Oil-Dri Corporation of America (ODC) 8 Jun 222022 Q3 Earnings call transcript

Good day, and thank you for standing by, and welcome to the Third Quarter Fiscal Year 2022 Investor Teleconference. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, President and Chief Executive Officer, Dan Jaffee. Please go ahead.

Thank you, and thank you, and welcome, everyone, to our third quarter teleconference. Amlan and and of of physically Financial and Relations. the Secretary; of President General Officer; Chris Vice Group either and Kreh, division; is of Controller; David Manager Garber, here Jessica of Lamson, Chief Wholesale; our Aaron VP me or Products Vice President our line on Susan Investor Scheland, Consumer Operations; Moskowitz, Robey, With Vice and and Retail Christiansen, our Atkinson, Laura our President President, Leslie Manager Vice Wade Agriculture Marketing; General Counsel President Vice Leslie?

uncertainties, filings, evaluating call, for Thank factors, Welcome, In highlight everyone. factors differ. in of consider On and statements may that affect a today's you Actual our periods ask in Company's those comments investment our performance those in press stock. any the risk number in future results We we periods. regarding trends you SEC Company's comments release may materially forward-looking future and that joining may performance. important contain us. our in and review the in evaluating and Oil-Dri

Thank questions, good you, in for everyone, really questions. host whole Leslie, thanks, a and of sending

got for informative very we've session so, And a you.

I'm waste not not of to what a I'll want lot you didn't So, covering time. hear.

it we'll turn to go let's over some and for So, from Susan financial results, first there.

to through and accounting been a that All today he'll accounting related you during right. Dave’s Thanks, quarter, about non-cash He's onetime our us charge. then answer the we Vice event. is special might us discuss and questions Dan. with have go President that Controller, took to with have details we details significant joining the This any Atkinson. to you with charge be available of And the morning, a guest the Corporate Dave a us year.

Dave, you about with impairment, to So, us talk want goodwill to do that, please?

the be impairment opportunity third Susan, that we you, Thank the noncash in goodwill to took for charge our about and onetime here to fiscal today quarter. Sure. talk

exceeds of For accounting the net In years in rising the on or our sum In asset, and performing goodwill for place value in acquisitions the each margins. triggering of experienced goodwill took longer. constraints fair the and is gross intangible during had this particular carrying to fair assumed. Xst. determined purchase quarter, fiscal flow supply goodwill -- our that was chain due acquired we we of quarter of than goodwill eight asset relates established third that multiple the event year that ago the to segment value this value liabilities acquisition costs test, model. on case impairment third the assets the background, cash We price continued adverse of when test a the as it its May based Retail and determined We impact higher discounted of Wholesale

a As no which Wholesale $X,XXX,XXX, of result, segment. impairment has and we our in remaining goodwill Retail recorded a goodwill

Business higher-margin based Now carrying our our share. tax of Business fair or of goodwill a not earnings on common value $X,XXX,XXX value. which on in require $X.XX its per segment, does of sheet $X,XXX,XXX to relates reduction this The having in of impairment balance impact, excess resulted remaining to

Business not segment. Business related future the impairment we to expect do goodwill In addition, charges to

Thanks, Dave.

partners have covenant exclude impairment with both to them calculations. So, our was a the goodwill described charge. lending charge liquidity. noncash charge with impact our impact of and itself strong that relationships from worked The we does we the not Dave our the Further, goodwill of

that million have doing getting to only Year-to-date, finished so from X.XX% we're supply rate we building at increased issued used we've of not levels out liquidity to longer, goods filed provide fact proceeds chain, to we've modified freight fiscal and favorable amended interested. $XX the of through that the in taking for XX-Q quarter of inventory, documents the with who third might be those customers. So, more just our any a those our because and is cash. notes because were of very higher service fund and our the on of cost growth and overall to hand, Transitioning

our also our are investment. investments growth We making manufacturing as capital to well support facilities in through

we of opportunistically We also currently repurchased value. have a at are shares as stock believe good very they

But a if for So, seeing the quarter, as revenues pricing questions, well all volume our because in about there highlights benefits a be I time of for I’ll the growth. I strong, our and lot of leave strong know will initiatives as we're think of businesses, queue.

