Oil-Dri Corporation Of America
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JULY 31, 1999 COMMISSION FILE NO. 0-8675

------------------------

OIL-DRI CORPORATION OF AMERICA
(Exact name of registrant as specified in its Charter)


DELAWARE 36-2048898
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

410 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
(Address of principal executive offices) (Zip Code)

The Registrant's telephone number, including area code: (312) 321-1515


Securities registered pursuant to Section 12(b) of the Act:


NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------

Common Stock, par value $.10 per share New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act:

NONE
(Title of Class)

Number of Shares of each class of the Registrant's Common Stock outstanding
as of September 30, 1999:

Common Stock -- 5,470,252 shares (including 1,173,470 treasury shares)
Class B Stock -- 1,765,266 shares (including 342,241 treasury shares)
Class A Common Stock -- 0 shares

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Aggregate market value of the Registrant's Common Stock owned by
non-affiliates -- $60,270,139 (based on the closing price on September 30,
1999).

================================================================================
2

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated herein by reference:

1. The Registrant's Proxy Statement for its 1999 Annual Meeting of
Stockholders ("Proxy Statement"), which will be filed with the Securities and
Exchange Commission not later than November 28, 1999 (120 days after the end of
the Registrant's fiscal year ended July 31, 1999), is incorporated into Part III
of this Annual Report on Form 10-K, as indicated herein.

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CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
ITEM 1: Business.................................................... 4-9
ITEM 2: Properties.................................................. 9-10
ITEM 3: Legal Proceedings........................................... 10
ITEM 4: Submission Of Matters To A Vote Of Security Holders......... 10
EXECUTIVE OFFICERS OF THE COMPANY...................................... 11

PART II
ITEM 5: Market For Registrant's Common Equity And Related
Shareholder Matters......................................... 12
ITEM 6: Selected Financial Data..................................... 14-15
ITEM 7: Management Discussion And Analysis Of Financial Condition
And The Results Of Operations............................... 16-19
ITEM 7A: Quantitative And Qualitative Disclosures About Market
Risk........................................................ 19
ITEM 8: Financial Statements And Supplementary Data................. 20-40
ITEM 9: Changes In And Disagreements With Accountants On Accounting
And Financial Disclosure.................................... 40

PART III
ITEM 10: Directors And Executive Officers Of The Registrant.......... 41
ITEM 11: Executive Compensation...................................... 41
ITEM 12: Security Ownership Of Certain Beneficial Owners And
Management.................................................. 41
ITEM 13: Certain Relationships And Related Transactions.............. 41

PART IV
ITEM 14: Exhibits, Financial Statement Schedule, And Reports On Form
8-K......................................................... 42-44
SIGNATURES............................................................. 45-46
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES.............................. 47
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS....................... 48
EXHIBIT INDEX.......................................................... 49
</TABLE>

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PART I

ITEM 1. BUSINESS

Oil-Dri Corporation of America was incorporated in 1969 in Delaware as the
successor to an Illinois corporation incorporated in 1946 which was the
successor to a partnership which commenced business in 1941. Except as otherwise
indicated herein or as the context otherwise requires, references herein to
"Registrant" or to "Company" are to Oil-Dri Corporation of America and its
subsidiaries. The Registrant is a leader in developing, manufacturing and
marketing sorbent products and related services for the consumer, fluids
purification, agricultural, and industrial and automotive markets. The
Registrant's products are principally produced from clay minerals and, to a
lesser extent, other sorbent materials. Consumer products, consisting primarily
of cat litter, are sold through the grocery products industry, mass
merchandisers, warehouse clubs, and pet specialty retail outlets. Fluids
purification products, consisting primarily of bleaching, filtration and
clarification clays, are sold to processors and refiners of edible and
petroleum-based oils. Agricultural products, which include carriers for crop
protection chemicals and fertilizers, drying agents, soil conditioners, pellet
binders for animal feeds and flowability aids, are sold to manufacturers of
agricultural chemicals and distributors of other agricultural products.
Industrial and automotive products, consisting primarily of oil, grease and
water sorbents (both clay and non-clay), are sold to distributors of industrial
cleanup and automotive products, environmental service companies, and retail
outlets.

The Registrant's sorbent technologies include absorbent and adsorbent
products. Absorbents, like sponges, draw liquids up into their many pores.
Examples of the Registrant's absorbent products are CAT'S PRIDE(R) Premium cat
litter and other cat litters, OIL-DRI ALL PURPOSE(R) clay floor absorbent and
AGSORB(R) granular agricultural chemical carriers.

Adsorbent products attract liquids, impurities, metals and surfactants to
themselves and form low level chemical bonds. The Registrant's adsorbents are
used for cleanup and filtration mediums. The Registrant's adsorbent products
include OIL-DRI LITE(R) sorbents for industrial cleanup, PURE-FLO(R),
PURE-FLO(R) Supreme, PERFORM(TM) and SELECT(TM) bleaching clays for edible oils,
fats and tallows, and ULTRA-CLEAR(R) clarification aids for petroleum-based oils
and by-products.

The Registrant has pursued a strategy of developing value-added and branded
products for consumer, fluids purification, agricultural and industrial and
automotive uses, where the Registrant's marketing and research and development
capabilities can play important roles. The Registrant's products are sold
through its specialized divisional sales staffs supported by technical service
representatives and through a network of industrial distributors and food
brokers. The Registrant maintains its own research and development facility and
staff.

Certain financial information on segments is contained in Note 4 of the
"Notes to Consolidated Financial Statements," incorporated herein by reference.
Information concerning total revenue of classes of similar products accounting
for more than 10% of consolidated revenues in any of the last three fiscal years
is not separately provided because it is the same as the information on net
sales of segments furnished in Note 4 of the "Notes to Consolidated Financial
Statements."

Certain financial information about the Registrant's foreign and domestic
operations is contained in Note 5 of the "Notes to Consolidated Financial
Statements," incorporated herein by reference.

Consumer Products

The Registrant's cat litter products, in both coarse granular and fine
granular clumping (scoopable) forms, are sold under the Registrant's CAT'S
PRIDE(R) and LASTING PRIDE(TM) brand names, FRESH STEP(R) brand manufactured for
The Clorox Company and private label cat litters manufactured for mass
merchandisers, wholesale clubs, drug chains, pet superstores and retail grocery
stores. Alternative litters, made from recycled paper, are sold under the DUST
STOPPER(TM)(coarse) and SCOOP 'N FLUSH(TM) (scoopable) brands and are marketed
through similar channels. The Registrant also packages and markets CAT'S
PRIDE(R) KAT KIT(TM) cat litter in a disposable tray. These products are sold
through independent food brokers and the Registrant's representatives to major
grocery outlets such as Publix, Kroger, Stop and Shop,
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and others. LASTING PRIDE(TM) cat litter is principally sold to mass
merchandisers such as Wal-Mart and K-Mart.

The Registrant and The Clorox Company have long-term arrangements under
which they developed FRESH STEP(R) premium-priced cat litter products. FRESH
STEP(R) brand, which is owned, trademarked and marketed by The Clorox Company,
utilizes the Registrant's special low density, highly absorbent clay mineral.
FRESH STEP(R) cat litter contains microencapsulated odor controllers which are
activated by the cat. The Registrant has a long-term exclusive right to supply
The Clorox Company's requirements for FRESH STEP(R) coarse cat litter up to
certain levels. According to independently published supermarket industry
reports, FRESH STEP(R) coarse cat litter was the largest dollar grossing branded
cat litter sold through grocery chains in the United States in the 52-week
period ended August 8, 1999.

Traditional coarse granular clay litters once represented approximately 98%
of the market. Beginning in 1990, the cat litter market changed and traditional
coarse litters are now complemented by new, fine granule clumping (scoopable)
products. These clumping products have the characteristic of binding together
and expanding when moisture is introduced. The Registrant's clumping cat litter
is based on naturally occurring organic ingredients which are biodegradable. On
an industry-wide basis, clumping cat litters have assumed market shares in
excess of 52% of retail dollar sales volume in the grocery industry and 63% of
retail dollar sales volume in the mass merchandiser industry in the 52-week
period ended August 8, 1999, compared with 49% and 61%, respectively, in a
similar period last year.

Fluids Purification Products Group

Fluids purification products include PURE-FLO(R) and PURE-FLO(R) Supreme
bleaching clays and ULTRA-CLEAR(R) clarification aids. These products are
supported by a team of technical sales and support representatives employed by
the Company and the services of the Registrant's research and development group.
The products are marketed in the United States and international markets.

PURE-FLO(R) bleaching clays, used in the bleaching of edible oils, remove
impurities and color bodies from these oils. The primary customers for these
products are refiners of food oils. ULTRA-CLEAR(R) clarification aids are used
as filtration and purification mediums for jet fuel and other petroleum-based
oils. These products adsorb unwanted moisture and other impurities, and are
primarily sold to oil refiners.

The Registrant also produces PERFORM(TM) and SELECT(TM) bleaching clays,
which offer performance advances to refiners. The PERFORM(TM) products are the
next generation of bleaching clays, providing increased activity for
hard-to-bleach oils. The SELECT(TM) line of products is used earlier in the
process stream to remove a variety of impurities from edible oils. SELECT(TM)
can also be used to replace the water wash step in the caustic refining of
edible oils.

Agricultural Products Group

The Registrant produces and markets a wide range of granular and powdered
mineral absorbent products that are used with crop protection chemicals, animal
feed, fertilizers and other horticultural applications. Products include
AGSORB(R) agricultural chemical carriers and drying agents; FLO-FRE(R), a highly
absorbent microgranule flowability aid; PEL-UNITE(R) and CONDITIONADE(TM)
pelleting aids used in the manufacture of animal feeds, and TERRA GREEN(R) soil
conditioner.

The AGSORB(R) carriers are used as mediums of distribution for crop
protection chemicals, including herbicides, fungicides, insecticides, and
fertilizers. AGSORB(R) customized carriers are designed to reduce dust and to
increase accuracy of application. The Registrant's AGSORB(R) drying agent is
used to prevent clogging in specialized farm machinery and enables farmers to
evenly apply granular fertilizers and liquid pesticides to their fields in one
application. The Registrant has also developed the AGSORB(R) product as a
blending agent for fertilizers and chemicals used in the lawn and garden market.

Agricultural products are marketed in the United States by technical
salesmen employed by the Company who sell to crop protection chemical
manufacturers, feed producers and agricultural product

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distributors. The Registrant's principal customers for these products include
the agricultural groups of Monsanto, DowElanco and Zeneca.

Industrial and Automotive Products

Products for industrial applications include the Registrant's oil, grease,
and water sorbents, which are cost effective floor maintenance products that
provide a nonslip and nonflammable surface for workers. These products are sold
through a wide range of distribution channels and have achieved a high level of
brand name recognition. The Registrant distributes clay-based sorbents sold in
granular form and in other configurations such as pillows and socks. The
Registrant also distributes non-clay sorbents including its OIL-DRI(R)
Industrial Pad and OIL-DRI(R) Industrial Rug, which are made of needle-punched
polypropylene.

The Registrant sells its industrial products through a distributor network
that includes industrial, auto parts, safety, sanitary supply, chemical and
paper distributors and environmental service companies. The Registrant supports
the efforts of the industrial distributors with specialized divisional sales
personnel.

The Registrant also produces for the consumer market OIL-DRI(R) Automotive,
a floor absorbent for home and garage use. This product is sold through
automobile parts distributors and mass merchandisers.

Transportation Services

In the second quarter of fiscal 1998, the Registrant exited the
transportation business and formed a strategic alliance with CRST International,
Inc., who since that time has serviced the majority of the Registrant's
over-the-road shipping requirements.

Patents

The Registrant has obtained or applied for patents for certain of its
processes and products. These patents expire at various times, beginning in
1999. Patented processes and products are not material to the Registrant's
overall business.

Foreign

SAULAR(R) cat litter manufactured and marketed by Favorite Products
Company, Ltd. (d.b.a. Oil-Dri Canada), the Registrant's wholly owned Canadian
subsidiary, is a leading cat litter brand sold in Canada. Favorite Products
Company, Ltd. also packages and markets the SAULAR(R) KAT-KIT(TM) disposable cat
litter tray and litter. Certain of the products sold in Canada are blends of
clay and synthetic sorbent materials.

The Registrant's wholly owned subsidiary in England, Oil-Dri, U.K., Ltd.,
packages clay granules produced by the Registrant's domestic manufacturing
facilities and, for certain applications, blends a synthetic sorbent material
which it manufactures locally. Oil-Dri, U.K., Ltd. markets these products,
primarily in the United Kingdom, as an oil and grease absorbent and as a cat
litter.

The Registrant's wholly owned subsidiary in Switzerland, Oil-Dri S.A.,
performs various management, sales and administrative functions for the
Registrant and its foreign subsidiaries.

The Company's foreign operations are subject to the normal risks of doing
business overseas, such as currency devaluations and fluctuations, restrictions
on the transfer of funds and import/export duties. The Registrant to date has
not been materially affected by these risks.

Backlog; Seasonality

At July 31, 1999 and 1998, the Registrant's backlog of orders was
approximately $2,534,000 and $2,635,000, respectively. The Registrant does not
consider its clay sorbent business, taken as a whole, to be seasonal to any
material extent. However, certain business activities of certain customers of
the Registrant (such as agricultural) are subject to such factors as crop
acreage planted and product formulation cycles.

