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WD-40 Company Reports 10.8% Increase in Third Quarter Net income


SAN DIEGO, July 10 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2006 of $73.1 million, an increase of 12.1% over the third quarter last year. Year-to-date net sales were $211.7 million, up 13.3% over the same period last year.

Net income for the third quarter was $7.0 million, up 10.8% compared to the prior year's quarter. Earnings per share in the third quarter grew to $0.42 compared to $0.38 during the same period last year. Year-to-date net income was $21.8 million, an increase of 26.1% from last year. Through nine months, earnings per share were $1.29 compared to $1.03 for the same period last year, an increase of 25.8%.

"We are pleased with our results through nine months and are on track to meet our expectations for the full year," said Garry O. Ridge, WD-40 Company president and chief executive officer.

Updated Fiscal Year Guidance

In fiscal year 2006, WD-40 Company expects net sales to grow to $285 to $290 million. WD-40 Company has updated the net income guidance and now expects net income for the year to be between $26.4 million and $28.0 million, achieving earnings per share of $1.55 to $1.65 based on an estimated 17 million shares outstanding. Fiscal year 2006 results include the expensing of stock options, which were not included in previous years. Stock options expense, after tax, in the third quarter was $0.2 million or 1 cent per share. Year-to-date stock options expense, after tax, was $1.0 million or 6 cents per share.

"While we expect to see an increase in sales, we also expect to see a continued investment in marketing in the fourth quarter," Ridge said. "We expect full year marketing expense to be in the range of 7.0% to 8.0% of net sales."

The board of directors of WD-40 Company declared a regular quarterly dividend on June 27, 2006 of $0.22 per share, payable July 31, 2006, to stockholders of record on July 17, 2006.

We are still seeing significant impacts from increases in cost of goods, but the price increases we have implemented over the last year have helped offset some of those increases," Ridge said.

Total sales for the quarter were 65% from the Americas, 28% from Europe and 7% from Asia/Pacific.

In the Americas, sales for the third quarter were up 7.9% from a year ago. In Europe, sales were up 22.8% for the third quarter. In the Asia/Pacific region, sales for the quarter were up 13.2% from last year.

"We're pleased to see sales growth across most of our brands as well as across our geographic regions." said Ridge.

Global sales of the lubricants WD-40(R) and 3-IN-ONE Oil(R) were up 13.2% for the quarter.

"We had another strong quarter across the globe in lubricant sales and have seen double digit increases each quarter this fiscal year," Ridge said.

Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 15.9% for the quarter.

Sales of household products X-14(R), Carpet Fresh, 2000 Flushes(R), Spot Shot(R) and 1001 were up 12.3% compared to the previous year's quarter.

"While we continue to face stiff competition in the household products arena, we have been able to achieve consistent growth in our household products brands so far this year," Ridge said.

"We are seeing the sales impact from our innovation program as we move into increasing distribution and building consumer demand for these new product and packaging innovations," Ridge said.

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

WD-40 Company's 10-Q will be filed on July 10, 2006.

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 fiscal 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 global sales trends, impact of cost of goods, the impact of new product innovations and the timing of advertising and sales promotion activities.

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 May 31,   Nine Months Ended May 31,
                          2006          2005           2006          2005

    Net sales         $73,052,000   $65,149,000   $211,747,000   $186,913,000
    Cost of products
     sold(1)           37,633,000    33,897,000    109,738,000     95,445,000

       Gross profit    35,419,000    31,252,000    102,009,000     91,468,000

      general and
      administrative   18,356,000    15,425,000     51,980,000     47,537,000
     Advertising and
      promotion         5,923,000     4,650,000     14,097,000     13,359,000
     Amortization of
      asset               132,000       141,000        394,000        418,000

    Income from
     operations        11,008,000    11,036,000     35,538,000     30,154,000

    Other income
      expense, net       (953,000)   (1,350,000)    (2,811,000)    (4,036,000)
     Other income,
      net                 181,000       128,000        404,000        459,000

    Income before
     income taxes      10,236,000     9,814,000     33,131,000     26,577,000

    Provision for
     income taxes       3,190,000     3,452,000     11,341,000      9,302,000

       Net income      $7,046,000    $6,362,000    $21,790,000    $17,275,000

    Earnings per
     common share:
     Basic                  $0.42         $0.38          $1.30          $1.04

     Diluted                $0.42         $0.38          $1.29          $1.03

     common shares
     basic             16,829,760    16,671,190     16,745,433     16,612,003

     common shares
     diluted           16,969,770    16,885,504     16,857,735     16,806,178

     declared per
     share                  $0.22         $0.22          $0.66          $0.62

    (1) Includes cost of products acquired from related party of $10,775,000
        and $9,730,000 for the three months ended May 31, 2006 and 2005,
        respectively; and $31,221,000 and $27,682,000 for the nine months
        ended May 31, 2006 and 2005, respectively.

