SAN DIEGO, Nov. 7 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported its fourth-quarter earnings and announced record sales for the fiscal year ended August 31, 2005.
Net sales for the year were $263.2 million, an increase of 8.6% over $242.5 million last year, a record for the Company. Net income for the year was $27.8 million compared to $25.6 million last year, an increase of 8.4%.
Earnings per share for the year grew 10.4% to $1.65 compared to $1.50 per share last year.
Net sales for the fourth quarter were $76.3 million, an increase of 6.4% from sales of $71.7 million in the fourth quarter last year.
Net income for the fourth quarter was $10.5 million, an increase of 17.7% over the same period last year. Earnings per share for the quarter were $0.63 compared to $0.53 for the prior year's quarter.
"Our focus on innovation and the introduction of new products allowed us to continue to perform even though we had some real challenges due to the increases in cost of goods that have plagued many manufacturers," said Garry O. Ridge, WD-40 Company president and chief executive officer. "While it is difficult to predict increases in the cost of goods and when they will occur, our plan is to continue to manage expenses while we invest in the long-term growth of our brands."
In fiscal year 2006, WD-40 Company expects net sales to grow 9%-14% to $288-$299 million.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 123-R, "Share-Based Payment," the company will begin expensing stock options in the first quarter of fiscal 2006. Stock options expense after tax is expected to range between $1.0-$1.3 million for 2006 which would reduce earnings per share by $0.06 to $0.08. After-tax stock options expense in 2005 would have been $1.2 million or $0.06 per share and $1.0 million or $0.05 per share in 2004.
WD-40 Company expects net income of $24.7 - $28 million in 2006, achieving earnings per share between $1.47 to $1.64 based on an estimated 17 million shares outstanding. This includes the 6-8 cent per share incremental impact of stock options expense.
"Our plan is to continue the innovation path we started down several years ago and we have a few products in the pipeline that will be coming to market, but we do not yet know if they will be ready to launch in 2006," Ridge said. "It is also prudent to continue R&D efforts and ramp up marketing for some of the new products we launched in 2005, including the WD-40 Smart Straw, the WD-40 No-Mess Pen and Spot Shot Trigger, as we continue to gain distribution.
"We will give a more strategic overview of our plans in our earnings call and at future investor meetings and will be updating our guidance as the year develops," Ridge said.
As previously announced, the board of directors of WD-40 Company declared a regular quarterly dividend on October 6, 2005, of $0.22 per share, payable October 28, 2005 to stockholders of record on October 17, 2005.
Total sales for the quarter were 67% from the Americas, 25% from Europe and 8% from Asia/Pacific.
In the Americas, sales for the fourth quarter were up 11.1% from a year ago and up 6.0% on a year-to-date basis. In Europe, sales were up 4.6% for the fourth quarter and up 18.5% for the year.
"The 1001 brand continues to track as we intended and we had solid growth in the brand during the year, including the launch of new products under the 1001 brand name," Ridge said.
In the Asia/Pacific region, sales for the fourth quarter were down 18.5% from last year and sales for the year were up 0.8% over the comparable period last year.
Global sales of the lubricants WD-40 and 3-IN-ONE Oil(R) in the fourth quarter were $50.8 million, up 9.1%, and $174.1 million for the year, up 10.2%.
"This is the third year in a row where we have grown our lubricant business by more than 8% across the globe," Ridge said.
Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 3.3% to $1.9 million for the fourth quarter, and for the year were $6.9 million, up 4.0%.
Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were $23.6 million during the fourth quarter, up 1.8%, and were $82.2 million year to date, up 5.5% from last year.
WD-40 Company also reported that return on invested capital (ROIC) grew to 18.4% in 2005 compared to 17.0% last fiscal year.
WD-40 Company, with headquarters in San Diego, is a global consumer products company dedicated to building brand equities that are first or second choice in their respective categories. The company will leverage and build the brand fortress of WD-40 Company by developing and acquiring brands that deliver a unique high value to end users and that can be distributed across multiple trade channels in one or more areas of the world. WD-40 Company produces multi-purpose lubricants, WD-40(R), and 3-IN-ONE(R), the Lava(R) and Solvol(R) brands of heavy-duty hand cleaners, and household products 2000 Flushes(R), X-14(R), Carpet Fresh(R), Spot Shot(R) and 1001(R). WD-40 Company markets its products in more than 160 countries worldwide and recorded sales of $263.2 million in 2005. Additional information about WD-40 Company can be obtained online at www.wd40.com.
