<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
__________________________________
FORM 10-Q
QUARTERLY REPORTS UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 31, 1995
Commission File No. 0-6936-3
WD-40 COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 95-1797918
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1061 Cudahy Place, San Diego, California 92110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 619/275-1400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock as of July 10, 1995 7,702,555
---------
<PAGE>
PART I Financial Information
---------------------
Item 1. Financial Statements
WD-40 COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
------------------------------------
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
May 31, 1995 August 31, 1994
------------ ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,354,000 $13,515,000
Short-term investments, held-
to-maturity 15,507,000 9,156,000
Trade accounts receivable, less
allowance for cash discounts
and doubtful accounts of
$556,000 and $443,000 17,457,000 14,875,000
Product held at contract packagers 3,708,000 3,767,000
Inventories 2,004,000 2,470,000
Prepaid expenses 1,550,000 1,703,000
----------- -----------
Total current assets 48,580,000 45,486,000
Property, plant and equipment, net 3,522,000 3,159,000
Long-term investments 4,461,000 4,711,000
Other assets 1,649,000 1,516,000
----------- -----------
$58,212,000 $54,872,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable & accrued liabilities $ 5,044,000 $ 4,298,000
Accrued payroll & related expenses 2,153,000 2,372,000
Income taxes payable 1,834,000 902,000
Current portion of long-term debt 615,000 615,000
----------- -----------
Total current liabilities 9,646,000 8,187,000
----------- -----------
Long-term debt 3,176,000 3,791,000
Deferred employee benefits 845,000 799,000
----------- -----------
4,021,000 4,590,000
----------- -----------
Shareholders' equity:
Common stock, no par value, 9,000,000
shares authorized - shares issued
and outstanding of 7,702,445 and
7,692,975 6,055,000 5,720,000
Paid-in capital 321,000 321,000
Retained earnings 38,597,000 36,433,000
Deferred stock compensation (29,000)
Cumlative translation adjustment (428,000) (350,000)
----------- -----------
Total shareholders' equity 44,545,000 42,095,000
----------- -----------
Commitments and contingencies (Note 2)
$58,212,000 $54,872,000
=========== ===========
</TABLE>
(See accompanying notes to unaudited consolidated condensed financial
statements)
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31 May 31
------ ------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $29,916,000 $29,459,000 $89,074,000 $85,896,000
Cost of product sold 13,220,000 12,587,000 38,153,000 36,203,000
----------- ----------- ----------- -----------
Gross profit 16,696,000 16,872,000 50,921,000 49,693,000
----------- ----------- ----------- -----------
Operating expenses:
Selling, general &
administrative 5,899,000 5,381,000 17,911,000 16,728,000
Advertising & sales
promotions 3,136,000 2,921,000 8,216,000 8,009,000
Legal expenses 128,000 12,628,000
----------- ----------- ----------- -----------
9,035,000 8,430,000 26,127,000 37,365,000
----------- ----------- ----------- -----------
Income from
operations 7,661,000 8,442,000 24,794,000 12,328,000
Other income (expense):
Interest, net 250,000 191,000 879,000 305,000
Other, net (215,000) (83,000) (250,000) 92,000
----------- ----------- ----------- -----------
Income before income
taxes 7,696,000 8,550,000 25,423,000 12,725,000
Provision for income
taxes 2,800,000 3,280,000 9,400,000 4,950,000
----------- ----------- ---------- -----------
Net income $ 4,896,000 $ 5,270,000 $16,023,000 $ 7,775,000
=========== =========== =========== ===========
Earnings per share $ .63 $ .68 $ 2.08 $ 1.01
=========== =========== =========== ===========
Average number of
shares outstanding 7,702,445 7,692,805 7,699,369 7,682,901
=========== =========== =========== ===========
</TABLE>
(See accompanying notes to consolidated condensed financial statements)
3
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
May 31 May 31
------ ------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 4,896,000 $ 5,270,000 $16,023,000 $ 7,775,000
Adjustments to recon-
cile net income to
net cash provided by
operating activities:
Depreciation 166,000 141,000 501,000 406,000
Amortization of tax
credit investment 83,000 84,000 249,000 251,000
Loss on sale of
equipment 21,000 8,000 113,000 47,000
Changes in assets and
liabilities:
Accounts receivable 2,020,000 3,240,000 (2,517,000) (2,533,000)
Income taxes receivable 2,255,000 (1,723,000)
Product held at
contract packagers 311,000 59,000
Inventories 234,000 (83,000) 531,000 1,031,000
Prepaid expenses 307,000 (455,000) 164,000 66,000
Deferred income taxes (46,000)
Accounts payable and
accrued liabilities (445,000) (8,000) 449,000 (942,000)
Income taxes payable (556,000) (219,000) 826,000 (227,000)
Legal judgment accrual (12,500,000)
Long-term deferred
employee benefits (17,000) 20,000 47,000 75,000
----------- ---------- ----------- -----------
Net cash provided by
(used in) operating
activities 7,020,000 (2,247,000) 16,399,000 4,226,000
----------- ---------- ----------- -----------
