ODC 10-K & 10-Q changes, risk factors and insider trading

Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future. Our overall competitive position depends on a number of factors including price, customer service, marketing, advertising and trade spending, technical support, product quality and delivery. Some of our competitors, particularly in the sale of cat litter (the largest product in our Retail and Wholesale Products Group), have substantially greater financial resources and market presence with established brands. We also face competition forbetween our product lines, as some of our products fromare alternativeconsidered alternatives to other products that we offer. TheThis competition in the future may, in some cases, lead to price reductions, increased promotional spending, or loss of market share or product distribution, any of which could materially and adversely affect our operating results and financial condition.

• our ability to anticipate and adapt to rapidly changing consumer behavior or other market conditions;

To the extent these factors slow or change, consumer demand for our products may not be sustained or may reverse,decrease, and our results could be adversely affected. Accordingly,This wevariability and unpredictability could result in our failure to meet the expectations of research analysts or investors for any period, which could cause our stock price to decline. We believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful.meaningful Investorsand shouldencourage investors to not rely on the results of one quarter as an indication of our future performance.

The United States has from time to time experienced challenging economic conditions and the global financial markets have recently undergone and may continue to experience significant volatility and disruption. Our business, financial condition and results of operations may be materially adversely affected by factors beyond our control, including changes in consumer confidence, levels of unemployment, consumer debt levels, inflation, interest rates, tax ratesrates, tariffs, adverse weather conditions and general uncertainty regarding the overall future economic environment. The keeping of pets and the purchase of pet-related products may constitute discretionary spending for some consumers and any material decline in the amount of consumer discretionary spending may reduce overall levels of pet ownership or spending on pets. As a result, a recession or slowdown in the economy may cause a decline in demand for our products. If economic conditions result in decreased spending on pets andor have a negative impact on our retail customers and suppliers, our business, financial condition and results of operations may be materially adversely affected.

As part of our business strategy we have recently completed the Ultra Pet acquisition in May 2024 and intend, from time to time, to strategically explore potential additional opportunities to expand our operations and reserves through acquisitions. Identification of good acquisition candidates is difficult and highly competitive. If we are unable to identify attractive acquisition candidates, complete acquisitions, and successfully integrate the companies, businesses or properties that we acquire, our profitability may declinedecline, and we could experience a material adverse effect on our business, financial condition, or operating results. Acquisitions involve a number of inherent risks, including but not limited to:

Any one or more of these factors could cause us not to realize the benefits we anticipate to result from an acquisition. Moreover, acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to use a significant portion of our available cash, incur indebtedness, seek equity capital or a combination of these optionsoptions, and there can be no assurances that we can obtain indebtedness or equity capital on terms acceptable to the Company. Using available cash and incurring indebtedness would result in a corresponding decrease in our liquidity. Increased borrowings would correspondingly increase the Company's financial leverage and could result in lower credit ratings and increased future borrowing costs. These risks could also reduce the Company's flexibility to respond to changes in its industry or in general economic conditions. In addition, future acquisitions could result in our assuming more long-term liabilities relative to the value of the acquired assets than we have assumed in our previous acquisitions.

A limited number of customers account for a large percentage of our net sales, as described in Item 1 “Business” above. The loss of, or a substantial decrease in the volume of, purchases by Walmart,Walmart or any of our other top customers could harm our sales and profitability. In addition, an adverse change in the terms of our dealings with, or in the financial wherewithal or viability of, one or more of our significant customers could harm our business, financial condition and results of operations.

The products we sell are subject to significant price competition and the prices of our products may fluctuate for a variety of reasons. From time to time, we may need to reduce the prices for some of our products to respond to competitive and customer pressures and to maintain market share. These pressures are often exacerbated during an economic downturn. Additionally, we have, from time to time, experienced customer-driven price deductions on our products as a result of delayed shipments of products. Any reduction in prices to respond to these pressures would reduce our profit margins. In addition, if our sales volumes fail to grow sufficiently to offset any reduction in margins, our results of operations would suffer. Because of the competitive environment facing many of our customers, particularly our high-volume mass merchandiser customers, these customers have increasingly sought to obtain price reductions, deductions, specialized packaging or other concessions from product suppliers.us. These business demands may relate to inventory practices, logistics or other aspects of the customer-supplier relationship. To the extent we provide these concessions, our profit margins are reduced. Further, if we are unable to maintain terms that are acceptable to our customers, these customers could reduce purchases of our products and increase purchases of products from our competitors, which would harm our sales and profitability.

We are subject to volatility in the price and availability of natural gas, as well as other sources of energy. Such volatility could be intensified by geopolitical tensions, including war and terrorism, as well as other disruptions and market reactions to such events. In fiscal year 20242025 and 20232024 we purchased several forward fuel contracts to cover a portion of our fuel needs in Georgia and California and from time to time, we may use additional forward purchase contracts or financial instruments to moderate the volatility of a portion of our energy costs. The success or failure of any such transactions depends on a number of factors, including our ability to anticipate and manage volatility in energy prices, the general demand for fuel by the manufacturing sector, seasonality and theglobal weather patterns throughout the United States and the world.patterns.

Our business could be negatively affected by supply, capacity, labor, information technology, logistics and other disruptions or the costs incurred to avoid these disruptions.

Supply, capacity, information technologySupply and logistics disruptions (which may be caused by a variety of factors, including public health crises such as outbreaks of diseases or illnesses, weather conditions, governmental controls, tariffs, national emergencies, natural or man-made disasters, other force majeure events, abrupt political change or other political, civil or social unrest or instability, mass or other physical violence (or threats thereof), including terrorist activity and armed conflict, or other similar events) or our failure to mitigate such disruptions could adversely affect our ability to manufacture, package or transport our products or require additional resources to maintain or restore our supply chain. Some of our products require raw materials and/or packaging that are provided by a limited number of suppliers and/or service providers, are demanded by other industries or are simply not available at times. The loss of any of these suppliers and/or service providers, or problems or delays experienced by these suppliers and/or service providers as a result of labor shortages or other events could lead to shortages in our production capacity, which could impact our ability to meet customer demand. In addition, as we grow or experience increased customer demand, our existing suppliers and/or service providers may not be able to meet our increasing demand, and we may need to find additional suppliers and/or service providers. We may not be able to secure suppliers and/or service providers who provide materials at, or services to, the specification, quantity and quality levels that we demand (or at all) or be able to negotiate acceptable fees and terms of services with any such suppliers and/or service providers. Additionally, such disruptions have resulted in challenges in addressing our backlogs and further backlog could develop in the event of continued disruptions. Disruptions arising from the foregoing or other events could adversely impact our results. See “Increases in energy, commodity, transportation, labor and other costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges” for additional risks related to increased transportation costs and logistics disruptions.

