our consolidated net sales during the first six months of ~~both~~ fiscal ~~years 2020~~year 2021 and ~~2019.~~2020.

Our foreign subsidiaries reported a net loss of $42,000 for the first six months of fiscal year 2021, compared to a net loss of $169,000 for the first six months of fiscal year ~~2020, compared to~~2020. The net ~~income of $315,000~~loss was primarily driven by lower net sales for our subsidiary in the United Kingdom and continued investment in our subsidiary in Indonesia. The improvement during the first six months of fiscal year ~~2019. The lower sales described above for~~2021 compared to fiscal year 2020 relates primarily to our ~~subsidiary~~subsidiaries in China and ~~additional costs to establish operations~~Mexico with the improvements in ~~Indonesia drove~~Mexico primarily occurring in the ~~net loss.~~second quarter of fiscal year 2021 as described below in “Results of Operations for the Three Months ended January 31, 2021”.

Identifiable assets of our foreign subsidiaries as of January 31, ~~2020~~2021 were ~~$10,158,000,~~$12,249,000, compared to ~~$9,643,000~~$10,158,000 as of January 31, ~~2019.~~2020. The increase was attributed primarily to ~~the addition of~~working capital contributed to our subsidiary in Mexico during the third quarter of fiscal year 2020 that has not yet been used; an increase in inventory for our subsidiaries in Canada, China and Indonesia in anticipation of meeting customer needs and ~~new right-of-use lease assets recorded upon~~thwarting any potential supply chain disruptions due to COVID-19 and to some extent, an increase in accounts receivable due to the ~~implementation of ASC 842,~~ ~~Leases~~.increase in sales.

THREE MONTHS ENDED JANUARY 31, ~~2020~~2021 COMPARED TO

THREE MONTHS ENDED JANUARY 31, ~~2019~~2020

CONSOLIDATED RESULTS

Consolidated net sales for the three months ended January 31, ~~2020~~2021 were ~~$71,005,000~~,$74,500,000, a 2%5% increase compared to net sales of ~~$69,880,000~~$71,005,000 for the three months ended January 31, ~~2019~~.2020. Net sales increased for both our Retail and Wholesale Products Group ~~but decreased for our~~and Business to Business Products Group. Segment results are discussed further below.

Consolidated gross profit for the three months ended January 31, ~~2020~~2021 was ~~$18,958,000,~~$18,172,000, or ~~27%~~24% of net sales, compared to ~~$15,404,000,~~$18,958,000, or ~~22%~~27% of net sales, ~~for the~~ ~~second~~ ~~quarter of fiscal year~~ ~~2019. Lower freight and natural gas costs drove the increase in gross profit. Freight costs declined approximately 21%~~ for the second quarter of fiscal year ~~2020~~2020. Higher freight, natural gas, packaging and non-fuel costs per manufactured ton drove the decrease in gross profit. Freight costs per manufactured ton increased approximately 13% in the second quarter of fiscal year 2021 compared to the same period of fiscal year 2020 as the result of ~~lower~~higher transportation rates ~~from improved truck availability.~~due to a national driver shortage and tight trucking capacity in part caused by the continued return of non-essential businesses. Our overall freight costs also vary between periods depending on the mix of products sold and the geographic distribution of our customers. Despite the tight trucking capacity, we have been able to continue to meet the increase in customer demand. The cost of natural gas used to operate kilns that dry our clay was approximately ~~36% lower~~8% higher per manufactured ton for the second quarter of fiscal year ~~2020~~2021 compared to the same period of fiscal year ~~2019. Non-fuel manufacturing costs per ton produced were slightly lower compared~~2020 due to the ~~second~~ ~~quarter~~increase in ~~the prior fiscal year.~~gas prices. In ~~contrast,~~addition, packaging costs per manufactured ton were ~~slightly~~approximately 13% higher compared to the second quarter of the prior fiscal year, driven primarily by the mix of products ~~produced. In addition, many~~produced and rising commodity prices, particularly as it relates to resin. Many of our contracts for packaging purchases are subject to periodic price adjustments, which trail changes in underlying commodity prices. In addition, our non-fuel manufacturing costs per ton increased during the second quarter of fiscal year 2021 compared to the same period in fiscal year 2020, particularly due to higher costs for purchased materials and labor. While we incurred additional employee compensation costs to meet increased customer demand as well as cleaning and sanitation costs in the second quarter of fiscal 2021 due to COVID-19, these costs did not have a significant impact on our consolidated gross profit. Further, our suppliers have either remained open or we have found new suppliers to meet our increased customer demand without any price increases.

Total SG&A expenses were ~~$13,085,000~~$13,928,000 for the second quarter of fiscal year ~~2020,~~2021, a 4%6% increase compared to ~~$12,577,000~~$13,085,000 for the second quarter of fiscal year ~~2019.~~2020. The discussion below describes the SG&A expenses allocated to the operating segments. The remaining unallocated corporate expenses ~~included~~includes a ~~higher~~lower estimated annual incentive bonus accrual ~~which was based on performance targets established~~ for ~~each~~ fiscal ~~year. The increased bonus expense was partially~~year 2021 compared to fiscal year 2020 offset by additional expense related to the increase in employer match for our 401(k) plan. In addition, the second quarter of the prior fiscal year included a curtailment gain ~~reported upon~~of $1,296,000 related to the freeze of our ~~SERP in~~Supplemental Executive Retirement Plan, which has since been terminated.

