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FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File No.
August 31, 1997 0-6936-3
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WD-40 COMPANY
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(Exact Name of Registrant as specified in Charter)
California 95-1797918
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1061 Cudahy Place, San Diego, California 92110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 275-1400
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Securities registered pursuant to Section 12(b) of the Act:
Title of Class: None
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Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Common Stock, no par value
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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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K:____.
The aggregate market value (closing price) of the voting stock held by non-
affiliates of the Registrant as of October 10, 1997 was $372,530,000.
As of October 10, 1997 the Registrant had 15,563,792 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
The Proxy Statement for the annual meeting of shareholders on November 25,
1997 is incorporated by reference into PART III, Items 10-13. The Annual Report
to Shareholders for the fiscal year ended August 31, 1997 is incorporated by
reference into PART I, ITEM 1, PART II, ITEMS 5-8, and PART IV.
1
PART I
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ITEM 1 - Business
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(a) General Development of Business.
For more than four decades, WD-40 Company sold only one petroleum-based
product, known as "WD-40." WD-40 is a multi-purpose product which acts as a
lubricant, rust preventative, penetrant and moisture displacer. In December
1995 the Company acquired the 3-IN-ONE Oil brand from affiliates of Reckitt &
Colman, P.L.C. 3-IN-ONE Oil is a lower cost general purpose lubricant. During
the fiscal year ended August 31, 1996, the Company developed a third product,
T.A.L 5, which was introduced to the market in fiscal year 1997. T.A.L 5 is an
extra-strength synthetic lubricant for heavy-duty applications.
The acquisition of the 3-IN-ONE Oil brand was completed on December 8,
1995. WD-40 company acquired all of the worldwide trademarks and other
intangible assets relating to the sale of 3-IN-ONE Oil brand lubricating oil
products from Reckitt & Colman, Inc., a Delaware corporation, Reckitt & Colman
(Overseas) Limited, an English corporation, and other affiliates of Reckitt &
Colman P.L.C., an English corporation. The acquisition of assets included
inventory and the rights to manufacture, sell and distribute this product line.
No other physical property, plant or equipment was acquired. The Company paid
cash in the amount of $15,047,000 for the trademarks and other intangible assets
and approximately $400,000 for inventory.
The Company's objective is to dominate the entire category of lubrication
products by combining the smaller niche markets targeted by 3-IN-ONE Oil and
T.A.L 5 with the broad-based market held by the WD-40 brand. The three brands
complement each other, providing the Company with a complete line of lubricants
that is intended to obviate the need for distributors to stock, and consumers to
buy, other brands.
The acquisition of the 3-IN-ONE Oil brand and the introduction of T.A.L 5
will allow the Company to pursue a comprehensive and targeted marketing
strategy. The acquisition of the 3-IN-ONE Oil brand provided the Company with
an existing network of distribution in 17 countries, including several markets
in which the WD-40 brand had not been sold. The Company will be using this
distribution network to introduce the WD-40 brand to these markets and to add
distribution channels to markets that have been previously established.
At the same time, the 3-IN-ONE Oil brand has been introduced to the
Company's existing distribution system on a targeted basis. The 3-IN-ONE Oil
brand will offer the greatest potential in developing economies worldwide where
it can be sold in small, affordable units that may provide people in these
markets with an introduction to lubricants.
In maturing, industrial markets, including North America, the U.K., and
Australia, the Company will focus on growth in sales of the WD-40 brand and the
introduction of the T.A.L 5 brand to the distribution system. T.A.L 5 will be
offered to industrial users and other consumers in need of an extra-strength
lubricant.
(b) Financial Information About Industry Segments. Not applicable.
2
(c) Narrative Description of Business.
WD-40 Company manufactures and markets three multi-purpose lubricant
products known as "WD-40," "3-IN-ONE Oil," and "T.A.L 5." WD-40 is sold
primarily in aerosol cans through chain stores, hardware and sporting goods
stores, automotive parts outlets as well as through industrial distributors and
suppliers. It has a wide variety of consumer uses (including household use, the
care and protection of sporting goods, and marine and automotive equipment) as
well as numerous industrial applications.
