Oil-Dri Corp of America

Oil-Dri Corporation of America develops, mines, manufactures and markets sorbent products principally produced from hydrated aluminosilicate minerals, primarily consisting of calcium bentonite, attapulgite and diatomaceous shale, which the company refers to collectively as its clay, minerals, or Fuller's Earth ¹. The company surface mines its clay on leased or owned land near its manufacturing facilities in Mississippi, Georgia, Illinois and California, and also holds reserves in Nevada and Tennessee ². It produces both absorbent products, which like sponges draw liquids up into their many pores, and adsorbent products, which attract impurities in liquids such as metals and surfactants and form low-level chemical bonds ³. The business is organized into two reportable operating segments derived from the different characteristics of its two major customer groups: the Retail and Wholesale Products Group and the Business to Business Products Group ⁴. The Retail and Wholesale Products Group serves mass merchandisers, the farm & fleet channel, drugstore chains, pet specialty retail outlets, dollar stores, retail grocery stores, online retailers, co-packaged products customers, distributors of industrial cleanup and automotive products, environmental service companies and users of sports field products and sports turf materials ⁵. The Business to Business Products Group serves processors and refiners of edible oils, renewable diesel, petroleum-based oils and biodiesel fuel; manufacturers of animal feed and agricultural chemicals; and distributors of animal health and nutrition products ⁶. The company considers its business, taken as a whole, to be moderately seasonal, though business activities of certain customers such as agricultural chemical manufacturers and edible oil producers are subject to seasonal factors including crop acreage planted, product formulation cycles and weather conditions, and demand for sports products fluctuates depending on the time of year that sports including baseball, softball, football, cricket and soccer are played ⁷.

Competition in the company's markets is based principally on product performance, price, brand recognition, customer service, technical support and distribution resources, and competition historically has been very vigorous, with advertising, promotion, merchandising and packaging also having a significant impact on retail consumer purchasing decisions ⁸. Most of the principal competitors for the Retail and Wholesale Products Group have established brands as well as substantially greater financial resources or market presence than the company, and may be able to spend more aggressively on advertising and promotional activities, introduce competing products more quickly and respond more effectively to changing business and economic conditions ⁹. The company has six principal competitors in its Retail and Wholesale Products Group, one of which is also its customer, with two of the principal competitors relating to Industrial and Sports products and the other four relating to cat litter products ¹⁰. The overwhelming majority of all cat litter is mineral based, including both scoopable and coarse non-clumping litter, and through the acquisition of Ultra Pet the company has expanded its footprint into the silica gel-based cat litter market, which is a growing cat litter market ¹¹. Cat litters based on other alternatives, such as paper and various agricultural waste products, have niche positions, while scoopable products have a majority of the cat litter market share followed by coarse non-clumping litters ¹². There is significant competition to attract cat litter consumers across multi-outlet channels, including grocery, mass-merchandiser, dollar, pet and drug stores, as well as through online retailers, and competition for the scoopable litter market continues to be impacted by new product offerings and increased advertising and promotions by competitors and by the company ¹³. The company provides its customers with product innovation, a nation-wide distribution network and strong customer service, and its exceptional sales and research and development teams, as well as its being vertically integrated, give it a further advantage over smaller and regional manufacturers ¹⁴. The company currently has ten principal competitors in its Business to Business Products Group compared to nine reported in the prior year, due to a reassessment of principal competitors as a result of a competitor's increased product offerings ¹⁵. Its bleaching clay and fluids purification products are sold in a highly cost competitive global marketplace, with demand having grown in recent years due to the use of its products in the filtration of renewable diesel, and performance is a primary competitive factor for these products ¹⁶. The animal health portion of this segment also operates in a global marketplace with price and performance competition from multi-national and local competitors, while competition for crop protection products is primarily based on price, with competitor differentiation also existing in the ability to meet customer product specifications and enhancements in engineered granule technologies ¹⁷.

