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WD-40 Company Reports First Quarter Sales Up 7.1%


SAN DIEGO, Jan 09, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the first quarter ended November 30, 2006 of $72.0 million, an increase of 7.1% over the first quarter last fiscal year.

Net income for the quarter was $5.7 million, down 24.2% compared to the prior year's quarter. Earnings per share were $0.33 in the first quarter, compared to $0.45 per share in the same quarter last year, a decrease of 26.3%.

"During the first quarter, we increased our marketing investment to support new products," said Garry O. Ridge, WD-40 Company president and chief executive officer. "In addition, we continued to invest in infrastructure to support global sourcing, inventory management, product development, and our China operation."

"We had a solid sales quarter and are on track to meet our annual goal," Ridge said.

Cost of goods during the first quarter was 52.1% of sales compared to 51.9% in the first quarter last year.

"We continue to be concerned about cost of goods. Our focus on innovation and renovation of our brands is a part of our on-going effort to help address higher costs," Ridge said.

Fiscal Year Guidance

In fiscal year 2007, WD-40 Company reaffirmed that it expects net sales to grow 7%-13% to $307-$324 million. WD-40 Company also still 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. The 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.

WD-40 Company also released its four-year outlook, and expects total sales to grow at a compound annual rate of 6.9% to 9.1% per year through fiscal year 2010. The company expects net income to grow at a compound annual rate of 9.2% to 11.5% per year over that same period. Investors can find a link to the company's four-year outlook on the home page of the investor relations website at www.wd40.com/ir/.

"We are on track with our plans in China and in the first quarter of this year we invested approximately $200,000 in the business," Ridge said. "We expect to be fully operational in March, just after the Chinese New Year."

As previously announced on December 12, 2006, the board of directors declared on Tuesday, December 12, 2006 the regular quarterly dividend of $0.25 per share, an increase of 13.6%, payable January 31, 2007 to shareholders of record on January 8, 2007.

Total sales for the quarter were 63% from the Americas, 30% from Europe and 7% from Asia/Pacific. In the Americas, sales for the first quarter were down 2.4% from a year ago.

In Europe, sales were up 29.1% for the first quarter.

"We continue to do well in our European region due to growth in our distributor markets in Eastern and Northern Europe as well growth in direct markets," Ridge said. "We also benefited from our investment in innovation and had solid growth in our new products throughout Europe and received a positive impact from foreign exchange rates as well."

In the Asia/Pacific region, sales for the quarter were up 22.9% from last year.

"We continue to grow in the Asia/Pacific region and are seeing the benefits of increased promotional activity and product innovations," Ridge said.

Global sales of the lubricants WD-40(R) and 3-IN-ONE Oil(R) were up 15.3% or $6.5 million for the quarter.

"During the first quarter we continued to have a positive impact from the new WD-40 Smart Straw and No-Mess Pen across the globe," Ridge said.

Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001 (R) were down 6.9% or $1.6 million compared to the previous year's quarter.

"The decline in household product sales was primarily in the U.S. and was the result of several factors, including a temporary loss of distribution due to seasonal product rotation in certain customers," Ridge said. "We expect to regain these sales during the year."

Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 8.0% or $0.1 million for the quarter.

WD-40 Company's 10-Q will be filed on January 9, 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.

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 marketing expenditures, the impact of new product innovations, foreign exchange rates and fluctuating market conditions, both in the United States and internationally, 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

                                               Three Months Ended November 30,
                                                     2006            2005

    Net sales                                    $71,956,000     $67,215,000
    Cost of products sold(1)                      37,483,000      34,901,000

        Gross profit                              34,473,000      32,314,000

    Operating expenses:
      Selling, general and
       administrative                             19,055,000      16,357,000
      Advertising and sales promotion              5,642,000       3,345,000
      Amortization of intangible asset               141,000         132,000

    Income from operations                         9,635,000      12,480,000

    Other (expense) income:
      Interest expense, net                         (681,000)     (1,005,000)
      Other (expense) income, net                    (91,000)        141,000

    Income before income taxes                     8,863,000      11,616,000

    Provision for income taxes                     3,169,000       4,103,000

        Net income                                $5,694,000      $7,513,000

    Earnings per common share:
      Basic                                            $0.33           $0.45

      Diluted                                          $0.33           $0.45

    Weighted-average common shares
     outstanding, basic                           17,022,286      16,688,982

    Weighted-average common shares
     outstanding, diluted                         17,241,140      16,776,627

    Dividends declared per share                       $0.22           $0.22

    (1)  Includes cost of products acquired from related party of $5,191,000
         and $10,750,000 for the three months ended November 30, 2006 and
         2005, respectively.