3-IN-ONE Oil is a drip oil lubricant, sold primarily through the same
distribution channels as the WD-40 brand. It is a low-cost, entry-level
lubricant. The unique drip tip allows precise application for small mechanisms
and assemblies, tool maintenance, and threads on screws and bolts. 3-IN-ONE Oil
is a market share leader among drip oils for household consumers. It also has
wide industrial applications in such areas as locksmithing, HVAC, marine,
farming, construction, and jewelry manufacturing. The product's high quality
and the established distribution network that was acquired with the brand
trademarks have enabled the product to gain international acceptance.
T.A.L 5 was developed during the Company's 1996 fiscal year as an extra
strength synthetic spray lubricant for heavy-duty applications. Marketing for
T.A.L 5 is targeted at specialized users in the trades and general industry,
especially manufacturing. T.A.L 5, which stands for "Triple Additive Lubricant /
5 functions," resists breakdown due to corrosion, friction, temperature, load,
and motion. It provides long-lasting film strength and durability which can
ultimately help prolong the life of equipment. There are numerous competing
heavy-duty spray lubricant products, none of which are seen as being dominant.
T.A.L 5 is designed to be competitive as a high quality multi-application
product that can be funneled into the Company's existing distribution network.
WD-40 Company is subject to competition from many similar products which
perform some or all of the functions of WD-40, 3-IN-ONE Oil and T.A.L 5. The
Company is aware of at least 250 competing products, some of which sell for
lower prices. Competition in international markets varies by country. The
Company has no way of estimating the total size of the market or the proportion
of the market held by the Company.
With the ongoing consolidation in the marketplace, many of the major
retailers are aggressively pursuing additional trade allowances. These demands
could produce a long-term negative impact on both sales and profits.
Alternate sources of constituent chemicals are readily available and there
are no current or anticipated shortages of any raw materials essential to the
business. There are no environmental laws or regulations currently affecting
capital expenditures. Recent focus on environmental regulations relating to
VOC's (Volatile Organic Compounds) have resulted in a change in the formulation
of the WD-40 brand product resulting in increases in product cost and product
pricing. Such increases could have an adverse affect on the Company's
competitive position.
The Company has no patents, but relies upon its established trademarks,
brand names, and marketing efforts, including advertising and sales promotion,
to compete effectively. The WD-40, 3-IN-ONE Oil and T.A.L 5 trademarks are
registered in the United States and in various foreign countries.
3
Ninety-three (93) persons are employed by the United States parent
corporation, ten (10) by the Company's Canadian subsidiary, fifty-two (52) by
the United Kingdom subsidiary, and eleven (11) by the Australian subsidiary.
The Company operates in one business segment -- the manufacture and sale of
multi-purpose lubricants.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
The information required by this item is incorporated by reference from
Page 12 of the Annual Report to Shareholders for the fiscal year ended August
31, 1997 under Note 4 -- Business Segment and Foreign Operations. There are no
material risks attendant to the Registrant's foreign operations.
ITEM 2 - Properties
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The Company owns and occupies an office and plant facility at 1061 Cudahy
Place, San Diego, California 92110. The building consists of approximately
11,000 square feet of office space and 4,000 square feet of plant and storage
area.
The Company owns and occupies an office and plant facility at Kiln Farm,
Milton Keynes, England. The building consists of approximately 8,000 square
feet of office space and 4,700 square feet of plant and storage area.
The Company leases approximately 1,300 square feet of office space for
sales offices in each of the following cities: Atlanta, Georgia; Miami, Florida;
Northbrook, Illinois; Thousand Oaks, California, and Trevose, Pennsylvania.
The Company leases approximately 2,000 square feet of office space in
Etobicoke, Ontario, Canada.
The Company leases approximately 2,500 square feet of office space in
Epping, New South Wales, Australia.
The Company leases approximately 1,800 square feet of office space in Kuala
Lumpur, Malaysia.
The Company believes that these properties should be sufficient to meet the
Company's needs for office and plant facilities for several years.
ITEM 3 - Legal Proceedings
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Not Applicable.
ITEM 4 - Submission of Matters to a Vote of Security Holders
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Not applicable.
4
Executive Officers of the Registrant
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The following table sets forth the names and ages of, and the positions and
offices held by, all executive officers within the Company:
Name Age Position
- - ---- --- --------
Garry O. Ridge 41 President and Chief Executive Officer: Mr. Ridge
joined the Company's Australian subsidiary, WD-40
Company (Australia) Pty. Limited, in 1987 as
Managing Director and has held several senior
management positions prior to his election as CEO in
1997.