Except for the historical information contained herein, this news release contains forward-looking statements concerning WD-40 Company's outlook for sales, earnings, dividends and other financial results. These statements are based on an assessment of a variety of factors, contingencies and uncertainties considered relevant by WD-40 Company. Forward-looking statements involve risks and uncertainties, which cause actual results to differ materially from the forward-looking statements, including impact of cost of goods, the impact of new product introductions and the uncertainty of market conditions, both in the United States and internationally. The company's expectations, beliefs and projections are expressed in good faith and are believed by the company to have a reasonable basis, but there can be no assurance that the company's expectations, beliefs or projections will be achieved or accomplished.
The risks and uncertainties are detailed from time to time in reports filed by WD-40 Company with the SEC, including Forms 8-K, 10-Q, and 10-K, and readers are urged to carefully review these and other documents.
WD-40 Company
Consolidated Condensed Statements of Income
Three Months Ended Fiscal Year Ended
August 31, August 31,
2005 2004 2005 2004
Net sales $76,314,000 $71,704,000 $263,227,000 $242,467,000
Cost of
products
sold(1) 38,388,000 35,308,000 133,833,000 116,944,000
Gross profit 37,926,000 36,396,000 129,394,000 125,523,000
Operating
expenses:
Selling,
general
and
administrative 15,992,000 15,797,000 63,529,000 58,311,000
Advertising
and sales
promotion 4,534,000 5,167,000 17,893,000 21,539,000
Amortization
of intangible
assets 134,000 135,000 552,000 224,000
Income from
operations 17,266,000 15,297,000 47,420,000 45,449,000
Other income
(expense):
Interest
expense, net (1,097,000) (1,507,000) (5,133,000) (6,387,000)
Other income
(expense), net 119,000 (58,000) 578,000 (209,000)
Income before
income taxes 16,288,000 13,732,000 42,865,000 38,853,000
Provision for
income taxes 5,765,000 4,794,000 15,067,000 13,210,000
Net income $10,523,000 $8,938,000 $27,798,000 $25,643,000
Earnings per
common
share:
Basic $0.63 $0.53 $1.67 $1.52
Diluted $0.63 $0.53 $1.65 $1.50
Weighted-average
common shares
outstanding,
basic 16,679,664 16,788,269 16,629,057 16,905,587
Weighted-average
common shares
outstanding,
diluted 16,810,508 16,935,419 16,807,399 17,118,829
Dividends
declared per
share $0.22 $0.20 $0.84 $0.80
(1) Includes cost of products acquired from related party of $10,702,000
and $10,120,000 for the three months ended August 31, 2005 and 2004,
respectively; and $38,384,000 and $36,615,000 for the years ended
August 31, 2005 and 2004, respectively.
WD-40 Company
Consolidated Condensed Balance Sheets
August 31, August 31,
2005 2004
Assets
Current assets:
Cash and cash equivalents $37,120,000 $29,433,000
Trade accounts receivable, less allowance
for cash discounts, returns and doubtful
accounts of $1,506,000 and $1,440,000 44,487,000 40,643,000
Product held at contract packagers 1,814,000 1,975,000
Inventories 8,041,000 6,322,000
Current deferred tax assets, net 2,946,000 2,830,000
Other current assets 6,784,000 3,026,000
Total current assets 101,192,000 84,229,000
Property, plant and equipment, net 8,355,000 7,081,000
Goodwill 95,858,000 95,832,000
Other intangibles, net 42,884,000 43,428,000
Investment in related party 1,112,000 932,000
Other assets 4,852,000 5,273,000
$254,253,000 $236,775,000
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $10,714,000 $10,000,000
Accounts payable 13,671,000 11,910,000
Accounts payable to related party 1,945,000 1,926,000
Accrued liabilities 14,058,000 12,151,000
Accrued payroll and related expenses 3,828,000 3,935,000
Income taxes payable 2,484,000 2,613,000
Total current liabilities 46,700,000 42,535,000
Long-term debt 64,286,000 75,000,000
Deferred employee benefits and other
long-term liabilities 1,838,000 1,969,000
Long-term deferred tax liabilities, net 11,363,000 4,853,000
Total liabilities 124,187,000 124,357,000
Shareholders' equity:
Common stock, $.001 par value,
36,000,000 shares authorized -- 17,222,410
and 17,089,015 shares issued 17,000 17,000
Paid-in capital 52,990,000 49,616,000
Unearned stock-based compensation (136,000) --
Retained earnings 89,983,000 76,152,000
Accumulated other comprehensive income 2,238,000 1,659,000
Common stock held in treasury, at cost
(534,698 shares) (15,026,000) (15,026,000)
