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WD-40 Company Reports Third Quarter Earnings

06/29/05

SAN DIEGO, June 29 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2005 of $65.1 million, an increase of 9.1% over the third quarter last year. Year-to-date net sales were $186.9 million, up 9.5% over the same period last year.

Net income for the third quarter was $6.4 million, up 4.8% compared to the prior year's quarter. Earnings per share in the third quarter grew by 8.6% to $0.38. Year-to-date net income was $17.3 million, an increase of 3.4% from last year. Through nine months, earnings per share were $1.03, up 6.2% compared to the same period last year.

"We are pleased that our lubricants, hand cleaners, and household products all achieved sales growth in the third quarter," said Garry O. Ridge, WD-40 Company president and chief executive officer.

While we performed well across the globe in the sales arena, the continuing increases in cost of goods has had a clear impact on the bottom line," said Ridge. "We implemented a price increase in the third quarter that we thought would offset the rise in cost of goods. However, the increases in cost of goods have been impacting us since the beginning of the year and some have continued to go up even more than expected," said Ridge.

Cost of goods increases are mainly attributed to rises in steel for cans as well as petroleum products, which impact the ingredients of some of WD-40 Company products, freight and shipping costs, as well as the cost of plastics that are also used in the company's packaging.

"We had also hoped to see a positive trend in our gross margin, bringing it closer to our historical 50 percent, but that did not happen," Ridge added. "Because of the higher cost of goods, we are not confident that we will see a material increase in our margins through the rest of the fiscal year."

Fiscal Year Guidance

As a result of the higher costs of goods and current sales trends, WD-40 Company has revised its guidance for the full year. In fiscal year 2005, WD-40 Company now expects sales growth of approximately 8% to $260 - $265 million, net income to remain flat at approximately $25 - $26 million, achieving earnings per share of $1.50 - $1.55 based on an estimated 16.8 million shares outstanding.

The board of directors of WD-40 Company declared a regular quarterly dividend on June 28, 2005 of $0.22 per share, payable July 29, 2005, to stockholders of record on July 18, 2005.

The board of directors also announced on June 28, 2005 that Mr. Peter D. Bewley was elected a director of WD-40 Company. Mr. Bewley served as senior vice president, general counsel and corporate secretary of The Clorox Company from 1998 to 2005. He also served as a director and chairman of the audit committee for Access Worldwide Communications Inc. from 1997 to 2001. He worked previously at Novacare, Inc. and Johnson & Johnson.

"We look forward to Mr. Bewley's wealth of knowledge in the consumer packaged goods industry from his many years of experience at The Clorox Company and Johnson & Johnson," Ridge said.

Total sales for the quarter were 67% from the Americas, 26% from Europe and 7% from Asia/Pacific. In the Americas, sales for the third quarter were up 7.2% from a year ago.

"We had strong lubricant sales in the Americas during the quarter as well as increases in heavy duty hand cleaners and household products," Ridge said. "Our investments in innovation have been a major driver within our business, and we have more coming that will have positive impacts across all regions."

In Europe, sales were up 12.5% for the third quarter.

"We have also had growth in lubricants and household product sales in Europe, and are especially proud of the successes we have created with the 1001(R) brand," Ridge said.

In the Asia/Pacific region, sales for the quarter were up 14.4 % from last year.

"Sales were up across all product segments in the Asia/Pacific region as well, led by strong growth in lubricants in Asia and the Carpet Fresh(R) No Vac product in Australia," Ridge said.

Global sales of the lubricants WD-40(R) and 3-IN-ONE Oil(R) were up 8.7% for the quarter.

"We had a strong quarter across the globe in lubricant sales, and are moving the WD-40 Smart Straw (R) and the WD-40 No Mess (R) Pen from the commercialization phase to the launch phase," Ridge said. "We have begun shipping both these products into select global markets during the fourth quarter and will see some results by the end of the year."

Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were up 4.9% for the quarter.

