WD-40 Co (WDFC) 2008 Q1 法說會逐字稿

Good day, everyone, and welcome to the WD-40 Company first-quarter 2008 earnings release conference call.

Today's call is being recorded.

And at this time I'd like to turn the call over to the Vice President of Corporate and Investor Relations for WD-40 Company, Ms.

Maria Mitchell.

Please go ahead, ma'am.

Good afternoon, and thank you for joining us for our first-quarter earnings call for fiscal 2008.

Today we are pleased to have Garry Ridge, President and CEO, and Mike Irwin, Executive Vice President and CFO.

This conference call 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.

The forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from forward-looking statements, including: the impact from cost of goods, the impact of new product innovation, foreign exchange rates, and the uncertainty of market conditions, both in the United States and internationally.

The company's expectations, beliefs and projections are expressed in good faith and 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 8K, 10Q,10K, and readers are urged to carefully review these and other documents and stay up to date with our most recent company developments provided in the investor relations section of our website at WD40.com.

Our first quarter -- our second-quarter fiscal 2008 earnings conference call is scheduled to take place on Wednesday, July 2nd, 2008, at 2:00 PM.

At this time, I'd like to turn the call over to Garry Ridge.

Good day.

Welcome to today's conference call.

Today we reported net sales of $79.2 million for the first quarter of fiscal year 2008, an increase of 10% over last year.

During the first quarter, our sales figures clearly represent the results of our ongoing strategy to diversify the company's brands across borders and trade channels.

In fact, in the first quarter 67% of WD-40 brand sales and 56% of our total sales were outside the United States, provide -- proving we are truly a global company.

Net income for the first quarter was $6.2 million, up 9.4% compared to the first quarter last year.

Diluted earnings per share for the quarter were $0.36, up 10% from our -- from $0.33 last year.

By product segment, our lubricant sales in Q1 were $57.3 million, an increase of 17.2% versus 57 -- sorry, and year-to-date are the same.

Hand cleaners were $1.7 million, down .1%.

And household products were $20.1 million, down 5.7%.

Lubricant sales were up 17% globally in the first quarter, with the growth driven by the European and Asian Pacific trading blocks.

Our core lubricant business continues to be a growth opportunity with geographic expansion and the addition of WD-40 Smart Straw.

As announced in Q4, we plan to convert many of our canned sizes exclusively to the Smart Straw format in the United States in late March 2008.

Household products were down 6% globally in Q1 versus the first quarter last year due to the declines in the -- in Europe.

U.S.

household product sales were down 9% in the first quarter versus last year as a result of decreased distribution and temporary supply chain disruptions.

The supply chain disruptions resulted in lost sales of approximately $1 million.

WD-40 -- sorry.

2001 household brand sales in Europe declined 11% versus the first quarter last year, as a result of reduced account specific promotional activity with key customers, along with some competitive activity.

The decrease in the U.S.

and Europe were partially offset by an increase in Canada and Australia -- or Australia and Canada, which grew 57% and 17% respectively.

These increases were driven by the growth of NoVac sales in Australia and Spot Shot sales in Canada.

Heavy-duty hand cleaners continued to be a small stable and profitable line of our business for the company.

Hand cleaners represented 2% of the global sales this quarter and in Q1 were essentially equal to the same period last year.

Now let's review sales by region.

In the Americas trading block sales for the quarter were $43.6 million, down 3.5%.

The American -- Americas region is our largest segment and accounted for 55% of the total sales in the current quarter.

Last year the Americas accounted for 63% of our total company sales.

In the U.S., sales were down 6.4% in Q1 versus the first quarter last year.

Household product sales in the U.S.

decreased by $1.5 million or 9%, due to the sales of Spot Shot, Carpet Fresh, X-14 and 2000 Flushes.

U.S.

sales were down 4% due to the -- due to decreased promotional activity and inventory levels with key customers.

Declining shelf space and category impacted Spot Shot and Carpet Fresh sales as the carpet care segment reallocates space to nonaerosol stain removers and air care products.

The sales decreases in Spot Shot aerosol was partially offset by the increased distribution of Spot Shot trigger.

The company expects to further offset these declines through new packaging, promotional and promotional offerings and innovation, including a nonaerosol environmentally friendly product such as the new Spot Shot Pet Clean, which is a non -- which is nontoxic and biodegradable.

