1

                       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, 1998 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 identifi- 
             incorporation or organization)          cation no.)

                410 North Michigan Avenue
                    Chicago, Illinois                          60611 
            ---------------------------------       --------------------------- 
            (Address of principal executive                  (Zip Code)
             offices)

       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 Registrant's common stock outstanding as of
September 30, 1998:

         Common Stock - 5,456,098 shares (including 1,031,960 treasury shares)
         Class B Stock - 1,779,420 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 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.

Aggregate market value of Registrant's Common Stock owned by non-affiliates -
$53,926,544 (based on the closing price on September 30, 1998).

                                      -1-
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                       DOCUMENTS INCORPORATED BY REFERENCE

         The following documents are incorporated herein by reference:

        1.      Registrant's Proxy Statement for its 1998 Annual Meeting of
                Stockholders ("Proxy Statement"), which will be filed with the
                Securities and Exchange Commission not later than November 27,
                1998 (120 days after the end of Registrant's fiscal year ended
                July 31, 1998), is incorporated into Part III of this Annual
                Report on Form 10-K, as indicated herein.

        2.      The following portions of Registrant's 1998 Annual Report to
                Stockholders ("Annual Report"), which is an exhibit to this
                Annual Report on Form 10-K, are incorporated into Parts I, II
                and IV of this Annual Report on Form 10-K, as indicated herein
                (page numbers refer to the Annual Report):

                a) Common Stock on page 36.

                b) Ten-Year Summary of Financial Data on pages 12 and 13.

                c) Management's Discussion and Analysis of Financial Condition 
                   and Results of Operations on pages 14 to 17.

                d) Consolidated Statements of Income on page 20.

                e) Consolidated Statements of Stockholders' Equity on page 21.

                f) Consolidated Balance Sheets on pages 18 and 19.

                g) Consolidated Statements of Cash Flows on page 22.

                h) Notes to Consolidated Financial Statements on pages 23 to 36.

                i) Independent Auditor's Report on page 37.

                j) Selected Quarterly Financial Data on page 36.

                k) Financial Highlights, including Sales Trends, on page 1.

                                      -2-
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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, industrial,
environmental, agricultural and fluids purification 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. Industrial and environmental 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. 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. Fluids purification products, consisting primarily of
bleaching, filtration and clarification clays, are sold to processors and
refiners of edible and petroleum-based oils.

The Registrant's sorbent technologies include absorbent and adsorbent products.
Absorbents, like sponges, draw liquids up into their many pores. Examples of
Oil-Dri'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 and environmental 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, industrial and environmental, agricultural and fluids
purification 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 about Registrant's foreign and domestic operations
is contained in Note 4 of Notes to Consolidated Financial Statements on pages 25
and 26 of the Annual Report and is incorporated herein by reference. Certain
financial information on revenues from classes of similar products and services
is contained in Sales Trends on page 1 of the Annual Report to Stockholders and
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, and 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. The registrant also packages and markets Cat's Pride(R) Kat Kit(TM)
which contains 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 Food Lion, Publix, Kroger, Stop and Shop, and others. LASTING
PRIDE(TM) is principally sold to mass merchandisers such as Wal-Mart and K-Mart.
During fiscal year 1998, the Registrant developed 

                                      -3-
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both traditional coarse, as well as scoopable cat litter products made from     
recycled paper. These products, sold under the Registrant's DUST STOPPER(TM)
and SCOOP `N FLUSH(TM) brands, are expected to produce incremental sales in
fiscal 1999 and years beyond.

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) 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) up to certain levels. According to
independently published supermarket industry reports, FRESH STEP(R) Scoopable
was the largest dollar grossing branded cat litter sold through grocery chains
in the United States during the year ended August 9, 1998.

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 49% of retail dollar sales volume in the grocery industry and 61% of
retail dollar sales volume in the mass merchandiser industry in the 52 week
period ended August 9, 1998, compared with 46% and 57%, respectively, in a
similar period last year.

Industrial and Environmental 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 and environmental 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.

Agrisorbents Product 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. 

                                      -4-
   5

The Registrant has also developed AGSORB(R) 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 distributors. The Registrant's principal
customers for these products include the agricultural groups of Monsanto,
DowElanco and Zeneca.

Fluids Purification Products Group

Fluids purification products include PURE-FLO(R) Bleaching Clays, ULTRA-CLEAR(R)
clarification aids, and PURE-FLO(R) Supreme. 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 Aid is used as
a filtration and purification medium for jet fuel and other petroleum based
oils. This product adsorbs unwanted moisture and other impurities, and is
primarily sold to oil refiners.

The Registrant also produces PERFORM(TM) and SELECT(TM) 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.

Transportation Services

In the second quarter of fiscal 1998, the Registrant exited the transportation
business and formed a strategic alliance with CRST, who will service the
majority of the Registrant's over-the-road shipping requirements.

Patents

Registrant has obtained or applied for patents for certain of its processes and
products. These patents expire at various times, beginning in 1998. Patented
processes and products are not material to Registrant's overall business.

Foreign

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

                                      -5-
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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, 1998 and 1997, Registrant's backlog of orders was approximately
$7,741,000 and $3,049,000, 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.

Customers

Sales to Wal-Mart Stores, Inc. and its affiliate Sam's Club accounted for
approximately 23% of the Registrant's net sales for the fiscal year ended July
31, 1998. Sales to The Clorox Company accounted for approximately 9% of the
Registrant's net sales for the fiscal year ended July 31, 1998. Clorox and the
Registrant are parties to a long-term supply contract. The loss of any other of
Registrant's customers would not have a materially adverse effect on the
Registrant.

Competition

Registrant has approximately seven 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 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

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
498,205,000 tons. Based on its rate of consumption during the 1998 fiscal year,
Registrant considers its proven recoverable reserves adequate to supply
Registrant's needs for over 40 years. It is the Registrant's policy to attempt
to add to reserves in most years, but not in the most recent year, an amount at
least equal to the amount of reserves consumed in that year. Registrant has a
program of exploration for additional reserves and, although reserves have
increased, 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, 1998,
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 4,735 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 298 million 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. 

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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 beginning in
1998.

The Registrant's raw materials are open pit 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.

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.

                                                                 PLANT AND
                                      LAND                       EQUIPMENT 
                                  ------------                 ------------ 
                                                                
Ochlocknee, Georgia                 $  1,785                     $ 15,989
Ripley, Mississippi                 $  1,513                     $ 12,856
Mounds, Illinois                    $    325                     $  8,563
Blue Mountain, Mississippi          $    939                     $  7,340
Christmas Valley, Oregon            $     68                     $    535

Employees

As of July 31, 1998, the Registrant employed 705 persons, 55 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 44 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.

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Environmental Compliance

The Registrant's mining and manufacturing operations and facilities in Georgia,
Mississippi and Oregon are required to comply with state strip 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 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), SELECT(TM) CAT'S PRIDE(R) Scoopable, LASTING
PRIDE(TM), Dust Stopper(TM) and Scoop 'N Flush(TM). The technical center
produces prototype samples and tests new products for customer trial and
evaluation.

Registrant spent approximately $2,376,000, $2,049,000 and $2,026,000 during its
fiscal years ended July 31, 1998, 1997 and 1996, 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.

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Item 2. PROPERTIES

Registrant's properties are generally described below:

                                                  LAND HOLDINGS & MINERAL RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
                                  LAND             LAND                              PROVEN           PROBABLE
                                 OWNED            LEASED            TOTAL            RESERVES         RESERVES           TOTAL
                            --------------------------------------------------------------------------------------------------------
                                (acres)           (acres)          (acres)       (000s of tons)    (000s of tons)   (000s of tons)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Florida                              537              446               983            4,512             1,092            5,604
Georgia                            1,852            1,804             3,656           44,295            10,894           55,189
Illinois                             161              598               759            9,000             6,000           15,000
Mississippi                        2,354            1,431             3,785          129,235           118,633          247,868
Nevada                               415            6,747             7,162          306,830           250,874          557,704
Oregon                               360              640             1,000               83               420              503
Tennessee                            778               --               778            4,250             4,250            8,500
                            ----------------------------------------------------------------------------------------------------
                                   6,457           11,666            18,123          498,205           392,163          890,368
                                ========         ========          ========          =======          ========         ========  
- ------------------------------------------------------------------------------------------------------------------------------------

See "Item 1. Business-Reserves"

There are no mortgages on the property owned by Registrant. The Mississippi,
Georgia, Oregon, Florida and Illinois land is used primarily for mining. Parcels
of such land are also sites of mills operated by Registrant. The Illinois land
also includes the site of 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.

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 1999 to 2053, no one of which is material, generally provide for a
lease term which continues as long as the Registrant pays a minimum monthly
rental. 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 mills 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; and a dog biscuit manufacturing plant in Kiel, Wisconsin. Registrant's
facilities at Ripley, Mississippi; Ochlocknee, Georgia; Christmas Valley,
Oregon; Mounds, Illinois; Kiel, Wisconsin; Laval, Quebec, Canada and Wisbech,
United Kingdom are wholly owned by Registrant and Registrant's mill at Blue
Mountain, Mississippi is owned in-part by Registrant, with the balance leased as
herein after described. Registrant is a party to leases that relate to certain
plant acquisition and expansion projects at the Registrant's mill 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 mill 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 facility in Kiel,
Wisconsin is leased.

All of Registrant's domestic mills, 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 

                                      -9-
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square feet at Ochlocknee, Georgia, 129,000 square feet at Mounds, Illinois,
18,000 square feet at Christmas Valley, Oregon, 16,000 square feet at Kiel,
Wisconsin and 140,000 square feet at Blue Mountain, Mississippi. Registrant
maintains railroad siding facilities near the Ripley, Mississippi; Ochlocknee,
Georgia, Blue Mountain, Mississippi and Mounds, Illinois mills. Equipment at all
mills 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.

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.

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 REGISTRANT

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

                                                 PRINCIPAL OCCUPATION
    NAME (3)                                      FOR LAST FIVE YEARS                               AGE
    --------                                      -------------------                               ---
                                                                                               
Richard M. Jaffee               Chairman of the Board of the Registrant; President from 1960         62
                                     to June, 1995; Chief Executive Officer from 1962 until
                                     1997.

Daniel S. Jaffee (2)            President and Chief Executive Officer of the Registrant;             34
                                     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; Group Vice
                                     President Canadian Operations and Consumer Products -
                                     Grocery from 1992 until June, 1994.

Joseph C. Miller                Vice-Chairman of The Board of the Registrant; Senior Vice            56
                                     President for Consumer, Industrial & Environmental and
                                     Transportation from 1993 to 1995; Group Vice President
                                     for Sales, Marketing and Distribution, from 1990 to 1993.

Michael L. Goldberg             Executive Vice-President & Chief Financial Officer of the            48
                                     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 (1)           Group Vice-President, Technology, of the Registrant.                 59

Daniel J. Jones                 Vice-President of Favorite Products Co., LTD, a subsidiary of        36
                                     the Registrant; Div. III National Sales Manager - Grocery
                                     of the Registrant 1994 to 1996; National Sales Manager,
                                     Favorite Products Co. 1990 to 1994.

                                      -11-

   12

                                                                                               
Eugene W. Kiesel                Vice President & General Manager, Global Fluids Purification         41
                                     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; Director of
                                     Gas Applications for AGA Gas, Inc. from June, 1990 to
                                     November, 1993.

Steven M. Levy                  Vice-President & General Manager, Consumer Products Group of         38
                                     the Registrant; General Manager Consumer Products Div.
                                     1995 to 1996; Miles, Inc. Director of Marketing, 1992 to
                                     1995.

The term of each executive officer expires at the 1998 Annual Meeting of the
Stockholders and when his successor is elected and qualified.

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

(2)      Daniel S. Jaffee and Richard M. Jaffee, his father, are the nephew and
         brother, respectively, of Robert D. Jaffee, a director of the
         registrant.

(3)      Of the persons in this table, only Richard M. Jaffee and Daniel S. 
         Jaffee are directors.

                                      -12-
   13

                                     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 Registrant, which is traded on the New York Stock Exchange, and
information concerning dividends with regard to the Class B Stock of Registrant,
for which there is no established public trading market, is contained in Note 14
of the "Notes to Consolidated Financial Statements" in the Annual Report,
incorporated herein by reference. No shares of Class A common stock are
outstanding. Registrant's ability to pay dividends is limited by the
Registrant's Credit Agreement with Harris Trust and Savings Bank dated September
21, 1994. See Note 5 of "Notes to Consolidated Financial Statements" in the
Annual Report, incorporated herein by reference.

Item 6.  SELECTED FINANCIAL DATA

See the "Ten Year Summary of Financial Data" on pages 12 and 13 of the Annual
Report, and "Financial Highlights" on page 1 incorporated herein by reference.

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

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 14 to 17 of the Annual Report, incorporated herein by
reference.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Consolidated Statements of Income," "Consolidated Statements of
Stockholders' Equity," "Consolidated Balance Sheets," "Consolidated Statements
of Cash Flows," "Notes to Consolidated Financial Statements" and "Independent
Auditor's Report" on pages 18 to 37 of the Annual Report, "Ten Year Summary of
Financial Data" on page 12 and 13 of the Annual Report, and "Selected Quarterly
Financial Data" on page 36 of the Annual Report, incorporated herein by
reference.

Item 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                      -13-
   14

                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is (except for information in Part I,
hereof, concerning executive officers) contained in the Registrant's Proxy
Statement for its 1998 Annual Meeting of stockholders ("Proxy Statement") under
the caption "Election of Directors" and is incorporated herein by this
reference.

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 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.

                                      -14-
   15

                                     PART IV

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

(a)(1)    The following financial statements are contained on pages 18 to 37 of 
the Annual Report and are incorporated herein by this reference:

          Consolidated Balance Sheets as of July 31, 1998 (audited) and July 31,
          1997 (audited).

          Consolidated Statements of Income for the fiscal years ended July 31,
          1998 (audited), July 31, 1997 (audited) and July 31, 1996 (audited).

          Consolidated Statements of Stockholders' Equity for the fiscal years
          ended July 31, 1998 (audited), July 31, 1997 (audited) and July 31,
          1996 (audited).

          Consolidated Statements of Cash Flows for the fiscal years ended July
          31, 1998 (audited), July 31, 1997 (audited) and July 31, 1996
          (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,
                         1998, 1997 and 1996.

(a)(3)    The following documents are exhibits to this Report:
                      
              (3)(a)(1)     Articles of Incorporation of Registrant, as amended.
                     
              (3)(b)(2)     By-Laws of Registrant, as amended of June 16, 1995.
                         
              (10)(c)(1)(3) Agreement ("Clorox Agreement") dated January 12, 
                            1981 between The Clorox Company and Registrant, as 
                            amended. (Confidential treatment of certain 
                            portions of this Exhibit has been granted.)

- ---------------------------------
                  (1) Incorporated by reference to Exhibit (4.1) to 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
         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 Registrant's
         Registration Statement on Form S-2 (Registration No. 2-97248) made
         effective on May 29, 1985.

