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Oil-Dri Corp. of America (ODC)

Q2 2008 Earnings Call

March 10, 2008 11:00 am ET

Executives

Daniel S. Jaffee – President, Chief Executive Officer, Director

Andrew N. Peterson - Chief Financial Officer, Vice President

Charles P. Brissman - Vice President, General Counsel, Secretary

Rhonda Williams – Investor Relations

Analysts

Ethan Star – Private Investor

Robert Smith – Oil-Dri

Brad Evans – Heartland Advisors

James Schwartz – Harvey Partners

Operator

Good day ladies and gentlemen and welcome to the second quarter 2008 Oil-Dri Corporation America earnings call. My name is Shawn and I’ll be your coordinator for you today. At this time all participants are in a listen-only mode. If at any time during the call you require assistance please press *0 and a coordinator will be happy to assist you.

I would now like to turn the presentation over to your host for today’s call Mr. Daniel Jaffee, President and CEO. Please proceed.

Daniel Jaffee

Thanks Shawn and welcome everybody to our second quarter earnings teleconference. As always Andrew Peterson, our CFO is here. Charlie Brissman, our VP and General Council and Rhonda Williams who will be doing the Safe Harbor and this time it covers not only any forward-looking statements we might make but it also covers any kind of telephone numbers we might put out. So can we hear the Safe Harbor?

Rhonda Williams

I do apologize for the mistake that was made today and I will take the heat today for that.

On today’s calls comments may contain forward-looking statements regarding the company’s performance in future periods. Actual results in those periods may materially differ. In our press release and SEC filings we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We urge you to review and consider those factors in evaluating the company’s comments and in evaluating any investment in Oil-Dri stocks.

Thanks again. I’ll give it back to Dan.

Daniel Jaffee

Thanks Rhonda. Okay good. As always we’re going to cover the same format. Andy is going to take us through some of the details of the quarter. I may or may not have some comments to add to that and then we’ll open it up to some Q&A so we can cover the big issues that are on your radar screen. As always I urge you to prioritize. Try and get your most important one or two questions asked. After you ask one question go to the back of the queue so other people can get their question asked and everyone can get on with their day.

Andy will you cover the quarter for us?

Andrew Peterson

Sure. We had a strong second quarter revenue growth in both the retail and wholesale products group and the business-to-business products group. We had record sales of $58 million for the quarter, up 10% from last years $52.9 million. The increase was due to higher average selling prices and increased volume. We were disappointed in the 19.6% gross profit margin in the quarter, down from last year’s 21.7%.

Margins were negatively impacted by higher freight, packaging and material costs offset by the $507,000 reduction in cost of sales due to the sale of emission credits.

Operating expenses were 14.2% of sales, which was down from 16.4% as a percentage of sales in last year’s second quarter. Net income was 3.6% of sales, which was down slightly from 3.7% in last year’s second quarter.

EPS in the quarter was 29 cents, compared with 28 cents in the second quarter of fiscal 2007.

Through the first six months of fiscal 2008, $2.7 million of cash was provided by operating activities compared with $7.1 million in the comparable period of last year. This was due to a higher cash bonus payout in fiscal 2008 that was earned in fiscal 2007 and higher accounts receivable and inventory balances relating primarily to the 10% increase in sales.

Dividends of $1.7 million paid in the first six months of fiscal 2008 were up 11% in comparison with the prior year. Cash and investments at January 31, 2008, was $28.7 million, or about the same as last year’s $28.4 million.

Dan.

Daniel Jaffee

Thanks Andy. About the only color I would add to your comments is first of all when I back out the emission credits just for my own apples-to-apples comparison what I see is our margins dropped even more. Really they would have been about 18.7% without those numbers and so clearly dramatizes the impact of the rising cost that has had on our cost to goods sold. There is no doubt that costs are going up faster than our ability to raise prices.