Sales of household products X-14(R), Carpet Fresh, 2000 Flushes(R), Spot Shot(R) and 1001 were up 10.2% compared to the previous year's quarter.

"We had growth in our household products brands in all regions driven by the success of our innovations with 1001 and 2000 Flushes and the two new X-14 products we launched," Ridge said. "We are very pleased with the off-the-shelf performance numbers we have seen with the X-14 Orange Aerosol product and have more innovations in the pipeline across many of our brands."

We are also continuing to look for the right acquisition that meets our guidelines for success," Ridge added.

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 cost of goods, 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 May 31,    Nine Months Ended May 31,
                         2005         2004           2005          2004


     Net sales        $65,149,000  $59,742,000   $186,913,000  $170,763,000
     Cost of products
      sold(1)          33,897,000   28,878,000     95,445,000    81,636,000

       Gross profit    31,252,000   30,864,000     91,468,000    89,127,000

     Operating
      expenses:
      Selling,
       general and
       administrative  15,425,000   14,338,000     47,537,000    42,514,000
      Advertising and
       sales promotion  4,650,000    5,839,000     13,359,000    16,372,000
      Amortization
       of intangible
       assets             141,000       89,000        418,000        89,000

     Income from
      operations       11,036,000   10,598,000     30,154,000    30,152,000

     Other income
      (expense):
      Interest
       expense, net    (1,350,000)  (1,574,000)    (4,036,000)  (4,880,000)
      Other income
       (expense), net     128,000      (13,000)       459,000     (151,000)

     Income before
      income taxes      9,814,000    9,011,000     26,577,000    25,121,000

     Provision for
      income taxes      3,452,000    2,939,000      9,302,000     8,416,000

       Net income      $6,362,000   $6,072,000    $17,275,000   $16,705,000

     Earnings per
      common share:
      Basic                 $0.38        $0.36          $1.04         $0.99

      Diluted               $0.38        $0.35          $1.03         $0.97

     Weighted average
      common shares
      outstanding,
      basic            16,671,190   17,019,026     16,612,003    16,938,416

     Weighted average
      common shares
      outstanding,
      diluted          16,885,504   17,244,931     16,806,178    17,188,710

     Dividends
      declared per
      share                 $0.22        $0.20          $0.62         $0.60

     (1)Includes cost of products acquired from related party of $9,730,000
          and $8,455,000 for the three months ended May 31, 2005 and 2004,
          respectively; and$27,682,000 and $26,495,000 for the nine months
          ended May 31, 2005 and 2004, respectively.



                                WD-40 Company
                    Consolidated Condensed Balance Sheets
                                 (unaudited)

                                              May 31, 2005   August 31, 2004

                                    Assets
     Current assets:
      Cash and cash equivalents               $32,063,000     $29,433,000
      Trade accounts receivable, less
       allowance for cash discounts, returns
       and doubtful accounts of $1,538,000
       and $1,440,000                          36,065,000      40,643,000
      Product held at contract packagers        1,873,000       1,975,000
      Inventories                               7,921,000       6,322,000
      Current deferred tax assets, net          3,343,000       2,830,000
      Other current assets                      5,334,000       3,026,000

       Total current assets                    86,599,000      84,229,000

     Property, plant and equipment, net         7,883,000       7,081,000
     Goodwill                                  95,910,000      95,832,000
     Other intangibles, net                    43,107,000      43,428,000
     Investment in related party                  968,000         932,000
     Other assets                               4,992,000       5,273,000

                                             $239,459,000    $236,775,000

                     Liabilities and Shareholders' Equity

     Current liabilities:
      Current portion of long-term debt       $10,714,000     $10,000,000
      Accounts payable                          8,680,000      11,910,000
      Accounts payable to related party         1,383,000       1,926,000
      Accrued liabilities                      13,869,000      12,151,000
      Accrued payroll and related expenses      3,586,000       3,935,000
      Income taxes payable                        619,000       2,613,000