The company generates revenue by selling sorbent products to two primary customer groups: customers who resell its products as originally produced to the end consumer, and other customers who use its products as part of their production process or use them as an ingredient in their final finished product ¹⁸. The Retail and Wholesale Products Group sells branded and private label cat litter, industrial and automotive absorbents, and sports field products, while the Business to Business Products Group sells fluids purification adsorbents, agricultural and horticultural carriers and drying agents, and animal health and nutrition products ¹⁹. The company's business is based primarily upon individual sales orders placed by customers rather than contracts with a fixed duration, so most customers could reduce their purchasing levels or cease buying products on relatively short notice, although the company does have long-term contracts with certain customers that are subject to termination in certain circumstances ²⁰. Walmart Inc. is a customer in the Retail and Wholesale Products Group with whom the company has a long-term relationship, and sales to Walmart and its affiliates accounted for approximately 18% and 19% of total net sales for fiscal years 2026 and 2025, respectively ²¹. Sales to Walmart are comprised of a variety of products including but not limited to multiple scoopable, coarse, and crystal cat litter items and accessories, and there are no customers in the Business to Business Products Group with sales equal to or greater than 10% of total sales ²². The degree of margin contribution of significant customers in the Business to Business Products Group varies, with certain customers having a greater effect on operating results, and the loss of any customer other than those described would not be expected to have a material adverse effect on the business ²³. The company has long-term supply agreements with A&M Products Manufacturing Company, a subsidiary of The Clorox Company, under which it manufactures certain branded cat litter products and is responsible for manufacturing finished goods of certain Fresh Step cat litter products based on market demand ²⁴.

The Retail and Wholesale Products Group is the company's larger segment by revenue, with net sales of $313.646 million in fiscal year 2026 compared to $302.976 million in fiscal year 2025 ²⁵. Within this segment, cat litter is the largest product category, with net sales of $265.318 million in fiscal year 2026 versus $255.926 million in fiscal year 2025 ²⁶, and Industrial and Sports products generated net sales of $48.328 million in fiscal year 2026 compared to $47.050 million in fiscal year 2025 ²⁷. The company manufactures clay-based cat litter and supplies crystal cat litter products, both designed for absorbency and odor control, with clay-based offerings including scoopable and coarse non-clumping litters ²⁸. Scoopable litters clump when exposed to moisture, allowing consumers to remove and dispose of only the used portion, and these products are further differentiated into lightweight and heavyweight varieties, with lightweight scoopable litters providing strong performance along with the added convenience of easier carrying and pouring ²⁹. Crystal cat litter is made from synthetic silica-gel granules and, like lightweight clay-based litter, offers a lightweight format with superior odor control, is 99.9% dust-free and provides long-lasting performance with minimal maintenance ³⁰. Branded scoopable and non-clumping clay-based litters are sold under the Cat's Pride and Jonny Cat brand names, and the Cat's Pride litters created the lightweight segment of the scoopable litter market ³¹. The Cat's Pride Antibacterial Clumping Litter was the first and is the only Environmental Protection Agency approved antibacterial cat litter in the United States ³². The company also offers non-clumping litter in a pre-packaged, disposable tray under the Cat's Pride KatKit brand, crystal cat litters under the Cat's Pride, Ultra and Litter Pearls brand names, and litter box liners under the Cat's Pride and Jonny Cat product lines ³³. The company produces private label scoopable and non-clumping clay-based cat litters as well as crystal cat litter ³⁴. In Industrial and Automotive, the company manufactures and markets clay-based, polypropylene and recycled absorbent products used to absorb oil, water, chemicals and other liquids across industrial, automotive, marine, environmental, and residential applications, with a product portfolio including floor absorbents, spill containment products, pads, rolls, socks, booms and spill kits sold under branded and private-label offerings ³⁵. In Sports, the company manufactures and markets Pro's Choice branded and private label sports field products used in the construction, maintenance, and improvement of natural turf athletic fields, with offerings including infield conditioners, soil conditioners, packing clays, and drying agents that enhance drainage, field performance, and playability, serving professional, collegiate, high school, and municipal sports facilities ³⁶.

