Oil-Dri Corporation Of America

Good morning and welcome to Oil Dry Corporation of America's 2019 annual meeting of stockholders. My name is Leslie Garber and I am the manager of investor relations at Oil Dry. During the meeting, Today we will be covering the election of directors and two other stockholder voting items. Next will be the presentations and financial review, followed by time for Q&A. We ask that you hold your questions until the Q&A portion of the meeting. At that time, we will be taking questions from the live audience, phone lines, and from our webcast. Now it is my pleasure to introduce our General Counsel and Secretary, Laura Sheland.

Good morning, ladies and gentlemen. It is 9.30 a.m. on December 11, 2019. And I now, okay, correction, 9.26 a.m. on December 11, 2019. And I now call to order the 2019 Annual Meeting of Stockholders of Oil Dry Corporation of America. While I conduct the meeting, Tony Parker, the Assistant Secretary of Oil Dry, will record the minutes for this meeting. As you enter the meeting room, you should have received an agenda and the rules of conduct that will govern the meeting. We ask that you adhere to these rules. Stockholders who previously voted by proxy using the internet, telephone, or mail need not cast ballots today unless they wish to change their vote on their proxies. We will provide ballots to those who desire them at the appropriate time. Oil Dry has appointed Jerry Lane of C.T. Hagberg, LLC, to serve as the Inspector of Elections for this meeting. He is present and has taken the oath of office. Commencing on October 30, 2019, a notice regarding the availability of proxy materials or a copy of the proxy materials was mailed to all Oil Dry stockholders of record as of the close of business on October 14, 2019, which is the record date fixed by Oil Dry's Board of Directors for the determination of stockholders entitled I have an affidavit of mailing signed by Broadridge Financial Solutions, Inc., confirming the foregoing, and such affidavit is available for examination by any stockholder present here today. As described in the proxy statement, the purpose of this meeting is to elect nine directors from the board of directors ratify the appointment of Graham Thornton, LLP, as Oil Dry's independent auditor for the fiscal year ending July 31, 2020, approve an amendment to the Oil Dry Corporation of America 2006 Long-Term Incentive Plan, and transact such other business as may properly come before this meeting. As of October 14, 2019, the record date for this meeting, there were 5,388,672 shares I have an alphabetical list of the holders of such outstanding shares, and such list is available for examination by any stockholder present here today. As many of you know, holders of our common stock are entitled to one vote per share, and holders of our class B stock are entitled to 10 votes per share, and generally vote together without regard to class. A quorum is present at this meeting if holders of a majority of our common stock and Class B stock outstanding and entitled to vote are present in person or represented by proxy. Thus, the number of votes necessary to constitute a quorum at this meeting is 13,791,677 votes. Mr. Lane has informed me that there are more than such number of votes represented at this meeting. Therefore, I declare that a quorum is present, and accordingly, this meeting is properly convened and ready for the transaction of business. As described in the proxy statement, the first item of business is the election of nine directors. The proxy statement listed Oil Dry's nominees for director, each of whom currently serve as a director of Oil Dry. The nominees are Daniel S. Jaffee, Ellen Blair Shube, Paul M. Hinesley, Joseph C. Miller, Michael A. Nemeroff, George C. Roth, Alan H. Selig, Paul E. Succo, and Lawrence E. Washa. In accordance with Oil Dry's bylaws, stockholders are required to provide advance notice of their intent to nominate candidates for directors. No such notice was received. Therefore, I declare the nominations for directors closed. A motion to elect nine directors as described in the proxy statement is now in order.

My name is Dave Wojcicki. I am a stockholder of record. I hereby move that each of Daniel S. Jaffee, Elaine Blair Shube, Paul M. Hinesley, Joseph C. Miller, Michael A. Nemeroff, George C. Roth, Alan H. Selig, Paul E. Sukal, Lawrence E. Waschow be elected to directors to serve the 2020 annual meeting of stockholders or until their respective successors are elected and qualified.

My name is Bruce Sohn and I am a stockholder of record and I second the motion.

Are there any questions or comments on this motion? I hereby call the question and declare the polls open to vote on the motion. We will provide ballots to any stockholders who have not previously given their proxy or who desire to change their vote. Please raise your hand if you would like a ballot. Is there any... Stockholder of record who wishes to vote in person? I now declare the polls closed on this motion. As described in the proxy statement, the second item of business is the ratification of the appointment of Grant Thornton, LLP, as Oil Dry's independent auditors for the fiscal year ending July 31, 2020. Grant Thornton has just completed its sixth year as Oil Dry's independent auditor. The Audit Committee of the Board of Directors of Oil Dry has appointed Grant Thornton to again serve in the role for fiscal year 2020, and has directed that the appointment be submitted for ratification by the stockholders at this meeting. A motion to ratify Grant Thornton of Oil Dry's independent auditor for the fiscal year ending July 31, 2020 is now in order.

My name is Michelle Heaser, and I'm a stockholder of record. I hereby move that the appointment of Grant Thornton, LLP, as Oil Dry's independent auditor for the fiscal year ending July 31, 2020, be ratified.

My name is Bruce Patsy, and I am a stockholder of a record. I second the motion.

Are there any questions or comments on this motion? I hereby call the question and declare the polls open to vote on the motion. I now declare the polls closed on this motion. As described in the company's proxy statement, the third order of business is the approval of an amendment to the Oil Dry Corporation of America 2006 Long-Term Incentive Plan, to increase the number of shares of stock authorized for issuance thereunder. A copy of the proposed amendment was included as Appendix A to the company's proxy statement. A motion to approve the amendment is now in order.

My name is Stephen Klein, and I'm a stockholder of record. I hereby move that the amendment to the Oil and Dry Corporation of America 2006 Long-Term Incentive Plan be approved.

My name is Leslie Steffenshaw, and I'm a stockholder of record. I second the motion.

