As used in this report, the terms "we," "our," "us" and "the Company" refer to WD-40 Company and its wholly-owned subsidiaries, unless the context suggests otherwise. Amounts and percents in tables and discussions may not total due to rounding.

The following information is provided as a supplement to, and should be read in conjunction with, the unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2008 filed with the Securities and Exchange Commission ("SEC") on October 23, 2008.

Overview

The Company

WD-40 Company, based in San Diego, California, is a global consumer products company dedicated to delivering unique, high value and easy-to-use solutions for a wide variety of maintenance needs of "doer" and "on-the-job" users by leveraging and building the brand fortress of the Company. We market two multi-purpose maintenance products, WD-40® and 3-IN-ONE® Oil, and eight homecare and cleaning products, X-14® hard surface cleaners and automatic toilet bowl cleaners, 2000 Flushes® automatic toilet bowl cleaners, Carpet Fresh® and No Vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers, 1001 ® carpet and household cleaners and rug and room deodorizers and Lava® and Solvol® heavy-duty hand cleaners.

Multi-purpose maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia and the Pacific Rim, Europe, the Middle East and Africa. Homecare and cleaning products are sold primarily in North America, the U.K., Australia and the Pacific Rim. We sell our products primarily through mass retail and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts outlets and industrial distributors and suppliers.

We plan to continue to leverage and build the brand fortress of our Company by developing and acquiring brands that deliver a unique, high value to end users and that can be distributed across multiple trade channels in one or more areas of the world.

Highlights

• Consolidated net sales decreased 22% for the second quarter of the current fiscal year compared to the corresponding period of the prior fiscal year due to decreases in Europe, Asia-Pacific and the Americas of 34%, 31% and 11%, respectively. On a year-to-date basis, consolidated net sales decreased 8% compared to the corresponding period of the prior fiscal year due to decreases in Europe, Asia-Pacific and the Americas of 15%, 10% and 3%, respectively.

• Net income decreased 53% and 21% for the three and six months ended February 28, 2009, respectively, compared to the corresponding periods of the prior fiscal year.

• Changes in foreign currency exchange rates for the second quarter of the current fiscal year compared to the corresponding period of the prior fiscal year had an unfavorable impact on our net sales and net income. The current fiscal year second quarter results translated at last fiscal year's second quarter exchange rates would have produced net sales of $70.3 million and net income of $5.7 million. Thus, excluding the impact of the change in foreign currency exchange rates quarter over quarter, net sales and net income would have decreased by 11% and 34%, respectively. The current fiscal year-to-date results translated at last fiscal year's exchange rates would have produced net sales of $159.4 million and net income of $14.2 million. Thus, excluding the impact of the change in foreign currency exchange rates period over period, net sales would have increased 1%, while net income would have decreased 5%.

• Sales of multi-purpose maintenance products decreased 21% for the current fiscal year second quarter compared to the prior fiscal year second quarter due to declines in Europe, Asia-Pacific and the Americas of 34%, 32% and 4%, respectively. On a year-to-date basis, sales of multi-purpose maintenance products decreased 3% compared to the corresponding period of the prior fiscal year due to declines in Europe and Asia-Pacific of 15% and 10%, respectively,

• The categories in which our homecare and cleaning products are sold are very competitive by nature. Sales of our homecare and cleaning products decreased 25% for the current fiscal year second quarter compared to the corresponding period of the prior fiscal year as a result of sales decreases in Europe, Asia-Pacific and the Americas of 36%, 25% and 23%, respectively. On a year-to-date basis, sales of homecare and cleaning products decreased 22% compared to the corresponding period of the prior fiscal year due to declines in the Americas, Europe and Asia-Pacific of 24%, 14% and 13%, respectively. The year-to-date sales decline in the Europe segment was due solely to the impact of the changes in foreign currency exchange rates. In local currency, the Europe segment experienced an increase of 8% in sales of homecare and cleaning products.

• During the second quarter of fiscal year 2009, the Company recorded an impairment charge of $2.8 million related to its Carpet Fresh indefinite-lived intangible asset. The impairment was due to an increase in cost of goods and a decline in future forecasted sales levels of the Carpet Fresh brand, both of which occurred during the second quarter of fiscal year 2009. The decline in future forecasted sales levels resulted from our strategic decision to redirect our research and development efforts towards our global brands, the loss of distribution with a significant U.S. mass retail customer and assumed lower future foreign currency exchange rates in the U.K. and Australia. We are taking measures to reduce the influence of the volatile grocery trade channel on the sales of our homecare and cleaning products.

• A significant challenge for us continues to be the rising costs of components and raw materials. In recent years, we have incurred continuous cost increases. To combat the rise in costs, we have implemented price increases on certain products during each of the last three fiscal years, and we have implemented further price increases worldwide during fiscal year 2009. As a result, our gross margin as a percentage of net sales increased to 49.6% from 48.3% for the second quarter of fiscal year 2009 compared to the corresponding period of the prior fiscal year.