So, if I on quarter to growing. pricing end strategic growth drive there. break optimistic in we turn capital opportunities and sales growth that the you, note in growth is to volume. quarters This making as was positive health -- is We'll quarterly SG&A and over investments three the both, particularly we're business, about strategic, out is that I'm animal other revenue down, I XX% build and that and about said it a as back our products which in leadership strong to and Dan. is the well

going John Great. address you I'm is your and really the Nature was I in some takeaway of just positive older more may Bair I put billions from ago. the stuff But wrote third them of of we this before that? questions, the unfolding? growth trends. then, together, interested to couple products, or that other and we excitement take see may sales think Susan encouraging to is the results products. our And significantly we've in get grow newer because seeing there go of I a wrote, to will will going covered positive a trends. tell And to Star you. towards because you Ethan positives, them combined. not question being combined I'm most made in. -- it what of was And two that we're the quarter? really even can Ethan progress be driving take years ground Thank the And the what's prioritized the the Mother Two, Amlan What trends any with what positive And think

-- is and say, minerals performance by by play design. nature, Our we as

Our processed, end what really the play years mined, selectively excitement actual maximize the billions did with of to the driving is customers. what's ago, Mother actual selectively user, Nature all

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left they the all better than repeat, without see just be hoped wouldn't deep forward back right results what repeat, when data and into changing sure Having and it very if performance. agreed entrees said had they even major forth methodical they they moving repeat the being that, accounts things and ahead So, into getting test were for making and new good went and products. are with to bouncing

Center so joined gave they And So Chuck because joined to and same And job in our need U.S. us, in Heath believe do the the in truly of the never company, in a Jay strong started and because what that really It when with the their I they reputation grow? them is building mineral, we each bringing left industry had U.S. and with before we understand they industry. team. the accountant. an started Dan, really chasing really, research to I'm It presence. the spiel look, go to staying come to there's the and here, don't my out was, or into back the Jaffee and and your me no, Go tell but data I'm here, excited Nick get the either and rainbows, Lab, XX-year nothing job center, in it's real. Microbiology career -- me, our this I'm Jaffee which Innovation I play, about Nick

-- and the In fact, it's that even pudding. they is And thought. the all better proof and joined than we in

because now, And I too know said of so, while we we we in And animal I exactly about a million the global water, such be customer can our chain Depending revenue in it hands supply product health, on animal The exciting. of positive. streams, docks it's properly very sitting health sitting in the recognized we'll have results where the revenue Q, very right generally the just and can't until did $XX.X that's don't really you disclose on sales. in tell gets the is be. much in are we that that recognition mess

have year, $XX in that's trial we the for water the between $XX million, we'll push be $XX did $XX invoiced, have the million. -- to but seen, on around we three-quarter And $XX million million year. sorry, year. $XX got next confidence north and pull around we in and And we everything budgeting somewhere already the be this that We was to and then, of we've million million commitments expansion the million tests enough million. believe $XX last on we at year's we've We're enough but last the be -- so be could hand $XX already over $XX.X And million. believe number. we'll If gets

you is going be kind continued And Meaning is build also it once they what snowball are slow does again, run as then So, dice, word of move, they industry learning -- their of slow move as and this to to really this from to it. which seeing, see away mouth. we're growth. I'm

going single really this to industry. not in hit You're a

have the strike so chain. and rightly because global a they're food they U.S. grand to they trying chain and to out, talk. or food you're to going help slam talk, These You're all nutritionists going should, the but

we're around doing the success, industry And with such trials variety so, customers a when why pretty someone well. of the have all starts that's gets wide And same time. to at it

little any The not I what probably to line. are the that. line them I give results not have than I'm be bottom than going we like usually definition want felt great. more give, because So results I more to still on been needed the to, but top It's a

did a quarter. up of prior we it June increases second until price our really hit round down year increases. basis in still and didn't third profit show And was -- dollar basis, percentage it's while some the price Xst. benefit But XXth and see because can on You we gross on from May a of a

it. you We of of have this when at tripling, But top hit, inflation, really happening see sort same fourth diesel everything gas prices rising, is global should prices us and you gorilla the start get see on quarter of bunches of can time. to the