Are there any questions or comments on this motion? If not, I hereby call the question and declare the polls open to vote on the motion. I now declare the polls closed on this motion. I will now report the results of the voting at this meeting. As described in the proxy statement, a director may only be elected by a plurality of votes cast. The nine nominees who receive the largest number of votes will be elected. Mr. Lane has informed me that the nine candidates nominated by Oil Dry received the largest number of votes. I therefore find that each of Oil Dry's nominees for director has been elected as a director of Oil Dry to serve until the 2020 annual meeting of stockholders or until his or her respective successor is elected and qualified. Congratulations to each of you. As described in the proxy statement, An affirmative majority of the votes represented at this meeting is necessary for ratification of the appointment of Grant Thornton as Oil Dry's independent auditor for the fiscal year ending July 31, 2020. Mr. Lane has informed me that such ratification received more than a majority of the votes represented at this meeting. I therefore find that the appointment of Grant Thornton as Oil Dry's independent auditor for the fiscal year ending July 31, 2020 has been ratified. Note that representatives of Grant Thornton are here with us today and will be available after the meeting to answer any appropriate questions. As described in the proxy statement, an affirmative majority of the votes represented at this meeting is necessary for approval of an amendment to the Oil Dry Corporation of America 2006 Long-Term Incentive Plan. Mr. Lane has informed me that such proposal received more than a majority of the votes represented at this meeting. I therefore find that the Third Amendment to the Oil Dry Corporation of America 2006 Long-Term Incentive Plan, a copy of which was included as Appendix A to the company's proxy statement, is approved. You have now heard the results of the voting, and this completes the business to be conducted at this meeting. Since there are no other matters to come before this meeting, a motion to adjourn is now in order.

My name is Curtis Wellborn, and I'm a stockholder of record. I hereby move that this meeting be adjourned.

My name is Toni Mitchell, and I am a stockholder of record. I second the motion.

All in favor of the motion of adjournment, please signify by saying aye. Those opposed, please signify by saying no. The motion has been carried. It is now 9.36 a.m. on December 11, 2019, and I hereby declare the meeting adjourned. Thank you all for attending. I am now happy to introduce Dan Jaffee, our President and Chief Executive Officer. Please note that the business presentation and any other commentary by any of Oil Dry's employees today may contain forward-looking statements of expected future performance. Any such forward-looking statements are subject to certain risks, uncertainties, and assumptions that could cause actual results to differ materially. We highlight a number of important risk factors that may affect our performance in our SEC filings, including our annual report for the fiscal year ended July 31, 2019. We urge you to review and consider those factors carefully in evaluating the company's comments and evaluating any investment in oil-dry stock. Thank you.

Thank you, Laura. Good morning. I would like to start. Fiscal 19 was quite a year. I mean, those of you who followed the company, I'm getting signaled by Leslie. Thank you. Do I have to send it forward? There we go. And I figured it out. She didn't even have to train me. Those of you who filed the company during the year know we had quite a roller coaster ride in fiscal 19. We literally started the year August 1st, launching our new ERP system. And while we picked the right package and we did a lot of things right, as those of you who have been through this yourselves know, it never goes as planned. And while they call it a go live, we pretty much went dead. And the whole company had to join in and make things right or wrong. Thank you, Ellen. Paul Hinesley. Michael Nemeroff, George Roth, Paul Succo, and Larry Washoe. Did I forget anyone? No, I did not. So please, a round of applause for the board. Because I had the chance to interact with some investors who are here today, and universally everybody was very impressed with the talent in the Oil Dry team. And the board deserves a lot of credit. I mean, for years they've been pushing me to say, hey, let's keep upgrading. Every time someone leaves, let's take it as an opportunity to upgrade. Let's bring more training and give our current teammates the experience to up their skills. And so the results you're going to see today and going forward are a direct result of that team's effort. And I'm proud to be the leader of the team. And I would say my most important job is to put the team together and then help the team put our direction together, our strategies, our goals, So I always like to recognize the new vice presidents. I'd love to recognize everybody in the room. I think I just did in a general way. But specifically I'm going to recognize people who are either with the team but got promoted into a new vice presidential role or people that weren't even with us a year ago and are now in a vice presidential role for us. So first I'd like to start with Aaron Christiansen. So Aaron's been with us for, what, eight years? No, five years now. Is that about right? Where am I? Four years. There we go. I hate to take notes because I like to speak extemporaneously, but then I miss some stuff. But we've had some dynamic growth in our consumer area. And for years, let's say for the first 73 years of oil price history, our packaging was primarily in rail cars, big bags, 50-, 40-pound bags, bulk hopper cars, big one-ton bags. It didn't get to be until we launched lightweight litter and fresh and light and then got into private label lightweight. Thank you very much. He then went to Proctor and spent years at Proctor on working on such household names as Cascade and Febreze and Comet. And, you know, he's so committed to his job that one of the brands he worked on was Mr. Clean, and he did everything he could to look like Mr. Clean. So that's just how committed Aaron is to his job. And, in fact, let's just finish this off. There we go. Mr. Clean Aaron Christiansen. But he was promoted to VP over all North American manufacturing this year. Under his leadership, our North American operations team has been rebuilt, relocated, and refocused. I mean, all the plant managers have either been moved around or brought in new, and this team is really reinvigorated. Our safety, quality, and financial metrics are all headed in the right direction, and we're very, very fortunate to have Aaron on the team. So, Aaron, please stand up and be recognized. And not with us today is my brother-in-law. Let me get through this. Okay, there we go. Tom Kofsky. Our family dogs, my mom and dad had a dog, Daisy, and they had a dog, Lily, from the same litter. They're golden retrievers. They're 14 1⁄2 years old, if you can imagine. And when my father passed away, Carrie and Tom took over the stewardship of Daisy so that she could be reunited with her sister. And they've been doing great and Daisy's not doing so well anymore. But at 14 and a half, she's lived an amazing life. So Carrie and Tom rightly so are with Daisy. This is a tough day for them on that front. Tom joined us. He was a chemical engineer at RPI. He had worked at UOP. And he's now been with Oil Dry for 32 years in a myriad of jobs, started out in the ag division, then in manufacturing. And when we went live with J.D. Oracle, his unique skill set of being able to get very focused, very process-oriented, really made him invaluable to us. He has always been a loud proponent of processes over people, you know, making sure we have the right disciplines in place. And he really was just ahead of our time. We weren't ready, and we finally caught up to him with the launch of J.D. Edwards. So he's doing a phenomenal job as our VP of Global Infrastructure. Sarah Heitkamp is our Vice President of Nonfoods and E-Commerce. And she got her B of A from UIC. She then, we sponsored her, and she did a phenomenal job just recently receiving her MBA from Kellogg's Business School at Northwestern. She's had a great background in consumer packaged goods with Kraft, Mars, Vita Foods, and she's been with us six years. And, you know, we give her a couple of little accounts to cover, Walmart and Target, and, you Thank you very much. All right. Paula. Paula got her B.S. in accounting from Iowa, from Northern Iowa. Is that right? Okay. There we go. And her M.B.A. and Master's from Loyola. She then went on to Arthur Young, worked in public accounting, and has been with us for 19 years. She was our assistant controller before being promoted to vice president controller. And the thing I love about Laura, Laura, sorry, Paula. I love Laura, too. But I love everyone. Exactly. Exactly. She leads by example. And if she has any flaws, that she cares so much about her job that she literally, we have these things called our core values of we care. And the W is work-life balance. And she literally will forego the life part for the work when the job demands it. And it really demanded it these past 12 to 24 months. And so I'm forever in her debt. For stepping up, leading her team, and we couldn't have a better controller. So Paula, please stand up and be recognized. Next is Jessica Moskowitz. Jessica got her accounting degree in finance from Indiana. She got her MBA from Kellogg as well. She went to William Blair, where two of our board members are, and was an analyst at Blair and did a lot of research there. She then went to Kraft and rose to the level of brand manager, working on desserts like Jell-O and so forth. And she's been with us only two and a half years. And she has done such a great, great job jumping and leading our consumer products division. I'd say my only complaint is that she's making her predecessor look really bad. And by the way, those of you who don't know, I was her predecessor. So I was running the consumer division when we came up with Lightweight, and I really was hesitant to hand it off to anyone. Thank you. Thank you very much. Really, one or two at Publix on their supplier scorecard. They put it up when you walk in their lobby. They have a big screen, and it shows who their best suppliers are, and oil drives always one or two. Well, out of their 54, and they do it by size of the company, of the 54 suppliers that were being measured, after we went live, we dropped to 53 out of 54, if you can believe it. And Thank you very much. And her impact has already been incredible. She's an S&OP, sales and operating plan guru. We are now drinking out of a fire hose because we're trying to catch up to what she knows and Susan knows and people who have been out in the real world, Fleming. We're big companies. This is how they run their business. I mean, George, I'm sure this is how Clorox did it. Well, we were very people reliant, which is great, but people get sick. People take vacations. People move on, and then you're in big trouble. And so we are rapidly becoming very much forecasting, rolling forecasts, and helping to drive our supply chain. We are back number one at Publix, which is very exciting. And you see it in the results. Our sales are building and our costs are dropping. And so, Molly Vanden Heuvel, please stand and be recognized. Chief Operating Officer, by the way. So at this point in time, the best part about today's presentation, that's all you're going to hear from me until the Q&A. I want the team to get up in front of you, and you will see what great hands we are in. Before I do that, I'm going to show this video. This is an interesting thing for those of you who missed this. This ran nationally on Fox Business Network. And they were looking for people who have used the earth for innovation. And they stumbled across lightweight litter. And at first, their first entree was to go to Nestle because they saw that Nestle had this big business. And then they started to realize, well, wait a minute, there's this other company, Oil Dry, that launched two years before they did and had all sorts of patents around this. So they called me and said, do you have any innovation that you think would fit our show? They didn't lead the question. And I told them about lightweight litter, that how, you know, as the U.S. economy or category is adopting it, we're cutting the carbon footprint by up to 40%. Transcription by CastingWords Consumers don't put their tray on a scale. They don't weigh it in. They fill the two or three inches. So they use it by volume. But the fact that it was being sold by weight allowed people to put heavier and heavier density stuff into their boxes and make it look like the consumer was getting more when in reality they were getting less. So we turned the category on its head. We patented the whole thing. And now it's all going to be lightweight as we move forward.

