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WD-40 Company Reports Second Quarter Results, Revised Fiscal Year Guidance

04/09/08

SAN DIEGO, April 9 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 29, 2008.

Summary

  • Net sales were $78.9 million, a decrease of 0.5% from the second quarter last year. Year-to-date net sales were $158.1 million, up 4.5% from the same period last year.
  • Net income for the second quarter was $8.7 million, down 3.1% compared to the prior year's quarter. Year-to-date net income was $14.9 million, an increase of 1.8%.
  • Earnings per share were $0.51 in the second quarter, compared to $0.52 per share for the same quarter last year. Through six months, earnings per share were $0.87 compared to $0.85 in the same period last year.
  • Lubricant sales were up 4.5% for the second quarter and 10.4% for the first half. Household products sales were down 13.7% for the second quarter and down 9.7% through six months. Heavy-duty hand cleaner sales were down 0.7% in the second quarter and off 0.3% through six months.
  • The company announced it has completed its $35 million share repurchase authorization that expired in March 2008.

"While the shakiness of the U.S. economy has created some challenges for us in our own backyard, our strategy of diversification is paying off as we continue to see strong growth in our international markets," said Garry O. Ridge, WD-40 Company president and chief executive officer. "In fact, more than 57% of our sales in the second quarter were outside of the United States."

Revised Fiscal Year 2008 Guidance

WD-40 Company now expects fiscal year 2008 net sales to grow 4%-8% to $320-$332 million. The company expects net income of $30.3-$31.9 million in 2008, achieving earnings per share of $1.80 to $1.90 based on an estimated 16.8 million shares outstanding. Under its original guidance, the company had expected sales growth of 7%-10%, net income of $31.1-$32.8 million, and earnings per share of $1.83-$1.93 based on an estimated 17 million shares outstanding.

"We recently announced that beginning in the third quarter of 2008 we will be converting many of our WD-40 can sizes in the United States to the Smart Straw format, which features a permanently attached straw," Ridge said. "We are doing this to leverage the innovation of the Smart Straw to deliver added value to customers."

"Due to the conversion and the weakening U.S. economy, we had a softening in promotional activity and saw some retailer inventory reductions in the second quarter," Ridge added.

As previously announced, the WD-40 Company board of directors declared on Tuesday, March 25, 2008 the regular quarterly dividend of $0.25 per share, payable April 30, 2008 to stockholders of record on April 16, 2008.

Financial Highlights

Cost of goods during the second quarter was 51.7% of sales compared to 50.8% in the second quarter last year. Through six months, cost of goods was 52.2% versus 51.4% for the same period last year.

Advertising and sales promotion expenses were down 16.2% for the second quarter compared to the same period last year and were up 1.7% 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 53.1% from the Americas, 37.7% from Europe and 9.3% from Asia/Pacific.

In the Americas, sales for the second quarter were down 14.4% from a year ago. Through six months, Americas sales were down 9.2%.

"While we saw sales declines in the U.S. during the quarter, we had solid growth in Canada and Latin America that made up for some of the loss," Ridge said. "We are continuing to focus on innovation, and are rolling out two new non-toxic, biodegradable products under the Spot Shot brand in the third quarter."

In Europe, sales were up 22.2% for the second quarter and are up 25.8% through six months. In the Asia/Pacific region, sales for the second quarter were up 20.9% from last year and up 32.3% year to date.

"Australia continued its strong growth trend with sales up 35.5% in the first half of this year," Ridge said. "We are very pleased with our growth in China as we wrap up our first full year of direct distribution in that market."

WD-40 Company's 10-Q will be filed on April 9, 2008.

WD-40 Company's 3rd quarter fiscal 2008 earnings call is scheduled for Wednesday, July 2, 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), 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 cause actual results to differ materially from the forward-looking statements, including impact of cost of goods, the impact of new product innovations and line extensions 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 29 or 28,          February 29 or 28,
                         2008          2007          2008          2007

    Net sales         $78,948,000   $79,331,000  $158,098,000   $151,287,000
    Cost of products
     sold(1)           40,808,000    40,293,000    82,488,000     77,776,000

      Gross profit     38,140,000    39,038,000    75,610,000     73,511,000

    Operating expenses:
      Selling,
       general and
       administrative  20,344,000    19,736,000    41,568,000     38,791,000
      Advertising and
       sales promotion  4,243,000     5,061,000    10,883,000     10,703,000
      Amortization of
       intangible asset   150,000       146,000       302,000        287,000


    Income from
     operations        13,403,000    14,095,000    22,857,000     23,730,000

    Other (expense)
     income:
      Interest
       expense, net      (390,000)     (613,000)     (796,000)    (1,294,000)
      Other income
       (expense), net     229,000       (94,000)      541,000       (185,000)

    Income before
     income taxes      13,242,000    13,388,000    22,602,000     22,251,000

    Provision for
     income taxes       4,576,000     4,449,000     7,706,000      7,618,000

      Net income       $8,666,000    $8,939,000   $14,896,000    $14,633,000

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

      Diluted               $0.51         $0.52         $0.87          $0.85

    Weighted average
     common shares
     outstanding,
     basic             16,784,469    17,043,032    16,836,803     17,032,602

    Weighted average
     common shares
     outstanding,
     diluted           16,971,502    17,232,563    17,032,147     17,236,795

    Dividends
     declared per
     share                  $0.25         $0.25         $0.50          $0.47


    (1) Includes cost of products acquired from related party of $4,496,000
        and $4,604,000 for the three months ended February 29, 2008 and
        February 28, 2007, respectively; and $11,177,000 and $9,795,000 for
        the six months ended February 29, 2008 and February 28, 2007,
        respectively.



