OIL-DRI CORP OF AMERICA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read together with the financial statements and the related
notes included herein and our Consolidated Financial Statements, accompanying
notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in our Annual Report on Form 10-K for the fiscal
year ended July 31, 2021. This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially
from the results discussed in the forward-looking statements. Factors that might
cause a difference include, but are not limited to, those discussed under
"Forward-Looking Statements" and Item 1A, Risk Factors of this Quarterly Report
on Form 10-Q for the quarter ended January 31, 2022 and of our Annual Report on
Form 10-K for the fiscal year ended July 31, 2021.

PREVIEW

We develop, mine, manufacture and market sorbent products principally produced
from clay minerals and, to a lesser extent, other clay-like sorbent
materials. Our principal products include agricultural and horticultural
chemical carriers, animal health and nutrition products, bleaching clay and
fluid purification aids, cat litter, industrial and automotive floor absorbents
and sports field products. Our products are sold to two primary customer groups,
including customers who resell our products as originally produced to the end
consumer and those who use our products as part of their production process or
use them as an ingredient in their final finished product. We have two
reportable operating segments based on the different characteristics of our two
primary customer groups: Retail and Wholesale Products Group and Business to
Business Products Group, as described in Note 11 of the Notes to the unaudited
Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

PREVIEW

In late 2019 and early 2020, COVID-19 was first reported and then declared a
pandemic by the World Health Organization, and continues to have a worldwide
impact. All of our facilities, with the exception of our subsidiary in China
(which experienced certain disruptions in the first half of our fiscal year 2020
but subsequently resumed operations), have continued to operate as essential
businesses during the course of the pandemic as permitted under exceptions in
the applicable shelter-in-place mandates due to our inclusion in the Critical
Manufacturing Sector as defined by the U.S. Department of Homeland Security and
other functions defined as essential by government authorities. Our top priority
has been, and continues to be, the safety and health of our employees,
contractors, and customers. We have adhered, and continue to adhere, to guidance
from the U.S. Centers for Disease Control and Prevention ("CDC") and local
health and governmental authorities with respect to social distancing, physical
separation, and cleaning and sanitation programs at each of our facilities. We
have not experienced any shut downs due to workforce absences or illnesses.

As further discussed below, our consolidated net sales increased in the second
quarter and in the first six months of fiscal year 2022 compared to the second
quarter and first six months of fiscal year 2021. Net sales of our industrial
and sports products as well as most of our fluids purification products have
mostly returned to pre-pandemic levels as many businesses and sports have
re-opened and air travel has been increasing. Despite the overall increase in
net sales, we have not experienced any significant issues collecting amounts due
from customers to date. However, parts of our business continue to be negatively
impacted by the pandemic. Net sales for our industrial granules in the United
Kingdom have just recently started to increase in the second quarter of fiscal
year 2022. While we have had an overall increase in net sales of our fluids
purification products, not all regions have resumed travel to the same extent as
prior to the pandemic. In addition, net sales of our animal health and nutrition
products have been dampened due to COVID-19 and African swine fever in certain
geographic areas. We have also experienced an increase in backlog due, in part,
to supply chain disruptions and availability of labor amidst unprecedented
demand for our products.

As discussed below in "Consolidated Results," gross profit has declined in both
the second quarter and the first six months of fiscal year 2022 compared to the
same periods in fiscal year 2021 related to rising costs and supply chain
disruptions. We have faced longer lead times for some of our materials
purchases, which have contributed to an increase in our backlog but have been
able to avoid significant out of stock issues for most of our materials. Where
possible, we have found other suppliers to meet the increase in customer demand
for our products. In addition, the cost of repair parts has increased but this
has not caused any significant disruption to our business. Further, we, along
with some of our suppliers and toll processors, have experienced a shortage of
production labor, which has been a contributing factor to our increase in
backlog. We are closely monitoring the continuation, resurgence in certain
areas, and effects of COVID-19 on all aspects of our business, including how it
has impacted and may impact our suppliers and customers as well as the effects
of the pandemic on economic conditions and the financial markets. In general, we
have seen an increase in costs, particularly as it relates to commodities as the
economy continues to

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react to, and recover from, the pandemic and demand surpasses supply. In
addition to rising commodity costs, several of our suppliers have started to
pass along non-commodity price increases they have experienced in their own
business. However, we have not experienced any significant interruptions, and we
will continue to closely monitor our inventory levels to mitigate the risk of
any potential supply interruptions or changes in customer demand. It is possible
that significant disruptions could occur if the pandemic and other factors such
as labor shortages, ongoing geopolitical tensions, and other strains on the
supply chain continue to put pressure on production, transportation, and
shipping as a result of an imbalance of supply and demand or if there are
continued increases in costs that we are unable to recover. The impacts
of COVID-19 and related economic conditions on our future results are uncertain
at this time. The scope, duration, and magnitude of the direct and indirect
effects of COVID-19 continue to evolve (and in many cases, rapidly) in ways that
are difficult or impossible to anticipate. In addition, although COVID-19 has
not materially impacted our net sales to date, it remains uncertain whether and
how consumers will modify their purchasing habits in response to the ongoing
COVID-19 pandemic and/or the lifting or relaxing of mandates as the pandemic
abates in certain areas and government restrictions are reduced and/or
reimposed. As a result, our results to date may not be indicative of the
impact that COVID-19 may have on our results for the remainder of fiscal year
2022.

