WD-40 Company Reports Increase in Third Quarter Sales and Net Income

News provided by

WD-40 Company

Jul 07, 2010, 04:00 ET

SAN DIEGO, July 7 /PRNewswire-FirstCall/ -- WD-40 Company (Nasdaq: WDFC) today reported net sales for the third quarter ended May 31, 2010 of $82.6 million, an increase of 20.0% from the third quarter last year. Year-to-date net sales were $240.8 million, up 12.4% from the same period last year.

Net income for the third quarter was $9.1 million, an increase of 32.2% compared to the prior year's third quarter. Year-to-date net income was $29.2 million, an increase of  56.5% compared to the same period last year.

Summary

  • Third quarter multi-purpose maintenance products sales, which include the WD-40(R), 3-IN-ONE(R) and BLUE WORKS (TM) brands, were $67.9 million, up 29.2% versus the same quarter last year, and $194.2 million year-to-date, up 17.4% from the prior year. Homecare and cleaning products sales, which include all of our other brands, were $14.6 million for the third quarter, down 10.0%, and were $46.6 million year-to-date, down 4.4%.
  • Americas third quarter sales were $46.5 million, up 13.1% compared to the third quarter last year and were $134.4 million year-to-date, up 8.5%. Europe sales in the third quarter were $27.0 million, up 24.6% and were $82.9 million year-to-date, up 16.2%. Asia-Pacific sales were $9.1 million in the third quarter, up 50.2% and were $23.6 million year-to-date, up 23.9%.
  • Earnings per share (diluted) were $0.54 in the third quarter, compared to $0.41 per share for the same quarter last year. Through nine months, earnings per share (diluted) were $1.74 compared to $1.12 in the same period last year.

"Although we continue to experience uncertainty in the global economy, our tribe has the ability to come together to address challenges and to be patient and flexible with the things that are out of our control.  That has helped us continue to focus on the mid- to long-term strategies that are key to our success," said Garry Ridge, WD-40 Company president and chief executive officer. "We remain cautiously optimistic that our continued, steady focus on our four strategic initiatives will continue to drive our business forward as we navigate these turbulent waters."

In the third quarter, foreign currency exchange rates positively affected net sales by $2.9 million and net income by $0.4 million. Through the nine months, foreign currency exchange rates positively impacted net sales and net income by $4.9 million and $ 0.7 million, respectively.

Net sales by segment as a percent of total net sales were as follows: for the Americas, 56.3% for the quarter and 55.8% year-to-date; for Europe, 32.7% for the quarter and 34.4% year-to-date; and, for Asia-Pacific, 11.0% for the quarter and 9.8% year-to-date.

"We have seen solid, steady growth in almost all of our geographic markets throughout the year," Ridge said. "Our focus on expanding into growth markets has also led to an increase in the percentage of sales outside the U.S., which is now at 53% of total sales."

Gross margin was 51.2% in the third quarter compared to 50.9% in the same quarter last year. Year-to-date, gross margin was 51.7% of sales, compared to 48.7% in the same period last year.

Advertising and sales promotion expenses were up 6.8% for the third quarter compared to the same period last year and were up 5.9% for the year-to-date compared to last year.

"We continue our focus on innovation in the multi-purpose maintenance product line, and we are pleased with our progress on the BLUE WORKS brand in the U.S. market and the expansion of the 3-IN-ONE brand in the Europe and Asia markets," Ridge added. "BLUE WORKS is the first brand to carry the WD-40 Company Signature of Endorsement, and end-user feedback has shown it to be critical in the trial and use of the new product."

Selling, general and administrative expenses were $23.3 million in the third quarter, up 26.8% compared to the same period last year and were $63.2 million year-to-date, up 10.2% compared to last year.

"We continue to evaluate potential acquisitions and strategic partnerships and have seen more options that fit our strategic roadmap becoming available," Ridge said. "As we have stated, product, price, timing, strategic fit and return on investment are key drivers for us in this area."

As previously announced, the board of directors of WD-40 Company declared on Tuesday, June 22, 2010 the regular quarterly dividend of $.25 per share, payable July 30, 2010 to stockholders of record on July 16, 2010.

Updated Fiscal Year 2010 Guidance

WD-40 Company expects fiscal year 2010 net sales of $313.0 million to $319.0 million or growth between 7.2% and 9.2% versus fiscal year 2009. The company expects net income of $34.4 million to $36.0 million and diluted earnings per share of $2.05 to $2.14 for fiscal year 2010 based on an estimated 16.8 million weighted average shares outstanding.  The company expects advertising and sales promotion expenses to be within the range of 6.5% to 7.5% of net sales.  

WD-40 Company's Form 10-Q will be filed on July 8, 2010.

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) 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. 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 the introduction of new products, changes in foreign currency exchange rates, 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.





WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)































Three Months Ended May 31,

Nine Months Ended May 31,




2010

2009

2010

2009














Net sales

$

82,561

$

68,816

$

240,835

$

214,250

Cost of products sold(1)

40,306

33,821

116,434

109,873
















Gross profit

42,255

34,995

124,401

104,377














Operating expenses:











Selling, general and administrative

23,348

18,412

63,231

57,365

Advertising and sales promotion

5,685

5,321

16,237

15,338

Amortization of definite-lived intangible assets

178

107

548

346

Impairment of indefinite-lived intangible assets

-

-

-

2,760
















Total operating expenses

29,211

23,840

80,016

75,809














Income from operations

13,044

11,155

44,385

28,568




























Other income (expense):

























Interest income

49

29

124

377

Interest expense

(402)

(597)

(1,327)

(1,895)

Other income (expense), net

42

(157)

120

544














Income before income taxes

12,733

10,430

43,302

27,594

Provision for income taxes

3,616

3,533

14,095

8,929
















Net income

$

9,117

$

6,897

$

29,207

$

18,665














Earnings per common share:











Basic

$

0.55

$

0.42

$

1.76

$

1.13





























Diluted

$

0.54

$

0.41

$

1.74

$

1.12














Shares used in per share calculations:











Basic

16,613

16,501

16,585

16,499















Diluted

16,752

16,646

16,697

16,657














Dividends declared per common share

$

0.25

$

0.25

$

0.75

$

0.75




























(1)  Includes cost of products acquired from related party of $3,830 and $11,550 for the three and nine months ended May 31, 2009, respectively.  


WD-40 COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

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























May 31, 2010

August 31, 2009










Assets






Current assets:







Cash and cash equivalents

$

59,141


$

45,956

Trade accounts receivable, less allowance for doubtful









   accounts of $481 and $694 at May 31, 2010







   and August 31, 2009, respectively

49,450



48,061

Product held at contract packagers

2,314



1,797

Inventories

14,705



15,858

Current deferred tax assets, net

4,361



4,369

Other current assets

4,064



4,736












Total current assets

134,035



120,777










Property, plant and equipment, net

9,420



10,930

Goodwill

94,983



95,424

Other intangible assets, net

31,195



32,205

Other assets

2,964



3,281











Total assets

$

272,597


$

262,617




















Liabilities and Shareholders' Equity






Current liabilities:







Accounts payable

$

16,095


$

12,529

Accrued liabilities

16,128



15,233

Current portion of long-term debt

10,714



10,714

Accrued payroll and related expenses

8,814



7,168

Income taxes payable

420



2,570












Total current liabilities

52,171



48,214










Long-term debt

10,714



21,429

Long-term deferred tax liabilities, net

18,187



16,868

Deferred employee benefits and other long-term liabilities

3,108



3,159












Total liabilities

84,180



89,670










Shareholders' equity:







Common stock -- authorized 36,000,000 shares, $0.001 par value;








18,213,363 and 18,093,879 shares issued at May 31, 2010








and August 31, 2009, respectively; and 16,649,865 and










16,530,381 shares outstanding at May 31, 2010 and








August 31, 2009, respectively

18



18

Additional paid-in capital

91,437



86,729

Retained earnings

155,098



138,367

Accumulated other comprehensive loss

(8,070)



(2,101)

Common stock held in treasury, at cost -- 1,563,498 shares








at May 31, 2010 and August 31, 2009

(50,066)



(50,066)












Total shareholders' equity

188,417



172,947












Total liabilities and shareholders' equity

$

272,597


$

262,617

WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)






















Nine Months Ended May 31,





2010

2009

Operating activities:





Net income

$

29,207

$

18,665

Adjustments to reconcile net income to net cash provided by





    operating activities:






Depreciation and amortization


3,279

2,733


Impairment of indefinite-lived intangible assets

-

2,760


Net gains on sales and disposals of property and equipment

(57)

(48)


Deferred income taxes

1,087

1,616


Excess tax benefits from exercises of stock options and







conversions of restricted stock units to common shares

(165)

(14)


Stock-based compensation

2,275

2,174


Unrealized foreign currency exchange losses (gains), net

1,037

(74)


Provision for bad debts

59

625


Equity losses from related party

-

435


Changes in assets and liabilities:







Trade accounts receivable

(4,115)

1,647



Product held at contract packagers

(517)

332



Inventories

788

548



Other assets

459

(1,028)



Accounts payable and accrued expenses and liabilities

6,963

(9,838)



Accounts payable to related party

-

(320)



Income taxes payable

(1,505)

1,678



Deferred employee benefits and other long-term liabilities

(45)

(10)












Net cash provided by operating activities

38,750

21,881









Investing activities:





Capital expenditures

(1,326)

(2,666)

Proceeds from sales of property and equipment

192

208












Net cash used in investing activities

(1,134)

(2,458)









Financing activities:





Repayments of long-term debt

(10,714)

(10,714)

Dividends paid

(12,476)

(12,409)

Proceeds from issuance of common stock

2,561

640

Excess tax benefits from exercises of stock options and








conversions of restricted stock units to common shares

165

14












Net cash used in financing activities

(20,464)

(22,469)









Effect of exchange rate changes on cash and cash equivalents

(3,967)

(2,712)









Net increase (decrease) in cash and cash equivalents

13,185

(5,758)









Cash and cash equivalents at beginning of period

45,956

41,983









Cash and cash equivalents at end of period

$

59,141

$

36,225







WD-40 COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)










































Three Months Ended May 31,

Nine Months Ended May 31,



2010

2009

2010

2009


























Net income

$

9,117

$

6,897

$

29,207

$

18,665













Other comprehensive (loss) income:











Equity adjustment from foreign currency











  translation, net of income taxes

(2,817)

5,247

(5,969)

(5,994)













        Total comprehensive income

$

6,300

$

12,144

$

23,238

$

12,671

SOURCE WD-40 Company

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