The Business to Business Products Group generated net sales of $180.198 million in fiscal year 2026 compared to $182.596 million in fiscal year 2025 ³⁷, with operating income of $55.348 million in fiscal year 2026 versus $59.796 million in fiscal year 2025 ³⁸. Within this segment, Fluids Purification net sales were $104.753 million in fiscal year 2026 compared to $110.105 million in fiscal year 2025 ³⁹, Agricultural and Horticultural net sales were $49.232 million in fiscal year 2026 compared to $44.338 million in fiscal year 2025 ⁴⁰, and Animal Health & Nutrition net sales were $26.213 million in fiscal year 2026 compared to $28.153 million in fiscal year 2025 ⁴¹. The company produces an array of adsorbent products for bleaching, purification and filtration applications used around the world by edible oil processors, as well as by refiners of renewable diesel, jet fuel, including sustainable aviation fuel, and other petroleum-based products ⁴². Bleaching clays are used by edible oil processors to adsorb soluble contaminants that promote oxidation problems, and the Pure-Flo and Perform bleaching clays remove impurities such as trace metals, chlorophyll and color bodies in various types of edible oils, with Perform products providing increased activity for hard-to-bleach oils ⁴³. Select adsorbents are used in a pre-treatment process to remove metals and trace soap in vegetable oil processing and can also be used to pre-treat oil in the processing of biodiesel, while Metal-X and Metal-Z are highly efficient adsorbents for the renewable diesel and sustainable aviation fuel markets, and Ultra-Clear is used as a purification and filtration medium for jet fuel and other petroleum-based products ⁴⁴. In Agricultural and Horticultural, the company manufactures granules and powders that enhance agricultural and horticultural products, with mineral-based absorbents serving as carriers for biological and chemical active ingredients, drying agents, and growing media under brands including Agsorb, an agricultural and horticultural carrier and drying agent; Verge, an engineered carrier and drying granule; and Flo-Fre, a highly absorbent microgranule designed to improve flowability ⁴⁵. Agsorb and Verge carriers support lawn and garden and row crop products that serve as alternatives to liquid sprays, with mineral granules absorbing active ingredients and delivering them directly into or onto the soil, enabling more targeted application, and Verge carriers are spherical, uniformly sized granules with very low dust ⁴⁶. Agsorb drying agents are blended into fertilizer-pesticide formulations to absorb moisture and improve flowability, and Flo-Fre microgranules are used by grain processors and other bulk handlers to absorb excess moisture and prevent caking ⁴⁷. In Animal Health and Nutrition, the company produces, or uses contract processors to produce, Amlan brand name and private label products that support good health and productivity of species in livestock industries, including Calibrin, Varium and NeoPrime products in international markets and Sorbiam, Ambio P and Ambio S products sold to customers in North America, providing solutions for swine, poultry and dairy cattle livestock production ⁴⁸. The MD-09 moisture manager product is a feed additive for the reduction of wet droppings in poultry, and Pel-Unite and Pel-Unite Plus products are specialized animal feed pellet binders ⁴⁹.

During fiscal year 2026, the company utilized its reserves to produce substantially all of the sorbent products that it sold, and it estimates proven mineral reserves as of July 31, 2026 of approximately 98.9 million tons in aggregate and probable mineral reserves of approximately 129.6 million tons in aggregate, for a total of 228.5 million tons of mineral reserves ⁵⁰. Based on its rate of consumption during fiscal year 2026, and without regard to any reserves in Nevada or Tennessee, the company considers its proven and probable reserves adequate to supply its needs for over forty years ⁵¹. The company has continuously conducted mining operations in Ripley, Mississippi since 1963, in Ochlocknee, Georgia since 1968, in Blue Mountain, Mississippi since 1989, in Mounds, Illinois since 1998 and in Taft, California since 2002 ⁵². The company has a total of 69 mining properties in all stages of operation, with 3 mining properties in California, 38 mining properties in Georgia, 3 mining properties in Illinois, 23 mining properties in Mississippi, 1 mining property in Nevada, and 1 mining property in Tennessee ⁵³. On October 9, 2024, the company announced that its Board approved a two-for-one stock split in the form of a stock dividend, with stockholders of record as of the close of business on December 20, 2024 receiving a distribution of one additional share of Common Stock for each share of Common Stock held and one additional share of Class B Stock for each share of Class B Stock held as of the record date, with additional shares distributed on January 3, 2025 and Common Stock beginning trading on a post-split basis on January 6, 2025 ⁵⁴. In order to implement the stock split the company amended its Certificate of Incorporation on December 11, 2024 to increase the number of authorized shares of Common Stock from 15 million to 30 million ⁵⁵. As of July 31, 2026, the company had approximately 927 employees globally, including 892 based in the U.S and 35 located internationally, and approximately 65 U.S. teammates and 12 Canadian teammates are represented by labor unions under separate collective bargaining agreements ⁵⁶. The company operates two research and development facilities in Vernon Hills, Illinois, comprised of the Nick Jaffee Center for Innovation and the Richard M. Jaffee Laboratory for Applied Microbiology, with the Innovation Center including a pilot plant that simulates the production processes of customers and the company's manufacturing plants ⁵⁷.

