EXHIBIT 99.1
CONTACT: GARRY O. RIDGE
Phone: 619-275-9324
WD-40 COMPANY REPORTS SECOND QUARTER SALES UP 11%, NET INCOME UP
24%; ANNOUNCES SHARE REPURCHASE AUTHORIZATION
SAN DIEGO, April 5, 2007 — WD-40 Company (Nasdaq: WDFC) today reported net sales for the second quarter ended February 28, 2007 of $79.3 million, an increase of 11.0% over the second quarter last year. Year-to-date net sales were $151.3 million, up 9.1% from the same period last year.
Net income for the second quarter was $8.9 million, up 23.6% compared to the prior year's quarter. Earnings per share were $0.52 in the second quarter, compared to $0.43 per share for the same quarter last year. Year-to-date net income was $14.6 million, a decrease of 0.8%. Through six months, earnings per share were $0.85 compared to $0.88 in the same period last year.
“We had a solid quarter and are on track to meet our expectations for the year,” said Garry O. Ridge, WD-40 Company president and chief executive officer.
Summary
| • | | Net sales increased 11.0% to $79.3 million for the second quarter. Year-to-date net sales grew 9.1% to $151.3 million. |
| • | | Net income for the second quarter grew 23.6% to $8.9 million. Year to date net income was down 0.8% at $14.6 million |
| • | | Lubricant sales were up 15.7% for the second quarter and 15.5% for the first half. Household products sales were up 1.6% for the second quarter and down 2.8% through six months. Heavy-duty hand cleaner sales were down 12.1% in the second quarter and off 9.7% through six months. |
| • | | The company announced an open-ended share repurchase authorization of up to $35 million that expires in March 2008. |
Fiscal Year Guidance
In fiscal year 2007, WD-40 Company reaffirmed that it expects net sales to grow 7%-13% to $307-$324 million. WD-40 Company also still expects net income of $29.1-$31.6 million in 2007, achieving earnings per share between $1.70 to $1.85 based on an estimated 17.1 million shares outstanding. The fiscal year 2007 outlook reflects the impact of the company's move to open a direct operation in China. Results from the first year of direct operations in China are expected to reduce net income in 2007 by approximately $1.0 million, or 6 cents per share.
“We opened our operation in China on time and are now able to provide direct service to our customers in that country,” Ridge said.
As previously announced, on March 27, 2007 the board of directors of WD-40 Company declared a regular quarterly dividend of $0.25 per share, payable April 30, 2007 to stockholders of record on April 16, 2007.
Share Repurchase Authorization
WD-40 Company also announced that at its regularly scheduled meeting on March 27, 2007, the board of directors authorized an open-ended buy back of Company shares up to $35 million over the next 12 months.
Financial Highlights
Cost of goods during the second quarter was 50.8% of sales compared to 52.0% in the second quarter last year. Through six months, cost of goods was 51.4% versus 52.0% for the same period last year.
“While we’ve achieved some improvement in cost of goods so far, we continue to be concerned about the rising cost of components and raw materials, and have created an internal cost reduction team to focus on cost saving initiatives and supply chain opportunities,” Ridge said.
Advertising and sales promotion expenses were up 4.8% for the second quarter compared to the same period last year and were up 30.9% for the first six months of the year. The company expects its investment in global advertising and sales promotion expenses to be in the range of 6.5% to 8.5% of net sales for the fiscal year.
Total sales for the second quarter were 61.7% from the Americas, 30.7% from Europe and 7.6% from Asia/Pacific.
In the Americas, sales for the second quarter were up 7.6% from a year ago. Through six months, Americas sales were up 2.6%.
“We had strong growth of the WD-40(R) brand across the Americas, which were offset slightly by declines in the 3-IN-ONE Oil(R) brand and in some of our household products,” Ridge said.
In Europe, sales were up 19.1% for the second quarter and are up 23.6% through six months.
“We continue to have strong growth throughout Europe in both our direct and distributor markets,” Ridge said. “These markets represent important long-term growth potential and we are pleased to see the continued development of our business there.”
In the Asia/Pacific region, sales for the second quarter were up 8.7% from last year and up 14.6% year to date.
“Australia continued a strong growth trend thanks to the development of our No Vac brand along with WD-40,” Ridge said. “The second quarter in Asia was marked by the opening of our Chinese subsidiary.”
Global sales of the lubricants WD-40 and 3-IN-ONE Oil were up 15.7% for the second quarter and are up 15.5% through six months.
“Our lubricant sales have grown at a compound annual rate of 9.5% over the past three full fiscal years which reflects both the opportunity and the execution of our plans,” according to Ridge. “Our results stem from the effort and investment we’ve made in developing markets and in product innovation in WD-40 and 3-IN-ONE.”
Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were up 1.6% compared to the previous year's quarter. First half household product sales are down 2.8% from the prior year.
“The categories where we compete with our household brands continue to face significant competition,” Ridge said. “However, we are continuing to focus on new product development under our brand names and intend to continue our commitment to work on future product, packaging and promotional innovation and renovation.”
