WD-40 Company Reports 22% Increase in First Quarter Net Income

Jan 11, 2010, 16:00 ET from WD-40 Company

SAN DIEGO, Jan. 11 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported sales for the first quarter ended November 30, 2009, of $77.7 million, a decrease of 7.0% from the first quarter last year. Net income for the first quarter was $9.4 million, up 22.5% over the prior year first quarter.

Gross margin was 51.4% in the first quarter compared to 46.3% in the same quarter last year.

"Our continued focus has helped us weather these turbulent times and produce positive overall results," said Garry O. Ridge, WD-40 Company president and chief executive officer. "Staying focused has helped us get our gross margin back where we like it through a combination of product development initiatives such as the Smart Straw conversion, supply chain enhancements, including new manufacturing partners, and the benefits of the price increases we implemented last year to compensate for our increased cost of goods."

During the quarter foreign currency exchange rates negatively affected net sales by $1.8 million and net income by $0.3 million.

The Company's constant currency disclosures represent the translation of the Company's current fiscal year revenues and expenses from the functional currencies of WD-40 Company subsidiaries to U.S. dollars utilizing the exchange rates in effect for the corresponding period of the prior fiscal year.

Summary

  • First quarter multi-purpose maintenance products sales, which include the WD-40(R) and 3-IN-ONE(R) brands, were $60.7 million, down 7.9% from the same quarter last year. Homecare and cleaning products sales, which include all other brands, were $17.0 million in the first quarter, down 3.8%.
  • Americas first quarter sales were $43.7 million, down 4.0% compared to the first quarter last year. Europe sales in the first quarter were $27.2 million, down 9.6%. Asia-Pacific quarter sales were $6.8 million, down 14.4%.
  • Diluted earnings per share for the first quarter were $0.56 versus $0.46 in the prior period.

Total sales by segment for the quarter were 56% from the Americas, 35% from Europe and 9% from Asia/Pacific.

Advertising and sales promotion expenses were down 4.0% for the first quarter compared to the same period last year.

"While our overall advertising and sales promotion expenses were down in the quarter, they slightly increased as a percentage of net sales," Ridge said. "We saw some great success from the focused efforts we did during the quarter, including the Spot Shot promotion we did with the hit movie 'Cloudy With A Chance of Meatballs,' which generated positive sales lifts for this brand."

Selling, general and administrative expenses were down 6.2% in the first quarter to $19.8 million.

Fiscal Year 2010 Guidance

WD-40 Company expects fiscal year 2010 net sales to grow 2%-9% to $298-$318 million. The Company expects diluted earnings per share of $1.80 to $1.95 for fiscal year 2010 based on an estimated 16.8 million shares outstanding.

Dividend

As previously announced, the board of directors declared on Tuesday, December 8, 2009 the regular quarterly dividend of $.25 per share, payable January 29, 2010 to stockholders of record on January 8, 2010.

WD-40 Company also announced that at its regularly scheduled meeting on December 8, 2009, the board of directors authorized an open-ended buy back of Company shares up to $15 million over the next 12 months.

"We are also pleased to report that we began shipping our new BLUE WORKS(TM) line as we expected in early December and will start to see modest results in the second quarter as we begin to build distribution," said Ridge. "BLUE WORKS is aimed at the repair maintenance and overhaul segment of the market, so you will not find this new line at your local hardware store. We are encouraged by the feedback and the early acceptance we have received from this line that was developed specifically for our industrial customers."

More detailed information will be available on WD-40 Company's 10-Q that will be filed on January 11, 2010.

"We remain focused on committing our time, talent and treasure to our core strategic initiatives," Ridge added. "We will do this by continuing our efforts to expand around the world by helping end users in countries like Russia, China and others to solve their rust, squeak and other maintenance issues. We will continue focusing our R&D resources on our multi-purpose maintenance products and adjacent categories as we did with the new BLUE WORKS line. We will also continue developing our business through acquisitions and strategic partnerships and leveraging the trust the WD-40 brand has established with its broad user base."

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) hard surface cleaners 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.

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 changes in foreign currency exchange rates, the impact of new product introductions 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.

http://www.wd40company.com


                                             WD-40 Company
                          Condensed Consolidated Statements of Operations
                          -----------------------------------------------
                         (Unaudited and in thousands, except share and per
                                             share amounts)
                         -------------------------------------------------


                                      Three Months Ended November 30,
                                      -------------------------------
                                              2009         2008
                                              ----         ----

    Net sales                                $77,721     $83,597
    Cost of products sold(1)                  37,808      44,860
                                              ------      ------

        Gross profit                          39,913      38,737
                                              ------      ------

    Operating expenses:
      Selling, general and administrative     19,801      21,117
      Advertising and sales promotion          5,198       5,413
      Amortization of definite-lived
       intangible assets                         185         129
                                                 ---         ---

        Total operating expenses              25,184      26,659
                                              ------      ------

    Income from operations                    14,729      12,078


    Other (expense) income:
      Interest expense, net                     (489)       (440)
      Other income, net                          114         221
                                                 ---         ---

    Income before income taxes                14,354      11,859
    Provision for income taxes                 4,941       4,174
                                               -----       -----

        Net income                            $9,413      $7,685
                                              ======      ======

    Earnings per common share:
      Basic                                    $0.57       $0.47
                                               =====       =====

