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WD-40 Company Reports Record Sales for Year


SAN DIEGO, Oct. 18 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported its fourth-quarter earnings and announced record sales for the fiscal year ended August 31, 2006.

Net sales for the year were $286.9 million, an increase of 9.0% over $263.2 million last year. Net income for the year was $28.1 million compared to $27.8 million last year, an increase of 1.1%. Earnings per share for the year grew 0.5% to $1.66 compared to $1.65 per share last year. Fiscal year 2006 results include the expensing of stock options, which were not included in previous years. Fiscal year stock options expense, after tax, was $1.3 million or 8 cents per share.

"We are pleased with both our sales progress for the year and the fact that we met or exceeded our annual guidance in all areas," said Garry O. Ridge, WD-40 Company president and chief executive officer. "For the year, we continued to feel the impact from increases in cost of goods as well as our decision to ramp up our investments in marketing and R&D," Ridge added.

Net sales for the fourth quarter were $75.2 million, a decrease of 1.5% from sales of $76.3 million in the fourth quarter last year.

Net income for the fourth quarter was $6.3 million, a decrease of 39.9% compared to the same period last year. Earnings per share for the quarter were $0.37 compared to $0.63 for the prior year's quarter. Stock options expense, after tax, in the fourth quarter was $0.3 million or 2 cents per share.

"Our fourth quarter didn't track along in proportion with our historical sales patterns as a result of the timing of promotions and new product introductions, Ridge said. "We also invested more in marketing to support innovations introduced over the past year. We expect that investment to help our brands going forward."

In fiscal year 2007, WD-40 Company expects net sales to grow 7%-13% to $307-$324 million. WD-40 Company expects net income of $29.1-$31.6 million in 2007, achieving earnings per share between $1.70 to $1.85 based on an estimated 17.1 million shares outstanding. Fiscal year 2007 outlook reflects the impact of the company's move to open a direct operation in China. The investment in China is expected to reduce net income in 2007 by approximately $1.0 million, or 6 cents per share.

"We are pleased to report that we are making great progress in opening our direct operations in China," Ridge said.

"While we continue to look for acquisitions that meet our guidelines for success, we feel the investments we are making in China now are similar to an acquisition, but they impact the P&L, more so than the balance sheet."

As previously announced, the board of directors of WD-40 Company declared a regular quarterly dividend on Friday, October 6, 2006 of 22 cents per share, payable October 31, 2006, to shareholders of record on October 17, 2006.

Total sales for the quarter were 64% from the Americas, 28% from Europe and 8% from Asia/Pacific.

In the Americas, sales for the fourth quarter were down 6.7% from a year ago and up 6.1% on a year-to-date basis.

"We had solid growth for the year in Canada and Latin America, driven by lubricant sales," Ridge said. "US sales growth was spurred by household products."

In Europe, sales were up 10.3% for the fourth quarter and up 15.7% for the year.

"While we continued our strong growth in all of our direct markets in Europe, we also had double-digit growth in our distributor markets in that region," Ridge said. "The success we have had in our European markets clearly demonstrates how investments in building our business in growth markets pays off for the long-term."

In the Asia/Pacific region, sales for the fourth quarter were up 5.1% from comparable period last year and sales for the year were up 12.1% over last year.

Global sales of the lubricants WD-40 and 3-IN-ONE Oil(R) in the fourth quarter were $50.2 million, down 1.2%, and $190.5 million for the year, up 9.4%.

"This is the fourth 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 up 1.6% to $1.9 million for the fourth quarter, and for the year were $6.6 million, down 4.1%.

Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were $23.1 million during the fourth quarter, down 2.3%, and were $89.8 million year to date, up 9.2% from last year.

"We had solid growth for the year across the globe in all of our household products as we continue our strategy of innovation followed by distribution," Ridge said.

"We only see one market, and that is the global marketplace," Ridge said. "That is why we continue to invest in innovations that will not only help maintain our base business, but will also fuel future growth in our existing markets and allow us to enter new markets."

WD-40 Company also reported that its return on invested capital (ROIC) was 17.1% in 2006 compared to 18.4% last fiscal year. Stock options expense in 2006 reduced ROIC by 0.7%.

