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

07/07/10

SAN DIEGO, July 7, 2010 /PRNewswire via COMTEX/ --

WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2010 of $82.6 million, an increase of 20.0% from the third quarter last year. Year-to-date net sales were $240.8 million, up 12.4% from the same period last year.

Net income for the third quarter was $9.1 million, an increase of 32.2% compared to the prior year's third quarter. Year-to-date net income was $29.2 million, an increase of 56.5% compared to the same period last year.

Summary

  • Third quarter multi-purpose maintenance products sales, which include the WD-40(R), 3-IN-ONE(R) and BLUE WORKS (TM) brands, were $67.9 million, up 29.2% versus the same quarter last year, and $194.2 million year-to-date, up 17.4% from the prior year. Homecare and cleaning products sales, which include all of our other brands, were $14.6 million for the third quarter, down 10.0%, and were $46.6 million year-to-date, down 4.4%.
  • Americas third quarter sales were $46.5 million, up 13.1% compared to the third quarter last year and were $134.4 million year-to-date, up 8.5%. Europe sales in the third quarter were $27.0 million, up 24.6% and were $82.9 million year-to-date, up 16.2%. Asia-Pacific sales were $9.1 million in the third quarter, up 50.2% and were $23.6 million year-to-date, up 23.9%.
  • Earnings per share (diluted) were $0.54 in the third quarter, compared to $0.41 per share for the same quarter last year. Through nine months, earnings per share (diluted) were $1.74 compared to $1.12 in the same period last year.

"Although we continue to experience uncertainty in the global economy, our tribe has the ability to come together to address challenges and to be patient and flexible with the things that are out of our control. That has helped us continue to focus on the mid- to long-term strategies that are key to our success," said Garry Ridge, WD-40 Company president and chief executive officer. "We remain cautiously optimistic that our continued, steady focus on our four strategic initiatives will continue to drive our business forward as we navigate these turbulent waters."

In the third quarter, foreign currency exchange rates positively affected net sales by $2.9 million and net income by $0.4 million. Through the nine months, foreign currency exchange rates positively impacted net sales and net income by $4.9 million and $ 0.7 million, respectively.

Net sales by segment as a percent of total net sales were as follows: for the Americas, 56.3% for the quarter and 55.8% year-to-date; for Europe, 32.7% for the quarter and 34.4% year-to-date; and, for Asia-Pacific, 11.0% for the quarter and 9.8% year-to-date.

"We have seen solid, steady growth in almost all of our geographic markets throughout the year," Ridge said. "Our focus on expanding into growth markets has also led to an increase in the percentage of sales outside the U.S., which is now at 53% of total sales."

Gross margin was 51.2% in the third quarter compared to 50.9% in the same quarter last year. Year-to-date, gross margin was 51.7% of sales, compared to 48.7% in the same period last year.

Advertising and sales promotion expenses were up 6.8% for the third quarter compared to the same period last year and were up 5.9% for the year-to-date compared to last year.

"We continue our focus on innovation in the multi-purpose maintenance product line, and we are pleased with our progress on the BLUE WORKS brand in the U.S. market and the expansion of the 3-IN-ONE brand in the Europe and Asia markets," Ridge added. "BLUE WORKS is the first brand to carry the WD-40 Company Signature of Endorsement, and end-user feedback has shown it to be critical in the trial and use of the new product."

Selling, general and administrative expenses were $23.3 million in the third quarter, up 26.8% compared to the same period last year and were $63.2 million year-to-date, up 10.2% compared to last year.

"We continue to evaluate potential acquisitions and strategic partnerships and have seen more options that fit our strategic roadmap becoming available," Ridge said. "As we have stated, product, price, timing, strategic fit and return on investment are key drivers for us in this area."

As previously announced, the board of directors of WD-40 Company declared on Tuesday, June 22, 2010 the regular quarterly dividend of $.25 per share, payable July 30, 2010 to stockholders of record on July 16, 2010.