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Customers

Sales to Wal-Mart Stores, Inc. accounted for approximately 20% of the
Registrant's net sales for the fiscal year ended July 31, 1999. Sales to The
Clorox Company accounted for approximately 8% of the Registrant's net sales for
the fiscal year ended July 31, 1999. The Clorox Company and the Registrant are
parties to a long-term supply contract. The loss of any other of the
Registrant's customers would not have a materially adverse effect on the
Registrant.

Competition

The Registrant has approximately six principal competitors in the United
States, some of which have substantially greater financial resources than the
Company, which compete with the Registrant in certain markets and with respect
to certain products. Price, service and technical support, product quality and
delivery are the principal methods of competition in the Registrant's markets
and competition has historically been very vigorous. The Registrant believes
that it can compete favorably in all of its present markets.

Reserves

The Registrant mines sorbent materials, consisting of either
montmorillonite, attapulgite or diatomaceous earth on leased or owned land near
its mills in Mississippi, Georgia, Illinois and Oregon, and on leased and owned
land in Florida (see "Item 2 -- Properties" below). The Registrant estimates
that its proven recoverable reserves of these sorbent materials aggregate
approximately 497,715,000 tons. Based on its rate of consumption during the 1999
fiscal year, the Registrant considers its proven recoverable reserves adequate
to supply the Registrant's needs for over 40 years. It is the Registrant's
policy to attempt to add to reserves in most years, but not necessarily in every
year, an amount at least equal to the amount of reserves consumed in that year.
The Registrant has a program of exploration for additional reserves and,
although reserves have increased, the Registrant cannot assure that such
reserves will continue to increase. The Registrant's use of these reserves will
be subject to compliance with existing and future federal and state statutes and
regulations regarding mining and environmental compliance. Also, requirements
for environmental compliance may restrict exploration or use of lands that might
otherwise be utilized as a source of reserves. During the fiscal year ended July
31, 1999, the Registrant utilized these reserves to produce substantially all of
the sorbent minerals that it sold.

In 1997, the Registrant acquired mineral reserves on approximately 5,907
acres in Nevada. This acreage is in addition to approximately 598 acres acquired
in 1991 in Washoe County, Nevada of which 415 acres are mineral in character.
The Registrant estimates that there are over 300,000,000 tons of proven reserves
of sorbent materials on the combined acreage. Mining these reserves requires the
approval of federal, state and local agencies, which approvals the Registrant is
in the process of seeking. In the future, the Registrant hopes to develop
facilities so as to use these reserves as a source of supply for its West Coast
customers. However, there can be no assurance that this will be accomplished.

In 1998, mineral reserves on approximately 778 acres in Tennessee and 755
acres in Illinois were acquired in conjunction with the purchase of Oil-Dri,
Mounds Production Company.

Mining Operations

The Registrant has conducted mining operations in Ripley, Mississippi since
1963; in Ochlocknee, Georgia since 1971; in Christmas Valley, Oregon since 1979;
in Blue Mountain, Mississippi since 1989; and in Mounds, Illinois since 1998.

The Registrant's raw materials are surface mined on a year-round basis,
generally using large earth moving scrapers and bulldozers to remove overburden,
and then loaded into dump trucks with backhoe or dragline equipment for movement
to the processing facilities. The mining and hauling of the Registrant's clay is
performed by the Registrant and by independent contractors.

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The Registrant's current operating mines range in distance from immediately
adjacent to several miles from its processing plants. Access to processing
facilities from the mining areas is generally by private road, and in some
instances public highways are utilized.

Each of the Registrant's processing facilities maintains stockpiles of
unprocessed clay of approximately one to three weeks production requirements.

Proven reserves are those reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from results of detailed sampling, and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral content of
reserves are well established. Probable reserves are computed from information
similar to that used for proven reserves, but the sites for inspection,
sampling, and measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven reserves,
is high enough to assume continuity between points of observation.

The Registrant employs a staff of geologists and mineral specialists who
estimate and evaluate existing and potential reserves in terms of quality,
quantity and availability.

The following schedule summarizes, for each of the Registrant's
manufacturing facilities, the net book value of land and other plant and
equipment:

<TABLE>
<CAPTION>
PLANT AND
LAND EQUIPMENT
---- ---------
(IN THOUSANDS)
<S> <C> <C>
Ochlocknee, Georgia......................................... $2,622 $16,529
Ripley, Mississippi......................................... $1,523 $13,130
Mounds, Illinois............................................ $ 325 $ 8,698
Blue Mountain, Mississippi.................................. $ 939 $ 8,477
Christmas Valley, Oregon.................................... $ 98 $ 659
</TABLE>

Employees

As of July 31, 1999, the Registrant employed 743 persons, 56 of whom were
employed by the Registrant's foreign subsidiaries. The Registrant's corporate
offices, research and development center and manufacturing facilities are
adequately staffed and no material labor shortages are anticipated.
Approximately 42 of the Registrant's employees in the U.S. and approximately 13
of the Registrant's employees in Canada are represented by labor unions, which
have entered into separate collective bargaining agreements with the Company.
Employee relations are considered satisfactory.

Environmental Compliance

The Registrant's mining and manufacturing operations and facilities in
Georgia, Mississippi, Oregon and Illinois are required to comply with state
surface mining statutes and various federal, state and local statutes,
regulations and ordinances which govern the discharge of materials, water and
waste into the environment and restrict mining on "wetlands" or otherwise
regulate the Registrant's operations. In recent years, environmental regulation
has grown increasingly stringent, a trend which the Registrant expects will
continue. The Registrant endeavors to stay in substantial compliance with
applicable environmental controls and regulations and to work with regulators to
correct any deficiency. As a result, expenditures relating to environmental
compliance have increased over the years; however, in recent years expenditures
have not been material. The Registrant continues, and will continue, to incur
costs in connection with reclaiming exhausted mining sites. The costs of
reclamation have not had a material effect on its mining costs. These costs are
treated as part of the Registrant's mining expense.

In addition to the environmental requirements relating to mining and
manufacturing operations and facilities, there is increasing federal and state
legislation and regulation with respect to the labeling, use, and

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disposal after use, of various of the Registrant's products. The Registrant
endeavors to stay in substantial compliance with that legislation and regulation
and to assist its customers in that compliance.

The Registrant cannot assure that, despite its best efforts, it will always
be in compliance with environmental legislation and regulations or with
requirements regarding the labeling, use, and disposal after use, of its
products; nor can it assure that from time to time enforcement of such
requirements will not have an adverse impact on its business.

Energy

The Registrant uses natural gas and recycled fuel oil as energy sources for
the processing of its clay products. In prior years, the Registrant has switched
from natural gas to fuel oil during the winter months due to the seasonal
unavailability and higher cost of natural gas relative to fuel oil.

Research and Development

At the Registrant's research facility, the research and development staff
develops new products and applications and improves existing products. The staff
and various consultants consist of geologists, mineralogists and chemists. In
the past several years, the Registrant's research efforts have resulted in a
number of new sorbent products and processes including PURE-FLO(R)Supreme,
PURE-FLO(R) B80, B81, PERFORM(TM) and SELECT(TM) absorbents, and CAT'S PRIDE(R)
Scoopable, LASTING PRIDE(TM), DUST STOPPER(TM) and SCOOP 'N FLUSH(TM) cat
litters. The technical center produces prototype samples and tests new products
for customer trial and evaluation.

The Registrant spent approximately $2,110,000, $2,376,000 and $2,049,000
during its fiscal years ended July 31, 1999, 1998 and 1997, respectively, for
research and development. None of such research and development was customer
sponsored, and all research and development costs are expensed in the year in
which incurred.

ITEM 2. PROPERTIES

The Registrant's properties are generally described below:

LAND HOLDINGS & MINERAL RESERVES

<TABLE>
<CAPTION>
LAND LAND PROVEN PROBABLE
OWNED LEASED TOTAL RESERVES RESERVES TOTAL
----- ------ ----- -------- -------- -----
(ACRES) (ACRES) (ACRES) (000S OF TONS) (000S OF TONS) (000S OF TONS)
<S> <C> <C> <C> <C> <C> <C>
Florida......................... 537 446 983 4,512 1,092 5,604
Georgia......................... 1,900 1,804 3,704 45,067 11,174 56,241
Illinois........................ 161 598 759 8,661 6,000 14,661
Mississippi..................... 2,354 1,431 3,785 128,261 118,678 246,939
Nevada.......................... 415 6,747 7,162 306,830 250,874 557,704
Oregon.......................... 400 260 660 134 323 457
Tennessee....................... 778 -- 778 4,250 4,250 8,500
----- ------ ------ ------- ------- -------
6,545 11,286 17,831 497,715 392,391 890,106
===== ====== ====== ======= ======= =======
</TABLE>

See "Item 1. Business -- Reserves"

There are no mortgages on the property owned by the Registrant. The
Mississippi, Georgia, Oregon, Florida and Illinois land is used primarily for
mining. Parcels of such land are also sites of manufacturing facilities operated
by the Registrant. The Illinois land also includes the site of the Registrant's
research and development facility. The Registrant owns approximately one acre of
land in Laval, Quebec, Canada, which is the site of the processing and packaging
facility for the Registrant's Canadian subsidiary.

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The Registrant's mining operations are conducted on leased or owned land.
The Georgia, Illinois, Florida and Mississippi mining leases, with expiration
dates ranging from 2000 to 2053, no one of which is material, generally require
that the Registrant pay a minimum monthly rental to continue the lease term.
This rental payment is applied against a royalty related to the number of
unprocessed, or in some cases processed, tons of mineral extracted from the
leased property.

The Registrant operates manufacturing facilities at Ripley, Mississippi,
Ochlocknee, Georgia, Christmas Valley, Oregon, Blue Mountain, Mississippi and
Mounds, Illinois; production and packaging plants at Laval, Quebec, Canada and
Wisbech, United Kingdom; a non-clay lite sorbents processing and warehousing
facility in Alpharetta, Georgia; and a dog biscuit manufacturing plant in Kiel,
Wisconsin. The Registrant's facilities at Ripley, Mississippi; Ochlocknee,
Georgia; Christmas Valley, Oregon; Mounds, Illinois; Alpharetta, Georgia; Kiel,
Wisconsin; Laval, Quebec, Canada and Wisbech, United Kingdom are wholly owned by
the Registrant and the Registrant's facility at Blue Mountain, Mississippi is
owned in part by the Registrant, with the balance leased as hereinafter
described. The Registrant is a party to leases that relate to certain plant
acquisition and expansion projects at the Registrant's facility at Blue
Mountain, Mississippi. The Blue Mountain, Mississippi lease was entered into
with the Town of Blue Mountain, Mississippi in 1988 in connection with the
issuance by the Town of $7,500,000 in aggregate principal amount of industrial
revenue bonds ($5,000,000 of which has been subsequently retired), full payment
of which is guaranteed by the Registrant. Upon expiration of the leases in 2008,
a subsidiary of the Registrant has the right to purchase the leased property for
$100 upon full payment of the bonds. The land on which the manufacturing
facility at Wisbech, United Kingdom is located is leased pursuant to a long-term
lease arrangement with the Port Authority of Wisbech which expires in 2032. The
facilities in Alpharetta, Georgia and Kiel, Wisconsin are leased.

All of the Registrant's domestic manufacturing facilities, whether owned or
leased, consist of related steel frame, sheet steel covered or brick buildings
of various heights, with concrete floors and storage tanks. The buildings occupy
approximately 208,000 square feet at Ripley, Mississippi, 247,000 square feet at
Ochlocknee, Georgia, 129,000 square feet at Mounds, Illinois, 18,000 square feet
at Christmas Valley, Oregon, 26,000 square feet at Alpharetta, Georgia, 16,000
square feet at Kiel, Wisconsin and 140,000 square feet at Blue Mountain,
Mississippi. The Registrant maintains railroad siding facilities near the
Ripley, Mississippi, Ochlocknee, Georgia, Blue Mountain, Mississippi and Mounds,
Illinois manufacturing facilities. Equipment at all facilities is in good
condition, well maintained and adequate for current processing levels.

All of the Registrant's foreign facilities are owned and consist of related
steel frame, sheet steel covered or brick buildings of various heights, with
concrete floors and storage tanks. The buildings occupy 22,500 square feet at
Laval, Quebec, Canada and 66,850 square feet at Wisbech, United Kingdom.

The Registrant's research and development facility is located on land in
Vernon Hills, Illinois and consists of brick buildings of approximately 19,100
square feet, including a pilot plant facility.