Our next stop, Chicago. You know, our good earth provides many materials for building the buildings we live in and the minerals we use, like the mineral I'm holding in my hand right now, which is up to mankind to determine the source and the value of. But this mineral is not only good for mankind, it's good for our pet companions in the animal world as well, as you're about to see. Dogs may be man's best friend, but cats are just as important, providing needed companionship in our lives that can actually make them part of the human family.

Cats are the most popular companion animal in the country, and we know both instinctively how powerful the human-animal bond is, but now there's a lot of science to support both the physical and mental health benefits of having a companion animal in your family, and of course cats are wonderful companion animals.

One of the primary needs of animal shelters, including the Anti-Cruelty Society in Chicago, is absorbent cat litter that will not only do the job, but is also lightweight for the amount of product that needs to be poured every day.

Here at the Anti-Cruelty Society, we use 1,000 pounds of litter a day. And so it's a really important element of what we do, and it's also a really important element of caring for your cat to have a good quality litter that you change on a regular basis.

No one could be more passionate about caring for our pet companions and solving the problems for the plight of cats and their caretakers than Dan Jaffee, the President, CEO of Oil Dry. His company was able to create a cat litter that was lighter than anything on the market, an innovation that literally started a lightweight cat litter revolution.

So Cat's Pride is very unique in that we have this amazing mineral that Mother Nature put into the ground billions of years ago And it's very light in density. Cat litter was sold by weight, and everybody compared value on a price per pound basis. They thought if they were getting more pounds, they were getting more litter. This idea hit me as I was reading about liquid detergents. And I said, we can do this with Cat's Pride, only we're going to deliver the volume and reduce the weight. So I called the research center, and we have the cat litter folks, and I shared my idea with them. I said, now you've got to take this crazy idea... This innovation and research development takes place at the Nick Jaffee Center for Innovation.

An 18,000 square foot facility in Vernon Hills, Illinois, dedicated to research and development on the multiple uses of these unique clay minerals like bentonite clay.

Well, John, this is where the magic happens. This is the Nick Jaffee Center for Innovation named after my grandfather who founded the business. And we have scientists who come in every day to find unique applications for our mineral. How important is this? This is where the value is created, and so this is fundamental to Oil Dry's existence. We're only limited by our own imagination, so we have 20-plus scientists who come in every day. We have PhDs in clay mineralogy. We have DVMs, the vets, all the different areas of science. And we come in every day trying to find new and sophisticated ways to deliver value to our customers so they can help use our mineral to make the world a better place.

The minerals that Dan Jaffee is talking about are unique clay minerals called bentonite clay that are naturally light in weight with a wide range of uses, from crop protection to absorption to animal health. It's a mineral that has kept oil dry in business for nearly 80 years.