                                      -15-
   16

Exhibit
 Index
                          
             (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 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)     Extension and Amendment, dated October 9, 1998, to 
                            the 1989 Agreement.*

             (10)(f)(8)     1988 Stock Option Plan.*

             (10)(g)(9)     Note Agreement, dated April 5, 1991, between 
                            Registrant and the Teacher's Insurance and Annuity
                            Association of America regarding $8,000,000 9.38%
                            Senior Notes due November 15, 2001.

             (10)(h)(10)    Note Agreement, dated as of April 15, 1993, between 
                            Registrant and the Teacher's Insurance and Annuity
                            Association of America regarding $6,500,000 7.17%
                            Senior Notes due August 15, 2004.

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

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

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

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

                                      -16-
   17

 Exhibit
 Index
                        
               (10)(i)(11)  Credit Agreement, dated as of September 21, 1994, 
                            between Registrant and Harris Trust and Savings Bank
                            regarding $5,000,000 7.78% Term Loan Note and
                            $5,000,000 Revolving Credit Note.

               (10)(i)(12)  Credit Agreement, dated as of September 21, 1994, 
                            between 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.*

               (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 Registrant and    
                            Harris Trust and Savings Bank incorporated by
                            reference to Exhibit 10(l) to 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 Company and Teachers
                            Insurance and Annuity Association of America and
                            Cigna Investments, Inc.

   23          (10)(n)      Oil-Dri Corporation of America Outside Director 
                            Stock Plan effective June 9, 1998.*

   40          (11)         Statement re: computation of per share earnings.

   41          (13)         1998 Annual Report to Stockholders of Registrant.

   78          (21)         Subsidiaries of Registrant.

   79          (23)         Consent of Blackman Kallick Bartelstein, LLP.

   80          (27)         Financial Data Schedule.

               *Management contract or compensatory plan or arrangement.

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

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

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

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

                                      -17-
   18

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

             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.

       (b)      On May 7, 1998, the Company filed a Report on Form 8-K 
                announcing that the Company completed the purchase of the
                Fuller's Earth absorbent business of American Colloid Company
                pursuant to an Asset Purchase Agreement dated as of April 20,
                1998.

                                      -18-
   19

         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, 1998

         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:

         /s/ Richard M. Jaffee                               October 20, 1998
         ---------------------------------------------
         Richard M. Jaffee
         Chairman of the Board of Directors

         /s/ Michael L. Goldberg                             October 20, 1998
         ---------------------------------------------
         Michael L. Goldberg
         Executive Vice President and
         Chief Financial Officer
         Principal Financial Officer

         /s/ James F. Japczyk                                October 20, 1998
         ---------------------------------------------
         James F. Japczyk
         Corporate Controller
         Principal Accounting Officer

         /s/ Robert D. Jaffee                                October 20, 1998
         ---------------------------------------------
         Robert D. Jaffee
             Director

         /s/ J. Steven Cole                                  October 20, 1998
         ---------------------------------------------
         J. Steven Cole
             Director

         /s/ Arnold W. Donald                                October 20, 1998
         ---------------------------------------------
         Arnold W. Donald
              Director

                                      -19-
   20

         /s/ Ronald B. Gordon                                October 20, 1998
         ---------------------------------------------
         Ronald B. Gordon
             Director

         /s/ Edgar D. Jannotta                               October 20, 1998
         ---------------------------------------------
         Edgar D. Jannotta
              Director

         /s/ Joseph C. Miller                                October 20, 1998
         ---------------------------------------------
         Joseph C. Miller
             Director

         /s/ Paul J. Miller                                  October 20, 1998
         ---------------------------------------------
         Paul J. Miller
              Director

         /s/ Haydn H. Murray                                 October 20, 1998
         ---------------------------------------------
         Haydn H. Murray
              Director

         /s/ Allan H. Selig                                  October 20, 1998
         ---------------------------------------------
         Allan H. Selig
              Director

                                      -20-
   21

                    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, 1998
         and 1997 and for each of the three years in the period ended July 31,
         1998, which report thereon dated September 18, 1998, 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 18, 1998

                                      -21-
   22

                 OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

                    Years Ended July 31, 1998, 1997 and 1996

                                                         Additions*
                                       Balance at        Charged to                        Balance
                                        Beginning        Costs and                         at End
Description                             of Period         Expenses      Deductions**      of Period
- -----------                             ---------         --------      ----------        ---------
Allowance for doubtful accounts:

Year Ended July 31, 1998                 $260,530         $201,901         $111,094        $351,337
                                         ========         ========         ========        ========
Year Ended July 31, 1997                 $225,970         $125,000         $ 90,440        $260,530
                                         ========         ========         ========        ========
Year Ended July 31, 1996                 $180,602         $202,690         $157,322        $225,970
                                         ========         ========         ========        ========

*Includes transfers from Restructuring Reserve.
**Net of recoveries.

                                      -22-
   1

                                                               EXHIBIT 10(10)(n)

                         OIL-DRI CORPORATION OF AMERICA
                           OUTSIDE DIRECTOR STOCK PLAN

ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION

         1.1. Establishment of the Plan. Oil-Dri Corporation of America, a
Delaware corporation (the "Company"), hereby establishes its Outside Director
Stock Plan (the "Plan").

         1.2. Objectives of the Plan. The objectives of the Plan are to enhance
the ability of the Company to attract and retain the best-qualified directors,
to increase the identity of interest between directors and the Company's
shareholders, and to provide additional incentives for directors to maximize the
long-term success of the Company's business.

         1.3. Duration of the Plan. The Plan shall become effective on June 9,
1998 (the "Effective Date") upon its adoption by the Board (which term is
hereinafter defined to include the Executive Committee of the Board). Subject to
the right of the Board to amend or terminate the Plan pursuant to Article 14,
(i) Awards may be granted from time to time on or after the Effective Date so
long as Shares reserved for delivery under Section 4.1 remain available and (ii)
Compensation earned by the Outside Directors from time to time after the
Effective Date may be deferred.

ARTICLE 2. DEFINITIONS

         For purposes of the Plan, the following capitalized terms shall have 
the meanings set forth below:

         2.1.     "Account":  see Section 8.1.

                                      -23-
   2

         2.2. "Award" means, individually or collectively, a grant by the
Committee under this Plan of Options, Restricted Stock, Stock, or Stock Units,
whether formula-based or otherwise.

         2.3. "Annual Meeting" means an annual meeting of the shareholders of 
the Company.

         2.4. "Award Agreement" means an agreement between the Company and an
Outside Director setting forth the terms applicable to an Award. Except as
otherwise provided in the Plan, the terms of an Award Agreement need not be the
same for each Outside Director, nor for each grant, and may reflect distinctions
based on the reasons for termination of Service.

         2.5. "Board" means the Board of Directors of the Company or the
Executive Committee of the Board of Directors of the Company.

         2.6. "Committee" means the Compensation Committee of the Board, which
shall be comprised entirely of Outside Directors.

         2.7. "Company": see Section 1.1.

         2.8. "Compensation" means all retainer, meeting, committee and chair
fees payable in cash to an Outside Director for Service.

         2.9. "Deferral Election" see Section 10.2.

         2.10. "Director" means any member of the Board.

         2.11. "Distribution Election" see Section 8.6.

         2.12. "Effective Date": see Section 1.3. 

                                      -24-
   3

         2.13. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.14. "Expiration Date": see Section 5.4.

         2.15. "Fair Market Value" means, as of any specified date, the closing
price of the Shares on the New York Stock Exchange, or any other national stock
exchange or national market system on which the Shares are then traded, on the
last preceding trading day on which the Shares were traded.

         2.16. "Option" means an option to purchase Shares granted under Article
5.

         2.17. "Option Price" means the price at which a Share may be purchased
under an Option.

         2.18. "Outside Director" means a Director who is not an employee of the
Company or a Subsidiary.

         2.19. "Period of Restriction" means the period established by the
Committee in its discretion during which the transfer of Restricted Stock is
limited in some manner, and the Shares are subject to a substantial risk of
forfeiture, all as provided in Article 6.

         2.20. "Restricted Stock" means an Award granted under Article 6.

         2.21. "Rule 16b-3" means Rule 16b-3 (or a successor rule) of the
Securities and Exchange Commission under the Exchange Act, as such Rule may be
amended from time to time. 

         2.22. "Service" means an Outside Director's service on the Board or any
Board committee.

                                      -25-
   4

         2.23. "Shares" means shares of Common Stock of the Company.

         2.24. "Stock" means an Award of Shares granted under Article 7.

         2.25. "Stock Units" means the units in which an Account is denominated.
A Stock Unit is an unsecured obligation of the Company that is intended, subject
to the terms of Article 8, to represent the economic equivalent of one Share.

         2.26. "Subsidiary" means any corporation, partnership, joint venture,
limited liability company, or other entity in which the Company owns securities
representing a majority of the aggregate voting power.

ARTICLE 3. ADMINISTRATION

         3.1. General. The Plan shall be administered by the Committee. Except
as may be limited by law, the articles of incorporation or bylaws of the
Company, or the Plan, the Committee shall have full power and discretion to
determine the amounts, types and terms of Awards; to determine the terms of any
Award Agreement; to construe and interpret the Plan and any Award Agreement; to
establish, amend, or waive rules for the Plan's administration; to make all
other determinations which may be necessary or advisable for the administration
of the Plan; and (subject to Section 14.3) to amend the terms of any outstanding
Award. To the extent permitted by law, the Committee shall have the authority to
delegate administrative duties to officers or Directors of the Company.

         3.2. Decisions Binding. All determinations and decisions made by the
Committee under the Plan shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Outside Directors, and their respective
estates and beneficiaries.

                                      -26-
   5

ARTICLE 4.  SHARES SUBJECT TO THE PLAN

         4.1. Shares Available for Grants. Subject to adjustment as provided in
Section 4.2, the number of Shares reserved for delivery under the Plan is
200,000. If any Shares subject to any Award are forfeited or such Award
otherwise terminates without the delivery of such Shares, the Shares subject to
such Award, to the extent of any such forfeiture or termination, shall again be
available for the delivery under the Plan. Shares delivered pursuant the Plan
may be treasury stock or newly-issued Shares.

         4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization (such as a stock split, stock dividend, spin-off, or
other distribution of stock or property of the Company), or any merger,
consolidation, separation, reorganization (whether or not tax-free) or any
partial or complete liquidation of the Company, the Committee may make such
adjustment in the number and class of Shares which may be delivered under
Section 4.1 as it may determine in its discretion to be appropriate.

ARTICLE 5. OPTIONS

         5.1. Award of Options. Subject to the terms of the Plan, Options may be
awarded to Outside Directors in such number, upon such terms, and at such time
or times as the Committee shall determine in its discretion.

         5.2. Award Agreement. Each Option shall be evidenced by an Award
Agreement that shall specify the Option Price, the Expiration Date of the
Option, the number of Shares subject to the Option, and such other provisions as
the Committee may determine.

         5.3. Option Price. The Option Price for each grant of an Option shall
not be less than 100% of the Fair Market Value of a Share on the date the Option
is granted.

                                      -27-
   6

         5.4. Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant (the "Expiration Date"), but in
no event after the tenth anniversary of the date of such grant.

         5.5. Exercise of Options. Each Option shall be exercisable at such
times prior to the Expiration Date and be subject to such restrictions and
conditions as the Committee shall determine in its discretion, including without
limitation restrictions on the Shares acquired pursuant to the exercise of such
Option.

         5.6. Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, and accompanied by full payment
for the Shares. Upon the exercise of any Option, the exercise price shall be
payable by any one or combination of the following means:

         (i)  cash or its equivalent,

         (ii) with the prior approval of the Committee, delivery of Shares
         already owned by the Outside Director and valued at the Fair Market
         Value thereof at the time of exercise,

         (iii) with the prior approval of the Committee, a cashless exercise
         through a broker-dealer approved for this purpose by the Company.

         5.7. Termination of Service. Each Award Agreement shall set forth the
extent to which the Outside Director shall have the right to exercise an Option
after termination of Service, but in no event shall any Option be exercised
after its Expiration Date.

                                      -28-
   7

         5.8. Nontransferability of Options. Except as may otherwise be
specified by the Committee in its discretion, no Option may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than (i) by will, (ii) by the laws of descent and distribution, or (iii)
pursuant to a beneficiary designation in accordance with Article 11.

ARTICLE 6. RESTRICTED STOCK

         6.1 Award of Restricted Stock. Subject to the terms of the Plan,
Restricted Stock may be awarded to Outside Directors in such number of Shares,
upon such terms, and at such time or times as the Committee shall determine in
its discretion.

         6.2 Restricted Stock Agreement. Each Restricted Stock Award shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares of Restricted Stock granted, and such other provisions as
the Committee may determine.

         6.3. Nontransferability. Except may as otherwise be specified by the
Committee in its discretion, Restricted Stock may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until after the end of
the applicable Period of Restriction. Shares of Restricted Stock shall vest and
become freely transferable after the end of the applicable Period of
Restriction.

         6.4. Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Restricted Stock as it deems advisable, including
without limitation a stipulated purchase price for any Share of Restricted
Stock. The Company may retain possession of the certificates representing Shares
of Restricted Stock until all conditions and/or restrictions applicable to such
Shares have been satisfied.

                                      -29-
   8

         6.5 Voting Rights. Shares of Restricted Stock shall have the same
voting rights as unrestricted Shares.

         6.6. Dividends and Other Distributions. Shares of Restricted Stock
shall have the same dividend rights as unrestricted Shares; provided, however,
that (i) the Committee may in its discretion provide that dividends shall be
reinvested in additional Shares of Restricted Stock based on the Fair Market
Value of the Shares on the applicable dividend payment date and on such other
terms as may be determined by the Committee in its discretion and (ii) the
Committee may impose any restrictions it deems appropriate on dividends payable
in any form other than cash.

         6.7. Termination of Service. The extent, if any, to which the Outside
Director shall have the right to receive unvested Shares of Restricted Stock
following termination of the Outside Director's Service shall be set forth in
each Restricted Stock Award Agreement and, subject to Section 14.3, may
subsequently be modified by the Committee in its discretion.

ARTICLE 7. STOCK

         7.1. Award of Stock. Subject to the provisions of the Plan, Shares of
Stock may be awarded to Outside Directors in such number, upon such terms, and
at such time or times as the Committee shall determine in its discretion.

         7.2. Award Agreement. Each Stock Award may, but need not, be evidenced
by an Award Agreement that shall specify the number of Shares to which the Award
pertains, the purchase price (if any), and such other provisions as the
Committee shall determine.

                                      -30-
   9

ARTICLE 8. STOCK UNITS AND ACCOUNTS

         8.1. Accounts. One or more accounts (each, an "Account") shall be
created and maintained on the books of the Company for each Outside Director to
which shall be credited all Stock Units that may be attributed to such Outside
Director from time to time in connection with (i) Awards of Stock Units by the
Committee pursuant to Article 9, (ii) deferrals of Compensation by such Outside
Director pursuant to Article 10, or (iii) the automatic reinvestment of dividend
equivalents pursuant to Section 8.3. Accounts shall be maintained solely for
accounting purposes and shall not require a segregation of any assets of the
Company.

