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WD-40 Company Reports 6.2% Increase in Third Quarter Sales and 8.5% Increase in Third Quarter Net Income

07/09/07

SAN DIEGO, July 9 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2007 of $77.6 million, an increase of 6.2% over the third quarter last year. Year-to-date net sales were $228.9 million, up 8.1% over the same period last year.

Net income for the third quarter was $7.6 million, up 8.5% compared to the prior year's quarter. Earnings per share in the third quarter grew to $0.44 compared to $0.42 during the same period last year. Year-to-date net income was $22.3 million, an increase of 2.2% from last year. Through nine months, earnings per share were $1.29, even with last year.

Summary

  • Net sales increased 6.2% to $77.6 million for the third quarter. Year-to-date net sales grew 8.1% to $228.9 million.
  • Third quarter lubricant sales were $56.5 million, up 15.9%, and $162.2 million for the first nine months, up 15.6%. Household products sales for the quarter were $19.4 million, down 14.9%, and were $62.1 million year to date, down 7.0%. Third quarter heavy-duty hand cleaner sales were $1.7 million, up 12.4%, and $4.6 million through nine months, down 2.8%.
  • Americas region third quarter sales were down 2.5% from a year ago and are up 0.8% for the year. Europe sales for the third quarter were up 23.3% and are up 23.5% for the year. Asia/Pacific region sales for the third quarter were up 17.3% from last year and are up 15.5% for the year. -- Net income for the third quarter grew 8.5% to $7.6 million. Year to date net income was up 2.2% at $22.3 million.

 

"We are pleased with the sales growth in Asia-Pacific and Europe driven by our lubricants and household products brands," said Garry Ridge, WD-40 Company president and CEO. "We have achieved strong sales increase in Australia, the Asian region, and across Europe through a combination of new distribution, expanded distribution, and new product growth. While those markets continue to show promise, we are also facing ongoing challenges in our household products business in the US."

Updated Fiscal Year Guidance

In fiscal year 2007, WD-40 Company now expects net sales to grow 7%-9% to $307-$313 million. The company expects net income of $29.1-$30.2 million in 2007, achieving earnings per share of $1.70 to $1.75 based on an estimated 17.3 million shares outstanding. The fiscal year 2007 outlook reflects the impact of the company's move to open a direct operation in China. Results from the first year of direct operations in China are expected to reduce net income in 2007 by approximately $0.6 million, or 4 cents per share.

Financial Highlights

Third quarter gross margin was 47.5% of sales compared to 48.5% in the period last year reflecting higher underlying cost of goods as well a change in product mix. Through nine months, gross margin was 48.2%, equal with the same period last year.

"We continue to be concerned about rising costs of components and raw materials," Ridge said, "and we are working to improve our gross margin over time."

Advertising and sales promotion expenses were down 12.7% for the third quarter compared to the same period last year and were up 12.6% for the first nine months of the year. The company expects its investment in global advertising and sales promotion expenses to be in the range of 6.5% to 7.5% of net sales for the fiscal year.

Selling, general and administrative expenses were up 10.1% in the third quarter to $20.2 million and are up 13.5% through nine months to $59.0 million.

"Our investment in China and infrastructure to support global sourcing and inventory management along with higher employee-related costs, legal expense, and the impact of foreign exchange rates contributed to the rise in our overhead expense," Ridge said. "As our sales grow in our developing markets, we expect to pick up operating leverage."

On June 26, 2007, the board of directors of WD-40 Company declared the regular quarterly dividend of $0.25 per share, payable July 31, 2007 to stockholders of record on July 17, 2007.

WD-40 Company's 10-Q will be filed on July 10, 2007.

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 $286.9 million in fiscal 2006. Additional information about WD-40 Company can be obtained online at http://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 innovations and renovations, the impact of foreign currency exchange rates 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 Operations
                                 (unaudited)


                       Three Months Ended May 31,   Nine Months Ended May 31,
                            2007          2006         2007          2006


    Net sales            $77,581,000  $73,052,000  $228,868,000  $211,747,000
    Cost of products
     sold(1)              40,714,000   37,633,000   118,490,000   109,738,000

        Gross profit      36,867,000   35,419,000   110,378,000   102,009,000

    Operating expenses:
      Selling, general and
       administrative     20,215,000   18,356,000    59,006,000    51,980,000
      Advertising and
       sales promotion     5,173,000    5,923,000    15,876,000    14,097,000
      Amortization of
       intangible asset      147,000      132,000       434,000       394,000


    Income from
     operations           11,332,000   11,008,000    35,062,000    35,538,000


    Other (expense)
     income:
      Interest
       expense, net         (401,000)    (953,000)   (1,695,000)   (2,811,000)
      Other income, net      333,000      181,000       148,000       404,000


    Income before income
     taxes                11,264,000   10,236,000    33,515,000    33,131,000

    Provision for income
     taxes                 3,620,000    3,190,000    11,238,000    11,341,000


        Net income        $7,644,000   $7,046,000   $22,277,000   $21,790,000

    Earnings per common share:
     Basic                     $0.45        $0.42         $1.31         $1.30


     Diluted                   $0.44        $0.42         $1.29         $1.29


    Weighted-average
     common shares
     outstanding,
     basic                17,144,254   16,829,760    17,070,228    16,745,433

    Weighted-average
     common shares
     outstanding,
     diluted              17,328,473   16,969,770    17,267,763    16,857,735

    Dividends
     declared per
     share                    $0.25         $0.22         $0.72         $0.66


    (1)  Includes cost of products acquired from related party of $4,481,000
         and $10,775,000 for the three months ended May 31, 2007 and 2006,
         respectively; and $14,276,000 and $31,221,000 for the nine months
         ended May 31, 2007 and 2006, respectively.



