<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
----------------------------------
FORM 10-Q/A
QUARTERLY REPORTS UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 29, 1996
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 April 12, 1996 7,712,853
---------
<PAGE>
PART I Financial Information
---------------------
Item 1. Financial Statements
WD-40
CONSOLIDATED CONDENSED BALANCE SHEET
------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
February 29, 1996 August 31, 1995
----------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,716,000 $11,090,000
Short-term investments 13,227,000
Trade accounts receivable, less
allowance for cash discounts and
doubtful accounts of $659,000 and $476,000 26,042,000 17,088,000
Product held at contract packagers 2,787,000 2,307,000
Inventories 2,971,000 2,570,000
Other current assets 2,403,000 3,298,000
----------- -----------
Total current assets 36,919,000 49,580,000
Property, plant and equipment, net 3,651,000 3,467,000
Long-term investments 4,211,000 4,378,000
Goodwill, net 14,861,000
Other assets 1,717,000 2,154,000
----------- -----------
$61,359,000 $59,579,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable & accrued liabilities $ 6,567,000 $ 4,749,000
Accrued payroll & related expenses 1,264,000 2,619,000
Income taxes payable 2,911,000 3,053,000
Current portion of long-term debt 706,000 659,000
----------- -----------
Total current liabilities 11,448,000 11,080,000
----------- -----------
Long-term debt 2,427,000 3,132,000
Deferred income tax 193,000
Deferred employee benefits 884,000 862,000
----------- -----------
3,504,000 3,994,000
----------- -----------
Shareholders' equity:
Common stock, no par value, 9,000,000
shares authorized - shares issued and
outstanding of 7,710,263 and 7,703,155 6,231,000 6,083,000
Paid-in capital 321,000 321,000
Retained earnings 39,846,000 38,251,000
Cumulative translation adjustment 9,000 (150,000)
----------- -----------
Total shareholders' equity 46,407,000 44,505,000
----------- -----------
Commitments and contingencies (Note 3) $61,359,000 $59,579,000
=========== ===========
</TABLE>
(See accompanying notes to consolidated condensed financial statements)
2
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
February 29 February 28 February 29 February 28
----------- ----------- ----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $35,080,000 $29,389,000 $62,692,000 $59,158,000
Cost of product sold 15,100,000 12,297,000 26,786,000 24,933,000
----------- ----------- ----------- -----------
Gross profit 19,980,000 17,092,000 35,906,000 34,225,000
----------- ----------- ----------- -----------
Operating expenses:
Selling, general &
administrative 6,997,000 6,044,000 12,769,000 12,012,000
Advertising & sales
promotions 3,216,000 2,357,000 5,254,000 5,080,000
Amortization of
goodwill 167,000 167,000
----------- ----------- ----------- -----------
Income from operations 9,600,000 8,691,000 17,716,000 17,133,000
Other income (expense):
Interest, net 177,000 213,000 415,000 629,000
Other, net 106,000 4,000 148,000 (35,000)
----------- ----------- ----------- -----------
Income before income
taxes 9,883,000 8,908,000 18,279,000 17,727,000
Provision for income
taxes 4,000,000 3,300,000 7,131,000 6,600,000
----------- ----------- ----------- -----------
Net income $ 5,883,000 $ 5,608,000 $11,148,000 $11,127,000
=========== =========== =========== ===========
Earnings per share $ .77 $ .73 $ 1.45 $ 1.45
=========== =========== =========== ===========
Average number of
shares outstanding 7,707,585 7,701,793 7,706,043 7,697,780
=========== =========== =========== ===========
</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 Six Months Ended
------------------------- -------------------------
February 29 February 28 February 29 February 28
------------ ----------- ------------ -----------
1996 1995 1996 1995
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 5,883,000 $ 5,608,000 $ 11,148,000 $11,127,000
Adjustments to reconcile
net income to net cash
(used in) provided by
operating activities:
Depreciation 167,000 166,000 332,000 335,000
Amortization of tax
credit investment 83,000 83,000 166,000 166,000
Amortization of goodwill 167,000 167,000
Loss on sale of equipment 18,000 61,000 34,000 92,000
Changes in assets and
liabilities:
Trade accounts receivable (10,476,000) (4,168,000) (9,049,000) (4,537,000)
Product held at contract
packagers (920,000) 291,000 (480,000) (252,000)
Inventories (634,000) 430,000 (429,000) 297,000
Other assets 58,000 (128,000) 806,000 (143,000)
Accounts payable and
accrued liabilities 3,239,000 2,328,000 493,000 894,000
Income taxes payable (1,384,000) (1,222,000) (5,000) 1,382,000
Deferred tax asset 900,000 (46,000) 900,000 (46,000)
Long-term deferred
employee benefits 19,000 29,000 23,000 64,000
------------ ----------- ------------ -----------
Net cash (used in) provided
