Good day, ladies and gentlemen and welcome to the fourth quarter 2009 Oil-Dri Corporation of America earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Daniel S. Jaffee, President and Chief Executive Officer.

Welcome everyone to our fourth quarter and fiscal 2009 year-end teleconference. Joining me, as usual, is Andy Peterson, our CFO, and Charlie Brissman, our VP and General Counsel, and Rhonda Williams, who handles all our Investor Relations as well as our Safe Harbor provision.

That's right, so I'll take it from there. Again, welcome, everyone, and thank you for joining us. On today’s call, 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 our 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 stock.

Before I turn it over to Andy for some details, just high-level, you know record sales, record earnings, and given the fact that that occurred in an economic environment that some say was the toughest since the depression, very, very impressive performance turned in by the team and again validating the value of the sorbent mineral deposits that we control and process and market. So it's an especially good time to be Oil-Dri. We're appreciative and proud of that and I'm happy to turn it over to again and he can give you a lot more of the details.

We had sales of $55.9 million in the quarter, down 6% compared with last year's $59.5 million. We achieved record sales in fiscal 2009 of $236.3 million, up 2% from the prior year. We had a gross profit margin in the quarter of 21.2%, up from last year's 18.9%. Higher average selling prices and lower freight costs more than offset reduced volume. Operating expenses in the quarter were 14.5% of sales, which was up compared with 13.4% in last year's fourth quarter. The higher percentage was primarily due to lower sales. Our effective tax rate in the quarter was 30% of pre-tax income, up from 22% last year. For the full year, the tax rate was 28% compared with last year's 26%. Net income in the quarter was 4.6% of sales, up from 4.1% last year. We achieved record net income in fiscal 2009 of $9.6 million, up 6% from the prior year. EPS in the quarter was $0.35, up 3% compared to $0.34 last year. We achieved record EPS in fiscal 2009 of $1.32, up 6% from the prior year. Cash provided from operations in fiscal 2009 was $15.8 million, up $4.5 million from last year. Capital expenditures of $15.3 million were up $8.0 million compared with last year. The increase in capital expenditures was primarily due to the construction of a new plant designed to manufacture engineered granules. Debt payments of $5.6 million were up $1.5 million compared with last year. Purchases of treasury stock were up $600,000 compared with last year. Dividends paid of $3.7 million were up $300,000, or 9% compared with last year. Cash in investments at July 31, 2009, was $19.8 million, down $7.9 million compared to last year. At the end of fiscal 2009, our debt, net of cash and investments, was only $1.7 million compared to $89.6 million in stockholders' equity.

Very positive financial results. A lot of qualitatively going on positively as well. Would like to respond, as always, to your questions rather than try and guess what's on your minds and your radar screens. So I would like to open it up to Q&A but as always, I would like encourage everyone to prioritize your questions. You know we hold the conference call to 30 minutes and so ask your most important questions first and if you would, in respect to other people's time, ask one and then get to the end of the queue to allow everyone to at least get a question in during the teleconference.

(Operator Instructions) Your first question comes from Ethan Starr - Private Investor.

How did Calibrin do in the fourth quarter and, also, when do expect to have revenue from Verge?

First of all, how did Calibrin do? Let me continue with the trend that we started reporting, just to remind everyone where we were at. So we launched it in the first quarter of last year, so August, September, October was the first real launch parade and we sold $88,000 worth of Calibrin products. We sold $204,000 in the second quarter, $325,000 in the third quarter, and sold $452,000 in the fourth quarter. So you can see the snowball is rolling and that's very positive. Regarding Verge, we have already invoiced some customers of some initial product that they're putting in to testing. We're still proving out the process, so as anything, you bring it up, you're going to have chinks in a new process and so I wouldn't call it fully operational and functional but we're already shipping and billing in the Verge front.

Your next question comes from Robert Smith - Centa Performance.

You have spoken about the loss of sales at Walmart and the hopeful pick-up elsewhere. Could you give an idea of—you said it's very uncertain how this might play out in your mind, as well, but what are the metrics involved here about the pick-ups elsewhere, so to speak.

