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WD-40 Company Reports Record Sales and Earnings for Fiscal 2007

10/17/07

SAN DIEGO, Oct. 17 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today announced record sales and earnings for the fiscal year ended August 31, 2007.

Net sales for the year were $307.8 million, an increase of 7.3% over the prior year. Net income for the year was $31.5 million up 12.2%. Earnings per share for the year grew 9.8% to $1.83 compared to $1.66 per share last year.

"We are pleased with our sales and profit growth," said Garry O. Ridge, WD-40 Company president and chief executive officer. "The revenue growth was driven by strong achievement in Europe, Asia Pacific, and Latin America while we also benefited from an improved gross margin, a reduction in debt, and a lower effective tax rate."

Net sales for the fourth quarter were $78.9 million, an increase of 5.0% from the fourth quarter last year. Net income for the fourth quarter was $9.3 million, an increase of 46.4% from the same period last year. Earnings per share for the quarter were $0.54 compared to $0.37 for the prior year's quarter, an increase of 44.7%. Also during the fourth quarter, the company acquired 500,000 shares under the share buyback plan at a total cost of $17.3 million.

Fiscal Year Guidance

In fiscal year 2008, WD-40 Company expects net sales to grow 7%-10% to $329-$339 million. The company expects net income of $31.1-$32.8 million in 2008, achieving earnings per share of $1.83 to $1.93 based on an estimated 17.0 million shares outstanding.

As previously announced, the board of directors of WD-40 Company declared a regular quarterly dividend on Thursday, October 4, 2007 of $0.25 per share, payable October 31, 2007 to stockholders of record on October 18, 2007.

Total sales for the year were 61% from the Americas, 31% from Europe and 8% from Asia/Pacific.

In the Americas, sales for the fourth quarter were $47.1 million, down 1.7% from a year ago, and on a year-to-date basis were $187.1 million up 0.2%.

"We had solid results in Canada and a great performance in Latin America in the quarter that were offset by a decline in U.S. sales," Ridge said. "For the year, we grew our Americas lubricant business by more than 8% but showed declines in household products and hand cleaners in the region. "

In Europe, sales were $24.9 million, up 17.8% for the fourth quarter and $96.5 million, up 22.0% for the year.

"We had robust sales in our distributor markets in Europe, and had double digit sales growth in France, Germany, Spain and Italy for both the quarter and the year," Ridge said. "We have continued our progress across Europe with sales growing at a compound annual rate of 19.9% since 2002."

In the Asia/Pacific region, sales for the fourth quarter were $7.0 million, up 13.4% from the comparable period last year and sales for the year were $24.2 million, up 14.9% over last year.

"Australia continues to have strong growth across all brands and we are very pleased with our results in China," Ridge said. "During the past year we had increased sales in China of 50.3% as a result of our new direct operations."

Global sales of the lubricants WD-40 and 3-IN-ONE Oil(R) in the fourth quarter were $54.1 million, up 7.8%, and $216.3 million for the year, up 13.6%.

"We have grown our lubricant sales by a compound annual rate of 10% across the globe for the past five years," Ridge said. "This long term trend stems from the success of our geographic expansion and brand development as well as new delivery systems for the WD-40 brand."

"Due to the success of the WD-40 Smart Straw product in the market, we plan to convert many of our can sizes to that format exclusively in the United States in the third quarter of fiscal 2008."

The WD-40 Smart Straw features a permanently attached straw that flips up to provide either a pinpoint stream or a wide spray that solves the number one complaint about WD-40 -- losing the little red straw.

"The Smart Straw delivers extremely good value to our end users, and we have received favorable consumer response to this delivery system," Ridge said.

WD-40 Company will begin the Smart Straw conversion in the third quarter of fiscal 2008. As a result, WD-40 Company will not see the full impact of this change in fiscal 2008.

Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were $23.0 million during the fourth quarter, down 0.3%, and were $85.1 million year to date, down 5.3% from last year.

"While sales were down from last year, our household products portfolio is cyclical but sustainable," Ridge said. "The household products sector continues to be highly competitive, and an ongoing innovation program is an important factor in differentiating our brands."

Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 4.4% to $1.8 million for the fourth quarter, and for the year were $6.4 million, down 3.3%.

"Our heavy-duty hand cleaners continue to be good for us as they are harvest brands and deliver good margins," Ridge said.

WD-40 Company also reported that its return on invested capital in fiscal year 2007 was 20.1% compared to 17.1% for the prior year.