Fiscal year 2026 was another record year, with consolidated net sales and net income reaching all-time highs, as consolidated net sales were $493.844 million, up 2% from net sales of $485.572 million in fiscal year 2025 driven by favorable mix ⁵⁸. The Retail and Wholesale operating segment drove the overall increase with higher cat litter volumes, while Business to Business net sales declined slightly due to softer volumes in fluid purification and animal health products, partially offset by growth in demand of agriculture products ⁵⁹. Cost of goods sold increased $13.8 million, or 4%, in fiscal year 2026 compared with fiscal year 2025, as domestic per-ton costs rose 4% compared to fiscal year 2025, driven by higher per ton manufacturing and transportation costs ⁶⁰. Per ton manufacturing costs increased 6% in fiscal 2026 as compared to fiscal 2025, primarily due to higher labor, materials and depreciation costs, while per ton transportation costs increased 3% mainly due to higher diesel costs and fourth-quarter trucking market impacts, and per ton packaging costs remained flat ⁶¹. These cost pressures resulted in a $5.573 million, or 4%, decrease in consolidated gross profit in fiscal year 2026 to $137.510 million compared to $143.083 million in the prior fiscal year ⁶². Gross margin declined to 27.8% in fiscal year 2026 from 29.5% in fiscal year 2025 ⁶³. Operating income remained relatively flat at $67.982 million in fiscal year 2026 compared to $68.220 million in fiscal year 2025, as the decrease in SG&A offset the decrease in gross profit ⁶⁴. Total SG&A decreased $5.3 million, or 7%, in fiscal year 2026 compared to fiscal year 2025, driven by a $4.6 million reduction in corporate unallocated expenses and, to a lesser extent, by SG&A incurred by the operating segments ⁶⁵. Total other income, net for fiscal year 2026 was $1.5 million, a $3.5 million change from other expense, net of $2.0 million in fiscal year 2025, driven by a number of items including $1.0 million due to a reduction in the landfill modification costs recognized in fiscal year 2026 compared to an increase in the estimated cost recognized during fiscal year 2025 and $0.9 million in higher interest income in fiscal year 2026 compared to the prior fiscal year, as well as the positive outcome of a confidential legal settlement in the matter of Oil-Dri Corporation of America vs. Entera Animal Health, et al. ⁶⁶. Tax expense for fiscal year 2026 was $12.5 million compared to $12.2 million with an effective tax rate of 18% in both fiscal year 2026 and fiscal year 2025 ⁶⁷. Consolidated net income for fiscal year 2026 was $56.969 million, or $3.92 per share of diluted Common Stock, compared to $53.996 million, or $3.70 per share of diluted Common Stock in fiscal year 2025 ⁶⁸. The company's Consolidated Balance Sheets as of July 31, 2026, and its Consolidated Statements of Cash Flows for fiscal year 2026 show an increase of $23.2 million in total cash and cash equivalents from fiscal year-end 2025, mainly due to cash flows from operating activities ⁶⁹.

The company's future growth and financial performance are meaningfully impacted by successful new product introductions, and a significant part of future growth will require that it successfully introduce new products or extend existing product offerings to meet emerging customer needs, technological trends and product market opportunities ⁷⁰. A significant portion of net sales comes from the sale of products in mature categories, some of which have, at times, experienced little or no volume growth or have had volume declines in recent fiscal years ⁷¹. The development and introduction of new products generally require substantial and effective research, development and marketing expenditures, some or all of which may be unrecoverable if the new products do not gain market acceptance ⁷². The company has expanded its footprint into the silica gel-based cat litter market through the Ultra Pet acquisition, which is a growing cat litter market, and continues to expand its customer offerings as evidenced by its recent entrance into the crystal cat litter market ⁷³. The company's research efforts and partnerships in the past several years have resulted in several new sorbent products and processes, and the R&D team produces prototype samples and tests new products for customer trial and evaluation across all Oil-Dri businesses ⁷⁴.