                                WD-40 Company
                    Consolidated Condensed Balance Sheets
                                 (unaudited)

                                                   February 29,   August 31,
                                                       2008         2007
                                  Assets
    Current assets:
      Cash and cash equivalents                    $23,394,000   $61,078,000
      Trade accounts receivable,
       less allowance for
       doubtful accounts of
       $391,000 and $369,000                        52,866,000    47,204,000
      Product held at contract packagers             1,550,000     1,447,000
      Inventories                                   16,962,000    13,208,000
      Current deferred tax assets, net               4,157,000     4,145,000
      Other current assets                           3,846,000     3,489,000

        Total current assets                       102,775,000   130,571,000

    Property, plant and equipment, net              10,036,000     8,811,000
    Goodwill                                        96,340,000    96,409,000
    Other intangibles, net                          42,145,000    42,543,000
    Marketable securities                            6,075,000           -
    Investment in related party                        996,000     1,015,000
    Other assets                                     3,690,000     3,837,000

                                                  $262,057,000  $283,186,000


                 Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt            $10,714,000   $10,714,000
      Accounts payable                              15,727,000    21,854,000
      Accounts payable to related party                525,000     1,506,000
      Accrued liabilities                           15,159,000    12,780,000
      Accrued payroll and related expenses           3,878,000     6,906,000
      Income taxes payable                           2,523,000        97,000

        Total current liabilities                   48,526,000    53,857,000

    Long-term debt                                  32,143,000    42,857,000
    Deferred employee benefits and
     other long-term liabilities                     4,842,000     2,195,000
    Long-term deferred tax liabilities, net         15,977,000    16,005,000

        Total liabilities                          101,488,000   114,914,000

    Shareholders' equity:
      Common stock, $.001 par value,
       36,000,000 shares authorized -- 17,990,915
       and 17,883,299 shares issued; and
       16,427,417 and 16,848,601 shares
       outstanding                                      18,000        18,000
      Paid-in capital                               79,305,000    74,836,000
      Retained earnings                            124,139,000   118,260,000
      Accumulated other comprehensive income         7,173,000     7,504,000
      Common stock held in treasury,
       at cost (1,563,498 and 1,034,698 shares)    (50,066,000)  (32,346,000)

        Total shareholders' equity                 160,569,000   168,272,000

                                                  $262,057,000  $283,186,000



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

                                           Six Months Ended February 29 or 28,
                                                2008                 2007
    Cash flows from operating activities:
      Net income                              $14,896,000         $14,633,000
      Adjustments to reconcile net
       income to net cash provided by
       operating activities:
        Depreciation and amortization           1,862,000           1,820,000
        (Gains) losses on sales and
         disposals of property and equipment       (2,000)             22,000
        Deferred income tax expense              (151,000)            989,000
        Excess tax benefits from
         exercises of stock options              (149,000)           (114,000)
        Distributions received and
         equity losses (earnings)
         from related party, net                   19,000                 -
        Stock-based compensation                1,391,000           1,064,000
        Changes in assets and liabilities:
          Trade accounts receivable            (5,698,000)         (4,663,000)
          Product held at contract packagers     (103,000)           (525,000)
          Inventories                          (3,727,000)            358,000
          Other assets                           (446,000)            879,000
          Accounts payable and accrued
           expenses                            (6,869,000)          3,801,000
          Accounts payable to related party      (981,000)            439,000
          Income taxes payable                  2,690,000             107,000
          Deferred employee benefits
           and other long-term liabilities      2,056,000              55,000

            Net cash provided by
             operating activities               4,788,000          18,865,000

    Cash flows from investing activities:
      Purchases of marketable securities      (76,175,000)        (99,600,000)
      Sales of marketable securities           70,100,000          99,600,000
      Proceeds from collections on
       notes receivable                               -                25,000
      Capital expenditures                     (2,656,000)         (1,181,000)
      Proceeds from sales of property
       and equipment                              108,000             109,000

            Net cash used in investing
             activities                        (8,623,000)         (1,047,000)

    Cash flows from financing activities:
      Repayments of long-term debt            (10,714,000)        (10,714,000)
      Proceeds from issuance of common
       stock                                    2,906,000           2,025,000
      Excess tax benefits from
       exercises of stock options                 149,000             114,000
      Treasury stock purchases                (17,720,000)                -
      Dividends paid                           (8,453,000)         (8,007,000)

          Net cash used in financing
           activities                         (33,832,000)        (16,582,000)

    Effect of exchange rate changes on
     cash and cash equivalents                    (17,000)            201,000

    (Decrease) increase in cash and
     cash equivalents                         (37,684,000)          1,437,000

    Cash and cash equivalents at
     beginning of period                       61,078,000          45,206,000

    Cash and cash equivalents at end of
     period                                   $23,394,000         $46,643,000



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

                           Three Months Ended        Six Months Ended
                           February 29 or 28,        February 29 or 28,
                           2008         2007         2008         2007

    Net income          $8,666,000   $8,939,000  $14,896,000  $14,633,000

    Other comprehensive
     (loss) income:
      Equity adjustment
       from foreign
       currency
       translation, net
       of tax           (1,419,000)    (111,000)    (331,000)   1,205,000

    Total comprehensive
     income             $7,247,000   $8,828,000  $14,565,000  $15,838,000

SOURCE WD-40 Company

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

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