SAN DIEGO, Oct. 18 /PRNewswire-FirstCall/ -- WD-40 Company (NASDAQ:WDFC) today reported its fourth-quarter earnings and announced record sales for the fiscal year ended August 31, 2006.
Net sales for the year were $286.9 million, an increase of 9.0% over $263.2 million last year. Net income for the year was $28.1 million compared to $27.8 million last year, an increase of 1.1%. Earnings per share for the year grew 0.5% to $1.66 compared to $1.65 per share last year. Fiscal year 2006 results include the expensing of stock options, which were not included in previous years. Fiscal year stock options expense, after tax, was $1.3 million or 8 cents per share.
"We are pleased with both our sales progress for the year and the fact that we met or exceeded our annual guidance in all areas," said Garry O. Ridge, WD-40 Company president and chief executive officer. "For the year, we continued to feel the impact from increases in cost of goods as well as our decision to ramp up our investments in marketing and R&D," Ridge added.
Net sales for the fourth quarter were $75.2 million, a decrease of 1.5% from sales of $76.3 million in the fourth quarter last year.
Net income for the fourth quarter was $6.3 million, a decrease of 39.9% compared to the same period last year. Earnings per share for the quarter were $0.37 compared to $0.63 for the prior year's quarter. Stock options expense, after tax, in the fourth quarter was $0.3 million or 2 cents per share.
"Our fourth quarter didn't track along in proportion with our historical sales patterns as a result of the timing of promotions and new product introductions, Ridge said. "We also invested more in marketing to support innovations introduced over the past year. We expect that investment to help our brands going forward." In fiscal year 2007, WD-40 Company expects net sales to grow 7%-13% to $307-$324 million. WD-40 Company 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. Fiscal year 2007 outlook reflects the impact of the company's move to open a direct operation in China. The investment in China is expected to reduce net income in 2007 by approximately $1.0 million, or 6 cents per share.
"We are pleased to report that we are making great progress in opening our direct operations in China," Ridge said.
"While we continue to look for acquisitions that meet our guidelines for success, we feel the investments we are making in China now are similar to an acquisition, but they impact the P&L, more so than the balance sheet." As previously announced, the board of directors of WD-40 Company declared a regular quarterly dividend on Friday, October 6, 2006 of 22 cents per share, payable October 31, 2006, to shareholders of record on October 17, 2006.
Total sales for the quarter were 64% from the Americas, 28% from Europe and 8% from Asia/Pacific.
In the Americas, sales for the fourth quarter were down 6.7% from a year ago and up 6.1% on a year-to-date basis.
"We had solid growth for the year in Canada and Latin America, driven by lubricant sales," Ridge said. "US sales growth was spurred by household products." In Europe, sales were up 10.3% for the fourth quarter and up 15.7% for the year.
"While we continued our strong growth in all of our direct markets in Europe, we also had double-digit growth in our distributor markets in that region," Ridge said. "The success we have had in our European markets clearly demonstrates how investments in building our business in growth markets pays off for the long-term." In the Asia/Pacific region, sales for the fourth quarter were up 5.1% from comparable period last year and sales for the year were up 12.1% over last year.
Global sales of the lubricants WD-40 and 3-IN-ONE Oil(R) in the fourth quarter were $50.2 million, down 1.2%, and $190.5 million for the year, up 9.4%.
"This is the fourth 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 up 1.6% to $1.9 million for the fourth quarter, and for the year were $6.6 million, down 4.1%.
Sales of household products X-14(R), Carpet Fresh(R), 2000 Flushes(R), Spot Shot(R) and 1001(R) were $23.1 million during the fourth quarter, down 2.3%, and were $89.8 million year to date, up 9.2% from last year.
"We had solid growth for the year across the globe in all of our household products as we continue our strategy of innovation followed by distribution," Ridge said.
"We only see one market, and that is the global marketplace," Ridge said. "That is why we continue to invest in innovations that will not only help maintain our base business, but will also fuel future growth in our existing markets and allow us to enter new markets." WD-40 Company also reported that its return on invested capital (ROIC) was 17.1% in 2006 compared to 18.4% last fiscal year. Stock options expense in 2006 reduced ROIC by 0.7%.
