EXHIBIT 99.1
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| | | Contact: | | Mike Irwin |
| | | PH: | | 619-275-9336 |
WD-40 COMPANY REPORTS SECOND QUARTER SALES UP 17%, NET INCOME UP 37%
SAN DIEGO, April 5, 2006 /PRNewswire/ — WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 28, 2006 of $71.5 million, an increase of 17% over the second quarter last year. Year-to-date net sales were $138.7 million, up 13.9% from the same period last year.
Net income for the second quarter was $7.2 million, up 37.0% compared to the prior year’s quarter. Earnings per share were $0.43 in the second quarter, compared to $0.31 per share for the same quarter last year. Year-to-date net income was $14.7 million, an increase of 35.1%. Through six months, earnings per share were $0.88 compared to $0.65 in the same period last year.
“We are pleased with the sales and profit growth we have generated across all of our trading blocs,” said Garry O. Ridge, WD-40 Company president and chief executive officer. “We have also started to see success from our commitment to innovation and the recent introduction of new products that have resulted from that strategy.”
Cost of goods during the second quarter was 52% of sales compared to 51.5% in the second quarter last year.
“We are still challenged by the continuing increases in cost of goods,” Ridge said. “As a result, we plan to implement price increases on certain products during the third quarter of this year.”
Updated Fiscal Year Guidance
In fiscal year 2006, WD-40 Company expects net sales to grow 9% to 14% to $288 to $299 million. WD-40 Company has updated the net income guidance and now expects net income for the year to be between $25.5 million and $28.0 million, achieving earnings per share of $1.50 to $1.65 based on an estimated 17 million shares outstanding. Fiscal year 2006 results include the expensing of stock options, which were not included in previous years. Stock options expense, after tax, in the second quarter was $0.4 million or 2.5 cents per share. Year to date stock options expense was $0.7 million or 4.3 cents per share.
“Based on our performance in the second quarter, we have narrowed our net income guidance by increasing our lower range estimate, narrowing the gap in what we expect for the year,” Ridge said. “While our marketing expenses for the first six months are down from last year due to timing, we expect to increase our investment through the remainder of the year.”
As previously announced, on March 28, 2006 the board of directors of WD-40 Company declared a regular quarterly dividend of $0.22 per share, payable April 28, 2006 to stockholders of record on April 17, 2006.
Total sales for the second quarter were 63.6% from the Americas, 28.6% from Europe and 7.8% from Asia/Pacific.
In the Americas, sales for the second quarter were up 18.9% from a year ago.
“During the quarter we had solid growth in the U.S., Canada and Latin America, with strong sales in the lubricant and household products business,” Ridge said.
In Europe, sales were up 15.1% for the second quarter. In the Asia/Pacific region, sales for the quarter were up 10.2% from last year.
“We did well in both our European and Asia/Pacific regions during the quarter, but some of this growth was offset by changes in foreign currency exchange rates,” Ridge said. “If we were still seeing the same rates we had last year, we would have seen an additional $1.7 million in sales and $0.2 million in net income.”
Global sales of the lubricants WD-40® and 3-IN-ONE Oil® were up 13.8% for the quarter.
“We continue to see a positive impact from the new WD-40 delivery systems across the globe and are on target with the launch of these new products,” Ridge said.
Sales of heavy-duty hand cleaners Lava® and Solvol® were down 3.4% for the quarter. Sales of household products X-14®, Carpet Fresh®, 2000 Flushes®, Spot Shot® and 1001® were up 27.1% compared to the previous year’s quarter.
“While we continue to face significant competition in the household products categories, we were able to achieve success in this area due to increased distribution, increases in promotions and the launch of new products,” Ridge said.
WD-40 Company’s 10-Q will be filed on April 10, 2006.