         8.2. Vesting. Stock Units awarded by the Committee pursuant to Article
9 shall become vested and nonforfeitable upon such terms as the Committee may
determine. Stock Units credited to an Outside Director's Account by reason of
his or her election to defer Compensation pursuant to Article 10 shall at all
times be fully vested and nonforfeitable. Any additional Stock Units resulting
from the crediting of dividend equivalents to an Outside Director's Account or
Accounts pursuant to Section 8.3 shall be vested and nonforfeitable to the same
extent and at the same time or times as the underlying Stock Units on account of
which such dividend equivalents were credited.

         8.3. Dividend Equivalents. Dividend equivalents shall be earned on
Stock Units and credited to an Outside Director's Account as of any date (a
"Dividend Payment Date") on which the Company pays any dividend on the
outstanding Shares (a "Dividend"). Such dividend equivalents shall be expressed
as a number of Stock Units equal to:

         (i) the number of Stock Units credited to an Outside Director's Account
         as of the record date for such Dividend multiplied by the value of the
         per Share 

                                      -31-
   10

         amount of such Dividend (as determined by the Committee in the case of 
         dividends paid other than in cash), 

divided by:

         (ii) the Fair Market Value of a Share as of the Dividend Payment Date.

         8.4. Amount of Payment. The amount of value payable to an Outside
Director on account of a Stock Unit as of the date of any payment determined in
accordance with Section 8.5 shall equal the Fair Market Value of a Share on such
date.

         8.5. Timing and Method of Payment. The value of vested Stock Units
shall be paid to an Outside Director in a lump sum as soon as administratively
possible following the termination of such Outside Director's service as a
Director, except that (i) the Committee may otherwise provide in an Award
Agreement, (ii) an Outside Director may otherwise provide in Distribution
Election, or (iii) the Company may defer such payment on account of any or all
Stock Units for up to six months after the date of such termination of such
service to the extent necessary to ensure the availability of an exemption under
Rule 16b-3. All payments on account of Stock Units shall be made in cash unless
the Committee determines in its discretion to make a payment or payments in
Shares; provided that any fractional Shares shall be paid in cash based on the
Fair Market Value of a Share on the date of such payment.

         8.6. Distribution Elections. The Committee may in its discretion permit
the Outside Director to specify in a written notice delivered to the Secretary
of the Company (a "Distribution Election") such Outside Director's election with
respect to (i) when payment to such Outside Director in respect of Stock Units
(whether resulting from an Award under Article 9 or from deferrals pursuant
Article 10) shall commence, 

                                      -32-
   11

and (ii) whether such payment shall be in a lump sum or in such number of annual
installments as the Outside Director may designate, subject to a maximum number
of installments that the Committee shall determine from time to time, but not in
excess of ten (10). To the extent the Committee permits Distribution Elections,
an Outside Director may make or change such a Distribution Election as to the
entire balance of his or her Account at any time or from time to time, but only
by a Distribution Election filed with the Company no later than December 31 of
the year next preceding such Outside Director's termination of service as a
Director. Any Distribution Election that is not timely made or changed shall be
disregarded.

         8.7. Nontransferability of Stock Units. Except as may otherwise be
specified by the Committee in its discretion, no Stock Unit may be transferred
in any manner other than (i) by will, (ii) by the laws of descent and
distribution, or (iii) pursuant to a beneficiary designation in accordance with
Article 11.

         8.8. Unsecured Obligation. An Outside Director shall be a general
unsecured creditor of the Company with respect to all Stock Units credited to
his or her Account or Accounts. The Committee may, but is not required to,
establish a so-called "rabbi" trust or similar mechanism to fund the Company's
obligations under this Plan; provided, however, that any funds contained therein
shall remain subject to the claims of the Company's general creditors.

ARTICLE 9. AWARD OF STOCk UNITS BY THE COMMITTEE

         9.1. Award of Stock Units. Subject to the terms of the Plan, Stock
Units may be awarded to Outside Directors in such number, upon such terms, and
at such time or times as the Committee shall determine in its discretion. Stock
Units may be awarded 

                                      -33-
   12

in substitution for, or replacement of, the rights or interests (whether vested
or unvested) of Outside Directors under other plans of the Company.

         9.2. Award Agreement. Each Stock Unit Award shall be evidenced by an
Award Agreement that shall specify the number of Stock Units to which the Award
pertains, the vesting of such Stock Units, the extent (if any) to which a
payment is to be made in respect of Stock Units that are unvested upon the
termination of an Outside Director's Service, and such other provisions as the
Committee shall determine.

ARTICLE 10. DEFERRALS BY OUTSIDE DIRECTORS

         10.1. Deferral Election. An Outside Director may elect to defer receipt
of all or any specified portion of any Compensation payable to him or her, and
to have such amounts credited to his or her Account in accordance with Section
10.3; provided, however, that the Committee may in its discretion (i) provide
that any such election shall be subject to the prior approval of the Committee
or (ii) suspend the right of all Outside Directors to defer receipt of
Compensation to be received after the date of such suspension.

         10.2. Timing of Deferral Election. A deferral election shall be made by
written notice (an "Deferral Election") filed with the Secretary of the Company:

         (i) on or before the Effective  Date  (covering  Compensation  to be 
         earned after the Effective Date),

         (ii) no more than 30 days after a Outside Director is first elected or
         appointed to the Board (covering Compensation to be earned at any time
         after the filing of such election),

                                      -34-
   13

         (iii) on or before the date of any Annual Meeting (covering
         Compensation to be earned after such Annual Meeting), or

         (iv) on or before such other date or dates as may be approved in
         advance by the Committee (covering Compensation earned for such period
         or periods commencing after such other date as may be specified by the
         Committee).

Subject to Section 8.6, a Deferral Election may be accompanied by a Distribution
Election. Subject to Section 10.1, any Deferral Election shall continue in
effect (including with respect to the Compensation relating to subsequent
periods) unless and until revoked or modified by a new Deferral Election filed
with the Secretary of the Company. Amounts credited to an Outside Director's
Account prior to the effective date of any such revocation or modification of a
deferral election shall not be affected by such revocation or modification. An
Outside Director who has revoked a Deferral Election may file a new Deferral
Election to defer Compensation relating exclusively to services to be rendered
during the calendar year following the year in which such new Deferral Election
is filed with the Company.

         10.3. Deferrals Credited to Account. Any Compensation deferred by an
Outside Director pursuant to this Article 10 shall be allocated to his or her
Account and deemed to be invested in a number of Stock Units equal to (i) the
amount of such Compensation divided by (ii) the Fair Market Value of a Share on
the date Compensation would otherwise have been paid.

ARTICLE 11. BENEFICIARY DESIGNATION

         Unless the Committee in its discretion determines otherwise, each
Outside Director may from time to time name any beneficiary or beneficiaries
(who may be named contingently or 

                                      -35-
   14

successively) to whom any benefit under the Plan is to be paid in the event of
such Outside Director's death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by such
Outside Director, shall be in a form prescribed by the Company, and will be
effective only when filed by the Outside Director in writing with the Company
during the Outside Director's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Outside Director's death shall be paid to his
or her estate.

ARTICLE 12. TAX WITHHOLDING

         If any federal, state, and local tax withholding may from time to time
be required in respect of the grant, vesting or exercise of any Award or the
settlement of any Stock Unit (any such event, "Taxable Event"), the Company
shall have the authority to withhold, or require an Outside Director to remit to
the Company, an amount sufficient to satisfy such tax withholding. The Company
may defer the payment of cash or delivery of Shares in connection with a Taxable
Event until such withholding requirements have been satisfied. The Committee
may, in its discretion, permit an Outside Director to elect, subject to such
conditions as the Committee may require, to have the Company withhold Shares
otherwise deliverable pursuant to the Plan and having a Fair Market Value
sufficient to satisfy all or part of any Outside Director's estimated total
federal, state, and local tax obligation associated with a Taxable Event.

ARTICLE 13. RIGHTS OF DIRECTORS

         Nothing in the Plan shall interfere with or limit in any way the right
of the Company's shareholders to terminate any Outside Director's Service at any
time, nor confer upon any Outside Director any right to continue in Service.

                                      -36-
   15

ARTICLE 14. AMENDMENT, MODIFICATIONS, AND TERMINATION

         14.1. Amendment, Modification, and Termination. Subject to the terms of
the Plan, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Plan in whole or in part without the approval of the Company's
shareholders, except that no such amendment shall increase the number of Shares
available for delivery under the Plan, change the minimum Option Price or
maximum term of an option, or change the requirements relating to the
composition of the Committee.

         14.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. In connection with any unusual or nonrecurring events
(including, without limitation, the events described in Section 4.2) affecting
the Company or of changes in applicable laws, regulations, or accounting
principles, the Committee may in its discretion adjust:

         (i) the terms of Options, Restricted Stock, Stock and Stock Units
         (including without limitation in the number, class and/or price of
         Shares or Stock Units subject to, or to be distributed in connection
         with, outstanding Awards or Stock Units) and

         (ii) the criteria specified in the Award Agreements related to
         outstanding Awards,

whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits intended to be made available
under the Plan.

                                      -37-
   16

         14.3. Awards Previously Granted. Notwithstanding any other provision of
the Plan to the contrary, no termination, amendment, or modification of the Plan
shall adversely affect in any material way any previously granted Award, without
the written consent of the Outside Director holding such Award.

ARTICLE 15. NONALIENABILITY

         Except as may otherwise be specified by the Committee in its
discretion, no Award, Stock Unit, nor any right to a payment of Stock Units
pursuant to Section 8.5 shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Outside Director or the Outside Director's
beneficiary, other than (i) by will, (ii) by the laws of descent and
distribution, or (iii) pursuant to a beneficiary designation in accordance with
Article 11.

ARTICLE 16. SUCCESSORS

         All obligations of the Company under the Plan shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company. The Company and
such successor shall be jointly and severally liable for all of the Company's
obligations under the Plan.

ARTICLE 17. LEGAL CONSTRUCTION

         17.1. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.

                                      -38-
   17

         17.2. Articles and Sections. Except where otherwise indicated by the
context, any reference to an "Article" or "Section" shall be to an Article or
Section of this Plan.

         17.3. Severability. If any part of the Plan is declared to be unlawful
or invalid, such unlawfulness or invalidity shall not invalidate any other part
of the Plan. Any part of the Plan so declared to be unlawful or invalid shall,
if possible, be construed in a manner which will give effect to the terms of
such part to the fullest extent possible while remaining lawful and valid.

         17.4. Legal Compliance. If the Company determines that the exercise or
nonforfeitability of, or delivery of benefits pursuant to, any Award or Deferral
Election would violate any applicable provision of (i) federal or state
securities laws or (ii) the listing requirements of any national securities
exchange or national market system on which are then listed any of the Company's
equity securities, then the Company may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise, nonforfeitability or delivery to
comply with all such provisions at the earliest practicable date. If the Company
deems necessary to comply with any applicable securities law, the Company may
require a written investment intent representation by an Outside Director and
may require that a restrictive legend be affixed to certificates for Shares
delivered pursuant to the Plan.

         17.5. Governing Law. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Illinois,
without regard to the conflict of laws principles thereof.

                                      -39-

   1

                                                                     EXHIBIT 11
                 OIL-DRI CORPORATION OF AMERICA AND SUBSIDIARIES

                        Computation of Earnings per Share

                                                1998             1997             1996             1995             1994
                                             ----------       ----------       ----------       ----------       ----------
                                                                                                       
Average number of shares outstanding
during the year                               6,125,057        6,595,782        6,806,448        6,931,726        6,990,435

Options exercisable, less shares
that could have been purchased
based on the average market
value for the period
                                                 39,466            3,314              443            4,429           20,289
                                             ----------       ----------       ----------       ----------       ----------

Average number of common and common
equivalent shares outstanding during
the year (a)                                  6,164,523        6,599,096        6,806,891        6,935,975        7,010,724
                                             ==========       ==========       ==========       ==========       ==========

Net earnings                                  4,723,226       $6,793,473       $3,374,257       $8,002,828       $9,852,200
                                             ==========       ==========       ==========       ==========       ==========
                                                                                                                           
Net earnings per share                       $     0.77       $     1.03       $     0.50       $     1.15       $     1.41
                                             ==========       ==========       ==========       ==========       ==========

(a) Does not include options which are not dilutive. Effect under fully diluted
computations is not material.

                                      -40-
   1
                                                                      EXHIBIT 13

                         OIL-DRI CORPORATION OF AMERICA

   2

                                        
                              FINANCIAL HIGHLIGHTS

(in thousands except
for per share amounts)                 1998       1997     1996        1995       1994
- ---------------------------------------------------------------------------------------------------------
                                                                     
INCOME STATEMENT DATA
Net Sales ........................   $160,252   $156,616  $153,787    $152,899   $147,147
Income from Operations(1)$ .......      8,429   $ 10,669  $  5,983    $ 12,710   $ 14,296
Net Income(1).....................   $  4,723   $  6,793  $  3,374    $  8,003   $  9,852
                                     
BALANCE SHEET DATA                   
Working Capital ..................   $ 36,283   $ 31,165  $ 30,399    $ 33,074   $ 29,337
Total Assets .....................   $134,215   $114,558  $117,693    $116,988   $112,267
Long-Term Debt ...................   $ 39,976   $ 17,052  $ 18,978    $ 20,422   $ 21,521
                                     
PER SHARE DATA                       
Net Income per Share(1) ..........   $   0.77   $   1.03  $   0.50    $   1.15   $   1.41
Book Value per Share .............   $  12.15   $  12.03  $  11.46    $  11.35   $  10.51
- ----------------------------------------------------------------------------------------------------------

   (1) Includes pre-tax special charges of $3,129,000 or $0.36 per share in 1998
and $921,000 or $0.10 per share in 1996.

       NET SALE                             NET INCOME PER SHARE(1)
  millions of dollars                        millions of dollars

1994         145 million                  1994         1.4 million 
1995         150 million                  1995         1.1 million 
1996         155 million                  1996         5.0 million 
1997         157 million                  1997         1.0 million 
1998         165 million                  1998         .75 million 

                                     Owned         Leased        Total      Proven Reserves
LAND HOLDINGS & MINERAL RESERVES    (acres)        (acres)      (acres)   (thousands of tons)
- -------------------------------------------------------------------------------------------------------------------

   Florida..........................   537           446           983           4,512
   Georgia.......................... 1,852         1,804         3,656          44,295
   Illinois.........................   161           598           759           9,000
   Mississippi...................... 2,354         1,431         3,785         129,235
   Nevada...........................   415         6,747         7,162         306,830
   Oregon...........................   360           640         1,000              83
   Tennessee........................   778            --           778           4,250
                                     -------------------------------------------------
                                     6,457        11,666        18,123         498,205
                                     =====        ======        ======         =======

   3

                                BUSINESS OVERVIEW

Oil-Dri Corporation of America delivers innovative solutions that help our
customers make the world cleaner, safer and healthier. The company is the
leading developer, manufacturer and marketer of sorbent products for a variety
of markets.
- --------------------------------------------------------------------------------
[PHOTO OF PET PRODUCTS]

PET PRODUCTS
   Oil-Dri is the largest manufacturer of cat litters in North America. The
company's Cat's Pride(R) brand has grown faster than both the market and all
other major brands over the past two years. During the past year, the company
increased retail sales and product distribution. Recent acquisitions and new
product launches are expected to strengthen Oil-Dri's position in this
competitive market.