Believe it or not, it's a real solution. There's a lot of uses for this material. Our old mission used to be makes the world cleaner, safer, and healthier, and it can do all those things. Today, of course, it's creating value from sorbent minerals. We select the mine and we process it a certain way so it's very absorbent and it's lightweight in this case. That creates the value for the consumer. In this case, a clumping cat litter that is lightweight.

Oil Dry recognized that a lightweight litter product was a necessary feature that all litter products should have, not only helping animal shelters like the Anti-Cruelty Society, But also launching animal health donation programs like its Litter for Good program.

Cat's Pride has been donating cat litter to animal shelters for many, many years. So this program is giving back tenfold in terms of litter donations. So litter is the number one demanded item from shelters. And a lot of times it's not really donated heavily. And so this program helps those shelters free up resources. To pay for other programs such as vet bills, spay and neuter programs, adoption events, because these litter donations are provided to them at no cost and they can then use those dollars for other resources.

If it isn't grown, it has to be mined. And that's it. That's the only two ways to really naturally bring products to the American people and the world. And so all of us owe our existence to the earth. And Oil Dry in particular owns our entire business to the earth.

It's a mineral-based product that not only helps mankind, but I think you'll find the cats love the minerals this earth provides too.

Yeah, they produced that whole thing. They did a phenomenal job. So let's go here. So now we're going to move on to operations. Molly, please.

That's my mic on. There we go. So hello, everyone. Good morning. As it was introduced earlier, I'm Molly Vanden Heuvel, the Chief Operating Officer now. And I want to talk to you this morning about our implementation of the sales and operations planning, as I mentioned earlier. So I'll reference it as S&OP, Sales and Operations Planning. So those who may have heard of this term before in the industry, This is sometimes thought of just as simple supply and demand. And what we're doing with this is actually broader than that. We're actually implementing a process in the industry known for as integrated business planning. And so it really is, as it says here, it's a way we're going to integrate our business decisions from end to end. So what is it? It's a monthly cycle process, right? It really puts a lot of rigor forward looking and allows for one set of numbers, one set of assumptions for all of our business decisions. And it will be the foundation for us for future growth. It's really going to put some more process in place, more understanding, more consistency across the board. So as I said, it's a monthly process. It's forward looking. And it starts with each week has a different focus and a different area that we will talk about and we review on each month. So in the first week of the month is our portfolio management review. Sorry, is my mic coming in and out here? It can go here. Is our portfolio management review. So this is the way that we look at all of our new items to make sure that we have portfolio for future growth and new items. We're making sure that we're on track, on time, within budget, and we're finding ways to make sure we continue bringing new items to the industry. The second week of the month is our demand review, and this is a full commercial review where we look at starting at a buy-skew forecast, looking forward 12 to 24 months to really have a better understanding what are we going to sell, where are we going to sell it, where is it going to be from. The output of this is what we call the demand management statement. So then the third week of the month, we talk about supply. So the demand management statement is handed over to the supply group to do an assessment to determine what is the optimal way to deliver this forecast to the business. And in any one of these scenarios, I'll talk about it a lot, is when you look forward that far in advance and you're looking at a regular basis, It is an opportunity to either leverage potential opportunities very quickly, right? So you see opportunities early, you can act on them and making sure you leverage them and exploit them as much as possible. And on the flip side, it's an opportunity if you have a gap in your plan, how do you go find actions to be able to close that gap? So in all those areas. So in supply, we look for the most optimal way to deliver the forecast and to deliver the demand with looking for opportunities to exploit or gaps to fill. And in the very last week of the month, we really roll it all together. We consolidate all of that information into what we call the management business review. We bring in all the input from the other meetings as well as all of our financial integration to determine whether or not we have a plan that meets our overall goals and that if we have any gaps, we have plans on how to close those gaps. It's a one set of numbers, one set of assumptions. All of our decisions are documented and communicated across the board. And we have clear action plans coming from each of those meetings to determine what's the next steps we're going to take within the business. So that is a highlight of the S&OP and what the process looks like. So why S&OP and why now? Really, S&OP is a perfect time for us. So any time that you are looking to make major change within the organization or continue to grow the business, take it to the next level like we are, you really have to focus on three areas for implementation for change management. And that's people, process, and tools. So Dan talked about people, right? There's been a lot of really great changes coming. We've got really great people that we've leveraged for a very, very long time. You know, there's a lot of great things going on with people. So S&OP is that leverage in the process arena. So that is where, as I talked about, it is the way we're going to make our integrated business decisions. We're looking forward. What's the process we leverage to do that? And then last but not least is tools, right? We talked about we've spent a lot implementing JDE. It's a great tool. It's been great. We've got some good use from it, but we really want to make sure we exploit it and we leverage it to its full extent. And the S&OP process goes hand in hand with that to really leverage all of those. So we've got those three areas focused on. So what are some of the benefits expected with S&OP? So the first is really integrated plan visibility. So one maybe analogy in the S&OP process is a GPS system, right? So you say, where is it that you want to go? You punch it into the GPS, and it gives you the detailed directions on how to get there. And as you're looking at the GPS, you always know, here's my endpoint and mine, right? But there's these turns and exits and jigs and jags along the way. And the S&OP process is the one to keep us on track for those turns, but also to make sure it's always on the same course for the end in mind. And so that's probably the analogy there. The second one is it's very forward-looking in the 12 to 24-month horizon. So again, back to that analogy, if you're driving forward somewhere, you don't want to spend a lot of time looking in the rearview mirror, right? We really want to make sure we're looking forward and seeing what's ahead. You glance in the rearview mirror because you want to know where you've been, that you have valid assumptions moving forward, but you really want to make sure you move forward. Okay, so then what does that do for us, right? We see forward. We have our best estimate of what's going to happen. That helps us anticipate what's going to go on in the business, both the good and the bad, right? You really need to make sure you're honest with yourself and with your organization what is really going to happen. So you anticipate the good. You leverage the good. You anticipate the gaps. You put plans in place for that. So that's the anticipation. But then we work together. So that's what's really important about this. We have every function represented in this process. And so when we put these actions in place to say, what are we going to do, we make sure it's all together and it's in sync. And then the last one really is to orchestrate it. So we've got clear processes saying, here's the steps we're going to take, and we make sure we follow against those steps. So again, it truly is a business consensus plan. Where are we going to go? I say to close potential gaps. I should have said, too, is where to leverage potential opportunities. So really, earlier is better than later, and so it's always better to work through that. Okay, so that's a little bit about the S&OP process we're implementing here at Oil Dry. Okay, so the next thing I want to talk about is, after S&OP, is an area that I also want to talk about is supply chain and operations and what is our focus areas and priorities within this group Now, and I think this is for the next coming years. So as you can see, I coined it as the four Cs. You can talk about foreseeing something, but four Cs of customer, cost, cash, and capability. And we talk about it in this priority order as well. So as you can imagine, the customer is always the first priority. Not everyone in my organization is an external facing role. So we talk about what's the customer you're servicing and how do you make sure you're meeting the needs of your customer, which will meet the needs of the business downstream. We're also implementing much more rigor and data around customer service metrics. So we are looking at case fill rate, on-time metrics, measuring and, I'm happy to say, very much improving, as well as other customer service metrics along the way. So we've got a really good focus on the customer at this point. The next one is cost. So once your customer needs are met, we want to make sure we're also looking at costs and finding the best optimal cost for all of our processes and systems. And we've also had a lot of really great focus there. We've got a really broad portfolio of cost savings projects that we're looking at. There's more discipline in the process. And I will tell you, I'm very happy with the team, a lot of really big thinking. There's a lot of very creative ideas in how to optimize costs within our supply chain. And we have a very good process to track against that. And so we're obviously looking at costs in the main areas of logistics and warehousing, purchase price, and manufacturing costs. So once costs continue to focus, you also need to focus on cash and the cash conversion cycle. We've really been working that, managing our inventory management processes and parameters. We're really optimizing the inventory that we do have. making sure it's the best use and making sure our parameters match the capability that we have today. And then last but not least is capability. So we talked about that before, but you won't get the results and you definitely won't sustain the results unless you're really building capability in people and processes. So I talked about S&OP process, but we're also implementing lean manufacturing, or I should say focusing more on lean manufacturing as well as a lot of business system excellence. And we're also focusing on people along with that, and there are a few examples around some demand management that we're making changes to, as well as production planning, training, and system execution. So that's the four areas, four focus areas that I've got in the supply chain and operations group. And so far, I think the results have been good, and we will continue to move along in that direction. Okay, so with that, I'd like to hand it off to Mike McPherson, who's our VP of B2B Business. Oh, I'm sorry, they changed it. I guess I'd like to hand it off to Jessica Moskowitz.

