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WD-40 Company Reports Second Quarter Sales and Earnings

04/06/11

SAN DIEGO, April 6, 2011 /PRNewswire via COMTEX/ --

WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended Feb. 28, 2011 of $79.2 million, a decrease of 2% from the second quarter last fiscal year. Year-to-date net sales were $160.1 million, up 1% from the same period last fiscal year.

Net income for the second quarter was $9.1 million, a decrease of 15% compared to the prior year fiscal quarter. Year-to-date net income was $18.2 million, a decrease of 9% from the prior fiscal year.

Second quarter multi-purpose maintenance products sales, which include the WD-40(R), 3-IN-ONE(R) and BLUE WORKS (TM) brands, were $65.4 million, flat as compared to the same quarter last year, and $132.0 million year-to-date, up 4% from the prior fiscal year. Homecare and cleaning products sales, which include all other brands, were $13.8 million for the second quarter, down 8%, and were $28.2 million year-to-date, down 12%, both as compared to the prior fiscal year periods.

Americas segment second quarter sales were $38.1 million, down 14% compared to the second quarter last fiscal year and were $77.3 million year-to-date, down 12% compared to the last fiscal year. Europe segment sales in the second quarter were $31.8 million, up 11% and were $62.5 million year-to-date, up 12% compared to last fiscal year. Asia-Pacific segment sales were $9.4 million in the second quarter, up 22% and were $20.3 million year-to-date, up 40% compared to last fiscal year.

Diluted earnings per share were $0.53 in the second quarter, compared to $0.64 per share for the same quarter last fiscal year. Through six months, diluted earnings per share were $1.06 compared to $1.20 in the same period last fiscal year.

"We continue to invest in our four core strategic initiatives, which are to expand into growth markets, to bring innovation into existing markets, to develop our business through acquisitions and strategic partnerships and to take advantage of new marketing strategies to leverage our loyal end-users' affinity for our brands." said Garry O. Ridge, WD-40 Company president and chief executive officer. "This focus continues to pay off as we plan for the future."

Net sales by segment as a percent of total net sales were as follows: for the Americas, 48% for both the second quarter and year-to-date; for Europe, 40% for the second quarter and 39% year-to-date; and, for Asia/Pacific, 12% for the second quarter and 13% year-to-date.

"Our focus on our global expansion strategic initiative continues to be a driving force for sales and profit growth, and we had sales growth of 11% outside the U.S. in the second quarter as compared to the same period last fiscal year while continuing to build our core business," Ridge said. "In the U.S., we saw some declines due to lost distribution, a lower level of replenishment orders and the timing of promotional activities with certain key customers."

Foreign currency exchange rates negatively affected net sales by $0.4 million for the second quarter and $0.9 million year-to-date as compared to the prior fiscal year periods.

Gross margin was 51.8% in the second quarter compared to 52.4% in the same quarter last fiscal year. Year-to-date, gross margin was 51.4%, compared to 51.9% in the same period last fiscal year.

"We continue to see challenges in terms of rising prices for many of our major input costs, and we will continue to work hard to manage them," Ridge said. "We do anticipate that price increases in the second half of the current fiscal year will offset the flow through of some of those costs."

Advertising and sales promotion expenses were flat for the second quarter compared to the same period last fiscal year and were up 8% year-to-date compared to last fiscal year.

"With respect to the multi-purpose maintenance products strategic initiative, we are now celebrating our first anniversary of the launch of the Blue Works product line." Blue Works sales increased 32% in the U.S. in the second quarter," Ridge said. "In addition to our launch earlier this year in the UK, we plan to launch Blue Works in Canada later this calendar year, and we are testing the brand in one Latin American country as well."

Selling, general and administrative expenses were up 8% in the second quarter to $21.6 million and were up 9% year-to-date to $43.3 million as compared to the same periods last fiscal year.

"We are also focused on our acquisitions and joint ventures strategic initiative, and we continue to look for targeted acquisitions that fit with our strategy but have yet to find such an acquisition at the right price," Ridge added.

"Finally, we are excited about our progress in the development of the new WD-40 Specialist(TM) line, which will feature a new line of products created out of our fourth strategic initiative, the exploration of the WD-40 brand" Ridge said. "This product line will feature a portfolio of specialty problem solving products aimed at the trade and doer enthusiasts, and we will continue to do research on what appeals to our end users and use this research and learning to develop products that have "staying power" in the market to grow the overall category."

This specialty line will feature several new products and will be launched in both the U.S. and U.K. by the end of this fiscal year, and WD-40 Company expects phase one of the product line to be completed during fiscal year 2012. WD-40 Company will continually assess and update this product portfolio to reflect an offering that provides solutions for end-users and consumers.

As previously announced, WD-40 Company's board of directors declared on Tuesday, March 22, 2011 the regular quarterly dividend of $0.27 per share, payable April 29, 2011 to shareholders of record on April 15, 2011.

On April 4, 2011, WD-40 Company's board of directors authorized an increase in the existing share buyback plan of $25.0 million (of which $9.6 million has been utilized) to a total of $60.0 million of its outstanding shares and to extend the expiration date of the plan to April 4, 2013.

Updated Fiscal Year 2011 Guidance

WD-40 Company now expects fiscal year 2011 net sales of $335.0 million to $350.0 million. The Company expects net income of $37.5 million to $39.5 million and diluted earnings per share of $2.23 to $2.35 for fiscal year 2011 based on an estimated 16.8 million weighted average shares outstanding. The Company expects advertising and promotion expenses to be within its historical range of 6.5% to 8.0% of net sales.

