Exhibit 99.1
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| | | | | Contact: Garry O. Ridge |
| | | | | Phone: 619-275-9324 |
WD-40 Company Reports 8% Growth in Net Income - Fiscal 2005
SAN DIEGO, Nov. 7, 2005 /PRNewswire — WD-40 Company (Nasdaq: WDFC) today reported its fourth-quarter earnings and announced record sales for the fiscal year ended August 31, 2005.
Net sales for the year were $263.2 million, an increase of 8.6% over $242.5 million last year, a record for the Company. Net income for the year was $27.8 million compared to $25.6 million last year, an increase of 8.4%.
Earnings per share for the year grew 10.4% to $1.65 compared to $1.50 per share last year.
Net sales for the fourth quarter were $76.3 million, an increase of 6.4% from sales of $71.7 million in the fourth quarter last year.
Net income for the fourth quarter was $10.5 million, an increase of 17.7% over the same period last year. Earnings per share for the quarter were $0.63 compared to $0.53 for the prior year’s quarter.
“Our focus on innovation and the introduction of new products allowed us to continue to perform even though we had some real challenges due to the increases in cost of goods that have plagued many manufacturers,” said Garry O. Ridge, WD-40 Company president and chief executive officer. “While it is difficult to predict increases in the cost of goods and when they will occur, our plan is to continue to manage expenses while we invest in the long-term growth of our brands.”
Fiscal Year Guidance
In fiscal year 2006, WD-40 Company expects net sales to grow 9%-14% to $288-$299 million.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 123-R, “Share-Based Payment,” the company will begin expensing stock options in the first quarter of fiscal 2006. Stock options expense after tax is expected to range between $1.0-$1.3 million for 2006 which would reduce earnings per share by $0.06 to $0.08. After-tax stock options expense in 2005 would have been $1.2 million or $0.06 per share and $1.0 million or $0.05 per share in 2004.
WD-40 Company expects net income of $24.7 - $28 million in 2006, achieving earnings per share between $1.47 to $1.64 based on an estimated 17 million shares outstanding. This includes the 6-8 cent per share incremental impact of stock options expense.
“Our plan is to continue the innovation path we started down several years ago and we have a few products in the pipeline that will be coming to market, but we do not yet know if they will be ready to launch in 2006,” Ridge said. “It is
also prudent to continue R&D efforts and ramp up marketing for some of the new products we launched in 2005, including the WD-40 Smart Straw, the WD-40 No-Mess Pen and Spot Shot Trigger, as we continue to gain distribution.
“We will give a more strategic overview of our plans in our earnings call and at future investor meetings and will be updating our guidance as the year develops.” Ridge said.
As previously announced, the board of directors of WD-40 Company declared a regular quarterly dividend on October 6, 2005, of $0.22 per share, payable October 28, 2005 to stockholders of record on October 17, 2005.
Total sales for the quarter were 67% from the Americas, 25% from Europe and 8% from Asia/Pacific.
In the Americas, sales for the fourth quarter were up 11.1% from a year ago and up 6.0% on a year-to-date basis. In Europe, sales were up 4.6% for the fourth quarter and up 18.5% for the year.
“The 1001 brand continues to track as we intended and we had solid growth in the brand during the year, including the launch of new products under the 1001 brand name” Ridge said.
In the Asia/Pacific region, sales for the fourth quarter were down 18.5% from last year and sales for the year were up 0.8% over the comparable period last year.
Global sales of the lubricants WD-40 and 3-IN-ONE Oil(R) in the fourth quarter were $50.8 million, up 9.1%, and $174.1 million for the year, up 10.2%.
“This is the third year in a row where we have grown our lubricant business by more than 8% across the globe,” Ridge said.
Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 3.3% to $1.9 million for the fourth quarter, and for the year were $6.9 million, up 4.0%.
Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were $23.6 million during the fourth quarter, up 1.8%, and were $82.2 million year to date, up 5.5% from last year.
WD-40 Company also reported that return on invested capital (ROIC) grew to 18.4% in 2005 compared to 17.0% last fiscal year.