So good morning, everyone. I am Jessica Moskowitz, the VP and General Manager of our Consumer Products Division. First of all, I want to thank Dan for entrusting me with your baby. I definitely feel like it is my baby now, and I'm excited about all the fun things we have. I wouldn't be here without such a strong team. We've been posting strong momentum and strong results, and it's all due to the great team that we have, and everything I present today is really. So thank you. Thank you to the team. So today I'm going to talk to you a little bit about our branded portfolio. Our branded litters and accessories continue to be a strong strategic push for us as we're looking to grow the business longer term. And part of this push is really continuing to evolve our brand and understanding what are the consumer needs and how can we better meet them over time. And a big initiative this past year has been a rebranding effort of our Cats Pride brand, which culminated in a packaging and rebranding launch on shelf this past May. Thank you so much for joining us. and influence their decisions. And so, you know, as we look at our packaging, we have to make tough decisions, right? Trade-offs about how we're going to talk to them and be really laser focused about the communication that we have on pack and in our messaging in general. And so, you know, as we were thinking about our packaging redesign, our logo redesign, we engage consumers. We partner with consumers to make those tough trade-offs Thank you so much for joining us. Some of the folks who have lived with the Cat's Pride brand for such a long time challenged us, is this really within the equity of what we believe Cat's Pride to be? And then thirdly, I would say, is it simple? Is it ultimately going to drive more purchase, people to drive more purchase in cat litter? And we think, yes, we absolutely did. So, you know, the changes were kind of, you know, broken into three key buckets. One, I would say, you know, this is kind of a summary of some of the specific changes that we made. I would say one, we just wanted to simplify, right? We have seconds to influence consumers. Let's make sure the communication is as simple as possible. Second, we thought a lot about our variety names, making sure that they were as impactful as possible and increasing differentiation between our better what we call our better white jug line and our green jug, our best green jug line. And then thirdly, I would say, you know, really trying to connect with consumers on a more emotional level. I think we're starting to do that in terms of, you know, infusing some fun into our new logo. And then also, you know, increasing the Litter for Good logo or our marketing messaging on the packaging as well. In addition to the logo and the new packaging showing up at shelf, this bright new look is definitely radiating throughout our messaging across everything we're doing. We have a Clear the Shelters partnership again this year where we partnered with Clear the Shelters in August. This is our long-term commitment to helping animals find forever homes, and what better partner than this nationwide partnering of thousands of animals with their forever homes. So I'll show you a little clip of Clear the Shelters and how Cats Pride messaging came to life within this important program.

Helps more shelter cats find forever homes.

And the cat person who completes them.

We also sponsored Cat Week this year. This is our second year to sponsor Cat Week with Ellen DeGeneres. This partnership just makes so much sense. Ellen really marries her fun, down-to-earth, very light-hearted approach as well as her caring for animals with our Litter for Good program. And so she always has a fun way to bring our brand and brand message to life. So with that, I'll show you a clip from the Ellen show this year.

Cat Week wouldn't be possible without our sponsor, Cat's Pride. For every green jug of cat litter you buy, Cat's Pride donates a pound of litter to shelters in need.

All right, and get this. Just because it's Cat Week, they're upping their donation at two pounds of cat litter for every green jug purchased.

All right. Okay. Thank you. Thanks to Cat's Pride, you're all getting a $150 Walmart gift card.

Last year it was just Gina, and this year they added Gino, and they are obviously showing us a new usage for cat litter by eating the cat litter, but really a lot of great brand representation for Cats Pride on the Ellen Show. So that's all I have. Really excited about all that we have going on on the brand and all aspects of our portfolio, and excited for much more growth going forward. So thank you.

