Oil-Dri Corporation of America Aktie

Good day, and thank you for standing by. Welcome to the Oil-Dri Corporation of America Q3 Fiscal 2026 Earnings Discussion via Webcast. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Dan Jaffee, President and CEO.

Thank you, and welcome, everyone. Before we get started, I'd like to introduce who is here today to field questions. We have Susan Kreh, CFO and CIO; Aaron Christiansen, VP of Operations; Chris Lamson, Group Vice President of business-to-business and Strategic Growth Initiatives; Wade Robey, VP of Agriculture and President of Amlan International; Heath Wessels, VP of Sales for North America, Amlan International; Laura Scheland, Vice President and General Manager of the Consumer Products Division; Bruce Patsey, VP of Fluids Purification; Mervyn de Souza, VP of Research and Development; Jon Blake, VP and Corporate Controller; Tony Parker, VP, General Counsel and Secretary; and last but not least, Leslie Garber, our Director of Investor Relations, who will walk us through our safe harbor provisions.

Thank you, Dan, and welcome, everyone. 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 in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Back to you, Dan.

All right. Thank you, Leslie. Before I turn it over to Susan to walk us through the quarter, I'm going to cover some long-term macro trends that are developing for Oil-Dri, which are right in line with what we said. As you'll recall, if you followed us for this period of time, about 5 years ago, our operations team led by Aaron identified that we needed to dramatically improve our facilities if we're going to continue to give our customers the high quality and the service that they demand and deserve, frankly.

And so I'm going to throw some numbers at you. If I lose you, you can always go back in the transcript later, and it will all be spelled out for you. But from fiscal '17 to fiscal '21, which is right before we announced this program, we averaged about $15 million in capital expense and about $13 million in depreciation.

When COVID hit and the whole global supply chain got hammered, everything was costing twice as much to replace as what its historical cost was. So remember, $15 million in capital, $13 million in depreciation. These last 5 years, we have spent almost $32 million a year in capital, so double. But the depreciation because it's a lagging indicator has averaged $15.5 million. Now this year, if you project, you take the third quarter in the cash flow statement and then project it for 9 -- 12 months, you'll get about $22.5 million.

So what you're seeing is our depreciation was $13 million. It's now running about $22 million, but we're still spending over $30 million. So it's a lagging indicator, and it's catching up. So why am I telling you all this? I'm telling you this because you're seeing pressure on our margins and as my dad always said, earnings are an opinion, cash is a fact, yet because our cash generation is super strong, and Susan will cover that.

So as the depreciation catches up with the capital, which will happen over time, if your average useful life is 10 years, if we spend $30 million for 10 years, 5 years from now because we'll be 5 years into it, the depreciation will be about $30 million a year. So the margins are going to continue to get pressured because when we went to our customers, it wasn't about us expanding our margins. It was about them helping us invest in our business so that we could give them the quality and quantity they deserve. And that was played out beautifully during Winter Storm Fern.

Winter Storm Fern caused all sorts of grief for a lot of our competitors. We were able to navigate that storm very well because our facilities are really in great shape. And in this last quarter, our fill rate was 99.9% that means for every 1,000 pallets shipped, there were 999 ordered and one of them didn't make it onto a truck out of 1,000, 99.9%. That's ridiculously high, and we are getting Supplier of the Year awards from many customers because of our fill rates and our on-time shipping.

So I'm going to turn it over to Susan, but I want to thank our customers for their support. I want you guys to understand, yes, you're going to see some margin pressure, but zero in on the cash generation, and that's where you'll see what's going on here at Oil Product.

Yes. Thanks, Dan. As Dan highlighted last summer when we were moving into fiscal year 2026, our expectation was that the first half of the year would have a tough comparison to the very robust first half that we had in fiscal year 2025.

We had also indicated that we expected to pick up year-over-year momentum in the second half of our fiscal year, and that is what happened during our third fiscal quarter. So my comments today will focus on several third quarter financial highlights as well as a financial challenge.

So highlight number 1, our third quarter net sales of $126 million were 9% higher than net sales in the third quarter of fiscal year 2025.

In our Retail and Wholesale Products Group, we experienced significant growth in cat litter sales, which were up 13% over the same quarter in the prior year, driven by higher demand in our coarse, lightweight, co-packaged and Crystal products. Notably, we expanded our co-packaged offering to include lightweight litter and our crystal cat litter volumes reached record high sales levels. So some really good tailwinds there.

In our Business-to-Business Products Group, we experienced substantial demand-driven top line growth in our Agricultural and Animal Health businesses. Highlight number 2, our top line growth, combined with the year-over-year reduction in selling, general and administrative costs resulted in an increase in income from operations of 23% over the same quarter in the prior year. And that strong earnings growth performance led to highlight number 3, and Dan touched on this in his opening comments, where our strong earnings drove the generation of $25 million of net cash provided by operating activities during our fiscal third quarter. Very, very good cash generation. And this strong cash generation continues to enable us to make the investments needed to strengthen and grow our business, also as were highlighted in Dan's opening comments.

Now on the flip side, we faced a challenge during the quarter in terms of cost pressure on our gross margin, which was unfavorably impacted by a 190 basis point reduction compared to the same quarter in the prior year. Our domestic cost per ton of goods sold was up 6% year-over-year, driven by increases in purchased materials, labor, packaging and transportation costs.

So how are we addressing these cost challenges? We start by focusing on costs within our control. Our manufacturing and operations team, together with support from the rest of the organization, works to help offset these economic headwinds by focusing on and investing in productivity and cost reduction initiatives. At the same time, our sales teams partner with our customers to identify and deliver reductions in costs.

And then finally, it is our responsibility to adjust our pricing to mitigate the negative impacts these costs have on our margins. We are working through this carefully as our product groups are impacted to different degrees by costs such as packaging, freight and transportation and purchase materials.

So to conclude, we continue to work together to drive opportunities for profitable growth and to demonstrate our ability to generate cash flow, which is the lifeblood for funding our growth and for providing returns to our stakeholders. And our belief in the sustainability of that cash flow generation inspired us to announce last week that our Board of Directors raised our dividend to $0.225 per share of common stock payable on August 21, 2026. That represents a 10% increase over the most recent dividend paid. That increase is on top of the dividend increase that we announced in December of 2025.

We understand the sustainability and predictability of our dividend, along with profitable growth is important to our long-term shareholders and to our customers.

With that, I'll turn it back over to you.

Thank you, Susan. Before we open up for Q&A, I want to correct one thing I said. I got it a little bit -- I didn't even get a little bit backwards. I got it totally backwards. Our fill rate of 99.9% means we shipped 999 pallets for every 1,000 ordered and one pallet didn't make it. I think I said it in reverse. So now I've corrected it. And so now we can open up the Q&A line.

[Operator Instructions]. The first question comes from John Bair from Ascend Wealth Advisors and he asks, what do you attribute the elevated cat litter demand to? Laura, can you please answer that for us?

Sure. And John, thank you for your question. Yes, very pleased with the 10% year-over-year increase in our domestic cat litter sales, excluding co-packaged products in the third quarter.

The increase was driven by higher demand as well as a shift of orders from third quarter caused by the delays from Winter Storm Fern, but really excited about the continued higher increased demand for the litter products. Some of this is attributed to growth in the category with an increase in cat ownership as well as increased sales of our crystal, lightweight and coarse litter products.

During the quarter, our Crystal cat litter reached record sales for us in the quarter. The growth was driven by both private label and branded crystal products. We leveraged established relationships with existing key clay customers to expand our private label Crystal business and really become a valued supplier for our customers.

In addition, we continue to build the distribution of our branded crystal items in both brick-and-mortar and e-commerce and launched our new health monitoring Crystal products under Cat's Pride Ultra and private label brands, and we are very excited about our expanded Crystal litter portfolio.

In addition, we saw increased sales in the lightweight and coarse segments with expanded distribution and new branded and private label lightweight and course items. In fiscal 2026, we've launched 2 new Cat's Pride pail items and Cat's Pride Max Power Pro, which is our e-com exclusive items as well as multiple private label clay items. We remain pleased and excited about the momentum of our cat litter business and the year to go.

Great. Thank you. We have 2 questions regarding the Amlan business. One comes from John Bair and the other one from Robert Smith, Center for Performance Investing. I'm going to combine -- I'm going to read the questions and then Wade Robey will answer them.

John says, good to see Amlan International sales were up, helped by your reference to additional demand from new end user accounts. Are these new accounts likely to be repeat customers with potential to expand their purchase volumes?

And then in addition, Robert Smith is interested in the state of the Amlan business for the next 12 to 18 months? And if there are any competitive constraints proving difficulty in moving the needle at Amlan. Wade, will you please address those?

I will, and thank you, Leslie, and good morning, everybody. John and Robert, thank you for your question.

I'll start with where we were in the first half of the year, and we reported this in a previous earnings call, where we had lost a key account in one of our world areas, which certainly impacted our business, and we reported against that.

But the team has been 100% focused on 2 things. One, we're gaining our share at that key account, but also expanding our business by bringing on new customers, not only in that particular world area, but in all world areas that we serve. I'm happy to report in both cases, we've been successful. We haven't 100% regained that key account, but we've gotten a foothold in there again and are seeing that business grow.

But what I'm truly excited about is in response to that, we've also grown our business base in each world area. So we've been expanding the accounts that we we serve as well as selling more of the accounts that have been existing customers. All those things contribute, I believe, to a strong outlook for the business.

Now as we look forward, we're going to focus on what we actually have been doing over the previous 12 months, which is continue to build the relationships with our key distribution partners, but also with our end-user customers.

In Amlan, we believe we truly have a differentiating value proposition, which makes us very competitive in this market. And that includes not only the value of our core mineral, but also the other things that really set Oil-Dri apart, and that's our vertical integration, our excellent manufacturing capability and the ability to control the quality and consistency of the value that we bring to our customers from the mine all the way to the feed mill where our customers formulate our products in their rations.

All of those things, we believe, again, give us a competitive advantage, which will allow us to grow in the future. So very excited about the business. We're going to focus on what has helped us be successful to date, and those are those key elements of the strategy that I've mentioned.

Great. Thank you. The next question is from John Bair. He asks, the Middle East conflict has seriously constrained jet fuel and biofuel supply and inventories globally. A recent Wall Street Journal article highlighted how airlines are scrambling to secure sustainable aviation fuel. Has Oil-Dri seen a pickup in demand from its biofuel producing customers? Bruce, would you like to address that, please?

Sure. Thanks for the question. There are 2 segments. You have the mineral oil that's being processed in the jet fuel. And we have seen an increase in business actually in that marketplace based on the war in the Middle East.

Margins are running real high right now for these refineries. So they're producing more fuel, which is helping drive our sales. On the SAF front, the plants that we do sell today that produce SAF, they are seeing increased business, and we are seeing increased sales because of that.

There are other plants that I think over the next 12 months, we will be adding SAF capacity which should help drive more sales in the future. But right now, the market still doesn't have enough capacity to meet all the demands on SAF.

Okay. Next question comes from Robert Smith. R&D is the lifeblood of new products and growth. How are you adapting artificial intelligence in the innovation lab? Do you feel it will lead to faster introductions? Mervyn, can you please take that?

Sure, Leslie. Thanks for the question, Robert. As I've mentioned before, the R&D team is actively engaged with all of our Oil-Dri divisions and operations teams as we explore opportunities both to use our existing sorbent minerals in new applications and drive improvements with our existing products.

AI has a lot of potential to accelerate growth and innovation in R&D. And at Oil-Dri, we continue to explore artificial intelligence and capabilities to increase efficiency and effectiveness through enhancing our ability to more rapidly technology and access market attractiveness.

Wonderful. Thank you. Next question is from John Bair. Have your shipping costs for silica crystals from China [ region ] have been affected due to the conflict in the Middle East? If so, have you been able to recoup some or all of that impact through pricing adjustments? Laura, can you address that, please?

Sure. In the third quarter, the Middle East conflict didn't have a meaningful impact on the inbound ocean freight for silicon crystals from China and the lower tariff rate from approximately 49% to 39% offset the increases we saw in the third quarter. However, we are continuing to see increases in freight costs and are carefully evaluating pricing opportunities and cost synergies to mitigate these costs.

Wonderful. Okay. The next question, I'm actually going to combine 2 questions. Robert Smith asks, what is the state of the fluid purification sector for the next 12 to 18 months. But we also had a question regarding the press release, we said that in Q3, sales of fluid purification products were down slightly year-over-year by 1%. Can you provide more detail on the underlying performance of that business? Bruce?

Sure. Thanks very much for the question. Our business actually for the quarter in North America was up. We had a real strong quarter. However, in some of our export business, we saw a decline -- a slight decline in sales due to the crop -- last year's crop, which came in, in October, the quality of the crop was very good. So it's a good quality crop, they use less clay to process it. So it wasn't due to loss of business. It was more around just the amount of clay needed to process the oil.

As we look forward in our business, we see it's still going to see very good strong demand for our products in this market. There are a few new plants coming up in North America, both in the renewable and vegetable oil sectors that should help drive some more sales. And then just in general, the industry is healthy. And with the tax breaks that are out there for these companies to make renewable fuels, we think that's going to be a very stable market over the next 12 to 18 months.

Great. Okay. We have another question regarding cat litter. Are you still experiencing increased competitor activity with higher trade spending levels in the cat litter category? If so, how are you navigating this situation? Laura?

Sure. Yes, we are continuing to see elevated promotional activity, trade spending and competitive pricing pressure in the cat litter category. We are working to navigate with strategic trade spend, price pack architecture to protect and expand our distribution.

In addition, we are focused on strategic marketing and advertising. During the third quarter, we launched our Go Big or Go Home retail integration campaign with a goal to donate 1 million pounds of cat litter to shelters across the country.

As part of the campaign, we partnered with the American Humane Society and our retail customers to help cats find their forever homes, which is a message that resonates with both our customers and our consumers. And it's exciting as it coincides with National Pet Month in May and includes social media influencers, retail offers and shopper marketing to drive both upper funnel awareness and all the way down through in-store presence and conversion.

So to kind of summarize, we are doing strategic spending at the store levels with key customers and to protect and expand distribution as well as strategic advertising and marketing to really drive consumer decision at the point of sale and remain focused on driving the best performance and return for every dollar of spend.