[PHOTO OF INDUSTRIAL & AUTOMOTIVE PRODUCTS]

INDUSTRIAL & AUTOMOTIVE PRODUCTS
   Oil-Dri(R) branded oil and grease absorbents have been the professional's
choice for cleanup since 1941. The company continues to distinguish itself as
the premier supplier by offering a breadth of cleanup solutions, including clay
and polypropylene sorbents. In addition, Oil-Dri products are being offered to
consumers through wholesale clubs and automotive aftermarket retailers.

[PHOTO OF AGRICULTURAL PRODUCTS]

AGRICULTURAL PRODUCTS
   Oil-Dri sets the standard for the highest quality carriers for crop
protection products in the agricultural chemical industry. The company is
expanding its participation in the agricultural industry with animal health
products, including feed binders and conditioners. The company's position in the
turf and ornamental market is expanding with Terra-Green(R) soil conditioner.

[PHOTO OF FLUIDS PURIFICATION PRODUCTS]

FLUIDS PURIFICATION PRODUCTS
   These specialty adsorbents are used to remove impurities from food oils and
petroleum products. This past year, sales of Pure-Flo(R) adsorbents to Malaysia,
the world's largest producer of palm oil, were down substantially due to
devaluation of the local currency. On the positive side, business in Europe was
very strong. Oil-Dri is consolidating global fluids purification activities and
expanding business opportunities worldwide.

SALES TRENDS (millions of dollars)                        1998            1997            1996            1995            1994
- -------------------------------------------------------------------------------------------------------------------------------

   Pet Products.......................................   $ 99.9          $ 95.0          $ 90.5         $ 91.1            $84.4
   Industrial and Automotive Products.................     20.6            19.6            20.2           22.2             22.8
   Agricultural Products..............................     19.7            18.6            19.9           16.6             18.3
   Fluids Purification Products.......................     17.7            15.7            13.6           13.7             14.1
   Transportation Services(2).........................      2.4             7.7             9.6            9.3              7.5
                                                         ----------------------------------------------------------------------

                                                         $160.3          $156.6          $153.8         $152.9           $147.1
                                                         ======          ======          ======         ======           ======

(2) Oil-Dri exited the transportation business in the second quarter of fiscal
1998.

   4

[PHOTO OF RICHARD M. JAFFEE]                    To Our Shareholders

FROM THE CHAIRMAN
   Fiscal 1998 was a year of significant progress and solid achievement. Dan
Jaffee and his team completed two important acquisitions and exited a non-core
business. These strategic steps were consistent with the company's five-year
business plan. The financial results achieved were in line with the company's
stated growth objectives.
   The success recorded this year should be particularly gratifying to all
Oil-Dri shareholders since it was accomplished against a background of difficult
and unexpected external events. Worldwide currency devaluations, so much in the
news this past year, had a very negative impact on our Malaysian Pure-Flo(R)
business and slowed the introduction of our agricultural products in Asia. The
Canadian dollar depreciated in value steadily throughout the year, negatively
impacting profitability.
   When good results are achieved in a difficult economic environment, it is
particularly important. I want to take this opportunity to congratulate Dan, the
senior management and all of our Oil-Dri employees on a job well done.
   I would also like to thank the Board of Directors for their ongoing support
and counsel. Their dedication to the success of Oil-Dri is one of our greatest
assets. The strength of our board comes from the wisdom and long-term business
experience of some members and the fresh perspective of others.
   At the start of the year, Arnold W. Donald, Senior Vice-President of the
Monsanto Company, joined our board. Mr. Donald's experience in agriculture and
biotechnology is invaluable. In addition, his general management experience,
particularly in international marketing, is important. Mr. Donald's integrity
and social responsibility complement the corporate culture and core values of
our organization.
   All of us at Oil-Dri were very proud when our long-time friend and director,
Allan H. (Bud) Selig, was unanimously chosen as the ninth Commissioner of
Baseball. We are proud of Bud's accomplishments and pleased that his first
official year as commissioner has been one of greatly renewed interest in our
national pastime.
   My brother, Robert Jaffee, an Oil-Dri director since 1956, is retiring from
the board this year. I want to extend my sincere and deepest thanks to Bob for
his years of service. He has both challenged and supported me over these many
years and I am grateful for his input and guidance.
   While these are difficult times in the financial markets and particularly
tough for small capitalization stocks such as ours, the future of Oil-Dri has
never been brighter. Sales and earnings growth have reaccelerated and our
business continues to generate excess free cash. In the past few years, a
portion of that cash has been returned to shareholders in the form of dividends
and the repurchase of our common stock. Since 1994, the company has repurchased
more than one million shares of its common stock, reducing shares outstanding by
approximately 15%.
   Fiscal 1999 promises to be a very exciting year. We will continue to
profitably integrate our recent acquisitions while launching several significant
new products.
   We thank you for your continued support and look forward to another
successful year.

/S/ Richard M. Jaffee
Richard M. Jaffee
Chairman

2

   5

         To Our Shareholders                    [Photo of Daniel S. Jaffee]

FROM THE PRESIDENT AND CEO
   This year, my letter is being written as if you, our shareholder, are sitting
in my office and giving me five minutes to communicate why Oil-Dri is a company
worthy of your investment. The only rules are that I stick to what transpired
during fiscal 1998 and that I cover the positive and negative events with equal
attention. When my time is up, I hope you will have a clear picture of where
Oil-Dri is heading so you can decide for yourself whether Oil-Dri is a company
you will be glad to own over the long term. With that, turn over your
five-minute egg timer and say, "Go."
   By focusing on the businesses which give Oil-Dri the best chance to succeed
over the long term, we are committed to growing the sales and earnings by 10%
per year; some years will be more, some less, but over time we fully expect to
achieve double-digit growth on both the top and bottom lines.
   We finished the year with record sales of $160 million and, due to our stock
repurchase program, we were able to deliver a 10% increase in earnings per share
(before a special charge) from $1.03 to $1.13. This made fiscal 1998 the second
consecutive year of double-digit growth in per share earnings.
     Fiscally, Oil-Dri had a good year in 1998. Strategically, we had a great
year. We opened the year by acquiring the Phoebe Products Company, a
manufacturer of high-quality pet treats. While retail sales of cat litter in the
United States are roughly $850 million, pet treats represent nearly $1 billion
annually. This acquisition broadens Oil-Dri's position as a pet products
company. We spent this year doing our homework. We talked to consumers about
what they did and did not like about treats on the market today. In fiscal 1999
we will test market our new line of pet treats. We plan to leverage Oil-Dri's
critical mass in the grocery and mass merchandiser channels to build a sizable
and profitable pet treat business. Provided we have a successful test market,
this new product line will be prominently featured in next year's annual report.
   In the second quarter, we exited the transportation business and formed a
strategic alliance with CRST. This divestiture and the ensuing alliance were all
about focusing on core strengths. Oil-Dri needs to invest your money in
businesses that can give you a better than average return. Trucking was not one
of those businesses. CRST is doing what they do best, so Oil-Dri can focus on
doing what it does best.
   As Sir Winston Churchill said after Dunkirk, "Wars are

                                 [ILLUSTRATION]
                                                                              3

   6

                              TO OUR SHAREHOLDERS

not won in retreat." With that in mind, let's turn from defense to offense. In
April of this year, after months of negotiations, we acquired the Oil-Dri,
Mounds Production Company from one of our competitors. This acquisition enhanced
our position as a supplier of quality private label cat litter products. By
manufacturing an account's private label cat litter, we in effect become a
partner with them. We know from experience that retailers are more receptive to
stocking our Cat's Pride(R) brand of products when we are supplying their
private label requirements. Additionally, the geographic location of this plant
has allowed us to better serve our agricultural, industrial and automotive
customers.
   Not all events were positive during the year. When the Malaysian ringgit's
value plummeted versus the US dollar, our Pure-Flo(R) business in that country
evaporated. Our products are sold in US dollars and became too expensive as
compared to locally available bleaching clays. Year over year, we saw sales to
Malaysia drop $1,540,000. We have not budgeted any Malaysian sales for fiscal
1999.
   The second negative event of the year was the loss of most of our Sam's
Wholesale Club business. Eighteen months ago, Sam's decided to discontinue our
brand of scoopable litter in favor of stocking their own private label. However,
Cat's Pride Premium traditional litter was awarded distribution in over 80% of
their clubs after winning head-to-head, in-store tests against our competitors.
During the ensuing year and a half, sales of our Cat's Pride Premium traditional
litter grew dramatically faster than the category. Despite this, Sam's decided
to replace our brand with a competitor's product.
   To put this in perspective, over the past four years we have lost $14 million
of sales with Sam's, yet companywide sales have increased $7 million. This means
that our non-Sam's business has grown by $21 million during this period. This is
a good news/bad news story. The bad news is that we never like to lose business.
The good news is that in spite of the loss of what was once our single largest
account, the company has been able to offset these losses and show small sales
growth and greater diversification. Furthermore, our relationship with Wal-Mart
Stores, Sam's sister company, has never been stronger. All-in-all, our total
business with Wal-Mart is doing very well.
   Finally, the cost of natural gas impacted profitability this year. In March
1997, the manufacturing team was given the authority to forward-purchase a
significant percentage of our gas requirements for the 1998 fiscal year. In an
effort to bottom fish, we waited for the market to go lower and lower. This left
us unprotected against the unexpected run-up in prices which occurred during the
first six months of the fiscal year, and cost us 7 cents per share during fiscal
1998.
   My grandfather, Nick Jaffee, the founder of this business, was fond of the
saying, "You don't learn anything by getting kicked by a mule a second time." We
got kicked last year and are not about to let it happen again. We have
implemented a policy which dictates when and how much we will forward buy so as
to minimize the impact that the volatility of natural gas prices can have on our
business.
   Despite the negative events of the year, Oil-Dri reported sales and earnings
growth. In addition, we successfully digested two acquisitions, restructured our
over-the-road shipping program, and continued to reduce costs by investing in
productivity improvements throughout the organization.
   I wish I could say that our stock price reflected these successes. The
positive spin on our stock price is that, at September 30, 1998, it's trading
near book value and selling at only 11.3 times operating income per share.
   Beginning in the new fiscal year, we are implementing a management tool we
call "NOVA," an acronym for Net Oil-Dri Value Added. Here is how it works. Every
investment decision, whether it be in fixed assets or working capital, carries
with it a cost of capital. We were able to borrow $25 million this past year at
an excellent fixed rate of 6.55% over the 15-year term of the debt. With our mix
of debt and equity, along with the higher cost associated with equity, our
weighted average cost of capital is 10%. This

4

   7

                               TO OUR SHAREHOLDERS

means that for a project to add value to the company, it must yield a positive
return after being charged approximately 10% for the cost of all capital
necessary to realize the opportunity.
   As an example, let's look at two very different projects. The first (Project
A) involves building a plant while the second (Project B) is a marketing
opportunity whereby the manufacturing will be done by a third party. For
simplicity's sake, let's assume that all other variables are the same (i.e.,
inventory levels, payment terms, etc.). The only difference in the cost is the
fixed investment in the first opportunity. Here's what the two projects look
like:

                           PROJECT A        PROJECT B
Annual Sales              $ 15.0 million   $ 15.0 million
Pre-Tax Earnings          $  2.0 million   $  1.5 million
Fixed Investment          $ 10.0 million   $  0.0

   In which one do you invest? In the past, we might have bet on Project A
because the depreciation on the fixed assets is in the pre-tax number and it
still yields a better return. However, starting August 1, 1998, the individual
business units at Oil-Dri will be charged for the cost of the capital employed
related to each specific business unit. This requires our business managers to
go to the "bank" and borrow at a rate of 10% for all the capital required to run
their businesses. Once you charge Project A 10% of the $10 million fixed
investment, the NOVA (Net Oil-Dri Value Added) drops to $1.0 million, while the
NOVA for Project B remains $1.5 million and becomes the project of choice.
   In the past, the business units were given a free pass for the capital used
in their respective areas. They were charged for depreciation, but not for the
carrying cost of the inventory, outstanding accounts receivable, or the funds
necessary to finance a growth initiative. That has all changed. NOVA will put
the responsibility for making informed investment decisions where it needs to
be, in the hands of our general managers. Once we've had a year to work with it,
a significant piece of annual incentive bonuses will be tied to NOVA growth.
   This leads to our growth opportunities. In fiscal 1999, we will be launching
two new cat litters made from recycled paper. A third-party supplier will
provide the raw material and we will add the technical know-how to make the
materials perform like cat litter. The traditional cat litter, DustStopperTM,
performs like the best cat litters except for one notable omission - it's
virtually dust-free.
   The new scoopable litter is equally exciting. Demographics of cat owners show
that a large percentage of them live in high rises and keep their cat box in a
bathroom. Consumer research indicates they would prefer to flush the used litter
rather than dispose of it in a waste can. Our new product, Scoop'N FlushTM, acts
just like the leading scoopable litters, but unlike the other litters, has been
certified safe-to-flush through residential plumbing systems. The initial
reaction from the trade has been very favorable.
   My time is up. The remainder of this annual report provides additional detail
on the positive events of the year and opportunities for the future. The Oil-Dri
team is extremely bullish about our prospects. I hope at the end of your
analysis, you will decide that Oil-Dri is a company worthy of your investment
and whose stock you can be proud to own.

/s/ Daniel S. Jaffee
DANIEL S. JAFFEE
President and CEO
                                                                               5

   8

                                   [DIAGRAM]

FOCUSING ON CORE STRENGTHS

CUSTOMER BASE

MANUFACTURING EXPERTISE

MINERAL RESERVES

RESEARCH AND DEVELOPMENT CAPABILITIES

INNOVATIVE PRODUCTS

CREATIVE MARKETING

   9

                         Seeing the Forest for the Trees

During Oil-Dri's strategic planning process, each business unit was examined and
the company's strengths and weaknesses were defined. The strengths far
outnumbered the weaknesses, but during this introspection, it became clear that
Oil-Dri Transportation Company was no longer an integral part of Oil-Dri's
strategy. The reasons behind entering the transportation business (direct store
door deliveries for major customers, over-the-road shipments to the West Coast,
heavy competition for drivers and equipment) were no longer issues. Shipping to
distribution centers is more common, rail shipments to the West Coast have
become more economical, and drivers and equipment are more readily available.
Oil-Dri Transportation Company was no longer providing a strategic, competitive
advantage, and, while it generated sales of almost $8,000,000 in fiscal 1997, it
has historically not contributed to profitability.
   The question was then, "How to serve our customers with convenient,
cost-effective transportation options while focusing energies and resources on
Oil-Dri's core strengths, delivering innovative solutions that help our
customers make the world cleaner, safer and healthier?"
   The answer was to exit the trucking business and form a strategic alliance
with a firm that could handle Oil-Dri's over-the-road shipping needs. CRST was
just the kind of partner Oil-Dri was looking for. In this new relationship, CRST
has assumed all equipment leases and set up logistics centers at our facilities
to handle over-the-road shipments for our customers.
   A special charge of $0.36 per share was taken in fiscal 1998 to cover the
cost of exiting the transportation business as well as writing down certain
nonperforming assets. Going forward, trucking rates are expected to be more
competitive through CRST, and because we no longer need to support Oil-Dri's
backhaul business, many of our traditional over-the-road shipping lanes are
being replaced with less expensive rail shipping. We anticipate related savings
will be approximately $1,000,000 annually.