WD-40 Company's 10-K will be filed on October 25, 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 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 $307.8 million in 2007. 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 changes in advertising and promotion expenditures, changes in product formats 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,
                         2007          2006          2007          2006


    Net sales         $78,948,000   $75,169,000  $307,816,000   $286,916,000
    Cost of products
     sold(1)           40,464,000    38,778,000   158,954,000    148,516,000

      Gross profit     38,484,000    36,391,000   148,862,000    138,400,000

    Operating
     expenses:
      Selling,
       general and
       administrative  19,514,000    19,787,000    78,520,000     71,767,000
      Advertising and
       sales
       promotion        4,867,000     5,982,000    20,743,000     20,079,000
      Amortization of
       intangible
       asset              149,000       138,000       583,000        532,000

    Income from
     operations        13,954,000    10,484,000    49,016,000     46,022,000

    Other (expense)
     income:
     Interest
      expense, net       (323,000)     (692,000)   (2,018,000)    (3,503,000)
     Other income
      (expense), net       29,000       (65,000)      177,000        339,000

    Income before
     income taxes      13,660,000     9,727,000    47,175,000     42,858,000

    Provision for
     income taxes       4,403,000     3,405,000    15,641,000     14,746,000

      Net income       $9,257,000    $6,322,000   $31,534,000    $28,112,000

    Earnings per
     common share:
      Basic                 $0.54         $0.37         $1.85          $1.67

      Diluted               $0.54         $0.37         $1.83          $1.66

    Weighted average
     common shares
     outstanding,
     basic             17,100,547    16,900,319    17,077,870     16,784,473

    Weighted average
     common shares
     outstanding,
     diluted           17,281,432    17,074,942    17,271,242     16,912,355

    Dividends
     declared per
     share                  $0.25         $0.22         $0.97          $0.88


    (1) Includes cost of products acquired from related party of $4,791,000
        and $9,783,000 for the three months ended August 31, 2007 and 2006,
        respectively; and $19,067,000 and $41,004,000 for the fiscal years
        ended August 31, 2007 and 2006, respectively.



                                WD-40 Company
                    Consolidated Condensed Balance Sheets

                                          August 31, 2007      August 31, 2006

                                    Assets
    Current assets:
      Cash and cash equivalents             $61,078,000      $45,206,000
      Trade accounts receivable, less
       allowance for doubtful accounts
       of $369,000 and $762,000              47,204,000       44,491,000
      Product held at contract packagers      1,447,000        1,385,000
      Inventories                            13,208,000       15,269,000
      Current deferred tax assets, net        4,145,000        4,331,000
      Other current assets                    3,489,000        4,858,000

        Total current assets                130,571,000      115,540,000

    Property, plant and equipment, net        8,811,000        8,940,000
    Goodwill                                 96,409,000       96,118,000
    Other intangibles, net                   42,543,000       42,722,000
    Investment in related party               1,015,000          972,000
    Other assets                              3,837,000        4,183,000

                                           $283,186,000     $268,475,000


                     Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt     $10,714,000    $10,714,000
      Accounts payable                       21,854,000     11,287,000
      Accounts payable to related party       1,506,000        463,000
      Accrued liabilities                    12,780,000     11,678,000
      Accrued payroll and related expenses    6,906,000      7,485,000
      Income taxes payable                       97,000      2,040,000

        Total current liabilities            53,857,000     43,667,000

    Long-term debt                           42,857,000     53,571,000
    Deferred employee benefits and
     long-term liabilities                    2,195,000      1,895,000
    Long-term deferred tax liabilities,
     net                                     16,005,000     13,611,000

        Total liabilities                   114,914,000    112,744,000

    Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized --
       17,883,299 and 17,510,668 shares
       issued; and 16,848,601 and 16,975,970
       shares outstanding                        18,000         17,000
      Paid-in capital                        74,836,000     62,322,000
      Retained earnings                     118,260,000    103,335,000
      Accumulated other comprehensive
       income                                 7,504,000      5,083,000
      Common stock held in treasury, at
       cost (1,034,698 and 534,698 shares)  (32,346,000)   (15,026,000)