      Diluted                                  $0.56       $0.46
                                               =====       =====

    Shares used in per share calculations:
      Basic                               16,556,206  16,495,678
                                          ==========  ==========

      Diluted                             16,651,944  16,673,569
                                          ==========  ==========

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


    (1) Includes cost of products acquired from related party of $4,260 for
    the three months ended November 30, 2008



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



                                                       November 30, August 31,
                                                           2009       2009
                                                           -----      ----

    Assets
    Current assets:
      Cash and cash equivalents                           $48,876   $45,956
      Trade accounts receivable, less allowance for
       doubtful accounts of $682 and $694 at
       November 30, 2009 and August 31, 2009,
       respectively                                        45,059    48,061
      Product held at contract packagers                    1,398     1,797
      Inventories                                          17,573    15,858
      Current deferred tax assets, net                      4,380     4,369
      Other current assets                                  4,438     4,736
                                                            -----     -----

        Total current assets                              121,724   120,777

    Property, plant and equipment, net                     10,503    10,930
    Goodwill                                               95,484    95,424
    Other intangible assets, net                           32,081    32,205
    Other assets                                            3,000     3,281
                                                            -----     -----

        Total assets                                     $262,792  $262,617
                                                         ========  ========


    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                                    $15,277   $12,529
      Accrued liabilities                                  15,334    15,233
      Current portion of long-term debt                    10,714    10,714
      Accrued payroll and related expenses                  5,306     7,168
      Income taxes payable                                  4,133     2,570
                                                            -----     -----

        Total current liabilities                          50,764    48,214

    Long-term debt                                         10,714    21,429
    Long-term deferred tax liabilities, net                17,658    16,868
    Deferred employee benefits and other long-term
     liabilities                                            3,150     3,159
                                                            -----     -----

        Total liabilities                                  82,286    89,670
                                                           ------    ------

    Shareholders' equity:
      Common stock -- authorized 36,000,000 shares,
       $0.001 par value; 18,147,003 and 18,093,879
       shares issued at November 30, 2009 and August
       31, 2009, respectively; and 16,583,505 and
       16,530,381 shares outstanding at November 30,
       2009 and August 31, 2009, respectively                  18        18
      Additional paid-in capital                           88,047    86,729
      Retained earnings                                   143,631   138,367
      Accumulated other comprehensive loss                 (1,124)   (2,101)
      Common stock held in treasury, at cost --
       1,563,498 shares at November 30, 2009 and
       August 31, 2009                                    (50,066)  (50,066)
                                                          -------   -------

        Total shareholders' equity                        180,506   172,947
                                                          -------   -------

        Total liabilities and shareholders' equity       $262,792  $262,617
                                                         ========  ========



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

                                                          Three Months Ended
                                                             November 30,
                                                             ------------
                                                            2009      2008
                                                            ----      ----
    Operating activities:
      Net income                                           $9,413   $7,685
      Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation and amortization                       1,082      909
        Net gains on sales and disposals of property and
         equipment                                             (2)      (3)
        Deferred income tax expense                           501      519
        Excess tax benefits from exercises of stock options
         and conversions of restricted stock units to
         common shares                                       (108)     (14)
        Stock-based compensation                              665      625
        Unrealized foreign currency exchange gains, net      (469)    (295)
        Provision for bad debts                                 -      135
        Equity losses from related party                        -      243
        Changes in assets and liabilities:
            Trade accounts receivable                       3,798     (864)
            Product held at contract packagers                405   (1,263)
            Inventories                                    (1,629)  (2,903)
            Other assets                                      534     (950)
            Accounts payable and accrued expenses and
             liabilities                                   (1,133)  (2,873)
            Accounts payable to related party                   -     (380)
            Income taxes payable                            3,272    2,872
            Deferred employee benefits and other long-
             term liabilities                                 (12)     (33)
                                                              ---      ---

                Net cash provided by operating activities  16,317    3,410
                                                           ------    -----

    Investing activities:
      Capital expenditures                                   (314)  (1,172)
      Proceeds from sales of property and equipment            17       60
                                                               --       --

                Net cash used in investing activities        (297)  (1,112)
                                                             ----   ------

    Financing activities:
      Repayments of long-term debt                        (10,714) (10,714)
      Dividends paid                                       (4,149)  (4,134)
      Proceeds from issuance of common stock                  859      640
      Excess tax benefits from exercises of stock options and
       conversions of restricted stock units to common
       shares                                                 108       14
                                                              ---       --

                Net cash used in financing activities     (13,896) (14,194)
                                                          -------  -------

    Effect of exchange rate changes on cash and cash
     equivalents                                              796   (3,747)
                                                              ---   ------

    Net increase (decrease) in cash and cash equivalents    2,920  (15,643)

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

    Cash and cash equivalents at end of period            $48,876  $26,340
                                                          =======  =======



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



                                             Three Months Ended November 30,
                                             -------------------------------
                                                   2009          2008
                                                   ----          ----


    Net income                                    $9,413        $7,685

    Other comprehensive income (loss):
      Equity adjustment from foreign currency
       translation, net of tax                      977         (8,250)
                                                    ---         ------

          Total comprehensive income (loss)     $10,390          $(565)
                                                =======          =====

SOURCE WD-40 Company



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