<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 November 30, 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)
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 January 10, 1997 7,746,082
<PAGE>
Part I Financial Information
Item 1. Financial Statements
WD-40 COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
(UNAUDITED)
November 30, 1996 August 31, 1996
----------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,527,000 $ 6,748,000
Short-term investments 104,000
Trade accounts receivable, less allowance
for cash discounts and doubtful accounts
of $469,000 and $420,000 21,649,000 21,440,000
Product held at contract packagers 1,242,000 2,304,000
Inventories 3,966,000 3,867,000
Other current assets 2,911,000 3,170,000
----------------- ---------------
Total current assets 40,295,000 37,633,000
Property, plant, and equipment, net 4,076,000 3,938,000
Long-term investments 3,961,000 4,044,000
Goodwill 14,251,000 14,392,000
Other assets 1,929,000 1,651,000
----------------- ---------------
$ 64,512,000 $ 61,658,000
================= ===============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 5,844,000 $ 5,784,000
Accrued payroll and related expenses 1,645,000 2,737,000
Income taxes payable 3,820,000 1,879,000
Current portion of long-term debt 706,000 706,000
----------------- ---------------
Total current liabilities 12,015,000 11,106,000
Long-term debt: 2,427,000 2,427,000
Deferred income taxes 597,000
Deferred employee benefits 989,000 954,000
----------------- ---------------
16,028,000 14,487,000
Shareholders' equity:
Common stock, no par value, 9,000,000
shares authorized -- shares issued and
outstanding of 7,744,712 and 7,720,953 7,572,000 6,603,000
Paid-in capital 321,000 321,000
Retained earnings 40,109,000 40,425,000
Cumulative translation adjustment 482,000 (178,000)
----------------- ---------------
Total shareholders' equity 48,484,000 47,171,000
----------------- ---------------
$ 64,512,000 $ 61,658,000
================= ===============
</TABLE>
(See accompanying notes to financial statements)
2
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
November 30
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Net sales $ 28,265,000 $ 27,612,000
Cost of product sold 11,419,000 11,686,000
------------- -------------
Gross profit 16,846,000 15,926,000
------------- -------------
Operating expenses:
Selling, general & administrative 7,279,000 5,772,000
Advertising & sales promotions 2,245,000 2,038,000
Amortization expense 335,000
------------- -------------
Income from operations 6,987,000 8,116,000
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Other income:
Interest, net 21,000 238,000
Other, net (379,000) 42,000
------------- -------------
Income before income taxes 6,629,000 8,396,000
Provision for income taxes 2,389,000 3,130,000
------------- -------------
Net Income $ 4,240,000 $ 5,266,000
============= =============
Earnings per share $ 0.55 $ 0.68
============= =============
Average number of shares
outstanding 7,730,878 7,704,477
============= =============
</TABLE>
(See accompanying notes to financial statements)
3
<PAGE>
WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
November 30
-----------------------------
1996 1995
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,240,000 $ 5,266,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 214,000 165,000
Amortization expense 335,000 83,000
Loss on sale of equipment 8,000 16,000
Changes in assets and liabilities:
Accounts receivable 261,000 1,427,000
Product held at contract packagers 1,062,000 440,000
Inventories 96,000 205,000
Other assets 547,000 747,000
Accounts payable and accrued expenses (1,300,000) (2,746,000)
Income taxes payable 1,845,000 1,379,000
Long-term deferred employee benefits 35,000 4,000
Deferred taxes 295,000
------------- -----------
Net cash provided by operating activities 7,638,000 6,986,000
------------- -----------
Cash flows from investing activities:
Decrease in short-term investments 104,000 8,807,000
Increase in deposits (1,600,000)
Proceeds from sale of equipment 60,000 26,000
Capital expenditures (361,000) (294,000)
------------- -----------
Net cash (used in) provided by
investing activities (197,000) 6,939,000
------------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 969,000 108,000
Dividends paid (4,790,000) (4,776,000)
------------- -----------
Net cash used in financing activities (3,821,000) (4,668,000)
------------- -----------
Effect of exchange rate changes on cash 159,000 (88,000)
------------- -----------
Increase in cash 3,779,000 9,169,000
Cash at beginning of period 6,748,000 11,090,000
------------- -----------
Cash at end of period $ 10,527,000 $20,259,000
============= ===========
</TABLE>
(See accompanying notes to financial statements)
4
<PAGE>
WD-40 COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
-----------------
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION
The consolidated 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 read in conjunction with the
financial statements and notes thereto included in the Company's 1996 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, 1996.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 - COMMITMENTS AND CONTINGENCIES
The Company is party to various claims, legal actions and complaints, including
product liability litigation, 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.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
FIRST QUARTER OF FISCAL YEAR 1997 COMPARED TO FIRST QUARTER OF FISCAL YEAR 1996
- -------------------------------------------------------------------------------
Consolidated net sales for the quarter were $28,265,000, an increase of 2.4% or
$653,000 from a year ago. Currency exchange losses amounted to $432,000 for the
quarter, versus no effect in the prior year. Management anticipates sales
continuing to improve in subsequent quarters.