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 $263.2 million in 2005. Additional information about WD-40 Company can be obtained online at 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 introductions and the uncertainty of 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
Consolidated Condensed Statements of Income
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| | | Three Months Ended August 31,
| | | Fiscal Year Ended August 31,
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| | | 2005
| | | 2004
| | | 2005
| | | 2004
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Net sales | | $ | 76,314,000 | | | $ | 71,704,000 | | | $ | 263,227,000 | | | $ | 242,467,000 | |
Cost of products sold(1) | | | 38,388,000 | | | | 35,308,000 | | | | 133,833,000 | | | | 116,944,000 | |
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Gross profit | | | 37,926,000 | | | | 36,396,000 | | | | 129,394,000 | | | | 125,523,000 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 15,992,000 | | | | 15,797,000 | | | | 63,529,000 | | | | 58,311,000 | |
Advertising and sales promotion | | | 4,534,000 | | | | 5,167,000 | | | | 17,893,000 | | | | 21,539,000 | |
Amortization of intangible assets | | | 134,000 | | | | 135,000 | | | | 552,000 | | | | 224,000 | |
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Income from operations | | | 17,266,000 | | | | 15,297,000 | | | | 47,420,000 | | | | 45,449,000 | |
Other income (expense): | | | | | | | | | | | | | | | | |
Interest expense, net | | | (1,097,000 | ) | | | (1,507,000 | ) | | | (5,133,000 | ) | | | (6,387,000 | ) |
Other income (expense), net | | | 119,000 | | | | (58,000 | ) | | | 578,000 | | | | (209,000 | ) |
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Income before income taxes | | | 16,288,000 | | | | 13,732,000 | | | | 42,865,000 | | | | 38,853,000 | |
Provision for income taxes | | | 5,765,000 | | | | 4,794,000 | | | | 15,067,000 | | | | 13,210,000 | |
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Net income | | $ | 10,523,000 | | | $ | 8,938,000 | | | $ | 27,798,000 | | | $ | 25,643,000 | |
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Earnings per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.63 | | | $ | 0.53 | | | $ | 1.67 | | | $ | 1.52 | |
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Diluted | | $ | 0.63 | | | $ | 0.53 | | | $ | 1.65 | | | $ | 1.50 | |
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Weighted-average common shares outstanding, basic | | | 16,679,664 | | | | 16,788,269 | | | | 16,629,057 | | | | 16,905,587 | |
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Weighted-average common shares outstanding, diluted | | | 16,810,508 | | | | 16,935,419 | | | | 16,807,399 | | | | 17,118,829 | |
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Dividends declared per share | | $ | 0.22 | | | $ | 0.20 | | | $ | 0.84 | | | $ | 0.80 | |
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| (1) | Includes cost of products acquired from related party of $10,702,000 and $10,120,000 for the three months ended August 31, 2005 and 2004, respectively; and $38,384,000 and $36,615,000 for the years ended August 31, 2005 and 2004, respectively. |
WD-40 Company
Consolidated Condensed Balance Sheets
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| | | August 31, 2005
| | | August 31, 2004
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| Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 37,120,000 | | | $ | 29,433,000 | |
Trade accounts receivable, less allowance for cash discounts, returns and doubtful accounts of $1,506,000 and $1,440,000 | | | 44,487,000 | | | | 40,643,000 | |
Product held at contract packagers | | | 1,814,000 | | | | 1,975,000 | |
Inventories | | | 8,041,000 | | | | 6,322,000 | |
Current deferred tax assets, net | | | 2,946,000 | | | | 2,830,000 | |
Other current assets | | | 6,784,000 | | | | 3,026,000 | |
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Total current assets | | | 101,192,000 | | | | 84,229,000 | |
Property, plant and equipment, net | | | 8,355,000 | | | | 7,081,000 | |
Goodwill | | | 95,858,000 | | | | 95,832,000 | |
Other intangibles, net | | | 42,884,000 | | | | 43,428,000 | |
Investment in related party | | | 1,112,000 | | | | 932,000 | |
