Oil-Dri of America Management Discusses Q2 2013 Results - Earnings Call Transcript
March 13, 2013 1:50 PM ET
Oil-Dri of America (ODC)
Q2 2013 Earnings Call
March 13, 2013 11:00 am ET
Daniel S. Jaffee - Chief Executive Officer, President, Director and Member of Executive Committee
Daniel T. Smith - Chief Financial Officer and Vice President
Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Oil-Dri Corporation of America Earnings Conference Call. My name is Takisha, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Daniel S. Jaffee, President and CEO. Please proceed.
Daniel S. Jaffee
Thank you, Takisha, and welcome, everyone, to the Oil-Dri Second Quarter and 6-Month Teleconference. Joining me, as always, Dan Smith, our CFO; and Doug Graham, our Legal VP and General Counsel; and Reagan Culbertson, our Manager, Investor Relations and Manager -- Reagan, will you go through the Safe Harbor?
Yes. Thank you, Dan. Welcome, everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ. In our press release and our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us.
Daniel S. Jaffee
Thanks, Reagan, and everyone has had an extra 24 hours to prepare so we're expecting extra insightful questions today. But before we open up the Q&A line, Dan, will you walk us through the quarter and 6 months?
Daniel T. Smith
Sure. Thank you. Good morning to everyone. Oil-Dri's first 6 months were strong, but the second quarter's results reflected anticipated increases in advertising spending. Sales of $61.1 million for the quarter and $122.5 million for the year were both up approximately 2% from last year. Our EPS was $0.31 per diluted share for the quarter was down substantially from the $0.45 earned in the second quarter of fiscal '12. Year-to-date, our EPS was $0.94, which was up significantly from the $0.60 earned last year for the first 6 months.
The lower earnings in the second quarter reflected a $2.3 million increase in our advertising and promotional spending in the Retail and Wholesale segment compared to the second quarter of fiscal '12. The increased spending was to encourage consumer trial and expand distribution for Cat's Pride Fresh & Light cat litters. Year-to-date, our advertising spending is down about $300,000 from fiscal '12.
In the Retail and Wholesale section, team reported about 1% sales growth for the quarter and 2% for the first 6 months. However, the segment's income was down $1.1 million for the quarter due to the additional advertising and promotional spending that I mentioned before. Year-to-date, Retail and Wholesale team reported a profit increase of $4.6 million over the first 6 months of fiscal '12. We continue to expect that our overall advertising expense for the fiscal '13 will be more than historical norms but less than fiscal '12.
In the B2B section, the group had another strong quarter. Sales increased 2%, but profit increased 10%. We saw a strong sales growth in our fluids purification, animal health and nutrition, copacked cat litter products during the quarter. Sales declined for our agricultural carriers in the quarter. Year-to-date, B2B team reported a 3% sales growth and a 5% income growth over the first 6 months of fiscal '12. Our gross profit remains strong at 26.6% for the quarter and 27.3% for the first 6 months, both were up substantially from the same period last year.
Our balance sheet continues to be strong. Cash generation continue to be good. Our cash and investment balance at the end of the quarter was $35.8 million, which was only down about $500,000 from last year, despite accelerating about $2.4 million in dividends and investing about $1.5 million more in capital expenditures for the first 6 months of fiscal '12 -- versus the first 6 months of fiscal '12. Our cash and investment balances continue to substantially exceed our debt.
Finally, during the quarter, we announced our intention to accelerate payments of our fiscal third and fourth quarter dividends. A dividend of $0.36 per share of common stock and $0.27 per share of Class B stock was paid on December 28, 2012. This payment was not a special dividend or an increase but rather an acceleration of the quarterly dividends that normally would be paid over the course of fiscal '13.
Thanks. I'll return the meeting back to Dan Jaffee.
Daniel S. Jaffee
Thanks, Dan. And Takisha, at this time, we'll open up the Q&A. And as always, we encourage you to ask your most important question first and then go back in the queue just to allow everyone a chance to ask at least one question. And then if we have time for more, we'll cover your second and third questions.
[Operator Instructions] And your first question comes from the line of Ethan Starr [ph] private investor.
To what extent are you seeing the percentage of repeat buyers of Cat's Pride Fresh & Light increasing?
Daniel S. Jaffee
We are continuing to see that positive trend of repeat, which is very encouraging. And I'm prepared to cover IRI information. I'm assuming you're always interested to hear what's going on in the marketplace. Would you like me to cover that now?
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