        Total shareholders' equity          168,272,000    155,731,000

                                           $283,186,000   $268,475,000



                                WD-40 Company
               Consolidated Condensed Statements of Cash Flows

                                              Fiscal Year Ended August 31,
                                               2007                  2006
    Cash flows from operating activities:
      Net income                            $31,534,000           $28,112,000
      Adjustments to reconcile net income
       to net cash provided by
        operating activities:
         Depreciation and amortization        3,649,000             3,467,000
         Gains on sales and disposals of
          property and equipment                (23,000)              (38,000)
         Deferred income tax expense          2,336,000             1,396,000
         Excess tax benefits from exercise
          of stock options                     (741,000)             (503,000)
         Distributions received and equity
          (earnings) losses from related
          party, net                            (43,000)              140,000
         Stock-based compensation             1,919,000             1,836,000
         Changes in assets and liabilities:
           Trade accounts receivable         (1,365,000)            1,146,000
           Product held at contract
            packagers                           (62,000)              429,000
           Inventories                        2,392,000            (6,889,000)
           Other assets                       1,362,000             1,976,000
           Accounts payable and accrued
            expenses                         10,388,000            (1,621,000)
           Accounts payable to related
            party                             1,043,000            (1,481,000)
           Income taxes payable                (984,000)              147,000
           Deferred employee benefits and
            other long term liabilities         246,000                80,000

             Net cash provided by operating
              activities                     51,651,000            28,197,000

    Cash flows from investing activities:
     Purchases of short-term investments   (224,675,000)          (31,675,000)
     Sales of short-term investments        224,675,000            31,675,000
     Proceeds from collections on note
      receivable                                 25,000               125,000
     Capital expenditures                    (2,561,000)           (2,947,000)
     Proceeds from sales of property and
      equipment                                 319,000               267,000

             Net cash used in investing
              activities                     (2,217,000)           (2,555,000)

    Cash flows from financing activities:
     Repayments of long-term debt           (10,714,000)          (10,714,000)
     Proceeds from issuance of common
      stock                                   9,754,000             7,018,000
     Excess tax benefits from exercise of
      stock options                             741,000               503,000
     Treasury stock purchases               (17,320,000)                  -
     Dividends paid                         (16,609,000)          (14,760,000)

             Net cash used in financing
              activities                    (34,148,000)          (17,953,000)

    Effect of exchange rate changes on
     cash and cash equivalents                  586,000               397,000

    Increase in cash and cash equivalents    15,872,000             8,086,000

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

    Cash and cash equivalents at end of
     year                                   $61,078,000           $45,206,000



                                   WD-40 Company
             Consolidated Condensed Statements of Comprehensive Income

                                  Three Months              Fiscal Year
                                 Ended August 31,          Ended August 31,
                                 2007       2006           2007       2006


    Net income               $9,257,000  $6,322,000   $31,534,000  $28,112,000

    Other comprehensive
     income:
      Foreign currency
       translation adjustment,
       net of tax               776,000   1,387,000     2,510,000    2,845,000

    Total comprehensive
     income                 $10,033,000  $7,709,000   $34,044,000  $30,957,000



                                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(dollar amounts in
     thousands)                               FY07        FY06        FY05
    Net Sales                               $307,816    $286,916    $263,227
    Operating Profit                         $49,016     $46,022     $47,420
    Net Income                               $31,534     $28,112     $27,798
    Amortization                                $583        $532        $552
    Tax Rate                                    33.2%       34.4%       35.2%
    NOPAT = Op Inc + Amort after Tax         $33,154     $30,536     $31,110
    Total Assets (beginning)                $268,475    $254,253    $236,775
    Total Assets (ending)                   $283,186    $268,475    $254,253
    Total Assets (average)                  $275,831    $261,364    $245,514
    Cash                                     $61,078     $45,206     $37,120
    Transactional cash 3% of net sales        $9,234      $8,607      $7,897
    Other Cash                               $51,844     $36,599     $29,223
    Non-interest bearing liabilities:
                         Accounts Payable    $23,360     $11,750     $15,616
                      Accrued Liabilities    $12,780     $11,678     $14,058
                Accrued Payroll & Related     $6,906      $7,485      $3,828
                       Income Tax Payable        $97      $2,040      $2,484
                   Long-term Deferred Tax    $16,005     $13,611     $11,363
    Total Non-interest Bearing
     Liabilities:                            $59,148     $46,564     $47,349
    Return on Invested Capital (ROIC)           20.1%       17.1%       18.4%
SOURCE WD-40 Company 10/17/2007

CONTACT:
Garry O. Ridge of WD-40 Company,
+1-619-275-9324

Web site: http://www.wd40.com
(WDFC)

0629 10/17/2007 16:00 EDT http://www.prnewswire.com

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