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 fortress of brands 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 $286.9 million in 2006. 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 fluctuation in advertising and promotion expenditures 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 Operations

                  Three Months Ended August 31,   Fiscal Year Ended August 31,
                        2006          2005          2006            2005

    Net sales        $75,169,000   $76,314,000   $286,916,000    $263,227,000
    Cost of products
     sold (1)         38,778,000    38,388,000    148,516,000     133,833,000

      Gross profit    36,391,000    37,926,000    138,400,000     129,394,000

      general and
      administrative  19,787,000    15,992,000     71,767,000      63,529,000
      and sales
      promotion        5,982,000     4,534,000     20,079,000      17,893,000
      of intangible
      asset              138,000       134,000        532,000         552,000

    Income from
     operations       10,484,000    17,266,000     46,022,000      47,420,000

    Other income
      expense, net      (692,000)   (1,097,000)    (3,503,000)     (5,133,000)
      income, net        (65,000)      119,000        339,000         578,000

    Income before
     income taxes      9,727,000    16,288,000     42,858,000      42,865,000

    Provision for
     income taxes      3,405,000     5,765,000     14,746,000      15,067,000

      Net income      $6,322,000   $10,523,000    $28,112,000     $27,798,000

    Earnings per
     common share:
     Basic                 $0.37         $0.63          $1.67           $1.67

     Diluted               $0.37         $0.63          $1.66           $1.65

     average common
     basic            16,900,319    16,679,664     16,784,473      16,629,057

     average common
     diluted          17,074,942    16,810,508     16,912,355      16,807,399

     declared per
     share                 $0.22         $0.22          $0.88           $0.84

     (1)  Includes cost of products acquired from related party of $9,783,000
          and $10,702,000 for the three months ended August 31, 2006 and 2005,
          respectively; and $41,004,000 and $38,384,000 for the fiscal years
          ended August 31, 2006 and 2005, respectively.

                                WD-40 Company
                    Consolidated Condensed Balance Sheets

                                         August 31, 2006     August 31, 2005

    Current assets:
      Cash and cash equivalents              $45,206,000         $37,120,000
      Trade accounts receivable, less
       allowance for cash discounts,
       returns and doubtful accounts of
       $1,839,000 and $1,506,000              44,491,000          44,487,000
      Product held at contract packagers       1,385,000           1,814,000
      Inventories                             15,269,000           8,041,000
      Current deferred tax assets, net         4,331,000           2,946,000
      Other current assets                     4,858,000           6,784,000

         Total current assets                115,540,000         101,192,000

    Property, plant and equipment, net         8,940,000           8,355,000
    Goodwill                                  96,118,000          95,858,000
    Other intangibles, net                    42,722,000          42,884,000
    Investment in related party                  972,000           1,112,000
    Other assets                               4,183,000           4,852,000
                                            $268,475,000        $254,253,000

                 Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt      $10,714,000         $10,714,000
      Accounts payable                        11,287,000          13,671,000
      Accounts payable to related party          463,000           1,945,000
      Accrued liabilities                     11,678,000          14,058,000
      Accrued payroll and related expenses     7,485,000           3,828,000
      Income taxes payable                     2,040,000           2,484,000

         Total current liabilities            43,667,000          46,700,000

    Long-term debt                            53,571,000          64,286,000
    Deferred employee benefits and other
     long-term liabilities                     1,895,000           1,838,000
    Long-term deferred tax liabilities, net   13,611,000          11,363,000

         Total liabilities                   112,744,000         124,187,000

    Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized --
       17,510,668 and 17,222,410 shares
       issued                                     17,000              17,000
      Paid-in capital                         62,322,000          52,990,000
      Unearned stock-based compensation               --            (136,000)
      Retained earnings                      103,335,000          89,983,000
      Accumulated other comprehensive
       income                                  5,083,000           2,238,000
      Common stock held in treasury, at
       cost (534,698 shares)                 (15,026,000)        (15,026,000)

         Total shareholders' equity          155,731,000         130,066,000
                                            $268,475,000        $254,253,000