U.S.

sales of X-14 hand surface cleaners and X-14 and 2000 Flushes toilet bowl cleaners declined due to a loss distribution as well as a temporary manufacturer disruption that resulted in lost sales totaling $1 million.

The entire toilet bowl cleaning category has declined in the grocery trade and consumer's preferences have shifted towards the dropping in manual cleaning categories.

The company also continues to -- to commit marketing and R&D resources to the -- to support and create innovation for these brands.

In Latin America, our sales were up 27.6% in the quarter.

Our Latin American business is primarily based on our lubricants WD-40 and 3-IN-ONE.

WD-40 brand sales were up 26% in the quarter due to increased distribution and a successful bonus sales promotion.

In Canada our sales were off 5.3% in the quarter, we saw lubricants hand cleaners and household products in Canada.

Canada sales were down 5 -- about 5% in Q1 due to the WD-40 brand.

Sales of -- of the WD-40 brand declined against strong performances in Western Canada during the first prior-year quarter.

Looking at Europe, our European trading block sales were $28.4 million for the quarter, up 29.7%.

Our European business includes lubricants and household products.

We sell into Europe through a combination of direct operations in certain countries, as well as through distributors in other countries.

The European region generated a sales increase of just on 30% versus the Q1 last year and grew to account for 36% of our total company business.

Changes in foreign currency exchange rates compared to Q1 fiscal year positively impacted the quarter sales in the region by approximately $2 million or 8%.

In our direct markets, our sales in Europe were up 24%.

We have direct sales force operations in the UK, Spain, Italy, France, Germany, Portugal, Austria, Denmark and the Netherlands.

The European direct markets grew 24% over the first quarter of last year.

While sales were flat in the UK, we enjoyed significant growth in other territories as follows: France increased 56%, Germany, Switzerland, Austria Denmark and the Netherlands were up 42%, Spain and Portugal were up 27% and Italy up 19%.

Direct markets accounted for 63% of the total European sales in the current fiscal quarter down from 65% in Q1 last year.

Our European distributor business, we sell through independent local distributors in eastern and northern Europe and the Middle East and Africa.

All European distributor markets combined grew over 40% in the first quarter over last year.

The distributor markets grew to account for 36% of the European segment, up from 35% in the same quarter last year.

Now, looking down to the Asia-Pacific trading block, we had sales of $7.2 million in the quarter, the Asia-Pacific trading block -- that was an increase of some 46%.

Asia-Pacific sales are approximately 9% of the company's total compared to 7% in the same -- in the total in the same first quarter last year.

Asia-Pacific benefited from increased lubricant sales both in Australia -- Australia and Asia as well as increased NoVac and Solvol sales in Australia.

Changes in foreign currency exchange rates compared to the same period last fiscal year positively impacted the sales by approximately $400,000 or 6%.

Looking at Asia separately from Australia, the region represents long-term growth potential for the company.

While the company has historically sold to Asia through third-party marketing distributors, to help accelerate the growth in the region the company began direct operations in China in 2007.

We are pleased that our sales in China grew by 34% in Q1 over the first quarter last year.

Other Asian distributor markets grew by 52% in the first quarter, sales across the region were up, including Indonesia, Korea, Malaysia, the Philippines, and Singapore.

The increased sales are a result of both increased promotional activity and the ongoing growth in awareness and penetration of the WD-40 brand.

The strong growth in China and Asian distributor markets led to the total sales in this region increasing some 47% over the first quarter of last year.

Australia on its own sales were up 44% over the first quarter last year, probably due to the sales growth of WD-40 and NoVac.

Sales of WD-40 benefited from account specific promotional activity with key customers, as well as continued broad distribution across all trade channels.

NoVac continued to gain market share in Australia growing the aerosol rug and room deodorizer category.

That's it for the sales update.

Now, I'll just turn over to Mike Irwin who will continue to review the financials.

Thank you, Garry.

In addition to the information presented on this call, we suggest that you review our 10Q that will be filed today as well.

As Garry has already covered the sales in detail we'll continue with the rest of the financials.

And on the first-quarter results, gross profit was 47.3% of sales in the quarter compared to 47.9% of sales in Q1 last year.

The slight decrease in gross margin was primarily due to higher cost of goods and shifts in product mix partially offset by price increases.

Costs have risen for components and raw materials including aerosol cans and petroleum-based products and have negatively affected gross margins in all of the company's regions.

Timing of promotional activities also contributes to the fluctuation of gross margin percentage period to period.