Further, some of our products are manufactured on equipment at or near its capacity thus limiting our ability to sell additional volumes of such products until more capacity is obtained. As with all manufacturing facilities, equipment and infrastructure age and become subject to increasing maintenance and repair costs which may be significant. We have experienced increased costs and shortages in repair parts. Our ability to procure components to repair equipment essential for our manufacturing processes could be negatively impacted by various restrictions or disruptions in supply chains. SeeThe “Increasesdisruption in energy, commodity, transportation, labor and other costs would increaseof our operatingsupply costs,of andcomponents or services, or the extension of our lead times, could have a material adverse effect on our business, results of operations, or financial condition. In addition, if we may beare unable to passeffectively allforecast theseour increasescustomers’ ondemand, it could affect our ability to oursuccessfully customersmanage operating capacity limitations. These hazards, limitations, disruptions in the form of higher pricessupply and surcharges”capacity forconstraints additionalcould risksadversely relatedaffect tofinancial increased transportation costs and logistics disruptions.results.

We depend on our mining operationsoperations, and quality of the clay mined, for a majority of our supply of sorbent minerals.

We rely on intellectual property rights based on trademark, trade secret, patent and copyright laws to protect our brands, products and packaging for our products. WeAlthough we maintain an enforcement program for the protection of our intellectual property rights, we cannot be certain that these intellectual property rights will be maximized or that they can be successfully asserted. There is a risk that we will not be able to obtain and perfect our own intellectual property rights or, where appropriate, license intellectual property rights necessary to support new product introductions. We cannot be certain that these rights, if obtained, will not later be invalidated, circumvented or challenged, and we could incur significant costs in connection with legal actions to assert our intellectual property rights or to defend those rights from assertions of invalidity. In addition, even if such rights are obtained in the United States or in other countries, the laws of some of the other countries in which our products are or may be sold may not protect intellectual property rights to the same extent as the laws of the United States. If other parties infringe our intellectual property rights, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers associate with our brands and harm our sales. Accordingly, we have takenasserted that products sold by our competitors infringe patents owned or licensed by us and may need to continue to take legal action in the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that type could be costly and time consuming and no assurances can be made that any lawsuit will be successful. The failure to perfect or successfully assert our intellectual property rights could make us less competitive and could have a material adverse effect on our business, operating results, and financial condition. Trade secret protection requires specific agreements, policies and procedures to ensure the secrecy of information classified as a trade secret. If such agreements, policies and procedures are not effective to maintain the secrecy of our trade secrets, the loss of trade secret protection could have a material adverse effect on our business, financial condition or results of operations.

In addition, if our products are found to infringe intellectual property rights of others, the owners of those rights could bring legal actions against us claiming substantial damages for past infringement and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for damages from past infringement, we could be required to obtain a license in order to continue to manufacture or market the affected products, potentially adding significant costs. Similarly, we have asserted that products sold by our competitors infringe patents owned or licensed by us. We may not prevail in any action brought against us or we may be unsuccessful in securing any license for continued use and therefore have to discontinue the marketing and sale of a product. This could make us less competitive and could have a material adverse impact on our business, operating results and financial condition.

Risks Related to Legal and Regulatory Compliance

Government laws and regulation imposesimpose significant costs on us, and future legal or regulatory changes (or related customer responses to regulatorysuch changes) could increase those costs or limit our ability to produce and sell our products.

If we are found to be out of compliance with applicable laws and regulations in these or other areas, we could be subject to loss of customers and to civil remedies, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on our business. Loss of or failure to obtain necessary permits and registrations could delay or prevent us from meeting product demand, introducing new products, building new facilities or acquiring new businesses and could adversely affect operating results. Further, if applicable laws or regulations are changed or interpreted differently in the future, it may become more difficult or expensive for us to comply. In addition, investigations or evaluations of our products by government agencies may require us to adopt additional labeling, safety measures or other precautions, or may effectively limit or eliminate our ability to market and sell these products. Accordingly, there can be no assurance that we will be able to obtain or renew required governmental permits and registrations in the future. Further, there can be no assurance that current or future legislation, governmental regulation or other rule-making (including proposals regarding increased disclosure on climate-related matters) will not have a material adverse effect on our business. Our efforts to comply with new requirements and regulations could result in increased general and administrative expenses and a diversion of substantial management time and attention from revenue-generating activities to compliance activities.

Unstable economic, political, regulatory and other conditions could adversely affect demand for our products or disrupt our operations in the United States and in international markets. The international nature of our operations subjects the Company to numerous risks, including political, civil and/or instability (including acts of terrorism, civil or social unrest, labor unrest, violence in connection with political or social events, trade tensions and reciprocal tariffs, outbreaks of war and pandemics or other disease outbreaks). Specifically, our reliance on certain suppliers based in China has resulted in additional risks concerning the country's current trade relations with the U.S. Both international and domestic operations are also subject to regulatory requirements and issues, including with respect to environmental matters. Any of these matters could result in sudden, and potentially prolonged, changes in domestic and international demand for our products. Further, 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. For instance domestic sales may be impacted by changes in government issued incentives, such as tax rebates and credits, for renewable diesel producers. In addition to considerations around U.S. politics and government, geopolitical concerns may also impact our business; for instance, 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. These developments, as well as the risks outlined above, could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, our international sales and operations are subject to various economic-related risks. Our international sales and operations are, among other factors, subject to currency exchange fluctuations, fund transfer and trade restrictions and import/export duties. In some cases, we may have difficulty enforcing agreements and collecting accounts receivable through a foreign country’s legal system. Further, an increase in inflation rates could affect the Company’s profitability and cash flows, due to higher employment costs, higher operating costs, higher financing costs, and/or higher supplier prices. Inflation may also adversely affect foreign exchange rates. The Company may be unable to pass along such higher costs to its customers. In addition, inflation may adversely affect customers’ operations. Our financial results are negatively impacted when the foreign currencies in which our subsidiary offices operate weaken relative to the U.S. Dollar. We do not currently use instruments to hedge foreign currency risks, and thus are not protected against foreign currency fluctuations. Accordingly, our reported earnings may be affected by changes in foreign currency exchange rates. Moreover, any favorable impacts to profit margins or financial results from fluctuations in foreign currency exchange rates are likely to be unsustainable over time.

We may incur adverse safety events or product liability claims that may be costly, create adverse publicity and may addresult furtherin governmentalregulatory regulation.action.