                                WD-40 Company
               Consolidated Condensed Statements of Cash Flows

                                                  Fiscal Year Ended August 31,
                                                      2006             2005
    Cash flows from operating activities:
      Net income                                   $28,112,000    $27,798,000
      Adjustments to reconcile net income
       to net cash provided by
       operating activities:
        Depreciation and amortization                3,467,000      3,007,000
        Gains on sales and disposals of
         property and equipment                        (38,000)       (24,000)
        Deferred income tax expense                  1,396,000      3,474,000
        Tax benefit from exercise of stock
         options                                            --        377,000
        Excess tax benefits from exercise
         of stock options                             (503,000)            --
        Distributions received and equity
         losses (earnings) from related
         party, net                                    140,000       (180,000)
        Stock-based compensation                     1,836,000         22,000
        Changes in assets and liabilities:
          Trade accounts receivable                  1,146,000     (3,635,000)
          Product held at contract packagers           429,000        161,000
          Inventories                               (6,889,000)    (1,655,000)
          Other assets                               1,976,000       (970,000)
          Accounts payable and accrued expenses     (1,621,000)     3,262,000
          Accounts payable to related party         (1,481,000)        14,000
          Income taxes payable                         147,000       (125,000)
          Deferred employee benefits and
           other long-term liabilities                  80,000         38,000

             Net cash provided by operating
              activities                            28,197,000     31,564,000

    Cash flows from investing activities:
      Purchases of short-term investments          (31,675,000)            --
      Sales of short-term investments               31,675,000             --
      Proceeds from collections on note
       receivable                                      125,000         50,000
      Capital expenditures                          (2,947,000)    (3,101,000)
      Proceeds from sales of property and
       equipment                                       267,000        162,000

             Net cash used in investing activities  (2,555,000)    (2,889,000)

    Cash flows from financing activities:
      Repayments of long-term debt                 (10,714,000)   (10,000,000)
      Proceeds from issuance of common stock         7,018,000      2,839,000
      Excess tax benefits from exercise of
       stock options                                   503,000             --
      Dividends paid                               (14,760,000)   (13,967,000)

             Net cash used in financing
              activities                           (17,953,000)   (21,128,000)

    Effect of exchange rate changes on
     cash and cash equivalents                         397,000        140,000

    Increase in cash and cash equivalents            8,086,000      7,687,000

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

    Cash and cash equivalents at end of period     $45,206,000    $37,120,000

                                WD-40 Company
          Consolidated Condensed Statements of Comprehensive Income

                   Three Months Ended August 31,  Fiscal Year Ended August 31,
                         2006          2005            2006           2005

    Net income         $6,322,000    $10,523,000    $28,112,000    $27,798,000

     income (loss):
     Equity adjustment
      from foreign
      net of tax        1,387,000        (87,000)     2,845,000        579,000

     income            $7,709,000    $10,436,000    $30,957,000    $28,377,000

                                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 / 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                                  FY04        FY05        FY06
    Net Sales                                242,467     263,227     286,916
    Operating Profit                          45,449      47,420      46,022
    Net Income                                25,643      27,798      28,112
    Amortization                                 224         552         532
    Tax Rate                                    34.0%       35.2%       34.4%
    NOPAT = Op Inc + Amort after Tax          30,144      31,110      30,536
    Total Assets (beginning)                 236,658     236,775     254,253
    Total Assets (ending)                    236,775     254,253     268,475
    Total Assets (average)                   236,717     245,514     261,364
    Cash                                      29,433      37,120      45,206
    Transactional cash 3% of net sales         7,274       7,897       8,607
    Other Cash                                22,159      29,223      36,599
    Non-interest bearing liabilities:
                         Accounts Payable     13,836      15,616      11,750
                      Accrued Liabilities     12,151      14,058      11,678
                Accrued Payroll & Related      3,935       3,828       7,485
                       Income Tax Payable      2,613       2,484       2,040
                   Long-term Deferred Tax      4,853      11,363      13,611
    Total Non-interest Bearing Liabilities:   37,388      47,349      46,564
    Return on Invested Capital (ROIC)           17.0%       18.4%       17.1%

SOURCE WD-40 Company 10/18/2006

CONTACT: Garry Ridge of WD-40 Company, +1-619-275-9324
Web site: http://www.wd40.com (WDFC)
3543 10/18/2006 16:00 EDT http://www.prnewswire.com

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