Updated Fiscal Year 2010 Guidance

WD-40 Company expects fiscal year 2010 net sales of $313.0 million to $319.0 million or growth between 7.2% and 9.2% versus fiscal year 2009. The company expects net income of $34.4 million to $36.0 million and diluted earnings per share of $2.05 to $2.14 for fiscal year 2010 based on an estimated 16.8 million weighted average shares outstanding. The company expects advertising and sales promotion expenses to be within the range of 6.5% to 7.5% of net sales.

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

WD-40 Company, with headquarters in San Diego, is a global consumer products 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 the introduction of new products, changes in foreign currency exchange rates, 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 May   Nine Months Ended May
                                     31,                    31,
                          ----------------------- ----------------------
                             2010            2009      2010           2009
                             ----            ----      ----           ----

    Net sales             $82,561         $68,816  $240,835       $214,250
    Cost of products
     sold(1)               40,306          33,821   116,434        109,873
                           ------          ------   -------        -------

        Gross profit       42,255          34,995   124,401        104,377
                           ------          ------   -------        -------

    Operating expenses:
      Selling, general
       and administrative  23,348          18,412    63,231         57,365
      Advertising and
       sales promotion      5,685           5,321    16,237         15,338
      Amortization of
       definite-lived
       intangible assets      178             107       548            346
      Impairment of
       indefinite-lived
       intangible assets        -               -         -          2,760
                              ---             ---       ---          -----

        Total operating
         expenses          29,211          23,840    80,016         75,809
                           ------          ------    ------         ------

    Income from
     operations            13,044          11,155    44,385         28,568


    Other income
     (expense):

      Interest income          49              29       124            377
      Interest expense       (402)           (597)   (1,327)        (1,895)
      Other income
       (expense), net          42            (157)      120            544
                              ---            ----       ---            ---

    Income before
     income taxes          12,733          10,430    43,302         27,594
    Provision for
     income taxes           3,616           3,533    14,095          8,929
                            -----           -----    ------          -----

        Net income         $9,117          $6,897   $29,207        $18,665
                           ======          ======   =======        =======

    Earnings per common
     share:
      Basic                 $0.55           $0.42     $1.76          $1.13
                            =====           =====     =====          =====


      Diluted               $0.54           $0.41     $1.74          $1.12
                            =====           =====     =====          =====

    Shares used in per
     share
     calculations:
      Basic                16,613          16,501    16,585         16,499
                           ======          ======    ======         ======

      Diluted              16,752          16,646    16,697         16,657
                           ======          ======    ======         ======

    Dividends declared
     per common share       $0.25           $0.25     $0.75          $0.75
                            =====           =====     =====          =====
    (1)  Includes cost of products acquired from related party of $3,830
    and $11,550 for the three and nine months ended May 31, 2009,
    respectively.
                               WD-40 COMPANY
                   CONDENSED CONSOLIDATED BALANCE SHEETS
     (Unaudited and in thousands, except share and per share amounts)



                                               May 31, 2010 August 31, 2009
                                               ------------ ---------------

    Assets
    Current assets:
      Cash and cash equivalents                   $59,141         $45,956
      Trade accounts receivable, less
       allowance for doubtful
          accounts of $481 and $694 at May 31,
           2010
          and August 31, 2009, respectively        49,450          48,061
      Product held at contract packagers            2,314           1,797
      Inventories                                  14,705          15,858
      Current deferred tax assets, net              4,361           4,369
      Other current assets                          4,064           4,736
                                                    -----           -----

        Total current assets                      134,035         120,777

    Property, plant and equipment, net              9,420          10,930
    Goodwill                                       94,983          95,424
    Other intangible assets, net                   31,195          32,205
    Other assets                                    2,964           3,281
                                                    -----           -----

      Total assets                               $272,597        $262,617
                                                 ========        ========


    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                            $16,095         $12,529
      Accrued liabilities                          16,128          15,233
      Current portion of long-term debt            10,714          10,714
      Accrued payroll and related expenses          8,814           7,168
      Income taxes payable                            420           2,570
                                                      ---           -----

        Total current liabilities                  52,171          48,214

    Long-term debt                                 10,714          21,429
    Long-term deferred tax liabilities,
     net                                           18,187          16,868
    Deferred employee benefits and other
     long-term liabilities                          3,108           3,159
                                                    -----           -----