Selling general and administrative expenses for the first quarter increased 11.4% versus Q1 last year, which ranged then from $219.1 million -- from $19.1 million to $21.2 million.

SG&A costs increased slightly as a percent of sales from 26.5% in Q1 last year to 26.8% in the first quarter of this year.

The higher SG&A stems in part from higher freight costs of $900,000 due to global sales growth, and increased fuel costs across all regions, higher salary and fringe expense of $500,000, which includes additional staffing to support global sourcing and inventory management and our direct operation in China.

Higher professional services expense of -- of $300,000 primarily in legal costs.

And about $600,000 at the SG&A expense increase was due to changes in foreign exchange rates.

Excluding the exchange rate effect SG&A would have increased by 8% in the first quarter.

Advertising and sales promotion expenses increased to $6.6 million in the first quarter from $5.6 million in Q1 last year, and as a percent of sales grew to 8.4% from 7.8% in the first quarter last year.

The increase in the current period is related to the timing of investment in advertising activities, primarily the 1001 TV campaign in Europe which began in Q4 and continued into Q1 of this fiscal year.

Operating income for the quarter was $9.5 million, or 11.9% of sales compared to $9.6 million or 13.4% of sales in Q1 last year.

Net interest expense for the quarter was $0.4 million, down from $0.7 million in Q1 last year.

The lower net interest expense was primarily due to the reduced principal balance on our long-term borrowings as the company made its annual $10.7 million principal repayment in October 2007.

The company also benefited from increased interest income resulting from higher cash balances versus Q1 last fiscal year.

The provision for income taxes was 33.4% for the current quarter, a decrease from 35.8% in Q1 last year.

The company benefited from additional municipal bond interest and increase in benefits related to qualified production activities, a decrease in foreign tax rates and one-time benefits associated with the settlement of state and foreign tax matters.

These benefits partially offset by the loss of ETI -- of the ETI deduction and an increase in state tax.

Net income in the quarter was $6.2 million, up 9.4% from Q1 last year, foreign currency exchange rates period-over-period had a positive impact of $0.3 million on Q1, 2008 net income.

And on a diluted per share basis, earnings were $0.36 a share compared to $0.33 in Q1 last year.

Diluted shares outstanding have decreased to 17.1 million shares compared to 17.2 million for the prior first quarter.

On December 11th, the Board of Directors declared a regular quarterly dividend of $0.25 a share payable on January 31st, 2008, to shareholders of record on January 8th, 2008.

And based on today's closing price of $36.34, the annualized dividend yield would be 2.8%.

About our balance sheet at November 30th, 2007 cash was $50.4 million, down from $61.1 million at the end of the fiscal year.

Due to the annual $10.7 million principal payment on long-term borrowings made in October, accounts receivable increased slightly to $47.4 million, up $0.2 million from the end of the last year, and inventories increased to $15.7 million, up by $2.5 million.

The increased in inventory was a result of timing in the UK and the acquisition of inventory from VML, which is a contract manufacturer and warehouse distributor for the company.

In Q1 the company acquired an additional $0.8 million of certain finished goods manufactured by VML, which had previously been owned and warehoused by VML under the company's historical contract manufacturer model.

As the company transitioned to direct management of these finished goods it acquired inventory from VML to supply its distribution centers.

The purchase of VML manufacturing goods will continue going forward.

Current liabilities at November 30th, 2007, were $50.8 million down from $53.9 million at the fiscal year end.

Accounts payable on accrued liabilities decreased by $1.3 million due to timing of payments.

Accrued payroll and related expenses were down $2.6 million, primarily due to decreased bonus accrual as the company paid its fiscal 2007 bonuses during Q1 of fiscal 2008.

Income taxes payable increased $0.8 million, due to the timing of payments for federal income tax.

As you may remember on March 27th, 2007, the company's Board of Directors approved a share buyback plan.

Under the plan which is in effect for up to 12 months the company is authorized to acquire up to $35 million of the company's outstanding shares.

The company did not acquire any shares under the plan during Q1 of fiscal 2008.

However, the company has acquired 500,000 shares at a total cost of $17.3 million under the plan since its inception.

That's the financial update.

Again, more information is available on the 10Q that's filed today.

Thanks very much, and back to Garry Ridge.

Thank you, Mike.

We believe we're on track with our guidance for fiscal year 2001, which we issued at our last conference call despite the challenges we continued to see in cost of goods and the fluctuating performances within the total categories of household products.