                                WD-40 Company
                    Consolidated Condensed Balance Sheets

                                           May 31, 2006    August 31, 2005
    Current assets:
     Cash and cash equivalents              $24,378,000      $37,120,000
     Short-term investments                  20,300,000               --
     Trade accounts receivable, less
      allowance for cash discounts,
      returns and doubtful accounts
      of $1,885,000 and $1,506,000           40,087,000       44,487,000
     Product held at contract packagers       1,488,000        1,814,000
     Inventories                             15,434,000        8,041,000
     Current deferred tax assets, net         4,704,000        2,946,000
     Other current assets                     3,256,000        6,784,000

       Total current assets                 109,647,000      101,192,000

    Property, plant and equipment, net        9,042,000        8,355,000
    Goodwill                                 96,044,000       95,858,000
    Other intangibles, net                   42,753,000       42,884,000
    Investment in related party                 893,000        1,112,000
    Other assets                              4,305,000        4,852,000

                                           $262,684,000     $254,253,000

          Liabilities and Shareholders' Equity

    Current liabilities:
     Current portion of long-term debt      $10,714,000      $10,714,000
     Accounts payable                        12,283,000       13,671,000
     Accounts payable to related party          714,000        1,945,000
     Accrued liabilities                     12,071,000       14,058,000
     Accrued payroll and related expenses     5,296,000        3,828,000
     Income taxes payable                     4,336,000        2,484,000

      Total current liabilities              45,414,000       46,700,000

    Long-term debt                           53,571,000       64,286,000
    Deferred employee benefits and other
     long-term liabilities                    1,958,000        1,838,000
    Long-term deferred tax liabilities, net  12,998,000       11,363,000

      Total liabilities                     113,941,000      124,187,000

    Shareholders' equity:
     Common stock, $.001 par value,
      36,000,000 shares authorized --
      17,425,743 and 17,222,410
      shares issued                              17,000           17,000
     Paid-in capital                         59,326,000       52,990,000
     Unearned stock-based compensation               --         (136,000)
     Retained earnings                      100,730,000       89,983,000
     Accumulated other comprehensive
      income                                  3,696,000        2,238,000
     Common stock held in treasury,
      at cost (534,698 shares)              (15,026,000)     (15,026,000)

        Total shareholders' equity          148,743,000      130,066,000

                                           $262,684,000     $254,253,000

                                WD-40 Company
               Consolidated Condensed Statements of Cash Flows

                                             Nine Months Ended May 31,
                                                2006            2005
    Cash flows from operating activities:
      Net income                            $21,790,000      $17,275,000
      Adjustments to reconcile net
       income to net cash provided by
       operating activities:
         Depreciation and amortization        2,571,000        2,182,000
         Gains on sales and disposals of
          property and equipment                (24,000)         (13,000)
        Deferred income tax expense            (437,000)       5,854,000
        Tax benefit from exercise of
         stock options                               --          354,000
        Excess tax benefits from
         exercise of stock options             (321,000)              --
        Distributions received and equity
         losses (earnings) from related
         party, net                             219,000          (37,000)
        Stock-based compensation              1,396,000           15,000
        Changes in assets and
           Trade accounts receivable          5,283,000        4,995,000
           Product held at contract
            packagers                           326,000          101,000
          Inventories                        (7,029,000)      (1,530,000)
          Other assets                        3,623,000       (2,351,000)
          Accounts payable and accrued
           expenses                          (2,288,000)      (2,164,000)
          Accounts payable to related
           party                             (1,231,000)        (547,000)
          Income taxes payable                2,141,000       (1,998,000)
          Deferred employee benefits and
           other long-term liabilities           78,000          112,000

          Net cash provided by operating
           activities                        26,097,000       22,248,000

    Cash flows from investing activities:
      Purchases of short-term investments   (20,300,000)              --
      Proceeds from collections on notes
       receivable                                50,000               --
      Capital expenditures                   (2,446,000)      (1,996,000)
      Proceeds from sales of property
       and equipment                            210,000           92,000

         Net cash used in investing
          activities                        (22,486,000)      (1,904,000)

    Cash flows from financing activities:
      Repayments of long-term debt          (10,714,000)     (10,000,000)
      Proceeds from issuance of common
       stock                                  4,755,000        2,568,000
      Excess tax benefits from exercise
       of stock options                         321,000               --
      Dividends paid                        (11,043,000)     (10,298,000)

         Net cash used in financing
          activities                        (16,681,000)     (17,730,000)

    Effect of exchange rate changes on
     cash and cash equivalents                  328,000           16,000

    (Decrease) increase in cash and cash
     equivalents                            (12,742,000)       2,630,000

    Cash and cash equivalents at
     beginning of period                     37,120,000       29,433,000

    Cash and cash equivalents at end of
     period                                 $24,378,000      $32,063,000

                                WD-40 Company
          Consolidated Condensed Statements of Comprehensive Income

                         Three Months Ended May 31,  Nine Months Ended May 31,
                             2006        2005          2006         2005

    Net income           $7,046,000   $6,362,000   $21,790,000   $17,275,000

    Other comprehensive
     income (loss):
       Equity adjustment
        from foreign
        net of tax        1,935,000   (1,209,000)    1,458,000       666,000

    Total comprehensive
     income              $8,981,000   $5,153,000   $23,248,000   $17,941,000

SOURCE WD-40 Company
Garry O. Ridge of WD-40 Company,
Web site: http://www.wd40.com

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