Wade Robey: Thank you, Leslie. And again, thank you, John for that question. Let me start with the last question or part of the question that you asked, and that was are animal health sales trends continuing to improve? And the answer is, yes. Although, a differential depending upon the world area. So we are continuing to see impacts in the animal production industry around the world based on lingering effects of the pandemic, as well as regional economies. But we are continuing to see that improve and the opportunity for our products to continue to improve and grow in those markets. In the U.S., yes, there has been some depression of profitability among some of the largest integrators and producers. What that really causes is a little bit more scrutiny as they look at new products and maybe a little longer lead time for us to penetrate and begin commercial sales.
But because we’re new in a couple of these markets like the U.S. with our new portfolio, we don’t expect a significant impact. We’ll work through it and we continue to see good testing, good adoption, and good growth specifically in the U.S. but around the world. So yes, conditions are continuing to persist a little bit and we hear that as we travel around and visit customers, but we continue to see great interest in our products and lots of new adoption and growth in all the markets that we’re serving.
Leslie Garber: Thank you. Okay. The next question comes from Ethan Starr, and he asks, to what extent are your costs continuing to increase, if at all? And I think we’re going to have Aaron Christiansen handle that question.
Aaron Christiansen: Leslie, thank you, and Ethan, thanks for the question. I’m happy to answer it. Unfortunately, costs do continue to rise. I’ll cite four things quickly. The first is the ECI or Employment Cost Index. Right now, national total compensation costs are up 4.5% over the last 12 months and have peaked as high as 5.5% in recent months. Oil-Dri continues to find ways to be competitive in total compensation for our teammates. So that’s one key cost input. Second is, the cost of materials and material inputs. The consumer price index is up nine months in a row. Many of our suppliers and material bases peg their costs on the CPI. That’s another area we’re continuing to battle rising cost inputs. The third, and Dan alluded to it earlier, Ethan, is our ongoing repair both through expense and capital of our asset base.
Oil-Dri has an aging infrastructure. Much of our asset base is now being replaced through a multi-year capital strategy. The cost to both repair and replace those assets is significantly higher than what was initially put on the book for. It is mathematically impossible for us to maintain our depreciation base. And the last I’ll mention Ethan is, remind the audience, we’re mining a milling company. Mining costs continue to rise, the cost of environmental and other regulation as well as the natural reality of moving deeper and further from our factories. So I hope I answered your question Ethan.
Leslie Garber: Thanks Aaron. The next question is from Robert Smith, and he asks, what accounts for the dramatic increase in diluted common shares? And I’m going to turn that over to David Atkinson.
David Atkinson: Thank you, Leslie, and thank you, Robert for the question. What I would like to point to is you’ll notice, we added an earnings per share reconciliation to Note 1. Although, extremely unlikely, we included the potential impact of all of our Class B shares being converted to common. There have been no issuances in new shares other than those to support the restricted stock program, which has been consistent with prior years, and you can see those numbers in Putnam number 8 on the 10-K.
Leslie Garber: Okay, Thank you. We will move on. Robert Smith asks, discuss your R&D efforts, other new products coming in — into the current fiscal year, and what is the R&D budget for the current year? Did it really decline meaningfully last year, and if so, why? I’m also going to combine this because we’re going to talk about some new products. I’m going to combine this question with John Bear’s question, which I will read, which is, when did you receive EPA approval for your new antibacterial product? Will this be marketed solely as a new standalone product, or will the additive component be incorporated into your other product offerings to enhance your overall marketing efforts? So first, I’m going to have Wade answer the first part of the question, and then he will turn it over to Chris to talk about our new antibacterial cat litter. Wade, do you want to start us off?
Wade Robey: Yeah. Thank you, Leslie. And again, thank you, Robert. We look at our R&D efforts really in two buckets. What we would call traditional R&D that we do at our innovation center and then at contract research organizations as we do true discovery and product development. The second element of it is really our field validation work that we either do directly with customers or at regional universities that help validate the performance of our products and encourage customer adoption. As a result of that, we can see pretty significant volatility, either within a year or across years, because obviously the R&D efforts that we do in research and discovery tend to be a lot more expensive than the field validation work. Currently, we’re really focusing on field validation as we have two new products that we’re introducing into the market.
Those are being evaluated both at universities as I mentioned, but also in direct customer trials. These sorts of evaluations allow us to be a lot more efficient with our spend. Oftentimes, we’re actually selling the product as we move into the market, sometimes at a discounted price, but selling the product as we do those field validations with customers. So it really offsets some of the R&D expense that you would normally see. That’s what causes our volatility and again, given where we are in the rollout of the existing two products into the marketplace, it’s causing us or allowing us to be a little bit more efficient in R&D spend in the current year. Okay, with that I’ll turn it over to Chris.
Chris Lamson: Thanks, Wade, and thanks for the question, John. So I’ll pull back really quick and just elaborate on the launch. So at the very end of fiscal ’23, we launched Oil-Dri Cat’s Pride antibacterial clumping litter. The first and only EPA-approved antibacterial litter here in the U.S. The storage kills 0.9% (ph) of odor-causing bacteria, and helps obviously further the highly — the high effectiveness of our clay, this really helps further relative to odor control and then obviously, the broader sanitary home and the consumer very takes this benefit to the cap not tracking nasties, if you will, through the home. And we’re excited about it, and I can tell you, retailers are excited about it. So where Cat Pride particularly strong, which is up and down the East Coast and into the Southeast, virtually all of our customers have taken it into distribution and not only just distribution but incremental distribution.
I’ll come back to your question on timing, but insightful question around launching it against everything or launching it against the base versus an incremental item, that choice out of the gate was deliberate. We wanted to build — use it as an opportunity to build out our shelf space and really highlight a new benefit to the category. We are, as we speak, innovating further against this benefit. We think it’s a big deal. Our customers think it’s a big deal. Our consumer returns on it, both from an early takeaway perspective but also some of the research led up to it, we’re all very positive. I will tell you, the EPA process is quite long, which is a good thing and a bad thing. It builds a really nice moat around us driving this benefit. We received federal approval at this point more than 18 months ago, you then and these cannot be a parallel path.