The impacts of COVID-19 on our specific operating segments are discussed below.


SIX MONTHS ENDED JANUARY 31, 2022 COMPARED TO
SIX MONTHS ENDED JANUARY 31, 2021

CONSOLIDATED RESULTS

Consolidated net sales for the six months ended January 31, 2022 were
$169,670,000, a 13% increase compared to net sales of $150,597,000 for the six
months ended January 31, 2021. Net sales increased for both our Retail and
Wholesale Products Group and Business to Business Products Group primarily due
to an increase in sales volume and somewhat due to higher prices instituted to
compensate for rising costs. The increase in demand for our products during the
first six months of fiscal year 2022 has led to an increase in our backlog of
orders driven by late customer pick-ups and our own constraints related to
production, capacity and transportation. We have hired additional manufacturing
personnel, expanded our production shifts and increased production equipment to
aid in the resolution of these constraints in the coming months as well as
increased our use of alternate modes of transportation. We continue to analyze
our constraints and implement strategies to meet the increase in customer
demand. Segment results are discussed further below.
Consolidated gross profit for the first six months of fiscal year 2022 was
$29,404,000, or 17% of net sales, compared to $35,469,000, or 24%, of net sales,
for the first six months of fiscal year 2021. Higher freight, packaging, natural
gas, and non-fuel manufacturing costs per ton drove the decrease in gross
profit. We continue to experience high freight costs both domestically and with
respect to ocean freight. Domestic freight costs per ton, excluding the freight
we no longer charge to a significant customer who now picks up its own
purchases, increased approximately 35% in the first six months of fiscal year
2022 compared to the same period of fiscal year 2021. The increase relates to,
in part, higher transportation rates due to a national driver shortage and tight
trucking capacity. The continued increase in cost of diesel fuel has also
contributed to the higher transportation rates. In addition, our overall freight
costs can vary between periods depending on the mix of products sold and the
geographic distribution of our customers. Packaging costs per ton for the first
six months of fiscal year 2022 were approximately 37% higher compared to the
first six months of fiscal year 2021 due to higher commodity costs, particularly
as it relates to resin. Many of our contracts for packaging purchases are
subject to periodic price adjustments, which trail changes in underlying
commodity prices. The cost of natural gas per ton used to operate kilns that dry
our clay was 93% higher in the first six months of fiscal year 2022 compared to
the first six months of fiscal year 2021 due to higher natural gas prices, which
are being driven by demand surpassing available supply. Non-fuel manufacturing
costs per ton also increased during the first six months of fiscal year 2022
compared to fiscal year 2021 by 14%. The increase in non-fuel manufacturing
costs relate to higher repairs, labor costs, and costs of purchased materials.
In addition to the above, during the first six months of fiscal year 2022,
several suppliers started to pass along non-commodity price increases related to
cost increases experienced in their own businesses and we expect such increases
to persist. While we have faced higher costs due to the reasons mentioned above,
we continue to strive to restore our historical margins utilizing various
strategies including reducing costs where possible, increasing sales volume, and
implementing price increases.

Total selling, general and administrative ("SG&A") expenses of $27,041,000 for
the first six months of fiscal year 2022 were higher by $993,000, or 4%,
compared to $26,048,000 for the first six months of fiscal year 2021. SG&A
expenses for the operating segments were essentially flat for the, first six
months of fiscal year 2022 compared to the same period in the prior fiscal year
and unallocated corporate expenses were higher by $953,000, or 8%. The
discussion of the segments' operating incomes below describes the changes in
SG&A expenses that were allocated to the operating segments. The increase in
unallocated corporate expenses were driven by higher professional fees related
to costs for various outside services related to growing business needs and
strategic initiatives.

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Other income of $717,000 for the first six months of fiscal year 2022 was higher
than the same period in fiscal year 2021 by $226,000 and included less periodic
benefit costs related to our pension plan and insurance recoveries related to
our property, plant and equipment partially offset by higher interest expense
and exchange rate losses.

Consolidated net income before taxes for the first six months of fiscal year
2022 was $3,080,000 compared to net income before taxes of $9,912,000 for the
first six months of fiscal year 2021. Results for the first six months of fiscal
year 2022 were driven by the factors discussed above.

Tax expense for the first six months of fiscal year 2022 was $524,000 compared
to $1,675,000 for the first six months of fiscal year 2021, which resulted in an
effective tax rate of 17% in both periods. We used an estimated annual effective
tax rate ("ETR") in determining our provision for income taxes, which is based
on expected annual taxable income and the assessment of various tax deductions,
including depletion.