The Registrant's principal office, consisting of approximately 20,000
square feet in Chicago, Illinois, is presently occupied under a lease expiring
on June 30, 2008.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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ITEM 401(B) OF REGULATION S-K. EXECUTIVE OFFICERS OF THE REGISTRANT

The following table gives certain information with respect to the Executive
Officers of the Registrant.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME(1) FOR LAST FIVE YEARS AGE
------- -------------------- ---
<S> <C> <C>
Richard M. Jaffee.............. Chairman of the Board of the Registrant; President from 1960 63
to June 1995; Chief Executive Officer from 1962 until 1997.
Daniel S. Jaffee(2)............ President and Chief Executive Officer of the Registrant; 35
President and Chief Operating Officer from June 1995 until
August 1997; Chief Executive Officer of Favorite Products
Company, Ltd., a subsidiary of the Registrant since 1990;
Chief Financial Officer of the Registrant from 1990 to 1995;
Group Vice-President, Consumer Products of the Registrant
from 1994 to 1995.
Joseph C. Miller............... Vice-Chairman of The Board of the Registrant; Senior Vice 57
President for Consumer, Industrial & Environmental and
Transportation from 1993 to 1995.
Michael L. Goldberg............ Executive Vice-President, Chief Financial Officer and 49
Secretary of the Registrant; Vice-President & Chief
Financial Officer from May 1996 until August 1997;
Vice-President & Controller, Alberto-Culver USA, Inc. from
August 1991 until April 1996.
Richard V. Hardin(3)........... Group Vice-President, Technology, of the Registrant. 60
Daniel J. Jones................ Vice-President of Favorite Products Co., Ltd, a subsidiary 37
of the Registrant; Division III National Sales
Manager -- Grocery of the Registrant from 1994 to 1996.
Eugene W. Kiesel............... Vice-President & General Manager, Global Fluids Purification 42
Group of the Registrant since October 1997; Vice-President
of Radian International, LLC, a subsidiary of Dow Chemical
Company from July 1996 to October 1997; General Manager of
ACS, a division of Dow Chemical Company from November 1993
to July 1996.
Steven M. Levy................. Vice-President & General Manager, Consumer Products Group of 39
the Registrant; General Manager Consumer Products Division
from 1995 to 1996; Miles, Inc. Director of Marketing, from
1992 to 1995.
</TABLE>

The term of each executive officer expires at the 1999 Annual Meeting of
the Stockholders and when his successor is elected and qualified.
- -------------------------
(1) Of the persons in this table, only Richard M. Jaffee, Joseph C. Miller and
Daniel S. Jaffee are directors.

(2) Daniel S. Jaffee is Richard M. Jaffee's son.

(3) Richard V. Hardin is Richard M. Jaffee's son-in-law.

11
12

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS

Information concerning stock prices and dividends with regard to the Common
Stock of the Registrant, which is traded on the New York Stock Exchange, and
information concerning dividends with regard to the Class B Stock of the
Registrant, for which there is no established public trading market, is
contained in Note 15 of the "Notes to Consolidated Financial Statements,"
incorporated herein by reference. No shares of Class A common stock are
outstanding. The Registrant's ability to pay dividends is limited by the
Registrant's new Credit Agreement with Harris Trust and Savings Bank dated
January 29, 1999. See Note 6 of "Notes to Consolidated Financial Statements,"
incorporated herein by reference. Information concerning a private placement of
$25,000,000 in principal amount of notes in April 1998 is incorporated herein by
reference to Note 6 of the "Notes to the Consolidated Financial Statements." The
notes were sold in reliance on the exemption from registration under the
Securities Act of 1933 contained in Section 4(2) thereof, based on the fact that
they were privately sold in their entirety to two financial institutions.

12
13

(THIS PAGE INTENTIONALLY LEFT BLANK)

13
14

ITEM 6. SELECTED FINANCIAL DATA

TEN YEAR SUMMARY OF FINANCIAL DATA

<TABLE>
<CAPTION>
--------------------------------------------
1999 1998 1997 1996
---- ---- ---- ----
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales........................................... $173,985 $160,252 $156,616 $153,787
Cost of Sales....................................... 119,126 110,096 108,687 107,730
-------- -------- -------- --------
Gross Profit........................................ 54,859 50,156 47,929 46,057
Selling, General and Administrative Expenses........ 43,108 38,598 37,260 39,153
Special Charges..................................... -- 3,129 -- 921
-------- -------- -------- --------
Income from Operations.............................. 11,751 8,429 10,669 5,983
-------- -------- -------- --------
Other Income (Expense)
Interest Income................................ 480 491 637 587
Interest Expense............................... (3,185) (2,049) (1,775) (1,917)
Foreign Exchange (Losses) Gains................ (124) (146) -- (7)
Other, Net..................................... 1,114 (119) (17) 137
-------- -------- -------- --------
Total Other Expense, Net.................. (1,715) (1,823) (1,155) (1,200)
-------- -------- -------- --------
Income before Income Taxes.......................... 10,036 6,606 9,514 4,783
Income Taxes........................................ 2,860 1,883 2,721 1,409
-------- -------- -------- --------
Net Income.......................................... $ 7,176 $ 4,723 $ 6,793 $ 3,374
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING
Basic............................................. 5,827 6,125 6,596 6,806
Dilutive.......................................... 5,996 6,165 6,599 6,807
NET INCOME PER SHARE
Basic............................................. $ 1.23 $ 0.77 $ 1.03 $ 0.50
Dilutive.......................................... $ 1.20 $ 0.77 $ 1.03 $ 0.50
IMPORTANT HIGHLIGHTS
Total Assets...................................... $133,750 $134,215 $114,558 $117,693
Long-Term Debt.................................... $ 38,150 $ 39,976 $ 17,052 $ 18,978
Working Capital................................... $ 37,141 $ 36,283 $ 31,165 $ 30,399
Working Capital Ratio............................. 3.3 3.1 3.0 2.7
Book Value per Share.............................. $ 13.00 $ 12.15 $ 12.03 $ 11.46
Dividends Declared................................ $ 1,904 $ 1,808 $ 1,936 $ 2,022
Capital Expenditures.............................. $ 8,495 $ 6,496 $ 5,395 $ 7,184
Depreciation and Amortization..................... $ 8,497 $ 7,832 $ 7,587 $ 7,926
Operating Cash Flows, less Capital Expenditures... $ 1,165 $ 2,330 $ 8,349 $ 6,869
Long-Term Debt to Total Capital................... 33.9% 35.8% 18.1% 19.7%
Net Income as a Percent of Net Sales.............. 4.1% 3.0% 4.3% 2.2%
Return on Average Stockholder's Equity............ 9.8% 6.3% 8.8% 4.3%
Gross Profit as a Percent of Net Sales............ 31.5% 31.3% 30.6% 29.9%
Operating Expenses as a Percent of Net Sales...... 24.8% 26.0% 23.8% 26.1%
</TABLE>

14
15

<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$152,899 $147,147 $140,866 $124,585 $106,054 $97,677
108,268 102,457 97,396 85,116 74,370 68,110
-------- -------- -------- -------- -------- -------
44,631 44,690 43,470 39,469 31,684 29,567
31,921 30,394 29,553 28,967 21,778 20,016
-- -- -- -- -- --
-------- -------- -------- -------- -------- -------
12,710 14,296 13,917 10,502 9,906 9,551
-------- -------- -------- -------- -------- -------
448 441 452 515 602 633
(1,921) (1,752) (1,729) (1,884) (1,363) (1,156)
(5) 3 (88) 63 (23) 37
(84) 171 (298) 15 50 73
-------- -------- -------- -------- -------- -------
(1,562) (1,137) (1,663) (1,291) (734) (413)
-------- -------- -------- -------- -------- -------
11,148 13,159 12,254 9,211 9,172 9,138
3,145 3,307 2,834 2,110 2,092 2,351
-------- -------- -------- -------- -------- -------
$ 8,003 $ 9,852 $ 9,420 $ 7,101 $ 7,080 $ 6,787
======== ======== ======== ======== ======== =======
6,932 6,990 6,995 6,994 7,004 6,975
6,936 7,011 7,031 7,026 7,055 7,042
$ 1.15 $ 1.41 $ 1.35 $ 1.02 $ 1.01 $ 0.97
$ 1.15 $ 1.41 $ 1.34 $ 1.01 $ 1.00 $ 0.96
$116,988 $112,267 $102,117 $ 95,018 $ 89,394 $76,779
$ 20,422 $ 21,521 $ 17,766 $ 18,831 $ 20,176 $11,893
$ 33,074 $ 29,337 $ 26,043 $ 24,359 $ 24,763 $16,149
3.1 3.0 2.7 2.8 3.4 2.3
$ 11.35 $ 10.51 $ 9.50 $ 8.66 $ 7.93 $ 7.14
$ 2,047 $ 1,807 $ 1,679 $ 1,548 $ 1,422 $ 1,149
$ 7,032 $ 13,559 $ 9,158 $ 8,040 $ 10,416 $ 6,403
$ 7,808 $ 6,798 $ 5,835 $ 5,407 $ 4,831 $ 4,466
$ 5,285 $ (3,734) $ 5,080 $ 645 $ (1,310) $ 4,410
20.7% 22.8% 21.1% 24.0% 26.6% 19.2%
5.2% 6.7% 6.7% 5.7% 6.7% 6.9%
10.6% 14.1% 14.9% 12.3% 13.4% 14.5%
29.2% 30.4% 30.9% 31.7% 29.9% 30.3%
20.9% 20.7% 21.0% 23.3% 20.5% 20.5%
</TABLE>

15
16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations
Fiscal 1999 Compared to Fiscal 1998

Consolidated net sales for the year ended July 31, 1999, were $173,985,000,
an increase of 8.6% over net sales of $160,252,000 in fiscal 1998. Excluding the
$2,372,000 of fiscal 1998 sales from the transportation business, which was
divested last year, sales increased 10.2% in fiscal 1999. Net income for fiscal
1999 was $7,176,000, an increase of 51.9% from $4,723,000 earned in fiscal 1998.
Basic net income per share for fiscal 1999 was $1.23 and diluted net income per
share was $1.20, versus $0.77 per share (basic and diluted) earned in fiscal
1998. A significant portion of the year-to-year increase in net income and net
income per share was due to a special charge recorded in the second quarter of
fiscal 1998 to cover the costs of exiting the transportation business and
writing off certain non-performing assets. This charge reduced pre-tax income by
$3,129,000, net income by $2,237,000 and net income per share by $0.36 for the
year ended July 31, 1998.

Net sales of the Consumer Products segment for fiscal 1999 were
$114,704,000, an increase of 12.7% over net sales of $101,766,000 in fiscal
1998. This growth was primarily due to incremental sales from the introduction
of SCOOP 'N FLUSH(TM) and DUST STOPPER(TM)paper litters and the acquisition of
Oil-Dri, Mounds Production Company, partially offset by the loss of sales to
Sam's Club, which in fiscal 1998 discontinued carrying the Company's cat litter
products. Consumer Products' operating income declined 3.9% from $18,034,000 in
fiscal 1998 to $17,331,000 in fiscal 1999. This decline was due to nonrecurring
development, marketing and slotting costs related to the launch of the paper
litters in fiscal 1999.

Net sales of the Fluids Purification Products segment for fiscal 1999 were
$23,071,000, an increase of 8.1% over net sales of $21,337,000 in fiscal 1998.
Sales of ULTRA-CLEAR(R) clarification aids grew in fiscal 1999, and demand for
PURE-FLO(R) was particularly strong in the United Kingdom. Fluids Purification
Products' operating income increased 27.8% from $4,413,000 in fiscal 1998 to
$5,641,000 in fiscal 1999 due to productivity improvements and favorable changes
in sales mix.

Net sales of the Agricultural Products segment for fiscal 1999 were
$19,119,000, a decrease of 1.5% from net sales of $19,403,000 in fiscal 1998.
This overall decline is due to sharply reduced demand for agricultural carriers
as a result of a depressed farm economy and the growth of biotechnology
products. Agricultural Products' operating income increased 7.4% from $3,225,000
in fiscal 1998 to $3,464,000 in fiscal 1999 due to a decrease in advertising
expenditures.

Net sales of the Industrial and Automotive Products segment for fiscal 1999
were $17,091,000, an increase of 11.2% from net sales of $15,374,000 in fiscal
1998 due to incremental sales from last year's acquisition of Oil-Dri, Mounds
Production Company. Industrial and Automotive Products' operating income
increased 26.7% from $618,000 in fiscal 1998 to $783,000 in fiscal 1999,
primarily as a result of decreased advertising expenditures.

Consolidated gross profit as a percentage of net sales for fiscal 1999
increased to 31.5% from 31.3% in fiscal 1998. Changes in sales mix, a
companywide effort to reduce costs and exiting the transportation business
contributed to this increase.

Operating expenses as a percentage of net sales decreased to 24.8% for
fiscal 1999 from 26.0% in fiscal 1998. This decrease is primarily due to a
pre-tax special charge of $3,129,000 recorded in the second quarter of fiscal
1998 for the cost of exiting the transportation business and writing off certain
non-performing assets, partially offset by nonrecurring development, marketing
and slotting costs related to the launch of the paper litters in fiscal 1999.

Interest expense increased $1,136,000 while interest income decreased
$11,000. The higher interest expense is primarily due to the fixed rate
financing secured during the third quarter of fiscal 1998 which was used to fund
the purchase of Oil-Dri, Mounds Production Company, repay draws against the
Company's line of credit and for general working capital purposes.

The Company's effective tax rate was 28.5% of pre-tax income in fiscal 1999
and fiscal 1998.

16
17

Total assets of the Company decreased $465,000 or 0.3% during the year
ended July 31, 1999. Current assets decreased $529,000 or 1.0% from fiscal 1998
year-end balances primarily due to decreased cash and cash equivalents,
partially offset by increases in inventory, prepaid expenses and accounts
receivable levels. Property, plant and equipment, net of accumulated
depreciation, decreased $37,000 during the year as depreciation expense
essentially offset new capital expenditures.