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 fortress of brands 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 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 fluctuation in advertising and promotion expenditures 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 Operations Three Months Ended August 31, Fiscal Year Ended August 31,
2006 2005 2006 2005 Net sales $75,169,000 $76,314,000 $286,916,000 $263,227,000
Cost of products
sold (1) 38,778,000 38,388,000 148,516,000 133,833,000 Gross profit 36,391,000 37,926,000 138,400,000 129,394,000 Operating
expenses:
Selling,
general and
administrative 19,787,000 15,992,000 71,767,000 63,529,000
Advertising
and sales
promotion 5,982,000 4,534,000 20,079,000 17,893,000
Amortization
of intangible
asset 138,000 134,000 532,000 552,000 Income from
operations 10,484,000 17,266,000 46,022,000 47,420,000 Other income
(expense):
Interest
expense, net (692,000) (1,097,000) (3,503,000) (5,133,000)
Other
(expense)
income, net (65,000) 119,000 339,000 578,000 Income before
income taxes 9,727,000 16,288,000 42,858,000 42,865,000 Provision for
income taxes 3,405,000 5,765,000 14,746,000 15,067,000 Net income $6,322,000 $10,523,000 $28,112,000 $27,798,000 Earnings per
common share:
Basic $0.37 $0.63 $1.67 $1.67 Diluted $0.37 $0.63 $1.66 $1.65 Weighted
average common
shares
outstanding,
basic 16,900,319 16,679,664 16,784,473 16,629,057 Weighted
average common
shares
outstanding,
diluted 17,074,942 16,810,508 16,912,355 16,807,399 Dividends
declared per
share $0.22 $0.22 $0.88 $0.84
(1) Includes cost of products acquired from related party of $9,783,000
and $10,702,000 for the three months ended August 31, 2006 and 2005,
respectively; and $41,004,000 and $38,384,000 for the fiscal years
ended August 31, 2006 and 2005, respectively.
WD-40 Company
Consolidated Condensed Balance Sheets August 31, 2006 August 31, 2005 Assets
Current assets:
Cash and cash equivalents $45,206,000 $37,120,000
Trade accounts receivable, less
allowance for cash discounts,
returns and doubtful accounts of
$1,839,000 and $1,506,000 44,491,000 44,487,000
Product held at contract packagers 1,385,000 1,814,000
Inventories 15,269,000 8,041,000
Current deferred tax assets, net 4,331,000 2,946,000
Other current assets 4,858,000 6,784,000 Total current assets 115,540,000 101,192,000 Property, plant and equipment, net 8,940,000 8,355,000
Goodwill 96,118,000 95,858,000
Other intangibles, net 42,722,000 42,884,000
Investment in related party 972,000 1,112,000
Other assets 4,183,000 4,852,000
$268,475,000 $254,253,000
Liabilities and Shareholders' Equity Current liabilities:
Current portion of long-term debt $10,714,000 $10,714,000
Accounts payable 11,287,000 13,671,000
Accounts payable to related party 463,000 1,945,000
Accrued liabilities 11,678,000 14,058,000
Accrued payroll and related expenses 7,485,000 3,828,000
Income taxes payable 2,040,000 2,484,000 Total current liabilities 43,667,000 46,700,000 Long-term debt 53,571,000 64,286,000
Deferred employee benefits and other
long-term liabilities 1,895,000 1,838,000
Long-term deferred tax liabilities, net 13,611,000 11,363,000 Total liabilities 112,744,000 124,187,000 Shareholders' equity:
Common stock, $.001 par value,
36,000,000 shares authorized --
17,510,668 and 17,222,410 shares
issued 17,000 17,000
Paid-in capital 62,322,000 52,990,000
Unearned stock-based compensation -- (136,000)
Retained earnings 103,335,000 89,983,000
Accumulated other comprehensive
income 5,083,000 2,238,000
Common stock held in treasury, at
cost (534,698 shares) (15,026,000) (15,026,000) Total shareholders' equity 155,731,000 130,066,000
