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WD-40 Company Reports Increase in Second Quarter Sales and Net Income

04/07/10

SAN DIEGO, April 7, 2010 /PRNewswire via COMTEX/ --WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 28, 2010 of $80.6 million, an increase of 30.3% from the second quarter last year. Year-to-date net sales were $158.3 million, up 8.8% from the same period last year.

Net income for the second quarter was $10.7 million, an increase of 161.5% compared to the prior year's quarter. Year-to-date net income was $20.1 million, an increase of 70.7%. Summary

  • Second quarter multi-purpose maintenance products sales, which include the WD-40(R), 3-IN-ONE(R) and BLUE WORKS (TM) brands, were $65.6 million, up 39.4% versus the same quarter last year, and $126.3 million for the year-to-date, up 11.8%. Homecare and cleaning products sales, which include all of our other brands, were $14.9 million for the second quarter, up 1.1%, and were $32.0 million year-to-date, down 1.6%.
  • Americas second quarter sales were $44.2 million, up 18.7% compared to the second quarter last year and were $87.9 million year-to-date, up 6.2%. Europe sales in the second quarter were $28.6 million, up 46.5% and were $55.9 million year-to-date, up 12.5%. Asia-Pacific sales were $7.7 million in the second quarter, up 52.5% and were $14.5 million year-to-date, up 11.6%.
  • Earnings per share (diluted) was $0.64 in the second quarter, compared to $0.25 per share for the same quarter last year. Through six months, earnings per share (diluted) was $1.20 compared to $0.71 in the same period last year.

"While we are obviously pleased with our results so far this year and have seen improvements in our business activities and general economic conditions, we remain cautiously optimistic about the uncertain state of the global economy and what the remainder of fiscal 2010 holds for us," said Garry O. Ridge, WD-40 Company president and chief executive officer. "We have also seen customers return to more normal stock inventory which has helped sell-in."

In the quarter, foreign currency exchange rates positively affected net sales by $3.9 million and net income by $0.7 million. Through six months, foreign currency exchange rates positively impacted net sales and net income by $2.1 million and $ 0.4 million, respectively.

Net sales by segment as a percent of total net sales were as follows: for the Americas, 54.9% for the quarter and 55.5% year-to-date; for Europe, 35.5% for the quarter and 35.3% year-to-date; and, for Asia/Pacific, 9.6% for the quarter and 9.2% year-to-date.

"We are tracking well this year and we remain focused on committing our time, talent and treasure to our core strategic initiatives to continue to grow the business," Ridge said. "We will continue to invest where we see opportunities to expand into growth markets, where we can implement innovation into existing markets, where we can develop our business through acquisitions and strategic partnerships and where we can take advantage of new marketing strategies to leverage our loyal end-users affinity for our brands."

Gross margin was 52.4% in the second quarter compared to 49.6% in the same quarter last year. Year-to-date, gross margin was 51.9% of sales, compared to 47.7% in the same period last year.

"We believe that if oil prices and other commodities stay at their current levels, we can continue to maintain our margins above our target of 50 percent," Ridge said. "The tail wind from lower oil pricing is turning to a head wind as oil moves closer to $90 a barrel."

Advertising and sales promotion expenses were up 16.3% for the second quarter compared to the same period last year and were up 5.3% for the year-to-date compared to last year.

"In the second quarter, we began shipping our new BLUE WORKS line of industrial multi-purpose maintenance products designed for industrial professionals and are pleased with the early results," Ridge said. "We anticipated this line would be a slow build and we continue to gain distribution in the industrial channels for the brand."

Selling, general and administrative expenses were up 12.6% in the second quarter to $20.1 million and were up 2.4% year-to-date to $39.9 million as compared to the same period last year.

As previously announced, the board of directors of WD-40 Company declared on Tuesday, March 23, 2010 the regular quarterly dividend of $.25 per share, payable April 30, 2010 to stockholders of record on April 16, 2010.

Updated Fiscal Year 2010 Guidance

WD-40 Company now expects fiscal year 2010 net sales of $308.0 million to $321.0 million. The Company expects diluted earnings per share of $1.92 to $2.01 for fiscal year 2010 based on an estimated 16.8 million weighted average shares outstanding. Advertising and promotions expenses should be within our historical range of 6.5% to 8%.

"We restructured our compensation program this year to drive behavior that delivers increased revenue, which we are happy to reward. We are pleased that this new program has helped us achieve positive results for our employee tribe as well as for our shareholders." Ridge added. "As a result, we anticipate a higher employee bonus expense through the end of the current fiscal year."

WD-40 Company's 10-Q will be filed on April 8, 2010.