BUSINESS TO BUSINESS PRODUCT GROUP

Net sales of the Business to Business Products Group for the first six months of
fiscal year 2022 increased compared to the first six months of fiscal year 2021
for all our products. Net sales were $61,553,000 for the first six months of
fiscal year 2022, an increase of $7,748,000, or 14%, from net sales of
$53,805,000 for the first six months of fiscal year 2021. Net sales of our
fluids purification products increased approximately $4,134,000, or 16%,
compared to the first six months of the prior fiscal year. We experienced sales
improvement primarily in Latin America, North America and Asia. The increases in
net sales to these countries were partially offset by lower net sales to Europe.
The increase in net sales occurred for a variety of reasons, including new
customer wins, increased sales to existing customers, increase in air travel,
price increases that were instituted to offset rising costs, and in some cases,
timing of net sales. Net sales of our Ultra-Clear clay products rebounded as
global air travel increased compared to the same period last year. Net sales of
bleaching clay to Europe decreased primarily as a function of timing and ocean
freight shipping delays. Similar to our Retail and Wholesale Products Group cat
litter business, our co-packaged coarse cat litter business experienced a
significant increase of 23% in net sales during the first six months of fiscal
year 2022 compared to fiscal year 2021 primarily due to price increases and to
some extent, an increase in volume. Net sales of our agricultural and
horticultural chemical carrier products increased approximately $1,486,000, or
12%, for the first six months of fiscal year 2022 compared to the same period in
fiscal year 2021 as a result of continued strong demand for these products as
well as price increases. Net sales of our animal health and nutrition products
increased $413,000, or 5%, during the first six months of fiscal year 2022
compared to the first six months of the prior year. The increase in net sales
relates to several new customers, a new product line in North America, and in
general, timing of when sales occur. Despite the overall increase in net sales,
the African swine fever and low pork prices are still affecting the swine market
and ultimately, the net sales of our feed additives in some countries. The swine
population has been reduced, and demand and consumption are down, thereby
causing a decrease in our net sales in some regions, mostly in China. Ocean
freight delays also continue to negatively impact our business. See "Foreign
Operations" below for a discussion of net sales for our foreign operations that
sell our animal health and nutrition products.

SG&A expenses for the Business to Business Products Group increased
approximately 19% or $1,081,000 for the first six months of fiscal year 2022
compared to the same period of the prior fiscal year. We continued to invest in
our animal health business which resulted in higher costs due to increased
headcount of sales and leadership personnel, increased travel costs, and
increased marketing efforts associated with our animal feed additives.

The Business to Business Products Group's operating income for the first six
months of fiscal year 2022 was $14,336,000, a decrease of $377,000, or 3%, from
operating income of $14,713,000 for the first six months of fiscal year 2021.
The decrease in operating income was driven by higher freight, packaging,
natural gas, and non-fuel manufacturing costs per ton as discussed in
"Consolidated Results" above as well as higher SG&A expenses.

RETAIL AND WHOLESALE PRODUCT GROUP

Net sales of the Retail and Wholesale Products Group for the first six months of
fiscal year 2022 were $108,117,000, an increase of $11,325,000, or 12%, from net
sales of $96,792,000 for the first six months of fiscal year 2021 driven by
higher net sales of both our cat litter and industrial and sports products.
Total cat litter net sales were approximately $7,262,000, or 9%, higher compared
to the first six months of the prior fiscal year primarily due to increased
sales volume and somewhat due to price increases in response to rising costs.
Net sales of branded scoopable litter, private label lightweight and heavyweight
litter, and accessories (liners) increased in the first six months of fiscal
year 2022 as we gained business from new customers and existing customers either
sold certain of our products for the first time or increased the volume of their
purchases from us. E-commerce sales were also higher during the first six months
of fiscal year 2022 compared to fiscal year 2021. The impact of COVID-19 on
increased pet adoption continues to boost sales as well as the overall macro
trend of increased spending on pets. In addition, cat litter net sales increased
despite revising our shipping terms with one of our significant customers in the
fourth quarter of fiscal year 2021 to provide that freight charges are the
responsibility of such customer and no longer included in the
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prices charged. Cat litter net sales by our subsidiary in Canada further
contributed to the net sales increase, as discussed in "Foreign Operations"
below. Also included in the Retail and Wholesale Products Group's results were
increased net sales of our industrial and sports products compared to the first
six months of fiscal year 2021. Net sales of our industrial and sports products
increased approximately $3,968,000, or 28%, compared to the first six months of
fiscal year 2021, due to both an increase in volume due to the re-opening of
businesses and sports fields as well as an increase in selling price per ton as
we continue to respond to rising costs.

SG&A expenses for the Retail and Wholesale Products Group were lower by
approximately $1,074,000, or 12%, during the first six months of fiscal year
2022 compared to the first six months of fiscal year 2021 primarily due to lower
advertising costs partially offset by compliance penalties caused by supply
chain disruptions, travel expense and personnel costs. We anticipate total
advertising expense in fiscal year 2022 will be lower compared to fiscal year
2021.
The Retail and Wholesale Products Group's operating income for the first six
months of fiscal year 2022 was $1,000,000, a decrease of $5,728,000, or 85%,
from operating income of $6,728,000 for the first six months of fiscal year
2021. The decrease in operating income was driven by higher freight, packaging,
natural gas and non-fuel costs as discussed in "Consolidated Results" above
which outpaced the increase in net sales.

