PENSION AND OTHER POSTRETIREMENT BENEFITS Level 1 (Notes)

12 Months Ended

Jul. 31, 2023

EMPLOYEE BENEFIT PLANS [Abstract]

Pension and Other Postretirement Benefits

PENSION AND OTHER POSTRETIREMENT BENEFITS

    The Oil-Dri Corporation of America Pension Plan ("Pension Plan") was a defined benefit pension plan for eligible salaried and hourly employees. Pension benefits were based on a formula of years of credited service and levels of compensation or stated amounts for each year of credited service. On January 9, 2020, Oil-Dri amended the Pension Plan to freeze participation, all future benefit accruals and accrual of benefit service, including consideration of compensation increases, effective March 1, 2020. Consequently, the Pension Plan was closed to new participants and existing participants no longer earned additional benefits on or after March 1, 2020. On September 20, 2022, the Company's Board of Directors approved a resolution to terminate the Company's defined benefit pension plan.

    On April 20, 2023, Oil-Dri settled $14 million of the pension obligation through the purchase of an annuity. The remaining $16 million of the pension obligation was settled on April 28, 2023, via lump-sum payments. All pension assets were remeasured immediately before settlement resulting in a net surplus amount of $3.6 million and net unrealized loss of $1.9 million included in accumulated other comprehensive income. Upon settlement of the pension obligations Oil-Dri recognized through net income all unrealized losses resulting in a $1.9 million reduction to net income included in "Loss on pension termination" within "Other Income (Expense), Net".

On April 27, 2023, the Executive Committee of the Company's Board of Directors approved the distribution of the surplus to a qualified defined contribution retirement fund. A portion of the surplus to be distributed to pension participants was irrevocably distributed to the 401(k) plan on April 28, 2023, which resulted in an additional $2.8 million charge to net income included in "Loss on pension termination" within "Other Income (Expense), Net". The remaining $0.8 million to be held by the 401(k) plan to cover qualified future plan expenses was recognized as a prepaid asset.

A postretirement health benefits plan is also provided to domestic salaried employees who meet specific age, participation and length of service requirements at the time of retirement. Eligible employees may elect to continue their health care coverage under the Oil-Dri Corporation of America Employee Benefits Plan until the date certain criteria are met, including attaining the age of Medicare eligibility. We have the right to modify or terminate the postretirement health benefit plan at any time.

A 401(k) savings plan is maintained under which we match a portion of employee contributions. This plan is available to essentially all domestic employees following a specific number of days of employment. Our contributions to this plan, and to similar plans maintained by our foreign subsidiaries, were $3.2 million and $2.9 million for fiscal years 2023 and 2022, respectively.

Obligations and Funded Status

The following tables provide a reconciliation of changes in the plans’ benefit obligations, asset fair values and funded status by fiscal year (in thousands):

	Pension Benefits				Postretirement Health Benefits
	2023		2022		2023		2022
Change in benefit obligation:
Benefit obligation, beginning of year	$	33,741	$	42,267	$	2,119	$	3,125
Service cost	—		—		84		123
Interest cost	1,009		1,068		73		58
Actuarial gain	(3,054)		(8,386)		(429)		(1,155)
Benefits paid	(941)		(1,208)		6		(32)
Settlements	(30,755)		—		—		—
Benefit obligation, end of year	—		33,741		1,853		2,119
Change in plan assets:
Fair value of plan assets, beginning of year	34,989		40,388		—		—
Actual return on plan assets	502		(4,191)		—		—
Employer contribution	—		—		(6)		32
Benefits paid	(941)		(1,208)		6		(32)
Settlements	(30,755)		—		—		—
Surplus Transfer	(3,647)		—		—		—
Fair value of plan assets, end of year	148		34,989		—		—
Funded status, recorded in Consolidated Balance Sheets	$	148	$	1,248	$	(1,853)	$	(2,119)

See “Cash Flows” below for further information about employer contributions and benefits payments.

There was no accumulated benefit obligation for the Pension Plan as of July 31, 2023. The accumulated benefit obligation for the Pension Plan was $33.7 million as of July 31, 2022.