Other income of $913,000 for the second quarter of fiscal year 2020 (see Note 7 of the Notes to the unaudited Condensed Consolidated Financial Statements). In addition, lower SG&A expenses were reported in the second quarter of fiscal year 2020 for consulting costs2021 includes approximately $800,000 related to a gain upon the annual actuarial valuation of our ~~ERP system and costs for legal proceedings resolved in the third quarter of the prior fiscal year.~~pension plan.

Consolidated net income before taxes for the second quarter of fiscal year ~~2020~~2021 was ~~$5,758,000,~~$5,157,000, compared to net income before taxes of ~~$2,788,000~~$5,758,000 for the second quarter of fiscal year ~~2019.~~2020. Results for the second quarter of fiscal year ~~2020~~2021 were driven by the factors described ~~above, including higher sales and lower freight and natural gas costs, which more than offset the increase in SG&A expenses.~~above.

Tax expense was $869,000 for the second quarter of fiscal year 2021, compared to $1,009,000 for the second quarter of fiscal year 2020, ~~compared to $506,000 for the second quarter of fiscal year 2019,~~ which resulted in an effective tax rate of 17% and 18% ~~for the second quarters of both fiscal years.~~, respectively. We used an estimated annual

effective tax rate in determining our quarterly provision for income taxes, which is based on expected annual taxable income and the assessment of various tax deductions, including depletion.

BUSINESS TO BUSINESS PRODUCTS GROUP

Net sales of the Business to Business Products Group for the second quarter of fiscal year ~~2020~~2021 were ~~$24,471,000, a decrease~~$26,283,000, an increase of ~~$1,987,000,~~$1,812,000, or 8%7%, from net sales of ~~$26,458,000~~$24,471,000 for the second quarter of fiscal year ~~2019.~~2020. Net sales increased for all of our products within the Business to Business Products Group. Net sales of our animal health and nutrition products increased 20% or approximately $774,000 in the second quarter of fiscal 2021. Net sales increased in almost all of our markets for our animal feed additives, particularly in China, Latin America, and Mexico. See “Foreign Operations” below for a discussion of net sales in China and Mexico. Net sales in Latin America increased due to winning new business. In addition, a change in one of our distributors last quarter is coming to fruition during the second quarter of fiscal year 2021 resulting in higher sales. Net sales of our agricultural and horticultural chemical carrier products ~~decreased 31%~~increased $469,000 or 10%, ~~due primarily~~the majority of which relates to ~~the loss of a customer for our traditional granules.~~increased sales to existing customers and product mix. Net sales of our fluids purification products ~~decreased~~increased approximately 1%$383,000 or 3% for the second quarter of fiscal year ~~2020. Lower~~2021. Net sales increased despite the negative impacts of COVID-19. Reduced air travel due to COVID-19 decreased the sales of our jet fuel fluids purification products. However, we experienced sales improvement in Latin America, Europe, and Africa for a ~~plant closing~~variety of reasons, primarily due to either customer wins or increased sales to existing customers. Sales in Latin America increased due to one of our existing customers starting to buy from us again after a ~~biodiesel processing customer was~~period of little to no sales. Another of our customers in Latin America opened a new facility and has increased its orders from us. The increase in net sales in Europe and Africa relate to higher net sales of our bleaching clay to existing customers. The increases in net sales were partially offset by ~~higher~~lower sales to ~~edible~~North America due to the high quality of oil ~~producers. Net sales of our animal health~~ and ~~nutrition products were essentially flat as sales growth~~therefore less need for our ~~feed additives in Mexico~~clay products and ~~Asia, excluding China, mostly offset~~ lower sales in China. See “Foreign Operations” below for a discussion of sales in China, which were impacted by the spread of the African swine fever in the prior year and the recent outbreak of the coronavirus.to Asia due to reduced air travel. Net sales of our co-packaged coarse cat litter for the second quarter were approximately 8%$186,000 or 5% higher compared to the second quarter of the prior ~~year.~~year as consumers continued to purchase more cat litter and related products.

SG&A expenses for the Business to Business Products Group were approximately ~~11%~~$614,000 or 26% higher compared to the second quarter of fiscal year ~~2019, including~~2020, but are relatively consistent as a percentage of sales. The increase in SG&A expenses correlates to the higher ~~costs for product development~~sales of our animal health products in the second quarter of fiscal year 2021 as mentioned above. During the second quarter of fiscal year 2021 we made a concentrated effort to invest in our animal health business through increased sales personnel, leadership, and ~~support and compensation-related expenses.~~marketing of our animal health products.

The Business to Business Products Group’s operating income for the second quarter of fiscal year ~~2020~~2021 was ~~$7,552,000,~~$7,663,000, an increase of ~~$280,000,~~$111,000, or 4%1%, from operating income of ~~$7,272,000~~$7,552,000 in the second quarter of fiscal year ~~2019.~~2020. The improved operating income was driven by the ~~lower~~increase in net sales which exceeded the increase in freight, ~~and~~ natural gas, packaging, and non-fuel manufacturing costs discussed in “Consolidated Results” ~~above.~~above as well as the increase in SG&A.