Great. Thank you. The next question is from Tyler Ventura, Diamond Hill Capital. Given that you own 11,700 acres of proprietary mineral reserves and asset competitors must source externally, are you strategically using that advantage in your R&D to create projects in adjacent markets? Dan, did you want to talk about our unique mineral reserves?

Sure. Yes. I mean, thanks for the question. Listen, the vertical integration strategy was something my father embarked upon back in the early '60s when he recognized we would get squeezed out between the market and the suppliers and the customer. So year after year after year, we've continued to leverage that strategy.

We are firmly committed to having 40 years reserves in all product lines. We have I think, over 100 years of reserves in total. But for any individual product line, we have 40. And what that enables us to do is to become very, very deeply invested in our mineral. So I've been saying this for years. If there's value in calcium bentonite, we're the company to invest in. If there isn't, then I run for the hills. But luckily, this is what we know. This is what we do. We invest every year in R&D.

And again, I've said over the years, we're only limited by our own imagination. So we've gotten into product lines that we never would have thought of. I mean, Amlan is a perfect example. Even the fluids purification group, when my father first built that plant, it was to get into the gel clay business and our product didn't work well there, but it's like the posted notes. Sometimes you build something for one application, you find a different one. And just by understanding our mineral, we figured out that our Georgia clay was uniquely qualified to work in that fluids purification area.

So I'm not really going to give you too much about the forward-looking stuff because I'm not a fan of yelling to the competition what plays we're going to run. That tends not to yield a lot of yardage. But I will tell you that this is where we're focused. This is what we want to be the global experts in, which is calcium bentonite. And we're going to continue to do everything we can to better understand our reserves so that we can, as you say, supply in adjacent markets or give existing customers better products that do more enhanced things for them as they buy from us.

So you'll know if you've been following us, our mission is to create value from sorbent minerals and it's working. So we're actually selling less tonnage today than we did 25 years ago, which is sort of stunning given if you look at where the market cap of the company is going. So it shows that really what you want to chase is not tons, but value, and that's what we're doing. So does that...

Yes, that answers. Great. We have another question from Ethan Star. He's following up on Wade Robey's earlier comments. What are the prospects for significant sales growth for Amlan products? Wade?

Yes. Thank you, Leslie, and thank you, Ethan, for that question. It gives me the opportunity to say just how excited I am about the prospects for the future. If you look at Amlan, a lot of the folks that have joined the organization joined Oil-Dri over the last couple of years have been people that are very experienced in the industry.

We've done that because we believe in the technology of Oil-Dri Amlan and what kind of value that we can deliver to the market. As we look at the growth we're seeing in all world areas, we feel very good about that. We have strong partnerships, strong customers. And so the long-term outlook is very good for the organization.

Excellent. Ethan Star has another question. Given the uncertain economy, are you seeing any increase in consumers shifting to private label cat litter from branded cat litter? Laura?

Sure. At this point, with the heightened promotional environment, seeing limited shifting as branded products are heavily discounted. However, seeing some shifting. We monitor consumer sentiment closely and seeing it low back at kind of 2022 inflationary levels and expect that as sentiment continues to be low and promotional -- competitive promotional spending may level with some of the facing headwinds, expect that there could be additional shifting to private label.

Great. And our last question comes from Ethan Star, and he says, this is for Dan Jaffee. Why is the best still yet to come? And what opportunities are you most excited about over the next 1 to 3 years?

Ethan, thanks for the question. And again, I'm not a big fan of yelling out our place, so I'm not going to do that. But you can see we're investing heavily in the business. And other than to pay taxes or maybe to give some money away, my sisters and I are holding on to all of our shares. So we're either the dumbest people on the planet or we believe the best is yet to come. And my sisters are not dumb. I may be, but they are not.

So you can understand from the major investors in this business, we are still very excited about the future. I will say it again, we are limited only by our own imagination. My grandfather would never have predicted what my dad did and my dad would never predicted what we're doing. So when I close, what I want to do is thank the Oil-Dri team because what you're seeing is a direct result of the cumulative incredible work and caring of 1,000 people globally, who are making this happen. I've been running it since '95.

And if you look at the progression, it's really accelerated in the last 5 years, and it's not that I got a lot smarter. It's really that the team has gelled together. I mean -- and those of the people who report to me, who I get to hear from a lot, have all said, this is the most cohesive team they've ever been on. We have our issues, but it's always about the business. It's never about ego, and it's -- you never have to worry that you can't trust your fellow teammates. So that's really what's happening here.

It's just a lot of positive momentum, a lot of great work done every single hour of every single day to make this happen. And I just want to thank the team for that. So I think we'll close it at that. Great questions. We'll be back at you in another quarter, and it will be our fiscal year-end. So it will be exciting. Josh, we are done.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q2 Fiscal '26 earnings discussion for Oil-Dri Corporation of America. [Operator Instructions]. I would now like to turn the conference over to your speaker for today, President and CEO, Dan Jaffee. Jaffee, go ahead.

Thank you, and welcome, everybody. And we are in virtual mode. So we've got people dialing in all over, I'm going to introduce them. We very much appreciate you guys getting your questions in early. That gave us a chance to develop our responses and prioritize. So thank you for doing that.

With me today is Susan Kreh, our CFO and CIO; Aaron Christiansen, our VP of Operations; Chris Lamson, Group Vice President of business-to-business and strategic growth initiatives; Wade Robey, VP of Agriculture and President of [ Amlan ] International; Laura Scheland, Vice President and General Manager of our Consumer Products division; Bruce Patsey, our Vice President of Fluids Purification; [ Mervin DeSouza], VP of Research and Development; Tony Parker, our VP, General Counsel and Secretary; and Leslie Garber, our Director of Investor Relations, and I'm going to turn it over to Leslie for our safe harbor provision.

Good morning, everyone. I also just want to note that [ John Blake], VP, Corporate Controller, is also on the call today.

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 in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Now I'm turning it back over to you, Dan.

Thank you, Leslie. And as always, I'm going to have a few comments, but I'm really going to turn it over to the team to walk you through a lot of the details and what went on in the quarter. Very proud of the results. We had a very, very, very strong quarter, especially given the way we navigated through the storm called [ Fern ] and I'm not going to get into that too much because I know Susan is going to cover it. Aaron is probably going to cover it.

But all I'm going to say is it was another validation of the commitment and the caring that our global teammates have for doing everything he can to create value from [indiscernible] minerals and help deliver value to our shareholders because we had a lot of heroic effort. We absolutely emphasize safety first, making sure that everyone took care of their family, they were without power. They were without water for some period of time. It was really a dynamic situation, and we navigated it very, very well. So I'm just very proud of the team. Susan, I'm going to turn it over to you to walk us through the quarter.

Sure. Thank you, Dan. In order to preserve the most time for the Q&A portion of this call, I'm going to highlight a few financial matters, and then address any of your other questions during the Q&A session.

During our second fiscal quarter, Oil-Dri continued to deliver strong financial performance. However, when I reflect back on the second quarter, what makes me so proud to be a part of this team is how everyone, especially our operations leadership handled the situation with winter storm [ Fern ]. They played a team game and demonstrated agility in using our entire plant network to service our customers.

[ Andy ] did so well embracing the core values of our culture. Those core values shown brightly, when the first thing that the operations team addressed as the magnitude of the storm impact unfolded was the safety and well-being of our teammates, followed closely by a focus on taking care of our customers, both of which are key pillars of our We Care values. Aaron, I hope your team is listening and that they know how much the rest of us appreciate what they did to handle such a major disruption and handle it so well.

Switching gears back to financial performance. I want to highlight our continued ability to generate strong cash flows. During the second quarter of our fiscal year 2026, Oil-Dri generated EBITDA of $22 million which was in line with the $22 million of EBITDA generated during the same quarter a year ago. For the first 6 months of fiscal year 2026, Oil-Dri generated cash flows from operating activities of just over $28 million. Our strong ability to generate cash was an enabler in building our inventories.

The elevated levels of inventory going into January played a key role in being able to service our customers while several of our production facilities experienced outages resulting from winter storm firm. Our strong cash position also supports our continued investments in growth and infrastructure projects in our manufacturing facilities. We ended our fiscal second quarter with cash and cash equivalents of $47 million.

Our outstanding debt at the end of the second quarter, including current maturities of notes payable, was $40 million. Meaning that at this point in time, we have more cash than that, and we are extremely well positioned to make continued investments in our business to support our strategic growth initiatives such as a couple of the new product launches that we will see in the second half of this fiscal year.

In summary, our strong financial performance and our strong cash position, coupled with our deep cultural values of being a team-based organization with a focus on our people and our customers enables our resiliency during a major weather-related disruption. And again, I'll say I'll take your questions during the Q&A if you have any specific accounting or financial questions. And with that, Dan, I will turn it back over to you.

Okay. Great. And before I open it up to the Q&A, we had a great board meeting yesterday and I wasn't being [ facetious ] when I said, look, the one constant I've been doing this job since 1995. So I haven't been promoted in 31 years. But you've seen a lot of dynamic growth the last 3 to 5 years, and a lot of that was seeds that were planted maybe 3 years before that.

And for the fun of it, I was clicking on my app this morning, and if you look at our 1-year growth rate on the stock price, it's 36%. When I click to 2, it jumps to 88% and when I click the 5, that jumps to 258%. And I'm sincere in saying that is a direct result of the incredible work that our team does on a global basis every single day. led by the people you're hearing on this teleconference. So when you invest in Oil-Dri, you're investing in the team and we have a phenomenal team, and I just want to thank them publicly for the incredible job they do. So Leslie, I'll turn it over to you now for the Q&A.

Leslie, I'm not hearing you.

I'm here. I'll open up the floor for Q&A. Please submit your questions using the ask a question field on the webcast and click submit.

So our first question comes from John Bair from Ascend Wealth Advisors. And he asks, several years ago, Oil-Dri made it known that considerable CapEx costs would be undertaken over a 3- to 5-year period to upgrade and modernize plant and equipment. Recognizing there are always unexpected developments that pop up, how far along is that effort? Have the major initiatives been accomplished? And can we expect that those costs will diminish over the next few years? Aaron, will you please take that?

Thanks, John. I appreciate the question. As we approach the completion of our fourth year of elevated capital spending, I'd say the program has really progressed as intended. We've executed our plan with strong discipline, addressing some foundational areas of the business, including revitalizing portions of our mine fleet, advancing power air and other critical infrastructure and prioritizing core processing assets.

Really importantly, we don't view this as a discrete project with a defined end point although prior communicated is a 3- to 5-year endeavor that was an initial belief. Our approach to capital allocation ongoing is to increasingly anchor to our long-term replacement cost of our asset base with a focus on sustaining high uptime, optimizing capacity and consistently meeting customer service expectations.

I often say to Dan and Susan, I am the steward of our asset base and manufacturing plants. Reliability and service performance that our customers experience is directly tied to having a manufacturing network that is flexible, continually ready to perform and they remain central to how we think about capital going forward. Susan and Dan both paid me significant complements in the way we manage through a winter storm [ Fern ]. I'll make a direct connection to the ability to have our entire asset base ready to perform when we match the pedal coming out of that storm and to use our plants in a way that's flexible and somewhat atypical in the weeks that followed the storm. So I hope that answers your question, John.

Perfect. The next question comes from [ Evan Star ] and he asks what's the sales increase in agriculture and horticulture products? And is the increase in sales sustainable? Are you still finding new customers who want to include verge granules and products they manufacture? I'm going to turn that over to Wade.

Yes. Thank you, Leslie, and thank you, Ethan, for that question and for noting the excellent performance we've seen in that division in the first half of this year. There's really 2 parts of the market that we serve, and I'll segregate those for you real quick.

The first is the what I'll call the broad acre market, which would be directed at grains oilseeds or pulses. And that's a large-scale farming side of the business that we target with the fine ag products that we sell. The second would be on the turf and ornamental side, where we focus with engineered granules like [ verge ], in both cases, we've seen good performance out of those segments in the first half of the year. The broad anchor side is really driven mostly by planted acres, and we've seen increases in those planted acres over the last year, which allows our ag retailer partners who are our customers to service more acres and that drives sales.

So that's been good growth, and we expect that to continue kind of normal to historic patterns. On the [ turf ] and ornamental side, it's again, it's the engineered side of the business where we target with Verge. That's been good as well for us, and we've seen new product opportunities for us or new application opportunities for us come in, specifically with some new customers we've been developing.

Those granules are used in products like insecticides or in products like specialty fertilizers for the turf and ornamental markets. So those markets have both been strong. We remain very bullish on the growth of that side of the business as well. So overall, we expect to see good performance over the next couple of years as we continue to expand with current customers and they expand their respective markets as well.

Great. The next question comes from Robert Smith from Center for Performance Investing. And we also have a couple of other questions that are similar. Will there be new product introductions of note during the second half, which areas? And can you share any color of expectations as to their importance. As always, thank you. I'm going to have Laura Scheland cover that.

Sure. Thanks for the question. At Oil-Dri, we're always dedicated to innovation and improved consumer experience with our robust R&D impact development teams as evidenced by our recent and new product launches in the past fiscal year and this fiscal year. So I'm excited to report on some updates there.

In recent past years, we launched our EPA-approved antibacterial litter and excited and pleased with the progress and increased distribution during this fiscal year. Also, last quarter, I reported out on 3 new Cat's Pride crystal items that test better than competition with 30 days guaranteed odor control. We are pleased with these items and performance of the market and the distribution that's growing.

And then very excited to announce a new expansion of our [ Crystal ] litter portfolio. Just in the past month, launched a new health monitoring litter that provides great peace of mind to consumers. We're excited to see our proprietary health monitoring formulation that we put a lot of effort to develop not just what's currently in market, but even improved formulations for real vibrant color indications.

In addition, last quarter, I reported on our new tax priceable sales that launched in the fall at Walmart. Well, in the second quarter, we added an additional Cat's Pride total odor guard [ tail ] exclusively at Walmart and excited with that expansion of branded items. Additionally, we also just launched a new line of Cat's Pride Max Power Pro items that are exclusively online in our stand-up bags and are designed and optimized for e-commerce fulfillment.

So really excited about the progress of our innovation that geared to offer consumers the best experience but also to partner with our strategic customers to satisfy their needs and desires and kind of maximize for growing e-commerce segment as well.

Great. Next question comes from [ Curry ] [indiscernible] from [indiscernible]. Can you give more details on underlying and renewable diesel sales [indiscernible] are the bottom of the [indiscernible]. When can we expect [indiscernible]?