Is this mic working? Yep. Okay. Today I'm going to spend a few minutes talking about how oil dry is creating value from our unique mineral in the new era of antibiotic-free livestock production. Typically when I meet with large producers of poultry or pork, they'll look at my business card and say, what in the world is a mining company Thank you for joining us. Doesn't matter if that fluid is vegetable oil, jet fuel, pickled brine, or increasingly the fluid that you find in the intestinal tract of an animal. All of these fluids have contaminants that different companies want to have removed. Our expertise for nearly 80 years has been finding ways to get our materials to remove these contaminants. And that's the role that Oil Dry has been focusing on with our investments in R&D in the last several years. We're combining our legacy expertise in material sciences. We're adding and augmenting to it expertise in life science. You merge these two things together and it has a lot of powerful leverage across several of our businesses. Capitor, odor control. What causes the odor? Bacteria. Agzorb used to be used, still is used, to hold synthetic pesticides. But increasingly, those companies are investing in natural microorganisms to give the same pest control that chemicals used to do. No one really wants to use chemicals anymore. So if you have to be able to hold a microorganism, our type of carrier is the perfect carrier. But you need to understand about living organisms and bacteria. That's the investment in the life sciences. And then lastly, in the area of poultry and swine and dairy production, When you go antibiotic-free, you need to find some alternative to be able to do that. That is about managing bacteria. So all of these businesses leverage in our investment in microbiology. So the trend in antibiotics, why has that created an opportunity for oil drying for our technology? The ban started in 2006 in Europe. It's subsequently spread over the years to other countries. They've banned the use of antibiotics that are used to promote growth, not to treat disease, which is a lesser use of antibiotics, but to make the animal grow faster, grow bigger, and weigh more. And since the meat is sold by weight, the producers make more money. Why we're playing in this space, I mean, why we're making investments, it's very common. A poultry company I was with yesterday said, well, you're making a, Daniel Jaffee, Susan Marie Kreh, Jonathan Blake, which oil dries technology plays a part. So it's a rapidly growing attractive market. So to understand a little bit about how our technology fits, I was talking about that with a shareholder this morning. You have to understand how antibiotics traditionally have been used so you can understand the value that our minerals play in that application. It was pretty simple in the world of livestock production for the past 30 or 40 years. Every ounce of food that is fed to a chicken or a pig contains a low dose of an antibiotic that's there no matter what. You just feed it to the animal continually, and when it reaches the end of its productive life, it goes into the food supply chain, everything goes well, no problems. If there is a disease outbreak, much like if you or I were sick, You have a veterinarian on staff. They diagnose the illness in the animal, and they treat the illness with a therapeutic dose of an antibiotic. The animal lives the rest of its productive life, enters the food supply chain. It's pretty simple. Feed them all antibiotics. When they're sick, feed them more antibiotics. When you remove the antibiotic, that's where our mineral plays an essential role. A little bit, again, a little bit of background. The slide looks busy, but it's easy just to think about. I'll use chickens as an example. Chickens will be walking around a chicken house. They'll peck on the floor. They pick up bacteria. There's bacteria everywhere in livestock production. The bacteria enters the animal. The next thing it does is it attaches to the intestine, colonizes the animal, multiplies, produces more bacteria, and when the bacteria get to a certain population, They begin to make toxins. It's actually the toxins, not the bacteria, that damage the intestine, cause the diarrhea, ultimately causes dehydration, and the animals die. Same thing that can cause a human to die. The actual causative agent are the toxins. Well, how are you going to produce animals without antibiotics and to be able to control this? Enter oil dries unique mineral, a perfect fit for toxin control. What we have, unlike typical montmorillonite, we were gifted with a unique natural blend that was formed million years ago of sheets of montmorillonite, but also this other component called opal, not the opal the jewelry is made of, a different type of opal. These are high capacity, high surface area clusters that when put in the hands of our scientists and our manufacturing experts, They can modify the surfaces of these minerals to make them more amenable to bind these small toxins produced by bacteria. And it's that simple. It took years to develop, so Mark Herpfer would say, not so simple, but it was simple now to manage the processes. By adding our life science experts that then looked at a little more in depth on the surfaces of our mineral and said, I wonder what else it might be doing, because the customers that use our products see tremendous benefit that even went beyond what we even understood initially. So they look at the application and they say, well, not only are these surfaces that you've activated bind the toxins produced by the bacteria, but actually, oh, sorry, went backwards. They've created a surface that bacteria preferentially prefer to attach to instead of attaching to the intestinal wall. And if the bacteria don't attach to the intestinal wall, they don't multiply, grow, produce toxins that then damage the animal. So it's a dual effect of our technology. We either bind the bacteria to reduce the stress that that causes on the animal, And if they should go on to grow and produce toxins, we ultimately will chemically bind the toxins and ultimately help alleviate the disease and the loss of productivity and the animal production. Minerals used to control digestive issues and bacterial-related diarrhea is not new. It's been used for decades. What is new? Oil dry is up the game. We found the right mineral, the right processing technology, The right amount of research that have greatly enhanced the ability of these minerals to be able to function in antibiotic freight. In order for us to take advantage of this opportunity and treat our mineral more like the functional active ingredient that it is, it required an investment in our new Richard M. Jaffee Center for Applied Microbiology, named after Dan's father. In light of the fact he had a strong passion for science, He was part of the first decision we made in a smaller microbiology lab that we built in our current innovation center. We're very excited about the future of our mineral and livestock production. Customers that use it see the benefit. We are coming off our first quarter where we had record sales of our antibiotic alternative products that are all built around our mineral technology. So thank you, and I look forward to any questions at the end of today's meeting.