And increasing the as up. are surcharges. price increases. And price so, those surcharges implementing absolute we're we gas We're goes taking

to a to sits our have now on And did gas be we I've have. because surcharges hedge say, in hedge go $X, We will to to we guessed as it's been at we consistent. call so look, goes forward those certainly back $XX, was down. relieve look, to and going And And thought don't cannot relieve going to pretty if hedging. market. -- That's we and a question rational the wrong, customers we surcharges we wrong. we $X, We're down price and fuel real thought gas want but it bought hedge we and fun the a sales not we

seller. every all the As market a is of we definition buyer, for know, a there's

at So, be meaning the ride both. professed going And wave And that's some gas then than someone wrong, $X.XX, forward. our stay $X.XX, to thinking We there's there's best would someone in And experts, gas be We've our to ride never that is the There's best potentially and interest market, when believe or at going late going market. selling the and and be us, move if which down. buying just thinking handle we're natural really to it days either we to XX going customer's then up. customers don't dollars. and to merely detrimental it's it's means be that guess with to so to guess our we're trying the profess it.

four off knocked about three that So, or questions.

we next? where are going Leslie, So

Wealth litter you are question Advisors. the And is consumer by he shift from products So, from to offering? the seeing asked, from premium cat away lower-end Ascend John next your any Bair

question. Chris. we John. Thanks answer quarter, take think had last question the same. a the largely Yes. Good question. similar morning, I'll the remains This and I the for is And

category, look as at So, bit of effect. total we barbell what we a really the a see is

segment in I'd into also the what above value-oriented, the doing is Those, bucket. well, the tailwinds from what that of brands fairly that tracked well, already and so benefiting litter specifically modest litter perform more products, can't say, result, nicely. is Category teens. particularly within we're real pull value call are brands obviously right, category. latter Cat’s brands are call consumer Jonny category. they growing of a category. those low I'll Cat that that performing that premium are price significant retail I performed would I'd either use, are the label at long. overall particularly very per the premium seeing the put then, as other for super And ahead market, of Value well, private the in crystals and excess or brands of growth play Pride label and our in end brands private And brands, both premium the So, our businesses

Okay, great. Thank you.

Star. world, hearing and Our both about next of with Amlan in question Amlan comes the United States What customers results the around from the Ethan seeing Amlan are especially for kind results and interested newer in products, products?

Wade?

you, Dan. the around question. excellent world. you for morning, seeing and Thank results thank Yes. the Good Ethan, We're

do last first we've the customers hand. XX, products We discussed calls, In but conducting seen months, products As sales try universally CROs we've at field, the the products cycle We is R&D really XX we've universities, in or the to over results. want trials share excellent in in been the this results. certainly of to previous in customer with industry part operations. Amlan our evaluate

are seeing performance customers products. our Our with improved

world the our well. the launch of to around products, evaluate look as new we and those beginning As we're

As two in and internationally, launches, expected, previous product moving our into market. And NutriPat call we [ph] with starting IPP testing them now Both we're great again, we're are perform make we're products as to and product. those and those our progress customers. new products in a seeing again, products with in mentioned, our launching of the

Wade. you, Thank great. Okay,

your improvements Our next are indicates and benefits question this? are $X.X result one spending million The renovate also that comes you manufacturing be you from of what Star. Ethan what to renovating, plant will from Which facility. XX-Q making you'll

Operations, promoted one. And Aaron Vice Christiansen, that Aaron? of take our President newly will

Ethan. alluded the largely to a Susan great for already Thanks answer. asking, That's question. Yes.