Yes. I'll respond to that. This is Bruce Patsey. And currently, the blenders tax or the blenders rebate was removed and producers rebate was put in place this caught a little disruption at some of the renewable customers and actually reduced production as they were trying to figure out how much money they would get back from the federal government. So we did see a slowdown.

Secondly, the feedstock oils that were brought into these plants changed a little bit and no longer is there a rebate for feedstocks that come over from China or foreign markets into the U.S. So with that, the plants are just adjusting. But currently, there's a 45 [ z ] rebate been put in place and as these companies start to work with that more in the future, I'm sure we're going to see some growth in that renewable market in the coming quarters. Thank you.

The next question comes from [ Esen Star ]. Are you selling the co-packaged lightweight litter to the same customer you sell, other co-package later 2? Or is it being sold to multiple customers? Chris Lamson, please address that.

Thanks, Leslie, and thanks, Ethan, for the question. Fortunately, our contractual obligations than really don't allow us to share either the name of the brands or partners that we're working with. But that being said, I'd really like to take the opportunity to highlight the revenue that you saw, and we mentioned in the press release, it was really a culmination of a multiyear cross-functional effort from our team and the partner to bring our first offering -- bring our first offering in the lightweight segment that is, in fact, the contract manufacturing item for us.

While we're really excited about the new business and the revenue and profit stream it should create for us going forward, we're just as excited about really what it does for the lightweight segment. You've heard me and more recently, Laura talked time and time again that really our strategy is about growing the lightweight segment. We've got a nice sized pilot, and we'll continue to have that nice size [indiscernible], but we really want to grow that pie. And we think, candidly, as much as there's a big revenue gain here.

We also think having a strong player with strong brands participating in the segment with a great product that we worked with them to develop over the last couple of years, we'll continue to do just that. And Laura would -- I think Laura would tell you because she told me that segment growth is really continuing to work. If you looked at Nielsen data, you'd see that growth rates in the lightweight segment. are well ahead of the rest of the segment. In fact, it's the same biggest driver of growth in total cat litter over the last year. So we're both pleased about the revenue, and we're pleased about the strategic impact this will make for us for a long time.

John Bair asked in the recent 10-Q, you indicate that the year-over-year 6 months per ton manufacturing costs were up, but per ton transportation and packaging costs were lower. Can you speak to the current trends in your manufacturing costs as well as transportation and packaging cost trends? Are the latter improvements due to your efficiency efforts or the macro environment. Aaron, will you please address that?

Yes, John, that's another thoughtful question. And there's a few elements in your question. I'll try to unpack one at a time. Starting with manufacturing costs, the year-over-year comparison reflects a combination of timing and normal volatility with no real single underlying driver or trend.

As both Susan and Dan and I already talked to, we experienced meaningful operational disruption late in the quarter from winter storm [ Fern ] which included temporary production outages and multiple U.S. plants, which created some short-term fixed cost absorption pressure as well as some variable costs that came with the event. In addition to the timing of the weather -- the winter storm late in January, labor-related inputs in particular, benefits continue to be an area of cost pressure for us, which is not uncommon in the industry and we've seen that flow through our results. I'll add here, our repair costs continue to stabilize directly related to your prior question and the ongoing reinvestment in capital into our asset base.

Turning to transportation. We do operate in markets that naturally fluctuate in recent periods reflected a more balanced freight environment. That being said, we tend to view freight performance less through the lens of spot conditions and more through execution and how we take advantage of those spot conditions.

I'll take a moment to thank, recognize and acknowledge our freight and logistics team for the great work that they do to align the right carrier partnerships, network design and operating discipline to consistently meet customer service expectations to our wildly high on-time performance that commonly exceeds 90%. Maintaining a strong on-time performance while managing freight costs requires daily coordination across the organization that remains a core operational focus for us regardless of those market conditions. We would always be better than market conditions through our operational execution.

On packaging input costs, input costs have been relatively stable overall with offsetting pressures across different materials and sourcing categories, including tariffs, I will remind the audience here that a very large portion of our manufacture or our packaging costs or packaging materials are domestically sourced. We're less exposed to tariff costs than many competitors.

Our focus here is elsewhere is on structural capability, standardization, specification, diversification where appropriate and supplier engagement and partnership rather than short-term commodity movements, we are focused on long-term strategy with the right partners. Those efforts help us manage variability over time, but we don't view them as eliminating exposure to broader cost dynamics. Overall, we continue to manage the business for reliability, service and long-term operating resilience, recognizing the cost inputs will move differently across categories and time periods.

Thanks, Aaron. So we have 2 questions regarding Amlan, one from [ Eaton Star ] and one from Robert Smith. I'm just going to read one of them because Wade Robey will touch on both. Despite the rough quarter for Amlan, what progress are you making with Amlan and do you expect sales growth for Amlan over the long term? Wade?

Yes. Thank you, Leslie, and thank you to both of you for that question. I appreciate the opportunity to address the performance in the first part of the year for Amlan. As was mentioned in the press release, we did lose a key account, which has impacted our performance to date quite a bit, which is reflected in the numbers. This is really a function of the extraordinarily large size of the accounts that we target in many cases, really around the world, not just in the U.S. market, but and Lat Am and in Asia Pacific as well. These accounts are really enormous in size.

That benefits us greatly on the positive side when we gain a new account that can hurt us on the downside if we lose account and account albeit temporarily. In this case, we did have an account loss early in the fiscal year, very early in fact. And since then, we've been working very, very hard to recover that business with our distribution partner. They're actually the seller of the products to the account directly through our distribution network.

The second thing we've been doing, which we always do, which is we're to broaden the base of our customers. This has the best effect long term to mitigate the impact of any single account loss. So really, those 2 actions is what we've been focusing on. None of this, in any way, changes the outlook we have for the business or the excitement we have around these markets that we're targeting for Oil-Dri. The animal nutrition and animal feed additive markets are very, very large. They're around the globe, as you know. And there -- they tend to be high margin, high-value markets. So we're continuing the strategy, continuing our approach and are just working hard to recover the loss that we saw early in the year.

Thank you. Next question is from Robert Smith. From what you see now, what are the headwinds and tailwinds of the oil and gas situation. First, with respect to the Fluids segment and then corporate wide. I'm thinking of sustainable aviation fuels, renewables and then costs. I'm first going to have Bruce Patsey address that regarding renewable diesel and fluid purification and then I'm going to turn it over to Aaron Christiansen about costs. Bruce?

Yes. Thanks for the question. The increase -- or the conflict is causing increased fuel costs, obviously, for us at the pump. This also helps increase the margin for our end users that are using our products to make renewable diesel. So we are seeing a slight uptick in orders right now and they're trying to produce more oil to get out into the market.

The tailwinds, I guess, for our end user in this case would be if this price stays up high for a long time, the suppliers of the feedstock oil are going to pass increases on to them, which will then affect and negatively impact their margins. So but at this point, if it stays a 30, 60-day issue, I think we'll see an uptick with that business. So that's my answer. Thank you.

Aaron?

And then Leslie, I'll speak to it from a cost perspective. Robert, I'll remind you and other investors that several years ago, Oil-Dri resumed the practice of [ for ] buying a portion of our consumed natural gas. Very mathematically and algorithmically, we purchased trips of natural gas that buffer and dollar cost to average are forward exposure.

I deliberately continue to avoid the word hedge. We're not trying to beat the market. We're trying to dollar cost average over time and then buy our organization time to understand where prices are going and then where appropriate, pass those costs along in the marketplace as utility costs rise over a period of time. Periods like we're experiencing right now are the points in time that our current strategy provides me great comfort knowing that we're not exposed to substantial changes in cost short term, we have time to react as we see where prices go longer term.

Thank you. Okay. We have one last question from Robert Smith. Are you already at work using artificial intelligence in the microbiology center to identify targets for new product development for your clay? Mervin, I'll turn that over to you.

Thanks, Leslie. I appreciate the question, Robert. I think we all know artificial intelligence has become a household term now that's impacting almost every walk of life, both with positive and negative outcomes. Across Oil-Dri and within the R&D team, as I've mentioned in the past, we have a very thoughtful and deliberate approach when it comes to the use of AI to drive us towards both increased efficiency and effectiveness.

We're working on integrating both human and artificial intelligence into our day-to-day operations as they become relevant, both for new product development as well as for improving our existing products to deliver innovative solutions to our oil dry customers.

Wonderful. Thank you. That is the end of the Q&A portion. Dan, do you have any closing remarks?

Yes. I just want to thank the investors for very thoughtful and on point questions. It shows your long-time holders and you've been very invested in the strategy and growth of the company over many, many years and your knowledge of where we create value and where we have opportunities is clear by the questions you're asking. So thank you for that.

Thank you to the Oil-Dri team, and we will be looking forward to our third quarter teleconference in around 90 days.

This does conclude today's program. Thank you all for joining, and you may now disconnect.

Welcome to the Annual Meeting for Oil-Dri Corporation of America. Our host for today's call is Leslie Garber, Director of Investor Relations at Oil-Dri. I will now turn the call over to your host, Leslie Garber. You may begin.

Good morning, and welcome to Oil-Dri Corporation of America's 2025 Annual Meeting of Stockholders. My name is Leslie Garber, and I am the Director of Investor Relations at Oil-Dri.

Similar to last year, we are conducting this meeting virtually via live webcast, a format, which enables U.S. stockholders to attend and participate fully and equally, improves efficiency, increases our ability to communicate effectively and engage with stockholders and overall reduces costs.

On your screen under Meeting Materials, you will find the Meeting Agenda, Rules of Conduct, the List of Stockholders of Record, Oil-Dri's proxy materials and annual report.

During the meeting today, we will be covering 2 proposals: the election of directors and the ratification of the appointment of Oil-Dri's independent auditor, followed by a financial review, business presentations, and lastly, time for Q&A. We ask that you submit your questions online under the Ask A Question field on your screen. Only stockholders of record are able to ask questions during the meeting. Stockholders will be able to vote online by clicking on the Vote Here button on your screen.

Now, it is my pleasure to introduce Tony Parker, our Vice President, General Counsel and Secretary. He will conduct the formal portion of today's meeting.

Good morning, ladies and gentlemen. I now call to order the 2025 Annual Meeting of Stockholders of Oil-Dri Corporation of America to conduct the formal business set forth in the notice of meeting and proxy statement commencing on October 28, 2025, a notice of Internet availability of proxy materials or a copy of the proxy materials was mailed to all Oil-Dri stockholders of record as of the close of business on October 13, 2025, which is the record date fixed by Oil-Dri's Board of Directors for the determination of stockholders entitled to notice of and to vote at this meeting. .

Broadridge Financial Solutions has delivered an affidavit confirming the foregoing.

Oil-Dri has appointed Richard Kratz of Hagberg Associates LLC to serve as the Inspector of Election for this meeting. He is present on the webcast and has taken the oath of office. As of October 13, 2025, the record date for this meeting, there were 10,373,180 shares of Oil-Dri common stock and 4,269,856 shares of Oil-Dri Class B outstanding.

Holders of our common stock are entitled to 1 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 capital stock outstanding are present in person or represented by proxy. Thus, the number of votes necessary to constitute a quorum at this meeting is 26,535,871 votes. Mr. Crest has informed me that there are more than such number of votes represented at this meeting. Therefore, I declare there is a quorum present for purposes of transacting business.

Now, I will present the matters to be voted upon, each of which is described in the proxy statement. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the Ask A Question field in the web portal, and we will provide any comments on the proposals themselves after all proposals have been presented.

The first item of business is the election of 9 directors. The proxy statement listed Oil-Dri's nominees for director, each of them currently serves as a Director of the company. Those nominees are Daniel S. Jaffee, Alan Blair Cho, Paul M. Hinsley, Michael A. Nemeroff, George C. Roth, Amy L. Ryan, Patricia Jay Smita, Allan H. Selig and Lawrence E. Washow.

The second item of business is the ratification of the appointment of Grant Thornton LLP as Oil-Dri's independent auditor for the fiscal year ending July 31, 2026. The Audit Committee of the Board of Directors of Oil-Dri has appointed Grant Thornton to serve as the company's independent auditor for fiscal year 2026 and has directed the appointment be submitted for ratification by the stockholders at this meeting.

At this time, we will check and review any comments on the proposals that have been submitted. It looks like there have been no comments received, so we will proceed with the opening polls. It is currently 9:35 a.m. on December 9, 2025, and the polls are now open. Any stockholder who hasn't yet voted or wishes to change or vote, may do so by clicking on the Vote Here button on your screen. Stockholders who have sent in proxies or voted via telephone or Internet and who do not want to change their vote, do not need to take any further action.

While we allow time for stockholders who haven't already done so to complete their voting, I'd like to remind you that the business presentations and any other commentary by Oil-Dri's employees who we refer to as teammates 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 future performance in our SEC filings, including our annual report for the fiscal year ended July 31, 2025. We urge you to review and consider those risk factors carefully in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Copies of our SEC filings are available through the company or online. All right, one last moment to finish voting.

Okay. At this point, the polls are closed. I will now report the preliminary results of the voting provided by the Inspector of Election. We will be reporting the final vote results in a Form 8-K to be filed within 4 business days. As described in the proxy statement, a director may only be elected by plurality of votes cast. The 9 nominees who receive the largest number of votes will be elected. We have been informed by the inspector of election that the preliminary vote report shows that the 9 candidates nominated by Oil-Dri received the largest number of votes.

Regarding the second item of business, an affirmative majority of the votes represented at this meeting is necessary for ratification of the appointment of Grant Thornton as Oil-Dri's independent auditor for the fiscal year ending July 31, 2026. We have been informed by the Inspector of Election that the preliminary vote report shows that such ratification received more than a majority of the votes represented at this meeting.

This concludes the business to be conducted at this meeting. There being no further business to come before the meeting, the 2025 Annual Meeting of Stockholders of Oil-Dri Corporation of America is now adjourned.

I am happy to introduce Dan Jaffee, our President and Chief Executive Officer for our presentations and financial review.

Great. Thank you, Tony, and thanks for walking us through. The vote always happy when we get reelected. We -- I want to thank really our shareholders and our global team. We always say winning an Oil-Dri is a team game and the team really delivered in fiscal '25, record-breaking performance and lots of momentum heading into '26 and beyond. .