Michael L. Freeman 44 Vice President Administration, Chief Information
Officer: Mr. Freeman joined the Company in 1990 as
Director of marketing and was named Director of
Operations in 1994. He was named Vice President
Administration and Chief Information Officer in
December, 1996.
Geoffrey J. Holdsworth 35 Managing Director, Asia Pacific, WD-40 Company
(Australia) Pty. Ltd.: Mr. Holdsworth joined the
Company's Australian subsidiary, WD-40 Company
(Australia) Pty. Limited, in 1996 as General
Manager, Australia. Prior to joining WD-40 Company,
Mr. Holdsworth held sales management positions at
Columbia Pelikan Pty. Ltd., Australia.
Graham P. Milner 43 Vice President, Sales and Marketing, The Americas:
Mr. Milner joined the Company in 1992 as
International Director, and was appointed Vice
President, Sales and Marketing, The Americas in
March, 1997.
William B. Noble 39 Managing Director, Europe, WD-40 Company Ltd.
(U.K.): Mr. Noble joined the Company's Australian
subsidiary, WD-40 Company (Australia) Pty.
Limited, in 1993 as International Marketing Manager
for the Asia Region. He was appointed Managing
Director, Europe in December, 1996.
Peter E. Williams 54 Vice President Finance, Chief Financial Officer,
Treasurer and Assistant Secretary: Mr. Williams
joined the Company in 1996 as Controller and was
named Vice President Finance and Chief Financial
Officer in December, 1996. Prior to joining WD-40
Company, Mr. Williams held financial management
positions at Silicon Graphics, Inc.
All officers hold office at the pleasure of the Board of Directors.
5
PART II
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ITEM 5 - Market For Registrant's Common Equity and Related Stockholder Matters
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The Company's common stock is traded in the over-the-counter market (Nasdaq
National Market System). As of August 31, 1997, the approximate number of
holders of record of the Company's common stock was 2,226. Other information
required in this item is incorporated by reference from Page 16 of the Annual
Report to Shareholders for the year ended August 31, 1997 under the heading,
"Stock Information."
ITEM 6 - Selected Financial Data
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See ITEM 7.
ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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The information required in ITEMS 6 and 7 is incorporated by reference from
Pages 19 and 20; and Pages 17 and 18, respectively, of the Annual Report to
Shareholders for the fiscal year ended August 31, 1997.
ITEM 8 - Financial Statements and Supplementary Data
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See the Index to Consolidated Financial Statements and Financial Statement
Schedule on Page 7 of this report (ITEM 14(a)). Other information required by
this item is incorporated by reference from Page 16 of the Annual Report to
Shareholders for the fiscal year ended August 31, 1997.
ITEM 9 - Changes in and Disagreements With Accountants on Accounting and
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Financial Disclosure
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Not applicable.
PART III
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ITEM 10 - Directors and Executive Officers of the Registrant
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See ITEM 13.
ITEM 11 - Executive Compensation
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See ITEM 13.
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
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See ITEM 13.
6
ITEM 13 - Certain Relationships and Related Transactions
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The information required in ITEMS 10, 11, 12 and 13 is incorporated by
reference from Pages 4, 5, and 6; Pages 6, 7, 8, 9, 10, 11, and 12; Pages 2 and
4; and Page 5; respectively, of the Proxy Statement for the annual meeting of
shareholders, November 25, 1997.
PART IV
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ITEM 14 - Exhibits, Financial Statement Schedule, and Reports on Form 8-K
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(a) Documents filed as part of this report
WD-40 COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of WD-40 Company and its
subsidiaries, included in PART II, ITEM 8, are incorporated by reference from
Pages 6-16 of the Annual Report to Shareholders for the fiscal year ended August
31, 1997:
1. Financial Statements
Report of Independent Accountants
Consolidated Statement of Income for the three years ended August 31, 1997
Consolidated Balance Sheet at August 31, 1997 and 1996
Consolidated Statement of Shareholders' Equity for the three years ended August
31, 1997
Consolidated Statement of Cash Flows for the three years ended August 31, 1997
Notes to Consolidated Financial Statements
The following financial statement schedule of WD-40 Company for the three
years ended August 31, 1997 is included in PART II, ITEM 8:
2. Financial Statement Schedule
Page
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Report of Independent Accountants on Financial Statement Schedule 11
II - Consolidated Valuation and Qualifying Accounts and Reserves 12
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
7
3. Exhibits
Exhibit No. Description
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Articles of Incorporation and By-Laws.