Total liabilities decreased $3,164,000 or 5.1% during the year due
primarily to decreases in accrued expenses and in notes payable, partially
offset by an increase in accounts payable. Current liabilities decreased
$1,387,000 or 8.0% from July 31, 1998 balances, due to decreases in accrued
expenses, partially offset by increases in accounts payable and in the current
maturities of notes payable.

Expectations

The Company anticipates net sales for fiscal 2000 will be higher than the
net sales in fiscal 1999. Sales of branded cat box absorbents are expected to
increase moderately as existing products and new product introductions gain
incremental distribution. However, sales growth of cat box absorbents is subject
to continuing competition for shelf space in the grocery, mass merchandiser and
club markets. Sales of the Company's fluids purification products are also
expected to increase moderately in fiscal 2000. Sales of the Company's
agricultural products are expected to be lower in fiscal 2000 than in fiscal
1999 due to biotechnology, depressed export demand and low domestic crop prices.

Liquidity and Capital Resources

The current ratio increased to 3.3 at July 31, 1999 from 3.1 at July 31,
1998. Working capital increased $858,000 during fiscal 1999 to $37,141,000. Cash
provided by operations continues to be the Company's primary source of funds to
finance ordinary investing and financing activities. During the year, the
balances of cash, cash equivalents and investment securities decreased
$4,996,000. Cash provided by operating activities of $9,551,000 and cash on hand
were used to fund capital expenditures ($8,495,000), purchases of the Company's
common stock ($2,607,000), principal payments on long term debt ($2,085,000) and
dividend payments ($1,865,000). Total cash and investment balances held by the
Company's foreign subsidiaries at July 31, 1999 and July 31, 1998 were
$2,692,000 and $3,350,000, respectively.

Results of Operations
Fiscal 1998 Compared to Fiscal 1997

Consolidated net sales for the year ended July 31, 1998, were $160,252,000,
an increase of 2.3% over net sales of $156,616,000 in fiscal 1997. Excluding
transportation sales, which were $2,372,000 in fiscal 1998 and $7,705,000 in
fiscal 1997, sales increased 6.0% over 1997. Net income for fiscal 1998 was
$4,723,000 or $0.77 per share (basic and diluted), a decrease of 30.5% from
$6,793,000 or $1.03 per share (basic and diluted) earned in fiscal 1997. This
decrease was primarily due to a special charge recorded in the second quarter of
fiscal 1998. The special charge, which primarily covered the costs of exiting
the transportation business as well as writing off certain non-performing
assets, reduced pre-tax income by $3,129,000, net income by $2,237,000 and net
income per share by $0.36 for the year ended July 31, 1998. Excluding the
special charge, net income per share was $1.13, an increase of 9.7% over the
prior year.

Net sales of the Consumer Products segment for fiscal 1998 were
$101,766,000, an increase of 5.2% over net sales of $96,725,000 in fiscal 1997.
This growth was primarily due to increased sales of branded and private label
products in both the grocery and mass merchandiser markets and incremental sales
resulting from the purchase of Oil-Dri, Mounds Production Company on April 20,
1998. These sales increases were partially offset by a decline of approximately
$2,300,000 in sales to Sam's Club, which in fiscal 1998 discontinued carrying
the Company's cat litter products. Consumer Products' operating income increased
10.9% from $16,267,000 in fiscal 1997 to $18,034,000 in fiscal 1998, primarily
due to the incremental gross profit resulting from the growth in sales.

Net sales of the Fluids Purification Products segment for fiscal 1998 were
$21,337,000, an increase of 12.4% over net sales of $18,981,000 in fiscal 1997
due to increased demand for these products in the United

17
18

Kingdom. Fluids Purification Products' operating income increased 5.0% from
$4,204,000 in fiscal 1997 to $4,413,000 in fiscal 1998 due to the incremental
gross profit resulting from the growth in sales, partially offset by unfavorable
changes in sales mix.

Net sales of the Agricultural Products segment for fiscal 1998 were
$19,403,000, an increase of 4.9% from net sales of $18,493,000 in fiscal 1997
due to increased demand in the industry for agricultural carriers. Agricultural
Products' operating income decreased 24.4% from $4,267,000 in fiscal 1997 to
$3,225,000 in fiscal 1998, primarily due to unfavorable changes in sales mix.

Net sales of the Industrial and Automotive Products segment for fiscal 1998
were $15,374,000, an increase of 4.5% from net sales of $14,712,000 in fiscal
1997, primarily due to incremental sales resulting from the acquisition of
Oil-Dri, Mounds Production Company. Industrial and Automotive Products'
operating income increased 39.8% from $442,000 in fiscal 1997 to $618,000 in
fiscal 1998, due to a focus on decreasing costs and increasing product
profitability.

Consolidated gross profit as a percentage of net sales for fiscal 1998
increased to 31.3% from 30.6% in fiscal 1997. Changes in sales mix, a
companywide effort to reduce costs and exiting the transportation business
contributed to this increase.

Operating expenses as a percentage of net sales increased to 26.0% for
fiscal 1998 from 23.8% in fiscal 1997. This increase is primarily due to a
pre-tax special charge of $3,129,000 recorded in the second quarter of fiscal
1998 for the cost of exiting the transportation business and writing off certain
non-performing assets.

Interest expense increased $274,000 while interest income decreased
$146,000. The higher interest expense is primarily due to the fixed rate
financing secured during the third quarter of fiscal 1998, which was used to
fund the purchase of Oil-Dri, Mounds Production Company, repay draws against the
Company's line of credit and for general working capital purposes.

The Company's effective tax rate decreased to 28.5% of pre-tax income in
fiscal 1998 from 28.6% in fiscal 1997.

Total assets of the Company increased $19,657,000 or 17.2% during the year
ended July 31, 1998. Current assets increased $6,699,000 or 14.3% from fiscal
1997 year-end balances primarily due to higher inventory and accounts receivable
levels. Property, plant and equipment, net of accumulated depreciation,
increased $7,004,000 or 12.5% during the year, primarily due to the acquisition
of Oil-Dri, Mounds Production Company, partially offset by depreciation expense
exceeding capital expenditures. Investments in property, plant and equipment
included expenditures for increased productivity. Other assets increased
$5,954,000 due to intangibles resulting from the acquisition.

Total liabilities increased $25,179,000 or 67.6% during the year due
primarily to a $25,000,000 increase in long-term debt partially used to acquire
Oil-Dri, Mounds Production Company. Current liabilities increased $1,581,000 or
10.0% from July 31, 1997 balances, due to an increase in freight payables
related to exiting the transportation business, accounts payable and other
accrued expenses, partially offset by a decrease in accrued trade promotions and
advertising.

Foreign Operations

Net sales by the Company's foreign subsidiaries during fiscal 1999 were
$14,501,000 or 8.3% of total Company sales. This represents an increase of 3.7%
from fiscal 1998 in which foreign subsidiary sales were $13,987,000 or 8.7% of
total Company sales. The increase is due to higher demand for fluids
purification products in the United Kingdom. Net income of the foreign
subsidiaries for fiscal 1999 was $590,000, a decrease of 6.9% from $634,000
earned in fiscal 1998. This decrease was primarily due to unfavorable changes in
sales mix. Identifiable assets of the Company's foreign subsidiaries as of July
31, 1999 were $11,064,000, a decrease of $696,000 from $11,760,000 as of July
31, 1998. The decrease is primarily due to lower inventories and cash and cash
equivalents.

Net sales by the Company's foreign subsidiaries during fiscal 1998 were
$13,987,000 or 8.7% of total Company sales. This represents an increase of 16.6%
from fiscal 1997, in which foreign subsidiary sales were

18
19

$12,000,000 or 7.7% of total Company sales. Net income of the foreign
subsidiaries for fiscal 1998 was $634,000, an increase of 14.0% from $556,000
earned in fiscal 1997. The increases in sales and net income were due to higher
demand for fluids purification products in the United Kingdom, partially offset
by substantially lower demand for these products in Malaysia. Identifiable
assets of the Company's foreign subsidiaries as of July 31, 1998 were
$11,760,000, an increase of $1,894,000 from $9,866,000 as of July 31, 1997. The
increase is primarily due to higher inventories and cash and cash equivalents.

Year 2000

The Year 2000 ("Y2K") issue is a result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond 1999, which could cause a
system failure or application errors, leading to disruptions in operations.

The Company has completed a process of conducting an internal review of all
business information systems, including hardware, software, telecommunication
systems, and manufacturing equipment, to determine major areas of exposure to
Y2K issues, and believes that it has resolved all material issues.

The Company has also assessed the readiness of its key suppliers, customers
and business partners to be Y2K-compliant. Information requests have been
distributed and the Company has received representations from key third parties
that their systems are Y2K-compliant.

Based upon the foregoing Y2K efforts, no contingency plans are expected to
be needed; however, contingency plans have been developed for all systems and
processes determined to be critical. The plans include the ability to switch to
manual systems as well as the identification of alternative suppliers.

The project to address Y2K has been underway since fiscal 1998. Pretax
costs incurred to date, as well as anticipated remaining expenses to be incurred
in fiscal 2000, are not material.

Forward-Looking Statements

Certain statements in this report, including, but not limited to, those
under the heading "Expectations" and those statements elsewhere in this report
that use forward-looking terminology such as "expect," "would," "could,"
"should," "estimates," and "believes" are "forward-looking statements" within
the meaning of that term in the Securities Exchange Act of 1934, as amended.
Actual results may differ materially from those reflected in these
forward-looking statements, due primarily to continued vigorous competition in
the grocery, mass merchandiser and club markets, the level of success of new
products, and the cost of product introductions and promotions in the consumer
market. These forward-looking statements also involve the risk of changes in
market conditions in the overall economy and, for the fluids purification and
agricultural markets, in planting activity, crop quality, and overall
agricultural demand, including export demand and foreign exchange rate
fluctuations. Other factors affecting these forward-looking statements may be
detailed from time to time in reports filed with the Securities and Exchange
Commission.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company did not have any derivative financial instruments as of July
31, 1999. However, the Company is exposed to interest rate risk. The Company
employs policies and procedures to manage its exposure to changes in the market
risk of its cash equivalents and short term investments. The Company believes
that the market risk arising from holdings of its financial instruments is not
material.

19
20

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JULY 31,
-------------------------
1999 1998
---- ----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 4,362 $ 9,410
Investment securities..................................... 1,225 1,173
Accounts receivable, less allowance of $358 in 1999 and
$351 in 1998........................................... 25,365 24,210
Inventories............................................... 15,165 13,258
Prepaid expenses.......................................... 6,963 5,558
-------- --------
Total Current Assets.............................. $ 53,080 $ 53,609
-------- --------

PROPERTY, PLANT AND EQUIPMENT, AT COST
Buildings and leasehold improvements...................... 20,391 20,132
Machinery and equipment................................... 87,536 80,884
Office furniture and equipment............................ 8,658 8,999
Vehicles.................................................. 5,118 6,276
-------- --------
121,703 116,291
Less accumulated depreciation and amortization............ (69,631) (63,493)
-------- --------
52,072 52,798
Construction in progress.................................. 3,199 3,390
Land...................................................... 7,577 6,697
-------- --------
Total Property, Plant and Equipment, Net.......... 62,848 62,885
-------- --------

OTHER ASSETS
Goodwill and intangibles (Net of accumulated amortization
of $2,128 in 1999 and $1,469 in 1998).................. 9,780 8,963
Deferred income taxes..................................... 3,045 3,697
Other..................................................... 4,997 5,061
-------- --------
Total Other Assets................................ 17,822 17,721
-------- --------
Total Assets.............................................. $133,750 $134,215
======== ========
</TABLE>

20
21

<TABLE>
<CAPTION>
JULY 31,
-------------------------
1999 1998
---- ----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of notes payable....................... $ 2,226 $ 2,084
Accounts payable.......................................... 4,842 4,416
Dividends payable......................................... 484 444
Accrued expenses
Salaries, wages and commissions........................ 3,016 3,120
Trade promotions and advertising....................... 1,166 1,900
Freight................................................ 1,119 1,747
Other.................................................. 3,086 3,615
-------- --------
Total Current Liabilities......................... 15,939 17,326
-------- --------
NONCURRENT LIABILITIES
Notes payable............................................. 38,150 39,976
Deferred compensation..................................... 3,206 3,174
Other..................................................... 1,948 1,931
-------- --------
Total Noncurrent Liabilities...................... 43,304 45,081
-------- --------
Total Liabilities................................. 59,243 62,407
-------- --------
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 per share, issued 5,470,252
shares in 1999 and 5,456,098 shares in 1998............ 547 546
Class B Stock, par value $.10 per share, issued 1,765,266
shares in 1999 and 1,779,420 shares in 1998............ 177 178
Additional paid-in capital................................ 7,702 7,702
Retained earnings......................................... 90,430 85,158
Restricted unearned stock compensation.................... (9) (51)
Cumulative translation adjustments........................ (1,159) (1,151)
-------- --------
97,688 92,382
Less treasury stock, at cost (1,163,764 Common shares and
342,241 Class B shares in 1999 and 981,260 Common
shares and 342,241 Class B shares in 1998)............. (23,181) (20,574)
-------- --------
Total Stockholders' Equity........................ 74,507 71,808
-------- --------
Total Liabilities and Stockholders' Equity................ $133,750 $134,215
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