I thought it would be nice to look back as Susan is going to look at more of the recent results. So I'm going to take more of a long-term perspective and walk you through what we call mini ball, which is our version of Moneyball, which is bringing data analytics to our decision-making here at Oil-Dri. And had I gone to you as the investors back in '03, and I'll remind you who have been around a long time in '02, we actually lost money for the year. So we lost $1 million for the entire year, and we're doing over 1 million tons. And if I said, look, we're going to adopt a new mission. We're changing direction. We're no longer going to chase tons. We are now going to create value from sort of minerals, and in effect, what you're going to see is over 23 years, we're going to reduce our tons from 1 million to 800,000. I'm not sure how many investors would have said, okay, that's the kind of stock I want to buy. But what happened was underneath it all, there was a lot of disparate profitability.

Yes, we lost money on that 1 million tons in fiscal '02, but we made money a lot of -- a good amount of money on about 600,000 tons and lost a lot of money on 400,000 tons. So the devil was in the detail. and we started to implement Mini ball, which basically was the equivalent of saying, we're no longer going to swing at every pitch. So we're no longer going to stay in every hand to lay in poker. Those are guaranteed losing strategies. Instead, we're going to be a lot more discerning and figure out who values us and let's get closer to them. And whoever doesn't value us let them go find someone else because they're clearly not -- whatever we're doing, our product quality was not resonating with them, and they were viewing us as a commodity, someone who could be swapped out for a penny.

So while the tons did decline by nearly 20% over that 23-year period, which is very important because we do sell in nonrenewable resource. And it's important that as we use up our reserves, we put them to their most valuable use. And it's those of you who haven't followed us long, know, will be happy to know that we keep at least 40 years of proven reserves in every single product line at any given point in time. And it's actually been easier to do because our denominator has gone down over this 23-year period. Had we tried to grow linearly, we'd be already out of clay is my guess. It just would never have worked.

But you can see, look, even though our tons were down, our net sales have grown nicely, CAGR of almost 5%. Our net sales per ton have grown by 6%, and that's a combination of both pricing, but also mix, selling more of the stuff that our customers were valuing. And then when you get into the profitability lines, you see even more dramatic slopes. The gross profit per ton has grown by 7.6% per year for that entire 22-year period. That's pretty powerful. And so it's enabled us to generate cash, pay down debt and return dividends to our shareholders.

So you can see we've raised our dividend 22 years in a row and have actually accelerated those increases in the last couple of years. And the market has rewarded that or been aware of that and rewarded us with an increased stock price because you could have bought oil by shares back to $4 back in '03, and now, it's all the way it's up to $56 at our 7/31 close. So that's what that number is.

So I didn't want to take up too much of your time. I did want to turn it over to Susan because obviously, you care 1 of the recent results and what's coming down the pike. But I did want to do this because it does show the power of creating value from absorbent minerals and executing our mini ball strategy.

So I'm going to turn it over to Susan Kreh, and she'll walk you through the more recent history.

Thanks, Dan. So let's take a look back to some of the things that we said when we were here a year ago. And what was that? Well, we talked about our objective using Miniball to grow the top and bottom line via improved volumes and product mix, exactly what Dan described. We talked about continuing to invest in our manufacturing infrastructure, not only to enhance operational efficiencies, but also to support some longer-term growth. And Aaron Christiansen is going to talk to us about that a little later. And we talked about integrating what was then our new acquisition of Ultra pet Crystals.

So what are some of the highlights that we accomplished in fiscal 2025, well, as Dan said, we set new records in net sales in gross profit and in net income. It was a really strong year for the Oil-Dri teammates. Building on that, it will make it a tough comparable moving into 2026.

In 2025, we significantly expanded the renewable diesel business, and Bruce Patsey will have some great color on that when we get to his section. And we also successfully integrated the ultrapet business and achieved the synergistic benefits that we use in the business case to make the acquisition.

We continued our capital investment strategy, and we raised the annual dividend increase, the amount we increase it every year from $0.04 per share to $0.10 per share giving more value back to our shareholders, and we'll talk more about debt and cash and our strong balance sheet as we go through the presentation.

Talking about a record year. We saw records by many of our principal products. And if you take a look at this chart, you see 3 years, cat litter growing nicely at a CAGR of 6.3. And in the B2B segment, the star in the middle is fluids purification, making that a very tough comparable for that business here in fiscal 2026.

This center chart has 2 full fiscal years on the left of fiscal '24 and '25. And then on the right, to acclimate you, it's quarter 1 of fiscal '25 and quarter 1 of fiscal '26. And again, our first quarter of fiscal '25, as we go through these charts was our best quarter ever. So it's going to make for a tough comp. But taking a look at the right here in fiscal '26, we had revenue net sales of $120 million in the first quarter. So we are off to a good start.

If I think about where the growth came from last year, this chart lays it out nicely. It was a combination of price and mix, improving that mix. And it was also volume, both from our organic businesses growth and from the acquisition of Ultra Pet, all contributing to that 11% year-over-year growth.

Now this year, where is the volume coming from? Well, actually, volume is down in Q1, but we still had a strong quarter. If you see 203,000 tons, and you compare that to last year when we had a full year of 811,000 tons.

Our net sales per ton are actually virtually flat at 592 in this quarter versus 594 in the same quarter last year. When we get to gross profit per ton, you see that first quarter gross profit per ton is $175, and that compares to a fiscal '25 full year average gross profit per ton of $176, so very much in line. And actually, the gross margin percent is dead on Q1 fiscal '26 at 29.5% versus the same number for the full year of fiscal 2025.

When we get to net income per ton in the quarter, $76 is an exact match to the first fiscal quarter of '25, our best quarter ever. And EBITDA coming in strong at $24 million here in Q1 of fiscal '26 and compare that to a full year of $90 million in fiscal '25. So things are going well from a cash standpoint.

When we look at diluted earnings per basic common share and $1.06 per share in Q1, that compares to a full year last year of $3.70. So also off to a strong start. And our paid dividends per share in Q1, as Dan mentioned, we have been raising our dividends every year for 22 years. You see the $0.18 per share versus the 15.5% last year. We think about significant cash outlays the last couple of years. Fiscal '24 was the year we acquired Ultrapet and you see the significant cash outlay for that. Then, the second largest one is our CapEx or continuing to invest in our businesses. That's the largest slice of the pie in fiscal '25. And Aaron Christiansen will show you some of the key projects that, that went into when he does his presentation.

Also, note that in fiscal '25, we had substantial debt repayment, and that was paying down the variable rate debt that we had used to finance the acquisition of Ultra pet. So speaking of debt, our debt has gone down after we've made payments to $39.8 million at the end of our first fiscal quarter. But if you net that against the cash, we actually are net cash. We have more cash on hand at the end of Q1 than we do then, meaning our balance sheet is in a very strong position to enable us to continue investing in our business, investing in our facilities, and we have capacity to make other investments were they to become available to us.

So taking a look at our fiscal 2026 outlook. We're going to continue to use the mini ball approach that Dan described to improve volumes and product mix and improve our bottom line. Part of that is we continue to strengthen and invest in our digital infrastructure, and that is software, that is people, that is process, that is governance. We are tackling it all so that we can enhance our Miniball approach to generating data-driven better results. We'll maintain and return value to our shareholders, and we will execute opportunistic share repurchases if the value makes sense.

Finally, we will continue to invest heavily in manufacturing facilities to support the second half of the year growth that we expect and to support growth beyond that.

And that seems like a good time to segue over to Aaron Christiansen, our Vice President of Operations, to talk about continuing to invest in our manufacturing foundation.

Thank you very much, Susan. You did a great job of teeing me up a number of times. I appreciate that. Today, for -- it's probably the third or fourth year in a row, I get the chance to talk about our capital investments in our manufacturing base. For investors paying attention, they probably recognize these images that I've shared in prior years. That's deliberate. What I'm going to talk to here is the consistency of purpose, a consistency of strategy and a consistency of message.

We're committed to continue to invest repeatedly year in and year out in our manufacturing base. As Susan talked to earlier, fiscal '25 was our highest year of capital investment back into our manufacturing plants, very similar to the prior year. As I've shared in prior years, we're continuing to look for ways to invest in pure infrastructure maintenance, but we're also finding capacity, flexibility, responsiveness, things that improve our working conditions, our cost structure and as well as protect the environment.

I'm about to talk to 4 examples of themes of investments made in the past year. These might be the types of things that are not intuitively obvious to investors that Oil-Dri needs to spend money on. All 4 also provide great examples where we're not just purely investing in the infrastructure of our manufacturing plants, we're also finding other benefits in workplace conditions, costs and environmental improvement at the same time.

We are absolutely committed to continue to do this and to invest in these levels over a period of years ahead. Our manufacturing foundation is essential to take care of our customers in the decades that are in front of us.

The first theme that I'd like to talk about is investments in our rail infrastructure. Oil-Dri moves more than 200,000 tons per year of play around our manufacturing plants. Much of this is headed directly to our customers in the form of our fluids purification products and our ag carriers, some of which is handled between our manufacturing plants or within our manufacturing plants for multistep processing. In some cases, we buy material, but is integrated and formulated with our own clay. The amount of clay that we move around via rail is rather significant. This past year in several plants, we've made investments to stabilize and improve the rail conditions themselves and buy equipment that can more safely and efficiently move railcars through our facilities and position them in a place where they can be prepared to be picked up by local rail companies and moved throughout the nation.

Another theme where we've invested over the past number of years is in compressed air. I often like to say that stable power and electricity is the heart of a factory, where stable electricity is the heart, compressed air the lungs. Modern packaging equipment and processing equipment runs off clean, dry and efficient compressed air. Healthy lungs make for a healthy body. Longevity of packaging equipment can be extended by reliable, clean and dry compressed air. In addition, modern compressed air equipment can be made more efficiently, requiring less power and electricity to generate that compressed air, which is often a very large consumer of electricity in any modern manufacturing plant.

Speaking of air, in addition, we've invested in cleaning up the air that leaves our facilities, air that's used in our dryers, many of our processing areas, packaging equipment, cleanup. Oil-Dri is committed to protecting and maintaining environmental controls. Baghouses and scrubbers are key pollution control devices that remove particulate matter and other contaminants from that air as it leaves our facilities.

Over the past year, we've made investments -- or actually, over the past several years, we've continued to make investments in modernizing scrubbers and baghouses, both to maintain the highest level of environmental compliance, but also at the same time using more modern equipment that requires lower horsepower, which reduces electricity usage and makes us more cost-effective and cost-efficient while protecting the environment. We're very proud of what we've continued to be able to do in this area.

The last theme I'll talk to is the use of modern robotics. Robotics are often viewed as ways to improve cost structure and reduce the number of teammates. I do not like to think of the use of robotics only in this way. They create a safer environment that reduces ergonomic risks, makes many jobs more engaging, easier to attract and retain teammates in those positions. This particular application that you see presented here is a great example where we've partnered with a key supplier of ours through the use of several robots that we have in our own facility and robots at our partner provider. These jobs that you see presented on this page are not touched by human hands, until they're touched by your local or online retailer and their stock person in the back room.

Very proud of the ability to move product throughout our supply chain in a way that is efficient, cost-effective, creates high quality by lower touch of the packages themselves and makes the workplace more hospitable for our hundreds of Oil-Dri teammates.

I hope you've enjoyed those examples that are hopefully unique. And maybe eye-opening about Oil-Dri's committed to reinvest our free cash in ways that are strategic in the years ahead.

And with that, I'd like to hand you off to one of our commercial leaders, Bruce Patsey, who's the Vice President of our Fluids Purification business.

Thanks, Aaron. Appreciate the introduction. Fluid Purification division had a very strong year in fiscal '25. A lot of this was driven by new business in our renewable diesel sector as well as we've had increase in our vegetable oil customers as well. And specifically in North America, which we consider our Blue Zone.

Fiscal year '24, we've made a lot of capital investments, which helped really strengthen us to supply in '25 as we grew. Aaron talked a little bit about the rail investment that was significant for my business, but we also increased capacity to make bleaching clay products at our plant in Georgia, which also helps service our customers. We had superior technical support in the field to grow this business. It's one of our #1 strengths that we have in our division is that we can go in and work with customers and help them to use our products efficiently, better than our competitors. When looking at the sales, you can see we've had another strong year of growth, almost 20% growth from fiscal '24 to '25. Again, a lot of this was driven by the renewable sector and the vegetable oil business.

As we look at future requirements, we know that the EPA released recently increased domestic biofuel production for biomass-based diesel, and our bleaching clay products are used in the filtration of renewable diesel, biodiesel and sustainable aviation, and so we fall under this sector, and we do expect some increased business in '26 from this -- these EPA rulings.

We are well positioned to service this potential business as we increased our capacity, as I recently just said. And imported biofuels feedstocks from other countries coming into the U.S. will be reduced as there's not as many credits given to them. However, we do think that there'll still be used cooking oil coming in from China and other locations into some of these markets.

As we look forward into '26, we continue to focus on growing the vegetable oil business and the renewable diesel business. We're going after some new plants that will be coming on in '26 to help strengthen our business. We'll be expanding more into foreign markets. We have a couple of targets that we're going after now that will increase our business nicely.

And then, we're leveraging our high active products to go after poor oil quality conditions in the marketplace. Our clays have the ability to better absorb the contaminants in these poor-quality feedstock oils when compared to competitors.

And lastly, we're going to be, again, using technical support to promote the growth of our business. We have some very high-level people in the field that walk into our customers and really help them run their businesses better and help them reduce the cost of use of our product. So we look forward to '26.

And with that, I'm going to turn it over to Laura Scheland, who is our Vice President and General Manager of our Consumer Products division. Thank you.

Thank you, Bruce, and good morning, everyone. Today, I'm excited to share how our team is driving growth in the lightweight litter segment and capitalizing on new opportunities and crystals. I'll start with a slide that we've shown over the past few years. As you can see, our domestic cat litter business continues to grow across multiple segments, sales channels in both branded and private label products with a 10% CAGR over the past 5 years. A significant milestone was our acquisition of Ultra pet in May of 2024, which allowed us to add Crystal litter to our expanding product portfolio. .

If we look at our strategic priorities of lightweight clay and Crystal Litter, we have realized a 16.7% CAGR, surpassing the growth of our overall domestic litter business. For years, we've emphasized our commitment to expand lightweight litter due to its clear value for consumers who've got the convenience of carrying less weight home and easier handling, as well as for our retail and e-commerce customers to benefit from logistics and fulfillment cost savings.

