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 16% for the third 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 17%, 16 % and 16%, respectively. On a year-to-date basis, consolidated net sales decreased 11% compared to the corresponding period of the prior fiscal year due to decreases in Europe, Asia-Pacific and the Americas of 15%, 12% and 8%, respectively.

• Net income decreased 15% and 19% for the three and nine months ended May 31, 2009, respectively, compared to the corresponding periods of the prior fiscal year.

• Changes in foreign currency exchange rates for the third 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. Net sales and net income for the third quarter of the current fiscal year translated at the exchange rates in effect for the corresponding period of the prior fiscal year would have been $78.4 million and $7.8 million, respectively. Thus, on a constant currency basis, net sales and net income would have decreased 5% and 4%, respectively, compared to the corresponding period of the prior fiscal year. On a constant currency basis, current fiscal year-to-date net sales and net income would have been $237.8 million and $22.0 million, respectively, resulting in decreases of 1% and 4%, respectively. Note that our constant currency disclosures represent the translation of our current fiscal year revenues and expenses from the functional currencies of our subsidiaries to U.S. dollars utilizing the exchange rates in effect for the corresponding period of the prior fiscal year.

• The categories in which our homecare and cleaning products are sold are very competitive by nature. Sales of our homecare and cleaning products decreased 22% for the current fiscal year third quarter compared to the corresponding period of the prior fiscal year as a result of sales decreases in the Americas, Europe and Asia-Pacific of 24%, 18% and 14%, 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%, 15% and 14%, 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 10% in sales of homecare and cleaning products.

• Our gross profit as a percentage of net sales increased to 50.9% from 46.5% for the third quarter of fiscal year 2009 compared to the corresponding period of the prior fiscal year, primarily due to the impact of worldwide price increases implemented on certain products during fiscal year 2009 and during each of the last three fiscal years. These price increases were implemented to combat the continuous rise in costs of components and raw materials in recent years.

Results of Operations

  Three Months Ended May 31, 2009 Compared to Three Months Ended May 31, 2008

Operating Items

The following table summarizes operating data for our consolidated operations
for the three months ended May 31, 2009 and 2008 (in thousands, except
percentages and per share amounts):



                                                  Three Months Ended May 31,
                                                                    Change from
                                                                     Prior Year
                                           2009       2008      Dollars       Percent
   Net sales:
   Multi-purpose maintenance products    $ 52,559   $ 61,187   $  (8,628 )        (14 )%
   Homecare and cleaning products          16,257     20,917      (4,660 )        (22 )%

   Total net sales                         68,816     82,104     (13,288 )        (16 )%
   Cost of products sold                   33,821     43,921     (10,100 )        (23 )%

   Gross profit                            34,995     38,183      (3,188 )         (8 )%
   Operating expenses                      23,840     25,932      (2,092 )         (8 )%

   Income from operations                $ 11,155   $ 12,251   $  (1,096 )         (9 )%

   Net income                            $  6,897   $  8,073   $  (1,176 )        (15 )%

   Earnings per common share - diluted   $   0.41   $   0.49   $   (0.08 )        (16 )%

Net Sales by Segment

The following table summarizes net sales by segment for the three months ended
May 31, 2009 and 2008 (in thousands, except percentages):



                                       Three Months Ended May 31,
                                                         Change from
                                                          Prior Year
                                2009       2008      Dollars       Percent
               Americas       $ 41,084   $ 48,638   $  (7,554 )        (16 )%
               Europe           21,675     26,252      (4,577 )        (17 )%
               Asia-Pacific      6,057      7,214      (1,157 )        (16 )%

                              $ 68,816   $ 82,104   $ (13,288 )        (16 )%

Americas

The following table summarizes net sales by product line for the Americas
segment for the three months ended May 31, 2009 and 2008 (in thousands, except
percentages):



                                                  Three Months Ended May 31,
                                                                        Change from
                                                                        Prior Year
                                         2009          2008        Dollars       Percent
  Multi-purpose maintenance products   $ 27,997      $ 31,514      $ (3,517 )        (11 )%
  Homecare and cleaning products         13,087        17,124        (4,037 )        (24 )%

                                       $ 41,084      $ 48,638      $ (7,554 )        (16 )%

  % of consolidated net sales                60 %          59 %

Sales in the Americas decreased to $41.1 million, down $7.6 million, or 16%, for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year had an unfavorable impact on sales. Sales for the three months ended May 31, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have been $41.7 million in the Americas segment. Thus, on a constant currency basis, sales would have decreased by $6.9 million, or 14%, for the three months ended May 31, 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 May 31, 2009 decreased 11% compared to the corresponding period in the prior fiscal year primarily due to a sales decrease of 10% in the U.S. Sales of multi-purpose maintenance products in the U.S. declined due to lost distribution and the impact of customers continuing to reduce inventory levels in response to general economic conditions, partially offset by price increases implemented during the first quarter of the current fiscal year.