However, on the good news side revenue was very strong. Our tonnage was very strong. And, Bud Seliq, our board member, always says nothing is good or bad except by comparison. Meaning you can’t really see something unless you compare it to something else. We did make over $2 million net income in the quarter which the $2.089 million we made was more than any quarter we made in last year of fiscal 2007. We didn’t break $2 million once in fiscal 2006. So it just shows that we have raised the bad rightly so and we hold ourselves to a much higher standard, continually growing as we go forward.

Really our major source of discontent was twofold. One was in comparison to the first quarter which was such a strong quarter. And then two just generally we want to be delivering incremental value and to do that we have to show a greater profit per ton sold or however unit of measure you want to use. So when you look at the margins and you see them drop down that is very disconcerting. That’s why, as we put in the news release, we are very focused we already had price increases in the price line, we have been taking price increases but obviously they weren’t enough. I’ve talked about our average price per ton and it was very strong in the quarter. It was over $220 a ton in the quarter and a year ago it was under $214 so it was up. It just wasn’t up enough to cover the incremental costs.

So it is our commitment to go back out into the marketplace and share with our customers that we are doing everything we can to control those costs that are in our control. Our operating efficiencies was very excellent. Our usage of various inputs was excellent but the costs of some of those inputs – anything that is resin based, petroleum based, those kinds of inputs they went up dramatically. Fortunately we took some of the volatility out with our hedging program which as we said a million times it is never about timing the market or beating the market. It is all about taking out some of the volatility. So we do have somewhat of a buffer going forward but our net costs are up and we need to be raising prices.

Well Shawn that is all for my introductory comments and I think what we’d like to do now is open it up to our investors and see what is on their minds.

Question-and-Answer Session

Operator

Sure. Ladies and gentlemen if you’d like to ask a question please press *1. If your question has been answered or you’d like to withdraw your question please press *2. In the interest of time please limit your questions to one per caller. If you wish to ask a follow-up question you may re-enter the queue by pressing *1. Please press *1 to begin.

Your first question comes from the line of [Ethan Star], private investor.

[Ethan Star] – Private Investor

Good morning. Just wondering…I know that Oil-Dri is developing a couple of non-medicated additives for animal feeds and I’m wondering what you can tell us about those products and when will they generate revenue?

Daniel Jaffee

Again, just the usual. I’m a broken record but I say it every call so I’ll say it again. Maybe you are trying to see if I’m nothing if not consistent. But we’re never going to dance until we get into the end zone. So until we have something material there is no reason…it is not going to help you as an investor. I’m not even referencing this particular thing that you’re referring to, I’m just saying in general with this product. While it may be somewhat frustrating from an investor’s standpoint, long term it is really in your best interest that I don’t signal to the competition which play we’re going to run before we run it. So no comment on that.

[Ethan Star] – Private Investor

So since it is no comment can I ask another one or do you want me to go back in the queue?

Daniel Jaffee

You can ask another one unless it is about new products and then you can get back in the queue.

[Ethan Star] – Private Investor

What can you tell us about Project Snow Drop and what might it mean as far as increased sales for Oil-Dri?

Daniel Jaffee

I can’t answer that one either. You’re two-for-two Ethan.

[Ethan Star] – Private Investor

Okay I’ll get back in the queue.

Daniel Jaffee

Okay thanks.

Operator

Your next question comes from the line of Robert Smith with Oil-Dri. Please proceed.

Robert Smith – Oil-Dri

Good morning. So can you tell me about the timeline for implementation of the price increase that will get you back to where you want to be?

Daniel Jaffee

Yeah. I mean some of them are contractually driven. It has been a commitment of ours over the last five years that any contract over a year in length has a PPI escalator mechanism in it which is something the U.S. government put in place so that companies could do business over the long haul. So those things are automatically driven. We’ve got a big one going up at the end of April, another one going up at the end of June. So those are going to kick in as they kick in. Interestingly enough, the PPI is up significantly in the last twelve months. We’ll see what this next month of data does, but everything we’re seeing is it is something north of 6% something less than maybe right around 7%, something in that range is what you’re looking at year-over-year which is telling you costs in this country are going up significantly at the producer level. So those are going to take care of themselves.

