Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Silka Koopf for Jeffrey Zekauskas - J.P. Morgan.
Silka Koopf for Jeffrey Zekauskas - J.P. Morgan
You talk about the price impact of 3.3% of the gross margin. What was the price benefit to the sales line?
Jay Rembolt
We really didn’t give that number but you can back into it.
Silka Koopf for Jeffrey Zekauskas - J.P. Morgan
So when you say 3.3% to gross profit, that means like the margin benefited by 330 basis points due to pricing?
Jay Rembolt
Yes.
Silka Koopf for Jeffrey Zekauskas - J.P. Morgan
In terms of the WD-40 line, how much of the product line has been converted to a Smart Straw in the U.S. at this point? Like in very rough terms. Is it 1/3, is it ½? Can you tell at all?
Garry O. Ridge
If you look at the total line of our total SKUs , there are only about four now that aren’t Smart Straw, that won’t convert because the Smart Straw is not appropriate to that. So I would think that it’s a large percentage of our total SKU count is now in Smart Straw format.
Silka Koopf for Jeffrey Zekauskas - J.P. Morgan
Because the conversion has largely been completely, what do you believe that to what’s the end of the year going into 2010, maybe some of the beneficial pricing, what level of pricing you have achieved, will it flatten out?
Garry O. Ridge
Yes, I think that now that most of all of the classic product has been flushed through the system that the majority of our customers in the retail segment and in the areas that are supplying doers and people who use our product on the job are now supplying Smart Straw through those trade channels. So it won’t be much longer before most of the volume is in Smart Straw and then the volume, or the dollar volume, will level out.
But we are very far through the whole process now. You will still find the classic product, of course, on the shelf at retail, as that continues to be flushed through the system. But in all cases, now we are shipping Smart Straw on the product where it is appropriate.
Silka Koopf for Jeffrey Zekauskas - J.P. Morgan
An raw materials, how much existing raw materials were worked through this period, meaning it seems if I look at your costs and look at the raw material cost increases, it seems that there must have been some higher cost inventory that is still working its way through income statements. And all things being equal, things should look more favorable for the next two or three quarters, I would think.
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