Our latest crystal product offerings aligned perfectly with our lightweight strategy, delivering the same benefits to both consumers and customers.

Taking a look at the lightweight opportunity. We've been saying for years that our strategy is to grow the lightweight segment because of the lightweight pie grows, our piece of the pie grows. While in the past year, the lightweight pie did just that with an explosive 10% volume growth. Much of this year's momentum can be attributed to our competitors' trade and advertising, which has helped drive trial and educate consumers on the benefits of lightweight litter, and this is great for our long-term strategy.

But this year's growth is not just a recent phenomenon. The lightweight segment has consistently outperformed the overall litter category in each of the past 4 years with a CAGR of 5.2% versus 1.8% for the cat litter category. And to look at the opportunity, you can look at the chart on the right, the lightweight segment has generated $118 million in additional value over the past 2 years, demonstrating its increasing importance in consumer demand.

Looking at the chart on the right, you can see that Oil-Dri maintains a strong presence across the lightweight segment with the #1 unit share in private label and a #2 unit share in branded. Our strong share enables us to leverage our strengths to drive further lightweight growth and capitalize on the growing lightweight demand.

Our strategy in the lightweight segment is anchored on 3 core pillars: innovation, marketing and partnerships, which I'll review a little more closely. We are committed to ongoing innovation to enhance consumer value and support growth within the lightweight segment. During the past year, we expanded our product portfolio with larger value-size offerings to provide consumers with greater convenience and value and help mitigate e-commerce fulfillment costs.

Our leading cat's price scoopable is now available in pales at Walmart and our antibacterial litter is now available in value-sized bags on the Amazon and Chewy.

Looking at marketing, we leverage a full funnel strategy to drive consumer awareness, encourage trial and build lasting loyalty. Our multifaceted approach includes a range of digital platforms, including streaming TV, digital display ads, social media and paid search campaigns as well as key influencers and retail integration programs to further amplify our message and reach.

Our consumer messaging continues to emphasize the dual benefits of lightweight and performance with odor control as the #1 consumer benefit. Our message is clear, our lightweight litter delivers results with no compromise on performance.

I'm now excited to share our new lightweight commercials that go big on the lightweight plus performance message and emphasize our superior instant and long-lasting odor control. Please play the video.

[Presentation]

Our digital display banner ads also showcased the same lightweight performance method as part of our 360 media campaign. The ads reinforce our message of shrink to stink, maximize odor control and make litter care easier for consumers. Additional part of our lightweight strategy is focusing on driving distribution in key retailers and growth channels, such as Walmart, Amazon and Chewy. These 3 customers have large market share and reach over half of consumers and are growing rapidly.

With strength at Amazon and Walmart and making great progress on Chewy, our brands have great opportunity for future growth.

With respect to Chewy, since the launch of our premium lightweight jugs in 2024, our branded products have demonstrated consistent growth with ongoing expansion of additional products, including our value-sized lightweight bags and our antibacterial jugs and bags.

Moving to our second major strategic initiative is driving innovation and expansion in Crystal litter, which is also anchored by the same 3 core pillars of innovation, marketing and partnerships.

Regarding innovation, we recently launched new and improved cat pride crystal litters that leverage our total odor-control variety name from our clay portfolio and have stronger product claims, including superior odor control that really leveraged our R&D resources and know-how from our clay to bring superior performance to crystal litter products.

We also recently launched a new ultra-clean crystals, which is low tracking for clean halls and home. This new item offers the same #1 odor control with strong messages of convenience and further strengthens our Crystal litter portfolio.

During the year, we also conducted extensive research to redesign our cat crystal packaging to increase appeal and shelf impact. The new design communicates bigger, bolder benefits and claims and creates a stronger emotional connection with cat owners, which tested very well in research.

We have also redesigned our ultra brand packaging to add the cat logo and to leverage both of our brands of cat's pride and Ultra. New packaging retains Ultra signature elements and incorporates cat green equity with enhanced communication of the claims and benefits. So how is our crystal expansion going? While in our first year since the Ultrapad acquisition, first full year since the acquisition, our team did an amazing job of adding crystal distribution. And our brick-and-mortar distribution is up 58% since the acquisition.

And where we have gained new distribution, we've achieved 45% dollar share of those customers' Crystal business. Our Crystal brands are winning with retail customers, and we're poised for even greater growth. And there's still room to grow. This chart shows the significant opportunity gap between our distribution of our existing clay products and crystals. And you can see the opportunity gap for us to use our clay relationships and customer partnerships to expand the distribution of our Crystal products.

So we're very excited about leveraging these partnerships and adding distribution opportunities in the coming year.

I will now turn it over to Wade Robey, Vice President of Agriculture Oil-Dri and President of Amlan International. Thank you.

Thank you, Laura, and good morning, everyone. I'm calling you this morning from Jakarta, Indonesia. So hopefully, everyone can hear me clearly. I've been fortunate to be traveling around the major Pacific region over the last 10 days, visiting with our customers and our distribution partners and have been very gratified by the excitement they have in the inland business and the potential we have to grow in the future.

I'm going to be talking this morning about Amlan and sharing a little bit more about our current results as well as some of the prospects we have for the future. So hopefully, you'll find this information very exciting as we do.

I'm going to start with a little bit of a graphic that shows the history of the use of our Amlan products in the industry. I'll start on the left side of the figure and move around it to the right side. As I've shown in the figure, we have a long histor of commercializing value-based solutions with really strong customer ROI to the animal production industry. I show on this graphic that we were founded as Amlan in 2007, but Oil-Dri actually provided these products to the agricultural industry and animal production industry well before that time.

We focus on our core technology, our core mineral. We leverage our vertical integration to ensure the quality to the consistency and the efficacy of our solutions, which give our customers confidence that the products that we deliver to them will be consistent and will show real value in their operations. We're global in our focus. We serve the North American, Latin American and Asia Pacific regions, as I've mentioned, and we sell across a whole range of species that are important in those industries.

We focus on delivering natural solutions, solutions that our customers want as we move away from some therapeutic antibiotics or other products that are not as beneficial as ours to the productivity of our customers or to animal welfare.

Here's a look at our current portfolio, and it's very broad in its relevance. We saw both in the North American market and international markets, as I've indicated. We had a new set of brands in North America that we launched about 3 years ago in the feed additive category. And further on the right of the chart, I show our global brands that we sell internationally. All of our products are manufactured within Oil-Dri and our partners and are under strict quality and compliance standards, again, giving our customers confidence that they'll be consistent and they'll bring real value in their operations.

We have a multi species focus on Amlan, as I mentioned. We sell in the poultry industry, the dairy industry in beef, swine and aquaculture. In this chart, I show the CAGRs of growth of those respective industries. And you can see in all cases, they're very strong. Ultra is our largest market, and we sell into that market in all world areas that we cover. Some of the predominant trends we see are the reduction or removal of subtherapeutic antibiotics, which give the way or lead the way for Amlan's natural products to be better solutions for our customers.

In the dairy industry, that's growing at a fast CAGR, as I indicated as well. We focused principally in the U.S. and China. While in beef, we target North America, Brazil and also Argentina.

The swine industry has been up and down over the last couple of years with African swine fever, ASF, especially in the Asia Pacific region. But we're seeing that industry rebound as customers deal with ASF and begin to repopulate their herds. It's a prime target for Amlan's premium solutions AmbiandVeriam, and we're excited about the growth opportunity this one industry will offer.

In aquaculture, we're currently targeting both finfish and shrimp. It differs by region in Asia. It's both a combination of tilapia or finfish and shrimp in the Mekong Delta of Vietnam. While in Latin America, it's principally tilapia production in Brazil.

If we look at the last 5 years, this is a chart you've seen other division leads provide, you can see that we've had a strong CAGR of growth over that period, double digit. And that's in spite of a difficult year for the agricultural industry in total in fiscal year 2024. In spite of a down year, we came back very strong in fiscal year '25 and got back on a good growth curve. This is really the result of a couple of changes that the organization made in how we go to market in Amlan.

We focus on our mineral now more acutely, bringing forward that technology to our customers. Secondly, we've redesigned or realigned our strategy globally, focusing more with our distribution partners on more efficient delivery of solutions to our customers.

And thirdly, we've really focused on bringing forward solutions that are -- that have strong demand pull from our customers. Again, as subtherapeutic antibiotics are removed, as we look for more natural solutions. Our products fit that needs very, very well.

I'm going to talk a little bit about our product spot like that we have or a new product launch we're conducting now in North America. It's a product called Ambio. We're launching that in the current fiscal year. It's based on varium, which is a decades long product of Amlan that has been sold really worldwide. Varium is a product that saw really strong emergence as customers begin to remove subtherapeutic antibiotics as it provides not only the core value of our mineral, but also benefits from other formulated additives that help customers see strong performance and replacing benefits as they remove the antibiotics from their rations.

I'm going to talk specifically about varian and hope you understand how that product is targeted globally. And then, I'll finish up with some examples of in the U.S. So, it's really a formulated product based on our core mineral. It had 3 constituents, the mineral, a source of whole new scales and in amino-acid that we bring in the formulation as well. The combination of those 3 additives allow us to buying biotoxin both at fungal and bacterial origin. It also allows us to target specific pathogenic bacteria to remove in from the gastrointestinal tract of the animal, while enhancing function. This promotes optimum gut health and a healthy gut microbiome.

All of these lead to a stronger epithelial and better absorption of the nutrients that our customers providing their rations. These allow customers to remove antibiotics with confidence and still maintain the strong performance that they expect.

In the United States, we'll be launching this product this year as. The regulations are a little bit different in the U.S., so we have to position it differently market, but it contains the same synergy formulation components that allow us to provide those strong benefits to our customers. It helps poultry and livestock reach their optimal performance for growth and really delivered strong economic performance for our customers.

As we look at future opportunities, the annual production market is growing strongly every year. It's at a CAGR now above 5%, and actually, the use of feed additives, which provides is growing at an even higher CAGR as customers continue to become more sophisticated in their rations and look for better solutions to optimize performance. Amlan products are natural and provide a range of benefits to customers, allowing them to ensure that the will give the type of economic performance and support the health of the animals that they expect.

Our unique position in the market because of Oil-Dri's vertical integration and the benefits that our corporation brings allows Amlan to provide truly differentiating solutions to our customers and be a leading supplier of these technologies to the animal production industry.

I'll now turn it over to Leslie for the Q&A portion.

Thank you, Wade, and thank you, everyone, for listening to our presentation. I will now open up the floor to questions. In addition to those who just presented, we also have Chris Lamson, Group Vice President of Business to Business and Strategic Growth Initiatives; and Mervyn de Souza, VP of Research and Development on the line.

Please submit your questions using the Ask A Question field on the webcast. Questions or remarks must be relevant to the meeting and pertinent to the matters brought before the meeting.

I will now read the first question. It comes from Robert Smith, and he asks, back in early October on the last conference call, a previewed a softer first half. Are you now more or less confident of recovery in the second half? Do you have a realistic possibility of a profit gain for the year as a whole? Dan, I'm going to turn that over to you.

Thank you, Bob. Great question. And we'll take it in pieces. So regarding the first half, we did signal that we're going to be up against a very tough comparison. In our 80-something year history, we've had 330 quarters, and this quarter beat all but 1 of them, and that was last year, but it still was a great quarter but was softer than last year, and this was just a quarter we've signaled that we expect to be behind through the 6-month turn of the year, and we are.

The good news is this gets to the second half of your question, are we more or less confident of recovery in the second half and do we have a realistic possibility of a profit gain for the year as a whole? The good news is we actually beat our plan for the first quarter. So we plan to be down and we were, but we actually are ahead of our plan. And if all of the divisions and all of the supply chain and the whole company delivers on their plan, which again, I'll remind you we were ahead of in the first quarter. If they all just deliver on their plan, we have a very realistic possibility of a profit gain for the year all. So, so far, tracking exactly as we thought, if not even a little better. So thank you for your question.

Okay. The next question comes from Ethan Star. Our Oil-Dri's clays currently being used to filter sustainable aviation fuel and to what extent is that a potential growth market for Oil-Dri? Bruce, will you take that, please?

Sure. Thanks, Ethan, for the question. Yes, sustainable aviation fuel is a growing market. And we will see increased sales of our bleaching clay products into this market. The sustainable aviation fuel is produced by the same renewable diesel producers, and they have to clean the fuel up before they can then convert it into sustainable aviation fuel. So you should see some growth in the future with our business in this market.

Okay. The next question comes from Robert Smith. What are the headwinds for Amlan this year? And how will you overcome them? Wade, please answer that first.

Yes. Thanks, Liz. That's an excellent question. And there are a number of factors that we have to be cognizant of as we continue to grow our Amlan business. One of the key issues we faced over the last year that persists into this year is the situation with tariffs. That has caused a lot of customer uncertainty and has certainly in certain markets slowed orders or make customers a little bit more cautious. We saw that in the first quarter in Brazil, where the back and forth between President Trump and President of Brazil, actually brought the orders there to stop for a period of time. Customers were nervous about the high cost of tariffs that might impact their ability to acquire our products from main land. .

We've seen that now lesson, and we now have orders on the books for Brazil for the balance of the year. It's 1 of the things we have to watch very closely.

Great. Another question from Robert Smith. Will we see new products this year? What color can you give? And please touch on the overall R&D budget in areas of emphasis? Mervyn, can you please handle that?

Sure, Leslie. Thanks for the question, Robert. Oil-Dri continues to invest in R&D and innovation. We balance our investments between base product improvements and new product development. We continue to execute on our R&D strategy, which mirrors our Oil-Dri's division's growth strategies with lightweight cat litter, fluids purification, agricultural solutions and animal health and nutrition. .

To give you some color on new products, as Laura Scheland highlighted, we're excited to have new and improved crystal solutions with stronger claims and low tracking through collaboration with our division teammates.

Wonderful. Thank you. The next question that came in is the press release noted a record-breaking quarter for agricultural product sales. Can you please provide some color around the growth for that part of the business? Wade, can you please answer that?

Yes. Thanks, Robert. So coming out of a down year in 2024 -- fiscal year '24, we really saw the whole industry rebound pretty significantly, but that was especially true in the fiscal year '25 in the sales of our Verge product. Verge an engineered brand that we sell that has multiple applications, both for biologicals as well as for herbicides and pesticides that can be applied in broader agriculture. The result of those higher sales of Verge, which is one of our premium products, allowed us to see improved product mix. .