Our indicate we combination that be in capacity, a areas that cost is and the our add our spend the avoid is growth. cases are bulk where capital question redundancy is business The flexibility, capital of in the of structure. Amlan strategic detail, that The most I'd continues spend heavy areas infrastructure. states lightweight and but where the definitely to definitely specifically targeted the commercial it rather teams address investments in to litter. aging our the support It's spend location, some cat clear targeting in

comes long-time increase Was Great. quarter is impairment a And this charge Thank inventories you to the the satisfied with Curt levels? year-to-year? decision to you. [ph] goodwill current substantial next Cornwell, are shareholder. question take The in in who from inventory related the

for the over So, to Aaron. I'll that? start hand I'll How's and it then question. Thanks

charge of inventory impairment weren't what levels the the Now, part triggered of the quarter.

are seen question, situation an year. satisfied your we've inventory this to times finished goods of the lead in customers product getting Certainly, long with half second the The was increased increase as we our level? has whole great and the

As to rest of what levels? about you Operations Aaron, levels, think VP what inventory that -- inventory do the answer of let our I'll

pieces are for where over and our we export simply of over predict not go dynamics unpredictable, Extremely quarter past increase the have export incredibly and finding to hard the The in to product the historically. freight, improve have been rate freight. we All to we have have manage capital over not be ways move obviously, able indications down. is to that unique with the particular, to But in production freight been working where in the several of market to next bulk particular going capital has export begin we unstable. quarter. are at now, the move freight volume to our majority quarter. The right in in product the business, coming to able We're working the

as in of monitor ahead. the the and we'll supply the aspects So, months market stabilize freight other chain

Asia? what sold Great. what And in? And countries have of John the Ethan of And Amlan Bair take is I'm decline products Wade, have you you call you. couple to to logistic a you a in we Thank those issue Is drop on it questions. asked do number both? demand Mexico attribute a two. going different already or asked, or and on the sales

going world are questions, Thank key investment around and we're Asia, key the instead but and except countries the guys. as EU, countries in the you, area all yet. really we're the that South geographies, targeting. and well that in to question countries start like countries Dan, Yes. geographies, discussed North in focusing really in selling thank we've We're approximately the we're for the These XX that and on. over market haven't have We'll we today America that approached America, in for Americas, the months. the you with Ethan time. targeting large a the next see number not why gradually I'll significant related to expansion list will world as in key more XX expand

As product we fiscal think reference we third which net saw or question core the discontinue XXXX, were for the quarter. that I our a to of to versus decrease asking, It XXXX was by that is that you in were XX% at chose and sales rather about mechanical if strategy. that Agromex of we but saw look our at that were the related wasn't sold you're nature. to which products, of certain that And $XXX,XXX, constituted we a quarter discontinuation look Mexico year core really equipment there, the to products related lines more change approximately in

And a so, that we see really event. temporal as

Okay, Thank great. you.

that related annual I In presentation three have animal Ethan question Oil-Dri comes has target Amlan from noted next slide to opportunity Our questions an at that. rations. Star. the to companion the meeting,

proven to you do First, agreement? manufacturer, Wade, contractual you want tell might with can food has innovation that when product product? already either working Second, about Oil-Dri? to this a the center us are third, for begin a or generate scientifically question? developed take informally already And a with pet you revenue what

see it the because is future. about the Dan sure. breadth Ethan, are in our pretty this, an broad the you certainly, and great and opportunity you, core again, and range products product, thank What's thank they clay mentioned the of for mineral in question our is that we that a significant effective And is of Yes, Company for species.

animal say, although we're and reason products geographies key And well the the animal. companion swine work initially poultry the looking producers. not large is the of ruminant we also formulated business also specifically the companies a We're market, some that animals. integrated basically This can process to for exceptions, in we but So markets vertically products species. today that food that talking of species is like or production our lot penetrate, feed dairy with portfolio targeting, and food these large very have as companion but a true of companion target, animals in about we in the are that is breadth we're currently also only pursuing What's really with and cross fortunate same. with we're do across

So, produce and they well. poultry both sometimes as might feed feed feed, companion ruminant

data the that So it way to companion a makes see test, of validate customers and testing in sales it in in in future. the a fiscal begin then and to some them not We're providing for I in the us with that the rations. But do And to near very going convincing animal into product that hope order. market. We're penetrate to we'll have the companion year again, down yet would XXXX, efficient animal but market. hope we begin sales we validation cycle

Great. Thanks, Wade.