If any of the products that we sell cause, or appear to cause, harm to any of our customers or to consumers, we could be exposed to product liability lawsuits, heightened regulatory scrutiny, requirements for additional labeling, withdrawal of products from the market, indemnification obligations, imposition of fines or criminal penalties or other governmental actions. AnyProduct ofliability theseclaims could result in negative publicity that could harm our sales and operating results. In addition, any such actions could result in material write-offs of inventory, material impairments of intangible assets, goodwill and fixed assets, material restructuring charges and other adverse impacts on our business operations. We cannot predict with certainty the eventual outcome of any pending or future litigation, and we could be required to pay substantial judgments or settlements against usus, recall our products or change our product formulations in response to governmental action. If successful claims are asserted by regulatory agencies or third parties against us for non-compliance or uninsured liabilities or liabilities more than applicable limits of insurance coverage, our business, financial condition and results of operations may be adversely affected. Further, lawsuits can be expensive to defend, whether or not they have merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in managing our business and our reputation could suffer, any of which could harm our business. Additionally, our products may be associated with competitor products or other products in the same category that may be alleged to have caused harm to consumers. As a result of this association, we may be named in unwarranted legal actions. The potential costs to defend such claims may materially affect our business, financial condition and results of operations.

We review goodwill,goodwill and other long-lived assets, including property, plant and equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. Factors which may cause an impairment of long-lived assets include lower share trading prices and the adverse impact of rising costs and additional expenses to mitigate supply chain disruptions, among other factors. We assess all existing goodwill at least annually for impairment on a reporting unit basis. The techniques used in our qualitative assessment and goodwill impairment tests incorporate a number of estimates and assumptionsassumptions, including macroeconomic conditions, overall category growth rates, sales growth rates, cost containment and margin expansion and expense levels for advertising and promotions and general overhead, that are subject to change. Although we believe these estimates and assumptions are reasonable and reflect market conditions forecasted at the assessment date, any changes to these assumptions and estimates due to market conditions or otherwise may lead to an outcome where impairment charges would be required in future periods.

Our interpretation of current tax laws and their applicability to our business, as well as any changes to existing laws, can significantly impact our effective tax rate. In particular, the U.S. as well as jurisdictions around the world are considering or have enacted changes in relevant tax regulations and interpretations. Changes in income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain revenues or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. In the U.S., various proposals, if enacted, could raise the U.S. corporate tax rate and increase the tax on non-U.S. income. Such unfavorable tax legislation could create the potential for added volatility in our quarterly provision for income taxes and could have a significant adverse impact on our future income tax provision and tax rate. Further, a number of factors may cause our effective tax rate to fluctuate, including: changes in tax rates in various jurisdictions, unanticipated changes in the amount of profit in jurisdictions in which the statutory tax rates may be higher or lower than the U.S. tax rate, changes in the valuation of our deferred tax assets and liabilities, adjustments to income taxes upon finalization of various tax returns, increases in expenses not deductible for tax purposes, and changes in available tax credits or our ability to utilize foreign tax credits. TheFurthermore, U.S.new presidentialaccounting electionpronouncements inor Novembernew 2024 adds further uncertainty regarding the potential effectsinterpretations of U.S.existing corporateaccounting taxpronouncements, ratesand/or any internal restructuring initiatives we may beimplement subjectfrom time to intime theto future.streamline our operations, can have a material impact on our effective income tax rate. We could experience an effective tax rate significantly different from that of prior periods or current expectations, which could have an adverse effect on our results of operations or cash flows.

We are also subject to potential reviews, examinations, and audits by the Internal Revenue Service (the "IRS") and other taxing authorities with respect to taxes within and outside of the U.S. Although we believe our tax estimates are reasonable, unfavorable resolution of any tax audits and controversies could cause our tax liabilities to increase (including interest and penalties) and may have a significant adverse impact on our provision for income taxes and tax rate. Our effective tax rate is also influenced by the geography, timing, nature, and magnitude of transactions, such as acquisitions and divestitures, restructuring activities, and impairment charges.

Our Board of Directors has previously authorized a share repurchase program.programs for our Common Stock and our Class B Stock. Under these authorizations, the Company has authority to repurchase bothup to 750,000 shares of our Common Stock and up to 300,000 shares of our Class B Stock. 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. The Company has no obligations to repurchase any specific dollar amount or to acquire any specific number of shares. The timing, number and manner of share repurchases is determined by management and may depend upon a number of factors, including the trading price, market conditions, and the Company’s liquidity needs and management of its spending. Further, the Company’s share repurchases may be limited, suspended or discontinued at any time without prior notice (subject to the terms and conditions of the repurchase plan(s) in place at such time). The existence of athese share repurchase programauthorizations could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock or otherwise affect stock price and/or volatility. Additionally, our share repurchase programauthorizations could diminish our cash reserves, which may impact our ability to otherwise deploy such cash. There can be no assurance that these share repurchases will enhance shareholder value.

Under our Certificate of Incorporation, the holders of our Common Stock are entitled to one vote per share and the holders of our Class B Stock are entitled to ten votes per share; the two classes generally vote together without regard to class (except that any amendment to our Certificate of Incorporation changing the number of authorized shares or adversely affecting the rights of Common Stock or Class B Stock requires the separate approval of the class so affected as well as the approval of both classes voting together). As a result, the holders of our Class B Stock exert control over the Company and thus limit the ability of other stockholders to influence corporate matters. Beneficial ownership of Common Stock and Class B Stock by the Jaffee Investment Partnership, L.P. and its affiliates (including Daniel S. Jaffee, our President, Chief Executive OfficerCEO and Chairman of the Board of Directors) provides them with the ability to control the election of our Board of Directors and the outcome of most matters requiring the approval of our stockholders, including the amendment of certain provisions of our Certificate of Incorporation and By-Laws, the approval of any equity-based employee compensation plans and the approval of fundamental corporate transactions, including mergers and substantial asset sales. Through their concentration of voting power, our principal stockholders may be able to delay, deter or prevent a change in control of our company or other business combinations that might otherwise be beneficial to our other stockholders. It is possible that the interests of our principal stockholders may in some circumstances conflict with our interests and the interests of our other stockholders. For example, the principal stockholders may have different tax positions or other differing incentives from other stockholders that could influence their decisions regarding whether and when to cause us to dispose of assets, incur new or refinance existing indebtedness, issue additional stock, or take other actions. Additionally, the holders of our Class B Stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to holders of our Common Stock or may not be in the best interests of holders of our Common Stock.

Dividends are declared at the discretion of our Board of Directors,Board, and future dividends will depend on our future earnings, cash flow, financial requirements and other factors, including market and economic conditions. We are not obligated to continue a dividend for any fixed period, and the payment of dividends could be suspended or discontinued at any time at our discretion and without prior notice. There can be no assurance that we will continue to pay dividends. The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will pay dividends in the future.