Other assets | | | 4,852,000 | | | | 5,273,000 | |
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| | | $ | 254,253,000 | | | $ | 236,775,000 | |
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| Liabilities and Shareholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 10,714,000 | | | $ | 10,000,000 | |
Accounts payable | | | 13,671,000 | | | | 11,910,000 | |
Accounts payable to related party | | | 1,945,000 | | | | 1,926,000 | |
Accrued liabilities | | | 14,058,000 | | | | 12,151,000 | |
Accrued payroll and related expenses | | | 3,828,000 | | | | 3,935,000 | |
Income taxes payable | | | 2,484,000 | | | | 2,613,000 | |
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Total current liabilities | | | 46,700,000 | | | | 42,535,000 | |
Long-term debt | | | 64,286,000 | | | | 75,000,000 | |
Deferred employee benefits and other long-term liabilities | | | 1,838,000 | | | | 1,969,000 | |
Long-term deferred tax liabilities, net | | | 11,363,000 | | | | 4,853,000 | |
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Total liabilities | | | 124,187,000 | | | | 124,357,000 | |
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Shareholders’ equity: | | | | | | | | |
Common stock, $.001 par value, 36,000,000 shares authorized — 17,222,410 and 17,089,015 shares issued | | | 17,000 | | | | 17,000 | |
Paid-in capital | | | 52,990,000 | | | | 49,616,000 | |
Unearned stock-based compensation | | | (136,000 | ) | | | — | |
Retained earnings | | | 89,983,000 | | | | 76,152,000 | |
Accumulated other comprehensive income | | | 2,238,000 | | | | 1,659,000 | |
Common stock held in treasury, at cost (534,698 shares) | | | (15,026,000 | ) | | | (15,026,000 | ) |
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Total shareholders’ equity | | | 130,066,000 | | | | 112,418,000 | |
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| | | $ | 254,253,000 | | | $ | 236,775,000 | |
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WD-40 Company
Consolidated Condensed Statements of Cash Flows
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| | | Year Ended August 31,
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| | | 2005
| | | 2004
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Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 27,798,000 | | | $ | 25,643,000 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 3,007,000 | | | | 2,369,000 | |
Gains on sales and disposals of property and equipment | | | (24,000 | ) | | | (49,000 | ) |
Deferred income tax expense | | | 3,474,000 | | | | 4,504,000 | |
Tax benefit from exercise of stock options | | | 377,000 | | | | 965,000 | |
Equity earnings from related party in excess of distributions received | | | (180,000 | ) | | | (281,000 | ) |
Stock-based compensation | | | 22,000 | | | | 130,000 | |
Changes in assets and liabilities, net of assets and liabilities acquired: | | | | | | | | |
Trade accounts receivable | | | (3,635,000 | ) | | | 3,153,000 | |
Product held at contract packagers | | | 161,000 | | | | (271,000 | ) |
Inventories | | | (1,655,000 | ) | | | (1,306,000 | ) |
Other assets | | | (970,000 | ) | | | (479,000 | ) |
Accounts payable and accrued expenses | | | 3,262,000 | | | | 74,000 | |
Accounts payable to related party | | | 14,000 | | | | (2,758,000 | ) |
Income taxes payable | | | (125,000 | ) | | | (321,000 | ) |
Deferred employee benefits and other long-term liabilities | | | 38,000 | | | | 118,000 | |
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Net cash provided by operating activities | | | 31,564,000 | | | | 31,491,000 | |
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Cash flows from investing activities: | | | | | | | | |
Acquisition of a business | | | — | | | | (11,555,000 | ) |
Capital expenditures | | | (3,101,000 | ) | | | (2,358,000 | ) |
Proceeds from sales of property and equipment | | | 162,000 | | | | 169,000 | |
Proceeds from collections on notes receivable | | | 50,000 | | | | 100,000 | |
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Net cash used in investing activities | | | (2,889,000 | ) | | | (13,644,000 | ) |
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Cash flows from financing activities: | | | | | | | | |
Repayments of long-term debt | | | (10,000,000 | ) | | | (10,000,000 | ) |
Proceeds from issuance of common stock | | | 2,839,000 | | | | 7,914,000 | |