[Ph] Oil-Dri a of long We Eric very have a question Simon. balance has history maintaining sheet. strong from a

mind? the next maximum cash a Given and leverage free improve or debt buybacks, capital been ratio will expenditures, cash a expect flow remain capital Does with capital should And we increased. dividends Company heavy the working has net needs it's leverage have high? growth, in year, over to year elevated or

Susan?

there. questions lot A of Yes. different

start. let So, me

expect to cash improve. We free flow

because continue spending identified the to we're or that fiscal we've in two. capital, at into got in spending next here year expect level opportunities We XXXX the

are in do good volatility the customers to a seeing debt some inventory We opportunities strong So, investment Inventories, there. have a in earlier, we shipping. because XX.X%. about Aaron total we've to our freight sitting just with and serve of capital talked sheet. balance very got our an We support we're still and have

means along. that got opportunities as low, powder pretty they dry we've to come the and really -- we've -- fund and So got

have So, mind. ratio in specific we a

opportunity the XX%. that think we've we I not we and -- would would you imagine really conversations was had something where unless above that going see

that So, leaves that things whole accretive. for a lot opportunity are of

to dividends, at now. -- that to the buybacks supporting as will as But opportunistic. So dividend. far we price intend share with attractive honest, right be be And of very the stock

on have year-to-date spent do -- any million repurchases. So, we $XX about we share

more it As today, capital that sit the don't and investment. our business the first and here we in opportunity is our to any form opportunities, comes plans but that have in would do of last good ranking be our trump cash use of a growth but we in working so, capital us, would of for

at the Mississippi, thing in million replace our they're sheet, answer major does Georgia, that values, one These locations, U.S. in California you. assets. question I we of is, forth. the I five Thank Taft, our is, close. for look the $XXX one only $XXX in we've are would historic all Mounds depreciated as two is values could And add in balance so that even not And and mean got Illinois, million. And of

as keep fact so, And all stuff. gets layer and some environmental of on the Aaron his admit, just team then, get just strict, the particular up upgrade only you amount that compliance that standard. these And even of as upgrade, kind and as to can not more and maintain, you in sense older

to more So like have equipment That's and it's the -- you business. It's that. more and bottom things line. air just have capital-intensive quality a

important. a in continuous row. a want on I And looking say raised in side, remember, I we've very XX release. We've a mean, obviously, in I back. XX XX, we've forever always dividend don't it's -- We've I paid the mean of years XX but it years, always on continuous paying row. our it's -- been to over was dividend a one years So, I dividend.

XX.

June. look I row, worries. And we thought. in at a XX years always it and in XX. this That's what is no June,

are going a the growth what the to a want on review the also to fund margins certainly agenda do today's to we the our increase and And meeting, but necessary for be discussion that Board. that to believe by is, business, only come back, and the we'll they're start it's will dividend. for the and subject then cash not of going see generating Board to approval maintenance So, and

today, I that signal a presenting So, and cash way business more And be and forth, you'll more of flow informed will say, strong one the can her because would Good. they know so information make be or by decision. some will close other. so a Susan and that team

So, we have what, one more question?

We recent included What have the that least you than If time for Oil-Dri Difficulty] for precise one its quarter? this wouldn't a more more the change tell us whether or $X of be customer can't Star. impact [Technical the quarter? top freight it's stated such could figure, per Oil-Dri give products. line price charges in a most million customer, on at directly question, is you would which In comes that approximate with per from and the significant less is costs the it Ethan XX-K, so charges pay

Chris. it's Ethan, So,

point from think that there the the here, no this, impact I really you think this. real but bottom emphasize to I question, want I is net nature just key to and understand line of your

line in the effect P&L, going this simply if we it's -- will. a next quarter, freight the in really will with into over going QX last year, our this offset an lower annualize detailed in you So, into sales

bottom shift. impact, of couple how a were of that roughly, again, approximately, points does much no And simply year, depressed. over that the sales So line to a approximate last

Yes, a million than $X So yes. quarter. more

we're good thank to So quarter. question. everybody. look, Well, the all looking fourth you, forward And

that then will be very after focused We our it significant talk we'll have we're protect to and grindstone, XX then. and costs longer. whenever around increases you a and days, quite on fourth is showing, you margins, already But to and not little the coming trying more probably we'll but nose and quarter, price to all and recapture close the with back we

That our concludes you. call. Thank

This concludes the call. conference

now may You disconnect.