21
22

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS
EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C>
NET SALES................................................... $173,985 $160,252 $156,616
COST OF SALES............................................... 119,126 110,096 108,687
-------- -------- --------
GROSS PROFIT................................................ 54,859 50,156 47,929
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 43,108 38,598 37,260
SPECIAL CHARGE.............................................. -- 3,129 --
-------- -------- --------
INCOME FROM OPERATIONS...................................... 11,751 8,429 10,669
-------- -------- --------
OTHER INCOME (EXPENSE)
Interest income........................................... 480 491 637
Interest expense.......................................... (3,185) (2,049) (1,775)
Foreign exchange losses................................... (124) (146) --
Other investment income................................... 939 -- --
Other, net................................................ 175 (119) (17)
-------- -------- --------
Total Other Expense, Net............................. (1,715) (1,823) (1,155)
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 10,036 6,606 9,514
INCOME TAXES................................................ 2,860 1,883 2,721
-------- -------- --------
NET INCOME.................................................. $ 7,176 $ 4,723 $ 6,793
======== ======== ========
NET INCOME PER SHARE
Basic..................................................... $ 1.23 $ 0.77 $ 1.03
======== ======== ========
Dilutive.................................................. $ 1.20 $ 0.77 $ 1.03
======== ======== ========
AVERAGE SHARES OUTSTANDING
Basic..................................................... 5,827 6,125 6,596
======== ======== ========
Dilutive.................................................. 5,996 6,165 6,599
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

22
23

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
RESTRICTED
COMMON & ADDITIONAL UNEARNED OTHER TOTAL
CLASS B PAID-IN RETAINED STOCK TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS COMPENSATION STOCK INCOME EQUITY
-------- ---------- -------- ------------ -------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1996............... $724 $7,684 $77,386 $(24) $ (7,522) $(1,018) $77,230
Net Income........................... -- -- 6,793 -- -- -- 6,793
Cumulative Translation
Adjustments...................... -- -- -- -- -- 111 111
---- ------ ------- ---- -------- ------- -------
Total Comprehensive
Income.................... 6,904
-------
Dividends Declared................... -- -- (1,936) -- -- -- (1,936)
Purchases of Treasury Stock.......... -- -- -- -- (4,883) -- (4,883)
Issuance of stock under 1995 Long
Term Incentive Plan................ -- 2 -- (9) 7 -- --
Amortization of Restricted Common
Stock Compensation................. -- -- -- 15 -- -- 15
---- ------ ------- ---- -------- ------- -------
BALANCE, JULY 31, 1997............... 724 7,686 82,243 (18) (12,398) (907) 77,330
Net Income........................... -- -- 4,723 -- -- -- 4,723
Cumulative Translation
Adjustments...................... -- -- -- -- -- (244) (244)
---- ------ ------- ---- -------- ------- -------
Total Comprehensive
Income.................... 4,479
-------
Dividends Declared................... -- -- (1,808) -- -- -- (1,808)
Purchases of Treasury Stock.......... -- -- -- -- (8,237) -- (8,237)
Issuance of stock under 1995 Long
Term Incentive Plan................ -- 16 -- (77) 61 -- --
Amortization of Restricted Common
Stock Compensation................. -- -- -- 44 -- -- 44
---- ------ ------- ---- -------- ------- -------
BALANCE, JULY 31, 1998............... 724 7,702 85,158 (51) (20,574) (1,151) 71,808
Net Income........................... -- -- 7,176 -- -- -- 7,176
Cumulative Translation
Adjustments...................... -- -- -- -- -- (8) (8)
---- ------ ------- ---- -------- ------- -------
Total Comprehensive
Income.................... 7,168
-------
Dividends Declared................... -- -- (1,904) -- -- -- (1,904)
Purchases of Treasury Stock.......... -- -- -- -- (2,607) -- (2,607)
Amortization of Restricted Common
Stock Compensation................. -- -- -- 42 -- -- 42
---- ------ ------- ---- -------- ------- -------
BALANCE, JULY 31, 1999............... $724 $7,702 $90,430 $ (9) $(23,181) $(1,159) $74,507
==== ====== ======= ==== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

23
24

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 7,176 $ 4,723 $ 6,793
------- ------- -------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 8,497 7,832 7,587
Non-cash special charge................................... -- 1,689 --
Deferred income taxes..................................... 652 (1,251) (181)
Provision for bad debts................................... 8 2 125
(Increase) decrease in
Accounts receivable.................................... (1,163) (4,282) 235
Inventories............................................ (1,906) (2,381) 1,133
Prepaid expenses and taxes............................. (1,405) (873) (383)
Other assets........................................... (788) (637) (537)
Increase (decrease) in
Accounts payable....................................... 426 366 (1,289)
Income taxes payable................................... -- -- (691)
Accrued expenses....................................... (1,637) 649 (361)
Deferred compensation.................................. 32 424 497
Other.................................................. (341) 250 261
------- ------- -------
Total Adjustments................................. 2,375 1,788 6,396
------- ------- -------
Net Cash Provided by Operating Activities......... 9,551 6,511 13,189
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (8,495) (6,496) (5,395)
Proceeds from sale of property, plant and equipment....... 109 78 555
Purchases of investment securities........................ (1,225) (1,173) (350)
Dispositions of investment securities..................... 1,173 1,544 400
Proceeds from sale of investments......................... -- 709 --
Purchase of Oil-Dri, Mounds Production Company assets..... -- (14,657) --
Other..................................................... 5 32 (141)
------- ------- -------
Net Cash Used in Investing Activities................ (8,433) (19,963) (4,931)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt...................... (2,084) (1,937) (1,628)
Proceeds from issuance of long-term debt.................. 400 25,000 21
Dividends paid............................................ (1,865) (1,839) (1,961)
Purchase of treasury stock................................ (2,607) (8,237) (4,883)
Other..................................................... (10) (122) 76
------- ------- -------
Net Cash (Used in) Provided by Financing
Activities........................................ (6,166) 12,865 (8,375)
------- ------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (5,048) (587) (117)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 9,410 9,997 10,114
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 4,362 $ 9,410 $ 9,997
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

24
25

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Oil-Dri
Corporation of America and its subsidiaries, all of which are wholly owned. All
significant intercompany balances and transactions have been eliminated from the
consolidated financial statements.

Management Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenues from sales of products are recognized upon shipment.

Income Taxes

Deferred income taxes reflect the impact of temporary differences between
the assets and liabilities recognized for financial reporting purposes and
amounts recognized for tax purposes.

No provision has been made for possible income taxes which may be paid on
the distribution of approximately $20,391,000 and $21,091,000 as of July 31,
1999 and 1998, respectively, of retained earnings of foreign subsidiaries, as
substantially all such amounts are intended to be indefinitely invested in these
subsidiaries or no additional income taxes would be incurred when such earnings
are distributed. It is not practicable to determine the amount of income taxes
or withholding taxes that would be payable upon the remittance of assets that
represent those earnings.

Interest Rate Derivative Instruments

An interest rate swap agreement which expired on August 1, 1998 was
utilized in the management of interest rate exposure. Interest differentials on
the swap contract (Note 6) are recorded as interest expense in the contract
period incurred. The Company recognized additional interest expense of $15,100,
$57,000 and $60,100 in fiscal years 1999, 1998 and 1997, respectively, as a
result of this contract.

Reclassification

Certain items in prior year financial statements have been reclassified to
conform to the presentation used in fiscal 1999.

Translation of Foreign Currencies

Assets and liabilities of foreign subsidiaries, where the local currency is
the functional currency, are translated at the exchange rates in effect at
period end. Income statement items are translated at the average exchange rate
on a monthly basis. Resulting translation adjustments are recorded as a separate
component of stockholder's equity.

Cash Equivalents

Cash equivalents are highly liquid investments with maturities of three
months or less when purchased.

25
26

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market. The composition of inventories as of July 31 is as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................................. $ 9,593 $ 7,935
Packaging.................................................. 4,267 4,220
Other...................................................... 1,305 1,103
------- -------
$15,165 $13,258
======= =======
</TABLE>

Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash investments in government
backed instruments, both foreign and domestic, and with other quality
institutions. Concentrations of credit risk with respect to accounts receivable
are subject to the financial condition of certain major customers, principally
the customer referred to in Note 5. The Company generally does not require
collateral to secure customer receivables.

Property, Plant and Equipment

Property, plant and equipment expenditures are generally depreciated using
the straight-line method over their estimated useful lives as follows:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and leasehold improvements........................ 5-30
Machinery and equipment..................................... 2-20
Office furniture and equipment.............................. 2-10
Vehicles.................................................... 2-8
</TABLE>

Research and Development

Research and development costs of $2,110,000 in 1999, $2,376,000 in 1998
and $2,049,000 in 1997 were charged to expense as incurred.

Intangibles and Goodwill

Intangibles and goodwill are amortized on a straight-line basis over
periods ranging from 15 to 40 years. The Company periodically reviews goodwill
and other intangibles to assess recoverability from projected undiscounted cash
flows of the related operating entities.

Advertising Costs

The Company defers recognition of advertising production costs until the
first time the advertising takes place; other advertising costs are expensed as
incurred. Advertising expenses were $4,577,000, $4,352,000 and $3,650,000 for
the years ended July 31, 1999, 1998 and 1997, respectively.

Fair Value of Financial Instruments

Non-derivative financial instruments included in the consolidated balance
sheets are cash and cash equivalents, investment securities and notes payable.
These instruments, except for notes payable, were carried at amounts
approximating fair value as of July 31, 1999 and 1998. The fair value of notes
payable was

26
27

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimated based on future cash flows discounted at current interest rates
available to the Company for debt with similar maturities and characteristics.
The fair value of notes payable as of July 31, 1999 was greater than its
carrying value by approximately $261,000 and was less than its carrying value by
approximately $125,000 as of July 31, 1998.

New Accounting Standards

In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires companies to
recognize all derivatives as assets or liabilities measured at their fair value.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and whether it qualifies for hedge accounting.
Although the impact of this statement has not been fully assessed, the Company
believes adoption of this statement, which will occur by July 2000, will not
have a material financial statement impact.

In July 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement established standards for reporting comprehensive income
in the financial statements. The Company adopted this standard in July 1999 and
has elected to disclose comprehensive income, which for the Company includes net
income and foreign currency translation adjustments, in the consolidated
statements of stockholders' equity.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Postretirement Benefits." This statement revises
employers' disclosures about pensions and other postretirement benefit plans. It
does not change the measurement or recognition of those plans in the financial
statements. The Company's adoption of this new standard in July 1999 did not
result in material changes to the previously reported amounts. See Note 10 for
further discussion.

NOTE 2 -- SPECIAL CHARGE

The Company recorded a pre-tax special charge of $3,129,000 during the
second quarter of fiscal 1998 to cover the cost of exiting the transportation
business ($1,508,000), to write off certain other non-performing assets
($932,000), and to cover other exit costs ($689,000). The transportation
business exit costs consisted primarily of trailer rehabilitation, employee
severance, and professional fees. None of these items was individually
significant. A summary of the balance sheet activity for the years ended July
31, is presented below:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Beginning Balance........................................... $ 358 $ 3,129
Utilization of accrual:
Transportation business exit costs........................ (68) (1,440)
Write-off of non-performing assets........................ (124) (808)
Other exit costs.......................................... (166) (523)
----- -------
Balance at End of Year...................................... $ 0 $ 358
===== =======
</TABLE>

27
28

NOTE 3 -- ACQUISITION

On April 20, 1998, the Company completed the purchase of the Fuller's Earth
absorbent business of American Colloid Co., a wholly owned subsidiary of Amcol
International, for approximately $14,657,000 including transaction expenses. The
purchase includes a production plant and mineral reserves in Mounds, Illinois
("Oil-Dri, Mounds Production Company"), and mineral reserves located in Paris,
Tennessee, and Silver Springs, Nevada. The business has annual sales
approximating $15,000,000. The Company financed the acquisition through a fixed
rate private debt placement. The acquisition was accounted for as a purchase,
with the excess purchase price over fair market value of the underlying assets
allocated to intangibles, including supply contracts and non-compete covenants.
These intangibles are being amortized over periods from 15 to 40 years.

NOTE 4 -- OPERATING SEGMENTS

In July 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for reporting information about operating segments. Under this standard, the
Company has four reportable operating segments: Consumer Products, Fluids
Purification Products, Agricultural Products, and Industrial and Automotive
Products. These segments are managed separately because each business has
different economic characteristics. A complete description of each segment can
be found in Item 1 of this report.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies.

Because management does not rely on segment asset allocation, information
regarding segment assets is not meaningful and therefore is not reported.

