Oops. Time for this Fool to take his crystal ball in for a tune-up.

While previewing the Q2 2006 earnings report for absorbent-materials maker Oil-Dri (NYSE:ODC) yesterday, my primary point of advice to investors was to look for positive free cash flow. As it turned out, however, there was none to look for.

As a general rule, when companies provide their cash flow statements (and kudos to Oil-Dri for including one with its earnings release, by the way -- many companies don't even bother), they do so on a "year to date" basis. So for example, in this quarter's earnings release, Oil-Dri gave its cash flow results for the first six months of fiscal 2006. Last quarter's earnings release gave the data for fiscal Q1 2006 alone. To determine how well the company did in this particular fiscal Q2 2006, therefore, you need to subtract the latter from the former. Like so:

H1 2006

Q1 2006

Q2 2006

Cash from operations




Capital expenditures




Free cash flow




Q1 2006 data provided by Capital IQ. H1 2006 data derived from Oil-Dri's earnings press release. All figures in millions of dollars.

As you can see, Oil-Dri burned through $3 million in free cash flow in Q2 2006, a worse performance than it turned in last quarter, and a much worse performance than it managed one year ago, when Oil-Dri produced $2.2 million in free cash flow.

Needless to say, this is not at all what I expected to see. Trolling through Capital IQ's voluminous data mines, I had to go back as far as January 1995, when the company was $600,000 in the red, to find a fiscal second quarter in which Oil-Dri reported negative free cash flow. (The company came close to negative again in January 1996, but eked out about $100,000 in free cash flow).

Mind you, you won't find any mention of this cash flow slip anywhere in the financial press. Indeed, pull up the company's "headlines" on Yahoo! Finance, and you'll see that literally no one has written about the company's earnings report. A quick scan of the site's message board, however, finds that the posters there were pleased enough with the company's 9% sales growth and continued GAAP profitability.

For my part, though, I prefer to focus on cash profits rather than just accounting profits. By this measuring stick, the company fell short yesterday.

Fool contributor Rich Smith does not own shares of Oil-Dri.