Cash flows from investing
activities:
Increase in
short-term investments (3,814,000) (2,615,000) (6,343,000) (739,000)
Decrease in restricted
note 7,915,000 8,117,000
Proceeds from sale of
equipment 78,000 41,000 266,000 125,000
Capital expenditures (316,000) (215,000) (1,237,000) (740,000)
----------- ---------- ----------- -----------
Net cash
(used in) provided by
investing activities (4,052,000) 5,126,000 (7,314,000) 6,763,000
----------- ---------- ----------- -----------
</TABLE>
(Continued on next page)
4
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(UNAUDITED)
Continued
<TABLE>
<S> <C> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from issuance
of common stock 76,000 335,000 539,000
Repayment of long term
debt (615,000) (594,000)
Deferred stock
compensation 29,000
Dividends paid (4,621,000) (4,616,000) (13,859,000) (13,063,000)
------------ ------------ ------------ ------------
Net cash used in
financing activities (4,621,000) (4,540,000) (14,110,000) (13,118,000)
------------ ------------ ------------ ------------
Effect of exchange rate
changes on cash and
cash equivalents (221,000) 132,000 (136,000) 149,000
------------ ------------ ------------ ------------
Decrease in cash and
cash equivalents (1,874,000) (1,529,000) (5,161,000) (1,980,000)
Cash and cash equivalents
at beginning of period 10,228,000 10,431,000 13,515,000 10,882,000
------------ ------------ ------------ ------------
Cash and cash equivalents
at end of period $ 8,354,000 $ 8,902,000 $ 8,354,000 $ 8,902,000
============ ============ ============ ============
Supplemental schedule of
non-cash investing and
financing activities:
Long-term investment $ 2,000,000 $ 2,000,000
Issuance of debt in
connection with the
long-term investment $ 2,000,000 $ 2,000,000
</TABLE>
(See accompanying notes to consolidated condensed financial statements)
5
<PAGE>
WD-40 COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995
------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION
The consolidated condensed financial statements include the accounts of the
Company and its wholly owned subsidiaries, WD-40 Company Ltd. (U.K.), WD-40
Products (Canada) Ltd. and WD-40 Company (Australia) Pty. Ltd. All significant
intercompany transactions and balances have been eliminated.
The financial statements included herein have been prepared by the Company,
without audit, according to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations.
In the opinion of management, the unaudited financial information for the
interim periods shown reflects all adjustments (which include only normal,
recurring adjustments) necessary for a fair presentation thereof. These
financial statements and notes thereto should be used in conjunction with the
financial statements and notes thereto included in the Company's 1994 Annual
Report to Shareholders, which statements and notes are incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended August
31, 1994.
SHORT-TERM INVESTMENTS
Effective September 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" prospectively. Short-term investments consist of debt
securities of high credit quality financial institutions, government agencies
and corporate of high credit quality financial institutions, government
agencies and corporate entities which are recorded at amortized cost and
classified as "held-to-maturity". Unrealized gains and losses are not
significant at May 31, 1995.
EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares
outstanding during the period increased by the effect of dilutive stock options,
when applicable, using the treasury stock method.
RECLASSIFICATIONS
Certain prior period balances have been reclassified to conform to current year
presentation.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company is party to various claims, legal actions and complaints arising in
the ordinary course of business. In the opinion of management, all such matters
are adequately covered by insurance or will not have a material adverse effect
on the Company's financial position or results of operations.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
THIRD QUARTER FISCAL YEAR 1995 VERSUS THIRD QUARTER FISCAL YEAR 1994
--------------------------------------------------------------------
Consolidated net sales for the third quarter were a record $29.9 million,
an increase of 1.6% or $457,000 over last year. The overall increase in
net sales is primarily due to increased sales to customers in the Pacific
Rim, Latin America, Prime Europe and the U.K., partially offset by
decreases in the U.S, and Canada.
Cost of product sold increased to 44.2% of net sales versus 42.7% last
year primarily due to increased costs of packaging components and a shift
in the sales mix toward higher cost promotional sizes and packaging
configurations. Management expects these costs to continue to increase in
the coming months.
Selling, general and administrative expenses increased 9.6% or $518,000
for the quarter totalling 19.7% of net sales versus 18.3% of net sales in
1994. This increase is primarily due to inflationary increases in
recurring expenses and the addition of administrative personnel to meet
the demands of expanding the Company's presence in international
markets.
