SAN DIEGO, April 6, 2005 /PRNewswire-FirstCall via COMTEX/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 28, 2005 of $61.1 million, an increase of 4.4% over second quarter last year. Year-to-date net sales were $121.8 million, up 9.7% over the same period last year.
Net income for the second quarter was $5.3 million, down 15.5% compared to the prior year's quarter. Earnings per share were $0.31 in the second quarter, compared to $0.36 per share for the quarter last year. Year-to-date net income was $10.9 million, an increase of 2.6%. Through six months, earnings per share were $0.65 compared to $0.62 in the same period last year.
"We are on track with our performance for the first six months to meet our goals for the year," said Garry O. Ridge, WD-40 Company president and chief executive officer. "Although we've had challenges that we did not anticipate this year, our 'Fortress of Brands' business strategy has given us more ways to win and that is serving us well. We continue to be focused and committed to innovation," said Ridge.
"As expected in the second quarter, we were hit hard by higher cost in manufacturing and freight and our results reflect those higher costs. We are implementing price increases to offset a portion of those costs. At the same time, we are pleased to have our innovation program in place and delivering," Ridge added.
Fiscal Year Guidance
In fiscal year 2005, WD-40 Company still expects net income to increase 5.5% to $27 million, achieving earnings per share of $1.62 based on an estimated 16.7 million shares outstanding.
As previously announced on April 1, 2005, the board of directors of WD-40 Company declared a regular quarterly dividend on March 31, 2005 of $.22 per share, payable April 29, 2005 to stockholders of record on April 18, 2005.
"While we still expect to end the year right where we anticipated, there are several offsetting factors that have changed how we expect to get there," Ridge said. "We are seeing increases in the cost of some raw materials such as steel and oil beyond what we expected, and our costs for compliance related to Sarbanes-Oxley have gone up significantly.
"On the other side, we have also implemented a price increase that will begin to impact us in the third quarter and now expect to begin shipping two new WD-40 product innovations in the fourth quarter, both of which will help offset those increased costs," Ridge added.
Total sales for the quarter were 63% from the Americas, 29% from Europe and 8% from Asia/Pacific. In the Americas, sales for the second quarter were down 3% from a year ago.
"We had a solid quarter in both Latin America and Canada, with both seeing double digit growth over last year," Ridge said. "In the U.S., the lubricant business was strong, but was offset by declines in some of the household products."
In Europe, sales were up 23.6% for the second quarter.
"We continue to do well with the 1001 brand and are gaining distribution of the new 1001 items in the UK," Ridge said. "We also achieved strong results in Italy, Spain, Germany, and the Middle East."
In the Asia/Pacific region, sales for the quarter were up 8.4% from last year.
"Asia/Pacific has done well with new product innovations, and we are gaining distribution with these new products in Australia," Ridge said.
Global sales of the lubricants WD-40(R) and 3-IN-ONE Oil(R) were up 6.7% for the quarter.
"We had increased sales of WD-40 in all three trading blocs and are continuing to gain distribution for the new 3-IN-ONE Professional Line in a number of markets," Ridge said.
Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were up 6.7% for the quarter.
Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001 (R) were down 1.2% compared to the previous year's quarter.
"We are building distribution of the new X-14 products and are pleased with their performance as well as the success we have had with the 1001 brand," Ridge said. "However, we had declines in Spot Shot, Carpet Fresh and 2000 Flushes that offset those successes."