Anywhere where we are sort of at-will lets call it then oftentimes because we take such a long-term perspective of pricing we take annual and if it is a really dramatic type season for increases we’ll take semi-annual increases. We try not to just react to daily blips in the price of oil or something like that and put what we call put our customers into cardiac arrest.

We buffer it. We wait and see what happens. We do our forward buying and then we go ahead and pass along the increase to our customers, or if there were a decrease we would pass that along. It just hasn’t seemed to happen since I’ve been running the company – the last ten years.

So we’ve got significant increases coming online towards the end of the third quarter into the fourth quarter and then really our annual increases pretty much time – a lot of them anyway – with August 1. So you’ll have some big ones coming with the new fiscal year. So I would say if you are going to try and measure progress you may or may not see a lot of margin progress in the third quarter. You should see some in the fourth quarter but again this is hoping that the cost pressures are going to be sort of plateauing. If those keep going up more than our price increases well then you’re not going to see that. And then you’ll see hopefully some return to more historic margin levels by the first quarter of fiscal 2009.

Robert Smith – Oil-Dri

Okay. That’s fair. I’ll get back in the queue.

Operator

As a reminder ladies and gentlemen, please press *1 if you have a question.

You have a follow-up question from the line of [Ethan Star]. Please proceed.

[Ethan Star] – Private Investor

Yes. I really would hate to see where Oil-Dri would be today had you not brought in the whole procurement team a few years ago and I’m wondering if the procurement team is still finding many ways to save money?

Daniel Jaffee

Yeah. We have a lot of discussions. Brian Bancroft is our Chief Procurement Officer and in a rising type environment like this, as he points out, it is really their job in many cases to just chip away at the increases. So it is sometimes hard to measure because you are taking an increase less than you would have otherwise taken and we absolutely believe that to be the case. Our procurement process is very robust and they go through a whole strategic sourcing discipline to find strategic suppliers and then to the best of both parties’ abilities share information so that we can help them save money and they can in turn pass some of those savings back to us. So yeah it has been a major victory for the company both in terms of the procurement and in terms of the spillover effect around the company. But a lot of it doesn’t necessarily show up the way you’d like it to show up in the bottom line in a rising cost environment.

[Ethan Star] – Private Investor

Okay. Related to that question, would it be possible to switch the rosin used in your packaging to a rosin that uses less petroleum in the manufacturing process and thus costs less? Or has that already been done?

Daniel Jaffee

I think you mean resin.

[Ethan Star] – Private Investor

Resin?

Daniel Jaffee

Yes, resin. Well baseball season is right around the corner and rosin is always a big part of the baseball season. But yes. Absolutely. They look at can they take grams out of the package…can we go to maybe more environmentally friendly/cheaper packaging. Jugs and pails are pretty plastic intensive and very resin intensive. So we are absolutely looking at those things. Continually looking at it. The balance is that if you take too much out of it and it gets too weak now it either has a bad appearance on the shelf or you increase your damages and now the account is unhappy with you. So you’re always trying to strike that balance between strong enough but not too strong and putting excess dollars into the package.

[Ethan Star] – Private Investor

Any chance of going back to boxes or not?

Daniel Jaffee

I hope not. It’s hard. The box…our foray into boxes was not all that successful. If you’re running whatever pound, 14 pound Tide, and that line gets to be setup 24/7, 365 days per year, it is pretty easy to get operationally excellent. If instead you are continually changing the footprint or changing the skew because you don’t have those 365 day runs, things like box lines tend to really not appreciate the changeovers. Bags are forgiving. Boxes just weren’t. So until the whole market went a certain way I’m not sure we would follow again.

[Ethan Star] – Private Investor

Okay. That’s kind of the impression I had. I just wanted to ask. It would be nice to save the money if it would work.

Daniel Jaffee

Yes that’s true. We just see our efficiencies it was so bad it was hard to find that savings.

[Ethan Star] – Private Investor

Okay. I’ll go back in the queue.

Operator

Your next question comes from the line of Brad Evans from Heartland. Please proceed.