Come up next. Good morning. Like Jessica, I am very excited to be here this morning. It's actually my first chance to come and talk to you guys at an annual meeting, so pretty excited about that. In fact, yesterday was my one-year anniversary at Oil Dry, and that went wickedly quickly, honestly. Thank you. And as I think back on that year, that year was really one that was both challenging and rewarding. And Dan talked at the outset about some of the challenges. I think he called it the rollercoaster ride of a new ERP. There's probably other words that can describe it, too. So you think about a company that goes live on an ERP, and it's one challenge to go from an ERP to a new ERP. But what Oil Dry did was go from a system or a basis of homegrown systems to an ERP. So this is the real first ERP experience for this team. And they really, really worked hard to make it work. So when I got here, it was challenging, but I was very, very impressed by the team. And we stand here a year later, and I said it's rewarding to see how far we've gotten. We've truly moved from survive to thrive. And we're positioned now where our ERP works for us and it serves our customers. I think, Dan, the end of the story you told about the customer scorecard is today we're back up to number one, right? So that story has a good ending. So we're well positioned to serve our customers, and now we're positioned to leverage this technology. So think about the story Molly told about the SNOP and integrated business systems. We're positioned to start driving process and really undermine it. Using data to help us make better decisions. So we're really in a great place, and that's why it's exciting. So I've got some financial data here. You guys were probably all really excited to hear this part of the presentation. I've got some key financial metrics, and it'll show you a decade's worth of history. And you'll see that oil dry has done well over that decade. But what I'm going to focus on is the most recent first quarter results. And what you're going to see is we knocked it out of the park. It's hard to argue Thank you for joining us. An all-time record for net sales in a quarter. That's pretty good momentum, right? Volume strong with 4% year-over-year growth. And let me just back up and talk a little bit about this net sales growth. It was in all our businesses. So Jessica talked about strong growth in our retail and wholesale, both in lightweight and private label. And Mike just mentioned, you know, strong record in animal health, but it was really business to business. We also saw strength in Bruce's business in the edible oils in the first quarter. So everybody was contributing to this really strong performance. If we look at net sales per ton, we see that grow from last year at $366 to $376 in the first quarter here of fiscal 20. There's a couple things there. Not only are we seeing an improved mix in our customers and in our businesses, but we're also seeing the impact of the fact that subsequent to the first quarter of last year, we did take some pricing out to the marketplace to compensate for some of the costs that we were seeing, and it stuck. Here's one we talk about quite a bit internally, gross profit per tonne. And you see really nice growth there from $89 to $105 per ton. So that reflects what we just looked at on the last page, the improvement in the net sales per ton, but it also reflects an improvement in our cost position. So last year, freight prices were higher than they are this year because demand was, following Hurricane Michael, there was a lot of demand for freight and we were paying higher rates. So that's a tailwind we've got now. In addition to that, during the first quarter of last year, as we were trying to satisfy our customers, we incurred a lot of what I call freight expediting costs, just trying to ship product to customers to keep their inventory in stock. And that's behind us now as well. Natural gas has been another tailwind for us. It was higher last year than it is this year. And we also ended up paying some customer fines last year that won't be reoccurring because As we've talked about, our ERP, our legs are underneath us now, and we know how to run it, and we know how to serve our customers with it. So all in all, a good story. Molly talked earlier about her team and their ability to identify cost-saving initiatives, and we're starting to see some of that come through as well in manufacturing. So some nice momentum there. So gross profit per ton drives a nice net income per ton. What else would be Thank you. Thank you. It's up over where it was a few years ago, but we closed the quarter really pretty much flat with where we came into the quarter. And dividends. This is certainly something our investors in oil dry come to count on. And you'll see that very consistent with our past practice, our dividend per share is up one penny in the quarter over a year ago. And as you look back in history, you'll see that'll translate to four cents per share across the year. Thank you. Thank you for joining us. Our cash from operations is adequate to fund all of these, the CapEx, the dividend, the R&D that is required to sustain and support our business. So I want to talk to you a little bit about opportunity. This is our outstanding debt, and during the first quarter of fiscal 20, we paid down $3 million, meaning we only have $3 million of debt left, and it's not even long term anymore. That payment will come up in August, and it's considered short term In addition to this, we have a $45 million undrawn revolving credit facility. So what does that mean? It means from a financial position, we are really, really well positioned to be able to fund key strategic or other growth initiatives that the company identifies and gets ready to move forward with. So with that, I'd like to turn it back over to Dan to take questions.

Well, good. You got a good cross-section of our business and got to see why I'm so excited about the future, because it's in such great hands with our team. I'd love to open up to Q&A, and we'll circulate a mic just so that the people online can hear you.

And are we going to be getting questions from... We're going to start with three questions from the live audience, then we're going to turn it over to the phone lines and have them ask three questions, and then we'll turn it over to the webcast. And we can cycle back if they're additional.

Yeah, I'm Terry Bray. I'm a shareholder. I've been a shareholder for a couple of years. Not making money yet, but I'm kind of impressed with what I'm seeing. A friend here introduced me to the company, and I'm still impressed. I really came here to understand the company. And you filled most of the blanks in during the presentation, but I've got one. Your material, is that something that's readily available, or can I just go out anywhere and dig it up? I mean, how common is the clays and things you're using in terms of availability in the world? Is it something you've got to hunt for, or do you just have to find a spot and use it? And what does it mean in California? It's something for... Yeah, well, it doesn't really matter. How common is this material? Patented in California, you were talking about your reserves. I'm not sure what that means, but how common is this material? Sure. And how would I recognize it if I'm driving around? You wouldn't recognize it.

So great question. Thank you. The question, for those of you who couldn't hear, is how common is the material? The material is very pervasive across the United States, but then the question is how economically viable is it to then mine it? And it's very difficult, very, very difficult. So we have over 40 years of proven reserves in every product line we have. And there have been no new clay plants built in the United States in the last 25, probably 35 years. There have been multiple closures, acquisitions, and reductions because, you know, the environmental compliance now around building a clay plant is very difficult. So once you're grandfathered in and you have that infrastructure, you can do it. But I don't see any new entrants coming on anytime soon. So good question.

If I could sneak one more in here.

Well, let's move it around, and then we'll come back around. Thank you.

Hi, Dan. My name is Dan Joseph, a long-time shareholder at Oil Dry. I have two questions, one now and one after to call in questions. First, I want to thank you for combining names, and every one of your cat litter products is now called Cat Pride. I used to never remember the name Fresh and Light, and I was always calling it Light and Fluffy. The question for now is, in that video produced by Earth, you show the mining facility, Cat Pride mining facility. One, where is it? My cats, Lillian and Sina, want to know and go there. And second, is that calcium betonite or sodium betonite? And the other question I'll ask later.

Okay. So that plant that you saw in the drone footage is in Ripley, Mississippi. All of our minerals are generally calcium bentonite. They have other mixes in them out in Taft. It's called diatomite, and it's a blend. And none of our minerals are sodium bentonite. So the sodium bentonites swell. Ours do not swell, and that's sort of the fundamental difference. So we mine and market calcium bentonite. Ethan.