We rely on information technology systems to process, transmit, store, and protect electronic information. For example, a significant portion of the communications between the Company's personnel, customers, suppliers and vendors depends on information technology and we rely on access to such information systems for our operations. Additionally, we rely on third-party service vendors to execute certain business processes and maintain certain information technology systems and infrastructure. We cannot guarantee that the security measures in place will prevent disruptions, failures, computer viruses or other malicious codes, malware or ransomware incidents, unauthorized access attempts, theft of intellectual property, trade secrets, or other corporate assets, denial of service attacks, phishing, hacking by common hackers, criminal groups or nation-state organizations or social activist (“hacktivist”) organizations, and other cyber-attacks or other privacy or security breaches in the information technology, phone systems or other systems (whether due to third-party action, bugs or vulnerabilities, physical break-ins, employee error, malfeasance or otherwise) of the Company, our customers or third parties, which could adversely affect our communications and business operations. Further, events such as natural disasters, fires, power outages, systems failures, telecommunications failures, error or malfeasance of our employees, vendors, or other third parties, or other catastrophic events could similarly cause interruptions, disruptions or shutdowns, or exacerbate the risk of the failures described above. TheseIncreased risksuse mayof beremote increasedworking asarrangements morehas employeesfurther workexacerbated fromthese home.risks. We may not have the resources or technical sophistication to anticipate, prevent or detect rapidly-evolving types of cyber-attacks and other security risks. Attacks may be targeted at us, our customers, suppliers or vendors, or others who have entrusted us with information. Our co-packaged litter sales were impacted by a cyberattack on our customer which prevented it from placing and receiving orders during the first quarter of fiscal year 2024. To date, the Company has not experienced any material impacts to our business or operations resulting from that cyberattack or any other information or cybersecurity attacks. Because of the frequently changing attack techniques, including through the use of artificial intelligence, along with the increased volume, persistence and sophistication of the attacks, there is the potential for the Company to be adversely impacted. Because such techniques change frequently or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement sufficient control measures to defend against these techniques. Once a security incident is identified, we may be unable to remediate or otherwise respond to such an incident in a timely manner. While the Company has implemented a cybersecurity framework of policies, procedures, and tools, and has documented plans for incident response, disaster recovery, and business continuity to prevent or mitigate the effects of these potential disruptions or breaches, security breaches and other disruptions to information technology systems could interfere with our operations. Any failure to maintain, or disruption to, our information technology systems, whether as a result of cybersecurity attacks or otherwise, could damage our brands or reputation, subject the Company to legal claims and proceedings or remedial actions, create risks of violations of data privacy laws and regulations, and cause us to incur substantial additional costs. There can be no assurance that existing or emerging threats will not have an adverse impact on our systems or communications networks and, further, technological enhancements to prevent business interruptions could require increased spending. Furthermore, security breaches pose a risk to confidential data and intellectual property, which could result in damage to our competitiveness, brands and reputation. There can be no assurance that the costs, potential monetary damages, and operational consequences of responding to cyber incidents and implementing remediation measures would be covered by any insurance that we may carry from time to time. We cannot predict the degree of any impact that increased monitoring, assessing, or reporting of cybersecurity matters would have on operations, financial conditions and results.

Section 404 of the Sarbanes-Oxley Act and related SEC rules require that we perform an annual management assessment of the design and effectiveness of our internal control over financial reporting and obtain an opinion from our independent registered public accounting firm on our internal control over financial reporting. Our assessment concluded that our internal control over financial reporting was effective as of July 31, 20242025 and we obtained from our independent registered public accounting firm an unqualified opinion on our internal control over financial reporting; however, there can be no assurance that we will be able to maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time in future periods. Accordingly, we cannot assureprovide assurance that we will be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes- OxleySarbanes-Oxley Act. Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could be negatively impacted.

In light of evolving expectations around corporate social responsibility, our reputation or brand could be adversely impacted by a failure (or perceived failure) to maintain a level of corporate responsibility. In today’s environment, an allegation or perception regarding quality, safety, or corporate social responsibility can negatively impact our reputation. This may include, without limitation: failure to maintain certain ethical, social and environmental practices for our operations and activities, or failure to require our suppliers or other third parties to do so; our environmental impact, including our mining operations and their impact on the environment; the practices of our employees, agents, customers, suppliers, or other third parties (including others in our industry) with respect to any of the foregoing, actual or perceived; the failure to be perceived as appropriately addressing matters of social responsibility; consumer perception of statements made by us, our employees and executives, agents, customers, suppliers, or other third parties (including others in our industry); or our responses to any of the foregoing. Further, we may be subject to rulemaking regarding corporate social responsibility and/or disclosure, as public awareness and focus on social and environmental issues hashave ledhistorically toresulted in legislative and regulatory efforts to impose increased regulations and require further disclosure.disclosure and may do so in the future. As a result, we may become subject to new or more stringent regulations, legislation or other governmental requirements, customer requirements or industry standards and/or an increased demand to meet voluntary criteria related to such matters. Increased regulations, customer requirements or industry standards including around climate change concerns,standards, could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices and/or product designs, which could negatively impact our business, results of operations, financial condition and competitive position.

A portion of our teammates in the U.S. and Canada are represented by labor unions, with whom we have entered into separate collective bargaining agreements. See “Item 1 – Business – Human Capital Management – Overview” above. We may experience labor disputes in the future, including protests and strikes, which could disrupt our business operations, increase wage rates and other costs of labor and have an adverse effect on our business and results of operation. We may also be unable to renegotiate collective bargaining agreements at acceptable termsterms, or we may be unable to maintain a satisfactory working relationship with our employees in the future. We may also be adversely affected by strikes and other labor disputes by the employees of our suppliers, customers, and other parties.

Our Consolidated Balance Sheets as of July 31, 2024,2025, and our Consolidated Statements of Cash Flows for the fiscal year 20242025 show an decreaseincrease in total cash and cash equivalents from fiscal year-end 2023.2024. The decreaseincrease is mainly due to cash usedflows infrom theoperating acquisition of Ultra Pet, net of cash proceeds for financing the acquisition, and capital expenditures, off-set by improved net income.activities. Refer to the "Liquidity and Capital Resources" section below.below for additional information about our cash and cash equivalents.

Our principal shortliquidity andneeds long-termare to fund our capital requirementsrequirements, include:including funding working capital needs; purchasing and upgrading equipment, facilities, information systems, and real estate; supporting new product development; spending on marketing and advertising costs; investing in infrastructure; repurchasing stock; paying dividends; and, from time to time, business acquisitions.acquisitions and funding our debt service requirements. During fiscal year 2024,2025, we principally funded these short and long-term capital requirements using cash from current operations as well as cash generated from previous borrowings under our Credit Agreement and additionalthe debtSeries B, C and D Senior Notes issued under the Note Agreement. On September 30, 2024, we amended the Credit Agreement to, among other things, increase our line of credit from $45 million to fund$75 amillion, portionproviding more financial flexibility. See Note 4 of the acquisitionNotes ofto Ultrathe Pet.Consolidated Financial Statements in this Annual Report on Form 10-K for further information relating to our existing borrowings.