RETAIL AND WHOLESALE PRODUCTS GROUP

Net sales of the Retail and Wholesale Products Group for the second quarter of fiscal year ~~2020~~2021 were ~~$46,534,000,~~$48,217,000, an increase of ~~$3,112,000,~~$1,683,000, or 7%4%, from net sales of ~~$43,422,000~~$46,534,000 for the second quarter of fiscal year ~~2019.~~2020. Total cat litter net sales ~~were 10% higher~~increased 6%, or $2,494,000, compared to the second quarter of fiscal year ~~2019,~~2020, driven by increased sales of both private label and branded ~~litters. Sales of private label~~ scoopable ~~litter increased~~litters to existing customers. Further, an increase in e-commerce sales, where the customer base differs from brick and mortar customers, ~~some~~continues to increase cat litter sales. The impact of ~~whom had expanded their selection~~COVID-19 on increased pet adoption continues to boost sales as well as the overall macro trend of our products during the prior fiscal year. Higher sales of private label coarse litter included incremental sales to customers who added these products in the second half of the prior fiscal year. Branded coarse litter and litter box liners sales were also higher compared to the second quarter of the prior year.increased spending on pets. Cat litter sales by our subsidiary in Canada also contributed to the sales increase, as discussed in “Foreign Operations” below. Also included in the Retail and Wholesale Products Group's results were ~~slightly~~ lower sales ~~for~~of our industrial and ~~automotive~~sports products compared to the second quarter of fiscal year ~~2019.~~2020. Sales of our industrial and sports products decreased 10%, or approximately $702,000, compared to the second quarter of fiscal year 2020, primarily driven by the impact of businesses and sports fields shutting down due to COVID-19 subsequent to our second quarter of fiscal year 2020. Additionally, a number of sports customers still have inventory on hand from previous seasons which is causing current sales to be lower.

SG&A expenses for the Retail and Wholesale Products Group were ~~slightly~~ higher ~~to support the increased sales compared to~~in the second quarter of fiscal year ~~2019.~~2021 than in fiscal year 2020 by 15% or $533,000, primarily due to the timing of our advertising programs and costs. We anticipate total advertising expense in fiscal year 2021 will be comparable to fiscal year 2020.

For the second quarter of fiscal year ~~2020,~~2021, the Retail and Wholesale Products Group reported operating income of ~~$5,608,000, an increase~~$4,111,000, a decrease of ~~$2,955,000,~~$1,497,000, compared to operating income of ~~$2,653,000~~$5,608,000 for the second quarter of fiscal year ~~2019.~~2020. The ~~improved~~decrease in operating income was driven by the higher ~~sales described above, and by lower~~ freight, ~~and~~ natural gas, packaging, and non-fuel manufacturing costs ~~discussed~~described above in “Consolidated Results”.

Foreign operations ~~included~~include our subsidiaries in Canada and the United Kingdom, which are reported in the Retail and Wholesale Products Group, and our subsidiaries in China, Mexico and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries during the second quarter of fiscal year ~~2020~~2021 were ~~$3,505,000~~,$4,703,000, a ~~15%~~34% increase compared to net sales of ~~$3,039,000~~$3,505,000 in the second quarter of fiscal year ~~2019. This increase was attributable primarily to new cat~~2020. Cat litter ~~business and improved~~ sales ~~of industrial absorbents~~ for our Canada ~~subsidiary.~~subsidiary increased by approximately $563,000 or 44% in the second quarter of fiscal year 2021 compared to the same period of fiscal year 2020 due to new product sales; higher sales to existing customers; and in-store promotions. In addition, the impact of COVID-19 on increased pet adoption continues to boost cat litter sales as well as the overall macro trend of increased spending on pets. Sales of our animal health products by our foreign operations grew during the second quarter of fiscal year 2021 compared to fiscal year 2020, particularly in China and Mexico. Net sales in China increased approximately $647,000 or 140% during the second quarter of fiscal year 2021 as compared to the same period in fiscal year 2020. Despite the continued impacts of the African Swine Fever to pork consumption, net sales in the second quarter of fiscal year 2021 in China were strong for various reasons. The new contract with an existing customer won in the prior quarter continues to generate additional revenue and we also won back several distributors which contributed to a ~~lesser~~strong second quarter of fiscal year 2021. To some extent, the increase in net sales also relates to the economy starting to recover in China as ~~higher~~compared to the second quarter last year when the pandemic and lockdowns were already prevalent in China. In Mexico, there were several small customer wins as well as increased sales ~~for~~to existing customers. The increase in sales of our ~~Mexico~~cat litter and ~~Indonesia subsidiaries~~animal health products were ~~mostly~~somewhat offset by lower sales for our subsidiary in ~~China. Sales~~the United Kingdom. The effect of ~~these products~~COVID-19 lockdowns and restrictions on the industry in Europe has, to ~~pork producers~~some extent, reduced demand for our industrial floor granules. Also contributing to the decrease in ~~China have not fully recovered since the spread of African swine fever in fiscal year 2019. In addition, business operations~~sales of our ~~Chinese~~ subsidiary ~~have been impacted~~ in the ~~second quarter~~United Kingdom was one of ~~fiscal year 2020 by the recent outbreak of the coronavirus. Chinese government restrictions to control the spread of the coronavirus disrupted~~ our ~~sales office, limited travel by~~customers discontinuing a product that used our ~~salesforce and delayed product shipments.~~clay granules. Our foreign subsidiaries' net sales represented approximately 5%6% and 4%5%, respectively, of consolidated net sales during the second quarters of fiscal years ~~2020~~2021 and ~~2019, respectively.~~2020.

Our foreign subsidiaries reported net income of $170,000 for the second quarter of fiscal year 2021 compared to a net loss ~~attributable to Oil-Dri~~ of $101,000 for the second quarter of fiscal year 2020 ~~compared to net income of $79,000 for~~driven by the ~~second quarter of fiscal year 2019. The lower~~increase in sales ~~described above~~ for our subsidiaries in Canada, China ~~subsidiary,~~and Mexico.

~~higher material costs for our subsidiary in the United Kingdom and additional costs to establish operations in Indonesia drove the net loss.~~

LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements include: funding working capital needs; purchasing and upgrading equipment, facilities, information systems, and real estate; supporting new product development; investing in infrastructure; repurchasing stock; paying dividends; making pension contributions; and, from time to time, business acquisitions. During the first six months of fiscal year ~~2020~~,2021, we principally ~~used~~funded these requirements using cash from current operations as well as cash generated in the fourth quarter of fiscal year 2020 from borrowings and a one-time receipt of cash related to licensing of certain of our patents.