$268,475,000 $254,253,000 WD-40 Company
Consolidated Condensed Statements of Cash Flows Fiscal Year Ended August 31,
2006 2005
Cash flows from operating activities:
Net income $28,112,000 $27,798,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 3,467,000 3,007,000
Gains on sales and disposals of
property and equipment (38,000) (24,000)
Deferred income tax expense 1,396,000 3,474,000
Tax benefit from exercise of stock
options -- 377,000
Excess tax benefits from exercise
of stock options (503,000) --
Distributions received and equity
losses (earnings) from related
party, net 140,000 (180,000)
Stock-based compensation 1,836,000 22,000
Changes in assets and liabilities:
Trade accounts receivable 1,146,000 (3,635,000)
Product held at contract packagers 429,000 161,000
Inventories (6,889,000) (1,655,000)
Other assets 1,976,000 (970,000)
Accounts payable and accrued expenses (1,621,000) 3,262,000
Accounts payable to related party (1,481,000) 14,000
Income taxes payable 147,000 (125,000)
Deferred employee benefits and
other long-term liabilities 80,000 38,000 Net cash provided by operating
activities 28,197,000 31,564,000 Cash flows from investing activities:
Purchases of short-term investments (31,675,000) --
Sales of short-term investments 31,675,000 --
Proceeds from collections on note
receivable 125,000 50,000
Capital expenditures (2,947,000) (3,101,000)
Proceeds from sales of property and
equipment 267,000 162,000 Net cash used in investing activities (2,555,000) (2,889,000) Cash flows from financing activities:
Repayments of long-term debt (10,714,000) (10,000,000)
Proceeds from issuance of common stock 7,018,000 2,839,000
Excess tax benefits from exercise of
stock options 503,000 --
Dividends paid (14,760,000) (13,967,000) Net cash used in financing
activities (17,953,000) (21,128,000) Effect of exchange rate changes on
cash and cash equivalents 397,000 140,000 Increase in cash and cash equivalents 8,086,000 7,687,000 Cash and cash equivalents at beginning
of period 37,120,000 29,433,000 Cash and cash equivalents at end of period $45,206,000 $37,120,000 WD-40 Company
Consolidated Condensed Statements of Comprehensive Income Three Months Ended August 31, Fiscal Year Ended August 31,
2006 2005 2006 2005
Net income $6,322,000 $10,523,000 $28,112,000 $27,798,000 Other
comprehensive
income (loss):
Equity adjustment
from foreign
currency
translation,
net of tax 1,387,000 (87,000) 2,845,000 579,000
Total
comprehensive
income $7,709,000 $10,436,000 $30,957,000 $28,377,000 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.
Worldwide FY04 FY05 FY06
Net Sales 242,467 263,227 286,916
Operating Profit 45,449 47,420 46,022
Net Income 25,643 27,798 28,112
Amortization 224 552 532
Tax Rate 34.0% 35.2% 34.4%
NOPAT = Op Inc + Amort after Tax 30,144 31,110 30,536
Total Assets (beginning) 236,658 236,775 254,253
Total Assets (ending) 236,775 254,253 268,475
Total Assets (average) 236,717 245,514 261,364
Cash 29,433 37,120 45,206
Transactional cash 3% of net sales 7,274 7,897 8,607
Other Cash 22,159 29,223 36,599
Non-interest bearing liabilities:
Accounts Payable 13,836 15,616 11,750
Accrued Liabilities 12,151 14,058 11,678
Accrued Payroll & Related 3,935 3,828 7,485
Income Tax Payable 2,613 2,484 2,040
Long-term Deferred Tax 4,853 11,363 13,611
Total Non-interest Bearing Liabilities: 37,388 47,349 46,564
Return on Invested Capital (ROIC) 17.0% 18.4% 17.1%
DATASOURCE: WD-40 Company CONTACT: Garry Ridge of WD-40 Company, +1-619-275-9324 Web site: http://www.wd40.com/
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