       Total current liabilities               38,851,000      42,535,000

     Long-term debt                            64,286,000      75,000,000
     Deferred employee benefits and other
      long-term liabilities                     2,020,000       1,969,000
     Long-term deferred tax liabilities, net   11,304,000       4,853,000

       Total liabilities                      116,461,000     124,357,000

     Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized --
       17,209,954 and 17,089,015 shares issued     17,000          17,000
      Paid-in capital                          52,673,000      49,616,000
      Unearned stock-based compensation          (120,000)             --
      Retained earnings                        83,129,000      76,152,000
      Accumulated other comprehensive income    2,325,000       1,659,000
      Common stock held in treasury, at cost
       (534,698 shares)                       (15,026,000)    (15,026,000)

       Total shareholders' equity             122,998,000     112,418,000

                                             $239,459,000    $236,775,000



                                WD-40 Company
               Consolidated Condensed Statements of Cash Flows
                                 (unaudited)


                                                   Nine Months Ended May 31,
                                                   2005               2004
     Cash flows from operating activities:
      Net income                                $17,275,000       $16,705,000
      Adjustments to reconcile net income to
       net cash provided by operating
       activities:
        Depreciation and amortization             2,182,000         1,703,000
        Gains on sales and disposals of
         property and equipment                     (13,000)          (68,000)
        Deferred income tax expense               5,854,000         2,504,000
        Tax benefit from exercise  of stock
         options                                    354,000           822,000
        Equity earnings from related party in
         excess of distributions received           (37,000)         (168,000)
        Stock-based compensation                     15,000           130,000
        Changes in assets and liabilities, net of
         assets and liabilities acquired:
          Trade accounts receivable               4,995,000        10,557,000
          Product held at contract packagers        101,000           (59,000)
          Inventories                            (1,530,000)       (1,416,000)
          Other assets                           (2,351,000)        1,049,000
          Accounts payable and accrued expenses  (2,164,000)       (4,238,000)
          Accounts payable to related party        (547,000)       (2,461,000)
          Income taxes payable                   (1,998,000)       (1,800,000)
          Deferred employee benefits and other
           long-term liabilities                    112,000           197,000

            Net cash provided by operating
             activities                          22,248,000        23,457,000

     Cash flows from investing activities:
      Acquisition of a business                          --       (11,545,000)
      Capital expenditures                       (1,996,000)       (2,017,000)
      Proceeds from sales of property and
       equipment                                     92,000           160,000

        Net cash used in investing activities    (1,904,000)      (13,402,000)

     Cash flows from financing activities:
      Repayments of long-term debt              (10,000,000)      (10,000,000)
      Proceeds from issuance of common stock      2,568,000         7,775,000
      Treasury stock purchases                           --        (5,184,000)
      Dividends paid                            (10,298,000)      (10,183,000)

        Net cash used in financing activities   (17,730,000)      (17,592,000)

     Effect of exchange rate changes on cash
      and cash equivalents                           16,000           214,000

     Increase (decrease) in cash and cash
      equivalents                                 2,630,000        (7,323,000)

    Cash and cash equivalents at beginning
      of period                                  29,433,000        41,971,000

     Cash and cash equivalents at end of
      period                                    $32,063,000       $34,648,000



                                WD-40 Company
          Consolidated Condensed Statements of Comprehensive Income
                                 (unaudited)

                    Three Months Ended May 31,   Nine Months Ended May 31,
                        2005          2004          2005           2004

    Net income        $6,362,000    $6,072,000   $17,275,000    $16,705,000

    Other
     comprehensive
     income:
      Equity
       adjustment
       from foreign
       currency
       translation,
       net of tax     (1,209,000)     (130,000)      666,000      1,339,000

    Total
     comprehensive
     income           $5,153,000    $5,942,000   $17,941,000    $18,044,000
SOURCE WD-40 Company
06/29/2005
CONTACT: Garry O. Ridge of WD-40 Company, +1-619-275-9324
Web site: http://www.wd40.com

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