It's a very fair question. You know we don't give forward guidance but let me sort of qualitatively put some parenthesis around. As I said in the news release, only time will tell exactly how this is going to play out. Long term, I believe this is all going to be very positive. I think it's going to bring us closer to Walmart. I don't think it's going to push us farther away from them. I think sometimes you don't know what you have until it's gone so I think if at the end of this period, that they find that having Cat's Pride wasn't beneficial to their category, then frankly they shouldn't have been ever carrying it. But they were selling over 8.0 million units a year of Cat's Pride scoopable. And so the odds that that many shoppers were finding it that useful and then the day after they decide to change their planogram they no longer want that item, even though it's unique, it is the only certified safe to flush item, it is the only item that due to its light density Mother Nature blessed us with. You get 40% more scoops per pound, which is a huge value. It may not play a lot at a Neiman Marcus but at a Walmart we think that is exactly why it was one of the top selling single SKUs they had. So when they went through this line review, they didn't do it by SKUs, they did it by brand presence in total. And if that proves out to be beneficial for them, then they're going to keep doing it. If instead, there are specific categories where it proves out not to be so beneficial, they have sent us a lot of communication signals that they're going to revisit it and they are going to look at what's best for Walmart, as was always the case. So we feel very positive and confident that this is only going to strengthen our relationship with them over time. However, are they going to pull a 180 instantly? No. I mean, they are a very strategic, rational thinking organization so they didn't go into this plan overnight and they're not going to get out of it overnight. So who knows how long it could take for the data to play out in a way where they say project impact may be good overall but it isn't helping us for pet, or for litter. Who knows?

You said that you've gotten support from other retailers. Could you give some color on that?

It's been great. I mean, literally, you can go around the markets and you can think who the major retailers are in each market. If you're down in Florida it's Publix, if you're in Texas it's AGB, if you're up in New England it's Stop-N-Shop, if you're in the Midwest it's Kroger. If you're out West, again, it's Kroger, Safeway, Albertson's. All of them see this, not just in cat litter, but in every category, as an opportunity to finally try and turn things around. They've been losing shoppers for the last twenty years to Walmart because Walmart gave better pricing and equal-to or better variety. Now Walmart is saying they're going to compete not on variety, they're actually going to reduce the variety, but obviously try to keep their price point. So I think these grocery accounts, rightly so, have said, you know what, we can then be the guys who provide variety. We now have an opening. There's a chink in the armor. So with respect to us, specifically, we are having a huge quarter with our non-Bentonville cat litter accounts because they're piling it high. We're getting displays, we're getting end caps, we're getting everything because we just ran and FSI last Sunday, a free-standing insert, where we partner up with the American Breast Cancer Awareness Month and that's running right now. We were just recently on TV on a thing called The Balancing Act. If you didn't see it, it's out there on You Tube. Just Google Cat's Pride Balancing Act and you'll get to watch a three-minute spot of that. And so we're very encouraged.

So from what you see now, what is the feel as far as recapturing, if all this is happening?

My feeling is, look, are we going to be up in fiscal 2010, in a year when we lose the biggest piece of the biggest part of our retail business? Probably not. Again, we're not giving guidance, but I'm just trying to manage expectations. I think I've put out there in written—net-net time will tell but in the short term, just this fiscal year, we will probably be down. Are we going to be unprofitable? No. So we'll be profitable; we'll be less profitable than we were this past year, which was a record year in our 70-year history.

Your next question comes from Brad Evans – Heartland Advisors. Brad Evans – Heartland Advisors: Can you give us your volumes for the full year?

For the past year? Brad Evans – Heartland Advisors: Yes. Tonnage for the full year.

Sure. We shipped and billed 967,000 tons. Brad Evans – Heartland Advisors: Would you be willing to give us a sense as to what type of savings you might realize from lower natural gas prices if we were to—if you just give us your—taking your view of volumes and recognizing, obviously, if volumes are down next year, lower natural gas purchases, but clearly the offset being lower prices for the commodities. Can you just give us your sense as to the savings opportunity there?

Let me field that, vis-à-vis the forward-purchase contracts in the delta.

If you look at our 10-K, we estimate that the weighted average cost of natural gas contracts in fiscal 2010 to be approximately 36% lower than the contracts for fiscal 2009 and of course the caveat is that we are currently—we bought for 40% of our kiln fuel needs in fiscal 2010, so you can kind of work through the math. But the big question is what is going to happen with natural gas over the balance of the year for what we have not hedged. I think that helps you sort of get your arms around the magnitude of the opportunity.

Your next question is a follow-up from Ethan Starr - Private Investor.

Which is going to cost Oil-Dri more profit, the lost sales of Cat's Pride to Walmart or the effective deleveraging due the lower volumes of clay being processed?

Walmart.

Also, how much lower will capex be this year? The 10-K just said lower; it didn't say how much lower.

We're anticipating about $12.0 million in capex this year.

Your next question is a follow-up from Robert Smith - Centa Performance.