Cash and cash equivalents, including restricted cash, totaled $50.5 million and $24.5 million as of July 31, 2025, and 2024, respectively. The following table sets forth certain elements of our Consolidated Statements of Cash Flows for the fiscal year (in thousands):

Excluding the impact of accounts receivable acquired through the purchase of Ultra Pet, accountsAccounts receivables, less allowance for credit losses and cash discounts, were $1.5$7.8 million lowerhigher at fiscal year-end 20242025 compared to fiscal year-end 2023.2024. The variation in accounts receivable balances reflects differences in the level and timing of collections as well as the payment terms provided to various customers.

Excluding the impact of inventory acquired through the purchase of Ultra Pet, inventoriesInventories were $4.7$2.3 million higherlower at fiscal year-end 20242025 compared to fiscal year-end 2023.2024. The increasedecrease is primarily due to rising coststiming and buildingscheduled inventoryplant levelsoutages tofor meetmaintenance expectedin futurethe demand.fourth Duringquarter of fiscal year 2024 we have continued to manage inventory balances primarily focusing on building finished goods inventory offset by decreases in packaging and other through strategic supply chain management.2025. See Note 1 of the Notes to the Consolidated Financial Statements for further information regarding our inventory.

Excluding the impact of accountspayments payablerelated acquiredto throughcapital the purchase of Ultra Pet,expenditures, accounts payable were $2.8$0.9 million lowerhigher at fiscal year-end 20242025 compared to fiscal year-end 2023.2024. The decreaseincrease is due to higher trade payables mainly due to timing. Changes in trade accounts payable in all periods are subject to normal fluctuations in the timing of payments, the cost of goods and services we purchased, production volume levels and vendor payment terms. In fiscal year 2025, there was a $0.9 million increase in accounts payable related to capital expenditures which reduced the cash used in investing activities as compared to fiscal year 2024.

Cash used in investing activities was $76.1$32.5 million in fiscal year 2024.2025. Cash used in investing activities primarily related to the acquisition of Ultra Pet and capital expenditures to expand our plant equipment and improve our facilities in order to support increased demand for our products.

Net cash provided by (used in) financing activities

Total cash and investment balances held by our foreign subsidiaries were $4.7 million as of July 31, 20242025, and 2023 were $4.5 andmillion $5.2as million,of respectively.July 31, 2024. See further discussion in the “Foreign OperationsSubsidiaries” section above.

As of July 31, 2024,2025, we had remaining authority to repurchase 379,925360,946 shares of Common Stock and 262,092244,113 shares of Class B Stock under a repurchase plan approved by our Board of Directors.Board. Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing and number of shares repurchased will be determined by our management pursuant to the repurchase plan approved by our Board of Directors.Board. In fiscal years 20242025 and 2023,2024, we made repurchases of stock as further discussed in Item 5 "Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities."

Management’s discussion and analysis of the financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with the generally accepted accounting principles of the United States (“U.S. GAAP”). We review our financial reporting and disclosure practices and accounting policies annually to ensure that our financial reporting and disclosures provide accurate and transparent information relative to the current economic and business environment. We believe that, of our significant accounting policies stated inSee Note 1 of the Notes to the Consolidated Financial Statements,Statements the policies listed below involvefor a higher degreediscussion of judgmentour and/or complexity. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates include income taxes, promotional programs, pensionsignificant accounting and allowance for credit losses. Actual results could differ from these estimates.policies.

Over a period of several days in January 2026, the southern and eastern United States was impacted by a significant weather event known as "Winter Storm Fern" that resulted in snow, freezing rain, and ice causing widespread damage and power outages (“Weather Event”). During this time, due to safety concerns and interruptions that we experienced to power, natural gas, and water, we temporarily shut down operations of our facilities in the effectedaffected regions, which resulted in reduced production. Our supply chain was also impacted, causing significant delays in delivery of materials and services necessary to resume production. These shutdowns and delays resulted in decreased fixed cost absorption and an increase of backlog,backlog whichin wethe second quarter of fiscal year 2026. All operations have since resumed normal activity and the backlog has decreased by $2.2 million at the end of the third quarter when compared to the prior quarter. We define backlog as purchase orders that we have received from customers and that we have accepted, but that have not shipped by the customers’ requested ship dates.

SIXNINE MONTHS ENDED JANUARYAPRIL 31,30, 2026 COMPARED TO

SIXNINE MONTHS ENDED JANUARYAPRIL 31,30, 2025

Consolidated net sales for the sixnine months ended JanuaryApril 31,30, 2026 were $238.2$364.6 million, representing a 3%1% decreaseincrease compared to net sales of $244.9$360.4 million for the sixnine months ended JanuaryApril 31,30, 2025. The decreaseincrease was driven primarily by softerhigher volumes acrossof bothcat our Business to Businesslitter and Retailagricultural and Wholesalehorticultural product groupsproducts, when compared to the same period in fiscal year 2025. Further details of the drivers are discussed below in the segment analysis.

Consolidated gross profit in the sixnine months ended JanuaryApril 31,30, 2026 was $67.8$101.5 million, a decrease of $7.4$6.7 million, or 10%,6%, from gross profit of $75.2$108.3 million in the sixnine months ended JanuaryApril 31,30, 2025. Gross margin (defined as gross profit as a percentage of net sales) in the sixnine months ended JanuaryApril 31,30, 2026 decreased to 28.5%27.8% from 30.7%30.0% in the sixnine months ended JanuaryApril 31,30, 2025. This reduction in gross margin was mainly2025, driven primarily by softer volume and higher costs,per whichton led to unfavorable fixed cost absorption. This was in part driven by the Weather Event which impacted our plants' production and ability to fulfill orders.costs. For the sixnine months ended JanuaryApril 31,30, 2026, the overall domestic per ton cost of goods sold increased 3%4% compared to the same period of fiscal year 2025. The increase was primarily driven by higher per ton manufacturing costs, including materials,costs which increased 8% when compared to sixnine months ended JanuaryApril 31,30, 2025. Labor was the largest contributor to this increase, along with higher costs for repairs, depreciation, purchased materials, and natural gas. These increases were slightly offset by a 5%3% decrease in per ton transportation costs, and 3%1% decrease in per ton packaging costs for the sixnine months ended JanuaryApril 31,30, 2026, when compared to the sixnine months ended JanuaryApril 31,30, 2025.

Total SG&A expenses of $35.2$51.8 million for the sixnine months ended JanuaryApril 31,30, 2026 were $1.4$3.9 million, or 4%,7%, lower compared to $36.6$55.7 million for the sixnine months ended JanuaryApril 31,30, 2025. The decrease was driven by a $1.5$3.5 million reduction in corporate unallocated expenses, primarily as a result of a lower incentive bonus accrual and lower corporate human resource costs and a lower incentive bonus accrual.costs. The additional $0.4 million decrease was partially offset byin SG&A expenses at the operating segments level,level which increased by $0.1 million, asis discussed below.