AWAY OPERATIONS

Foreign operations include our subsidiaries in Canada and the United Kingdom,
which are reported in the Retail and Wholesale Products Group, and our
subsidiaries in China, Mexico and Indonesia, which are reported in the Business
to Business Products Group. Net sales by our foreign subsidiaries during the
first six months of fiscal year 2022 were $9,626,000, an increase of $787,000,
or 9%, compared to net sales of $8,839,000 during the first six months of fiscal
year 2021. Total net sales of our subsidiary in Canada during the first six
months of fiscal year 2022 increased by $1,226,000, or 27%, compared to the same
period in fiscal year 2021 driven by higher cat litter net sales. The increase
was mainly driven by a key customer carrying three of our products for the first
time as well as price increases instituted in response to rising costs. Net
sales of our industrial absorbent granules were flat in the first six months of
fiscal year 2022 compared to the first six months of fiscal year 2021. Net sales
of our subsidiary in the United Kingdom in the first six months of fiscal year
2022 increased by $95,000, or 10%, compared to net sales of the first six months
of fiscal year 2021. The increase related to timing of net sales and partly due
to demand starting to slowly return post pandemic. Net sales of our subsidiary
in Mexico decreased during the first six months of fiscal year 2022 compared to
the same period of fiscal year 2021 by $420,000, or 29%, as the first six months
of fiscal year 2021 included net sales of products that are no longer part of
our business strategy. Net sales of our subsidiary in China decreased $129,000,
or 7%, during the first six months of fiscal year 2022 compared to the first six
months of fiscal year 2021. The decrease relates primarily to the impact of the
African swine fever, low pork prices, as well as timing of net sales due to
ocean freight delays and because some customers made purchases in the prior
fiscal year ahead of effective price increases. Net sales by our foreign
subsidiaries represented 6% of our consolidated net sales during the first
quarter of fiscal years 2022 and 2021.

Our foreign subsidiaries reported a net loss of $812,000 for the first six
months of fiscal year 2022, compared to a net loss of $42,000 for the first six
months of fiscal year 2021. The net loss in the first six months of fiscal year
2022 was primarily driven by lower net sales for our subsidiary in Mexico,
higher cost of sales and higher SG&A expenses by our subsidiary in China due to
increased sales personnel and marketing of our animal feed additives as we
continue to invest in our animal health and nutrition products.

Identifiable assets of our foreign subsidiaries in January 31, 2022 were
$12,174,000compared to $12,572,000 from July 31, 2021.

THREE MONTHS ENDED JANUARY 31, 2022 COMPARED TO
THREE MONTHS ENDED JANUARY 31, 2021

CONSOLIDATED RESULTS

Consolidated net sales for the three months ended January 31, 2022 were
$87,210,000, a 17% increase compared to net sales of $74,500,000 for the three
months ended January 31, 2021. Net sales increased for both our Retail and
Wholesale Products Group and Business to Business Products Group primarily due
to an increase in sales volume and somewhat due to higher prices instituted to
compensate for rising costs. The increase in demand for our products during the
second quarter of fiscal year 2022 has continued to increase the backlog that
arose in the first quarter of fiscal year 2022. See discussion above in "Results
from Operations - Six Months Ended January 31, 2022 compared to Six Months ended
January 31, 2021" for more detail on backlog. Segment results are discussed
below.

Consolidated gross profit for the three months ended January 31, 2022 has been
$15,586,000i.e. 18% of turnover, against

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$16,689,000, or 22%, of net sales, for the three months ended January 31,
2021. Higher freight, packaging, natural gas, and non-fuel manufacturing costs
per ton drove the decrease in gross profit. We continue to experience high
freight costs both domestically and with respect to ocean freight. Domestic
freight costs per ton, excluding the freight we no longer charge to a
significant customer who now picks up its own purchases, increased approximately
31% in the second quarter of fiscal year 2022 compared to the same period of
fiscal year 2021. The increase relates, in part, to higher transportation rates
due to a national driver shortage and tight trucking capacity. The continued
increase in cost of diesel fuel has also contributed to the higher
transportation rates. Our overall freight costs can also vary between periods
depending on the mix of products sold and the geographic distribution of our
customers. Packaging costs per ton for the second quarter of fiscal year 2022
were approximately 30% higher compared to the second quarter of fiscal year 2021
due to higher commodity costs, particularly as it relates to resin. Many of our
contracts for packaging purchases are subject to periodic price adjustments,
which trail changes in underlying commodity prices. The cost of natural gas per
ton used to operate kilns that dry our clay was 90% higher in the second quarter
of fiscal year 2022 compared to the second quarter of fiscal year 2021 due to
higher natural gas prices which are being driven by demand surpassing available
supply. Non-fuel manufacturing costs per ton also increased during the second
quarter of fiscal year 2022 compared to fiscal year 2021 by 9%. The increase in
non-fuel manufacturing costs relate to higher repairs, labor costs and costs of
purchased materials. In addition to the above, during the second quarter of
fiscal year 2022, several suppliers started to pass along non-commodity price
increases related to cost increases experienced in their own businesses and we
expect such increases to persist. While we have faced higher costs due to the
reasons mentioned above, we continue to strive to restore our historical margins
utilizing various strategies including reducing costs where possible, increasing
sales volume and implementing price increases.

