Fool.com: Slippery Business [Special] July 17, 2002

From squeaky-clean Lava soap to down-and-dirty grease, WD-40 products treat everything but the kitchen sink -- oh wait, that too. WD-40 products can be found in the garages, toolboxes, and sinks of the world. And WD-40 stock can be found on the Nasdaq, where shares have beaten the market over the last one- and three-year periods. On July 16, Gary Ridge, president and CEO of WD-40, came all the way from San Diego, Calif., to join David and Tom Gardner on The Motley Fool Radio Show.

TMF: Gary, welcome to The Motley Fool Radio Show.

Gary Ridge: G'day. Nice to be here.

TMF: Gary, many of us obviously know the product WD-40, but we don't necessarily know the company WD-40. Is that good or bad?

GR: It is good, I guess. Really, the brand is what... we call WD-40 the brand, our fortress brand. The company will be 50 years old next year. For 43 years, we only did one thing, and that was build that magnificent brand. That brand fortress of WD-40. In the U.S., it is in eight-out-of-10 households. More people will use it this week than dental floss. It is just a remarkable brand, and it is a great learning base for us to be able to expand our business, which we have been doing.

TMF: I don't know about that dental floss line. I am going back to that for a second. Is that a positive statement about WD-40, or is that an indictment of the American people?

GR: I would never indict the American people.

TMF: OK. You mentioned earlier that the company is about 50 years old now, and I am wondering Gary: Our scribes and sages here at Fool HQ have done the research to find out the company was originally called Rocket Chemical. How did WD-40 become WD-40?

GR: Well, it was called Rocket Chemical Company back in 1953. That company made a range of anti-corrosives and lubricants. There was a problem with the umbilical cord in the Atlas space rocket, and the then-chemists at WD-40 mixed up a product, and they submitted it for tender to solve that problem. It was "WD," water displacement, and the fortieth formula was the one that won the tender. So the brand was born as WD, water displacement, fortieth formula.

TMF: Gary, what is the strangest use of WD-40 you have ever heard of?

GR: I was sharing that with the guys here in the studio earlier. In Hong Kong some time ago, there was a python snake caught in the suspension of a public bus. They used WD-40 to get that little, slippery guy out of there. I think that is the strangest use I have ever heard.

TMF: Gary, let me ask you. Let's talk a little bit more about the company. Let's look back over the last, say five to seven years. What was it like to be ignored as a business because of the incredible technology craze?

GR: I found that to be a frustrating time. I remember talking to some analysts on Wall Street one time, saying, "I'm sorry -- I didn't go to the business class on how to lose money and be successful, and I really don't intend to take it this summer." So we just had to keep on keeping on, if you will. We knew that if we did good business on a daily basis, that eventually people would come back. We are not one-hit wonders; we will be here for another 50 years. That is really what it is about. "Above expectation performance at extremely good value" is something that is really tattooed in our skin. We want to be that to investors, and we want to be that to consumers.

TMF: Do you still feel ignored?

GR: Yeah. If you compare our P/E ratio with other consumer products companies, we are performing better than any company in the sector right now. A couple of our larger institutional shareholders that have been buying over the time have said that we are just "undiscovered."

TMF: You mentioned that WD-40 has made a number of acquisitions in recent years. I think the average investor today is becoming increasingly skeptical of acquisitions because of accounting issues and the integration of those businesses. Why do you think acquisitions at WD-40 are going to work for the long term for shareholders?

GR: Well, they have worked. The acquisition that we made a year ago, which was the brands of X-14: 2000 Flushes and Carpet Fresh, we fully integrated those brands into our system. We have grown those brands organically more than 16% this year. The Spot Shot brand we have owned for about a month. The true core strength of WD-40 is we are one company that knows how to, and does, sell in multiple trade channels. We learned that by selling WD-40. You can buy WD-40 everywhere from a convenience store to an industrial supply house. So we know how to sell to Home Depot; we know how to sell to Wal-Mart; we know how to sell to 7-Eleven; we know how to sell to Auto Zone; we know how to sell to K-Mart; we know how to sell to Target; we know how to sell to Tractor Supply and Farm stores.

TMF: Gary, looking at competition and looking at your company as it matures, tell me, who are you competing against or who do you want to be when you grow up? Procter & Gamble?

GR: No, I don't want to be Procter & Gamble. One of the great things about our business is that our revenues this year are heading for north of $230 million. We only have 206 people, so our revenue per employee is north of $1 million. So my goal is to have 1,000 employees, with the same revenue per employee, so that will be a bit different than Procter & Gamble one day, jokingly said.

Our competitor is everybody fighting for our shelf space. Our job, whether it be light globes or batteries, is to have products that the retailers will see investing in -- that shelf space with us will give them a better return. So we have got to have great products that deliver above-expectation performance at extremely good value to consumers on a daily basis.

TMF: Gary, there are a lot of questions about the accuracy of financial statements and whether or not to believe corporate executives when they explain their business. How do you respond to that, and why do you think that problem has arisen?

GR: It really makes me mad when I see things happening in corporate America that are truly driven by greed. My role as WD-40 CEO is to create increased value over time. My role is not to create a spike in something (the stock price) that makes all of us rich, so that I can then say goodbye. It makes me sick when I get caught in the same post code as people who are not that way.

TMF: Well-said. Gary, thanks for joining us on The Motley Fool Radio Show.

GR: Yeah, g'day. Have a great one, all right?

TMF: To you as well.

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