The following table shows amounts recognized in the Consolidated Balance Sheets as of July 31 (in thousands):

	Pension Benefits				Postretirement Health Benefits
	2023		2022		2023		2022
Deferred income taxes	$	—	$	(335)	$	478	$	544
Other current assets	$	148	$	—	$	—	$	—
Other current liabilities	$	—	$	—	$	(100)	$	(73)
Other noncurrent liabilities	$	—	$	1,248	$	(1,753)	$	(2,046)
Accumulated other comprehensive loss – net of tax:
Net actuarial loss (gain)	$	—	$	2,998	$	(1,012)	$	(756)

Benefit Costs and Amortizations

The following table shows the components of the net periodic pension and postretirement health benefit costs by fiscal year (in thousands):

	Pension Cost				Postretirement Health Benefit Cost
	2023		2022		2023		2022
Service cost	$	—	$	—	$	84	$	123
Interest cost	1,009		1,068		73		58
Expected return on plan assets	(1,673)		(2,586)		—		—
Amortization of:
Prior service income	—		—		(6)		(6)
Other actuarial loss	42		145		(83)		—
Settlement cost	5,544		—		—		—
Net periodic benefit (income) cost	$	4,922	$	(1,373)	$	68	$	175

Service cost is recorded in Other, net within Other Income (Expense) in the Consolidated Statements of Operations. As the pension plan was frozen, there was no service cost recorded in fiscal years 2022 or 2023.

The following table shows amounts, net of tax, that are recognized in other comprehensive income by fiscal year (in thousands):

	Pension Benefits				Postretirement Health Benefits
	2023		2022		2023		2022
Net actuarial gain	$	(1,412)	$	(1,203)	$	(324)	$	(878)
Amortization of:
Prior service income	—		—		5		5
Amortization of actuarial loss	(32)		(110)		63		—
Curtailment/Settlement	$	(1,554)	$	—	$	—	$	—
Total recognized in other comprehensive income	$	(2,998)	$	(1,313)	$	(256)	$	(873)

Cash Flows

We have funded the Pension Plan based upon actuarially determined contributions that take into account the amount deductible for income tax purposes, the normal cost and the minimum contribution required and the maximum contribution allowed under applicable regulations. We made no contributions in fiscal years 2022 or 2023. The Pension Plan was terminated in fiscal year 2023 and there will be no more contributions to the Pension Plan. The postretirement health plan is an unfunded plan. Our policy is to pay health insurance premiums and claims from our assets.

The following table shows the estimated future benefit payments by fiscal year (in thousands):

	Postretirement Health Benefits
2024	$	100
2025	$	132
2026	$	129
2027	$	133
2028	$	136
2029-2033	$	867

Assumptions

Our pension benefit and postretirement health benefit obligations and the related effects on operations are calculated using actuarial models. Critical assumptions that are important elements of plan expenses and asset/liability measurements include discount rate and expected return on assets for the Pension Plan and health care cost trend for the postretirement health plan. We evaluate these critical assumptions at least annually. Other assumptions involving demographic factors such as retirement age, mortality and turnover are evaluated periodically and are updated to reflect our experience and to meet regulatory requirements. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors. The assumptions used in the previous calculations by fiscal year were as follows:

	Pension Benefits		Postretirement Health Benefits
	2023	2022	2023	2022
Discount rate for net periodic benefit costs	—%	2.57%	3.82%	2.10%
Discount rate for year-end obligations	—%	4.05%	4.90%	3.82%
Rate of increase in compensation levels for net periodic benefit costs	—%	—%	—%	—%
Rate of increase in compensation levels for year-end obligations	—%	—%	—%	—%
Long-term expected rate of return on assets	—%	6.50%	—%	—%

The discount rate was based on the FTSE Pension Discount Curve to determine for the Pension Plan and the postretirement health plan, the single equivalent rate that would yield the same present value as the specific plan’s expected cash flows.

