0001628280-26-041539
SEC filingQ3 FY2026 revenue grew 9% YoY driven by cat litter volume growth, but gross margin contracted to 26.7% due to higher manufacturing costs.
For the third quarter of fiscal year 2026 (three months ended April 30, 2026), Oil-Dri reported consolidated net sales of $126.3 million, a 9% increase compared to $115.5 million in the same quarter of fiscal 2025. Gross profit rose 2% to $33.7 million, but gross margin contracted to 26.7% from 28.6%, pressured by a 6% rise in domestic per ton cost of goods sold, driven by a 9% increase in manufacturing costs (purchased materials, repairs, natural gas, labor) and additional expenses from recovery efforts following Winter Storm Fern. Operating income jumped 23% to $17.1 million, benefiting from a 13% decline in SG&A expenses ($16.6 million vs. $19.1 million) primarily due to a $2.0 million reduction in corporate bonus accrual. Net income increased 25% to $14.5 million.
For the nine months ended April 30, 2026, consolidated net sales rose 1% to $364.6 million, while gross profit fell 6% to $101.5 million (margin 27.8% vs. 30.0%). Operating income decreased 5% to $49.7 million, but net income increased 4% to $42.6 million, helped by $3.5 million higher other income from legal settlement and lower landfill costs.
Retail and Wholesale Products Group: Q3 net sales increased 13% to $82.5 million, led by cat litter (up 16% to $69.2 million). Co-packaged cat litter sales surged 94% due to expanded lightweight offerings and sales shifted from weather delays. Domestic cat litter (excluding co-pack) rose to $57.9 million. Industrial and Sports sales grew 1% on higher pricing. Gross profit rose 7% but margin declined as per ton manufacturing costs rose 9%. SG&A decreased 9% due to lower advertising. Operating income increased 16% to $11.3 million.
Business to Business Products Group: Q3 net sales increased 3% to $43.8 million, with agricultural/horticultural up 7% and animal health up 10% (partial recovery), while fluids purification eased 1%. Gross profit fell 2% as manufacturing costs rose 8%, partially offset by lower packaging costs. SG&A was flat. Operating income decreased 3% to $13.0 million.
Management highlighted the impact of Winter Storm Fern, which disrupted operations in Q2 but has since normalized, with backlog decreasing $2.2 million by Q3 end. Geopolitical tensions in the Middle East pose potential input and transportation cost risks. The company continues to invest in plant equipment and facilities to improve manufacturing efficiency. No specific numerical guidance was provided. Cash flow from operations ($53.2 million YTD) and available credit are expected to support working capital, capex, dividends, and stock repurchases ($12.5 million in YTD repurchases).
As of April 30, 2026, Oil-Dri held $62.9 million in cash and cash equivalents, a $12.5 million increase from July 31, 2025, mainly driven by operating cash flows. Total debt stood at $39.8 million, including $1.0 million current maturities and $38.8 million long-term debt (net of issuance costs). Shareholders' equity was $285.2 million, up from $259.1 million at fiscal year-end, reflecting net income and share repurchases. The current ratio (current assets/current liabilities) was 3.3x, indicating strong liquidity.
The company disclosed operating lease commitments with total undiscounted future payments of $16.2 million as of April 30, 2026. Payments due within the next 12 months (remaining three months of fiscal 2026) are $1.2 million, with $7.8 million due in 1-3 years, and $7.1 million beyond 3 years. Additionally, a reserve of $3.6 million has been accrued for Georgia landfill modification costs, with expected completion in fiscal 2026. No other material purchase commitments were noted.
During the nine months ended April 30, 2026, Oil-Dri repurchased $12.5 million of treasury stock. Dividends paid totaled $7.6 million, with quarterly dividends per share increasing to $0.205 for Common (up 32.3% from $0.155) and $0.153 for Class B (up 31.3%). The company invested $20.9 million in capital expenditures (5.7% of sales), primarily in property, plant, and equipment. Debt remained essentially flat with no new borrowings or repayments under the revolving credit facility.
Oil-Dri operates two reportable segments: Business to Business Products Group and Retail and Wholesale Products Group. For the nine months ended April 30, 2026, the B2B segment generated $130.1 million in net sales (down 3.3% YoY) and operating income of $38.4 million (29.5% margin). The Retail segment generated $234.4 million in net sales (up 3.8% YoY) and operating income of $34.5 million (14.7% margin). Segment expenses include cost of goods sold, compensation, advertising, and other operating costs, with corporate expenses of $23.1 million unallocated. No geographic breakdown was provided.
Net income of $42.6M was well below operating cash flow of $53.2M, indicating strong cash generation. The primary positive adjustments were depreciation and amortization ($17.2M) and non-cash stock compensation ($4.1M). However, working capital consumed cash: accounts receivable increased $6.2M, accounts payable declined $0.6M, and accrued expenses fell $5.5M. These outflows were partially offset by a $4.1M reduction in other assets.
Capital expenditures of $20.9M represented 39% of CFO, a decrease from the prior year's $24.5M (45% of prior CFO). The company continues to invest in PP&E, but at a reduced rate.
Free cash flow (CFO minus capex) was $32.3M, amply covering dividends ($7.6M) and share repurchases ($12.5M), totaling $20.1M. The payout ratio (dividends + buybacks / CFO) was 38%. The company also reduced debt? Net financing outflows of $20.2M were mostly capital returns; no new debt issued.
No significant one-time items. Tax payments of $7.6M and interest payments of $1.2M were normal. The change in capital expenditures in accounts payable and accrued expenses indicates timing differences in capex payments.