Brad Evans – Heartland Advisors

Good morning everybody. Could you just comment Dan on the SG&A run rate in the second quarter? You came down about 5% year-over-year and it was down nicely sequentially. Is that $8.25 million a good number we should be thinking about on a go forward basis for quarterly SG&A?

Daniel Jaffee

I’ll take it from a general standpoint and then Andy if you have any specifics you may want to speak up. Because I always do it just as a matter of discipline. I’ll go into the Yahoo chat room and see what are the investors chatting about before I come in to the call. There was some bantering back and forth about this very issue. The big driver really is the bonus accrual. When we have big earnings you’re going to have a bigger bonus accrual. When we have not so big earnings you’re going to have not so big a bonus accrual. I don’t know if Andy will agree or disagree with me. But to me the biggest delta of change in the SG&A was probably the bonus. Is that correct?

Andrew Peterson

Yes.

Daniel Jaffee

So is it sustainable? I hope not meaning it is running with earnings.

Andrew Peterson

I think kind of where we are for six months would be a better look for kind of how we are with operating expenses.

Daniel Jaffee

Yeah. We have such a huge first quarter that the bonus accrual had to be beefed up commensurately and then the second quarter was, as we put it in there, disappointing so the bonus accrual wasn’t near what it was in the first quarter.

Brad Evans – Heartland Advisors

I’m sorry, so did you reverse the bonus accrual in the second quarter or did you just not accrue for it?

Andrew Peterson

We accrued less.

Daniel Jaffee

You would accrue less.

Brad Evans – Heartland Advisors

You accrued less. Okay. I’ll get back in the queue. Thank you.

Operator

Your next question comes from the line of Jim Schwartz with Harvey Partners. Please proceed.

James Schwartz – Harvey Partners

Hi guys. Could you touch on international sales? In past calls you talk about the moats and how the weaker dollar makes those moats even stronger and I’m just curious what international sales look like to you on a go-forward basis and just maybe if that could buttress up the gross margin a bit and on the last call you kind of talked about it not being unreasonable to shoot for a 25% gross margin. I guess between late November and now there has been a pretty big impact of raw material prices and freight costs for the most part for you guys. Any touch on the goals that you set last call – if it has changed at all and also the international piece of the business. Thanks.

Daniel Jaffee

Okay. I’ll take the first part first. International – I think the best way to look at it from an Oil-Dri standpoint is north and south our business is very strong so into Central and South America and so forth we are finding that those markets very much are responding to both the product offerings we have in terms of value and then the weakening dollar is certainly helping in those markets. Heading east we are not seeing it so much but I think the bigger drag is not the ocean, it is the regulatory environment. So those markets are more closed, however you want to talk about it, to our products and while they are interested in our products certainly from a weakening dollar standpoint, due to the regulatory environment and so forth they are not taking a huge advantage of it. Charlie?

Charles Brissman

Yeah. I mean Jim for products in and around the food chain if you are looking to bring new products into the European Union these days or expand existing sales and so for us bleaching earth in the European Union as the Europeans sort of approach risk in the food chain from the cautionary principle standpoint rather than a risk based standpoint, we are finding it is just tougher to expand the sales base in the EU. We are going to continue to work at it but for years and years thinking of the U.S. as the most rigorous regulatory framework the Europeans are clearly in first place for better for worse when it comes to food chain issues and that is a big part of where we would see expanding sales in the EU.

Daniel Jaffee

And regarding the margins by memory and if I’m wrong then you’ll have to recount what I’m saying, my memory is that when you layer in the impact – the hopeful impact – of the new product it would not be unreasonable to think that we could see 25% but with the core business I’m not so sure…I think I said the high end of the goal might be, but we were really hoping to get back to around the 23 range. I’m not sure I said that specifically but I think I did talk about the new product.

So I think it is still reasonable that if and when we are successful with these new products as to the extent that they have a greater and greater impact on the business getting to a 25% margin is a very realistic goal in the mid to long-terms. Call it 24 months and beyond. In the short run that would not be realistic because the new products are not going to have as big effect on the short-run and as we have seen the costs are going up faster than our ability to raise – our ability I suppose is the way to put it – our ability to raise the prices. I guess I would temper the ability with more our desire, meaning we make the conscious choice as I said earlier not to just knee jerk and jam our accounts every time something jumps. You are right diesel is at an all time high and so with a freight intensive business that is a huge deal. Many of our businesses you can have fuel surcharges so we can at least share some of those costs with those customers. That is mostly on the B2B front.