                                                                               7

   10

[ILLUSTRATION]

   11

                               Spreading Our Roots

Oil-Dri has significant roots in the sorbent mineral business. The acquisition
of American Colloid's Fuller's Earth business has helped spread these roots even
further. The purchase will contribute approximately $15,000,000 in revenues next
year, including coarse private label cat litter, oil and grease absorbents, and
agricultural carriers.
   With this acquisition, Oil-Dri has become the largest manufacturer of cat
litters in North America and a consolidated source for private label and branded
cat litter products. The acquisition also increased manufacturing capacity for
clay sorbents to over 1,000,000 finished tons, provided a Midwestern
distribution point, and expanded Oil-Dri's mineral reserve base in the western
United States.
   Strategically, the acquisition will allow Oil-Dri to more effectively partner
with retailers. As the only manufacturer dedicated to providing private label
and branded cat litter products in coarse and scoopable varieties, Oil-Dri can
offer retailers a consolidated source for all their cat litter needs. The
breadth of our product offerings is important to retailers who want to reduce
the number of vendors providing products. It also allows them to enjoy the
logistic synergies of receiving truckload orders with a variety of branded,
private label, scoopable and traditional cat litters. Combining these orders
will help reduce inventories, purchase orders and logistical difficulties.
   At the same time, in accounts where Oil-Dri provides private label products,
its branded products are represented, on average, three times more often,
increasing the profitability and value for Oil-Dri from these partnerships.
   The acquisition is also benefiting our agricultural, industrial and
automotive product groups. The new Mounds, Illinois plant is Oil-Dri's
northernmost facility for these products. It has added capacity and provided
more flexibility in both manufacturing and shipping options for our customers.
   The cost of the acquisition was less than a dollar for a dollar of sales.
Financing was done with a long-term, fixed-rate private debt placement at 6.55%
over a fifteen-year life.

                                                                               9

   12

[ILLUSTRATION]

   13

                                  Branching Out

Diversification and continued innovation in our pet product line was marked this
year by two exciting developments. First, Oil-Dri's research and development
team, in conjunction with a major paper manufacturer, created two new cat
litters made from recycled paper. DustStopperTM and Scoop'N FlushTM cat litters
perform as well as, or better than, clay cat litters while offering consumer
benefits clay products can't. They're like "toilet paper for your cat."
   Consumers demand absorbency and odor control from their cat litters.
DustStopper granular cat litter performs these mandatory tasks, and because it
is made from recycled paper, it has none of the nuisance dust that consumers
associate with clay cat litters.
   Scoop'N Flush scoopable litter offers the same odor control and absorptivity,
and it is completely safe to flush. This is particularly important because most
consumers keep their litter boxes in the bathroom and would prefer to flush the
litter. It's the more convenient scoopable cat litter.
   In addition to product performance, consumers can feel good about the fact
that DustStopper and Scoop'N Flush are environmentally responsible and carry the
recommendation of the American Humane Association.
   The second event related to branching out in the pet aisle was the
acquisition of a dog biscuit manufacturer. Phoebe Products Company, named,
appropriately enough, after a labrador retriever, will produce a line of
high-quality dog biscuits that address specific pet issues. Special, 100%
American-made rawhides and healthy jerky treats, which will be outsourced, will
round out the dog treat line.
   During the past year, consumer research and product testing were completed.
The dog treats will be launched into test markets around mid-year of fiscal
1999.
   Oil-Dri continues to deliver innovation to the pet aisle and expand its
product offerings for retailers and consumers. In a time of vendor
rationalization, Oil-Dri is establishing itself, not just as a leading
manufacturer of cat litters, but as a leading supplier of pet products -
delivering clay cat litters, new paper cat litters, and soon, a full line of dog
treats.

                                                         [PHOTO OF PET PRODUCTS]

                                                                              11
   14

                       TEN YEAR SUMMARY OF FINANCIAL DATA

            GROSS PROFIT                             CAPITAL EXPENDITURES 
         millions of dollars                          millions of dollars  
                                         
    1989           25.0 million                     1989           9.0 million 
    1990           30.0 million                     1990           7.0 million 
    1991           31.0 million                     1991          10.5 million 
    1992           40.0 million                     1992           8.5 million 
    1993           45.0 million                     1993           9.0 million 
    1994           47.5 million                     1994          13.5 million 
    1995           47.5 million                     1995          10.5 million 
    1996           47.5 million                     1996          10.5 million 
    1997           48.0 million                     1997           5.0 million 
    1998           50.0 million                     1998           7.0 million 

(in thousands except for per share amounts)
- ------------------------------------------------------------------------------------------------
                                                      1998          1997        1996        1995
                                                     --------------------------------------------
                                                                                
SUMMARY OF OPERATIONS
NET SALES ........................................   $160,252    $156,616    $153,787    $152,899
COST OF SALES ....................................    110,096     108,687     107,730     108,268
                                                                                                                         
GROSS PROFIT .....................................     50,156      47,929      46,057      44,631
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .....     38,598      37,260      39,153      31,921
SPECIAL CHARGES ..................................      3,129        --           921        --
                                                     --------------------------------------------
INCOME FROM OPERATIONS ...........................      8,429      10,669       5,983      12,710
                                                     --------------------------------------------
OTHER INCOME (EXPENSE)
   Interest Income ...............................        491         637         587         448
   Interest Expense ..............................     (2,049)     (1,775)     (1,917)     (1,921)
   Foreign Exchange (Losses) Gains ...............       (146)       --            (7)         (5)
   Other, Net ....................................       (119)        (17)        137         (84)
                                                                                                                         
      Total Other Expense, Net ...................     (1,823)     (1,155)     (1,200)     (1,562)
                                                     --------------------------------------------
INCOME BEFORE INCOME TAXES .......................      6,606       9,514       4,783      11,148
INCOME TAXES .....................................      1,883       2,721       1,409       3,145
                                                     --------------------------------------------
NET INCOME .......................................   $  4,723    $  6,793    $  3,374    $  8,003
                                                     ========    ========    ========    ========

AVERAGE SHARES OUTSTANDING .......................      6,165       6,599       6,807       6,936
NET INCOME PER SHARE .............................   $   0.77    $   1.03    $   0.50    $   1.15
IMPORTANT HIGHLIGHTS
   Total Assets ..................................   $134,215    $114,558    $117,693    $116,988
   Long-Term Debt ................................   $ 39,976    $ 17,052    $ 18,978    $ 20,422
   Working Capital ...............................   $ 36,283    $ 31,165    $ 30,399    $ 33,074
   Working Capital Ratio ........................         3.1         3.0         2.7         3.1
   Dividends Declared ............................   $  1,808    $  1,936    $  2,022    $  2,047
   Capital Expenditures ..........................   $  6,496    $  5,395    $  7,184    $  7,032
   Depreciation and Amortization .................   $  7,832    $  7,587    $  7,926    $  7,808
   Operating Cash Flows, less Capital Expenditures   $  2,331    $  8,349    $  6,869    $  5,285
   Long-Term Debt to Total Capital ...............       35.8%       18.1%       19.7%       20.7%
   Net Income as a Percent of Net Sales ..........        3.0%        4.3%        2.2%        5.2%
   Return on Average Stockholder's Equity ........        6.3%        8.8%        4.3%       10.6%
   Gross Profit as a Percent of Net Sales ........       31.3%       30.6%       29.9%       29.2%
   Operating Expenses as a Percent of Net Sales ..       26.0%       23.8%       26.1%       20.9%

12

   15

            ASSETS                             SHAREHOLDERS' EQUITY  
       millions of dollars                      millions of dollars   

    1989           70 million               1989           44 million 
    1990           78 million               1990           50 million 
    1991           90 million               1991           55 million 
    1992           92 million               1992           60 million 
    1993          103 million               1993           65 million 
    1994          112 million               1994           72 million 
    1995          120 million               1995           78 million 
    1996          122 million               1996           76 million 
    1997          112 million               1997           76 million 
    1998          140 million               1998           70 million 

                             YEAR ENDED JULY 31

- --------------------------------------------------------------------------------
   1994          1993           1992          1991          1990           1989
- --------------------------------------------------------------------------------

$ 147,147     $ 140,866     $ 124,585     $ 106,054     $  97,677     $  85,652
  102,457        97,396        85,116        74,370        68,110        61,508
- --------------------------------------------------------------------------------
   44,690        43,470        39,469        31,684        29,567        24,144
   30,394        29,553        28,967        21,778        20,016        16,252
       --            --            --            --            --            --    
- --------------------------------------------------------------------------------
   14,296        13,917        10,502         9,906         9,551         7,892
- --------------------------------------------------------------------------------
      441           452           515           602           633           567
   (1,752)       (1,729)       (1,884)       (1,363)       (1,156)         (979)
        3           (88)           63           (23)           37            11
      171          (298)           15            50            73            (9)
- --------------------------------------------------------------------------------
   (1,137)       (1,663)       (1,291)         (734)         (413)         (410)
- --------------------------------------------------------------------------------
   13,159        12,254         9,211         9,172         9,138         7,482
    3,307         2,834         2,110         2,092         2,351         1,935
                                                                                    
- --------------------------------------------------------------------------------
$   9,852     $   9,420     $   7,101     $   7,080     $   6,787     $   5,547
=========     =========     =========     =========     =========     =========

    7,011         7,031         7,026         7,055         7,042         7,003
$    1.41     $    1.34     $    1.01     $    1.00     $    0.96     $    0.79

$ 112,267     $ 102,117     $  95,018     $  89,394     $  76,779     $  67,193
$  21,521     $  17,766     $  18,831     $  20,176     $  11,893     $  11,820
$  29,337     $  26,043     $  24,359     $  24,763     $  16,149     $  15,170
      3.0           2.7           2.8           3.4           2.3           2.7
$   1,807     $   1,679     $   1,548     $   1,422     $   1,149     $     959
$  13,559     $   9,158     $   8,040     $  10,416     $   6,403     $   8,936
$   6,798     $   5,835     $   5,407     $   4,831     $   4,466     $   3,990
$  (3,734)    $   5,080     $     645     $  (1,310)    $   4,410     $  (1,976)
     22.8%         21.1%         24.0%         26.6%         19.2%         21.4%
      6.7%          6.7%          5.7%          6.7%          6.9%          6.5%
     14.1%         14.9%         12.3%         13.4%         14.5%         13.5%
     30.4%         30.9%         31.7%         29.9%         30.3%         28.2%
     20.7%         21.0%         23.3%         20.5%         20.5%         19.0%

                                                                              13

   16

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, a decrease of 30.5% from $6,793,000 or $1.03 per
share 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 earnings per share by $0.36 for the
year ended July 31, 1998. Excluding the special charge, earnings per share were
$1.13, an increase of 9.7% over the prior year.

Net sales of pet products increased $4,851,000 or 5.1% over prior year amounts,
even though such sales to Sam's Club, which decided to discontinue carrying the
Company's cat litter product, were down approximately $2,300,000 from the prior
year. The growth resulted primarily from increased sales of branded and private
label products in both the grocery and mass merchandiser markets. Additionally,
sales of private label products increased as a result of the April 20, 1998
acquisition of Oil-Dri, Mounds Production Company. Net sales of fluids
purification products increased $2,016,000 or 12.9% from fiscal 1997, due to
increased demand for these products in the United Kingdom. Agricultural product
sales increased $1,113,000 or 6.0% compared to fiscal 1997, due to increased
demand in the industry for agricultural carriers. Net sales of industrial and
environmental sorbents increased $1,027,000 or 5.3% from prior year levels.

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. 
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 which was used to fund the purchase of 
Oil-Dri, Mounds Production Company.

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

14

   17

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 an 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 payable related to exiting the
transportation business, partially offset by a decrease in accrued trade
promotions and advertising.

EXPECTATIONS
The Company anticipates net sales for fiscal 1999 will be higher than the net
sales in fiscal 1998. Sales of branded cat box absorbents are expected to
increase moderately as existing products and new product introductions gain
incremental distribution. Sales of private label cat box absorbents,
agricultural carriers, and industrial sorbents in fiscal 1999 will be at higher
levels than 1998 due to incremental sales resulting from the April 20, 1998
acquisition of Oil-Dri, Mounds Production Company. 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 1999.

The foregoing statements under this heading are "forward-looking statements"
within the meaning of that term in the Securities Exchange Act of 1934, as
amended. Actual results may be lower than 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, integration of recent acquisitions, 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 agricultural and fluids purification 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.

LIQUIDITY AND CAPITAL RESOURCES
The current ratio increased to 3.1 at July 31, 1998 from 3.0 at July 31, 1997.  
Working capital increased $5,118,000 during fiscal 1998 to $36,283,000. 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
$958,000. Cash on hand at the beginning of the year of $9,997,000, cash
provided by operating activities of $6,511,000 and $25,000,000 of fixed-rate
financing secured during the third quarter was used for the purchase of
Oil-Dri, Mounds Production Company ($14,657,000), the purchase of the Company's

                                                                              15

   18

Common Stock ($8,238,000), capital expenditures ($6,496,000), principal
payments on long-term debt ($1,937,000) and dividend payments ($1,839,000).
Total cash and investment balances held by the Company's foreign subsidiaries
at July 31, 1998 and July 31, 1997 were $3,350,000 and $2,803,000,
respectively.

RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Consolidated net sales for the year ended July 31, 1997, were $156,616,000, an
increase of 1.8% over net sales of $153,787,000 in fiscal 1996. Net income for
fiscal 1997 was $6,793,000 or $1.03 per share, an increase of 101.3% from
$3,374,000 or $0.50 per share earned in fiscal 1996.

Net sales of pet products increased $4,384,000 or 4.8% over prior year amounts,
even though such sales to Sam's Club were down approximately $4,100,000 from
the prior year. The growth resulted from increased sales of branded and private
label products in both the grocery and mass merchandiser markets. Net sales of
fluids purification products increased $2,115,000 or 15.6% from fiscal 1996,
due to increased demand for Pure-Flo(R) Supreme products. Agricultural product
sales decreased $1,270,000 or 6.4% compared to fiscal 1996, primarily due to
reduced demand in the industry for agricultural carriers. Net sales of
industrial and environmental sorbents decreased $665,000 or 3.3% from prior
year levels. The decrease was due to an internal focus on profitability versus
sales growth as well as open positions in the sales force responsible for these
products during the first quarter. Net sales of transportation services
decreased $1,976,000 or 20.4% from fiscal 1996 due to lower backhaul revenue
resulting from a reduction in the Company's fleet.

Consolidated gross profit as a percentage of net sales for fiscal 1997
increased to 30.6% from 29.9% in fiscal 1996. Changes in sales mix and a
companywide effort to reduce costs contributed to this increase.

Operating expenses as a percentage of net sales decreased to 23.8% for fiscal
1997 from 26.1% in fiscal 1996. This decrease is primarily attributable to
lower advertising and promotion costs for the consumer products introduced last
year and a pre-tax special charge in the second quarter of fiscal 1996 of
$921,000, reflecting settlement costs and legal fees related to patent
litigation.