Demand for the company's bleaching clay and fluids purification products has grown in recent years due to the use of its products in the filtration of renewable diesel, and Metal-X and Metal-Z are highly efficient adsorbents for the renewable diesel and sustainable aviation fuel markets ⁷⁵. Domestic sales may be impacted by changes in government issued incentives, such as tax rebates and credits, for renewable diesel producers ⁷⁶. Net sales of fluids purification products decreased $5.352 million or 5% in fiscal year 2026 compared with fiscal year 2025, driven primarily by the decrease in demand for products used in renewable diesel filtration, which was significantly higher in fiscal year 2025 when several new customers began operations in new plants ⁷⁷. The company's international sales and operations are subject to various economic-related risks including currency exchange fluctuations, fund transfer and trade restrictions and import/export duties, and the company does not currently use instruments to hedge foreign currency risks ⁷⁸.

The company's foreign operations located in Canada and the Netherlands are included in the Retail and Wholesale Products Group, while operations in the United Kingdom, China, Switzerland, Mexico and Indonesia are included in the Business to Business Products Group ⁷⁹. The wholly-owned subsidiary MBA Pet BV, located in the Netherlands, which was acquired on May 1, 2024 as part of the acquisition of Ultra Pet Company, Inc., is a distributor of silica gel-based cat litter to the Europe region ⁸⁰. The wholly-owned subsidiaries Amlan Trading (Shenzhen) Company, Ltd., located in China, and PT Amlan Perdagangan Internasional, located in Indonesia, are dedicated to the animal health business, and the wholly-owned subsidiary Agromex Importaciones, S.A de C.V, located in Mexico, sells international animal health and nutrition products ⁸¹. The company's animal health and nutrition products are sold both directly and through a network of distributors to livestock producers, feed mill operators, nutritionists and veterinarians in the United States, Latin America, Mexico, Asia and Africa ⁸². The company intends, from time to time, to strategically explore potential additional opportunities to expand its operations and reserves through acquisitions, though identification of good acquisition candidates is difficult and highly competitive ⁸³.

The company's cost of goods sold increased $13.8 million, or 4%, in fiscal year 2026 compared with fiscal year 2025, as domestic per-ton costs rose 4% compared to fiscal year 2025, driven by higher per ton manufacturing and transportation costs ⁸⁴. Per ton manufacturing costs increased 6% in fiscal 2026 as compared to fiscal 2025, primarily due to higher labor, materials and depreciation costs, while per ton transportation costs increased 3% mainly due to higher diesel costs and fourth-quarter trucking market impacts, and per ton packaging costs remained flat as many packaging supply contracts are subject to periodic price adjustments which lag changes in underlying commodity prices ⁸⁵. Gross margin declined to 27.8% in fiscal year 2026 from 29.5% in fiscal year 2025 ⁸⁶. If energy, commodity, transportation, labor and/or other costs increase disproportionately to net sales, earnings could be significantly reduced, and increases in operating costs may reduce profitability if the company is unable to pass them on to customers through price increases or surcharges ⁸⁷. The company has purchased several forward fuel contracts to cover a portion of its fuel needs in Georgia and California and from time to time may use additional forward purchase contracts or financial instruments to moderate the volatility of a portion of its energy costs ⁸⁸. The prices of other commodities such as paper, plastic resins, synthetic rubber, lumber, and steel significantly influence the costs of packaging, replacement parts and equipment used in the manufacture of products and the maintenance of facilities ⁸⁹.

The company is dependent on the continued operation of its production facilities, which are subject to hazards associated with the manufacturing, handling, storage, and transportation of products, including fires, inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, and environmental risks ⁹⁰. Some of the company's products are manufactured on equipment at or near its capacity thus limiting its ability to sell additional volumes of such products until more capacity is obtained ⁹¹. Each of the company's processing facilities maintains inventories of unprocessed clay for approximately one week of production requirements ⁹². The company's current operating mines range in distance from immediately adjacent to approximately eleven miles from the related processing plants ⁹³. The company's enterprise resource planning system is designed to accurately maintain its books and records and provide information important to the operation of its business, and further development and maintenance of the ERP system will continue to require investment in human and financial resources, which may cause increased costs and other difficulties ⁹⁴. The company utilizes and intends to expand its use of AI technologies to support its business, and evolving regulations related to AI use, transparency, safety, and accountability may require additional investment, changes to existing processes, or limitations on the development and application of these technologies ⁹⁵.