To date, COVID-19 has not had a significant impact on our operations as a whole, and we anticipate cash flows from operations and our available sources of liquidity will be sufficient to ~~fund these~~meet our cash requirements.

In addition, we are actively monitoring the timing and collection of our accounts receivable. Given the dynamic nature of COVID-19, we will continue to assess our liquidity needs and to actively manage our spending.

The following table sets forth certain elements of our unaudited Condensed Consolidated Statements of Cash Flows (in thousands):


	For the Six Months Ended January 31,
	2021		2020
Net cash provided by operating activities	$	3,085	$	14,270
Net cash used in investing activities	(7,595)		(7,286)
Net cash used in financing activities	(5,795)		(7,133)
Effect of exchange rate changes on cash and cash equivalents	123		(144)
Net decrease in cash and cash equivalents	$	(10,182)	$	(293)

For the Six Months Ended January 31,
2020 2019
Net cash provided by operating activities $ 14,270
$ 2,692
Net cash (used in) provided by investing activities (7,286 ) 455
Net cash used in financing activities (7,133 ) (6,505 )
Effect of exchange rate changes on cash and cash equivalents (144 ) (24 )
Net decrease in cash and cash equivalents $ (293 ) $ (3,382 )

Net cash provided by operating activities

In addition to net income, as adjusted for depreciation and amortization and other non-cash operating activities, the primary sources and uses of operating cash flows for the first six months of fiscal years ~~2020~~2021 and ~~2019~~2020 were as follows:

Accounts receivable, less allowance for doubtful accounts, increased $3,836,000 in the first six months of fiscal year 2021 compared to an increase of $213,000 in the first six months of fiscal year ~~2020 compared to an increase of $4,697,000~~2020. Higher sales in the first six months of fiscal year ~~2019. Higher sales in~~2021 compared to the ~~second quarter~~first six months of fiscal year 2020 ~~compared to the second quarter of 2019~~ drove the increase in accounts receivable as of January 31, 2020. The accounts receivable balance at the end of the second quarter of fiscal year 2019 was significantly higher due to delays in sending invoices to some customers upon implementation of the new ERP system on August 1, 2018.2021. The variation in accounts receivable balances also ~~reflected~~reflects differences in the level and timing of collections as well as the payment terms provided to various customers.

Inventory decreased $412,000 in the first six months of fiscal year 2021 compared to a decrease of $1,508,000 in the first six months of fiscal year 2020 ~~compared~~due to decreases in other inventory and finished goods offset by an increase ~~of $5,607,000~~ in packaging. Overall, the decrease is due to increased demand during the first six months of fiscal year ~~2019.~~2021 offset by higher packaging costs. Packaging and finished goods decreased as of January 31, 2020 due to higher production and efforts to better manage our safety stock levels. In addition, our inventory obsolescence reserve increased during the first six months of fiscal year 2020 which is attributable to our focus on inventory management and enhanced data available from our new ERP system. ~~Previously, inventory had~~

Prepaid expenses increased ~~significantly~~$760,000 in the first six months of fiscal year 2021 driven primarily by prepayment of income taxes. This increase in fiscal year 2021 was offset by lower prepaid advertising costs and insurance. Lower prepaid advertising costs and insurance also drove the decrease of $1,561,000 during the first six months of fiscal year ~~2019 due to production interruptions and~~2020.

Other assets increased ~~safety stock for anticipated disruptions during the new ERP system implementation.~~

~~Prepaid expenses decreased $1,561,000~~$266,000 in the first six months of fiscal year ~~2020~~2021 compared to a decrease of ~~$970,000~~$731,000 in the first six months of fiscal year ~~2019. Lower prepaid advertising~~2020. The increase in other assets relates primarily to an increase in capitalized pre-production mining costs offset by amortization of our operating lease right-of-use lease assets. Amortization of our operating lease right-of-use lease assets also drove the decrease in the first six months of fiscal ~~year~~ 2020. ~~Lower prepaid~~

Accounts payable, including income taxes ~~was the primary reason for lower prepaid expenses~~payable, decreased $3,901,000 in the first six months of fiscal year ~~2019. Prepaid expenses also fluctuated in both periods due to the timing of prepayment of insurance premium renewals.~~

~~Other assets decreased $731,000 in the first six months of fiscal year 2020~~2021 compared to an increase of $422,000 in the first six months of fiscal year 2019. The decrease in fiscal year 2020 related to amortization of our operating lease right-of-use lease assets while the increase in fiscal year 2019 related to additional costs to establish operations in Indonesia.

~~Accounts payable, including income taxes payable, increased~~ $2,661,000 in the first six months of fiscal year ~~2020 compared to an increase of $2,295,000~~2020. Lower trade payables drove the decrease in accounts payable in the first six months of fiscal year ~~2019. Higher accrued~~2021 as well as income taxes ~~due to higher net income drove~~payable being in a prepaid position versus a payable position at the ~~increase in~~end of the ~~first half~~second quarter of fiscal year ~~2020. Accounts payable increased in the first half of fiscal year 2019 as we managed our cash flow due to issues related to the ERP system implementation.~~2021. Trade and freight payables ~~also varied~~vary in both periods due to the timing of payments, fluctuations in the cost of goods and services we purchased, production volume levels and vendor payment terms. Higher accrued income taxes due to higher net income drove the increase in the first half of fiscal year 2020.