On the consumer retail front that is just not the way they handle cost increases. You can not put through a fuel surcharge. They’ll just deduct it and penalize you for having a nonconforming invoice. You really just have to raise your price. So in some areas we are the price leader and we are out there raising prices. And other areas we are more of a follower and that is just the way it is going to be. We’ll have to wait and see.

James Schwartz – Harvey Partners

Thanks.

Operator

You have a follow-up question from the line of Robert Smith. Please proceed.

Robert Smith – Oil-Dri

Could you give us some color on the cat litter market? What’s going on there and our competitive position, market shares, things like that? What’s happening that is new?

Daniel Jaffee

New? It is still dominated in dollars by scoopable. The pounds I think the scoopable pounds have actually eclipsed the coarse pound. It is hard to tell these days because the single largest player is Wal-Mart and they don’t share information. So we see our piece of the Wal-Mart business so we can kind of add that to the numbers. But I think the estimate now is that 20-23% of all the cat litter sold in America is being sold through Wal-Mart. So when almost a quarter of the market is not reporting and you add in Sam’s Club which is their sister company and they don’t report. And a lot of the other players, the Petco’s and the PetSmart’s are not reporting – which is my understanding – maybe something has changed but I don’t think so. None of the major outlets in cat litter are reporting. So when you get this scanner data you are getting a very skewed look. You are pretty much seeing the historic avenues of sales but not the current avenues of sales. The figure where the growth has come in the last ten years it has been at the pet specialties, the Petco and the PetSmart, it has been at the mass merchandise players like Wal-Mart or club like Sam’s, or even and again these guys don’t report either, the dollar stores; the Dollar General the Family Dollar and the Family Tree.

So it is hard to answer your question. We can give you sort of anecdotal stuff. It is just not nearly as transparent as it used to be.

Robert Smith – Oil-Dri

Any scuttlebutt, any new products, anything like that which might affect the market?

Daniel Jaffee

Nothing in terms of format changes, meaning all of a sudden someone’s going away from clay. Everyone has their new items. We have some new items. These are product line extensions. There is nothing revolutionary. They are pretty much evolutionary. The same can be said for our competition. It seems that the competition is at the moment as much or more focused on packaging as they are on the actual product and that makes sense because in every usage and attitude study we’ve done in cat litter people are more size loyal and package loyal than they are brand loyal. Meaning if they go into a store looking for, just make it up, a 20 pound bag of X brand if there is not a 20 pound bag of that brand but there is a 20 pound bag of somebody else’s brand they are more likely to leave with that than they are to leave with a different size of the brand they are looking for. They really can’t even recall most of them the brand. They can sometimes recall the color of the package they buy, but they absolutely can recall the package. I either buy the big size, or I buy the jug or I buy the pail. They are way more size and package loyal than they are the brand.

So it is never totally quiet on the long-term front, but at the moment there is nothing evolutionary going on in cat litter.

Robert Smith – Oil-Dri

Thanks. I’ll go back in the queue.

Operator

As a reminder ladies and gentlemen please press *1 to ask a question.

You have a follow-up question from the line of Brad Evans. Please proceed.

Brad Evans – Heartland Advisors

Dan I was just curious with [RO Prof] prices where they are today and the probability of some marginal acreage perhaps being planted this year – CRP acreage – do you see anything on the horizon that might incite some demand on the AG carrier side?

Daniel Jaffee

The traditional AG carrier business is in a pretty strong decline because of GMO (genetically modified organisms). However planting more acreage does take some of the slope out of that decline there is no doubt about it. We’re really in the best position to benefit from that. They have to set aside a certain percentage of their acreage every year so that you avoid resistance on the GMO. I think it is 15-20% on the acreage. So the more acres that are planted the more set aside acres there are going to be. And then you still have a certain percentage of the farmers who have not adopted GMO because they don’t believe in the technology, they can’t afford the technology or they are not seeing the benefits of the technology for whatever reasons they are not. So a bigger pie is good for us but our share of that pie is going to keep declining.