The company's Board has previously authorized a share repurchase program for its Common Stock and Class B Stock, under which the company has authority to repurchase up to 750,000 shares of Common Stock and up to 300,000 shares of Class B Stock ⁹⁶. The company has undertaken repurchases of Common Stock on the open market (including pursuant to a 10b5-1 plan or otherwise) and is also authorized to undertake repurchases in private, negotiated transactions, and has no obligations to repurchase any specific dollar amount or to acquire any specific number of shares ⁹⁷. The Board authorized the repurchase of 300,000 shares of Class B Stock on March 21, 2018, and of this amount, 208,197 shares of Class B Stock remain authorized for repurchase as of July 31, 2026 ⁹⁸. The Board of Directors authorized the repurchase of 750,000 shares of Common Stock on March 11, 2019, and this authorization does not have a stated expiration date ⁹⁹. Dividends are declared at the discretion of the Board, and future dividends will depend on future earnings, cash flow, financial requirements and other factors, including market and economic conditions, and the company is not obligated to continue a dividend for any fixed period ¹⁰⁰. The Credit Agreement with BMO Harris Bank N.A. and certain domestic subsidiaries, and the Amended and Restated Note Purchase and Private Shelf Agreement with PGIM, Inc., require that the company maintain a maximum debt to earnings ratio and a minimum fixed charge coverage ratio, and to the extent that these balances are not attained, the ability to pay dividends may be impaired ¹⁰¹. No significant R&D was customer sponsored, and all R&D costs are expensed in the period in which incurred ¹⁰².

The company's mining operations are affected by weather events and natural disasters, power outages, equipment failures and other unexpected maintenance problems, variations in the amount of rock and soil overlying reserves, variations in geological conditions, fires and other accidents, fluctuations in the price or availability of supplies, landowner disputes, permit requirements and other matters ¹⁰³. The company is impacted by the clay quality in its mines, and although it uses drilling and surveying to assess the expected composition of clay, it cannot always predict with certainty the clay quality, and poor quality or unexpected differences in clay composition could increase processing costs, reduce production, or impact product performance ¹⁰⁴. The company may not be successful in acquiring adequate additional reserves in the future, and its ability to acquire additional reserves could be limited by competition by others to be used either for mining or other uses, the lack of suitable properties that can be acquired on terms acceptable to the company or restrictions under its existing or future debt facilities ¹⁰⁵. Requirements for environmental or other regulatory compliance may restrict exploration or use of lands that might otherwise be utilized as a source of reserves ¹⁰⁶. The company's mining operations are subject to extensive governmental regulation on matters such as permitting and licensing requirements, workplace safety, plant and wildlife protection, wetlands and other environmental protection, reclamation and restoration of mining properties after mining is completed, the discharge, storage and disposal of materials in the environment, and the effects that mining has on air or groundwater quality and water availability ¹⁰⁷. The company will need additional permits and renewals of permits in the future, and the expense, liabilities and requirements associated with environmental, health and safety laws and regulations are costly and time-consuming and may delay commencement or continuation of exploration, mining or manufacturing operations ¹⁰⁸.

The company's operations are subject to various federal, state, local and foreign laws and regulations relating to the mining, manufacture, packaging, labeling, content, storage, distribution and advertising of its products and the conduct of its business operations, and in the United States some of its products, product claims, labeling and advertising are regulated by the FDA, CPSC, OSHA, MSHA, EPA and FTC ¹⁰⁹. There is increasing federal and state regulation with respect to the content, labeling, use, and disposal after use of various products the company sells, and throughout the world, but particularly in the United States and Europe, there is also increasing government scrutiny and regulation of the food chain and products entering or affecting the food chain ¹¹⁰. The company is also experiencing increasing customer scrutiny of the content and manufacturing of its products, particularly products entering or affecting the food chain, and customers may impose product specifications, certifications or other requirements that are different from, and more onerous than, applicable laws and regulations ¹¹¹. The company's reliance on certain suppliers based in China has resulted in additional risks concerning the country's current trade relations with the U.S., and ongoing developments in U.S. politics and government have introduced greater uncertainty with respect to tax policies, trade relations, tariffs and government regulations affecting trade between the U.S. and other countries ¹¹². International conflicts could increase the cost of raw and packaging materials and commodities (including the prices of oil and natural gas), supply chain and logistics challenges and foreign currency volatility, and it is not possible to predict the broader or longer-term consequences of such conflicts ¹¹³.