Total other income, net was $0.8$1.7 million for the sixnine months ended JanuaryApril 31,30, 2026, roughly a $3.0$3.5 million gain compared to total other expenses, net of $2.2$1.9 million in the same period of fiscal year 2025. $0.8This million of this changegain was driven by thea number of items including, $0.9 million due to a reduction in the estimated landfill modification costs recognized in fiscal year 2026 compared to an increase in the estimated cost recognized during the firstnine halfmonths ofended fiscalApril year30, 2025 and $0.8 million wasdue driven byto foreign exchange gains. The gain was also in part driven by the positive outcome of a confidential legal settlement in the matter of Oil-Dri Corporation of America vs. Entera Animal Health, et al., as well as $0.5 million due to higher interest income and $0.2 million due to lower interest expense.al.

Our unaudited Condensed Consolidated Balance Sheet as of JanuaryApril 31,30, 2026 and our unaudited Condensed Consolidated Statement of Cash Flows for the sixnine months ended JanuaryApril 31,30, 2026 show a $3.5$12.5 million decreaseincrease in total cash and cash equivalents from fiscal year-end 2025. The decreaseincrease was driven primarily by financing and investing activities, partially offset by positive cash flow from operations.operations, partially offset by investing and financing activities. Refer to the "Liquidity and Capital Resources" section below for more details.

Net sales of the Business to Business Products Group for the sixnine months ended JanuaryApril 31,30, 2026 decreased $5.6$4.4 million, or 6%,3%, compared to the sixnine months ended JanuaryApril 31,30, 2025, driven primarily by a reduction in sales of our fluidfluids purification and animal health products, partially offset by an increase in sales of our agricultural and horticultural products. Net sales of our fluids purification products for the sixnine months ended JanuaryApril 31,30, 2026 decreased $5.0$5.2 million, or 9%,6%, compared to the sixnine months ended JanuaryApril 31,30, 2025. This decrease was due to lower volumes, primarily of our products used in renewable diesel filtration, which were significantly higher in fiscal year 2025 when several new customers began operations in new plants. Net sales of our animal health & nutrition products for the sixnine months ended JanuaryApril 31,30, 2026 decreased $4.0$3.4 million, or 29%,17%, compared to the sixnine months ended JanuaryApril 31,30, 2025, due to lower volume primarily driven by thea temporary loss of a key customer at one of our distributors. Net sales of our agricultural and horticultural chemical carrier products for the sixnine months ended JanuaryApril 31,30, 2026 increased $3.4$4.2 million, or 16%,13%, compared to the sixnine months ended JanuaryApril 31,30, 2025, due to a combination of favorable mix, higher volumemix and higher prices.volume.

Gross profit decreased 14%11% in the sixnine months ended JanuaryApril 31,30, 2026 compared to the sixnine months ended JanuaryApril 31,30, 2025. This decrease was mainly due to lower sales resulting in unfavorable fixed cost absorption and higher per ton manufacturing costs. ThisFor the nine months ended April 30, 2026, the overall Business to Business domestic per ton cost of goods sold increased 5% compared to the same period of fiscal year 2025. The increase was in partprimarily driven by thehigher Weatherper Eventton manufacturing costs, including materials, which impactedincreased our9% plants'when production and abilitycompared to fulfillnine orders.months ended April 30, 2025. Per ton manufacturingtransportation and packaging costs increased 9% and 2%, respectively, while transportation costs remained flat.flat for the nine months ended April 30, 2026, when compared to the nine months ended April 30, 2025. SG&A expenses increased by $0.3$0.4 million, or 4%,3%, for the sixnine months ended JanuaryApril 31,30, 2026 compared to the sixnine months ended JanuaryApril 31,30, 2025. This increase is2025, primarily driven by higher compensation costs.

Net sales of the Retail and Wholesale Products Group for the sixnine months ended JanuaryApril 31,30, 2026 decreasedincreased $1.1$8.6 million, or 1%,4%, compared to the sixnine months ended JanuaryApril 31,30, 2025, mainly due to aan decreaseincrease in cat litter sales. Domestic cat litter net sales, excluding co-packaged cat litter, were $112.3 million for the six months ended January 31, 2026, a decrease of $3.3 million, or 3%, when compared to the six months ended January 31, 2025. $2.1 million of the decrease was due to a private label account that was lost in the second quarter of fiscal year 2025, and $1.5 million decrease was tied to high demand in fiscal year 2025 due to a large promotion at a key account. These losses were partially offset by revenue gains with other customers. Net sales of co-packaged cat litter products increased 20%43% in the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025. This increase was driven primarily by higher volumes as we expanded our co-packaged offerings to include lightweight cat litter. Domestic cat litter net sales, excluding co-packaged cat litter, were $170.2 million for the nine months ended April 30, 2026, an increase of $1.9 million, or 1%, when compared to the nine months ended April 30, 2025, mainly driven by higher volumes of crystal cat litter products. Net sales of our domestic industrial and sports products were $21.2$33.8 million for the sixnine months ended JanuaryApril 31,30, 2026, an increase of $0.3$0.6 million, or 1%,2%, when compared to the sixnine months ended JanuaryApril 31,30, 2025, mainly driven by higher prices to offset elevated costs including higher transportation costs. Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, increased $0.1$0.2 millionmillion, or 2%, for the sixnine months ended JanuaryApril 31,30, 20262026, when compared to the sixnine months ended JanuaryApril 31,30, 2025. Due to the Weather Event, several of our plants were shut down and unable to ship products or allow for customers to pick up orders. This drove our backlog of Retail and Wholesale products to increase by $2.8 million at the end of the second quarter when compared to the prior quarter.

Gross profit decreased 5%1% in the sixnine months ended JanuaryApril 31,30, 20262026, compared to the sixnine months ended JanuaryApril 31,30, 2025. This decrease was mainly due to lower sales resulting in unfavorable fixed cost absorption, and higher per ton manufacturing costs. ThisFor the nine months ended April 30, 2026, the overall Retail and Wholesale domestic per ton cost of goods sold increased 4% compared to the same period of fiscal year 2025. The increase was in partprimarily driven by thehigher Weather Event which impacted our plants' production and ability to fulfill orders. Perper ton manufacturing costs, including purchasedmaterials, materials,which increased 8%,8% thiswhen compared to nine months ended April 30, 2025. This increase was partially offset by a 10%5% reduction in per ton transportation and 4%2% reduction in per ton packaging costs. Certain key customers shifting terms from delivery to pick-up was the primary driver of the reduction of transportation costs. SG&A expenses decreased $0.2$0.7 million, or 2%,4%, during the sixnine months ended JanuaryApril 31,30, 2026, compared to the sixnine months ended JanuaryApril 31,30, 2025, primarily due to lesstiming badof debtadvertising expense related to customer bankruptcies.spend.