WD-40 Company, with headquarters in San Diego, is a global consumer product company dedicated to delivering unique, high-value and easy-to-use solutions for a wide variety of maintenance needs of "doer" and "on-the-job" users by leveraging and building the brand fortress of the company. The company markets three multi-purpose maintenance product brands - WD-40(R), 3-IN-ONE(R) and BLUE WORKS (TM) - and eight homecare and cleaning product brands: X-14(R) mildew stain remover and automatic toilet bowl cleaners, 2000 Flushes(R) automatic toilet bowl cleaners, Carpet Fresh(R) and No Vac(R) rug and room deodorizers, Spot Shot(R) aerosol and liquid carpet stain removers, 1001(R) carpet and household cleaners and rug and room deodorizers, and Lava(R) and Solvol(R) heavy-duty hand cleaners.

WD-40 Company markets its products in more than 160 countries worldwide and recorded sales of $292 million in fiscal year 2009. Additional information about WD-40 Company can be obtained online at http://www.wd40company.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 the impact of commodity prices, changes in foreign currency exchange rates, stocking levels of our customers, introduction of new products and fluctuating 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
                         Condensed Consolidated Statements of Operations
                         -----------------------------------------------
                      (Unaudited and in thousands, except per share amounts)
                      ------------------------------------------------------



                                     Three Months Ended
                                        February 28,
                                     ------------------
                                     2010              2009
                                     ----              ----

    Net sales                     $80,553           $61,837
    Cost of products
     sold(1)                       38,320            31,192
                                   ------            ------

        Gross profit               42,233            30,645
                                   ------            ------

    Operating expenses:
      Selling, general and
       administrative              20,082            17,836
      Advertising and sales
       promotion                    5,354             4,604
      Amortization of
       definite-lived
       intangible assets              185               110
      Impairment of
       indefinite-lived
       intangible assets                -             2,760
                                      ---             -----

        Total operating
         expenses                  25,621            25,310
                                   ------            ------

    Income from
     operations                    16,612             5,335


    Other (expense)
     income:
      Interest expense, net          (361)             (510)
      Other (expense)
       income, net                    (36)              480
                                      ---               ---

    Income before income
     taxes                         16,215             5,305
    Provision for income
     taxes                          5,538             1,222
                                    -----             -----

        Net income                $10,677            $4,083
                                  =======            ======

    Earnings per common
     share:
      Basic                         $0.64             $0.25
                                    =====             =====


      Diluted                       $0.64             $0.25
                                    =====             =====

    Shares used in per
     share calculations:
      Basic                        16,585            16,501
                                   ======            ======

      Diluted                      16,688            16,650
                                   ======            ======

    Dividends declared
     per share                      $0.25             $0.25
                                    =====             =====





                                      Six Months Ended
                                        February 28,
                                       ----------------
                                     2010              2009
                                     ----              ----

    Net sales                    $158,274          $145,434
    Cost of products
     sold(1)                       76,128            76,052
                                   ------            ------

        Gross profit               82,146            69,382
                                   ------            ------

    Operating expenses:
      Selling, general and
       administrative              39,883            38,953
      Advertising and sales
       promotion                   10,552            10,017
      Amortization of
       definite-lived
       intangible assets              370               239
      Impairment of
       indefinite-lived
       intangible assets                -             2,760
                                      ---             -----

        Total operating
         expenses                  50,805            51,969
                                   ------            ------

    Income from
     operations                    31,341            17,413


    Other (expense)
     income:
      Interest expense, net          (850)             (950)
      Other (expense)
       income, net                     78               701
                                      ---               ---

    Income before income
     taxes                         30,569            17,164
    Provision for income
     taxes                         10,479             5,396
                                   ------             -----

        Net income                $20,090           $11,768
                                  =======           =======

    Earnings per common
     share:
      Basic                         $1.21             $0.71
                                    =====             =====


      Diluted                       $1.20             $0.71
                                    =====             =====

    Shares used in per
     share calculations:
      Basic                        16,570            16,498
                                   ======            ======

      Diluted                      16,670            16,662
                                   ======            ======

    Dividends declared
     per share                      $0.50             $0.50
                                    =====             =====




    (1) Includes cost of products acquired from related party of $3,460
    and $7,720 for the three and six months ended February 28, 2009,
    respectively

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


                                              February 28,   August 31,
                                                  2010         2009
                                            -------------  -----------

    Assets
    Current assets:
      Cash and cash equivalents                 $48,949          $45,956
      Trade accounts receivable, less
       allowance for doubtful
        accounts of $619 and $694 at
         February 28, 2010
        and August 31, 2009, respectively        55,062           48,061
      Product held at contract packagers          1,764            1,797
      Inventories                                14,934           15,858
      Current deferred tax assets, net            4,370            4,369
      Other current assets                        4,255            4,736
                                                  -----            -----

        Total current assets                    129,334          120,777

    Property, plant and equipment, net            9,900           10,930
    Goodwill                                     95,177           95,424
    Other intangible assets, net                 31,571           32,205
    Other assets                                  2,988            3,281
                                                  -----            -----