Brad Evans – Heartland Advisors

Okay thank you.

Operator

You have a follow-up call from the line of Ethan Star. Please proceed.

[Ethan Star] – Private Investor

Yes. A couple of years ago you increased capacity and a higher margin product line by 50% and I’m wondering how much of that additional capacity are you now using?

Daniel Jaffee

That has been, and I say it is better to be lucky than smart, that has been great for us. That business is doing very well and without that capacity we would never have been able to deliver near the results we’re seeing. How much of it is left over? Again that is just tipping off the competition as to how much we can respond to new business or not. Suffice it to say we would not be in the position we are in today if we had not made that investment. Like I said you’d love to think it wasn’t luck but at the end of the day you are building in advance of the orders. No one is saying, “Hey if you build that thing I’ll wait and then I’ll give you all my business.” It’s like the old adage you can’t do business from an empty wagon.

So we had to put the capacity in place so we had space in our product line, space in our team and that has been paid off nicely.

[Ethan Star] – Private Investor

Okay. The 10Q noted that you gained new business that included [s/l outations] in the bio-diesel production industry and I’m wondering what is the potential for further growth in this area?

Daniel Jaffee

Yeah I mean that has been nice and I would say the more adoption there is to bio-diesel the more chance there is for us to participate in that market. So that has been a good thing.

[Ethan Star] – Private Investor

What product is being used for that?

Daniel Jaffee

A multitude of products.

[Ethan Star] – Private Investor

Okay. I’ll get back in the queue.

Operator

You have a follow-up question from the line of Brad Evans. Please proceed.

Brad Evans – Heartland Advisors

Dan you have been…the balance you have been holding roughly $3-$4 share in cash for I guess going on seven or eight quarters now. How do you prioritize the use of that cash going forward between raising the dividend or perhaps buying back stock or acquisitions I guess?

Daniel Jaffee

I guess if you had to make me prioritize those three at the moment anyway acquisitions would be at the top of the list. Dividends are always very important. Andy and I have had a lot of discussions…Michael Nemeroff who is a board member of ours who is well in tune to the MNA market has helped me understand that a strategic buyer sitting on both cash and available leverage is going to have opportunities in this marketplace. Private equity guys are reeling the credit that they used to be able to open a spigot and have it slow rode to them. That spigot has been dialed back if not completely shut down and so the ability of the financial guy to outbid the strategic guy and run up the multiples at the moment is seeming to be curtailed.

So we are going to continue to be disciplined. We’re not just going to spend money because it is sitting in our pockets. On the other hand we are going to be opportunistic if we can if there is value to the seller and value to the buyer then acquisition would be great.

So if I had to prioritize the three I would say acquisitions with dividends…you know we’re not going to cut the dividend earning or anything like that. We have a history of always maintaining or growing it. We’ve been covered by Safe Harbor so I can say that I don’t see any change in the near term from that history. Then stock buy back I think we still have some shares authorized that if we wanted to get opportunistic there we could do that as well. But ranking the three that would be my perspective.

Brad Evans – Heartland Advisors

Could you just talk about the MNA pipeline? What does it look like qualitatively today versus say six or twelve months ago?

Daniel Jaffee

It’s going to be interesting because let me analogize it to you and I don’t have a crystal ball but my analogy is it is like the housing market right now. If you are trying to sell your home and you were sitting on it six months ago you were thinking it was worth X and today it may be worth 10% less than X but it is really worth about 20-25% less than X and so are you going to be willing to take that haircut and sell your home? Don’t know. But that’s sort of what I’m seeing in the acquisition world is that while we are in discussions like we always are on strategic acquisitions the sellers have not necessarily lowered their expectations given today’s market. So they can decide not to sell and just wait for the market to come back around, which may or may not happen that is going to be the call, or they can hope to find a buyer who is willing to buy today assets at six months ago or year ago prices. So who knows? Like I said I don’t have a crystal ball. But that’s my concern about whether we will or will not be able to complete any acquisitions in the near term – whether or not the sellers are adjusting to today’s market.