        Total liabilities                          84,180          89,670
                                                   ------          ------

    Shareholders' equity:
      Common stock --authorized
       36,000,000 shares, $0.001 par
       value;
        18,213,363 and 18,093,879 shares
         issued at May 31, 2010
        and August 31, 2009, respectively;
         and 16,649,865 and
        16,530,381 shares outstanding at May
         31, 2010 and
        August 31, 2009, respectively                  18              18
      Additional paid-in capital                   91,437          86,729
      Retained earnings                           155,098         138,367
      Accumulated other comprehensive loss         (8,070)         (2,101)
      Common stock held in treasury, at
       cost --1,563,498 shares
        at May 31, 2010 and August 31, 2009       (50,066)        (50,066)
                                                  -------         -------

        Total shareholders' equity                188,417         172,947
                                                  -------         -------

        Total liabilities and shareholders'
         equity                                  $272,597        $262,617
                                                 ========        ========


                                               WD-40 COMPANY
                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Unaudited and in thousands)



                                               Nine Months Ended May 31,
                                               -------------------------
                                                   2010               2009
                                                   ----               ----
    Operating activities:
      Net income                                $29,207            $18,665
      Adjustments to reconcile net income
       to net cash provided by
           operating activities:
        Depreciation and amortization             3,279              2,733
        Impairment of indefinite-lived
         intangible assets                            -              2,760
        Net gains on sales and disposals of
         property and equipment                     (57)               (48)
        Deferred income taxes                     1,087              1,616
        Excess tax benefits from exercises
         of stock options and
           conversions of restricted stock
            units to common shares                 (165)               (14)
        Stock-based compensation                  2,275              2,174
        Unrealized foreign currency
         exchange losses (gains), net             1,037                (74)
        Provision for bad debts                      59                625
        Equity losses from related party              -                435
        Changes in assets and liabilities:
            Trade accounts receivable            (4,115)             1,647
            Product held at contract packagers     (517)               332
            Inventories                             788                548
            Other assets                            459             (1,028)
            Accounts payable and accrued
             expenses and liabilities             6,963             (9,838)
            Accounts payable to related party         -               (320)
            Income taxes payable                 (1,505)             1,678
            Deferred employee benefits and
             other long-term liabilities            (45)               (10)
                                                    ---                ---

               Net cash provided by operating
                activities                       38,750             21,881
                                                 ------             ------

    Investing activities:
      Capital expenditures                       (1,326)            (2,666)
      Proceeds from sales of property and
       equipment                                    192                208
                                                    ---                ---

               Net cash used in investing
                activities                       (1,134)            (2,458)
                                                 ------             ------

    Financing activities:
      Repayments of long-term debt              (10,714)           (10,714)
      Dividends paid                            (12,476)           (12,409)
      Proceeds from issuance of common
       stock                                      2,561                640
      Excess tax benefits from exercises
       of stock options and
        conversions of restricted stock
         units to common shares                     165                 14
                                                    ---                ---

               Net cash used in financing
                activities                      (20,464)           (22,469)
                                                -------            -------

    Effect of exchange rate changes on
     cash and cash equivalents                   (3,967)            (2,712)
                                                 ------             ------

    Net increase (decrease) in cash and
     cash equivalents                            13,185             (5,758)

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

    Cash and cash equivalents at end of
     period                                     $59,141            $36,225
                                                =======            =======


                           WD-40 COMPANY
     CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                    (Unaudited and in thousands)




                             Three Months Ended May   Nine Months Ended May
                                       31,                    31,
                            ----------------------- ----------------------
                               2010               2009    2010           2009
                               ----               ----    ----           ----


    Net income               $9,117             $6,897 $29,207        $18,665

    Other
     comprehensive
     (loss)
     income:
      Equity
       adjustment
       from foreign
       currency
         translation,
          net of
          income taxes      (2,817)              5,247 (5,969)         (5,994)
                             ------              -----  ------         ------

             Total
              comprehensive
              income         $6,300            $12,144 $23,238        $12,671
                             ======            ======= =======        =======

SOURCE WD-40 Company

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