SAN DIEGO, July 9 /PRNewswire-FirstCall/ -- WD-40 Company (NASDAQ:WDFC) today reported net sales for the third quarter ended May 31, 2007 of $77.6 million, an increase of 6.2% over the third quarter last year. Year-to-date net sales were $228.9 million, up 8.1% over the same period last year.
Net income for the third quarter was $7.6 million, up 8.5% compared to the prior year's quarter. Earnings per share in the third quarter grew to $0.44 compared to $0.42 during the same period last year. Year-to-date net income was $22.3 million, an increase of 2.2% from last year. Through nine months, earnings per share were $1.29, even with last year.
Summary -- Net sales increased 6.2% to $77.6 million for the third quarter. Year-to-date net sales grew 8.1% to $228.9 million. -- Third quarter lubricant sales were $56.5 million, up 15.9%, and
$162.2 million for the first nine months, up 15.6%. Household
products sales for the quarter were $19.4 million, down 14.9%, and
were $62.1 million year to date, down 7.0%. Third quarter heavy-duty
hand cleaner sales were $1.7 million, up 12.4%, and $4.6 million
through nine months, down 2.8%. -- Americas region third quarter sales were down 2.5% from a year ago and
are up 0.8% for the year. Europe sales for the third quarter were up
23.3% and are up 23.5% for the year. Asia/Pacific region sales for
the third quarter were up 17.3% from last year and are up 15.5% for
the year. -- Net income for the third quarter grew 8.5% to $7.6 million. Year to
date net income was up 2.2% at $22.3 million. "We are pleased with the sales growth in Asia-Pacific and Europe driven by our lubricants and household products brands," said Garry Ridge, WD-40 Company president and CEO. "We have achieved strong sales increase in Australia, the Asian region, and across Europe through a combination of new distribution, expanded distribution, and new product growth. While those markets continue to show promise, we are also facing ongoing challenges in our household products business in the US." Updated Fiscal Year Guidance In fiscal year 2007, WD-40 Company now expects net sales to grow 7%-9% to $307-$313 million. The company expects net income of $29.1-$30.2 million in 2007, achieving earnings per share of $1.70 to $1.75 based on an estimated 17.3 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 $0.6 million, or 4 cents per share.
Financial Highlights Third quarter gross margin was 47.5% of sales compared to 48.5% in the period last year reflecting higher underlying cost of goods as well a change in product mix. Through nine months, gross margin was 48.2%, equal with the same period last year.
"We continue to be concerned about rising costs of components and raw materials," Ridge said, "and we are working to improve our gross margin over time." Advertising and sales promotion expenses were down 12.7% for the third quarter compared to the same period last year and were up 12.6% for the first nine 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 7.5% of net sales for the fiscal year.
Selling, general and administrative expenses were up 10.1% in the third quarter to $20.2 million and are up 13.5% through nine months to $59.0 million.
"Our investment in China and infrastructure to support global sourcing and inventory management along with higher employee-related costs, legal expense, and the impact of foreign exchange rates contributed to the rise in our overhead expense," Ridge said. "As our sales grow in our developing markets, we expect to pick up operating leverage." On June 26, 2007, the board of directors of WD-40 Company declared the regular quarterly dividend of $0.25 per share, payable July 31, 2007 to stockholders of record on July 17, 2007.
WD-40 Company's 10-Q will be filed on July 10, 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 http://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 May 31, Nine Months Ended May 31,
2007 2006 2007 2006
Net sales $77,581,000 $73,052,000 $228,868,000 $211,747,000
Cost of products
sold(1) 40,714,000 37,633,000 118,490,000 109,738,000 Gross profit 36,867,000 35,419,000 110,378,000 102,009,000 Operating expenses:
Selling, general and
administrative 20,215,000 18,356,000 59,006,000 51,980,000
Advertising and
sales promotion 5,173,000 5,923,000 15,876,000 14,097,000
Amortization of
intangible asset 147,000 132,000 434,000 394,000
Income from
operations 11,332,000 11,008,000 35,062,000 35,538,000
Other (expense)
income:
Interest
expense, net (401,000) (953,000) (1,695,000) (2,811,000)
Other income, net 333,000 181,000 148,000 404,000
Income before income
taxes 11,264,000 10,236,000 33,515,000 33,131,000 Provision for income
taxes 3,620,000 3,190,000 11,238,000 11,341,000
Net income $7,644,000 $7,046,000 $22,277,000 $21,790,000 Earnings per common share:
Basic $0.45 $0.42 $1.31 $1.30
Diluted $0.44 $0.42 $1.29 $1.29
Weighted-average
common shares
outstanding,
basic 17,144,254 16,829,760 17,070,228 16,745,433 Weighted-average
common shares
outstanding,
diluted 17,328,473 16,969,770 17,267,763 16,857,735 Dividends
declared per
share $0.25 $0.22 $0.72 $0.66
(1) Includes cost of products acquired from related party of $4,481,000
and $10,775,000 for the three months ended May 31, 2007 and 2006,
respectively; and $14,276,000 and $31,221,000 for the nine months
ended May 31, 2007 and 2006, respectively.
