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WD-40 Company Reports Second Quarter Sales Up 11%, Net Income Up 24%; Announces Share Repurchase Authorization

04/05/07

SAN DIEGO, April 5 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 28, 2007 of $79.3 million, an increase of 11.0% over the second quarter last year. Year-to-date net sales were $151.3 million, up 9.1% from the same period last year.

Net income for the second quarter was $8.9 million, up 23.6% compared to the prior year's quarter. Earnings per share were $0.52 in the second quarter, compared to $0.43 per share for the same quarter last year. Year-to-date net income was $14.6 million, a decrease of 0.8%. Through six months, earnings per share were $0.85 compared to $0.88 in the same period last year.

"We had a solid quarter and are on track to meet our expectations for the year," said Garry O. Ridge, WD-40 Company president and chief executive officer.

Summary

  • Net sales increased 11.0% to $79.3 million for the second quarter. Year-to-date net sales grew 9.1% to $151.3 million.
  • Net income for the second quarter grew 23.6% to $8.9 million. Year to date net income was down 0.8% at $14.6 million.
  • Lubricant sales were up 15.7% for the second quarter and 15.5% for the first half. Household products sales were up 1.6% for the second quarter and down 2.8% through six months. Heavy-duty hand cleaner sales were down 12.1% in the second quarter and off 9.7% through six months.
  • The company announced an open-ended share repurchase authorization of up to $35 million that expires in March 2008.

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. Results from the first year of direct operations in China are expected to reduce net income in 2007 by approximately $1.0 million, or 6 cents per share.

"We opened our operation in China on time and are now able to provide direct service to our customers in that country," Ridge said.

As previously announced, on March 27, 2007 the board of directors of WD-40 Company declared a regular quarterly dividend of $0.25 per share, payable April 30, 2007 to stockholders of record on April 16, 2007.

Share Repurchase Authorization

WD-40 Company also announced that at its regularly scheduled meeting on March 27, 2007, the board of directors authorized an open-ended buy back of Company shares up to $35 million over the next 12 months.

Financial Highlights

Cost of goods during the second quarter was 50.8% of sales compared to 52.0% in the second quarter last year. Through six months, cost of goods was 51.4% versus 52.0% for the same period last year.

"While we've achieved some improvement in cost of goods so far, we continue to be concerned about the rising cost of components and raw materials, and have created an internal cost reduction team to focus on cost saving initiatives and supply chain opportunities," Ridge said.

Advertising and sales promotion expenses were up 4.8% for the second quarter compared to the same period last year and were up 30.9% for the first six 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 8.5% of net sales for the fiscal year.

Total sales for the second quarter were 61.7% from the Americas, 30.7% from Europe and 7.6% from Asia/Pacific.

In the Americas, sales for the second quarter were up 7.6% from a year ago. Through six months, Americas sales were up 2.6%.

"We had strong growth of the WD-40(R) brand across the Americas, which were offset slightly by declines in the 3-IN-ONE Oil(R) brand and in some of our household products," Ridge said.

In Europe, sales were up 19.1% for the second quarter and are up 23.6% through six months.

"We continue to have strong growth throughout Europe in both our direct and distributor markets," Ridge said. "These markets represent important long- term growth potential and we are pleased to see the continued development of our business there."

In the Asia/Pacific region, sales for the second quarter were up 8.7% from last year and up 14.6% year to date.

"Australia continued a strong growth trend thanks to the development of our No Vac brand along with WD-40," Ridge said. "The second quarter in Asia was marked by the opening of our Chinese subsidiary."

Global sales of the lubricants WD-40 and 3-IN-ONE Oil were up 15.7% for the second quarter and are up 15.5% through six months.

"Our lubricant sales have grown at a compound annual rate of 9.5% over the past three full fiscal years which reflects both the opportunity and the execution of our plans," according to Ridge. "Our results stem from the effort and investment we've made in developing markets and in product innovation in WD-40 and 3-IN-ONE."

Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were up 1.6% compared to the previous year's quarter. First half household product sales are down 2.8% from the prior year.

"The categories where we compete with our household brands continue to face significant competition," Ridge said. "However, we are continuing to focus on new product development under our brand names and intend to continue our commitment to work on future product, packaging and promotional innovation and renovation."

Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 12.1% for the quarter and are off 9.7% for the first half of the year.

"While we are unhappy with the decline in hand cleaner sales, we recognize that the business requires minimal investment and remains quite profitable to us," Ridge said.

WD-40 Company's 10-Q will be filed on April 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. 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 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            Six Months Ended
                            February 28,                 February 28,
                         2007          2006           2007          2006

    Net sales         $79,331,000   $71,480,000   $151,287,000   $138,695,000
    Cost of products
     sold(1)           40,293,000    37,204,000     77,776,000     72,105,000

       Gross profit    39,038,000    34,276,000     73,511,000     66,590,000

    Operating
     expenses:
      Selling,
       general and
       administrative  19,736,000    17,267,000     38,791,000     33,624,000
      Advertising and
       sales promotion  5,061,000     4,829,000     10,703,000      8,174,000
      Amortization of
       intangible asset   146,000       130,000        287,000        262,000

    Income from
     operations        14,095,000    12,050,000     23,730,000     24,530,000

    Other (expense)
     income:
      Interest
       expense, net     (613,000)      (853,000)    (1,294,000)    (1,858,000)
      Other (expense)
       income, net       (94,000)        82,000       (185,000)       223,000

    Income before
     income taxes      13,388,000    11,279,000     22,251,000     22,895,000

    Provision for
     income taxes       4,449,000     4,048,000      7,618,000      8,151,000

       Net income      $8,939,000    $7,231,000    $14,633,000    $14,744,000

    Earnings per
     common share:
      Basic                 $0.52         $0.43          $0.86          $0.88

      Diluted               $0.52         $0.43          $0.85          $0.88

    Weighted-average
     common shares
     outstanding,
     basic             17,043,032    16,716,309     17,032,602     16,702,570

    Weighted-average
     common shares
     outstanding,
     diluted           17,232,563    16,825,560     17,236,795     16,801,018

    Dividends
     declared per
     share                  $0.25         $0.22          $0.47          $0.44


    (1) Includes cost of products acquired from related party of $4,604,000
        and $9,696,000 for the three months ended February 28, 2007 and 2006,
        respectively; and $9,795,000 and $20,446,000 for the six months ended
        February 28, 2007 and 2006, respectively.