We also just generally, again, coming out of fiscal year '24, experienced good growth not only with new customers, but also with our existing customers as their businesses continue to improve.

Finally, where possible and where it was reasonable, we have continued to raise prices to ensure we maintain appropriate profitability for the organization, delivering, again, big value to our customers, but also making sure that we're pricing our products to value in the marketplace. All of those factors have really contributed to the strong quarter we saw this year in fiscal year '26.

All right. Thank you. The next question is from Robert Smith. What are the prospects for a rebound includes purifications for the remainder of the year? Bruce?

Robert, thanks for the question. First off, fiscal '25, the first quarter was our strongest quarter in the history of our division, which mirrors kind of what Dan was saying. We had a real strong first quarter. So our business really is doing very well still. We're above our plan of where we're supposed to be this year. And we expect to have a good back half of the year, so we look to have a good year in both the renewable and the vegetable oil business as we move forward. Thank you.

Excellent. The next question that came in, last year at the annual meeting, you talked about service levels. Can you please provide an update on company-wide service levels? Have they remained the same, increase or decrease? Aaron, can you please respond to that?

Absolutely. Leslie, I get to -- I'd love to talk about service. So first, the really simple answer is our service levels have actually improved slightly from when we talked about it a year ago. We're now 12 quarters in a row that both are fill rate percentage and on-time percentage of met goal. Fill rate hovers around 99.8%, a reminder that our most demanding customers expect 99. So that's mathematically only 1 in 500 pallets that we don't have available to sell. On-time arrival to customers hovers in the mid-90s, 94% to 95% commonly. I can't help myself but take a moment to talk about why. Everything we do is essentially built around maintaining high service levels.

What I presented earlier in our capital reinvestment, it's all about flexibility, capacity and responsiveness in our manufacturing plants to deliver high service. Culturally, I know we've got many of our teammates listening right now in the supply chain that are investors, our customer service team, our planning team, our operating team, culturally, we have built a service-minded foundation. Everything we do is ultimately built around taking care of our customers at the highest level.

Thank you, Aaron, and thank you all for submitting your questions. We got through all of them. The queue is empty. And so I'm happy that we were able to answer all the questions that were top of mind for our shareholders. So we look forward to being with you again in 90 days. Have a happy and healthy holiday season, and see you next year. Thanks. .

The meeting has now concluded. Thank you for joining, and have a pleasant day.

Good day, and thank you for standing by. Welcome to the Oil-Dri Corporation of America Fourth Quarter Fiscal 2025 discussion via webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Jaffee, President and CEO of Oil-Dri. Please go ahead.

Thank you, and welcome, everyone, to our fourth quarter fiscal '25 teleconference. Joining me in various locations to the miracles of modern science are Susan Kreh, our CFO and CIO; Aaron Christiansen, VP of Operations; Chris Lamson with his new title and new responsibilities as Group Vice President of business-to-business and strategic growth initiatives; Wade Robey, Vice President of Ag and President of Amlan International; Laura Scheland, VP and General Manager of the Consumer Products Division; Bruce Patsey, VP of Fluids Purification; Mervyn de Souza, VP of R&D; Tony Parker, VP of General Counsel -- and General Counsel and Secretary, and then, of course, Leslie Garber, our Director of Investor Relations, and Leslie, please walk us through the safe harbor provisions.

Thank you, Dan, and welcome, everyone. 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 in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock.

Thank you for joining us. Dan, turning it back over to you.

Yes. Thanks, Leslie. And I'm going to turn it over to Susan, and I'll make my remarks after her because I don't want to steal her thunder. So Susan, take it...

Thank you, Dan. And in order to preserve the most time for questions, I'll highlight a few financial matters and then address any other areas of interest in the Q&A portion of this call. But I wanted to start by giving a shout out to [ John Blake ], [ Anna Tennenbaum ] and the entire corporate accounting team. This is the first 10-Q that Oil-Dri filed in which we were not using the SEC's smaller reporting company designation. Not only were the additional requirements incorporated well, but in my opinion, this is the highest quality 10-K that the team has produced. So a big thank you to our excellent accounting team.

Now switching back to results. The team here at Oil-Dri continues to deliver robust solutions for our customers that have resulted in the very strong financial performance that we continue to deliver during our fiscal fourth quarter. Revenue increases of 10% over the fourth quarter of the prior year were driven primarily by volume, but our results also benefited from product mix improvements, which resulted in large part from the robust 24% year-over-year revenue growth in our B2B products, an excellent year for them. These products tend to have higher prices and margins than our retail and wholesale products. And therefore, as the increases in the overall part of the portfolio, the product mix becomes more favorable.

On the manufacturing side of the business, during our fourth quarter, we had several planned outages in our production facilities. We used these outages to complete capital projects for both growth initiatives and also to replace aged plant infrastructure. At the same time, we refreshed much of our information technology network hardware and we were able to upgrade our cybersecurity defenses. The financial impact of these outages was not only the capital that we invested, but also incremental contract services and repair expenses as well as the impact of lowering inventories. We used inventory on hand to serve our customers while we were not producing product, and this enabled us to maintain our historically high service levels. As a team, we continue to work to strengthen our balance sheet and to demonstrate our ability to generate cash flow, which is the lifeblood for funding growth and providing returns to our stakeholders.

During fiscal year 2025, Oil-Dri's net cash provided by operating activities was $80 million a remarkable increase of 33% compared to the net cash provided by operating activities during fiscal year 2024. Additionally, full year EBITDA of $90 million was up 29% over the $70 million EBITDA that was generated during fiscal year 2024. And with that amount of cash on hand, we continue to assess capital allocation in the following order of priority. Our top goal remains investing in our business for long-term sustainability. We continue to invest in our fixed asset base, including our mobile mining equipment. As mentioned earlier, in addition to replacing aged assets, we are investing capital to support current and future growth. For fiscal year 2025, we spent just under $33 million on these types of investments.

Additionally, we invest in people, process and technology to support our growth strategy. One example of this is the investment that we have provided funding during the fiscal year to stand up a centralized data analytics function. This function has been funded to support our commitment to [ mining ban ] for [ Moneyball ] type analytics from [ mining ] company. While we are in the early stages of this journey, we plan to expand this area to help focus on opportunities to leverage AI or artificial intelligence in applications where the payback generates acceptable returns and doesn't introduce unacceptable levels of rest.

We also use our cash to service our debt, and in fiscal year 2025, we paid down $11 million in debt. $10 million of that debt resulted from a draw on our revolving credit facility to partially finance the Ultra Pet acquisition. At this time, our revolving credit facility is undrawn, and we have full access to the $75 million financing vehicle. We look for and evaluate M&A opportunities to expand our businesses and support our growth strategies. Our Ultra Pet acquisition, which hit its 1-year anniversary of being part of the Oil-Dri portfolio during our fiscal fourth quarter of 2025 is a great example. That acquisition has performed well and has been viewed by our customers very favorably as a value-added product expansion to our portfolio.

We also acquired some key talent with the acquisition that will help drive growth in our core business as well as our Ultra Pet product line. Because of our strong cash position, I often get asked what type of M&A opportunities are of interest to Oil-Dri. We remain committed to our mission of creating value from sorbent minerals, it's what we do day in and day out. My team has demonstrated that together, we do it well. We believe we will create the most value if we acquire businesses that are closely aligned with our current portfolio. Additionally, we are open to exploring possibilities in other sorbent mineral-based solutions as well as other businesses that would expand our mineral-based product offerings to our current customers. Ultra Pet was a good example of this by providing us with an additional premium product to offer our existing customers.

Another high priority use of our cash is dividends. Our goal here is to provide predictable and sustainable dividends to our shareholders. The announcement during the fourth quarter of fiscal 2025, of the 16% dividend per share increase for fiscal year 2026 demonstrates that commitment. We also occasionally buy back shares of our stock to offset the dilution associated with our restricted stock program for our teammates and we occasionally opportunistically repurchase shares when we believe they are undervalued by the market.

During fiscal year 2025, we did not purchase any shares on the open market but we did buy back shares turned in by our teammates to pay taxes when they're restricted shares vesting. It's very rewarding to be a part of a team that delivered a year like we had in fiscal 2025. Each year that we continue to set new financial records makes the comparisons more challenging for the next year. The team here at Oil-Dri help to that challenge as we continue to make strategic investments, launch new products and maintain close relationships with our customers.

And Dan, with that, I'll turn it back over to you.

Okay. Great. Thank you. And before I open up to Q&A, I just want to embellish on a few things. First of all, as you'll recall, those of you who have owned our stock are filled us for the past few years. About 3 years ago, we launched what we called our Capital Recapture Program. And what that was, was a recognition starting from our Board that we were pricing to historic replacement cost for our assets when they were put into service 10 years, let's say, on average 10 years ago. The problem was that those same assets were costing twice as much in today's dollars versus what it cost us to put into service.

So back in '22 our annual depreciation was $13 million, $13.5 million, to be exact. And we were pricing to that $13.5 million. But we realized it was going to cost us at least double to replace those assets or $27 million over time. And as you've been hearing from Susan, we've been spending $30 million and $32 million and $33 million. So it's going to get there eventually. And if you look at our financial statements, you'll see that our annual depreciation which was $13.5 million back in '22 was $19.3 million in '24 and was $22 million last year. So clearly, as we're replacing those assets, the depreciation is going up because we're replacing them at twice the cost of the assets we're taking off the books.

Why am I telling you all this? I'm telling you all this because we get a lot of questions on margins, which we tend never to answer anyway because, look, it's just we're never into the guidance business. We're into focusing and delivering but on an apples-to-apples basis, look, with mix, we're clearly selling more and more of the high-value stuff. That's in line with our mission of creating value from sorbent minerals and playing what you read, we call it [ mining ball ], really getting into the analytics of our business. But apples-to-apples, let's say a 40-pound bag of Oil-Dri floor absorbent to a 40-pound bag of Oil-Dri floor absorbent, well, in 2022, that 40-pound bag was being charged at a depreciation rate based on the company of $13 million, now it's $22 million.

So clearly, the cost of those items is going up. And I could not be more appreciative of our customers who, when we went to them back in 2022, said we're going to price to these higher depreciation levels even though that isn't the cost currently being experienced. So again, long-winded way of saying, apples-to-apples, there's going to be a lot of margin pressure on some of these historic products because we've been pricing to a higher replacement cost but the cash generation stays the same. And as Susan pointed out, and we have paid a dividend every year since we went public in 1971. And we've raised it now, I want to say, 22 years in a row. And so we're very protective of our cash flow. We run the business and my dad always used to say, earnings or an opinion, cash is a fact.

So for the first time in a long time, we gave some forward guidance on earnings just to help you see what we're seeing. And if you look at the news release, I'll just read it for you. It says, as we enter fiscal year 2026, the first 6 months will be measured against a particularly strong first half of fiscal year 2025, creating challenging comparisons. However, we remain confident in our ability to build on our past success and continue to deliver growth of our diverse product portfolio. So what does all that mean? It means we're going to have a tough year-to-year comparison in the first half because, look, it was gangbusters this past fiscal 2025, records in every year. But the team and I have put together a plan and have every expectation of delivering a year that beats last year, obviously, we've given you the safe harbor. No one knows what's going to happen but I will tell you, first half is going to be challenging. We are hoping for and planning for a very successful fiscal 2026.

So with that, I will turn it over because I don't want to get into any more trouble with the lawyers or the safe harbor provisions. But I think you -- hopefully, you can understand or appreciate the guidance that I am giving.

So Leslie, I'm going to turn it over to you, and you can conduct the Q&A.

Okay. Great. [Operator Instructions]. I will start the first question, which is from John Bair from Ascend Wealth Advisors. He says, Dr. Mervyn de Souza recently joined Oil-Dri to lead R&D efforts. What brought him to Oil-Dri? What are his vision and goals related to Oil-Dri R&D efforts and focus and how do they align with Oil-Dri? Is there a particular R&D emphasis envisioned? Or is it balanced between agricultural, animal health and industrial product development. Mervyn?

Thanks, Leslie. I appreciate the opportunity to address your question, John. My vision and goals indeed do align with Dan and the rest of the senior leadership teams to deliver innovation and create value from [ sorbent ] minerals while helping the company grow within our existing markets and develop new products for different applications.

I joined Oil-Dri for a couple of reasons. The major one was Dan's commitment to future growth as well as creating a culture where Oil-Dri teammates can grow and develop. Another reason was that Oil-Dri is vertically integrated to owned and leased mines, we produce the raw material used to make our distinctive products. And last but not least, the opportunity to work with an R&D team again, many of whom are listening in from our R&D innovation campus at Vernon Hills.

There's a lot of room for innovation and creativity when we go all the way from our mines to various global markets and that is a unique advantage that many R&D leaders and companies don't have. My R&D teammates have a diverse range of experiences and specialized expertise that we leverage when partnering with each Oil-Dri division at the GM to support their specific growth strategies, be it with [ Catheter ], animal health, fluids purification or agricultural solutions. The R&D team supports all our Oil-Dri divisions, while our innovation processes and entrepreneurial culture allow us to flex resources the best and biggest opportunities across the company.

Great. Thank you so much. Our next question comes from Robert Smith, [ The Center for Performance Investing ]. And he asks what ways the current soybean situation affecting your business? And I'm going to have Bruce Patsey to answer that.

Robert, thanks for the question. The current administration has put more emphasis on tax benefits for renewable business with the use of soybeans in the market. So we do expect there'll be more crushing of soybeans and more oil going into renewable plants that will be processing this oil and turning it into diesel fuel. This will also probably generate more business at our current customers that are in the market as well. And we saw this in the fourth quarter as more soybean or oil was being produced in the marketplace, and it helped drive some of our sales in the fourth quarter, and we expect that to continue in [ F'26 ].

Great. The next question is from [ Estar ] and both [indiscernible] and Robert Smith are interested in the future prospects for increased sales for both Amlam products in the upcoming year and for fluids purification, but I'm actually going to have Wade to talk about Amlan.

Thank you, Leslie, and thank you, Ethan, for the question. As many of you remember, in fiscal year '24, there was a general downturn in the ag industry. And certainly, the Amlan business and other of our agricultural businesses impacted by that downturn, really driven by macro events that we built across the industry, not just in the U.S. but in our international markets as well.