Calibrin, give me some idea of the flavor out there as to you've given the numbers, so tell me what you can about the reception of this and what has to happen for the incremental figures to begin growing even greater? So it looks like you're gaining $100,000 or so per quarter.

But I wouldn't look at it that way. It's one thing if you're doing $5.0 million in business, gaining $100,000 a quarter isn't that impressive.

I know.

When your first quarter was $88,000, it was very impressive. So I would look at it more as a percentage and see how is it rolling, and clearly it's—we were up 100% from quarter one to quarter two, we were up 60% up to three, we were up another 40% up to four. So the question is where is that going to level out. Our expectations certainly are more than it's going to go up $100,000 a quarter infinitum. I mean, as the snowball rolls, yes, your percentage may come down but the $100,000 will be exceeded. So all I can give you is our initial reaction. Our initial reaction is very positive. The market has received it very well. If you think about it, we launched this product, which is a high-end, high-performance product, in a very tough economy at the same time when there was something called swine flu, which you would think wouldn't impact a product like Calibrin Z, which is particularly targeted for zearalenone and swine. But swine flu, how does that impact it? Well, when the whole country of Egypt goes out and slaughters their entire swine population, you can see the people took hysterical reactions to the whole concept of swine flu. So we feel very positive. For us to have eclipsed a million dollars in sales in the first year of launch at what we have already communicated at better than average margins, we feel very positive. The team is doing a great job, getting a lot of positive support from our distributor network throughout the globe. I, personally, was out in Asia making calls and it's very impressive how well this product is being received. And so how high is up? Nobody knows. But as you know, because you've followed the pluses and minuses, we never sold this much of Brick Aid or something like that and we were very clear with that communication. This one, in the first twelve months it's looking like a winner.

Do you think you have a shot to get to $3.0 million, for the year?

For fiscal 2010?

Yes.

Tripling. I would say it depends on a lot of things. We're still hoping to get registered in China; we're not. That has taken longer, and it's not just targeted at us. They have gotten a lot more disciplined with the product that they register in general. So their process has gotten lengthier and more cumbersome. So, it's not a bad number. I would say that's a solid A reading on an A+. We won't be disappointed if we don't, put it that way.

Your next question comes from Jim Schwartz - Havi Partners.

So basically we have $35.0 million of sales to make up, that delta, if you think Walmart will be roughly 105 or more and it was 26% this year. So the question I have is, the other opportunities out there, the retailers who are taking advantage of this, how do you size up the non-Walmart opportunity, from just like a total available market? Not that we're going to make up that $35.0 million this year, but just a bigger opportunity than you've probably ever imagined, because just in the commentary you sound a little more optimistic than you did when this whole thing happened, which is a good thing.

Yes, first of all, time heals all wounds. [Slight laugh.] So you talk to me in another few months, I'll probably feel even better. But given that, we have had more data points and we've had more communication with Walmart, we've had more communication with our other trade partners. Are we going to make up that full $35.0 million in fiscal 2010? No. So for sure, sales are going to be down in fiscal 2010, barring an acquisition. I don't feel, again using our Safe Harbor, but every expectation is that sales are going to be down. But as Bob and Ethan have sort of danced around, there are cost drivers that are working to our benefit and we do have these opportunities with incremental retail customers. So I think the bigger question going forward is what kind of feedback are we getting from Bentonville, are we going to get back in there or aren't we, and if we do how long is it going to take and what is scope of that. I mean, they could say they would put us in an extra 500 stores. Okay, well they've basically cut us out of 3,000 and left us in 300 to 400. So then you could do the math and say we picked up 16% of it but we're still out of the majority of it. So time will tell but I'm hoping that we pick up more than that, for the next planogram. They may do it before that, but really, they tend to do these things on an annual set basis. So all of us should sort of be moderating our expectations and shooting towards the next planogram.

What's the Verge opportunity? Like if you had this, just the long-term opportunity there?

Honestly, it's limited by our imagination. We are getting so much interest from the field, in areas that we never even sort of thought of. And then as we start to dream in other areas, you see that this engineered granule can do all sorts of things. So who knows? It really—not that it's limitless in the sense it's going to be billions and billions of dollars, but in our little, small corner of the world where we do $200.0 million in sales, it could be a significant product line for us, both in revenue and profit.

Your next question is a follow-up from Ethan Starr - Private Investor.

I see construction and progress on the balance sheet went up quite a bit to $8.22 million at the end of the year and I'm wondering if that's related to the Verge plant or something else.

Yes, that is the Verge plant.

So it's not quite finished yet.

Correct.

We're still proving out the product.