Total SG&A expenses of $13,668,000 for the second quarter of fiscal year 2022
were higher by $1,223,000, or 10%, compared to $12,445,000 for the second
quarter of fiscal year 2021. SG&A expenses for both the operating segments and
unallocated corporate expenses contributed to the increase. The discussion below
describes the SG&A expenses allocated to the operating segments. The increase in
unallocated corporate expenses were driven by higher professional fees related
to costs for various outside services related to growing business needs and
strategic initiatives.

Other income from $452,000 for the second quarter of fiscal 2022 was lower than the same period of fiscal 2021 by $461,000 and included higher interest expense and foreign exchange losses partially offset by insurance recoveries related to our property, plant and equipment.

Consolidated net income before taxes for the second quarter of fiscal year 2022
was $2,370,000, compared to net income before taxes of $5,157,000 for the second
quarter of fiscal year 2021. Results for the second quarter of fiscal year 2022
were driven by the factors described above.

Tax expense for the second quarter of fiscal year 2022 was $409,000 compared to
tax expense $869,000 for the second quarter of fiscal year 2021, which resulted
in an effective tax rate of 17% in both periods. We used an estimated annual
effective tax rate in determining our provision for income taxes, which is based
on expected annual taxable income and the assessment of various tax deductions,
including depletion.

BUSINESS TO BUSINESS PRODUCT GROUP

Net sales of the Business to Business Products Group for the second quarter of
fiscal year 2022 increased compared to the second quarter of fiscal year 2021
for all our products. Net sales were $32,624,000, an increase of $6,341,000, or
24%, from net sales of $26,283,000 for the second quarter of fiscal year 2021.
Net sales of our fluids purification products increased approximately
$2,270,000, or 18%, in the second quarter of fiscal year 2022 compared to same
period in fiscal year 2021. The increase in net sales occurred for a variety of
reasons, including new customer wins, increased sales to existing customers,
increase in air travel, price increases that were instituted to offset rising
costs and in some cases, timing of net sales. Net sales of our Ultra-Clear
products rebounded as global air travel increased compared to the same period
last year. Net sales of our agricultural and horticultural chemical carrier
products increased approximately $2,265,000, or 45%, in the second quarter of
fiscal year 2022 compared to the same period in fiscal year 2021 driven by both
volume and to some degree, price increases. The increase in volume is
attributable to continued strong demand for our products as well as a shift in
timing of net sales from the first quarter to the second quarter of fiscal year
2022 as several of our customer delayed their orders due to their own supply
chain issues. In addition, one of our customers had partially shut down in the
second quarter of fiscal year 2021 which reduced our net sales and then later
resumed operations. Similar to our Retail and Wholesale Products Group cat
litter business, our co-packaged coarse cat litter business experienced a
significant increase of $955,000, or 26%, in net sales during the second quarter
of fiscal year 2022, compared to the same quarter in fiscal year 2021, primarily
due to price increases and to some extent, an increase in volume. Net sales of
our animal health and nutrition products increased approximately $851,000, or
18%, in the second quarter of fiscal 2022 compared to the second quarter of
fiscal year 2021. The increase in net sales relates to several new customers, a
new product line in North America, and in general, timing of when net sales
occur. Despite the overall increase in net sales, ocean freight delays continue
to negatively impact our business. African swine fever and low pork prices are
still affecting the swine market and ultimately, the net sales of our feed
additives in some countries. The swine population has been reduced, and demand
and consumption are down, thereby causing a decrease in our net sales in some
regions, mostly in China. However, net sales from our subsidiary in China
increased during the second quarter of fiscal year 2022 compared to
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fiscal year 2021 primarily due to a new customer. See "Foreign Operations" below
for a discussion of net sales for our foreign operations that sell our animal
health and nutrition products.

SG&A expenses for the Business to Business Products Group increased
approximately $569,000, or 19%, in the second quarter of fiscal year 2022
compared to the second quarter of fiscal year 2021. We continued to invest in
our animal health business which resulted in higher costs due to increased
headcount of sales and leadership personnel, increased travel costs, and
increased marketing efforts associated with our animal feed additives partially
offset by lower bad debt expenses.

The Business to Business Products Group's operating income for the second
quarter of fiscal year 2022 was $7,590,000, an increase of $477,000, or 7%, from
operating income of $7,113,000 in the second quarter of fiscal year 2021. The
increase in operating income was driven by the higher sales partially offset by
higher SG&A expenses and an increase in freight, packaging, materials, natural
gas, and non-fuel manufacturing costs discussed in "Consolidated Results" above.