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 $242.5 million in fiscal 2004. 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 impacts of new product introductions and innovations, increases in raw material costs, increases in the cost of compliance 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
(unaudited)
Three Months Ended Six Months Ended
February 28 or 29, February 28 or 29,
2005 2004 2005 2004
Net sales $61,076,000 $58,481,000 $121,764,000 $111,021,000
Cost of products
sold 31,429,000 28,152,000 61,548,000 52,758,000
Gross profit 29,647,000 30,329,000 60,216,000 58,263,000
Operating expenses:
Selling, general
and
administrative 16,741,000 14,042,000 32,112,000 28,176,000
Advertising and
sales promotion 3,448,000 5,092,000 8,709,000 10,533,000
Amortization of
intangible
assets 142,000 -- 277,000 --
Income from
operations 9,316,000 11,195,000 19,118,000 19,554,000
Other income
(expense):
Interest
expense, net (1,230,000) (1,690,000) (2,686,000) (3,306,000)
Other income
(expense), net 7,000 (47,000) 331,000 (138,000)
Income before
income taxes 8,093,000 9,458,000 16,763,000 16,110,000
Provision for
income taxes 2,815,000 3,215,000 5,850,000 5,477,000
Net income $5,278,000 $6,243,000 $10,913,000 $10,633,000
Earnings per
common share:
Basic $0.32 $0.37 $0.66 $0.63
Diluted $0.31 $0.36 $0.65 $0.62
Weighted average
common shares
outstanding,
basic 16,592,465 17,005,812 16,581,919 16,910,978
Weighted average
common shares
outstanding,
diluted 16,806,735 17,254,329 16,766,024 17,159,458
Dividends
declared
per share $0.20 $0.20 $0.40 $0.40
WD-40 Company
Consolidated Condensed Balance Sheets
(unaudited)
February 28, 2005 August 31, 2004
Assets
Current assets:
Cash and cash equivalents $36,029,000 $29,433,000
Trade accounts receivable, less
allowance for cash discounts,
returns and doubtful accounts
of $1,654,000 and $1,440,000 39,093,000 40,643,000
Product held at contract packagers 1,772,000 1,975,000
Inventories 8,150,000 6,322,000
Current deferred tax assets, net 2,873,000 2,830,000
Other current assets 7,812,000 3,026,000
Total current assets 95,729,000 84,229,000
Property, plant and equipment, net 7,778,000 7,081,000
Goodwill 96,156,000 95,832,000
Other intangibles, net 43,646,000 43,428,000
Other assets 6,057,000 6,205,000
$249,366,000 $236,775,000
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $20,714,000 $10,000,000
Accounts payable 14,522,000 13,836,000
Accrued liabilities 12,705,000 12,151,000
Accrued payroll and related expenses 3,283,000 3,935,000
Income taxes payable 945,000 2,613,000
Total current liabilities 52,169,000 42,535,000
Long-term debt 64,286,000 75,000,000
Deferred employee benefits and
other long-term liabilities 1,999,000 1,969,000
Long-term deferred tax liabilities,
net 10,165,000 4,853,000
Total liabilities 128,619,000 124,357,000
Shareholders' equity:
Common stock, $.001 par value,
36,000,000 shares authorized --
17,175,971 and 17,089,015 shares
issued 17,000 17,000
Paid-in capital 51,787,000 49,616,000
Retained earnings 80,435,000 76,152,000
Accumulated other comprehensive
income 3,534,000 1,659,000
Common stock held in treasury,
at cost (534,698 shares) (15,026,000) (15,026,000)
Total shareholders' equity 120,747,000 112,418,000
$249,366,000 $236,775,000
WD-40 Company
Consolidated Condensed Statements of Cash Flows
(unaudited)
Six Months Ended February 28 or 29,
2005 2004
Cash flows from operating activities:
Net income $10,913,000 $10,633,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,440,000 1,126,000
Gains on sales and disposals of
property and equipment (13,000) (50,000)
Deferred income tax expense 4,750,000 1,908,000
Tax benefit from exercise of
stock options 272,000 742,000
Equity earnings in joint venture in
excess of distributions received (22,000) (162,000)
Stock-based compensation -- 23,000
Changes in assets and liabilities:
Trade accounts receivable 2,805,000 7,970,000
Product held at contract packagers 202,000 147,000
Inventories (1,566,000) (826,000)
Other assets (4,725,000) 276,000
Accounts payable and accrued expenses 15,000 (2,269,000)
Income taxes payable (1,704,000) (2,434,000)
Deferred employee benefits and other
long-term liabilities 37,000 156,000
Net cash provided by operating
activities 12,404,000 17,240,000
Cash flows from investing activities:
Capital expenditures (1,231,000) (1,325,000)
Proceeds from sales of property and
equipment 72,000 107,000
Net cash used in investing
activities (1,159,000) (1,218,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 1,899,000 6,548,000
Dividends paid (6,630,000) (6,767,000)
Net cash used in financing
activities (4,731,000) (219,000)
Effect of exchange rate changes on cash
and cash equivalents 82,000 180,000
Increase in cash and cash equivalents 6,596,000 15,983,000
Cash and cash equivalents at beginning
of period 29,433,000 41,971,000
Cash and cash equivalents at end
of period $36,029,000 $57,954,000
WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
(unaudited)
Three Months Ended Six Months Ended
February 28 or 29, February 28 or 29,
2005 2004 2005 2004
Net income $5,278,000 $6,243,000 $10,913,000 $10,633,000
Other
comprehensive
income:
Equity
adjustment
from foreign
currency
translation,
net of tax 786,000 589,000 1,875,000 1,469,000
Total comprehensive
income $6,064,000 $6,832,000 $12,788,000 $12,102,000
SOURCE WD-40 Company
Garry O. Ridge of WD-40 Company, +1-619-275-9324