<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-----------------------------------------------------------------
NET SALES OPERATING INCOME
-------------------------------- -----------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Consumer Products.................. $114,704 $101,766 $ 96,725 $17,331 $18,034 $16,267
Fluids Purification Products....... 23,071 21,337 18,981 5,641 4,413 4,204
Agricultural Products.............. 19,119 19,403 18,493 3,464 3,225 4,267
Industrial and Automotive
Products......................... 17,091 15,374 14,712 783 618 442
-------- -------- -------- ------- ------- -------
Total Ongoing Businesses........... 173,985 157,880 148,911 27,219 26,290 25,180
-------- -------- -------- ------- ------- -------
Total Exited Businesses(1)......... 0 2,372 7,705 0 35 195
-------- -------- -------- ------- ------- -------
TOTAL SALES/OPERATING INCOME....... $173,985 $160,252 $156,616 $27,219 $26,325 $25,375
======== ======== ======== ------- ------- -------
Less: Special Charges(2)........... -- 3,129 --
Corporate Expenses........... 14,478 15,032 14,723
Interest Expense, net of
interest
income....................... 2,705 1,558 1,138
------- ------- -------
INCOME BEFORE INCOME TAXES......... 10,036 6,606 9,514
------- ------- -------
INCOME TAXES....................... 2,860 1,883 2,721
------- ------- -------
NET INCOME......................... $ 7,176 $ 4,723 $ 6,793
======= ======= =======
</TABLE>

- -------------------------
(1) The Company exited the transportation business during the second quarter of
fiscal 1998.

(2) See Note 2 for a discussion of the special charge recorded in fiscal 1998.

28
29

NOTE 5 -- BUSINESS AND GEOGRAPHIC REGION INFORMATION

Nature of Business

The Company is a leader in developing, manufacturing and marketing sorbent
products for consumer, fluids purification, agricultural, and industrial and
automotive markets. The Company has operations in the United States, Canada and
the United Kingdom and exports goods worldwide. The Company had net sales in
excess of 10% of total net sales to one unaffiliated customer in 1999, 1998 and
1997. These sales were all reportable under the Consumer Products segment.
Accounts receivable related to this major customer amounted to $6,105,000,
$6,220,000, and $4,736,000 as of July 31, 1999, 1998 and 1997, respectively.

The sales to this customer for the years ended July 31 were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Amount........................................ $34,143 $36,125 $37,219
Percent of net sales.......................... 20% 23% 24%
</TABLE>

The following is a summary of financial information by geographic region
for the years ended July 31:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to unaffiliated customers:
Domestic................................... $159,484 $146,265 $144,616
Foreign subsidiaries....................... $ 14,501 $ 13,987 $ 12,000
Sales or transfers between geographic areas:
Domestic................................... $ 7,332 $ 9,200 $ 5,611
Income before income taxes:
Domestic................................... $ 9,263 $ 5,750 $ 8,637
Foreign subsidiaries....................... $ 773 $ 856 $ 877
Net Income:
Domestic................................... $ 6,586 $ 4,089 $ 6,237
Foreign subsidiaries....................... $ 590 $ 634 $ 556
Identifiable assets:
Domestic................................... $122,686 $122,455 $104,692
Foreign subsidiaries....................... $ 11,064 $ 11,760 $ 9,866
</TABLE>

29
30

NOTE 6 -- NOTES PAYABLE

The composition of notes payable at July 31 is as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Town of Blue Mountain, Mississippi
Principal payable on October 1, 2008. Interest payable
monthly at a variable interest rate set weekly based on
market conditions for similar instruments. The average
rate was 3.50% and 3.91% in fiscal 1999 and fiscal 1998
respectively. Payment of these bonds by the Company is
guaranteed by a letter of credit issued by Harris Trust
and Savings Bank. In May 1991, the Company entered into a
seven-year interest rate swap contract. Under this
agreement, which expired on August 1, 1998, the Company
received a floating interest rate based on LIBOR and paid
interest at a fixed rate of 6.53%......................... $ 2,500 $ 2,500
Teachers Insurance and Annuity Association of America
Payable in annual principal installments on November 15;
$1,200,000 in fiscal 2000; $1,100,000 in fiscal 2001; and
$1,000,000 in fiscal 2002. Interest is payable
semiannually at an annual rate of 9.38%................... 3,300 3,300
Teachers Insurance and Annuity Association of America
Payable in annual principal installments on August 15;
$500,000 in fiscal 2002; $1,000,000 in fiscal 2003; and
$2,500,000 in fiscal 2004 and 2005. Interest is payable
semiannually at an annual rate of 7.17%................... 6,500 6,500
Harris Trust and Savings Bank
Payable in annual principal installments on June 20;
$900,000 in fiscal 2000; $650,000 in fiscal 2001 and 2002;
and $350,000 in fiscal 2003. Interest is payable quarterly
at an annual rate of 7.78%................................ 2,550 4,500
Teachers Insurance and Annuity Association of America and
Connecticut General Life Insurance Company
Payable in annual principal installments on April 15;
$1,500,000 in fiscal 2003, 2004 and 2005; $3,000,000 in
fiscal 2006; $4,000,000 in fiscal 2007 and 2008;
$1,500,000 in fiscal 2009; $3,000,000 in fiscal 2010;
$2,000,000 in fiscal 2011; and $1,500,000 in fiscal 2012
and 2013. Interest is payable semiannually at an annual
rate of 6.55%............................................. 25,000 25,000
Other....................................................... 526 260
------- -------
40,376 42,060
Less current maturities of notes payable.................. (2,226) (2,084)
------- -------
$38,150 $39,976
======= =======
</TABLE>

On January 29, 1999, the Company entered into a new Credit Agreement with
Harris Trust and Savings Bank which provides for up to $15,000,000 in committed
unsecured revolving credit loans and/or letters of credit (not to exceed
$5,000,000). This agreement terminates on January 29, 2004, or such earlier date
as provided for in the agreement. Additionally, the Company decreased its
uncommitted line of credit agreement with Harris Trust and Savings Bank to
$15,000,000. There were no outstanding borrowings against these or prior lines
at July 31, 1999 and 1998.

In April 1998, the Company completed a private debt placement of
$25,000,000 at 6.55% with Teachers Insurance and Annuity Association of America
($14,000,000) and Connecticut General Life Insurance Company ($11,000,000). The
proceeds of this fixed rate note were used to fund the purchase of the Company's
production facility in Mounds, Illinois, repay draws against the Company's line
of credit and for general working capital purposes.

30
31

NOTE 6 -- NOTES PAYABLE (CONTINUED)
The agreements with the Town of Blue Mountain, Mississippi, Teachers
Insurance and Annuity Association of America, Harris Trust and Savings Bank and
Connecticut General Life Insurance Company impose working capital requirements,
dividend and financing limitations, minimum tangible net worth requirements and
other restrictions. The Company's new Credit Agreement with Harris Trust and
Savings Bank indirectly restricts dividends by requiring the Company to maintain
tangible net worth, as defined, in the amount of $50,000,000 plus 40% of
cumulative annual earnings from July 31, 1998.

In prior years, the Town of Blue Mountain, Mississippi issued long-term
bonds to finance the purchase of substantially all of the assets of certain
plant expansion projects, and leased the projects to the Company and various of
its subsidiaries (with the Company and various of its wholly owned subsidiaries
as guarantors) at rentals sufficient to pay the debt service on the bonds.

The following is a schedule by year of future maturities of notes payable
as of July 31, 1999:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
2001........................................................ $ 1,750
2002........................................................ 2,150
2003........................................................ 2,850
2004........................................................ 4,000
Later years................................................. 27,400
-------
$38,150
=======
</TABLE>

NOTE 7 -- INCOME TAXES

The provision for income tax expense consists of the following:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................ $1,324 $ 2,159 $1,988
Foreign............................................ 182 194 308
State.............................................. 702 781 606
------ ------- ------
2,208 3,134 2,902
------ ------- ------
Deferred
Federal............................................ 649 (436) 35
Operating loss carryforward........................ 91 (611) (154)
Foreign............................................ 1 25 12
State.............................................. (89) (229) (74)
------ ------- ------
652 (1,251) (181)
------ ------- ------
Total Income Tax Provision........................... $2,860 $ 1,883 $2,721
====== ======= ======
</TABLE>

31
32

NOTE 7 -- INCOME TAXES (CONTINUED)

Principal reasons for variations between the statutory federal rate and the
effective rates for the years ended July 31 were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory income tax rate................ 34.0% 34.0% 34.0%
Depletion deductions allowed for mining............... (12.0) (15.1) (10.8)
State income taxes, net of federal tax benefit........ 4.0 2.2 4.1
Valuation allowance without income tax benefit........ 4.6 10.4 1.6
Difference in effective tax rate of foreign
subsidiaries........................................ (1.0) (1.1) 0.1
Other................................................. (1.1) (1.9) (0.4)
----- ----- -----
28.5% 28.5% 28.6%
===== ===== =====
</TABLE>

The consolidated balance sheets as of July 31 included the following tax
effects of cumulative temporary differences:

<TABLE>
<CAPTION>
1999 1998
---------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Depreciation.............................. $ -- $1,608 $ -- $1,455
Deferred Compensation..................... 1,244 -- 1,232 --
Postretirement Benefits................... 474 -- 614 --
Trade Promotions and Advertising.......... -- -- 39 --
Other Assets.............................. 633 -- 583 --
Accrued Expenses.......................... 486 -- 523 --
Tax Credits............................... 750 -- 936 --
Operating Loss Carryforward............... 2,768 -- 2,133 --
Other..................................... 40 -- -- 260
------- ------ ------ ------
6,395 1,608 6,060 1,715
Valuation Allowance....................... (1,742) -- (648) --
------- ------ ------ ------
Total Deferred Taxes...................... $ 4,653 $1,608 $5,412 $1,715
======= ====== ====== ======
</TABLE>

The valuation allowance represents operating loss carryforwards not
anticipated to be utilized. As of July 31, 1999, for federal income tax purposes
there were regular tax operating loss carryforwards of approximately $7,133,000,
which begin to expire in the year 2013. A valuation allowance has been
established for $1,742,000 of the deferred tax benefit related to those loss
carryforwards for which it is considered more likely than not the benefit will
not be realized. Tax credits of approximately $750,000, primarily consisting of
foreign tax credits expiring in 2001 and later years, are also being carried
forward.

NOTE 8 -- STOCKHOLDERS' EQUITY

The authorized capital stock of the Company at July 31, 1999 and 1998
consisted of 15,000,000 shares of Common Stock, 7,000,000 shares of Class B
Stock and 30,000,000 shares of Class A Common Stock, each with a par value of
$.10 per share. There are no Class A shares currently outstanding.

The Common Stock and Class B Stock are equal, on a per share basis, in all
respects except as to voting rights, conversion rights, cash dividends and stock
splits or stock dividends. The Class A Common Stock is equal, on a per share
basis, in all respects, to the Common Stock except as to voting rights and stock
splits or stock dividends. In the case of voting rights, Common Stock is
entitled to one vote per share and Class B Stock is entitled to ten votes per
share, while Class A Common Stock generally has no voting rights. Common Stock
and Class A Common Stock have no conversion rights. Class B Stock is convertible
on a share-for-share basis into Common Stock at any time and is subject to
mandatory conversion under certain circumstances.

32
33

NOTE 8 -- STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock is entitled to cash dividends, as and when declared or paid,
equal to 133 1/3% on a per share basis of the cash dividend paid on Class B
Stock. Class A Common Stock is entitled to cash dividends on a per share basis
equal to the cash dividend on Common Stock. Additionally, while shares of Common
Stock, Class A Common Stock and Class B Stock are outstanding, the sum of the
per share cash dividend paid on shares of Common Stock and Class A Common Stock,
must be equal to at least 133 1/3% of the sum of the per share cash dividend
paid on Class B Stock and Class A Common Stock. See Note 6 regarding dividend
restrictions.

Shares of Common Stock, Class A Common Stock and Class B Stock are equal in
respect of all rights to dividends (other than cash) and distributions in the
form of stock or other property (including stock dividends and split-ups) in
each case in the same ratio except in the case of a Special Stock Dividend. The
Special Stock Dividend, which can be issued only once, is either a dividend of
one share of Class A Common Stock for each share of Common Stock and Class B
Stock outstanding or a recapitalization, in which half of each outstanding share
of Common Stock and Class B Stock would be converted into a half share of Class
A Common Stock.

In June 1999, the Board of Directors of the Company authorized the
repurchase, from time to time, of up to 200,000 additional shares of the
Company's stock. This authorization, in addition to previous authorizations,
totals 1,566,771 shares. As of July 31, 1999, 1,349,071 shares have been
repurchased under these authorizations.

The number of holders of record of Common Stock and Class B stock on July
31, 1999 was 1,149 and 33, respectively. The Company's Common Stock is traded on
the New York Stock Exchange. There is no established trading market for the
Class B Stock.

NOTE 9 -- STOCK OPTION PLANS

The Company instituted the Oil-Dri Corporation of America 1995 Long Term
Incentive Plan during the fiscal year ended July 31, 1996. On December 9, 1997,
the stockholders voted to increase the number of shares available for grant
under the 1995 Plan from 500,000 to 1,000,000 and further authorized the grant
of Class B Shares under the Plan to certain members of the Richard M. Jaffee
family. Generally, other than grants to Richard M. Jaffee family members, shares
of stock awarded under the 1995 Plan will be Class A Common Stock, except that,
if there is no Class A Common Stock issued and publicly traded on a securities
exchange when such awards are exercised, the shares awarded would be Common
Stock. The Plan provides for various other types of awards. Awards of restricted
stock in the amount of 4,500 and 500 shares were made during the fiscal years
ended July 31, 1998 and 1997 respectively. On September 18, 1998, 840,125 shares
which had been issued in prior fiscal years under the 1995 Plan at an average
price of $14.83 were reissued at an exercise price of $11.25. The reissued
options awarded to members of the Richard M. Jaffee family covered Class B
shares. A new vesting period applied to all the reissued options.