WD-40 Company
Consolidated Condensed Balance Sheets
(unaudited) August 31,
May 31, 2007 2006 Assets
Current assets:
Cash and cash equivalents $65,982,000 $45,206,000
Trade accounts receivable, less
allowance for doubtful accounts of
$715,000 and $762,000 45,474,000 44,491,000
Product held at contract packagers 2,059,000 1,385,000
Inventories 15,061,000 15,269,000
Current deferred tax assets, net 4,218,000 4,331,000
Other current assets 3,079,000 4,858,000 Total current assets 135,873,000 115,540,000 Property, plant and equipment, net 8,551,000 8,940,000
Goodwill 96,316,000 96,118,000
Other intangibles, net 42,565,000 42,722,000
Investment in related party 971,000 972,000
Other assets 3,912,000 4,183,000 $288,188,000 $268,475,000
Liabilities and Shareholders' Equity Current liabilities:
Current portion of long-term debt $10,714,000 $10,714,000
Accounts payable 17,974,000 11,287,000
Accounts payable to related party 1,183,000 463,000
Accrued liabilities 14,539,000 11,678,000
Accrued payroll and related expenses 5,505,000 7,485,000
Income taxes payable 1,515,000 2,040,000 Total current liabilities 51,430,000 43,667,000 Long-term debt 42,857,000 53,571,000
Deferred employee benefits and other
long-term liabilities 2,057,000 1,895,000
Long-term deferred tax liabilities, net 15,304,000 13,611,000 Total liabilities 111,648,000 112,744,000 Shareholders' equity:
Common stock, $.001 par value, 36,000,000
shares authorized -- 17,775,634 and
17,510,668 shares issued 18,000 17,000
Paid-in capital 71,418,000 62,322,000
Retained earnings 113,313,000 103,335,000
Accumulated other comprehensive income 6,817,000 5,083,000
Common stock held in treasury,
at cost (534,698 shares) (15,026,000) (15,026,000) Total shareholders' equity 176,540,000 155,731,000 $288,188,000 $268,475,000 WD-40 Company
Consolidated Condensed Statements of Cash Flows
(unaudited)
Nine Months Ended May 31,
2007 2006
Cash flows from operating activities:
Net income $22,277,000 $21,790,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,742,000 2,571,000
Gains on sales and disposals of property
and equipment (17,000) (24,000)
Deferred income tax expense 1,622,000 (437,000)
Excess tax benefits from exercise
of stock options (436,000) (321,000)
Distributions received and equity
(earnings) losses from related
party, net 1,000 219,000
Stock-based compensation 1,502,000 1,396,000
Changes in assets and liabilities:
Trade accounts receivable 21,000 5,283,000
Product held at contract packagers (674,000) 326,000
Inventories 449,000 (7,029,000)
Other assets 1,769,000 3,623,000
Accounts payable and accrued
expenses 7,222,000 (2,288,000)
Accounts payable to related
party 720,000 (1,231,000)
Income taxes payable 83,000 2,141,000
Deferred employee benefits and
other long-term liabilities 82,000 78,000 Net cash provided by
operating activities 37,363,000 26,097,000 Cash flows from investing activities:
Purchases of short-term investments (171,625,000) (20,300,000)
Sales of short-term investments 171,625,000 --
Proceeds from collections on
notes receivable 25,000 50,000
Capital expenditures (1,628,000) (2,446,000)
Proceeds from sales of property
and equipment 233,000 210,000 Net cash used in investing
activities (1,370,000) (22,486,000) Cash flows from financing activities:
Repayments of long-term debt (10,714,000) (10,714,000)
Proceeds from issuance of common
stock 7,086,000 4,755,000
Excess tax benefits from exercise
of stock options 436,000 321,000
Dividends paid (12,299,000) (11,043,000) Net cash used in financing
activities (15,491,000) (16,681,000) Effect of exchange rate changes on
cash and cash equivalents 274,000 328,000 Increase (decrease) in cash and
cash equivalents 20,776,000 (12,742,000) Cash and cash equivalents at
beginning of period 45,206,000 37,120,000 Cash and cash equivalents at end of
period $65,982,000 $24,378,000 WD-40 Company
Consolidated Condensed Statements of Comprehensive Income
(unaudited)
Three Months Ended May 31, Nine Months Ended May 31,
2007 2006 2007 2006
Net income $7,644,000 $7,046,000 $22,277,000 $21,790,000 Other comprehensive
income:
Equity adjustment
from foreign
currency translation,
net of tax 529,000 1,935,000 1,734,000 1,458,000 Total comprehensive
income $8,173,000 $8,981,000 $24,011,000 $23,248,000
DATASOURCE: WD-40 Company CONTACT: Garry O. Ridge of WD-40 Company, +1-619-275-9324 Web site: http://www.wd40.com/
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