Interest expense decreased $142,000 while interest income increased $50,000.
The lower interest expense is primarily due to reduced notes payable balances.

The Company's effective tax rate decreased to 28.6% of pre-tax income in fiscal
1997 from 29.5% in fiscal 1996 due to higher domestic income subject to
depletion allowances.

Total assets of the Company decreased $3,135,000 or 2.7% during the year ended
July 31, 1997. Current assets decreased $1,300,000 or 2.7% from fiscal 1996
year-end balances primarily due to lower inventory levels. Property, plant and
equipment, net of accumulated depreciation, decreased

16
   19

$2,331,000 during the year due to depreciation expense exceeding capital
expenditures. Investments in property, plant and equipment included
expenditures for increased productivity and pollution control equipment.
Additionally, the Company leased substantial acreage in Nevada containing a
mineral reserve for potential development in the future.

Total liabilities decreased $3,235,000 or 8.0% during the year due primarily to
the repayment of long-term debt and a reduction in accounts payable. Current
liabilities decreased $2,067,000 or 11.6% from July 31, 1996 balances, due to a
reduction in accounts payable, income taxes payable, and accrued trade
promotions and advertising, partially offset by an increase in accrued
salaries, wages, and commissions.

FOREIGN OPERATIONS
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
$1,987,000 from fiscal 1997, in which foreign subsidiary sales were $12,000,000
or 7.7% of total Company sales. The increase is due to higher demand for fluids
purification products in the United Kingdom, partially offset by substantially
lower demand for fluids purification products in Malaysia. Net income of the
foreign subsidiaries for fiscal 1998 was $650,000 compared with $570,000 in
fiscal 1997. 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.

Net sales by the Company's foreign subsidiaries during fiscal 1997 were
$12,000,000 or 7.7% of total Company sales. This represents an increase of
$113,000 from fiscal 1996, in which foreign subsidiary sales were $11,887,000
or 7.7% of total Company sales. Net income of the foreign subsidiaries for
fiscal 1997 was $570,000 compared with $554,000 in fiscal 1996. Identifiable
assets of the Company's foreign subsidiaries as of July 31, 1997 were
$9,866,000, an increase of $830,000 from $9,036,000 as of July 31, 1996. The
increase is primarily due to higher current assets.

YEAR 2000
The Year 2000 (Y2K) issue is the 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 an internal review of all systems to determine major
areas of exposure to Y2K issues, and most of these issues have been resolved.
In addition, third parties with whom there are systems interaction are being
surveyed to assess Y2K compliance, or if contingency plans will become
necessary. The cost of Y2K issue resolution will not have a material adverse
impact on the Company's financial statements, and it is anticipated that the
Company's computer systems will be Y2K-compliant by July 31, 1999.

                                                                              17
   20

                          Consolidated Balance Sheets

                                                                                                       JULY 31
                                                                                              -----------------------
                                                                                                 1998          1997
                                                                                              -----------------------
                                                                                                           
ASSETS (in thousands)
CURRENT ASSETS
 Cash and cash equivalents..................................................................  $  9,410       $  9,997
 Investment securities......................................................................     1,173          1,544
 Accounts receivable, less allowance of $351 in 1998 and $261 in 1997.......................    24,210         20,080
  Inventories...............................................................................    13,258         10,604
 Prepaid expenses...........................................................................     5,558          4,685
                                                                                              -----------------------
     Total Current Assets...................................................................    53,609         46,910
                                                                                              -----------------------

PROPERTY, PLANT AND EQUIPMENT, AT COST
 Buildings and leasehold improvements.......................................................    20,132         16,963
 Machinery and equipment....................................................................    87,070         81,666
 Office furniture and equipment.............................................................     8,999          8,742
 Vehicles...................................................................................        90             95
                                                                                              -----------------------
 ............................................................................................   116,291        107,466
 Less accumulated depreciation and amortization.............................................   (63,493)       (58,737)
                                                                                              -----------------------
 ............................................................................................    52,798         48,729
Construction in progress....................................................................     3,390            840
 Land.......................................................................................     6,697          6,312
                                                                                              -----------------------
     Total Property, Plant and Equipment, Net...............................................    62,885         55,881
                                                                                              -----------------------

OTHER ASSETS
 Goodwill and intangibles, net of accumulated amortization of $1,469 in 1998                     
 and $1,337 in 1997.........................................................................     8,963          4,041
 Deferred income taxes......................................................................     3,697          2,446
 Other......................................................................................     5,061          5,280
                                                                                              -----------------------
     Total Other Assets.....................................................................    17,721         11,767
                                                                                              -----------------------
 Total Assets...............................................................................  $134,215       $114,558
                                                                                              ========       ========

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

18
   21

                                                                JULY 31
                                                         -------------------
                                                            1998      1997
                                                         -------------------
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands)
CURRENT LIABILITIES
 Current maturities of notes payable................     $  2,084   $  1,946
 Accounts payable...................................        4,416      4,050
 Dividends payable..................................          444        475
 Accrued expenses
  Salaries, wages and commissions...................        3,120      3,177
  Trade promotions and advertising..................        1,900      2,902
  Freight...........................................        1,747        554
  Other.............................................        3,615      2,641
                                                         -------------------
     Total Current Liabilities......................       17,326     15,745
                                                         -------------------

NONCURRENT LIABILITIES
 Notes payable......................................       39,976     17,052
 Deferred compensation..............................        3,174      2,750
 Other..............................................        1,931      1,681
                                                         -------------------
     Total Noncurrent Liabilities...................       45,081     21,483
                                                         -------------------
     Total Liabilities..............................       62,407     37,228
                                                         -------------------

STOCKHOLDERS' EQUITY
 Common and Class B Stock...........................          724        724
 Paid-in capital in excess of par value.............        7,702      7,686
 Restricted unearned stock compensation.............          (51)       (18)
 Retained earnings..................................       85,158     82,243
 Cumulative translation adjustments.................       (1,151)      (907)
                                                         -------------------
                                                           92,382     89,728
 Less treasury stock, at cost.......................      (20,574)   (12,398)
                                                         -------------------
     Total Stockholders' Equity.....................       71,808     77,330
                                                         -------------------
 Total Liabilities and Stockholders' Equity.........     $134,215   $114,558
                                                         ========   ========

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

                                                                             19
   22
 
                       Consolidated Statements of Income

                                                       YEAR ENDED JULY 31

                                                 ----------------------------
   (in thousands except for per share amounts)     1998      1997      1996
                                                 ----------------------------
                                                            
Net Sales.....................................   $160,252  $156,616  $153,787
Cost of Sales.................................    110,096   108,687   107,730
                                                 ----------------------------
Gross Profit..................................     50,156    47,929    46,057
Selling, General and Administrative Expenses..     38,598    37,260    39,153
Special Charges...............................      3,129        --       921
                                                 ----------------------------
Income from Operations........................      8,429    10,669     5,983
                                                 ----------------------------
Other Income (Expense)
 Interest income..............................        491       637       587
 Interest expense.............................     (2,049)   (1,775)   (1,917)
 Foreign exchange losses......................       (146)       --        (7)
 Other, net...................................       (119)      (17)      137
                                                 ----------------------------
   Total Other Expense, Net...................     (1,823)   (1,155)   (1,200)
                                                 ----------------------------
Income before Income Taxes....................      6,606     9,514     4,783
Income Taxes..................................      1,883     2,721     1,409
                                                 ----------------------------
Net Income....................................     $4,723    $6,793    $3,374
                                                 ========    ======    ======
Average Shares Outstanding....................      6,165     6,599     6,807
                                                 ========    ======    ======
Net Income Per Share..........................     $ 0.77    $ 1.03    $ 0.50
                                                 ========    ======    ======

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

20

   23

                Consolidated Statements of Stockholders' Equity

                                                     Stock
                                          --------------------------   Paid-In     Restricted
                                                 Shares              Capital In     Unearned
                                          -----------------          Excess of       Stock         Retained
(in thousands)                            Common    Class B   Amount  Par Value   Compensation     Earnings
- -----------------------------------------------------------------------------------------------------------
                                                                                 
BALANCE, JULY 31, 1995..................   5,119       2,114    $724   $7,657       $  --          $ 76,034
 Net income.............................      --          --      --       --          --             3,374
 Dividends declared.....................      --          --      --       --          --            (2,022)
 Conversion of Class B Stock to
   Common Stock.........................      72         (72)     --       --          --                --
 Issuance of stock under 1995
   Long Term Incentive Plan.............       2          --      --       27         (27)               --
 Amortization of Restricted unearned
   common stock compensation............      --          --      --       --           3                --
                                          -----------------------------------------------------------------
BALANCE, JULY 31, 1996..................   5,193       2,042     724    7,684         (24)           77,386
 Net income.............................      --          --      --       --          --             6,793
 Dividends declared.....................      --          --      --       --          --           ( 1,936)
 Conversion of Class B Stock to
   Common Stock.........................      74         (74)     --       --          --                --
 Issuance of stock under 1995
   Long Term Incentive Plan.............      --          --      --        2         (18)               --
 Amortization of Restricted unearned
   common stock compensation............      --          --      --       --          14                --
                                          -----------------------------------------------------------------
BALANCE, JULY 31, 1997..................   5,267       1,968     724    7,686         (18)           82,243
 Net income.............................      --          --      --       --          --             4,723
 Dividends declared.....................      --          --      --       --          --           ( 1,808)
 Conversion of Class B Stock to
   Common Stock.........................     189       ( 189)     --       --          --                --
 Issuance of stock under 1995
   Long Term Incentive Plan.............      --          --      --       16         (77)               --
 Amortization of Restricted unearned
   common stock compensation............      --          --      --       --          44                --
                                          -----------------------------------------------------------------
BALANCE, JULY 31, 1998..................   5,456       1,779    $724   $7,702       $ (51)         $ 85,158

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

                                                                              21

   24

                    Consolidated Statements of Cash Flows

                                                                                                YEAR ENDED JULY 31
                                                                                            --------------------------
(in thousands)                                                                                1998      1997     1996
                                                                                            --------------------------
                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................................................     $4,723     $6,793   $3,374
                                                                                            --------------------------
Adjustments to reconcile net income to net cash provided by operating activities:
 Depreciation and amortization.........................................................      7,832      7,587    7,926
 Non-cash special charge...............................................................      1,689         --       --
 Deferred income taxes.................................................................     (1,251)      (181)  (1,791)
 Provision for bad debts...............................................................          2        125      202
 (Increase) decrease in
   Accounts receivable.................................................................     (4,282)       235      692
   Inventories.........................................................................     (2,381)     1,133     (838)
   Prepaid expenses and taxes..........................................................       (873)      (383)   1,191
   Other assets........................................................................       (637)      (537)    (830)
 Increase (decrease) in
   Accounts payable....................................................................        366     (1,289)     636
   Income taxes payable................................................................         --       (691)     457
   Accrued expenses....................................................................        649       (361)     333
   Deferred compensation...............................................................        424        497      475
   Other...............................................................................        250        261      642
                                                                                            --------------------------
    Total Adjustments..................................................................      1,788      6,396    9,095
                                                                                            --------------------------
    Net Cash Provided by Operating Activities..........................................      6,511     13,189   12,469
                                                                                            --------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Capital expenditures..................................................................     (6,496)    (5,395)  (7,184)
 Proceeds from sale of property, plant and equipment...................................         78        555      923
 Purchases of investment securities....................................................     (1,173)      (350)    (167)
 Dispositions of investment securities.................................................      1,544        400      906
 Proceeds from sale of investments.....................................................        709         --       --
 Purchase of Oil-Dri, Mounds Production Company assets.................................    (14,657)        --       --
 Other.................................................................................         32       (141)    (267)
                                                                                            --------------------------
    Net Cash Used in Investing Activities..............................................    (19,963)    (4,931)  (5,789)
                                                                                            --------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
 Principal payments on long-term debt..................................................     (1,937)    (1,628)  (1,145)
 Proceeds from issuance of long-term debt..............................................     25,000         21      230
 Dividends paid........................................................................     (1,839)    (1,961)  (2,015)
 Purchase of treasury stock............................................................     (8,238)    (4,883)  (2,434)
 Other.................................................................................       (121)        76      (32)
                                                                                            --------------------------
    Net Cash Provided by (Used in) Financing Activities................................     12,865     (8,375)  (5,396)
                                                                                            --------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................................       (587)      (117)   1,284
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...........................................      9,997     10,114    8,830
                                                                                            --------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................................     $9,410     $9,997  $10,114
                                                                                            ======     ======  =======

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

22
   25

                   Notes to Consolidated Financial Statements

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 wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated from the
consolidated financial statements.
No provision has been made for possible income taxes which may be paid on the
distribution of approximately $10,251,000 and $9,870,000 as of July 31, 1998
and 1997, 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.

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.

INTEREST RATE DERIVATIVE INSTRUMENTS
An interest rate swap agreement is utilized in the management of interest rate
exposure. Interest differentials on the swap contract (Note 5) are recorded as
interest expense in the contract period incurred. The Company recognized
additional interest expense of $57,000, $60,100 and $58,100 in fiscal years
1998, 1997 and 1996, 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 1998.

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 stockholders' equity.

Changes in the cumulative translation adjustments account for the years ended
July 31 are as follows: (in thousands)
- ------------------------------------------------------------------------------

                                                              ---------------------------
                                                                1998      1997     1996
                                                              ---------------------------
                                                                         
Balance, at beginning of year..............................   $  (907)  $(1,018)  $  (988)
                                                              ---------------------------
Translation adjustments resulting from exchange 
 rate changes and intercompany transactions................      (244)      111       (30)
                                                              ---------------------------
Balance, at end of year....................................   $(1,151)  $  (907)  $(1,018)
                                                              =======   =======   =======

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

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: (in thousands)
- -------------------------------------------------------------------------------------------
                                                                         ------------------
                                                                           1998     1997
                                                                         ------------------
                                                                            
Finished goods........................................................   $ 7,935  $ 6,684
Packaging.............................................................     4,220    3,168
Other.................................................................     1,103      752
                                                                         ----------------
                                                                         $13,258  $10,604
                                                                         =======  =======

- --------------------------------------------------------------------------------
                                                                             23

   26

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)

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 4. The Company generally does not require collateral to secure customer
receivables.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment expenditures are primarily depreciated using the
straight-line method over their estimated useful lives as follows:

                                                                   Years
                                                                   -----
                                                                
Buildings and leasehold improvements..............................  5-30
Machinery and equipment...........................................  3-15
Office furniture and equipment....................................  2-10
Vehicles..........................................................  2- 8

RESEARCH AND DEVELOPMENT
Research and development COSTS OF $2,376,000 IN 1998, $2,049,000 IN 1997 AND
$2,026,000 IN 1996 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 $4,352,000, $3,650,000 and $6,295,000 for
the years ended July 31, 1998, 1997 and 1996, respectively. Prepaid advertising
production costs at July 31, 1998, 1997 and 1996 were not material.

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, 1998. The fair value of notes payable
was 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, 1998 and 1997 was less than its
carrying value by approximately $125,000 and $720,000, respectively.

EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share" during the second quarter of 1998. This standard
prescribes the methods of calculating basic and diluted earnings per share and
requires dual presentation of these amounts on the face of the income
statement. As the calculation of basic and diluted earnings per share resulted 
in the same amount, only one earnings per share amount has been reported for 
all years presented.

NEW ACCOUNTING STANDARDS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" were
issued. SFAS No. 130 establishes standards for the reporting of comprehensive
income and its components in a financial statement presentation. SFAS No. 130
separates comprehensive income into net income and other comprehensive income,
but does not change the measurement and presentation of net income. Other
comprehensive income includes certain changes in the equity of the Company
which are currently recognized and presented separately in the Consolidated
Statements of Stockholders' Equity, such as the change in the Cumulative
Translation Adjustment account. SFAS No. 130 is effective for the Company
beginning in fiscal 1999.

SFAS No. 131 establishes new standards for the way companies report information
about operating segments and requires that those enterprises report selected
information about operating segments in the financial reports issued to
shareholders. SFAS No. 131 is effective for the Company beginning in fiscal
1999.

- ------------------------------------------------------------------------------
24
   27

NOTE 2 -- SPECIAL CHARGE

The Company recorded a pre-tax special charge of $3,129,000 during the second
quarter.  At July 31, 1998, $358,000 of the charge remained in current
liabilities. A summary of the special charge and other expense is presented
below: (in thousands)

                                                                 
Transportation business exit costs................................  $1,508
Writeoff of other nonperforming assets............................     932
Other exit costs..................................................     689
                                                                    ------
                                                                    $3,129
                                                                    ======

The transportation business exit costs consisted primarily of trailer
rehabilitation, employee severance, and professional fees.  None of these items
were individually significant.

The Company recorded a pre-tax special charge of $921,000 during the second
quarter of fiscal 1996, reflecting settlement costs and legal fees related to
patent litigation.

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

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 $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 15 years.

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

NOTE 4 -- BUSINESS AND GEOGRAPHIC REGION
INFORMATION

Nature of Business
The Company is a leader in developing, manufacturing and marketing sorbent
products for consumer, industrial, environmental, agricultural and fluids
purification markets, and operates within a single segment. 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 1998, 1997 and 1996. Accounts receivable related to
this major customer amounted to $6,220,000, $4,736,000 and $4,905,000 as of
July 31, 1998, 1997 and 1996, respectively.

- ------------------------------------------------------------------------------
                                                                              25

   28

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 -- BUSINESS AND GEOGRAPHIC REGION INFORMATION (Continued)

The sales to this customer for the years ended July 31 were as follows: (in
thousands)
- ------------------------------------------------------------------------------

                                                       -------------------------
                                                        1998     1997    1996
                                                       -------------------------
                                                               
Amount.........................................        $36,125  $37,219 $39,916
Percent of net sales...........................             23%      24%     26%

The following is a summary of financial information by geographic region for
the years ended July 31 : (in thousands)
- ------------------------------------------------------------------------------

                                                  ------------------------------
                                                     1998       1997     1996
                                                  ------------------------------
                                                               
Sales to unaffiliated customers:                                       
 Domestic......................................   $146,265    $144,616  $141,900
 Foreign.......................................   $ 13,987    $ 12,000  $ 11,887
Sales or transfers between geographic areas:
 Domestic......................................   $  9,200    $  5,611  $  5,039
Income before income taxes:
 Domestic......................................   $  5,750    $  8,637  $  3,920
 Foreign.......................................   $    856    $    877  $    863
Net Income:
 Domestic......................................   $  4,073    $  6,223  $  2,820
 Foreign.......................................   $    650    $    570  $    554
Identifiable assets:
 Domestic......................................   $122,455    $104,692  $108,657
 Foreign.......................................   $ 11,760    $  9,866  $  9,036

- ------------------------------------------------------------------------------
26

   29

NOTE 5 -- NOTES PAYABLE

The composition of notes payable at July 31 is as follows: (in thousands)
- -----------------------------------------------------------------------------------------------------------
                                                                                       --------------------
                                                                                          1998      1997
                                                                                       --------------------
                                                                                       
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 3.91% in fiscal 1998 and fiscal 1997. 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 receives a floating interest rate based on LIBOR and pays
   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     5,100

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; $2,500,000 in fiscal 2004; and $2,500,000 in
   fiscal 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; $1,950,000 in fiscal
   1999; $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%.............................................................             4,500     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        --
Other........................................................................               260       398
                                                                                        -----------------
                                                                                         42,060    18,998
Less current maturities of notes payable                                                 (2,084)   (1,946)
                                                                                        -----------------
                                                                                        $39,976   $17,052
                                                                                        =======   =======

- --------------------------------------------------------------------------------
                                                                            27
   30

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 -- NOTES PAYABLE (Continued)

The Company has a Credit Agreement with Harris Trust and Savings Bank which
provides for a $5,000,000 committed unsecured revolving line of credit which
expires on August 1, 1999, at certain short-term rates. Additionally, in April
1998, the Company increased its uncommitted unsecured line of credit agreement
with Harris Trust and Savings Bank to $20,000,000. There were no outstanding
borrowings against these lines at July 31, 1998 and 1997.

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, to repay
draws against the Company's line of credit and for general working capital
purposes.

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 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 25% of
cumulative annual earnings from July 31, 1994.

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 at 
July 31, 1998: (in thousands)
- --------------------------------------------------------------------------------

                                                                         
2000 ...............................................................    $ 2,226
2001 ...............................................................      1,750
2002 ...............................................................      2,150
2003 ...............................................................      2,850
Later years ........................................................     31,000
                                                                        -------
                                                                        $39,976

NOTE 6 -- INCOME TAXES

The provision for income tax expense for the years ended July 31 consists of the
following: (in thousands)
- --------------------------------------------------------------------------------

                                          --------------------------------------
                                            1998           1997         1996
                                          --------------------------------------
                                                                  
Current
   Federal ............................   $ 2,159        $ 1,988       $ 2,020
   Foreign ............................       194            308           332
   State ..............................       781            606           848
                                          --------------------------------------
                                            3,134          2,902         3,200
                                          --------------------------------------
Deferred
   Federal ............................      (436)            35          (799)
   Operating loss carryforward ........      (611)          (154)         (644)
   Foreign ............................        25             12           (23)
   State ..............................      (229)           (74)         (325)
                                          --------------------------------------
                                           (1,251)          (181)       (1,791)
                                          --------------------------------------
Total Income Tax Provision ............   $ 1,883        $ 2,721       $ 1,409
                                          =======        =======       =======

- --------------------------------------------------------------------------------
28

   31

NOTE 6 -- 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:
- --------------------------------------------------------------------------------

                                                                -----------------------------------
                                                                   1998         1997        1996
                                                                -----------------------------------
                                                                                      
U.S. federal statutory income tax rate .......................      34.0%        34.0%       34.0%
Depletion deductions allowed for mining ......................     (15.1)       (10.8)      (23.4)
State income taxes, net of federal tax benefit ...............       2.2          4.1         7.4
Valuation allowance without income tax benefit ...............      10.4          1.6        12.0
Difference in effective tax rate of foreign subsidiaries .....      (1.1)        (0.1)       (0.1)
Other ........................................................      (1.9)        (0.2)       (0.4)
                                                                -----------------------------------
                                                                    28.5%        28.6%       29.5%
                                                                =========       ======     ======== 

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

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

                                                             1998                                    1997               
                                                   -------------------------------------------------------------------  
                                                     Assets        Liabilities             Assets          Liabilities  
                                                   -------------------------------------------------------------------  
                                                                                                         
Depreciation ...................................    $    --          $ 1,455              $    --         $ 1,667       
Deferred Compensation ..........................      1,232               --                1,031              --       
Postretirement Benefits ........................        614               --                  474              --       
Trade Promotions and Advertising ...............         39               --                  117              --       
Other Assets ...................................        583               --                   --              --       
Accrued Expenses ...............................        523               --                  464              --       
Tax Credits ....................................        936               --                  922              --       
Operating Loss Carryforward ....................      2,133               --                1,528              --       
Other ..........................................         --              260                  307              --       
                                                   -------------------------------------------------------------------  
                                                      6,060            1,715                4,843           1,667       
Valuation Allowance ............................       (648)              --                 (730)             --       
                                                   -------------------------------------------------------------------  
Total Deferred Taxes ...........................    $ 5,412          $ 1,715              $ 4,113         $ 1,667       
                                                    =======          =======              =======         =======       

The valuation allowance represents operating loss carryforwards not anticipated
to be utilized. As of July 31, 1998, for federal income tax purposes there were
regular tax operating loss carryforwards of approximately $5,494,000, which
begin to expire in the year 2011. A valuation allowance has been established for
$648,000 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 $936,000 primarily consisting of foreign tax
credits expiring in 2001 and later are also being carried forward.

- --------------------------------------------------------------------------------
                                                                              29

   32
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 -- 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 permits Directors and certain
management employees to defer portions of their compensation and earn interest
on the deferred amounts. The compensation, which has been deferred since the
inception of the original plan, has been accrued as well as interest thereon.
The Company has purchased life insurance contracts on some participants to
partially fund the original plan. The new plan is unfunded.

NOTE 8 -- STOCKHOLDERS' EQUITY

The authorized capital stock of the Company at July 31, 1998 and 1997 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.

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 5 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.

All per share amounts included in the financial statements and notes reflect
adoption of SFAS No. 128. See Note 9 for information regarding common share
equivalents.

In July 1998, the Board of Directors of the Company authorized the repurchase,
from time to time, of up to 200,000 shares of the Company's stock. This
authorization, in addition to previous authorizations, totals 1,366,771 shares.
As of July 31, 1998, 1,166,771 shares have been repurchased under these
authorizations.

The number of holders of record of Common Stock and Class B stock on July 31,
1998 was 1,196 and 28, 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.

- --------------------------------------------------------------------------------
30

   33

NOTE 8 -- STOCKHOLDERS' EQUITY (Continued)

The following reflects the changes in treasury stock over the last three years: 
(in thousands)
- --------------------------------------------------------------------------------

                                                   Common Stock                 Class B Stock                    Total
                                              ---------------------------------------------------------------------------------
                                               Shares         Amount        Shares         Amount        Shares         Amount
                                              ---------------------------------------------------------------------------------
                                                                                                    
Balance July 31, 1995. ....................       332       $  5,088            --          $  --           332       $  5,088
   Purchased during Fiscal 1996 ...........       167          2,434            --             --           167          2,434
                                              ---------------------------------------------------------------------------------
Balance July 31, 1996 .....................       499          7,522            --             --           499          7,522
   Reissued during Fiscal 1997 ............   (     1)       (     7)           --             --        (    1)       (     7)
   Purchased during Fiscal 1997 ...........       307          4,883            --             --           307          4,883
                                              ---------------------------------------------------------------------------------
Balance July 31, 1997 .....................       805         12,398            --             --           805         12,398
   REISSUED DURING FISCAL 1998 ............   (     4)       (    62)           --             --        (    4)       (    62)
   PURCHASED DURING FISCAL 1998 ...........       180          3,104           342          5,134           522          8,238
                                              ---------------------------------------------------------------------------------
BALANCE JULY 31, 1998 .....................       981       $ 15,440           342         $5,134         1,323       $ 20,574
                                                  ===       ========           ===         ======         =====       =========

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

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 Jaffee
family. Generally, other than grants to Richard 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, 500 and 2,000 shares were made during the fiscal
years ended July 31, 1998, 1997 and 1996 respectively. On June 24, 1998, 442,500
options originally issued on various days during April 1998 at an average
exercise price of $15.94 were cancelled and reissued at an exercise price of
$14.06. The terms of the reissued options are identical to the original options,
except that the period required before vesting of the option was lengthened.

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
options grants and various other types of awards.

- --------------------------------------------------------------------------------
                                                                             31

   34

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 -- STOCK OPTION PLANS (Continued)

A summary of option transactions under the plans is as follows: (in thousands except for per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------

                                                         1988 OPTION PLAN                         1995 OPTION PLAN
                                                ----------------------------------------------------------------------------------
                                                         NUMBER OF SHARES                         NUMBER OF SHARES
                                                  (WEIGHTED AVERAGE OPTION PRICE)          (WEIGHTED AVERAGE OPTION PRICE)
                                                ----------------------------------------------------------------------------------
                                                    1998         1997        1996          1998           1997         1996
                                                ----------------------------------------------------------------------------------
                                                                                                           
Outstanding, Beginning of Year.................        199         251         267           324            195           --
                                                   $(18.49)    $(18.63)    $(18.66)      $(14.88)       $(14.92)          --
Granted........................................         --          --          --         1,036            145          199
                                                        --          --          --       $(15.33)       $(14.82)     $(14.93)
Exercised                                               --          --          --            --             --           --
                                                        --          --          --            --             --           --
Canceled/Terminated............................         13          52          16            37             16            4
                                                   $(18.59)    $(19.14)    $(19.13)      $(15.62)       $(14.96)     $(15.13)
Canceled/Reissued..............................         --          --          --           442             --           --
                                                        --          --          --       $(15.94)            --           --
Outstanding, End of Year.......................        186         199         251           881            324          195
                                                   $(18.49)    $(18.49)    $(18.63)      $(14.84)       $(14.88)     $(14.92)

                                                      OUTSIDE DIRECTOR'S PLAN                      COMBINED PLANS
                                                ---------------------------------------------------------------------------------
                                                         NUMBER OF SHARES                         NUMBER OF SHARES
                                                  (WEIGHTED AVERAGE OPTION PRICE)          (WEIGHTED AVERAGE OPTION PRICE)
                                                ---------------------------------------------------------------------------------
                                                    1998         1997        1996          1998           1997         1996
                                                ---------------------------------------------------------------------------------
                                                                                                 
Outstanding, Beginning of Year.................         --          --          --           523            446            267
                                                        --          --          --       $(16.25)       $(17.00)       $(18.66)
Granted........................................         70          --          --         1,106            145            199
                                                   $(14.63)         --          --       $(15.28)       $(14.82)       $(14.93)
Exercised                                               --          --          --            --             --             --
                                                        --          --          --            --             --             --
Canceled/Terminated............................         --          --          --            50             68             20
                                                        --          --          --       $(16.36)       $(18.16)       $(18.34)
Canceled/Reissued..............................         --          --          --           442             --             --
                                                        --          --          --       $(15.94)            --             --
Outstanding, End of Year.......................         70          --          --         1,137            523            446
                                                   $(14.63)         --          --       $(15.42)       $(16.25)       $(17.00)

- --------------------------------------------------------------------------------
32

   35

NOTE 9 -- STOCK OPTION PLANS (Continued)

The Company has reserved 112,375 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 $15.60 and $20.00 per share with a weighted average price of $18.49 per
share and a weighted remaining average contractual life at July 31, 1998 of 4.19
years. As of July 31, 1998, 149,066 options were exercisable.

The exercise price of options outstanding under the Outside Director's Stock
Plan is $14.63 with a contractual life of 9.9 years. None of these options are
exercisable at July 31, 1998.