Advertising and sales promotion expenses increased 7.4% to 10.5% of net
sales versus 9.9% in 1994. This was due to timing of promotional activity
and should return to historic levels of approximately 9.5% by fiscal year
end.
Other expense, net increased $132,000 from 1994 due to the effects of the
affordable housing investment amortization.
Net income decreased 7.1% or $374,000 primarily due to the factors
described above offset partially by a decline in the effective tax rate
from 38.4% in 1994 to 36.4% in 1995. The favorable rate change is
primarily due to tax credits available to the Company as a result of its
investment in a low income housing partnership fund.
Cash and cash equivalents decreased $1,874,000 during the three months
ended May 31, 1995 versus a decrease of $1,529,000 for the same period of
last year. Cash flows from operating activities provided $7.0 million in
cash and cash equivalents in 1995 versus using $2.2 million in 1994
primarily due to payment of a $12.7 million legal judgment in the third
quarter of 1994. Payment of the judgment was partially offset by
increased collections of receivables in the prior year. Cash flows from
investing activities used cash and cash equivalents of $4.1 million in
1995 versus providing $5.1 million in 1994. The increase in cash used in
investing activities is due to greater net purchases of short-term
investments in 1995 and the maturity of previously restricted investments
of $7.9 million in 1994. Cash used in financing activities in 1995 is
comparable to 1994.
7
<PAGE>
WD-40 COMPANY (U.S.)
--------------------
1995 vs. 1994 Net sales decreased 1.8% or $403,000 from 1994 primarily as
-------------
a result of lower domestic sales. Export sales to the Pacific Rim and
Latin America were up about 10% for this period which partially offset
the domestic decrease.
Cost of product sold increased to 45.4% of net sales versus 42.7% last
year. This increase was primarily due to both inflationary increases in
the cost of product components and a shift in the sales mix toward higher
cost promotional sizes and packaging configurations.
Selling, general and administrative expenses increased to 18.9% of net
sales versus 17.1% in fiscal year 1994 primarily due to lower net sales
and inflationary increases in recurring expenses.
Advertising and sales promotion expenses increased to 10.7% of net sales
versus 9.6% of net sales in 1994 as a result of the timing of promotions.
Net income decreased by 17.4% or $664,000 primarily due to the effects of
the factors discussed above.
WD-40 COMPANY LTD. (U.K.)
-------------------------
1995 vs. 1994 Net sales increased 26.5% or $1,331,000 over 1994, due to
-------------
an 18.6% increase in net sales volume combined with a favorable exchange
rate effect of 6.8%. Unit sales were up over 50% in Prime Europe and 5%
in the U.K., however unit sales were down slightly in the Middle East.
Cost of product sold was up to 38.2% of net sales versus 37.4% a year ago
due mainly to the product sales mix when shifted toward higher cost
sizes.
Selling, general and administrative dropped to 22.4% of net sales versus
24.8% of net sales in 1994 because expenses remained flat while net sales
increased as discussed above.
Advertising and promotional expenses decreased to 9.9% of net sales
versus 11.1% of net sales last year also due to the increase in net sales
as expenses were constant.
Net income increased by $346,000 or 33.4% primarily due to the above
factors.
8
<PAGE>
OTHER FOREIGN SUBSIDIARIES
--------------------------
1995 vs. 1994 Net sales decreased $471,000 or 18.9% due entirely to lower
-------------
net sales volume in Canada. This reflects an ongoing soft retail economy
in Canada which management expects to continue throughout the year.
Cost of product sold decreased to 50.4% of net sales versus 53.5% of net
sales last year due to a shift in packaging size being sold.
Net income decreased $92,000 or 24.4% due primarily to the decrease in
net sales in Canada.
NINE MONTHS FISCAL YEAR 1995 VERSUS NINE MONTHS FISCAL YEAR 1994
----------------------------------------------------------------
Consolidated net sales were $89.1 million in 1995, an increase of $3.2
million or 3.7% from 1994. The increase in net sales was generated by
sales outside North America as sales in the U.S., Canada and Mexico
decreased 1.2%, 34.2% and 5.7%, respectively. The decrease in sales to
Canadian customers is due to a generally soft retail economy in Canada
while the decline in Mexico is a result of the Peso devaluation.
Cost of product sold as a percentage of net sales was 42.8% versus 42.1%
of net sales last year. The increase is primarily due to inflationary
increases in the cost of components.
Selling, general and administrative expenses were up slightly to 20.1% of
net sales versus 19.5% in 1994. Most of this increase occurred in the
U.S. as described in the quarterly discussion.
Advertising and sales promotion expenses were flat at 9.2% of net sales
versus 9.3% in 1994. Management expects these expenses to come in at
historic levels of approximately 9.5% by fiscal year end.