RETAIL AND WHOLESALE PRODUCT GROUP

Net sales of the Retail and Wholesale Products Group for the second quarter of
fiscal year 2022 were $54,586,000, an increase of $6,369,000, or 13%, from net
sales of $48,217,000 for the second quarter of fiscal year 2021 driven by net
sales of both our cat litter and industrial and sports products. Total cat
litter net sales were approximately $4,161,000, or 10%, higher in the second
quarter of fiscal year 2022 compared to the same period in fiscal year 2021 due
to increased sales volume and somewhat due to price increases in response to
rising costs. Net sales of branded scoopable litter, private label lightweight
and heavyweight litter increased in the second quarter of fiscal year 2022 as
existing customers either sold certain of our products for the first time or
increased the volume of their purchases from us. The impact of COVID-19 on
increased pet adoption continues to boost sales as well as the overall macro
trend of increased spending on pets. In addition, cat litter net sales increased
despite revising our shipping terms with one of our significant customers in the
fourth quarter of fiscal year 2021 to provide that freight charges are the
responsibility of such customer and no longer included in the prices charged. In
addition, net sales of cat litter by our subsidiary in Canada continue to
increase as further discussed in "Foreign Operations" below. E-commerce sales
were flat during the second quarter of fiscal year 2022 compared to the same
period in fiscal year 2021. Also included in the Retail and Wholesale Products
Group's results were increased net sales of our industrial and sports products
compared to the second quarter of fiscal year 2021. Net sales of our industrial
and sports products increased approximately $2,110,000, or 31%, in the second
quarter of fiscal year 2022 compared to the second quarter of fiscal year 2021,
due to both an increase in volume due to the re-opening of businesses and sports
fields as well as an increase in selling price per ton in response to rising
costs.

SG&A expenses for the Retail and Wholesale Product Group were lower in the second quarter of fiscal 2022 than fiscal 2021 by 1%, or $41,000primarily due to lower advertising costs partially offset by compliance penalties caused by supply chain disruptions, travel costs and personnel costs.

For the second quarter of fiscal year 2022, the Retail and Wholesale Products
Group reported operating income of $926,000, a decrease of $2,252,000, compared
to operating income of $3,178,000 for the second quarter of fiscal year 2021.
The decrease in operating income was driven by higher freight, packaging,
natural gas, and non-fuel manufacturing costs described above in "Consolidated
Results" which outpaced higher net sales.

AWAY OPERATIONS

Foreign operations include our subsidiaries in Canada and the United Kingdom,
which are reported in the Retail and Wholesale Products Group, and our
subsidiaries in China, Mexico and Indonesia, which are reported in the Business
to Business Products Group. Net sales by our foreign subsidiaries during the
second quarter of fiscal year 2022 were $5,283,000, a 12% increase compared to
net sales of $4,703,000 in the second quarter of fiscal year 2021. All of our
foreign operations, with the exception of our subsidiary in Mexico, experienced
an increase in net sales during the second quarter of fiscal year 2022 compared
to fiscal year 2021. Total net sales of our subsidiary in Canada during the
second quarter of fiscal year 2022 increased by $566,000, or 24%, compared to
the same period in fiscal year 2021 driven by cat litter net sales. Cat litter
net sales for our subsidiary in Canada increased by approximately $499,000, or
27%, in the second quarter of fiscal year 2022 compared to the same period of
fiscal year 2021 due to increased sales to existing customers, a key customer
carrying three of our products they had not previously purchased and, to some
extent, price increases to keep pace with rising costs. Moreover, the impact of
COVID-19 on increased pet adoption continues to boost cat litter net sales as
well as the overall macro trend of increased spending on pets. In addition to
increased net sales of cat litter, net sales of our industrial absorbent
granules in Canada increased by approximately $67,000, or 12%, during the second
quarter of fiscal year 2022 compared to the same period in fiscal year 2021. Net
sales of our absorbent granules by our subsidiary in the United Kingdom
increased by $97,000 during the second quarter of fiscal year 2022 compared to
the same period in fiscal year 2021. This increase related partly due to timing
of net sales and partly due to demand starting to slowly return in the United
Kingdom. Net sales of our animal health and nutrition
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products by our subsidiary in China increased moderately in the second quarter
of fiscal year 2022 compared to the same period in fiscal year 2021 by $130,000,
or 12%. The increase in net sales related primarily to a new customer. Net sales
by our subsidiary in Mexico decreased $298,000, or 39%, in the second quarter of
fiscal year 2022 compared to the same period in fiscal year 2021 as the second
quarter of fiscal year 2021 included net sales of products that are no longer
part of our business strategy. Our foreign subsidiaries' net sales represented
approximately 6% of consolidated net sales during the second quarters of fiscal
years 2022 and 2021.

Our foreign subsidiaries reported a net loss of $477,000 for the second quarter
of fiscal year 2022 compared to net income of $170,000 for the second quarter of
fiscal year 2021. The net loss in the second quarter of fiscal year 2022 was
primarily driven by lower net sales of our subsidiary in Mexico, higher cost of
sales, and higher SG&A expenses incurred by our subsidiary in China due to
increased sales personnel and marketing of our animal feed additives as we
continue to invest in our animal health and nutrition products.