Accrued expenses decreased $5,201,000 in the first six months of fiscal year 2021 compared to a decrease of $1,602,000 in the first six months of fiscal year ~~2020 compared to a decrease of $1,390,000 in the first six months of fiscal year 2019.~~2020. The payout of the prior fiscal year's discretionary incentive bonus reduced accrued salaries

in both fiscal ~~years.~~years, but to a greater extent in fiscal year 2021 as the accrual was higher in the prior fiscal year. Accrued ~~freight~~advertising also decreased in the first six months of fiscal year 2021 more than the same period of fiscal year 2020 ~~but increased~~due to timing of our advertising programs. Accrued real estate taxes also decreased based on lower real estate taxes for one of our facilities. These decreases were partially offset by the reclassification of the current portion of the deferred employer payroll taxes under the CARES Act which is due by the end of calendar year 2021 as further described in Note 1 of the Notes to the unaudited Condensed Financial Statements and an increase in accrued freight. In contrast, the decrease in accrued expenses in the first six months of fiscal year ~~2019 due~~2020 related to ~~cash flow management as described above.~~a decrease in accrued freight. Accrued freight can vary with freight rates, timing of shipments, and production requirements. In addition, accrued plant expenses can also ~~fluctuated~~fluctuate due to timing of payments, changes in the cost of goods and services we ~~purchased,~~purchase, production volume levels and vendor payment terms.

Pension and postretirement benefits decreased $437,000 in the first six months of fiscal year 2021 compared to a decrease of $5,536,000 in the first six months of fiscal year ~~2020 compared~~2020. The liability decreased during the first six months of fiscal year 2021 due to ~~an increase~~reduced service expense related to the Pension Plan which was frozen in fiscal year 2020. The decrease in the first six months of fiscal year ~~2019 of $859,000. See Note 7 of the Notes~~2020 relates to the ~~unaudited Condensed Consolidated Financial Statements for explanation of the decrease in fiscal year 2020 upon~~ curtailment of our Pension ~~Plan. The increase in~~Plan during the second quarter of that fiscal year ~~2019 is due to normal increases in~~which reduced the pension benefit ~~obligation due to additional service.~~obligation.

Other liabilities decreased $857,000 in the first six months of fiscal year 2021 compared to a decrease of $1,052,000 in the first six months of fiscal year ~~2020 compared to an increase of $370,000~~2020. The decrease in other liabilities for the first six months of fiscal year ~~2019.~~2021 relates to reclassifying the current portion of the deferral of employer taxes under the CARES Act to current liabilities. The decrease in fiscal year 2020 for the same period is due to a reclassification of the deferred lease liability to operating lease liabilities. ~~The increase in fiscal year 2019 was due to a new deferred lease liability.~~

Net cash ~~(used in) provided by~~used in investing activities

Cash used in investing activities of $7,595,000 in the first six months of fiscal year 2021 was slightly higher than cash used in investing activities of $7,286,000 in the first six months of fiscal year 2020 ~~compared to~~driven by capital expenditures.

Net cash ~~provided by investing~~used in financing activities

Cash used in financing activities of ~~$455,000~~$5,795,000 in the first six months of fiscal year ~~2019. Cash used for capital expenditures~~2021 was ~~higher for the first quarter of fiscal year 2020~~lower than ~~fiscal year 2019. Net dispositions of investment securities provided~~ cash ~~in the first half of fiscal year 2019; however, no short-term investments were held in fiscal year 2020 due to the low returns available on these investments.~~

~~Net cash used in financing activities~~

~~Cash~~ used in financing activities of $7,133,000 in the first six months of fiscal year ~~2020 was~~2020. The first six months of fiscal year 2021 includes higher ~~than cash used in financing activities~~purchases of ~~$6,505,000~~treasury stock than in the first six months of fiscal year ~~2019, primarily due to increased purchases~~2020. Offsetting this increase is lower payments on our notes payable. The first six months of ~~treasury stock~~fiscal year 2020 included the semi-annual payment on the then existing notes payable. The remaining notes payable were paid in the fourth quarter of fiscal year 2020 and replaced by a ~~higher dividend payout.~~new notes payable agreement as further described below. No payments on the new notes payable agreement are yet due.

Total cash and investment balances held by our foreign subsidiaries of ~~$2,709,000~~$3,411,000 as of January 31, ~~2020~~2021 were slightly higher than the January 31, ~~2019~~2020 balances of ~~$2,123,000.~~$3,042,000. See further discussion in “Foreign Operations” above.

On January 31, 2019, we signed a fifth amendment to our credit agreement with BMO Harris Bank N.A. (“BMO Harris”), which expires on January 31, 2024. The agreement provides for a $45,000,000 unsecured revolving credit agreement and a maximum of $10,000,000 for letters of credit. The agreement terms also state that we may select a variable interest rate based on either the BMO Harris prime rate or a LIBOR-based rate, plus a margin that varies depending on our debt to earnings ratio, or a fixed rate as agreed between us and BMO Harris. As of January 31, ~~2020,~~2021, the variable rates would have been ~~5.00%~~3.50% for the BMO Harris prime-based rate or ~~3.00%~~1.45% for the three-month LIBOR-based rate. The credit agreement contains restrictive covenants that, among other things and under various conditions, limit our ability to incur additional indebtedness or to dispose of assets. The agreement also requires us to maintain a minimum fixed coverage ratio and a minimum consolidated net worth. As of January 31, ~~2020~~2021 and ~~2019,~~2020, we were in compliance with the covenants. There were no borrowings during the first six months of either fiscal year ~~2019~~2020 or ~~2020.~~2021.

