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WD-40 Company Reports 5.8% Increase in Third Quarter Sales and 5.6% Increase in Third Quarter Net Income


SAN DIEGO, July 2 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2008 of $82.1 million, an increase of 5.8% over the third quarter last year. Year-to-date net sales were $240.2 million, up 5.0% over the same period last year.

Net income for the third quarter was $8.1 million, up 5.6% compared to the prior year's quarter. Earnings per share in the third quarter grew to $0.49 compared to $0.44 during the same period last year. Year-to-date net income was $23.0 million, an increase of 3.1% from last year. Through nine months, earnings per share were $1.36, compared to $1.29 for the same period last year.


-- Net sales increased 5.8% to $82.1 million for the third quarter. Year-to-date net sales grew 5.0% to $240.2 million.

-- Third quarter lubricant sales were $61.2 million, up 8.2%, and $177.8 million for the first nine months, up 9.6%. Household products sales for the quarter were $19.2 million, down 1.0%, and were $57.7 million year-to-date, down 7.0%. Third quarter heavy-duty hand cleaner sales were $1.8 million, up 4.9%, and $4.7 million through nine months, up 1.6%.

-- Americas region third quarter sales were up 5.8% from a year ago and are down 4.3% year-to-date. Europe region sales for the third quarter were up 3.4% and are up 17.9% year-to-date. Asia/Pacific region sales for the third quarter were up 16.1% from last year and are up 26.4% year-to-date.

-- Net income for the third quarter grew 5.6% to $8.1 million. Year-to-date net income was up 3.1% to $23.0 million.

We had a solid quarter around the globe, said Garry Ridge, WD-40 Company President and CEO. During the quarter we saw a positive impact from our conversion to the Smart Straw(R) (http://www.wd40.com/products/smart-straw) delivery system on the WD-40(R) brand in the U.S.

We were able to implement the conversion to Smart Straw smoothly, and are now moving into the promotional period for that product, Ridge added.

Updated Fiscal Year 2008 Guidance

WD-40 Company still expects fiscal year 2008 net sales to grow 4%-8% to $320-$332 million. The company now expects net income of $30.0-$31.2 million for fiscal year 2008, achieving earnings per share of $1.78 to $1.85 based on an estimated 16.8 million shares outstanding.

Third quarter gross margin was 46.5% of sales compared to 47.5% in the same period last year, reflecting higher underlying cost of goods. Through nine months, gross margin was 47.4% of sales, compared to 48.2% in the same period last year.

Our cost of goods have been impacted by the general increases in commodity prices, particularly the sharp increases in oil and steel, Ridge said. We are working hard to minimize the impact of these cost increases on our gross margin through a combination of price increases, innovation and cost reduction strategies around the globe.

Advertising and sales promotion expenses were down 16.1% for the third quarter compared to the same period last year and were down 4.1% for the first nine months of the year.

Selling, general and administrative expenses were up 6.1% in the third quarter to $21.4 million and were up 6.8% through nine months to $63.0 million.

Recently we have also launched new products under the Spot Shot(R) (http://www.spotshot.com) brand that give our consumers the best of both worlds -- they want powerful but environmentally safe products, and that's what we're delivering, Ridge said.

Spot Shot Instant Carpet Stain and Odor Eliminator(TM) and Spot Shot PetClean(TM) are non-toxic, certified biodegradable by the Scientific Certification System and environmentally friendly -- containing no volatile organic compounds or phosphates -- while still delivering the superior efficacy consumers have come to expect from Spot Shot.

Also from our innovation program is the 3-IN-ONE(R) No-Rust Shield(TM) (http://www.norustshield.com/Default.asp?bhcp=1), a new product launching in the fourth quarter that protects tools, sporting goods and other items from rust and corrosion, Ridge added.

On June 24, 2008, the Board of Directors of WD-40 Company declared the regular quarterly cash dividend of $.25 per share, payable July 31, 2008 to shareholders of record on July 17, 2008.

Total sales for the third quarter were 59% from the Americas, 32% from Europe and 9% from Asia/Pacific.

WD-40 Company's 4th quarter fiscal 2008 earnings call is scheduled for Wednesday, October 15, 2008. WD-40 Company's 10-Q will be filed the week of July 7th, 2008.

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), No Vac(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 fiscal 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 may 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
               Condensed Consolidated Statements of Operations
            (Unaudited and in thousands, except per share amounts)

                                     Three Months Ended    Nine Months Ended
                                          May 31,              May 31,
                                       2008      2007       2008      2007

    Net sales                         $82,104   $77,581   $240,202   $228,868
    Cost of products sold(1)           43,921    40,714    126,409    118,490

        Gross profit                   38,183    36,867    113,793    110,378

    Operating expenses:
      Selling, general and
       administrative                  21,446    20,215     63,014     59,006
      Advertising and sales
       promotion                        4,339     5,173     15,222     15,876
      Amortization of intangible
       asset                              147       147        449        434

        Total operating expenses       25,932    25,535     78,685     75,316

    Income from operations             12,251    11,332     35,108     35,062

    Other (expense) income:
      Interest expense, net              (433)     (401)    (1,229)    (1,695)
      Other income, net                   212       333        753        148

    Income before income taxes         12,030    11,264     34,632     33,515

    Provision for income taxes          3,957     3,620     11,663     11,238

        Net income                     $8,073    $7,644    $22,969    $22,277

    Earnings per common share:
      Basic                             $0.49     $0.45      $1.38      $1.31

      Diluted                           $0.49     $0.44      $1.36      $1.29

    Weighted average common shares
     outstanding, basic                16,431    17,144     16,700     17,070

    Weighted average common shares
     outstanding, diluted              16,580    17,328     16,881     17,268

    Dividends declared per share        $0.25     $0.25      $0.75      $0.72

    (1) Includes cost of products acquired from related party of $5,927 and
        $4,481 for the three months ended May 31, 2008 and 2007, respectively;
        and $17,104 and $14,276 for the nine months ended
        May 31, 2008 and 2007, respectively.