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®, and 3-IN-ONE®, the Lava® and Solvol® brands of heavy-duty hand cleaners, and household products 2000 Flushes®, X-14®, Carpet Fresh®, Spot Shot® and 1001®. WD-40 Company markets its products in more than 160 countries worldwide and recorded sales of $263.2 million in fiscal 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 innovations, the impact of foreign currency exchange rates and the timing of advertising and
sales promotion activities. 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
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended February 28, | | | Six Months Ended February 28, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Net sales | | $ | 71,480,000 | | | $ | 61,076,000 | | | $ | 138,695,000 | | | $ | 121,764,000 | |
Cost of products sold(1) | | | 37,204,000 | | | | 31,429,000 | | | | 72,105,000 | | | | 61,548,000 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 34,276,000 | | | | 29,647,000 | | | | 66,590,000 | | | | 60,216,000 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 17,267,000 | | | | 16,741,000 | | | | 33,624,000 | | | | 32,112,000 | |
Advertising and sales promotion | | | 4,829,000 | | | | 3,448,000 | | | | 8,174,000 | | | | 8,709,000 | |
Amortization of intangible assets | | | 130,000 | | | | 142,000 | | | | 262,000 | | | | 277,000 | |
| | | | | | | | | | | | | | | | |
Income from operations | | | 12,050,000 | | | | 9,316,000 | | | | 24,530,000 | | | | 19,118,000 | |
Other income (expense): | | | | | | | | | | | | | | | | |
Interest expense, net | | | (853,000 | ) | | | (1,230,000 | ) | | | (1,858,000 | ) | | | (2,686,000 | ) |
Other income, net | | | 82,000 | | | | 7,000 | | | | 223,000 | | | | 331,000 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 11,279,000 | | | | 8,093,000 | | | | 22,895,000 | | | | 16,763,000 | |
Provision for income taxes | | | 4,048,000 | | | | 2,815,000 | | | | 8,151,000 | | | | 5,850,000 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 7,231,000 | | | $ | 5,278,000 | | | $ | 14,744,000 | | | $ | 10,913,000 | |
| | | | | | | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.43 | | | $ | 0.32 | | | $ | 0.88 | | | $ | 0.66 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.43 | | | $ | 0.31 | | | $ | 0.88 | | | $ | 0.65 | |
| | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding, basic | | | 16,716,309 | | | | 16,592,465 | | | | 16,702,570 | | | | 16,581,919 | |
| | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding, diluted | | | 16,825,560 | | | | 16,806,735 | | | | 16,801,018 | | | | 16,766,024 | |
| | | | | | | | | | | | | | | | |
Dividends declared per share | | $ | 0.22 | | | $ | 0.20 | | | $ | 0.44 | | | $ | 0.40 | |
| | | | | | | | | | | | | | | | |
| (1) | Includes cost of products acquired from related party of $9,696,000 and $8,380,000 for the three months ended February 28, 2006 and 2005, respectively; and $20,446,000 and $17,952,000 for the six months ended February 28, 2006 and 2005, respectively. |
WD-40 Company
Consolidated Condensed Balance Sheets
(unaudited)
| | | | | | | | |
| | | February 28, 2006 | | | August 31, 2005 | |
| Assets | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 33,589,000 | | | $ | 37,120,000 | |
Trade accounts receivable, less allowance for cash discounts, returns and doubtful accounts of $1,543,000 and $1,506,000 | | | 44,783,000 | | | | 44,487,000 | |
Product held at contract packagers | | | 2,154,000 | | | | 1,814,000 | |
Inventories | | | 12,501,000 | | | | 8,041,000 | |
Current deferred tax assets, net | | | 2,944,000 | | | | 2,946,000 | |
Other current assets | | | 6,390,000 | | | | 6,784,000 | |
| | | | | | | | |
Total current assets | | | 102,361,000 | | | | 101,192,000 | |
Property, plant and equipment, net | | | 8,916,000 | | | | 8,355,000 | |
Goodwill | | | 95,740,000 | | | | 95,858,000 | |
Other intangibles, net | | | 42,435,000 | | | | 42,884,000 | |
Investment in related party | | | 934,000 | | | | 1,112,000 | |
Other assets | | | 4,526,000 | | | | 4,852,000 | |
| | | | | | | | |
| | $ | 254,912,000 | | | $ | 254,253,000 | |
| | | | | | | | |
|
| Liabilities and Shareholders’ Equity | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 10,714,000 | | | $ | 10,714,000 | |
Accounts payable | | | 12,518,000 | | | | 13,671,000 | |
Accounts payable to related party | | | 980,000 | | | | 1,945,000 | |
Accrued liabilities | | | 14,065,000 | | | | 14,058,000 | |
Accrued payroll and related expenses | | | 3,236,000 | | | | 3,828,000 | |
