0001628280-26-016822
SEC filingRevenue decreased 3% to $238.2M; gross margin fell 220bps to 28.5% due to weather-related production disruptions and higher manufacturing costs.
For the six months ended January 31, 2026, Oil-Dri Corporation reported consolidated net sales of $238.2 million, a 3% decrease from $244.9 million in the prior year. Gross profit fell 10% to $67.8 million, resulting in a gross margin of 28.5% versus 30.7% a year ago. The margin compression was primarily due to unfavorable fixed cost absorption from lower volumes and higher per-ton manufacturing costs (up 8%), partially offset by lower transportation and packaging costs. The Winter Storm Fern in January 2026 caused temporary plant shutdowns, exacerbating production inefficiencies and increasing backlog. Income from operations decreased 16% to $32.6 million, and net income declined 4% to $28.0 million. SG&A expenses decreased 4% to $35.2 million, mainly due to lower corporate human resource costs and bonus accruals. Other income improved to $0.8 million from an expense of $2.2 million, driven by foreign exchange gains, a legal settlement, and reduced landfill costs.
The Business to Business segment saw net sales decline 6% to $86.3 million, with operating income down 19% to $25.4 million. Fluids purification sales dropped 9% due to lower volumes in renewable diesel filtration, and animal health & nutrition sales plunged 29% due to a key customer loss. Agricultural and horticultural sales rose 16% on favorable mix and higher prices. Gross profit for the segment decreased 14% as manufacturing costs increased. The Retail and Wholesale segment posted net sales of $152.0 million, down 1%, with operating income decreasing 6% to $23.2 million. Cat litter sales fell 1%, but co-packaged cat litter grew 20% due to lightweight offerings. Industrial and sports sales edged up 1% on pricing. Gross profit declined 5% as manufacturing costs rose 8%, offset by lower transportation and packaging costs. The Weather Event drove a $2.8 million backlog increase in Retail and Wholesale.
Management believes cash flow from operations, existing credit facilities, and current cash balances provide sufficient liquidity for near-term needs. Capital expenditures continued for plant equipment upgrades. The company repurchased $12.4 million in stock and paid $4.9 million in dividends during the six-month period. No specific forward guidance was provided, but the MD&A highlights ongoing cost pressures and the impact of the weather event on production. The backlog increase indicates potential revenue catch-up in subsequent quarters, though input cost inflation and customer losses remain headwinds.
As of January 31, 2026, Oil-Dri held $46.9M in cash and equivalents, down from $50.5M at July 31, 2025. Total debt stood at $39.8M (including $1.0M current maturities and $38.8M long-term debt net of issuance costs). The net cash position is approximately $7.1M, compared to $10.6M six months earlier. Working capital (current assets minus current liabilities) was $125.5M vs $108.2M at year-end, driven by a reduction in current liabilities. Stockholders’ equity increased to $272.5M from $259.1M, mainly due to net income of $28.0M partially offset by $12.4M in treasury stock purchases and $5.2M in dividends.
The Notes do not disclose any significant purchase commitments beyond normal operations. The only notable contingency is a reserve of $3.6M for the Georgia landfill modification, with remaining costs expected to be immaterial. Lease obligations total $15.5M (present value) with weighted-average remaining lease term of 4.7 years.
During the six months ended January 31, 2026, Oil-Dri repurchased $12.4M of treasury stock (222,120 shares), significantly higher than $2.2M in the prior-year period. Dividend payments totaled $4.9M (vs $4.2M), with declared per-share dividends of $0.385 for Common and $0.288 for Class B, representing a 24% increase. Capital expenditures were $14.8M (6.2% of sales), down from $17.8M a year ago. No new debt was issued or repaid; the company maintained a $75M undrawn revolving credit facility with $3.0M in letters of credit outstanding.
Oil-Dri operates two reportable segments: Business to Business (B2B) and Retail & Wholesale. For the six months, B2B generated $86.3M in revenue (down 6.1% YoY) with an operating margin of 29.5%, while Retail & Wholesale generated $152.0M (down 0.7%) with a 15.3% margin. Within B2B, Fluids Purification ($52.1M) and Animal Health & Nutrition ($10.0M) declined 8.7% and 28.7% respectively, while Agricultural & Horticultural grew 16.5% to $24.2M. In Retail, Cat Litter sales were $129.7M (down 0.9%) and Industrial & Sports were $22.3M (up 0.8%). Geographic mix is not disclosed in the Notes.
The company generated $28.4M in operating cash flow against net income of $28.0M, resulting in a CFO/Net Income ratio of ~1.01, indicating strong cash conversion. However, CFO declined ~12% YoY primarily due to negative working capital swings: accounts payable decreased $2.9M, accrued expenses dropped $10.6M, and inventories consumed $2.1M. These outflows outweighed non-cash items like $11.5M depreciation and $2.8M stock compensation.
Capital expenditures of $14.8M represented 52% of CFO, down from 55% in the prior period. The company did not disclose free cash flow, but implied FCF (CFO minus capex) would be $13.6M. Share repurchases of $12.4M and dividends of $4.9M totaled $17.3M, exceeding implied FCF, leading to a net cash decrease of $3.5M.
Notable anomalies include a significant decrease in accrued expenses and a $3.7M non-cash reduction in capex payables, reflecting timing of payments. Restricted cash was zero, and income tax payments of $5.8M were higher than interest payments of $0.8M. Overall, the cash flow statement shows solid operational performance but increased capital allocation to shareholders, resulting in a net cash outflow.