Thank you. Thank you. Ethan Starr, individual shareholder, and I'd like to just say it's a pleasure to be affiliated with a company with so many fine people that I've met today. And my question is, what will it take to significantly increase B2B sales? Is it a matter of new products, greater distribution, or what else? What else?

I mean, I'm certainly willing to answer this question, and you guys can embellish it if you want. I think really all it is is patience. I think, you know, we had a great idea. We had a lot of great science, but we didn't necessarily have the great commercial team put in place to get it out the way it needed to be. We made a fundamental change, 8-1 a year ago. Fleming Maz, please stand just so they can see you. Fleming is the president of Amlin International, and he comes to us with a strong background in animal health and most particularly in commercialization and actually taking great ideas and great science and getting them out into the marketplace. It's one thing to have a great product, but you've got to have Thank you very much. And any sliver of that is going to be a big deal. Now, our go-to-market strategy for now is going to be trying to gain a greater share in a smaller geography than a tiny share in the whole world, because it's hard to defend multi-fronts. We all know that. So we're very focused. We're very happy we have the footprint in China. We're going to make that work for us. And we've got some other acquisitions. So Mexico, we're really focused. Latin America, we're very focused. Indonesia. So just patience. Just hang in there. You've been here this long. This would not be a good time to bail out. Anything you guys want to add? Yeah.

Okay, now we're going to open up the phone lines and take our first question.

Yes, hi, Bob. Can you repeat the question? It didn't come out very clearly. Do you believe that you're putting to place now sustained, speculant growth in animal health?

I'll jump in real quick, and then, Mike, you can embellish on me. I mean, look, Bob, what it takes is these guys are very slow to change one way or the other. So when they've adopted you, they're very slow to move out because they've done their homework. But they're not so quick to change what they're doing either. There's billions of birds. Their careers are staked on fractions of a penny. Thank you for joining us. And succeeding, then you'll see big growth. But it's, you know, a company are small, as small as we are. If we were GE, then it would look more linear. But, you know, we're so small that as any of these opportunities hit, you're going to notice it and it's going to be material. But to call it sustained and whatever, I forgot what the word you put on it. It's going to be more, you know, leaps forward as it happens. Well, when I refer to sexual approach, I mean...

Yes, as we put on more accounts, we will grow.

We're ready for the next question on the telephone line.

Okay.

Well, let's come back here. No questions?

Yeah, we'll come back.

Okay, good. I know Dan, what happened to Dan? Oh, there he is. Do you have one more question?

Yes. Oh, do we have one? Is there one on the phone line? No question. Oh, no question. You know what? We need to, why don't you ask your second question?

Oh, why don't you ask your second question?

We both do. You first.

Yeah, I'm getting my question preempted here. You're walking all over my second question, and I'm really not getting an answer. Animal health. It looks like that is a whole big, huge field that covers a lot of territory. You're basically a clay company. And I'm impressed seeing a clay company that's basically a mining company that's gotten off and doing things like animal health. But beyond just laying the stuff on the floor and keeping bacteria from growing, how, like your presentation, was inside of a chicken? I don't see clay. What's the mechanism? Somebody along the way mentioned edible oils, and I didn't hear that in the presentation on medical. But just what are we doing? Is that more clay, or is that a whole new field that we're going into to actually get stuff in the intestine?

Yeah, no, it's clay, and it's put in the animal feed itself. And, look, the fact that we're all here tells you that the clay is doing something. A caveman came out of the cave with diarrhea. He didn't run over to the Walgreens and picked up Pepto-Bismol or get antibiotics. But I'm serious. So look at all the other planets in the galaxy. They don't sustain life because whatever's on it, the mix of the oxygen in the plant, whatever there, it doesn't have the ability to sustain life. Earth does. So the fact that this product works doesn't surprise me at all. It would stun me if it didn't because we wouldn't be here if it didn't work.

You're really making something like Pest Bowl Visible. Well, not really, but we're just giving you an analogy. That's how you're getting it inside of the animal is by coming up with some sort of a thing they eat.

In the food.

In the food.

It's blended into their food.

So that's kind of well away from clay. It could be any number of things that are in there. Well. It could be. Okay.

We've done the science. Our clay is fundamental to the success of what goes on in the gut.

I'm impressed with the technology direction. That's all. Yeah. That's going to have a lot of potential in the future. Keep going.

Okay, so Dan wanted a question.

Hello again, Dan. This is Dan Joseph once again. Concerning marketing, I saw that clip of the Ellen Gineris show, but many people who have cats are at work, like all your staff, and don't watch daytime TV. However, they do probably listen to music on the radio getting ready for work. In particular, Classical music. And best classical radio station is right here in Chicago, WFMT, and many, many, many of their listeners own cats. So I would, and since Oil Dry is a local Chicago company, I would suggest you give a try on the early morning program to see what kind of response. At one time I owned a bike store and we promoted delivery of bicycles on Christmas Eve and it was very, very successful. This is 30 years ago and it might be successful also in promoting cat litter, but you must also indicate on the advertisement Thank you very much.

Oh, thank you. Trust me, our team does a great job of trying to figure out where to get our message and how to get it to them. If you do want to hear us on the radio, the last Saturday now of every month, we're on the 1030 old-time radio show, and we've been sponsoring that, and we give away a year's supply of cat litter, and we get a great reaction. Because WGN at night reaches 42 different states. So we are on the radio, but thank you. I think I'm going to call it to an end.

We have one question from the web, which we'll take. It is from John Baer from Ascend Wealth Advisors. He says, great quarter, great outlook. Congrats to all. I wonder if you have had any thoughts or discussions to have John Holden do a follow-up segment focused on oil dry's significant efforts in the animal health market. And do the chickens really prefer the strawberry-flavored Montmorillonite powder as shown in the slides? Just kidding, he says.

John, thank you, and yes, that's a great question, and if they are interested, we would certainly want to participate, so we'll keep that under advisement. Well, thank you. I mean, we had a great year, a great quarter. We got a lot of momentum going. I always like to tell the investors, look, you have to make your own decision. You get to buy, sell, or hold, and all we can do is try and be transparent with where we're going. Myself, personally, I've increased my holdings again this year. I think I've done it every year for the last 25 years. So, you know, I'm putting my money where my mouth is, and you guys just have to decide You know how you want to go. So thank you for your interest, and we will talk to you again on our investor teleconference in about three months.

Thank you.