WD 40 ARTICLE ON APPLICATION OF LEVERAGE
On March 26,2001 ,WD-40 Company (NASDAQ: WDFC) announced the acquisition of Global Household
Brands, maker of such well-known products as X-14,,, 2000 Flushes, and Carpet Fresh., The acquisition
represents another milestone in our creation of a new business model on which to build our fortress of
brands. It furthers our successful transitioning to a global consumer products company with brands that
deliver superior performance and value to end users who buy in a variety of trade channels.
How we will finance the acquisition? We have stated in the past that we would lower our dividend
payout when the right opportunity came along to enhance shareholder value. Such an opportunity is
here right now. A five cent (per share) quarterly dividend reduction will allow us to qualify for a more
favorable credit facility for financing the Global Household Brands acquisition: a syndicated senior
secured credit facility totaling $85 million and led by Union Bank of California. This is an excellent move
for us — a vital investment in short- and long-term sales and earnings growth.'
What the acquisition means to shareholders The acquisition offers several advantages. Not only will it
give us an additional $69 million in sales revenues, but it will augment and further enhance our fortress
of brands model, Global Household Brands has been a star performer in the household goods sector,
and its acquisition will further diversify our product portfolio and substantially reduce our concentration
on one product. As a result, no brand or trade channel will be greater than 60% of our total revenues/
With this acquisition, WD-40 Company makes a big move into the household goods sector, joining the
ranks of consumer goods companies, which the stock market has historically rewarded with higher
price-earning (P/E) ratios.
Our goals for the coming year Consumers remain the focus of our business, and the acquisition of Global
Household Brands will allow us to broaden this focus. We will leverage their considerable knowledge
and expertise in the grocery channel to complement our expertise in other channels. The combined
company will have two marketing groups: The Do-it-Yourselfers Group for Solvol,, Lava,, WD-40,, and 3IN-ONE, and the Household Products Group for
2000 Flushes, Carpet Fresh, and X-14. Our distribution infrastructure will expand, as well, to support our
new household product platform and new brand and product launch opportunities, Increased research
and development will allow the combined company to leverage our collective brands and thus create
greater shareholder value in both dividends and stock price. Non-core competencies, such as the Global
Household Brands manufacturing, will be sold to one of our key suppliers, maintaining the outsourcing
business model we have successfully managed over the past 48 years.'
On behalf of WD-40 Company management, I want to express my appreciation for your support and
underscore our continued commitment to achieve faster and more profitable growth through strategic
acquisitions such as this one. We will continue to build, defend and acquire; in so doing, we will make
WD-40 Company a fortress of brands in every sense of the term.
Gaity Ridge, President and CEO
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