Results of Operations

Three Months Ended February 28, 2009 Compared to Three Months Ended February 29, 2008

Operating Items

The following table summarizes operating data for our consolidated operations
for the three months ended February 28, 2009 and February 29, 2008 (in
thousands, except percentages and per share amounts):



                                             Three Months Ended February 28 or 29,
                                                                       Change from
                                                                       Prior Year
                                           2009         2008       Dollars      Percent
  Net sales:
  Multi-purpose maintenance products    $   47,084    $  59,306   $ (12,222 )       (21 )%
  Homecare and cleaning products            14,753       19,642      (4,889 )       (25 )%

  Total net sales                           61,837       78,948     (17,111 )       (22 )%
  Cost of products sold                     31,192       40,808      (9,616 )       (24 )%

  Gross profit                              30,645       38,140      (7,495 )       (20 )%
  Operating expenses                        25,310       24,737         573           2 %

  Income from operations                $    5,335    $  13,403   $  (8,068 )       (60 )%

  Net income                            $    4,083    $   8,666   $  (4,583 )       (53 )%

  Earnings per common share - diluted   $     0.25    $    0.51   $   (0.26 )       (52 )%

Net Sales by Segment

The following table summarizes net sales by segment for the three months ended
February 28, 2009 and February 29, 2008 (in thousands, except percentages):



                                  Three Months Ended February 28 or 29,
                                                            Change from
                                                            Prior Year
                                2009         2008       Dollars      Percent
              Americas       $   37,241    $  41,887   $  (4,646 )       (11 )%
              Europe             19,546       29,757     (10,211 )       (34 )%
              Asia-Pacific        5,050        7,304      (2,254 )       (31 )%

                             $   61,837    $  78,948   $ (17,111 )       (22 )%

Americas

The following table summarizes net sales by product line for the Americas
segment for the three months ended February 28, 2009 and February 29, 2008 (in
thousands, except percentages):



                                              Three Months Ended February 28 or 29,
                                                                         Change from
                                                                          Prior Year
                                           2009           2008       Dollars      Percent
   Multi-purpose maintenance products   $   25,368      $ 26,550     $ (1,182 )        (4 )%
   Homecare and cleaning products           11,873        15,337       (3,464 )       (23 )%

                                        $   37,241      $ 41,887     $ (4,646 )       (11 )%

   % of consolidated net sales                  60 %          53 %

Sales in the Americas decreased to $37.2 million, down $4.6 million, or 11%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year had an unfavorable impact on sales. Sales for the three months ended February 28, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced sales of $38.0 million in the Americas segment. Thus, excluding the impact of the change in foreign currency exchange rates period over period, sales would have decreased by approximately $3.9 million, or 9%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year.

Sales of multi-purpose maintenance products in the Americas for the three months ended February 28, 2009 decreased 4% compared to the corresponding period in the prior fiscal year primarily due to sales decreases in Canada of 29% and the U.S. of 1%. The decrease in sales in Canada was primarily due to the changes in foreign currency exchange rates and the timing of promotional activities. Sales of multi-purpose maintenance products in the U.S. declined as customers continued to reduce inventory levels in response to the slowing economy, partially offset by price increases that were implemented during the current fiscal year first quarter.

Sales of homecare and cleaning products in the Americas decreased 23% for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year due to sales declines across all homecare and cleaning brands throughout the Americas segment. The most significant decreases related to sales of automatic toilet bowl cleaners and Carpet Fresh which were down 27% and 47%, respectively, compared to the corresponding period of the prior fiscal year. These declines were the result of several factors, including lost distribution, declining product categories or shifts within these categories, the effect of competitive factors and challenges due to the ongoing economic slowdown.

Our homecare and cleaning products compete in a highly competitive market and continue to face diminishing product categories or shifts within these categories. Additionally, as a result of the current economic slowdown, our sales are subject to changes in customer purchasing patterns. Such changes may result from changes in the manner in which customers purchase and manage inventory levels and/or display and promote our products within their stores. We are addressing these challenges through our focus on increased consumer-targeted marketing tactics and new distribution channels, as well as the continued renovation of certain of our homecare and cleaning product lines. We have made a strategic decision to redirect our research and development efforts related to our homecare and cleaning products to reduce our dependence on the volatile grocery trade channel.

For the Americas segment, 82% of sales came from the U.S., and 18% came from Canada and Latin America for the three months ended February 28, 2009, compared to the distribution for the three months ended February 29, 2008, when 81% of sales came from the U.S. and 19% came from Canada and Latin America.