On May 15, 2020, we entered into a new debt instrument pursuant to which, among other things, we issued $10,000,000 in aggregate principal amount of our 3.95% Series B Senior Notes due May 15, 2030 and entered into an amended note agreement that provides the Company with the ability to request, from time to time until May 15, 2023 (or such earlier date as provided for in the agreement), additional senior unsecured notes of the Company in an aggregate principal amount of up to $75,000,000 minus the aggregate principal amount of the notes then outstanding and the additional notes that have been accepted for purchase. The issuance of such additional notes is at the discretion of the noteholders and purchasers and on an uncommitted basis. As of January 31, 2021 outstanding notes payable were $9,864,000, net of $136,000 of unamortized debt issuance costs.

As of January 31, ~~2020,~~2021, we had remaining authority to repurchase ~~1,041,371~~838,022 shares of Common ~~Stock and 288,925 shares of Class B~~ Stock under a repurchase plan approved by our Board of Directors (the “Board”). Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing, number and ~~number~~manner of ~~shares repurchased~~share repurchases will be determined by our management pursuant to the repurchase plan approved by our Board.

We believe that cash flow from operations, availability under our revolving credit facility, current cash and investment balances and our ability to obtain other financing, if necessary, will provide adequate cash funds for foreseeable working capital needs, capital expenditures at existing facilities, deferred compensation payouts, dividend payments and debt service obligations for at least the next 12 months. We expect ~~both~~ capital expenditures ~~and advertising expense~~ in fiscal year ~~2020~~2021 to be greater than in fiscal year ~~2019.~~ 2020. We do not believe that these increased expenditures will dramatically impact our cash position; however our cash requirements are subject to change as business conditions warrant and opportunities arise. Our anticipated advertising expense for fiscal year 2021 is expected to be flat as compared to fiscal year 2020.

We continually evaluate our liquidity position and anticipated cash needs, as well as the financing options available to obtain additional cash reserves. Our ability to fund operations, to make planned capital expenditures, to make scheduled debt payments, to contribute to our pension plan and to remain in compliance with all financial covenants under debt agreements, including, but not limited to, the current credit agreement, depends on our future operating performance, which, in turn, is subject to prevailing

economic conditions and to financial, business and other factors. The timing and size of any new business ventures or acquisitions that we complete may also impact our cash requirements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This discussion and analysis of financial condition and results of operations is based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP for interim financial information and in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of these financial statements

requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. Estimates and assumptions are revised periodically. Actual results could differ from these estimates. See the information concerning our critical accounting policies included under “Management’s Discussion of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~.2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon the controls evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

~~The Company has implemented, and is continuing~~We have not experienced any material impact to ~~add new functionality to, a new ERP system designed to upgrade~~ our technology and improve our financial and operational information. While the Company believes that this new system and related changes to internal controls will ultimately strengthen its internal control over financial reporting, there are inherent risks in implementing a new ERP system. The Company has appropriately considered these changes in its design of and testing for effectiveness of internal controls over financial reporting despite the fact that many of our employees are working remotely due to COVID-19. We are continually monitoring and ~~concluded, as part~~assessing the effects of COVID-19 on our internal controls to minimize the ~~evaluation described in the above paragraph, that the implementation~~impact to their design and ~~ongoing enhancement of the new ERP in these circumstances has not materially changed the effectiveness of its internal control over financial reporting.~~operating effectiveness.

There were no changes ~~other than those described herein,~~ in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fiscal quarter ended January 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II – OTHER INFORMATION

Items 1, 3 and 5 of this Part II are either inapplicable or are answered in the negative and are omitted pursuant to the instructions to Part II.

ITEM 1A. RISK FACTORS

The Company's operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended July 31, ~~2019.~~2020. Except as set forth below, there have been no material changes to our risk factors since the Company's Annual Report on Form 10-K for the year ended July 31, ~~2019.~~2020.

Failure to effectively utilize or successfully assert intellectual property rights, and the loss or expiration of such rights, could materially adversely affect our competitiveness. Infringement of third-party intellectual property rights could result in costly litigation and/or the modification or discontinuance of our products.

We rely on intellectual property rights based on trademark, trade secret, patent and copyright laws to protect our brands, products and packaging for our products. We cannot be certain that these intellectual property rights will be maximized or that they can be successfully asserted. There is a risk that we will not be able to obtain and perfect our own intellectual property rights or, where appropriate, license intellectual property rights necessary to support new product introductions. We cannot be certain that these rights, if obtained, will not later be invalidated, circumvented or challenged, and we could incur significant costs in connection with legal actions to assert our intellectual property rights or to defend those rights from assertions of invalidity. In addition, even if such rights are obtained in the United States or in other countries, the laws of some of the other countries in which our products are or may be sold may not protect intellectual property rights to the same extent as the laws of the United States. If other parties infringe our intellectual property rights, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers associate with our brands and harm our sales. Accordingly, we have taken and may need to continue to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be ~~adversely affected by~~costly and time consuming and no assurances can be made that any lawsuit will be successful. The failure to perfect or successfully assert our intellectual property rights could make us less competitive and could have a ~~widespread threat to public health~~.material adverse effect on our business, operating results, and financial condition.