Brad Evans – Heartland Advisors

I’m sorry just to dovetail on that, with respect to the cash and the short term investments you have no exposure to auction rate securities?

Daniel Jaffee

None.

Brad Evans – Heartland Advisors

Okay. Thank you.

Operator

You have a follow-up call from the line of Robert Smith. Please proceed.

Robert Smith – Oil-Dri

This is a comment on something that was referenced before. I’d like to see you guys continue to annually increase the dividend. Then Ethan’s question about bio-diesel…is this now a seven figure revenue product? Is it over $1 million?

Andrew Peterson

I don’t know. I would hate to answer that and be wrong.

Daniel Jaffee

I don’t think…I’d rather not be that specific.

Andrew Peterson

I don’t think we break it out.

Daniel Jaffee

No we don’t.

Robert Smith – Oil-Dri

Okay. Anything new in the specific areas that I questioned you guys last quarter? [s/l Cam turner, Drick?]

Daniel Jaffee

No. Nothing new there.

Robert Smith – Oil-Dri

Okay. Is there any timeline on the introduction of new products? Are we going to see anything this calendar year?

Daniel Jaffee

Well we’ve already rolled out some new products on the consumer end and we talked about we’ve run some ads so it is not anything…

Robert Smith – Oil-Dri

Yeah I’m thinking more on the B2B.

Daniel Jaffee

On the B2B side still targeting for the end of the fourth quarter with no material impact on this fiscal year but hopefully a material impact or at least reportable impact on the next fiscal year.

Robert Smith – Oil-Dri

Okay so when you introduce this product when will you be able to share some information with us?

Daniel Jaffee

Trust me we are all in the same boat so you don’t want me to share with you any sooner than…

Robert Smith – Oil-Dri

Yeah that’s what I’m asking you.

Daniel Jaffee

I don’t know. I can’t tell you that. I don’t know the answer to that question. As soon as I’m kind of legally required to share with you I will. Until then I’m not going to because it is just going to mount defense against our efforts. So what is the point? It doesn’t help you. It doesn’t help us.

Robert Smith – Oil-Dri

Okay well put me down. I’ll buy one unit.

Daniel Jaffee

You can have it.

Robert Smith – Oil-Dri

Thank you.

Daniel Jaffee

Well I guess this is good. We have hit our new half-hour format and I hope everyone appreciated getting the queue in advance of the call. That was the first time that has happened. We changed the schedule around so at least you had the benefit of the queue versus we have the call and then the queue comes out and we have a bunch more questions and you have to wait another 90 days to get it. So the next 90 days what we are focusing heavily on is really everything that you guys surfaced during the call. We got to get our prices up. We have to control our costs. We want to keep taking advantage of opportunities as they present themselves to us and luckily, or not luckily, it is due to a lot of discipline our balance sheet allows us to do that. We did not benefit from a lot of the financial derivatives that maybe some of these companies for a short period of time benefited from, but we are not suffering from their rapid decline either. We are, I own almost 100% U.S. Treasury, so that is where we’ve decided to park our cash and it has always pretty much been parked. We have a little bit in some other mutual funds but even that I think was treasury backed. So today’s exposure is zero and we have nothing going there so it’s like we always talk about. We are the ultimate turtle in the tortoise and the hare race but we never apologize for that because the tortoise wins the race every time and we believe that through our disciplined approach towards long-term focus on creating value from absorbent minerals we are going to be in a very good position to take advantage of those opportunities.

So thank you for your patience. I know it must get frustrating from time to time. Some of our activity may look glacial in nature but in reality we are making a lot of progress. We’ve come a long way but we still have a long way to go. We still feel the best is yet to come. So we will talk to you again in 90 days and thanks very much.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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Source: Oil-Dri Corp. of America (ODC) Q2 2008 Earnings Call Transcript
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