The Oil-Dri Corporation of America 1988 Stock Option Plan terminated on
December 12, 1995, for purposes of future grants. The outstanding options under
this plan will remain outstanding and exercisable in accordance with their
respective terms.

The Company instituted the Oil-Dri Corporation of America Outside
Director's Stock Plan on June 9, 1998. All shares of stock issued under this
plan will be shares of Common Stock issued from Treasury Stock. The Plan
provides for stock option grants and various other types of awards.

33
34

NOTE 9 -- STOCK OPTION PLANS (CONTINUED)
A summary of option transactions under the plans follows:

<TABLE>
<CAPTION>
1988 OPTION PLAN 1995 OPTION PLAN
-------------------------------- --------------------------------
NUMBER OF SHARES NUMBER OF SHARES
(WEIGHTED AVERAGE OPTION PRICE) (WEIGHTED AVERAGE OPTION PRICE)
-------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, Beginning of
Year................... 186 199 251 881 324 195
$(18.49) $(18.49) $(18.63) $(14.84) $(14.88) $(14.92)
Granted.................. -- -- -- 882 1,036 145
-- -- -- $(11.29) $(15.33) $(14.82)
Exercised................ -- -- -- -- -- --
-- -- -- -- -- --
Canceled/Terminated...... 42 13 52 39 37 16
$(15.85) $(18.59) $(19.14) $(13.51) $(15.62) $(14.96)
Canceled/Reissued........ -- -- -- 840 442 --
-- -- -- $(14.83) $(15.94) --
Outstanding, End of
Year................... 144 186 199 884 881 324
$(19.27) $(18.49) $(18.49) $(11.37) $(14.84) $(14.88)
</TABLE>

<TABLE>
<CAPTION>
OUTSIDE DIRECTOR'S PLAN COMBINED PLANS
-------------------------------- --------------------------------
NUMBER OF SHARES NUMBER OF SHARES
(WEIGHTED AVERAGE OPTION PRICE) (WEIGHTED AVERAGE OPTION PRICE)
-------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, Beginning of
Year................... 70 -- -- 1,137 523 446
$(14.63) -- -- $(15.42) $(16.25) $(17.00)
Granted.................. -- 70 -- 882 1,106 145
-- $(14.63) -- $(11.29) $(15.28) $(14.82)
Exercised................ -- -- -- -- -- --
-- -- -- -- -- --
Canceled/Terminated...... -- -- -- 81 50 68
-- -- -- $(14.73) $(16.36) $(18.16)
Canceled/Reissued........ -- -- -- 840 442 --
-- -- -- $(14.83) $(15.94) --
Outstanding, End of
Year................... 70 70 -- 1,098 1,137 523
$(14.63) $(14.63) -- $(12.61) $(15.42) $(16.25)
</TABLE>

As of July 31, 1999, the Company has reserved 109,438 and 130,000 shares of
Common Stock for future grants and issuances under the Oil-Dri Corporation of
America 1995 Long Term Incentive Plan and the Oil-Dri Corporation of America
Outside Director's Stock Plan, respectively.

Exercise prices of the options outstanding under the 1988 Option Plan range
between $17.75 and $20.00 per share with a weighted average price of $19.27 per
share and a weighted remaining average contractual life at July 31, 1999 of 4.3
years. As of July 31, 1999, 125,600 options were exercisable.

The exercise price of options outstanding under the Outside Director's
Stock Plan is $14.63 with a contractual life of 8.9 years. All of these options
are exercisable at July 31, 1999.

34
35

NOTE 9 -- STOCK OPTION PLANS (CONTINUED)

Exercise prices of the options outstanding under the 1995 Long Term
Incentive Plan range between $11.25 and $15.13 per share with a weighted average
exercise price of $11.37 per share and a weighted remaining average contractual
life of 9.09 years at July 31, 1999. As of July 31, 1999, 8,937 of these options
were exercisable.

The Company has elected to continue to account for stock-based compensation
using the intrinsic value method under APB Opinion No. 25. Consequently, no
compensation expense has been recognized for stock options. If compensation
expense for the Company's stock options issued in the fiscal years ended July
31, 1999, 1998 and 1997 had been determined based on the fair value method of
accounting, as defined in SFAS No. 123, the Company's net income and net income
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS
EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income as reported........................ $7,176 $4,723 $6,793
Pro forma..................................... $6,515 $4,430 $6,651

Net income per share as reported
Basic....................................... $ 1.23 $ .77 $ 1.03
Dilutive.................................... $ 1.20 $ .77 $ 1.03
Pro forma
Basic....................................... $ 1.12 $ .72 $ 1.01
Dilutive.................................... $ 1.09 $ .72 $ 1.01
</TABLE>

The fair value of issued stock options is estimated on the grant date using
the Black-Scholes Option Pricing Method with the following assumptions for the
fiscal years ended July 31, 1999, 1998 and 1997, respectively: Dividend yields
of 2.8%, 2.1% and 2.1%; volatility of 25.8%, 25.6% and 25.7%; risk-free interest
rates of 5.9%, 5.7% and 6.0%; and an expected life of 5.4 years for all three
years. The weighted average fair value of the options granted, including the
effect of repricing, was $1.42, $4.55 and $4.22 for the fiscal years ended July
31, 1999, 1998 and 1997, respectively. The fair value method of accounting has
not been applied for options granted prior to August 1, 1995.

NOTE 10 -- EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries have defined benefit pension plans for
eligible salaried and hourly employees. Benefits are based on a formula of years
of credited service and levels of compensation or stated amounts for each year
of credited service. The assets of these plans are invested in various high
quality marketable securities.

The net periodic pension cost for the years ended July 31 consists of the
following:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................. $ 539 $ 438 $ 348
Interest cost on projected benefit
obligations................................ 591 538 441
Earnings on plan assets...................... (686) (1,060) (1,892)
Net amortization and deferral................ (33) 422 1,427
----- ------- -------
Net pension cost............................. $ 411 $ 338 $ 324
===== ======= =======
</TABLE>

35
36

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The funded status of the plans at July 31 is as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated Benefit Obligations
Vested................................................. $ 6,194 $ 6,320
Nonvested.............................................. 337 374
------- -------
Total Accumulated Benefit Obligations.......... $ 6,531 $ 6,694
======= =======
Projected Benefit Obligations.......................... 8,370 8,943
Plan Assets at Fair value................................ 10,059 8,524
------- -------
Excess (Deficiency) of Plan Assets Over (Under) Projected
Benefit Obligations.................................... 1,689 (419)
Unrecognized Net Gain.................................... (3,303) (1,267)
Unrecognized Prior Services Cost......................... 581 626
Unrecognized Net Excess Plan Assets as of August 1, 1987,
Being Recognized Principally Over 21 Years............. (238) (264)
Adjustment Required to Recognize Minimum Liability....... -- (247)
------- -------
Accrued Pension Included in Noncurrent
Liabilities -- Other................................... $(1,271) $(1,571)
======= =======
</TABLE>

Reconciliation of the assets and liabilities of the plans at July 31 is as
follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Change in Plan Assets
Plan assets at fair value, beginning of year................ $ 8,524 $7,546
Actual return on plan assets................................ 1,322 1,027
Contributions............................................... 464 150
Benefits paid............................................... (251) (199)
------- ------
Plan assets at fair value, end of year...................... $10,059 $8,524
======= ======
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year............. $ 8,943 $6,566
Service cost................................................ 539 438
Interest cost............................................... 592 538
Change in discount rate..................................... (1,131) 688
Other assumption changes.................................... -- 631
Plan amendments............................................. 3 132
Actuarial (gain) loss....................................... (325) 149
Benefits paid............................................... (251) (199)
------- ------
Projected benefit obligation, end of year................... $ 8,370 $8,943
======= ======
</TABLE>

Assumptions used in the previous calculations are as follows:

<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Discount rate............................................... 7.75% 7.0%
Rate of increase in compensation levels..................... 5.0% 5.0%
Long-term expected rate of return on assets................. 8.0% 8.0%
</TABLE>

36
37

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company has funded the plans based upon actuarially determined
contributions that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee Retirement
Income Security Act of 1974 (ERISA), as amended.

For the years ended July 31, 1999, 1998 and 1997, the Company maintained a
401(k) savings plan under which the Company matches a portion of employee
contributions. The plan is available to essentially all domestic employees at
the beginning of the fiscal quarter following thirty or sixty days of
employment. Prior to May 1, 1998, domestic employees were eligible to
participate after one year of service and the attainment of age 21. The
Company's contributions to this plan, and to similar plans maintained by the
Company's foreign subsidiaries, were $449,000, $226,000 and $175,000 for fiscal
years 1999, 1998 and 1997, respectively.

NOTE 11 -- DEFERRED COMPENSATION

In December 1995, the Company adopted the Oil-Dri Corporation of America
Deferred Compensation Plan. Deferrals are no longer being made under the
original plan, The Oil-Dri Corporation of America Key Employee and Directors
Deferred Compensation Plan. The new plan has permitted Directors and certain
management employees to defer portions of their compensation and earn interest
on the deferred amounts. Effective January 1, 1999, the new plan was amended.
Participants' returns are now tied to the performance of various investment
elections. The compensation, which has been deferred since the inception of the
original plan, has been accrued as well as earnings thereon. The Company has
purchased life insurance contracts on some participants to partially fund both
the original plan and the new plan.

NOTE 12 -- CONTINGENT LIABILITIES

The Company is involved in various litigation of a nature that is normal to
its business. While it is impossible at this time to determine with certainty
the ultimate outcome of these or other lawsuits, each lawsuit is either covered
by insurance or adequate provisions have been made for probable losses with
respect thereto as can best be determined at this time. Management therefore
believes that none of the pending litigation will have a material adverse effect
on the financial condition of the Company or on results of operations.

NOTE 13 -- LEASES

The Company's mining operations are conducted on leased or owned property.
These leases generally provide the Company with the right to mine as long as the
Company continues to pay a minimum monthly rental, which is applied against the
per ton royalty when the property is mined. During fiscal 1997 and 1999, the
Company leased 5,907 acres in Nevada for potential future development of a
mineral reserve base.

The Company leases its corporate offices in Chicago, Illinois (20,000
square feet), office, production and warehouse space in Alpharetta, Georgia
(26,000 square feet), office and production facilities in Kiel, Wisconsin
(16,000 square feet) and office facilities in Europe. The office space in
Chicago is subject to a lease expiring in 2008. The Alpharetta, Georgia lease
expires in 2000, and the Kiel, Wisconsin lease expires in 2003. The facilities
in Europe are leased on a year-to-year basis.

In addition, the Company leases railcars, mining equipment, data processing
equipment, and office equipment. In most cases, the Company expects that, in the
normal course of business, leases will be renewed or replaced by other leases.
Prior to exiting the transportation business, the Company leased tractors and
trailers.

37
38

NOTE 13 -- LEASES (CONTINUED)
The following is a schedule by year of future minimum rental requirements
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of July 31, 1999:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
2000........................................................ $ 3,468
2001........................................................ 2,394
2002........................................................ 1,301
2003........................................................ 1,116
2004........................................................ 2,549
Later years................................................. 4,127
-------
$14,955
=======
</TABLE>

The following schedule shows the composition of total rental expense for
all operating leases, including those with terms of one month or less which were
not renewed as of the years ended July 31:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Transportation equipment.............................. $1,807 $2,347 $2,734
Office facilities..................................... 475 441 382
Mining properties
Minimum............................................. 186 202 177
Contingent.......................................... 410 403 361
Other................................................. 846 488 654
------ ------ ------
$3,724 $3,881 $4,308
====== ====== ======
</TABLE>

NOTE 14 -- OTHER CASH FLOW INFORMATION

Cash payments for interest and income taxes were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Interest.............................................. $2,879 $1,398 $1,557
====== ====== ======
Income Taxes.......................................... $3,152 $2,619 $3,997
====== ====== ======
</TABLE>

38
39

NOTE 15 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected information for 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
FISCAL 1999 QUARTER ENDED
-------------------------------------------------------
OCTOBER 31 JANUARY 31 APRIL 30 JULY 31 TOTAL
---------- ---------- -------- ------- -----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net Sales........................ $43,670 $47,435 $42,405 $40,475 $173,985
Gross Profit..................... $14,085 $15,208 $13,015 $12,551 $ 54,859
Net Income....................... $ 2,028 $ 2,276 $ 1,195 $ 1,677 $ 7,176
Net Income Per Share
Basic.......................... $ 0.34 $ 0.39 $ 0.21 $ 0.29 $ 1.23
Dilutive....................... $ 0.34 $ 0.38 $ 0.20 $ 0.28 $ 1.20
Dividends Per Share
Common......................... $ 0.08 $ 0.09 $ 0.09 $ 0.09 $ 0.35
Class B........................ $ 0.06 $0.0675 $0.0675 $0.0675 $ 0.2625
Company Common Stock Price Range:
High........................... $ 13.75 $ 15.50 $ 15.94 $ 16.38
Low............................ $ 10.81 $ 12.50 $ 14.25 $ 13.63
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1998 QUARTER ENDED
-------------------------------------------------------
OCTOBER 31 JANUARY 31 APRIL 30 JULY 31 TOTAL
---------- ---------- -------- ------- -----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net Sales........................ $39,749 $40,912 $38,334 $41,257 $160,252
Gross Profit..................... $11,898 $13,296 $12,186 $12,776 $ 50,156
Net Income (Loss)................ $ 1,872 $ (97) $ 1,389 $ 1,559 $ 4,723
Net Income (Loss) Per Share
Basic.......................... $ 0.30 $ (0.02) $ 0.23 $ 0.26 $ 0.77
Dilutive....................... $ 0.30 $ (0.02) $ 0.23 $ 0.26 $ 0.77
Dividends Per Share
Common......................... $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.32
Class B........................ $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.24
Company Common Stock Price Range:
High........................... $ 18.13 $ 17.88 $ 17.00 $ 16.00
Low............................ $ 16.38 $ 14.13 $ 14.63 $ 13.63
</TABLE>

39
40

INDEPENDENT AUDITOR'S REPORT

STOCKHOLDERS AND BOARD OF DIRECTORS
Oil-Dri Corporation of America

We have audited the consolidated balance sheets of OIL-DRI CORPORATION OF
AMERICA AND SUBSIDIARIES as of July 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended July 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of OIL-DRI
CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended July 31, 1999 in conformity with generally accepted accounting
principles.