In ~~December 2019, a novel strain~~addition, if our products are found to infringe intellectual property rights of others, the owners of those rights could bring legal actions against us claiming substantial damages for past infringement and seeking to enjoin manufacturing and marketing of the ~~coronavirus was reported~~affected products. If these legal actions are successful, in ~~China~~addition to any potential liability for damages from past infringement, we could be required to obtain a license in order to continue to manufacture or market the affected products, potentially adding significant costs. Similarly, we have asserted that has subsequently spread outside of China. In response to the coronavirus outbreak, the Chinese government has placed restrictions on travel and mandated business closures. Such restrictions and closures have disrupted our sales office in China, limited travelproducts sold by our ~~salesforce~~competitors infringe patents owned or licensed by us. We may not prevail in any action brought against us, or that we bring against competitors or third parties, or we may be unsuccessful in securing any license for continued use and ~~delayed product shipments. Although~~therefore have to discontinue the ~~impact~~marketing and sale of ~~such disruptions~~a product. This could make us less competitive and ~~delays has not had~~could have a material adverse impact on our business, operating results and financial condition.

We cannot guarantee that that our share repurchases will enhance long-term shareholder value.

Our Board of ~~operations, there~~Directors has previously authorized a share repurchase program. Under these authorizations, the Company has authority to repurchase both shares of our common stock and our Class B stock. The Company has undertaken repurchases of common stock on the open market (including pursuant to a 10b5-1 plan) and is ~~significant uncertainty relating~~also authorized to undertake repurchases in private, negotiated transactions. The Company has no obligations to repurchase any specific dollar amount or to acquire any specific number of shares. The timing, number and manner of share repurchases is determined by management and may depend upon a number of factors, including the ~~outbreak~~trading price, market conditions, and the Company’s liquidity needs and management of ~~coronavirus as well as~~its spending. Further, the ~~potential effects~~Company’s share repurchases may be limited, suspended or discontinued at any time without prior notice. The existence of a share repurchase program could cause our stock price to be higher than it would be in the absence of such ~~outbreak on~~a program and could potentially reduce the market liquidity for our ~~business. Related disruptions, inside~~stock or ~~outside of China, to~~otherwise affect stock price and or volatility. Additionally, our ~~operations, or the operations of~~share repurchase program could diminish our ~~suppliers or customers,~~cash reserves, which may impact our ~~operations and results. Given the uncertainties related~~ability to the outbreak, including its duration and severity, we cannot reasonably estimate the scope of its impact on our employees, operations, suppliers, or customers, or the full extent to which the coronavirus could affect the global economy and our results.otherwise deploy such cash. There can be no assurance that these share repurchases will enhance shareholder value.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended January 31, ~~2020,~~2021, we did not sell any securities which were not registered under the Securities Act of 1933. The following ~~charts~~chart summarize our ~~repurchases (and remaining authority to repurchase) shares of our~~ Common Stock stock purchases during this period. There were no ~~repurchases~~purchases of our Class B ~~Stock~~stock during ~~this period~~the three months ended January 31, 2021 and no shares of our Class A Common Stock are currently outstanding.


ISSUER PURCHASES OF EQUITY SECURITIES1, 2
	(a)	(b)	(c)	(d)
For the Three Months Ended January 31, 2021	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under Plans or Programs3
Common Stock
November 1, 2020 to November 30, 2020	—	$—	—	871,616
December 1, 2020 to December 31, 2020	27,498	$36.42	27,498	844,118
January 1, 2021 to January 31, 2021	6,096	$34.64	6,096	838,022

1 The table summarizes repurchases of (and remaining authority to repurchase) shares of our Common Stock. Descriptions of our Common Stock, Class B Stock and Class A Common Stock are contained in Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended July 31, ~~2019~~2020 filed with the SEC.

ISSUER PURCHASES OF EQUITY SECURITIES
(a) (b) (c) (d)
For the Three Months Ended January 31, 2020 Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that may yet be Purchased Under Plans or Programs¹
Common Stock
November 1, 2019 to November 30, 2019 602 $37.22 — 1,041,371
December 1, 2019 to December 31, 2019 — $— — 1,041,371
January 1, 2020 to January 31, 2020 — $— — 1,041,371
2 The figures in the table reflect transactions according to the settlement dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to the settlement dates.

¹3 Our Board of Directors authorized the repurchase of 250,000 shares of Common Stock on ~~March 11, 2011, an additional 250,000 shares on~~ June 14, 2012 and an additional 750,000 shares of Common Stock on March 11, 2019. These authorizations do not have a stated expiration date. Our Board ~~also~~of Directors authorized the repurchase of 300,000 shares of Class B ~~Stock~~stock on March 21, 2018. ~~These authorizations do not have a stated expiration date.~~ The share numbers in this column indicate the number of shares of ~~each class of stock~~Common Stock that may yet be repurchased under these authorizations. Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing, number and ~~number~~manner of ~~shares repurchased~~share repurchases will be determined by our management.

ITEM 4. MINE SAFETY DISCLOSURES

Our mining operations are subject to regulation by the Mine Safety and Health Administration under authority of the Federal Mine Safety and Health Act of 1977, as amended. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Exhibit
No.

Description

SEC Document Reference

~~Exhibit~~

~~No.~~

~~Description~~

~~SEC Document Reference~~

~~10.1~~

First Amendment, effective as of March 1, 2020 to Supplemental Executive Retirement Plan dated April 1, 2003.*

~~Filed herewith.~~

Statement re: Computation of Earnings ~~per~~Per Share.

Filed herewith.

Certifications pursuant to Rule 13a–14(a).

Filed herewith.

Certifications pursuant to Section 1350 of the Sarbanes-Oxley Act of ~~2002~~2002..

Furnished herewith.

Mine Safety Disclosures.

Filed herewith.

~~101.INS~~101.SCH

~~XBRL Taxonomy Instance Document~~

~~Filed herewith.~~

~~101.SCH~~

XBRL Taxonomy Extension Schema Document

Filed herewith.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

Filed herewith.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

Filed herewith.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101

Filed herewith.