Income taxes payable | | | 5,158,000 | | | | 2,484,000 | |
| | | | | | | | |
Total current liabilities | | | 46,671,000 | | | | 46,700,000 | |
Long-term debt | | | 53,571,000 | | | | 64,286,000 | |
Deferred employee benefits and other long-term liabilities | | | 1,914,000 | | | | 1,838,000 | |
Long-term deferred tax liabilities, net | | | 12,241,000 | | | | 11,363,000 | |
| | | | | | | | |
Total liabilities | | | 114,397,000 | | | | 124,187,000 | |
| | | | | | | | |
| | |
Shareholders’ equity: | | | | | | | | |
Common stock, $.001 par value, 36,000,000 shares authorized — 17,322,722 and 17,222,410 shares issued | | | 17,000 | | | | 17,000 | |
Paid-in capital | | | 56,380,000 | | | | 52,990,000 | |
Unearned stock-based compensation | | | — | | | | (136,000 | ) |
Retained earnings | | | 97,383,000 | | | | 89,983,000 | |
Accumulated other comprehensive income | | | 1,761,000 | | | | 2,238,000 | |
Common stock held in treasury, at cost (534,698 shares) | | | (15,026,000 | ) | | | (15,026,000 | ) |
| | | | | | | | |
Total shareholders’ equity | | | 140,515,000 | | | | 130,066,000 | |
| | | | | | | | |
| | $ | 254,912,000 | | | $ | 254,253,000 | |
| | | | | | | | |
WD-40 Company
Consolidated Condensed Statements of Cash Flows
(unaudited)
| | | | | | | | |
| | | Six Months Ended February 28, | |
| | | 2006 | | | 2005 | |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 14,744,000 | | | $ | 10,913,000 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 1,699,000 | | | | 1,440,000 | |
Gains on sales and disposals of property and equipment | | | (20,000 | ) | | | (13,000 | ) |
Deferred income tax expense | | | 1,053,000 | | | | 4,750,000 | |
Tax benefit from exercise of stock options | | | — | | | | 272,000 | |
Excess tax benefits from exercise of stock options | | | (205,000 | ) | | | — | |
Distributions received and equity losses (equity earnings) from related party, net | | | 178,000 | | | | (22,000 | ) |
Stock-based compensation | | | 987,000 | | | | — | |
Changes in assets and liabilities: | | | | | | | | |
Trade accounts receivable | | | (657,000 | ) | | | 2,805,000 | |
Product held at contract packagers | | | (341,000 | ) | | | 202,000 | |
Inventories | | | (4,513,000 | ) | | | (1,566,000 | ) |
Other assets | | | 274,000 | | | | (4,725,000 | ) |
Accounts payable and accrued expenses | | | (1,564,000 | ) | | | 423,000 | |
Accounts payable to related party | | | (965,000 | ) | | | (408,000 | ) |
Income taxes payable | | | 2,891,000 | | | | (1,704,000 | ) |
Deferred employee benefits and other long-term liabilities | | | 52,000 | | | | 37,000 | |
| | | | | | | | |
Net cash provided by operating activities | | | 13,613,000 | | | | 12,404,000 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Capital expenditures | | | (1,878,000 | ) | | | (1,231,000 | ) |
Proceeds from sales of property and equipment | | | 163,000 | | | | 72,000 | |
Proceeds from collections on notes receivable | | | 50,000 | | | | — | |
| | | | | | | | |
Net cash used in investing activities | | | (1,665,000 | ) | | | (1,159,000 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Repayments of long-term debt | | | (10,714,000 | ) | | | — | |
Proceeds from issuance of common stock | | | 2,334,000 | | | | 1,899,000 | |
Excess tax benefits from exercise of stock options | | | 205,000 | | | | — | |
Dividends paid | | | (7,344,000 | ) | | | (6,630,000 | ) |
| | | | | | | | |
Net cash used in financing activities | | | (15,519,000 | ) | | | (4,731,000 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | 40,000 | | | | 82,000 | |
| | | | | | | | |
(Decrease) increase in cash and cash equivalents | | | (3,531,000 | ) | | | 6,596,000 | |
Cash and cash equivalents at beginning of period | | | 37,120,000 | | | | 29,433,000 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 33,589,000 | | | $ | 36,029,000 | |
| | | | | | | | |
WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
(unaudited)
| | | | | | | | | | | | | |
| | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | | 2006 | | 2005 | | 2006 | | | 2005 |
Net income | | $ | 7,231,000 | | $ | 5,278,000 | | $ | 14,744,000 | | | $ | 10,913,000 |
Other comprehensive income: | | | | | | | | | | | | | |
Equity adjustment from foreign currency translation, net of tax | | | 400,000 | | | 786,000 | | | (477,000 | ) | | | 1,875,000 |
| | | | | | | | | | | | | |
Total comprehensive income | | $ | 7,631,000 | | $ | 6,064,000 | | $ | 14,267,000 | | | $ | 12,788,000 |
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