                                WD-40 Company
                    Consolidated Condensed Balance Sheets
                                 (unaudited)

                                                  February 28,    August 31,
                                                      2007          2006

                       Assets
    Current assets:
      Cash and cash equivalents                    $46,643,000   $45,206,000
      Trade accounts receivable,
       less allowance for
       doubtful accounts of
       $712,000 and $762,000                        49,690,000    44,491,000
      Product held at contract
       packagers                                     1,910,000     1,385,000
      Inventories                                   15,010,000    15,269,000
      Current deferred tax assets, net               4,336,000     4,331,000
      Other current assets                           3,970,000     4,858,000

        Total current assets                       121,559,000   115,540,000

    Property, plant and equipment, net               8,802,000     8,940,000
    Goodwill                                        96,263,000    96,118,000
    Other intangibles, net                          42,647,000    42,722,000
    Investment in related party                        972,000       972,000
    Other assets                                     3,987,000     4,183,000

                                                  $274,230,000  $268,475,000


             Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt             10,714,000   $10,714,000
      Accounts payable                              17,534,000    11,287,000
      Accounts payable to related party                902,000       463,000
      Accrued liabilities                           13,129,000    11,678,000
      Accrued payroll and related expenses           3,759,000     7,485,000
      Income taxes payable                           1,975,000     2,040,000

        Total current liabilities                   48,013,000    43,667,000

    Long-term debt                                  42,857,000    53,571,000
    Deferred employee benefits and
     other long-term liabilities                     2,001,000     1,895,000
    Long-term deferred tax liabilities, net         14,588,000    13,611,000

        Total liabilities                          107,459,000   112,744,000

    Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized
       -- 17,587,807 and 17,510,668 shares
       issued                                           18,000        17,000
      Paid-in capital                               65,530,000    62,322,000
      Retained earnings                            109,961,000   103,335,000
      Accumulated other comprehensive income         6,288,000     5,083,000
      Common stock held in treasury,
       at cost (534,698 shares)                    (15,026,000)  (15,026,000)

        Total shareholders' equity                 166,771,000   155,731,000

                                                  $274,230,000  $268,475,000



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

                                               Six Months Ended February 28,
                                                 2007                2006
    Cash flows from operating
     activities:
       Net income                              $14,633,000        $14,744,000
       Adjustments to reconcile net
        income to net cash provided by
        operating activities:
          Depreciation and amortization          1,820,000          1,699,000
          Losses (gains) on sales and
           disposals of property
           and equipment                            22,000            (20,000)
          Deferred income tax expense              989,000          1,053,000
          Excess tax benefits from
           exercise of stock options              (114,000)          (205,000)
          Distributions received and
           equity (earnings) losses
           from related party, net                      --            178,000
          Stock-based compensation               1,064,000            987,000
          Changes in assets and
           liabilities:
             Trade accounts receivable          (4,663,000)          (657,000)
             Product held at contract
              packagers                           (525,000)          (341,000)
             Inventories                           358,000         (4,513,000)
             Other assets                          879,000            274,000
             Accounts payable and accrued
              expenses                           3,801,000         (1,564,000)
             Accounts payable to related
              party                                439,000           (965,000)
             Income taxes payable                  107,000          2,891,000
             Deferred employee benefits
              and other long-term liabilities       55,000             52,000

               Net cash provided by
                operating activities            18,865,000         13,613,000

    Cash flows from investing
     activities:
       Purchases of short-term investments     (99,600,000)                --
       Sales of short-term investments          99,600,000                 --
       Proceeds from collections on
        notes receivable                            25,000             50,000
       Capital expenditures                     (1,181,000)        (1,878,000)
       Proceeds from sales of property
        and equipment                              109,000            163,000

               Net cash used in investing
                activities                      (1,047,000)        (1,665,000)

    Cash flows from financing
     activities:
       Repayments of long-term debt            (10,714,000)       (10,714,000)
       Proceeds from issuance of common
        stock                                    2,025,000          2,334,000
       Excess tax benefits from exercise
        of stock options                           114,000            205,000
       Dividends paid                           (8,007,000)        (7,344,000)

               Net cash used in financing
                activities                     (16,582,000)       (15,519,000)

    Effect of exchange rate changes on
     cash and cash equivalents                     201,000             40,000

    Increase (decrease) in cash and
     cash equivalents                            1,437,000         (3,531,000)

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

    Cash and cash equivalents at end of
     period                                    $46,643,000        $33,589,000



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

                          Three Months Ended           Six Months Ended
                             February 28,                 February 28,
                         2007           2006          2007           2006

    Net income         $8,939,000     $7,231,000   $14,633,000    $14,744,000

    Other
     comprehensive
     (loss) income:
       Equity
        adjustment
        from
        foreign
        currency
        translation,
        net of
        tax              (111,000)       400,000     1,205,000       (477,000)

    Total
     comprehensive
     income            $8,828,000     $7,631,000   $15,838,000    $14,267,000

SOURCE WD-40 Company 04/05/2007

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

9260 04/05/2007 16:00 EDT http://www.prnewswire.com

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