* Management contract or compensatory plan or arrangement.

Note: Stockholders may receive copies of the above listed exhibits, without fee, by written request to Investor Relations, Oil-Dri Corporation of America, 410 North Michigan Avenue, Suite 400, Chicago, Illinois 60611-4213, by telephone at (312) 321-1515 or by e-mail to info@oildri.com.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OIL-DRI CORPORATION OF AMERICA

BY /s/ Daniel S. Jaffee

Chairman, President and Chief Executive Officer

BY /s/ Susan M. Kreh

Chief Financial Officer

Dated: March ~~5, 2020~~



	(unaudited)
ASSETS	January 31, 2020			July 31, 2019
Current Assets
Cash and cash equivalents	$	21,569		$	21,862
Accounts receivable, less allowance of $851 and $644 at January 31, 2020 and July 31, 2019, respectively	35,699			35,459
Inventories	22,679			24,163
Prepaid repairs expense	4,679			4,708
Prepaid expenses and other assets	1,555			3,084
Total Current Assets	86,181			89,276

Property, Plant and Equipment
Cost	253,927			249,834
Less accumulated depreciation and amortization	(164,096		)	(159,036		)
Total Property, Plant and Equipment, Net	89,831			90,798

Other Assets
Goodwill	9,262			9,262
Other intangibles, net of accumulated amortization of $398 and $299 at January 31, 2020 and July 31, 2019, respectively	1,545			1,599
Customer list, net of accumulated amortization of $6,592 and $6,297 at January 31, 2020 and July 31, 2019, respectively	1,193			1,488
Deferred income taxes	7,445			7,755
Operating lease right-of-use assets	8,535			—
Other	5,087			5,049
Total Other Assets	33,067			25,153

Total Assets	$	209,079		$	205,227



Balance, October 31, 2019	10,879,655	(3,268,057	)	$	1,088	$	42,327	$	166,526		$	(57,103	)	$	(14,812	)	$	(90	)	$	137,936
Net Income (Loss)	—	—		—		—		4,830			—			—			(81		)	4,749
Other Comprehensive Income	—	—		—		—		—			—			5,223			—			5,223
Dividends Declared	—	—		—		—		(1,766		)	—			—			—			(1,766		)
Purchases of Treasury Stock	—	(602	)	—		—		—			(23		)	—			—			(23		)
Net issuance of stock under long-term incentive plans	1,500	(400	)	—		12		—			(12		)	—			—			—
Amortization of Restricted Stock	—	—		—		810		—			—			—			—			810
Balance, January 31, 2020	10,881,155	(3,269,059	)	$	1,088	$	43,149	$	169,590		$	(57,138	)	$	(9,589	)	$	(171	)	$	146,929




	For the Six Months Ended January 31
	(unaudited)
	Number of Shares
	Common & Class B Stock	Treasury Stock		Common & Class B Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total Stockholders’ Equity
Balance, July 31, 2018	10,555,828	(3,238,833	)	$	1,056	$	38,473	$	158,935		$	(55,946	)	$	(10,615	)	$	(18	)	$	131,885
Net Income	—	—		—		—		3,193			—			—			23			3,216
Other Comprehensive Income	—	—		—		—		—			—			255			—			255
Dividends Declared	—	—		—		—		(3,340		)	—			—			—			(3,340		)
Purchases of Treasury Stock	—	(4,545	)	—		—		—			(135		)	—			—			(135		)
Net issuance of stock under long-term incentive plans	257,100	(6,350	)	25		373		—			(399		)	—			—			(1		)
Amortization of Restricted Stock	—	—		—		884		—			—			—			—			884
Balance, January 31, 2019	10,812,928	(3,249,728	)	$	1,081	$	39,730	$	158,788		$	(56,480	)	$	(10,360	)	$	5		$	132,764




Balance, July 31, 2019	10,860,678	(3,251,288	)	$	1,086	$	41,300	$	164,756		$	(56,543	)	$	(15,039	)	$	(14	)	$	135,546
Net Income (Loss)	—	—		—		—		8,366			—			—			(157		)	8,209
Other Comprehensive Income	—	—		—		—		—			—			5,450			—			5,450
Dividends Declared	—	—		—		—		(3,532		)	—			—			—			(3,532		)
Purchases of Treasury Stock	—	(15,621	)	—		—		—			(523		)	—			—			(523		)
Net issuance of stock under long-term incentive plans	20,477	(2,150	)	2		70		—			(72		)	—			—			—
Amortization of Restricted Stock	—	—		—		1,779		—			—			—			—			1,779
Balance, January 31, 2020	10,881,155	(3,269,059	)	$	1,088	$	43,149	$	169,590		$	(57,138	)	$	(9,589	)	$	(171	)	$	146,929



2020	$	1,823
2021	1,512
2022	1,141
2023	812
2024	773
Thereafter	6,523
Total	12,584
Less: imputed interest	(2,521		)
Net lease obligation	$	10,063



	Assets
	January 31, 2020		July 31, 2019
	(in thousands)
Business to Business Products Group	$	63,744	$	66,655
Retail and Wholesale Products Group	96,043		95,593
Unallocated Assets	49,292		42,979
Total Assets	$	209,079	$	205,227



ISSUER PURCHASES OF EQUITY SECURITIES
	(a)	(b)	(c)	(d)
For the Three Months Ended January 31, 2020	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under Plans or Programs¹
Common Stock
November 1, 2019 to November 30, 2019	602	$37.22	—	1,041,371
December 1, 2019 to December 31, 2019	—	$—	—	1,041,371
January 1, 2020 to January 31, 2020	—	$—	—	1,041,371