Foreign operations include our subsidiaries in Canada and the Netherlands, which are reported in the Retail and Wholesale Products Group, and our subsidiaries in the United Kingdom ("UK"), Mexico, China and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries for the sixnine months ended JanuaryApril 31,30, 2026 were $9.9$14.6 million, a decrease of $0.2$0.3 million compared to net sales of $10.1$14.9 million in the same period ended JanuaryApril 31,30, 2025, driven primarily by net salesa decrease in sales volume in Mexico. Net sales by our foreign subsidiaries represented 4% of our consolidated net sales for both the sixnine months ended JanuaryApril 31,30, 2026, and JanuaryApril 31,30, 2025.

Our foreign subsidiaries reported net income of $0.2$0.3 million for the sixnine months ended JanuaryApril 31,30, 2026, compared to net loss of $0.3$0.1 million in the sixnine months ended JanuaryApril 31,30, 2025. The increase in net income was primarily driven by the preliminary foreign VAT assessment recognized in fiscal year 2025.

Identifiable assets of our foreign subsidiaries as of JanuaryApril 31,30, 2026 were $9.2$10.3 million, compared to $9.0 million as of July 31, 2025.

THREE MONTHS ENDED JANUARYAPRIL 31,30, 2026 COMPARED TO

THREE MONTHS ENDED JANUARYAPRIL 31,30, 2025

Consolidated net sales for the secondthird quarter of fiscal year 2026 were $117.7$126.3 million, a 1%9% increase compared to net sales of $116.9$115.5 million for the secondthird quarter of fiscal year 2025 primarily driven by favorable product mix. This increase was2025, primarily driven by higher salesvolume of our agriculture and horticultural products within our Business to Business products group and higher sales of our cat litter products within theour Retail and Wholesale productsoperating group.segment.

Consolidated gross profit for the secondthird quarter of fiscal year 2026 was $32.3$33.7 million, aan decreaseincrease of 6%2% when compared to $34.4$33.0 million for the secondthird quarter of fiscal year 2025.2025, mainly due to higher net sales. Our gross margin (defined as gross profit as a percentage of net sales) decreased to 27.4%26.7% from 29.5%28.6% in the secondthird quarter of fiscal year 2026 compared to the secondthird quarter of fiscal year 2025. This decrease was mainly driven by higher per ton costs of goods sold. Domestic per ton cost of goods sold increased 4%,6%, due to ana 8%9% increase in per ton manufacturing costs,costs includingwhen materials,compared whichto wasthe drivensame primarilyperiod byin productfiscal mixyear and2025. certainThe higherlargest expensesdriver suchof as labor and depreciation. Thisthis increase was partiallypurchased offsetmaterials, byalong with higher repair, natural gas and labor costs. There was also a 5%3% reductionincrease in per ton packaging, and 1% higher transportation costs. These increases were also partially driven by additional costs andincurred 2%during reductionrecovery infrom packagingthe costs.Weather Event.

Total SG&A expenses of $16.6 million for the secondthird quarter of fiscal year 2026 decreased by $0.4$2.5 million, or 2%,13%, compared to $17.0$19.1 million for the same period of fiscal year 2025,2025. This decrease was primarily due to the decrease in corporate unallocated expenses, partially offset by an increase in operating segments' SG&A expenses. Unallocated corporate expenses werewhich $6.9decreased million, a decrease of $1.3$2.0 million, or 16%,22%, compared to the same period in fiscal year 2025, primarily as a result of a lower corporate bonus accrual. SG&A expenses at the operating segments level also decreased and are discussed below in the discussion of our segments' operating income.

Tax expense was $3.2$3.4 million for the secondthird quarter of fiscal year 2026 compared to $3.3$2.6 million for the secondthird quarter of fiscal year 2025.2025, mainly due to higher pre-tax income. We used an effective tax rate of 21%19% in both the secondthird quarter of fiscal year 20262026, andcompared to an 18% effective tax rate in the third quarter of fiscal year 2025. We adjust our effective tax rate quarterly based on expected annual taxable income and our assessment of various tax adjustments, including depletion and discrete items.

Net sales of the Business to Business Products Group decreasedincreased $1.4$1.2 million, or 3%, in the secondthird quarter of fiscal year 2026, compared to the same period in 2025, driven primarily by agricultural and horticultural and animal health sales, offset partially by a reductionslight decrease in fluids purification sales. Net sales of our animal health and fluids purification products, partially offset by an increase in net sales of our agricultureagricultural and horticultural products.products in the third quarter of fiscal year 2026 increased $0.8 million, or 7%, compared to the third quarter of fiscal year 2025, due to higher volume from increased demand by new and existing customers. Net sales of our animal health and nutrition products in the secondthird quarter of fiscal year 2026 decreasedincreased $2.5$0.6 million, or 32%,10%, compared to the secondthird quarter of fiscal year 2025, driven by higher volumes due to lowerincreased volumedemand, primarilyincluding drivennew byend-users theand losspartial recovery of sales from a keypreviously lost customer at one of our distributors. Net sales of our fluids purification products in the secondthird quarter of fiscal year 2026 decreased $1.0$0.2 million, or 4%,1%, compared to the secondthird quarter of fiscal year 2025. This decrease was due to lower volumes, primarily of our products used in renewable diesel filtration. Net sales of our agricultural and horticultural chemical carrier products in the second quarter of fiscal year 2026 increased $2.1 million, or 23%, compared to the second quarter of fiscal year 2025, due to a combination of favorable mix, higher prices and increased demand.

Gross profit for the Business to Business Products Group decreased 10%2% in the secondthird quarter of fiscal year 2026, compared to the same period in 2025. This decrease was2025, mainly due to a combination of lower sales resulting in unfavorable fixed cost absorption and higher per ton costs. This was in part driven by thehigher Weathermanufacturing Event which impacted our plants' production and ability to fulfill orders.costs. Domestic per ton manufacturing andcosts packagingfor costsBusiness to Business products increased 5%8%. andThis 11%, respectively,was partially offset by a 2% reduction inlower per ton transportationpackaging costs.cost, Thewhich increasedecreased 4%. Per ton freight cost in packagingthe wasthird primarilyquarter dueremained flat compared to mixthe andsame sellingperiod morein packagedfiscal agricultural and horticultural products.2025. Total SG&A expenses for the Business to Business Products Group in the secondthird quarter of fiscal year 2026 increasedremained $0.7 million, or 21%,flat compared to the same period of fiscal year 2025. This increase is primarily driven by higher compensation and consultant costs.