3(a) Restated Articles of Incorporation are incorporated by reference
from the Form 10-K Annual Report dated November 9, 1995, Exhibit
3(a) thereto.
3(b) Restated By-Laws are incorporated by reference from the Form 10-K
Annual Report dated November 9, 1995, Exhibit 3(b) thereto.
3(c) Amendment No. 1 to Restated By-Laws.
Material contracts.
Executive Compensation Plans and Arrangements (Exhibits 10(a)
through 10(d) are management contracts and compensatory plans or
arrangements required to be filed as exhibits pursuant to ITEM
14(c)).
10(a) The Restated WD-40 Company Incentive Stock Option Plan is
incorporated by reference from the Form 10-K Annual Report dated
November 9, 1995, Exhibit 10(a) thereto.
10(b) The WD-40 Company Supplemental Death Benefit Plan is incorporated
by reference from the Form 10-K Annual Report dated November 9,
1995, Exhibit 10(b) thereto.
10(c) The WD-40 Company Supplemental Retirement Benefit Plan is
incorporated by reference from the Form 10-K Annual Report dated
November 9, 1995, Exhibit 10(c) thereto.
10(d) Second Amendment and Restatement, WD-40 Company 1990 Incentive
Stock Option Plan.
13 Annual Report to Shareholders for the fiscal year ended August
31, 1997; incorporated by reference in this report.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
Registrant's fiscal year ended August 31, 1997.
8
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WD-40 COMPANY
Registrant
By /s/ Peter E. Williams
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PETER E. WILLIAMS, Vice President Finance
(Principal Financial Officer and
Principal Accounting Officer)
November 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Garry O. Ridge
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GARRY O. RIDGE
Chief Executive Officer and Director
(Principal Executive Officer)
November 25, 1997
/s/ John S. Barry
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JOHN S. BARRY, Director
November 25, 1997
/s/ Harlan F. Harmsen
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HARLAN F. HARMSEN, Director
November 25, 1997
/s/ Mario L. Crivello
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MARIO L. CRIVELLO, Director
November 25, 1997
9
/s/ Margaret L. Roulette
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MARGARET L. ROULETTE, Director
November 25, 1997
/s/ C. Fredrick Sehnert
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C. FREDRICK SEHNERT, Director
November 25, 1997
/s/ Daniel W. Derbes
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DANIEL W. DERBES, Director
November 25, 1997
/s/ Jack L. Heckel
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JACK L. HECKEL, Director
November 25, 1997
/s/ Edward J. Walsh
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EDWARD J. WALSH, Director
November 25, 1997
/s/ Gerald C. Schleif
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GERALD C. SCHLEIF, Director
November 25, 1997
10
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of WD-40 Company
Our audits of the consolidated financial statements referred to in our
report dated October 2, 1997 appearing on Page 6 of the 1997 Annual Report to
Shareholders of WD-40 Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Diego, California
October 2, 1997
11
SCHEDULE II
WD-40 COMPANY
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
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ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
OF PERIOD EXPENSES DEDUCTIONS* PERIOD
Reserve for bad debts and sales discounts:
Year ended
August 31, 1995 $ 443,000 $ 984,000 $ 951,000 $ 476,000
========= ========== ========== =========
Year ended
August 31, 1996 $ 476,000 $1,085,000 $1,141,000 $ 420,000
========= ========== ========== =========
Year ended
August 31, 1997 $ 420,000 $1,104,000 $1,029,000 $ 495,000
========= ========== ========== =========
* Write-off of doubtful accounts and sales discounts taken.
12
INDEX TO EXHIBITS
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Incorporated
By Reference
No. Exhibit Page
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3(a) Restated Articles of Incorporation 8
3(b) Restated By-Laws 8
3(c) Amendment No. 1 to Restated By-Laws
10(a) Restated WD-40 Company Incentive Stock Option Plan 8
10(b) WD-40 Company Supplemental Death Benefit Plan 8
10(c) WD-40 Company Supplemental Retirement Benefit Plan 8
10(d) Second Amendment and Restatement, WD-40 Company 1990
Incentive Stock Option Plan
13 Annual Report to Shareholders for the fiscal year ended August 31, 1997
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule (electronic filing only)
13