Sales of homecare and cleaning products in the Americas decreased 24% for the three months ended May 31, 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 Carpet Fresh and automatic toilet bowl cleaners which were down 53% and 26%, 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 general economic conditions. See further discussion of the potential impairment of the indefinite-lived intangible assets related to our homecare and cleaning products beginning on page 29 of this report.

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 general economic conditions, our sales are subject to 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, trade promotions and new distribution channels that reduce our dependence on the volatile grocery trade channel, as well as through the continued renovation of certain of our homecare and cleaning product lines.

For the Americas segment, 86% of sales came from the U.S., and 14% came from Canada and Latin America for the three months ended May 31, 2009, compared to the distribution for the three months ended May 31, 2008, when 85% of sales came from the U.S. and 15% 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 May 31, 2009 and 2008 (in thousands, except
percentages):



                                                  Three Months Ended May 31,
                                                                        Change from
                                                                        Prior Year
                                         2009          2008        Dollars       Percent
  Multi-purpose maintenance products   $ 19,581      $ 23,712      $ (4,131 )        (17 )%
  Homecare and cleaning products          2,094         2,540          (446 )        (18 )%

                                       $ 21,675      $ 26,252      $ (4,577 )        (17 )%

  % of consolidated net sales                31 %          32 %

Sales in Europe decreased to $21.7 million, down $4.6 million, or 17%, for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year had an unfavorable impact on sales. Sales for the three months ended May 31, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced sales of $29.9 million in the Europe segment. Thus, on a constant currency basis, sales would have increased by $3.6 million, or 14%, for the three months ended May 31, 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 19% for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year and accounted for 71% of the region's sales, compared to 72% for the corresponding period in the prior fiscal year. For the three months ended May 31, 2009, we experienced sales decreases in U.S. dollars throughout the Europe segment as follows: German sales region, 31%; Italy, 24%; U.K., 15%; France, 14%; and Spain, 3%.

While most of the countries throughout the Europe segment experienced sales declines as customers reduced inventory levels in response to general economic conditions, the U.K. and France, which represented 39% and 20% of the total direct sales in the Europe segment, respectively, experienced sales growth of 16% and 2%, respectively, in their respective local currencies for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year. The sales growth in the U.K. was due primarily to new distribution, while 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 unfavorable impact of changes in foreign currency exchange rates period over period more than offset the sales growth in local currencies in the U.K. and France.

In the countries in which we sell through local distributors, sales decreased 13% for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year due primarily to the unfavorable impact of changes in foreign currency exchange rates period over period. In local currencies, sales for the distributor markets were essentially flat for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year. The distributor market accounted for approximately 29% of the total Europe segment sales for the three months ended May 31, 2009, compared to 28% 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 May 31, 2009 and 2008 (in thousands, except
percentages):



                                                  Three Months Ended May 31,
                                                                       Change from
                                                                       Prior Year
                                         2009         2008        Dollars       Percent
   Multi-purpose maintenance products   $ 4,981      $ 5,961      $   (980 )        (16 )%
   Homecare and cleaning products         1,076        1,253          (177 )        (14 )%

                                        $ 6,057      $ 7,214      $ (1,157 )        (16 )%

   % of consolidated net sales                9 %          9 %

In the Asia-Pacific segment, which includes Australia and Asia, sales decreased to $6.1 million, down $1.2 million, or 16%, for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year had an unfavorable impact on sales. Sales for the three months ended May 31, 2009 translated at the exchange rates in effect for the corresponding period in the prior fiscal year would have produced sales of $6.8 million in the Asia-Pacific segment. Thus, on a constant currency basis, sales would have decreased by $0.4 million, or 6%, for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year.

Sales in Asia decreased 12% for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year primarily due to lower sales of multi-purpose maintenance products across most of the region, including China, India, the Philippines and Taiwan. Sales in China decreased 32%, which represented 86% of the total decrease in Asia, while sales across the rest of the Asia region decreased 3%. Sales of multi-purpose maintenance products in China declined due to the impact of general economic conditions. Certain markets throughout the rest of the Asia region also experienced sales declines while others experienced increased sales due to the timing of promotional activities.

Sales in Australia decreased 23% for the three months ended May 31, 2009 compared to the corresponding period in the prior fiscal year due to the unfavorable impact of foreign currency exchange rates. On a constant currency basis, sales would have increased by 6% for the three months ended May 31, 2009 compared to the corresponding period of the prior fiscal year due to increased promotional activities and price increases implemented during the first quarter of the current fiscal year.