by operating activities (2,880,000) 3,432,000 4,106,000 9,379,000
------------ ----------- ------------ -----------
Cash flows from investing
activities:
Decrease (increase) in
short-term investments 4,420,000 1,947,000 13,227,000 (2,529,000)
Purchase of goodwill (15,047,000) (15,047,000)
Decrease in deposits 1,600,000
Proceeds from sale of
equipment 34,000 121,000 60,000 188,000
Capital expenditures (324,000) (404,000) (618,000) (922,000)
------------ ----------- ------------ -----------
Net cash
(used in) provided by
investing activities $ (9,317,000) $ 1,664,000 $ (2,378,000) $(3,263,000)
------------ ----------- ------------ -----------
</TABLE>
(Continued on next page)
4
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(UNAUDITED)
Continued
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
February 29 February 28 February 29 February 28
------------ ----------- ------------ -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from issuance
of common stock $ 40,000 $ 280,000 $ 148,000 $ 335,000
Repayment of long term
debt (659,000) (615,000) (659,000) (615,000)
Deferred stock
compensation 29,000
Dividends paid (4,778,000) (4,621,000) (9,554,000) (9,237,000)
------------ ----------- ------------ -----------
Net cash used in
financing activities (5,397,000) (4,956,000) (10,065,000) (9,488,000)
------------ ----------- ------------ -----------
Effect of exchange rate
changes on cash and
cash equivalents 51,000 (74,000) (37,000) 85,000
------------ ----------- ------------ -----------
(Decrease) increase in cash
and cash equivalents (17,543,000) 66,000 (8,374,000) (3,287,000)
Cash and cash equivalents
at beginning of period 20,259,000 10,162,000 11,090,000 13,515,000
------------ ----------- ------------ -----------
Cash and cash equivalents
at end of period $ 2,716,000 $10,228,000 $ 2,716,000 $10,228,000
============ =========== ============ ===========
</TABLE>
(See accompanying notes to consolidated condensed financial statements)
5
<PAGE>
WD-40 COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
-----------------
(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 1995
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, 1995.
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 entities which are recorded at amortized cost and classified as
"held-to-maturity".
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.
NOTE 2 - ACQUISITION OF 3-IN-ONE OIL BUSINESS
The Company completed its acquisition of the 3-IN-ONE Oil brand from affiliates
of Reckitt & Colman plc on December 8, 1995. The Company paid cash in the
amount of $15,000,000 for the trademarks and other intangible assets and
approximately $950,000 for inventory. None of the funds required for the
acquisition were borrowed.
6
<PAGE>
NOTE 3 - 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER FISCAL YEAR 1996 VERSUS SECOND QUARTER FISCAL YEAR 1995
- ----------------------------------------------------------------------
Consolidated net sales for the second quarter were a record $35,080,000, an
increase of 19.4% or $5,691,000 from a year ago. Strong promotional sales by
all of the operating units augmented with the sales of 3-IN-ONE products
commencing in December of 1995, helped to achieve these sales. Management
continues to expect record net sale levels for the remainder of fiscal year
1996.
Cost of product sold for the quarter was up to 43.0% of net sales versus 41.8%
last year, due to the added costs associated with promotional sales and the
higher cost of sales related to 3-IN-ONE products. It is anticipated that these
costs as a percentage of sales will decrease as the Company assumes control of
all of the manufacturing of the 3-IN-ONE product line.
Selling, general and administrative expenses for the quarter increased by
$953,000 primarily due to increased professional expenses as a result of the
3-IN-ONE acquisition. As a percentage of net sales, these expenses decreased to
19.9% as compared to 20.6% last year.
Advertising and sales promotion expenses increased by $859,000 in support of the
added sales. As a percentage of net sales these expenses were 9.2% versus 8.0%
a year ago. These expenses are expected to remain within historic levels of 9%
to 10% of net sales throughout the remainder of fiscal year 1996.
Amortization of goodwill, an initial expense in this quarter, results from the
acquisition of certain intangible assets relating to the 3-IN-ONE oil brand from
affiliates of Reckitt & Colman plc. in December of 1995.
Interest, net decreased $36,000 due to the reduction of short-term investments.
Other income, net increased $102,000 primarily due to the increase in exchange
gains from translating those U.K. sales denominated in foreign currencies to
British sterling.
Net income only increased $275,000 or 4.9% due to higher tax provisions. Net
income as a percentage of net sales this quarter was 16.8% versus 19.1% in
fiscal year 1995.