Sales of heavy-duty hand cleaners Lava(R) and Solvol(R) were down 12.1% for the quarter and are off 9.7% for the first half of the year.
“While we are unhappy with the decline in hand cleaner sales, we recognize that the business requires minimal investment and remains quite profitable to us,” Ridge said.
WD-40 Company's 10-Q will be filed on April 9, 2007.
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 $286.9 million in fiscal 2006. 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 and renovations, 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 Operations
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended February 28, | | | Six Months Ended February 28, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Net sales | | $ | 79,331,000 | | | $ | 71,480,000 | | | $ | 151,287,000 | | | $ | 138,695,000 | |
Cost of products sold(1) | | | 40,293,000 | | | | 37,204,000 | | | | 77,776,000 | | | | 72,105,000 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 39,038,000 | | | | 34,276,000 | | | | 73,511,000 | | | | 66,590,000 | |
| | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 19,736,000 | | | | 17,267,000 | | | | 38,791,000 | | | | 33,624,000 | |
Advertising and sales promotion | | | 5,061,000 | | | | 4,829,000 | | | | 10,703,000 | | | | 8,174,000 | |
Amortization of intangible asset | | | 146,000 | | | | 130,000 | | | | 287,000 | | | | 262,000 | |
| | | | | | | | | | | | | | | | |
Income from operations | | | 14,095,000 | | | | 12,050,000 | | | | 23,730,000 | | | | 24,530,000 | |
| | | | |
Other (expense) income: | | | | | | | | | | | | | | | | |
Interest expense, net | | | (613,000 | ) | | | (853,000 | ) | | | (1,294,000 | ) | | | (1,858,000 | ) |
Other (expense) income, net | | | (94,000 | ) | | | 82,000 | | | | (185,000 | ) | | | 223,000 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 13,388,000 | | | | 11,279,000 | | | | 22,251,000 | | | | 22,895,000 | |
| | | | |
Provision for income taxes | | | 4,449,000 | | | | 4,048,000 | | | | 7,618,000 | | | | 8,151,000 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 8,939,000 | | | $ | 7,231,000 | | | $ | 14,633,000 | | | $ | 14,744,000 | |
| | | | | | | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.52 | | | $ | 0.43 | | | $ | 0.86 | | | $ | 0.88 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.52 | | | $ | 0.43 | | | $ | 0.85 | | | $ | 0.88 | |
| | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding, basic | | | 17,043,032 | | | | 16,716,309 | | | | 17,032,602 | | | | 16,702,570 | |
| | | | | | | | | | | | | | | | |
Weighted-average common shares outstanding, diluted | | | 17,232,563 | | | | 16,825,560 | | | | 17,236,795 | | | | 16,801,018 | |
| | | | | | | | | | | | | | | | |
Dividends declared per share | | $ | 0.25 | | | $ | 0.22 | | | $ | 0.47 | | | $ | 0.44 | |
| | | | | | | | | | | | | | | | |
(1) | Includes cost of products acquired from related party of $4,604,000 and $9,696,000 for the three months ended February 28, 2007 and 2006, respectively; and $9,795,000 and $20,446,000 for the six months ended February 28, 2007 and 2006, respectively. |
WD-40 Company
Consolidated Condensed Balance Sheets
(unaudited)
| | | | | | | | |
| | | February 28, 2007 | | | August 31, 2006 | |
| Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 46,643,000 | | | $ | 45,206,000 | |
Trade accounts receivable, less allowance for doubtful accounts of $712,000 and $762,000 | | | 49,690,000 | | | | 44,491,000 | |
Product held at contract packagers | | | 1,910,000 | | | | 1,385,000 | |
Inventories | | | 15,010,000 | | | | 15,269,000 | |
Current deferred tax assets, net | | | 4,336,000 | | | | 4,331,000 | |
Other current assets | | | 3,970,000 | | | | 4,858,000 | |
| | | | | | | | |
Total current assets | | | 121,559,000 | | | | 115,540,000 | |
| | |
Property, plant and equipment, net | | | 8,802,000 | | | | 8,940,000 | |
Goodwill | | | 96,263,000 | | | | 96,118,000 | |
Other intangibles, net | | | 42,647,000 | | | | 42,722,000 | |
Investment in related party | | | 972,000 | | | | 972,000 | |
Other assets | | | 3,987,000 | | | | 4,183,000 | |
| | | | | | | | |
| | $ | 274,230,000 | | | $ | 268,475,000 | |
| | | | | | | | |
| | |
| Liabilities and Shareholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 10,714,000 | | | $ | 10,714,000 | |
Accounts payable | | | 17,534,000 | | | | 11,287,000 | |
Accounts payable to related party | | | 902,000 | | | | 463,000 | |
Accrued liabilities | | | 13,129,000 | | | | 11,678,000 | |
Accrued payroll and related expenses | | | 3,759,000 | | | | 7,485,000 | |