We continue to focus on growing sales and improving gross margins from both innovation activities and cost reduction initiatives.

Here's a recap of the guidance for fiscal 2008.

We expect our sales to grow from between 7% and 10% to 2 -- to $329 million -- or $339 million and that will be driven by continued geographic expansion, market penetration, and new products.

We expect for the full year our advertising and promotional investment to range somewhere between 6.5% and 8.5% of sales.

We expect net income to range between $31.1 and $32.8 million, which would achieve an EPS ranging between $1.83 to $1.93, assuming 70 million shares were outstanding.

Today we also released our new four-year goals extending from fiscal year 2007 to 2011.

With that update, we'd like to share what we see as we look at our business today.

We see lubricant sales growing at a compounded annual growth rate over that time of between 8.1% and 9.9%.

We see household product sales growing at a compounded annual growth rate of between 3.6% and 6.1%.

We see our hand cleaner business to be relatively flat.

Our total sales over that period growing at a compounded annual growth rate of between 6.7% and 9.7%.

And our net income at a compounded annual growth rate of between 9% and 11%.

Earnings per share growing at a compounded annual growth rate of between 9.4% and 11.5%, based on an assumed 17 million shares outstanding.

These goals do not include any impact that may come from any future acquisitions.

We continue to look for the right acquisition of a well-known niche brand that can be entirely integrated into our business.

And new four-year goals do not include the impact of any further new acquisitions.

And just as a reminder, our second-quarter fiscal 2008 earnings conference call is scheduled to take place on Wednesday, April 9th, 2008, at the same time.

I'd like to now turn the call over for any questions.

Thank you.

The question and answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS).

We'll pause for just a moment to allow you a chance to signal.

Our first question today will come from JPMorgan's Jeff Zekauskas.

Hi, good day.

Hi, Jeff.

Hi.

A few things.

When you sell a can of WD-40 with Smart Straw, what's the average price differential versus a can of WD-40 without Smart Straw?

At a retail level, it's about 30% higher than a normal can.

So maybe $0.90 higher or --

About $1.

About $1 higher?

Yes.

Okay.

And how much have you converted over in the United States of your cans of WD-40 so far?

The -- we've run primarily promotional programs with selected sizes over the past couple of years as we've been testing the concept.

The majority of the conversion which will be most of the cans that we sell in aerosol sizes in the U.S.

will commence in March of this year and will be final about -- about middle to the later part of the year as we phase it into all of our customers.

So far the promotional side that we've used has only been on the 12-ounce can.

So if it's $1 at retail, is it maybe $0.50 at wholesale?

It depends on the customer and the distribution, Jeff.

But, certainly the wholesale price and the cost price are -- does rise in line with -- with somewhat the retail -- the retail percentage.

Right.

Okay.

In the quarter did you say how fast WD-40 grew in North America or in the United States?

In the United States our -- or in the Americas our lubricant sales for the quarter were just off slightly.

I don't have the exact figure in front of me.

Mike, do you have it there?

It indicated that WD-40 in the U.S.

-- WD-40 sales were down 4%.

Minus 4%.

Okay.

And how about sales to Wal-Mart as a percentage of the total?

You usually disclose that in the Q.

Yes, we have disclosed it in the Q.

And because of the shift of our business, where we've got now, Jeff, substantially more business overall outside of the U.S., in fact, two thirds of our business is now outside the U.S., I recall our sales to Wal-Mart were 7% down from 9% as a total of our total sales.

In the -- thank you very much for that.

In the quarter there was other income of $300,000, what is that?

With the other income we do own a manufacturing facility in Memphis, which is utilized by VML, which is a manufacturing partner.

Yes.

And we have -- part of that other income includes the rental for that property and we also have the exchange -- foreign exchange gains on that as well.

And some FX gains.

So is that a representative number for the year, Mike, or -- how do we think about the other line to the year?

We don't guide on that line in particular.

And as you can probably imagine in the case of the foreign exchange gains and losses that's a pretty -- that's a moving target anyway.

Okay.

But it sounds like you had a little -- some gains in the -- in the quarter?

Yes.

And then, lastly, when do you -- I mean in your longer-term projections you have positive growth for household products, but for a period of time we've had negative growth.

When does that business begin to turn around from a sales point of view?

We had -- we had a slight downturn last year, a gain of 10% the year before.

It's really surrounded the introduction of new products and -- and our belief that we're going to get some traction from those new products.

We have guided down the growth a little bit.

Yes.