Our expected rate of return on Pension Plan assets is determined by our asset allocation, our historical long-term investment performance, our estimate of future long-term returns by asset class (using input from our actuaries, investment managers and investment advisors), and long-term inflation assumptions.

For fiscal year 2023, the medical cost trend assumption used for the postretirement health benefit cost was 8.2%. The graded trend rate is expected to decrease to an ultimate rate of 4.9% in fiscal year 2044.

Pension Plan Assets

The investment objective for the Pension Plan assets was to optimize long-term return at a moderate level of risk in order to secure the benefit obligations to participants at a reasonable cost. To reach this goal, our investment structure included various asset classes, asset allocations and investment management styles that, in total, have a reasonable likelihood of producing a sufficient level of overall diversification that balances expected return with expected risk over the long-term. The Pension Plan does not invest directly in Company stock.

We measured and monitored the plan’s asset investment performance and the allocation of assets through quarterly investment portfolio reviews. Investment performance was measured by absolute returns, returns relative to benchmark indices and any other appropriate basis of comparison. The Pension Plan was terminated in fiscal year 2023 and there are no targeted allocation percentages of plan assets for 2024. The actual allocation percentages of plan assets as of July 31, 2023:

Asset Allocation	2023	2022
Cash and accrued income	100%	—%
Fixed income	—%	36%
Equity	—%	64%

    The following table sets forth by level, within the fair value hierarchy, the Pension Plan's assets carried at fair value (in thousands):

	Fair Value At July 31, 2022
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)
Asset Class
Cash and cash equivalents(a)	$	51	$	51	$	—
Equity securities(b):
U.S. companies	15,389		10,387		5,002
International companies	521		521		—
Equity securities - international mutual funds:
Developed market(c)	4,025		923		3,102
Emerging markets(d)	1,517		1,149		368
Commodities(e)	1,137		1,137		—
Fixed Income:
U.S. Treasuries	3,019		904		2,115
Debt securities(f)	1,656		—		1,656
Government sponsored entities(g)	1,256		—		1,256
Multi-strategy bond fund(h)	5,079		—		5,079
Money market fund(i)	389		—		389
Other(j)	950		—		950
Total	$	34,989	$	15,072	$	19,917

(a)Cash and cash equivalents consists of highly liquid investments which are traded in active markets.

(b)This class represents equities traded on regulated exchanges, as well as funds that invest in a portfolio of such stocks.

(c)These mutual funds seek long-term capital growth by investing no less than 80% of their assets in stocks of non- U.S. companies that are primarily in developed markets, but also may invest in emerging and less developed markets.

(d)These mutual funds seek to track the performance of a benchmark index that measures the investment return of stock issued by companies located in emerging market countries.

(e)These investments seek attractive total return by investing primarily in a diversified portfolio of commodity futures contracts and fixed income investments.

(f)This class includes bonds and loans of U.S. and non-U.S. corporate issuers from diverse industries and bonds of domestic and foreign municipalities.

(g)This class represents a beneficial ownership interest in a pool of single-family residential mortgage loans. These investments are generally not backed by the full faith and credit of the United States government, except for securities valued at $114,000 in our portfolio as of July 31, 2022.

(h)This class invests at least 80% of its net assets in bonds and other fixed income instruments issued by governmental or private-sector entities. More than 30% of its net assets are invested in asset-backed and mortgage-backed securities. The fund may invest up to 20% of its net assets in securities below investment grade.

(i)These money market mutual funds seek to provide current income consistent with liquidity and stability of principal by investing in a diversified portfolio of high quality, short-term, dollar-denominated debt securities. These funds may include securities issued or guaranteed as to principal and interest by the U.S. government or its agencies, short-term securities issued by domestic or foreign banks, domestic and dollar-denominated foreign commercial papers, and other short-term corporate obligations and obligations issued or guaranteed by one or more foreign governments.

(j)This class includes funds that use a number of other strategies, including arbitrage, to obtain long-term positive returns. The portfolio of instruments may include equities, debt securities, real estate properties, warrants, options, swaps, future contracts, forwards or other types of derivative instruments.