                                WD-40 Company
                    Consolidated Condensed Balance Sheets

                                       November 30, 2006     August 31, 2006

    Current assets:
      Cash and cash equivalents              $46,436,000         $45,206,000
      Trade accounts receivable,
       less allowance for cash
       discounts, returns and
       doubtful accounts of
       $1,496,000 and $1,839,000              40,626,000          44,491,000
      Product held at contract
       packagers                               1,305,000           1,385,000
      Inventories                             15,669,000          15,269,000
      Current deferred tax
       assets, net                             4,336,000           4,331,000
      Other current assets                     4,192,000           4,858,000

         Total current assets                112,564,000         115,540,000

    Property, plant and equipment,
     net                                       8,914,000           8,940,000
    Goodwill                                  96,285,000          96,118,000
    Other intangibles, net                    42,822,000          42,722,000
    Investment in related party                  942,000             972,000
    Other assets                               4,061,000           4,183,000
                                            $265,588,000        $268,475,000

                     Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt      $10,714,000         $10,714,000
      Accounts payable                        14,375,000          11,287,000
      Accounts payable to related party          870,000             463,000
      Accrued liabilities                     12,100,000          11,678,000
      Accrued payroll and related expenses     4,733,000           7,485,000
      Income taxes payable                     2,653,000           2,040,000

         Total current liabilities            45,445,000          43,667,000

    Long-term debt                            42,857,000          53,571,000
    Deferred employee benefits and
     other long-term liabilities               1,926,000           1,895,000
    Long-term deferred tax
     liabilities, net                         14,161,000          13,611,000

         Total liabilities                   104,389,000         112,744,000

    Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized --
       17,571,380 and 17,510,668
       shares issued                              18,000              17,000
      Paid-in capital                         64,526,000          62,322,000
      Retained earnings                      105,282,000         103,335,000
      Accumulated other comprehensive
       income                                  6,399,000           5,083,000
      Common stock held in treasury, at
       cost (534,698 shares)                 (15,026,000)        (15,026,000)

         Total shareholders' equity          161,199,000         155,731,000

                                            $265,588,000        $268,475,000

                                WD-40 Company
               Consolidated Condensed Statements of Cash Flows

                                             Three Months Ended November 30,
                                                 2006               2005
    Cash flows from operating
       Net income                             $5,694,000         $7,513,000
       Adjustments to reconcile net
        income to net cash provided by
        operating activities:
         Depreciation and amortization           924,000            848,000
         Losses (gains) on sales and
          disposals of property and
          equipment                                8,000             (9,000)
         Deferred income tax expense             550,000            556,000
         Excess tax benefits from exercise
          of stock options                       (71,000)            (1,000)
         Distributions received and equity
          (earnings) from related party, net      30,000             19,000
         Stock-based compensation                423,000            412,000
         Changes in assets and liabilities:
           Trade accounts receivable           4,517,000          6,512,000
           Product held at contract
            packagers                             80,000            171,000
           Inventories                          (241,000)        (2,303,000)
           Other assets                          720,000            595,000
           Accounts payable and accrued
            expenses                             497,000         (2,395,000)
           Accounts payable to related
            party                                407,000            557,000
           Income taxes payable                  733,000           (116,000)
           Deferred employee benefits and
            other long-term liabilities           27,000             26,000

               Net cash provided by
                operating activities          14,298,000         12,385,000

    Cash flows from investing activities:
      Purchases of short-term investments    (59,075,000)                --
      Sales of short-term investments         59,075,000                 --
      Proceeds from collections on notes
       receivable                                     --             30,000
      Capital expenditures                      (550,000)          (989,000)
      Proceeds from sales of property and
       equipment                                  39,000             19,000

               Net cash used in investing
                activities                      (511,000)          (940,000)

    Cash flows from financing activities:
      Repayments of long-term debt           (10,714,000)       (10,714,000)
      Proceeds from issuance of common
       stock                                   1,633,000            106,000
      Excess tax benefits from exercise of
       stock options                              71,000              1,000
      Dividends paid                          (3,747,000)        (3,671,000)

               Net cash used in financing
                activities                   (12,757,000)       (14,278,000)

    Effect of exchange rate changes on
     cash and cash equivalents                   200,000            (23,000)

    Increase (decrease) in cash and cash
     equivalents                               1,230,000         (2,856,000)

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

    Cash and cash equivalents at end of
     period                                  $46,436,000        $34,264,000

                                WD-40 Company
          Consolidated Condensed Statements of Comprehensive Income

                                              Three Months Ended November 30,
                                                  2006               2005

    Net income                                $5,694,000         $7,513,000

    Other comprehensive income (loss):
      Equity adjustment from foreign
       currency translation, net of
       tax benefit of $24,000 and $260,000
       for the three months ended
       November 30, 2006 and 2005,
       respectively                            1,316,000          (877,000)

    Total comprehensive income                $7,010,000        $6,636,000

SOURCE WD-40 Company

Garry O. Ridge of WD-40 Company,


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