Treasury stock purchases | | | — | | | | (15,026,000 | ) |
Dividends paid | | | (13,967,000 | ) | | | (13,559,000 | ) |
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Net cash used in financing activities | | | (21,128,000 | ) | | | (30,671,000 | ) |
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Effect of exchange rate changes on cash and cash equivalents | | | 140,000 | | | | 286,000 | |
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Increase (decrease) in cash and cash equivalents | | | 7,687,000 | | | | (12,538,000 | ) |
Cash and cash equivalents at beginning of period | | | 29,433,000 | | | | 41,971,000 | |
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Cash and cash equivalents at end of period | | $ | 37,120,000 | | | $ | 29,433,000 | |
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WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
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| | | Three Months Ended August 31,
| | | Year Ended August 31,
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| | | 2005
| | | 2004
| | | 2005
| | 2004
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Net income | | $ | 10,523,000 | | | $ | 8,938,000 | | | $ | 27,798,000 | | $ | 25,643,000 |
Other comprehensive income: | | | | | | | | | | | | | | |
Equity adjustment from foreign currency translation, net of tax | | | (87,000 | ) | | | (192,000 | ) | | | 579,000 | | | 1,147,000 |
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Total comprehensive income | | $ | 10,436,000 | | | $ | 8,746,000 | | | $ | 28,377,000 | | $ | 26,790,000 |
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WD-40 Company
Return on Invested Capital
In addition to GAAP measures, WD-40 Company management believes that the quality of business performance can also be illustrated by its Return on Invested Capital (ROIC).
Return on Invested Capital is important to investors because it provides an indication as to how well a company is utilizing the resources invested in a business. Long-term economic value is created by companies with Returns on Invested Capital that exceed the company’s weighted average cost of capital.
Return on Invested Capital is calculated as follows:
ROIC = Net Operating Profit After Tax ÷ Average Total Assets less other cash minus non-interest bearing liabilities
| | • | | Net Operating Profit After Tax = Operating Income + Amortization – Tax |
| | • | | Average Total Assets = (Beginning Total Assets + Ending Total Assets) divided by 2 |
| | • | | Other Cash = Total Cash – Transactional Cash representing 3% of Annual Net Sales |
| | • | | Non-interest bearing Liabilities = Accounts Payable + Accrued Liabilities + Accrued Payroll & Related + Income Tax Payable |
The calculation is illustrated below.
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Worldwide
| | FY03
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| | | FY05
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Net Sales | | 238,140 | | | 242,467 | | | 263,227 | |
Operating Profit | | 49,752 | | | 45,449 | | | 47,420 | |
Net Income | | 28,641 | | | 25,643 | | | 27,798 | |
Amortization | | 950 | | | 224 | | | 552 | |
Tax Rate | | 34.0 | % | | 34.0 | % | | 35.2 | % |
NOPAT = Op Inc + Amort after Tax | | 33,463 | | | 30,144 | | | 31,110 | |
Total Assets(beginning) | | 215,045 | | | 236,658 | | | 236,775 | |
Total Assets(ending) | | 236,658 | | | 236,775 | | | 254,253 | |
Total Assets(average) | | 225,852 | | | 236,717 | | | 245,514 | |
Cash | | 41,971 | | | 29,433 | | | 37,120 | |
Transactional cash 3% of net sales | | 7,144 | | | 7,274 | | | 7,897 | |
Other Cash | | 34,827 | | | 22,159 | | | 29,223 | |
Non-interest bearing liabilities: | | | | | | | | | |
Accounts Payable | | 14,772 | | | 13,836 | | | 15,616 | |
Accrued Liabilities | | 11,999 | | | 12,151 | | | 14,058 | |
Accrued Payroll & Related | | 5,122 | | | 3,935 | | | 3,828 | |
Income Tax Payable | | 2,780 | | | 2,613 | | | 2,484 | |
Long-term Deferred Tax | | — | | | 4,853 | | | 11,363 | |
Total Non-interest Bearing Liabilities: | | 34,673 | | | 37,388 | | | 47,349 | |
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Return on Invested Capital (ROIC) | | 21.4 | % | | 17.0 | % | | 18.4 | % |
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