BLACKMAN KALLICK BARTELSTEIN, LLP

Chicago, Illinois

September 10, 1999

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

40
41

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is (except for information set forth
below concerning the Board of Directors and information in Part I, hereof,
concerning executive officers) contained in the Registrant's Proxy Statement for
its 1999 Annual Meeting of stockholders ("Proxy Statement") under the caption
"1. Election of Directors" and is incorporated herein by this reference.

BOARD OF DIRECTORS

Richard M. Jaffee
Chairman

Daniel S. Jaffee
President and Chief Executive Officer

J. Steven Cole(1)
President, Cole & Associates,
Chairman, Sav-A-Life Systems, Inc.

Arnold W. Donald
Senior Vice-President, Monsanto Company

Ronald B. Gordon
Chief Executive Officer, Beiersdorf North America

Edgar D. Jannotta
Senior Director, William Blair & Company, LLC
Joseph C. Miller
Vice-Chairman

Paul J. Miller
Partner, Sonnenschein Nath & Rosenthal

Haydn H. Murray
Professor Emeritus of Geology, Indiana University,
President, H.H. Murray & Associates

Allan H. Selig(2)
President and Chairman, Selig Lease Company,
Commissioner of Major League Baseball

(1)Audit Committee Chair
(2)Compensation Committee Chair

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is contained in the Registrant's
Proxy Statement under the captions "Executive Compensation," "Report of the
Compensation and the Stock Option Committees of Oil-Dri Corporation of America
on Executive Compensation," "Compensation Committee Interlocks and Insider
Participation" and "Performance Graph" and is incorporated herein by this
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is contained in the Registrant's
Proxy Statement under the captions "General -- Principal Stockholders" and
"Security Ownership of Management" and is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is contained in the Registrant's
Proxy Statement under the caption "Compensation Committee Interlocks and Insider
Participation" and is incorporated herein by this reference.

41
42

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) The following financial statements are contained herein.

Consolidated Balance Sheets as of July 31, 1999 (audited) and July 31,
1998 (audited).

Consolidated Statements of Income for the fiscal years ended July 31,
1999 (audited), July 31, 1998 (audited) and July 31, 1997 (audited).

Consolidated Statements of Stockholders' Equity for the fiscal years
ended July 31, 1999 (audited), July 31, 1998 (audited) and July 31, 1997
(audited).

Consolidated Statements of Cash Flows for the fiscal years ended July
31, 1999 (audited), July 31, 1998 (audited) and July 31, 1997 (audited).

Notes to Consolidated Financial Statements.

Independent Auditor's Report.

(a)(2) The following financial statement schedules are contained herein:

Independent Auditor's Report on Schedules.

Schedules to Financial Statements, as follows:

Schedule II -- Valuation and Qualifying Accounts, years ended
July 31, 1999, 1998 and 1997.

(a)(3) The following documents are exhibits to this Report:

<TABLE>
<S> <C>
(3)(a)(1) Articles of Incorporation of the Registrant, as amended.
(3)(b)(2) Bylaws of the Registrant, as amended June 16, 1995.
(10)(c)(1)(3) Agreement ("Clorox Agreement") dated January 12, 1981
between The Clorox Company and the Registrant, as amended.
(Confidential treatment of certain portions of this Exhibit
has been granted.)
(10)(c)(2)(4) Amendment to Clorox Agreement dated March 3, 1989, as
accepted by the Registrant on March 20, 1989, between The
Clorox Company and the Registrant. (Confidential treatment
of certain portions of this Exhibit has been granted.)
(10)(c)(3)(5) Amendment to Clorox Agreement dated February 14, 1991,
between The Clorox Company and the Registrant. (Confidential
treatment of certain portions of this Exhibit has been
granted).
(10)(d)(6) Description of 1987 Executive Deferred Compensation
Program.*
(10)(e)(1)(7) Salary Continuation Agreement dated August 1, l989 between
Richard M. Jaffee and the Registrant ("1989 Agreement").*
(10)(e)(2)(8) Extension and Amendment, dated October 9, 1998, to the 1989
Agreement.*
(10)(f)(9) 1988 Stock Option Plan.*
(10)(g)(10) Note Agreement, dated April 5, 1991, between the Registrant
and Teacher's Insurance and Annuity Association of America
regarding $8,000,000 9.38% Senior Notes due November 15,
2001.
(10)(h)(11) Note Agreement, dated as of April 15, 1993, between the
Registrant and Teacher's Insurance and Annuity Association
of America regarding $6,500,000 7.17% Senior Notes due
August 15, 2004.
</TABLE>

42
43

<TABLE>
<S> <C>
(10)(i)(12) Credit Agreement, dated as of September 21, 1994, between the Registrant and Harris Trust and
Savings Bank regarding $5,000,000 7.78% Term Loan Note and $5,000,000 Revolving Credit Note.
(10)(j)(13) The Oil-Dri Corporation of America Deferred Compensation Plan adopted November 15, 1995 and
related resolution, as amended and restated effective January 1, 1999.*
(10)(k)(14) Oil-Dri Corporation of America 1995 Long Term Incentive Plan as amended through July 31, 1998.*
(10)(l) $10,000,000 unsecured line of credit agreement dated as of July 25, 1996 between the Registrant
and Harris Trust and Savings Bank incorporated by reference to Exhibit 10(l) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31, 1996.
(10)(m)(15) $25,000,000 Note Purchase Agreement dated as of April 15, 1998 between the Registrant and Teachers
Insurance and Annuity Association of America and Cigna Investments, Inc.
(10)(n)(16) Oil-Dri Corporation of America Outside Director Stock Plan effective June 9, 1998.*
(10)(o)(17) $15,000,000 unsecured line of credit agreement dated January 29, 1999 between the Company and
Harris Trust and Savings Bank.
(10)(p)(18) $15,000,000 unsecured, uncommitted line of credit agreement dated January 29, 1999 between the
Company and Harris Trust and Savings Bank.
(10)(q)(19) Split Dollar Life Insurance Agreements dated February 26, 1999.*
(10)(r) Agreement ("Church & Dwight Agreement") dated May 19, 1999 between Church & Dwight Co., Inc. and
the Registrant. (Confidential treatment of certain portions of this Exhibit has been granted.)
(11) Statement re: Computation of Income per Share.
(21) Subsidiaries of the Registrant.
(23) Consent of Blackman Kallick Bartelstein, LLP.
(27) Financial Data Schedule.
</TABLE>

- -------------------------
* Management contract or compensatory plan or arrangement.

(1) Incorporated by reference to Exhibit (4.1) to the Registrant's Registration
Statement on Form S-8 (Registration No. 333-57625), made effective on June
24, 1998.

(2) Incorporated by reference to Exhibit (3)(b) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1995.

(3) Incorporated by reference to Exhibit 10(f) to the Registrant's Registration
Statement on Form S-2 (Registration No. 2-97248) made effective on May 29,
1985.

(4) Incorporated by reference to Exhibit 10(e)(2) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1989.

(5) Incorporated by reference to Exhibit 10(e)(3) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1991.

(6) Incorporated by reference to Exhibit 10(f) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1988.

(7) Incorporated by reference to Exhibit 10(g) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1989.

(8) Incorporated by reference to Exhibit (10)(n) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1998.

(9) Incorporated by reference to Exhibit 4(a) to the Registrant's Registration
Statement on Form S-8, filed June 30, 1989, Registration No. 33-29650.

43
44

(10) Incorporated by reference to Exhibit 10(h) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1991.

(11) Incorporated by reference to Exhibit 10(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1993.

(12) Incorporated by reference to Exhibit 10(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1994.

(13) Incorporated by reference to Exhibit 10(j) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1999.

(14) Incorporated by reference to Exhibit 10(k)(I) to the Registrant's Report on
Form 8-K dated April 20, 1998.

(15) Incorporated by reference to Exhibit (10)(m) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1998.

(16) Incorporated by reference to Exhibit (10)(n) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 1998.

(17) Incorporated by reference to Exhibit (10)(o) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1999.

(18) Incorporated by reference to Exhibit (10)(p) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1999.

(19) Incorporated by reference to Exhibit (10)(q) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1999.

The Registrant agrees to furnish the following agreements upon the request
of the Commission:

<TABLE>
<S> <C>
Exhibit 4(b) Letter of Credit Agreement, dated as of October 1, 1988
between Harris Trust and Savings Bank and Blue Mountain
Production Company in the amount of $2,634,590 in connection
with the issuance by Town of Blue Mountain, Mississippi of
Variable/Fixed Rate Industrial Development Revenue Bonds,
Series 1988 B (Blue Mountain Production Company Project) in
the aggregate principal amount of $2,500,000 and related
Indenture of Trust, Lease Agreement, Remarketing Agreement
and Guaranties.
</TABLE>

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45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

OIL-DRI CORPORATION OF AMERICA
(Registrant)

By /s/ DANIEL S. JAFFEE

------------------------------------
Daniel S. Jaffee,
President and Chief Executive
Officer Director

Dated: October 20, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<C> <S>

/s/ RICHARD M. JAFFEE October 20, 1999
- -----------------------------------------------------
Richard M. Jaffee
Chairman of the Board of Directors

/s/ MICHAEL L. GOLDBERG October 20, 1999
- -----------------------------------------------------
Michael L. Goldberg
Executive Vice President
Chief Financial Officer and Secretary
Principal Financial Officer

/s/ JAMES F. JAPCZYK October 20, 1999
- -----------------------------------------------------
James F. Japczyk
Corporate Controller
Principal Accounting Officer

/s/ J. STEVEN COLE October 20, 1999
- -----------------------------------------------------
J. Steven Cole
Director

/s/ ARNOLD W. DONALD October 20, 1999
- -----------------------------------------------------
Arnold W. Donald
Director

/s/ RONALD B. GORDON October 20, 1999
- -----------------------------------------------------
Ronald B. Gordon
Director
</TABLE>

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46
<TABLE>
<C> <S>
/s/ EDGAR D. JANNOTTA October 20, 1999
- -----------------------------------------------------
Edgar D. Jannotta
Director

/s/ JOSEPH C. MILLER October 20, 1999
- -----------------------------------------------------
Joseph C. Miller
Director

/s/ PAUL J. MILLER October 20, 1999
- -----------------------------------------------------
Paul J. Miller
Director

/s/ HAYDN H. MURRAY October 20, 1999
- -----------------------------------------------------
Haydn H. Murray
Director

/s/ ALLAN H. SELIG October 20, 1999
- -----------------------------------------------------
Allan H. Selig
Director
</TABLE>

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INDEPENDENT AUDITOR'S REPORT ON SCHEDULES

Board of Directors
Oil-Dri Corporation of America
Chicago, Illinois

In connection with our audit of the consolidated financial statements of
OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES as of July 31, 1999 and 1998 and
for each of the three years in the period ended July 31, 1999, which report
thereon dated September 10, 1999, is incorporated by reference in this Annual
Report on Form 10-K, we also examined the financial statement schedules listed
in the accompanying index at Item 14(A)(2). In our opinion, these financial
statement schedules present fairly, when read in conjunction with the related
consolidated financial statements, the financial data required to be set forth
therein.

Blackman Kallick Bartelstein, LLP

September 10, 1999

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48

OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS*
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS** OF PERIOD
----------- ---------- ---------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>

Allowance for doubtful accounts:

Year Ended July 31, 1999............................ $351 $ 18 $ 11 $358
==== ==== ==== ====
Year Ended July 31, 1998............................ $261 $201 $111 $351
==== ==== ==== ====
Year Ended July 31, 1997............................ $226 $125 $ 90 $261
==== ==== ==== ====
</TABLE>

- -------------------------
* Includes transfers from Restructuring Reserve.

** Net of recoveries.

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49

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
(10)(r) Church & Dwight Agreement
(11) Computation of Net Income per share
(21) Subsidiaries of the Registrant
(23) Consent of Blackman Kallock Bartelstein, LLP
(27) Financial Data Schedule
</TABLE>

49