Income taxes payable | | | 1,975,000 | | | | 2,040,000 | |
| | | | | | | | |
Total current liabilities | | | 48,013,000 | | | | 43,667,000 | |
| | |
Long-term debt | | | 42,857,000 | | | | 53,571,000 | |
Deferred employee benefits and other long-term liabilities | | | 2,001,000 | | | | 1,895,000 | |
Long-term deferred tax liabilities, net | | | 14,588,000 | | | | 13,611,000 | |
| | | | | | | | |
Total liabilities | | | 107,459,000 | | | | 112,744,000 | |
| | | | | | | | |
Shareholders’ equity: | | | | | | | | |
Common stock, $.001 par value, 36,000,000 shares authorized — 17,587,807 and 17,510,668 shares issued | | | 18,000 | | | | 17,000 | |
Paid-in capital | | | 65,530,000 | | | | 62,322,000 | |
Retained earnings | | | 109,961,000 | | | | 103,335,000 | |
Accumulated other comprehensive income | | | 6,288,000 | | | | 5,083,000 | |
Common stock held in treasury, at cost (534,698 shares) | | | (15,026,000 | ) | | | (15,026,000 | ) |
| | | | | | | | |
Total shareholders’ equity | | | 166,771,000 | | | | 155,731,000 | |
| | | | | | | | |
| | $ | 274,230,000 | | | $ | 268,475,000 | |
| | | | | | | | |
WD-40 Company
Consolidated Condensed Statements of Cash Flows
(unaudited)
| | | | | | | | |
| | | Six Months Ended February 28, | |
| | | 2007 | | | 2006 | |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 14,633,000 | | | $ | 14,744,000 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 1,820,000 | | | | 1,699,000 | |
Losses (gains) on sales and disposals of property and equipment | | | 22,000 | | | | (20,000 | ) |
Deferred income tax expense | | | 989,000 | | | | 1,053,000 | |
Excess tax benefits from exercise of stock options | | | (114,000 | ) | | | (205,000 | ) |
Distributions received and equity (earnings) losses from related party, net | | | — | | | | 178,000 | |
Stock-based compensation | | | 1,064,000 | | | | 987,000 | |
Changes in assets and liabilities: | | | | | | | | |
Trade accounts receivable | | | (4,663,000 | ) | | | (657,000 | ) |
Product held at contract packagers | | | (525,000 | ) | | | (341,000 | ) |
Inventories | | | 358,000 | | | | (4,513,000 | ) |
Other assets | | | 879,000 | | | | 274,000 | |
Accounts payable and accrued expenses | | | 3,801,000 | | | | (1,564,000 | ) |
Accounts payable to related party | | | 439,000 | | | | (965,000 | ) |
Income taxes payable | | | 107,000 | | | | 2,891,000 | |
Deferred employee benefits and other long-term liabilities | | | 55,000 | | | | 52,000 | |
| | | | | | | | |
Net cash provided by operating activities | | | 18,865,000 | | | | 13,613,000 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Purchases of short-term investments | | | (99,600,000 | ) | | | — | |
Sales of short-term investments | | | 99,600,000 | | | | — | |
Proceeds from collections on notes receivable | | | 25,000 | | | | 50,000 | |
Capital expenditures | | | (1,181,000 | ) | | | (1,878,000 | ) |
Proceeds from sales of property and equipment | | | 109,000 | | | | 163,000 | |
| | | | | | | | |
Net cash used in investing activities | | | (1,047,000 | ) | | | (1,665,000 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Repayments of long-term debt | | | (10,714,000 | ) | | | (10,714,000 | ) |
Proceeds from issuance of common stock | | | 2,025,000 | | | | 2,334,000 | |
Excess tax benefits from exercise of stock options | | | 114,000 | | | | 205,000 | |
Dividends paid | | | (8,007,000 | ) | | | (7,344,000 | ) |
| | | | | | | | |
Net cash used in financing activities | | | (16,582,000 | ) | | | (15,519,000 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | 201,000 | | | | 40,000 | |
| | | | | | | | |
Increase (decrease) in cash and cash equivalents | | | 1,437,000 | | | | (3,531,000 | ) |
| | |
Cash and cash equivalents at beginning of period | | | 45,206,000 | | | | 37,120,000 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 46,643,000 | | | $ | 33,589,000 | |
| | | | | | | | |
WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
(unaudited)
| | | | | | | | | | | | | | |
| | | Three Months Ended February 28, | | Six Months Ended February 28, | |
| | | 2007 | | | 2006 | | 2007 | | 2006 | |
Net income | | $ | 8,939,000 | | | $ | 7,231,000 | | $ | 14,633,000 | | $ | 14,744,000 | |
| | | | |
Other comprehensive (loss) income: | | | | | | | | | | | | | | |
Equity adjustment from foreign currency translation, net of tax | | | (111,000 | ) | | | 400,000 | | | 1,205,000 | | | (477,000 | ) |
| | | | | | | | | | | | | | |
Total comprehensive income | | $ | 8,828,000 | | | $ | 7,631,000 | | $ | 15,838,000 | | $ | 14,267,000 | |
| | | | | | | | | | | | | | |