                                WD-40 Company
                    Condensed Consolidated Balance Sheets
              (Unaudited and in thousands, except share amounts)

                                               May 31, 2008    August 31, 2007


    Cash and cash equivalents                      $37,547           $61,078
    Trade accounts receivable, less allowance
     for doubtful accounts of $537 and $369 at
     May 31, 2008 and August 31, 2007,
     respectively                                   52,097            47,204
    Product held at contract packagers               1,810             1,447
    Inventories                                     17,275            13,208
    Current deferred tax assets, net                 4,159             4,145
    Other current assets                             3,017             3,489

       Total current assets                        115,905           130,571

    Property, plant and equipment, net              11,016             8,811
    Goodwill                                        96,321            96,409
    Other intangible assets, net                    41,975            42,543
    Investment in related party                        767             1,015
    Other assets                                     3,616             3,837

          Total assets                            $269,600          $283,186

                       Liabilities and Shareholders' Equity

    Accounts payable                               $18,298           $21,854
    Accounts payable to related party                  365             1,506
    Accrued liabilities                             14,176            12,780
    Current portion of long-term debt               10,714            10,714
    Accrued payroll and related expenses             4,571             6,906
    Income taxes payable                             3,016                97

       Total current liabilities                    51,140            53,857

    Long-term debt                                  32,143            42,857
    Long-term deferred tax liabilities, net         16,601            16,005
    Deferred employee benefits and other
     long-term liabilities                           3,497             2,195

          Total liabilities                        103,381           114,914

    Shareholders' equity:
    Common stock, $0.001 par value, 36,000,000
     shares authorized -- 18,004,565 and
     17,883,299 shares issued at May 31, 2008
     and August 31, 2007, respectively; and
     16,441,067 and 16,848,601 shares
     outstanding at May 31, 2008 and August 31,
     2007 respectively                                  18                18
    Additional paid-in capital                      81,063            74,836
    Retained earnings                              128,093           118,260
    Accumulated other comprehensive income           7,111             7,504
    Common stock held in treasury, at cost
     -- 1,563,498 and 1,034,698 shares at
     May 31, 2008 and August 31, 2007,
     respectively                                  (50,066)          (32,346)

          Total shareholders' equity               166,219           168,272

          Total liabilities and
           shareholders' equity                   $269,600          $283,186

                                WD-40 Company
               Condensed Consolidated Statements of Cash Flows
                         (Unaudited and in thousands)

                                                 Nine Months Ended May 31,
                                                 2008                 2007
    Cash flows from operating activities:
      Net income                                 $22,969             $22,277
      Adjustments to reconcile net
       income to net cash provided by
       operating activities:
        Depreciation and amortization              2,799               2,742
        Net gains on sales and disposals
         of property and equipment                    (6)                (17)
        Deferred income tax expense                  417               1,622
        Excess tax benefits from
         exercises of stock options                 (158)               (436)
        Distributions received and
         equity losses (earnings)
         from related party, net                     248                   1
        Stock-based compensation                   1,887               1,502
        Changes in assets and
          Trade accounts receivable               (4,947)                 21
          Product held at contract
           packagers                                (363)               (674)
          Inventories                             (4,036)                449
          Other assets                               360               1,769
          Accounts payable and accrued
           expenses and liabilities               (4,560)              7,222
          Accounts payable to related
           party                                  (1,141)                720
          Income taxes payable                     3,219                  83
          Deferred employee benefits and
           other long-term liabilities             1,724                  82

            Net cash provided by operating
             activities                           18,412              37,363

    Cash flows from investing activities:
      Purchases of marketable securities         (76,175)           (171,625)
      Proceeds from sales of marketable
       securities                                 76,175             171,625
      Capital expenditures                        (4,351)             (1,628)
      Proceeds from sales of property
       and equipment                                 142                 233
      Proceeds from collections on note
       receivable                                    -                    25

            Net cash used in investing
             activities                           (4,209)             (1,370)

    Cash flows from financing activities:
      Repayments of long-term debt               (10,714)            (10,714)
      Proceeds from issuance of common
       stock                                       3,278               7,086
      Excess tax benefits from exercises
       of stock options                              158                 436
      Treasury stock purchases                   (17,720)                -
      Dividends paid                             (12,572)            (12,299)

            Net cash used in financing
             activities                          (37,570)            (15,491)

    Effect of exchange rate changes on
     cash and cash
      equivalents                                   (164)                274

    Net (decrease) increase in cash and
     cash equivalents                            (23,531)             20,776

    Cash and cash equivalents at beginning
     of period                                    61,078              45,206

    Cash and cash equivalents at end of
     period                                      $37,547             $65,982

                                WD-40 Company
          Condensed Consolidated Statements of Comprehensive Income
                         (Unaudited and in thousands)

                        Three Months Ended May 31,   Nine Months Ended May 31,
                             2008            2007         2008        2007

    Net income              $8,073          $7,644       $22,969    $22,277

    Other comprehensive
     (loss) income:
      Equity adjustment
       from foreign
       net of tax             (151)            529          (482)     1,734

      Other, net of tax         89               -            89          -

    Total comprehensive
     income                 $8,011          $8,173       $22,576    $24,011
SOURCE WD-40 Company

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

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