Total shareholders' equity 130,066,000 112,418,000
$254,253,000 $236,775,000
WD-40 Company
Consolidated Condensed Statements of Cash Flows
Year Ended August 31,
2005 2004
Cash flows from operating activities:
Net income $27,798,000 $25,643,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 3,007,000 2,369,000
Gains on sales and disposals of
property and equipment (24,000) (49,000)
Deferred income tax expense 3,474,000 4,504,000
Tax benefit from exercise of stock
options 377,000 965,000
Equity earnings from related party
in excess of distributions received (180,000) (281,000)
Stock-based compensation 22,000 130,000
Changes in assets and liabilities,
net of assets and liabilities
acquired:
Trade accounts receivable (3,635,000) 3,153,000
Product held at contract packagers 161,000 (271,000)
Inventories (1,655,000) (1,306,000)
Other assets (970,000) (479,000)
Accounts payable and accrued
expenses 3,262,000 74,000
Accounts payable to related party 14,000 (2,758,000)
Income taxes payable (125,000) (321,000)
Deferred employee benefits and
other long-term liabilities 38,000 118,000
Net cash provided by operating
activities 31,564,000 31,491,000
Cash flows from investing activities:
Acquisition of a business -- (11,555,000)
Capital expenditures (3,101,000) (2,358,000)
Proceeds from sales of property and
equipment 162,000 169,000
Proceeds from collections on notes
receivable 50,000 100,000
Net cash used in investing
activities (2,889,000) (13,644,000)
Cash flows from financing activities:
Repayments of long-term debt (10,000,000) (10,000,000)
Proceeds from issuance of common stock 2,839,000 7,914,000
Treasury stock purchases -- (15,026,000)
Dividends paid (13,967,000) (13,559,000)
Net cash used in financing
activities (21,128,000) (30,671,000)
Effect of exchange rate changes on cash
and cash equivalents 140,000 286,000
Increase (decrease) in cash and cash
equivalents 7,687,000 (12,538,000)
Cash and cash equivalents at beginning
of period 29,433,000 41,971,000
Cash and cash equivalents at end of
period $37,120,000 $29,433,000
WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
Three Months Ended Year Ended
August 31, August 31,
2005 2004 2005 2004
Net income $10,523,000 $8,938,000 $27,798,000 $25,643,000
Other comprehensive
income:
Equity adjustment
from foreign
currency
translation,
net of tax (87,000) (192,000) 579,000 1,147,000
Total comprehensive
income $10,436,000 $8,746,000 $28,377,000 $26,790,000
WD-40 Company
Return on Invested Capital
In addition to GAAP measures, WD-40 Company management believes that the quality of business performance can also be illustrated by its Return on Invested Capital (ROIC).
Return on Invested Capital is important to investors because it provides an indication as to how well a company is utilizing the resources invested in a business. Long-term economic value is created by companies with Returns on Invested Capital that exceed the company's weighted average cost of capital
Return on Invested Capital is calculated as follows:
ROIC = Net Operating Profit After Tax divided by Average Total Assets less other cash minus non-interest bearing liabilities
* Net Operating Profit After Tax = Operating Income + Amortization - Tax
* Average Total Assets = (Beginning Total Assets + Ending Total Assets)
divided by 2
* Other Cash = Total Cash - Transactional Cash representing 3% of Annual
Net Sales
* Non-interest bearing Liabilities = Accounts Payable + Accrued
Liabilities + Accrued Payroll & Related + Income Tax Payable
The calculation is illustrated below.
Worldwide FY03 FY04 FY05
Net Sales 238,140 242,467 263,227
Operating Profit 49,752 45,449 47,420
Net Income 28,641 25,643 27,798
Amortization 950 224 552
Tax Rate 34.0% 34.0% 35.2%
NOPAT = Op Inc + Amort after Tax 33,463 30,144 31,110
Total Assets (beginning) 215,045 236,658 236,775
Total Assets (ending) 236,658 236,775 254,253
Total Assets (average) 225,852 236,717 245,514
Cash 41,971 29,433 37,120
Transactional cash 3% of net sales 7,144 7,274 7,897
Other Cash 34,827 22,159 29,223
Non-interest bearing liabilities:
Accounts Payable 14,772 13,836 15,616
Accrued Liabilities 11,999 12,151 14,058
Accrued Payroll & Related 5,122 3,935 3,828
Income Tax Payable 2,780 2,613 2,484
Long-term Deferred Tax -- 4,853 11,363
Total Non-interest Bearing Liabilities: 34,673 37,388 47,349
Return on Invested Capital (ROIC) 21.4% 17.0% 18.4%
SOURCE WD-40 Company
CONTACT:
Garry O. Ridge of WD-40 Company,
+1-619-275-9324
Web site: http://www.wd40.com
(WDFC)