But that's the way we see it.

As we've guided up the growth a little bit in our lubricant products.

Yes.

So we've got some new product, particularly in the -- in the green clean area of Spot Shot that we're now launching, but that business is very dependent on the -- I've described it Jeff as being cyclical yet sustainable.

Yes.

It is harder to -- to predict than our other business because there are so many moving parts.

But we're hoping that some of the new product development will get some traction and you'll see some of that into the latter part of this year.

As you would expect, our lubricant business you will see as we convert, it's going to be a bit of a muddy year in converting the biggest brand we have in the biggest country we have into Smart Straw, so there's a little bumper this year in that area than we normally used to.

Okay.

Thank you very much.

Thanks, Jeff.

Our next question will come from Liam Burke with Farris Baker Watts.

Garry, how are you tonight?

Good day, Liam.

Or this afternoon is better, I guess.

Garry, could you give us a little more detail on the supply chain disruption on the household side in the U.S.?

Sure.

We had a kerfuffle.

That's the best I can -- I could --

Is that a technical term or --

Yes.

It's an English term which probably I shouldn't describe in a -- in an open forum, but it means not a good thing.

We -- one of our suppliers had some supply manufacturing issues in the quarter, and, , we lost sales due to out of stocks in our X-14 and some of our automatic toilet bowl cleaning products.

And it caused us to miss shipments on promotions in -- in a couple of areas.

Bottom line is, it cost us about $1 million worth of sales that we're not very happy about.

Not to say that there's any excuse, but fortunately this doesn't happen to us very often.

We've now substantially rectified the problem.

We have now back-up supplies for all of the areas where we had the issues.

So those sales disappeared and I -- and we weren't happy that that

Okay.

Thanks.

And I -- and I apologize for it.

Mike, you mentioned that the added promotional line was up partially as a result of programs for -- 2001 -- 1001 promotion in the UK that spilled into the first quarter.

But the -- 1001 sales were down 11% in the UK.

Wouldn't you have gotten some benefit from that promotion in the first quarter?

We obviously would expect that we would get returns on the advertising investments we make, but we believe that in our business the response isn't necessarily an immediate one and that there's a lasting benefit of the advertising that we do run.

Okay.

Thank you.

And on the cash flow statement, the payables line was an outflow this quarter.

Is that a timing issue or is there something else in there?

It was a timing issue.

Okay.

Thank you.

Thanks, Liam.

You now have a question from Mank -- excuse me, Frank Magdlen with the Robins Group.

Good afternoon.

Good afternoon, Frank.

We've gone over most of it, but what -- in the cans, are you going to reduce the can size offerings in the U.S.?

And if not, what will they end up being anyway?

We are going to reduce the number of sized cans we sell.

Now, currently we have about seven or eight different sizes in cans.

An example: two ounce, five -- .5 ounce, eight ounce, nine ounce, 11 ounce, 12 ounce, 13.2 ounce.

We're going to reduce them down to primarily five.

But the majority will be three.

All right.

And that's going to -- and that is a strategic move that we made in this change to try and get some -- some volume out of -- out of more volume out of fewer sizes to take some complexity out of the supply chain to use those volumes to -- to help us offset some pricing and to really make it -- make it an easier range of products to handle.

Well, Garry, when you look at your gross margin, how dependent now, since we've been through an extended period of rising costs, I know you're reluctant to raise prices, but how -- are you going to become -- ultimately become dependent on raising prices?

And I think you've done two in the last couple years, is that correct?

We've done two in the last three years on -- in the United States.

We -- we -- when we go out with Smart Straw, of course, we're going to have a material move in our price because the -- the cost of manufacturer is going to go up.

But there are four ways that we're looking at this, is innovation, supply chain evolution and price -- actual price itself.

So we will take pricing where we can, where it's prudent.

And my main concern is -- and it will always be there, that we are not going to open -- when you've got an 80% market share, it is not prudent to open up the market to -- with greedy pricing to allow others to want to come and play.

So it's a very, very considered balance that we have.

But we are taking pricing.

And, again, one of my stated goals -- and we will do this until the sun sets and rises, is to work on improving that gross margin again, even in the headwind.

If we would have thought that we'd have a $100 oil barrel price this week and where's steel going to end up as that industry gets monopolized.

So we've got to continue to work hard at that through innovation and better supply chain evolution and pricing.

I don't envy you on that side of it.

But what have you spent on R&D, or what's the budget for the coming year?