8
<PAGE>
WD-40 COMPANY (U.S.)
- --------------------
1996 vs. 1995 Net sales increased $2,631,000 or 11.9%. Export sales to
- -------------
Latin America and Pacific Rim were up approximately 40% and domestic sales were
up 8%. Again strong promotional sales accounted for these gains.
Cost of product sold as a percentage of net sales was 43.9% versus 42.7% in
fiscal year 1995. This increase was due to the additional costs of the
promotional packaging.
Selling, general and administrative expenses increased $759,000 or 17.8% and, as
a percentage of net sales, were 20.3% versus 19.3% last year.
Advertising and sales promotion expenses increased by $271,000 or 15.2%. This
increase is due to the promotional sales and amounted to 8.3% of net sales
versus 8.1% in the second quarter of fiscal year 1995.
Amortization of goodwill was an initial expense in the second quarter of fiscal
year 1996.
Net income decreased $499,000 or 12.3% from last year due to the increased
expenses as described above.
WD-40 COMPANY LTD. (U.K.)
- -------------------------
1996 vs. 1995 Net sales for the second quarter were up $1,913,000
- -------------
or 31.8% reflecting strong promotional sales in the U.K., Europe and the Middle
East.
Cost of product sold also increased because of the promotional packaging and was
38.8% of net sales versus 37.5% a year ago.
Selling, general and administrative expenses increased $173,000 or 12.2%;
however, as a percentage of net sales, were down from 23.6% last year to 20.1%
this quarter.
Advertising and promotional expenses were up to 12.4% of net sales versus 7.8%
last year due entirely to the timing of promotions.
Net income increased by $466,000 or 34.0% and came in at 23.2% of net sales
versus 22.8% last year.
9
<PAGE>
OTHER FOREIGN SUBSIDIARIES
- --------------------------
1996 vs. 1995 Net sales increased $1,147,000 or 91.5% due entirely to the
- -------------
improvement of the retail economy in Canada.
Cost of product sold as a percentage of net sales was 48.4% versus 48.1% last
year.
Net income increased $308,000 or 170% as a result of the increased sales in
Canada.
SIX MONTHS FISCAL YEAR 1996 VERSUS SIX MONTHS FISCAL YEAR 1995
- --------------------------------------------------------------
Consolidated net sales were $62,692,000, an increase of $3,534,000 or 6.0% over
fiscal year 1995. This increase was generated primarily by increased foreign
sales.
Cost of product sold as a percentage of net sales was 42.7% versus 42.1% last
year. This small increase was mainly due to promotional packaging.
Selling, general and administrative expenses were up $757,000 or 6.3% and, as a
percentage of net sales, these expenses remained flat at 20.3%.
Advertising and sales promotion expenses were also up by 3.4% or $174,000;
however, these expenses declined as a percentage of sales to 8.4% versus 8.6%
last year. These expenses are expected to return to historic levels of 9% to
10% by fiscal year end.
Amortization of goodwill was an initial expense in the second quarter of fiscal
year 1996.
Interest income, net decreased $214,000 mainly due to the reduction of
short-term investments. Other income, net increased $183,000 due primarily to
the increase in exchange gains from translating those U.K. sales denominated in
foreign currencies to British sterling.
Net income increased slightly from last year.
10
<PAGE>
WD-40 COMPANY (U.S.)
- --------------------
Net sales increased $719,000 as a result of higher export sales to the Pacific
Rim and Latin America where sales increased approximately 30%. Domestic sales
were down 2.3%, however due to strong promotional support by the trade, the
second quarter rebounded by 8% compared to the first quarter.
Cost of product sold as a percent of net sales increased to 43.5% versus 42.8%
in 1995 primarily due to promotional packaging.
Selling, general, and administrative expenses as a percentage of net sales
increased to 20.9% versus 19.8% in 1995.
Advertising and promotion expenses as a percentage of net sales were down
slightly to 8.3% versus 8.6% of last year.
Amortization of goodwill was an initial expense in the second quarter of fiscal
year 1996.
Net income decreased 14.4% or $1,072,000 due to increased expenses as described
above.
WD-40 COMPANY LTD. (U.K.)
- -------------------------
Net sales increased $1,854,000 or 14.4%, due to strong promotional sales in the
U.K., Europe, and the Middle East.
Cost of product sold as a percentage of net sales was up to 38.8% versus 38.0%
in 1995 due to promotional packaging.
Selling, general and administrative expenses increased 2.5% or $71,000, and as a
percentage of net sales, these expenses dropped to 20.0% versus 22.4% last
year.
Advertising and promotion expenses increased 24.3% or $253,000 due to the
timing of promotions during the second quarter.
