SAN DIEGO, April 5 /PRNewswire-FirstCall/ -- 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 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 Six Months Ended
February 28, 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, August 31,
2007 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 Six Months Ended
February 28, 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
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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