The company depends on a limited number of customers for a large portion of its net sales, with sales to Walmart and its affiliates accounting for approximately 18% and 19% of total net sales for fiscal years 2026 and 2025, respectively, and the loss of, or a substantial decrease in the volume of, purchases by Walmart or any other top customer could harm sales and profitability ¹¹⁴. The company's markets are highly competitive and it expects that both direct and indirect competition will increase in the future, with some competitors, particularly in the sale of cat litter (the largest product in the Retail and Wholesale Products Group), having substantially greater financial resources and market presence with established brands, and this competition may lead to price reductions, increased promotional spending, or loss of market share or product distribution ¹¹⁵. Increases in energy, commodity, transportation, labor and other costs would increase operating costs, and the company may be unable to pass all these increases on to customers in the form of higher prices and surcharges, as competitive pressures and other factors may limit its ability to quickly raise prices in response to increased costs ¹¹⁶. The company's mining operations are subject to many conditions beyond its control, including weather events and natural disasters, power outages, equipment failures and other unexpected maintenance problems, variations in the amount of rock and soil overlying reserves, variations in geological conditions, fires and other accidents, fluctuations in the price or availability of supplies, landowner disputes, permit requirements and other matters, any of which could result in significant damage to mining properties or processing facilities, personal injury to employees, environmental damage, delays in mining or processing, losses or possible legal liability ¹¹⁷. The company's operations are subject to extensive governmental regulation on matters such as permitting and licensing requirements, workplace safety, plant and wildlife protection, wetlands and other environmental protection, reclamation and restoration of mining properties after mining is completed, the discharge, storage and disposal of materials in the environment, and the effects that mining has on air or groundwater quality and water availability, and failure to maintain or achieve compliance with these laws and regulations or with the permits required for operations could result in substantial operating costs and capital expenditures, in addition to fines and administrative, civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup and site restoration costs, site modification (such as the modification to address capacity issues at the sole landfill located in Ochlocknee, Georgia), and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures ¹¹⁸.

Management's message to shareholders emphasizes that fiscal year 2026 was another record year, with consolidated net sales and net income reaching all-time highs, as consolidated net sales were $493.844 million, up 2% from net sales of $485.572 million in fiscal year 2025 driven by favorable mix, and consolidated net income was $56.969 million, or $3.92 per share of diluted Common Stock, compared to $53.996 million, or $3.70 per share of diluted Common Stock in fiscal year 2025 ¹¹⁹. The Retail and Wholesale operating segment drove the overall increase with higher cat litter volumes, while Business to Business net sales declined slightly due to softer volumes in fluid purification and animal health products, partially offset by growth in demand of agriculture products ¹²⁰. Management's tone reflects disciplined cost management amid margin pressure, as cost of goods sold increased $13.8 million, or 4%, in fiscal year 2026 compared with fiscal year 2025, as domestic per-ton costs rose 4% compared to fiscal year 2025, driving gross margin down to 27.8% in fiscal year 2026 from 29.5% in fiscal year 2025, while total SG&A decreased $5.3 million, or 7%, in fiscal year 2026 compared to fiscal year 2025, driven by a $4.6 million reduction in corporate unallocated expenses ¹²¹. Management's strategic priorities center on driving continued growth and profitability through building an organization that attracts and retains top talent and develops the skills needed to differentiate the business, with a keen focus on human capital management ¹²². The company's culture and business objectives are based on its WE CARE values, which serve as the foundation for how it conducts business and engages with teammates, customers, vendors and other stakeholders, and these values are reinforced through leadership, training, in-person collaboration, and recognition of positive behaviors ¹²³. Management also emphasizes product innovation, a nation-wide distribution network and strong customer service as competitive advantages, with exceptional sales and research and development teams, as well as vertical integration, giving the company a further advantage over smaller and regional manufacturers ¹²⁴. The company continues to closely monitor geopolitical developments and assess potential impacts on operations and costs, noting that while ongoing geopolitical tensions and conflict in the Middle East have contributed to broader market volatility in the second half of fiscal year 2026, these conditions did not have a direct, material impact on results for the current fiscal year, though continued uncertainty in the region may lead to increased input and transportation costs in future periods ¹²⁵.