Exercise prices of the options outstanding under the 1995 Long Term Incentive
Plan range between $13.63 and $17.63 per share with a weighted average exercise
price of $14.84 per share and a weighted remaining average contractual life of
9.03 years at July 31, 1998. 43,750 of these options are exercisable as of July
31, 1998. See Note 15 regarding the cancellation and reissuance of these
options.

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, 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:

(in thousands except for per share amounts)
- -----------------------------------------------------------------------------
                                            ---------------------------------
                                                1998       1997       1996
                                            ---------------------------------
                                                              
Net income as reported ....................    $4,723     $6,793     $3,374
   pro forma ..............................    $4,430     $6,651     $3,311
Net income per share as reported ..........    $  .77     $ 1.03     $  .50
   pro forma ..............................    $  .72     $ 1.01     $  .49

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, 1998, 1997 and 1996, respectively: Dividend yields
of 2.1%, 2.1% and 2.2%; volatility of 25.6%, 25.7% and 26.0%; risk-free interest
rates of 5.7%, 6.0% and 6.2%; and an expected life of 5 years for all three
years. The weighted average fair value of the options granted was $4.55, $4.22
and $4.28 for the fiscal years ended July 31, 1998, 1997 and 1996, respectively.
The fair value method of accounting has not been applied for options granted
prior to August 1, 1995.

                                                                           

- --------------------------------------------------------------------------------
                                                                              33

   36

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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: (in thousands)
- --------------------------------------------------------------------------------

                                                      ---------------------------------------
                                                       1998            1997           1996
                                                      ---------------------------------------
                                                                           
Service cost.......................................   $   438        $   348        $   349
Interest cost on projected benefit obligations.....       538            441            427
Earnings on plan assets............................    (1,060)        (1,892)          (561)
Net amortization and deferral......................       422          1,427            154
                                                      ---------------------------------------
Net pension cost...................................   $   338        $   324        $   369
                                                      =======        =======        =========

- --------------------------------------------------------------------------------
The funded status of the plans at July 31 is as follows: (in thousands)
- --------------------------------------------------------------------------------

                                                                                           --------------------------
                                                                                                1998           1997
                                                                                           --------------------------
                                                                                                      
Actuarial Present Value of Benefit Obligations                                       
   Accumulated Benefit Obligations                                                   
   Vested.................................................................................    $  6,320      $  4,711
   Nonvested..............................................................................         374           446
                                                                                              -----------------------
     Total Accumulated Benefit Obligations................................................    $  6,694      $  5,157
                                                                                              ========      =========
   Projected Benefit Obligations..........................................................    $  8,943      $  6,565
Plan Assets at Fair Value.................................................................       8,524         7,546
                                                                                              -----------------------
   (Deficiency) Excess of Plan Assets (Under) Over Projected Benefit Obligations..........      (  419)          981
Unrecognized Net Gain.....................................................................      (1,267)     (  2,361)
Unrecognized Prior Service Cost...........................................................         626           535
Unrecognized Net Excess Plan Assets as of August 1, 1987 Being                       
   Recognized Principally Over 21 Years...................................................      (  264)      (   291)
Adjustment Required to Recognize Minimum Liability........................................      (  247)           --
                                                                                              -----------------------
Accrued Pension Included in Noncurrent Liabilities - Other................................    $ (1,571)      $(1,136)
                                                                                              ========       =======

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

34
   37

NOTE 10 -- EMPLOYEE BENEFIT PLANS (Continued)

Assumptions used in the previous calculations are as follows:

                                                 ------------------
                                                    1998     1997
                                                 ------------------
                                                       
Discount rate ..................................    7.0%     7.5%
Rate of increase in compensation levels ........    5.0%     5.0%
Long-term expected rate of return 
on assets ......................................    8.0%     8.0%

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, 1998, 1997 and 1996, the Company maintained a
profit sharing/401(k) savings plan under which the Company matches a portion of
employee contributions. The plan is available to essentially all domestic
employees. The Company's contributions to this plan, and to similar plans
maintained by the Company's foreign subsidiaries, were approximately $226,000,
$175,000 and $141,000 for fiscal years 1998, 1997 and 1996, respectively.

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

NOTE 11 --  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 best can 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 12 --  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 1998, 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 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, 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.

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, 1998:

(in thousands)

                                                                
1999 ...........................................................   $ 2,826
2000 ...........................................................     2,148
2001 ...........................................................     1,718
2002 ...........................................................     1,170
2003 ...........................................................     1,067
Later years                                                          4,952
                                                                   -------
                                                                   $13,881
                                                                   =======

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: (in thousands)

                                             ------------------------------
                                              1998        1997       1996
                                             ------------------------------
                                                           
Transportation equipment...................  $2,347      $2,734     $3,770 
Office facilities..........................     441         382        377 
Mining properties                                                          
   Minimum.................................     202         177        168 
   Contingent..............................     403         361        239 
Other......................................     488         654        688 
                                             ------------------------------ 
                                             $3,881      $4,308     $5,242 
                                             ======      ======     =======

- --------------------------------------------------------------------------------
                                                                              35
   38

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 -- OTHER CASH FLOW INFORMATION

Cash payments for interest and income taxes for the years ended July 31 were as follows: (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------

                                                                                ----------------------------------------------
                                                                                     1998           1997           1996
                                                                                ----------------------------------------------
                                                                                                     
Interest................................................................            $1,398         $1,557         $1,706
                                                                                   ========       ========       ========

Income Taxes............................................................            $2,624         $3,997         $1,353
                                                                                   ========       ========       ========

NOTE 14 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected information for 1998 and 1997 is as follows: (in thousands except per share amounts)
- ------------------------------------------------------------------------------------------------------------------
                                                                                    FISCAL 1998 QUARTER ENDED
                                                             ---------------------------------------------------------------
                                                                OCT. 31       Jan. 31      April 30      July 31     Total
                                                             ---------------------------------------------------------------
                                                                                                    
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................................    $   0.30      $ (0.02)     $   0.23      $  0.26    $   0.77
Dividends Paid Per Common Share............................    $   0.08      $  0.08      $   0.08      $  0.08    $   0.32
Dividends Paid Per Class B Share...........................    $   0.06      $  0.06      $   0.06      $  0.06    $   0.24
Company Common Stock Price Range:
   High....................................................    $ 18 1/8      $17 7/8      $ 17          $16
   Low.....................................................    $ 16 3/8      $14 1/8      $ 14 5/8      $13 5/8

                                                                                    FISCAL 1997 QUARTER ENDED
                                                             ----------------------------------------------------------------
                                                                Oct. 31       Jan. 31      April 30      July 31       Total
                                                             ----------------------------------------------------------------
Net Sales..................................................    $ 40,525      $42,792      $ 36,002      $37,297      $156,616
Gross Profit...............................................    $ 12,292      $13,635      $ 10,064      $11,938      $ 47,929
Net Income.................................................    $  1,930      $ 2,264      $  1,164      $ 1,435      $  6,793
Net Income Per Share.......................................    $   0.29      $  0.34      $   0.18      $  0.22      $   1.03
Dividends Paid Per Common Share............................    $   0.08      $  0.08      $   0.08      $  0.08      $   0.32 
Dividends Paid Per Class B Share...........................    $   0.06      $  0.06      $   0.06      $  0.06      $   0.24
Company Common Stock Price Range:
   High....................................................    $ 15 1/4      $17 1/8      $ 17 3/4      $17 5/8
   Low.....................................................    $ 13 1/4      $12 3/4      $ 15 1/2      $15 3/8

NOTE 15 -- SUBSEQUENT EVENT

On September 18, 1998, the Company approved the cancellation and reissuance of
all the outstanding options granted under the Oil-Dri Corporation of America
1995 Long Term Incentive Plan. A total of 880,625 outstanding options under the
plan were repriced at the closing market price of $11.25 per share on September
18, 1998.

As discussed in Note 9, the Company has elected to continue to account for stock
based compensation under the intrinsic value method under APB Opinion No. 25 and
adopted the disclosure-only provisions of SFAS No. 123. Consequently, no
compensation expense will be recognized for stock options, since they were
granted at the market price. Under the Black-Scholes Option Pricing Method the
maximum additional fair value attached to the options due to the repricing is
approximately $702,000, net of tax benefit, and would be recognized over the new
five-year vesting period. The assumptions used in this valuation were similar to
the assumptions used in determining the fair value disclosures for the fiscal
year ended July 31, 1998. In addition, it was assumed that all participants
would elect to reprice their individual options outstanding.

- --------------------------------------------------------------------------------
36

   39

                         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 July31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended July 31, 1998. 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, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1998 in conformity with generally accepted accounting principles.

BLACKMAN KALLICK BARTELSTEIN, LLP
Chicago, Illinois

September 18, 1998

                                                                              37

   40

              BOARD OF DIRECTORS o OFFICERS o SENIOR MANAGEMENT

BOARD OF DIRECTORS
Richard M. Jaffee, Chairman
Daniel S. Jaffee, President and Chief Executive Officer
Robert D. Jaffee, Retired Chairman of the Board, Amco Corporation
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, Inc.
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 Executive Leasing, Inc., 
 Commissioner of Baseball

OFFICERS
Richard M. Jaffee, Chairman
Daniel S. Jaffee, President and Chief Executive Officer
Joseph C. Miller, Vice-Chairman
Michael L. Goldberg, Executive Vice-President and Chief Financial Officer
Thomas F. Cofsky, Vice-President, Logistics, Quality & Service
Brian P. Curtis, General Counsel and Secretary
Norman B. Gershon, Vice-President, International Operations, Managing Director,
 Oil-Dri S.A.
Richard V. Hardin, Group Vice-President, Technology
Daniel J. Jones, Vice-President, Oil-Dri, Canada
Steven M. Levy, Vice-President and General Manager, Consumer Products Group
Richard L. Pietrowski, Treasurer
William O. Thompson, Vice-President, Manufacturing

SENIOR MANAGEMENT
Wade R. Bradley, General Manager, Industrial & Environmental Products Group
Karen Jaffee Cofsky, Director, Human Resources
Sam J. Colello, Director, Information Systems
Fred G. Heivilin, Vice-President, Raw Materials Development
James F. Japczyk, Corporate Controller
Richard D. Johnsonbaugh, Eastern Regional Manager, Manufacturing
Eugene W. Kiesel, Vice-President and General Manager, Global Fluids 
 Purification Products Group
Michael A. Komenda, Vice-President, Human Resources
Jeffrey M. Libert, Vice-President, Corporate Development & Planning
Kelly A. McGrail, Director, Investor Relations & Corporate Communications
John D. McMaster, Western Regional Manager, Manufacturing
E. Thomas Rutherford, General Manager, Agricultural Products Group

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

38

   41

                              INVESTOR INFORMATION

INVESTOR INQUIRIES
Securities analysts, portfolio managers and representatives of financial
institutions seeking information about the corporation should contact Kelly
McGrail, Director of Investor Relations, at Oil-Dri's corporate headquarters.

Stockholders with inquiries related to stockholder records, stock transfers,
change of ownership, change of address, or dividend payments should contact the
company's registrar and transfer agent:

Harris Trust and Savings Bank
Shareholder Services Department
311 W. Monroe, 11th Floor
Chicago, Illinois 60690-9502
(312) 461-3309

STOCK LISTING
Oil-Dri Corporation of America's Common Stock is listed under the ticker symbol
ODC on the New York Stock Exchange. The corporation's daily trading activity,
stock price and dividend information are in the financial sections of most major
newspapers. Stock prices are also available on the company's web site at
WWW.OILDRI.COM.

ANNUAL MEETING
Oil-Dri Corporation of America will hold its 1998 annual meeting of stockholders
on Tuesday, December 8, 1998 at 10:30 a.m. (Central Time) at the Standard Club,
320 South Plymouth Court, Chicago, Illinois.

INDEPENDENT PUBLIC ACCOUNTANTS
Blackman Kallick Bartelstein, LLP

LEGAL COUNSEL
Sonnenschein Nath & Rosenthal

Forward-Looking Statements: When used in this report, the words "expect",
"believe", "should", "would" and similar expressions which are not historical
are intended to identify forward-looking. These forward-looking statements are
subject to uncertainties, which include, without limitation, the integration of
acquisitions, the realization of cost savings, the degree of success of new
products, changes in market conditions and the overall economy, and other
factors detailed from time to time in the company's annual report and reports
filed with the Securities and Exchange Commission.

                                                                              39

   42

                             Investor Information

CORPORATE HEADQUARTERS
Oil-Dri Corporation of America
410 North Michigan Avenue, Suite 400
Chicago, Illinois 60611-4211
(312) 321-1515

OIL-DRI SUBSIDIARIES
Oil-Dri Corporation of Georgia
Georgia, U.S.A.

Oil-Dri, Mounds Production Company, LLC
Illinois, U.S.A.

Oil-Dri Production Company
Mississippi and Oregon, U.S.A.

Oil-Dri S.A.
Coppet, Switzerland

Oil-Dri U.K. Limited
Wisbech, United Kingdom

Blue Mountain Production Company
Mississippi, U.S.A.

Oil-Dri, Canada
Quebec, Canada

Phoebe Products Company
Wisconsin, U.S.A.

CREDITS
ILLUSTRATIONS: Scott Roberts

PRODUCED BY: Kelly McGrail, Director, Investor Relations and Corporate 
             Communications
DESIGN: Lee Ann Jaffee Design Associates, Inc.

40

   1

Exhibit 21

                           SUBSIDIARIES OF THE COMPANY

                                                         State or Country
Subsidiary                                               of Incorporation
- ----------                                               ----------------
Oil-Dri Corporation of Georgia                           Georgia
Oil-Dri Production Company                               Mississippi
Mounds Production Company, L.L.C.                        Delaware
Oil-Dri, S.A                                             Switzerland
Favorite Products Company, Ltd.                          Canada
Blue Mountain Production Co.                             Mississippi
Oil-Dri (U.K.) Limited                                   United Kingdom
Ochlocknee Holding Co., S.A                              Spain
Ochlocknee Mining Co., S.A                               Spain
Oil-Dri Corporation of Nevada                            Nevada
Phoebe Products Company                                  Delaware
Mounds Management, Inc.                                  Delaware
B.T. Acquisition Company                                 Illinois

                                      -78-

   1

EXHIBIT 23

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or by incorporation by reference
made a part of the Annual Report on Form 10-K of Oil-Dri Corporation of America
for the fiscal year ended July 31, 1998 and the Registration Statement of Form
S-8 relating to the Oil-Dri Corporation of America Stock Option Plan.

Blackman Kallick Bartelstein, LLP

October 19, 1998

                                      -79-

  

 5

                   12-MOS
                          JUL-31-1998
                               JUL-31-1998
                                       9,410,000
                                 1,173,000
                               23,859,000
                                 (351,000)
                                 13,258,000
                            53,609,000
                                     126,378,000
                              63,493,000
                             134,215,000
                       17,326,000
                                     39,976,000
                                0
                                          0
                                       724,000
                                  71,084,000
               134,215,000
                                    160,252,000
                           160,252,000
                                      110,096,000
                              110,096,000
                            41,499,000
                                 2,000
                           2,049,000
                              6,606,000
                                 1,883,000
                          4,723,000
                                       0
                                      0
                                            0
                                 4,723,000
                                    $0.77
                                    $0.77