Frank, historically I think if we look back our R&D investment has been in the range of about $3 million to $4 million a year.

I think that's right.

And that -- that takes the form of the things that we do directly.

We have a group of people that we call Team Tomorrow who are focused on developing new products as well as improving the things that we have.

We also, through them, utilize an outsourced network of other current and potential suppliers who develop on our behalf and at our direction.

And we are -- feel like we get good leverage on the dollars we invest in R&D.

And, Frank, Smart Straw, which is the biggest thing that's ever happened to this brand in 55 years, came out of five or six years' work of our R&D group to be able to make sure that we could deliver above expectation performance at extremely good value, and to take our product and to be able to raise the price and still have our consumers leave with a smile and come back expecting to be amazed and fulfilled.

So, Smart Straw is the biggest thing we've done in 55 years.

All right.

No.

I like the product, I use it and as you say, there's one less expletive deleted every time you use it.

Yes.

-- on that.

All right.

Well, thank you.

Thanks, Frank.

We'll hear from Alan Robinson with RBC.

Hey, good afternoon.

Good day, Alan.

Regarding the -- the sort of increase in the -- in the distribution of the Smart Straw format there, what kind of one-time cost increases do you expect going through the third quarter associated with that -- that rollout?

Already within our plan we've increased -- we are saying that we are going to be turning up the volume on our consumer communication.

But other cost increases which will be the normal ones will be the cost increases in cost of goods related to the Smart Straw itself, most of which, all of which will be offset by the increased costs that we will flow through to the consumer.

We don't see any unusual operational costs.

There's no -- no unusual delinquency or redundancies that will happen.

There may be a few bibs and bobs here and there, but there's no unusual third-quarter huge cost that we would see that's not already reflected in the guidance that we've given.

And there's no particular change in tooling costs or anything like that.

Oh, yes, there is, but that's capital -- CapEx and we have already -- we've already --

Deleted some costs.

Some costs will be deleted, and as you know we don't guide quarter-to-quarter.

And then it's interesting that even not guiding quarter-to-quarter this quarter's net income is about the same percentage of sales as it was the first quarter of last year.

And we're on track and we're -- the rocket's off and let's wait for it to land.

Fair enough.

And in terms of the -- the cost of goods of the new Smart Straw can, how much more expensive is that in a cost of goods perspective compared to the traditional can?

Well, we don't actually give the detail of it, but it is more expensive because we're replacing what is basically a single button actuator with a very complex and highly engineered spray device that allows the product to spray both in its normal format and out of the straw.

So -- but overall we hope that we're going to get a higher revenue in dollars at a growth margin percentage equal to or better than the one we have now.

Okay.

That's fair enough.

Thanks for that.

And then, one are the big differences compared to my expectations this quarter was regarding that of advertising and sales promotion.

I know you don't typically guide quarterly for that line item, but in general terms for the year what kind of percentage of revenue range do you see that -- that line item accounting for this year?

Mike, you've got it.

We see that ranging between 6.5% and 8.5% of sales for the full fiscal year.

Okay.

So no change there.

Okay.

Okay.

And one last question.

Something I noted in the recent filing you put out or I guess it was the 10K, was an added risk regarding the possibility of an impairment relating to goodwill surrounding some of your household product acquisitions.

Now, given you've got about $96 million of goodwill on the balance sheet, what -- roughly, what proportion of that goodwill is accounted for in terms of the possible household products acquisitions that might be at risk?

Well, I guess just in general in looking at our business, because the biggest assets that sit on our balance sheet are the ones that we acquired, and the ones that we acquired essentially are nearly all related to the household products.

So it's really the whole thing.

And it's, again, just annualizing stating basis, stating the risk factors within the business.

So, it -- it can't impact the goodwill of WD-40 because the goodwill of WD-40 is already embedded in our business.

Yes.

Fair enough.

Okay.

Here's hoping for a kerfuffle for a year.

No, being English, you know what a kerfuffle is.

Thanks.

Little Britain, here we come.

(OPERATOR INSTRUCTIONS) And again we'll pause for just a moment.

And it appears there are no further questions at this time.

Mr.

Ridge, I'll turn the call back over to you.

Okay.

Thank you all for joining us, and again we remind you that our next conference call will be on April 9th, 2008, at 2:00 PM, and until then stay squeaky clean and keep spraying.

Bye.

Once again, thank you all very much for joining us today.

That does conclude the presentation.

Have a great afternoon.