And also, what percentage of ConditionAde users have switched to Calibrin? Roughly.

78%.

Your next question is a follow-up from Brad Evans – Heartland Advisors. Brad Evans – Heartland Advisors: I know you don't give guidance, but just from what you can see today would you be disappointed if volumes were not up in the second half of 2010 versus the second half of 2009?

But the fact is we hadn't lost Walmart in the second half of 2009 so I would almost say I would be surprised if volumes were up. Brad Evans – Heartland Advisors: In light of the sales, have you any actions you take on the cost side that are noteworthy, in terms of trying to get the cost structure down, in light of lower revenues going forward?

No, we took an interesting approach. I've had the chance in the last 14 days, and we'll finish it off this afternoon, but to meet with 400 of our employees. So over half of our employees, and the esprit de corps has never been higher. No one is taking a salary increase in fiscal 2010. For the entire company; from me all the way through. And yet the team spirit is very positive because I think people recognize that by doing that, we didn't have to have a mass layoff, and we haven't had any layoff. Nobody has lost their job. Obviously in our industry we have turnover and so if there are positions that don't need to be refilled, they won't be. But no employee that wanted full-time employment the day before the announcement, lost their job the day after. And so that was received very well. But like I said, at the same time, mindful of the hit that we're taking in the short run, we all were—I mean it sounds crazy—but relatively happy to give up a merit increase in exchange for keeping 30 to 40 of our teammates on the team. So that's probably the most specific thing we did. Brad Evans – Heartland Advisors: So what I just heard is not cost cutting activities other than just freezing salaries, is that correct? And then normal attrition where you might not fill an open position here or there.

What do you consider cost cutting? Obviously our procurement team is functioning very well and so the cost of external inputs are dropping, but that's a lot to do with the environment, so not just freight and not just our fuel but our packaging and things like that are all going down, but in an inflationary environment they would be going up. I mean, that was not in reaction to Walmart, that was just good business. Brad Evans – Heartland Advisors: So rough math, if the loss of Walmart is a few million dollars to the operating line, plus or minus, you don't think there are costs within the business that could be taken out to help offset that loss to the contribution margin from Walmart?

Give me an example, that's what I'm struggling with. Brad Evans – Heartland Advisors: Well, I mean, reducing your headcount would be a starting point.

I've already addressed that. No. Obviously if we were losing money and it was looking long term like that wasn't going to change, then of course. But to hurt the long-term prospects of the business to react to a short-term change, that doesn’t sound like a good business decision. Brad Evans – Heartland Advisors: But it might be permanent.

Well, then we'd address that when it comes to it, wouldn't we? Brad Evans – Heartland Advisors: As reflected in terms of dollars per ton, was the Walmart business more valuable or less valuable versus the company average?

More valuable.

Your next question is a follow-up from Robert Smith - Centa Performance.

Can you outline when Verge is proven out, so to speak, and when the plant is up and operating, what are the first steps for sales?

I don't think we're disclosing that just because it will invite competition, but it's targeted at various key performance metrics. Dust [inaudible], uniformity, the ability to either disintegrate, slowly disintegrate or not disintegrate at all, depending on the customer's preference. And those attributes are very important to numerous applications that we already compete in and that we then hope to compete in.

So you are already working with product developers?

Absolutely. And have been for a long time.

What is the total capacity of the plant?

I think we disclosed that. I just don't want to trip over Reg FD. It depends on the size granule we make. If you make the biggest stuff you probably get 15,000 tons a year, if you make the smaller stuff you're only going to get about 10,000 tons a year. So depending on the blend, somewhere in between 10,000 and 15,000 tons a year. And it's modular so we can easily ramp it up. We've got the drying capacity to do more than that. It's the screening and the extruding and so forth like that that would have to be modularly increased. So incrementally, it's not an extra $8.0 million to $10.0 million each time, it's something less.

And how much more valuable is this per ton than your other industrial products?

Obviously it depends on the application, but even at the entry-level applications it is more valuable. We'll leave it at that. But there are some applications that we're working with customers that could be extremely valuable, like almost unique-type valuable. And that would be great.

We're up at 10:30 and they're all waving at me so I'm going to close the phone lines and let me just wrap up by again thanking all of our investors and looking forward to delivering the first quarter of digesting the new reality, which is the lower Cat's Pride branded business at Walmart but doing everything we can to both offset that with other retail customers and then get our B-to-B opportunities continuing to get off the ground. So still very, very bullish on the long-term prospects of creating value from sorbent minerals. Appreciate your support.

This concludes today’s conference call.