                                WD-40 Company
                    Consolidated Condensed Balance Sheets
                                 (unaudited)

                                                                   August 31,
                                                   May 31, 2007       2006

                                    Assets
    Current assets:
      Cash and cash equivalents                    $65,982,000    $45,206,000
      Trade accounts receivable, less
       allowance for doubtful accounts of
       $715,000 and $762,000                        45,474,000     44,491,000
      Product held at contract packagers             2,059,000      1,385,000
      Inventories                                   15,061,000     15,269,000
      Current deferred tax assets, net               4,218,000      4,331,000
      Other current assets                           3,079,000      4,858,000

        Total current assets                       135,873,000    115,540,000

    Property, plant and equipment, net               8,551,000      8,940,000
    Goodwill                                        96,316,000     96,118,000
    Other intangibles, net                          42,565,000     42,722,000
    Investment in related party                        971,000        972,000
    Other assets                                     3,912,000      4,183,000

                                                  $288,188,000   $268,475,000


                     Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt            $10,714,000    $10,714,000
      Accounts payable                              17,974,000     11,287,000
      Accounts payable to related party              1,183,000        463,000
      Accrued liabilities                           14,539,000     11,678,000
      Accrued payroll and related expenses           5,505,000      7,485,000
      Income taxes payable                           1,515,000      2,040,000

        Total current liabilities                   51,430,000     43,667,000

    Long-term debt                                  42,857,000     53,571,000
    Deferred employee benefits and other
     long-term liabilities                           2,057,000      1,895,000
    Long-term deferred tax liabilities, net         15,304,000     13,611,000

        Total liabilities                          111,648,000    112,744,000

    Shareholders' equity:
      Common stock, $.001 par value, 36,000,000
       shares authorized -- 17,775,634 and
       17,510,668 shares issued                         18,000         17,000
      Paid-in capital                               71,418,000     62,322,000
      Retained earnings                            113,313,000    103,335,000
      Accumulated other comprehensive income         6,817,000      5,083,000
      Common stock held in treasury,
       at cost (534,698 shares)                    (15,026,000)   (15,026,000)

        Total shareholders' equity                 176,540,000    155,731,000

                                                  $288,188,000   $268,475,000



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


                                                    Nine Months Ended May 31,
                                                       2007          2006
    Cash flows from operating activities:
      Net income                                   $22,277,000    $21,790,000
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:
        Depreciation and amortization                2,742,000      2,571,000
        Gains on sales and disposals of property
         and equipment                                 (17,000)       (24,000)
        Deferred income tax expense                  1,622,000       (437,000)
        Excess tax benefits from exercise
         of stock options                             (436,000)      (321,000)
        Distributions received and equity
         (earnings) losses from related
         party, net                                      1,000        219,000
        Stock-based compensation                     1,502,000      1,396,000
        Changes in assets and liabilities:
          Trade accounts receivable                     21,000      5,283,000
          Product held at contract packagers          (674,000)       326,000
          Inventories                                  449,000     (7,029,000)
          Other assets                               1,769,000      3,623,000
          Accounts payable and accrued
           expenses                                  7,222,000     (2,288,000)
          Accounts payable to related
           party                                       720,000     (1,231,000)
          Income taxes payable                          83,000      2,141,000
          Deferred employee benefits and
           other long-term liabilities                  82,000         78,000

          Net cash provided by
           operating activities                     37,363,000     26,097,000

    Cash flows from investing activities:
      Purchases of short-term investments         (171,625,000)   (20,300,000)
      Sales of short-term investments              171,625,000             --
      Proceeds from collections on
       notes receivable                                 25,000         50,000
      Capital expenditures                          (1,628,000)    (2,446,000)
      Proceeds from sales of property
       and equipment                                   233,000        210,000

          Net cash used in investing
           activities                               (1,370,000)   (22,486,000)

    Cash flows from financing activities:
      Repayments of long-term debt                 (10,714,000)   (10,714,000)
      Proceeds from issuance of common
       stock                                         7,086,000      4,755,000
      Excess tax benefits from exercise
       of stock options                                436,000        321,000
      Dividends paid                               (12,299,000)   (11,043,000)

          Net cash used in financing
           activities                              (15,491,000)   (16,681,000)

    Effect of exchange rate changes on
     cash and cash equivalents                         274,000        328,000

    Increase (decrease) in cash and
     cash equivalents                               20,776,000    (12,742,000)

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

    Cash and cash equivalents at end of
     period                                        $65,982,000    $24,378,000



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


                         Three Months Ended May 31,  Nine Months Ended May 31,
                               2007        2006         2007         2006


    Net income              $7,644,000  $7,046,000   $22,277,000  $21,790,000

    Other comprehensive
     income:
      Equity adjustment
       from foreign
       currency translation,
       net of tax              529,000   1,935,000     1,734,000    1,458,000

    Total comprehensive
     income                 $8,173,000  $8,981,000   $24,011,000  $23,248,000

SOURCE WD-40 Company 07/09/2007

CONTACT: Garry O. Ridge of WD-40 Company, +1-619-275-9324
Web site: http://www.wd40.com
(WDFC)

7208 07/09/2007 16:00 EDT http://www.prnewswire.com

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