Interest income, net increased by $574,000 primarily due to interest of
$250,000 received from settlement of a tax issue with Canadian tax
authorities. The remaining increase is attributable to higher interest-
bearing balances and generally higher rates earned on such balances in
1995 as compared to 1994.
Income before taxes increased $12.7 million primarily due to the
recording of the $12.6 million legal judgment in 1994. The provision for
income taxes dropped to 37.0% versus 38.9% in 1994 primarily due to tax
credits available to the Company as a result of its investment in a low
income housing partnership fund. These factors combined for net income of
$16,023,000 or 18.0% of net sales and $2.08 earnings per share.
Cash and cash equivalents decreased by $5,161,000 during the nine months
ended May 31,1995 versus a decrease of $1,980,000 for the same period of
last year primarily due to the reasons given in the quarterly discussion
although with a greater outflow for net purchases of short-term
investments.
9
<PAGE>
WD-40 COMPANY (U.S.)
--------------------
Net sales increased $1,759,000 or 2.8% as a result of higher export sales
to the Pacific Rim and South America where sales increased approximately
30%. Domestic sales decreased 1.2% in 1995.
Cost of product sold as a percent of net sales increased to 43.7% versus
42.2% in 1994 primarily due to inflationary increased in the cost of
components.
Selling, general, and administrative expenses as a percentage of net
sales increased to 19.5% from 19.0% in 1994 due to the same factors
discussed in the quarterly operations.
Advertising and promotion expenses were even with last year at 9.3% of
net sales.
Net income was up 25.2% due to the factors described above and the $12.6
million legal judgment charge recorded in 1994.
WD-40 COMPANY LTD, (U.K)
------------------------
Net sales increased $3,344,000 or 21.1%, as a result of the 13.6%
increase in units and a favorable currency exchange of 6.5%.
Cost of product sold was equal to 1994 at 38.1% of net sales.
Selling, general and administrative expenses and advertising and
promotion expenses were both down as a percentage of net sales at 22.4%
and 8.7%, respectively, versus 23.4% and 9.3%, respectively, in 1994. The
decreases are due to the increase in net sales as expenses remained
relatively constant in 1995.
Net income increased $821,000 or 23.4% over the previous year primarily
due to the combined effect of the factors discussed above.
OTHER FOREIGN SUBSIDIARIES
--------------------------
Net sales decreased $1,925,000 or 25.4% due entirely to the soft retail
economy in Canada. It is anticipated that Canadian net sales will be down
for the fiscal year due to the slow economy.
Cost of product sold decreased slightly to 49.5% of net sales versus
49.8% on net sales in 1994.
Selling, general and administrative expenses together with advertising
and promotion expenses were up to 29.6% of net sales versus 25.3% of net
sales in 1994 due to the decrease in sales.
Net income decreased $225,000 or 18.4% primarily due to the sales
shortfall.
10
<PAGE>
Liquidity and Capital Resources
-------------------------------
The current ratio has decreased from 5.0 to one on May 31, 1995 compared
to 5.6 to one as of August 31, 1994, mainly due to the increase in
current liabilities and reduced income taxes payable at August 31, 1994.
The Company's primary source of liquidity is funds provided by
operations. The Company's cash flows from operations are expected to
provide sufficient funds to meet both short and long-term operating
needs, as well as future dividends. Capital expenditures for the
remainder of fiscal year 1995 are expected to total $460,000 principally
for replacement of aged vehicles and updating of computer equipment.
11
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter
ended May 31, 1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
WD-40 COMPANY
Registrant
Date: July 10, 1995 _________________________________
Robert D. Gal,
Treasurer
(Principal FInancial Officer)
12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 8,354,000
<SECURITIES> 15,507,000
<RECEIVABLES> 21,721,000
<ALLOWANCES> 556,000
<INVENTORY> 2,004,000
1,550,000
<CURRENT-ASSETS> 48,580,000
<PP&E> 6,446,000
<DEPRECIATION> 2,924,000
[OTHER] 6,110,000
<TOTAL-ASSETS> 58,212,000
<CURRENT-LIABILITIES> 9,646,000
[DEBT] 4,021,000
<COMMON> 6,055,000
0
0
<OTHER-SE> 38,490,000
<TOTAL-LIABILITY-AND-EQUITY> 58,212,000
<SALES> 29,916,000
<CGS> 13,220,000
<TOTAL-COSTS> 9,035,000
<OTHER-EXPENSES> 215,000
<INTEREST-NET> 250,000
<INCOME-PRETAX> 7,696,000
<INCOME-TAX> 2,800,000
<INCOME-CONTINUING> 4,896,000
<NET-INCOME> 4,896,000
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