More detailed information will be in WD-40 Company's Form 10-Q which will be filed on April 7, 2011.

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) 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 $322 million in fiscal year 2010. 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, inventory levels of our customers, promotional timing, the introduction of new products and fluctuating global 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,


Six Months Ended
February 28,




2011

2010


2011

2010











Net sales

$ 79,206


$ 80,553


$ 160,133


$ 158,274

Cost of products sold

38,160


38,320


77,865


76,128













Gross profit

41,046


42,233


82,268


82,146











Operating expenses:









Selling, general and administrative

21,629


20,082


43,278


39,883


Advertising and sales promotion

5,375


5,354


11,444


10,552


Amortization of definite-lived intangible assets

181


185


363


370













Total operating expenses

27,185


25,621


55,085


50,805











Income from operations

13,861


16,612


27,183


31,341











Other income (expense):









Interest income

53


40


108


75


Interest expense

(219)


(401)


(541)


(925)


Other (expense) income, net

(119)


(36)


78


78











Income before income taxes

13,576


16,215


26,828


30,569

Provision for income taxes

4,468


5,538


8,641


10,479













Net income

$ 9,108


$ 10,677


$ 18,187


$ 20,090











Earnings per common share:









Basic

$ 0.53


$ 0.64


$ 1.07


$ 1.21












Diluted

$ 0.53


$ 0.64


$ 1.06


$ 1.20











Shares used in per share calculations:









Basic

16,994


16,585


16,895


16,570












Diluted

17,172


16,688


17,081


16,670











Dividends declared per common share

$ 0.27


$ 0.25


$ 0.54


$ 0.50


WD-40 COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share amounts)










February 28,
2011


August 31,
2010







Assets




Current assets:





Cash and cash equivalents

$ 67,525


$ 75,928


Trade accounts receivable, less allowance for doubtful accounts of $340 and $299 at






February 28, 2011 and August 31, 2010, respectively

56,004


47,846


Product held at contract packagers

1,855


1,536


Inventories

18,208


13,037


Current deferred tax assets, net

4,775


4,747


Other current assets

3,694


7,314









Total current assets

152,061


150,408







Property, plant and equipment, net

9,203


9,322

Goodwill

95,394


95,235

Other intangible assets, net

31,055


31,272

Other assets

2,866


2,871









Total assets

$ 290,579


$ 289,108













Liabilities and Shareholders' Equity




Current liabilities:





Accounts payable

$ 20,609


$ 18,943


Accrued liabilities

16,183


14,382


Current portion of long-term debt

10,715


10,714


Accrued payroll and related expenses

5,010


14,265


Income taxes payable

2,324


1,516









Total current liabilities

54,841


59,820







Long-term debt

-


10,715

Long-term deferred tax liabilities, net

18,688


17,414

Deferred employee benefits and other long-term liabilities

4,692


4,635









Total liabilities

78,221


92,584







Shareholders' equity:





Common stock - authorized 36,000,000 shares, $0.001 par value; 18,671,605 and






18,251,142 shares issued at February 28, 2011 and August 31, 2010, respectively; and






16,864,607 and 16,687,644 shares outstanding at February 28, 2011 and






August 31, 2010, respectively

19


18


Additional paid-in capital

106,591


93,101


Retained earnings

166,833


157,805


Accumulated other comprehensive loss

(1,467)


(4,334)


Common stock held in treasury, at cost - 1,806,998 and 1,563,498 shares at February 28, 2011






and August 31, 2010, respectively

(59,618)


(50,066)









Total shareholders' equity

212,358


196,524









Total liabilities and shareholders' equity

$ 290,579


$ 289,108














WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)



















Six Months Ended February 28,





2011


2010








Operating activities:





Net income

$ 18,187


$ 20,090


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

1,844


2,186



Net losses (gains) on sales and disposals of property and equipment

95


(21)



Deferred income taxes

244


871



Excess tax benefits from exercises of stock options and conversions of restricted







stock units to common shares

(706)


(110)



Stock-based compensation

1,904


1,641



Unrealized foreign currency exchange gains, net

(164)


(137)



Provision for bad debts

31


-



Changes in assets and liabilities:







Trade accounts receivable

(7,136)


(8,169)




Product held at contract packagers

(302)


40




Inventories

(4,880)


757




Other assets

3,580


433




Accounts payable and accrued expenses and liabilities

(7,249)


5,551




Income taxes payable

2,468


258




Deferred employee benefits and other long-term liabilities

43


33











Net cash provided by operating activities

7,959


23,423








Investing activities:





Capital expenditures

(1,286)


(760)


Proceeds from sales of property and equipment

100


62











Net cash used in investing activities

(1,186)


(698)








Financing activities:





Repayments of long-term debt

(10,714)


(10,714)


Dividends paid

(9,159)


(8,310)


Proceeds from issuance of common stock

11,531


896


Treasury stock purchases

(9,552)


-


Excess tax benefits from exercises of stock options and conversions of restricted






stock units to common shares

706


110











Net cash used in financing activities

(17,188)


(18,018)








Effect of exchange rate changes on cash and cash equivalents

2,012


(1,714)








Net (decrease) increase in cash and cash equivalents

(8,403)


2,993








Cash and cash equivalents at beginning of period

75,928


45,956








Cash and cash equivalents at end of period

$ 67,525


$ 48,949

SOURCE WD-40 Company

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