      Total assets                             $268,970         $262,617
                                               ========         ========


    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                          $20,037          $12,529
      Accrued liabilities                        15,427           15,233
      Current portion of long-term debt          10,714           10,714
      Accrued payroll and related expenses        4,674            7,168
      Income taxes payable                        2,335            2,570
                                                  -----            -----

        Total current liabilities                53,187           48,214

    Long-term debt                               10,714           21,429
    Long-term deferred tax liabilities,
     net                                         17,968           16,868
    Deferred employee benefits and other
     long-term liabilities                        3,193            3,159
                                                  -----            -----

        Total liabilities                        85,062           89,670
                                                 ------           ------

    Shareholders' equity:
      Common stock --authorized
       36,000,000 shares, $0.001 par
        value; 18,148,493 and 18,093,879
         shares issued at February
        28, 2010 and August 31. 2009,
         respectively; and 16,584,995 and
        16,530,381 shares outstanding at
         February 28, 2010 and
        August 31, 2009, respectively                18               18
      Additional paid-in capital                 89,062           86,729
      Retained earnings                         150,147          138,367
      Accumulated other comprehensive loss       (5,253)          (2,101)
      Common stock held in treasury, at
       cost --1,563,498 shares
        at February 28, 2010 and August 31,
         2009                                  (50,066)          (50,066)
                                                -------          -------

        Total shareholders' equity              183,908          172,947
                                                -------          -------

        Total liabilities and shareholders'
         equity                                $268,970         $262,617
                                               ========         ========


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



                                                 Six Months Ended
                                                   February 28,
                                                    ----------------
                                                  2010                2009
                                                  ----                ----
    Operating activities:
      Net income                               $20,090             $11,768
      Adjustments to reconcile net
       income to net cash provided by
        operating activities:
        Depreciation and amortization            2,186               1,780
        Impairment of indefinite-lived
         intangible assets                           -               2,760
        Net gains on sales and disposals
         of property and equipment                 (21)                (21)
        Deferred income tax expense                871               1,113
        Excess tax benefits from exercises
         of stock options and
           conversions of restricted stock
            units to common shares                (110)                (14)
        Stock-based compensation                 1,641               1,577
        Unrealized foreign currency
         exchange gains, net                      (137)               (569)
        Provision for bad debts                      -                 351
        Equity losses from related party             -                 435
        Changes in assets and liabilities:
            Trade accounts receivable           (8,169)              1,870
            Product held at contract packagers      40              (1,557)
            Inventories                            757              (1,324)
            Other assets                           433              (1,223)
            Accounts payable and accrued
             expenses and liabilities            5,551              (6,382)
            Accounts payable to related party        -                (258)
            Income taxes payable                   258               1,330
            Deferred employee benefits and
             other long-term liabilities            33                 (57)
                                                   ---                 ---

               Net cash provided by operating
                activities                      23,423              11,579
                                                ------              ------

    Investing activities:
      Capital expenditures                        (760)             (2,019)
      Proceeds from sales of property
       and equipment                                62                 126
                                                   ---                 ---

               Net cash used in investing
                activities                        (698)             (1,893)
                                                  ----              ------

    Financing activities:
      Repayments of long-term debt             (10,714)            (10,714)
      Dividends paid                            (8,310)             (8,271)
      Proceeds from issuance of common
       stock                                       896                 640
      Excess tax benefits from exercises
       of stock options and
        conversions of restricted stock
         units to common shares                    110                  14
                                                   ---                 ---

               Net cash used in financing
                activities                     (18,018)            (18,331)
                                               -------             -------

    Effect of exchange rate changes on
     cash and cash equivalents                  (1,714)             (4,844)
                                                ------              ------

    Net increase (decrease) in cash
     and cash equivalents                        2,993             (13,489)

    Cash and cash equivalents at
     beginning of period                        45,956              41,983
                                                ------              ------

    Cash and cash equivalents at end
     of period                                 $48,949             $28,494
                                               =======             =======


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




                                                      Three Months Ended
                                                         February 28,
                                                        ------------------
                                                       2010               2009
                                                       ----               ----


    Net income                                      $10,677             $4,083

    Other comprehensive loss:
      Equity adjustment from
       foreign   currency
       translation, net of tax                       (4,129)           (2,991)
                                                     ------             ------

             Total comprehensive income              $6,548             $1,092
                                                     ======             ======



                                           Six Months Ended
                                             February 28,
                                              ----------------
                                           2010                 2009
                                           ----                 ----


    Net income                          $20,090              $11,768

    Other comprehensive loss:
      Equity adjustment from
       foreign   currency
       translation, net of tax           (3,152)             (11,241)
                                         ------              -------

             Total comprehensive income $16,938                 $527
                                        =======                 ====



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