In fiscal year '25, we saw good recovery. And again, that was across the industry across our [indiscernible], and that led to improved profitability for our customers. As a result of that, in fiscal year '25, we saw good growth and a return to more consistent growth as we had been forecasting previously. As we go into 2026, we expect that to continue. We still face regional challenges depending upon the geography in the world. Some of the economies are still recovering coming out of the pandemic. But generally, we've returned to more consistent and predictable economies that we sell into.

So going into 2026, we expect to see good growth across our businesses. Amlam is focused on continuing to expand into new geographies, both in Asia and in Latin America, adding new partnerships, adding new channels to the market. And so again, we expect a good year for the business, and again, more consistent growth that we can deliver. Macro events can change, but we don't see that necessarily on the near-term horizon. So that would be how we look at the coming year.

Thank you. Next question is from John Bair. He said you stated in the press release, competitors continue to increase their promotional spending during the 3-month period ending July 31, 2025, which Oil-Dri believes tempered its clay-based litter sales. Does this promotional activity refer to competitors' advertising activity as well as pricing discounts or couponing? Framing the question this way since Oil-Dri also stated advertising expenses were down in Q4. So wondering if lower advertising might have had an impact if competitors were advertising more heavily?

Laura Scheland, will you take that, please?

Sure. Thank you for the question. When referring to promotional activity in the release, we're mostly referring to heavy price discounts, couponing trade spend at large retailers such as rollback at Walmart or [ BionGetmanfree ] that public as well as other discounting and couponing in the brick-and-mortar and e-commerce channels.

During this heavy promotional climate in fiscal year '25, we shifted some of our advertising spend to strategic promotional trade spend, hence the reference to the lower advertising spend. We do not view this lower advertising spend as a driver for the tempered play sales, but more strategic shift to kind of match what's going on in the market. As in the earnings release, we're seeing that the lightweight casing litter segment expanded and surpassed the growth of the catheter category. And this was largely due to competitors' promotional spending on the lightweight products. While the competitive promotions can temper sales for short term, the competitive spend on lightweight really helps drive consumer trial and educate consumers on the benefits of lightweight litter.

We've articulated over the years, our strategy of growing the lightweight litter pie as consumers learn the benefits of lightweight litter. All things being equal from a price and performance perspective consumers will want to buy lightweight litter. However, the concept of less weight, but the same amount of uses can be difficult to convey to consumers on package since litter sold by weight, but used by volume. Therefore, we see the promotional spending on lightweight as a positive development in the long term because we view the trend of the growing lightweight segment as a key driver for the advancement of our branded and private label litter.

So we remain focused on increased distribution and sell-in of our Cat's Pride and privately labeled lightweight litter products. We remain very excited about our prospects for growth, especially as promotional activity subsides, which we expect it will, as consumers remain budget constrained and look for really high-quality private label products and other value offerings.

Great. Next question from Robert Smith. I'm keenly interested in the prospect of using artificial intelligence in the innovation lab for R&D with respect to new product development, can Dr. de Souza, please give us his thoughts about this.

Thanks, Leslie, and thanks, Bob. I, too, am excited about the potential for using automation and AI tools to increase the efficiency and effectiveness of R&D and innovation at Oil-Dri. That being said, I'm also a big fan of the crawl, walk, run philosophy. In my experience, the best outcomes are obtained when balancing automation with qualified human oversight.

Currently, this hybrid approach seems to be appropriate for Oil-Dri given deep minerals and application expertise that we have with teammates from both our R&D and operations team and the current -- recent AI technologies. For new product development AI can be used to quickly evaluate and then discard or elevate hypotheses, and it can screen a lot of data more rapidly than humanly possible. I've been at Oil-Dri for a little over 5 months now, and the team and I are in the process of critically reviewing existing data with a focus on quality as a first step, in addition to implementing processes to ensure that we generate technical information that is robust, reliable and reproducible. When working with AI and machine learning algorithms, garbage and garbage out.

In the medium term, Oil-Dri is actively assessing advancements in machine learning models, not just for R&D, but also AI applications as they relate to excavation, falling crushing and processing our minerals. We acknowledge the disruptive and transformative potential of AI, not just within R&D, but across our business to help with efficiency, sustainability and value creation. At Oil-Dri, we are employing a phased and strategic approach when it comes to AI that allows us to evaluate the cost benefit analysis for Oil-Dri as a whole.

Great. Next question is from [ Tyler Ventura ] from [ Diamond Hill ] Capital. And he asked agricultural sales surged 104% in Q4 to a record $11.9 million. You mentioned normalized purchasing patterns and one new key customer. Can you provide more color on the sustainability of this growth and the revenue contribution from the new customer versus normalized patterns?

And Wade, I'm going to turn that over to you.

Yes. Thank you, Leslie, and thank you, Tyler. So this goes back a little bit to or relates directly to the answer I gave a moment ago to a previous question. In FY '24, we saw a pretty substantial downturn in the agricultural markets, and this impacted the entire industry. As I mentioned, a lot of it international as well but also our businesses. And so in fiscal year '24, we did see reductions. And part of that was driven by agricultural practices. Part of that was driven by higher-than-normal inventories that had built up of products that farmers really use in broad acre production.

As we moved into 2025, so the last fiscal year, we worked through those inventories. We saw recoveries in the market and that resulted in not only our legacy or long-term customers expanding their purchases with us, but we also saw some new customers come on board with different types of applications. So fiscal year '25 was a real strong recovery year for us. As we move into fiscal year '26, some of that is going to normalize. We look to see growth in the ag sector this year, both in our turf and ornamental segments, but also in our broad acre segments as well, our row crop segments. And again, it will return to what I would call more consistent and predictable growth than we saw between '24 and '25 where we saw the significant drop and then the strong rebound.

Going forward, as we continue to see markets improve and become more technologically driven as we saw we see population increase as we see influence around the world increase and the desire to eat better and to have higher rates of animal protein, vegetable protein in diets. We see ag just continuing to grow on a consistent curve, those will -- those macro events are going to impact our businesses very favorably, and that's why we're very bullish about this segment for Oil-Dri into the future.

Great. Next question is from [ Bill Anderson ] from [ Bard ] Associates. He would like an update on the Ultra Pet business. Laura, can you give a brief overview of that, please?

Yes. Thanks for the question. As Susan noted, we closed on the Ultra Pet acquisition in May of 2024 and has been a great fit from a product, business, cultural and talent perspective. We are very pleased with the acquisition and really remain excited about the crystal business and the synergies and opportunities that it adds to our business.

During fiscal '25, we leveraged our relationships with branded and private label customers and the expanded portfolio offering as well as synergies of being able to co-load our [ plain ] Crystal products together to customers to exceed our estimates of distribution ads, some of which came on in F '25 and some of which will continue in F '26.

So in addition, we've also exceeded goals of synergies with freight and operations and other costs and SG&A, which has helped offsetting some softness in the legacy customers that came on with Ultra Pet. So all in all, we remain really excited about the acquisition and the opportunities that it's allowing for our business.

Great. And we probably have -- we only have one more minute. So Dan, did you have any closing remarks?

Look, our focus, you guys can tell from the team. I mean when I used to run these teleconferences, it was like a one-man band. And now it isn't at all. And I'm glad you guys, you and investors get to hear from the people that are making it happen every single day, pulling together. We've always said winning at Oil-Dri is a team game, and that's what you're seeing here. Not every quarter is going to be as great as this one so let's enjoy it. And we're going to continue to do everything we can to create value from [ sorbent ] minerals.

So thank you for your support, and we'll look forward to talking to you after the first quarter.

Thank you, ladies and gentlemen. This concludes today's presentation. We thank you for your participation. You may all disconnect, and have a wonderful day.

Good day and thank you for standing by. Welcome to the Oil-Dri Third Quarter Fiscal 2025 Earnings Discussion via Webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Jaffee, President and CEO of Oil-Dri. Please go ahead.

Thank you, and welcome, everybody. Before we get started, I'd like to introduce all the people that are on the call with us today. Susan Kreh, our CFO and CIO; Aaron Christiansen, Vice President of Operations; Chris Lamson, Group VP of Retail and Wholesale; Wade Robey, Vice President of Agriculture and President of Amlan International; Laura Scheland, Vice President and General Manager of the Consumer Products Division; Bruce Patsey, Vice President of our Fluids Purification Division; Tony Parker, Vice President, General Counsel and Secretary; and of course, Leslie Garber, our Director of Investor Relations, who will walk us through the safe harbor.

Thank you, Dan, and welcome, everyone. 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 in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Turning it back over to you, Dan.

Great. Thanks, Leslie. And before Susan walks us through some of the quantitative highlights, I just want to give some qualitative, and there's going to be some quantum here as well. Those of you who know me well know I keep my spreadsheets going back to the beginning of time. And on an apples-to-apples basis, this quarter was a really big apple. It was a really big apple. We made $11.644 million of net income. We've had 85 fiscal years, so 84 previous. And that $11.6 million was greater than all but 8 of our 84 prior fiscal years. And then through 9 months, we are now ahead of all 84 of our past fiscal year. So we are playing with the house's money in the fourth quarter. So it feels really, really good.

But most importantly, about all this is we've been reinvesting it in our business as we told our customers we would. So I want to make sure I thank our customer partners for embracing our capital replacement program. It was costing us twice as much to replace the capital as it was when we put it into service, and we're depreciating it. So to give you some metrics around that. We're probably going to spend around $32 million this year in capital and probably spend another $32 million next year. So if you look at the 5-year period from F'22 to F'26, which will end a year from this July, we will spend close to $143 million on capital. And if you look at the 5 prior fiscal years, so F'17 to F'21, we only spent $78 million. So we spent an extra $65 million or almost $14 million, $13 million -- $13 million more a year to put plow back in our business so that we can continue to give our customers the quality and the quantity that they expect and frankly, that they deserve. So it's going very well and thank you for supporting that.

We had our Board meeting this week, and I think you saw that the Board raised the dividend 16%, and you have them to thank for that. And we always go and finish with a roundtable. And so happy that Bud Selig is still on our Board. He joined our Board in 1969. He was just really shouting out what a great team we are, and he knows all about teamwork. And I love his quote that what's going on here at Oil-Dri is remarkable, but not surprising. And he talks about how he knew my grandfather, grandpa Nick, who started the business in 1941. And in fact, the first baseball game Bud ever went to in Comiskey Park was with my dad and my grandfather, and he has great stories to tell about that, but I won't digress. But he also was very close friends of my father.

So he joined our Board in 1969 when our annual sales were $4.9 million for the year. We now do $9 million a week if you count it as a 5-day work week. So that means every 2.7 days, we're doing the sales we were doing when he joined the Board. The year he joined the Board, we made $365,000 in net income. So now if you take our 9 months and annualize it, we make about $1,000 a week in net income. And so that's every 1.8 days, which is just ridiculous. And I'm sad that my father and my grandfather can't see this, but maybe they are, but they are through Bud. And so I just wanted to thank Bud for continuing to agree to stay on our Board and being such a great mentor to me. So I'm going to turn it over to Susan Kreh, CFO of the year in the city of Chicago. And Susan, take it over.

Thank you, Dan. And in order to preserve the most time for questions, I'll highlight a few financial matters and then address any of your other questions in the Q&A portion of the call. As Dan highlighted in his opening remarks, coming off another quarter of strong and record financial performance, our Board of Directors and our management team feel confident about our strong financial position and about Oil-Dri's future. And that confidence has been reflected in the announcement of a significant double-digit increase to our quarterly dividend. As a team, we continue to work together to strengthen our balance sheet and to demonstrate our ability to generate cash flow, which is the lifeblood for funding our growth and providing returns to our stakeholders. Year-to-date, as of April 30, Oil-Dri's net cash provided by operating activities was $55 million, which was an increase of 49% compared to the net cash provided by operating activities during the first 9 months of fiscal year 2024.

Our belief in the sustainability of that cash flow generation inspired us to raise the dividend 16%, an increase much larger than our normal annual increase. We understand that the sustainability and predictability of our dividend is important to our long-term shareholders, and that was reflected in the increase. Going forward, we will continue to take a long-term disciplined approach to capital deployment to balance shareholder returns with reinvestment in the business and potential M&A opportunities. We continue to assess our capital allocation in the following order of priority. First of all, investment in our business for long-term sustainability. We have a fixed asset-intensive business model that requires significant capital investment in our manufacturing facilities, along with investment in expensive mobile equipment in our mining operations.

You see this in the cash flows from investing activities section of our consolidated statement of cash flows, indicating that year-to-date, we've invested $24.5 million in these types of assets. We've also invested in enhancing maintenance, which flows through our cost of goods sold to improve uptime in our facilities. This not only leverages the investment in capital equipment in our manufacturing and mining operations, but the increased uptime also helps to improve service levels and responsiveness that's important for our customers. Additionally, we invest in people, process and technology to support our growth strategies. One example of this type of investment is the funding we've provided during this fiscal year to stand up a centralized data analytics function, and there are other examples as well.

Second, when we're thinking about our capital allocation, we continue to explore and evaluate M&A opportunities to expand our businesses and support our growth strategies. Our Ultra Pet acquisition, which hit its 1-year anniversary as being part of the Oil-Dri portfolio on May 1 is a great example. That acquisition has performed well. It has hit our internal financial benchmarks and most importantly, has been viewed by our customers very favorably as a value-added product expansion to our portfolio. We initially funded this acquisition with approximately $24 million in cash, $10 million in short-term financing and $10 million in long-term financing. Because of our strong cash generation during this current fiscal year, we've paid off the $10 million in short-term financing, thus leaving Oil-Dri with more dry powder to fund future opportunities.

Our third priority when we're thinking about capital allocation is our dividend, our goal to provide a predictable and sustainable dividend to our shareholders. The announcement of the 16% dividend increase marks the 22nd consecutive year of providing increased dividends to our shareholders, and that is a track record that we are proud of. And finally, share repurchases. We buy back shares to offset the dilution associated with restricted stock program for our teammates, and we opportunistically repurchase shares when we believe they're undervalued by the market. Year-to-date, we have not made any open market purchases, but we have bought back shares turned in by our teammates to pay taxes when their restricted shares vested. So those are -- that's the way we think about the cash allocation and the capital allocation.