Gross Profit

Gross profit was $35.0 million, or 50.9% of net sales, for the three months ended May 31, 2009 compared to $38.2 million, or 46.5% of net sales, for the corresponding period of the prior fiscal year. The increase in gross profit as a percentage of net sales was due primarily to worldwide price increases implemented during the first quarter of fiscal year 2009 which added 5.3 percentage points to our gross profit percentage for the third quarter of fiscal year 2009.

Gross profit percentage also benefited from a decline in costs of petroleum-based materials, product conversions, sourcing changes and the timing of advertising, promotional and other discounts. The decrease in costs of petroleum-based materials had a favorable impact on our gross profit percentage of 2.0 percentage points for the third quarter of fiscal year 2009, while product conversions and sourcing changes, which occurred in the U.S. during last fiscal year's fourth quarter, had a positive impact on our gross profit percentage of 0.3 percentage points for the third quarter of fiscal year 2009.

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 profit 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 third quarter of fiscal year 2009, advertising, promotional and other discounts decreased compared to the corresponding period of the prior fiscal year, positively impacting gross profit percentage by 0.4 percentage points. The decrease in such discounts was due to the fact that a greater percentage of sales during the third quarter of fiscal year 2008 was subject to promotional allowances.

Partially offsetting the favorable impacts to gross profit percentage discussed above were higher costs for aerosol cans, which negatively impacted our gross profit percentage by 2.0 percentage points for the third quarter of fiscal year 2009, and the closeout of slow-moving inventory, which negatively impacted our gross profit percentage by 0.5 percentage points. 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.

Note that our gross profits 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. These costs totaled $3.1 million and $4.9 million for the three months ended May 31, 2009 and 2008, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses for the third quarter of fiscal year 2009 decreased to $18.4 million, or 26.8% of net sales, from $21.4 million, or 26.1% of net sales, for the corresponding period of the prior fiscal year. The decrease in SG&A expenses 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 $2.6 million for the three months ended May 31, 2009. Thus, on a constant currency basis, SG&A expenses for the third quarter of fiscal year 2009 would have been $21.0 million for a decrease of $0.4 million, or 2%, from the corresponding period of the prior fiscal year. Freight costs decreased $1.3 million due to reduced fuel costs, improved shipping efficiencies and lower sales revenue. Other miscellaneous expenses, including stock-based compensation, professional services costs and bad debt expense, decreased by $0.4 million. Partially offsetting these decreases was an increase in employee-related costs, which include salaries, profit sharing and other fringe benefits, of $1.3 million due to annual compensation increases and higher staffing levels primarily to support the growth of international operations.

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 May 31, 2009 and 2008 were $0.9 million and $0.7 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 $5.3 million, or 7.7% of net sales, for the third quarter of fiscal year 2009, up from $4.3 million, or 5.3% of net sales, for the corresponding period of the prior fiscal year. The increase was due to the timing of investment in advertising activities, partially offset by the favorable impact of changes in foreign currency exchange rates period over period. On a constant currency basis, advertising and sales promotion expenses for the three months ended May 31, 2009 would have been $6.2 million for an increase of $1.9 million, or 44%, over the corresponding period of the prior fiscal year. In the current fiscal year third quarter, we increased our level of advertising in the U.S. to promote the Spot Shot brand of homecare and cleaning products. Investment in global advertising and sales promotion expenses for fiscal year 2009 is expected to be in the range of 6.5% to 7.5% of sales.

As a percentage of sales, advertising and sales promotion expenses may fluctuate period to period based upon the type of marketing activities employed by the Company and the period in which the costs are incurred. The costs of certain promotional activities are required to be recorded as reductions to sales, while others remain in advertising and sales promotion expenses. For the three months ended May 31, 2009, total promotional costs recorded as a reduction to sales were $4.1 million compared to $5.1 million for the corresponding period of the prior fiscal year.

Therefore, our total investment in advertising and sales promotion activities totaled $9.4 million for each of the three-month periods ended May 31, 2009 and 2008.

Amortization of Definite-lived Intangible Asset Expense

Amortization of our definite-lived intangible asset was $107,000 and $147,000 for the three months ended May 31, 2009 and 2008, respectively. The amortization relates to the non-contractual customer relationships acquired in the 1001 acquisition completed by the Europe segment in fiscal year 2004. This intangible asset is recorded and amortized in pounds sterling on a straight-line basis over its estimated eight-year life and is converted to U.S. dollars for reporting purposes. Therefore, any fluctuations in amortization from period to period are the result of changes in foreign currency exchange rates.

Non-Operating Items

The following table summarizes non-operating income and expenses for our
consolidated operations for the three months ended May 31, 2009 and 2008 (in
thousands):



                                             Three Months Ended May 31,
                                       2009                 2008          Change
    Interest expense, net         $          568        $         433   $       135
    Other (expense) income, net   $         (157 )      $         212   $      (369 )
    Provision for income taxes    $        3,533        $       3,957   $      (424 )
. . .