Cost of product sold declined to 40.4% of net sales this quarter versus 42.3% a
year ago. Management believes that costs have stabilized and that there will
be minimal inflationary impact for the remainder of fiscal year 1997.
Selling, general and administrative expenses increased $1,507,000 or 26.1% in
the first quarter of fiscal year 1997 as compared to the same period in 1996.
Such expenses as a percentage of net sales increased this quarter to 25.8%
versus 20.9% last year. In addition to the normal increases in general
overheads, the company experienced inflationary pressure on freight, airfares,
and fuel surcharges due to increased petroleum prices.
Advertising and sales promotion expenses increased $207,000 or 10.2% due to the
timing of overall promotional activities.
Net income decreased $1,026,000 or 19.5% due primarily to higher S, G & A
expenses, foreign exchange losses, and amortization of goodwill related to the
acquisition of 3-IN-ONE Oil. Net income as a percentage of net sales this
quarter was 15.0% versus 19.1% in fiscal year 1996.
WD-40 COMPANY (U.S.)
- --------------------
Net sales decreased $610,000 or 3.2% compared to last year. The primary reason
for the sales decline of WD-40 was due to the change over to the CO/2/
propellant. The Company chose not to plan any major promotions during the first
quarter because of the differences in pricing with the older WD-40. Export
sales to the Pacific Rim were lower due to heavy purchasing during August, 1996.
Cost of product sold decreased to 40.8% of net sales this quarter as compared to
43.1% in fiscal year 1996.
Selling, general and administrative expenses increased $620,000 or 15.2%, to
25.7% of sales versus 21.9% last year.
Advertising and sales promotion expenses decreased $32,000 or 2.0% but remained
flat at 8.3% of sales compared to 8.3% in the prior year.
Amortization expenses related to the acquisition of 3-IN-ONE Oil were $307,000
for this quarter, compared to zero for 1996.
As a result, net income was down by $2,720,000 or 45.5%.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
WD-40 COMPANY LTD. (U.K.)
- -------------------------
Net sales for the quarter increased $1,609,000 or 23.7% compared to the same
quarter in fiscal 1996. 3-IN-ONE sales combined with strong WD-40 sales into the
Middle East prior to a price increase accounted for the gain.
Cost of product sold increased to 41.3% of net sales versus 38.9% in fiscal year
1996.
As a percentage of net sales, selling, general, and administrative expenses were
26.6% versus 20.1% last year, and advertising and sales promotion expenses
increased to 6.0% versus 4.6% in 1996.
Foreign exchange activity resulted in a loss of $432,000 compared to a gain of
$139,000 for the first quarter of 1996.
As a result of the factors described above, net income decreased $727,000 or
54.3%.
OTHER FOREIGN SUBSIDIARIES
- --------------------------
Net sales decreased $113,000 or 5.2%.
Cost of product sold as a percentage of net sales was 47.0% versus 46.6% last
year.
Net income was down 27.5% or $98,000 due primarily to the foreign exchange
losses.
PRICE INCREASES
- ---------------
Prices increased 5%-9% worldwide in the first quarter of fiscal 1997, providing
an approximate overall 6% increase compared to last year.
CASH AND CASH EQUIVALENTS
- -------------------------
Cash and cash equivalents increased $3,779,000 during the three months ended
November 30, 1996 versus an increase of $9,169,000 for the same period of last
year. The increase in the prior year was primarily due to the liquidation of
short-term investments.
INTEREST AND OTHER INCOME, NET
- ------------------------------
Net interest income decreased by $217,000 due to reduced short-term investments.
Other income, net, increased by $151,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The current ratio of 3.4-to-one on November 30, 1996 was unchanged from the
current ratio on August 31, 1996.
The Company's primary source of liquidity are 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 fiscal year 1997 are expected to total approximately
$1,200,000 principally for replacement of aged vehicles and updating of computer
equipment.
7
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
Articles of Incorporation and By-Laws
3 (a) The Restated Articles of Incorporation 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 are incorporated by
reference from the Registrant's Form 10-K Annual
Report filed November 13, 1995, Exhibit 3 (b)
thereto.
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
quarter ended November 30, 1996.
</TABLE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities 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: January 13, 1997 /s/ PETER E. WILLIAMS
---------------------------------
Peter E. Williams
Chief Financial Officer
(Principal Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 10,527,000
<SECURITIES> 0
<RECEIVABLES> 22,118,000
<ALLOWANCES> 469,000
<INVENTORY> 3,966,000
<CURRENT-ASSETS> 40,295,000
<PP&E> 7,510,000
<DEPRECIATION> 3,434,000
<TOTAL-ASSETS> 64,512,000
<CURRENT-LIABILITIES> 12,015,000
<BONDS> 0
0
0
<COMMON> 7,572,000
<OTHER-SE> 40,912,000
<TOTAL-LIABILITY-AND-EQUITY> 64,512,000
<SALES> 28,265,000
<TOTAL-REVENUES> 28,265,000
<CGS> 11,419,000
<TOTAL-COSTS> 21,278,000
<OTHER-EXPENSES> 379,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,000
<INCOME-PRETAX> 6,629,000
<INCOME-TAX> 2,389,000
<INCOME-CONTINUING> 4,240,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,240,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