CASH AND CAPITAL RESOURCES

Our principal capital requirements include: funding working capital needs;
purchasing and upgrading equipment, facilities (including significant
renovations at one of our plants), information systems, and real estate;
supporting new product development; investing in infrastructure; repurchasing
stock; paying dividends; making pension contributions; and, from time to time,
business acquisitions. During the first six months of fiscal year 2022, we
principally funded these requirements using cash from current operations as well
as cash generated in the second quarter of fiscal year 2022 from borrowings.

We currently anticipate cash flows from operations and our available sources of
liquidity will be sufficient to meet our cash requirements. In addition, we are
actively monitoring the timing and collection of our accounts receivable. Given
the dynamic nature of COVID-19 and its effects, we will continue to assess our
liquidity needs and to actively manage our spending.

The following table sets forth certain items of our unaudited condensed consolidated statements of cash flows (in thousands):

                                                                     For 

six months ended January 31,

                                                                           2022                    2021
Net cash provided by operating activities                          $              61          $     3,085
Net cash used in investing activities                                        (10,574)              (7,595)
Net cash provided by (used in) financing activities                           14,957               (5,795)
Effect of exchange rate changes on cash and cash equivalents                     (26)                 123
Net increase (decrease) in cash and cash equivalents               $        

4,418 $(10,182)

Net cash flow generated by operating activities

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 first six months of fiscal years 2022 and 2021 were as
follows:

Accounts receivable, less allowance for doubtful accounts, increased $5,082,000
in the first six months of fiscal year 2022 compared to an increase of
$3,836,000 in the first six months of fiscal year 2021. The change in accounts
receivable was higher in fiscal year 2022 than fiscal year 2021 because net
sales increased significantly in the first six months of fiscal year 2022,
thereby driving accounts receivable higher. In addition, the variation in
accounts receivable balances reflect differences in the level and timing of
collections as well as the payment terms provided to various customers.

Inventory increased $6,236,000 in the first six months of fiscal year 2022
compared to a decrease of $412,000 in the first six months of fiscal year 2021.
While inventory increased in both periods due to rising costs, costs rose much
more significantly in the first six months of fiscal year 2022. In addition,
during the first six months of fiscal year 2022 we increased our inventory
levels to accommodate increased demand and thwart potential supply chain
disruptions. The decrease in inventory in the first six months of fiscal year
2021 was due to increased demand which offset the higher packaging costs.

Prepaid expenses decreased $846,000 in the first six months of fiscal year 2022
due to lower prepaid advertising costs and insurance somewhat offset by higher
prepaid repairs. Prepaid expenses increased $760,000 in the first six months of
fiscal year 2021 driven primarily by prepayment of income taxes. This increase
in fiscal year 2021 was offset by lower prepaid advertising costs and insurance.
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Other assets decreased $634,000 in the first six months of fiscal year 2022
compared to an increase of $266,000 in the first six months of fiscal year 2021.
The decrease in other assets in the first six months of fiscal year 2022 related
to capitalized pre-production costs being transferred to property, plant and
equipment as the mines are now in production, partially offset by an increase in
long-term royalties. The increase in other assets in the first six months of
fiscal year 2021 related primarily to an increase in capitalized pre-production
mining costs offset by amortization of our operating lease right-of-use lease
assets.

Accounts payable increased $1,326,000 in the first six months of fiscal year
2022 compared to a decrease of $3,901,000 in the first six months of fiscal year
2021. Higher trade payables drove the increase in accounts payable in the first
six months of fiscal year 2022. Lower trade payables drove the decrease in
accounts payable in the first six months of fiscal year 2021 as well as income
taxes payable being in a prepaid position versus a payable position at the end
of the second quarter of fiscal year 2021. Trade and freight payables vary in
both periods due to the timing of payments, fluctuations in the cost of goods
and services we purchased, production volume levels and vendor payment terms.

Accrued expenses decreased $1,595,000 in the first six months of fiscal year
2022 compared to a decrease of $5,201,000 in the first six months of fiscal year
2021. The payout of the prior fiscal year's discretionary incentive bonus
reduced accrued expenses in both fiscal years, but to a greater extent in fiscal
year 2021 as the accrual was higher in the prior fiscal year. In addition, the
timing of real estate tax payments also reduced accrued expenses in the first
six months of fiscal year 2022. The decrease in accrued bonus and real estate
taxes was partly offset by higher accrued utilities due to the rising cost of
natural gas, higher accrued advertising due to the timing of our advertising
programs, and additional accrued capital projects. In addition, accrued plant
expenses can also fluctuate due to timing of payments, changes in the cost of
goods and services we purchase, production volume levels and vendor payment
terms. Accrued expenses decreased $5,201,000 in the first six months of fiscal
year 2021 due to before-mentioned payout of discretionary incentive bonus,
decreased accrued advertising and real estate taxes partially offset by the
reclassification of the current portion of the deferred employer payroll taxes
under the CARES Act which was paid at the end of calendar year 2021 as further
described in Note 1 of the Notes to the unaudited Condensed Financial Statements
and an increase in accrued freight.