Europe

The following table summarizes net sales by product line for the Europe segment
for the three months ended February 28, 2009 and February 29, 2008 (in
thousands, except percentages):



                                              Three Months Ended February 28 or 29,
                                                                         Change from
                                                                         Prior Year
                                           2009          2008        Dollars      Percent
   Multi-purpose maintenance products   $   17,601     $ 26,706     $  (9,105 )       (34 )%
   Homecare and cleaning products            1,945        3,051        (1,106 )       (36 )%

                                        $   19,546     $ 29,757     $ (10,211 )       (34 )%

   % of consolidated net sales                  32 %         38 %

Sales in Europe decreased to $19.5 million, down $10.2 million, or 34%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates compared to the corresponding period of the prior fiscal year negatively impacted sales. Sales for the three months ended February 28, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced sales of $26.6 million in the Europe segment. Thus, excluding the impact of the change in foreign currency exchange rates period over period, sales would have decreased by approximately $3.2 million, or 11%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year.

The countries in Europe where we sell through a direct sales force include the U.K., Spain, Portugal, Italy, France, Germany, the Netherlands, Denmark and Austria. Overall, sales from these direct markets decreased 27% for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year and accounted for 77% of the region's sales, up from 69% in the corresponding period in the prior fiscal year. Percentage decreases in sales in U.S. dollars across the Europe segment were as follows: U.K., 39%; Spain, 36%; German sales region, 19%; Italy 15%; and France, 4%.

While most of the countries throughout the Europe segment experienced sales declines as customers reduced inventory levels in response to the economic slowdown, France experienced sales growth of 13% in local currency. The sales growth in France was driven by the continued growth of the WD-40 Smart Straw and the 3-IN-ONE Pro product line. However, the negative impact of changes in foreign currency exchange rates period over period more than offset this sales growth in local currency.

In the countries in which we sell through local distributors, sales decreased 52% for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year due primarily to the timing of promotional activities as well as customers reducing inventory levels across all trade channels. The distributor market accounted for approximately 23% of the total Europe segment sales for the three months ended February 28, 2009, compared to 31% for the corresponding period of the prior fiscal year.

Asia-Pacific

The following table summarizes net sales by product line for the Asia-Pacific
segment for the three months ended February 28, 2009 and February 29, 2008 (in
thousands, except percentages):



                                              Three Months Ended February 28 or 29,
                                                                         Change from
                                                                          Prior Year
                                          2009            2008       Dollars      Percent
   Multi-purpose maintenance products   $   4,115       $  6,050     $ (1,935 )       (32 )%
   Homecare and cleaning products             935          1,254         (319 )       (25 )%

                                        $   5,050       $  7,304     $ (2,254 )       (31 )%

   % of consolidated net sales                  8 %            9 %

In the Asia-Pacific segment, which includes Australia and Asia, sales decreased to $5.1 million, down $2.3 million, or 31%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates compared to the corresponding period in the prior fiscal year had an unfavorable impact on sales. Sales for the three months ended February 28, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced sales of $5.7 million in the Asia-Pacific segment. Thus, excluding the impact of the change in foreign currency exchange rates period over period, sales would have decreased by approximately $1.6 million, or 22%, for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year.

Sales in Asia decreased 35% for the three months ended February 28, 2009 compared to the corresponding period of the prior fiscal year, primarily due to decreased sales of WD-40 products across the entire region, including China, Indonesia, Malaysia, Singapore and Taiwan. Sales in China decreased 22%, while sales across the rest of the Asian region decreased 40%. The decreases throughout the entire Asia segment were primarily due to the slow economic environment. We began to experience a slowdown in certain markets in this region during the first quarter of fiscal year 2009. We expect the overall economic uncertainty across the region to negatively impact sales for the remainder of fiscal year 2009.

Sales in Australia decreased 24% for the three months ended February 28, 2009 compared to the corresponding period in the prior fiscal year due to the impact of foreign currency exchange rates which negatively affected sales for the three months ended February 28, 2009. Excluding the impact of the change in foreign currency exchange rates period over period, sales remained flat versus the same period last year.

Gross Profit

Gross profit was $30.6 million, or 49.6% of net sales, for the three months ended February 28, 2009 compared to $38.1 million, or 48.3% of net sales, in the corresponding period of the prior fiscal year. The increase in gross profit as a percentage of net sales was due primarily to price increases implemented worldwide during the first quarter of fiscal year 2009, partially offset by the continued increase in costs of products, losses associated with VML Company L.L.C. ("VML"), a related party contract manufacturer, and costs from product conversions and sourcing changes. The aforementioned price increases added approximately 5.4 percentage points to our gross margin percentage for the second quarter of fiscal year 2009.