Net sales of the Retail and Wholesale Products Group increased $2.3$9.7 million, or 3%,13%, in the secondthird quarter of fiscal year 2026, compared to the same period in 2025, primarily due to cat litter sales. Domestic cat litter net sales, excluding sales of co-packaged cat litter, were $57.9 million for the third quarter of fiscal year 2026, an increase of $5.2 million when compared to the third quarter of fiscal year 2025. This was primarily driven by higher volume, including sales shifted into the third quarter due to delays caused by the Weather Event. Net sales of co-packaged cat litter products increased 31%94% compared to the secondthird quarter of fiscal year 2025, due to higher volumes as we expanded our co-packaged offerings to include lightweight cat litter. Domestic cat litter net sales, excluding sales of co-packaged cat litter, were $56.0 million for the second quarter of fiscal year 2026, an increase of $0.3 million, when compared to the second quarter of fiscal year 2025. This was primarily driven by higher sales of our crystal cat litter. Net sales of our domestic industrial and sports products in the secondthird quarter of fiscal year 2026 were $10.2$12.7 million, an increase of $0.4$0.3 million, or 4%,3%, when compared to the secondthird quarter of fiscal year 2025, mainly driven by the higher pricing to offset elevated costs including higher transportation costs. Net sales by our subsidiary in Canada, which include both our cat litter and industrial products, in the secondthird quarter of fiscal year 2026, increased $0.1 million, or 4%,2%, compared to the same period in 2025. Due to the Weather Event, several of our plants were shut down and unable to ship products or allow for customers to pick up orders. This drove our backlog of Retail and Wholesale products to increase by $2.8 million at the end of the second quarter when compared to the prior quarter.

Gross profit decreasedincreased 2%7% in the secondthird quarter of fiscal year 2026, compared to the same period in 2025. This decreaseincrease was mainly due to a combination of unfavorable fixed cost absorption which was in part driven by the Weather Event that impacted our plants' production and ability to fulfill orders, and higher per ton manufacturing costs, including materials. Domestic per ton manufacturing costs increased 9%,is primarily due to higher pernet tonsales labor and depreciation costs. This was partiallywhich offset bythe aimpact 7%of reduction inhigher per ton cost of goods sold. Domestic per-ton manufacturing costs, including materials, increased by 9%. Per ton transportation and packaging costs increased 4% and a2%, 3% reduction in per ton packaging costs. Certain key customers shifting terms from delivery to pick-up was the primary driver of the reduction of transportation costs.respectively. SG&A expenses for the Retail and Wholesale Products Group increaseddecreased by $0.2$0.5 million, or 4%,9%, during the secondthird quarter of fiscal year 2026, compared to the same period in fiscal year 2025.2025, primarily due to timing of advertising spend.

Foreign operations include our subsidiaries in Canada and the Netherlands, which are reported in the Retail and Wholesale Products Group, and our subsidiaries in the UK, Mexico, China and Indonesia, which are reported in the Business to Business Products Group. Net sales by our foreign subsidiaries during the secondthird quarter of fiscal year 2026 were $4.8$4.7 million, a decrease of $0.1 million compared to net sales of $4.9$4.8 million during the same period of fiscal year 2025. This decrease was driven primarily by a $0.2 million decrease in net sales in Mexico, partially offset by a $0.1 million increase in net sales in Canada. Net sales by our foreign subsidiaries represented 4% of our consolidated net sales during the secondthird quarter of both fiscal years 2026 and 2025.

Our foreign subsidiaries reported annet increaseincome of $0.1 million for the secondthird quarter of fiscal year 2026 as compared to a net loss of $0.1$0.2 million in the secondthird quarter of fiscal year 2025.

Our principal liquidity needs are to fund our capital requirements, including funding working capital needs; purchasing and upgrading equipment, facilities, information systems, and real estate; supporting new product development; investing in infrastructure; repurchasing stock; paying dividends; and, from time to time, business acquisitions, and funding our debt service requirements. During the sixnine months ended JanuaryApril 31,30, 2026, we principally funded these short and long-term capital requirements using cash from current operations as well as cash generated from previous borrowings under our Credit Agreement and Series B, C and D Senior Notes issued under the Note Agreement. See Note 8 of the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information relating to our existing borrowings.

Cash and cash equivalents totaled $46.9$62.9 million and $22.6$36.5 million as of JanuaryApril 31,30, 2026, and 2025, respectively. The following table sets forth certain elements of our unaudited Condensed Consolidated Statements of Cash Flows (in thousands):

In addition to net income, as adjusted for depreciation and amortization and other non-cash operating activities, the primary sources and uses of operating cash flows for the sixnine months ended JanuaryApril 31,30, 2026, were as follows:

Accounts receivable, net of allowances increased by $0.6$6.2 million in the sixnine months ended JanuaryApril 31,30, 2026, as compared to the six months ended January 31, 2025.2026. The increase in accounts receivable was driven primarily by net sales and timing of collections.

Inventory increased by $2.1$0.8 million in the sixnine months ended JanuaryApril 31,30, 2026, as compared to the six months ended January 31, 2025, mainly due to the building of finished goods inventory and purchases of other additives to meet anticipated demand.

Excluding the impact of payments related to capital expenditures, accounts payable decreased by $2.9$0.6 million in the sixnine months ended JanuaryApril 31,30, 2026, as compared to the six months ended January 31, 2025.2026. The decrease was mainly due to the timing of payments, cost of goods and services we purchase, production volume levels and vendor payment terms. In the sixnine months ended JanuaryApril 31,30, 2026, there was a $3.7$2.3 million decrease in accounts payable related to capital expenditures recognized as cash used in investing activities as compared to the sixnine months ended JanuaryApril 31,30, 2025.

Excluding the impact of payments made related to capital expenditures, accrued expenses decreased $10.6$5.5 million in the sixnine months ended JanuaryApril 31,30, 2026, as compared to the six months ended January 31, 2025.2026. The decrease was mainly due to the payout of annual bonuses and other miscellaneous expenses which fluctuate due to timing of payments, changes in the cost of goods and services we purchase, production volume levels, and vendor payment terms, including freight. In the sixnine months ended JanuaryApril 31,30, 2026, there was a $1.1$1.0 million decrease in accrued expenses related to capital expenditures recognized as cash used in investing activities as compared to the sixnine months ended JanuaryApril 31,30, 2025.

Cash used in investing activities oftotaled $14.8$20.6 million in the sixnine months ended JanuaryApril 31,30, 20262026, wasprimarily driven by capital expenditures. During thethis six months ended January 31, 2026,period, we continued to expandinvest in expanding our plant equipment and improveenhance our facilities to improve efficiency of our manufacturing processefficiency and meetsupport customer demands.demand.

Cash used in financing activities of $17.2$20.2 million in the sixnine months ended JanuaryApril 31,30, 2026,2026 included $12.4$12.5 million for stock repurchases and $4.9$7.6 million for dividend payments.

Total cash balances held by our foreign subsidiaries were $5.8$7.1 million as of JanuaryApril 31,30, 2026, compared to $4.7 million as of July 31, 2025.

As of JanuaryApril 31,30, 2026, we had remaining authority to repurchase 174,742172,261 shares of Common Stock and 208,197 shares of Class B Stock under a repurchase plan approved by our Board. Repurchases may be made on the open market (pursuant to Rule 10b5-1 plans or otherwise) or in negotiated transactions. The timing, number and manner of share repurchases will be determined by our management pursuant to the repurchase plan approved by our Board.