Net cash used in investing activities

Cash used in investing activities of $10,574,000 in the first six months of
fiscal year 2022 were higher compared to cash used in investing activities of
$7,595,000 in the first six months of fiscal year 2021 driven by capital
expenditures. During the first six months of fiscal year 2022 we expanded our
plant equipment and improved our facilities to support increased demand for our
products as well as made improvements to our IT network.

Net cash used in financing activities

Cash provided by financing activities of $14,957,000 in the first six months of
fiscal year 2022 was higher than cash used in financing activities of $5,795,000
in the first six months of fiscal year 2021. The first six months of fiscal year
2022 included the issuance of $25,000,000 of notes payable offset by higher
repurchases of stock than in the first six months of fiscal year 2021.

Other

Total cash and investment balances held by our foreign subsidiaries of
$2,053,000 from January 31, 2022 were lower than the January 31, 2021 sales of $3,411,000. See further discussion in “Foreign Operations” above.

On January 31, 2019, we signed a fifth amendment to our credit agreement with
BMO Harris Bank N.A. ("BMO Harris"), which expires on January 31, 2024. The
agreement provides for a $45,000,000 unsecured revolving credit agreement and a
maximum of $10,000,000 for letters of credit. The agreement terms also state
that we may select a variable interest rate based on either the BMO Harris prime
rate or a LIBOR-based rate, plus a margin that varies depending on our debt to
earnings ratio, or a fixed rate as agreed between us and BMO Harris. As of
January 31, 2022, the variable rates would have been 3.50% for the BMO Harris
prime-based rate or 1.56% for the three-month LIBOR-based rate. The credit
agreement contains restrictive covenants that, among other things and under
various conditions, limit our ability to incur additional indebtedness or to
dispose of assets. The agreement also requires us to maintain a minimum fixed
coverage ratio and a minimum consolidated net worth. As of January 31, 2022 and
2021, we were in compliance with the covenants. There were no borrowings during
the first six months of either fiscal year 2021 or 2022.

On May 15, 2020, we entered into a debt instrument pursuant to which, among
other things, we issued $10,000,000 in aggregate principal amount of our 3.95%
Series B Senior Notes due May 15, 2030 and entered into an amended note
agreement that provides the Company with the ability to request, from time to
time until May 15, 2023 (or such earlier date as provided for in the agreement),
additional senior unsecured notes of the Company in an aggregate principal
amount of up to $75,000,000
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minus the aggregate principal amount of the notes then outstanding and the
additional notes that have been accepted for purchase. The issuance of such
additional notes is at the discretion of the noteholders and purchasers and on
an uncommitted basis. Pursuant to the amended note agreement, on December 16,
2021, the Company issued $25,000,000 in aggregate principal amount of its 3.25%
Series C Senior Notes due December 16, 2031. As of January 31, 2021 outstanding
notes payable were $33,778,000, net of $222,000 of unamortized debt issuance
costs.

As of January 31, 2022, we had remaining authority to repurchase 637,109 shares
of Common Stock and 273,100 shares of Class B Stock under a repurchase plan
approved by our Board of Directors (the "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.

We believe that cash flow from operations, availability under our revolving
credit facility, current cash and investment balances and our ability to obtain
other financing, if necessary, will provide adequate cash funds for foreseeable
working capital needs, capital expenditures at existing facilities, deferred
compensation payouts, dividend payments and debt service obligations for at
least the next 12 months. We expect capital expenditures in fiscal year 2022 to
be greater than in fiscal year 2021, including capital expenditures to renovate
one of our plants, estimated to be approximately $6,500,000. We do not believe
that these increased capital expenditures will dramatically impact our cash
position; however our cash requirements are subject to change as business
conditions warrant and opportunities arise. Our anticipated advertising expense
for fiscal year 2022 is expected to be lower compared to fiscal year 2021.
Adjustments to advertising spending for the remainder of the fiscal year may
occur due to any upcoming volatility in the economic environment.

We continually evaluate our liquidity position and anticipated cash needs, as
well as the financing options available to obtain additional cash reserves. Our
ability to fund operations, to make planned capital expenditures, to make
scheduled debt payments, to contribute to our pension plan and to remain in
compliance with all financial covenants under debt agreements, including, but
not limited to, the current credit agreement, depends on our future operating
performance, which, in turn, is subject to prevailing economic conditions and to
financial, business and other factors. The timing and size of any new business
ventures or acquisitions that we complete may also impact our cash requirements.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This discussion and analysis of financial condition and results of operations is
based on our unaudited Condensed Consolidated Financial Statements, which have
been prepared in accordance with U.S. GAAP for interim financial information and
in compliance with instructions to Form 10-Q and Article 10 of Regulation S-X.
The preparation of these financial statements requires the use of estimates and
assumptions related to the reporting of assets, liabilities, revenues, expenses
and related disclosures. In preparing these financial statements, we have made
our best estimates and judgments of certain amounts included in the financial
statements. Estimates and assumptions are revised periodically. Actual results
could differ from these estimates. See the information concerning our critical
accounting policies included under "Management's Discussion of Financial
Condition and Results of Operations" in our Annual Report on Form 10-K for the
fiscal year ended July 31, 2021.

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