The rise in costs of products has been primarily due to the increase in costs for components and raw materials, including petroleum-based materials and aerosol cans, during fiscal year 2009 compared to the corresponding period of the prior fiscal year. The higher costs for petroleum-based materials and aerosol cans negatively impacted our gross margin by 1.6 percentage points in the current fiscal year second quarter. Although the cost of oil declined during the second half of calendar year 2008, we will not begin to experience the full benefit from lower costs of petroleum-based products until the third quarter of fiscal year 2009. In addition, we began to experience a significant increase in the cost of aerosol cans at the end of the second quarter of fiscal year 2009 primarily due to the cost of tinplate used to manufacture such cans. Tinplate pricing is set annually and is independent of the movements in the cost of steel on the spot market. While the cost of steel on the spot market has experienced recent declines, the cost of aerosol cans has not benefited from this recent trend. The increase in the cost of aerosol cans is expected to offset any benefit from the decline in the cost of petroleum-based products.

Losses associated with VML also partially offset the benefit of price increases and negatively impacted gross profit by 0.2 percentage points during the second quarter of fiscal year 2009 compared to the corresponding period of the prior fiscal year. We have a 30%

equity investment in VML which is accounted for using the equity method of accounting, and our equity in earnings or losses of VML is recorded as a component of cost of products sold. During the three months ended February 28, 2009, we incurred additional cost of products sold of approximately $0.2 million related to our investment in VML. These losses were the result of manufacturing inefficiencies at VML related to their acquisition of a significant new customer during fiscal year 2008. In response to these inefficiencies, we obtained alternative manufacturers, who are expected to help improve the cost structure for some of our products. Our investment in VML has been written off in full as of February 28, 2009.

In addition to rising costs and losses associated with VML, the remaining costs associated with product conversions and sourcing changes in the U.S. during last fiscal year's fourth quarter also negatively impacted gross profit by 0.4 percentage points during the current fiscal year second quarter compared to the corresponding period of the prior fiscal year. Product conversions related to Spot Shot and automatic toilet bowl cleaners resulted in obsolete packaging and other components as well as finished goods that were expensed in cost of products sold. We expect the additional sales and margin opportunities arising from the conversions and sourcing changes to far outweigh the short-term costs of the conversions.

In general, shifts in product and customer mix, as well as the timing of advertising, promotional and other discounts, which are recorded as a reduction to sales, may cause fluctuations in gross margin percentage from period to period. Examples of advertising, promotional and other discounts include coupon redemptions, consideration and allowances given to retailers for space and/or favorable display positions in their stores, co-operative advertising and promotional activity, volume discounts and other one-time or ongoing incentives. During the second quarter of fiscal year 2009, advertising, promotional and other discounts increased compared to the corresponding period of the prior fiscal year, negatively impacting gross margin by 0.8 percentage points. The increase in such discounts was due to the fact that a greater percentage of sales during the second quarter of fiscal year 2009 was subject to promotional allowances due to the overall increase in promotional activity in response to the slowing economy.

Note that our gross margins may not be comparable to those of other reporting entities, since some entities include all costs related to distribution of their products in cost of products sold, whereas we exclude the portion associated with amounts paid to third parties for distribution to our customers from our contract packagers and include these costs in selling, general and administrative expenses.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses for the second quarter of fiscal year 2009 decreased to $17.8 million, or 28.8% of net sales, from $20.3 million, or 25.8% of net sales, for the corresponding period of the prior fiscal year. The decrease in SG&A was largely attributable to the impact of foreign currency translation and to lower freight costs. Changes in foreign currency exchange rates compared to the corresponding period of the prior fiscal year decreased SG&A expenses by $2.3 million for the three months ended February 28, 2009. SG&A expenses for the second quarter of fiscal year 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced total SG&A expenses of $20.1 million. Freight costs decreased $0.4 million primarily due to improved shipping efficiencies and reduced fuel costs. Sales commissions decreased $0.2 million primarily due to the decline in sales. Partially offsetting these decreases were increases in employee-related costs and other miscellaneous expenses. Employee-related costs, which include salaries, profit sharing and other fringe benefits, increased $0.2 million due to annual compensation increases and higher staffing levels primarily to support the growth of international operations. Other miscellaneous expenses, including stock-based compensation, professional services costs and bad debt expense, increased by $0.2 million.

We continued our research and development investment in support of our focus on innovation and renovation. Research and development costs for the three months ended February 28, 2009 and February 29, 2008 were $1.1 million and $1.0 million, respectively. Our new-product development team, Team Tomorrow, engages in consumer research, product development, current product improvement and testing activities. This team leverages its development capabilities by partnering with a network of outside resources including our current and prospective outsource suppliers.

Advertising and Sales Promotion Expenses

Advertising and sales promotion expenses increased to $4.6 million, or 7.4% of net sales, for the second quarter of fiscal year 2009, up from $4.2 million, or 5.4% of net sales, for the corresponding period of the prior fiscal year. The increase was related to the timing of investment in advertising activities, partially offset by the favorable impact of changes in foreign currency exchange rates. In the current fiscal year second quarter, we increased our level of . . .