Net income increased $918,000 or 31.2% over the previous year primarily due to
the combined effect of the factors as discussed above.
OTHER FOREIGN SUBSIDIARIES
- --------------------------
Net sales increased 26.5% or $961,000 due to the rebound of sales in Canada.
Cost of product sold as a percentage of sales decreased to 47.6% of net sales
versus 49.0% in 1995.
Selling, general and administrative expenses decreased to 15.6% of net sales
versus 18.9% in 1995.
11
<PAGE>
Advertising and promotion expenses decreased to 7.6% of net sales versus 10.3%
in 1995.
Net income was up $176,000 or 24.5% due to the increased sales.
PRICE INCREASES
- ---------------
The Company did not initiate any price increases during this quarter.
CASH AND CASH EQUIVALENTS
- -------------------------
Cash and cash equivalents decreased $17,543,000 during the three months ended
February 29, 1996 primarily due to amounts paid to the affiliates of Reckitt &
Colman plc. for the acquisition of certain assets relating to the 3-IN-ONE
brand. Cash and cash equivalents increased $66,000 for the same period of last
year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The current ratio of 3.2 to one on February 29, 1996 was less than the current
ratio of 4.5 to one on August 31, 1995 due to the cash paid to acquire all of
the worldwide 3-IN-ONE brand trademarks, other related intangible assets, and
inventory.
The Company's primary source of liquidity is funds provided by operations. The
Company anticipates its cash flows from operations will 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 1996 are expected to total
approximately $982,000 principally for replacement of aged vehicles and updating
of computer equipment.
12
<PAGE>
PART II OTHER INFORMATION
Item 6. Other Information
(a) Exhibits
Exhibit No. Description
- ----------- -----------
Articles of Incorporation and By-Laws.
3(a) The Restricted Articles of Incorporation dated
December 6, 1988 are incorporated by reference
from the Registrant's form 10-K Annual Report
filed November 13, 1995, Exhibit 3(a) thereto.
3(b) The restated By-Laws dated December 1, 1988 are
incorporated by reference from the Registrant's Form
10-K Annual Report filed November 13, 1995,
Exhibit 3(a) thereto.
(b) Reports on Form 8-K
The registrant filed a report on Form 8-K on December 22, 1995
to report the acquisition on December 8, 1995 of the 3-IN-ONE
business from affiliates of Reckitt & Colman plc., an English
corporation. The report was subsequently amended on Form 8-K/A
filed February 16, 1996 to include required financial statements
and pro forma financial information. The following financial
statements and pro forma financial information were filed with
the report on Form 8-K/A:
(1) Financial statements of the 3-IN-ONE Oil business
acquired.
Report of Independent Accountants
Statement of Assets as of December 31, 1994 and January 1,
1994
Statement of Revenues and Direct Operating Expenses for
the years ended December 31, 1994 and January 1, 1994
Notes to Statement of Assets and Statement of Revenues and
Direct Operating Expenses
Statement of Assets (Unaudited) as of November 25, 1995
Statement of Revenues and Direct Operation Expenses
(Unaudited) for the eleven months ended November 25, 1995
and November 26, 1994
Notes to Unaudited Statement of Assets and Unaudited
statement of Revenues and Direct Operating Expenses
13
<PAGE>
(2) Pro forma financial information
Introduction to Pro Forma Financial Statements
Pro Forma Combined Balance Sheet (Unaudited)
as of November 30, 1995
Pro Forma Combined Statement of Income (Unaudited)
for the year ended August 31, 1995
Pro Forma Combined Statement of Income (Unaudited)
for the three months ended November 30, 1995.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WD-40 COMPANY
Registrant
Date: April 12, 1996 /s/ Robert D. Gal
______________________________________
Robert D. Gal,
Treasurer
(Principal Financial Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 2,716,000
<SECURITIES> 0
<RECEIVABLES> 29,488,000
<ALLOWANCES> 659,000
<INVENTORY> 2,971,000
<CURRENT-ASSETS> 36,919,000
<PP&E> 6,661,000
<DEPRECIATION> 3,010,000
<TOTAL-ASSETS> 61,359,000
<CURRENT-LIABILITIES> 11,448,000
<BONDS> 2,427,000
<COMMON> 6,231,000
0
0
<OTHER-SE> 40,176,000
<TOTAL-LIABILITY-AND-EQUITY> 61,359,000
<SALES> 35,080,000
<TOTAL-REVENUES> 35,322,000
<CGS> 15,100,000
<TOTAL-COSTS> 10,380,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,000
<INCOME-PRETAX> 9,883,000
<INCOME-TAX> 4,000,000
<INCOME-CONTINUING> 5,883,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,883,000
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