But prior to turning this back over to Dan for questions, I'd like to provide a little color on our effective tax rate. For the third quarter of fiscal year 2025, we used an estimated effective tax rate of 18% compared to 23% for the rate for the third quarter of fiscal year 2024, so a 500-basis point difference. Our process for determining this rate involves preparing our fiscal year's tax return during the third quarter, so after -- for the prior year. So after we prepare that, we've got a view of what our final tax rate looks like for that prior year, we make the tax adjustments that are necessary and book them. Then we take a look at expected annual taxable income for the upcoming year and include any tax adjustments that we're aware of, including the depletion deduction and any other discrete items.

While this analysis resulted in year-over-year results in the quarter having a meaningful variation in the quarterly effective tax rates, when we look at that on a full year basis, we still estimate the full year effective tax rate to be about 19% compared to a full year effective tax rate last year of 20.5%. During the current year, we did benefit from a onetime tax credit related to solar investments in our Taft, California facility, which really makes up the difference in why the rate this year is slightly less than the full year effective tax rate that we used last year. So hopefully, that provides a little bit of what's going on in the quarter. I would just recommend that looking at the full year is probably the way to think about it when you're thinking about the future of the business. And with that, Dan, I'll turn it back over to you.

All right. Thank you. And for our investors, if you're ever -- thank you for the effective tax rate thing, but if you're ever suffering from insomnia, just ask Susan to walk you through our international taxes. And I guarantee you I'm just teasing you, Susan, but you know I love international tax. I'm going to turn it over to Chris Lamson for an Ultra Pet acquisition update, obviously.

Great. Thanks, Dan. So hey, at the end of Q3, we've now completed our first year of ownership of Ultra Pet, which made it seem like a good time. I think it was last -- it was at the end of Q1, but we thought this would be another good time to share an update regarding the acquisition. As Susan mentioned, we're right on our acquisition economics. We're obviously very pleased with that. That is we're right on the model we use to value the business. We're experiencing stronger-than-expected cost synergies, primarily in the logistics and administrative areas. One example, we've been able to close what were pretty expensive third-party warehouses and roll these into our existing Oil-Dri facilities from a distribution perspective faster and more efficiently than expected.

Susan again alluded to this, it's a win-win as customers are enjoying the efficiencies of what are fairly light crystals writing on the same trucks as our heavier clay litters. Conversely, the Ultra legacy business, the existing retailers we got as part of the business, been a little softer from a top line perspective, but then partially offsetting that has been the distribution drive that we made right after buying the business was really successful and also in line with our acquisition model. We've gotten a few questions back through Leslie over time as to the tariff situation. Silica gel comes out of China, so I thought I'd provide a little update on that. I think first, though, setting context, as much as crystals are a focus, given the growth opportunities we see, they only represent about 10% of our total litter business and less than 5% of Oil-Dri's total business from a top line perspective.

So important to realize that overall exposure here is limited in the crystals business and then as was talked about earlier, is a bit limited overall or is limited overall as a company. So as we're thinking about it, we really start with consumer value. And as the case with always with Oil-Dri, the tortoise being our mascot, we think about the business for the long term. The value player in the category, that means we really need to pay attention to price gaps, just like we do on our base clay business. Our Cat's Pride and Ultra brands and of course, private label have to offer a solid value versus the premium branded players. So we look up at those branded players, but in crystals, we also have to look down at the clay business as we really compete with them from a value perspective or compete with the clay segment from a value perspective as well.

So as of now, we're not really seeing any movement on crystals and clay. Now the flip to that is, especially with our tighter margins versus the premium players, we really must manage the P&L and the tariffs push on our margins, where they have to an unreasonably low level, we've got to pass along a little bit of surgical pricing, but only to the extent necessary and with a focus on maximizing that value like we talked about. Fortunately, per my prior comments, we really have generated significant cost savings via synergies, which we can use to offset the near-term impact of tariffs along with that surgical pricing and ultimately maintain good value equation. So ultimately, it's really a balance that we're leveraging to get through what is a bit of volatile times.

So it's kind of easy to become myopically focused on managing tariffs and the margin structure. I'm really pleased that we remain focused on growing the crystals business. As I've shared in this forum before, the selling cycle where we really began to leverage our strong capabilities built into our lightweight private label business by partnering with retailers to develop private label offerings in the Crystal segment. While we never share our retail lever plans, we remain really optimistic that part of our investment thesis around building out the private label business is very much on track. Recall that the momentum that we created out of the gate in terms of driving distribution was really on the Ultra brand and bringing Cat's Pride into Crystals. As we go forward into this next selling cycle, we're optimistic that we'll begin to drive penetration on the private label business as well. So pleased with where we are and pleased with growth prospects ahead and teams head down on growing the business. With that, we'll turn it over to Leslie, who I think is going to kick off taking your questions.

Thanks, Chris. [Operator Instructions] So our first question comes from John Bair from Ascend Wealth Advisors . He and Ethan Star, a private investor, are both interested in Amlan. And so I'm going to read the first question. Although Animal Health and Nutrition revenues for the 9 months year-over-year were up this past quarter, they were flat year-over-year as stated in the press release. Was this quarter's result due to seasonality or changes in customer order patterns? Any hesitation by customers outside the U.S. due to tariff controversy? And what will it take to get sales back on the growth trajectory? So Wade, I'm going to turn that over to you, please.

Yes. Thank you, Leslie, and thank you, John, for the question, and good morning, everyone. As you know, the performance for the third quarter was flat as we compare it to the previous year. But actually, as we look at the year-to-date, we're on very good growth and meeting our expectations and targets that we've set for the year. So why is that? As you know, we have quite a bit of volatility currently being caused by the tariff situation. This really exacerbates a previous situation we had where because of the -- some of the challenges we were seeing on logistics and delivering to our international markets, we are seeing longer transit times.

So the combination of those has caused increased volatility as we look month-over-month or as we compare on a quarter basis. So that we expect to work its way out. It actually has caused us or allowed us to work even more closely with our distribution partners, forming stronger relationships, helping them manage their inventory, so we don't have product shortages and that we meet our customer needs for our products. So overall, we're very pleased with the performance year-to-date and expecting to finish the year on track, but it has caused, as you know, some month-to-month or quarter volatility that was unexpected.

Great. Thank you, Wade. The next question comes from Robert Smith from the Center for Performance Investing. He asks, -- the U.S. renewable diesel production was down 12% in the first quarter of calendar 2025, yet you were up 13%. While not fully comparable in fiscal year month, it was significant outperformance. Please explain. So I'm going to turn that over to Bruce Patsey.

Yes, Robert, thanks for the question. And yes, the market was down slightly in the first quarter of this year. But in fiscal '25, new plants came online in the renewable diesel sector, and Oil-Dri was able to secure a lot of that new business that we didn't have the prior year. So even though the whole market was down slightly in the first quarter, we saw a gain in our business as we had new business and working with new plants. In addition, we saw an increase in some of our vegetable oil business as we picked up a few new customers in that segment as well. So overall, we're very strong, and we're looking forward to a good fourth quarter coming up.

Our next question comes from Ethan Star. He asks, noting that you recently lost what appears to be a significant private label clay cat litter account, what are the prospects for growing private label clay cat litter distribution and sales? I'm going to have Laura Scheland answer that.

Thanks for the question. We're continuing to see a lot of momentum in the private label clay cat litter, particularly for lightweight litter. And despite the loss of an account, we continue to have commanding share of private label lightweight. As we've mentioned during past calls and the stockholder meetings, our strategy has been to grow the lightweight segment, and we're very pleased to see that these efforts are paying off and the lightweight segment is growing more than the litter category, which poises us for long-term success as the lightweight litter pie grows, our sales grow as well. As more consumers move to the lightweight litter segment, the opportunity for private label lightweight is growing.

We've made great progress on private label lightweight accounts over recent years, but still have about 4 to 5 national retailers who don't carry us that we are targeting. We are leveraging existing relationships and are in active conversations with a couple of them and are very excited about the prospects. In addition, we've continued to develop the best-performing products to offer consumers the best value and have evidence of the superior performance and quality of our products versus other private label lightweight offerings and are actively using this evidence and data in our selling efforts with customers. So net-net, we remain very optimistic and excited about the momentum of the growing lightweight litter segment and our prospects to grow in the private label lightweight business along as well.

Great answer, Laura. I just want to add because lightweight is so near and dear to my heart that my belief is if it's a great lightweight litter, then it conforms to our patents. And if it doesn't conform to our patents, it's not a great lightweight litter because that's what we did. When we invented this category and we launched lightweight litter, we pretty much patented everything we thought that would make an effective lightweight litter.

So what you're seeing, we're not going to get into the details, but we can see what customers are saying about this product that they replaced us with. And the reviews are not friendly. And I would guess that their sales are declining. So we're going to play the long game like we always did. Sometimes when something is too good to be true, it's because it really isn't, and they obviously got a lower price, but I'm confident that over time, the consumers will get to vote, and my bet is we will be back in. But we'll see. And sometimes you got to take a step back to go 2 steps forward.

We have another question from John Bair. He asks, natural gas is a key production input cost. We know you partially lock in forward supply contracts for those needs. Natural gas prices are widely considered to be headed higher in the second half of 2025 and in 2026 due to increased demand for LNG exports, summer cooling demands and data center power demand. Are there any alternatives available to Oil-Dri to power your kilns or otherwise reduce your operating costs at the plant level? I'm going to turn this over to Aaron Christiansen.

John, that's a great question. I'm happy to answer it. I'll take it in a number of different ways. First, as you stated in your question, a reminder that we make partial purchases to secure a chunk of our natural gas needs. In a rising market, it helps sort of prove the value of long-term dollar cost averaging of the natural gas we purchase. Taking the question another way, in the past, we have explored alternative fuels, fuel oil and even coal. At present, liquid natural gas is still the most cost-effective and efficient fuel source.

Taking the question another way, Oil-Dri has explored alternative drying technologies, different types of dryers and even completely different alternatives like microwave technology that are available. Unfortunately, at present, most alternatives to traditional drying technology come with other pitfalls, high cost of capital, maintenance cost, rate and reliability issues potentially all come with pitfalls. At present, we've been unsuccessful finding an alternative that we really believe in. Now that being said, our job every day is to get better than we were yesterday. We're constantly looking at ways to optimize fuel consumption, improve moisture control and management, some unique ways to manage optimal combustion on our dryers, continually looking at creative ways to get better, including even pre-drying.

And then I'll close with taking an opportunity to just not within your question, but maybe to remind the audience, Oil-Dri has shifted more than half of our warehouse forklift fleet to the use of electric away from propane or natural gas-powered forklifts, and that has been -- for several reasons, has really been a highly beneficial shift in approach. I hope I've answered your question, John.

Okay. We'll take another question from Ethan Star. Are you gaining new distribution of the Ultra Pet crystal cat litter? If so, how many doors are they in? And how is retail sell-through? Chris Lamson, I'm going to turn that over to you.

Sure. Thanks, Leslie, and thanks, Ethan. I answered this partially in my earlier comments, so I'll be a little brief here. In short, we're up significantly in terms of what we call points of distribution year-over-year, which is number of doors, to your point, Ethan, times number of items. In fact, year-over-year from a brick-and-mortar branded perspective, we added more points of distribution than we had when we acquired the business. Now recall, Ultra Pet also had a sizable online business and a private label business.

But branded year-over-year between Cat's Pride and Ultra Pet, we added more points of distribution than we already had. We went right into selling season. It's been quiet since we built that distribution. We're back into selling season. And I outlined our plans to sell more branded business, but also now add private label points of distribution going into this next selling season, which really culminates with some customers and shipments in the fall and some customers with shipments in the early winter. So we'll be back with results as that stuff starts shipping and tell you about the progress, we've been able to make then. Thank you.

Great. Thanks, Chris. Our next question is from Robert Smith. He asks, is artificial intelligence playing any role yet in controlling expenses or in targeting advertising? I'm going to have Susan Kreh address that.

Yes. Thanks for the question. This is one that's near and dear to my heart. We do have a 5-year road map with artificial intelligence on it. I would say today, we're at the beginning of this journey. Today, we use it primarily to supplement our teammates and provide technology that makes them more efficient. So think about applications in customer service and in accounts payable. But we definitely do have items on the road map to get to your point here, Robert, where we will be taking a look at using them to control expenses. And hopefully, my boss will find that more exciting than international taxing strategies. But yes.

I will. It's a low bar. Well, thank you. We're running out of time, and we did have one more question that actually is a great dovetail into my closing comments. And so Samuel [Yake], I hope I pronounced your name right, but he said, Wall Street often gets caught up in short-term performance. It will be nice to hear your thought on what Oil-Dri will look like in 10 years.

And the reason why that's such a great question, Samuel, is because we do believe we have the best hybrid capital structure. We're both a public company. You get total transparency, and a lot of people have made a lot of money betting on and holding Oil-Dri shares over the years. As Susan said, we've raised our dividend 22 years in a row, with big increase this year of 16%. Lately, you've seen a great run-up in the value of the company, rightly so, as we have created more earnings and grown the top line. But we always have played for the long haul. And Chris mentioned that our mascot is the tortoise. It is because the tortoise always wins the race.

And I have to remind investors because sometimes they get a little frustrated, they're like, well, what do you mean a tortoise, tortoises go slow. And my take on that is the tortoise went as fast as he could go without jeopardizing the future. He wasn't going to do anything in the short run to jeopardize his future outcome. He just had stubby little legs in a shell, but he wasn't lazy. He wasn't going slow because he was lazy. We are not lazy. We will go as fast as an organization as we can without doing anything to jeopardize -- intentionally jeopardize the future. We're obviously human, and we will make mistakes. So I'm not going to answer your question in specificity. I will just tell you that we are benefiting today because of investments and decisions we made 2, 4, 6, 8, 10 years ago, even longer when we started an acquisition strategy and started to bring in new products and new mines and new materials. So -- and then invested more in R&D, invested more in capital.

These are long-term investments. So all I can tell you is we really have an internal commitment to having at least 40 years reserves in every single product line, and that's our window. We have over, I think, 100 years of reserves and proven and inferred if you take all of our materials, but we make sure that for every product line, we have at least 40 years. So I very much appreciate your support, your loyalty, and we've been rewarding it in the short run. I hope we're rewarding it forever. But it's a long game. And so let's deliver in the next quarter. So thank you. We'll be talking to you again when we close fiscal '25. I hope everyone has a great, happy and healthy summer.

Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may all disconnect and have a wonderful day.